Managing The New Product Development Processstrategic Imperatives

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Managing the New Product Development Process: Strategic Imperatives
Author(s): Melissa A. Schilling and Charles W. L. Hill
Source: The Academy of Management Executive (1993-2005), Vol. 12, No. 3 (Aug., 1998), pp. 67-81
Published by: Academy of Management

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? Academy of Management Executive, 1998, Vol. 12, No. 3
Managing the new product

developmentprocess:
Strategic imperatives
Melissa A. Schilling and Charles W. L. Hill
Executive Overview
For many industries, new product development is now the single most important factor
driving firm success or failure. The emphasis on new products has spurred researchers
from strategic management, engineering, marketing, and other disciplines to study the
new product development process. Most conclude that in order to be successful at new
product development, a firm must simultaneously meet two critical objectives:
maximizing the fit with customer needs, and minimizing time to market. While these
objectives often pose conflicting demands on the firm, there is a growing body of
evidence that the firm may employ strategies to successfully meet these objectives.
Successful firms are those that articulate their strategic intent and map their R&D
portfolio to find a fit between their new product development goals and their current
resources and competencies. Their success also rests on how well the technology areas
they enter contribute to the long term direction of the firm by helping them build new
core capabilities critical to the firm's long term goals. Strategic alliances to obtain
enabling technologies may shorten the development process, but partners must be chosen
and monitored carefully. When firms are choosing technologies to acquire externally,
they must assess the importance of the learning that would be accrued through internal
development of the project, and its impact on the firm's future success. Other imperatives
include using a parallel (rather than sequential) development process to both reduce
cycle time and to better incorporate customer and supplier requirements in the product
and process design, and using executive champions to ensure that projects gain the
resources and organizational commitment necessary to their completion. Development
teams should include people from a diverse range of functions and should include
suppliers and customers to improve the project's chances of maximizing the fit with
customer requirements while reducing cycle time and potentially reducing costs. Tools
such as Stage-Gate processes, Quality Function Deployment, Design for Manufacturing,
and Computer Aided Design/Computer Aided Manufacturing may be useful on different
projects.
.................. ................. ................. ................. ................. ................. ................. ................. .................
The importance of new product development (NPD) between 33 percent and 60 percent of all new prod-
has grown dramatically over the last few decades, ucts that reach the market place fail to generate an
and is now the dominant driver of competition in economic return.'
many industries. In industries such as automo- These trends have prompted a great deal of re-
biles, biotechnology, consumer and industrial search on how to optimize the new product devel-
electronics, computer software, and pharmaceuti- opment process. This research is both large and
cals, companies often depend on products intro- diverse, originating in disciplines as wide ranging
duced within the last five years for more than 50 as strategic management, engineering, and mar-
percent of their annual sales. However, new prod- keting. The purpose of this paper is to review the
uct failure rates are still very high. Many R&D previous research on managing the NPD process,
projects never result in a commercial product, and and make sense of it through a cohesive organiz-
67
68 Academy of Management Executive August
ing framework. Through this synthesis, a number omies of scale.3 As a result, it is now economical
of strategic imperatives emerge for improving the for manufacturing enterprises to customize their
management of new product development. Our fo- product offerings to the demands of fairly narrowly
cus is on how the firm may increase the likelihood defined customer groups, thereby out-focusing
of new product success, emphasizing the manage- their competitors. A prime example is Nike, which
ment of projects once the ideas have been pro- produces over 250 variants of its popular athletic
posed. shoes in twenty different sports categories, a port-
The strategic imperatives in this paper represent folio of products that appeals to every conceivable
a synthesis of the best industrial practices in this market niche.4 As a result, not only are product life
area, and are the result of a high degree of con- cycles compressed, but the size of the potential
sensus among various research efforts. Our objec- market for each variant of a product declines be-
tive is to provide a working guide for managers to cause of the rise of niche marketing.
identify opportunities for improving their NPD pro- In order to recoup development costs and make
cesses and a perceptual map for scholars to iden- an economic return in an environment character-
tify fruitful areas for research. ized by rapid product obsolescence and market
fragmentation, a company's new product develop-
ment must meet two critical objectives: (1) mini-
The Competitive Environment and Critical mize time-to-market, and (2) maximize the fit be-
Objectives of New Product Development tween customer requirements and product
The dramatic increase in emphasis on new product characteristics.
development as a competitive dimension can be
traced back to the globalization of markets, and Minimize Time to Market
the fragmentation of markets into ever smaller
niches. Minimizing time to market-or cycle time-is nec-
essary for a number of reasons.5 A company that is
slow to market with a particular generation of
The dramatic increase in emphasis on technology is unlikely to fully amortize the costs of
new product development as a development before that generation becomes ob-
competitive dimension can be traced solete. This phenomenon is particularly vivid in
back to the globalization of markets, and dynamic industries such as electronics, where life
the fragmentation of markets into ever cycles of personal computers and semiconductors
can be twelve months. Indeed, companies that are
smaller niches. slow to market may find that by the time they have
introduced their products, market demand has al-
The globalization of markets is a natural result ready shifted to the next generation of products.
of the steady decline in barriers to the free flow of Companies with compressed cycle times are
goods, services, and capital that has occurred more likely to be the first to introduce products that
since the end of World War II. The result has been embody new technologies. As such, they are better
