During a recent webinar titled The Five Most Important Drivers of Success in Product Innovation – That Most People Get Wrong! with Dr. Robert Cooper, President of the Product Development Institute Inc., he fielded a number of audience questions. Bob is also the creator of the Stage-Gate® system, the widely used innovation and new product development process and methodology used by leading organizations around the world to drive new products to market. Based on his broad and deep knowledge, here are his answers to a number of the audience questions:
AUDIENCE: For the metric that one out of nine concepts are commercially successful, are these just concepts or are they fully vetted / funded projects? We track project success, but do not currently track concept success, and are wondering if we should be looking at both.
BOB: These are early stage concepts, more than ideas, but not fully defined products as one might find in a business case. That is, they are not yet projects in the development stage. See the attrition curve chart below from the book Winning at New Products (4th ed., p. 19); it’s a different source, so this chart shows a 7:1 ratio, rather than the 9:1 I stated in the webinar. If we started with raw ideas, it’s 60:1.
Thus, the concepts cited in the webinar are somewhere around stage one of the idea-to-launch (I2L) gating model as shown in the webinar (slide 19) in the diagram below.
Having said that, it’s very difficult to operationally define a concept or an idea. Most firms would start the clock at the equivalent of gate three, approve business case, and determine project performance from this point onwards. That is, from the point where the project is well defined, which means an approved business case. From a practical standpoint, I concur. However, there’s no harm in tracking the success (or attrition) of ideas and concepts, especially if you’re interested in measuring the performance of your ideation efforts, or best sources of ideas.
AUDIENCE: Do the studies conducted show strong correlation between organic growth and the metrics of NPD performance between top, average and bottom performing companies?
BOB: Sadly, we lack data on this. The problem is that many factors correlate with business performance, when measured by metrics such as growth, profitability, and return-on-shareholder-equity. Many of these performance drivers have nothing to do with product development. For example, organic growth is likely a function of the growth rate of the markets you are in, your strategy (how robust it is, and how effectively it is implemented), the quality of your management team, your core competencies, the competitive environment, and so on.
While NPD performance is likely one driver of organic growth, there are many other confounding factors, hence it is often difficult to get a strong connection between new product success factors or performance and metrics that capture the overall or total business performance. There are various research studies such as Getting a Better Return on Your Innovation Investment (PDF) by Arthur D. Little that show businesses doing well have strong NPD programs.
AUDIENCE: Our Stage-Gate process really starts at approval of a business case. I recognize that we need to introduce one, if not two, gates prior to approving the business case. Any suggestions on how to change mindsets to introduce new gates without making people feel like we are starting from scratch?
BOB: Many studies reveal that the activities that occur before formal development begins, the front-end homework, market studies, technical assessment, building the business case are the really pivotal activities. They create the foundation for the project and the seeds of success or failure are often found in these pre-development phases (see for an example, New Products – What Separates the Winners from the Losers and What Drives Success). Thus, the game is won or lost in the first five plays. This is perhaps why Toyota’s 5 NPD Principles include front-end load your project, as a plea to do more work earlier in the project to do the needed early stage homework.
Given the importance of the front-end, it makes sense to capture these vital activities and include them in your idea-to-launch (I2L) system, and not merely assume that they’ll happen. They often don’t, which explains why so many new product failures can be traced directly to the front-end of the project.
AUDIENCE: Many companies often believe that the new product strategy is implicit in their company or brand strategies. How do you convince them that they are different and that they need to invest significant time in developing a new product strategy?
BOB: Bore them with the facts! There are countless studies that reveal that having a product innovation strategy for the business is strongly connected to the new product performance of the business. In short, a solid, well-defined strategy pays off. I cited two such studies in my webinar (see near the beginning). See for an example, Developing a Product Innovation and Technology Strategy for Your Business, especially figure one which shows that top performing businesses have the elements of an innovation strategy in place, whereas poor performers do not!
There are also the common-sense arguments: Without a strategy you drift, like a ship, without a rudder. You’ll likely end up in a lot of projects in unattractive markets and areas, or worse yet, just too many different and unrelated areas. Strategy helps to define the search fields for effective idea generation to focus your ideation efforts. Your innovation strategy is one of the key criteria for selecting the best projects in portfolio management. And so on.
AUDIENCE: Some innovation team leaders and consultants resist communicating areas that are out of bounds because they feel it limits creativity. How should we deal with this?
BOB: It depends on how limiting the defined areas are. Obviously, if strategic areas are defined so as to be very limiting, then creativity is indeed thwarted. So be careful in how tightly you define strategic areas, making sure that they are broad enough to allow creativity and some bolder, more imaginative development ideas and projects to occur.
