New product development (NPD) involves business and technical uncertainties. Sometimes, we know the markets well and can anticipate customer needs. In other instances, new technologies emerge, and we learn to apply them by making existing products more effective and more efficiently. In all situations, though, NPD involves understanding how to design and develop new products to deliver value to our customers while at the same time generating profit for the organization.
Over the past couple of weeks, we’ve examined the roles of organizational culture and risk tolerance on the selection of an NPD process. While many project management systems can be artfully applied to new product development, we recognize that these elements impact the successful implementation of a process to obtain the desired benefits.
In Part 1, we addressed the company culture (read more here) and how culture can influence the formality of an NPD system. Often firms that are more formal and rigid in investment practices rely upon traditional staged-and-gated processes. Organizations that embrace informal procedures, have high elements of trust, and are accepting of “failure” will tend to select processes that are more flexible, like Scrum.
Of course, culture is a reflection of the risk tolerance of upper management. In Part 2 of this series (read more here), we compared waterfall (staged-and-gated) processes and Agile systems as a factor of investment risk. Large financial bets tend to lead an organization to be risk-averse, while releasing products with little labor or capital investment leads to companies that are more risk-tolerant.
In between the staged-and-gated and Scrum processes are hybrid waterfall-Agile project management approaches to designing and developing new products. These systems include WAGILE Product Development (read more here) and Lean NPD (contact me at email@example.com for a case study). However, hybrid NPD systems rely on one additional factor – organizational maturity.
Innovation is tricky and most companies recognize the need to design and develop new products while also revamping existing products. However, most companies are in different places in their innovation journeys. Some firms are evolving from start-ups and needing to adopt practices to duplicate early successes. Others have been in business decades or longer and need to realize specific competitive goals, such as speed-to-market or quality delivery to the customer. Whether intentional or not, these components of organizational maturity also influence the selection of an NPD process.
The Innovation Health Assessment™ categorizes innovation teams as learning, adopting, transforming, or sustaining based on seven innovation skill areas. (Take the Innovation Health Assessment here with free registration.) As organizations learn about innovation, they often first adopt a staged-and-gated process. Such companies are growing, and the rigor of a staged-and-gated process provides a way for those funding the venture to stay connected to projects and decisions. Again, the more formal and risk-averse a company is, the more likely they are to adopt a waterfall system.
Unfortunately, as the number of projects grows as the firm grows, senior executives cannot (and should not) remain as key project decision-makers. NPD projects must advance quickly enough to take advantage of market and technical changes. With excessive bureaucracy and hierarchical decision-making, product development begins a slow decline to too many projects in flight, too few resources, and missed opportunities.
In my experience, I’ve observed companies adopting innovation goals preferentially utilize staged-and-gated processes. For example, a medium-sized food and beverage company began developing new products in addition to their direct agricultural products. They soon recognized the need to merge systems and decision-makers from several different locations to achieve revenue goals. With a formal review process for new products, both technical and commercial development became more consistent across the company. A staged-and-gated process was appropriate for this firm.
Many companies with which I’ve worked have allowed the decision-making rigor of a staged-and-gated process to become bureaucratic. An appliance manufacturer wanted to reduce both investment and customer risk. Their answer was to add multiple reviews by senior management which trickled down the from the top to the NPD teams. The working teams then spent a great portion of their time preparing slide decks to inform management that they were not taking too many risks. The staged-and-gated system was documented in a world-class manner but hindered speed-to-market and team trust.
Product Portfolio Management
As an aside, product portfolio management (PPM) keeps the senior executives involved in matching strategy and projects but elevates their decision-making to the right level. Senior executives, whether in a rapidly growing start-up or in an established firm, are responsible to establish the corporate vision and to set strategy. Strategy includes, of course, revenue and growth goals, but also informs the organization as to how innovation will work. (Read more here about PPM.)
Organizational Maturity and Innovation
So, as organizations mature and revamp their NPD processes, they often move to a hybrid waterfall-Agile method to manage projects. (Note that Agile remains an aspirational goal. It is extremely challenging to find a single corporate example of successful product development using a fully Agile process, even in the software industry.)
Hybrid processes typically adopt iterations and team structure from Agile philosophy but maintain the formality of gate reviews from the waterfall approaches. I encourage my clients to call these “Management Reviews” instead of gate reviews to build team trust and to emphasize a more light-handed approach to decision-making.
In Part 4 of this series, we will describe two hybrid project management methodologies applicable to new product development. In the meantime, register for my presentation on Hybrid Project Management Processes in NPD on 25 August 2002 at 12 pm EDT. Click here to register. Feel free to contact me at firstname.lastname@example.org if your organization is striving to find the right balance between culture, risk, and innovation maturity in new product development.
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