a substantial increase in foreign competition. The positioned to capture first mover advantages. The
more competitive a market becomes, the more dif- first mover in an industry can build brand loyalty,6
ficult it is for companies to differentiate their prod- reap experience curve economies ahead of poten-
uct offerings on the basis of cost and quality. As a tial competitors, preempt scarce assets, and create
result, new product development has become cen- switching costs that tie consumers to the compa-
tral to achieving meaningful differentiation. Prod- ny.7 Once achieved, first mover advantages can be
uct life cycles have been shortening as the inno- the basis of a more sustained competitive advan-
vations of others2 make existing products obsolete. tage.
Schumpeter's "gale of creative destruction," blow- In many industries, issues of dominant design
ing at full force, fosters shorter product life cycles are paramount.8 When a new technology is first
and rapid product obsolescence. introduced, competing variants of that technology
While product life cycles have compressed, mar- are often based on different standards. Different
kets have also fragmented into smaller niches. companies will promote different technological
Lean manufacturing technologies, developed in Ja- standards, and the company that establishes its
pan, have enabled this fragmentation. By reducing particular design as the dominant standard can
set-up times for complex equipment, lean manu- reap enormous financial rewards, while those that
facturing makes shorter production runs economi- fail may be locked out.9 Some examples of this
cal and reduces the importance of production econ- include Microsoft's Windows (which locked out
1998 Schilling and Hill 69
Geowork's Ensemble 1.0, among others) and Intel's nology strategy, or the process by which the com-
CPU platform. Companies with reduced cycle time pany constructs its new product development port-
have a greater probability of establishing their folio. Strategic Issue 2 is the organizational context
design as the dominant standard.'0 within which a NPD project is embedded. Strategic
Companies with short cycle times can continu- Issue 3 involves the construction and use of teams,
ally upgrade their products, incorporating state of and Strategic Issue 4 addresses the use of tools for
the art technology when it becomes available. This improving the NPD process.
enables them to better serve consumer needs, out-
run their slower competitors and, build brand loy-
alty. It also enables them to offer a wider range of Technology Strategy
new products to better serve niches. A crucial step in optimizing the NPD process is to
Some researchers have pointed out problems ensure that the company has a clear and consis-
with rushing new products to market. For example, tent technology strategy. The purpose of technol-
Dhebar points out that rapid product introductions ogy strategy is to identify, develop, and nurture
may cause adverse consumer reactions; consum- those technologies that will be crucial for the long
ers may regret past purchases and be wary of new run competitive position of the company. These
purchases for fear of obsolescence." Other re- technologies must have the potential to create
searchers have suggested that speed of develop- value for customers. A coherent technological
ment may come at the expense of quality.'2 How- strategy, therefore, focuses explicitly on customer
ever, numerous studies have found a strong requirements as they are now, and as they are
positive relationship between speed and the com- likely to become in the future.
mercial success of new products.'3 The objective,
then, is to minimize time to market by making the
NPD process more efficient, without sacrificing A crucial step in optimizing the NPD
product or service quality. process is to ensure that the company
has a clear and consistent technology
Maximize Fit with Customer Requirements strategy.
For a new product to achieve significant and rapid
market penetration, it must match such customer Many companies lack a well-articulated tech-
requirements as new features, superior quality, nology strategy. A northwestern company that
and attractive pricing. Despite the obvious impor- recently implemented a project tracking system
tance of this imperative, numerous studies have found to its dismay that there were many more
documented the lack of fit between new product projects underway than the company could sup-
attributes and customer requirements as a major port. As one engineer put it, "We never saw a
cause of new product failure.'4 Illustrative anec- problem we didn't like." Because the company
dotes abound-for example, the failure of Lotus to was attempting to support too many projects,
establish Lotus 1-2-3 for Windows as the major employees were assigned to many project teams
spreadsheet for Windows, and the commensurate and had little commitment to any particular
rise of Microsoft's Excel spreadsheet for Windows, project. Furthermore, because development re-
can be attributed to the failure of Lotus 1-2-3 for sources were stretched too thin, projects were
Windows to satisfy customer requirements with delayed and several had been abandoned. One
regard to features (e.g., program speed) and qual- major project that was expected to take nine
ity. Similarly, Philips' CD-Interactive home enter- months in development had stretched to three
tainment system failed because of a lack of under- and half years, and by the time the product was
standing of its customers' needs. The product was released, it was no longer clear that a market
overly complex and expensive, and required al- existed.
most an hour of training, and could not compete A company can focus its development efforts on
against the more straightforward game systems projects that will create long-term advantage by
produced by Nintendo, Sega, and Sony. defining its strategic intent.
Optimizing the New Product Development Strategic Imperative 1: Articulate the company's
Process strategic intent
Successful NPD requires attention to four strategic An ambitious strategic intent should create a gap
issues (see Figure 1). Strategic Issue 1 is the tech- between a company's existing resources and ca-
Strategic Imperatives
1. Articulatethe company's
Issue 1: strategic intent
Technology Strategy 2. Map the company's R&D
portfolio
3. Use strategic alliances to gain

rapid access to enabling
technologies
4. Choose and monitoralliance
partnersvery carefully
5. Include strategic implications
/Issue 2:
Organissue of technology development in
Organizational Context
the projectselection and
screening process
6. Use a parallel development
process
7. Use executive champions
Th fetveness and
Efiinyof the New /
Prdc evelopment
PrcssDpends On: \
8. Include a diverse range of
functionsin projectteams
9. Involve customers and
suppliers in the development
Issue 3: process.
10.Match team structureto
Teams projecttype
11.Match team leader attributes
to type of team
12.Establishmission, charter,and
contractbook forproject
team
Issue 4: 13.Use appropriate tools to

