Elko J. Kleinschmidt

New Products: What Separates Winners from Losers?

Abstract There is no issue more fundamental to new product managers than understanding the factors that separate success from failure. In this article, Robert Cooper and Elko Kleinschmidt present a series of ten hypotheses which they test using data obtained from their study of 203 new products. Significantly, these products include both commercial successes and failures, since previous studies have concentrated on either one or the other. The authors conclude that product superiority is the number one factor influencing commercial success and that project definition and early, predevelopment activities are the most critical steps in the new products development process. Success, they argue, is earned. It is not the ad hoc result of situational or environmental influences. Synergy, both marketing and technical, is crucial.

The Impact of Product Innovativeness on Performance

While many writers and strategists maintain that innovation is important, research has often demonstrated that product innovativeness does not have a major impact on the rate of success in the marketplace. Elko Kleinschmidt and Robert Cooper demonstrate that the relationship between product innovativeness and commercial success is U-shaped. That means that both high and low innovativeness products are more likely to be more successful than those in-between. The authors suggest that past research has not allowed for this non-linear relationship and that their data show that moderately innovative, middle-of-the-road products are less likely to succeed when measured by a number of performance criteria. They explore a number of implications of these results.

New Product Portfolio Management: Practices and Performance

Effective portfolio management is vital to successful product innovation. Portfolio management is about making strategic choices—which markets, products, and technologies our business will invest in. It is about resource allocation—how you will spend your scarce engineering, R&D, and marketing resources. It focuses on project selection—on which new product or development projects you choose from the many opportunities you face. And it deals with balance—having the right balance between numbers of projects you do and the resources or capabilities you have available. In this article, the authors reveal the findings of their extensive study of portfolio management in industry. This study, the first of its kind, reports the portfolio management practices and performance of 205 U.S. companies. Its overall objective was to gain insights into what portfolio methods companies use, whether they are satisfied with them, the performance results they achieve with the different approaches, and suggestions for others who are considering implementing portfolio management. The research first assesses management’s satisfaction with portfolio methods they employ and notes that some firms face major problems in portfolio management. Next, businesses are grouped or clustered into four groups according to management’s view of portfolio management: Cowboys, Crossroads, Duds, and Benchmark businesses. Various performance metrics are used to gauge the performance of the business’s portfolio. The results reveal major differences between the best and the worst. Benchmark businesses are the top performers. Their new product portfolios consistently score the best in terms of performance—high-value projects, aligned with the business’s strategy, the right balance of projects, and the right number of projects. The authors take a closer look at these benchmark businesses to determine what distinguishes their projects from the rest. Benchmark businesses employ a much more formal, explicit method to managing their portfolio of projects. They rely on clear, well-defined portfolio procedures, they consistently apply their portfolio method to all projects, and management buys into the approach. The relative popularity of various portfolio methods—from financial methods to strategic approaches, bubble diagrams, and scoring approaches—are investi-

Benchmarking Best NPD Practices—II

OVERVIEW: Translation of strategy into new product initiatives is the focus of this second of three articles reporting the results of the most recent American Productivity and Quality Center study on performance and best practices in new product development. Having a new product strategy for your business is clearly linked to positive performance, and the article outlines what the elements or components of a best-in-class innovation strategy are, and their relative impacts. Strategy ultimately must be reflected in spending decisions; best-performing businesses undertake a higher proportion of more innovative NPD projects, while the worst performers have a timid NPD project portfolio. There is also strong evidence that a formal portfolio management approach improves NPD performance overall. Finally, the issue of resources at the NPD team level is probed. Best performers were found to have far more resources available for NPD project teams, especially in non-technical areas, and to provide much sharper focus in the allocation of these resources.

