Company Competencies as a Network: The Role of Product Development

Product development managers and academics like to assure themselves and each other that new product development is one of the most critical areas of company competence and contributes positively to company success. But does top management agree? Because if they do not, the consequences will heavily influence the resource allocation to product development and career possibilities of new product developments manager. This study examines how top managers view the importance of product development relative to other central competence areas. Although asking managers about their perception is one way of evaluating the importance, its contribution to company success is another important measure. In this study, the impact of product development, relative to other important competence areas, is measured to assess further how critical product development is for overall company success.The authors investigate these matters in a survey of top managers in 513 Danish production companies. Ten areas important for achieving company objectives are identified. These are product development, market intelligence, production management, strategy and vision, sales, market responsiveness, promotion, internal co-operation, image, and supply management. Product development is rated a fairly important competence as it ranks number four, with sales, market responsiveness, and production management ranking numbers one to three. Yet a distressing negative impact on overall company success is found for product development proficiency, whereas success is positively related to production management, image, and differentiation of products. Further analysis reveals that product development contributes positively to success by enabling product differentiation and enhancing promotion proficiency. Influenced by and influencing many other competencies, product development is found to be a central competence.Results support a nonfunctional and broad perspective of how bundles of competences interact and impact on success and establish a positive overall contribution to product development.     

Do Firms Need a Custom-Designed New Product Screening Model?

Organizations have traditionally taken a variety of approaches to screening new product ideas. The use of a formal evaluation process to support screening decisions can reduce the costs and risks associated with product development. Although making good new product choices is vital, many managers have not applied analytical screening models because these models have not been customized to reflect the particular character of their firm and industry. In a study of how managers from different types of companies screen new product proposals, Ulrike de Brentani finds that the essential criteria determining new product selection do not differ radically among firms. This indicates that managers can potentially benefit from applying an existing formal evaluation model that encompasses the critical factors generally applied when making new product evaluation decisions, even if that model has not been customized for their specific application.     

Exploring Retail Bank Performance and New Product Development: A Profile of Industry Practices

Based on their survey, Eric Reidenbach and Donald Moak report that various aspects of new product development practices are associated with different levels of retail bank performance. Such practices and activities as the existence of a formal evaluation process, the existence of new product managers, the length of time a product spends in development, and the percentage of the operating budget spent on new product development tend to vary according to bank performance. Top performers have decidedly different new product development processes, structures, and practices than do average or negative performers.     

Auditing product innovation activities in manufacturing firms

Increasing numbers of large firms are splitting themselves into self-standing businesses for the purpose of targeting opportunities more accurately. Based on the findings of an empirical study of product development procedures in leading UK and US manufacturing firms this article provides R&D and other managers with a checklist of the processes involved in developing products speedily and efficiently. Businesses which use product innovation successfully as a competitive weapon are shown to approach development work in a way which is far more comprehensive than aiming only at efficient technical project management. In such businesses supportive top management and efficient interfunctional teamwork emerge as key factors concerned with running a total business both now and in the future.     

The R&D–Marketing Interface in Japanese High-Technology Firms

Gupta, Raj and Wilemon [11,12] have examined the R&D–marketing interface in US high-technology firms. X. Michael Song and Mark E. Parry explore the generalizability of those findings to Japanese high-tech firms, specifically, comparing the perceptions of 223 Japanese R&D and marketing managers regarding activities that require R&D–marketing integration, the level of achieved integration in Japanese firms and the types of integration related to variations in new product success rates. Their analyses reveal a number of consistencies between the perceptions of US and Japanese managers.     

