Management Question

‫المملكة العربية السعودية‬
‫وزارة التعليم‬
‫الجامعة السعودية اإللكترونية‬

Kingdom of Saudi Arabia
Ministry of Education
Saudi Electronic University

College of Administrative and Financial Sciences

Assignment 3
Management of Technology (MGT 325)
Due Date: 6/12/2025 @ 23:59

Course Name: Management of Technology

Student’s Name:

Course Code: MGT 325

Student’s ID Number:

Semester: First

CRN:
Academic Year:2025-26 -1st Semester

For Instructor’s Use only
Instructor’s Name:
Students’ Grade:
Marks Obtained: /Out of 10

Level of Marks: High/Middle/Low

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via allocated folder.
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may be reduced for poor presentation. This includes filling your information
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Restricted – ‫مقيد‬

Learning Outcomes:
➢ Explain of the concepts, models for formulating strategies, defining the organizational strategic
directions and crafting a deployment strategy.

Read Chapter 11 from Strategic Management of Technological Innovation (6th Edition,
Melissa Schilling) carefully, especially the case “Scrums, Sprints, and Burnouts: Agile
Development at Cisco Systems”. The case describes how Cisco replaced its long, structured
waterfall model with a faster and more flexible agile development approach to improve
innovation speed and employee engagement.
After reading and understanding the concepts from the chapter, answer the questions
below in your own words. You may also include examples from Saudi organizations or
Vision 2030 projects if relevant.

Assignment Questions
Q1. Analysis of the Shift to Agile (4 Marks – 500–600 words)
✓ Explain the major reasons behind Cisco’s decision to move from the traditional
waterfall method to the agile approach.
✓ Critically analyze how this shift changed the company’s product development process,
team dynamics, and innovation outcomes.
Use relevant concepts from Chapter 11 (such as development cycle time, customer
involvement, or team autonomy).
Q2. Evaluation of Agile’s Impact (4 Marks – 500–600 words)
✓ Evaluate both the advantages and limitations of using agile development at Cisco.
✓ Discuss whether agile truly supports long-term innovation or if it creates new
challenges such as burnout, coordination issues, or loss of control.
Support your analysis with arguments, examples, or comparisons to other firms or industries
Q3. Personal Reflection and Application (2 Marks – 200–300 words)
✓ Reflect on what managers can learn from Cisco’s experience.
✓ In your opinion, can the agile approach be applied successfully in Saudi organizations?
Explain your reasoning and suggest one key recommendation for implementing agile
effectively.

Restricted – ‫مقيد‬

Directions:
✓ Begin with a short introduction about agile development and Cisco’s situation.
✓ Use headings for each question.
✓ Write in clear, simple English with logical flow.
✓ Focus on critical analysis, not just description.
✓ Add examples or short comparisons (from Cisco or Saudi context).
✓ Include a brief conclusion and references
✓ All students are encouraged to use their own words.
✓ Use Saudi Electronic University academic writing standards and APA style guidelines.
✓ Use proper referencing (APA style) to reference, other styles will not be accepted.
✓ Support your submission with course material concepts, principles, and theories from
the textbook and at least two scholarly, peer-reviewed journal articles unless the
assignment calls for more.
✓ It is strongly encouraged that you submit all assignments into the safe assignment
Originality Check prior to submitting it to your instructor for grading and review the
grading rubric to understand how you will be graded for this assignment.

Restricted – ‫مقيد‬

Chapter Eleven
Managing the New
Product Development
Process
Scrums, Sprints, and Burnouts: Agile Development
at Cisco Systems
Cisco Systems, founded in 1984 in San Francisco, had grown to become a
global leader in networking technology such as routers, servers, switches,
networking software, security software, and more. For most of the company’s
existence, it had used the “waterfall” method to develop software.a The typical
waterfall method began with analysis that would result in documents specifying the business case, product requirements, marketing requirements, and so
on. Different teams would then be formed to sequentially design, build, test,
and deploy the product. A team could begin working only when the previous
team had completed its stage of the process, and the entire process could take
18 months or more.b
This approach was similar to “stage-gate” methods and consistent with how
the company developed hardware products. But managers in the software divisions were unsatisfied; they worried that their development cycles were too long
compared to other software companies, making it hard to compete. In 2014,
they decided to try a new approach called agile development to make software
development faster and more flexible at the firm.
Agile development began as a set of principles laid out by a group of
17 ­software engineers at a three-day retreat at a ski resort in Snowbird Utah in
2001.c Their objective was to come to an agreement about how to make software development faster and leaner. They ended up developing a set of core
values and practices that emphasize collaboration, self-organization, and crossfunctional teams.d The key distinction between traditional waterfall methods and
agile methods was that rather than designing a complete product upfront and
moving through a sequential process that culminates in testing and release,
the product is broken up into many smaller parts or features that are built and
249

