Winning at New Products The Critical Success Factors That Distinguish Best Performers

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Winning at New ProductsThe Critical Success
Factors That Distinguish Best Performers
Michael J. Wiebe, P.Eng.June 16th, 2005
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SG INNOVATION Program
Product Innovation Technology Strategy
Product Life Cycle Management
Post Launch Review
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Product Development The Business Challenge

• Best Practice Companies are achieving
• 38 of sales revenues 42.4 of their profits
  come from new products
• Companies expect to increase rate of product
  introductions by 21 over the next 5 years
• 79.5 of all products launched are commercially
  successful
• Companies that are doing well today invariably
  have an enviable stable of new products
• Innovativeness drives companies investment value

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Performance Results Percentage of Revenue
Profit from New Products
Bottom 20 of Businesses
The Average Business
Top 20 of Businesses
Percentage of the Businesss Sales Revenues
Profits Coming from New Products Launched in Last
3 Years
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Some Bad News Too!New Product Management is in
Trouble

• 44 of firms PD projects fail to meet profit
  objectives1
• Only one in seven concepts is a winner
• Performance ratings1
• 32 of businesses rate their NPD speed and
  efficiency very poor
• Only 27 rate their NPD profitability
  relative-to-spending as high
• 28 of businesses dont even measure their NPD
  performance results!

1. Source APQC Benchmarking study, 2003
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Ten Critical Success Factorsthat Decide New
Product Success

• Based on the APQC Benchmarking Studies and
  NewProd Studies
• over 2500 New Product Launches in 500 Firms
• Studies conducted by
• Dr. Robert G. Cooper and Dr. Scott J. Edgett

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Critical Success Factors

• 1. A unique, superior product or service
• a differentiated product that delivers unique
  benefits and superior value to the customer
• Understand your new product, your customers and
  your competition in relation to the opportunity
• 2. A strong market and international orientation
  
• a market driven and customer focused process
• During idea generation, product design,
  development, testing, and launch
• 3. Completion of the homework or up-front
  activities must be done before Development
  gets underway

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Critical Success Factors

• 4. Sharp and early product definition is required
  prior to Development
• Target market definition
• Product concept benefits to be delivered
• Positioning strategy (including price point)
• Features, attributes, requirement specs
• 5. The right organizational structure, design and
  climate are keys to new product success
• A true cross-functional team approach
• A defined and accountable team leader
• Team empowerment - no micro management
• Encourage innovation and creativity
• Do not punish failure learn from the experience

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Critical Success Factors

• 6. A supportive climate culture for innovation
• Resources available for creative work
• Risk averseness
• NP ideas rewarded
• Time off or scouting time
• 7. The actions and commitment of senior
  management impacts NPD performance
• Showing strong commitment to NPD in a variety of
  ways
• Make NPD a part of annual performance objectives
• Engage in the design of the companys new product
  process
• Empower project teams, and support committed
  them, but do not micro manage
• Make available necessary resources keep the
  commitment!
• Be an active Gatekeeper who makes tough Go/Kill
  decisions
• Keep score Measure new product results each year

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Critical Success Factors

• 8. Creation of a funnel . Not a tunnel
• Make tough Go/Kill decisions
• Focus limited resources on the right projects
• Develop more rigor in selection move to
  Portfolio Management
• Use scorecards that discriminates winners from
  losers
• 9. Focus on consistency, completeness and quality
  of execution for all deliverables
• Ensure that deliverables meet quality
  expectations
• Lead by example ask good questions and expect
  good information
• Quality of execution is the key to success its
  controllable!!

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Critical Success Factors

• 10. People! The resources must be in place
• Best performers have more Sales, Marketing,
  Manufacturing/Operations resources available
• Ensure that committed resources are available to
  perform the required activities
• Urgent things operations often take
  precedence over future-oriented projects
• Leaders must lead by example and stay committed
  to resource allocations

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One More Critical Success Factor

• Companies that implement a Best-in-Class
  Stage-Gate Process from idea-to-launch
• Get impressive results
• Fewer errors less recycling
• Shorter times to market (by about 30)
• Better cross-functional communication
  cooperation
• Earlier detection of failures higher success
  rates
• More projects on time on budget
• Better launch higher customer satisfaction

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Leading Firms Have Adopted Stage-Gate
MethodsNearly 73.7 of N.A. Industry Uses Some
form of Stage-Gate
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Some Examples from Best Practice firms

