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Innovation is in trouble at U.S. companies. Timid new product development (NPD) programs are concentrating more than they used to on safe, marginal product improvements and less on true product breakthroughs. As a result, new products provide a significantly smaller share of corporate revenue and profit than they did a decade ago, reports world-renowned new product marketing expert Robert G. Cooper. “Businesses are preoccupied with minor modifications, product tweaks, and minor responses to salespeople's requests, while true product development has taken a back seat,” Dr. Cooper writes in the April edition of Visions magazine, published by the Product Development and Management Association (PDMA).1 Dr. Cooper, an ISBM Distinguished Fellow and Professor of Marketing at McMaster University, regularly surveys corporate new product development strategies and tactics. He was the keynote speaker at this August’s ISBM Annual Members Meeting. PDMA studies find that new products accounted for 28 percent of total corporate sales in 2004, down from 32.6 percent in 1990, Dr. Cooper said. New products’ share of corporate profits slumped to 28.3 percent last year from 33.2 percent on 1990. Noting that R&D spending has remained stable and that companies have not been doing a worse job designing and marketing the products they develop, Dr. Cooper blames changes in the balance of NPD project types. Compared to 1990, companies today attempt only half as many “new to world” true innovations, but twice as many minor projects (line extensions, improvements to existing products), as a percentage of their development portfolios, Dr. Cooper explains, citing data (see Exhibit 1) from the APQC (formerly named the American Productivity & Quality Center). “What is particularly disturbing is the fact that the ‘the best’ companies at NPD today resemble the average company of 15 years ago when it comes to their portfolio mix. By contrast, the average company today has seen its portfolio shift markedly in the last 15 years.” Now, as then, the best new product companies are more aggressive in striving for innovation.
which tend to discriminate against genuine innovations with long-term returns that are harder to predict.” Visions (April 2005). (see Exhibit 2) • Overemphasizing NPD financial metrics. “Your NPD Portfolio May Be Harmful To Your Business Health. • Overemphasizing speed. low-cost. .Exhibit 1 NPD Project Types Source and detailed bibliography at Robert G. Cooper. forcing managers to stress easy. Cooper cites four main culprits for less ambitious NPD. quick return projects. • An overall “resource crunch” leaves companies with more projects than they can handle. • Reacting to customers' and salespeople's urgent requests saps NPD time and resources. Dr.
G. improvements-modifications-extensions and platform developments—and stick to the plan to keep the NPD portfolio balanced.J. in R.G. resource allocation and portfolio management”. Cooper recommends several solutions to the problem. 2. S. metrics that capture the longer term and the potential for growth of the business. 47. vol.J. XXIX. • Change old metrics. Cooper. “Benchmarking best NPD practices – II: Strategy. • Use “strategic buckets” to organize how much effort will go into each type of new product project—new products. Kleinschmidt. R.Exhibit 2 Data source: APQC study.” One approach is tracking a business unit’s percentage of sales and profit from new products. Research-Technology Management. Reversing the trends Advising his readers to “rethink what product innovation really means. . no. April 2005. 3. “While short term financial results are important. PDMA Visions.” Dr. consider introducing other metrics as well to gauge a business's performance—for example. “Your NPD portfolio may be harmful to your business’s health”. Cooper. May/June 2004. • Develop a product innovation and technology strategy that defines new product goals and indicates the resources and technologies needed. Also see. Edgett & E. 22-26. pp 50-59.
