1. BS4163 Business Creativity
Innovation and the new product development process
Andrew Turnbull

2. Outline PDMA Product Development Management Association
Background to the study of new product development
Lessons
Leadership
Cross functional teams
Portfolio management
Communication
Old product development vs. new product development
Organisation
Project management

3. PDMA Product Development and Management Association
According to its website; PDMA is the premier advocate and comprehensive resource for the profession of product development and innovation. It was founded in 1976, which is fairly recent in terms of areas of management science.
PDMA • Product Development and Management Association
The BOK (Body of Knowledge) covers:
Co-Development & Alliances
Customer & Market Research
Intellectual Property
Metrics
New Product Process & Execution
People, Teams and Culture
Portfolio Management
Strategy
Technology 

4. Study of New Product Development (NPD)
The first major study of NPD to be disseminated was by Booz Allen and Hamilton (a strategy and consulting firm) in 1968.
This put forward the first systematic model of new product development.
The model which has appeared in all marketing text books until recently

5. Booz Allen & Hamilton (1968)
Information Inputs
Model Stage
Decision/Outputs
Corporate objectives;
Market analysis
Techno-environmental scanning;
Competitor analysis.
New Product Strategy
Market opportunities for new products, which meet corporate objectives.
Customer needs;
Technological opportunities
in targeted markets.
Idea Generation
Body of acceptable ideas.
Market & technical assessment;
Initial financial assessment;
Corporate fit.
Screening
Acceptable ideas for further development work.
Customer needs analysis;
Market analysis;
Technical analysis.
Concept
Development
Identification of:
Key product dimensions;
Key technical costs;
Target markets and potential.

6. Launch (commercialisation)
Information Inputs
Model Stage
Decision/Outputs
Explicit market analysis including potential;
Explicit technical feasibility analysis, including costs;
Production implications;
Check with corporate objectives.
Business Analysis
GO/NO GO decision;
Initial marketing plan and budget;
Product development plan.
Market research;
Production requirements
Product Development
Finalised product
Production plan;
Marketing plan
Market research;
Finalised product;
Marketing plan
Promotion
Price
Distribution.
Market Testing
Product take up;
Final adjustments to the marketing plan.
Results of test marketing.
Launch (commercialisation)
Adjustments as a result of take up
Long term commitment.

7. Next Milestone
R.G., The New Product Process: A Decision Guide for Management, Journal of Marketing Management, 1988,3,
The aim of the research was to:
To identify the criteria which separates ‘winners’ and ‘losers’.
To take the findings from the research study and formulate them into guide for those managers involved in NPD.
The study in 1985 involved a retrospective analysis of 203 new industrial products in 120 firms.

8. Stage Gate Articles, Research, Knowledge and Working Papers
The State-Gate New Product Process, with Six Stages and Gates
Stage Gate Articles, Research, Knowledge and Working Papers
Stage Gate Articles, Research, Knowledge and Working Papers
Stage Gate Articles, Research, Knowledge and Working Papers
Production
& technical
activities
Technical
concept
definition&
production
possibility
In-house
product
tests
Preliminary
technical
appraisal
Product
development
Trial/test
production
Full
production
Gate 3
Project definition &
pre-development
business
analysis
Gate 6
Pre-
commercialisation
business
analysis
Gate 1
Initial
screen
Gate 2
Preliminary
assessment
Gate 4
Pre-test
review
Gate 5
Pre-trial
review
Review &
adjust
Idea
Marketing
activities
Concept
identification
& concept
testing
Preliminary
market
appraisal
Development
of marketing
plan
Customer
tests of
product
Test
market
Market
launch
Stage l Assessment ll Definition lll Development lV Testing V Trial Vl Commercialisation
Source: Cooper R.G., The New Product Process: A decision Guide for Management, Journal of Marketing Management, 1988,3,

9. Cooper’s Stage Gate Model Today
Rugby scrum approach as opposed to the relay race approach of the Booz Allen and Hamilton model.
Stage Gate - official site - Product Development Institute

10. The last 4 slides give a picture of evolutionary thinking in NPD.
The move from a linear model to parallel processing – shortens the NPD lead time => greater profitability. (see- next slide)
This involves the use of cross functional teams and parallel strands
There are more evaluation points – gates. Reduces risk.

