From Experience- The Invisible Success Factors in Product Innovation - Dr Cooper

8/3/2019 From Experience- The Invisible Success Factors in Product Innovation - Dr Cooper

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Compliments of:

Stage-Gate Inc. andProduct Development Institute Inc.

This article was published in Journal of Product InnovationManagement, 16, 2, April 1999, 115-133

For information call +1-905-304-8797

From Experience:The Invisible Success Factors

In P roduct Innovation

By: Dr. Robert G. Cooper

Product Innovation Best Practices Series

www.stage-gate.com

Reference Paper # 1 9

Product Development Institute Inc. 1999-2007


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From Experience: The Invisible Success Factors inProduct Innovation

Dr. Cooper lowers the microscope on the state of product innovation and examines the common

reasons for poor results. The critical success factors are noticeably absent from the typical new productproject. The article outlines how companies can recognize one of the seven common innovationproblems that Dr. Cooper refers to as the new product development Blockers to avoid repeating thesame mistakes.

These pages contain copyright information of Product Development Institute and member companyStage-Gate Inc., including logos, tag lines, trademarks and the content of this article. Reproducing inwhole or any part of this document is strictly forbidden without written permission from ProductDevelopment Inc. or Stage-Gate Inc.


Keywords:Product innovation process, critical success factors, blockers, portfolio approaches, and capacityanalysis



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From Experience: The Invisible SuccessFactorsin Product InnovationThose That Cannot Remem ber the Past

... are condemned to repeat it1. Twenty five

years of research into why new products suc-ceed, why they fail and what distinguishes win-ning businesses, and are we any further ahead?Some pundits say no! Todays new product pro-ject teams and leaders seem to fall into the sametraps that their predecessors did back in the1970s; moreover, there is little evidence thatsuccess rates or R&D productivity have increasedvery much.

So whats the problem? Surely, after myriadstudies into new product performance, almostevery product developer should be able to list offthe 10 or 15 critical success factors that makethe difference between winning and losing. This journal, and others, have published numeroussuch articles over the years ... so many that any-one introduced to new product managementsince 1980 should be as familiar with the criticalsuccess factors as a school child is with theirABCs.

But we still make the same mistakes. The suc-cess factors are invisible ... not found in typicalbusiness practices. Recent studies reveal that the

art of product development has not improved allthat much that the voice of the customer is still

missing, that solid up-front homework is notdone,that many products enter the development phaselacking clear definition, and so on [3,9].

Has an entire generation of product developersmissed the message?

Has management be blind to what ails innova-tion, and what makes winners? Or maybe weresearchers are guilty of missing the boat here of focusing on the wrong problems, or of com-municating poorly, or of not making the successfactors more visible. This article lowers the mi-

croscope on the state of product innovation ...on the fact that product innovation does not hap-pen as well as it should, and that the critical suc-cess factors are indeed noticeably absent fromthe typical new product project. The article out-lines the reasons why so many companies andsenior managements have failed to heed themessages, and continue to repeat the same mis-takes. And solutions are proposed no, not an-

other process, and not another market researchmethodology but approaches designed totackle the difficult question of managementsfailure to listen, and businesses failure to em-brace the critical success factors.

The ABCs: The Critical Success FactorsWhat are these critical success factors that areso noticeably absent in most businesses newproduct projects? Research has uncovered twotypes or classes of success factors. The firstdeals with doing the right projects; the secondwith doingprojects right[13].

Type 1. Doing the right projectsis captured by a

number of external or environmental successfactors, over which the project team has littlecontrol. These include characteristics of the newproducts market, technologies, and competitivesituation, along with the ability to leverage inter-nal competencies. While not within the control of

the project team, these are nonetheless usefulfactors to consider when selecting and prioritizingprojects. For example, develop a scoring model


From Experience: The Invisible Success Factors inProduct Innovation



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model for project selection that scores projects

positively when theyre in attractive markets,with positivecompetitive situations, and that leverage thebusinesss core competencies.

Type 2. These success factors emphasize doing projects right, and focus on process factors oraction

items things the project team does (or too of-ten doesnt do). And they are the invisible ones.Butthese actions are controllable and discretionary,so they are indeed seenfrom time to time. The

annuls of business history contain numerous ex-amples of exemplary project teams ... teams thatunderstood and built in these critical success fac-tors. Some examples [4]:

Transitions Optical, a joint venture between PPGIndustries of Pittsburgh and Essilor International,Paris, has a stunning success in the eye-glassesmarket with its Transitions IIIplastic lenses thatadjust to sunlight for prescription eye-wear. Ex-tensive market research revealed that consumerswere unhappy with the traditional product

Photo Gray Extrafrom Corning. This 20-year-oldtechnology was perceived as heavy, for olderpeople and worn by farmers. But the conceptof variable-tint eye-wear whose tinting changesto accommodate bright sunlight or darker rooms was appealing. Market research was under-taken in numerous countries to identify custom-ers needs in this lucrative market. The researchshowed that consumers were looking for light-weight, modern, variable-tint eye-wear, whosetinting changed quickly; at the same time, thelens had to be really clear when worn indoors.PPG, a world leader in the production of glass

and coatings, was capable of developing thephotochromic technology, and Essilor possessedthe distribution network. But would the proposedproduct be a winner? To find out, numerous con-cept tests were undertaken with the proposed

product shopping mall interviews and focusgroups of consumers to confirm customer likingand purchase intent, not only in the U.S., but inFrance, Germany and the U.K. When TransitionsIIIwas launched in the mid-90s, it proved to be

right on for the market, and very quickly

achieved the leading market share. Sales are stillgrowing at 25-30% yearly.

Heres another example of a superb team effort:

A strategic decision at the Fluke Corporation ofSeattle to diversify into new markets led to thecreation of the Phoenix team a project team

whose mandate was to deliver a superior newhandheldinstrument product to the chemical industry. Fac-ing a totally new market, the project team hadno one in the company to turn to. So they began

their voyage of discoverywith some prework,namely project planning, Synectics (creativitytraining for the team), a review of the tradeliterature, and visits to chemical industry tradeshows. Next came customer plant field visits simply spending a day in the control room, chat-ting with and observing the ultimate customer,the plant instrument engineers. The projectleader calls this fly on the wall research; othersmight call it anthropological research orcamping out2.

After some 25 customer site visits, the projectteam acquired a good understanding of theinstrument engineers problems and needs: thatfact that too many different instruments wereneeded to calibrate the plants gauges; and theexcessive time the instrument engineers spentrecording readings in the field. The solution: a universal calibration instrument could cali-brate any gauge in the plant (this was madepossible via the use of software rather than hard-ware in the hand-hand tool); and an instrument that recorded the readings in thefield the user simply keys in readings, which

go into the tools memory; and upon returning tothe control room, down-loads these directlyinto his computer.

The Documenting Process Calibrator the uni-

versal calibration tool that does its ownpaperwork went on to become a greatsuccess.

From Experience: The Invisible Success Factors in Product I nnovation



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What The Winners Have Taught Us

Studies of these and hundreds of other casesreveal just what makes the difference betweenwinners and losers. And many of the factors areindeed controllable. So, lets have a quick reviewof the controllable success factors the eightcommon denominatorsof successful new productprojects and the levers you can pull to

heighten your odds of success (Exhibit 1)[4].

1. Up-front homework pays off[2,3]

Too many projects move from the idea stageright into Development with little or no assess-ment or up-front homework. The results of this ready, fire, aim approach are usually disas-trous. Research shows that inadequate up-fronthomework is a major failure reason [12], whileother studies show that solid up-front homeworkdrives up new product success rates significantlyand is strongly correlated with financial perform-ance [3,7,13] . Successful project teams under-take superior up-front homework (more time,money and effort; and better quality work) than

do failure teams [7,8] , while a recent bench-marking study reveals that homework is a keyingredient in a high quality new product process,and is significantly and positively correlated withboth theprofitabilityand the impactof the busi-nesss total new product efforts [9].

