Constant innovations and outstanding technologies form the basis for the success of many companies.

Although most companies already know that working with simple tools such as Excel task lists or email traffic significantly slows efficiency and time-to-market, most are still unsure of what is really important in New Product Development.

lightbulb on a pinupboard

In order to give our recent webinar a written form, we have written an article on the subject, so that all those unable to attend also have the opportunity to gain an insight into the matter.

Although product innovations are so important, many fail after entering the market. According to a study published in the Journal of Product Innovation & Management, we are talking about 40%-50%. These usually must be taken from the market, before they supply at all a considerable financial net yield. In addition, new product launches are on average six times more expensive than simple product line extensions.
Nevertheless, companies still have a certain amount of pressure to bring new products to market. On the one hand there is pressure from consumers and on the other hand from competitors.
A study from 2015 shows that 63% of the consumers who participated in the study value innovation. Customerthink shows that it is particularly important for 43% of those surveyed to always buy from innovative companies.

Furthermore, product innovation is the driving factor for companies that seek growth. A McKinsey report showed that half of respondents said that developing new products, services or business models is a key to organic growth over the next three years. The study shows that companies are increasingly investing in the creation of new products. They invest in both existing and new markets to achieve organic business growth.
Given the importance of the cost of creating and launching new products in conjunction with the failure rate, it is particularly important to successfully plan, develop and bring product innovations to market

The innovation process of products is a complex construct. It begins with the first ideas or thoughts and extends all the way to the market launch. All processes that are included here must function smoothly and optimally in order not to lose time, costs and opportunities.

Which obstacles are the most frequent and how can this be prevented?

As already mentioned, the development of a successful product begins with the first thought or idea that needs to be handled correctly.

The lack of a strong idea pipeline

Many companies don’t anticipate the importance of this point, because this is where the entire process begins. It represents the entire foundation of the product launch. When ideas are generated and captured, product and portfolio managers can review them based on strategic direction, potential value, risk, and resource availability before taking them further. This ensures that resources are not wasted on ideas that sound good on one side but are not valuable enough or too expensive for the business.

Ideally, an enterprise platform should be created so that these new product ideas can be captured so that the idea pipeline can be better checked and prioritized. The goal is to recognize whether individual ideas are good, compare the opportunities in the pipeline and finally identify the best initiatives.
To achieve these goals with one tool, it should provide a portfolio management approach for screening the ideas.

Only when a database has been created where ideas are reviewed, analysed and prioritized companies can make decisions and statements about potential values, risks, resource availability before working on the ideas. This step is especially important as otherwise no real investment decision can be made.

In the best case, customers or partners should also be involved in the idea generation process. In the end products are developed in the interests of consumers in order to satisfy their needs and requirements.

This already leads to a further point, which is very important:

The needs or requirements of the customers are not met

One of the biggest failures of companies experience in product innovation is due to poorly defined customer requirements.

In 1970, AT&T, a North American telecommunications group, launched the “Picturephone” after years of research and product development.
The company’s executives believed that one million units would be sold within 10 years after the launch.
3 years after the release, the product was withdrawn from the market due to lack of customer interest.

Why did the Picturephone fail?

As it turned out, users found the device too bulky, the controls unfriendly and the image too small to really enjoy.
Blinded by their own vision, the company ignored negative user feedback from surveys and developed a product that ultimately failed to meet customers’ actual needs and desires.

A big issue that can cause many problems is the lack of insight and overview of company values and the associated difficulty in measuring innovation performance.

Insight and measurement of innovation performance

One problem with which many companies struggle, not only in the New Product Development process, is the lack of insight of the organization. Although this sounds like an obvious problem, it is still often underestimated.
In most cases, the cause lies in the technology used. Simple desktop tools were not developed to support company-wide and/or multi-product launches. Therefore, communication is often verbal, through post-it notes or corridor-long printouts of Gantt charts that need to be updated manually. Key stakeholders are often unaware of critical changes, and the chaos of the imminent catch-up process is never a nice picture.

A real-time insight into company values is a prerequisite for production companies. It must be possible to call up all the company’s information at any time. Without real-time insight into assets or project milestones, for example, it becomes more difficult and takes up all the valuable working time to make innovation performance measurable. Accordingly, there is an increasing risk that projects will not be recognized in terms of how they perform, whether they are still on budget, on schedule and whether they are still profitable for the company.

Measurement of risks and uncertainties

The keyword risk is also a big problem for some companies. However, not because the risk has such negative effects, but because the risks and uncertainties are unclearly measured.
Risk is an integral part of any product initiative. The more innovative, the riskier it is. If the plan is well defined, risks and problems can be identified earlier and thus alleviated more easily. Furthermore, if an insurmountable risk is identified early, a decision can be made to terminate a project before too much investment is made; the only limitation is that management must be on board with project completion. Often, ongoing development projects are not killed when they are already underway, which is often a big mistake in the end.