11. The financial impact of shorter time to market
(As cited in Shepherd & Ahmed, (2000) pg 170)

12. Stages
Each stage needs to be well defined – clear goals and purpose and proficiently executed (doing the right things and doing things right)
Each stage aims to reduce uncertainties and risk
Each stage costs more than the previous one – also cumulative investment (can make it hard to pull out in the latter stages – ugly baby)
Each stage is cross functional i.e. every stage is R&D, marketing, production, engineering etc. No function ‘owns’ any one stage.

13. Costs and risk
High
Costs
Risks
Low
No. of stages/time

14. Funnel not tunnel

15. Key themes from the product development literature
Process
timing
pre-development activities
development activities
marketing activities
launch activities
Organisational
structure
mechanism
style
Management
authority
support
technical aspects
communication
People
multifunctional
co-ordination
product champion
communication
Information
general
marketing
external
communication
Successful
new products
Strategy
orientation
objectives
synergy
product characteristics
Source: Hart (1995) in Bruce & Biemans, Wiley; Trott (2005), Prentice Hall

16. Efficiency and creativity
Managing the tension between the need for creativity and efficiency
Efficiency gains
The efficient day-to-day operations within an organisation require stable routines. This is usually achieved in stable and controlled environments
The development of new products and services requires creativity and room to try out new ideas. This is usually achieved in a loose and flexible environment
Creativity gains

17. Technology push vs. market pull
Source: Adapted from B. Rothwell and W. Zegveld (1985) Reindustrialisation and Technology, Longman, London.

18. Pearson’s uncertainty map
Applications engineering
Exploratory research
Combining market opportunities with technical capabilities
Development engineering
High
Uncertainty about output
Low
Low
High
As cited in Trott, P. (2008) Innovation Management and New Product Development. FT Prentice Hall, Harlow England
Uncertainty about process

19. Revamps vs NPD The requirements are different
Revamps are more defined and amenable to project management techniques.
NPD has a much fuzzier front end, is riskier, eats money, is complex to manage

20. Characteristics of Successful Product Innovators
Old Product Development
New Product Development
Strategy
Top management determines explicit plans and budgets for development work
Top management sets broad objectives for organic growth
Shared values
Top management fosters understanding of the need for product evolution
Top management fosters understanding of the need for really new products
Style
Top management is support -tive but does not meddle in development projects. Progress is checked regularly
Top management is intimately involved, often on a day to day basis
Structure
Top management uses the existing organisation which acknowledges the need to manage updates within a matrix of responsibilities
Top management uses new organisational forms, such as business teams, to nurture important developments outside the mainstream organisation

21. Characteristics of Successful Product Innovators
Old Product Development
New Product Development
Skills
There is efficient product planning using sophisticated market analysis techniques
Techno-commercial idea generation, screening and testing in concept. Development work often based on new technology
Staff
Existing line managers are used with some staff advice. When product leaders are appointed, they may be quite junior but receive a commission from top management.
An intrapreneur is allowed to select his/her own team with whom rewards are shared. Failures are viewed as a learning experience
Systems
Loose-tight using simultaneous or rugby scrum approach. More tight than loose.
Loose-tight using simultaneous or rugby scrum approach. More loose than tight.

22. The Performance Diamond
Climate, culture, teams & leadership
Product innovation & technology strategy for the business
Resources: commitment & portfolio management
Idea-to-launch system: stage-gate
Business’s new product performance

23. Portfolio Management
Portfolio management is a dynamic decision process whereby a business’s list of active new product (and R&D) projects is constantly up-dated and revised.
In this process, new projects are evaluated, selected and prioritised: existing projects may be:
accelerated, killed or de-prioritised; and resources are allocated and re-allocated to the active attractive projects.

24. Dynamic process Strategic objectives Portfolio management tools
Internal resource allocation
Portfolio management tools
External transactions and partnerships

25. It’s about getting your ducks lined up

26. Evaluation criteria for projects
Technical – do we have experience?
Research direction and balance – compatability?
Competitive rationale – is it superior/necessary?
Patentability
Stability of the market – time enough for ROI?
Integration and synergy – a good fit?
Technical – do we have experience of the technology, the skills and facilities, what is the probability of technical success?
Research direction and balance – compatibility with research goals, balance of risk in project portfolio
Competitive rationale – is the product likely to be superior, is it necessary to defend existing business.
Patentability – Can we get patent protection?
Stability of the market – is there an industry standard, will there be enough time to turn a profit.
Integration and synergy – does it fit/add to what we already do.

