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International
Marketing
Review
11,1
60
New Products:
The Factors that Drive
Success
Robert G. Cooper
McMaster University, Hamilton, Ontario, Canada
Product innovation is central to business prosperity. As industries and companies
restructure and “re-strategize” to cope with changing times — rapidly developing
technologies, new and fierce competition, and radically shifting marketplaces —
those managements that are able to improve the effectiveness and time efficiency
of their new product efforts will be the ultimate winners.
New product success remains an elusive goal for too many firms, however.
While major strides have been made in other areas of management — in
customer service, product quality and production efficiency improvements —
product innovation remains largely the hit-and-miss affair that it was two
decades ago. Indeed, product innovation may well be the last important frontier
area within the firm that needs major repair work: cut the failure rate in half,
and watch the bottom line improve!
This article is about new product success — more specifically about what
drives success in product innovation, and how these drivers can be translated
into management action. The results, conclusions and lessons that we present
are based not on hearsay, speculation and wishful thinking, but on rigorous
research into new product practices and what separates winners from losers.
Our NewProd research has investigated over 1,000 new product launches in
more than 350 firms in Europe and North America over the last two decades,
providing us with a rich database from which to draw conclusions.
Over the last 20 years, the NewProd research investigations have probed the
causes of new product failure, and what distinguishes new product successes
from failures. The database now includes over 1,000 new product projects –
products which went to market and whose commercial outcomes are known –
from over 350 firms in North America and Europe, largely industrial goods in
moderate-to-high technology industries.
The majority of the NewProd results referred to in the current article are
based on two studies:
•NewProd III: an investigation of 203 industrial new product projects: half
were commercial winners; the others failed financially in the marketplace.
Hundreds of characteristics of these projects were measured in order to
uncover what distinguished the successes from failures (see Cooper and
International Marketing Review,
Vol. 11 No. 1, 1994, pp. 60-76
© MCB University Press, 0265-1335 The research reported in this article was in part supported by funds from Esso Chemical Canada
(Exxon) and the Lawson Mardon Chair (sponsored by the Lawson Mardon Group).
New Products:
The Factors that
Drive Success
61
Kleinschmidt, 1990; Cooper, 1990; 1993; Cooper and Kleinschmidt, (1986;
1987a; 1987b).
•A study of new products in the chemical industry: 103 actual new
product projects from major chemical companies in four countries
(UK, USA, Germany, Canada); 68 commercial successes and 35 fail-
ures. These were major products and were speciality items (non-com-
modity). Although specific to one industry, many of the results are
consistent with previous studies, and hence appear to have validity
for a broad range of moderate-to-high tech businesses (see Cooper,
1994; Cooper and Kleinschmidt 1993a; 1993b).
So what are the keys to new product success? We’ve tried to keep the
presentation straightforward, limiting the number of major drivers to only
eight. There are other drivers of course, some with fairly minor effects; but if
management can get right the eight drivers outlined below, our guess is that
new product success and profitability would more than double!
The Number One Success Factor Is a Unique Superior Product: A
Differentiated Product that Delivers Unique Benefits and Superior
Value to the Customer
Product superiority — delivering unique benefits and product value to users —
separates winners from losers more often than any other single factor. That
product advantage, superiority or differentiation is the key determinant of
success is a recurring theme in all of our new product studies.
How dramatic is the impact of product superiority? We developed an index
of product superiority, comprising seven ingredients of a “superior” product:
(1) unique attributes and characteristics for the customer — not available
from competitive products;
(2) good value for moneyfor the customer (positive economic impact on the
customer);
(3) superior to competing products in terms of meeting customer needs;
(4) excellent relative product quality — relative to competitors’ products,
and in terms of how the customer measures quality;
(5) superior price/performance characteristics for the customer relative to
competitors’ products;
(6) product benefits or attributes easily perceived as being useful by the
customer.
(7) highly visible benefits — very obvious to the customer.
When the top 20 per cent of new products on this product superiority index
were compared to the bottom 20 per cent, the results were dramatic: these
superior products had much higher success rates, achieved greater market
shares, had higher profits, and met company sales and profit objectives much
more, according to NewProd III. Here, success was measured in a variety of
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ways, including financial performance, market share, impact on the firm,
meeting objectives, and even timeliness:
•Success rate: the proportion of products that met or exceeded the firm’s
minimum acceptable profitability (financial) cut-off criterion, however
profit is measured (yes/no).
•Profit rating: the degree to which the product’s profits exceeded (or fell
short of) the minimum acceptable profit criterion (0-10 scale).