Innovative versus incremental new business services: Different keys for achieving success

In companies where new product development plays an important strategic role, managers necessarily contend with a portfolio of projects that range from high technology, new‐to‐the‐world, innovations to relatively simple improvements, adaptations, line extensions, or imitations of competitive offerings. Recent studies indicate that achieving successful outcomes for projects that differ radically in terms of innovativeness requires that firms adjust their NPD practices in line with the type of new product project they are developing. Based on a large‐scale survey of managers knowledgeable about new product development in their firm, this study focuses on new business‐to‐business service projects in an attempt to gain insights about the influence of product innovativeness on the factors that are linked to new service success and failure. The research results indicate that there are a small number of “global” success factors which appear to govern the outcome of new service ventures, regardless of their degree of newness. These include: ensuring an excellent customer/need fit, involving expert front line personnel in creating the new service and in helping customers appreciate its distinctiveness and benefits, and implementing a formal and planned launch program for the new service offering. Several other factors, however, were found to play a more distinctive role in the outcome of new service ventures, depending on how really new or innovative the new service was. For low innovativeness new business services, the results suggest that managers can enhance performance by: leveraging the firm's unique competencies, experiences and reputation through the introduction of new services that have a strong corporate fit; installing a formal “stage‐gate” new service development system, particularly at the front‐end and during the design stage of the development process; and ensuring that efforts to differentiate services from competitive or past offerings do not lead to high cost or unnecessarily complex service offerings. For new‐to‐the‐world business services, the primary distinguishing feature impacting performance is the corporate culture of the firm: one that encourages entrepreneurship and creativity, and that actively involves senior managers in the role of visionary and mentor for new service development. In addition, good market potential and marketing tactics that offset the intangibility of “really new” service concepts appear to have a positive performance effect.     

A Retailer's View of Industrial Innovation: An Interview with David Glass, President and CEO of Wal-Mart Stores Inc.

Sales of innovative products are heavily influenced by the role of important channels of distribution. Gerald Udell and Linda Pettijohn interviewed David Glass, the President and CEO of the world's largest retail organization. Their conversation spanned a number of topics of interest to managers of innovation programs: the economic impact of innovation in the consumer sector, the rarity of truly innovative products capable of creating new business categories, difficulties in getting new products developed and produced in the US and the long-term consequences of emphasizing product improvement over product innovation strategies. David Glass challenges us to translate the American spirit of innovation into effective results.     

Perceptions of Industrial Design: The “Means” and the “Ends”

It is widely accepted that industrial design can play an important role in the development of innovative products, but integrating design‐thinking into new product development (NPD) is a challenge. This is because industrial designers have very different perspectives and goals than the other members of the NPD team, and this can lead to tensions. It has been postulated that the communications between NPD managers and industrial designers are made more difficult because each group uses very different language. This research made the first empirical investigation of the language used by designers and managers in describing “good” and “poor” industrial design. In‐depth interviews were conducted with a sample of 19 managers and industrial designers at five leading companies. Multiple sources of data were utilized, including the repertory grid technique to elicit the key attributes of design, from the perspective of managers and designers. Using a robust, systematic coding approach to maximize the validity and reliability of qualitative data analysis, it was established that managers and industrial designers do not use a completely different vocabulary as previously supposed. Rather, it was found that managers and industrial designers use some common terms augmented by additional terms that are specific to each group: managers are commercially orientated in the “ends” they want to achieve and designers perceive more antecedents (“means”) necessary to achieve their “ends”—iconic design. This research led to a grounded conceptual model of the role of design, as perceived by managers and industrial designers. The implications of the results achieved are wide: they indicate how managers and designers can interact more productively during NPD; they highlight the need for more research on the language of designers and managers; and they point to issues that need to be covered in the education of industrial designers. Finally, this work suggests how managers and designers can engage in a more fruitful dialogue that will help to make NPD more productive.     

Bidirectional Information Transfer: An Imperative for Network and Marketing Integration in a Canadian Telecommunications Firm

Market intelligence helps ensure that R&D efforts are focused on customer needs. In turn, R&D supplies the information necessary for gaining competitive advantage through advances in product and process technology. However, improved R&D–marketing integration means more than simply involving additional marketing personnel in product development. We must focus on identifying and achieving the desired level of integration. Jozée Lapierre and Brigitte Hénault present the results of a study examining the R&D–marketing interface in a large Canadian telecommunications company. Their study explores managers' perceptions of interfunctional integration during the planning and implementation of new services. The goal of this study is to identify the critical integration areas and managers' satisfaction with the organization's current level of integration. Network (i.e., technical) and marketing managers differ substantially in their perceptions of the required level of integration. However, they agree on the five most important areas of interfunctional integration: marketing involvement in establishing service development schedules; information transfer from marketing to network on competitors' moves; information transfer from marketing to network on customer requirements for new services; information transfer from network to marketing on network availability for providing evolved services; and information transfer from network to marketing on network restrictions affecting performance, after-sales servicing levels, and service pricing. In other words, network and marketing managers view information transfer between their groups as requiring the highest integration level. Both groups agree that their budgeting activities do not require as much integration as other activities. Managers from both groups are generally dissatisfied with the current level of interfunctional integration. Marketing managers are far more dissatisfied than network managers in most areas of integration explored in this study. However, network managers are more dissatisfied than their marketing colleagues in all areas involving the transfer of information from marketing to network.     

