Innovation in product development

Most consumer and industrial goods companies rely heavily on product development to remain competitive.  However, the traditional approach to developing products and performing R&D may not be optimal due to economic and organizational realities. To continue growing, managers should rethink how they develop and commercialize innovative products and services

Profitably growing market share has gotten a lot tougher since the 2008 financial meltdown – a situation unlikely to change in the medium term.  Stagnant market growth and evolving consumer behavior is negatively impacting the demand side of the equation.  At the same time, product development – the end-to-end process of bringing a new product to market – has grown more expensive and risky due to the high cost of R&D and the difficulty of generating truly differentiated innovation. The hash reality is that up to 90% of all new products fail to achieve market objectives.  Equally concerning, conventional product development practices are challenged to deliver category-expanding ‘blue ocean’ strategies or to target the unique needs of emerging market – so called ‘bottom of the pyramid’ – consumers.

The traditional product development model has 3 major drawbacks:  i) it is challenged to generate breakthrough thinking and execution beyond incremental improvements; ii) it is unable to deliver new products at a significantly lower cost and; iii) it typically does not produce a true and holistic picture of consumer needs.

In many cases, the only way to overcome these business challenges is to fundamentally retool how companies develop products.     To make this happen, organizations should address the 3 Rs of process innovation:   1) revamp how they approach product development; 2) refocus around fundamental consumer needs and; 3) remove organizational barriers within the structure, process, and culture.

Revamp the approach

In many enterprises, siloed product developers are hostage to preconceived notions and assumptions about what a product should be and how it should be developed.  This mindset is also reinforced by the firm’s dependence on the existing supply chain as a source of new ideas and technology.   In a revamped development process, open-minded managers approach product innovation with a clean sheet of paper, focusing on delivering only the most essential features and functionality with superior value.  Managers will adopt a wider product lens, looking outside the firm and industry to academia, other suppliers and geographies for inspiration and new technologies.  

Rethink consumer needs

In these difficult times, gaining superior utility and value (including but not limited to low cost) is top mind of most consumers, even in premium categories. Yet, many companies have a poor understanding of their consumer’s core functional and emotional needs (i.e. the job to be done) and are unable to prioritize these needs against their product roadmaps and capital spend.  Gaining a deeper, more holistic understanding of consumers and the trade-offs they make oblige managers to go beyond basic research techniques to include analytical tools such as ethnography and choice modeling.

Remove barriers

As with most change initiatives, any effort to improve the product development process will fail unless managers can overcome organizational barriers and inertia.  To do this, leaders should stress:

  1. Top-down support – Traditional enterprises, particularly successful ones, will exhibit inertia in the face of major change. Senior, cross-functional leaders will have to commit to and maintain ongoing support for the change initiative. This attention should include bold (yet realistic) goal-setting, ongoing performance tracking and regular engagement with external stakeholders and key customers.
  2. Cross-functional mobilization – Radical product or service innovation is about speed and creative problem solving.  One of the best ways to achieve this is by forming high-performance, cross functional teams that will secure input and support throughout the organization. In many cases, these teams will need to function as unique structures with their own streamlined processes, frank communications and pragmatic management styles.
  3. Open up R&D – Few companies have the resources, inspiration and time to support all of their R&D requirements. A proven way to catalyze new thinking and execution speed is by opening up product development to external stakeholders including supply chain partners, academia and innovative start-ups.  A variety of firms such as 3M, Siemens, P&G and GE have used Open Innovation strategies to improve R&D productivity and partner collaboration.

Many companies have successfully retooled their product development functions to dramatically improve how they develop and launch new, cutting-edge products.  Some examples include Nokia (the 1100 model is the best selling, low cost cell phone), Tata (with their $2000 Nano car) and GE (with their low-cost, portable Mac 1 ECG machine).  If firms want to develop more compelling and innovative products, their leadership should look to process innovation as a catalyst to enhance results.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.


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