•Market share: per cent share in the defined target market (domestic
market).
•Met sales objectives: degree to which new product met sales objectives
(0-10 scale).
•Met profit objectives: degree to which new product met profit objectives
(0-10 scale).
•Tech success: the technical success rating - degree to which the product
was considered to be a technical, technological or scientific success (0-10
scale).
•Impact on company: the impact that the product’s sales and profits had
on the firm (0-10 scale; 10=major positive impact).
•Time efficiency: how fast the product was developed and launched,
relative to what it could have been (0-10 scale; 10=very fast).
•Adhered to schedule: degree to which the product was developed and
launched on schedule (i.e., according to the timeline) (0-10 scale; 10=on
or ahead of schedule).
It should be noted that not all gauges of success listed above were measured in
both New Prod studies.
Compare the performance of the top 20 per cent — the truly superior
products — with the bottom 20 per cent, the “me too”, undifferentiated ones, as
shown in Table I.
Our most recent study of the chemical industry reveals almost identical
results (see Table II). When the top third on a similar product superiority index
were compared to the bottom third, success rates were three time as high;
profits were higher; market share was three times as great; sales and profit
objectives were met; and time efficiency was better[1], (see Table II).
A frequently voiced question is: what is the impact of advantages gained
from elements other than a better product, for example, via a superior
salesforce, a positive company image or superb customer service? Our chemical
industry study probed non-product advantage side-by-side with product
advantage: the conclusion was that elements of non-product advantage yield
positive results, but with not nearly the same impact as that obtained via
product advantage (above). Here, non-product advantage was gained from:
•superior customer service and technical support for the new product;
•a high level of company technical competence (as perceived by the
customer) for this type of product;
New Products:
The Factors that
Drive Success
63
•a superior sales force (e.g., a larger sales force, better qualified);
•a positive company image or reputation;
•product availability: faster or more reliable product delivery;
•a well-known brand name used for the product.
New products in the top third in terms of these six elements achieved a 40 per
cent higher success rate, and were more profitable, on average. But these
differences paled in comparison to the impact of product advantage. Note that
superior customer service stood out from the others in the list above. Two other
possible elements of non-product advantage included superior advertising and
promotion and low price. Neither impacted on positive new product outcomes in
the chemical study.
The management implications of the success impact of product superiority
are clear:
•First, the seven ingredients of a superior product (above) provide a useful
checklist of questions in assessing the odds of success of a proposed new
product project. In short, these seven items — unique attributes, good
value-for-money, superior in meeting needs, relative product quality and
so on — logically become top priority questions in a project screening
checklist. If a project rates low on these items, this is a signal that the
project should be put on “hold”.
•Second, the central role of product superiority provides prescriptions for
the management of the new product process. The development of a new
Top third Bottom third Difference
Performance measure superior products “me too” (impact)
Profit rating (0-10) 7.74 3.33 4.41
Per cent successful 90.6 29.4 61.2
Tech success rating (0-10) 9.09 5.82 3.27
Impact on company (0-10) 6.75 4.76 1.99
Market share (domestic %) 43.4 14.7 28.7
Time efficiency (0-10) 7.47 6.21 1.26
Table II.
Impact of Product
Advantage in the
Chemical Industry
Performance measure Top 20 per cent Bottom 20 per cent Difference
Superior products “me too” (impact)a
Success rate (%) 98.0 18.4 79.6
Profit rating (0-10 scale) 8.42 2.58 5.84
Market share (%) 53.5 11.6 41.9
Met sales objectives (0-10 scale) 6.96 2.19 4.77
Met profit objectives (0-10 scale) 7.02 2.21 4.81
Timeliness (0-10 scale) not measured in NewProd III
aAll differences reported are statistically significant at the 0.10 level, most at the 0.01
level.
Table I.
Impact of Product
Superiority (New Prod
III)
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product with real advantages and customer benefits becomes
paramount. Simply being “equal to the competition” or “having good
product/market fit” is not enough; the goal must be superiority and
advantage.
These ingredients of a superior product thus become challenges to the
project team to build into their new product design. Note that the definition
of what is “unique and superior”, what is “value” and what is a “benefit”
must be from the customer’s perspective; it must be based on an in-depth
understanding of customer needs, wants, problems, likes and dislikes:
•Determine customer needs at the outset. Start with a user needs-and-
wants study – market research – to probe customer needs, wants,
preferences, likes and dislikes.
•Do a competitive product analysis. If you can understand the competitor’s
product weaknesses, then you’re halfway to beating him.
