Successful Product Innovation - Research Money Inc

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Successful Product InnovationKey to International CompetivenessThe NRC-IRAP I2D“Big Ideas to WinningProduct Developments”InitiativeWith: Dr. Robert G. CooperCreator of the Stage-Gate SystemISBM Distinguished Research Fellow, Penn State UniProfessor Emeritus, McMaster UniRG Cooper & RG Cooper & Associates Inc.Private and Confidential48 Brant StreetOakville ON L6K 2Z4 CanadaP: 1 905 845 7273

Product & Service Innovation: Today’s Business Challengeü High positive impact: New products currently represent about 30% of companies’ sales (3 yrs.)ü Companies expect to increase rate of product introductions by21% over the next 5 yearsü Almost half of CEOs rate innovation as ‘very critical’ to their futurebusiness success – the ‘top rated’ areaü Companies that are doing well today usually have a great portfolioof new productsü Innovativeness drives companies’ investment values (P/E ratio)Innovation is a prerequisite for sustained growth.No other path to profitable growth can be sustained over time.A. G. Lafley, former CEO, Procter & Gamble

New Products Have An Alarming Failure Rate – MOST FAIL!q Of every nine new product concepts,only one becomes a commercialsuccess, according to PDMA studiesq A review of many investigationssuggests that about 40% of newproducts fail at launchØ Even after all the product tests, customertrials & market testsq Approximately 46% of company’sresources spent on NPD go tounsuccessful venturesq The PDMA best practices study reportsa 59% success rate after launch

Four Common Denominators Distinguish SuccessfulInnovation Businesses1A ProductInnovation& TechnologyStrategy toFocus on theRight ArenasA Positive Climate,Culture,Organization &Senior MgmtLeadershipSuccessfulInnovationCreating Big Ideas,Executing with anEffective Idea-toLaunch System:Stage-Gate 1. Based on a series of APQC studies in the USResources: Makingthe RightInvestmentDecisions viaEffective PortfolioManagement

Creating Winning Products – 5 Critical Success DriversVoice-of-Customer built in from idea-to-launchUnderstanding customers’ unmet, unspoken needs –their “points of pain”12The high performance cross-functional project team:dedicated players, strong team leader, cross-functional,empowered, (resources/authority), accountable345Doing the homework & front-end loading the projectis key to success – due diligence pays off!Fact-based decisionsFOCUS – tough gates with teeth. Learn to kill some“ugly” projects. Most firms have too many projectsand too few resources to do them!A systematic new-product idea-to-launchprocess or gating system, such as Stage-Gate, toguide new product projects to market

So How Do CanadianFirms Fare – Performance& Success Drivers?Sadly no comparable study to the US APQC study done in CanadaBut we do have some datafrom a Quebec-basedassociation of firmsA sub-set of 26 firms doing newproduct development took part mostlymedium-large manufacturing firmsVery provocative results!QC firms were gauged on theUS APQC metrics:performance & practices

Overall NPD Performance – QC Firms on Four Key Metrics0%Percent of thebusiness’s annualsales coming fromNPs launched in last3 years (the NPVI)10%20%30%40%50%60%70%9.0%80%90%Worst PerformersAverage BusinessQuebec firms27.5%13.0%38.0%Best Performers1Percent of newproducts launchedthat are commercialsuccesses38.0%Worst PerformersAverage FirmQuebec firms60.2%55.5%Best Performers84.00%2Percent of NPsmeeting sales & profittargets (targets inbusiness case)28.5%55.7%41.9%76.0%3On-timeperformance: percentof NPs launched ontime (vs date inbusiness case)415.0%51.1%39.8%Worst and Best are top & bottom 20% of firms; US APQC data79.0%

How These QC Companies Do on Six Success Drivers0123Worst PerformersThe business’s ProductInnovation &Technology Strategy456789103.7Average Firm6.5Quebec firms5.38.1Best Performers11.8NP portfolio & portfoliomanagement practices:Focus, picking the rightprojects5.05.47.32The climate & culture forinnovation in thebusiness2. and Best are top & bottom 20% of firms; US APQC dataExcellent

More How These QC Companies Do on Success Drivers0123Worst PerformersThe way the businessorganizes for NPD –effective crossfunctional project teams456789104.2Average Firm6.7Quebec firms6.0Best Performers8.511.85.1Idea generation for NPDin the business4.27.622.2VoC (voice-of-customer)& market intelligencebuilt into NPD projects5.25.17.43Very poorWorst and Best are top & bottom 20% of firms; US APQC dataExcellent

Poor performance is due to poor NPD practicesPouring more money into SME firmsis not the total answer! The key is how they spend it!Must change the way we work But how?Product innovationis also a teamsport it’s liketrying to win theStanley Cup

Winning at New Products Is Much Like Gearing Upto Win the Stanley CupGood players –the TeamSolid acticeLearning viaPost GameReviewsIn NPD – that’s what our NRC-IRAP I2D “Big Ideas toWinning Product Developments” Initiative is all about

INDUSTRIAL RESEARCH ASSISTANCE PROGRAM“From Big Ideas to WinningProduct Developments”DR. ROBERT COOPER &IRAP Workshop for ourClientsIRAP I2D Team

