innovation practices, metrics and performance by kenneth kahn ph.d of vcu's da vinci center...
DESCRIPTION
New Product Development (NPD) practitioners are keen to benchmark NPD practices because identifying practices which are able to more efficiently and/or effectively deliver a new product or service could mean the difference between success and failure. To help in identifying such practices Dr. Kahn will present findings pertaining to what practitioners find to be poor and best NPD practices. Among the different practices presented particular focus will be put on metrics and performance measurement. Thoughts on how to frame metrics and performance measurement during innovation will be introduced. The presentation will conclude with guidelines for manifesting better performance through practices and metrics, incorporating actual project experiences from VCU’s da Vinci Center for Innovation.TRANSCRIPT
© 2012 Kenneth B. Kahn, Ph.D.
Innovation Practices, Metrics, and Performance
Kenneth B. Kahn, Ph.D. Professor of Marketing and Director, da Vinci Center for Innovation
Virginia Commonwealth University Richmond, Virginia [email protected]
© 2012 Kenneth B. Kahn, Ph.D.
JPIM 2006
JPIM 2012
BUSINESS HORIZONS 2012
© 2012 Kenneth B. Kahn, Ph.D.
Innovation/NPD Dimensions
Proposed Dimensions
Commercialization
Company Culture
Metrics
Process
Project Climate
Research
Strategy
Dimensions Sorted by Weight
Strategy
Commercialization
Process
Project Climate
Research
Company Culture
Metrics
© 2012 Kenneth B. Kahn, Ph.D.
Best Practice Poor Practice Clearly defined and organizationally visible
NPD goals
The organization views NPD as a long-term
strategy
Mission and strategic plan help define strategic
arenas for new opportunities
NPD goals are clearly aligned with organization
mission and strategic plan
NPD projects and programs are reviewed on a
regular basis
Opportunity identification is ongoing and can
redirect the strategic plan in real time to
respond to market forces and new technologies
There is a ranking or prioritization of projects
There is keen consideration for balancing the
number of projects and available resources
Most NPD projects fit with mission, but some
pet projects that do not fit mission exist
No NPD goals
The organization views NPD only as a short-
term tactical initiative
Unclear NPD goals
A variety of NPD projects are supported with
little or no regard for mix appropriateness
No concern over types of NPD projects being
developed
No prioritization of NPD projects
No process for undertaking portfolio mgmt.
NPD projects may or may not be aligned with
organization’s mission or strategic plan
Pet projects are prevalent
All trade-offs among NPD projects are made
informally with no set criteria
STRATEGY
© 2012 Kenneth B. Kahn, Ph.D.
Best Practice Poor Practice The launch team is cross-functional in
nature
A project postmortem meeting is held after
the new product is launched
Logistics and marketing work closely
together on new product launch
Customer service and support are part of
the launch team
A standard protocol for planning a launch
exists within the company
Cross-functional teams make decisions
concerning manufacturing, logistics,
marketing, and sales
Marketing budget decisions can
dramatically change up to the point of
launch
COMMERCIALIZATION
© 2012 Kenneth B. Kahn, Ph.D.
Best Practice Poor Practice
A common NPD process cuts across
organizational groups
Go/no-go criteria are clear and
predefined for each review gate
The NPD process is flexible and
adaptable to meet the needs, size, and
risk of individual projects
The NPD process is visible and well
documented
An IT infrastructure with appropriate
hardware, software, and technical
support is available to all NPD personnel
A clear NPD process exists
Criteria for evaluating NPD projects are
not defined
Limited documentation on the NPD
process exists
Minimal testing (concept, product,
market) performed
No NPD process exists
There is no discipline in using the
organization’s NPD process
There is no NPD process owner or NPD
process champion
Not all NPD personnel have access to the
same IT tools (software, hardware)
Projects are not reviewed at completion
The NPD process can be circumvented
without management approval
PROCESS
© 2012 Kenneth B. Kahn, Ph.D.
Best Practice Poor Practice
Cross-functional teams underlie the
NPD process
Each project has a clearly identifiable
project leader
NPD activities between functional
areas are coordinated through formal
and informal communication
No identifiable NPD group
No project leader
NPD personnel are involved in too
many projects
PROJECT CLIMATE
© 2012 Kenneth B. Kahn, Ph.D.
Best Practice Poor Practice
Concept, product, and market testing is
consistently undertaken and expected
with all NPD projects
Customer or user is an integral part of
the NPD process
Results of testing (concept, product,
market) are formally evaluated
Customer or user is uninvolved in NPD
process
Little if any market research is
undertaken
No real evaluation of testing (concept,
product, market) results is undertaken
No market studies are undertaken to
understand marketplace
RESEARCH
© 2012 Kenneth B. Kahn, Ph.D.
