Impetus for Change

Jim Highsmith, director of the Cutter Consortium's Agile Project Management Practice, has identified two resolute forces impacting new product development, be it industrial products, consumer products or internal business processes. One is the continuing demand for innovation and the second the plunging cost of change (low-cost exploration) affecting a growing range of industries.

"As the uncertainty about the outcome of a development effort increases, and as the complexity of the interactions of design variables daunts cause-and-effect analysis, exploration through experimentation becomes the most effective and reliable mode of discovery," he says. "When we can conduct 1000 experiments a day for $10 apiece, creating elaborate designs that take a month to complete makes no sense. However, conducting 5000 random experiments makes no sense either. Good experiments require good experimental design.

Highsmith says it is hard to overstate the impact of low-cost exploration on product development, with undeniably valuable competitive advantage promising to accrue to those companies that can adjust their development and managerial processes appropriately. And others agree such technology is already changing the game on NPD.

According to CSIRO marketing and business development officers Barrie Finnin and Brad Cowley, product development is not necessarily in response to new needs. "Often it is that the technology is getting closer, for the first time, to being able to meet needs; developing a new product is about the technology getting stronger in areas where the problem needs to be solved or the market exists.

"For example, science fiction movies had people talking on mobile phones 60 years ago, but it is only recently that the technology has enabled them to be realized at a reasonable cost of manufacture of products for a broad market.

"Software is playing an increasing role in product development," they say. "The benefits derived from product, process or R&D software tools help to reduce the trial and error phase of development, but we do not quite yet have expert systems capable of developing ingenious new concepts. Available computers and software tools are very good at testing product concepts, giving them a precursory desktop evaluation before deciding which concepts to advance to prototype stage."

Five Forces

Tom Manning, a leader in Bain & Company's Information Technology Practice, sees five major forces acting on new product development. First is the aforementioned availability of new technology, with a newfound ability to get very particular about the measurement, characteristics and traits of new products and services, allowing for their extension to much broader sets of consumers and users - a trend seen repeatedly in many industries.

The second factor, according to Manning, is the lowering cost of development talent. The introduction of India and China into the R&D game has seen the entry of "talent inputs" at a much lower cost basis than ever before in great quantity and allowed the entry of extraordinarily imaginative individuals into the R&D space for the first time.

"With companies like Motorola with 19 R&D centres in China and GE expanding its presence there, as well as Microsoft and others, we're seeing a transformation taking place in the way in which R&D will be done worldwide, how it will be done, and potentially, how productive it will be, because essentially we will ultimately see a 24x7 R&D type functionality at many large companies," he says.

Third, and critical, has been the increased use of Internet-enabled collaboration, which has propelled the likes of Ford to new levels of productivity in creating global car designs, reusing platforms very efficiently and sharing information that was once pocketed or siloed in particular design teams within certain companies.

"I think the next gen on this will be to go to a simultaneous design effort worldwide across many of these platforms, which will probably take the design lead times down by half again, so there is a productivity prize that is being enabled by Internet connectivity in this area," Manning says.

Fourth, the blurring between hardware and software is triggering greater innovation by releasing companies from the presumed constraint of being fenced in by their own hardware. By recognizing that hardware is essentially a means of utilizing software, such software is coming into its own in design and becoming far more critical than ever before. Many companies that once sold only products today have at least half of their value embedded in software. Software-enabled services represent a further evolution of the trend.

Embedded software is now a critical piece of many industrial products, from mobile phones boasting a million or more lines of code to cars with microprocessors for everything from fuel injection to transmission shifting.

"The fifth factor comes from our base of experience at Bain and is really the philosophy of design, which has largely evolved from one of custom-type design and custom insertion and application and so forth to one of reuse, standardization, base platforms - kind of plug-and-play, if you will," Manning says. "This is obviously a term and a concept that has been around for many years in the high-tech field, but which is now being applied very liberally across numerous other industries. For example, cars are now using plug-and-play type componentry whether the platform is an economy car or a luxury car. The ability to plug and play parts at an economic advantage has become a real insight for most of the world's global producers.

"Toyota is obviously a leader in that thought-provoking methodology in the auto field."