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Innovative Systems Design and Engineering ISSN 2222-1727 (Paper) ISSN 2222-2871 (Online) Vol.4, No.

14, 2013

New Product Development and Customer Knowledge Management in Pakistani Firms: an exploratory study of processes and activities
Hira Sakrani (Corresponding Author) IME Dept., PNEC, National University of Science and Technology (NUST) 407, Mehran Estates Apts., Dr. Dawood Pota Road, Civil Lines, Cantt, Karachi, Pakistan Tel: +92346-3555643 Email: Dr. Joe Bogue Food Business and Development Department, University College Cork (UCC) Room 2.30, O' Rahilly Building, University College Cork, Cork, Ireland Telephone: +353 214902355 Email: Tooba Tariq Butt Institute of Business Management (IoBM), CBM Korangi Creek, CBM, Karachi, Pakistan Tel: +92333-3046743 Email: Abstract Investment in New Product Development (NPD) is vital for companies to remain competitive and sustain growth. Moreover, having an in-depth understanding of the needs and preferences of customers is increasingly being recognized as a key strategic resource for success. Customer Knowledge Management (CKM) as a competitive tool helps businesses achieve better customer understanding. Thus, as part of a companys NPD strategy it can play a significant role in enhanced competitiveness and productivity through utilizing customer knowledge to develop market-oriented new products. The research qualitatively examines the processes and activities of NPD and CKM within a sample of Pakistani firms. Keywords: New Product Development, Customer Knowledge Management, Knowledge Management, Consumer focus, Competitiveness. 1. Introduction The importance of New Product Development (NPD) is well documented and understood for continued business success (Ulrich and Eppinger, 2005; Cooper, 2001; Bogue, 2000; Booz, Allen and Hamilton, 1982). NPD effort(s) act as a catalyst for a firms ability to respond against competitive pressure. Correspondingly, managing NPD is becoming an increasingly challenging task for firms since it entails enormous financial and human resources. Thus, firms constantly engage in seeking better practices/approaches to optimize their NPD process (Bhuiyan, 2011). Innovation by firms can be a new technology, new product, new market, new material or a combination of any of the above (Cardinal et al, 2001). However, many studies have found consumer acceptance to be a key factor behind product success (Van Kleef, 2006; Bogue, 2000; Owens and Davies, 2000; Cooper, 1993; Crawford, 1987). Intense research on the subject has led to the conclusion that the success of new products depends mainly upon how efficiently they conform to consumer needs. An NPD effort that doesnt respect this core philosophy is likely to fail even if there is product superiority in terms of technology and functionality. The ability of firms to innovate through NPD is a direct reflection of the knowledge capacity of the organization (Du Plessis, 2007; Nesta and Saviotti, 2005). Thus the NPD process of a firm draws its inspiration from the knowledge of consumers so as to develop viable commercial solutions (Herkema, 2003). This requires firms to enhance their customer knowledge base and


Innovative Systems Design and Engineering ISSN 2222-1727 (Paper) ISSN 2222-2871 (Online) Vol.4, No.14, 2013

associated mechanisms so as to produce a more tangible output. Customer Knowledge Management (CKM) is one such platform that can help firms improve their fuzzy front activities (idea generation/screening). Therefore, the study of NPD and the processes and activities that influence its success remains critically important. This exploratory study qualitatively investigates the prevailing NPD structure in a sample of Pakistani firms and in tandem examines their current CKM competence level. 2. 1. Literature Review New Product Development: Strategy and Organization

Firms need to develop a New Product Development Strategy and Objectives prior embarking NPD efforts (Wind, 1982). Clarke and Muller (2003) noted that a clear cut product development strategy remained one of the main tenets of an overall business strategy. Wheelwright and Clark (1992) found that successful firms are those that are able to bring new products to the market at a much faster rate than their competitors due following reasons: (1) clear NPD strategy; (2) a structured NPD process; and (3) more focus on upfront activities. Cooper (1999) argued that a well understood NPD strategy would result in more successful products. In addition, Cooper and Kleinschmidts (1995) study concluded that a well-defined NPD strategy that was clearly understood across the firm produced a 32% more chance of product success. How firms organize the product development function dictates how designers, developers and other entities of the firms are linked together in a firms hierarchy so as to see through NPD efforts (Ulrich and Eppinger, 2005; Hayes et al, 1988). Eppinger (2005) has outlined the following links (of individuals) in the firm: (1) Reporting Structure: supervisorsubordinate relationship; (2) Financial Arrangements: groups or individuals can be linked together as part of the same financial entity; (3) Physical Layout: links of individuals sharing the same floor, office, building or site. Traditionally a firms organizational structure is either functional or project-oriented, however, a hybrid form, where functions and project entities overlap is often preferred by firms that are seeking growth through innovation and NPD (Hayes et al, 1988). 2.2 New Product Development: The Need for a Structured Process NPD is a process encompassing activities ranging from idea generation to commercialization of the product (Craig and Hart, 1992). Cooper and Kleinschmidt (2007) concluded that firms felt the need for a high-quality rigorous new product development process to ensure profitable innovation. The four most important critical factors of their study included: (1) a high-quality NPD Process: one that demanded up-front homework, sharp and early product definition based on clear and explicit consumer requirements, tough and unambiguous Go/Kill decision points while providing quality, flexibility and thoroughness of execution; (2) A well-defined new product strategy for the business unit that ensured new product goals for the business i.e. the role of new products for business; (3) Adequate resources of people and money through senior management commitment; (4) Increased Research and Development (R&D) spending within the prevalent NPD paradigm. Their study led to the conclusion that successful firms had a structured NPD process backed by strong management dedication clearly reflected in the vision and mission of the firm and translated at tactical level through requisite resources and channels. To reduce the risks associated with NPD, firms resort to some formalized process (Griffin, 1997). The systematic processes used by firms revolved around a number of ideas many of them renowned and accepted like the use of cross functional teams to support NPD effort back in 1960s (Lawrence and Lorsch, 1967) and NASAs phased review method (Cooper 1994). Since it is prudent that each firm tries to adopt/develop a process that meet its specific needs (Booz, Allen and Hamilton, 1982), therefore in effect firms employed at tactical level, a systematic and specific mechanism, for streamlining different NPD activities, comprising of two basic core ingredients, i.e. activities and decisions (Schmidt et al, 2001). Researchers have broadly categorized NPD structures into two main categories: (1) The Sequential or Traditional NPD process; and (2) The Concurrent NPD process. 2.3 New Product Development Paradigm: The Sequential and Concurrent Approach In the sequential NPD process each function passed information to the next stage in a chronological and sequential manner from idea generation to commercialization (Bogue, 2000; Owens and Davis, 2000; Griffin, 1997).Therefore, information flowed from one department to another only after completion from previous stage and remained void of requisite concurrence (Bogue, 2000; Owens and Davies, 2000). The approach is further dubbed as the problematic over the wall style of development (Bogue 2000, p. 9). The corollary of this is additional downstream effort and