Tools > improve the efficacy of new
productdevelopment
FIGURE 1
A Model of the New Product Development Process
pabilities and those required to achieve its in- Strategic Imperative 2: Map the company's R&D
tent.'5 At the same time, the company's strategic portfolio
intent should build on existing core competencies.
Once the strategic intent has been articulated, the New product development must be managed as a
company is able to identify the resources and ca- balanced portfolio of projects at different stages in
pabilities required to close the gap between intent development.'7 Companies may use a project map
and reality. This includes identification of any (similar to that depicted in Figure 2) to aid this pro-
technological gap and enables the company to cess. Four types of development projects commonly
focus its development efforts and choose the in- appear on this map-pure R&D, breakthrough, plat-
vestments necessary to develop strategic technol- form, and derivative projects. Over time, a particular
ogies and incorporate them into the company's technology may migrate through these different
new products.16 types of projects. R&D projects are the precursor to
ADVANCED R&D
PROJECTS More Less
<4 PRODUCTCHANGE
New Core Product Next Generation Addition to Derivatives

Product Product Family Enhancements
New Core
Process BREAKTHROUGH
More PROJECTS
Next Generation
Process PLATFORMPROJECTS
PROCESS
CHANGE
Single Department
Upgrade
DERIVATIVEPROJECTS
Less
Incremental
Change
FIGURE 2
The Project Map
(adapted from Wheelwright, S. C. and Clark, K. B. 1992. Revolutionizing Product Development. New York: Free Press)
commercial development projects and are necessary tomer requirements and new product attributes
to develop cutting edge strategic technologies. are: (1) the use of strategic alliances, (2) the deter-
Breakthrough projects involve development of prod- mination of how alliance partners are chosen and
ucts that incorporate revolutionary new product and monitored, (3) the use of appropriate project valu-
process technologies. Platform projects typically of- ation and screening mechanisms, (4) the develop-
fer fundamental improvements in the cost, quality, ment process scheme used by the firm (sequential
and performance of a technology over preceding process versus partly parallel process), and (5) the
generations. Derivative projects involve incremental involvement of executive champions.
changes in products and/or processes. A platform
project is designed to serve a core group of consum-
Strategic Imperative 3: Use strategic alliances to
ers, whereas derivative projects represent modifica-
gain rapid access to enabling technologies
tions of the basic platform design to appeal to differ-
ent niches within that core group.'8 Companies need Developing new products often requires the join-
to identify their desired mix of projects on a project ing together of complementary assets. Consider a
map and then allocate resources accordingly. It is company that has developed a body of technolog-
important that the mix of projects represented on ical knowledge with commercial possibilities,
such a map be consistent both with the company's such as the pen-based computer company, GO
resources, and with its expression of strategic intent. Corp. To transform this knowledge into a viable
Along with a coherent technology strategy, a product, the company had to assemble a set of
company must establish an organizational envi- assets that included complementary technological
ronment that enables it to optimize its likelihood of knowledge, market knowledge, manufacturing
new product development success. knowledge, and financial ability.'9 GO Corpora-
tion's product, a pen-based personal digital assis-
tant (a palm-sized computer) lacked value without
Organizational Context
complementary software, a powerful CPU, light-
Organizational context factors important in reduc- weight and long-lasting batteries, and adequate
ing cycle time and achieving a fit between cus- marketing and distribution channels. While the
company was successful in developing its core nisms to limit opportunism,23 and limits the num-
product, the product did not integrate seamlessly ber of strategic alliances in which it engages.
with desktop environments because the software
was not compatible. The product was also too
Strategic Imperative 5: Include strategic
heavy, slow, and too expensive. The company
implications of technology development in the
spent several years improving the product and try-
project selection and screening process
ing to figure out the appropriate target markets,
but eventually ran out of capital and failed. Methods used to evaluate and choose investment
It is not unusual for a company to lack some of projects range from informal to highly structured,
the complementary assets required to transform a and from entirely qualitative to strictly quantita-
body of technological knowledge into a commer- tive. Quantitative methods such as net present
cial product. The company can develop such as- value (NPV) techniques provide concrete financial
sets internally, at the expense of cycle time. Alter- estimates that facilitate strategic planning and
natively, the company might gain rapid access to trade-off decisions. However, NPV may fail to cap-
important complementary assets by entering into ture the strategic importance of the investment
strategic alliances.20 Consider Microsoft's strategic decision. Failure to invest in a project that has a
alliance with America Online (AOL). By the time negative NPV may prevent a company from taking
Microsoft realized the importance of offering inter- advantage of profitable future projects that build
net utilities such as a web server and a web on the first development effort. For instance, NPV
browser, it had lost considerable ground to analysis may value platform projects or derivative
Netscape Communications Corp. Netscape's web projects much higher than advanced R&D or break-
browser, Netscape Navigator, beat Microsoft's In- through projects (see Figure 2) because the former
ternet Explorer to market by almost a year. To are more likely to result in immediate revenues
rapidly deploy Internet Explorer and increase its from product sales. However, a firm that forgoes
exposure, Microsoft set up an exclusive contract basic research or development of breakthrough
with AOL, the largest online service provider in the projects may quickly find itself behind the technol-
US.21In this case, the asset gained was a distribu- ogy frontier, unable to respond to technological
tion channel that encouraged rapid adoption of change.
Microsoft's web browser. If Microsoft had taken the Some research has suggested that these prob-
time to build a better online service itself, it might lems might be addressed by treating new product
have never been able to catch up with the market development decisions as real options.24 A venture
lead attained by Netscape's Navigator. capitalist who makes an initial investment in ba-
sic R&D or in breakthrough technologies is buying
a real call option to implement that technology