Portfolio management for new product development: results of an industry practices study

Portfolio management for product innovation – picking the right set of development projects – is critical to new product success. This article reports on the new product portfolio practices and performance of a large sample of firms in North America. Reasons why portfolio management is important are identified, followed by the relative popularity of the different portfolio techniques: financial methods are first, followed by business strategy methods, bubble diagrams and scoring models. Next, how the various portfolio methods fare in terms of six performance metrics is probed. Financial methods, although the most popular and rigorous, yield the worst results overall, while top performing firms rely more on non-financial approaches – strategic and scoring methods. The details of how some of these more popular methods are employed by firms to rate and rank development projects are also provided. Finally, managerial implications, including suggestions for making portfolio management more effective in industry, are outlined.

Determinants of timeliness in product development

Abstract Speed to market is a compelling objective in new product development. Robert Cooper and Elko Kleinschmidt report the results of an extensive study of 103 new product projects in the chemical industry, with a particular emphasis on project timeliness. The key questions addressed in the study are: what are the drivers of an on-time, fast-paced project; and to what extent are timeliness and profitability connected? The strongest driver of project timeliness was the use of a cross-functional, dedicated, accountable team, with a strong leader and top management support. Number two was solid up-front or predevelopment homework, whereas building in the voice of the customer—a customer-focused, market-oriented new product effort—was the third key to on-time, fast-paced product development projects. In total, six drivers of project timeliness were uncovered. The authors expand on each timeliness driver, giving details of best practices in the projects and firms studied, as well as their recommendations to managers for driving products to market more quickly. There are some words of caution as well: the link between timeliness and profitability was also investigated, with some sobering and provocative results.

Success factors in product innovation

Management of the 1980s and 1990s faces a dilemma in product innovation. On the one hand, there is increasing pressure to develop and launch more new products; Booz-Allen and Hamilton report that firms expect new products to grow from 33% of corporate sales to 40% in the 198Os, and that the number of new products introduced will double [l]. On the other hand, product innovation remains a very high-risk endeavor, fraught with difficulties and littered with failures. New product failure rates remain high (estimated to be about 33% at launch [2, 3, 7]), while almost half the resources that U.S. industry devotes to product innovation is spent on innovation duds-products that fail commercially or never make it to the marketplace [ 1, 2]! If businesses are to survive and prosper, managers must become more astute at selecting new product winners, and at effectively managing the new product process from product idea through to launch. These two challengesbetter project selection and more effective process management-point to the need for a greater understanding of the components of success in product innovation. We set out to gather evidence to help answer the question, “What makes a new product a success?” by looking at the new product experiences of a large number of firms.

Optimizing the Stage-Gate Process: What Best-Practice Companies Do—I

OVERVIEW: Now that most companies have implemented a systematic new product process to drive projects from idea to launch, the best-practice companies are improving their processes to make them both faster and more effective. With breakthrough ideas and home-run projects in short supply, some companies are adding a Discovery stage to the front end of the process in order to generate better ideas. Activities in this new stage include: building in an idea capture and handling system; doing voice of customer research work, including “camping out” with customers and working with innovative users; generating scenarios; and holding major revenue-generating events. Best-practice companies are also harnessing fundamental research more effectively by implementing a novel stage-gate approach.

Portfolio Management in New Product Development: Lessons from the Leaders—I

OVERVIEW:A study of portfolio management practices in industry reveals three goals: maximizing the value of the portfolio, achieving the right balance and mix of projects, and linking the portfolio to the businesss strategy. This first of two articles provides examples of portfolio methods used to achieve the first two goals. Maximizing the portfolios value is achieved by means of various financial models, including the Expected Commercial Value method and the Productivity Index, which are outlined and critiqued. Scoring models are also used to maximize the value of the portfolio. Achieving a balanced portfolio is quite a different issue, involving the use of bubble diagrams and other visual models.

New product processes at leading industrial firms

Abstract This article is about game plans for new products. The strategic importance of product development coupled with high risks and failure rates has led many companies to reconsider the way they go about conceiving, developing, and launching new products. Some firms have adopted a formal new product process or “stage-gate system” for moving new product projects from idea to launch [1]. This article reports the performance results that a handful of leading firms—IBM, 3-M, GM, Northern Telecom, and Emerson Electric—have had with implementing such new product game plans.