product portfolio management for networked enterprises

59
Cormican, K. and O’Sullivan, D. (2004) Auditing best practice for effective for product innovation management. International Journal of Technical Innovation and Entrepreneurship (TECHNOVATION), 24, 10, pp 819-829. Auditing Best Practice for Effective Product Innovation Management Kathryn Cormican 1 * and David O’Sullivan ^ *Corresponding Author CIMRU, Department of Industrial Engineering, National University of Ireland, Galway, Nuns Island, Galway, Ireland. Tel: + 353 91 512292 Fax: + 353 91 562894 Email: [email protected] ^ CIMRU, Department of Industrial Engineering, National University of Ireland, Galway, Nuns Island, Galway, Ireland. Tel: + 353 91 750414 1 Corresponding Author 1

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Page 1: Product Portfolio Management for Networked Enterprises

Cormican, K. and O’Sullivan, D. (2004) Auditing best practice for effective for product innovation management. International Journal of Technical Innovation and Entrepreneurship (TECHNOVATION), 24, 10, pp 819-829.

Auditing Best Practice for Effective Product Innovation Management

Kathryn Cormican1* and David O’Sullivan^

*Corresponding Author

CIMRU, Department of Industrial Engineering, National University of Ireland,

Galway, Nuns Island, Galway, Ireland.

Tel: + 353 91 512292

Fax: + 353 91 562894

Email: [email protected]

^CIMRU, Department of Industrial Engineering, National University of Ireland,

Galway, Nuns Island, Galway, Ireland.

Tel: + 353 91 750414

Fax: + 353 91 562894

Email: [email protected]

1 Corresponding Author

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Kathryn Cormican (Ph.D) is a lecturer in the Department of Industrial

Engineering at the National University of Ireland Galway. Her research interests

lies in the areas of enterprise modeling, product innovation management, and

collaborative workgroups. Kathryn manages a number of European Union and

industry funded research projects in this area. Prior to joining NUI Galway,

Kathryn worked as a Management Consultant where she facilitated

organisations with product and process improvement initiatives as well as

strategic and operational change. She continues to work with many leading

organisations helping them to design, develop and deploy new processes and

systems.

David O'Sullivan (Ph.D) is research director at the National University of

Ireland, Galway and author of over fifty publications including ‘Manufacturing

Systems ReDesign’ (Prentice Hall), Reengineering the Enterprise (Chapman

and Hall), and Handbook of IS Management (Auerbach). David leads a number

of research projects in the area of innovation management and has also worked

on various innovation management issues with leading companies including

Nortel Networks, Thermo King, IBM, Hewlett-Packard, Fujisawa and Boston

Scientific.

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Abstract: Over the past number of years researchers and industrialists have

recognised the need for and importance of developing approaches to enhance

competitive advantage in new product development. However, the product

innovation process is extremely complex and involves the effective

management of many different activities. Despite the fact that many tools and

techniques have been developed in an attempt to make this process more

effective, product development projects are still prone to failure. The authors

surveyed senior research and development managers in an attempt to identify

the critical success factors for effective product innovation management. From

this, a best practice model and scorecard was developed. The scorecard

enables managers to measure their performance in terms of product innovation

management against best practice. It provides an overview of a company’s

strengths and areas for improvement with regard to product innovation

management, highlighting those areas that require attention. The product

innovation model and scorecard are presented, discussed and validated using

case study analysis.

Key Words: Product Innovation Management, Best Practice Model, Self

Assessment Scorecard, Case Study Analysis

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1. Introduction

It is widely recognised that effective product innovation management is critical

to the success of most manufacturing enterprises (March-Chordà et al, 2002;

Shepherd and Ahmed, 2000; Tuominen et al, 1999; Cooper, 1999; Patterson

1998, Crawford, 1996; Wheelwright and Clark, 1992). With such a close link

between product innovation performance and the organisation's overall

success, managers and decision makers must ensure that this process is well

managed and successful. However, product innovation is a risky and expensive

endeavour, which results in low success rates and many projects being

terminated midway in the development cycle. Research also indicates that a

very high proportion of new product ideas fail commercially in the market place

(Cooper, 1999; Clancy and Schulman, 1991). Liberatone and Stylianou (1995)

believe that only about 14% of ideas that enter the new product development

process are commercially successful. The emergence of networked

organisations where team members incorporate people form different

organisations and geographically dispersed locations can complicate this

process even further. Harris and McKay (1996) also point out that while many

companies have upgraded their product innovation processes, development

output is far from being maximised. According to McQuarter et al (1998) many

of the factors identified relate to coordination and management issues. With so

many issues to address and so many variables to consider practitioners and

researchers alike need a clear but complete framework for understanding and

improving the product innovation management process.