Best Practice Poor Practice
Top management supports the NPD
process
The company actively works with
customers to develop new solutions
NPD is not a management priority
All NPD ideas come from within the
company
Management is primarily focused on
operational efficiency and cost savings
COMPANY CULTURE
© 2012 Kenneth B. Kahn, Ph.D.
Best Practice Poor Practice
No standard criteria for evaluating NPD
projects exist
No standard criteria for evaluating the
overall NPD effort exist
One person does all NPD project
evaluations
Projects are never killed
METRICS AND PERFORMANCE MEASUREMENT
© 2012 Kenneth B. Kahn, Ph.D.
Study Conclusions
There is evidence verifying the 2006 framework.
We can distinguish between poor and best practices on most dimensions.
There is slightly more consensus on what constitutes poor practice rather than best practice.
Not all, but many characteristics appear common across countries suggesting global NPD best/poor practices.
Metrics is an area in need of further examination.
© 2012 Kenneth B. Kahn, Ph.D.
Metrics and Performance Measurement
Five-Stage Idea-to-Launch Stage-Gate® System for Major Product
Development Projects
For Less Complex and Smaller Development Projects,
Use an Abbreviated Version: 2-3 Gates
Source: Robert Cooper, Chapter 1, PDMA Handbook 3rd Edition, forthcoming 2012
Gate 1
Discovery:
Ideas
Generation
Stage 1:
Scoping
Stage 2: Build
Business
Case
Stage 3:
Development
Stage 4:
Testing &
Validation
Stage 5:
Launch -
Go to
Development
Gate 2 Gate 3 Gate 4 Gate 5
Idea Screen 2nd Screen Go to Test Go to Launch Post Launch
Review
PLR
The Customer or User
© 2012 Kenneth B. Kahn, Ph.D.
NPD Evaluation Stream
Development Activity
Evaluation Task
Evaluation Techniques
Strategic Planning
(Pre-Process)
Direction:
Where should we look?
Opportunity Identification,
Market descriptions
Ideas Generation Initial Review:
Is the idea worth consideration?
Product Innovation Charter,
Experience and Judgment,
Preliminary Market Analyses,
Concept Testing
Scoping
Business Case
Full Screen:
Should we develop it?
Checklists, Scoring Models
Development
Testing & Validation
Progress Reports:
Have we developed it successfully?
If not, should we continue to try?
Protocol checks, Prototype
Tests, Product Use Tests
Launch Market Testing:
How should we market it?
Pseudo Sale, Controlled
Sales, Rollout
Post-Mortem Review
Example: Measuring Product Success
1st Generation Derivative
2nd Generation
© 2012 Kenneth B. Kahn, Ph.D.
The Launch Control Protocol: An Example
Potential Problem Tracking Contingency Plan
Customers are not
making trial
purchases of the new
product as expected.
Use POS reports.
Minimum 100
purchases monthly
per retail outlet are
expected.
Install point-of-
purchase displays.
Competitor may have
similar new product.
Difficult to track, but
conduct surveys with
retailers and final
consumers.
Offer 2 for 1 program.
Consider bundling
new product with
other products.
© 2012 Kenneth B. Kahn, Ph.D.
Marketing Control Considerations
Type of Control Purpose of Control Approaches
Annual Plan Control Is the business plan
being achieved?
− Financial Analysis
− Scorecard
Efficiency Control How efficient are our
business expenditures?
− Cost Analysis
Profitability Control Is the company making
money?
− Profitability
Analysis
Strategic Control Are we doing the right
thing(s)?
− Marketing Audit
− NPD Audit
© 2012 Kenneth B. Kahn, Ph.D.
Considerations for NPD Metrics and Performance Measurement
Issue Question
Definition What is the objective/goal?
Operationalization How can/should this be measured?
Intelligence Which data, information, and knowledge?
Level Where should the measurement occur?
Rewards and Recognition “What gets measured, gets rewarded, and
what gets rewarded gets done.”
© 2012 Kenneth B. Kahn, Ph.D.
• Efficiency (cost, time, resources)
• Effectiveness (objectives/goal attainment)
Performance Measurement
Potential managerial paradox: as the market becomes increasingly vulnerable to performance competition, a sole focus to reduce costs diminishes the organization’s ability to respond to this kind of competition. Thus, cost efficiency can be the enemy of product innovation, and vice versa.
• Adaptiveness (ability to change/shift)
© 2011 Kenneth B. Kahn, Ph.D.