As they say, “What gets measured, gets done.” Measurements tell us how we are doing versus a standard and can provide motivation to improve systems or change behaviors. We know how far we’ve come and how far to go to achieve a goal by reviewing metrics.
Traditional project metrics focus on the project goals alone – scope, schedule, and cost. Improved innovation metrics also measure business goals – achieving sales targets, customer satisfaction, and learning. Innovation metrics must balance short- and long-term objectives for a new product development (NPD) system to be considered maturing and successful.
Traditional Project Metrics
Project managers are taught to monitor the project by evaluating the present accomplishments compared to the project plan. These traditional metrics are known as the triple constraint. The triple constraint marks the scope, schedule, and budget of a project as planned.
During the project execution phases, the project manager will gather data on a regular basis (typically weekly) and compare the completed scope of work at that point in time to the planned accomplishments. The actual cost of the project at that point in time is also compared to the planned expenditures in the project’s approved budget. Sophisticated tools, like Earned Value Management (EVM), are frequently employed to forecast the completion of the project based on the work done to date.
Advantage of the Triple Constraint
The advantage of the triple constraint metrics for an NPD project is that they are clear and relatively simple to measure. We can correctly determine if the project plan calls for a prototype to be built halfway through the project at a cost of $1M, whether that work was done and at what cost.
Project team members often like the triple constraint metrics because they are clearly related to specific requirements (the project plan) and a pre-determined schedule and budget. If the project runs behind schedule or over-budget, go-forward actions are clear to the project manager: increase the resources to speed the project delivery.
Disadvantages of Traditional Project Metrics
However, the use of the triple constraint metrics as a sole gauge of project success tends to short-sighted and focused on the short-term. NPD projects typically involve a lot more variables and factors than just scope of work, schedule, and budget. Moreover, NPD projects are difficult to plan upfront and to establish pre-determined requirements.
A singular failure of many firms is in assuming that if the scope of work is completed as stated, on-schedule, and on-budget that the product is successful. This is not necessarily true, especially if customer requirements are omitted in the project plan.
Consider for example, a project designed to make a cup of coffee. The project requirements are specified as follows.
- Pour water into the machine’s reservoir.
- Plug in the machine to the electric outlet.
- Place the coffee cup in the proper position.
- Press the “ON” button.
- Wait for the machine to boil the water and signal a green light.
- Enjoy your beverage.
I’m afraid you’d be sorely disappointed in the product since the plan left out the step t insert the pod that holds the coffee grounds. You’d be enjoying a lovely cup of hot water, but not coffee! Worse, the project manager could have completed each exacting step to perfection so that the scope of work was 100% completed within the required time frame (schedule) and within budget.
Traditional project metrics often leave out learning opportunities and neglect the flexibility necessary to modify the project work to deliver a product that meets the customer’s needs (coffee instead of hot water).
NPD Metrics
Better metrics for innovation projects should include strategic alignment to the goals of the project and the business objectives of the organization. In addition to traditional metrics, NPD measure should include achieving sales targets, customer satisfaction, and on-going organizational learning.
Sales Goals
Ides are only converted to innovations when they are successfully commercialized in the marketplace. Unless a new product or service provides a benefit to a customer, s/he is not willing to exchange money for that product or service. Measuring real market sales – in terms of volume and profit – demonstrates the success of a new product.
During the design and development of a new product, the NPD team will test various concepts and prototypes with potential customers. As the designs become more complete, customer purchase intent is also tested. Inquiries of potential customers include whether they would purchase the product, which features are most critical, and what price range is congruent with a given feature set. Customers are also asked about the value that a new product or service brings to them.
Based on this preliminary data, the NPD team will lay out a sales and marketing plan. The sales and marketing plan may be to roll out the new product at a premium price to just a few niche customers, or it may involve a full-scale, global product commercialization with introductory prices.
Whatever sales and marketing strategy is selected for the new product, the NPD team will be able to compare initial sales to these pre-determined targets. Moreover, as the NPD team compares actual sales to the marketing plan, they can adjust either the marketing collateral or to the product itself.
New product sales data should be monitored carefully to ensure a match with the preliminary concept and prototype testing. IF there is a large gap in the real market information versus the product specifications, then the organization must determine whether to continue sales of the current product to re-design the product. However, because a robust NPD process includes frequent customer testing with qualitative and quantitative feedback, the gaps between actual new product sales and targets ought to be small.
Customer Satisfaction
Of course, products sell when consumers perceive value in using the product that is greater than the purchase price. The greater the incremental value perceived by the customer, the more satisfied is the customer with the purchase.
Customer satisfaction can be measured by purchase intent, actual sales (volume and profit), and via qualitative assessments. Customer satisfaction surveys are common for services and often utilize the “net promoter score” as a measure of success. The net promoter score compares the ratio of consumers who are very satisfied with the product or service to those who would not make a purchase again.
Additional customer satisfaction measures should be subjective and qualitative, such as inquiry whether the customer would recommend the product or service to friends or family. Customer satisfaction can also be gauged in understanding if the customer had a problem with the new product or service and how quickly and to what extent the issue was resolved.
Remember that satisfied customers make repeat purchases and will recommend the products to others. While we can measure customer satisfaction through sales, we also need to monitor trends which are usually only available via qualitative measures. Frequent customer interaction is a key to successful NPD.
Learning
Frequent customer interactions are also a huge source of learning for the NPD teams. Next generation product ideas are often born during interviews and review of surveys gauging product or service satisfaction. Moreover, talking with both potential and existing customers can validate product concepts and ideas.
Learning is also an organizational maturity metric. Not only do NPD and project teams need to learn about customer insights, organizations need to grow and learn in their internal processes to solve problems. Innovation growth metrics should count the number of trained and certified New Product Development Professionals (NPDP), number of new products launched in the prior period, number of bad ideas killed (based on customer feedback), number of site or customer visits, and so on.
There is no singular set of learning metrics that can be applied to all organizations; however, learning and implementing standard practices for NDP is a noted strength of all successful innovators.
Innovation Metrics
Innovation is critical to the growth and sustainability of most firms today. Yet, we can only measure our success and changed behaviors if we choose the right metrics.
Traditional project metrics (the triple constraint) give us short-term feedback on delivering the specific scope, schedule, and cost of a given project. The project plan must be carefully detailed and completely inclusive of all project requirements. Unfortunately, this is difficult for a fast-changing innovation environment.
While scope, schedule, and cost are important for new product projects, various other metrics can also gauge success for the project. Innovation metrics include sales targets (volume and profit), customer satisfaction, and organizational learning. These qualitative metrics might seem to be more difficult to attain; however, NPD teams should be constantly interacting with potential and existing customers throughout a project and gaining this feedback. Concept and prototype testing yield early feedback to drive the design and development of features for a new product. The right combination of features at the right price point can stimulate increased sales. And through customer conversations, the NDP team is learning and improving product delivery processes.
Learn More
We invite you to learn more about new product development and innovation metrics in an upcoming New Product Development Professional (NPDP) certification workshop. Check out our full class schedule at Simple-PDH.com. For more information, feel free to contact me at info@globalnpsolutions.com or 281-280-8717.
Reading Recommendation
- Winning at New Products by Bob Cooper
- New Product Forecasting by Ken Kahn
- The Lean Startup by Eric Ries
- Effective Project Management by Robert Wysocki
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