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To this end we studied eight technology based organisations whose principal

activity was product design and development. The aim of this activity was to

interview members of the senior management team in order to understand the

product innovation process in specific industrial contexts. The goal of these

interviews was; (a) to identify the strengths and weaknesses of each

organisation's product innovation process, (b) to identify factors that facilitate

innovation in industry and finally, (c) to discuss how companies must improve in

order to maintain long term competitive advantage. From this analysis, the

authors developed a best practice model for product innovation management. In

addition, a self-assessment scorecard was developed, implemented and

validated. This paper reports the findings from this investigation.

2. Product Innovation Management

Product innovation is a continuous and cross-functional process involving and

integrating a growing number of different competencies inside and outside the

organisational boundaries. Simply put, it is the process of transforming business

opportunities into tangible products and services. In the past, emphasis has

focused on managing the single individual project in isolation of others and little

attention was paid to the aggregation of these projects. More recently, research

highlights the need to better manage the portfolio or collection of projects

(Cooper et al 1998; Harris and McKay 1996; Clark and Wheelwright 1995).

Companies are now realising that a key element of product innovation success

involves employing a platform or family perspective when planning and

implementing product development projects. In general, most firms will work on

a portfolio of innovations, some of which will represent incremental

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developments and improvements on existing and proven products while others

will focus on more radical innovations. While different firms put together

different portfolios, most will have a combination of low risk, short term projects

and high risk longer term ones. Ideally, a company should have a portfolio of

products whose life cycles overlap (Cooper et al 1998). This guarantees

continuity of income and growth potential.

Figure 1 illustrates a basic model for product innovation management. The goal

of the model is to identify and integrate the most valuable and successful ways

to plan and develop an effective product development process. It adopts a

socio-technical systems approach. In other words, it considers tools and

procedures as well as individuals and teams. The model is developed using

structured analysis design technique. This method enhances communication by

using diagrams based on simple box and arrow graphics. It consists of a set of

steps or activities to be accomplished, and each activity has various

considerations, that are intended to make each step successful. It provides a

structure, through which organisations can manage and co-ordinate their

innovation process.

[Insert Figure 1 about here]

There are five key activities in this model. These are; (a) analyse environment

and identify opportunities; (b) generate innovations and investigate; (c) plan

project and select sponsor; (d) prioritise project and assign teams; and finally

(e) implement product innovation plan. Each activity is described in terms of its

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inputs, outputs, controls and mechanisms. Controls are the enabling inputs to

an activity. They are the reason for the activity to take place. Inputs are

consumed by the activity and they together with controls are used to create

outputs. Mechanisms are used by the activity to transform inputs and controls

into outputs. This helps the user to identify what activities are performed in an

organisation, and what is needed to perform those activities.

3. Research Methodology

Lewis (1998) notes that researchers should employ field based research

methods in order to cope with the growing frequency and magnitude of changes

in technology and managerial methods. Case study analysis is an example of

field-based research. Based on in-depth examinations of real-world operations,

process and systems conditions, case study analysis can potentially improve

the relevance and workability of resulting management theory (Yin, 1993;

McCutcheon and Meredith, 1993). Case research is lauded to be particularly

useful in studying the product innovation process (Workman, 1993; Dougherty,

1992). With this in mind, extensive interviews were undertaken with senior

managers from eight companies whose principal activity is product design and

development (see table 1). The sample chosen for this analysis was selective,

based on organisations with a reputation for adopting best practices in product

innovation. The industrial sectors of the organisations were healthcare,

computing, pharmaceuticals, telecommunications and electronics. All eight

organisations surveyed were multinational companies. All companies employed

a high level of technology and focused on next generation product design and

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development. The research methodology used in this study is illustrated in

figure 2.