Additionally, some firms allow a discrete percentage of projects to be wildcards or outside the traditional areas as defined in the business’s strategy. These so-called test drill projects are indeed out of bounds, but often uncover new opportunities in a new field. This is not the same as a scattergun approach, because the number of such projects is quite limited.
Finally, some pundits argue that too broad a definition of in bounds areas actually hurts creativity and innovation. What happens is that a lot of off-strategy projects are proposed and may even progress. Thus, the firm ends up in a lot of unwanted and perhaps unattractive areas, and also in too many different areas, essentially a scattergun approach. So innovation actually suffers in this scenario.
AUDIENCE: If so many companies worldwide with over 73% of US and over 90% of German and Scandinavian companies having implemented a Stage-Gate system, why aren’t they all equality successful? How do the top performers distinguish?
BOB: There are two main reasons.
First off, many of the systems these firms have implemented, often with the best of intentions, are either now obsolete or were highly flawed. I cannot tell you how many firms I have visited that claim to have a Stage-Gate system “just like in the book” and when I inspect it more closely, I often discover that it’s nothing like what was described in my book. They simply got it wrong. It’s a poorly conceived, poorly designed system, and so results aren’t so good.
Further, some firms are living in the past, and are using much older versions of Stage-Gate, models typical of the 1990s, but a lot has changed since the 1990s. For an update on what’s new in Stage-Gate, see my website and topic section Next Generation Stage-Gate and What’s Next After Stage-Gate? and in particular, the two articles, What’s Next After Stage-Gate? and also What Leading Companies Are Doing to Re-Invent Their NPD Processes.
Secondly, while many firms have a well-designed Idea-to-Launch (I2L) system, they have failed to implement it well or consistently. For example, gate meetings are missed, decisions aren’t made, and gatekeepers behave inappropriately. As we saw in one of the polling questions during the webinar, almost 90% of attendees confess to poor project selection practices, too many projects, too few big projects, not enough resources to do the projects etc. This usually is not the result a bad system, rather a lack of discipline at gates and portfolio reviews!
In other firms, project teams sometimes just don’t get it. Expectations are unclear, the work doesn’t get done, business cases are weak, and so on. Sometimes this is due to a lack of training or skills; often it is because there are simply too many projects in the pipeline.
Most of these problems are implementation issues, often simply a lack of discipline and a failure to adhere to the spirit of an otherwise well-designed I2L gating system.
AUDIENCE: What do you say to the risk that going too flexible in the structure of a Stage-Gate system is just a “sop” to those individuals in a company that simply don’t want to have their decisions challenged?
BOB: There are limits to flexibility. Otherwise, soon you have no system at all and it’s back to the chaos of the 1970s, when project teams and R&D folks could do pretty well what they wanted. Back then, budgets were much less constrained, relatively speaking (resources seemed plentiful), and besides, NPD results were not so good.
These are relatively good policies for some limits:
- We have a basic I2L system, regardless of flexibility – a 5-stage, 3-stage lite and a 2-stage express system. All development projects must go through one of these (specify guides for routing).
- We have gates where go/kill decisions will be made. A decision must be made, usually that day, and resources must be committed to the project leader and team right at the gate meeting.
- There are certain deliverables expected at each gate regardless of the project. Other deliverables are discretionary. However, what will be delivered is agreed at the previous gate and not just on a whim of the project leader or some team member.
- There are certain expectations regarding key activities (tasks) that will be done regardless in each stage, and quality standards for the execution of those tasks. For example, for major projects, a solid voice of the customer (VOC) study, a financial analysis according to some template, and a technical assessment will all be done in stage 2.
Bottom line: There is a fine line between flexibility and intellectual laziness or plain and simple lack of discipline. You can have guide books or electronic manuals, templates and training, but ultimately the gatekeepers together with the Stage-Gate process manager must set the expectations.
AUDIENCE: Many companies seem to be cutting back on market research because they are trying to do things faster and cheaper. Many consultants are actively dissuading companies from doing research because they say it does not provide insights. How should companies deal with this?
BOB: Customer or user input, at the very front end to generate ideas is key. (See two articles on the best sources of new-product ideas, results of a survey of many firms, and VOC methods are highly-rated by users on my website). Customer inputs achieved via spirals or iterations (a series of build-test-feedback-and-revise loops are vital too. One problem with traditional market research is that customers don’t know what they want until they see it. So get something in front of them early, cheap, and fast. In short, consider it a plea to use this spiraling approach.
Perhaps it’s the type of market research that’s being done that’s the problem. Regardless, customer insights are critical: More new products fail due to faulty customer and market information than any other single cause!
AUDIENCE: I agree that the customer input is key, but how do you suggest one copes with when customers provide their needs in terms of potential solutions rather than what they want to achieve (e.g. when they are effectively making assumptions about what you can deliver)?
