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July 15th 2000 |
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AT
RISK OF BURN OUT
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An
overactive new product development system
can be a serious commercial performance
issue warn Jonathan Smith and Julie Craig of
Axis Management Consulting
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Everything
you read or hear about business tells
you that new product development is a
good thing. Companies are frequently
criticised for not innovating enough
and, to be fair, the food industry
certainly has its share of innovation
laggards.
So surely more new product
development is what is needed?
Well, by no means always.
At
Axis Management Consulting, for every
company which is doing too little new
product development, we see
two that are doing too much. To make
things worse, it's
too much of the wrong kind. Much of
the effort goes into projects that are
not true innovation but just range
extension and duplication.
The
record for excessive project numbers
that we have seen goes to a medium
sized business that had 99 NPD projects
on the books at once. Numbers above 50
are commonplace.
The resulting situation will be all
too familiar to many -chaos.
Endless meetings of
frustrated managers wade through
updates on the progress (or otherwise)
of a seemingly endless list of
projects. |
The
unfortunate project owners bounce
between departments trying to get time
and resources for their favoured
projects. Often the projects that get
the most resources are not the most
worthwhile. Often it's he who shouts
loudest (or is most senior) who gets
the most attention.
As with so many
business problems, the road to hell is
paved with good intentions.
New product ideas
spring up from a wide variety of
sources within the company, all for
the best of motives. Marketeers and
salespeople have no monopoly on ideas
generation.
Production and
technical people are also often keen
to be the source of new ideas. A
varied cast of others adds to the
list. Ideas originating with the
chairman's wife are usually modest in
number but unique in their disruptive
potential.
Brainstorming
sessions, while potentially valuable,
can add greatly to the number of
projects if they are not kept tightly
focused and their output carefully
managed.
Another common
cause is the otherwise laudable wish
to say "yes" to every
retailer request, however little
thought may have gone into the
request. This may be compounded by the
wish to be seen to be doing more NPD
for the customer than the next guy.
With the best of
intentions, the temptation is just to
start more and more projects and hope
for the best.
Wherever ideas come
from, the lack of an effective process
for screening ideas, and selecting
likely winners, leads to too many poor
quality projects getting started.
Similarly, the
failure to make effective use of
consumer research
early in the life of projects ensures
the survival of too many ideas that
will ultimately fail for lack of
consumer appeal.
Another
major contributor to excessively long
NPD lists is the unwillingness of many
managers to kill off projects that are
clearly failing. Costs may be turning
out to be far higher than expected,
consumer appeal has been shown to be
mediocre at best, or production
feasibility is proving to be a
nightmare.
Still
people press on, trying to save
projects long after there is a reason-
able chance of them being successful.
Lack
of basic project management
disciplines often means that
individual projects progress more
slowly and so clog up the system for
longer.
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Projects
are too often managed one step at a
time rather than comprehensively from
start to finish.
As
the number of projects rises, the
problem compounds itself. The greater
workload means that resources,
including management attention, are
spread ever thinner. Projects slow
down.
The
amount of meetings and talking goes up
but the results coming out of the far
end of the system do not.
Given
all the different forces pushing
managers towards NPD overload, it's an
easy trap to fall into. Without
systematic efforts to prevent the
problem, it is not surprising that we
so often see an excess of projects and
a shortage of successes.
Does
all this really matter? Too many NPD
projects may be a bit of a hassle but
surely it's worth it? And isn't coping
with hassle part of what we're paid to
do?
In
short, it certainly does matter. An
overactive new product development
programme can make a significant dent
on the bottom
line in the immediate term. It can
also significantly hamper overall
commercial performance and customer
relationships.
The
amount of management time soaked up by
large numbers of projects represents a
very considerable (though difficult to
quantify) cost. The employment cost of
the people concerned is the smaller
part of the picture. The real big
hitter is the opportunity cost the
contribution to profits they could
have been making if their time had
been better used. |
Ingredients,
packaging, and other materials used
are other obvious costs.
More projects
mean more disruption to production
operations. Plant trials have to be
organised. Machine downtime is
increased. Staff have to be
retrained and redirected. All this
causes substantial (though usually
unmeasured) costs.
An excess of
variable quality projects is
guaranteed to put extra strain on
the often fraught relationship
between sales and marketing on
the one hand, and production and
technical on the other.
Conflict is often
increased and mutual confidence
decreased. Sales and marketing
people get frustrated that
production appear unenthusiastic
about the latest clutch of projects.
Production and technical people
become increasingly disillusioned by
a stream of projects in which they
have little faith.
And ironically,
too much development activity can
stifle true creativity. If managers
are spending large amounts of time
on the detail of lots of projects,
they will have less time to devote
to thinking about the break- through
innovations that could make a real
difference.
It is often
projects that are running into
difficulties that eat up the most
resources. More and more time and
effort is soaked up as managers try,
against the odds, to keep a failing
project alive.
Substandard
projects that actually make it to
market before failing incur the
greatest costs of all. As well as
using up their full share of
resources in getting to market,
there is the cost of packaging and
ingredient write-offs and the
management effort needed to manage a
withdrawal. On top of this comes the
damage to credibility with key
customers.
Taking
all these effects together, an
over-active NPD system is clearly a
serious commercial performance
issue. Despite this, many companies
do not get around to making a
concerted and effective effort to
address the problem. So how do you
go about minimising these problems?
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Firstly, by making sure that fewer
projects of low potential ever get
started. This means having a proper
screening process, including a
small, cross-functional group of
managers who are responsible for
con- trolling the overall workload
going through the NPD system.
Secondly, by
making sure that low potential
projects are killed off early. This
means frequently reassessing
projects to see if they are on track
to deliver the results originally
anticipated.
The third key
part of the solution is to make
effective use of consumer research
early on in the process.
Too many projects
get to a highly advanced stage
without having been seen by a single
consumer. Inevitably, this leads to
mistakes as managers get too close
to projects and convince themselves
of the appeal of their own ideas.
Consumers, in
research, almost invariably give
useful feedback that will enhance
the success chances of a project
with potential. They also frequently
point out the blindingly obvious
points that bring managers back to
earth and save resources being
wasted on projects of low appeal.
The fourth step
is to ensure that projects are moved
quickly and efficiently through the
system.
This means having
effective project management -
projects being managed to a tight
timescale by a team of people who
all fully buy in to the importance
of the projects.
So, in running an
effective NPD operation, less
definitely is more. A smaller number
of carefully selected, effectively
managed projects is much better than
the chaos we so often see.
The penalties of
NPD overload are too serious to
ignore. The combination of increased
costs in the immediate term, loss of
speed to market, and damage to
credibility with key customers,
makes it an important commercial
performance issue.
The solutions,
while taking concerted effort to
implement, are within the reach of
any company.
Will we see them
being more widely implemented?
jonathan.
smith @axisconsulting. co. uk
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