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.