Welcome to Week 6!
This week, we will examine TCO E: New Product Development.
The key elements of this TCO follow.
Evaluate an organization’s product development strategy.
Make recommendations for improvement.
In order to learn about these elements, we will look at the role of the manager and the ways to integrate product and business strategies.
New products set a company apart from the competition and create strong ties with consumers. Yet, most new products fail. The readings this week suggest reasons why most new products fail and offer suggestions to improve the chances that new products will succeed. The readings are founded on the principle that the more one knows about new product development, the more likely an organization will succeed.
Some of the things you should pay attention to as you go through this week’s reading are the importance of communication in new product development and how to enhance the communication between the key functional groups in the product development process. Thus, we will look at some of the best practices for improving both the effectiveness and the efficiency of new product development and how to best organize the teams to solve new product development issues. We will also study how team size, composition, structure, leadership, and administration are factors that will impact the success of a new product development team.
This is an important week because we will see how to apply all the things we have learned up to this point.
I will talk to you in the Discussions.
Given information about a company’s industry and organization, formulate a technological innovation strategy through its new product development strategy.
Explain the three objectives that new product development projects must achieve in order to be considered a success: maximize fit with customer objectives, minimize time-to-market, and control development cost.
Determine the strengths and weaknesses of best practices used in managing the new product development process.
Analyze the metrics used to evaluate new product effectiveness and innovation performance.
Determine how team composition (e.g., size, diversity) impacts a team’s potential for problem solving as well as its coordination and communication costs.
Evaluate the different ways that teams can be structured, how structure influences performance of the team, and how team structure can be matched to project type.
Determine the factors that impact team success, including size, diversity, structure, and leadership.
Explain the role of team leadership and administration in ensuring that the team has access to the resources it needs and that team members feel committed to team goals.
Introduction | Product Development Success | Creating and Implementing a Development Strategy | Project Organization Management | Organizational Learning | Factors in Product Success | Bibliography
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The readings this week will suggest that the current economic situation, competition from abroad, and improper financial planning are not major contributors to product failure. They suggest that factors such as management control, coordination of internal functions, the amount of customer interaction and perceived product significance, and the quality and efficiency of technical management are instead the most important.
This week will also introduce the concept that learning is critical to success. This week, we will discover that a successful product can be created based on knowledge gained from an initial failure. We will also look at a proposed Learning Cycle Model where failures and achievements vary in an asymmetrical model of learning and unlearning.
Product Development Success
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Initial product offerings frequently fail due to companies misinterpreting the market, channels of distribution, their own technical strengths, and technical challenges. Risk cannot be completely avoided when launching a new product. However, it can be mitigated by fostering communication among all members of the development process.
New product development is often equated to a journey. You need a map and a plan. You need to know why, where, and when you are going and what you might encounter. Knowing your current location and having a vision of your destination is crucial to achieving your goal.
Creating and Implementing a Development Strategy
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The readings this week will explore mistakes firms often make in their product development strategy and offer many suggestions for avoiding them.
Too often, the many echelons of an organization ignore the opportunity to provide the guidance necessary to produce a quality product. Very few senior managers participate in any capacity during the early stages of a development effort. Most senior managers get involved in new product development only when there are problems. The problem is that by then it is often too late.
This is a reactive, not proactive, approach. This results in a situation in which the largest amount of energy management expends occurs at a time when there is minimal ability to influence the outcome. It is best to place management attention and effort at the point where product development is at its beginning stages, not at its end stages.
There are many reasons for why management exhibits this behavior. Managers may not know anything about the product or the market. They may not have the appropriate skills or tools to get the job done. There may be internal pressures preventing them from getting involved early.
Whatever the cause, if they can get involved early and set the project on the right course, they will be able to focus their time on using information gained from past projects to improve the current development process.
In many instances, no matter how good the initial plan, the participants fail to maintain a proper development pace. Even when the project plan contains reasonable milestone dates and acceptable resource procurement plans, unanticipated problems cause delays and, unfortunately, failure of the product, in many cases.
Why do so many projects fail to deliver fully on their planned goals and anticipated benefits?
Two reasons why new products often fail:
Company is undertaking many more projects than can possibly be completed with the resources available
Company is assigning critical resources to several projects concurrently
Having a management team that is capable of making difficult decisions and maintaining a disciplined environment can tend to reduce these problems. However, in many organizations, this environment does not exist. A typical corporate mindset is to assert that all projects could be completed if everyone put forth more time and effort.