[Insert table 1 about here]

[Insert figure 2 about here]

Five distinct phases were used in order to conduct this investigation. These

are:

Foundation: This phase incorporated identifying problems for product

innovation management

Induction: This phase dealt with analysing the data within and across

organisations or cases, developing initial hypothesis and comparing

propositions to the literature and cases

Iteration: This phase involved extending hypotheses and conjectures,

reaching closure and refining the work

Presentation: This phase involved introducing, presenting and explaining

the research findings

Implementation: The final phase incorporated implementing and validating

the PIM model in an industrial setting

4. Problems with Product Innovation Management

As a result of our survey the key reasons for failure have been identified and

synthesised. They include:

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4.1 Lack of Customer Focus

Manufacturing organisations often focus on internal procedures instead of

focusing on the customer. They do not have processes in place to

systematically identify current and emerging customer requirements and

expectations and infuse them throughout the development process.

4.2Lack of Shared Understanding

Product innovation teams comprise experts from a wide variety of functions and

disciplines and this diversity can create serious barriers for shared

understanding. Team members coming from different disciplines and different

organisations or countries often lack understanding of the critical development

factors for other areas. They also require a mechanism to communicate the

goals of the project so that everyone can work towards a similar end.

4.3Poor Portfolio Management

Often an organisation's portfolio of product innovation projects is badly

balanced in terms of optimal investment mix between risk versus return,

maintenance versus growth, and short term versus long term projects.

Frequently, there are too many marginal value or substandard projects in the

overall portfolio. Furthermore, many of these projects are unfocused. In other

words, they are not aligned to the strategic direction of the organisation.

4.4Poor Communication and Knowledge Transfer

Product innovation involves synthesising and reusing existing knowledge and

information. However, skills developed during the design and development

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process are often lost after the project is finished. Consequently, similar

mistakes are repeated and companies spend scarce resources reinventing

solutions that have been previously resolved. Furthermore, many organisations

face difficulties in transferring knowledge and information from one

organisational unit to another.

5. Best Practice Model

The results of our investigation revealed that there are many factors that affect

the successful management of a portfolio of product innovation projects.

However, an organisation's characteristics can have a significant impact on it.

Companies must purposefully construct strategies and structures so as to

enhance best practice for successful product innovation. Building an effective

framework for product innovation management depends on adopting a socio-

technical systems approach to all aspects of the organisation. This includes

people, process as well as technology related issues. With this in mind, we

identified and grouped five key factors that were found to facilitate product

innovation management. They are; (1) Strategy and Leadership, (2) Culture and

Climate, (3) Planning and Selection, (4) Structure and Performance, and finally,

(5) Communication and Collaboration. Each of these is discussed in more detail

below.

5.1 Strategy and Leadership

Strategy and leadership has been identified as the first critical success factor to

enable effective product innovation management. The importance of a product's

strategy is well documented in the literature (Lynn et al, 1999; Englund and

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Graham, 1999; Jones, 1997; Bookhart, 1996; Clark and Wheelwright, 1995). A

product strategy should define the aims and objectives of the product innovation

effort in relation to the organisation's overall strategy. It should specify market

niches as targets to focus on and formalise the necessary structures for

implementation. A product strategy should also focus and integrate team effort

and permit delegation. This is particularly important for virtual teams.

Whereas every member in the project team has an input into product

innovation, leaders appear to have a significant impact on product innovation

initiatives. Many researchers and theorists provide evidence to support this

(Cooper, 1999; Cooper and Kleinschmidt, 1996; Liberatone and Stylianou,

1995; Wheelwright and Clark, 1992). This is because the power to make, and

implement decisions, is concentrated in the hands of a few, leading individuals

in an organisation. Leaders drive innovative practice at all levels of the

organisation. A leader's role is to create a vision and effectively communicate

this by setting clear objectives. To be effective in product innovation it is

imperative that they develop co-operation and implement consistent priorities

across all functions and all project teams in the organisation. In order to do this,

senior managers must adopt a systems approach to projects (Englund and

Graham, 1999).

5.2 Culture and Climate

Positive cultural characteristics can provide an organisation with the necessary

ingredients to innovate (Banks, 1999; Ahmed, 1998). According to West (2000)

innovation and culture are intimately linked. Culture and climate are elusive

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concepts. While there is no widespread agreement on what exactly they are,

there is some consensus that organisational culture can be described in terms

of values, norms and beliefs while climate can be considered in terms of

policies, practices and procedures. In this view, culture and climate can be

considered in terms of the following functions:

Culture = f (Values; Norms; Beliefs)

Climate = f (Policies; Practices; Procedures)

Schneider et al (1996) maintain that culture and climate are interconnected. In

their view, employees' values and beliefs (which are part of culture) influence

their interpretations of organisational policies, practices and procedures

(climate). According to Ahmed (1998) culture has many characteristics, which

can serve to enhance or inhibit the tendency to innovate. Johannessen et al

(1999) note that innovative organisations are (a) proactive; (b) take risks (c)

create commitment and (d) initiate change.

