‘Doing Projects Right vs Doing Right Projects‘ the term as such commonly referred as ‘Portfolio Management’
In war, there is no second prize for the runner-up. – Omar Bradley, U.S. General
Organizations everywhere are engaged in a new products war / new portfolio war.As the twenty-first century begins, this product innovation war looms as the most important and critical war the companies of the world have ever fought. Winning this war is everything: It is vital to success, prosperity, and even survival of these organizations. Losing the war, or failing to take an active part in it, spells disaster: The annals of business history are replete with examples of companies that simply disappeared because they failed to innovate, failed to keep their product portfolio current and competitive, and were surpassed by more innovative competitors. Forty percent of the major corporations that existed in America in 1975 no longer exist today
New products currently account for a staggering 33 percent of company sales, on average. That is, one-third of the revenues of corporations are coming from products they did not sell five years ago
There are many different types of new products. “Newness” can be defined in two senses:
1. new to the company, in the sense that the firm has never made or sold this type of product before, but other firms might have
2. new to the market or “innovative”; he product is the first of its kind on the market
Some of the lessons learned in new product development process are
a) More and better market information, research and analysis.
b) Other suggestions. These include more careful product positioning, more effective concept testing prior to the development phase, better test marketing, sharper evaluation of new product projects (including early screening), and better planning and execution of sales and promotional efforts
c) Specific recommendations go further: Make sure senior company executives are kept informed about the progress of each new product project but aim to limit their personal involvement to no more than is appropriate or necessary; Support a new product with ample selling effort and promotional resources to enable it to achieve its goals.Be wary of proposed new products that stray too far from the company’s area of technical and marketing expertise. This is especially true when trying to market a new product through a sales force accustomed to a different selling task or to a different type of customer.
Don’t discount competitive responses:the launch of a rival “me too” product, price cuts, or heavy promotion of existing entries.Educating customers about the use and value of a new product can be a much longer and harder process than anticipated, especially if the “customer’s customer” must be reached.Get the positioning right—price, features, and quality—and not above or below customer expectations.Make a repeat check on expected costs, margins, revenues, and profitability whenever the original product specifications are significantly modified during the course of its development.
Thirteen Key Activities in the New Product Process
- Initial screen: The idea screen – the first decision to go ahead with the project; the initial commitment of resources (people and money)
- Preliminary market assessment: The initial market study: a “quick and dirty” assessment of the marketplace, customer requirements, possible market acceptance, and competitive situation; largely nonscientific and relying principally on in-house sources.
- Preliminary technical assessment: An initial technical appraisal, addressing questions such as “can the product be developed? how? can it be manufactured? etc.”; based largely on discussions, in-house sources, and some literature search.
- Detailed market study: Marketing research: detailed market studies such as user needs-and-wants studies, concept tests, positioning studies and competitive analyses; involves considerable field work and in-depth interviews with customers.
- Predevelopment business and financial analysis: The decision to go to a full development program; involves, for example, a financial analysis, risk assessment, and a qualitative business assessment, looking at market attractiveness, competitive advantage, etc.
- Product development: The actual development of the physical product.
- In-house product tests: Testing the product in-house under controlled or laboratory conditions; alpha tests.
- Customer product tests: Testing the product with the customer; field trials, beta tests, or preference tests: giving the product to customers and letting them try it under live field conditions.
- Trial sell: A trial sell or test market of the product: an attempt to sell the product to a limited number of customers or in a limited geographical area; a “soft launch”.
- Precommercialization business analysis: The decision to commercialize: a final business and financial analysis prior to launch.
- Production/operations start-up: Start-up of full-scale or commercial production or operations.
- Market launch: The full market launch of the product: the implementation of the marketing plan.
There are two fundamental ways to win at product innovation, according to studies on innovation success. The first is doing projects right; the second is doing the right projects. It means:
- Doing projects right. Research over the past twenty-five years has uncovered many success factors—common denominators of successful new product projects. For example, employing true cross-functional teams, doing the up-front homework prior to the development stage, building in the voice of the customer, getting a sharp, early, and stable product definition, and so on, have all been found to positively impact new product outcomes.
- Doing the right projects. Equally important, but often missed in traditional research, is the issue of doing the right projects. As one executive put it, “Even a blind man can get rich in a gold mine by swinging a pickaxe; it’s not so much how you mine—the trick is picking the right mine!” Thus project selection decisions and portfolio management techniques become critical facets of a successful new product effort.
Seven Goals of a New Product Process
Goal #1: Quality of Execution: Quality of execution is the goal of the new product process. More specifically, the ideal game plan should
- focus on completeness: Ensure that the key activities that are central to the success of a new product project are indeed carried out—no gaps, no omissions, a complete process.
- focus on quality: Ensure that the execution of these activities is first class; that is, treat innovation as a process, emphasize DIRTFooT (doing it right the first time), and build in quality controls and checks.
- focus on the important: Devote attention and resources to the pivotal and particularly weak steps in the new product process, notably the up-front and market-oriented activities.
Goal #2: Sharper Focus, Better Prioritization
Goal #3: Fast-Paced Parallel Processing
Goal #4: A True Cross-functional Team Approach
Goal #5: A Strong Market Orientation with Voice of the Customer Built In
Goal #6: Better Homework Up-Front
Goal #7: Products with Competitive Advantage
Reference: from the book 'Winning at New Products: Accelerating the Process from Idea to Launch'