2. Build in the voice of the customer

Successful businesses, and teams that drive win-ning new product projects, have a slave-likededication to the voice of the customer. Newproduct projects that feature high quality market-

ing actions preliminary and detailed marketstudies, customer tests, field trials and test mar-kets, as well as launch are blessed with morethan double the success rates and 70% highermarket shares than those projects with poor

marketing actions, according to one study [5].Sadly, a strong market orientation and customerfocus is noticeably lacking in many businessesnew product projects,however [6,7,9].



Exhibit 1: Eight Actionable Critical Suc-cessFactors

1. Solid up-front homework to define theProduct and justify the project.

2. Voice of the customer a slave-likededication to the market and customerinputs throughout the project.

3. Product advantage differentiated,unique benefits, superior value for thecustomer.

4. Sharp, stable and early productdefinition- Before Developmentbegins.

5. A well-planned, adequately-resourcedand proficiently-executed launch.

6. Tough go/kill decision points or gates Funnels not tunnels.

7. Accountable, dedicated, supportedcross unctional teams with strong leaders

8. An international orientation international teams, multi-country marketresearch and global or glocal products.

3. Seek differentiated, superior productsOne of the top success factors is delivering a dif-ferentiated productwith unique customer bene-

fitsand superior value for the user. Such superiorproducts have five times the success rate, overfour times the market share, and four times theprofitability as products lacking this ingredient,according to one study [7]. This quest for a su-perior product that met customer needs better

than the competition really made Transitions IIIand Flukes Documenting Process Calibrator thewinners they are.

Surprisingly, very few firms can point to specificfacets of their new product methodology thatemphasize this one vital success ingredient. Of-

ten product superiority is absent as a projectselection criterion, while rarely are steps deliber-ately built into the process that encourage thedesign of such superior products. Indeed, quitethe reverse is true: the preoccupation with cycletime reduction and the tendency to favor simple,inexpensive projects actually penalizes projectsthat lead to product superiority [10].


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4. Demand sharp, stable and early product

definition

A failure to define the product its target mar-ket; the concept, benefits and positioning; andits requirements, features and specs beforeDevelopment begins is a major cause of bothnew product failure and serious delays in time-to-market [7,8,13]. In Flukes new product proc-

ess, for example, a definitional gateexists beforethe project proceeds into Development. In spiteof the fact that early and stable product defini-tion is consistently cited as a key to success,however, firms continue to perform poorly here

[9].

5. Plan and resource the market launch ...early in the game!

Not surprisingly, a strong market launch under-lies successful products. For example, new prod-uct winners devote more than twice as manyperson-days and dollars to the launch as do fail-ure teams. Similarly, quality of execution of themarket launch is significantly higher for winners.The need for a quality launch well planned,

properly resourced and well executed shouldbe obvious. But not every project team and busi-ness devotes the same effort and attention here.In some businesses, its almost as though thelaunch is an after-thought something to worryabout after the product is fully developed.

6. Build tough go/kil l decision points intoyour process a funnel, not a tunnel.

In too many companies, projects move far intodevelopment without serious scrutiny: once aproject begins, there is very little chance that it

will ever be killed. The result is many marginalprojects approved, and a misallocation of scarceresources. Indeed, having tough Go/Kill decisionpoints or gates is strongly correlated with theprofitabilities of businesses new product efforts

[9]. Sadly, tough Go/Kill decision points is theweakest ingredientof all process factors studied!Further, for 88 percent of projects investigated,the idea screen is deficient; 37 percent of



Projects do not undergo a pre-development busi-

ness or financial analysis; and 65 percent do notinclude a pre-commercialization business analy-sis [6].

7. Organize around true cross-functionalprojects teams.

Rip apart a badly developed project and you will

unfailingly find 75 percent of slippage attribut-able to (1) siloing or sending memos up anddown vertical organizational silos or stovepipesfor decisions, and (2) sequential problem solv-ing, according to Peters [15]. Numerous studies

concur: good organizational design is stronglylinked to success [13]. Good organizational de-sign means projects that are organized as across-functional team, led by a strong projectleader, accountable for the entire project frombeginning to end, dedicated and focussed (asopposed to spread over many projects), andwhere top management is committed to the project. While the ingredients of a good teamshould be familiar ones, surprisingly many pro-jects are found lacking here, and receive medio-cre ratings on the team dimension [1].

8. Build an international orientation intoyour new product process.

New products aimed at international markets (asopposed to domestic) and with internationalrequirements built in from the outset fare better[7]. This international dimension is often missedby North American companies, however. An in-ternational orientation means defining the mar-ket as an international one, and designing prod-ucts to meet international requirements, not justdomestic. The result is either a global product

(one version for the entire world) or glocalprod-uct (one product concept, one development ef-fort, but perhaps several variants to satisfy dif-ferent international markets). An internationalorientation also means adopting a transnational

new product process, utilizing cross-functionalteams with members from different counties, andgathering market information from multiple inter-national markets as an input to the new


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new products design.

****

These are but eight commonly-cited success fac-tors, based on rigorous research into why win-ners win and losers lose. But note how poorlybusinesses and projects perform on each successfactor, on average. If these success drivers areso fundamental to winning, then why are they soinvisible in practice why do so many businessesand project teams fail to build them in?

The Winners Are All Too Rare

Examples such as Flukes Documenting ProcessCalibratorand PPGs Transitions IIIare superbexamples that hard work and brilliant executionon the part of the project team, along with theright kind of management involvement, pays off.The trouble is, these examples are all too rare.But is the rarity of such exemplary team effortsdue to lack of knowledge that fact that withfew exceptions, teams simply did not know whatthey should do, or did not know how to do it?We believe no! Most often, teams and manage-ment know what has to be done, and they knowhow to do it, but somehow, the work doesnt getdone, and the outcome is less than satisfactory.As one executive at P&G exclaimed, after seeingthe results of a study of 60 P&G new productprojects: Whats clear is that we do know howto do it ... theres lots of evidence of teams doingthe right things ... the right market studies, su-perb product development and testing, and soon. The issue is one of consistency ... we do

some plays well, some projects, some of thetime. But thats nothow you win championship,year after year.

Indeed there is a quality crisisin product innova-tion! No, not the usual kind of product qualitydeficiencies, but a quality of execution crisis. Instudies of hundreds of projects, quality of execu-tion of key tasks from idea generation through tolaunch was rated as deficient, scoring an averageof about 6.2 out of 10 [6,7,8]. If this was a fac-tory, and thats the quality of work you were get-ting at each workstation, youd shut the factory



down! These results are confirmed in an indus-

try-practices benchmarking study, where seniorpeople were asked to rate the quality of theirnew product process on 11 measures. Again, thesame message comes through: the process isbroken: managers rate their processes acrossmany elements at a meager 56 points out of apossible 100. Even more evidence:Weve conducted in-depth problem detection ex-

ercises in over 100 companies over the last fiveyears exercises whereby a large and represen-tative group of employees break into teams andidentify whats going wrong. The inputs wereprovided by more than 2500 people, but are pri-

vate to the companies. But the issues and defi-ciencies identified play like a broken record: insufficient market input, a failure to build inthe voice of the customer, and a lack ofunderstanding of the marketplace, poor up-front homework, ill-conceived, inadequately resourced launches, lack of a true cross-functional team organiza-tion, failure to get stable product definition early inthe project the product specs keep changing, failure to kill projects when they should be

they get a life of their own, poor or no project prioritization procedures, lack of management commitment and leader-ship, and so on.There is a consistent message here: the newproduct process is broken we are blind to thesuccess factors.

The same in-company exercises also attempt toidentify the underlying causes of this quality ofexecution crisis. Seven possible reasons I callthem blockers are offered by managers forwhy the success factors are invisible and why

projects seem to go wrong, or take too long, orarent well carried out. And each requires an anti-dote or specific action to overcome it:

Seven Blockers A Preview:

1. Ignorance: our people simply dont know whatshould be donein a well-executed project.2. Lack of skills: we dont know how to do thekey tasks for example, the market research


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Know-how and business analysis acumen are

missing; and we often underestimate whats in-volved in these tasks.3. Faulty or mis-applied new product process: wehave a process, but it doesnt work: its missingkey elements; its laden with bureaucracy; andits over-applied.4. Too confident: we already know the answers,so why do all this extra work?

