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1 © Stage-Gate International Stage-Gate ® is a registered trademark. Logo for Product Development Institute Inc. used under license by Stage-Gate International. Logo for Stage-Gate used under license where appropriate. The Innovation Diamond and Winning at Product Innovation are trademarks of Stage-Gate International. READY, FIRE… AIM: BALANCING SPEED AND ACCURACY IN NEW PRODUCT DEVELOPMENT Meg Sheehan Principal, Global Solutions June 23, 2009

2 © Stage-Gate International Key Discussion Points How to improve speed to market But, speed isnt everything How do you bring focus to your product development efforts

3 © Stage-Gate International Stage-Gate International Founded by Dr. Bob Cooper and Dr. Scott Edgett, creators of Stage-Gate ® 25+ years of highly-recognized research and implementation experience Focused exclusively on product innovation Worlds top provider of research-based solutions to improve innovation performance Maximum-value portfolio of consulting expertise and accelerator products

4 © Stage-Gate International New Product Development Research Based on the NewProd Studies and APQC Benchmarking Studies of almost 2000 new product launches in 500+ firms* *Studies conducted by Robert G. Cooper, Scott J. Edgett Ten Critical Success Drivers that separate the winners from the losers The Innovation Diamond

5 © Stage-Gate International The Innovation Diamond Product Innovation & Technology Strategy for the Business Idea-to-Launch System: Stage-Gate ® Climate, culture, teams & leadership Resources: Commitment & Portfolio Management And the Four Points of Performance Stage-Gate ® is a trademark of Product Development Institute Inc. Businesss new product performance

6 © Stage-Gate International The Innovation Diamond Product Innovation & Technology Strategy for the Business Idea-to-Launch System: Stage-Gate ® Climate, culture, teams & leadership Resources: Commitment & Portfolio Management And the Four Points of Performance Stage-Gate ® is a trademark of Product Development Institute Inc. Businesss new product performance READY AIM

7 © Stage-Gate International The Four Drivers of Performance: #1: Climate, culture and leadership The right climate and environment for innovation: Senior managers in top performing businesses create a positive climate and culture for innovation and entrepreneurship They foster effective cross-functional NPD teams And are properly engaged in the NPD decision-making process

8 © Stage-Gate International The Four Drivers of Performance: #2 The Stage-Gate® Process Stage-Gate is the worlds most widely cited, peer reviewed and implemented New Product Development process PDMA Best Practices Report, 1997: 68% of organizations participating in this study use a Stage-Gate system AMR Research, 2005: 71% of organizations surveyed confirmed use of the Stage- Gate process; 85% for organizations with 5,000+ employees Booz-Allen Hamilton study/report: 100% of the Global 1000 Innovators use a disciplined Stage-Gate process Stage-Gate has gone through 20+ years of evolution & refinement A disciplined decision-making framework to drive product success Defined, cross-functional contribution from teams and executives from Idea through to Launch, at the right pace and level of detail A risk management model outlining the right information at the right time for objective evaluation and alignment An investment management model with tough Go/Kill decisions

9 © Stage-Gate International 9 Ten Critical Success Factors for Winning 1. A unique & superior product 2. Strong market orientation throughout 3. More up-front research 4. Sharp & early product definition before development 5. The right organizational structure - Teamwork 6. An innovative & supportive environment 7. Leadership support 8. Creating a funnel not a tunnel 9. Managing product development as a process 10. Sufficient resources for product development

10 © Stage-Gate International Critical Success Driver #3 More pre-development work – the homework or up- front activities – must be done before Development gets underway The steps that precede Development – screening, market studies, tech feasibility, build business case – are critical to success New product failures are most often the result of weaknesses in the up-front activities – errors of omission or commission But little time and effort are spent here: 7% of money and 16% of effort (Japanese and highly successful US firms spend considerably more here) Homework answers key questions before Development begins : Is the project economically attractive? Who is the target customer? What positioning? What should the product be – features, attributes, performance – to make it a winner? Can it be developed? At the right cost? How?