later should it prove to be valuable.25 However,
Strategic Imperative 4: Choose and monitor
implicit in the value of options is the assumption
alliance partners very carefully
that one can acquire or retain the option for a small
Not all alliances for complementary technologies price, and then wait for a signal to determine if the
are beneficial.22 It may be difficult to determine if option should be exercised.26 In the case of a firm
the complementary assets provided by the alliance undertaking solo new product development, it may
partner are a good fit, particularly when the asset not be possible to secure this option at a small
gained through an alliance is something as diffi- price, and in fact, it may require full investment in
cult to assess as experience or knowledge. It is the technology before a firm can determine if the
also possible that an alliance partner will exploit technology will be successful. Furthermore, while
an alliance, expropriating knowledge while giving stock option holders can wait and exercise their
little in return. Furthermore, since managers can option once its value is clear, a firm considering
monitor and effectively manage only a limited new product development may not have this lux-
number of alliances, the firm's effectiveness will ury. By the time it becomes clear that the technol-
decline with the number of alliances to which it is ogy will be profitable, the firm may be locked out of
committed. This raises not only the possibility of the market by a competitor's dominant standard.27
diminishing returns to the number of alliances, but Although the use of option theory does not pro-
also negative returns as the number of alliances vide a problem-free solution to the development
grows. These risks can be minimized if the com- investment decision, it does provide a useful per-
pany undertakes a detailed search of potential spective for evaluating a firm's strategic alterna-
partners before entering an alliance, establishes tives. A firm may have either a project strategy of
appropriate monitoring and enforcement mecha- seeking direct venture ga:ins from the immediatte
project at hand, or an option strategy that empha- to the next stage, send the project back for further
sizes development of new technologies. While work, or kill the project. Typically, R&D and mar-
these strategies are not mutually exclusive, they keting provide input into the opportunity identifi-
represent different perspectives on the opportuni- cation and concept development stages, R&D takes
ties available to the firm: the former emphasizes the lead in product design, and manufacturing
the short run gains of the project under consider- takes the lead in process design. According to crit-
ation and does not consider other strategic im- ics, one problem with such a system emerges at
plications of the investment; the latter seeks to the product design stage, when R&D engineers fail
evaluate and incorporate the less tangible and to communicate directly with manufacturing engi-
longer-term returns of the development project. neers. As a result, product design proceeds without
manufacturing requirements in mind. A sequential
process has no early warning system to indicate
Strategic Imperative 6: Use a parallel
that planned features are not manufacturable.
development process
Consequently, cycle time can lengthen as the
Until recently, most US companies used a sequen- project iterates between the product design and
tial process for new product development, whereby process design stages.28
development proceeds sequentially from one func- To rectify this problem, and compress cycle time,
tional group to the next (see Figure 3, panel A). the firm should use a partly parallel process.29 As
Embedded in the process are a number of gates, shown in panel B of Figure 3, sequential execution
where decisions are made as to whether to proceed of the NPD stages is replaced by partly parallel
Panel A. Sequential Process
Opportunity
Identification
Concept
Development
Product
Design
Process
Design
Commercial
Production
CYCLE
TIME
Panel B: Partly Parallel Process
Opportunity
Identification
Concept
Development
Product
Design
Process
Design
Commercial
Production
FIGURE 3
Sequential Versus Partly Parallel Process
execution. Process design, for example, should customer requirements without input from market-
start long before product design is finalized, ing. By working closely with R&D, manufacturing
thereby establishing closer coordination between can ensure that R&D designs products relatively
these different stages and minimizing the chance easy to manufacture. Ease of manufacturing can
that R&D will design products difficult or costly to lower both unit costs and product defects, which
manufacture. This should eliminate the need for translates into a lower final price and higher qual-
lost time between the product and process design ity. Similarly, as we noted earlier, a lack of cross-
stages. The cycle time should be compressed. functional communication can lead to longer cycle
times.
The use of crossfunctional product development
Strategic Imperative 7: Use executive champions teams should minimize miscommunication.3' For
An executive champion is a senior member of the instance, in Chrysler's vehicle deployment plat-
company with the power and authority to support a form teams, team members are drawn from design,
project. Research has indicated that the support of engineering, purchasing, manufacturing, product-
an executive champion can improve a project's planning, finance, and marketing. Teams with di-
chances for success in a number of ways.30 An verse backgrounds have several advantages, over
executive champion can facilitate the allocation of less diverse teams.32 Their variety provides a
human and capital resources to the development broader knowledge base and increases the "cross-
effort. This ensures that cycle time is not limited by fertilization of ideas."33 The variety allows the
resource constraints. An executive champion can project to draw on more information sources.34 By
stimulate communication and cooperation be- combining members of different functional areas
tween the different functional groups involved in into one project team, a wide variety of information
the development process. Given that interfunc- sources can be ensured.
tional communication and cooperation is neces-
sary to both compress cycle time and achieve a Strategic Imperative 9: Involve customers and
good fit between product attributes and customer suppliers in the development process
requirements, the use of executive sponsors should
improve the effectiveness of the NPD process. Many products fail to produce an economic return
because they fail to meet customer requirements.
Financial considerations often take precedence
Research has indicated that the support over marketing criteria. This may lead to the de-
of an executive champion can improve a velopment of incremental product updates that
project's chances for success in a number closely fit existing business activities (for exam-
of ways. ple, the firm may overemphasize the derivative