5. A lack of discipline: no leadership.6. Big hurry: were in a rush, so we cut corners!7. Too many projects and not enough resources:theres a lack of money and people to get the jobdone.

If your business is typical, chances are that oneor some of these reasons or blockers apply toyou too, and might explain why too many pro-jects seem to go off course. Lets deal with eachof these, expand on them, and explore solutions.The first few blockers are common and obviousones, and many companies have taken steps toovercome them. The solutions are evident:

Blocker #1. Ignorance: We Dont KnowWhat Should be Done

Some companies leadership teams and projectteams simply dont understand whats required tomake new products successful. That is, they lacka complete and balanced perspective on what awell-run project looks like what the importanttasks and events are. For example, in a technol-ogy based company, often project team mem-bers, and indeed even senior management, aresomewhat in the dark when it comes to whatmarketing tasks are essential, particularly in theearly phases of the project. Ask a project engi-neer whats needed in order to pin down product

requirements, and he might reply : marketingresearch. But push him on just what marketresearch, and youre just as likely to get blankstares or the reply hire a consultant. Equally,product managers or project leaders from a mar-

keting group may not fully understand whatsrequired from a technical standpoint. Ask thetypical marketing person to list the importanttechnical activities in a project, and here too



shes likely to miss half of them. But its not just

a matter of functional silos and crossfunctionalignorance: Sadly, some of the marketing folksarent even aware of what marketingactions make for a well-executed project! Finally,many senior managers are inexperienced at newproduct management: for example, when itcomes to making project go/kill decisions, theyarent sure what their role is, have received rela-

tively little training here, and rely on the wrongdecision criteria.

One problem here is that some of the must doactions in a well-run project are not very visible

and also are based on soft science. For example,market research is often considered an intangibleingredient, and when compared to physical sci-ence (engineering, chemistry and physics), notvery predicable. Money spent on technical work,such as R&D, usually yields a tangible deliver-able, such as a lab-tested prototype product; butmoney spent on market research yields only in-formation as a deliverable intangible and some-times very soft.

When the R&D Director seeks extra money, the

General Manager asks, what will I get for it?.And the head of R&D replies: a working proto-type ready for production, 90% certain. When I,the head of Marketing, ask for more money for amarket study, I cant guarantee that the resultwill be even 50% accurate! exclaimed a frus-trated Marketing Director. And so, guess whogets the extra budget?

And so the uninformed manager moves aheadwithout the market study ... he simply doesntunderstand its importance to success. Other im-portant activities that make the difference be-

tween winning and losing such as obtainingsharp product definition based on facts, doingsolid up-front homework, project planning, andbuilding in the international dimension oftenfall prey to the same illogical reasoning as the

market study, and so they too are left out.Solution: Processes! Thats what the 90s havebeen all about re-engineering business proc-esses.


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Solution: Processes! Thats what the 90s have

been all about re-engineering business proc-esses.Processes have become instant cook-books:they create adequate chefs out of even the worstof us!

As part of this re-engineering or process overhaulexercise, many companies have designed and

implemented new product processes, such asStage-Gate [4]. These are roadmaps, blueprintsor game plans for driving new products to mar-ket. They lay out the key steps and activities,stage by stage; they define decision points or

gates, complete with go/kill and prioritizationcriteria; and they build in best practices. In somecompanies, such processes have evolved to thepoint where theyspecify all the steps and activi-ties in a well-run project, complete with how toinstructions for example, what market studiesare typically required, how to secure productdefinition, how to make go/kill decisions, and thelike.

Guinness Breweries has developed a new productprocess, that goes well beyond a roadmap for

project leaders it provides instructions andguidelines. Their new product process is totallyelectronic and paperless: the process manualor instructions are on web-pages that the projectleader and team can easily access via Intranet. All activities are outlined, along with templatesfor deliverables. The manual is comprehensiveand detailed, but the user only sees what sheneeds to. As one manager declared: If you canread, you know what needs to be done.

These new product processes have become verypopular in the last decade. The PDMA Best

Practicesstudies reveal that 60% of firms haveadopted a Stage-Gate process [11,14]3. Ourresearch concurs ... almost! Certainly, a high pro-portion of firms claimto have a process in place.But often the process does not yield the ex-

pected positive results. Heres why: First, a process per se is not the solution.Rather, a process is a guide, roadmap or enablerdesigned to help people find their won way and



reach a solution. Instead, we see too many

managements relying heavily on the process, anddemanding strict and mind-numbing adherenceto the process, regardless of the situation.

Second, a process may lay out the tasks andsteps clearly. But processes presuppose that pro-ject team members and management understandwhat is required in the execution of the process

that they have the skills to execute, and under-stand what constitutes best practices. The issueof lack of skills and a failure to understand whatsrequired is blocker #2, below.

Third, the process may be simply a poorly con-ceived one it is a badly designed process, andis missing the key elements of a high qualityprocess (this is blocker #3, below).

Finally, the process is a good one, but its notadhered to its an imaginary process (blockers#4-7, below).

So setting up a task force to design and imple-ment a new product process is a only partial an-swer. Its a good start, and if you lack a sys-

temic, well-oiled new product process, maybethats the place to begin [4]. But go further. Solets continue with blockers #2-7.

Blocker #2. Lack of Skills: We Dont KnowHow to Do It and/or We UnderestimateWhats Involved

The needed skills and knowledge are missing!Todays complex projects require a multitude oftechnical and people skills to be an effective,well-rounded team leader or player. Some ofthese

skills include, for example: how to undertake the needed market studies(user needs analysis, competitive analysis, con-cept testing, segmentation and market analysis,etc.).

how to do the up-front homework, build a busi-ness case and undertake a business and financialanalysis.


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how to run projects project management tools

and techniques; project planning. how to deal with joint venture or alliance part-ners (including the legal side). a knowledge of the technology required to de-sign, develop and produce the product. how to lead an effective cross-functional team conflict resolution, communication, etc. and so on.

The required skill set is a daunting one, suggest-ing a renaissance man or woman at the helm ofthe project. But such all-seeing, all-knowing peo-ple are few and far between.

One recurring problem is the lack of experienceand/or education of people expected to under-take new product projects. In the typical con-sumer goods firm, marketers tend to dominateproject teams. But they are too often freshlyminted MBAs self-assured and articulate, butlacking depth, wisdom and experience. Evenworse, the new product project leader is oftenthe assistant brand manager, recently hired. Inindustrial product companies, the problem is of-ten quite different. Far from dominating projectteams, marketers are usually noticeably absent

and frequently untrained as marketers. This mayin part explain in why marketing activities areconsistently rated as poorly handled in new prod-uct projects.

Its not just marketing skills, however. There aremany other talents needed to make a project asuccess, as noted in the list above. And too of-ten, project team members are either lacking inexperience or deficient in education and trainingin these skill areas as well.

A second and related problem is that both man-

agement and project team members underesti-mate what it takes to perform many of the tasksabove. Building in the voice of the customer, do-ing solid up-front homework, or getting sharp,stable product definition is not as easy as it

sounds. A handful of focus groups and somedesk research constitutes good market re-search, is the view of many marketers allthats needed to build in the voice of the cus-tomer. Wrong! Similarily, product definition in



too many companies amounts to key members of

the project team cloistered together to agree ona set of product specs. Again, wrong! If yourhomework phase, building in the voice of thecustomer, and gaining sharp product definitionamounts to focus groups, desk research andsome inhouse meetings, then youre not achiev-ing the best practice standards of performance.Witness the two examples cited above Transi-

tions III and Flukes Documenting Process Cali-brator where extensive homework and pains-taking market research resulted in winning prod-uct concept. These are examples of bestpractices.

Most companies new product projects fall farshort of the mark, however [3]. The vital home-work, research and definitional activities, asfound in Transitions III and Flukes Calibrator,are time consuming tasks, requiring considerableeffort and skill. But this effort is often underesti-mated. For example, a study of industrial productcompanies new product efforts reveals thatcertain critical tasks received relatively littleattention. The average detailed market studyamounted to a meager 16.2 person-days of

effort per new product project; whilepre-development business and financial analysistook only 13.6 person-days per project [7].