Innovative Systems Design and Engineering ISSN 2222-1727 (Paper) ISSN 2222-2871 (Online) Vol.4, No.14, 2013

late changes in the product development quest. Subsequently, the sustainability cost of the project increased due increased iteration and elongated the process span time, i.e., the start to finish time of the process (Cooper, 1993). Coates and Robinson (1995) pointed out that the traditional NPD process has been unable to guarantee the success where competition is fierce and consumers have more choices. Hence the traditional NPD process, being deficient in flexibility and speed and void of Design for Manufacturing (DFM) finds its audience for very limited traditional products and is largely unsuited for the dynamic and vibrant markets of today. The continual challenge of developing complex and innovative products has led to the replacement of the sequential NPD process by the Concurrent Engineering (CE) approach (Bogue, 2000). The essence of Concurrent Engineering in NPD processes is comprised of two basic thrusts: concurrency of the hitherto sequential activities and the implementation of cross-functional teams that contribute to a successful product (Bergring and Andersin, 1994; Clausing, 1994).The activities are continuously evaluated at different review points where a structured mechanism is used to take decisions on the next stage of product development. CE aids firms in streamlining their NPD processes by making suppliers and customers a part of the NPD team, hence, obviating the need for unnecessary iterations (Bogue, 2000). Thus, the new paradigm of Concurrent New Product Development (CNPD) has provided a concrete framework for companies to help reduce product development time, improve product success rates and offer a compelling value proposition to the customer (Cooper, 2001; Griffin, 1997; Crawford, 1987). Many researchers have developed a CNPD model aimed at creating requisite harmony among various functions and departments so as to achieve the optimization of different product development phases (Ulrich and Eppinger, 2005; Cooper, 1993; Crawford, 1987; Booz, Allen and Hamilton, 1982). 2.4 New Product Development (NPD) and Critical Success Factor(s) Research within the field of NPD has highlighted a number of critical success factors that influence product acceptability. Although, it has generally been accepted that it is the consumer who is the ultimate judge of the product (Van Kleef, 2006; Brown and Eisenhardt, 1995; Cooper and Kleinschmidt, 1987) yet studies have suggested a number of other factors that are also considered critical to product success: (1) An effective NPD strategy; (2) An effectively managed NPD process; (3) idea management; (4) market intelligence; and (5) technology and resource. However, idea management was found to have the strongest impact on the revenue of the company in comparison with other critical factors (Bhuiyan, 2011; Cooper et al, 2003; Griffin, 1997; Booz, Allen and Hamilton, 1982). Bhuiyan (2011) noted that firms having a structured NPD process must consolidate their idea management phase. It has also been concluded by many studies that idea management has remained the least understood link in a product development effort (Van Kleef 2006; APQC study, 2002; Cooper, 2000; Griffin, 1997; Cooper, 1988; Booz, Allen and Hamilton, 1982). Cooper and Dreher (2010) asserted that the portfolio of products should continue to re-adjust itself in the shadow of innovative product ideas which were bold, blockbuster and game changers so as to promote a competitive edge for the firm. Nonetheless there has been a lack of substantial research to reveal the most effective idea sources (Cooper and Dreher, 2010, p.40). Zhang and Doll (2001) pointed out that most projects did not fail at the end; rather they failed at the beginning. Booz, Allen and Hamilton (1982) noted that firms needed to generate at least seven ideas to make one successful. The same was further affirmed by Griffin (1997) who found that a mere 15 out of 100 ideas would yield success. Cooper (1988) found that weakness in upfront activities reduced the chances of product success. Van Kleef (2006) highlighted that the key outcome of NPD performance analysis revealed the initial opportunity identification phase as a key to product success. Furthermore, it has also been found that most of the existing opportunity identification methods are unable to tap latent needs of consumers and thus cannot propel radical innovation of the future (Nijssen and Frambach, 2000; Nijssen and Lieshout, 1995; Mahajan and Wind, 1992). 2.5 Idea Management and Customer Focus through Customer Knowledge Management Strenuous studies have noted that focusing on upfront activities from consumer viewpoint helps gather idea(s), for new products, and may also lower the attrition rate (Van Kleef, 2006; Bogue, 2000; Griffin, 1997; Cooper, 1988; Booz, Allen and Hamilton, 1982). However, accurately identifying consumer wants/needs has remained a challenge for firms since the traditional methods of gathering consumer ideas often do not precisely reveal the latent needs of consumers (Van kleef, 2006). In this regard, the CKM paradigm can be used to explore tacit consumer knowledge (Gibbert et al, 2002). Darroch (2005) established that firms were more innovative and used resources more efficiently when they had better knowledge management capabilities. Tiwana (2001) believed that effective knowledge management was necessary to extract and integrate knowledge both internal and external to the organization. Rollins and Halinen (2005) saw CKM as an area of management utilizing knowledge management