For companies it can be crucial to be able to monitor in real time how the NPD project portfolio is executed.
A product portfolio roadmap dashboard should be able to clearly identify the overall status of all projects in the organization in real time. It is important that not only information on individual projects is provided, but all other critical information such as utilization of the resources working on the project, budget, schedules, etc. and at the same time a list of where potential hazards or problems can occur.

Another problem are complex execution processes, inconsistent work results and metrics

As the saying goes: “You can’t manage what you can’t measure.” It is amazing that countless companies in our economy do not have a consistent and transparent way to measure the value of projects.. Portfolio management processes are a proven method for development teams to standardize their work and thereby eliminate time and effort by eliminating rework and duplication. Most importantly, PPM solutions have ready-made metrics in the form of reports and analysis that provide insight into different levels of granularity from time tracking to the final result. Today’s product organizations simply need a way to measure the value of their production.

This is accompanied by fragmented processes and data stores. Gaps in processes or incomplete data stores create a huge administrative burden to track people’s costs, status and work processes.

Furthermore, so many people are familiar with it: The balance between resources and demand. Those who do not have an overview of resource utilization are essentially in the dark. The right solution and the right processes help product managers to recognize who can do what, when, and what lies ahead of them. This helps them create a portfolio that balances innovation and other projects.
Too many projects in the company and too few available resources often result in late market entries or missed start windows. As a consequence, time is lost and further costs are incurred.
The evaluation of the pipeline in terms of value is only part of the story. Resources will always be a problem. No company will ever have enough resources available to do everything they want to do.
What is important here is that a capacity planner, i.e. a way to manage resources, provides 100% visibility of resource usage within the organization. It would be ideal for companies to know which employees are working at what capacity, how many hours they have left, and how the available resources can be used to maximize the benefits for the company.

The New Product Development Lifecycle

Wherever you are in an organization, decisions must be made to maximize enterprise value and return on investment (ROI)..
There are three important aspects to companies that need to function smoothly in order to work effectively and efficiently.

New Product Development Lifecycle visualised
  • The first point is to make the right investment decisions.
    The investment portfolio represents the plan of how you want to achieve your business goals. Management should decide what to do and how to better allocate, invest and optimize limited resources according to strategy and priorities. This ensures that the portfolio has the right investment mix.
  • The second main aspect is that the company is working on the right initiatives, i.e. projects, with the right resources. It is important that the delivery plan / roadmap is always strategically aligned and can be delivered at the right time intervals in accordance with resource capacity and budget. Since resources, both people and money, are always a constraint, it is imperative that organizations make their resource use and access to planning tools 100% visible so that the right resources are prioritized for the highest value initiatives.
  • Third, it is important that organizations make the right decisions, which means qualitative project execution, reducing cycle times and costs, and effectively managing risks and issues. Best practice templates ensure that the appropriate levels of governance are used and that the right processes and methodologies are followed to ensure timely, consistent and predictable delivery.

As shown in the figure above, agility is a key element of the cycle

The course of the project is clearly defined through the waterfall method for example. All structures are hierarchically shaped and divided into several stages or phases. These phases are carried out consistently and successively as soon as one can move on to the next phase. As soon as a phase is completed, these decisions can only be reversed with great difficulty, if at all.
One advantage of this is the high level of planning security. Complex processes can be planned precisely and carried out reliably.

A major problem with the waterfall method is the lack of flexibility. If the planned procedure is strictly adhered to, the errors in the implementation only become apparent at the end of the project. Correcting these errors is accordingly expensive and time-consuming.

This is where agility comes into play. The SCRUM model shows that projects are not carried out through long-term plans, but with the help of sprints, i.e. flexible and short processing cycles in which one or more areas are each processed, checked and completed. A sprint usually lasts between one and four weeks.
These sprints are repeated until the product or intermediate product is to be as planned. How long these sprints are repeated depends on how the improvement feedback has turned out.

Although agile project management is very popular with product innovations, it can of course also have an obstructive effect on the process:

  • Lack of overall visibility of the entire project pipeline
  • Increased coordination and communication effort
  • Loss of time due to too “defensive” sprint planning
  • “Danger of tunnel vision” with extreme focusing on individual tasks
  • Difficult coordination of teams

Nevertheless, the flexible and agile approach to projects brings enormous advantages in the long term:

A continuous improvement process of the product is created by a prompt realisation and a short-term problem identification of new increments or product characteristics. In the individual repetition phases, i.e. sprints, problems or errors are already recognized and corrected and not only noticed when the finished product comes onto the market. Thus, agile methods promise better quality and an overall faster, more efficient and more cost-effective course of the project. Accordingly, agile project management offers high flexibility through adaptive planning.
Through regular meetings and backlogs, a high level of corporate transparency is created, which counteracts the problem of a lack of corporate insight, which has already been addressed earlier.
Furthermore, agile work means letting the teams act freely in their decisions. Therefore, the teams align themselves with the defined goal and work towards it. Problems that arise during this time are usually clarified internally. This not only promotes cohesion within the teams, but also leads to direct success at the end of the entire project, after all development cycles.

At the end of the day, there is a big and decisive question that determines the success of a project: “Do we get a return on our investment – whether in money, efficiency, customer satisfaction or other standards?”.