So lut ions: There are four solutionsrecommended here, and the first two are fairlyobvious, but perhaps not to everyone:

1. Team training. Too many companies assumethat their employees will simply rise to theoccasion when it comes to new products.Management assigns people to project teamsfrom a variety of functions in the company, but

few have received formal training in the area ofproduct innovation. Even worse is the plight ofthe project leader: She is often thrust into theteam leader role, with little training and lackingmany of the skills needed to drive the project to

market. So train, train, train!


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Lucent Technologies, a company that has dra-

matically improved its overall and new productperformance in recent years, offers a compre-hensive package of training courses for would-beproject team members. Here are some of thetopics covered in these 2-3 day courses: Life Cy-cle

Management, Competitive Intelligence, Targeting

Your Markets, Marketing & Business Plans,Effective Strategies for Launching New Products,New Product Introduction, Project ManagementEssentials, Product Technology Roadmapping,and so on (there are 22 such courses in the

Product Management curriculum!).

And dont forget training senior management.Often their skill set can also be improved when itcomes to their role in product innovation. A num-ber of companies, such as Rohm and Haas,Reckitt & Colman, PECO Energy, Exxon Chemical,Guinness, and Arco Chemical have implementednew product gatekeeper training sessions tar-geted at senior management.

2. True cross functional teams. Lacking a

renaissance man or woman as a team memberor leader, the next best thing is a cross func-tional team comprised of members from variousfunctions and with complementary skills. Ourresearch shows that a truecross-functional teamdramatically improves both time to market andsuccess rates [8]. I emphasize the word true,simply because there are so many pretend ordis-functional project teams in existence. Hereswhat winning teams have in common in thisstudy[8]: an assigned team of players it is clear who ison the team (too often, team membership was

vague and unstable; such teams did not performas well). cross functional, from many departments andfunctions in the business, with each memberhaving an equal stake in the project (as opposed

to a leader from one department dictating to theother team members and departments).



a dedicated, accountable team leader that is,

not doing too many other projects or otherassignments at the same time; and held account-able for the projects results. accountable for the entire project as a team from beginning to end (not just one phase of it).Other facets of an effective cross-functional teaminclude genuine commitment of resources to theteam by management. That is, the functional

bosses become resources providers, and givedefined release time to team members; and onceresources are committed to a project, functionalbosses cannot arbitrary overrule the team, andrenege on resource commitments:

The head of product development at one ofReckitt & Colmans largest business units ex-plained:Youve got to work with a project team, and aproject team from a number of functions ...people who are empowered to take decisions.Its not much good having a project team withpeople who say yes, we can do that, and thengo off and speak to their bosses and find out well, I made a mistake. Getting a project teamto work simultaneously with you so you can

speed up the whole process, and work towards acommon goal, is essential.

3. Groom project team leaders. I call this thecare and feeding of good project leaders. Goodproject leaders are rare: Project leadership is anacquired skill, and typically does not materializeon ones first project. One reason for the paucityof exceptional project leaders is that manage-ment does not give them the chance to mature management typically promotes them to morelucrative jobs after a successful project. As oneteam leader put it: Being a new product project

leader is a career enhancing and very visible job assuming the project is a winner. But Ill onlydo it once ... Then Im on to something biggerand better. The point is this: if you have suc-cessful and skilled project leaders, let them ad-

vance their careers in this area. Provide rewards,incentives, recognition, pay increases and promo-tions for the good ones to remain as projectleaders.


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Royal Bank of Canada, one of the largest banks

in North America, has selected and groomed ateam of project leaders to head projects in theirBusiness Banking unit. Previously, projects wereled by Product Managers or their assistants busy people who had neither the time nor experi-ence to run new product projects. Concernedthat a lack of project leadership was hurting pro-jects, the Process Manager of RBCs new product

process hand-picked project leaders from insideand outside her company, trained them, and en-sured them long term, rewarding positions asfull-time project leaders. After several years, shenow has a superb team of project leaders in

place.

4. Define standards of performance ex-pected. This is perhaps the most difficult of thefour solutions. It begins with an understanding ofwhat constitutes best practices. A thorough lit-erature review combined with in-depth bench-marking studies of best practices in other compa-nies is one place to begin. Much has been writtenin the literature on different approaches, pre-scriptions and methods to improve product de-velopment, especially in JPIM. So access it

chances are your desired best practices havealready been published and are in the public do-main. Benchmarking studies of practices in otherfirms is also a useful way to identify new meth-ods and approaches. Some benchmarking studieshave been published (see Griffin and Page[11,14]); but likely youll need a more in-depthlook at practices, getting into the details and howthese processes really work within companies.

Having decided what are desired or expectedpractices, next, build these into your new prod-uct process. Do this via defined stages complete

with explicit deliverables for each gate review.For example, in Procter & Gambles SIMPLnewproduct process, deliverables in the form of endpoints, complete with templates, are de-fined for each stage - its clear whats expected

of the project team. Additionally, each stage inthe SIMPL process defines Current BestApproaches suggestions for a project leader,that represent standards of performance. Note



That P&Gs SIMPLprocess is a third generation

one, has been many years in its evolution, andrepresents the collective wisdom derived fromhundreds of product launches.

Blocker #3. A Faulty or Mis-Applied NewProduct Process

More than half the companies today claim to

have a new product roadmap or process in place one that guides them from idea to marketplace[11]. The trouble is, the process is missing keyelements and/or its poorly applied.

Missing success factors: The eight critical suc-cess factors outlined in Exhibit 1 arent even partofmost companies new product processes. Au-dits of new product roadmaps reveal that theyconsistently miss the mark. That is, managementgoes through the motions of re-engineering theirproduct development process, but fails to man-date that the re-engineering team build in thecritical success factors highlighted above. Some-times its not clear that either management orthe reengineering team even know what the suc-cess factors are in product innovation ... do you?

A review of the new product process in a divisionof a major U.S. food company revealed seriousomissions. When questioned about his businesssgreatest new product successes, the head ofR&D replied with words like dynamite prod-ucts ... breakthroughs ... Clearly differentiated ...superior performance and great value for moneyfor the consumer .... But when asked to pointout where in his new product process dynamiteproducts was the focus, or where the processwould result in such products, he was silent. Forexample, none of the project selection criteriaat

gates even asked the question; nor were any ofthe activitieswithin the stages designed to yieldunique and superior products. Even worse, if aproject team followed the divisions process liter-ally, they would probably end up with a product

that was quite the opposite of a dynamite prod-uct. In short, his re-engineering task force hadneglected to build into the process the numberone success factor! Rather they had merely


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merely documented their current methodology

(instead of building in best practices and theeight success factors), and in so doing, they hadinstitutionalized poor practices.

Our research shows that just having a new prod-uct process has absolutely no impact on perform-ance. Rather its the nature of that process andwhether or not it builds in key success factors

that makes the difference [2,3,9].

Bureaucracy: A second process deficiency isthat the process is too bureaucratic it encour-ages much non-value added activity. Some of

this unproductive work inherent in bad processesincludes:

Bullet-proofing for gates: The process has be-come an end in itself in some businesses, asteams go to great lengths to prepare for gatemeetings. As one team leader in a well-knownDanish company put it: Our team spends moretime preparing for gate meetings than we doactually progressing our project. Project teamswere delivering documentation in excess of 75pages at the gates. Ironically, when polled, sen-

ior management indicated they expected about a10-page summary ...not a 75 page essay! At amajor US chemical company, the gate meetingson the surface appeared to require a minimum ofpaperwork and preparation for example, pres-entations were kept to a maximum of 10 over-head transparencies. But as one team leader ex-claimed in frustration: ... Of course, that doesntinclude the 65 transparencies I have in my brief-case when I arrive at the gate meeting I wantto have a slide that will handle any possiblequestion they can throw at me ... Im bullet-proofing myself.