11 © Stage-Gate International Does More Homework Mean Longer Times to Market? 1. More time and money spent up-front greatly improves the odds of success – there is clear evidence for this! 2. More homework results in better and sharper product and project definition – this speeds up the Development phase (less recycling and wasted time) 3. Homework done up-front anticipates product problems and design changes – these product design changes are made early in the game (rather than as the product is going to market) NO! The message is: Do It Right the First Time – DIRTFooT

12 © Stage-Gate International Critical Success Driver #4 Sharp and early product and project definition (before Development) separates winners from losers Consistently cited as a key to success in success/ failure studies This definition includes: 1. Project scope 2. Target market definition 3. Product concept & benefits to be delivered: value proposition 4. Positioning strategy (including price point) 5. Features, attributes, requirement & specs Why so critical? Forces homework to be done up-front (Success Driver #3) Communication tool & commitment between functions Provides clear targets for Development – the goal posts are defined

13 © Stage-Gate International Impact of Sharp, Stable Product Definition Percent of Businesses That Have a Good Product Definition Before Development Stage Begins Worst Performers Average Business Best Performers

14 © Stage-Gate International The Innovation Diamond Product Innovation & Technology Strategy for the Business Idea-to-Launch System: Stage-Gate ® Climate, culture, teams & leadership Resources: Commitment & Portfolio Management And the Four Points of Performance Stage-Gate ® is a trademark of Product Development Institute Inc. Businesss new product performance READY AIM

15 © Stage-Gate International The Four Drivers of Performance: #3: Strategy Top performers put a product innovation and technology strategy in place Different than business strategy Driven by the leadership team and the strategic vision of the business This product innovation strategy guides the businesss NPD direction And helps to steer resource allocation & project selection Defines the role that new products and technologies will play in achieving the business overall goals, and what arenas or battlefields will be entered as a result.

16 © Stage-Gate International Why Bother With NPD Strategy? I find the great thing in this world is not so much where we stand, as in which direction we are moving: To reach the port of heaven, we must sail sometimes with the wind and sometimes against it but we must sail, and not drift, and not lie at anchor. Oliver Wendell Holmes, The Autocrat of the Breakfast Table, Plans are nothing. Planning is everything. Dwight D. Eisenhower, US General and Supreme Allied Commander at D-Day In the absence of a clear strategy, what you are working on is your strategy. Me

17 © Stage-Gate International The Importance of a New Product Strategy for Your Business Businesses that are most likely to succeed at new products are those 1... that implement a company- specific new product idea- to-launch process driven by business objectives & strategies with a well-defined new product strategy at its core Our benchmarking studies reveal that 2... having an articulated new product strategy for the business is one of the four most important drivers of NP performance 1 Source: Booz-Allen & Hamilton 2 Source: APQC Cooper, Edgett Kleinschmidt benchmarking study 1 Source: Booz-Allen & Hamilton 2 Source: APQC Cooper, Edgett Kleinschmidt benchmarking study The need for an articulated product innovation strategy is clear But how well-defined is the innovation strategy for your business?

18 © Stage-Gate International A Product Innovation Strategy to Guide the NPD Effort Percentage of Businesses 10%20%30%40%50%60%70%80% 37.9% 27.6% 19.2% Product roadmap in place 41.4% 26.9% 15.4% Strategic buckets 69.0% 64.8% 53.8% Strategic arenas defined 58.6% 38.1% 23.1% Long term commitment 58.6% 46.3% 30.8% Role in Business goals 51.7% 38.1% 34.6% Clearly defined NPD goals Worst Performers Average Business Best Performers Best performers articulate a product innovation strategy

19 © Stage-Gate International What Is a Product Innovation Strategy? 1. The goals for your businesss total product development efforts The role of product development: how new products tie into your business's overall goals 2. Arenas of strategic focus – the battlefields 3. Attack plans – how you plan to win here Strategic stance or approach Entry strategy (for new arenas) 4. Resource Commitment & Strategic Portfolio Decisions Deployment Strategic buckets Strategic product roadmap More than high level goals and a list of development projects!

