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READY, FIRE… AIM: BALANCING SPEED AND
ACCURACY IN NEW PRODUCT DEVELOPMENT
Meg Sheehan Principal, Global SolutionsJune 23, 2009
© 2000-2009 Stage-Gate International
Key Discussion Points
How to improve “speed to market”
But, speed isn’t everything
How do you bring focus to your product development efforts
© 2000-2009 Stage-Gate International
Stage-Gate International Founded by Dr. Bob Cooper and Dr. Scott
Edgett, creators of Stage-Gate®
25+ years of highly-recognized research and implementation experience
Focused exclusively on product innovation
World’s top provider of research-based solutions to improve innovation performance
Maximum-value portfolio of consulting expertise and “accelerator” products
© 2000-2009 Stage-Gate International
New Product Development Research
Based on the NewProd Studies and APQC Benchmarking Studies of almost 2000 new product launches in 500+ firms*
*Studies conducted by Robert G. Cooper, Scott J. Edgett
Ten Critical Success Drivers that separate the winners from the losersThe Innovation Diamond
© 2000-2009 Stage-Gate International
The Innovation Diamond
Product Innovation & Technology Strategy for the Business
Idea-to-Launch System: Stage-Gate®
Climate, culture, teams & leadership
Resources: Commitment & Portfolio Management
And the Four Points of Performance
Stage-Gate® is a trademark of Product Development Institute Inc.
Business’s new Business’s new product product
performanceperformance
© 2000-2009 Stage-Gate International
The Innovation Diamond
Product Innovation & Technology Strategy for the Business
Idea-to-Launch System: Stage-Gate®
Climate, culture, teams & leadership
Resources: Commitment & Portfolio Management
And the Four Points of Performance
Stage-Gate® is a trademark of Product Development Institute Inc.
Business’s new Business’s new product product
performanceperformance
READY
AIM
© 2000-2009 Stage-Gate International
The Four Drivers of Performance: #1: Climate, culture and leadership
The right climate and environment for innovation: ♦ Senior managers in top performing businesses
create a positive climate and culture for innovation and entrepreneurship
♦ They foster effective cross-functional NPD teams
♦ And are properly engaged in the NPD decision-making process
© 2000-2009 Stage-Gate International
The Four Drivers of Performance: #2 The Stage-Gate® Process
Stage-Gate is the world’s most widely cited, peer reviewed and implemented New Product Development process
♦ PDMA Best Practices Report, 1997: “68% of organizations participating in this study use a Stage-Gate system”
♦ AMR Research, 2005: “71% of organizations surveyed confirmed use of the Stage-Gate process; 85% for organizations with 5,000+ employees”
♦ Booz-Allen Hamilton study/report: “100% of the Global 1000 Innovators use a disciplined Stage-Gate process”
♦ Stage-Gate has gone through 20+ years of evolution & refinement
A disciplined decision-making framework to drive product success
Defined, cross-functional contribution from teams and executives from Idea through to Launch, at the right pace and level of detail
A risk management model outlining the right information at the right time for objective evaluation and alignment
An investment management model with tough Go/Kill decisions
© 2000-2009 Stage-Gate International
9
Ten Critical Success Factors for Winning1. A unique & superior product2. Strong market orientation throughout3. More up-front research4. Sharp & early product definition before
development5. The right organizational structure - Teamwork6. An innovative & supportive environment7. Leadership support8. Creating a funnel not a tunnel9. Managing product development as a process10. Sufficient resources for product development
© 2000-2009 Stage-Gate International
Critical Success Driver #3
More pre-development work – the homework or ‘up-More pre-development work – the homework or ‘up-front’ activities – must be done before ‘Development’ front’ activities – must be done before ‘Development’ gets underwaygets underway
The steps that precede Development – screening, market studies, tech feasibility, build business case – are critical to success
New product failures are most often the result of weaknesses in the ‘up-front’ activities – errors of omission or commission
But little time and effort are spent here: 7% of money and 16% of effort (Japanese and highly successful US firms spend considerably more here)
Homework answers key questions before Development begins:♦ Is the project economically attractive?♦ Who is the target customer? What positioning?♦ What should the product be – features, attributes, performance – to
make it a winner?♦ Can it be developed? At the right cost? How?
© 2000-2009 Stage-Gate International
Does More Homework Mean Longer Times to Market?
1. More time and money spent up-front greatly improves the odds of success – there is clear evidence for this!
2. More homework results in better and sharper product and project definition – this speeds up the Development phase (less recycling and wasted time)
3. Homework done up-front anticipates product problems and design changes – these product design changes are made early in the game (rather than as the product is going to market)
NO!