Organisational culture can be both an enabler and a barrier to sharing or

reusing knowledge and thus innovation. While much valuable knowledge is

encultured, so too are bad habits and incompetence. For example, cultural

practices within companies often present significant obstructions to the sharing

of knowledge. Banks (1999) notes that it is possible to create an organisation

that has an appropriate culture to enable knowledge creation, transfer and

reuse. This is achieved by developing a culture of openness and sharing, by

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motivating and engaging people and embedding knowledge management

activities in the day to day business processes, internal systems and structures.

5.3 Planning and Selection

A rationally planned product innovation effort is imperative for success. This is

particularly important when project teams are not co-located. Cooper and

Kleinschmidt (1996) emphasise the importance of pre-development activities to

anticipate problems in advance and bring conflicts to the surface earlier in order

to speed up the innovation process and facilitate the integration of new

technologies. Many other researchers concur with this (Hart et al, 1999;

Poolton and Barclay, 1998; Khurana and Rosenthal, 1997; Brown and

Eisenhart, 1995; Bacon et al , 1994; Montoyna-Weiss, and Calantone, 1994). It

is necessary to effectively plan and select projects, which are customer focused

and link to the new product strategy and goals. Furthermore, contemporary

organisations must be customer driven (de Brentani, 2001; Shepherd and

Ahmed 2000; Cooper, 1999; Griffin and Hauser, 1996; Pavia, 1991). Therefore,

a clear understanding of user needs is critical to product innovation plans and

all operations must be driven by these needs. Team members must work with

customers in order to establish the voice of the customer and translate that

value into the product concept and proposed solution.

According to Calantone et al (1999), "the screening of new product ideas is

perhaps the most critical new product development activity, yet it often is

performed poorly". The screening process helps to eliminate projects that

require extensive resources but are not justified by current business strategies.

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It also helps to prioritise projects so that efforts can focus on the critical few.

Several studies on project selection provide a robust set of criteria for

consideration (see Englund and Graham, 1999; Cooper et al, 1998). In this

view, success depends on exploiting synergy among projects. Therefore,

portfolio management techniques and methods should be incorporated into the

selection process. Cooper (1999) asserts that firms must maximise the value of

the portfolio and seek the right balance of projects. Product managers must

also ensure that the projects and the spending breakdown mirror the business's

strategy. One of the key skills in effective innovation management is balancing

the composition of this portfolio and matching it to the firm's competencies and

capabilities in technology and markets (Tidd, 1997).

5.4 Structure and Performance

An organisation's structure and performance has been identified as a key

enabler to effective product innovation management. Two very distinct

approaches to organisational structure are mechanistic and organic (Cumming,

1999). A centralised, mechanistic structure reinforces past behaviours while an

organic, decentralised structure promotes learning and knowledge generation

(Cumming, 1998; Baets, 1998; Davenport and Prusak, 1998). Centralisation

creates a more fragmented structure, which does not support people to

challenge underlying assumptions and think for themselves. Decentralisation,

on the other hand, enables faster and more effective decision making in

dynamic information rich environments. Knowledge sharing and transfer

depends on personal networks and the willingness of individuals to share

(Jones and Jordan, 1998; Ruggles, 1998; Ulrich, 1998). Nonaka and Takeuchi

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(1995) believe that organisations leverage individual talents into collective

achievements through networks of people who collaborate. Consequently,

organisations are beginning to reorganise reporting lines and organisational

structures not around traditional tasks or functional departments, but around

communities of practice. Work teams are emerging as the dominant

organisational component of the new economy (Shepherd and Ahmed, 2000;

Kayworth and Leidner, 2000; Griffin, 1997).

Motivation theory suggests that individuals respond positively to stimuli that

reward achievement and performance. Motivation and reward systems are key

elements in aligning the interests of employees to that of the organisation

(Liebeskind, 1996; Bukowitz and Pertrash, 1997). They can be adjusted to

encourage the desired behaviour from all staff. Griffin’s (1997) findings suggest

that organisations are not adequately handling the issue of team based

rewards. Furthermore, there are few reports of practical incentive mechanisms

linked to measuring and rewarding idea generation and knowledge sharing.

Most companies still use traditional performance measures, which in many

instances are inappropriate indicators of success.