•Test and verify all your assumptionsabout your winning product design
via concept tests prior to development; rapid-prototype-and-tests during
development; and customer trials following development.
This disciplined approach to discovering product superiority is decidedly
customer focused, which leads to success factor number 2, a strong market
orientation.
A Strong Market Orientation — a Market-driven and Customer-
focused New Product Process — Is Critical both to Success and to
Cycle Time Reduction
This message comes out strongly: a thorough understanding of customers’
needs and wants, the competitive situation and the nature of the market is an
essential component of new product success. Sadly a market orientation and
commitment to the customer are often missing. For example, new product
projects were found to be decidedly unbalanced between technological versus
marketing activities in NewProd III: only 16 per cent of the person-days spent
on projects went to marketing activities — market research, market
assessment, customer tests, trial sell and the launch. Worse yet, if the effort
spent on launch is subtracted, then marketing actions received just over 8 per
cent of the total effort! In terms of money, the marketing side of projects fared
even worse: market assessment, seeking customer inputs and customer-
oriented tasks accounted for only 5.5 per cent of total project costs, on average.
More evidence: Key marketing tasks were the ones most often omitted in new
product projects. The “omission rates” for three key marketing actions from the
two studies are shown in Table II.
Percentage of cases in which action omitted
Marketing action NewProd III Chemical industry
Detailed market study 75 57
Customer tests 34 11
Trial sell 77 45
Table III.
Omission Rates for Key
Marketing Tasks
A market-oriented, customer-focused approach pays off, however. When more
effort went to marketing actions, success rates rose, according to NewProd III:
successful projects had 2.2 times as much money spent on seeking customer
input and feedback — market studies, customer tests, etc. — as did failures!
Further, projects which featured quality of execution in their marketing actions
— from preliminary market assessment to launch — had much better success
rates. Here we measured quality of execution of five marketing activities:
preliminary market assessment; detailed market study; customer tests or trials;
trial sell/test market; and market launch. Those projects that scored in the top
20 per cent in terms of quality of execution of these marketing actions had a
stunning performance: double the success rate; three times the market share;
and excellent performance on the other measures, as shown in Table IV.
Our chemical industry studied yielded parallel results: when marketing
activities were carried out well, projects were significantly more profitable, had
more than double the success rate, boasted almost three time the market share,
and had a strong positive impact on the firm, as shown in Table V.
The added bonus was that this top third in terms of solid marketing
activities were actually done more quickly as well: they were more time efficient;
and they adhered to the time schedule far more.
A dedication to building in marketing activities is central to new product
success. Too often these actions were not an integral facet of the project, and
when done, were often included as an afterthought or were poorly resourced.
The message is that a strong market orientation coupled with quality of
executionof these vital marketing actions is essential. This finding is supported
Top 20 per cent Bottom 20 per cent
good execution poor execution Difference
Performance measure of marketing tasks of marketing tasks (impact)
Success rate (%) 71.1 32.5 38.6
Profit rating (0-10) 6.54 3.64 2.90
Market share (%) 42.1 24.6 17.5
Met sales objectives (0-10) 6.05 3.18 2.87
Met profit objectives (0-10) 5.55 3.18 2.37
Top third Bottom third
good execution poor execution Difference
Performance measure of marketing tasks of marketing tasks (impact)
Profit rating (0-10) 7.57 4.06 3.51
Per cent successful 88.6 37.5 51.1
Tech success rating (0-10) 8.54 6.49 2.05
Impact on company (0-10) 6.81 5.25 1.56
Current share (domestic, %) 40.8 14.6 26.2
Time efficiency (0-10) 7.60 5.67 1.93
Adhered to schedule (0-10) 6.60 4.27 2.33
Table IV.
Quality of Execution in
NewProd III
Table V.
Quality of Execution in
Chemical Industry
New Products:
The Factors that
Drive Success
65
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in virtually every study of product success factors. Conversely, a failure to adopt
a strong market orientation in product innovation, an unwillingness to
undertake the needed market assessments, and leaving the customer out of
product development spells disaster. Poor market research, inadequate market
analysis, weak market studies, test markets and market launch, and inadequate
resources devoted to marketing activities were common weaknesses found in
virtually every study of why new products fail.
To be successful, a market orientation must prevail throughout the entire
new product project:
•Idea generation: Companies must devote more resources to market-
oriented idea generation activities, such as focus groups with customers;
market research to determine customer need areas; using the sales force
to actively solicit ideas from customers; and developing relationships
with lead users.