done thru APQC. Provides an in-depth look at developing a product innovation and technology strategy. making the idea-to-launch process work. References—Books: (Order for next day shipments at: www. Mass) by RG Cooper… hardcover 2005. and strategic planning.” To assess radical breakthroughs and new product platform innovations. 2001. 3rd edition. A portfolio that is strategically driven. Cooper’s Product Development Institute. • Winning at New Products: Accelerating the Process from Idea to Launch.” “availability of production capacity. “ease of implementation. Cooper recommends scoring model criteria “that are more strategic in nature and emphasize strategic importance. and creating the right climate & culture for innovation. For harder-topredict genuine new products. Aimed at the senior executive. leverage. implementing portfolio management. March 2003. “financial criteria are almost useless. “Just like your stock market portfolio. Reading.” For More Information … Online: Contact www. creativity techniques.com) • Product Leadership: Pathways to Profitable Innovation (Perseus Books.prod-dev. relies on the right selection criteria to pick projects. As the project progresses … increasingly shift to financial metrics and quantitative success criteria for project validation and justification. competitive advantage. especially early in the life of such projects when the key investment decisions must be made. Houston.” Dr.g. with criteria such as strategic fit. • Change project selection criteria depending on the nature of the project. is fed by a proactive idea generation process. scenario generation. and balances quality-of-execution with speed to market is the solution that many leading firms have elected to improve their NPD performance. Reading.• Balance speed with NPD profitability and impact to achieve the goal of a steady stream of profitable new products. assiduously seeking blockbuster ideas via techniques such as voice of the customer (VOC) research. Cooper advises. “Use a multi-item scoring model. • An Investigation into Best Practices in Product Innovation:What Distinguishes the Top Performers.” • Feed the pipeline. Reports the results of the latest and definitive benchmarking study. Dr. • Proactively manage the NPD portfolio. Add a simple scoring model (e. market attractiveness and financial return-versus-risk. Mass).com to learn about Dr. 425 . the mix and balance of these new product project investments must be carefully scrutinized. idea contests. paperback. and feasibility. by RG Cooper (Perseus Books.prod-dev.” and “customer importance”) to financial metrics when selecting low-risk product modifications and extensions. strategic leverage.
Vol. Little. • R. climate. 2005.J. A. R. Kleinschmidt. “PDMA foundation CPAS study reveals new trends”. 47.G.stagegate. and their use in industry. May-June 2003.J. Innovation Excellence study. • APQC definitive benchmarking report online: “Best Practices in Product Development: What Distinguishes Top Performers. Drivers of NPD Success: The 1997 PDMA Report. 22-26. 6. Edgett & E. pp 50-59. 2002 (new!) by Cooper. May/June 2004. # . results achieved. Reading. • Product Development for the Service Sector. “Benchmarking best NPD practices – III: The NPD Process & Decisive Idea-to-Launch Practices”. & Boike. Visions.G.J. • R.G. ResearchTechnology Management. Kleinschmidt. Edgett & Kleinschmidt. M.” available via www. Mass) 1999. (Perseus Books. Provides an overview of the critical success factors in product development. Cooper.J. Provides a look at the best portfolio methods. by Cooper & Edgett (Perseus Books. No. Edgett & E. ResearchTechnology Management. “Benchmarking best NPD practices – II: Strategy. PDMA 1997.. 3. S. no.stagegate.. Cooper. • Arthur D. 2nd edition. S. vol. Mass) hardcover. PDMA Visions. Kleinschmidt. 3.” Research-Technology Management. see: Griffin. 2. 47. Cooper and S. Edgett & E. “Overcoming the crunch in resources for new product development. and outlines the Stage-Gate® process • Portfolio Management for New Products. 26 Edgett. 1. “Benchmarking best NPD practices – I: Culture. For mid 1990s data. • R. 48-58.J. see selected articles online at no charge at ww. How Companies Use Innovation to Improve Profitability and Growth. XXVIII: 3.com) • The PDMA Foundation's 2004 Comparative Performance Assessment Study (CPAS). The classic best seller – 3rd edition. Success factors and Stage-Gate® for service industries Additional References: (Also. July 2004. vol. D. Cooper. Nov/Dec 2003. ResearchTechnology Management.G. “Your NPD portfolio may be harmful to your business’s health”. Nov-Dec 2004. S. resource allocation and portfolio management”. teams and senior management roles”.J.G. April 2005. no.pages. XXIX. pp 31-43.J. • R.com. 47. Cooper. • PDMA studies: Adams. Reading. 46.
Cooper. 22-26. April 2005.G. XXIX. “Your NPD portfolio may be harmful to your business’s health”. PDMA Visions. 2.R. 1 .