Too many gates, too many stages: More is notnecessarily better. The typical proficient newproduct process contains about four or fivestages and gates (not counting the ideation

stage and post launch review). Much more thanthat, and bureaucracy sets in. At one large con-sumer packaged goods corporation, their NewProduct Roadmap, featuring seven stages andseven gates, quickly became labeled as seven,



Gates to hell. Management has taken steps to

streamline the process.

Inflexibility: The new product process is a riskmanagement tool. If the projects risk is high,thenone should adhere fairly closely to the prescrip-tions of the roadmap. But if risk is low, then de-tours

designed to speed projects through certainly arerecommended. Sadly, some companies newproduct processes have become straitjackets:they fail to recognize that some projects aresmall, low risk ones, and should be fast-tracked

stages collapsed and gates combined. That is,management tries to force fit their large projectprocess to every project, even the small, no riskones.

Management control system: A final and seriousprocess deficiency is that the businesss develop-ment process has become a command and con-trol system rather than a super-highway to themarketplace. In short, senior management viewsthe process as a way to keep them engaged inprojects to keep them informed of whats going

on, and to enable them to interject their de-mands and decisions, and worse, to micro-manage projects. For example, there are toomany presentations to senior management, toomany status reports, and generally too muchdeference and reporting to senior people.

At a hardware and software developer in theBoston area, senior management could not letgo. In addition to go/kill decision meetings, theleadership team (all the VPs) insisted on monthlyreviews of all projects, as well as event-drivenmilestone reviews. In managements view, this

was their way of staying on top of projects andproviding guidance to project leaders. But allthese reviews, preparations for reviews, andmanagement interference was driving projectleaders to distraction, and both cycle time and

morale were suffering.

This is wrong! The whole concept of a new prod-uct process is a system built for speed, and not a


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control and information process for the conven-

ience of senior management. A well-designed,properly implemented new product processshould be a system designed for and by projectleadersand teams ... to enable them to get newproducts to market quickly and successfully.

Solution: Time for an overhaul! If your newproduct process is more than two years old, it

probably needs up-dating and fixing [2] . Con-duct a post launch audit of your past projects,and find out what made them successes or fail-ures. Make a list of these success factors. And asyou overhaul your new product process, build in

these success factors, by design, not by accident.

Next, undertake a critical review of your newproduct process. For example, take the list ofeight critical success factors above, and seewhich ones your process builds in or omits. Ifsome are missing, take strong steps to redesignyour process to incorporate these success fac-tors. Dont get caught like the food company divi-sion, where your process overlooks key successfactors.Finally, get rid of the time wasters and speed

bumps in your process. Take some completedprojects and work with the team on a retrospec-tive analysis of their project. Map or flow-chartthe project from idea through to launch monthby month, activity by activity. Then lower themicroscope on each major activity, and brain-storm with the team: How could you have doneit better? How could you have done it faster. Dothis on enough projects, and you gain insightsinto how your process should be overhauled making it better and faster. Some examplesweve seen of the results of such an exercise de-signed to accelerate the process:

moving long lead time items forward (such asmajor equipment purchases) with cancellationclauses in the event the project is canceled. outsourcing legal or patent searches (ratherthan waiting for the companys legal department

to find the time). using outside tollers to provide limited produc-tion quantities to speed up field trials or testmarkets.



making the Board meeting on capital appropria-

tion requests event-driven rather than holding ittwice per year (this can save up to six months!). dumping the annual budgeting exercise, or atleast changing it to allocate funds to envelopes(for project types) rather than to specific projects(this means that if a better project comes along,it does not wait until the next budget year to befunded). involving people from international units on theproject team a trans-national team in orderto build off-shore design requirements and vol-ume data into the project early enough to makea difference.

Example: When overhauling their new productprocess, a large US energy company reviewedthe critical success factors listed above, andadded a few of their own. Then the re-designtask force set about designing a process thatdeliberately built in each factor. Heres are somespecifics: they incorporated major market research ef-

forts, designed to identify and articulate cus-tomer needs and wants, as a standard compo-nent of the pre-development phase (previously,

only concept tests, largely via focus groups, hadbeen part of the old process). they redesigned project reviews to be decisionpoints or gates, complete with defineddeliverables and visible, quantifiable go/kill crite-ria (previously, these project review meetingswere really project up-dates, rather than go/killdecision points; no criteria or list ofdeliverables existed; so no projects were killedonce underway). they mandated a sharp, early product definitionbefore the development phase (the project ishalted unless product definition is on the table,

based on facts, and signed off by the projectteam; previously, rather vague and unstableproduct definitions, non fact-based, had been therule). and they required a preliminary market launch

plan to be delivered, before the go todevelopment decision point (in the old proc-ess, launch plans were put together just beforethe launch phase, so often the sales force and


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The Final Four Blockers Tougher To Deal

With

What if the players know what to do; they havethe necessary training and skill set; and theyhave a good process or game plan in place in thecompany ... but still it doesnt happen right!

As one senior person in Lucent Technologies

exclaimed:

We have a very visible stage-and-gate process,with stages and gates clearly defined. Its a goodprocess too! And most of our people have been

trained on it. But it really hasnt been totallyimplemented ... that is, many projects dont rig-orously follow the process.

The four explanations I hear most often are: over-confident we already know the answers. a lack of discipline a lack of leadership and afailure to comply. the desire to get to market quickly we cutcorners and circumvent the process. too many projects and not enough resources a lack of people and money, so the job doesnt

get done.None of these deficiencies is easily solved. Letsexplore each in more depth.

Blocker # 4. Too Confident: We AlreadyKnow the Answers

This is a lame excuse and its like leading withones chin ... a cocky attitude that says : whybother doing this product test or this marketstudy ... we already know what the result willbe. The argument might be a legitimate one if itwere not for the compelling body of evidence

against it. The most frequently omitted activitiesin the new product process are the early marketassessment and market research tasks alongwith other activities in the homework phases ofthe project [3,7,8,13]. But consistently, a lack of

good market information and inadequate home-work are cited as the number one reasons fornew product failure! If we already know the an-swers, then why is it that products continue tofail for the same reasons?



Solution: Theres no breakthrough solution here

except common sense. So look at the evidence!New products fail because of omission of keyactivities or sloppy quality of execution. If yourestill a non-believer, as part of your retrospectiveanalysis of past projects, lower the microscopeon each activity in the project (the flow-chartingexercise above). Rate the quality of execution ofeach activity, and try to pinpoint the weak ones.

And if your company is typical, youll discovertwo truths: many activities and key tasks arent done well,or dont happen at all. success and failure hinges on certain of these

poorly handled key tasks.Before you skip over key activities because youthink you already know the answers or that theproject is a simple and obvious one, pause for amoment: chances are, youre wrong! The evi-dence strongly suggests that at least some of keyassumptions youve made are faulty, and theseassumptions will come back to haunt you! Some of your market information (based onopinion and guess-work, rather than fact) is al-most certain to lead to wrong conclusions. Justabout every major new product market study

Ive been involved with changes in some impor-tant way the key assumptionsabout product de-sign requirements, pricing, target market, bene-fits sought and so on. The original view of theproject was wrong, and had we proceeded basedon that view, the product and project would haveunderperformed. Apparently simple, obvious projects are oftenfar more complex than originally thought. Theproject looks simple, so one charges in withoutthe adequate up-front homework. Only later inthe project is it discovered that there more herethan anticipated a lot more uncertainties and

risks than first thought. And so the project teamhas to retreat and retrench, and do the neededwork. The trouble is, by the time the project getsback on track, much time and money has beenspent.

A word of warning: Be very careful about delet-ing actions that have been shown to be pivotalones. Its alright to have flexibility, but detours


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should be made consciously and in full aware-

ness of the risks and costs involved.

Blocker #5 . A Lack of Discipline: NoLeadership

The complaint is this : We lack the discipline ...we dont want to follow the process: it takessome extra effort. Human nature is such that

we often avoid doing something, even when weknow its the right path a lack of discipline orunwillingness to comply with a well-conceivedand logical prescription.

