During a recent webinar titled The Five Most Important Drivers of Success in Product Innovation – That Most People Get Wrong! with Dr. Robert Cooper, President of the Product Development Institute Inc., he fielded a number of audience questions. Bob is also the creator of the Stage-Gate® system, the widely used innovation and new product development process and methodology used by leading organizations around the world to drive new products to market. Based on his broad and deep knowledge, below are his answers to a number of the audience questions. (Read part one.)
Audience: Do the studies conducted show strong correlation between organic growth and the metrics of NPD performance between top, average and bottom performing companies?
Bob: Sadly, we lack data on this. The problem is that many factors correlate with business performance, when measured by metrics such as growth, profitability, and return-on-shareholder-equity. Many of these performance drivers have nothing to do with product development. For example, organic growth is likely a function of the growth rate of the markets you are in, your strategy (how robust it is, and how effectively it is implemented), the quality of your management team, your core competencies, the competitive environment, and so on.
While NPD performance is likely one driver of organic growth, there are many other confounding factors, hence it is often difficult to get a strong connection between new product success factors or performance and metrics that capture the overall or total business performance. There are various research studies such as Getting a Better Return on Your Innovation Investment by Arthur D. Little that show businesses doing well have strong NPD programs.
Audience: Our Stage-Gate process really starts at approval of a business case. I recognize that we need to introduce one, if not two, gates prior to approving the business case. Any suggestions on how to change mindsets to introduce new gates without making people feel like we are starting from scratch?
Bob: Many studies reveal that the activities that occur before formal development begins, the front-end homework, market studies, technical assessment, building the business case are the really pivotal activities. They create the foundation for the project and the seeds of success or failure are often found in these pre-development phases (see, for example, New Products – What Separates the Winners from the Losers and What Drives Success). Thus, the game is won or lost in the first five plays. This is perhaps why Toyota’s 5 NPD Principles include front-end load your project, as a plea to do more work earlier in the project to do the needed early stage homework.
Given the importance of the front-end, it makes sense to capture these vital activities and include them in your idea-to-launch (I2L) system, and not merely assume that they’ll happen. They often don’t, which explains why so many new product failures can be traced directly to the front-end of the project.
Audience: Many companies often believe that the new product strategy is implicit in their company or brand strategies. How do you convince them that they are different and that they need to invest significant time in developing a new product strategy?
Bob: Bore them with the facts! There are countless studies that reveal that having a product innovation strategy for the business is strongly connected to the new product performance of the business. In short, a solid, well-defined strategy pays off. I cited two such studies in my webinar (see near the beginning). See, for example, Developing a Product Innovation and Technology Strategy for Your Business, especially figure one which shows that top performing businesses have the elements of an innovation strategy in place, whereas poor performers do not!
There are also the common-sense arguments: Without a strategy you drift, like a ship, without a rudder. You’ll likely end up in a lot of projects in unattractive markets and areas, or worse yet, just too many different and unrelated areas. Strategy helps to define the search fields for effective idea generation to focus your ideation efforts. Your innovation strategy is one of the key criteria for selecting the best projects in portfolio management. And so on.
Audience: Some innovation team leaders and consultants resist communicating areas that are out of bounds because they feel it limits creativity. How should we deal with this?
Bob: It depends on how limiting the defined areas are. Obviously, if strategic areas are defined so as to be very limiting, then creativity is indeed thwarted. So be careful in how tightly you define strategic areas, making sure that they are broad enough to allow creativity and some bolder, more imaginative development ideas and projects to occur.
Additionally, some firms allow a discrete percentage of projects to be wildcards or outside the traditional areas as defined in the business’s strategy. These so-called test drill projects are indeed out of bounds, but often uncover new opportunities in a new field. This is not the same as a scattergun approach, because the number of such projects is quite limited.
Finally, some pundits argue that too broad a definition of in bounds areas actually hurts creativity and innovation. What happens is that a lot of off-strategy projects are proposed and may even progress. Thus, the firm ends up in a lot of unwanted and perhaps unattractive areas, and also in too many different areas, essentially a scattergun approach. So innovation actually suffers in this scenario.
Audience: If so many companies worldwide with over 73% of US and over 90% of German and Scandinavian companies having implemented a Stage-Gate system, why aren't they all equality successful? How do the top performers distinguish?
Bob: There are two main reasons.
First off, many of the systems these firms have implemented, often with the best of intentions, are either now obsolete or were highly flawed. I cannot tell you how many firms I have visited that claim to have a Stage-Gate system “just like in the book” and when I inspect it more closely, I often discover that it’s nothing like what was described in my book. They simply got it wrong. It’s a poorly conceived, poorly designed system, and so results aren’t so good.
Further, some firms are living in the past, and are using much older versions of Stage-Gate, models typical of the 1990s, but a lot has changed since the 1990s. For an update on what’s new in Stage-Gate, see my webpage and topic section Next Generation Stage-Gate and What’s Next After Stage-Gate? and in particular, the two articles, What’s Next After Stage-Gate? and also What Leading Companies Are Doing to Re-Invent Their NPD Processes. (We also regularly have seminars on these and related topics.)
Secondly, while many firms have a well-designed Idea-to-Launch (I2L) system, they have failed to implement it well or consistently. For example, gate meetings are missed, decisions aren’t made, and gatekeepers behave inappropriately. As we saw in one of the polling questions during the webinar, almost 90% of attendees confess to poor project selection practices, too many projects, too few big projects, not enough resources to do the projects etc. This usually is not the result a bad system, rather a lack of discipline at gates and portfolio reviews!
In other firms, project teams sometimes just don’t get it. Expectations are unclear, the work doesn’t get done, business cases are weak, and so on. Sometimes this is due to a lack of training or skills; often it is because there are simply too many projects in the pipeline.
Most of these problems are implementation issues, often simply a lack of discipline and a failure to adhere to the spirit of an otherwise well-designed I2L gating system.
Read part three of Dr. Cooper’s responses to a number of the audience questions from the webinar titled The Five Most Important Drivers of Success in Product Innovation – That Most People Get Wrong!