In this module, we will discuss the findings of Cooper and Edgett, who tried to answer the following question. What are the factors that distinguish the best performers in new product development form the rest of the companies? Their studies revealed that there are a few issues related to the way the new product development projects are managed, that distinguish the best performance in new product development from other organizations. The focus of this module is on the effort to develop a list of the most important issues project managers and their teams should focus on to succeed in new product development. These issues are called critical success factors. There are two types of critical success factors. The factors that project managers and their teams should focus on are discussed in this lecture, while the factors the top management should focus on are discussing in the next one. The goal is to help top management, product managers, and product teams understand the issues that have the greatest impact on the innovation process. It is important to note that most research in this area is based on taking a sample of companies and asking the managers of these companies, what in their opinion caused the success or failure of their new product development projects? Like any research based on sampling, one should be very careful when acting on the results of such studies. The first question is, how the sample was selected. The second one, was there any bias involved in the design of the study? And the third one is, what are the questions and how exactly were these questions formulated? These issues are very important when interpreting and implementing the results of studies on critical success factors or CSF. Cooper and Edgett classified organizations into three groups based on their performances in innovation. The group represented by the white bar is at the bottom 25 percent of the organizations studied. These are the poor innovators. The group represented by the gray bar is at the top 25 percent or excellent innovators. The third group is composed of the rest of the organizations. The sample average for each performance measure is reported along with the average for the top and bottom groups. Two performance measures are used to classify organizations based on their success in innovation. The first one is the percent of revenue from new product launched within the last three years. The second one is the percent of profit from new products launched within the last three years. For the best performance, the value of both performance measures exceed 30 percent, while the value for the poor performers is only about 10 percent. The second set of performance measures is based on the outcome of projects performed by the participating organizations. The organizations are classified again into three groups. The group represented by the white bar is the poor performers in innovation or the bottom 25 percent of organizations. The group represented by the gray bar is the best performers or the top 25 percent of the organizations. The third group is composed of the rest of the organizations. The sample average for each performance measure is reported along with the average for the top and bottom groups. There are three performance measures at the project level. The first one is the percentage of projects that meet sales objectives. The second one is the percentage of projects that meet profit objectives. And the third one is the percentage of project that meet market share objectives. In all three performance measures, the average for the top performers is about 70 percent, while the average for the poor performers is below 35 percent, namely, below half the value of the best performers. The first success factor is based on the outcome of the project. It should deliver a unique superior product that delivers unique benefits and compelling value proposition to the customer or user. Implementing these success factors is difficult. Most difficult is the measurement of benefit and value. How to measure these two and how to combine the benefit and values, the different customers in different markets see in the same product or service is a difficult problem. We will have to deal with these issues later on in the course. Cooper and Edgett gave some clues to the question of how value is measured in their study. One, meeting the customer's most important needs. This is a very logical measure for value, the degree to which customer needs and expectations are met. The problem is, of course, to integrate the needs and expectations of many customers in different markets. The second is meeting the customers new and unique needs, mainly those that are not met by the competition. The third one is value for money. This is a possible way to measure value by how much the customer is willing to pay for the product or the service. Another possible measure is superior quality versus competitors. The problem is how to define and understand quality and the way it is measured. The voice of the customer is evidently the best source of knowledge about his or her needs and expectations. And therefore, building the voice of the customer to create a market-driven and customer-focused new product process is critical to success, but different customers might have different needs and expectations. And when the customer has several needs and expectations, the relative importance of each must be taken into account. Furthermore, different customers might have different relevance or importance to a specific product or company. The most difficult issue is when the product is so new and innovative that customers do not know what needs it can satisfy and have no clear expectations. As Henry Ford said, "If I had asked people what they wanted, they would have said faster horses." The concept of project life cycle is very important in new product development. The project life cycle is a set of phases performed in a certain order. The three phases, idea generation, the design of the product, and the development of the product, represent a simple project life cycle. We will see later that other life cycles are frequently used in new product development projects. All of them are a collection of phases or stages performed in a specific order. Integrating input based on the voice of the customer in each phase of any new product development project life cycle is crucial to success. The front-end is the phase where ideas for new products are presented, analyzed, and selected for development. The front-end proceeds a go or no-go decision or the decision to start a fresh new product development project. The phase is part of an organizational process called portfolio management, a process in which new projects are added to the portfolio of projects performed by the organization, while other projects are terminated. In the front-end, major operational and technological decisions regarding the project and the product are made, including the allocation of budgets and resources to new and ongoing