A key determinate of innovation success is a robust process for choosing and defining new products. This is part of the “fuzzy front end” and sets the stage for successful innovation. I have written extensively about the concept of the portfolio process (1), but in this two-part article I will focus on the role of a solid product definition in innovation success.
Before discussing some important elements of the product definition in Part II of this article, there are four points I want to address. First, it is imperative that the product definition not be viewed as a singular event, but a process. In other words, someone does not simply go to their desk, write a draft document, consult with a few stakeholders, issue a final copy and proclaim victory. The development process is rarely linear. In the real world, it is not simply that a decision is made to develop a product, a definition is written, the product developed, and finally introduced to the market. There are many loop-backs as uncertainty is reduced, especially if the product being developed is based on technology unfamiliar to the firm or serves a new market. The product defined at the outset of a project is rarely the same product that is ultimately introduced. The organization has to understand and embrace the fact that the “definition” will most likely evolve as the project unfolds.
To elaborate on this point, consider the diagram below. On the left side is the portfolio process. As described in the articles previously referenced (1), this process is meant to prioritize ideas for new products and existing projects, consider resource availability, and establish a future-looking new product roadmap. It is an on-going process within a business. At some point, a new product idea rises to the top. It is at this point that someone will be charged to develop a definition. The definition is developed and then evaluated against multiple criteria. For instance, will the product as defined meet the customer need? Can it be produced at a cost that makes sense from a pricing and margin standpoint? Are the resources available and the tentative schedule acceptable? During the early part of the process, and depending on the nature of the project, there may still be much uncertainty in the answers to these questions, but you have to start somewhere. Both marketing functions and engineering will be involved in the process, and in many cases, the idea for the new product goes back into the portfolio process. At some point, there is sufficient agreement on the definition, the resources are available, and the project enters the execution phase on the right side of the diagram. Even during the execution phases there may be loop-backs to refine the definition. If the project continues to clear the gates in the phase gate process the product is introduced to the market.
A second issue starts with a question: What is the role of the product definition? That seems intuitive but I believe many companies miss the mark and projects are set-up for failure from the outset because of miscommunication among all the stakeholders. It is one thing to sit around a conference table and verbally agree on what a new product should be. It is something quite different to write that down and have everyone agree. The process of crafting a well thought out new product definition is really all about communication. The diagram below illustrates this point in a humorous way, but anyone who has ever had the responsibility to write this type of document will appreciate its message. Whether you are discussing a seemingly simple product extension based on existing technology or a radical new-to-the-world product, having a written definition I believe is absolutely essential. As with many issues in new product development, the process of writing the document and securing agreement from stakeholders is more important than the document itself or the fact that completing the document appears somewhere on a check-list your ISO auditor will be looking at.
What makes it so difficult to write a product definition and how do you address those difficulties? An effective product definition of course requires a good understanding of what potential customer’s value. This includes what the customer will pay for a given set of features/benefits given competitive alternatives. There are many tools available to illicit customer desires, which are beyond the scope of this article, but suffice it to say that this effort is crucial.
A common part of the project definition phase for many new products is to generate a financial analysis that considers project cost estimates, projected revenue over some reasonable time period based on unit volume and selling price assumptions, and margins assuming some product cost estimates. Relying on just one specific set of assumptions is dangerous. You should look at a range of outcomes from a worst case to a best case. If the business cannot live with the worst case scenario, you need to proceed with caution and address those concerns as soon as possible. A well-functioning phase gate process should help force resolution on these issues. You don’t want to be in a situation where you spend months or years developing a product that has a cost structure that does not make sense.
Another difficulty in defining new products is the fact that it does involve every functional group. It is a messy process. There are many trade-offs along the way in satisfying all the needs. If for example, the culture of a manufactured goods business is such that new products are defined by R&D and marketing, and no input is sought or incorporated from manufacturing, you might be setting the project up for failure before it even starts. That is why defining new products is really an iterative process and requires many compromises. On the other hand, you have to drive the process to conclusion, as endless debate or slow decision making wastes valuable time that cannot be regained. For every day you delay agreeing on a path forward, you delay the project by a day. In fact, this part of the NPD process is where you can typically gain big improvements in cycle time with little cost.
The final consideration is who drives the definition process. In many organizations, a product manager is a key role in managing innovation including defining new products and I have written extensively on this subject (2). If innovation is all about matching a technology with a market need, than the role of product manager is someone who has “one foot in engineering and one foot in sales and marketing”. Most every organization has this type of role, whether it is called that or not. In many small organizations, it may in fact be the owner or president of the company. Regardless of who writes this document, it is important that there is only one person ultimately responsible for driving the process, though the senior manager in the business has overall ownership of innovation management processes, successful or otherwise (3).
To summarize, in Part I of this article we discussed four key issues. First, it is important to view product definition as a process, not a singular event. Always remember that the purpose of the product definition is to communicate and make explicit assumptions about what the product will be and maybe just as important what it will not be. We considered some of the challenges in writing a definition and how to address them. Finally, we looked at who should be responsible for the product definition process.
What experiences, good or bad, have you had with product definitions? Are there other challenges to drafting this important document that you have experienced that were not explored here? What were they and how did you handle them? Who in your organization typically is responsible for the definition process?
(1) See these articles on the portfolio process: Critical Aspects of Project Portfolio Management in NPD Success; The Importance of a Balanced Project Portfolio
(2) See for example this article: The Product Manager and New Product Development (NPD) Success
(3) See this article on the role of the senior manager: New Product Development (NPD) as a Key Business Process
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