One of the problems in product innovation is thatmany of the prescribed actions in a well-runproject are discretionaryor optional. For exam-ple, one does not have to do market research orthe up-front homework or even extensive prod-uct testing in order to get the product to market.And because these actions are optional, they canbe too easily deleted or omitted ... and so theyare! Another example: instead of making toughGo/Kill decisions and gaining focus, its so mucheasier to keep adding projects to the active list.And so management does!

Often the lack of discipline comes from the top.The leadership team of the business talks thetalk, but doesnt walk the talk. Indeed the lead-ership team is often the first to break rank tobreak discipline. Here are five very commonnegative behaviors of management or leadershipteams we witness:8. Just go do it!. Frustrated with projects thatseem to take forever, some senior people adopta cavalier attitude and urge their people to justget on with it. In one major firm, a senior ex-ecutive criticized his new products people for

narrow perfectionism and extreme risk avoid-ance when he witnessed projects with extensivemarket research, product testing, business analy-sis and the like. But a subsequent analysis re-vealed that the companys new product results

were improving every year (higher success ratesand higher NPVs per project), and far superior towhat they had been before the company hadadopted this disciplined approach. His pleas toforget the discipline probably would have



resulted in disaster.

9.A failure to demand that the project team em-brace best practices. Senior management allowsprojects to proceed without key steps and activi-ties completed missing the market studies, up-front homework, international outlook, sharp

product definition, and the like. In short,management fails to challenge the team, andfails to set high standards for quality of execu-tion.10. Inappropriate behavior as gatekeepers. Sen-ior managers often miss project review meetings(or postpone them); they fail to make theneeded decisions at such reviews, leaving the

project team in limbo; they make decisions basedon opinion rather than fact, on emotion rathersolid criteria; and they progress pet or executiveprojects, circumventing the process altogether.11. Changing project priorities too often. Projectsare on again, off again; management reassignspeople without considering the impact on pro-jects; and senior people renege on resourcespreviously committed to a project leader.12. Micro-managing projects from a distance.

Management tries to over-manage the details ofprojects, but is not engaged enough to fully un-

derstand the implications of senior leveldecisions on projects.13. Insisting on too many make-work activities.Senior managers demand myriad reports andpresentations on the project. Do these behaviorssound familiar? If so, read on for some actionsolutions.

Solution: There are three solutions proposed fora lack of discipline; #1 and 2 below are aimed atsenior management.

1. The leaders must understand the vital

role of new products in their business. Toooften, senior management treats new products

as an afterthought. Senior management is so tiedup with day-to-day business issues and the pres-sures of achieving quarterly financial results thatthey seem relatively distant from new products.In one major US company, the CEO asked me ata management briefing meeting the question:Can you really make money at new products?.


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to him, product innovation was a sideshow and

simply not worth spending much time on. Thelack of appreciation of the role of innovation,coupled with a short term results focus, explainsthe doubtful behavior of senior people as innova-tion leaders. The first requirement, then, is thatyour leadership team be educated about the vitalrole of new products. For example, in this firm just cited, a study was undertaken within the

company to show the impact of new products their profitabilities, margins, and impact on sales.The results were impressive, but prior to theanalysis, had not been well understood. Addition-ally there is much evidence available to make the

case the new products are vital, and that one ofsenior managements most critical roles is to leadthe charge here.

2. The leaders must demonstrate leader-ship. And they must lead by example, practicingdiscipline and adherence to the principles thatunderlie best practices in product innovation [4].To the leadership team of your business, Ipreach the following message: Yes, re-engineeryour new product process. But most important,demonstrate that youre committed to the proc-

ess by your actions, not just your words. Hereare some positive leadership actions observed in

companies, based on an unpublished study4:

Senior management ... should have an in-depth understanding of com-panys new product or stage-gate process and acommitment to adhere to its principles and rulesof the game. must make timely, firm and consistent Go/Killdecisions. must prioritize projects objectively. should establish visible and clear deliverables

for successive project review or gate meetings. must commit and ensure availability of neces-sary resources. should mentor and enable project teams.

must set high standards for quality of executionof project tasks.



An effective gatekeeper is less an old-style man-

ager a judge and critic and more an enablerand resource provider, concludes the author ofthe study. Further, the last item in the list isworth noting. Instead of tacitly approving sloppywork, missed deliverables, or hasty corner cut-ting, senior management should challenge theproject team, and set high standards for tasksand deliverables. As one senior executive at

Hoechst-US put it: The gates are the qualitycontrol check points in the new product process.And I view my job as a quality controller I asktough questions at the gates to ensure that the[project] work is being done, and in a high qual-

ity fashion.

Next, develop a set of rules of the game thatyour leadership team agrees to adhere by [4].And make sure you live by them! Example:

An audit of new product performance and prac-tices at one Rohm and Haas business unit re-vealed that the leadership team was the prob-lem, and not so much the project teams. So,senior management agreed to be trained. Forexample, although the leadership team had en-

dorsed their businesss new product process,many senior people were not familiar with itsprescriptions, best practices and reasons why.Next, the leadership team developed a set ofrules of conduct to address their lack of disci-pline ... rules they committed to live by. Someexamples of this business units rules of thegame are in Exhibit 2.

3. Install a process manager. To my knowl-edge, there has never been a successful imple-mentation of a new product process without aprocess manager or facilitator in place! No proc-

ess, no matter how well-designed and needed itis, will never implement itself. It needs someoneto make it happen. This person is the processmanager; and for larger businesses, this is a full-time position. Indeed, the best performing busi-

nesses have incorporated process facilitation fortheir new product efforts [9].


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The role of this process manager often calledthe key master, process facilitator, gate meisteror process keeper is to make sure that the newproduct process works, efficiently and effectively.The process manager facilitates every importantgate meeting, acting as a referee, ensuring thatgatekeepers follow the rules of the game(above), and that a decision is made. Shecoaches the project teams, helping them over-come difficulties and roadblocks, and makingsure that all the key deliverables are in place.The process manager up-dates the process, andprovides for continuous process improvement; he

trains new employees on how to use the system;and most important, he is the scorekeeper in thegame, keeping the necessary metrics on pro-jects, their progress and outcomes.The process manager typically reports directly to

a senior person, such as the head of Marketingor R&D, although the position itself may not be asenior one.



Blocker # 6: In Just Too Big a Hurry

The speed argument is a tough one to refute intodays fast-paced world. It goes like this: Wevegot some tough deadlines ... a limited window ofopportunity. This product must be launched forthe trade show in September. So were going tohave to cut some corners cut out the marketstudies, cut short the product tests, do a quickie

sales force training effort in order to make thatdeadline.Lets just get it out there!

The fact that the product must be to market as

quickly as possible is a compelling reason to takesome chances, cut corners or collapse activities.But the results are often negative:

A well-known manufacturer of marine paint(paint for ships hulls) was in a hurry to get anew product to market. In the interest of savingsome time, management urged the project teamto rush the product to market and cut short theproduct testing phase. All went well until twoyears into launch, when ship-owners started tonotice that the paint was peeling off the their

hulls a full three years sooner than the sched-uled re-painting. Putting a ship into dry-dock forunscheduled repainting is a costly proposition,and soon the legal actions began. Not only doesthe paint company have a failure on its hands,but its lost credibility in the eyes of its custom-ers, and its also fighting dozens of legal actionsfrom angry customers.

The story is repeated in almost every industry.Fords Taurus suffered heavily in warranty costsand low resale value, largely because of stepstaken to reduce development cycle time. Today,

Mercedes faces a problem with a new car modelthat flips over not enough product testing, per-haps? Only the computer software industry getsaway with launching incomplete products orproducts that dont quite work. But their day too

will come.

Exhibit 2: Gatekeeper Rules of theGame Gatekeepers must hold the gate meetingand be there; if you cannot attend, find aproxy. Dont wait till gate meeting to raise keyissues; and contact the project team toresolve issuesbefore the gate meeting begins. No catching up on projects at gatemeetings, and no surprise attacks! Gatekeepers must make their decisionbased on the criteria for that gate.

