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Using effective methods to boost success
- 1. 1Best Practices in New Product Development.pptxApril 2013Using effective methodsto boost successBest practices innew product development
- 2. 2Best Practices in New Product Development.pptxFrom cost focus to product value management – Analysis of >400development projects reveals new product development best practices> In the last few years, the challenges for new product development have increased tremendously.Companies are facing intense competition from emerging markets, stricter standardization andregulations as well as changing customer behavior and requirements> If companies fail to get the development process right, their products will flop or be too expensive(up to 80% of all product-related costs are determined in the development phase)> We have analyzed over 400 product development projects at leading manufacturing companiesand identified best practices in new product development. The key findings are:> Successful companies focus on product value rather than merely on product costs> By doing so, they both satisfy customers and increase product profitability> Successful companies improve product value by using effective new productdevelopment methods and also by creating the right frameworkManagement Summary
- 3. 3Best Practices in New Product Development.pptxCONTENTS© Roland Berger Strategy ConsultantsA. BACKGROUND AND CHALLENGESPage 4C. FROM COST FOCUS TO PRODUCT VALUE MANAGEMENTPage 16B. KEY FINDINGS OF THE STUDYPage 7
- 4. 4Best Practices in New Product Development.pptxA. Background and challenges
- 5. 5Best Practices in New Product Development.pptxSuccessful new product development is a growingstrategic challenge for many companies> Increasing global competition in all major markets:More new products from new competitors> Shorter and shorter product lifecycles: Companiesare forced to churn out new innovations and newproducts in shorter times and greater frequency> High failure rates in many industries: Up to 60% ofnew products/innovations flop> Early cost determination: Up to 80% of product-relatedcosts determined already in the product developmentphaseBackground and challenges for companiesNEW PRODUCTDEVELOPMENTis afor companiesgrowingstrategicchallenge
- 6. 6Best Practices in New Product Development.pptxThe key question is: How can companies improve productdevelopment and maximize product success?Scope and key questionsKEYQUESTIONS> How to improve newproduct developmentand maximize newproduct success?> What are the mosteffective methods tosupport new productdevelopment?> How can companies setup an optimalframework for realizingsuccessful new productsdevelopment?APPROACHSCOPE: NEW PRODUCT DEVELOPMENTAND IMPACT ON PRODUCT SUCCESS> Expert interviews> Large scale empiricalstudy of 410 new productdevelopment projects> Ph.D. research togetherwith the BrandenburgTechnical UniversityCottbusNewproductsuccessCustomerpreferencesand trendsEconomicbackground,reaction ofcompetitorsNewproductdevelop-mentQuality ofmarketintroduction……
- 7. 7Best Practices in New Product Development.pptxB. Key findings of the study
- 8. 8Best Practices in New Product Development.pptxTo answer these questions, we analyzed 410 product developmentprojects from leading manufacturing companiesStudy of 410 product development projectsINDUSTRIES12%13%14%26%35%COMPANY SIZE [FTE]> 5,00020%1,000 to< 5,00026%500 to < 1,00017%250 to < 50022%< 25015%Other (building materials,aviations, chemicals)ElectronicsAutomotivePlantengineering MechanicalengineeringSmallcompaniesMedium-sizedcompaniesLargecorporations
- 9. 9Best Practices in New Product Development.pptxKey finding: Successful companies increase product profitability byusing effective new product development methodsSuccessful companies apply moremethods in new product developmentand use them more intensively1.Successful companies select the rightmethods at the right time2.Successful companies combine differentmethods from R&D, Market Research,Purchasing, Quality, Logistics and ProjectManagement3.KEY RESULTS
- 10. 10Best Practices in New Product Development.pptxCompanies that apply more methods in product development anduse them more intensely have significantly higher project successImpact of method application on product successSUCCESSFUL COMPANIES APPLYMORE METHODS …… AND THEY USE THEMMORE INTENSIVELYBelowaveragemethod useAboveaveragemethod useLowintensityof useHighintensityof useProductsuccess1)Productsuccess1)Companies thatuse an aboveaverage numberof methods havea 11% higheroverall productsuccess rateCompanies thatapply methodsparticularly intensivelyhave the highest overallproduct success rate+11% +19%1) Product success measured as a combination of different aspects (market share, product revenues, product cost, return on investment, etc.)1. MORE METHODS and INTENSIVE USE
- 11. 11Best Practices in New Product Development.pptxSpecified tenders1Target costing2Milestone planning(stage gate, critical pathanalysis)1Risk monitoring andcontrolling2Benchmarking1SWOT analysis2Failure mode and effectanalysis (FMEA)126 methods were analyzed in detail, thereof 15 purchasing,project management and quality and logistics methods … (1/2)PURCHASINGMETHODSQUALITY/LOGISTICSMETHODS.21**.15**.15**.14**PROJECT MANAGEMENTMETHODSCROSS-FUNCTIONALMETHODS.21**.17**.16**.14**.10.10.07.18**.16**.15**.14Supplier management anddevelopmentProduct value/profitabilityanalysisCreativity techniques(brain-writing…)3 3Low-cost/best-cost countrysourcing3 3Total cost of owner-ship (TCO)4 Project controlling(time and budget)4 Scenario planningand analysis4Design for six sigma(DFSS)2Methods sorted by impact on success.Correlation coefficients (**/*results are significant at error probability of 1%/5%)1-42. RIGHT METHODS