27. Evaluation criteria for projects (cont.)
Market - what is the size, is it growing, is there an existing customer base, is the potential big enough?
Channel fit – do we have existing customers?
Manufacturing – can we use existing resources?
Financial - what investment/ROR is expected/needed?
Strategic fit – does it support short/long term plans?
Channel fit – do we have existing customers or do we have to find new customers?
Manufacturing – can we use existing resources? Will we require new equipment, skills?
Financial – What is the expected investment required and the expected rate of return
Strategic fit – Does it support our shout-terms and long terms plans for the business.

28. Budgets allocated according
to strategic priority
Project Score Rank
Alpha
Beta
Gamma
Delta
New Products
Improvement to existing products
Cost reductions
Project Score Rank
Alpha
Beta
Gamma
Delta
Project Score Rank
Alpha
Beta
Gamma
Delta
Projects are scored and ranked within allocated budgets. The most promising projects are selected.

29. Pharmaceutical R&D by type
Source: ABPI (1993) Pharma Facts and Figures, Association of the British Pharmaceutical Industry, London.

30. Importance of Portfolio Management
Financial
To maximise return; to maximise R&D productivity; to achieve financial goals
To maintain the competitive position of the business
To increase sales and market share
To allocate scarce resources properly and efficiently
To forge the link between project selection and business strategy:
The portfolio is the expression of strategy: it must support the strategy
proximal

31. Importance of Portfolio Management
To achieve focus:
Not doing too many projects, focusing limited resources on the ‘great’ projects.
To achieve balance:
The right balance between long and short term/high risk and low risk projects, consistent with the business’s goals
To communicate priorities better within the organisation, both vertically and horizontally
To provide better objectivity in project selection – to weed out bad projects
proximal

32. Differentiation vs. standardisation?
Platform Development
Differentiation vs. standardisation?
How to deliver distinctive products to market whilst building on core capabilities and conserving development, production and marketing resources?
How to balance the needs of high-volume manufacturing/service delivery with the needs of individual customers?
Key questions:
Common platforms for a range of products
Shared components/parts, production processes, knowledge, people and relationships
Improves efficiency.
Product platforms:

33. VAG interfirm product platform development
Single platform
Many common parts

34. Platform development creates the architecture for a family of products

35. Brand positioning

36. Product platforms The benefits of product platforms include:
Increased product variety and ability to serve multiple market segments (mass customisation)
Greater speed to market
Improved management of demand and uncertainty
Accommodating differential technology change
Reducing production costs
Supports late-stage differentiation of products
Reduces service infrastructure requirements
Greater speed and efficiency in technological learning and knowledge creation.

37. reputation for innovation
The organisation’s
reputation for innovation
High morale and retention of creative people
Ability to attract creative people
Organisational encouragement of creativity and innovation
Motivates people within the organisation and reduces frustration
A willingness within the organisation to accept new ideas
Development of innovative products
Fig 3.7 Propagating a virtuous circle of innovation.

38. References
Chao, R. O., & Kavadias, S. (2008). A Theoretical Framework for Managing the New Product Development Portfolio: When and How to Use Strategic Buckets. Management Science, 54(5), Retrieved from EBSCOhost.
Cooper, R.G.,(1988)The New Product Process: A decision Guide for Management, Journal of Marketing Management,,3,
Cooper, R.G. (2008) Perspective: The Stage-Gate® Idea to launch Process – Update, What’s New, and NexGen Systems. Journal of Product Innovation management; 25:
Cooper, R, Edgett, S, & Kleinschmidt, (2001), 'Portfolio management for new product development: results of an industry practices study', R&D Management, 31, 4, p. 361, Business Source Premier, EBSCOhost, viewed 12 September 2011.
Cooper, R, Edgett, S, & Kleinschmidt, (2007), "Winning Businesses in Product Development: The Critical Success Factors" Revisited. Research Technology Management, May/Jun, Vol. 50 Issue 3, p60-61, 2p
Johne A. & Snelson P.(1988), Successful Product Innovation in UK and US Firms, European Journal of Marketing 24,12
PDMA • Product Development and Management Association [accessed ]
Pons, D. (2008) Project management for new product development. Project Management Journal, Jun, Vol. 39 Issue 2, p82-97
Shepherd, C. & Ahmed P.K (2000). NPD frameworks: a holistic examination. European Journal of Innovation Management V3. No 3. pp
Trott, P. (2008) Innovation Management and New Product Development. FT Prentice Hall, Harlow England. 4th edition.