An overactive new product development system can be a serious commercial performance issue warn Jonathan Smith and Julie Craig of Axis Management Consulting Everything you read or hear about business tells you that new product development is a good thing. Companies are frequently criticised for not innovating enough and, to be fair, the food industry certainly has its share of innovation laggards. So surely more new product development is what is needed? Well, by no means always. At Axis Management Consulting, for every company which is doing too little new product development, we see two that are doing too much. To make things worse, it's too much of the wrong kind. Much of the effort goes into projects that are not true innovation but just range extension and duplication. The record for excessive project numbers that we have seen goes to a medium sized business that had 99 NPD projects on the books at once. Numbers above 50 are commonplace. The resulting situation will be all too familiar to many ­ chaos. Endless meetings of frustrated managers wade through updates on the progress (or otherwise) of a seemingly endless list of projects. The unfortunate project owners bounce between departments trying to get time and resources for their favoured projects. Often the projects that get the most resources are not the most worthwhile. Often it's he who shouts loudest (or is most senior) who gets the most attention. As with so many business problems, the road to hell is paved with good intentions. New product ideas spring up from a wide variety of sources within the company, all for the best of motives. Marketeers and salespeople have no monopoly on ideas generation. Production and technical people are also often keen to be the source of new ideas. A varied cast of others adds to the list. Ideas originating with the chairman's wife are usually modest in number but unique in their disruptive potential. Brainstorming sessions, while potentially valuable, can add greatly to the number of projects if they are not kept tightly focused and their output carefully managed. Another common cause is the otherwise laudable wish to say "yes" to every retailer request, however little thought may have gone into the request. This may be compounded by the wish to be seen to be doing more NPD for the customer than the next guy. With the best of intentions, the temptation is just to start more and more projects and hope for the best. Wherever ideas come from, the lack of an effective process for screening ideas, and selecting likely winners, leads to too many poor quality projects getting started. Similarly, the failure to make effective use of consumer research early in the life of projects ensures the survival of too many ideas that will ultimately fail for lack of consumer appeal. Another major contributor to excessively long NPD lists is the unwillingness of many managers to kill off projects that are clearly failing. Costs may be turning out to be far higher than expected, consumer appeal has been shown to be mediocre at best, or production feasibility is proving to be a nightmare. Still people press on, trying to save projects long after there is a reasonable chance of them being successful. Lack of basic project management disciplines often means that individual projects progress more slowly and so clog up the system for longer. Projects are too often managed one step at a time rather than comprehensively from start to finish. As the number of projects rises, the problem compounds itself. The greater workload means that resources, including management attention, are spread ever thinner. Projects slow down. The amount of meetings and talking goes up but the results coming out of the far end of the system do not. Given all the different forces pushing managers towards NPD overload, it's an easy trap to fall into. Without systematic efforts to prevent the problem, it is not surprising that we so often see an excess of projects and a shortage of successes. Does all this really matter? Too many NPD projects may be a bit of a hassle but surely it's worth it? And isn't coping with hassle part of what we're paid to do? In short, it certainly does matter. An overactive new product development programme can make a significant dent on the bottom line in the immediate term. It can also significantly hamper overall commercial performance and customer relationships. The amount of management time soaked up by large numbers of projects represents a very considerable (though difficult to quantify) cost. The employment cost of the people concerned is the smaller part of the picture. The real big hitter is the opportunity cost ­ the contribution to profits they could have been making if their time had been better used. Ingredients, packaging, and other materials used are other obvious costs. More projects mean more disruption to production operations. Plant trials have to be organised. Machine downtime is increased. Staff have to be retrained and redirected. All this causes substantial (though usually unmeasured) costs. An excess of variable quality projects is guaranteed to put extra strain on the often fraught relationship between sales and marketing on the one hand, and production and technical on the other. Conflict is often increased and mutual confidence decreased. Sales and marketing people get frustrated that Production appear unenthusiastic about the latest clutch of projects. Production and technical people become increasingly disillusioned by a stream of projects in which they have little faith. And ironically, too much development activity can stifle true creativity. If managers are spending large amounts of time on the detail of lots of projects, they will have less time to devote to thinking about the breakthrough innovations that could make a real difference. It is often projects that are running into difficulties that eat up the most resources. More and more time and effort is soaked up as managers try, against the odds, to keep a failing project alive. Substandard projects that actually make it to market before failing incur the greatest costs of all. As well as using up their full share of resources in getting to market, there is the cost of packaging and ingredient write-offs and the management effort needed to manage a withdrawal. On top of this comes the damage to credibility with key customers. Taking all these effects together, an over-active NPD system is clearly a serious commercial performance issue. Despite this, many companies do not get around to making a concerted and effective effort to address the problem. So how do you go about minimising these problems? Firstly, by making sure that fewer projects of low potential ever get started. This means having a proper screening process, including a small, cross-functional group of managers who are responsible for controlling the overall workload going through the NPD system. Secondly by making sure that low potential projects are killed off early. This means frequently reassessing projects to see if they are on track to deliver the results originally anticipated. The third key part of the solution is to make effective use of consumer research early on in the process. Too many projects get to a highly advanced stage without having been seen by a single consumer. Inevitably, this leads to mistakes as managers get too close to projects and convince themselves of the appeal of their own ideas. Consumers, in research, almost invariably give useful feedback that will enhance the success chances of a project with potential. They also frequently point out the blindingly obvious points that bring managers back to earth and save resources being wasted on projects of low appeal. The fourth step is to ensure that projects are moved quickly and efficiently through the system. This means having effective project management ­ projects being managed to a tight timescale by a team of people who all fully buy in to the importance of the projects. So, in running an effective NPD operation, less definitely is more. A smaller number of carefully selected, effectively managed projects is much better than the chaos we so often see. The penalties of NPD overload are too serious to ignore. The combination of increased costs in the immediate term, loss of speed to market, and damage to credibility with key customers, makes it an important commercial performance issue. The solutions, while taking concerted effort to implement, are within the reach of any company. Will we see them being more widely implemented? {{MANAGEMENT FEATURE }}