Can You Afford Loopbacks?

In a world of limited resources and time, is it smarter to fund developing separate, duplicate paths, or to focus all energy on the most promising, least risky path?

Often our tendency is to think we only have enough time and resources to pursue one path, with the key being selecting the least risky solution. After all, how could you possibly develop alternative processes in the same time it takes to produce just one, with the same amount of resources?

But consider the cost of failure at the end of the development effort. What do you do when your least risky path fails? You loop back and start over with a different concept, which was probably already proposed, but only after the initial path was chosen and under way. The cost of a loopback in R&D far outweighs the cost of developing multiple paths at the front end as this graph indicates:

Clearly, the cost of investigating alternatives is the lowest at the front end of the development phase, and increases significantly toward the end. In addition, the number of alternatives capable of being investigated is highest at the front end. We should use this differential to our advantage. Put more resources on investigating multiple paths at the front end of a project when the cost is least and resource availability is highest. Then select the better of the two paths at the end of the development phase. Toyota uses this approach in their product development system to achieve the highest innovation rate in the industry, using the least amount of resources and having the least development cycle times. They NEVER miss project milestones because they never have loopbacks.

A Voice Crying in the Wilderness

The most difficult part of improving the innovation process is convincing the senior management of the need.

They will readily agree that having a new product pipeline is critical to success. They will also agree that a Stage-Gate process is most beneficial. In fact, I suspect most if not all senior managers would quickly agree that supporting NPD efforts is vital and worthy of their attention.

Sadly, experience has taught me that regardless of how much senior managers want to improve the NPD process, they fail to execute at the right level. By this I mean that they fail to make it their own priority. It is certainly true is this context that if you want a job done right you should do it yourself.

Innovation cannot be delegated to an individual or department. Neither can it be copied from other successful companies. Developing an NPD process is a process itself, and that process must begin at the top. The first step in developing an NPD process is to find a champion within the organization who is willing to do whatever it takes. It is too easy for senior managers to pay a consultant to teach NPD best practices, but it is impossible to establish lasting corporate change without an internal champion. This is precisely where the process begins to fail. Low-level managers, project managers, and designers typically first understand the need and have the desire to reinvent the NPD process (and join the PDMA), but they lack the visibility and voice to make their concerns known to the senior managers (who have never heard of PDMA) capable of making decisions. How hard would it be in your organization for a machine designer to have a little 1-on-1 with the CEO and tell him about the need to change NPD practices? How likely would the CEO be to make tough realignment and resource decisions based on this “low-level” advice?

Think about the next management level down from the CEO. Are they willing to sacrifice many of their own resources, much of their power, even their own jobs for the sake of improved product development? Of course not. Successful NPD processes may require significant corporate restructuring and pain for many managers. Who will force them to endure it?

So as it is, the lower-level employees see the obvious need for reinvented NPD processes, and they endure the agony of using ineffective processes. Meanwhile the CEO sees the decline of market share and fewer new products being released, and goes to the middle managers for a solution. Finally the middle managers seek to improve their own processes to the exclusion of others. The result is the failure to make sweeping, lasting, effective change. The senior-most managers must be willing to dive deep into their organization for ideas and input, and be ready for the response regardless of the source.

Innovation Didn't Work For Us

I have encountered many companies who have a phase-gate or stage-gate process documented in their official procedures, but seldom use the process effectively. Most often I hear "We implemented stage-gate back in the 90's and tried to make it work for several years, but now we just fill in the blanks to make the auditors happy". What's wrong? Is it the process? Maybe unrealistic expectations? Are there environments in which a formal NPD process just won't work?

The answer to these questions is, as usual, "it depends". The process may be assembled incorrectly. Senior management may have expected a two-day NPD seminar for a key employee to make the difference. The corporate environment or culture may preclude any formal development process.

Let's first tackle the issue of having an ineffective process. Companies jumped on the Six Sigma band wagon a few years before the Innovation wagon came along. This meant that new NPD procedures were grafted into existing quality initiatives. The resulting system is too detailed and cumbersome to be used for NPD, and lacks the focus on initial homework - "fuzzy front end". To use Stage-Gate terminology, in these cases the entire NPD effort consists of only a development stage. The process does little to ensure a focus on customer needs, hitting the market, and doing the right projects. These companies often are unable to distinguish between project management and product development. The best companies design a stand-alone, all encompassing NPD system with Product Management at the center. Stages and Gate meetings are built into everyday corporate live, and adherence to the system is required.

