A high-quality new product process was the strongest common denominator among high-performance businesses.
Four Key Success Factors
1. A high-quality new product process.—One that demanded up-front homework, sharp and early product definition, tough Go/Kill decision points, and quality of execution and thoroughness, yet provided flexibility.
2. A defined new product strategy for the business unit.— One in which: There were new product goals for the business unit; areas of focus were delineated, the role of new products was clearly communicated, and there was a longer-term thrust.
3. Adequate resources of people and money.—Where senior management had provided the needed people (and freed up their time for projects), and resourced the effort with adequate R&D funding.
4. R&D spending for new product development (as a percentage of sales).
The other success factors, with a more modest effect on performance, included:
5. High-quality new product project teams.
6. Senior management committed to, and involved in, new products.
7. An innovative climate and culture.
8. The use of cross-functional project teams.
9. Senior management accountability for new product results.
Four major performance drivers of NPD results
1. Strategic—Top performers possess a product innovation strategy, driven by the leadership team and its strategic vision for the business. Notably, even today, about half of businesses lack key facets of this strategy!
2. Portfolio management and resource allocation—A second common denominator of top-performing businesses is making sure that the business has the necessary resources available for NPD, both funds and people from all functional areas. But deep pockets is not the only driver of high performance; rather, astute investment of these resources is key too: top performers have a portfolio management system that helps the leadership team allocate these resources to the right areas and right projects—the right mix and balance of NPD investments, and a strategically aligned portfolio.
3. The NPD Process—Most firms have implemented a gating or Stage-Gate idea-to-launch new product process. But there is great variability among companies in how well the process works. The top performers have a well-crafted, robust new product process in place, one that drives NPD projects from idea to launch and beyond; their process emphasizes up-front homework, voice-of-customer input, quality of execution, and performance results metrics.
4. People: culture, climate, teams, and the role of senior management—A fourth dimension was later added to the 1996 study’s results to yield the performance diamond depicted on the following page. This fourth dimension is about people. In top-performing businesses, there is a positive climate and culture for innovation; the leadership team of the business actively supports innovation with words, actions and resource commitments, and senior management is engaged in the decision making process in the right way. Additionally topper forming businesses embrace a true team approach to NPD: they field effective, properly-resourced cross-functional teams that are accountable for the end result.