All projects must be treated fairly andconsistently no hidden agendas; no pet

projects! A go/kill decision must be made withinthat working day If the decision is Go, the gatekeeperssupport the agreed-to Action Plan, committhe resources, andagree to release people to the projectleader.


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Our study of fast-paced project teams reveals

that the speed argument above is false economy.Rather, project teams that emphasize doing theup-front homework, doing the necessary marketstudies, building in the voice of the customer,getting sharp early product definition based onfacts, and practicing quality of execution not onlyachieve a higher success rate, their time per-formance is the best they get there time effi-

ciently and on time [8]. And the strongest driverof cycle time reduction is the use of a true cross-functional team.

Solution: Recognize the need for cycle time re-

duction. But also recognize that some thingsdone in the interest of saving time have exactlythe opposite effect. Indeed, there is a dark sideto accelerated product development, accordingto Crawford [10]. The quest for cycle time reduc-tion leads companies to focus on the mundane to develop trivial products and line extensions,rather than genuine breakthrough products; itresults in short-cutting certain key activities product testing, careful product definition, mar-ket studies at the expense of quality of execu-tion with negative consequences; and it is disrup-

tive to the team concept, thereby resulting ingreater people costs and chewed up resources.

Cycle time reduction is certainly a worthwhileobjective. Our studies reveal a strong positivecorrelation between time efficiency and profitabil-ity in new product projects [8]. Further, note thatnot everyone is guilty of this misplaced emphasison cycle time reduction. Finally, often theproblems resulting here arise not so much fromthe goal of cycle time reduction, but rather fromhow people go about achieving the goal thefact that they mismanagetheir cycle time reduc-

tion efforts.

As noted in blocker #4 above, flexibility is fine,as long as short-cuts arent taken for the wrongreasons. And be careful that efforts taken to re-duce time to market do not compromise qualityof execution or the team process; and that accel-erated time lines are realistic, given the re-sources available. This is one more reason to



install a full time process manager someone

that can enforce discipline when either the teamor management are in too big a hurry.

Also, consider building short-cut rules into yournew product process:

Example: One major consumer firms ProductDelivery Roadmapoutlines when its OK to cutcorners, and when it is not:Its OK to cut corners when ... the concept is strong. product testing results are strong. concept testing results are very positive and no

change in the competitive environment hasoccurred since the concept tests were done.

we know the category well and have been suc-cessful here in the past.

the marketing plan is simple and incorporatesonly known elements.

the sales and advertising pieces are ready. the technology is known and in use within theCompany.

reliable production capacity exists.

If these conditions exist, it may be appropriate to

cut some corners. But if they dont exist

Blocker #7. Too Many P rojectsand Not Enough Resources: ALack of Moneyand People to Do the Job

Most businesses have too many projects and notenough resources to do them properly. This isthe result of two management failures: eithermanagement (1) doesnt provide the necessary

resources to achieve the businesss new productgoals; or (2) they approve too many projects forthe limited resources available. Indeed, the per-formance of project teams is often jeopardizedby senior management. Heres an example seentoo often:


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One frustrated new product project leader at her

companys technology conference exclaimed: Idont deliberately set out to do a bad job. Yet,when you look at the job that the project leadersaround here do, its almost as though our goal ismediocrity. But thats not true ... were goodproject leaders, but were being set up for fail-ure. There simply isnt enough time and notenough people or the right people to do the job

wed like to do! She went on to explain to seniormanagement how insufficient resources andbudget cuts coupled with too many projects wereseriously compromising the way key projectswere being executed. She was right! The point

is: the resource commitment must be alignedwith the businesss new product objectives, strat-egy and processesfor positive results.

Our research shows that poor project selectionapproaches and a lack of project prioritization isthe weakest facet of new product management[5,9]. Management in the businesses studiedrated themselves ... very poor in achieving the right balance be-tween numbers of active projects and availableresources (too many projects); and

also very poor at undertaking solid ranking andprioritization of projects.In spite of all the proposed solutions, manage-ment has been slow to adopt new and betterproject selection and portfolio management ap-proaches.

This lack of resources coupled with the failure ofmanagement to make tough project choices toprioritize projects leads to many negative con-sequences. Indeed, much of what ails productdevelopment can be directly or indirectly tracedto too many projects in the pipeline. Heres why:

Managements failure to make tough choicesresults in a lack of focus: far too many projectsfor the limited resources available [5].

Too many active projects in turn means thatresources and people are too thinly spread. Pro-jects end up in a queue, pipeline gridlock occurs,cycle time starts to increase, and quality of exe-cution suffers. So, not only are projects late to



market, their success rates drop!

Lack of effective and rigorous go/kill decisionsleads to too many mediocre projectsin thepipeline: too many extensions, minor modifica-tions and defensive products that yield marginalvalueto the company a noticeable lack of stel-lar new product winners.

Finally, the few really good projects are starvedfor resources, so that theyre either late tomarket, or never achieve their full potential.

Solution:

Strive for funnels, not tunnels! That is, move to afunneling process, where many concepts enterthe process, but at each successive stage andafter new information is delivered, a certain per-centage of projects are cut. To do this, buildtough go/kill decision points into your new prod-uct projects in the form of gates [4]. And de-velop criteria for use at gates criteria that areused to make go/kill and project prioritizationdecisions. (Criteria used by one leading chemicalcompany are shown in Exhibit 3 a validated

scoring model, next page). Ensure that the deci-sion-makers or gatekeepers are defined for eachgate, and receive training on how to be an effec-tive gatekeeper. And get senior managementengaged at some of the key gates in the process for example, the go to Development and goto Launch decision points. Finally, dont forget

gatekeeper rules to ensure that gatekeepersthemselves are disciplined.

But do more than merely implement a gatingprocess. Move towards effectiveportfoliomanagement. Note that a stage-and-gate proc-

ess focuses on one project at a time; by contrast,portfolio management considers all projects to-gether. That is, stage-gate processes deal withthe fingers (individual projects) whereas portfoliomanagement deals with the fist [5].


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In a well-designed portfolio approach, senior

management periodically reviews the entire listof projects. Here, they look to achieve threegoals [5]: Max imizati on of the value of the portfolio:A variety of approaches can be used to valueand hence rank-order projects. These range fromfinancial methods (Expected Commercial Value;Productivity Index; and Options Pricing Theory

[5]) through to scoring models, as in Exhibit 3. Seeking t he right balance of projects: Bub-ble diagrams appear most popular here, wherebythe businesss projects are plotted as bubbles onan X-Y plot in order to display balance [5,16].

Ensuring that projects and the spendingbreakdown mirror the businesss strategy:Strategic Buckets and scoring models can beused here [5].

One consistent weakness in portfolio approachesis that they often fail to deal with capacity-versus-demand or throughput. Maximizing thevalue of the portfolio, balance, and strategicalignment are all worthwhile goals, but merelyachieving these three in your portfolio does notdeal with the issue of numbers namely, too

many projectsin the portfolio.

Thus, when you implement portfolio manage-ment, be sure to undertake a capacity analysis.You can do this in one of two ways:

1. Do you have enough of the rightresources to handle projects currently inyour pipeline? Begin with your current list ofactive projects. Determine the resources requiredto complete them according to their timelines.Then look at the availability of resources. Youllusually find major gaps and hence potential bot-

tlenecks. Finally, identify the key resource con-straints the departments, people or capabilitiesthat you run out of first (see Exhibit 4 at end fordetails).

2. Do you have enough resources toachieve your new product goals? Begin withyour new product goals. What percent of yourbusinesss sales should come from new products?



Now, determine the resources required toachieve this goal. Again youll likely find a majorgap between demand based on your goals, andcapacity available. Its time to make some toughchoices about the realism of your goals or

whether more resources are required (again, seeExhibit 4 at end for details).Both analyses usually point to the need to reducethe number of projects in the pipeline (betterprioritization) and/or increase the resourcesavailable for new product projects.