Innovative Systems Design and Engineering ISSN 2222-1727 (Paper) ISSN 2222-2871 (Online) Vol.4, No.14, 2013

tools and instrumentation to exchange knowledge within an organization and between customer and organizations. Gibbert et al (2002) noted that by managing the knowledge of customers, firms were better placed to sense emerging market opportunities before their competitors which in turn allowed them to create economic value for the firm, its shareholders and its customers. Thus, studies on the subject have found that the CKM paradigm, a systematic mechanism that allows gathering, sharing and disseminating of consumer knowledge, can benefit firms by enhancing their capacity and reach towards customers. 2.6 CKM Process models Studies on CKM have clearly differentiated it from the traditional Knowledge Management (KM) and Customer Relationship Management (CRM) processes and tools (Darroch, 2005; Rollins and Halinen, 2005; Gibbert et al, 2002; Grover and Davenport, 2001). In this regard a number of CKM process models have been proposed in literature that tend to integrate KM/CRM aspects and are aimed at providing a knowledge sharing platform with customers. Studies have also suggested that the successful implementation of CKM remained largely dependent on smart and precise information flow between the different organs of the firm (Chen and Huang, 2011; Sofianti et al, 2010; Su et al, 2006; Dues et al, 2005; Rollins and Halinen, 2005; Gebert et al, 2003). In this regard Rollins and Halinen (2005) identified five key areas as pre-requisites for supporting CKM activities within an organization: (1) Inter Functional Cooperation; (2) Supportive Organization Systems; (3) Cooperation with Customers; (4) Supportive IT systems; and (5) An organizational culture that supports organizational learning and customer orientation, Figure 1 below. 3. Research Objectives The research objective(s) of this paper were: (1) To understand prevailing NPD practices in Pakistani firms, compare them with established global NPD models and to recognize the factors that impact them; (2) To examine the culture of market orientation in surveyed firms; (3) To gauge the CKM infrastructure in surveyed firms and understand how CKM can benefit NPD within Pakistani firms 4. Research Methodology A qualitative study aimed at gaining understanding of NPD and CKM in the sample of Pakistani firms, was used as a research method owing to the exploratory nature of the subject (Sekeran and Bougi, 2009; Neuman, 2003; Lincoln and Guba, 2000). A pre-determined semi-structured open-ended interview guide, as defined by Denscombe (1998) and Hussey and Hussey (1997), was utilized as the primary data source. Snowball sampling procedure was used to identify a non-probabilistic sample size of nine firms that represents a rich heterogeneous mixture of different industrial entities (Babbie, 2001). Respondents for each firm were chosen based on their knowledge and involvement with the firms NPD paradigm. Face to face semi-structured interview with firms respondents was documented in quotes, notes and narrations and was supplemented by observations and email responses to develop a complete understanding of the issue (Yin, 2003; Jovchelovitch et al, 2000; Descombe, 1998; Robson, 1993). Confidentiality of the firms was maintained by referring to them by a code instead of their name. Main sources of secondary data were firms annual reports, information available on official websites and government economic data ( Sekaran and Bougie, 2009; Kumar, 2005). Data reduction was carried out using pre-determined coding and categorization, the reduced data was then displayed in tables for useful analysis and supplemented by documented quotes of firms correspondents. The displayed data was deduced and further analyzed after comparing it with relevant literature and against each other (cross referencing) (Miles and Huberman, 1994). Data collection method and data analysis techniques were kept steady for each firm and data triangulation ensured the necessary accuracy and consistency (Sekaran and Bougie, 2009; Miles and Huberman, 1994). Sample firms were categorized as per Global Industry Classification Standard (GICS) due to its global acceptance and in order to produce a more robust analysis (Bhoraj et al, 2003). However, since all participant firms are not officially labeled as GICS classified therefore, for this reason their categorization was limited to the 1 st tier of the four-tiered hierarchical classification system i.e. firms were categorized into different industrial sectors, based on their principal business activity, as defined by GICS. Surveyed firms fell under the following three sectors: (1): Energy GICS code: 10 (including industry groups relating to energy equipment and services); (2): Consumer Discretionary GICS code: 25 (including industry groups relating to automobiles and components, consumer durables and apparel and consumer services); and (3): Consumer Staples GICS code: 30 (including industry groups relating to food and staples retailing and household and personal products) (Global Industry Classification Standard


Innovative Systems Design and Engineering ISSN 2222-1727 (Paper) ISSN 2222-2871 (Online) Vol.4, No.14, 2013

(GICS) Methodology, August 2006, p. 13-16). Only nine firms formed a part of this study therefore results cannot be assumed to be a representative of all Pakistani firms. However, the research is first of its kind in Pakistan and helped understand NPD and CKM paradigm, for surveyed firms, in a phenomenological manner (Hussey and Hussey, 1997). 5 5.1 Research Findings and Discussion Profile of the Firms

