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Henri Simula, Helsinki University of Technology Jarno Poskela, Helsinki University of Technology ______________________________________________________________________________________________ ABSTRACT This paper discusses how the front-end and back-end are interrelated in the context of new product development. It is proposed that management should pay more attention to the innovation process already in the beginning of the process and a successful product initiative requires improved linkages between the front-end and back-end activities. ______________________________________________________________________________________________ INTRODUCTION If companies want to stay competitive and be able to grow their business in the long run, they are required to produce more innovative products and services (Cooper 1993, Patterson 1998, Miller 2001, Debruyne et al. 2002). However, to bring a new product to the market is a strategic decision, which always includes a risk of failure (Dundas and Richardson 1980). An Innovation process can be understood to comprise three different phases: the (fuzzy) front-end phase, the development project phase, and the commercialization phase (Buckler 1997, Koen et al. 2001). Krishnan and Ulrich (2001 p. 1) define product development as “the transformation of a market opportunity and set of assumptions about product technology into a product available for sale”. This definition reveals the essentials of the innovation process very well. Before a firm can start opportunity transformation, there is a need to capture the opportunity. This capturing is conducted in the front-end phase followed by the development. However, in order to bring any products available for sale, a firm has to perform various commercialization activities. This paper considers the underlying phenomenon of innovation process management as a cross-functional research problem by acknowledging the logic formulated by Krishnan and Ulrich (2001). They argue that instead of trying to find coordination among different functions, there is a need to consider the underlying activities as a part of highly interdependent clusters. For instance, instead of trying to find the best ways to coordinate collaboration between engineering and marketing teams, a firm should consider how to integrate the front-end and back-end activities of an innovation process. This is the rationale behind the title of this paper. To remain successful, senior managers must be ambidextrous – able to focus and manage both ends of the innovation process equally. In this paper we discuss how these innovation process extremities should be taken into consideration as interdependent entities. The purpose of the paper is to discuss the management of innovations in an intra-firm context and to present propositions for further research based on theoretical background and literature review. The main propositions are related to innovation process integration and senior management role in the innovation process. SPECIAL CHARACTERISTICS OF FRONT-END Recent studies indicate that the early front-end activities represent the most troublesome phase of the innovation process, and at the same time one of the greatest opportunities to improve the overall innovation capability in companies (Reid and de Brentani 2004, Kim and Wilemon 2002, Zhang and Doll 2001, Koen et al. 2001). The frontend phase nourishes the new product development project phase by producing new incremental and radical product concepts. The front-end phase results in a well-defined product concept, clear development requirements and a business plan aligned with the corporate strategy (Kim and Wilemon 2002). In addition, the front-end phase should produce a formal project plan including resource needs, schedule and budget estimates, and a decision on how the product concept will be developed further (Khurana and Rosenthal 1997). It must be decided whether to continue with an immediate development project or whether to put the concept “on hold” to wait for more suitable timing, or whether even to kill the initiative. However, despite the recognized importance and great development potential of the front-end phase, there has still been relatively little research on the best practices related to that phase, e.g. compared to the development project phase. (Kim and Wilemon 2002, Koen et al. 2001). Buckler (1997) characterizes the front-end phase as experimental, requiring high tolerance for uncertainty, ambiguity and chaotic phenomena, and willingness to consider the unreasonable.
and loose culture subunits that aim to create radical innovations. Rein 2004). Wong 2002). 1987. Wheelwright and Clark (1992) describe product concepts becoming “moving targets” when there is no comprehensive strategy or strategic guidelines directing the innovation processes. to implement both incremental and revolutionary changes at the same time. Hertenstein and Platt (2000) conclude in their study that. Khurana and Rosenthal (1997) have listed familiar symptoms of front-end failure such as halfway cancelled new product initiatives that do not match the company strategy and delayed top-priority new product initiatives that suffer from lack of prioritization of assignments. the ability to influence the outcome without considerable redesign effort is low. According to Benner and Tushman (2003. which simply means that many products fail (Stevens and Burley 1997). Beard and Easingwood 1996). Tushman and O´Reilly suggest a creation of small. Unfortunately. a study among UK firms has revealed that the product launch tactics between consumer and industrial product actually share a great degree of similarities (Hultink et al. To conclude this chapter we refer to Cooper and Kleinschmidt (2000. the detailed launch practices differ between industries and firms. Hultlink et al.39) who have stated that one of the key success factors of new product initiatives is the quality of execution of a marketing task from idea generation to the launch. Management attention occurs mainly in later stages of the product development when problems become visible. To achieve this. Moreover. 252). Smith and Reinertsen 1998. The conventional wisdom would propose that it is always beneficial to hit the market first. It is also the costliest phase (Di Benedetto 1999. the integration between marketing and R&D has significant effect on the outcome of the . the launch timing is not such an unambiguous issue. in general. However. p. the timely introduction together with reduced development cycle has been stated to be one of the most important success factors of new products (Di Benedetto 1999. The importance of integrating marketing with research and development (R&D) efforts in the innovation process has been recognized as one of the key success factors in various studies (Souder and Chakrabarti 1978. McGrath 1996). 1995. but the commercialization or product launch phase actually determines the destiny of a product (Guiltinan 1999. p. According to Souder and Chakrabarti (1978). typical real involvement pattern shows that the senior management gets heavily involved after the design has been already completed and when large financial commitment is needed (Smith and Reinertsen 1998. Ruekert et al. For instance. “these inconsistent units must be strategically integrated by the senior team”. where. There is always a significant risk related to the new product introduction. Wheelwright and Clark (1992) emphasize the same problem in automotive industry. 