projects shown in Figure 2).35 The screening deci-
sion should focus instead on the new product's
Teams advantage and superiority to the consumer, and
the growth of its target market.36
There has been a great deal of consensus that One way of improving the fit between a new
using crossfunctional project teams should in- product and customer requirements is to include
crease the likelihood of project success. Research customers in the NPD process. This may be accom-
in this area has examined the advantages and plished by including the customer in the actual
difficulties of using crossfunctional teams, includ- development team, or by designing initial product
ing suppliers and customers on the project team, versions and then encouraging user extensions.37
types of team structures, team leadership, and the By exchanging information effectively with cus-
constitution and management of teams. tomers, the company helps maximize the product's
fit with customer needs.
The logic behind involving customers in the NPD
Strategic Imperative 8: Include a diverse range of
process also applies to involving suppliers. By tap-
functions in project teams
ping into the knowledge base of its suppliers, a
A lack of communication between the marketing, firm expands its information resources. Suppliers
R&D, and manufacturing functions of a company may be members of the product team or consulted
can be extremely detrimental to the NPD process. as an alliance partner. In either case, suppliers
Crossfunctional miscommunication leads to a poor contribute ideas for product improvement or in-
fit between product attributes and customer re- creased development efficiency. For instance, a
quirements. R&D cannot design products that fit supplier may suggest an alternative input (or con-
figuration of inputs) that would lower cost. Addi- project manager. Heavyweight project managers
tionally, by coordinating with suppliers, managers are senior managers with substantial organiza-
can help ensure that inputs arrive on time and that tional influence. They have the power to reassign
necessary changes can be made quickly.38 Consis- people and reallocate resources, and they tend to
tent with this argument, research has shown that devote most of their time to the project. Often the
many firms using supplier interaction are able to core group of people in a heavyweight team is
produce new products in less time, at a lower cost, dedicated full time to the project and physically
and with higher quality.39 For example, during located along with the heavyweight project man-
Boeing's development of the 777, United employees ager. Nevertheless, within a heavyweight team the
(including engineers, pilots and flight attendants) long-term career development of individual mem-
worked closely with Boeing's engineers to ensure bers continues to rest with their functional manag-
that the airplane was designed for maximum func- ers rather than the project manager. They are not
tionality and comfort. Boeing also included Gen- assigned to the project team on a permanent basis
eral Electric and other parts suppliers on the and their functional heads still exert some control
project team, so that the engines and the body of over them and participate in their performance
the airplane could be simultaneously designed for evaluation. The heavyweight team is far more ca-
maximum compatibility. pable of breaking down interfunctional coordina-
tion and communication barriers, primarily be-
cause of the facilitating role of the project leader.
Strategic Imperative 10: Match team structure to
Consequently, this type of team structure gener-
project type
ally improves the performance of the NPD process,
There are a number of different ways to structure and would be appropriate for platform projects
teams: functional, lightweight, heavyweight and (see Figure 2).
autonomous.40 In a functional team, members from The autonomous team also has a heavyweight
different functional divisions of the firm meet pe- team leader. The functional representatives are
riodically to discuss the project. The team mem- also formally removed from their functions, dedi-
bers are located together, their rewards are not cated full time to the team, and located with other
tied to the performance of the project, and the team team members. A critical distinguishing feature of
may be temporary. Functional teams also lack a the autonomous team is that the project leader
project manager and dedicated liaison personnel becomes the sole evaluator of the contributions
between the different functions. There is a general made by individual team members. Also, autono-
lack of coordination and communication between mous teams are allowed to create their own poli-
the different functions involved in the product de- cies and procedures, including their own reward
velopment process. As a consequence, the dangers systems, increasing the team members' commit-
of long cycle time and a lack of fit between cus- ment and involvement.4' However, a problem with
tomer requirements and product attributes become autonomous teams is that they can become too
particularly acute. independent and get away from top management
Lightweight teams have both project managers control. Moreover, once a project is complete it may
and dedicated liaison personnel who facilitate prove difficult to fold the members of an autono-
communication and coordination among functions. mous team back into the organization since team
In lightweight teams, the key resources remain members may have become accustomed to inde-
under the control of their respective functional pendence. Therefore, an autonomous team would
managers. Lightweight team members often spend be appropriate for breakthrough projects and some
no more than 25 percent of their time on a single major platform projects. It is particularly appropri-
project. Because of these characteristics, light- ate when the existing routines and culture of the
weight teams, are often unable to overcome inter- organization run counter to the objectives of the
functional coordination and communication prob- project, and the new project is likely to result in the
lems. Consequently, lightweight teams may not development of a new business unit. Several of the
improve the success of the product development business units of Quantum Corporation, a major
process. While the lightweight team has deficien- disk drive manufacturer, were formed in this way.
cies, it may be appropriate for derivative projects These business units are then integrated function-
(see Figure 2), where high levels of coordination ally in a matrix-like structure.
and communication are not required. Table 1 summarizes a number of key dimensions
Heavyweight teams also have project managers across which the four teams vary. Note that the
and dedicated liaison personnel. A critical distinc- potential for conflict between the functions and the
tion, however, is the power and influence of the team, and particularly the project manager, rises
Table 1
Key Characteristics of Different Types of Teams
Lightweight Heavyweight Autonomous