projects. Front end loading or front end planning is focusing on idea screening and conceptual planning. The go/no-go decision is made at the end of the phase and major technological and operational alternatives are considered for the proposed new product or service. The selection of the right alternatives early on can save time and money and reduce the need for changes later in the life cycle of the project. Cooper and Edgett found that an effort to collect as much information as possible and using the information to support the decision making process during the front end planning is a key success factor. The activities performed at the front end are aimed at collecting and analyzing information about potential new product development projects. Several issues are investigated, including marketing issues, technological issues, and business issues. Management has to develop a front end process with clear answers to the following questions. One, who should be involved in each of the front end activities? Two, who should be responsible for each of the front end activities? Three, what tools and techniques should be used to perform the front end activities? Four, what is the input required for each of the front end activities? Five, how is the input to each of the front end activities obtained? Six, what is the required output of each of the front end activities? And last, seven, who should get the output of each of the front end activities? Getting sharp and early product and project definition and avoiding scope creep and unstable specs is the first critical success factor identified by Cooper and Edgett. Scope creep is a common problem in new product development projects. It happen when the customer needs and expectations are not clarified as part of the front end. And therefore, during the project planning and execution, additional requirements are added, increasing the scope of the work and the time it takes to do it, as well as the cost of the product. A well-planned and executed front end planning can reduce scope creep substantially. In addition, any changes introduced during the new product development project should be managed carefully by estimating the impact of the proposed changes on the value, the cost, the schedule of the project. Good front end planning can reduce the scope creep, but cannot eliminate it. Lean product development is a methodology designed to reduce scope creep by developing the project in very short iterations. We will discuss lean product development later, and we'll see how it can handle unstable requirements by dividing the project into small increments, a few weeks each. And after each such increment, consulting with the customer to go to their input. Spiral development is another way to minimize scope creep, by focusing on time to market. The idea is to develop the minimum viable product, also known as MVP, as early as possible by focusing on the most important need and expectations of the most important customers. The effort is on translating these needs and expectations into necessary functionalities of the product that should be implemented in the first iteration. After the minimum viable product is launched, feedback from customers is used to learn about additional needs and expectations that should be introduced in the second version of the product, et cetera. Thus, the development is incremental and each version is adding some new features and functions to the product based on customer feedback. In spiral development, the idea of gates is frequently implemented. To start a new phase in the development project, a design or view or gate must be passed successfully. Typically, this is a pure evaluation in which expert in the project domains that are not part of the project team are presented with the information on what was planned and what was actually achieved so far. They assess the quality of the work done and a plans for future development. Only after getting the go or green light is the gate opened, and the project can go to the next phase. Lean new product development takes the idea of short iterations further, making each iteration so short that even a minimum viable product or MVP is not developed. The iterations are a couple of weeks long, and the goal is to develop the most important features and functions according to the customer. At the end of each iteration, the current version of the product is presented to the customer, who has to recommend which features and functions to developed in the next iteration. This manifesto is a philosophical basis for Lean and Agile software development. The important issues are people working together as a team, the development of working software that can be tested and delivered at the end of each iteration, and customer collaboration or listening to the voice of the customer throughout the process. The six critical success factor focuses on the flexibility to serve different customers at different markets. Since customer needs and expectations may be different in different countries, regions, or markets, the idea of a platform or family of products with common features, but also with the flexibility to meet different customer needs and expectations, is important. A local product is based on a global concept that is locally tailored. The car industry is a good example, where the same car is manufactured for countries where driving is on the right-hand side of the road and for countries where driving is on the left-hand side of the road. McDonald's developed special products for different countries, all of which are cooked by the same platform on cooking technology and served as fast food delivery. This is a very low tech and simple example of the local approach. A simple search of the web revealed many country-specific products with McDonald's. The company adopted the local concept of offering fast food that fits the taste of customers in different countries and regions around the world. The seventh critical success factor is focusing on the marketing aspects. Recall that innovation is invention plus marketing and sales. Therefore, marketing issues should be discussed at the front end and a solid marketing plan should be developed early on, as it is essential for success in innovation. The last critical success factor is time to market. Time to market is a major factor in the success of new product development projects. The earlier the product is available, the higher the probability that competition will not have competing products and market penetration will be easier and less expensive. The managers and teams of new product development projects can benefit from understanding and implementing the critical success factors. Although the best way to implement each factor may vary according to the issues like the type of product, the developing organization, the market and the competition, by discussing these factors early on in the project life cycle and deciding how to implement each one, the probability of success can increase substantially.