250 Part Three Implementing Technological Innovation Strategy

FIGURE 1

Waterfall
versus Agile
Development

Waterfall Development

Design

Build

Test

Release

Agile Development

Release

Design

Build

Release

Design

Build

Release

Design

Build

released quickly, enabling the developers to get feedback and fix bugs early
(see Figure 1). The process also gave developers considerably more autonomy.
The method rapidly grew in popularity, attracting companies such as Google,
­Spotify, Netflix, and Twitter. Furthermore, though it was designed for software
development, it had also been adopted for managing other kinds of projects,
and had even been adopted by companies such as Lockheed Martin, Walmart,
and ExxonMobil.e

The Agile Development Process
In agile development, a manager deemed the product owner (a person at the organization who represents the customer’s interests) assembles a complete list of functions to be developed for the product based on user stories—short descriptions of
functions described by customers in their own words. This list is called the product
backlog. Work on the product backlog is organized into a series of sprints, periods
of roughly two weeks in which a small set of features from the product backlog are
developed and tested. Work is conducted by scrum teams, small, self-organizing
teams with no titles or team manager. There is no formal task assignment; each
member just contributes in whatever way they can to complete the work and the
team makes decisions as a whole. Sometimes agile development projects also
have a scrum master who acts as a coach for multiple scrum teams. The scrum
master does not provide day-to-day direction or impose any particular technical
solution; rather, the scrum master’s job is to help guide the scrum process itself.
The teams figure out what items they can commit to and create a sprint
­backlog—a list of tasks they will complete during the sprint. Each day of the sprint,
all the team members and the product owner attend a quick scrum meeting of
15 minutes max where they share what they worked on the previous day, what
they will work on that day, and any obstacles to their progress. During the sprint,
the scrum team takes a small set of features from idea through coding and testing.
At the end of each sprint, there should be work that can be demonstrated to
a client—a minimum viable product

Chapter 11 Managing the New Product Development Process 251

feedback early and often, helping the scrum teams weed out or refine their ideas.
A burndown chart shows the amount of work remaining in a sprint or a product
release, and is used to determine whether a sprint or release is on schedule.

“Release Early, Release Often”
In agile development, rather than having grand comprehensive product redesigns, the product is constantly, incrementally adapted. Introducing small changes
one or a few at a time helps to reduce risk, and also improves transparency about
what works and what does not work. By contrast, when many changes are introduced simultaneously, it is harder to tell why the overall product succeeds or fails.
For this approach to work, a product has to be fairly modular. That is, it must
be possible for a large product to be broken down into many smaller, relatively
independent problems that can be worked on separately (something that is
not possible with all products).f Furthermore, a potential downside of the agile
approach is that it may be more difficult (or less likely) to make large-scale systemic changes to a product.
In the right setting, however, agile development can accelerate product
development, improve customer satisfaction, and even improve employee satisfaction because the process gives them much more autonomy and a sense of
ownership in their jobs. As one team member at Cisco put it, “My boss used to
come and tell me to get my team to do this or do that. Now, I tell him that I cannot
tell my team to do this or that; I can suggest it to them, but they will discuss and
decide if it’s the right thing to do.”g

Discussion Questions
1. What are some of the advantages and disadvantages of the agile development process?
2. How is agile development similar to or different from (a) the stage-gate process and (b) the parallel development process described in the chapter?
3. What are some of the likely changes agile development requires in managing development personnel?
4. What kinds of projects do you think agile development is appropriate for?
What kinds of projects do you think it might be inappropriate for?
a

R. Chen, R. Ravichandar, and D. Proctor, “Managing the Transition to the New Agile Business and Product
Development Model: Lessons from Cisco Systems,” Indiana University Kelley School of Business Teaching Case (2016).
c

d
“Agile Manifesto”, 2001, Agile Alliance.
e
C. M. Nyce, “The Winter Getaway that Turned the Software World Upside Down,” The Atlantic,
December 8, 2017
f
M. A. Schilling, “Modularity in Multiple Disciplines,” in R. Garud, R. Langlois, and A. Kumaraswamy eds.,
Managing in the Modular Age: Architectures, Networks and Organizations (Oxford, England: Blackwell
Publishers, 2002) pp. 203–214.
g
R. Chen, R. Ravichandar, and D. Proctor, “Managing the Transition to the New Agile Business and Product
Development Model: Lessons from Cisco Systems,” Indiana University Kelley School of Business Teaching Case (2016).
b