However, this is generally not the case. History has indicated that success is better achieved by investing resources in only one major and one minor project. Once these projects are underway and on schedule, management can then consider additional resources and means that may be needed to enhance the current projects and strive to have them completed on time.
Eight-step procedure to create a product development plan:
“Define the primary types of projects (advanced vs. sustaining).
Determine the resources and time requirements.
Identify existing resources.
Adjust the plan if more resources are required.
Determine the mix of project types required to achieve the objectives.
Estimate the number of projects that can be done to provide the desired mix without over committing resources.
Create and define projects.
Work to increase productivity of resources” (Robert Burgelman, 2008).
Senior management must be able to identify projects that are compatible with the goals of the business and then seek ways to complete those projects. In some cases, it might be advantageous to have the projects completed by a partnering business.
Every company has a different best answer to its situation. Senior management must realize when opportunities come, when it will benefit the most, and what different types of projects should be considered to produce the best result.
Project Organization Management
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The latest buzzword in an organization is teams. Unfortunately, there is a lot of confusion about a variety of issues, including what teams are and how they should be organized. However it is done, the key is to select a team approach that matches the capabilities and resources of the organization and type of project.
There are a number of readings this week that go into a great deal of depth on organizing and leading teams. These readings will help provide a framework for selecting the best team for a particular task.
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“The ability to learn from experience is critical. What is crucial in improving development is insight and understanding about how the organization works in practice.
Studies that benchmark the best practice among competitors may prove valuable, but solving the problems that limit performance requires a detailed understanding of the root causes of those problems as they play out in the specific circumstances of the organization’s development process” (Robert Burgelman, 2008).
Gaining knowledge from past experience is essential.
However, learning does not naturally occur at this stage because of the complexity of the interactions and the tendency of an organization to look to the next project without reflecting on the experience of the previous project. Management must recognize the need for learning in order for a company to learn from its projects. The problem is figuring out how to foster learning and to communicate it. In order to learn from past experience, a company must look at its past development experience and identify, analyze, capture, and incorporate that information into the future development activity of the company.
Senior management must be the source of leadership and guidance relating to goals, resources, and skills. An organization must look at how it will learn from previous experiences, how those lessons will be applied in the future, and what results to expect.
Factors in Product Success
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New product success requires an intimate understanding of market needs. Customer needs and ideas should be the primary driver for new products. This philosophy allows the greatest chance for the development of a successful product.
Unfortunately, many companies fail to listen to the customer and the market place because of preconceived notions and alternative mindsets. In some cases, companies are so captivated by the product itself that they ignore market research to the contrary.
Eight factors for product success:
“The developing organization, through in-depth understanding of the marketplace, introduces a product with a high performance-to-cost ratio.
The create, make, and market functions are well coordinated and interfaced.
The product provides a high contribution margin to the firm.
The new product benefits from the existing technological and marketing strengths of the business.
The developing organization is proficient in marketing and commits a significant number of its resources to selling and promoting the product.
The R&D process is well planned and coordinated.
There is a high level of management support for the product from conception to launch.
The product is an early market entrant” (Robert Burgelman, 2008).
These eight factors and the other points we explored this week are about helping management improve their chances of creating a successful product by analyzing their product development process. However, attempting to reduce the risk factor to zero would also be a mistake. There is always a lesson to be learned even from a failure. Future successes can be achieved by learning the lessons of past failures.
The “Stretch” computer, developed by IBM, was to be the world’s most advanced computer. It was a miserable failure. However, the IBM 360, which contained technology developed for the Stretch, went on to become one of its biggest successes.
Choosing your product
Please watch the following presentation for more information on selecting a product or service.
III. Discussion Grading and Follow-up Topics
Remind students about the Discussion Grading Policy for this class as an announcement or in an early discussion posting.
A. The New Product Development Process
What are some of the advantages and disadvantages of a parallel development process? What obstacles might a firm face in attempting to adopt a parallel process?
Consider a group project you have worked on at work or school. Did your group use mostly sequential or parallel processes?
Are there some industries in which a parallel process would not be possible or effective?
B. New Product Development Teams
What are the trade-offs in choosing a team’s size and level of diversity?
How can managers ensure that a team reaps the advantages of diversity while not being thwarted by some of the challenges team diversity raises?
What are some advantages and disadvantages of collocation? For what types of projects are virtual teams inappropriate?