The message is:“Do It Right the First Time” – DIRTFooT
© 2000-2009 Stage-Gate International
Critical Success Driver #4Sharp and early product and project definition (before Sharp and early product and project definition (before Development)Development) separates separates winners from losers winners from losers
Consistently cited as a key to success in success/ failure studies This definition includes:
1. Project scope2. Target market definition3. Product concept & benefits to be delivered: value proposition4. Positioning strategy (including price point)5. Features, attributes, requirement & specs
Why so critical?♦ Forces homework to be done up-front (Success Driver #3)♦ Communication tool & commitment between functions♦ Provides clear targets for Development – the ‘goal posts’
are defined
© 2000-2009 Stage-Gate International
Impact of Sharp, Stable Product Definition
44.8%
65.5%
48.3%
51.7%
65.5%
58.6%
65.5%
30.8%
48.6%
30.0%
30.5%
36.5%
40.0%
37.1%
15.4%
46.2%
15.4%
15.4%
23.1%
19.2%
15.4%
0% 10% 20% 30% 40% 50% 60% 70% 80%
Contract between projectteam & management
Defined requirements,features, specs
Stable product definition
Defined product concept -what product will be & do
Defined positioningstrategy vs. competitors
Well defined target market
Benefits to be deliveredclearly defined
Percent of Businesses That Have a Good Product Definition Before Development Stage Begins
Worst Performers
Average Business
Best Performers
© 2000-2009 Stage-Gate International
The Innovation Diamond
Product Innovation & Technology Strategy for the Business
Idea-to-Launch System: Stage-Gate®
Climate, culture, teams & leadership
Resources: Commitment & Portfolio Management
And the Four Points of Performance
Stage-Gate® is a trademark of Product Development Institute Inc.
Business’s new Business’s new product product
performanceperformance
READY
AIM
© 2000-2009 Stage-Gate International
The Four Drivers of Performance: #3: Strategy Top performers put a product innovation and technology
strategy in place♦ Different than business strategy
Driven by the leadership team and the strategic vision of the business
This product innovation strategy guides the business’s NPD direction
And helps to steer resource allocation & project selectionDefines the role that new products and technologies
will play in achieving the business’ overall goals, and what “arenas” or battlefields will be entered as a result.
© 2000-2009 Stage-Gate International
Why Bother With NPD Strategy?
“I find the great thing in this world is not so much where we stand, as in which direction we are moving: To reach the port of heaven, we must sail sometimes with the wind and sometimes against it but we must sail, and not drift, and not lie at anchor.”
Oliver Wendell Holmes, The Autocrat of the Breakfast Table, 1858.
“Plans are nothing. Planning is everything.”Dwight D. Eisenhower, US General and Supreme Allied Commander
at D-Day
“In the absence of a clear strategy, what you are working on is your strategy.”
Me
© 2000-2009 Stage-Gate International
The Importance of a New Product Strategy for Your BusinessBusinesses that are most likely to succeed at new products are those1...
♦ that implement a company-specific new product idea-to-launch process
♦ driven by business objectives & strategies
♦ with a well-defined new product strategy at its core
Our benchmarking studies reveal that2...
♦ having an articulated new product strategy for the business is one of the four most important drivers of NP performance
1 Source: Booz-Allen & Hamilton2 Source: APQC Cooper, Edgett Kleinschmidt benchmarking study
1 Source: Booz-Allen & Hamilton2 Source: APQC Cooper, Edgett Kleinschmidt benchmarking study
The need for an articulated product innovation strategy is clearBut how well-defined is the innovation strategy for your business?
© 2000-2009 Stage-Gate International
A Product Innovation Strategy to Guide the NPD Effort
Percentage of Businesses
10% 20% 30% 40% 50% 60% 70% 80%
37.9%27.6%
19.2%Product roadmap in place
41.4%26.9%
15.4%Strategic buckets
69.0%64.8%
53.8%Strategic arenas defined
58.6%38.1%
23.1%Long term commitment
58.6%46.3%
30.8%Role in Business goals
51.7%38.1%
34.6%Clearly defined NPDgoals
Worst Performers
Average Business
Best Performers
Best performers articulate a product innovation strategy
© 2000-2009 Stage-Gate International
What Is a Product Innovation Strategy?
1. The goals for your business’s total product development efforts
The role of product development: how new products tie into your business's overall goals
2. Arenas of strategic focus – the battlefields
3. Attack plans – how you plan to win here♦ Strategic stance or approach♦ Entry strategy (for new arenas)
4. Resource Commitment & Strategic Portfolio Decisions♦ Deployment♦ Strategic buckets♦ Strategic product roadmap
More than high level goals and a list of development projects!
© 2000-2009 Stage-Gate International
The Four Drivers of Performance: #4 Portfolio Management Resource investment and focusing on the
right projects – portfolio management: ♦ Top performers commit sufficient resources to
effectively undertake their new product projects♦ And they boast an effective portfolio
management system that helps the leadership team effectively allocate these resources
- To the right areas - To the right projects
Portfolio Management: How you operationalize your strategy
© 2000-2009 Stage-Gate International
Some food for thought …“You gotta know when to hold ‘em.
