Insights -- July 2004
According to a recent global survey of 650 companies conducted by Deloitte Research, new product revenue contribution is expected to average 34 percent of overall revenue by 2007, up 21 percent from 1998. While companies rank new products as the number one growth factor in the next three years Ñ product innovation and time-to-market are ranked as the lowest of 10 supply chain priorities.
There seems to be a perception that existing NPD capabilities can support aggressive growth targets. However, any company with a high launch failure rate, long time-to-market and large developmental costs cannot reasonably have a well-functioning innovation process. What's broken? Here are three key areas for your consideration.
It starts with a weak idea pipeline. Often, companies short-change the ideation process. The best ideas usually come from outside, and ideation is not a tap that you can switch on and off at will. So, what should organizations do?
- Complement internal ideation by tapping heavily into external sources (research institutions, trade shows, parallel industries, creative agencies or suppliers).
- Implement a cross-functional, ongoing ideation process configured around a centralized, Web-accessible idea bank.
Second, time and again, clients point to their Stage-Gate model as evidence of a strong innovation process. The reality is that many Stage-Gate-based processes are poorly designed and exclude key elements that drive successful innovation.
- Disciplined, yet flexible process. Organizations need to build one basic model to support blockbuster projects, and then develop variants that support line extensions, promotions and fast-track projects.
- Required minimum number of stages and gates. Anything less than five stages and gates creates an increase in development costs and often, no marked reduction in time-to-market. The underlying problem -- more ideas are worked on longer and usually by the same set of resources.
- Preparation. Nothing improves the probability of launch success more than the right focus on the first three stages of development Ñ idea definition, preliminary business case and prototype development.
- Ruthless focus on killing ideas. The basic premise of the stage-gate process is to focus organizational resources on the best ideas. If organizations are not ruthless about killing ideas in the first three stages, they are wasting resources. The biggest problem here is the misuse of consumer research when marketers persist in repeating research on weak ideas. If an idea fails consumer research twice, dump the idea.
- Streamlined decision making. 'Mini-gates' create process complexity and, consequently, increase time-to-market. Organizations need to decide on a core set of gatekeepers and then be disciplined about sticking with them.
- Correct mapping of time-to-market. Organizations err in determining the correct starting point for the innovation process, and thereby, end up with an incorrect time-to-market estimate. In reality, there is often a long lag Ñ anywhere from eight to 14 months Ñ between the product platform and the initial idea definition stage.
Finally, organizations often lack the tools and technology required to support new product development. One key area is packaging development. Organizations do a poor job of managing packaging specifications, artwork creation and packaging execution. It is common to find multiple, stand-alone, document-based systems that make it difficult to collaborate internally and externally, and reduce time-to-market. Organizations should consider implementing Web-based software that uses a data-enabled approach to managing packaging.