Nine firms were interviewed between May 2012 and September 2012. The firms belonged to different industrial sectors and ranged from small and medium enterprises to large multinationals with strong local footing vis- -vis technological landscape and market dominance. Majority of the surveyed firms had been in business for over 30 years and their market represented a mix of traditional and industrial consumers. Products produced by the firms included a wide range of consumer electronics, household and industrial appliances, welded pipes and tubes, industrial energy solutions, automotives, spare parts and accessories and food products. A brief classification of each industry and its product stream is displayed in Table 1 below. 5.2 General NPD Framework A general NPD framework was identified for each respondent firm by evaluating key concepts of NPD type, importance and level of strategic commitment and vision provided by their management. Firms responses were then pitched up against renowned benchmarks to establish the general NPD capacity in Pakistani firms as per international standards. The results of the same are depicted below in Table 2. 5.2.1 NPD Strategic Importance and Management Commitment Nearly all respondents felt that their management understood the importance of NPD for the future growth of their organizations. However, only a few companies (companies E, F and G) seemed to get it right by having a documented Product innovation Charter. NPD activities are considered very important for the companys growth and its quest for innovation. (Respondent firm F) NPD is very important to us owing to the nature of our business so as to keep ourselves updated with latest technological innovation in energy needs. (Respondent Firm B) NPD activities link companys vision with customers aspirations. (Respondent Firm G) On the other hand, majority of the firms, especially the ones of local origin, admitted that their management commitment lacked tangible transformation at their end We do discuss this (NPD) in official meetings but dont a llocate much resources to prestudy (idea generation phase) activities. (Respondent firm A) The reason for this was found to be the absence of a structured and documented NPD process and department at organizational level. The same was reaffirmed by the budget allocated to NPD activities. Over all it was noted that NPD was considered important by almost all surveyed firms but only few had made it a part of their strategic drive by having a dedicated staff and documented procedures or methods. 5.2.2 Type of New Product Development Activities Majority of the firms saw NPD as a derivative function that was useful for improving their existing product line with minor changes and modification(s). The type of NPD activities undertaken by firms also depended upon their nature of business. For (us) new product means modification in the existing Commercial off the Shelf (COTS) products we are using for our energy solutions. Like for instance if there is a new boiler in the market which is having PLC control, less user involvement and better coil material than the product we would offer to our customers, then using this (boiler)as part of our existing energy solution package is a New Product for us. (Respondent Firm B) Our experience has shown that there is more success in modification of existing products. (Respondent Firm H) Frankly we find more business latitude in improving existing products due to the very nature of our product range. (Respondent Firm I)


Innovative Systems Design and Engineering ISSN 2222-1727 (Paper) ISSN 2222-2871 (Online) Vol.4, No.14, 2013

Further, it was found that small local firms of CS category altered the portfolio of their products under the influence of retailers. These retailers acted as a feedback funnel for these firms. Consequently, they (retailers) seemed to restrict the focus of the firms usually on any one particular product type and sub-type (derivative). Our retailers are the greatest source of input for us regarding product acceptance and the changes required in it. (Respondent Firm H) Another reason cited was the lack of an organizational framework in smaller local firms. Moreover, it was also observed in certain cases that a few smaller firms, like firm H and I replicated the product recipes of their competitors as part of their NPD drive thus making the same recipe available at a cheaper price. We are committed to providing a competitive price to our customers and replicating the competitors product (at cheaper prices) is the part of (our) strategy. (Respondent Firm H) On the other hand large multinational firms introduced new products as a part of their NPD drive and saw it as the main reason for their growth. Our strategy is to continue to innovate to ensure companys growth and technological modification in existing product line is the part of that drive. (Respondent Firm G) Further, firms E, F and G highlighted the fact that their NPD was subjected to financial scrutiny in order to limit and control the R&D expenditure and manage Go/kill decisions. Thus the type of NPD activities carried out by firms seemed to be affected by: (1) Size of the company; (2) Feedback mechanism; (3) R&D budget; (4) Organizational Framework and (5) Competitive Strategy (Innovative, cost leadership etc). 5.2.3 Attrition Rate of New Product Ideas Nearly all respondents felt that their poor fuzzy front activities were responsible for the high attrition rate of new product ideas. However, the exception was company E and G who attributed their attrition rate to other reasons like budget constraints and technological issues. Our new product ideas are all well worked out but some of them are not pursued due development budget limitations and technology issues. (Respondent Firm E) Majority of the firms did not have any mechanism for harnessing customer(s) participation and involvement during the initial/Fuzzy front activities phase. Consequently, nearly all firms placed heavy reliance on sales persons, retailers and competitors for developing new concepts and ideas. The only exception was company F, a multinational engaged in producing fast moving consumer goods, who made use of focus groups and market survey techniques to develop and exploit new concepts and ideas for NPD. However, they still felt the need to consolidate their framework further and seek more customer participation. We have a system in place where focus groups help us in refining our ideas and some of these ideas come directly from customers through our web based customer service. (Respondent Firm F) Nonetheless harnessing ideas and concepts from retailers and sales personnel has proven quite satisfactory for firm E (multinational involved in producing standard bikes) due to the peculiar nature of their product whereby traditional channels of retailer feedback seemed to have been successful in clearly reflecting customer preferences. 5.3 Organization of New Product Development Table 3 below highlights the NPD hierarchy employed in the firms and the level of autonomy and authority offered to the prevailing NPD structure and team. 5.3.1 NPD Organizational Hierarchy Generally firms reported to have an overlapping structure of NPD hierarchy within their organizational structure. Also firms H and I had burdened their quality department with this (additional) responsibility. We dont require a dedicated staff for our NPD activities and generally any such activity is conducted by the quality department. (Respondent Firm I) The initial concept development phase of most firms was normally initiated by the marketing department which then trickled down to the NPD team after formal approval from management. The NPD team was then entrusted with the