Psychosocial antecedents of communication,trust, and relationship effectiveness in new product development projects: a functional manager perspective

The basic differences between marketing managers and their technically trained counterpart managers [e.g., research and development (R&D), engineering, and manufacturing managers] in terms of work experience, training, and differing decision‐making styles have often been suggested as a source of conflict, which acts as a barrier to effective working relationships and integration during new product development (NPD) work. In this paper, we empirically explore this issue by developing and testing a model of psychosocial differences (thought worlds and psychological distance) between the two groups of managers and their effect on communication, trust, and relationship effectiveness during NPD projects. We find that while thought world differences do still matter, it was from a marketing perspective that they had a stronger effect. These findings have implications for top management trying to manage the functional manager interface during NPD projects. We propose a semi‐formalized approach to relationship building that may speed up the acquisition of social data that is often necessary to elevate working relationships to trusting ones and improve the efficiency of NPD work. Our model is tested using data from two samples, 184 technically trained managers and 145 marketing managers from Australian companies involved in NPD work.     

Product development in the chemical industry: A description of a maturing business

To help us understand the massive complexity of the chemical industry, Robert A. Linn breaks it down into product/market sectors that show differing business requirements, and hence, differing new product development requirements. This is an important industry that has struggled through the 1970s with sharp changes in external pressures and very little technological excitement. Where are the new product opportunities in an industry such as this? How do you pursue them? On the basis of his years of experience in the industry, Linn offers some suggestions and some challenges for managers.     

The use of information technology tools in new product development phases: Analysis of effects on new product innovativeness, quality, and market performance

Extant research has largely ignored empirically examining how information technology (IT) affects new product effectiveness. Using the knowledge-based theory as a foundation, this study examines if, and how, particular IT tools used in the discovery, development, and commercialization phases of the new product development (NPD) process influence NPD effectiveness dimensions, namely, market performance, innovativeness, and quality of a new product. Based on data collected from NPD managers in the US and Canada, the findings indicate that specific IT tools contribute to various measures of new product effectiveness differently. Moreover, the results show the positive effect of these IT tools in different phases of the NPD process. This suggests that with regard to NPD, a decompositional approach that examines the role of IT within each phase of the NPD process is best. Based on these findings, the authors discuss theoretical and managerial implications of the study and suggest paths for future research. Managerially, some interesting results of our study are that decision support systems, file transfer protocols, and concept testing tools would significantly improve NPD effectiveness regardless of the phase they are used.     

An Interim Report on Measuring Product Development Success and Failure

This article represents findings of a PDMA task force studying measures of product development success and failure. This investigation sought to identify all currently used measures, organize them into categories of similar measures that perform roughly the same function, and contrast the measures used by academics and companies to evaluate new product development performance. The authors compared the measures used in over seventy-five published studies of new product development to those surveyed companies say they use. The concept of product development success has many dimensions and each may be measured in a variety of ways. Firms generally use about four measures from two different categories in determining product development success. Academics and managers tend to focus on rather different sets of product development success/failure measures. Academics tend to investigate product development performance at the firm level, whereas managers currently measure, and indicate that they want to understand more completely, individual product success.     

