Among the many factors that affect new product development, the role of senior management is right at the top. Anyone in a company’s product team will tell you that unless the top people are committed, it is difficult to churn out new products at a reasonable pace. Take Steve Jobs of Apple, AG Lafley of Procter and Gamble, Bill Gates of Microsoft for instance — they were/are all personally involved in developing new products in their companies.
Why is their role so important? It boils down to just one reason — the nature of new product development activity itself.
According to the Product Development Management Association, while the number of new products launched has, on an average, gone up substantially since 2004, the success rates have not kept pace. This is worrying.
While the reasons for this may range from insufficient process rigour, inadequate metrics for efficiency measurement, lack of manpower, and so on, new product development still ranks among the riskiest and most resource-intensive activities in any company.
How can senior management help?
Systematic process : First, by making new product development systematic. It should not be treated as an ad hoc process, where the output depends on the whims and fancies of individual employees. Instead, there should be a series of steps that enable ideas to get generated, validated and made viable for launch in the market-place.
In the short run, this may seem like a difficult task, but once the process is streamlined, the organisation can focus on how to make the activity more robust, instead of handling the uncertainty of whether there will indeed be a new product launch at all. 3M, as we may know, recognised the importance of this and put systems in place, to track and manage this activity more efficiently.
Open innovation model : Second, the organisation should follow an open innovation model. By this I mean ideas should be welcomed from all sources — employees, customers, vendors, competitors, agencies, et al. This will ensure that there is a plethora of ideas and the company is not left scrambling for new solutions to deal with a consumer problem.
Senior management can lead by example by undertaking market visits, interacting with competition, and having discussions with vendors. Prof Blain McCormick of Baylor University says taking a ten-minute walk with a partner to come up with several ideas on one particular topic can be very energising. So the senior management can foster a lot of creativity in the idea-generation process.
Adequate pre-testing : Third, insist on adequate pre-testing. Many new products fail, not because they were poor ideas, but they were not tested properly in the right environment. No idea is perfect in the beginning — it needs a lot of improvisation. Senior management can personally review the testing protocols in terms of manpower, ambience, action standards and other parameters. This will imbue the process with a sense of seriousness. Large research agencies such as IMRB have well-defined norms to help companies understand how their products are faring versus the requirements.
Team management : There are two aspects to a new product team. One is to have a cross-functional team from all departments and the second is to ensure that they stay on till the project is over. Cross-functional teams (CFTs) are helpful as they offer different perspectives; hence, the richness of information enables a better quality of decision making. And this saves time, since multiple view-points are put forth at the same meeting.
CFT is an important feature that defines Cavinkare’s new product activity. Having the same team continue till the project is over is equally important. This results in better ownership of ideas as well as execution. Also, there is no transfer of intellectual knowledge regarding the project to the external environment. Senior management needs to personally ensure that these two aspects regarding team management are taken care of.
Key deliverables : All functional heads should carry targets regarding new product activity in their annual performance record. This will guarantee that they push the process even during times of resource-crunch and time delays. Adequate manpower is set aside and the focus on the activity remains.
Targets could be in the form of number of new products launched in a year, revenues generated or even R&D spends as a percentage of sales. Pharma companies, for instance, spend up to 15 per cent on this front while foods and beverages may have a ratio of 2-5 per cent.
Jack Welch said: “Focus on a few key objectives … I have to choose the right people, allocate the right amount of resources and share ideas from one division to another with the speed of light. So I’m really in the business of being the gatekeeper and the transmitter of ideas.”
This seems to hold good in the context of new product development too.