Innovative Systems Design and Engineering ISSN 2222-1727 (Paper) ISSN 2222-2871 (Online) Vol.4, No.14, 2013

responsibility of refining and developing the marketing department s proposal into a concrete and tangible concept(s). Majority of our ideas come from the marketing department which are first presented to management and then go into further development with NPD team. (Respondent Firm H) Firms A, B, C, and D reported that their NPD team was primarily composed of the marketing department i.e. the people who had initially floated the idea. The team was then supplemented by the members of the quality department upon the approval of the initial concept by the management. In contrast, Firms E, F and G had a dedicated NPD department to kick start the project right from the concept phase: Having a dedicated team for NPD means that they are responsible for every milestone, ensure that every step is adhered as planned, make all necessary efforts to prevent a budget overrun and follow the time line by coordinating different activities. (Respondent Firm F) Firm F had dedicated NPD teams for different food brands which were further subdivided into cross functional teams during the detailed concept development phase. In the case of firm G the same NPD team was then later transformed into a larger venture panel after the addition and involvement of other personnel from different departments. Hence the NPD hierarchy across different industries was a reflection of their existing organizational structure which was further influenced by the level of product variety and type. 5.3.2 Stage of Concurrence among Different Departments of the Firm The stage of concurrence among different departments was a reflection of the NPD hierarchy of the surveyed firm(s). All respondents acknowledged the need to improve their existing level of concurrence in the initial concept building phase. They believed that the integration of marketing and technical expertise was necessary to ensure smooth sailing throughout the entire NPD process: We know that initial scrutiny by others (production, logistics etc) is important for the proposal to be viable but we realize that coordination could be further improved. (Respondent Firm A) Firms E, F and G had an integrated mechanism in place to bring satisfactory concurrence among different functions in the initial phase. Also firm E had a lower idea attrition rate due to structured planning: Our NPD team works in close liaison with other departments to avoid overrun and ensure that key milestones are realistic as per our capability. (Respondent Firm E) On the other hand firms F and G claimed to have requisite concurrence in the initial phases but both these firms felt that their existing concurrence level could be further enhanced. Though we have a systematic mechanism in place to consult all stakeholders (during concept development) but at times we have to disband further development of ideas in the later stages due to production or capacity issues. (Respondent Firm G) Locals firms also felt that a gap existed between the marketing and technical (including supply chain) expertise during the initial NPD meetings as often they were not on the same wavelength. Firms B, C and D wished to see more cooperation across the different entities of the organization in the initial concept and planning phase. However, they seemed to be less affected by this lack of coherence due to the derivative nature of their product line(s): Our Product demands are normally constant and (any) variation in it is related to minor modification(s) which (normally) doesnt affect existing logistic and technical arrangement. (Respondent Firm C) 5.3.3 Decision Making Process Decision making for firms A, B, C, H and I rested solely in the hands of the higher management. These firms had no specific Go/kill decision mechanism during the different NPD activities; rather their management approved ideas and concepts in the very nascent form. The firms admitted that a cross-functional team based decision making procedure would help bring harmony in their existing NPD arrangements and firms production capacity and capability. Furthermore, all respondents felt that cost was the main reason that influenced their decision making process. Nonetheless, firms E, F and G dedicated (comparatively) more resources to their NPD teams, with formal Go/Kill guidelines, for harnessing new ideas and concepts but these firms felt that their decision making processes were also influenced by their product category.


Innovative Systems Design and Engineering ISSN 2222-1727 (Paper) ISSN 2222-2871 (Online) Vol.4, No.14, 2013

It is important (for us) to know where (product type) we are committing our resources so that we could benefit after product launch. (Respondent Firm G) Firm D reported to have a team based decision making process for their NPD activities though there was no formal GO/KILL policy or guidelines i.e. their team meetings were limited to informal discussions and lacked any prescribed set of criterion or Standard Operating Procedures (SOP) for evaluating the different NPD activities. New ideas are evaluated in a joint discussion but we dont evaluate them against set of criterion (Respondent Firm E) Hence it was found that the decision making process within the majority of the research firms firm(s) was influenced by the level of concurrence (among different organs) at each stage and organizational NPD hierarchy. 5.4 5.4.1 Market Orientation in New Product Development Customer Involvement in the Idea Generation Phase Table 4 below presents a summary of the market orientation paradigm of surveyed firms. There was general consensus amongst all firms respondents with regards to the importance of customer involvement in the idea generation phase. However, it was basically the implementation of specific mechanisms at tactical level where views proved divergent. Majority of respondents felt that retailers influenced their idea generation processes as they (retailers) actually had a fair amount of insight regarding customer preferences We dont require (direct) end-user involvement as we normally get (requirements) from retailers. (Respondent firm H) Nonetheless, Firms F and G had in place a direct mechanism in the form of focus group(s) and market (segmentation) surveys which allowed them to directly capture customers preferences in their idea generation phase. However, both firms acknowledged the need of other knowledge capturing tools. Moreover, their mechanism was basically designed to meet and serve different purposes. Firm F saw customer involvement while seeking new product ideas as a means to gain their latent and implicit preferences while for firm G it was limited to gather customer insight on aesthetic aspects or to fine-tune few human interfaces. For (new) product development, customer suggestion is restricted to any feature introduction in the product but designing decisions are solely ours. (Respondent Firm G) 5.4.2 Most Important New Product Development Phase Majority of the firms with local origins couldnt differentiate between the planning and idea generation phase. Therefore, most of the firms (except E, F and G) felt that the planning phase (financial aspects, integrated logistic support etc.) was more important in NPD activities. However, the same respondents, except firms H and I also felt that the NPD planning phase could be improved using structured documentation outlining every detail. The planning phase with a (documented) roadmap is an important priority that we want to accomplish in the next few years. (Respondent Firm A) Firms E, F and G felt that well deliberated fuzzy front end activities and in particular the idea generation phase, would increase the chances of product success and hence warranted focused attention. Harnessing the right idea having strong commercial appeal is the most important initial activity to avert failure at later stages (Respondent firm F) Therefore, it was observed that for each firm the most important phase of NPD was the direct reflection of their NPD structure and their understanding of the NPD process. Firms with a dedicated NPD framework could rightly differentiate between the planning and idea generation phase and had a clearer understanding of the most important phase. 5.4.3 Feedback Mechanism All firms felt the need for a strong feedback mechanism for key NPD activities such as concept refining and testing. However, none of the firms seemed to have a system that allowed them to directly dovetail customer reactions on the outcome these NPD activities. The only exception was firm F who employed the focus group(s) mechanism to gauge the reaction of customers at key stages.