20 © Stage-Gate International The Four Drivers of Performance: #4 Portfolio Management Resource investment and focusing on the right projects – portfolio management: Top performers commit sufficient resources to effectively undertake their new product projects And they boast an effective portfolio management system that helps the leadership team effectively allocate these resources - To the right areas - To the right projects Portfolio Management: How you operationalize your strategy

21 © Stage-Gate International Some food for thought … You gotta know when to hold em. Know when to fold em. Know when to walk away. Know when to run. Kenny Rogers, The Gambler Take calculated risks. That is quite different from being rash. George S. Patton, U.S. General

22 © Stage-Gate International Portfolio Management Is Fundamental To Successful Product Development How should you invest your R&D or Development funds & people? What is your investment portfolio? Portfolio Management: Is about resource allocation Which Development projects should the business resource from among many opportunities (Go/Kill)? The relative prioritization of these (e.g., accelerated development; Go vs. Hold for now) PM is how you put into practice your Business Strategy Strategy becomes real when you start spending money! Technology Impact to Business HIGH LOW Likelihood of Commercialization Within Next 5 Years LOW HIGH

23 © Stage-Gate International Why Portfolio Management Is Vital Eight key reasons why portfolio management is fundamental to innovation success: 1. Financial – to maximize return 2. To maintain competitive position 3. To properly allocate scarce resources 4. To forge link between project selection & business strategy 5. For focus 6. For balance 7. To communicate priorities 8. To provide objectivity in project selection Top performers emphasize the link between project selection & business strategy

24 © Stage-Gate International Portfolio Management: A Major Problem Area Portfolio Management is typically poorly handled: Rated as weakest area in new product management in recent benchmarking study* Management confessed to... -No serious Go/Kill decision points -No criteria for making the Go/Kill decision The result: a tunnel, not a funnel -Also indicated poor project prioritization Too many projects for limited resources available Major business challenge Many different approaches No easy answers A problem many companies are addressing * Source: Cooper/Kleinschmidt Vital for success – but no quick fixes

25 © Stage-Gate International Breakdown of Projects By Project 16% 25% 24% 10% 24% 22% 33% 10% Average Business 7%New To The World Products 19%Major Product Revisions 20%New To The Business Products 28% Incremental Product Improvements & Changes 6%12% Promotional Developments & Package Changes Best Performers Worst Performers ~65%~55%~45% 10 Point Steps Best Performers focus more on innovative & game-changing projects 40%

26 © Stage-Gate International Some More Provocative Facts Not only are portfolios unbalanced Portfolios contain too many low value-to-the-company projects And far too many projects for the limited resources available A small minority of businesses have a systematic & formal portfolio management process in place But hi-productivity businesses suffer much less from these deficiencies Worst Performing Businesses Average Business Best Performing Businesses Percentage of Businesses

27 © Stage-Gate International Five Goals in Portfolio Management 1. To allocate resources so as to maximize the value of the portfolio Against some company goal -Long term profitability; or return-on-investment 2. To achieve a desired balance of projects Between long term and short, fast ones Between high risk and low risk Across different project types & market sectors 3. To link the new product effort to the Business Strategy Ensuring that projects are on strategy That spending reflects the strategic priorities of the Business That the businesss strategy will be realized thru the list of active projects

28 © Stage-Gate International Five Goals in Portfolio Management (continued) 4. To obtain the right number of projects Balancing resource demands with resource availability Not overloading the pipeline with too many projects 5. Sufficiency: ensuring that projects will enable business to reach its NPD goals Question: If we do these projects, will we achieve our Sales (or Profit) goals for NPD for the next few years?

29 © Stage-Gate International Balancing Speed and Accuracy in NPD Product Innovation & Technology Strategy for the Business Idea-to-Launch System: Stage-Gate ® Climate, culture, teams & leadership Resources: Commitment & Portfolio Management Focus on the Four Points of Performance Stage-Gate ® is a trademark of Product Development Institute Inc. Businesss new product performance READY AIM

30 © Stage-Gate International Thank You Meg Sheehan Principal, Global Solutions


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