Characteristics Functional Team Team Team Team
Project Manager No Yes Yes Yes

Power of Project Manager Low High Very High
Primary Orientation of Function Function Team Team
Team Members
Location of Team Members Functions Functions Co-Located with Co-Located with Project
Project Manager Manager
Evaluation of Team Functional Heads Functional Project Manager and Project Manager
Members Heads Functional Heads
Incentives Skewed Towards Functional Functional Team and Team Performance
Performance Performance Functional
Performance
Potential for Conflict Low Low Moderate High
between Team and
Functions
Degree of Crossfunctional Low Moderate High High
Integration
Degree of Fit with Existing High High High Moderate-Low
Organizational Practices
Appropriate For: Not Appropriate Derivative Platform Projects/ Breakthrough Projects
Projects Breakthrough
Projects
as we move from functional teams to autonomous should be involved in the development of its mission.
teams. This occurs because the independence of The team's mission should be encapsulated in a
heavyweight and autonomous teams may mean clear and explicit project charter, whose purpose is to
that they pursue goals counter to the interests of articulate the broad performance objectives of the
the functions. It is the task of senior managers to team. Once the team charter is established, core
keep such conflict in check. team members and senior managers must negotiate
a contract book that defines in detail the basic plan
to achieve the goal laid out in the project charter.
Strategic Imperative 11: Match team leader
Typically, the contract book will estimate the re-
attributes to type of team
sources that will be required, the development time
An important factor determining the effectiveness schedule, and the results that will be achieved. It is
of project teams, particularly of heavyweight and common practice following negotiation and accep-
autonomous teams, is the kind of leadership skills tance of this contract for all parties to sign the con-
exerted by the project manager.42 Project managers tract book as an indication of their commitment to
in heavyweight and autonomous teams must have honor the plan and achieve the results. Establishing
high status within the organization, act as concept a mission, charter, and contract book for the team not
champions for the team within the organization, be only increases the team's awareness and commit-
good at conflict resolution, have multidiscipline ment to the project's objectives, but provides a tool
skills (i.e., must be able to talk the language of for monitoring and evaluating the team's perfor-
marketing, engineering, and manufacturing), and mance in meeting its objectives.
be able to exert influence on the engineering, man-
ufacturing, and marketing functions.43 Other
things being equal, teams whose project managers
Tools
are deficient on one or more of these dimensions
will have a lower probability of being successful. Some of the most prominent of these are Stage-
Gate processes, QFD-House of Quality, Design
for Manufacturing, and Computer Aided Design/
Strategic Imperative 12: Establish mission,
Computer Aided Manufacturing. Using the avail-
charter, and contract book for the project team
able tools for improving NPD processes can greatly
To ensure that the project team has a clear focus and expedite the NPD process and maximize the prod-
commitment to the development project, the team uct's fit with customer requirements. Table 2 sum-
Table 2
Tools Appropriate for Different Types of Projects
Appropriate for.
Tools Basic R&D Breakthrough Research Platform Projects Derivative Projects
Stage-Gate Process X X XXX XX

QFD-House of Quality X XXX XX
Design for Manufacturing XXX XXX
Computer Aided Design XXX XXX XXX XXX
Computer Aided Manufacturing XXX XXX
marizes the usefulness of each tool to different tional communication, and through that, on cycle
types of projects. time and the product/customer fit.47
The organizing framework for QFD is the concept
known as the house of quality (see Figure 4), a
Strategic Imperative 13: Use appropriate tools to
matrix that maps customer requirements against
improve the new product development process
product attributes. The starting point is to identify
Stage-Gate Processes. The Stage-Gate process is a customer requirements. In the figure shown, mar-
method of managing the new product development ket research has identified five attributes that cus-
process to increase the probability of launching tomers want from a car door-that it be easy to
new products quickly and successfully.44 The pro- open and close, that it stay open when the car is
cess provides a blueprint to move projects through parked on a hill, that it does not leak in the rain,
the different stages of development: 1) idea gener- that it isolate the occupant from road noise, and
ation, 2) preliminary investment, 3) business case that it afford some protection in side-on crashes.
preparation, 4) product development, 5) product The next step is to weight the requirements in
testing, and 6) product introduction. terms of their relative importance from a custom-
The process is used by such companies as IBM, er's perspective. Once this has been done, the team
Procter & Gamble, 3M, General Motors and Corn- needs to identify the engineering attributes that
ing. In fact, Corning has made the process manda- drive the performance of the product-in this case
tory for all information system development the car door. In the figure shown, four attributes
projects, and Corning managers believe that the are highlighted; the weight of the door, the stiff-
process enables them to better estimate the poten- ness of the door hinge (a stiff hinge helps the door
tial payback of any project under consideration. stay open when parked on a hill), the tightness of
They also report that the Stage-Gate process has the door seal, and the tightness of the window seal.
reduced development time, allows identification of After identifying engineering attributes, the
projects which should be killed, and increases the team fills in the body of the central matrix. Each
ratio of internally developed products that result in cell in the matrix indicates the relationship be-
commercial projects.45 The Stage-Gate process is tween an engineering attribute and a customer
primarily used for research projects that are aimed requirement. This matrix should indicate both the
at developing a specific commercial product, and direction and strength of the relationship. A fourth
is more likely to be used for major platform projects piece of information in the house of quality is con-
than derivative projects. It could also be used, tained in the roof of the house. The matrix here
however, to assess the resources or advantages to indicates the interaction between design parame-
be gained through development of a basic R&D or ters. Thus, the negative sign between door weight
breakthrough research project. and hinge stiffness indicates that a heavy door
QFD-The House of Quality. QFD (originally de- reduces the stiffness of the hinge. The final piece of
veloped in Japan46) is a conceptual organizing information in the house of quality is a summary of
framework for enhancing communication and co- customer perceptions of the company's existing
ordination between engineering, marketing, and product compared with that of its competitors-in
manufacturing personnel. It does this by taking this case A and B.
managers through an instructional problem solv- The great strength of the house of quality is that
ing process in a very structured fashion. Advocates it provides a common language and framework
of QFD maintain that one of its most valuable within which the members of a project team may
characteristics is its positive effect on crossfunc- fruitfully interact. The house of quality makes the
X Competitor A
* Competitor B
X Company
ENGINEERING / _______/ \ Competitive Data on