Innovative Systems Design and Engineering ISSN 2222-1727 (Paper) ISSN 2222-2871 (Online) Vol.4, No.14, 2013

Every milestone related to the new product goes through acceptance check to ensure its appeal with potential customers. (Respondent Firm F) Firms E and G felt that direct customer involvement for their products was not necessary and they could use retailers input as an alternate means. Thus, all firms saw feedback mechanism as an instrument that could help them in refining their NPD activities, though majority didnt have a framework in place that would allow them to involve customers directly. 5.5 Customer Knowledge Management Competence Customer Knowledge Management (CKM) was an aspect that was evaluated among the surveyed firms in tandem with NPD activities. The summary of CKM competence level for surveyed firms is depicted below in Table 5. 5.5.1 Organizational Culture to Support Organizational Learning and Customer Orientation Respondents felt that a strong organizational culture was necessary to promote a customer orientation within their organizations. It was further noted that majority of the firms felt the need of more management commitment on this aspect. Firms F and G were found to have a reasonable structure to support CKM competence within their organization. They saw it as a part of their customer-focused philosophy propelled by strong management commitment. Management is fully committed to promote customer focused environment and pursues improvement through variety of programs focused at employee education and infrastructure development. (Respondent Firm F) Firms A, H and I felt the need to do more work on their organization culture. There is a need at our end to create a more customer centric organization at lower tiers. (Respondent Firm A) Firms B, C and D didnt feel the need to improve their existing organizational culture owing to the type of products they manufacture. Frankly we dont feel that we need to do more on that account (organizational culture) we know the segmentation of our products. (Respondent Firm D) 5.5.2 Inter Functional Cooperation Survey revealed that majority of the firms lacked a coordinated and systematic mechanism to share customer knowledge, both tacit and explicit, across the organization. Respondents reported that information handling; sharing and dissemination faced several barriers across different departments. Nonetheless, firms E and F had a reasonable mechanism in place that allowed different departments to share and provide customer knowledge in critical decision making processes. We do share customer complaints in new product development and often these complaints prove to be a great help in improving existing product lines but the existing system could be further improved to allow the retrieval of information held in different departments. (Respondent Firm F) Furthermore, all respondents felt that any customer knowledge sharing framework should also develop a tangible knowledge pattern, out of customer information, that could help NPD teams in gleaning customer preferences. For instances complaints registered against a specific product may be translated as a need for the NPD team. 5.5.3 Supportive Organizational System Nearly all firms admitted that their current reward system for employees was not linked with customer satisfaction. Majority of the firms didnt have a dedicated NPD department and employees from other sectors were assigned to carry NPD related tasks. However all respondents agreed that the said link could prove useful in making their organizational culture more customer focused. Since our NPD is a make shift arrangement so their primary appraisal would be evaluated by their parent department. (Respondent Firm I) Firms E, F and G had in place structured NPD framework but they acknowledged the process could be linked with some formal reward system to generate synergistic impact in overall NPD effort Linking NPD team appraisal (in some form) with commercial success of the product would definitely bring more synergy in the (NPD) effort. (Respondent Firm E)


Innovative Systems Design and Engineering ISSN 2222-1727 (Paper) ISSN 2222-2871 (Online) Vol.4, No.14, 2013


Cooperation with Customers

Firms acknowledged that partnering with customers was necessary to ensure the success of their businesses. However, their opinion was divided regarding the dimensions of such cooperation. For firms A, B, C, D, E and H and I such cooperation was the mere extension of their after sales service(s) and they felt that it was necessary that customers should get the requisite support from the company regarding the functionalities of their product: We definitely ensure every requisite help to our customer through our sales department so as to ensure they (customer) continue to enjoy our valuable product. (Respondent Firm A) For firms F and G cooperation with customer(s) was aimed at improving in their product line(s). We do (one on one) conversations to customers using various platforms which includes promotional campaigns so as to know the customers word of mouth and thus to take action s accordingly. (Respondent Firm G) Nevertheless, all firms felt that the subject activity could be more dynamic and result oriented if they were able to involve customer(s) in the idea generation phase of their NPD process. There was also awareness about the need of a specific organizational framework that could harness customer cooperation in broad areas of organizational activities and functions. 5.5.5 Supportive Information Technology systems All respondent firms claimed to have a supportive Information Technology (IT) system that shared customer information within the organization and connected customer(s) with their complaint centers. However, they acknowledged the need to improve and exploit it further. It was also reported by all respondents that their existing information system framework lacked customer acceptance with respect to its usage and efficacy. Customers were either unaware of such a mechanism or it was too cumbersome to use. Subsequently, customers tended to lose their interest. We know that our web based customer connection is underutilized and lacks real understanding among customers as they still prefer to use traditional channels to give any suggestions (mail or retailers). (Respondent Firm F) The IT mechanism of the firms which connected customer(s) to the organization was primarily used to register complaints. Thus it was noticed that the current IT arrangement employed by the firms lacked necessary tools for capturing and sharing customer knowledge that could help firms in their quest for NPD. 5.5.6 Overall CKM level The Overall level of CKM competence for each firm was the integrated result of each CKM activity. The CKM competence level in local companies remained below par and their major failing was the absence of an organizational culture to support organizational learning and customer orientation. This implied that management of the local industries couldnt fully grasp the importance of a strong CKM structure within the organization and its potential dividend towards product innovation and organization competitiveness. 6. Conclusions and Recommendations This exploratory research was successful in highlighting the prevailing NPD practices and the level of its understanding and implementation in the sample of Pakistani Firms. It was revealed that NPD performance in surveyed firms remained haphazard with wide divergence. Multinational firms seemed to have better NPD infrastructure and documentation, whereas for local firms the NPD expression remained merely a source of management rhetoric in organizational meetings and gatherings and the activities lacked a uniform framework. In either case, it was felt that initial fuzzy front activities of the surveyed firms relied heavily on the input from retailers and sales persons for harnessing new product idea(s). Besides, there was no structured mechanism, as proposed in literature, to solicit customer(s) participation and involvement during the idea generation phase. (Ulrich and Eppinger, 2005; Cooper, 1993; Booz, Allen and Hamilton, 1982) Organization of NPD was an area that created further polarization between the practices of the local and multinational firms. A makeshift NPD structure existed in most cases with only a few benefiting from the fruitful impacts of a long term dedicated NPD department. The said mechanism also in turn directed the decision making authority to be held by only the higher echelons of management instead of allowing NPD to be treated as separate