• Exxon Mobil Chemicals
• This process, a company-wide stage-gate
  framework, has become institutionalized and is
  ingrained in the language and culture of the
  company
• Kraft Foods
• Krafts formal NPD process emphasizes front-end,
  pre-development activities. These up-front
  activities typically involve extensive use of
  both external and internal consumer data
• Bausch Lomb
• BLs new product development process, called
  the product development management process (PDMP)
  is simple, easy to follow, and built on internal
  and external successes and best practices. The
  NPD team has built a process with stages/phases
  and gates that is practical, but not restrictive
• Exfo Engineering (winner of PDMA Outstanding
  Corporate Innovator Award 2000)
• EXFO believes its product development, or stage
  gate process, to be its second best practice.
  EXFO implemented a stage gate process when the
  organization became ISO certified in 1994
• Air Products (Chemicals)
• Best Practice An integrated work process for
  technology innovation involves integration along
  two axes business and technology and development
  pipeline

Quoted from APQC Benchmarking study, 2003
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References Books

• Best Practices in Product InnovationWhat
  Distinguishes Top Performers, March 2003. Reports
  the results of the latest and definitive
  benchmarking study, done thru APQC, Houston.
• Winning at New Products Accelerating the Process
  from Idea to Launch, 3rd edition, 2001, by RG
  Cooper (Perseus Books, Reading, Mass), paperback,
  425 pages. The classic best seller 3rd
  edition. Provides an overview of the critical
  success factors in product development, and
  outlines the Stage-Gate process
• Portfolio Management for New Products, 2nd
  edition, 2002 (new!) by Cooper, Edgett
  Kleinschmidt, (Perseus Books, Reading, Mass)
  hardcover. Provides a look at the best portfolio
  methods, results achieved, and their use in
  industry.
• Product Leadership Pathways to Profitable
  Innovation, 2nd edition (Perseus Books, Reading,
  Mass) by RG Cooper hardcover 2005. Aimed at
  the senior executive. Provides an overview of
  Stage-Gate, portfolio management, and developing
  a product innovation and technology strategy.
• Product Development for the Service Sector, by
  Cooper Edgett (Perseus Books, Reading, Mass)
  1999. Success factors and Stage-Gate for
  service industries
• Order on line for next day shipments
  www.prod-dev.com

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Articles

• R.G. Cooper, Benchmarking new product
  performance results of the best practices
  study, European Management Journal, 16, 1, 1998,
  pp 1-7.
• R.G. Cooper, The invisible success factors in
  product innovation, Journal of Product
  Innovation Management, 16,2, April 1999, pp
  115-133
• R.G. Cooper, New product leadership building in
  the success factors, New product Development
  innovation Management, 1,2, 199, pp 125-140.
• R.G. Cooper, New Product Development, chapter
  in International Encyclopedia of Business
  management Encyclopedia of Marketing, First
  Edition, edited by Michael J.Baker, International
  Thomson Business Press, London, UK, 1999, pp
  342-355.
• R.G. Cooper, contribution to Succeeding in
  Technological Innovation series Product
  Innovation and Technology Strategy,
  Research-Technology Management, 43, 1, Jan-Feb.
  2000, pp 28-44.
• R.G. Cooper, Doing it right -winning with new
  products, Ivey Business Journal, July-August
  2000, 4, pp 54-60.
• R.G. Cooper, Edgett, S.J., Kleinschmidt E.J.,
  Best practices for managing RD portfolios,
  Research-Technology Management, 41, 4, July-Aug..
  1998, pp 20-33.
• R.G. Cooper, S.J. Edgett E.J. Kleinschmidt,
  New product portfolio management practices and
  performance, Journal of Product Innovation
  Management, 16,4, July 1999, pp 333-351(winner of
  T.P. Hustad Best Paper award, 2000).
• R.G. Cooper, S.J. Edgett E.J. Kleinschmidt,
  New problems, new solutions making portfolio
  management more effective, Research-Technology
  Management, 2000, 43,2, pp 18-33.
• R.G. Cooper, S.J. Edgett E.J. Kleinschmidt,
  Optimizing the Stage-Gate Process What Best
  Practice Companies Are Doing Part I,
  Research-Technology Management 45, 5, Sept-Oct
  2002, 21-27. 
• R.G. Cooper, S.J. Edgett E.J. Kleinschmidt,
  Optimizing the Stage-Gate Process What Best
  Practice Companies Are Doing Part II,
  Research-Technology Management 45, 6, Nov-Dec
  2002.
• R.G. Cooper and S.J. Edgett, Overcoming the
  crunch in resources for new product development,
  Research-Technology Management, 46, 3, May-June
  2003, 48-58.
• Also, see selected articles on line (no charge)
  at www.prod-dev.com
• Order APQC definitive benchmarking report on line
  (same address) Best Practices in Product
  Development What Distinguishes Top Performers,
  Apr 2003.