•The design of the product : The stage at which the product’s specification
and requirements are being defined. Too often, market research, when
done at all, is done too late — after the product design has been decided
and simply to verify that the proposed product indeed has market
acceptance. If the results of the market study are negative, most often
they are conveniently ignored and the project is pushed ahead
regardless.
The mistake is clear: market research must be used as an input to the
design decisions, and not solely as an after-the-fact check. Investigations
to determine users’ needs, wants and preferences; and to identify
competitive product strategies, strengths and weaknesses provide
insights which are invaluable guides to the design team before they
charge into the design of the new product.
•Technology-push: New products (where the product emanates from the
lab or engineering design department, perhaps the result of a
technological breakthrough). Even here, there still should be
considerable marketing input as the technology is shaped into a final
product design. That is, following the technical discovery or initiation,
but before full fledged development gets under way, there is ample
opportunity to research and interact with the customer to determine
needs and wants, to shape the final product the way the customer wants
it, and to gauge likely product acceptance.
•Throughout the entire project: Customer inputs should not cease at the
completion of the pre-development market studies. Seeking customer
inputs and testing concepts or designs with the customer is very much
an iterative or “back and forth” process. For example, during the actual
development phase of the project, constant and continuing customer
contactremains essential. Keep bringing the customer into the process to
view facets of the product as the prototype or final product takes shape.
Develop rapid prototypes, working models or facsimiles of the product
as early as possible to show to the customer in order to seek feedback
regarding market acceptance and needed design changes. Do not wait
until the very end of the development phase — the field trials — to unveil
the product to the customer. There could be some very unpleasant
surprises!
Success or Failure Is Often Decided in the First Few Stages of the
Projects: The Up-front Homework Is Pivotal to Success
NewProd and other studies reveal that the steps that precede the actual design
and development of the product — screening, market studies, technical
feasibility assessment and building the business case — are key factors
separating winners from losers. Errors and omissions in these vital activities
can and often do spell disaster later in the project.
Consider the evidence:
•First, relatively little is spent on these up-front activities: on average,
only 7 per cent of the project’s total expenditures and only 16 per cent of
the person-days are devoted to these critical pre-development activities,
according to NewProd III. In too many projects, we witnessed a new
product idea that moved directly into development with very little in the
way of homework to define and justify the project.
•Those managers who did spend the time and money on pre-development
homework reaped the rewards: successes had 2.1 times as much money
and 1.7 times as many person-days spent on the up-front homework as
did failures.
•When these up-front or homework activities were well executed,
performance results were markedly higher. The top 20 per cent of
projects, in terms of quality homework, fared much better than those
projects with poor homework: higher success rates, double the market
share and higher profitability, as shown in Table VI.
•The chemical industry study results are almost identical. Good
homework doubles the success rate and improves profits. Moreover, far
from adding time to the project, good homework actually improves
timeliness: more time efficient projects and a closer adherence to the time
schedule, as shown in Table VII.
These pre development or up-front homework activities are important because
they qualify and define the project: they help to focus resources on the right
Table VI.
Impact of Pre-
development
Homework( in New
Prod III)
Top 20 per cent Bottom 20 per cent Difference
Performance measure good homework poor homework (impact)
Success rate (%) 75.0 31.3 43.7
Profit rating (0-10) 7.16 3.71 3.45
Market share (%) 45.7 20.8 24.9
Met sales objectives (0-10) 6.03 2.98 3.05
Met profit objectives (0-10) 5.92 3.11 2.81
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projects, and they provide inputs to assist in the definition of a winning new
product design.
Solid homework also reduces cycle time. A major time-waster occurs when
projects are poorly defined as they enter the development phase: they suffer
from vague targets and moving goalposts, usually the result of weak pre-
development activities; the target user is not well understood, user needs and
wants are vaguely defined, and desired product features and performance
requirements are clouded. Homework yields better product and project
definition which speeds up the development process. Additionally, good up-
front homework anticipates problems and likely changes in the product design,
and encourages changes to occur earlier in the process rather than later, when
they are more costly. The result is considerable savings in time and money at
the back end of the project, and overall a more cost- and time-efficient new
product process.
The message is that more time and resources must be devoted to the
activities that precede the design and development of the product. These initial
screening, market and technical analyses, and definitional stages are critical to
success. Managers must resist the temptation to skip over the up-front stages of
a project, and move an ill-defined and poorly investigated project into the
development phase. Pivotal pre-development activities which were so crucial to
new product success include: initial screening, preliminary market and
technical assessments, detailed market studies, and business or financial
analysis. These five key pre-development activities must be built into the new
product process as a matter of routine rather than by exception. These up-front
activities are also closely linked to the product definition (see next section);
unless these pre-development actions are carried out well, then product
definition is likely to be weak, vague, or at best, based on hearsay evidence.
