OIIS Lecture 06 - Managing New Product Development Processes 2024 PDF

|1 Outlining and Implementing Innovation Strategy Managing New Product Development Process Florian Noseleit  |2 Learning objectives › The managerial goals of new product development process › The m...

|1 Outlining and Implementing Innovation Strategy Managing New Product Development Process Florian Noseleit  |2 Learning objectives › The managerial goals of new product development process › The managerial approaches of new product development process › Avoiding escalating commitment in new product development process “ […]Specifically, I would love to learn more about the necessary steps for starting a business or launching an innovative product in the Netherlands. Also, I think it would be really valuable to explore the pros and cons of having business partners […]  |3 Goals of NPD › Maximizing product fit with customer needs › Minimizing the development cycle time › Controlling development costs › How to do that? What tools can we use?  |4 Customer needs › Are technologically advanced features always good?  |5 Time and costs › First-mover advantages Technological leadership (learning curve, R&D and patents) Preemption of scarce assets (input factors, geographic locations, product space) Switching costs (lock-in, choice under uncertainty) › First-mover disadvantages Free-rider effect Resolution of technological or market uncertainty Shifts in technology or customer needs Incumbent inertia: the innovator dilemma  |6 First-mover advantage: Anticipatory shipping › Amazons planning reaches at least 7 years into the future › E.g. Amazon filed a patent on anticipatory application in 2012, claiming priority to 2004. › US Patent 8,615,473 on anticipatory shipping (fulfillment and shipment of shipping a package before an actual order has occurred) was contemplated and filed for a patent 10 years ago. Sources: https://ipstrategy.com/2014/03/26/the-first-mover-advantage-of-ip-patents-vs-velocity/ https://patents.google.com/patent/US8615473  |7 Waterfall vs Agile Development Source: based on Schilling (2020); customerthink.com  |8 Waterfall vs Agile Development › Waterfall Development Linear, sequential process (requirements → design → implementation → testing → deployment) Pros: Clear milestones, easy to manage, good for well-defined projects Cons: Inflexible to change, longer delivery time, late testing phase › Agile Development Iterative, incremental process with continuous feedback (sprints, prototypes) Pros: Flexibility, faster delivery, customer involvement throughout Cons: Less predictability, requires frequent stakeholder engagement › Key Trade-Offs Structure vs. Flexibility: Waterfall offers structure; Agile adapts to change Planning vs. Iteration: Waterfall is front-loaded with planning; Agile continuously iterates Project Fit: Waterfall works for clear, unchanging requirements; Agile suits evolving, complex projects  |9 Using Agile Development in a Resource-Constrained Startup › Focus on MVP (Minimum Viable Product) Tip: Prioritize essential features and release early to gather feedback. Avoid overbuilding. Benefit: Maximizes limited resources by delivering value quickly and learning from the market. › Short Sprints with Clear Priorities Tip: Use 1-2 week sprints focusing on the most critical tasks first. Benefit: Allows flexibility and course correction without wasting time on non-essential features. › Small, Cross-Functional Teams Tip: Involve all necessary skills (dev, design, marketing) in small, collaborative teams. Benefit: Increases efficiency and reduces bottlenecks from handoffs. › Use Open-Source and Low-Cost Tools Tip: Leverage free or inexpensive project management tools (e.g., Trello, Jira, GitHub). Benefit: Reduces overhead costs while maintaining agility and communication. › Frequent Customer Feedback Loops Tip: Engage early users and incorporate their feedback into the next sprint. Benefit: Ensures you’re building what customers actually need, reducing wasted effort. › Continuous Improvement with Retrospectives Tip: Hold brief retrospectives after each sprint to identify improvements. Benefit: Helps optimize processes, making the team more efficient over time.  | 10 Interdependence of goals Source: Kessler and Chakrabarti(AMR, 1996) Core idea: Objectives of different teams, departments, and stakeholders are interconnected and mutually dependent. Achieving success in developing a new product requires coordination and alignment between these different goals.  | 11 NPD process: Sequential vs. partly parallel process Sequential Process: › Stages completed one after another › Pros: Clear structure, lower risk of rework › Cons: Longer time-to-market, siloed operations Partly Parallel Process: › Stages overlap › Pros: Faster time-to-market, better cross-functional collaboration › Cons: Higher risk of rework, complex resource management Key Trade-Offs: › Speed vs. Accuracy: Parallel reduces time-to-market but may increase rework › Risk Management: Sequential reduces rework but is slower to adapt › Context Matters: Choose based on industry, product complexity, and market dynamics Source: Schilling (2013)  | 12 Case: NPD process for microinverters Enphase IQ series › Key Features of Enphase's NPD: › Partly Parallel Development Iterative design and testing: Continuous feedback and refinement ensure high product quality. Faster time-to-market: Overlapping development stages allow quicker adaptation and innovation. › Accelerated Lifecycle Testing (ALT) Simulates extreme environmental conditions to ensure 25+ years of product durability. Helps identify and fix potential failures early in the process. › Cross-Functional Collaboration Teams from R&D, manufacturing, and customer service collaborate to align technical performance with market demands. › Modular and Scalable Design Enables flexibility for various configurations (e.g., grid-tied, off-grid). Supports diverse