Innovative Systems Design and Engineering ISSN 2222-1727 (Paper) ISSN 2222-2871 (Online) Vol.4, No.14, 2013

entity free from the influence of fiscal pressures (Bhuiyan, 2011; Ulrich and Eppinger, 2005; Cooper, 2001; Bogue, 2000). Market orientation as a necessity for innovation and growth has gained considerable awareness in Pakistan. Firms with a dedicated NPD structure in particular were conscious of the need to incorporate some form of customer ideas and preferences into their product development efforts in order to stay abreast the increasing competition. Failure to grasp the interlinking between the idea generation, planning and the execution phase was exceedingly prominent in local firms. Most firms viewed weak and ill conceived planning phase as a major contributor to the high attrition rate of new product ideas. In addition, they failed to identify the importance associated with allocating resources to the fuzzy front end of the NPD process. The importance of CKM in achieving NPD effectiveness and fueling customer centric innovation was vaguely understood by Pakistani firms (Darroch, 2005; Gibbert et al, 2002). Firms continued to look at CKM through a prism of CRM activity, treating it as marketing or sales function with little or no input in the idea generation phase. The framework of CKM in the sample was either weak or moderate with local firms falling way below par the international acclaimed standard of CKM competence as proposed by Rollins and Halinen (2005). However, Firms with structured NPD processes were observed to have a comparatively reasonable CKM framework. Nonetheless, any conclusive correlation requires further in-depth quantitative analysis. It is opined that Pakistani firms can use the CKM tool to strengthen the fuzzy front activities of the NPD process especially the idea generation phase. Local firms can especially benefit from this versatile tool. The CKM framework would not only increase the knowledge capacity of the firm but in tandem would help them align their NPD processes as per required international industrial standards to boost customer centric innovation and firms competitiveness. In this regard the following actions as proposed by Rollins and Halinen (2005) are considered essential to enhance Pakistani firms CKM competence level: (1) change of the organizational culture to make it a more CKM centric entity, this requires defining CKM concepts and creating a common understanding throughout the organization; (2) evaluate the existing CKM framework (IT, telecommunication, web based interaction, document management etc) so as to gauge its competence/shortcoming; (3) aligning the business strategy with CKM perspective (CKM based SWOT analysis, CKM gaps Vs. strategic gaps etc). The same would help firms to estimate their CKM framework requirement and in tandem would also enhance NPD capacity/effectiveness by better understanding customer preferences so as to build long term relationships; (4) design and build NPD (fuzzy front activity) centric CKM blueprint and implement the same on pilot projects to further refine the concept; and (5) adopt result driven incremental CKM plan throughout the organization.

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APPENDIX A QUESTIONNAIRE PART-1 COMPANYS PROFILE Company Name: ----------------------------------------------------------------------------Respondents Name: ------------------------------------------------------------------------Respondents Position In Company ------------------------------------------------------Product Line of the Company --------------------------------------------------------------Total Revenue: ------------------------------------------------------------------------------Export: ---------------------------------------------------------------------------------------Company Brief Profile: -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


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PART-1I GENERAL NPD ACTIVITIES Q1. How do you define the NPD process and how do you relate it with your companys vision and mission?? Q2. Can you please elaborate your NPD activities? Q3. How much proportion of your annual budget is dedicated to NPD activities including R&D? Q4. What is your experience on the success rate of following? a. b. Radically new product Modification of the existing product

Q5. What is the management view and role in relation to the NPD activities? Q6. What is generally the attrition rate of new product ideas in your organization and at what stage or phase of NPD process? Q7. What is your opinion on the causes of that attrition rate? PART II NPD ORGANIZATION& Market Orientation Q8. What is the hierarchy of the NPD function in your organization? Q9. What is the NPD criterion or method that is being followed in your organization (traditional or concurrent?) Q10. What type of research work, if any, does your organization carry out prior or during NPD? Q11. How is the decision making process carried out in NPD functions? Q12. How do the different organs of the organization interact with each other during NPD activities e.g. marketing/admin/finance/production etc.? Q13. How does you organization train/educate its employees about NPD activities? Q14. What is the most important phase of NPD in your opinion? a. b. c. Q15. Q16. Idea generation phase Planning phase Execution phase

What mechanism do you normally employ during the idea generation phase? Do you carry out any of the following activities during the early stages of NPD? a. b. c. d. e. In-house tasting sessions Sensory analysis In-store placing Focus groups Other

Q17. How do you carry out market research prior any NPD activity? Q18. What is your understanding of market-oriented NPD? Q19. What role, if any, do retailers play in your NPD activities? At what stages of NPD process are they involved? Q20. Do you feel it is necessary to develop new products according to the aspiration of the end-users? Or what benefit do you think can be achieved from listening to the 'Voice of the end-user? Q21. What role, if any, do end-users play in your NPD activities? What stages of the NPD process are they involved? Q22. What mechanism do you employ to evaluate the acceptability of your new product prior launching? Q23. How does your company react to the introduction of competitors product in the market? PART III Customer Knowledge Management Activities Q24. Please enlighten us with your understanding on CKM?


