Application of Project Management in New Product Development in Emerging organizations
- July 12, 2019
- Posted by: Ganesh Babu
- Categories: Business Head, Business Transformation, CEO, Culture, Organizational development
Except for a few organizations who indulged in making money through trading or labor content conversion,other emerging organization’s growth directly or indirectly depends on its capability on New product development (NPD).Even if the organization is Tier 1 or Tier 2 suppliers to OEM, their capability on new product query conversion into sales order determines its survival and competitive advantage.
Why should the emerging organization focus more on NPD capability building?
This can be answered by understanding the changes happening in external and internal to the organizations.
Changes in Internal to the organizations :
For any organization, the prime concerns are sustaining profitability and ensuring future growth. Conventionally, sustaining profitability calls for efficiency improvement,cost optimization and so on. Beyond some point, process optimization alone does not yield much improvement unless the organization revisits and re-engineer the product portfolio. Hence, an organization can sustain business profitability by creating an environment for continuous New product development and position itself as the first mover or the preferred source to its customer on new product developments and ramping up.
As a business head, you are aware that when you are manufacturing the same parts over a period of time, it will become a commodity and you lose the competitive advantage, in turn, you lose your profit margin. To compensate or sustain the profitability, smart organizations, equally focus more on New Product Development (NPD). Also, the existing product portfolio dries out, the only way for growth is bringing out more new products.
Changes in External to the organization :
External to the organization, the consumers are changing fast. Thanks to awareness, affordability and enhanced lifestyle, consumers are looking for more varieties and prefer to change the product frequently to keep them update in the society. For example in the case of mobile devices, laptop, automobile, there were fewer varieties and more volume when they were introduced to the world than now. This change in external environment results in more new product development focus inside the organization.
Going forward, the organization which equally focus on both efficiency and new value creation will sustain the profitability and ensure the future growth.
Reality of Product development scenario in Emerging organization:
Having worked with more than 60 small, emerging organization,realized that defining NPD success criteria is different for each organization.However, if we define NPD success criteria as the no of the projects successfully executed against accepted sales order (after accepting the order technically and commercially) in terms of meeting customer’s quality specification, cost and timeline, the result would be less than 20 % in most of the organization.
In fact, i came across an organization which undertakes project type of work ,ended up with a negative profit margin from positive double digit profit margin when the project signed off.
Most of the projects or new products fail in meeting time line or cost or quality requirements as dictated by the customer.
The reason is product development is not a simple or functional activity of one functions ,say design or engineering. It is a complex business process and calls for strategic cross functional integration in a way people works and interacts.
We can analyse the reasons for low NPD success rate interms of PROCESS and PEOPLE perspective.
Typical process related scenarios in existing product development :
1.Not fully aware of the customer’s requirement.
2.No sign off on idea/concept between customer & organization
3. Not identifying & involving all the key stakeholders at the beginning of the project may lead to changes at a later stage
4. Not spending sufficient time on planning .
5.No structured management reviews on risk assessment & mitigation.
6.No structured tracking systems on changes
7.No systematic planning on facilities like fixture/ gauges/material handling / tooling’s leads to delay and quality issues in the product.
8. NPD trials & proto building take the second priority in the organization next to day to day deliveries lead to delay and personal friction among the people on sharing the organizational resources.
Typical People related scenarios in product development :
1.Team is working in isolation
2.Mostly Design or Engineering team can take lead in NPD
3.No transparency on cost / budget / timeline as NPD handled by functional head
4.Most of the time, the team works in SEQUENTIAL leads to delay in completion
5.More of FUNCTIONAL orientation than CROSS FUNCTIONAL APPROACH as NPD calls for a cross functional approach
when you observe those above reasons and scenarios, you can find a pattern of challenges
1. Lack of shared targets
2. Lack of people integration
3. Lack of process on communication / risk assessment / resource planning
4. Lack of review forums & decision making
Solution calls for “Holistic approach on New Product Delivery Process”.
Some of the Project Management principles addresses the existing challenges or scenarios in the NPD process as follows
1. Starting the project with END GOAL in mind
2. Involving all stakeholders at an early stage
3. Define project scope with a set of key performance indicators
4. Tracking Key Performance Indicators throughout the project phase
5. Defining the phases or steps in the project
6. Proactive risk assessment and mitigation plan
7. Management Review and communication process
8. Active Change Management Practices
9. Engaging people with team/leader structure
When the organization understands the challenges in the existing way of product delivery process and the principles espoused by project management, it would be winning strategy of applying project management in the new product delivery process to sustain profitability and to ensure future growth of the organization!!