As we saw in previous lectures, senior management has to develop new product development project management strategy for the organization. To do it properly, the current level of implementation of critical success factors must be assessed as indicators of the maturity level of the organization in regards to the new product development projects. The next step is to select the most important success factors that are not implemented currently for implementation. The last step is to develop a roadmap for the implementation. A map that shows where the organization is, where it should be, and how it can get to the desired position is an important part of the implementation process. It is up to management to develop such a map that shows when and how to implement each critical success factor by developing a proper methodology. In the roadmap, the current processes, tools, and techniques are clearly defined, along with the processes, tools, and techniques that should be added in the journey from current situation to the desired one as planned. Similar maps are known as maturity models, for example, the model used by the software industry known as CMM or Capability Maturity Model. A very simple maturity model or map shows the current level of application of the critical success factors in the organization. Namely, for each success factor, the map shows if there is a process and a policy, how to apply it, and how it should be done. This is a good starting point, but other maps has been developed to help management in the task of managing new product development projects. A map proposed by Schilling and Hill is designed to help in mapping the level of innovation of projects performed by the organization. It has two dimensions, the change in the product and the change in process. Three levels of innovation are defined by this map. Derivative products are based on incremental innovation, typically by the modification of an existing product. It can be modification in the product or modification in the market or both. Platform projects are based on expanding into offerings that are related to existing offerings. Local products are typical examples of platforms. Breakthrough projects are focused on inventing new products or creating new markets by simultaneously mapping ideas for new projects and ongoing projects. In such a map, it is possible to see the resulting level of innovation on the project portfolio and use this information in the uncertain front-end to select new projects. As an example of Schilling and Hill model, let's look at the history of aviation. When the Wright Brothers developed the first airplane heavier than air, it was a breakthrough innovation. The timing was not the result of a decision regarding the best time to introduce this new product to the market. It was a result of the pace and success of the invention process. Nowadays, when continuous innovation is implemented in the aviation industry, a much better control over timing is possible because management can decide on when to introduce a change in the product or in the market. Managing the timing of innovation projects is very important, since time to market has a significant influence on the expected market share. Breakthrough innovation can create a new market where there are no competition. Such markets are known as the blue ocean. The analogy is to an ocean full of fish or customers with no sharks or competition. If a blue ocean market is possible, it is desired to enter it as soon as possible and develop barriers like patents to block competition from entering the market. The opposite of blue ocean is red ocean, where many sharks are competing over a small number of fish and the water are red with blood. Competition in the red ocean is frequently based on price. Many companies are using a mixed strategy. While trying to develop new products or services based on what we're thinking, they also continue their effort to introduce incremental improvement to existing products or services in order to be ahead of competition. To illustrate the point, consider the famous story about two guys hiking in the jungle in Africa and meeting a hungry lion. One of the guys starts stretching, ties his shoelaces, and get ready to run. The other guy ask him if he think that he can outrun the lion. And the answer is that he does not need to run faster than the lion, he only needs to run faster than the other guy. This is the basic idea of continuous improvement. Just be ahead of your competition, and you will survive. Apple used mixed innovation in its Mac computers, as well as iPad and iPhone products. It is interesting to know that there is some correlation between the introduction of breakthrough technology and the share price of Apple. A very good option now for a mixed strategy suggested by Andre Grove, former CEO of Intel, is known as Segment Zero. The idea is that a significant share of the market might be satisfied with the current technology and its performances. Introducing new and improved technology may not appeal to this segment of the market. If the leader in the market develops a new improved product and stop selling the old generation of products, competition may use the opportunity. And by selling a product based on the old technology to this market segment generate the funds needed for developing competing new products. The conclusion is that a mixed strategy in which the new product and the old one are sold simultaneously might be the right way to go for many companies that after the introduction of a new product continue to offload the old technology at a competitive price as a barrier to competition. Another model is used to map the adopters of new products and technologies. The pace of adoption may be fast or slow. But according to the model, it is possible to distinguish between five major groups or segments of the market. The first segment is the innovators, who are a small percentage of individuals that are first to adopt an innovation. They are adventurous, comfortable with the high degree of complexity and uncertainty, and typically have access to substantial financial resources. The second segment is the early adopters, those who have a potential for opinion leadership. The third segment is the early majority, those who are ready to adopt a new innovation slightly before the average person. The fourth segment is the late majority who are skeptical, and may not adopt the innovation until they feel pressure from their peers. The last segment is the laggards, the last to adopt a new innovation. They tend to be highly skeptical of innovations and innovators and hate risk. Due to the time failed adoption of new products, the rate cash is generated may lag beyond the rate of adoption. As a result, many startup companies are unable to generate enough cash to move on the early adopters to the early majority and are forced to quit. These cash flow valley of death must be taken into account when planning new product development projects. We will discuss the issue in detail and simulated by the project team builder later in this course. The question of when to introduce a derivative or incremental innovation in the form of modification to existing offerings, when to consider the development of a platform, whether or not to expand into offerings that are related to existing offerings and, finally, when to introduce breakthrough innovation are part of managing the life cycle of products and must be considered as part of the new product development process. A three-dimensional map was suggested by Paul Mic and Steve Markel. This map is based on the following dimensions: first; the level of innovation, second; the competence of the organization in project and portfolio management, and third; the organization strategy and cultural position. The three dimensions of the map are defined as follows. The innovation level, what kind of player the organization wants to be. The level of innovation is on a spectrum from a local player in a local market, from one extreme to a world leader in a global arena on the other extreme. The competence level, how well the organization is managing different parts of the innovation process. The organizational level, what is the maturity of the organization and its people in new product development. One extreme is the case where everything is done ad hoc based on the knowledge and ability of the people involved in a specific new product development project. The other extreme is an