Exhibit 3: Project Selection Criteria(19 Scoring Model Criteria taken fromHoechst-US [5])1. Reward: Absolute contribution to profitability Payback period Time to commercial start-up2. Business Strategy Fit: Strategic fit Strategic impact3. Strategic Leverage: Proprietary position Platform for growth Durability: the life of the product in marketplace

Synergy with other /businesses in company4. Probability of Commercial Success: Existence of a market need. Market maturity (growth rate) Competitive intensity Existence of commercial applications skillsin company

Commercial assumptions (predictability) Regulatory/social/political impact5. Probability of Technical Success:

Size of technical gap Program complexity Existence of technological skill base incompany

Availability of people & facilities


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Conclusions and Eleven Action I tems

The ABCs that underlie new product successhave been identified, and should be clear to eve-ryone. But blockers get in the way, and consis-tently make these success factors invisible. I nowintegrate the solutions highlighted in this articleinto eleven action items, beginning with the lead-ership team of the business:

1. Your leaders must lead. The leadership teamof the business must adopt a long termcommitment to product development. They mustcommit the necessary resources that are realisti-

cally required to achieve the businesss newproduct goals. They must understand andsupport the businesss new product process, andagree to live by the rules of the game. Theleaders must make consistent, timely and stableproject go/kill and prioritization decisions,and commit the necessary resources and peo-ples release time to project leaders. And theymust play the role of enablers, facilitators, andresource providers.

2. Design and implement a new product process

or Stage-Gate

(R)

system. Set up a task force andcharge it with a mandate to design a best prac-tices new product process. Refrain from simplydocumenting current practice, and in so doing,merely institutionalizing bad behavior.Rather, identify the critical success factors, bothfrom the ABCs list above and from yourown analysis of your past projects. Then set outto build in each success factor and bestpractice.

3. Overhaul your process. If you already have anew product process in place, and its more than

two years old, its time for an overhaul. Start byconducting a review of past projects thatwent through your existing process via flow-charting a retrospective analysis. Identify theweak areas, the areas needing improvement, and

the and time wasters. Identify what works,and consider suggestions for improvement fromboth project teams and gatekeepers. When youknow what needs fixing, then proceed as in ac-tion item 2 above.



4. Define standards of performance expected.

Build best practices into your new product meth-odology by defining key activities and clear ex-pectations regarding the nature and quality ofwork required. Establish menus of explicit deliv-erables (perhaps in the form of templates) intoyour process. And use the gates as quality con-trol checkpoints, where the quality of deliver-ables is gauged against these performance stan-dards.

5. Install a process manager to oversee the proc-ess, to make sure that the process works. This isa full time job in most medium and larger busi-

nesses. This process manager or process facilita-tor ensures that gate meetings are effective, thatproject teams and leaders are on course, andthat the discipline and spirit of the process areadhered to. Far from being extra overhead, thisperson pays for herself almost immediately.Without a process manager with some clout inplace, dont expect your re-engineered process towork very well.

6. Build in tough go/kill decision points with de-fined criteria. Many companies have formal

review points in projects. But theyre not veryeffective at killing projects and focusing re-sources on the deserving projects. When youoverhaul or design your new product process,ensure that the gates are in place, and thattheyre rigorous one. Gates should have: clearly defined and operational go/kill and

prioritization criteria (for example, aproject scorecard used right at the gate meet-ing); a menu of deliverables for each gate; defined gatekeepers for each gate whomakes the decision (the locus of decision making

defined); and gate procedures, and agreed-to rules ofthe game.


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7. Use true cross functional teams, with team

members from various functions, each with anequal stake in the project. Ensure the team has

the necessary resources, with people withspecified release time. And empower the team,but also make them accountable for results.Finally, designate a project leader, ideally frombeginning to end of project.

8. Provide training for project team members aswell as gatekeepers. Dont assume that running aproject, mentoring a project team, or gatekeep-ing is easy stuff. New product management isone of the most challenges management tasks in

business ... so educate those involved! Andgroom good project leaders, providing them re-wards, recognition and support.

9. Seek cycle time reduction, but dont become aspeed freak. There is a dark side to speed. Itsfine to build flexibility into the process ... for ex-ample, to collapse stages, combine gates, andeven overlap stages or bring long lead-time ac-tivities forward. But make sure these detoursare made consciously, in full awareness of therisks, and at gate meetings. Make it as rule:dontdelete or move over these because you think you

know the answers. And for higherrisk projects, stay close to the prescribed gameplan not too many detours.

10. Move to portfolio management. Implement-ing a solid gating process is an excellent firststep, but stage-gate processes look at each pro-ject on its own. Ultimately, however, you musttreat all projects together, and handle these R&Dand marketing investments as a portfolio deci-sion. Thus, implement portfolio management inparallel to a stage-gate process. Have portfolio

review meetings semi-annually or quarterly,staffed by the senior gatekeepers. Review the listof active and on-hold projects, assessing thevalue of the active portfolio (what are the goprojects really worth to the company?). Adopt a

valuation method, either a financial approach orscoring model. Look for balance in the portfolio,using one of the bubble diagrams recommendedor the pie chart breakdowns of spending alloca-tions..



Finally, ensure that all active projects are aligned

with your businesss strategy, and that yourspending breakdowns mirror strategic priorities.

11. Cut back the number of projects underway.Undertake a resource capacity-versus-demandanalysis in your business (Exhibit 4). Identifywhat resources are required to undertake thecurrently active projects to meet their scheduledlaunch date versus the availability of resources.Repeat the same exercise, but with your busi-nesss new product goals as the demand driver.Determine how much over-capacity you are,what the right number of resources or projects

should be, and where the bottlenecks are. Ifthere is a significant gap between resource needsand availability (there usually is), then maketough choices: either add resources consistentwith your new product goals, or rethink the real-ism of your goals.

* * *

The quest for successful innovation continues.Just when we think we know all the answers, werealize that the success factors are invisible

theyve vanished. The eleven action items abovemay not solve every problem. But theyll go along way to introducing common sense and put-ting the success factors back into product inno-vation.


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Exhibit 4: Two Ways to undertake a Capacity-Versus-Demand Analysis

1. Demand Created by your Active P rojects:Determine demand: Begin with your current list of active development projects, prioritized from best to worst (use a scoringmodel to prioritize projects as in Exhibit 2, or one of the financial approaches mentioned above [5]). De-velop a prioritized project list table [5]. Then consider the detailed plan of action for each project (use a timeline software package, such asMicrosoft Project). For each activity on the timeline, note the number of person-days of work (or work-months), and whatgroup (or what department) will do the work. Record these work-day requirements in the prioritized project list table one column per department.In other columns, note the cumulative work-days by department.What is your capacity? Next, look at the capacity available how many work-days each department1 has available in total.(These work-days look at all people in that group or department, and what proportion of their time theyhave available for new products.Be sure to consider their other jobs in this determination for example, the fact that a Marketing grouplikely has 90% of their time eaten up by day-to-day assignments). Then mark the point in your prioritized-list-of-projects table where you run out of resources wheredemand exceeds capacity.Results:

Youll likely learn three things from this exercise: You really do have too many projects, often by a factor of two or three; Youll see which department or group is the constraining one; and Youll also begin to question where some departments spend their time (and why such a small propor-tion is available to work on new products!).

2. Demand Generated by your Businesss New Product Goals:Determine demand: Begin with your new product goals what sales or percentage of sales you desire from new products. Translate these goals into numbers of major and minor new product launches annually. Then, using your attrition curve how many Stage 1, Stage 2, Stage 3, etc. projects does it take toyield one successful launch? determine the numbers of projects per year you need moving througheach stage. Next, consider the work-days requirements in each stage, broken down by function or department. Thenumbers ofprojects per stage combined with the work-days requirements yield the demand namely, thework-days andpersonnel requirements to achieve your businesss new product goals, again by depart-ment.What is your capacity? Now turn to availability how many work-days are available per department (as per the second part ofmethod 1 above).Results: Again youll likely find a major gap between demand and capacity. At this point, you either modify your goals, making them a little more realistic; or make tough choices

about adding

1 In a smaller business, this demand-versus-capacity analysis can be done on a group or even individualperson basis, rather than by departments. The same method applies, however.resources or reassigning people in order t

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From Experience- The Invisible Success Factors in Product Innovation - Dr Cooper