New Product Development MKTG 4320.002

1. New Product DevelopmentMKTG 4320.002 Dr. Audhesh Paswan Spring 2006 M 2:00-4:50 PM (BUSI 330) DML-COBA

2. NPD TEAM MANAGEMENTCHAPTER 14

3. Some Terms in New Products Organization • Functional: People in business departments or functional areas are involved, and product development activity must mesh with their work. • Project: The product innovation activity requires people who think first of the project. • Matrix: Two people are likely to be involved in any piece of work: project manager and line function head.

4. Options in New Products Organization 1. Functional 2. Functional Matrix 3. Balanced Matrix 4. Project Matrix 5. Venture These are listed in increasing projectization, defined as the extent to which participants see themselves as independent from the project or committed to it.

5. Options in New Products Organization 1. Functional: work is done by the various departments, very little project focus. • Usually a new products committee or product planning committee. • Does not lead to much innovation. 2. Functional Matrix: A specific team with people from various departments; project still close to the current business. • Team members think like functional specialists. • Departments call the shots. 3. Balanced Matrix: Both functional and project views are critical. • May lead to indecision and delay. • Many firms are making it work successfully.

6. Options in New Products Organization 4. Project Matrix: High projectization, team people are project people first and functional people second. • People may drive the project even against department’s best wishes. 5. Venture: Team members pulled out of department to work full time on project.

7. Operating Characteristics of the Basic Options Figure 14.3 Characteristic Functional <------------->Venture Decision Power of Leader Low High Independence of Group Low High % of time spent on project by member Low High Importance of Project Low High Degree of risk of project to firm Low High Disruptiveness of project Low High Degree of uncertainty Low High Ability of team to violate company policy Low High Independent funding Low High

8. Decision Rules for Choosing Among the Options Score each on a scale of 1 (low) to 5 (high): 1. How difficult is it to get new products in the firm? 2. How critical is it for the firm to have new products at this time? 3. How much risk to personnel is involved? 4. How important is speed of development? 5. Will the products be using new procedures in their manufacturing? 6. In their marketing? 7. What will be the $ profit contribution from each new item? 8. How much training do our functional people need in the markets represented by the new products we want? Rating: Below 15: functional matrix will likely work. 15-30: a balanced matrix will probably work. Over 30: You need a project matrix or even a venture!

9. Another View: Home Runs Vs. Singles • Characteristics of “home run” projects: • Distance from regular business -- markets, technologies, distribution system. • Conflicts with regular business -- success will threaten people in the organization’s regular business (production, sales, technical). • Major financial importance -- dollars, risk, or (especially) both. • Timing -- a project that may be a “single” in normal times -- competition, market change, threatened acquisition, insecure management team, shortage of new product projects. • (Do the opposite conditions make for singles?) • The more like a “home run” a project is, the more suited to a more projectized organizational structure.

10. Considerations when Selecting an Organizational Option • High projectization encourages cross-functional integration. • If state-of-the-art functional expertise is critical to project success (e.g., in a scientific specialty such as fluid dynamics), a functional organization might be better, as it encourages the development of high-level technical expertise. • If individuals will be part of the project for only a short time, it might make more efficient use of their time if they were organized functionally. Industrial designers may be involved in any given project for only a short time, so different projects can simply draw on their expertise when needed. • If speed to market is critical, higher projectization is preferred as project teams are usually able to coordinate their activities and resolve conflicts more quickly and with less bureaucracy. PC makers often use project teams, as they are under severe time pressure.

11. Who Are the Team Members? • Core Team: manage functional clusters (e.g., marketing, R&D, manufacturing) • Are active throughout the NPD process. • Ad Hoc Group: support the core team (e.g., packaging, legal, logistics) • Are important at intervals during the NPD process. • Extended Team Members: less critical members (e.g., from other divisions)

12. Project Manager Leader, integrator, mediator, judge Translator, coordinator Project Champion Supporter and spokesperson May be the project manager Enthusiastic but play within the rules Sponsor Senior executive who lends encouragement and endorsement to the champion Rationalist The “show-me” person Strategist Longer-range Managerial -- often the CEO Spelled out the Product Innovation Charter Inventor Creative scientist “Basement inventor” -- may be a customer, ad agency person, etc. Idea source Facilitator Enhance team’s productivity and output Participants in the Product Management Process

13. The Myths: Champions are associated with market successes. Champions are excited about the idea. Champions get involved with radical changes. Champions arise from high (or low) levels in the firm. Champions are mostly from marketing. The Truths: Champions get resources and keep projects alive. They are passionate, persuasive, and risk-taking. Champions work in firms with or without formal new product processes. Champions are sensitive to company politics. Champions back projects that align with the firm’s innovation strategy. Myths and Truths About Product Champions

14. Guiding Principles in New Product Process Implementation Clarity of Goals and Objectives Ownership Leadership, at both senior and team levels Integration with business processes Flexibility

15. Issues in Team Management • Team compensation and motivation • Monetary vs. non-monetary rewards? • Process-based vs. outcome-based rewards? • Closing the team down

16. Clues to Good Policy in Interface Management

17. Five Conflict Management Styles

18. Some Insights on Global Innovation From Senior Executives • Idea Generation: • Leverage global knowledge. • Source ideas from customers, employees, distributors, etc. • Product Development: • Focus on incremental vs. home run breakthroughs. • Share development costs. • Use standardization to better manage global operations. • Commercialization: • Early vs. late entrant decision. • Consider local support/local partner.

19. Managing Globally Dispersed Teams • Levels of language skills among team members • Physical distance among team members • Cultural differences among team members