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How you organize, plan/design and evaluate customer related information system of any kind?

Q26. What importance does the organization give to the fact that customer knowledge is a strategic resource necessary to keep organization competitive? Q27. How is customer related information/suggestions shared during different NPD activities? Q28. How does the company transform, if required, customer related knowledge into its strategic vision and mission for e.g. changing companys entire product line? Q29. How does your organization manage market campaign? How is that delivering on the management expectations? Q30. What methods do you use to search and find potential new customers? How does marketing campaign play a role in it? Q31. What method/mechanism, if any, do you employ to evaluate how to best reach out to customers? Q32. How does your organization respond to customer inquiry on products/services? Q33. How do you manage your supplier relationship while focusing the end user/customer? Like promotions/incentives and other contractual agreements with the view to optimize the cost in favor of end user/customer? Q34. What mechanism does your organization use to register the complaints of end-users and how are those complaints handled in the organization? Q35. How do you evaluate your service management organ (comprising campaign, lead, offer and complaint management) from customers perspective with the view to imp rove them?

Figure 1. A Tentative Framework for CKM Competence (Rollins and Halinen 2005, p. 6)


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Firms Profiles Length of Operation Markets Serviced2 GICS Category1 ECR Code 20 Yrs. 30 Yrs. CS CD EE L M 5% 10% CR IL FFMCG H.A I.A A.M O Product Type3


Product Type-Sub-Category4 Product Stream



Consumer electronics/house hold appliances Ranges from boilers to power plants, energy solutions developed using Commercial Off The Shelf (COTS) technology High end Industrial/ electrical appliances Initially functioning as a trading group now produces welded steel pipes and tubes Standard Motorbikes Home/ Personal Care and Foods categories Manufacturers, assemblers and distributors of auto motives. Consumer Food Products Consumer Food Products.

Table 1 Profile of Surveyed Firms

1 2 3 4

GICS Category: CS: Consumer Staples; CD: Consumer Discretionary; EE: Energy; Markets Serviced: L: Local; M: Multinational; ECR: Export Contribution in Revenue; Product Type: CR: Consumer; IL: Industrial;

Product Type-Sub category: FFMCG: Foods and Fast Moving Consumer Goods; H.A: Home appliances; I.A: Industrial appliances; A.M: Automotive; O: Others;


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COMPANY Management Commitment to NPD
Code Name GICS Category1

NPD Strategic Importance In Vision and Mission

Documented Non documented

Type of NPD Activities

Radically New Products Derivatives

% R &D Budget Allocation

2% 5%

Major Causes of High Attrition Rate of New Product Ideas

Weak Fuzzy Front Activities Other(s)





CS(Local) EE (Local) CD(Multin ational) CD(Local/ Multination al) CD(Multin ational) CS(Multina tional) CD(Local/ Multination al) CS(Local/ Multination al) CS(Local) CD(Local/ Multination al) CS(Local/ Multination al) CS(Local)

Table 2: General NPD Framework: Comparison of Sample Firms GICS Category: CS: Consumer Staples; CD: Consumer Discretionary; EE: Energy;


Innovative Systems Design and Engineering ISSN 2222-1727 (Paper) ISSN 2222-2871 (Online) Vol.4, No.14, 2013 NPD ORGANIZATION COMPANY NPD Organizational Hierarchy Point of Concurrence Among Different Departments Initial stage Later

Decision Making Process

Code Name

GICS Category1

Separate Identity

Overlapping Identity

Management driven


CS(Local) EE (Local) CD(Multinat ional) CD(Local/M ultinational) CD(Multinat ional) CS(Multinati onal) CD(Local/M ultinational) CS(Local/M ultinational) CS(Local)

Cross Functional Teams with Formal Go/kill Weak/Inf Guidelines ormal Go/Kill Guideline s -

Table 3 NPD Organization

GICS Category: CS: Consumer Staples; CD: Consumer Discretionary; EE: Energy;


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NPD and Market Orientation COMPANY Customer Involvement in the Idea Generation Phase
Direct Indirect

Most Important NPD Phase

Feedback Mechanism in NPD

Code Name

GICS Category1

Idea Generation Phase

Planning phase







CS(Local) EE (Local) CD(Multinational) CD(Local/Multinational) CD(Multinational) CS(Multinational) CD(Local/Multinational) CS(Local/Multinational) CS(Local)

Table 4 NPD and Market Orientation GICS Category: CS: Consumer Staples; CD: Consumer Discretionary; EE: Energy;


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CKM COMPETENCE LEVEL Organizational Culture to Support Organizational Learning and Customer Orientation

GICS Category1

Inter Functional Cooperation

Supportive Organization Systems

Cooperation with Customers

Supportive IT Systems

Over All CKM Level


CS(Local) EE (Local) CD(Multinational) CD(Local/Multinational) CD(Multinational) CS(Multinational) CD(Local/Multinational) CS(Local/Multinational) CS(Local)

Table 5 CKM Competence Level of Sample Industries GICS Category: CS: Consumer Staples; CD: Consumer Discretionary; EE: Energy; No Evidence; Weak Evidence; Moderate Evidence; Reasonable Evidence; Considerable Evidence


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