Generating a steady flow of new product ideas is difficult and time consuming so it can be tempting to push ahead with any product concepts that are identified without further thought. However, given the substantial resources allocated to a new product development, that approach can be an expensive mistake.
In this post we develop the discussion in our post covering how to reduce the risk of new product failure to discuss the value of the new product screening process, including some suggestions on what to include (and exclude) based on hard won experience.
In this old, but gold, post Susan Greco discusses some of the myths surrounding where new product ideas come from . Often, product ideas are not true new products at all but simply line extensions or copies of competitors’ products.
True new products (as defined in our recent post ) are less common but potentially much more valuable. That said, any screening process must be able to justify (or not) further development of both the line extension and the true new product as both may potentially add significantly to future growth of the business.
Key Elements Of A Screening Process
So what are the key elements of an appropriate new product screening process? To make a bland (but valid) statement it must be flexible enough to let through what may appear to be radical new product ideas but rigid enough to drop poor ideas as early as practical in the process. That may be easy to say but is far from easy to implement.
There are many examples of companies who have dropped new product ideas that have gone on to be a major success in the marketplace. Perhaps the most famous case is Xerox (allegedly) giving away the technology that led to the development of the Apple Mac. Famously, Kodak developed the digital camera way back in 1975 but failed to understand its potential. The key elements of any new product screening process are:
- It must be consistent
- It must match corporate objectives
- It must match corporate capability
- It must be based on solid data – documented
- It must have the flexibility to address true new product ideas and market opportunity.
Whatever the process it must be approved, and more importantly supported, by higher management and must not be circumvented by those with management or other influence that simply have a ‘gut feel’ their idea is a winner.
It must also be a formal process, undertaken at regular (communicated) intervals. An attempt should be made to match the frequency to the number of new product ideas arising otherwise there is a risk of ad hoc decisions being made simply on the basis there is no time to wait for the next meeting.
If either of the above are not in place then there is little point putting the time and effort into a process that will simply by bypassed at will. The process must apply in all situations or not at all.
Whatever the screening process may be it must deliver a pre-set number of gates (questions) any new product must answer to proceed to the next stage. Those gates must be designed to let through (or not) a wide variety of ideas, some of which may be radical or distinctly left field.
The same process must apply to every situation as it is not practical to have several flows (depending on the idea type) or a process that is over complex with too many options. Whatever flow is designed must be applied consistently regardless of the new product idea presented for screening.
Match Corporate Objectives
The new product must match with the stated corporate strategy, pre-requisite lifetime sales value, profit and growth objectives to be passed through to the next stage. As noted below these elements are top level screening elements coming before market opportunity.
Perhaps an example from my early career may illustrate the point. Sales identified an opportunity for an equivalent to a competitor product. The competitor had been entrenched in a particular account for years and my company had been unable to secure any of the valuable business available. However, an opportunity had arisen as the competitor could not deliver a particular product for technical reasons. The lifetime project value for the product was not significant but it was seen as an opportunity to gain a foothold in the target account
Sales, quite naturally, wanted to develop and deliver the initial quantities the customer needed of the equivalent product as quickly as possible. Commitment was made to tens of thousands of pounds of tooling costs and resources re-allocated from other projects to make the new product happen as quickly as practical. The product was delivered on time as were the remainder of the project quantities but no further orders were secured for the customer and tooling costs were not fully recovered.
The above is no criticism of sales as the objective was perfectly reasonable. The point is if project value was a top level screening element, higher than penetrating key accounts, then the above project would have been screened out (if we had a screening process at that time – which we did not). However, if the reverse was true then it would have passed. The screening process must be designed to specifically match corporate objectives, be they market penetration or maximising turnover and profitability.
Match Corporate Capability
This is perhaps the most contentious area of new product screening. It is a valid argument to state that if the product idea will generate sufficient returns then the capability can always be put in place to deliver it. However, in reality to produce something new to the business does not just require equipment it also requires people with specific experience of the required design and manufacturing processes.
Higher management must decree what will (and will not) be considered outside the boundaries of the current corporate capability. As a catch all a gate may be added, based on target revenue and turnover figures that allows new product ideas outside corporate capability but with sufficient value to pass through to be considered further at higher management or board level. If approved these product ideas may then be passed back to continue their journey through the screening process.
Based On Solid Data
Data on any new product idea will always be far from perfect but whoever may be promoting the new product idea internally must be prepared to collect relevant market data to support their idea. The data must be made available (and documented) to answer the specific questions at various gates in the process.
It is obvious therefore that the screening process and its gates should not be published and its criteria should only be known by the new product screening committee. If the criteria are known then those presenting new products may either massage the data accordingly or routinely discard new product ideas they believe will fail the process when they are genuine new products with merit.
Designing a process to select the best new product ideas is far from simple. There are many competing criteria and it is important to decide which of these criteria are the most important and which can be reviewed at a lower level. Higher management input to the selection criteria and there unwavering commitment to the process are crucial to success.