5.5 Communication and Collaboration

The final key factor identified for successful product innovation management is

communication and collaboration. Product innovation is a knowledge intensive

process (Balasubramanian and Tiwana, 1999; Davenport and Prusak, 1998;

Drucker, 1993; Nonaka and Takeuchi, 1995). It can be described as an

information transformation process where information is gathered, processed

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and transferred in a creative way. Therefore, communication is a vital and basic

necessity for product innovation especially when team members are

geographically distributed. Many researchers note that external communication

is vital to successful product innovation (Mendelson and Pillai, 1999; Poolton

and Barclay, 1998; Pitta and Franzak, 1997; Ancona and Cadwell, 1992). They

found that the presence of a gatekeeper, or someone that scans the

organisation's boundaries and brings information to the organisation and

disperses it to those inside, is essential for product innovation. In particular,

strong formal links with suppliers are very important to the product innovation

process (Griffin and Hauser, 1996; Crawford, 1996). Huang and Mak (2000)

found that significant benefits can be achieved if suppliers are involved in the

early stages of the product innovation process. Customer involvement has also

been proven to improve the effectiveness of the project (Shepherd and Ahmed,

2000; Leonard Barton and Sensiper, 1998; Griffin and Hauser, 1996; Cooper

and Kleinschmidt, 1996). The results indicate that manufacturers must

appreciate thoroughly the needs and behaviour of potential users (de Brentani,

2001; Bacon et al, 1994).

Internal communication is also vital for product innovation success. Griffin and

Hauser (1996) examined the impact of communication, co-operation and inter-

functional harmony and found that they strongly correlate with project success.

Many researchers also emphasise the importance of early integration of

functional expertise (Liberatone and Stylianou, 1995; Pavia, 1991). Enhancing

communication between functions is crucial to successful product development

and management (Maltz, 200; Hise et al, 1990). Terziovski et al (2002) found

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that the most significant success factor was the establishment of cross-

functional, multi-disciplinary teams.

5.6 Best Practice Model Summary

This section has introduced and presented five best practice features essential

to product innovation management. These features are a synthesis of best

practice in the area and useful to support the management of the product

innovation process. Over time, the application of these features may influence

the cultural norms and contribute to the development of an environment for

effective product innovation management. Taking these theoretical concepts

into consideration, a self-assessment audit called the product innovation

management (PIM) scorecard was developed. The scorecard is made up of fifty

criteria or traits drawn from the critical success factors model. This is discussed

in more detail in the next section.

7. PIM Scorecard

Innovation audits can help managers and decision makers improve their

product innovation process (Patterson 1998; Chiesa et al 1996). They assess

whether the conditions necessary for innovation are in place and the degree to

which best practice is used. The use of innovation scorecards provide an

overall assessment of the practices adopted with respect to best practices and

enables decision makers to identify whether or not the required managerial

processes and practices are in place (Chiesa et al, 1996). The PIM scorecard

is a self-assessment audit that consists of fifty statements, or traits, based on

the best practice model. The scorecard requires respondents to circle the

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extent to which they agree or disagree with the statements. The list of

statements is presented in table 2. Organisations that score high possess a

good fit between its current management practices and systems and traits that

are lauded to represent best practice. Inversely, an organisation that scores

low does not follow appropriate practices and will experience more difficulty

developing successful products. This allows managers and decision-makers to

acquire an overview of their strengths (to be exploited) and weaknesses (to be

improved) with regard to product innovation management in each category.

[Insert Table 2 about here]

7.1 Case Study Discussion

Senior product managers validated the scorecard by assessing its effectiveness

(i.e. how useful, applicable and appropriate the statements are) as well as its

practicality (i.e. how pragmatic, functional and deployable the statements are).

Key findings from the validation process are now discussed in more detail.

7.1.1 Strategy and Leadership

All product portfolio managers agree that an effective strategic plan is

imperative to successful product innovation management. This is particularly

notable when teams are not co-located. Product managers noted that "product

strategy is clearly defined and communicated to all employees" and "product

strategy is used to align priorities with other functions" are the most important

and effective characteristics for product innovation in terms of strategy.