Sharp and Early Product Definition — before Product
Development Begins — Decides the Winners and Helps to Keep
Projects on Time
How well the product is defined prior to entering the development phase is
increasingly cited as a key success factor. Crawford (1984) implores managers
to include a “protocol step” just prior to the development phase, where the
requirements of the product are clearly spelled out and agreed to by all parties
Table VII.
Impact of Pre-
development Homework
in the Chemical
Industry
Top third Bottom third Difference
Performance measure good homework poor homework (impact)
Profit rating (0-10) 7.33 4.31 3.02
Per cent successful 88.2 45.5 42.7
Tech success rating (0-10) 8.27 6.82 1.45
Impact on company (0-10) 6.71 5.33 1.38
Time efficiency (0-10) 7.29 5.94 1.35
Adhered to schedule (0-10) 6.94 4.06 2.88
involved in the project. Successful new products indeed had much sharper
definition prior to development, according to our research. Projects that had
these sharp definitions were more successful; had higher market shares;
achieved greater profitabilities; and tended to meet company sales and profit
objectives much more:
•Sharp, early definition was the number 2 success factor in NewProd III:
Those projects where sharp definition was in place before development
began — the best 20 per cent in terms of definition — achieved enviable
results, as shown in Table VIII.
•Sharp and early definition was also an important success factor in our
chemical industry study, impacting positively on most measures of
performance, including the ability to stay on schedule, as shown in Table
IX.
This early product definition includes four key elements, each of which was
correlated with performance:
(1) specification of the target market: exactly who the intended users are;
(2) description of the product concept and the benefits to be delivered;
(3) delineation of the positioning strategy;
(4) and definition of the product’s requirements, features, attributes and
specifications (prioritized: “must have” and “would like to have”).
It is evident why projects that have sharp project definition prior to
development are considerably more successful. First, building a definition step
into the new product process forces more attention to the up-front or pre-
development activities. Second, the definition serves as a communication tool
Table VIII.
Impact of Sharp
Definition
(in NewProd III)
Top 20 per cent Bottom 20 per cent Difference
Performance measure good definition weak definition (impact)
Success rate (%) 85.4 26.2 59.2
Profit rating (0-10) 7.64 3.10 4.54
Market share (%) 37.3 22.9 14.4
Met sales objectives (0-10) 6.35 2.51 3.84
Met profit objectives (0-10) 6.65 2.54 4.11
Table IX.
Impact of Sharp
Definition in Chemical
Industry
Top third Bottom third Difference
Performance measure good definition weak definition (impact)
Profit rating (0-10) 7.52 4.38 3.14
Per cent successful 85.2% 46.7% 38.5%
Tech success rating (0-10) 8.52 6.58 1.94
Impact on company (0-10) 6.78 5.30 1.28
Current share (domestic %) 36.3% 16.3% 20.0%
Adhered to schedule (0-10) 6.19 4.65 1.54
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and guide: all party agreement or “buy in” means that each functional area
involved in the project has a clear and consistent definition of what the product
and project are, and are committed to it. Finally, this definition provides a clear
set of objectives for the development phase of the project, and the development
team members — development proceeds more efficiently with no moving
goalposts and no fuzzy targets!
The Cross-functional Team Approach Not Only Speeds Products to
Market; It Also Enhances the Success Rate
Organizational design — how the firm organizes for new products — is critical.
Except for the simplest of products and projects — line extensions and product
up-dates — product innovation must cut across traditional functional
boundaries and barriers: a cross-functional team approach.
The evidence is compelling. Investigations into new product success
consistently cite interfaces between R&D and marketing, co-ordination among
key internal groups, multi-disciplinary inputs to the new product project, and
the role of teams and the team leader. Successful new product projects feature a
balanced process consisting of critical activities that fall into many different
functional areas within the firm: marketing and marketing research,
engineering, R&D, production, purchasing, finance, to name a few. Our
NewProd studies in the chemical industry show clearly that projects
undertaken by empowered multi-functional teams were more indeed successful.
Here were some of the ingredients in organization design that we found were
strongly connected to project outcomes in our chemical industry study:
•organized as a cross-functional team (as opposed to each function doing
its own part of the project independently);
•where the team was dedicated and focused (i.e., devoted a large
percentage of their time to this project, as opposed to spread over many
projects);
•where the team was accountable for the entire project from beginning to
end (as opposed to accountability for only a phase of the project);
•where there was a strong project leader who led and drove the project;
•where top management was committed to (and strongly supported) the
project.