Linking Product Development Outcomes to Market Valuation of the Firm: The Case of the U.S. Pharmaceutical Industry*

The purpose of this research was to examine empirically the effects of new product development outcomes on overall firm performance. To do so, first product development and finance literature were connected to develop three testable hypotheses. Next, an event study was conducted in order to explore whether the changes in the stock market valuation of firms are influenced by the outcomes of efforts to develop new products. The pharmaceutical industry was chosen as the empirical context for the present study's analysis largely because the gate‐keeping role played by the Food and Drug Administration (FDA) provides a specific event date on which to focus the event study methodology. As such, this study's events were dates of public announcements of the FDA decisions to approve or to reject the New Drug Applications submitted by the sponsoring firms. Consistent with the efficient market hypothesis, this study's results show that market valuations are responsive strongly and cleanly to the success or failure of new product development efforts. Hence, one of this study's key results suggests that financial markets may be attuned sharply to product development outcomes in publicly traded firms. This study also finds that financial market losses from product development failures were much larger in magnitude than financial market gains from product development successes—indicating an asymmetry in the response of financial markets to the success and failure of new product development efforts. Hence, another implication of this study's results is that managers should factor in a substantial risk premium when considering substantial new development projects. The present study's results also imply that managers should refrain from hyping new products and perhaps even should restrain the enthusiasm that the financial community may build before the product fully is developed. The effect on firm value is severe when expectations about an anticipated new product are not fulfilled. Managers in effect should take care to build reasonable and realistic expectations about potential new products.     

Empowering Management in New Product Development Units

In a study of management in new product development units, Josef Frischer compared managers who primarily intend empowering subordinates for the benefit of the whole organization (managers with the leadership motive pattern) with those who essentially are concerned with the establishment and maintenance of a friendly relationship with subordinates (managers high in need for affiliation). Thirty-five managers, heading new product development functions or units in four high-technology plants, were assessed along with their subordinates. When managers exhibited a leadership motive pattern, their subordinates perceived their work groups, their managers, and themselves as more influential (empowered). They also reported a more innovative climate as compared with subordinates of managers high in need for affiliation. Beside, those in subordinate positions, who are affected by the empowering managers, are given the opportunity to successfully influence and manage the turbulence and complexity arising from the development of new products, thus helping to establish an organizational climate that supports innovative pursuits.     

Market orientation, interdepartmental integration, and product development performance

Various research studies have shown that a market orientation and interdepartmental integration can positively influence product development performance. Addressed in this article is whether market orientation and interdepartmental integration both equally influence product development performance, whether one of these constructs is more influential than the other, and whether such influence is dependent on the type of department being examined? Analyzing survey data from 156 marketing, manufacturing, and R&D managers, the tentative results suggest that a market orientation and interdepartmental integration correlate to improved product development and product management performance in varying degrees across these three manager sets. It appears that a positive relationship between market orientation and product development petformance is likely to be reflected by the marketing department, while marketing and manufacturing departments are likely to reflect a positive relationship between the general construct of market orientation and product management performance. Manufacturing managers also reflect a positive relationship between interdepartmental integration and product development and product management performance. Further analyses involving the elements of a market orientation and interdepartmental integration find that a customer orientation appears important to performance in the case of marketing managers, and that collaboration is important to performance in the case of manufacturing managers. R&D managers did not reflect any statistically significant relationships between market orientation, interdepartmental integration, their constructs, and performance. These results should not be taken as refuting the claim of an important relationship between market orientation and product development performance, however. The present results refine our understanding of market orientation to consider department‐specific effects, as well as temper the claims that implementing a market orientation will readily lead to improved product development performance across all departments in an organization. This may or may not be the case, depending on the focal department.     

Interdepartmental Integration: A Definition with Implications for Product Development Performance