organization that has a well-developed methodology for managing new product development projects. It train its people in how to implement the methodology and develop the necessary environment, as well as tools and techniques, to support the implementation of the methodology. On the map of innovation level, the firm level is the lowest. It refers to a local player in a new product development arena. The focus is on current activities performed by the organization, and its current stakeholders, including customers, suppliers, partner, and competitors directly related to the firm. The organization is involved in opportunity recognition, technology and market evaluation, solution development and commercialization. At the intermediate level, known as the industry level, competitors in the same industry are analyzed, and tracked in an effort to be ahead of the competition, or learn from industry-wide competitors. The organization performs all the activities that belong to the firm level, and in addition, performs competitive analysis, and participates in industry organizations such as trade associations. At the upper level of the macro environment consists of information on the global economy, including current and future competition, regulations and trends, as well as social, political, economic, and technological innovation. The information is collected, and analyzed in an effort to play a major role in the global new product development arena. The organization performs all the activities that belong to the intermediate level, and in addition, it is responding to policy decisions, laws, and regulations. It also invests in scientific discovery and surveillance. Competency measure the maturity of the organization, and its ability to develop, maintain, and apply a methodology of innovation. The first competency is strategy. The ability to define the specific goals of the organization, and exactly how the organization will achieve them. This is the ability to map the current situation of the organization to collect information about its environment, the competition, and the technology, and to use this information to support decisions regarding the desired future position of the organization using strengths, opportunities, weaknesses, and threats known as SWOT analysis. This is the ability to develop plans on how to get to where the organization should be at a specific time. Organization and culture is also a major competency. It is the common language and background of how things get done. It represents the collective values, beliefs, and principles of organizational members. The organizational structure and the policies define formal authority and responsibility, as well as communication channels through which instructions are given, and reports on actual progress, and problems are communicated. The organizational culture is very important. It is the de facto definition of how things are done. In the absence of formal definitions of strategy, processes, tools, and techniques, culture plays a major role. When a formal definition exists, the culture is the spirit of the written formal policy. Processes are also important competency. A process is a set of activities performed in a certain order, in a certain time by certain members of the organization, in order to transform a given set of inputs into a desired output. A well-defined process supported by tools and techniques that are taught to the project managers, and their team is the backbone of new product development maturity. A well-designed process is based on workflow optimization, task definition in roles, and decision delineation. Tools and techniques are part of the organizational competency. The right tools and techniques provide a mechanical or mental advantage to accomplish a task. They facilitate communication and help processes, analyze and present data that aids in decision making. They are used by those who performs process activities in order to make the process more efficient, more effective, and improve the quality of the results. Metrics, also known as key performance indicators or KPIs, are performance measures that are based on data collected, in order to provide information on the real situation of the organization and its projects. Management can judge if plans are executed as expected, and if it is needed to take corrective action to ensure that the desired results are achieved. Metrics are also a great way to motivate project managers and their teams. By publishing outstanding results of projects and achievements of project team members, morale is boosted and motivation increases. The ability of a firm to effectively identify, assimilate, and quantify ideas is an organizational competency. Ideas regarding new technologies, or ideas that can lead to highly differentiated breaks, or products and services, are essential to success in new product development. Idea management is part of the front-end planning, the phase leading to the decision to start a new product development project. It includes ways to encourage the generation and identification of new ideas, as well as the development of a selection process that takes into account, both invention and innovation aspects of such ideas. The evaluation of ideas with respect to strategic goals, and the environmental condition in order to select the best ideas for implementation is part of the front-end planning early on in the project life cycle, and part of the change controls while the project's life cycle. Market management is a differentiator between organizations who are good at innovation, and organization who are good at invention. Identifying market opportunities, and planning offerings in response to them, that present the greatest value to both the organization and its customers shows cornerstone in innovation. Determining customers buying preferences, market segmentation, and creating a market strategy including pricing, advertising, and promotional activities are an important part of the new product development effort. Brilliant ideas and excellent new technologies that are not targeted at specific markets, and do not generate value to specific customers are doomed to fail. The ability to analyze the needs and expectations of customers, to translate these needs and expectations into value, and to develop a concrete marketing plan is essential for successful innovation. Portfolio management, is the highest level in the three level hierarchy of project platform and portfolio management. Portfolio management is an effort to manage a set of projects that are aligned with the business strategy, are balanced, and generate the greatest economic return. As part of portfolio management, new projects are selected based on the results of the front-end analysis. And existing projects are evaluated and terminated if needed at pre-specified kill points, or gates. The ability to select the right project and to take corrective action, including premature termination of existing project is critical to the organization's innovation process. Portfolio management is also responsible for prioritizing ongoing project, and the allocation of resources to these project based on the organization strategy, and the priorities of the project. Platform management is the second level of the three level hierarchy. A platform strategy is based on the design of a modular platform that is based on different, but similar products. When the needs and expectations from the same technology, from different customer, and different markets are not the same, it is essential that variants of the same product, or service are produced for each of the market. Project management deals with the selection, planning, executing, monitoring, and control of new product development project. Project management integrates different aspects like scope management, scheduling, resource management, budgeting, risk management, as well as monitoring and control of the project during execution. The last part of this course is developed to the tools and techniques of project management, and the implementation of these tools and techniques on the simulated new product development project. To summarize, the main use of the different maps is for diagnosis. In other words, to determine the current location of the organization on the map. Maps are also great tool for policy setting. In other words, deciding on what is the desired location of the organization on the map, and how to get there from the current location.