Consider how these five elements, acting together, led to high performance:
higher success rates and better profits; and most important, cycle time
reduction. Indeed, these organizational elements above were the strongest
drivers of cycle time reduction of all factors in our chemical industry study! (See
Table X.)
The lack of a cross-functional team, with a clear leader, and empowered and
dedicated team members, is probably the single greatest reason for project
delays, errors in product design, and miscues in the project. Yet, in too many
projects we have studied over the years, there was evidence of a decided lack of
a cross-functional team effort. Even in this chemical industry study, which
focused on large, multi-national, well-managed firms, the notion of a true cross-
functional team was missing in about 40 per cent of the projects probed.
Focus Is Central to Success: Much Sharper Evaluation and
Decision Points Are Required in the Process
Most firms’ new product programmes suffer from a lack of resources: too many
projects, and simply not enough time, money or people to do each well. Some
evidence of the constrained resources has already been highlighted above: the
pitifully small amounts of time and money devoted to critical activities such as
marketing actions, and the pre-development homework steps.
One solution is better focus: that is, sharper project selection, ensuring that
the limited resources are devoted to the truly meritorious projects. Sadly, project
evaluations — the various go/kill decision points in the innovation process —
tend to be handled badly. Indeed they are rated by managers to be among the
weakest steps in the entire process, yet ironically they prove decisive in
determining outcomes:
•Initial screening was identified by managers as the number 2 activity “in
greatest need of improvement” in NewProd III. Its proficiency was rated
poorly: in only 12 per cent of projects was this decision point well
handled. Yet effective screening was among the top activities which were
correlated with success.
•The critical “go-to-development” evaluation was similarly poorly
handled: in the chemical industry study, next to the detailed market
study, it was the weakest activity of the process. In both studies,
proficiency here was strongly correlated with success.
•In both the chemical industry study and NewProd III, the pre-launch
business analysis and decision point was frequently omitted (in 47 per
cent and 65 per cent of the projects, respectively). Again, proficiency at
this critical evaluation point proved to be key: for example, it was the
number two activity driving success in the chemical industry study.
Often the problem of poor project evaluation boils down to a lack of criteria
against which to judge projects: what is a “good” project? The many studies into
success and failure provide insights in what criteria to use. New product
success is fairly predictable — certain project characteristics consistently
separate winners from losers, and in a strong way:
Table X.
Impact of Cross-
functional Team
Working in Chemical
Industry
Top third Bottom third Difference
Performance measure cross-functional team functional, no team (impact)
Profit rating (0-10) 6.68 4.18 2.50
Per cent successful 71.4 44.1 27.3
Tech success rating (0-10) 8.07 6.47 1.60
Time efficiency (0-10) 7.36 5.97 1.39
Adhered to schedule (0-10) 7.00 4.00 3.00
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•Product superiority, specifically products that offer unique features;
provide good value-for-money; meet customer needs better; have higher
relative product quality; boast superior price/performance
characteristics; have benefits perceived as useful; and whose benefits are
highly visible (described above in the first section).
•Synergy, notably marketing and technological synergies: products that
build on in-house development technology, utilize inside engineering
skills, and use existing manufacturing resources and skills; and products
with a strong project/company fit in terms of sales force, distribution
channels, customer service resources, advertising and promotion, and
market intelligence skills and resources.
•Market attractiveness, specifically market size, market growth, degree of
market need, and purchase importance. While elements of the
competitive situation were not as strongly linked to success, they did
have some impact, and might also be included as part of market
attractiveness. They include: the absence of intense competition, lack of
price competition and weak competitive products.
These three success factors — product superiority, synergy and market
attractiveness — and the ingredients that comprise them, can and should be
used as scoring criteria in order to make more effective screening and project
prioritization decisions.
Quality of Execution Is Paramount: The Various Steps and Actions
which Make up the Innovation Process — How Well They Are
Done, and whether They Are Done — Drive New Product
Outcomes
A popular business adage is: “if you don’t like the results, then look at the
process that delivered them!” And so it is with product innovation. Indeed, the
various activities of the innovation process have been shown in countless
studies to be strongly linked to success and failure.
Consider Table XI (results from both NewProd III and our chemical industry
study), which provides an overview scorecard of the new product process: it
shows:
•the “percentage done” — the proportion of projects where the activity
was actually done (areas of omission are in bold);
•a “quality of execution index” for each activity for successes versus
failures (areas of deficiency are noted in bold);
•those activities having the greatest impact on project outcomes (major
impact; some; none).