252 Part Three Implementing Technological Innovation Strategy

OVERVIEW
In many industries, the ability to develop new products quickly, effectively, and efficiently is now the single most important factor driving firm success. In industries such
as computer hardware and software, telecommunications, automobiles, and consumer
electronics, firms often depend on products introduced within the past five years for
more than 50 percent of their sales. Yet despite the avid attention paid to new product
development, the failure rates for new product development projects are still agonizingly high. By many estimates, more than 95 percent of all new product development
projects fail to result in an economic return.1 Many projects are never completed, and
of those that are, many flounder in the marketplace. Thus, a considerable amount of
research has been focused on how to make the new product development process more
effective and more efficient. This chapter discusses some strategic imperatives for
new product development processes that have emerged from the study of best—and
worst—practices in new product development.
We will begin by looking at the three key objectives of the new product development process: maximizing fit with customer requirements, minimizing cycle time, and
controlling development costs. We then will turn to methods of achieving these objectives, including adopting parallel development processes, using project champions,
and involving customers and suppliers in the development process. Next we will look
at a number of tools firms can utilize to improve the effectiveness and efficiency of the
development process, including creating go/kill decision points with stage-gate processes, defining design targets with quality function deployment, reducing costs and
development time with design for manufacturing and CAD/CAM systems, and using
metrics to assess the performance of the new product development process.

OBJECTIVES OF THE NEW PRODUCT DEVELOPMENT PROCESS
For new product development to be successful, it must simultaneously achieve three
sometimes-conflicting goals: (1) maximizing the product’s fit with customer requirements, (2) minimizing the development cycle time, and (3) controlling development costs.

Maximizing Fit with Customer Requirements
For a new product to be successful in the marketplace, it must offer more compelling
features, greater quality, or more attractive pricing than competing products. Despite the
obvious importance of this imperative, many new product development projects fail to
achieve it. This may occur for a number of reasons. First, the firm may not have a clear
sense of which features customers value the most, resulting in the firm’s overinvesting
in some features at the expense of features the customer values more. Firms may also
overestimate the customer’s willingness to pay for particular features, leading them to
produce feature-packed products that are too expensive to gain significant market penetration. Firms may also have difficulty resolving heterogeneity in customer demands;
if some customer groups desire different features from other groups, the firm may end
up producing a product that makes compromises between these conflicting demands,
and the resulting product may fail to be attractive to any of the customer groups.

Chapter 11 Managing the New Product Development Process 253

Numerous new products have offered technologically advanced features compared
to existing products but have failed to match customer requirements and were subsequently rejected by the market. For example, consider Apple’s Newton MessagePad,
a relatively early entrant into the personal digital assistant market. The Newton was
exceptional on many dimensions. It had a highly advanced ARM610 RISC chip for
superior processing performance. Its operating system was object oriented (a feature
that software programmers had been clamoring for), and Apple openly licensed the
architecture to encourage rapid and widespread adoption by other vendors. Also, its
weight, size, and battery life were better than many of the other early competitors.
However, the Newton M
­ essagePad was still much too large to be kept in a pocket,
limiting its usefulness as a handheld device. Many corporate users thought the screen
was too small to make the product useful for their applications. Finally, early problems
with the handwriting recognition software caused many people to believe the product
was fatally flawed.
Another example is Philips’ attempt to enter the video game industry. In 1989,
Philips introduced its Compact Disc Interactive (CD-i). The CD-i was a 32-bit system (introduced well before Sega’s 32-bit Saturn or Sony’s 32-bit PlayStation), and
in addition to being a game player, it offered a number of educational programs and
played audio CDs. However, Philips had overestimated how much customers would
value (and be willing to pay for) these features. The CD-i was priced at $799, more
than double the cost of Nintendo or Sega video game systems. Furthermore, the product was very complex, requiring a half-hour demonstration by a skilled sales representative. Ultimately, the product failed to attract many customers and Philips abandoned
the product.