customer use cases, such as the IQ8 microinverter's grid-forming capabilities. Sources (selection): https://enphase.com/download/reliability-enphase-microinverters-tech-brief https://newsroom.enphase.com/news-releases/news-release-details/enphase-energy-launches-iq8-industrys- first-microgrid-forming https://www.pv-tech.org/new-inverters-new-ways-of-thinking-ampt-and-enphase-on-inverter-innovation/  | 13 The Dollar auction Rules: 1. The Dollar bill goes to the winner 2. The second-highest bidder loses the amount that they bid  | 14 Dollar auction: Insights › Rationality: The better (more rational) choice not always clear. › Thinking strategically matters: Being able to see more than one step ahead is valuable (as are the tools that help you with that) The same strategy that helps you to exploit something in the short run may end up causing losses in the long run. › Quit: Sometimes the best strategy is to quit – even if it entails cost (and it does not feel well).  | 15 Escalating commitment › What is it? Examples › Why relevant  | 16 Escalating commitment › Also known as “commitment bias” Behavioral pattern in which an individual or group experiences negative outcomes from an earlier decision, action, or investment but continues to provide supportive behavior. Did this happen to you earlier? Can you associate with such a bias? www.youtube.com/watch?v=s_B26pK2lz4 Source: decisionbiases.weebly.com  | 17 Escalating Commitment Case: The Motorola Iridium Case › Project Overview: Motorola’s $5 billion investment in a global satellite phone network in the 1990s. › Key Signs of Escalating Commitment: 1. Sunk Cost Fallacy: Continued investment despite emerging evidence of low market demand and competition from mobile phones. 2. Product Limitations: Bulky, expensive phones with technical issues (e.g., limited indoor use). 3. Market Misalignment: Failure to adapt to the fast-growing mobile phone market. › Outcome: Commercial failure within 9 months, leading to bankruptcy of the Iridium subsidiary and financial losses. → Escalating commitment can result in continued investments in doomed projects, driven by past costs and emotional attachment. Source: Finkelstein, S., & Sanford, S. H. (2000). Learning from corporate mistakes: The rise and fall of Iridium. Organizational Dynamics, 29(2), 138-148.  | 18 Process control: avoiding escalating commitment › Goals of process control tools: › Avoid that managers support projects even long time after their expected value has turned negative: Stage-gate model › Improving communication and coordination among engineering, marketing, & manufacturing personnel: Quality function development (QFD) - House of quality › Early identification of issues of manufacturability in the design process: Design for manufacturing  | 19 Process control: avoiding escalating commitment › Stage-gate model: go/kill decision points Source: Schilling (2013)  | 20 Process control Stage-Gate Process: Helps avoid that managers support projects even long time after their expected value has turned negative Source: bpminstitute.org, 2021  | 21 Product design › Quality function development (QFD): House of quality Improving communication and coordination among engineering, marketing, & manufacturing personnel. Source: Schilling (2013)  | 22 Process design › Design for manufacturing Early identification of issues of manufacturability in the design process Source: Schilling (2013)  | 23 Risk control › Failure modes and effects analysis (FMEA) Risk priority number RPN = severity * likelihood of occurrence * inability of controls to detect › Example: Microinverter FMEA Failure Mode Severity (S) Occurrence (O) Detection (D) RPN Power Conversion 9 4 3 108 Failure Overheating 8 5 6 240 Communication 6 3 5 90 Failure Key Takeaways: Top Priority: Overheating (RPN = 240) requires immediate action. Moderate Risk: Power conversion failure (RPN = 108). Lower Priority: Communication failure (RPN = 90).  | 24 Tracking performance › NPD project performance Average cycle time of projects Percentage of projects met deadlines Percentage of projects stayed within budget Percentage of projects resulted in completed products Ratio of successful projects › Organizational innovation performance Number of patents applied/granted Number of new products introduced Return on innovation (ROI) Percentage of sales from new products  | 25 Involving managers in NPD process › Benefits from senior managers championing a NPD project Facilitating the allocation of human and capital resources Encouraging development efforts Ensuring cycle time is under controlled Stimulating communication and cooperation across functional groups › Drawbacks of senior managers championing a NPD project Clouding judgment about the true value of the project Unwillingness to challenge the project champion  | 26 Involving suppliers in NPD process  | 27 Involving customers in NPD process Source: Nambisan (AMR, 2002)  | 28 Managing NPD teams › Team size Large teams are often more capable but with more administrative costs and communication problems Social loafing: when size increases, individuals feel they will not receive full credit for contribution and so their efforts decrease › Team composition Cross-functional teams: diversity vs. homophily › Team leadership Different teams have different leadership needs Leadership affects team learning and innovation › Team administration Project charter: missions and goals Contract book: basic plan to achieve goals Source: Schilling (2013)  | 29 NPD systems › Computer-aided design (CAD) systems › Computer-aided manufacturing (CAM) systems  | 30 Case: Procter & Gamble www.youtube.com/watch?v =SAvwst8FAuk  | 31 Our initial starting point: Goals of NPD › Maximizing product fit with customer needs › Minimizing the development cycle time › Controlling development costs › How to do that? What tools can we use?  | 32 Case Question: https://www.youtube.com/watch?v=_7mMToRlAxs