The results show a strong link between quality of execution and success for
most activities: observe the differences in “quality of execution” scores between
winners and losers and the number of activities with major impacts in Table XI.
In both studies, quality of execution of both marketing and technological
activities was strongly tied to a variety of measures of new product
performance[2].
What we also witness is a process that is very much in trouble. It is plagued
by errors of omission, with pivotal activities, such as market studies and
business analyses, simply omitted altogether in the majority of projects. It is
also a process plagued by errors of commission: poor quality of execution for
too many crucial activities that make the difference between winning and losing
— activities such detailed market studies, business and financial analyses, test
market or trial sell and initial screening. Note the mean quality ratings are
typically in the range of 4-6 out of 10 across all activities — hardly the scores
one would expect from a well executed project.
A Multi-stage-and-gate “Game Plan” Overcomes Some of the
Deficiencies
The solution that some enlightened firms have adopted is the re-engineering of
their product innovation process (Cooper, 1993). That is, they have dissected
their current “process” from idea to launch; observed what is good and bad
about it; and redesigned the innovation process around best practices. Often,
many of the conclusions and lessons derived from our NewProd studies are
built into these re-engineered processes.
The typical result is a “stage-gate” new product process. Firms such as
Exxon Chemicals (worldwide), Lego in Denmark, various divisions of ICI,
DuPont and Rohm and Haas, Reckitt & Colman in the UK, Proctor & Gamble
and Polaroid in the USA, and even financial institutions (e.g. Royal Bank of
Table XI.
Overview of New
Product Process
New Products:
The Factors that
Drive Success
73
NewProd III results Chemical industry study
Percentage Quality of Percentage Quality of
done execution done execution
Activity Success Failure Impact Success Failure Impact
Initial screening 92 6.3 3.7 Major 88 6.5 5.3 Major
Preliminary market
assessment 74 5.9 4.4 Major 85 6.7 5.1 Some
Preliminary technical
assessment 83 7.5 5.2 Some 91 7.1 5.9 Some
Detailed market study 26 6.6 4.7 Major 43 4.4 1.6 Major
Business/financial
analysis 60 6.9 5.6 Major 62 5.2 3.3 Some
Development of product 88 7.1 5.5 Some 93 7.9 None
In-house product tests 87 7.3 6.2 Major 87 6.9 None
Customer tests 65 6.6 None 89 7.8 6.1 Major
Test market, trial sell 22 7.4 6.0 Some 54 7.0 4.3 Major
Pilot or trial production 48 6.8 Some 70 7.4 5.8 Some
Pre-launch business
analysis 32 6.1 None 53 5.9 2.8 Major
Production start up 54 6.3 Some 74 7.9 5.0 Major
Market launch 66 6.7 5.6 Some 72 6.4 4.3 Major
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Canada) have opted for a re-engineered stage-gate process for new products.
Here, TQM methodology is applied to the new product process: the process is
divided into stages — typically four to six in number. These stages comprise
multiple, parallel and prescribed activities that cut across functional
boundaries. Particular emphasis is placed on traditionally weak activities and
stages, including marketing actions and pre-development activities or
homework.
Separating the stages are “gates” or decision points: these act as quality
control check-points in the process. Gates, which are manned by senior
management, have pre-specified deliverables, and a set of go/kill decision
criteria. The combination of prescribed activities, a multi-functional approach,
an emphasis on homework, a dedication to the marketplace and customer, pre-
specified deliverables and visible Go/Kill criteria helps to overcome many of the
deficiencies which currently beset most firms’ innovation processes.
Do these stage-gate new product processes work? While many firms are just
now beginning implementation, the evidence appears positive from the handful
of companies with longer experience. A study of 29 divisions in major
companies which had implemented a stage-and-gate process reveals positive
results (Cooper and Kleinschmidt, 1991) (see Table XII).
Overall, the results are encouraging — higher success rates, and generally
faster to market — so much so that one management study proclaimed that
“The multi-step new product process is an essential ingredient in successful
new product development” (Booz, Allen & Hamilton, 1982). Some European
firms have even used stage-gate systems to meet ISO 9004 requirements for
management/internal processes[3].
Cycle Time Reduction
The goal of getting products to market on time is an overriding one for many
companies, so much so that it merits special attention here. Several factors
drove the two measures of cycle time reduction — time efficiency and adherence
to the time schedule — some in a strong fashion. These are given in rank order
in Table XIII (correlations are shown in parentheses).
Table XII.