BOB: It’s OK that the customer has your next new product. In fact, there’s some research that shows this is very true, especially in some industries. Lab instruments is an example. Just make sure that your front-line people (e.g. sales and tech service) are trained to recognize a customer-developed product, and act on it.
AUDIENCE: Can you comment on the Innovator Dilemma comparing innovation of sustaining vs. disruptive products.
BOB: Wow! We could spend hours on this topic. Today I fear that, facing the demands of shareholders for short term profitability, too many firms have opted for a new-product effort that results in a pipeline full of modifications, tweaks, product improvements, and small initiatives. These are sometimes called sustaining innovation, but in reality, it’s not innovation at all, but rather a renovation strategy.
Our research over the years shows that the proportion of significant innovations and genuine new product projects in the typical development portfolio has dropped in the USA. The chart below shows the trend from the 1990s to today. We have a similar chart that shows that poor performers have a much higher proportion of small projects in their portfolios.
This preoccupation with the short-term and low-hanging fruit development projects is most serious, and will ultimately result in the demise of many companies.
AUDIENCE: Steve Blank’s customer discovery approach seems to support your customer interface approach.
BOB: Agreed, but he is not the first advocate of this type of methodology.
AUDIENCE: Adaptive development. What is your experience of how this approach could lead to trial fatigue at customers, especially in a B2B situation?
BOB: Yes, adaptive development complete with multiple spiral or iterations can lead to user fatigue. Thus the project must be an important one for both the customer (one with significant benefits for him or her) and for you. And the early iterations can even be done online using virtual products, so they are less onerous and maybe fun, even enlightening, for the customer too.
Key point: Don’t let doing lots of customer trials (spirals, iterations, user trials) be a substitute for doing your homework up-front with the customer. Again, there is a fine line between good practices here and just plain laziness (unwilling to do the hard work early on). Without that front-end homework, you probably won’t get the product right at all, and then be caught in an endless set of spirals (user trials) which can indeed begin to annoy the customer.
For B2C products, not as problematic, as one can go to different groups of customers for iterative feedback along the way. Again, do the front-end homework with customer/users to yield a higher likelihood of getting the product rights, and save yourself some unnecessary trials or iterations later on. Pay me now, or pay me later!
AUDIENCE: Do you have a maturity/quality scale for PD processes?
BOB: Not really. We do have a maturity model that captures moving from no process to an I2L gating process to portfolio management to a full innovation model or system. Frankly, it might be difficult to generalize a maturity model for just the I2L process, as I see companies following so many different paths to reach their destination (and of course, many do get lost along the way!). We do have a model for the design and implementation of an I2L process however.
AUDIENCE: I attended your course, several years ago at McGill University. What major changes have you made to the Stage-Gate process in the interim?
BOB: Wow, several years ago was probably more like 10-15 years ago, as I have not given my seminars at McGill in Canada for many years. And a lot has happened since then, so much, that this topic is a full-day question and answer session.
In a nutshell, leading firms have adopted a “Triple A” approach – more agile, more accelerated, and more adaptive and flexible. A comprehensive article on what firms have done is available. For example, see What’s Next After Stage-Gate (both the long and short versions) in the section Next Generation Stage-Gate® and What’s Next After Stage-Gate®. There are another few other articles in that section that are not quite so step-out for more modest improvements to Stage-Gate. We do have a two day seminar on this topic, so it’s a bit tough to answer in a paragraph or two.
AUDIENCE: Many companies vary in their skills and priorities. The top five drivers in this webinar are not listed in a priority order for everyone, it is infinitely variable. Some of the other nine problem areas you mentioned could come forward and be a priority for some.
BOB: Agreed. There are a number of success drivers or factors in new-product development that I did not cover in the webinar, both at the project level and at the business-unit level. Some of these may be drivers or practices relevant for you. I tended to focus in the webinar on those factors with the highest impact and/or where performance is most in need of improvement, again, based on research.
AUDIENCE: Do you have any statistics on the percentage of dropout of NPD’s in various stages, 1, 2, etc.?
BOB: Yes, but be careful about using averages. First, no one is average, and second, if you use these average drop-off percentages as a guide for how many projects you should be killing at each gate, it may become a self-fulfilling prophecy. Not good. For data, see the chart in the answer to my first question in this series. That attrition chart comes close to giving you what you want. Again, there are great dangers in generalizing.
Dr. Robert Cooper is a world expert in the field of new product management. He was named The World’s Top Innovation Management Scholar and The Quintessential Scholar in the U.S. publication, Journal of Product Innovation Management (JPIM). He is one of three Crawford Fellows of the Product Development & Management Association (PDMA). Bob is the creator of the Stage-Gate® system, now widely used by leading organizations around the world to drive new products to market. He has helped hundreds of leading corporations design and implement his Stage-Gate® innovation and new product development process. He is also the developer of the NewProd® system for screening and diagnosing new product projects.