ATTRIBUTES Weight of Stiffness of Tightness Tightness Customer Perceptions
Importance Door Hinge of Door of Window 1 2 3 4 5 6 7
Seal Seal Poor Good
Easy to Open 6 T--
StaysOpenonaHill 5 - ++
CUSTOMER
REQUIREMENTS Does not Leak 10 ++ ++
Isolates Occupant 8 +
from Road Noise
Crash Protection 8 ++ *
FIGURE 4
House of Quality
relationship between product attributes and cus- pursuing a goal that is congruent with the strate-
tomer requirements clear, focuses on design gic intent of the company, and when QFD is
tradeoffs, highlights the competitive shortcomings viewed for what it is-an aid to decision making
of the company's existing products, and helps rather than an end in itself.
identify what steps need to be taken to improve Design For Manufacturing. To facilitate integra-
them. tion between engineering and manufacturing, and
to bring issues of manufacturability into the de-
sign process as early as possible, many companies
The house of quality makes the
have implemented design for manufacturing meth-
relationship between product attributes ods (DFM).Like QFD, DFM represents nothing more
and customer requirements clear, focuses than a way of structuring the NPD process. One
on design tradeoffs, highlights the way in which DFM finds expression is in the artic-
competitive shortcomings of the ulation of a number of design rules. A series of
company's existing products, and helps commonly used design rules are summarized in
Table 3, along with their expected impact on per-
identify what steps need to be taken to
formance.
improve them. As can be seen, the purpose of such design rules
typically is to reduce costs and boost product qual-
Exploratory research has identified a number of ity by designing products that are easy to manu-
project and implementation characteristics that facture. This means reducing the number of parts
distinguish successful attempts to apply QFD tech- in a product, eliminating any time-consuming ad-
niques from failed attempts.48 QFD seems to work justments that have to be made to the product
best for less complex product development during manufacturing, and eliminating as many
projects, where QFD is seen as an investment that fasteners as possible. The easier products are to
has the commitment of team members, where there manufacture, the fewer the assembly steps re-
is strong crossfunctional integration, where QFD is quired, the higher labor productivity will be, and
seen as a means of achieving an end, rather than hence, the lower unit costs. Also, the easier prod-
a goal in its own right, and where the goals of the ucts are to manufacture, the higher product quality
project stretch capabilities (note the fit with the tends to be.
concept of strategic intent discussed earlier). All of The effect of adopting DFM rules can be dra-
this would seem to suggest that QFD works best matic. Taking manufacturing considerations into
when used as a tool by a heavyweight project team account at an early stage in the design process can
Table 3
Design Rules for Fabricated Assembly Products
Design Rule Impact Upon Performance
Minimize the number of parts Simplify assembly; reduce direct labor; reduce material handling and inventory
costs; boost product quality.
Minimize the number of part numbers Reduce material handling and inventory costs; improve economies of scale
(use common parts across product family) (increase volume through commonalty).
Eliminate adjustments Reduce assembly errors (increase quality); allow automation; increase capacity
and throughput.
Eliminate fasteners Simplify assembly (increase quality); reduce direct labor costs; reduce squeaks
and rattles; improves durability; allows for automation.
Eliminate jigs and fixtures Reduce line changeover costs; lower required investment.
compress cycle time. Also, because DFM tends to ferent product variations, and allow for more vari-
lower costs and increase product quality, DFM has ety and customization in the manufacturing pro-
a favorable impact on critical product attributes cess. Computer aided design is often used early in
that customers normally require, such as high the development process, and may be imple-
quality and an attractive price relative to the fea- mented for basic R&D and breakthrough research
tures of the product. When NCR used DFM tech- projects, in addition to being used in the design of
niques to redesign one of its electronic cash regis- platform and derivative projects. Computer aided
ters, it found it could reduce assembly time by 75 manufacturing is used in the later stages of those
percent, reduce the parts required by 85 percent, projects that become commercial projects, and
utilize 65 percent fewer suppliers, and reduce di- therefore is more useful for improving platform
rect labor time by 75 percent.49 and derivative projects.
Because DFM is oriented around improving the
manufacturability of a product, it is more useful for
Conclusion
platform and derivative projects than for basic
R&D projects or breakthrough research. Despite the rapidly increasing amount of attention
Computer Aided Design/Computer Aided Manu- that new product development has received over
facturing. Computer aided design (CAD) is another the last decade, the development project failure
product development tool worthy of note. Rapid rate is still very high. Many companies develop
advances in computer technology have enabled interesting products- but only those firms that are
the development of low priced and high powered effective in developing products that meet cus-
