product portfolio management for networked enterprises
TRANSCRIPT
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
1
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.
2
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
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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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32
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
33
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
34
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
35
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
36
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