London, England/ -- The challenges that organizations face in product development have been studied by researchers for years and are well understood. It's noteworthy that in spite of the tendency to associate product development with scientific and engineering disciplines, most of the recognized challenges in this area are business problems, not technical problems.

In April of 2003, Jeffery Hyman, chairman of the Food and Drink Innovation Network in London, England, facilitated a new product development (NPD) workshop discussing six converging business issues facing product-development organizations. The session, attended by more than 40 representatives from the food, chemical and high technology industries, invested a half-day exploring areas including:

• Prioritization and Resource Allocation
• Process Adherence and Risk Management
• Speed to Market On-time Delivery
• Cross-functional Team Culture / Working Environment
• Idea Generation
• Voice of the Customer / Consumer

Here are the key learnings from this interactive session.

Prioritization and Resource Allocation

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Prioritization and resource allocation were by far the most difficult areas to gain control over for all participants. The delegates agreed that a formal portfolio management or project evaluation process could resolve challenges around project prioritization and resource allocation. Their collective view revealed that portfolio management provides a flexible way to respond to changing demands without compromising the quality needed to deliver projects efficiently. It was noticeable during the discussion that some organizations still view new product development as a function of research and development (R&D) versus a cross-functional team representing the broader organization.

Discussion Learning: Define and communicate the process used to prioritize projects.

Process Adherence and Risk Management

This section focused on the premise that good new product development manages both business and technical risk for an organization. The discussion was largely split in two areas:

• The rationale used for undertaking projects
• The bureaucracy of following a structured NPD process

Rationale used for undertaking projects. The need for portfolio management was again emphasized during this discussion. Projects priorities are not always undertaken for financial purposes. Some may be more strategic (we need to develop this technology now to develop the know-how and patents to incorporate it into tomorrows products). Others may be competitive (if we dont develop it first our competitor will and will make inroads into one of our core markets).

Following a structured NPD process. While all delegates validated they had a formal NPD process, only two indicated using software tools to help automate their process. The challenge discussed at length was the bureaucracy surrounding process structure. Tension exists between scientists, who prefer certainty and marketing / sales, who generate an idea and ask the scientists to build it. This gives rise to technical and commercial risk in product development, where the required solution may not be technically feasible or commercially viable.

As with the strategic issue of product development above, the crucial point is to recognize risk and uncertainty and build it into the NPD process through appropriate gate criteria and a healthy kill rate for projects.  Best practice companies have clear gate criteria to establish technical and commercial risk and the gate keepers, as a team, make an informed decision of whether to continue funding the project or not.  Ultimately this feeds up into the portfolio where a risk versus reward profile of the portfolio can give senior executives a good overview of the risk profile for the company.

Discussion Learning: Managing risk can be driven by a structured process. The manifestation of project priorities and risk can be determined by the gate criteria used in the NPD process. The structured process, in turn, should provide enough quality control to deliver successful new products. One NPD process does not fit all projects. Companies should categorize projects, applying varied processes to the product categories, so they can fast-track lower risk projects and be more comprehensive for those that are high-risk.

Speed to Market On-time Delivery

It is no surprise that this factor was high on everyones list. In a difficult economy, time to market can become a key factor in NPD success. Not only can a successful first to market launch provide critical market leverage, but also the company starts to get an early revenue stream from its investment. The reigning tension between time and quality played a role in guiding this discussion. However, most agreed that being efficient at the tasks most commonly completed during NPD is a good practice to ensure time is not wasted.

Since product development is largely cross functional, having a structured process will help coordinate the expectations during execution. Automated tools were discussed as a way to promote collaboration providing built-in tools that communicate roles and assignments, capture project discussions, share documents and leverage supplemental internal or external supporting resources.

Discussion Learning: While the group agreed that you couldn't buy time unless you shift a due date, they did agree that you can impact efficiency during a project by:

• Identifying the stages and activities where delays are likely occurring and plan how they could be resolved. This may involve putting more resources on the job to get tasks completed more quickly.
• Making sure the gatekeepers have the authority to cut through any red tape that puts a deadline at risk. If a project requires a gate decision quickly, then they should be sufficiently aware of the project and its deadlines to convene a gate meeting at short notice.

Cross-functional Team Culture / Working Environment

The delegates spent considerable time discussing cross-functional teamwork and its role in the NPD process. While the discussion touched on topics such as project management, awards systems, and the principles of teamwork, the group agreed that having a mechanism to improve communication could resolve much of the tension that exists within project teams.

The usual cause of discontent within cross-functional teams comes from a lack of understanding project priorities, which should be agreed upon at an executive level in the organization and communicated to the teams. Working from the top down, as executives assign project priorities these should feed into project work across functions and align with company strategy. The NPD process can then be used to guide projects and provide visibility to whether the priorities are being met.

They agreed that one of the main benefits of having a well-defined NPD process is that work is broken down into manageable parts that can be assigned to various members and re-assembled to complete stage deliverables. This gives each participant in a project a very consistent and clear vision of what other functions are doing in the project. Ensuring that the tasks required of each team member are visible and understandable by all participants helps to break down some of the barriers. This also helps to ensure that the right functions are involved or informed at the appropriate time in the process.

Discussion Learning: Establish standard metrics for reporting on the portfolio of projects in process, so you have effective gate keeping with a consistent information flow between the different teams involved. This allows the teams to focus on the critical information necessary to inform strategic decisions. If the executive team agrees on the priorities, teams tend to work well together.

Idea Generation

Idea Generation and the problems of identifying how to develop a culture of innovation are taxing many leading companies. The delegates discussed innovation making certain it was understood that innovation is not just about New-to-World products, but can also include Cost Improvements and other profitable project categories. Delegates developed this section into six key components of innovation.

1. Raw ideas: How are the ideas generated? Where will the next "killer" ideas come from?
2. Valuation: How do you value ideas?
3. Screening: How do you assess an idea?
4. Prioritization: How do you rank ideas with the greatest potential?
5. Tracking: How do you track ideas and concepts?
6. Culture: Do you cultivate an environment for people that can innovate?

While there were varied opinions about each of these six areas, there was general agreement that the success of innovation is aligned with the effectiveness of portfolio management and the NPD process.

Discussion Learning: Give consideration to designing a mini-process prior to entry into the NPD process, formalizing the generation, capture and screening of ideas. This can provide a setting for input from a variety of internal and external sources, such as the business strategy or a competitor analysis as well as with different groups of people.

Voice of the Customer / Consumer

Having a customer-orientated focus to NPD is vital to developing successful new products. In this discussion, participants expressed concern about the way the voice of the customer or consumer is integrated into the NPD process. Traditionally, the interface with the customer has been the responsibility of Sales and Marketing. Delegates agreed there is a shift toward getting R&D involved with customers during the development of a new product. This kind of close contact can be vital in some industries where there is a highly technical element to the new product.

Discussion Learning: Establish guidelines within the structured process for getting the Voice of the Customer into the NPD process. Identify specific tactics such as market research, customer panels, focus groups, and beta or prototype testing that ensures their voice is heard.

Summary

Delegates agreed that the need for coherent project prioritization and portfolio management can make the difference in winning at new products. Decision-making and the information required to make decisions can flow out of the project work, be aligned with the different levels in the organization and becomes an integrated part of the portfolio review. If the executive team in an organization can articulate what markets it wants to move into and what technologies it wants the firm to develop, then ideas tend to be generated that meet these criteria and priority is given to those projects that meet the strategic objectives.

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