Improved interdepartmental integration yields improved product development performance. But what do we mean by interdepartmental integration? Is it increased interaction between the various departments involved in product development—in other words, more meetings and other formal information flows between R&D marketing and manufacturing? Or is the term integration another way of saying collaboration—that is, various departments working collectively toward common goals? Or are collaboration and interaction both important elements of interdepartmental integration? Kenneth B. Kahn presents the results of a study exploring how collaboration and interaction affect product development performance and product management (post-launch) performance. Survey respondents are marketing, manufacturing, and R&D department managers working for firms in the electronics industry. It is hypothesized that both collaboration and interaction between departments will positively influence product development performance and product management performance. It is further hypothesized that collaboration will have a stronger effect than interaction. The survey responses indicate that collaboration has a strong, positive effect on performance. (The only exception is the effect of manufacturing managers' collaboration with marketing on product development success; the effect of this variable is not statistically significant). However, interaction does not have a significant effect on product development performance or product management performance. In fact, the responses indicate negative effects for meetings and the exchange of documented information. The results support increased emphasis on company policies that facilitate collaboration between departments as opposed to those that only stress meetings and documented information exchange. Although a certain level of interaction is necessary throughout the product development process, such interaction doesn't lead to success; collaboration makes the difference between success and failure. To best manage interdepartmental integration, managers should first assess their firm's levels of interdepartmental collaboration and interaction. The scales presented in this study can be used for this benchmarking effort. The results of this assessment can be used for developing and implementing an action plan for improving interdepartmental integration. For example, a manager faced with a prevailing interaction philosophy might seek to reduce the number of meetings or the amount of paperwork flowing between departments.     

Coordination of Design Supply Chains for Bundling Physical and Software Products*

Research on product development management has concentrated on physical products or on software, but not both. This article explores a special new product development (NPD) approach in which the internal development of core physical products is augmented by bundled and largely outsourced software features. We studied a medical device producer that has established a new medical information product group (MIPG) within their NPD organization to create software features that are bundled with their core physical products. The MIPG has conceptualized these software features as multiple software development projects, and then coordinated their realization largely through the use of external software suppliers. This case study centers on the question: how can firms effectively coordinate such product development processes? Our analysis of case evidence and related literature suggests that such product bundling processes, when pursued through design supply chains (DSC), are more complex than is typical for the development of streams of either physical products or software products individually. We observe that DSC coordination transcends the requirements associated with traditional “stage‐gate” NPD processes used for physical product development. Managers in DSC settings face a tension inherent to distributed work: keeping internal and external development efforts separate to exploit the design capabilities within a network of software suppliers, while ensuring effective delivery of a stream of bundled products. Many managers face this coordination tension with little, if any, prior knowledge of how to create a streamlined and effective DSC. Our research indicates that these managers need to make a series of interrelated decisions: the number of suppliers to qualify and include in or exclude from the DSC; the basis for measuring and modifying the scope of the suppliers' work; the need to account for asymmetric cost structures and expertise across the DSC; the mechanisms for synchronizing development work across elements of the DSC; and the approaches for developing skills—both technical and administrative—that project managers need for utilizing in‐house competencies while acquiring and assimilating design know‐how from external development organizations. When managers take a flexible approach toward these decisions based on a modular set of software development projects, they can improve their NPD outcomes through technical and organizational experimentation and adjust their own resource deployment to best utilize the suppliers' capabilities within their DSC.     

Patterns of market research timing for new industrial products

The importance of market research to new industrial product ventures has been widely noted, and some evidence has suggested that failure of managers to carry out effective research can increase the probability of new product failure. In planning for market research, a problem facing managers is when market research should be done during the new product development process. In this study, patterns of timing of market research resource expenditures in 112 industrial new product situations were measured, and differences in these patterns related to seven major situational characteristics, marketing task similarity, distribution complexity, competitive advantage, buyer risk, development complexity, project downsides and project payoffs.
Data analysis using MDA revealed significant differences between the patterns of research timing in different new product situations, and related these differences most strongly to marketing task similarity, competitive advantage, and buyer risk. The findings have important implications for managers involved in planning market research activities and resource allocations in new industrial product situations.     

Financial Evaluation of the Product Line

When decisions are being made about adding or dropping a product, most managers will make a financial evaluation of the product and they may try to get some sense of the riskiness of the decision. They will also probably consider the effect of the add/drop decision on other products in the line. Seldom, however, do they consider the risk of a product mix decision in the context of the risk level of the overall product line. Professors Rabino and Wright argue that product managers should take a leaf from the analytical book of financial analysts and calculate a "product Beta" that shows the impact of the risk of the individual product on the risk of the whole portfolio of products. They also suggest some other ways of sharpening the financial picture in what are often strictly marketing evaluations. This is Professor Rabino's second article in JPIM . As in the previous one he coauthored with Howard Moskowitz, this one adds some interesting analytical methodology to managerial decision making.