Minimizing Development Cycle Time

development
cycle time

The time elapsed
from project initiation to product
launch, usually
measured in
months or years.

Even products that achieve a very close fit with customer requirements can fail if they
take too long to bring to market. As discussed in Chapter Five, bringing a product to
market early can help a firm build brand loyalty, preemptively capture scarce assets,
and build customer switching costs. A firm that brings a new product to market late
may find that customers are already committed to other products. Also, a company
that is able to bring its product to market early has more time to develop (or encourage others to develop) complementary goods that enhance the value and attractiveness
of the product.2 Other things being equal, products that are introduced to the market
earlier are likely to have an installed base and availability of complementary goods
advantage over later offerings.
Another important consideration regarding development cycle time relates
to the cost of development and the decreasing length of product life cycles. First,
many development costs are directly related to time. Both the expense of paying
employees involved in development and the firm’s cost of capital increase as the
development cycle lengthens. Second, a company that is slow to market with a
particular generation of technology is unlikely to be able to fully amortize the fixed
costs of development before that generation becomes obsolete. This phenomenon
is particularly vivid in dynamic industries such as electronics where life cycles
can be as short as 12 months (e.g., personal computers, semiconductors). Companies that are slow to market may find that by the time they have introduced their

254 Part Three Implementing Technological Innovation Strategy

products, market demand has already shifted to the products of a subsequent technological generation.
Finally, a company with a short development cycle can quickly revise or upgrade its
offering as design flaws are revealed or technology advances. A firm with a short development cycle can take advantage of both first-mover and second-mover advantages.
Some researchers have pointed out the costs of shortening the development cycle
and rushing new products to market. For example, Dhebar points out that rapid product introductions may cause adverse consumer reactions; consumers may regret past
purchases and be wary of new purchases for fear they should rapidly become obsolete.3 Other researchers have suggested that speed of new product development may
come at the expense of quality or result in sloppy market introductions.4 Compressing
development cycle time can result in overburdening the development team, leading to
problems being overlooked in the product design or manufacturing process. Adequate
product testing may also be sacrificed to meet development schedules.5 However,
despite these risks, most studies have found a strong positive relationship between
speed and the commercial success of new products.6

Controlling Development Costs
Sometimes a firm engages in an intense effort to develop a product that exceeds customer expectations and brings it to market early, only to find that its development costs
have ballooned so much that it is impossible to recoup the development expenses even
if the product is enthusiastically received by the market. This highlights the fact that
development efforts must be not only effective, but also efficient. Later in the chapter,
ways to monitor and control development costs are discussed.

SEQUENTIAL VERSUS PARTLY PARALLEL
DEVELOPMENT PROCESSES
partly parallel
development
process

A development
process in which
some (or all) of
the development
activities at least
partially overlap.
That is, if activity A would precede activity B in
a partly parallel
development process, activity B
might commence
before activity A
is completed.

Before the mid-1990s, most U.S. companies proceeded from one development stage
to another in a sequential fashion (see Figure 11.1a). The process included a number
of gates at which managers would decide whether to proceed to the next stage, send
the project back to a previous stage for revision, or kill the project. Typically, R&D
and marketing provided the bulk of the input in the opportunity identification and
concept development stages, R&D took the lead in product design, and manufacturing took the lead in process design. According to critics, one problem with such a
system emerges at the product design stage when R&D engineers fail to communicate
directly with manufacturing engineers. As a result, product design proceeds without
manufacturing requirements in mind. A sequential process has no early warning system to indicate that planned features are not manufacturable. Consequently, cycle time
can lengthen as the project iterates back and forth between the product design and
process design stages.7
To shorten the development process and avoid time-consuming and costly iterations
between stages of the development cycle, many firms have adopted a partly parallel
development process, as shown in Figure 11.1b.8 Product design is initiated before

Chapter 11 Managing the New Product Development Process 255

FIGURE 11.1
Sequential
versus Partly
Parallel
Development
Processes

Sequential Process

Opportunity
identification
Concept
development
Product
design
Process
design
Commercial
production

(a)

Cycle
time

Partly Parallel Development Process

Opportunity
identification
Concept
development
Product
design
Process
design
Commercial
production

(b)

concurrent
engineering

A design method
in which stages
of product development (e.g.,
concept development, product
design, and
process design)
and planning
for later stages
of the product
lifecycle (e.g.,
maintenance,
disposal, and
recycling) occur
simultaneously.