However, the findings of this analysis reveal that while this was identified as the

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strongest feature in this category, organisations do not use the product strategy

effectively to align priorities with other functions. Most strategic plans are

developed at a high level in the organisation (i.e. corporate level). It is also

evident that while some of these plans are comprehensive and systematic,

others are more arbitrary and loose. In addition, there is evidence to suggest

that there is a large gap between strategy development and project

implementation. In other words, product strategies are not directly deployed

into individual projects. Product innovation projects, in general, are merely

loosely aligned with the organisation's strategies, requirements and

performance measures. Furthermore, the study found that many projects are

not measured in terms of how they meet or satisfy these strategies, measures

and requirements.

7.1.2 Culture and Climate

An organisations culture (i.e. values, norms and beliefs) and climate (i.e.

policies, practices and procedures) were found to have a significant impact on

successful product innovation management. In other words, members of

innovative organisations are actively encouraged to share ideas, take risks, and

initiate change. Innovative organisations create commitment (i.e. they instil a

level of pride in the organisation and promote employee development at a social

and technical level). Moreover, mistakes are not punished when something

does not go according to plan. This analysis also found that research and

development functions experience problems with cohesion when their function

reaches a certain size. When the function grows or expands past a certain level

it is important to have a systematic and structured system in place to guide

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development efforts and to keep all players focused in the same direction.

However, the adoption of a formalised system may conflict with the need to

maintain responsiveness and flexibility. This is found to be particularly

significant when team members are geographically distributed.

7.1.3 Planning and Selection

While, project planning and selection was found to be the most significant area

in successful product innovation management, it was also found to be the area

most in need of attention. "An effective product plan is consistently

implemented" was considered to be a strong trait in this category. However,

most product managers concede that they suffer from poor project planning.

Project planning in general is not formalised, systematic and widespread; many

organisations cut corners and skip steps to speed up development time.

Product managers also note that there is too much crisis management. In other

words, they seem to adopt a short-term view with regard to their initiatives and

consequently, spend most of their time "fire fighting". In addition, when

contingency planning schedules fall off track there is a domino, or knock on

effect with regard to all other projects in the portfolio. This analysis also found

that not all functions and levels (i.e. operations) are involved at the planning

stage. Furthermore, while most projects are assigned some form of priority,

projects are not selected according to how they meet the organisation's goals

and measures. Product managers found that "the project and spending

breakdown mirrors the organisations goals and measures" is a very effective

trait. Many organisations also suffer from poor resource management. It seems

that the organisations studied have an abundance of new product ideas in its

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development pipeline but not enough resources available to implement them.

Internal competition for people, tools and equipment is also prevalent.

7.1.4 Structure and Performance

Most organisations analysed in this study employ team-based structures for

product innovation initiatives. Many of these teams are cross-functional in

nature and are organic, flexible and agile. It also seems that the most

successful organisations employ cross-functional teams from the initial stages

of the product innovation effort (i.e. gap analysis and concept development).

The findings of this analysis reveal that cross-functional teams are more

customer focused. They enjoy a large degree of autonomy and have the

flexibility to interact easily with other key players. Such team members are also

more responsible and accountable for their actions and/or decisions.

This analysis found evidence to suggest that the trait that refers to team

members' reward systems namely "team members rewards are equitable" is

very significant in this category. In particular, cross-functional team members in

a virtual environment often have specialised core competencies, come from

different disciplines and different countries or cultures. Therefore, it can be

difficult to reward such members fairly and equitably in view of the fact that no

two people have similar backgrounds nor do they undertake similar work.

Furthermore, many organisations had some form of performance rewards

system linked to idea generation. While this has proven successful in the

majority of organisations, some organisations also highlighted that it had proven

to be a source of potential conflict at an employee or department level and

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these organisations abandoned these schemes.

7.1.5 Communication and Collaboration

Communication and collaboration is imperative to successful product innovation

management. This is particularly evident when team members are not co-

located. Face to face interaction is lauded to be the most powerful, effective

and productive form of communication between team members. However, this

is not always possible when teams are virtual; therefore, organisations are

investing heavily in emerging web technologies in order to support the

communication process. It seems that communication between product

innovation team members is particularly important. Problems can and do occur

between project team members and their functional specialisms. It is often

difficult to leverage skills, knowledge and competencies from core

competencies (i.e. design engineering) to project team members when they are

not co-located.

It also seems that organisations have an abundance of information regarding its

product innovation projects. However, it is often difficult to locate the required

pieces of information as they are often distributed across different document

archives. Organisations are finding it difficult to access and gather minimum

critical information regarding the status of each of their projects. Examples of

minimum critical information include; start date, end date, project status, priority,

and exception reports (i.e. projects that are red flagged; in other words those

that are falling behind key milestones). This is important to keep track of their

progress.

