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Some companies, alliances of companies, and project teams are more effective than others at NPD, even though they do not necessarily have staff members who are any smarter or more creative. In this chapter we draw on our own research and on our observations of a large number of companies, as well as the research and observations of others, to describe some of the characteristics that make some companies, alliances and project teams particularly effective at NPD.

Managers sometimes face the painful necessity of having to stop an NPD process. On other occasions, they may have to divest or discontinue a current product that is no longer successful or that no longer fits the company’s strategy. This chapter takes up these situations.

New product success depends heavily on the compatibility of the product with corporate strategy, and on the formulation of a new product concept that meets market needs. Information on the market must be collected and evaluated. At the same time the NPD team must not be so constrained by current market demands that it overlooks opportunities in new markets. This chapter takes up these aspects of the creation of a new product concept.

As we saw in Chapter 1, a company can be the first to market a new product, only to have other companies quickly move in and take the market away from them. EMI invented the CT scanner, and Konica was the first to come out with an auto-focus camera, but both EMI and Konica were soon eclipsed by other firms that entered the market with improved versions of the new products. In Chapter 1 we described how Sony avoided this problem by continually making improvements after launching the Walkman.

Each new product is unique, and no two new products are developed in quite the same way. Part of the challenge for those involved in managing NPD is finding commonalities that make it possible to learn from their own experiences and those of others. In Chapter 3 we described how different processes should be used, depending on whether the new product is technology intensive, market intensive where consumer preferences are stable, or market intensive where consumer preferences are highly dynamic. The development of a new drug or copying Figure 12.1 Success factors in new product development machine should be approached very differently from the development of a new mayonnaise or a new line of women’s clothing. But, even though there are major differences in new product processes, certain success factors are generally applicable. These factors, and how they fit together, are shown schematically in Figure 12.1.

So far we have looked at the various stages of the NPD process, why the process sometimes fails, and how organizations can be structured to increase the chance of success. In this chapter we will look at how new products can be evaluated during the various stages of the NPD process.

In this chapter we explore creativity in research organizations. A major problem facing managers is how to structure organizations to conduct research that is effective for the company. Machine-like organizations with their rigid hierarchical structures, tightly specified roles, elaborate decision-making rules and standard operating procedures (SOPS) are highly efficient at performing standard tasks. But they do not do well when it comes to tasks like research, where inputs cannot be standardized, where processes require frequent adaptation, and where outputs must be dynamically tailored for acceptance in fast changing environments. Many researchers on organizations and the psychology of creativity conclude that the best organizational form to carry out non-routine objectives is one that allows maximum flexibility and gives almost unlimited discretion to organization members. Some scholars call this an “organic” form of organization and contrast it with the “mechanical” form associated with traditional bureaucracies.57 In this chapter we draw on some of our own research to suggest that while the mechanical organizational form is not suited to research, the pure organic form also has its problems. We propose a third model.

The successful development of different types of products requires that different NPD processes be used. Some products, for example, are technology intensive, such as copiers and pharmaceuticals. Some are market intensive, but in markets where consumer preferences are relatively stable, such as cosmetics and mayonnaise. And for some products, consumer preferences are crucial, but are highly dynamic. An example is fashionable women’s clothing. The successful development of new technology intensive products requires considerable technological testing. With market intensive products extensive market testing is needed. And, when the product involves a high level of demand uncertainty, it is necessary to use a trial and error experimental approach involving several cycles of short production runs and dynamic market feedback.

Often a new product development (NPD) process does not result in a new product. This may mean that the NPD process should be considered a failure. The company may desperately need the new product. But sometimes a NPD process can be considered successful because it prevents a money-losing product from being launched. Discontinuing development at an early stage may be the right decision. It may keep the company from spending a lot of money on a product that has poor prospects. In any case, no one should expect that every NPD process, or even most of them, will result in a product. To take an extreme example, the pharmaceutical industry screens an average of 10,000 molecules to find 250 suitable for preclinical testing. Of the 250 undergoing testing, only ten make it through to clinical trials, and only one is approved to go on the market. An effective NPD process is not one that makes a new product out of each new idea, but rather one that efficiently selects and develops the ideas that result in products that best fit the needs of the corporation and its customers.

In this book we define a “new product” as a product that is new to the company. If the product is simply an improved version of a product the company already has on the market, it’s not a new product for our purposes. On the other hand, if a product is new to the company, even though other companies already make it, we count it as a new product. Such products may not be new to the world, but they are crucial to the success of the company, and developing them is no simple matter.

One of the most dramatic developments in NPD over the past 10 to 15 years has been the globalization of new product development. Today some of the largest and fastest growing markets for new products are in countries that were not truly part of the global economy a generation ago. China, for example, is now the largest market for cellular telephones. China and India are the world’s fastest growing markets for automobiles and many consumer appliances. China, India and other emerging economies are also, increasingly, centers of excellence for the technologies key to certain products. Major new challenges for managers of NPD include both finding ways to develop products for a wider range of global markets than ever before, and drawing on the capabilities of human and technological resources that were largely ignored in the past. This chapter deals with these challenges.

INTERNATIONAL differences in the diffusion of the basic oxygen furnace (BOF) have been examined in numerous studies. The reasons for this interest are clear. BOFs are cheaper to build than open hearths, produce steel at lower cost, and better lend themselves to automation and pollution control. Thus, within two decades of the BOF's introduction by a small Austrian steelmaker in 1952, it had supplanted the open hearth as the world's most widely used steelmaking process. A question for research has been whether a slowness to adopt the BOF and other new technologies may have been a factor in the decline of the U.S. steel industry. Widely differing conclusions have been reached. Most analyses, however, have been based on aggregate production statistics. 1 The purpose of this study is to introduce new, disaggregated data to compare the adoption of the BOF by the U.S. and Japanese steel industries. Our data directly compare the number of times the BOF was chosen over the open hearth when firms in the two countries were expanding steelmaking capacity. These data lead to conclusions that differ from those based on aggregate data. We are particularly concerned with two issues: How did the U.S. and Japanese steel industries compare in their propensity to use the BOF when this technology was not yet universally recognized as being superior to the open hearth? And: Which nation's industry was more aggressive in replacing open hearth capacity with BOF when the BOF was known to be superior? An answer to the first question could reflect managerial performance in quickly recognizing and exploiting new technology. An answer to the second could indicate performance in replacing obsolete equipment.

At the end of 1982 Japan's robot population was triple that of the United States, and Japan's robot producers seemed positioned to dominate this strategic new industry. Underlying this early success was an elaborate set of government policies including low-interest loans, special depreciation allowances, and government-coordinated research projects. Many argue that the Japanese have been successful not only in developing their robotics industry but also in coping with the social impacts of this new technology. Their success, however, should not be overstated. Some Japanese fear that the introduction of robots may lead to record unemployment by the end of the decade. Women and certain other groups may already be disproportionately bearing the costs of the change in technology. This suggests that while we may have much to learn from Japan, it is a mistake to regard Japan as a paragon. What is needed is for Americans to study the Japanese experience with robotics, just as the Japanese routinely study our experiences, not to borrow uncritically but to seek new ideas and insights.