What about unrealistic expectations? Sending key employees to NPD seminars, or even providing NPDP certification are not enough. Middle-level employees cannot effect the level of change required to make NPD work. They most often do not control resources, cannot hire and fire, and do not have the trust / credibility of senior management. The best companies charge senior management with developing and implementing the NPD process. This ensures that NPD receives the focus, attention and resources it deserves.

Finally, if you gave up on formal NPD because the corporate environment wouldn't support it, there are many possibilities improvement. A renewed focus on Stage-Gate can actually improve employee morale and enhance performance because it eliminates much of the frustration associated with obscure objectives, unrealistic goals, lack of resources and poor customer relationships. Culture change is slow, and must be demonstrated by senior managers to all employees. If managers can agree on a common corporate strategy and provide links to business and product strategies, support staff can do their part too. If you are a manager, try thinking of your group as a stand-alone company. What changes would you make, and how would you use Stage-Gate?

Don't give up on formal NPD processes such a Stage-Gate just because execution may not have worked in the past. The best companies use formal NPD processes to outperform other companies by up to 7 times earnings. It is worth revisiting NPD and finding the roadblocks to initial success.

For some real help you should read "Winning at New Products" by Robert C. Cooper, the inventor of the Stage-Gate process.

NPD Must Be Driven from the Top Down

"Inventories can be managed, but people must be led."

Ross Perot

Tell me if this sounds familiar:

Senior Management indicates that the company must develop new products in order to remaining competitive. They have been alarmed by new competitors’ products, which could cause significant loss of market share if unchecked. You have been chosen to participate on a New Products Development team as a technical expert, assuming you will allocate roughly 25% of your time to it. Senior Management has given you several other team members who will also devote a fraction of their time to the team. In order to kick things off, Senior Management called a meeting to discuss the need for the team, and a few criteria for the team to use as they come up with new product concepts. Management would like a follow-up meeting in 1 month to discuss results and sift through the list of great ideas. How do you think the team will perform?

First, new product development must be driven from the top down, not from the bottom up as is the case is the preceding example. Bottom-up NPD processes can produce good new products, but most often they do not. Issues such as management buy-in, resource allocation, and strategic fit will plague NPD teams. By contrast, a top-down approach ensures that Management has first set a strategic course, has allocated significant resources to fund all critical projects, and has provided a detailed list of criteria for the team to use, both in creating and screen new concepts. Top-down NPD management means that only great concepts, which meet the corporate strategy and hit the customer’s mark will receive funding.

Second, NPD must be owned and operated by Senior Management. They must own the NPD process, have authority over resource allocation, and understand the strategic implications of each project. Without having that ownership managers are unable to make informed and timely decisions. More often than not, Senior Management does not fulfill their obligation to provide direction, guidance and resources to the NPD process. They leave those decisions to the team, requiring detailed financial and market analyses before the concept is even well defined. They then must step in at the last minute to either kill a misdirected project, or postpone it until internal and external factors are resolved.

The first step for a Senior Management team is to agree that they must lead and own NPD processes and any resulting concepts. Having done that they must craft a solid business strategy, which includes answers to several questions. What kind of company are we? What markets do we wish to pursue? How much money and how many employees can we allocate to NPD? How much revenue do we wish to generate from new products? Third, the company must install a Senior Manager (optimally) as the owner of the NPD process. This person must attend NPD meetings regularly, providing direction. If no such manager is available then a senior employee with significant power and influence can fill the slot assuming Senior Managers are all in agreement with the selection and responsibilities.

Please see New Products: What Separates Winners from Losers? by Robert G. Cooper and Elko Kleinschmidt. (Journal of Product Innovation Management, 1987, 4: 169-184). This is a very powerful research article describing exactly what works and what doesn’t in new product development processes. It is free to PDMA members.