Cycle
time

concept development is complete, and process design is begun long before product
design is finalized, enabling much closer coordination between the different stages
and minimizing the chance that R&D will design products that are difficult or costly
to manufacture. This should eliminate the need for time-consuming iterations between
design stages and shorten overall cycle time. One type of parallel development process, concurrent engineering, involves not only conducting the typical product
development stages simultaneously but also takes into account downstream stages of a
product’s lifecycle such as maintenance and disposal.
Parallel development processes are not universally endorsed, however. In some
situations, using a parallel development process can substantially increase the risks
or costs of the development process. If, for example, variations in product design
require significant changes to the process design, beginning process design before
product design is finalized can result in costly rework of the production process. Such
risks are especially high in markets characterized by rapid change and uncertainty.9

Theory in Action   The Development of Zantac
In the 1970s, Glaxo Holdings PLC of Great Britain was
one of the larger health care conglomerates in the
world, known principally for its baby food, but it needed
a new hit product to stimulate sales. While contemplating research possibilities, the head of Glaxo’s research
laboratory, David Jack, attended a lecture by James
Black, a Nobel Prize–winning scientist and researcher
for U.S.-based SmithKline Beecham. During the lecture,
Black described a new possibility for treating ulcers
that involved compounds called H2 blockers that would
inhibit gastrointestinal cells from secreting acid. Jack
was intrigued. Ulcers were a common problem, and thus
represented a large market opportunity for an effective solution. Jack began experimenting with different
compounds in pursuit of a formula that would be safe
and effective. Unfortunately, researchers at ­SmithKline
­Beecham beat Glaxo to the finish line, introducing
Tagamet in 1977. Tagamet revolutionized ulcer treatment, and sales grew phenomenally.a
Discouraged but not thwarted, Jack’s team kept
working. Other companies (including Merck and Eli
Lilly) were also developing their own ulcer treatments,
and Jack believed that beating them to market might
still give the company a shot at a significant share. In
that same year, the team came up with a compound
based on ranitidine (Tagamet was based on a compound called cimetedine) that achieved the desired
objectives. However, Jack realized that if Glaxo was
going to beat Merck and Eli Lilly to market, it would
need to radically shorten the typical 10-year testing
period required to secure regulatory approval and
bring the product to market. To achieve this, Jack proposed the first parallel development process used in
the pharmaceutical industry. Instead of following the
typical sequence of testing (e.g., from rats to monkeys,
and from short-term toxicity to long-term toxicity), Jack
proposed doing all of the tests concurrently.b This
intensified development process could potentially cut
the cycle time in half—to five years—however, it would
also be expensive and risky. If the development efforts
increased the research costs substantially, it would be
much harder to recoup those expenses through sales
of the drug.

256

Fortunately for Jack’s team, Paul Girolami, Glaxo’s
director of finance, chose to champion the project.
Girolami argued that the company should be willing to
risk its range of decently profitable products for one
potentially sensational drug, stating, “Having all your
eggs in one basket concentrates the mind because
you had better make sure it is a good basket.”c Not
only was he able to convince the company that it was
worth investing in the shortened development process,
but also insisted that the product be modified so that
it could be taken once a day (Tagamet required twicea-day use) and so that the product would have fewer
side effects than Tagamet. These features would help
differentiate Zantac as a superior product, and it was
hoped they would enable Glaxo to take share away
from SmithKline Beecham. The development process
was successful, and the product was ready for launch
in 1982. To recoup its development costs, Girolami
chose a premium pricing strategy for the product (onethird higher than Tagamet), arguing that its advantages
would warrant its additional cost. He also insisted that
the product be launched globally in all major markets,
and he set up a distribution alliance with HoffmanLaRoche to speed up the product’s penetration of the
U.S. market.
Girolami’s strategies were successful, and by the end
of the year, Zantac was stealing about 100,000 patients
a month from Tagamet. By 1987, Zantac sales had
exceeded Tagamet’s, and by 1991, Zantac became the
world’s No. 1 selling prescription drug and the first drug
ever to achieve $1 billion in U.S. sales.d Both David Jack
and Paul Girolami were knighted, and Sir Paul Girolami
was appointed chairman of Glaxo.e
a

 A. Corsig, T. Soloway, and R. Stanaro, “Glaxo Holdings PLC:
Zantac,” in New Product Success Stories, ed. R. Thomas
(New York: John Wiley & Sons, Inc., 1995), pp. 242–52.
b
Ibid.
c
 C. Kennedy, “Medicine Man to the World,” Director 46, no. 4
(1992), pp. 106–10.
d
 “Anti-Ulcer Drugs: Too Much Acid,” The Economist 318, no.
7700 (1991), pp. 82–84.
e
 Corsig, Soloway, and Stanaro, “Glaxo Holdings PLC:
Zantac.”

