Optimizing people, process and technology to drive competitive advantage
When it comes to developing new products, be they widgets or wikkis, examples of costly failures are legion. In today's US dollars, Federal Express lost $294 million on Zap Mail. NeXT lost $250 million on its computer workstation. GM lost $420 million on the Wankel Rotary Engine. Xerox invented the personal computer ahead of Apple but failed to commercialize it. Motorola invested more than a decade and more than $360 million in its cellular telephone project before taking a single major order. And the list could go on.
All up, the ratio of effort to results is truly miserable. Gary S Lynn, Associate Professor with the Wesley J Howe School of Technology Management at Stevens Institute of Technology in New Jersey, says from every 3000 raw ideas come just 125 small projects, nine of which will go to early development, four of which will continue to major development, and two of which - if their developers are really lucky - will actually make it to market. One recent study found that newly launched industrial products failed 33 percent of the time; new consumer packaged goods fail to live up to management's expectations 80 percent of the time.
You might think the lessons from such an unrelenting track record of failure would have been seared into the collective corporate conscience by now, especially in a time of unprecedented change for new product development (NPD) activities. If so, you would be sadly mistaken. Studies show even as technology is speeding up new product development, companies maintain their dismal record on creating new products and services. After 10 years studying more than 800 new product teams, Lynn believes corporations can and must do much, much better.
"A lot of people talk about innovation, but innovation is disruptive. People say: 'We want innovation - but just not in my workspace'," Lynn says. "For a company to really break out of the crowd, they have to innovate . . . but innovation is problematic, and for all the research that's been done for the last 40 years on new products, the net result is we're no better in launching new products today than we were 40 years ago, and this is from credible studies that have been done for the past 10 years."
Lynn says numerous companies have responded by trying to systematize the new product process. These companies invest heavily in new product development systems, then sit back and await results. Five years later a grim realization strikes. "They then call people like me to say: 'Okay, you know what we've found? We are now really great at the system, but we are very poor at innovating.'"
However, with new technology starting to make an indelible mark on new product development, agile technologies providing control with flexibility, with product lifecycle management (PLM) coming into its own as an extremely respectable component of ERP, and with the leaders in product innovation starting to make huge strides in the use of virtual teams and collaborative software, the pressure is on for all corporations to lift substantially their NPD game.
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