Predicting New Product Success

The following list provides 20 indicators of the likelihood of new product success. 11-14 "yes" answers indicates probable success. 8-10 "yes" answers indicates even probability. Less than 8 "yes" answers indicates a very low probability of success. So if you can honestly answer "yes" to better than half of the questions, success is likely. If not, strategy and process should be your focus.

1. Has the product been in development for a year?


2. Does your company now make a similar product?


3. Does your company now sell to a related customer market?


4. Is research and development at least 1/3 of the product budget?


5. Will the product be test marketed for at least 6 months?


6. Does the person in charge have a private secretary?


7. Will the ad budget be at least 5% of anticipated sales?


8. Will a recognized brand name be on the product?


9. Would the company take a loss on it for the first year?


10. Does the company "need" the product more than it "wants" it?


11. Have 3 samples of advertising copy been prepared?


12. Is the product really new, as opposed to improved?


13. Can the decision to buy it be made by only one person?


14. Is the product to be made in fewer than 5 versions?


15. Will the product not need service and repair?


16. Does the development team have a working code name?


17. Will the company president (or business unit manager) see the project leader without an appointment?


18. Did the project leader make a "go" of the last two projects?


19. Will the product be on the market for at least 10 years?


20. Would the project leader quit and take the product along if the company said it wouldn't back it?

Published by The Wall Street Journal, Sept 24, 1981

SWIFT – Sorting through and evaluating the new ideas

How do you evaluate the merit of a new concept for a product or service at the fuzzy front end? One very effective way to do this is to apply the SWIFT method (Dorval and Lauer, 2006).

To begin, you must first have completed the ideation process, that is, ideas have already been generated via brainstorming or other technique, and the best ones have been screened. The concept statement is clearly written, and individual key words from the statement are defined and understood by all team members. The SWIFT methodology can then be applied to these concepts.

SWIFT = Strengths, Weaknesses, Individuality, Fixes and Transformation

Strengths – The group lists all of the strengths about the particular concept. Begin each statement with “It might work because…” Why does it seem like a good idea? What about this concept will help it get through later NPD phases? Why will others like it (employers, distributors, customers, users)? Beginning with strengths causes the team to avoid negative responses to new ideas.

Weaknesses – The group then lists all of the weak points of the concept. Begin each statement with “It might not work because…”What problems are foreseen? What NPD hurdles may result? What objections may others have to the concept? Try to rank order the list to be used in a later stage.

Individuality – The group then lists all the elements which make the concept novel or different (from other products or other new ideas). What does the concept have which others do not? How does this concept differ from the others? Individuality is not the same as strengths. All concepts may have the same strengths. Individuality identifies what makes each idea unique.

Fixes – The team now moves from evaluation to development, by finding fixes to the weaknesses previously identified. Work on the top two or three weaknesses which may be show-stoppers or may prevent success. How can the weakness be turned into a strength? How can it be eliminated? Is there a way to eliminate it which is difficult or painful? The team can begin to see how a particular concept may not so good after all.

Transformation – The team now goes back to the original concept statement and reworks it to encompass the changes which have been made. Does it still sound like a good idea? Does it still hit the target? Has some key aspect of the idea been lost?

If this methodology makes sense to you and seems like a good idea you can read detailed instruction and examples in the PDMA Toolbook 2 for New Product Development, Chaper 10.

Top 10 Innovation Killers

This is an excellent article describing the causes of innovation initiative failure. In summary, senior management holds the keys to either success or failure. Proper execution in the establishment of an innovation framework is critical to future performance. This article will help you determine what is wrong and how to fix it, or to avoid failure altogether. The list:

• Not creating a culture that supports innovation
• Not getting buy-in and ownership from business unit managers
• Not having a widely understood, system-wide process
• Not allocating resources to the process
• Not tying projects to company strategy
• Not spending enough time and energy on the fuzzy front-end
• Not building sufficient diversity into the process
• Not developing criteria and metrics in advance
• Not training and coaching innovation teams
• Not having an idea management system

Joyce Wycoff is the Co-Founder of the InnovationNetwork, an organization which helps organizations build competency in innovation. She is the author of several books in the field of innovation and creativity including industry standards Mindmapping and To Do … Doing … Done! For more information about innovation, please go to www.thinksmart.com.