graphics-based workstations. Using these work- tomer needs and efficient in allocating their devel-
stations, it is now possible to achieve what at one opment resources will succeed in the long run.
time could only be done on a super-computer: con- Better new product development processes should
struct a three-dimensional working image of a translate into a higher completion rate of projects,
product or subassembly. The advantage of this more projects meeting their deadlines and budget
technology is that prototypes can now be built and requirements, and more new products meeting
tested in virtual reality. The ability to quickly ad- their sales objectives and earning a commercial
just prototype attributes by manipulating the 3-D return.
model allows engineers to compare and contrast This article describes those strategies that have
the characteristics of different variants of a prod- been shown to improve the process of new product
uct or subassembly. This can reduce cycle time development, and about which there is a great
and lower costs by reducing the need for physical deal of consensus. This is not meant to imply that
model building. Visualization tools and 3-D soft- other, newly emerging processes will not also im-
ware are used to allow nonengineering customers prove new product development processes. This is
to see and make minor alterations to the design an area that is receiving a great deal of attention
and materials. This has proven to be particularly in both managerial and academic arenas. Just as
valuable in architecture and construction. innovation is rapidly producing new products from
By implementing machine-controlled processes which we may choose, so too is the research into
as in computer aided manufacturing (CAM), man- the NPD process producing new methods of config-
ufacturing can operate faster, and accommodate uring and managing development projects. Stay-
more flexibility in the manufacturing process.50 ing abreast of the work being done in this area is
Computers can automate the change between dif- challenging. Being able to rapidly assimilate and
implement strategies for maximizing the effective- P., Robertson, A. B. & Townsend, J. 1974. SAPPHO Updates-
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28
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About the Authors
Using the NewProd system, Journal of Product Innovation Man- Melissa A. Schilling is an assistant professor of management
agement, 2: 34-44. policy at the School of Management of Boston University. Pro-
37 Butler, J. E. 1988. Theories of technological innovation as
fessor Schilling received her PhD in strategic management from
useful tools for corporate strategy, Strategic Management Jour-
the University of Washington in 1997. She has published several
nal, 9: 15-29. articles in peer reviewed academic journals, including the
38Asmus, D. & Griffin, J. 1993. Harnessing the power of your
Academy of Management Review, Journal of Management His-
suppliers, McKinsey Quarterly, Summer (3): 63-79. Bonaccorsi, tory, and Public Productivity and Management Review. Her
A. & Lipparini, A. 1994. Journal of Product Innovation Manage-
current research interests include the strategic development
ment, 11(2): 134-146. and management of technology, stakeholder theory, and corpo-
39 Birou, L. & Fawcett, S. 1994. Supplier involvement in new
rate governance.
product development: A comparison of US and European prac-
tices, Journal of Physical Distribution and Logistics Manage- Charles W. L. Hill is the Hughes M. Blake Endowed Professor of
ment, 24(5): 4-15, and Ansari, A. & Modarress, B. 1994. Quality Strategic Management and International Business at the School
Function Deployment: The role of suppliers. International Jour- of Business, University of Washington. Professor Hill received
nal of Purchasing and Materials Management, 30(4): 28-36. his PhD in industrial organization economics in 1983 from the
40 Wheelwright, S. C. & Clark, K. B. 1992. Revolutionizing University of Manchester's Institute of Science and Technology
product development: Quantum leaps in speed, efficiency and (UMIST) in Britain. He has published over 40 articles in peer
quality. New York: Free Press. reviewed academic journals, including the Academy of Man-
41 Damanpour, F. 1991. Organization innovation: A meta- agement Journal, Academy of Management Review, Academy
analysis of effects of determinants and moderators, Academy of of Management Executive, Strategic Management Journal, and
Management Journal, 34(3): 555-590. Organization Science. He has also published two best-selling
42Clark, K. B. & Wheelwright, S. C. 1993. Managing new college texts, one on strategic management and the other on
product and process development. New York: Free Press. Mc- international business.
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Managing the new product development process: Strategic imperatives, product

Article · December 1998

Melissa A. Schilling Charles William Leslie Hill

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Published by: Academy of Management

Managing the new product

Melissa A. Schilling and Charles W. L. Hill

3. Use strategic alliances to gain

Issue 4: 13.Use appropriate tools to

New Core Product Next Generation Addition to Derivatives

Panel A. Sequential Process

Lightweight Heavyweight Autonomous

Project Manager No Yes Yes Yes

Tools Basic R&D Breakthrough Research Platform Projects Derivative Projects

Stage-Gate Process X X XXX XX

ENGINEERING / _______/ \ Competitive Data on

Easy to Open 6 T--

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