Chapter 11 Managing the New Product Development Process 257

­Furthermore, once process design has commenced, managers may be reluctant to alter
the product design even if market testing reveals that the product design is suboptimal.
It is precisely these risks that the stage-gate* process (discussed later in the chapter)
attempts to minimize.

PROJECT CHAMPIONS
A number of studies on new product development have suggested that firms should
assign (or encourage) a senior member of the company to champion a new product
development project.10 Senior executives have the power and authority to support and
fight for a project. They can facilitate the allocation of human and capital resources to
the development effort, ensuring that cycle time is not extended by resource constraints,
and help ensure that the project can sustain the necessary momentum to surmount
the hurdles that inevitably will arise.11 A senior project champion also can stimulate
communication and cooperation between the different functional groups involved in
the development process. Given that interfunctional communication and cooperation
are necessary both to compress cycle time and to achieve a good fit between product
attributes and customer requirements, the use of executive sponsors can improve the
effectiveness of the development process. As of 2001, 68 percent of North American
firms, 58 percent of European firms, and 48 percent of ­Japanese firms reported using
senior managers to champion new product development p­ rojects.12 An example of a
successful use of project championing is described in the accompanying Theory in
Action: The Development of Zantac.

Risks of Championing
Vigorous project championing, however, also has its risks. A manager’s role as champion
may cloud judgment about the true value of the project. Optimism is the norm in product development—surveys indicate a systematic upward bias in estimates of future cash
flows from a project.13 In the role of champion, this optimism is often taken to extreme
levels. Managers may fall victim to escalating commitment and be unable (or unwilling)
to admit that a project should be killed even when it is clear to many others in the organization that the project has gone sour, or the factors driving the project’s original value
are no longer relevant. While it is common to read stories about projects that succeed
against all odds because of the almost fanatical zeal and persistence of their champions,
bankruptcy courts are full of companies that should have been less zealous in pursuing
some projects. Managers who have invested their reputations and years of their lives
in development projects may find it very difficult to cut their losses, in much the same
way that individuals tend to hold losing stocks much longer than they should due to the
temptation to try to recoup what they have lost. Though the champion’s seniority is an
asset in gaining access to resources and facilitating coordination, this same seniority
may also make others in the firm unwilling to challenge the project champion even if it
has become apparent that the project’s expected value has turned negative.14
Firms may benefit from also developing “antichampions” who can play the role
of devil’s advocate. Firms should also encourage a corporate culture open to the
*Note: Stage-Gate® is a registered trademark of Stage-Gate International Inc.

258 Part Three Implementing Technological Innovation Strategy

Research Brief   Five Myths about Product Champions
Stephen Markham and Lynda Aiman-Smith argue that
a number of myths have become widely accepted
about new product champions. While Markham and
Aiman-Smith believe that product champions are
critical to new product development, they also argue
that for product champions to be effective, their role
in the development process must be completely
understood. Markham and Aiman-Smith conducted
a systematic review of the theoretical and empirical
literature on product champions and identified five
popular myths:
Myth 1: Projects with champions are more likely
to be successful in the market. Markham
and Aiman-Smith’s review of the empirical
data on use of project champions found that
projects with champions were just as likely
to be market failures as market successes.
Markham and Aiman-Smith point out that while
champions may improve the likelihood of a
project being completed, the factors determining its market success are often beyond the
champion’s control.a
Myth 2: Champions get involved because they
are excited about the project, rather than from
self-interest. Markham and Aiman-Smith report
that empirical evidence suggests champions
are more likely to support projects that will
benefit the champion’s own department.b
Myth 3: Champions are more likely to be involved
with radical innovation projects. Empirical
evidence from multiple large sample studies
indicates that champions were equally likely
to be involved with radical versus incremental
innovation projects.
Myth 4: Champions are more likely to be from
high (or low) levels in the organization.
Markham and Aiman-Smith argue that there
are myths about both high-level and low-level

managers being more likely to be product
champions. Though stories abound featuring prominent senior managers supporting
projects, as do stories featuring low-level
champions fighting vigorously for a project’s
success, empirical evidence suggests that
champions may arise from any level in the
organization. (Note that this research does not
indicate champions from all levels of the firm
are equally effective.)
Myth 5: Champions are more likely to be from
marketing. Markham and Aiman-Smith argue
that while anecdotal evidence may more
often emphasize champions who have marketing backgrounds, an empirical study of
190 ­champions found that champions arose
from many functions of the firm. Specifically,
the study found that 15 percent of champions
were from R&D, 14 percent were from marketing, 7 ­percent were from production and operations, and 6 percent were general managers.
Interestingly, 8 percent of champions were
potential users of the innovations.c
a 