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7.2 Implementing the Scorecard

The PIM scorecard was implemented in all companies that participated in the

case study. However, for the purposes of illustration two companies were

chosen to describe how the process works. The first (Company X) is a design

and manufacturing facility. The findings of the scorecard reveal that the

company scores below average in all of the five areas critical to product

innovation management (see figure 3). More specifically, this organisation

scores particularly low in terms of its project planning and selection. In this

case the organisation does not have a formal product innovation process in

place. It operates in an ad hoc manner and does not use pre-determined explicit

criteria to select and prioritise projects. Consequently, project teams compete

for resources. Furthermore, the customer is not part of the development team.

There is no procedure in place to capture voice of the customer. Consequently,

customer requirements are not effectively gathered and introduced into the

product concept. The process of implementing the scorecard stimulated key

managers and decision makers to address some of these issues.

Consequently, a major improvement initiative was launched to establish and

document a comprehensive and visible product innovation process.

[Insert Figure 3 about here]

The second organisation chosen to illustrate the PIM scorecard fares

significantly better than the first. This organisation (Company Y) is also a design

and manufacturing facility. In this instance many of the best practices

highlighted are adopted and used in this company. As figure 3 illustrates, this

21

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organisation scores particularly well across all five categories in the critical

success factors model. This company has very effective leaders who visibly

drive innovation. They encourage the submission of new ideas and adopt a

consensus and shared approach to decision making. It seems that these

leaders not only encourage the desired behaviour but also have the appropriate

infrastructures in place to facilitate this behaviour. For example, this

organisation has an effective and used product innovation process in place.

There is also a formal idea generation process in place and pre-development

market and feasibility studies are rigorously undertaken. This study stimulated

Company Y to embark on an inter-organisational benchmarking study to assess

its current practices against industry leaders.

8. Conclusion

In today's dynamic environment, it is becoming increasingly apparent that the

survivors in this new era will be those companies who are rigorous in their

pursuit of innovation, in order to develop and deploy new products more

efficiently, effectively and profitability. It is also increasingly clear that the only

way to achieve this goal is to actively manage the innovation process. In order

to do this, managers must develop and provide the appropriate infrastructures

and support systems. By understanding the process and the factors that

facilitate product innovation, organisations can increase the likelihood of

developing an appropriate environment for innovation. This in turn will help

minimise their failure rate and maximise their chances of successful product

innovation.

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This paper presents a best practice model that aims to facilitate product

innovation management in a dynamic environment. The underlying objective is

to develop more robust, generalisable guidelines for managers in technology-

based companies who want to build successful new product portfolios. Analysis

of the study revealed that successful organisations demonstrate a number of

common traits. These organisations have a focused vision, strong leadership

and customer orientation. Employee contribution to the innovation process was

widespread and the organisations studied demonstrated a high proficiency in

both exploiting ideas and actively engaging in problem solving. Cross-functional

teams with contributions from different levels of the organisations are also

extensive. Effective project planning and selection was identified to be

imperative and the study found that this area is most in need of attention.

Communication issues are also imperative for successful product innovation

management. Specifically, organisations noted that infrastructures are

imperative to support communication within teams, between teams and with key

customers and suppliers. Improving the product innovation process is not about

quick fixes but rather it is about recognising true symptoms, identifying their

cause and then applying the appropriate treatment or remedies. Therefore, the

implementation of product development best practices can best be viewed as a

journey (i.e. continuing process improvement) rather than as a destination.

23

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Figure 1 Basic Model of Product Innovation Management

Internal \ External Information

Draft Schedule\ Budget

Competitive Analysis

Analyse Environment

and IdentifyOpportunities A1

Generate Innovations

and Investigate

A2

Plan Projectand

Select Sponsor

A3

Prioritise Projectand

Assign Teams

A4

Implement PI Plan

A5

Industry Trends

ProjectsTeams

Results

Project Brief

Project Proposal

Critical Specification

ProductInnovation Plan

ProjectsTeams

GoalsProblems

IdeasTeams

Goals Customers

Stimuli Creations

New Products

ECO

CorporateConformance

Manufacturing andMarketing Requirements

Design Results

Top Mgt. DirectivesBusiness Strategy

Ideas\ Problems\ ECR’s

Design StrategyDesign Measures

Voice of the Customer

ECR Analysis

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Figure 2 Research Methodology