1). According to Kerin et al. It is very crucial to notice the product failure in time and to react with proper counter actions in order to avoid the risk of losing the course of action (Boulding et al. (1997) have presented a model of strategic (what. Kotler 2005). This corporate level ambidexterity means the balance between exploitation and exploration. and pricing to the development team. However.IMPORTANCE OF PRODUCT COMMERCIALIZATION As discussed earlier. decentralized. p. where the traditional units keep on serving existing customers under tight culture and strict process management practices. firms want more explicit links between strategy and the NPD process. Another common symptom of front-end failures in many organizations is too many projects being attempted by too few people with no apparent link to strategy or organizational goals (Englund and Graham 1999). They emphasize that “strategic launch decisions made early in the new product development process affect the tactical decisions made later in the process” (Hultlink et al. Griffin and Hauser 1996. Loch (2000) in turn emphasizes that evaluation and selection procedures of development initiatives are weak and incomplete if there is a lack of clear understanding and linkage to the strategy. the front-end is the most uncertain phase. However. choice of market segments. THE ROLE OF AMBIDEXTERITY IN THE INNOVATION PROCESS Tushman and O´Reilly (1996) argue that a firm should utilize ambidextrous organizational form if it wants to maintain and develop its innovation capability. 1997. (1992) and Lambert and Slater (1999). we feel that different type of ambidexterity is required on the program level. 1997). McGrath 1996). The senior management’s ability to influence a new product development project is naturally greatest at the beginning. when and why) and tactic (how to) launch decision alignment. Moenaert et al. Naturally. a firm should take holistic product portfolio and overall strategy aspects into consideration when launching a product (Lambert and Slater 1999). Further Khurana and Rosenthal have shown that this is because the senior managers do not communicate their strategic-level expectations such as the product's core benefits. 1999). The senior management should invest their time proactively to confirm that critical choices made in the front-end are strategically feasible (Wheelwright and Clark 1992. Fisher et al. 1997. while reaping the benefits from existing technology and product range.
We are not proposing extra tasks for the senior executives that are already under heavy load. One of the main problems is related to the observation that the senior management quite often take active part during the actual development and in the product launch phases as shown in Figure 1. Based on the findings and literature review we present the following proposition: P1: The senior management’s more active role in strategic decision-making in the front-end leads to improved product launch success measured in terms of strategic fit in the product portfolio and strategic renewal. new-to-the company products (Olson et al. this could ensure less iteration in the commercialisation/launch phase. Neither do we mean that a firm should add more . 2005). The organizing for innovation depends on the underlying project. The curves are illustrative and elaborative in nature. 1995). The main findings of that study indicate that the efficiency of integration of strategic and operative level front-end activities is dependent on the amount of business-minded decision-making. However. For instance. measured on the level of strategic and tactical alignment leads to more successful product launch in terms of financial and customer related success measures. (Poskela et al. it is very difficult for the rest of the organization to decide which initiatives to pursue. smaller companies that invested most in R&D activities in relation to turnover were interviewed. that is often the case in the front-end. They point out that well-defined targets that emphasize both commercial and technical aspects is one of the key aspects for success. Based on the findings and literature review we present the following proposition: P2: More concrete integration of the front-end and back-end activities. line extensions and product modifications may not benefit from cross-functional team. Better understanding of the innovation process integration between the front-end and the product launch activities as well as the managing innovation projects in different maturity phases is needed. However. However.innovation process. Innovation process integration plays a major role in the intra-firm context and successful product initiative requires improved linkages between the front-end and back-end activities. which is often the case with innovative. It is also suggested that a firm should improve the effectiveness of integration of the front-end activities by locating the responsibility for new concept creation to the sales and marketing function. it is essential to notice that cross-functional teams are not always required. These people represent the biggest Finnish companies investing most in R&D activities during 2003 (such as Nokia. Propositions for innovation process alignment: Firms need to be agile to respond market shifts in time. KONE. increased communication and integration between R&D and marketing activities during the front-end will reduce uncertainty and enhance the innovation success rate. We assume that the senior management may have little willingness to consider the unreasonable. according to Moenaert et al. the study simultaneously produced insight to the subject discussed in this paper. DISCUSSION AND IMPLICATIONS This paper has discussed innovation management and integration of different phases of the innovation process in intra-firm context. However. FIGURE 1: ABOUT HERE Proposition for senior management role in the innovation process: If senior management gets involved already in the front-end phase. The role of the senior management knowledge is especially important when analyzing and interpreting the information during the concept creation. Poskela et al. StoraEnso). the empirical part is only tentative and the literature review needs to be deepened. The continuous managerial feedback is also likely to produce better launch results. nor would they be characterized as having tolerance for uncertainty. and the balance between control and creativity. The empirical data is founded on interviews of 20 senior managers of Finnish innovation intensive companies. 2005). While the original research focus was related to the integration of the front-end activities (see. we feel that if the senior team does not provide strategic guidance and vision during the beginning of the innovation process. In addition. (1995). PROPOSITIONS The following propositions are based on previous literature review but also backed up on recent empirical work.
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