IRAP helps clients Grow ThroughINNOVATIONThis workshop and program is aboutImproving IRAP clients’ abilities todevelop and launch innovative productsmore successfullyIt is also about Enriching IRAP toolset to help ourclients growNRC Industrial Research Assistance Program1313

Outline of Program: Big Ideas to Winning New ProductsCheck #1: Project ReviewCheck #2: Business Case Review Results of homework are reviewed – theBusiness Case Equivalent of gate 3 Done by I2D Team & Cooper, Wiebe Client’s scoped-out idea is reviewed, next stepsdiscussedEquivalent of Gate 2 in RAPIDDone by I2D Team, client's ITA, Cooper, Wiebe& Program ManagerKick-OffSeminarTraining: BestPractices -- “FromBig Ideas to WinningDevelopments” An intensive 1-dayseminar With 12 ITAs And 12 clients (with 3senior people perclient) Plus IRAP Directors,Steering Group,others (about 45people)Ideation& ScopingFront EndHomeworkCheck-In#1Build Business CaseDevelopment & Launch ARP request prepared,submitted & approved(optional; at IRAP discretion) Client begins heavy homeworkphase of their project(equivalent of Stage 2 inRAPID) VoC Technical Assessment Business Analysis Ultimately culminating inBuild Business Case The ITA coaches & monitors About 3 months Full IRAP contribution requestsubmitted after Check-In #2 Contribution secured, at IRAPdiscretion Client progresses into fullDevelopment ITA continues to coach &monitor the project as it movesthrough Development &ultimately to Launch Timing: months, maybe a yearor moreGet an Idea, Scope It Then, clients, with ITAhelp, define one ormore NP ideas They do InitialScoping – equivalentof RAPID Stage 1 – onthat project About 2-3 monthsCheck-In#2DevelopmentTestingLaunchNRC Industrial Research Assistance Program

The I2D Team Epshtein, Ariel (Oakville)Keast, Kathy (Sudbury)Reed, Christine (Toronto)Singer, Janice (Ottawa)Witzel, Mark (Toronto)Mike Wiebe (coach, AncasterON) Audet-Lapointe, Patrice(Boucherville) Briand, Claude (Boucherville) Belletete, Guy (IDP, Montreal)Long term vision: roll out a “Program” available to NRC advisorsto use with select SME firms – includes learning materials andtools along with guidance and support from the I2D teamNRC rogramAssistance Program15

Impact of I2D Program of Firms’ NPD Practices:‘Before’ & ‘After’Percentage of Businesses Implementing Each NPD Best Practice88.0%Use of Voice-of-Customer research as part ofNPD projects77.0%8.0%94.0%Doing solid up-front homework (buildbusiness case) before entering Development78.0%10.0%79.0%Use of effective cross-functional projectteams62.0%16.0%82.0%Focus--picking the right projects (effectivegates)58.0%8.0%0.%Long Term20.%NPD Project in I2D40.%60.%Before I2D Program80.%100.%

Articles – Some available free at www.bobcooper.ca1. Cooper, The Stage-Gate System: A Road Map from Idea to Launch – An Intro & Summary (2013). Available onwebpage. Free download.R.G. Cooper, “A Stage-Gate Idea-to-Launch Framework for Driving New Products to Market”, Chapter 7.1 in: ProjectPortfolio Management: A Practical Guide to Selecting Projects, Managing Portfolios, and Maximizing Benefits, ed. By H.Levine (San Francisco: Jossey-Bass Business & Management, John Wiley & Sons Imprint), 2005.R.G. Cooper, “Formula for success”, Marketing Management Magazine (American Marketing Association), March-April 2006,p 21-24.R.G. Cooper and S.J. Edgett, “Maximizing productivity in product innovation,” Research Technology Management, MarchApril 2008, pp 47-58.R.G. Cooper, “The Stage-Gate Product Innovation System: From Idea to Launch, in Encyclopedia of Technology &Innovation Management, ed. by V.K. Narayanan and G. O’Connor (Chichester, West Sussex, UK: John Wiley & Sons Ltd.,2010): Chapter 24, 157-167.Cooper, R.G. (2011), “Stage-Gate Idea to Launch System,” in Wiley International Encyclopedia of Marketing: ProductInnovation & Management (Volume 5), B.L. Bayus (ed.), West Sussex, UK: Wiley.Cooper, Robert G. (2013), "New Products -- What Separates the Winners from the Losers and What Drives Success," inthe PDMA Handbook of New Product Development, 3rd Edition, edited by Kenneth B. Kahn, Hoboken, New Jersey: JohnWiley & Sons, Inc. Chapter 1.Cooper, Robert G., “The Stage-Gate System for Product Innovation in B2B Firms”, in Handbook of Business-to-BusinessMarketing, edited by G.L. Lillien and R. Grewat, Northampton, MA: Edward Elgar Publishing Inc., 2012, Chapter 32.Cooper, Robert G., “Agile-Stage-Gate Hybrids: The next stage for product development” Research-Technology Management,Jan 2016, 59, 1, pp 1-9.Cooper, R.G. and Sommer, A.F., “Agile-Stage-Gate: New idea-to-launch method for manufactured new products is faster,more responsive” Industrial Marketing Management, vol 59, Nov 2016, pp 167–180.Cooper, Robert G., “Idea-to-Launch Gating Systems: Better, Faster, and More Agile,” Research-Technology-Management JanFeb 2017, 60, 1, pp 48-52.