PHASE 5: Verification

PHASE 4: Presentation

PHASE 3: Iteration

Present Model

Validate Model

Refine Theory

Shape Hypothesis

Analyse Cases

Identify Problem

Review

Literature

Iteration

Iteration

PHASE 1: Foundation PHASE 2: Induction

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Figure 3 Implementing the PIM Scorecard

5

4

3

2

1

Strategyand Leadership

Cultureand Climate

Planningand Selection

Structureand Performance

Communicationand Collaboration

1= Strongly Agree2= Agree3= Neutral4= Disagree5= Strongly Disagree

Company X

Company Y

5

4

3

2

1

Strategyand Leadership

Cultureand Climate

Planningand Selection

Structureand Performance

Communicationand Collaboration

1= Strongly Agree2= Agree3= Neutral4= Disagree5= Strongly Disagree

Company X

Company Y

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NAME CONTACT PRODUCT SIZE TECHNOLOGY STRUCTURE

Company A R&D manager Temperature Control Units

Large Medium Function Oriented

Company B R&D Manager Electronics Large High Team Based

Company C Product Manager Medical Devices Large Medium Function Oriented

Company D Product Manager Electronics Medium High Team Based

Company E Product Manager Tele-communications

Large High Process Oriented

Company F Product Manager IT Solutions Large Medium Team Based

Company G R&D Manager Pharmaceuticals Large High Team Based

Company H Product Portfolio Manager

IT Solutions Large High Process Oriented

Table 1 Profile of Organisations Studied

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Please circle the extent to which you agree or disagree with these statements where 1 represents strongly agree and 5 represents strongly disagree

STATEMENT SCORE

Strategy and Leadership 1. The product strategic plan is effective and used2. Product strategy is clearly defined and communicated to all employees3. The product innovation programme has a long term thrust and focus4. Product strategy is used to align priorities with other functions5. Strategies are flexible enough to respond to changes in the environment6. Senior management are accountable for new product results7. Leaders visibly drive innovation8. Leaders adopt a consensus and shared approach to decision making9. Leaders adopt a participative decision making style10. Senior management actively encourages the submission of new product ideas

Culture and Climate 1. The organisation permits the emergence of intrapreneurs or product champions2. The organisation provides support in terms of autonomy, time and rewards3. Money is made available for internal projects4. Adequate resources are available and committed to achieve project goals5. All employees participate in generating ideas6. Senior management is committed to risk taking in product innovation7. Failures and mistakes are tolerated and not punished8. Knowledge sharing is encouraged and rewarded9. All operations are driven by customer needs 10. There is a formal idea generation process in place

Planning and Selection1. An effective product innovation process is consistently implemented 2. A formal process is used to determine and update project priorities3. Concepts are selected using predefined, multiple and explicit criteria4. Pre-development market and feasibility studies are rigorously undertaken 5. Projects are terminated if and when necessary6. Project proposals are tested for alignment with organisational goals7. The project and the spending breakdown mirrors the organisations goals and

measures8. There is a good balance of projects which maximises the value of the portfolio9. The product portfolio is matched to the firm's competencies and capabilities 10. The voice of the customer is built into all product innovations

Structure and Performance 1. Projects are developed using effective cross functional teams 2. Project teams are organic, flexible and agile3. All team operations are driven by customer needs 4. Team leaders are involved in setting the product performance objectives5. All team members are mutually accountable6. Team members are empowered to make decisions7. Virtual team members are equipped with effective ICT tools8. Team members rewards are equitable9. Performance indicators are aligned with the organisations goals 10. Performance indicators encourage desired behaviour

Communication and Collaboration1. Gatekeepers are in place to continuously span the external environment2. Customers and suppliers are involved in the product innovation process3. Alliances are often formed with other organisations for mutual benefit4. Communications among team members is efficient and effective5. Communications between project teams is efficient and effective6. Information on ideas generated, problems raised and project status are accessible7. User needs analysis are undertaken and communicated to all8. Product strategy and performance measures are clearly communicated to all 9. Individual skills are effectively leveraged within and between project teams10. Virtual team members seamlessly communicate with each other

1111111111

1111111111

1111111111

1111111111

1111111111

2222222222

2222222222

2222222222

2222222222

2222222222

3333333333

3333333333

3333333333

3333333333

3333333333

4444444444

4444444444

4444444444

4444444444

4444444444

5555555555

5555555555

5555555555

5555555555

5555555555

Table 2 The PIM Scorecard

37