- 12. 12Best Practices in New Product Development.pptxDesign for manufacturing/assembly (DFM/A)1Quality function deployment(QFD)2Collaborative supplierintegration4Standardization/modular design57... and 11 research and development and customer integration/market research methods (2/2)CUSTOMER INTEGRATION/MARKET RESEARCHMETHODSComputer-aided engineering/design.21**.14**.12*.14**RESEARCH AND DEVELOPMENTMETHODS.33**.15**.15**3 Simultaneous/concurrentengineering6 (Rapid) PrototypingPrice test/price sensitivityanalysis.23**.19**.19**.13*Product(design) test1Consumer interviewsand observations23Conjointanalysis4Methods sorted by impact on success.Correlation coefficients (**/*results are significant at error probability of 1%/5%)1-72. RIGHT METHODS
- 13. 13Best Practices in New Product Development.pptxSuccessful companies select the right methods at the right timeMethod application by project stage – Particularly successful companiesMethodapplicationper stageProductdevelop-mentstageLegendCOMMENTS> Successful companiesuse market researchmethods already inearly stages tounderstand customerrequirements> Successful companiesconsider purchasing,quality and logisticsalso from an earlystage> Highest use oftechnical methods inconcept and prototypephaseIDEADEVELOPMENTPRODUCTCONCEPTDEVELOPMENTPROTOTYPEDEVELOPMENTAND TESTINGDEVELOPMENTOF FINALPRODUCTOftenusedRarelyusedPurchasingResearch and developmentCustomer integration/market researchCross functional methodsQuality and logistics2. RIGHT METHODS at the RIGHT TIME
- 14. 14Best Practices in New Product Development.pptxMost important: Using the right combination of different methods iskey to product successTHE COMBINATION OF DIFFERENT METHODSIS THE KEY TO PRODUCT SUCCESS1) Product success measured as combination different aspects (market share, product revenues, product cost, return on investment, etc.)2) Above average number of methods from all clusters usedImpact of combined (instead of isolated) use of methodsIMPACT ON PRODUCT SUCCESS COMBINATION OF METHODSCompanies that combine methods from all functions are 15%more successful with their new productsIsolatedmethoduseCombineduse ofmethods2)Productsuccess1)+15%PurchasingProjectmanagementCross-functionalQuality andlogisticResearch &developmentCustomer integration/marketing research3. RIGHT COMBINATION OF METHODS
- 15. 15Best Practices in New Product Development.pptxSuccessful companies set up the right framework: They foster top-management support and structure their product development processFramework set by successful companies1. MORE METHODSand INTENSIVE USE2. RIGHT METHODSat the RIGHT TIME3. RIGHT COMBINATIONof methods> Top-management is actively involved in the project> Top-management closely monitors the progressof the project> Top-management provides required resourcesStrong top-management support> Defined process stages with go/no-go decision gates> Dedicated gatekeepers review projects at gates> Activities per stage and corporate functions involved areclearly defined> Methods for each stage are defined and documentedRobust product development processFRAMEWORK
- 16. 16Best Practices in New Product Development.pptxC. From cost focus toProduct Value Management
- 17. 17Best Practices in New Product Development.pptxIncreased product value can only be achieved through a perspectivechange – From cost focus to Product Value ManagementEvolution of company focusTODAY TOMORROWVALUECOSTSSource: Roland BergerFUNCTIONALCOSTREDUCTIONPRODUCTVALUEMANAGE-MENT (PVM)Giving customerswhat they want> For a price theyare willing to pay> At minimum costs
- 18. 18Best Practices in New Product Development.pptxProduct Value Management pursues two basic optimization routesto satisfy customers and maximize the product marginVALUECONTRIBUTIONRESULTProductswith theright featuresat theright costCUSTOMERPERSPECTIVE1 BETTERPrice increasegreater than (>)cost increase2 SAMENew costless than (<)old cost> Brandperformance> Productperformance> Functionsand featuresCustomersatisfactionValue formulaPERCEPTION=Value/profitabilitymaximizationon product levelCOMPANYPERSPECTIVESource: Roland Berger
- 19. 19Best Practices in New Product Development.pptxExamples from different industries demonstrate that both highercustomer satisfaction and increased product profitability can be achievedBenefits – ExamplesCOMPETITIVE ADVANTAGE VIA SUPERIOR PRODUCT PERFORMANCE> Packaging size reduction – Moresustainability and reduced cost> Improvements vs. conventionalfolding box:– Reduced size by 20%– Optimized construction– Reduced material cost by 15%– Reduced logistics costs> New product idea – Panoramasunroof with improved funct. value> Improvements vs. standardsunroof:– Increased glass surface– Increased margin by ~40%– Differentiating element– Standardized across car lines,variants modularized> New packaging with improvedfunctional value> Improvements vs. conventionalpackaging:– Packaging improved: re-closable– Product handling improved:dragees– Content increased: 46 piecesSales growth of +14%~15% cost reduction ~40% margin increase ~6% price increase per pieceCar panoramasunroofCosmeticspackagingChewing gumpackaging
- 20. 20Best Practices in New Product Development.pptxProduct Value Management is enabled by methods/toolsApproachA What areconsumerpreferences(e.g. performance,features)?> Consumer interviewand observations> …B What drivescost and howcan we influencethem early on?> Target costing> Quality functiondeployment (QFD)> …C What alternativesdo we have(e.g. features,solutions)?> Collaborativesupplier integration> …D What alternativeis valued by theconsumer andincreasesprofitability?> Conjoint analysis> Price test> …Method/tool examplesCONSUMERperspectiveCOMPANYperspectiveDEVELOPMENT PROCESSSource: Roland Berger
- 21. 21Best Practices in New Product Development.pptx• Focus on target customers• Understand customer value• Choose the right methods andcombine them intelligently• Take a cross-functional approach• Think in terms of alternatives• Execute in a consistent manner• Anchor the principle of PVMin your organizationFurther reading on Product Value Management availableFurther reading think:act CONTENT Product Value ManagementKEY ELEMENTS OF PVM APPROACH
- 22. 22Best Practices in New Product Development.pptx