Know when to fold ‘em.
Know when to walk away.
Know when to run.”
Kenny Rogers, The Gambler
“Take calculated risks. That is quite different from being rash.”
George S. Patton, U.S. General
© 2000-2009 Stage-Gate International
Portfolio Management Is Fundamental To Successful Product Development
How should you invest your R&D or Development funds & people?
What is your investment portfolio? Portfolio Management:
♦ Is about resource allocation
♦ Which Development projects should the business resource from among many opportunities (Go/Kill)?
♦ The relative prioritization of these (e.g., accelerated development; Go vs. Hold for now)
PM is how you put into practice your Business Strategy
Strategy becomes real when you start spending money!T
echn
olog
y Im
pact
to B
usin
ess
HIGH
LOW
Likelihood of CommercializationWithin Next 5 Years
LOW HIGH
© 2000-2009 Stage-Gate International
Why Portfolio Management Is Vital
Eight key reasons why portfolio management is fundamental to innovation success:1. Financial – to maximize return
2. To maintain competitive position
3. To properly allocate scarce resources
4. To forge link between project selection & business strategy
5. For focus
6. For balance
7. To communicate priorities
8. To provide objectivity in project selection
Top performers emphasize the link between project selection & business strategy
© 2000-2009 Stage-Gate International
Portfolio Management: A Major Problem Area Portfolio Management is typically poorly handled:
♦ Rated as weakest area in new product management in recent benchmarking study*
♦ Management confessed to...- No serious Go/Kill decision points- No criteria for making the Go/Kill decision
♦ The result: a tunnel, not a funnel- Also indicated poor project prioritization
♦ Too many projects for limited resources available Major business challenge
♦ Many different approaches♦ No easy answers♦ A problem many companies are addressing * Source: Cooper/Kleinschmidt
Vital for success – but no quick fixes
© 2000-2009 Stage-Gate International
Breakdown of Projects By Project
16%
25%
24%
10%
24%
22%
33%
10%
Average Business
7%New To The World Products
19%Major Product Revisions
20%New To The Business Products
28%Incremental Product Improvements & Changes
6%12%Promotional Developments & Package Changes
Best Performers
Worst Performers
~65%~55%~45%
10 Point Steps
Best Performers focus more on innovative & game-changing projects
40%
© 2000-2009 Stage-Gate International
Some More Provocative Facts
Not only are portfolios unbalanced
Portfolios contain too many low value-to-the-company projects
And far too many projects for the limited resources available
A small minority of businesses have a systematic & formal portfolio management process in place
But hi-productivity businesses suffer much less from these deficiencies 31.0%
37.9%
41.4%
37.9%
31.0%
21.2%
24.0%
25.0%
21.2%
19.4%
3.8%
4.0%
12.0%
0.0%
0.0%
0% 10% 20% 30% 40% 50%
Formal & systematic portfoliomanagement process in place
Good balance between number ofprojects & resources
Good job of ranking/prioritizing projects
Portfolio contains high value-to-the-business projects
Portfolio has excellent balance inproject types
Worst Performing Businesses
Average Business
Best Performing Businesses
Percentage of Businesses
© 2000-2009 Stage-Gate International
Five Goals in Portfolio Management
1. To allocate resources so as to maximize the value of the portfolio ♦ Against some company goal
- Long term profitability; or return-on-investment
2. To achieve a desired balance of projects♦ Between long term and short, fast ones♦ Between high risk and low risk♦ Across different project types & market sectors
3. To link the new product effort to the Business Strategy♦ Ensuring that projects are ‘on strategy’♦ That spending reflects the strategic priorities of the Business♦ That the business’s strategy will be realized thru the list of active
projects
© 2000-2009 Stage-Gate International
Five Goals in Portfolio Management (continued)
4. To obtain the right number of projects♦ Balancing resource demands
with resource availability♦ Not overloading the pipeline
with too many projects
5. Sufficiency: ensuring that projects will enable business to reach its NPD goals♦ Question: If we do these
projects, will we achieve our Sales (or Profit) goals for NPD for the next few years?
© 2000-2009 Stage-Gate International
Balancing Speed and Accuracy in NPD
Product Innovation & Technology Strategy for the Business
Idea-to-Launch System: Stage-Gate®
Climate, culture, teams & leadership
Resources: Commitment & Portfolio Management
Focus on the Four Points of Performance
Stage-Gate® is a trademark of Product Development Institute Inc.
Business’s new Business’s new product product
performanceperformance
READY
AIM
© 2000-2009 Stage-Gate International
Thank You
Meg Sheehan Principal, Global Solutions
[email protected]+1-905-304-8797
www.stage-gate.com