New product development (NPD) is typically a complex, but routine, endeavor for most mature companies. Product development and product management begin with the innovation strategy. In turn, the innovation strategy links to the corporate strategy via growth goals. For instance, one company might seek to grow its retail outlets over wholesale for a specialty product. Meanwhile, another firm is seeking to grow business in Central America over its existing European markets.

Strategy is a guiding force for both what work gets done as well as how work gets done. There are five key elements to innovation strategies that govern how NPD projects are executed. These include:

Management trust,
Risk tolerance,
Team culture,
Customer interfaces, and
Financial strength.

Let’s take a quick look at each of these components.

Management Trust

Perhaps more than any other element, trust guides how work gets done. When NPD teams are empowered to design and develop new products (within a set of boundaries and high-level constraints), the results are exceptional. On the other hand, when senior leaders micro-manage decisions (especially for those which they are far-removed), trust and productivity are destroyed. Check your level of management trust by counting the number of meetings in your organization and examining at what level decisions – including minor features and attributes – are made.

Risk Tolerance

Risk is a favorite topic of mine (read more about risk management here). However, each organization has a different level of risk acceptance, depending on management trust and financial strength. When risk tolerance is very low, management behaves with low trust.

For example, consider a consumer goods firm that recently launched a next generation product. When the product reached consumers, a fatal flaw in operation was discovered by the end-users. Rather than addressing the “fix” from a technical and marketing perspective, the executive team instead insisted on additional testing of prototypes for all future products under development, regardless of relation to product line.

A lack of risk tolerance (acceptance of learning) resulted in delayed time-to-market for all future products. Ask yourself if every project review is necessary for every product under development. Are some reviews in place just to prevent a 1:1000 error, as we observed for the company above.

Team Culture

Of course, the strategy is revealed in NPD team culture as well. Empowered teams act autonomously and make project decisions within a set of clearly defined project constraints. In my experience, most folks at the working team level want to do their jobs with excellence and advance the goals of their organization. The trouble starts when risks (learning opportunities) are limited, and management trust devolves.

Does your culture empower the NPD teams for decision-making? (Read more here about the ideal NPD team size that drives efficient decisions.)

Customer Interfaces

We design and develop products to delight our customers. By improving their lives, we increase customer satisfaction while also making a profit for the firm. Innovation strategies hinge on the degree to which NPD teams interact with customers and end-users.

Generally, broad customer interaction with the team and functions increases productivity and market satisfaction. For example, if manufacturing hears a direct message from end-users that are challenged to operate product features, the design is managed better up-front. Do you challenge your NPD teams to be collaborative and cross-functional, even at the idea stage?

Financial Strength

No corporate strategy stands without a comment on the financial strength of the firm. Some companies will cut R&D, innovation, and market spending as we enter into a period of recession. Other firms seek to strengthen their financial position via acquisition of weak competitors or key partners. Still other organizations invest in product development that is forward-looking to gain market share when economic prosperity returns.

Of course, there is no blanket, right answer that couples product development with corporate financial strength. However, a solid innovation strategy recognizes current financial models for growth based upon management objectives, team culture, and risk acceptance. If returns are suffering, consider slimming your product offerings to increase focus in target markets and technologies.

Five Elements of an NPD Strategy

As you consider your innovation strategy, be sure to address the key components that drive internal productivity and external efficiency. These elements include management trust, organizational risk tolerance, team culture, customer interfaces (more to come in a later post), and financial position of the firm. As you go forth, remember that the innovation strategy sets the tone and scope for product management across regions and functions.

For a short list of strategic questions in these five categories, click here.

Building Innovation Leaders