Impact of Stage-and-
gate Process
Measure Score (1-5)
Overall rating (impact of new process)
(1=strong negative impact; 5=strong positive) 4.25
Areas of improvement (in rank order):
(1=no improvement; 5=great improvement)
Improved homework/better communication 4.11
Less recycling/rework 3.83
Improved new product success rate 3.80
Better launch 3.41
Earlier detection of failures 3.35
Improved time efficiency/ shorting cycle times 3.32
Conclusion
As managements look for ways to improve their firms’ productivities and
profits, product development activities will increasingly come under scrutiny.
Indeed, product innovation represents the last frontier within the corporation
where significant productivity improvements can and should be sought.
Ironically, it is the one area characterized by glaring deficiencies, poor
management practices, and gross errors of omission and commission — in
short, a process in disarray.
Improvements in new product effectiveness (e.g., higher success rates) and
efficiency (e.g., better returns on allocated resources and faster to market) go
straight to the firm’s bottom line. By highlighting eight key success drivers in
Table XIII.
Drivers of Cycle Time
Reduction
Impact on
Driver of cycle adherence
time reduction Impact on to the time
(rank ordered) time efficiency schedule
A cross-functional team: Strong impact Very
accountable, empowered, (0.316) strong
dedicated, clear leader, impact
with top management (0.527)
support
A strong market orientation Strong impact Very
and customer focus; (0.308) strong
and quality of execution impact
of marketing actions (0.411)
Undertaking the homework Modest impact Very
up-front — before (0.226) strong
development begins impact
(0.478)
Quality of execution of Modest impact Strong
technological activities (0.223) impact
(technical assessment; (0.331)
development; lab tests;
trial production;
production start-up)
Product definition: clearly No impact Modest
defined target market, impact
product concept, positioning (0.277)
and requirements before development
Product superiority: a unique, Minor impact No impact
superior product, high quality, (0.172)
good value-for-money,
excellent price/performance,
visible benefits
New Products:
The Factors that
Drive Success
75
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product innovation, this article has shed light on what actions management can
take to obtain needed improvements. The time is ripe to take those needed
actions!
Notes
1. Note that the chemical industry differences are not quite as pronounced as those for our
general industry study, NewProd III: in the latter, we looked at polar extremes (the top 20
per cent vs the bottom 20 per cent); whereas in the chemical industry, the two groups
were not quite as extreme — merely the top third versus the bottom third.
2. For example, when both marketing activities and pre-development activities were
considered as activity groups, their respective impacts on performance were dramatic
(see second and third sections: “a strong market orientation” and “up-front homework”).
The same was true for technological activities when taken as a group (development and
production tasks) — results not shown here.
3. While ISO 9000 regulations deal with product standards, higher levels of ISO deal with
processes and methods within the firm. For product development methods, see for
example, ISO 9004 Section 7, items 7.1, 7.2, 7.3, which focus on the role of marketing input
to the new product design; and Section 8, items 8.1 through 8.8, which set standards for
various facets of the product development process, including product testing, design
reviews, production release and market readiness.
References
Booz, Allen & Hamilton (1982), New Product Management for the 1980s. Booz, Allen & Hamilton
Inc., New York, NY.
Cooper, R.G. (1990), “New Products: What Distinguishes the Winners”, Research and Technology
Management, November-December, pp. 27-31.
Cooper, R.G. (1993), Winning at New Products: Accelerating the Process from Idea to Launch,
Addison-Wesley, Reading, MA.
Cooper, R.G. (1994), “Debunking the Myths in New Product Management”, Research &
Technology Management,July.
Cooper, R.G. and Kleinschmidt, E.J. (1986), “An Investigation into the New Product Process: Steps,
Deficiencies and Impact”, Journal of Product Innovation Management, Vol. 3 No. 2, pp. 71-85.
Cooper, R.G. and Kleinschmidt, E.J. (1987a), “New Products: What Separates Winners from
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Marketing Management, Vol. 16 No. 3, pp. 215-23.
Cooper, R.G. and Kleinschmidt, E.J. (1990), New Products: The Key Factors in Success,
monograph, American Marketing Association, Chicago, IL.
Cooper, R.G. and Kleinschmidt, E.J. (1991), “New Product Processes at Leading Industrial Firms”,
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Cooper, R.G. and Kleinschmidt, E.J. (1993a), “Major New Products: What Distinguishes the
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Cooper, R.G. and Kleinschmidt, E.J. (1993b), “New Product Success in the Chemical Industry”,
Industrial Marketing Management, Vol. 22 No. 2, pp. 85-99.
Cooper, R.G. and Kleinschmidt, E.J. (1993c), “Stage Gate Systems for New Product Success”,
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