S. Markham, S. Green, and R. Basu, “Champions and
Antagonists: Relationships with R&D Project Characteristics and Management,” Journal of Engineering and Technology Management 8 (1991), pp. 217–42; S. Markham
and A. Griffin, “The Breakfast of Champions: Associations
between Champions and Product Development Environments, Practices, and Performance,” The Journal of Product Innovation Management 15 (1998), pp. 436–54; and
S. Markham, “Corporate Championing and Antagonism as
Forms of Political Behavior: An R&D Perspective,” Organization Science 11 (2000), pp. 429–47.
b
 Markham, “Corporate Championing and Antagonism as
Forms of Political Behavior.”
c
 D. Day, “Raising Radicals: Different Processes for Championing Innovative Corporate Ventures,” Organization
­Science 5 (1994), pp. 148–72.

expression of dissenting opinion, and champions should be encouraged to justify their
projects on the basis of objective criteria, without resorting to force of personality.15
The accompanying Research Brief describes five myths that have become widely
accepted about project champions.

Chapter 11 Managing the New Product Development Process 259

INVOLVING CUSTOMERS AND SUPPLIERS
IN THE DEVELOPMENT PROCESS
As mentioned previously, many products fail to produce an economic return because
they do not fulfill customer requirements for performance and price, or because they
take too long to bring to market. Both of these problems can be reduced by involving
customers and suppliers in the development process.

Involving Customers

agile
development

A process commonly used
in software
whereby the
overall product is
broken down into
smaller independent pieces that
are worked on
by autonomous,
self-organizing
teams. Features
are developed
and presented
to customers
quickly so that
the overall
product can
be rapidly and
continuously
adapted.

lead users

Customers who
face the same
general needs of
the marketplace
but are likely to
experience them
months or years
earlier than the
rest of the market
and stand to
benefit disproportionately from
solutions to those
needs.

Firms often make decisions about projects on the basis of financial considerations
and level of production and technical synergy achieved by the new product proposal
rather than on marketing criteria. This can lead to an overemphasis on incremental
product updates that closely fit existing business activities.16 The screening decision
should focus instead on the new product’s advantage and superiority to the consumer,
and the growth of its target market.17 The end customer is often the one most able to
identify the maximum performance capabilities and minimum service requirements of
a new product. Including the end customer in the actual development team or designing initial product versions and encouraging user extensions can help the firm focus
its development efforts on projects that better fit customer needs.18 Distributors can
also be valuable partners in the new product development process. These organizations will often be the first to know who is buying the product, how they are using it,
and be the first to hear of problems with the product or suggestions for how it might
be improved.19
Customers may be involved in the new product development process as an information source, or as actual co-developers of a new product.20 Many firms use beta testing
to get customer input early in the development process. A beta version of a product
is an early working prototype of a product released to users for testing and feedback.
Beta versions also enable a firm to signal the market about its product features before
the product reaches the commercial production stage. Agile development processes
(that are now often used in software development) take this approach even further. In
agile development, the product is divided into many smaller features or functionalities, and these are rapidly developed into minimum viable products and presented to
the customer for feedback, enabling rapid incremental adaptation. Other firms involve
customers in the new product development process in even more extensive ways, such
as enabling customers to co-create the end product (this is discussed more in the section below on crowdsourcing).
Some studies suggest that firms should focus on the input of lead users in their
development efforts rather than a large sample of customers. Lead users are those
who face the same needs of the general marketplace but face them months or years
earlier than the bulk of the market, and expect to benefit significantly from a solution to those needs.21 According to a survey by the Product Development & Management Association, on average, firms report using the lead user method to obtain input
into 38 percent of the projects they undertake. Not surprisingly, when customers help
­co-create an innovation, the resulting innovations tend to better fit their needs or expectations.22 More detail on how firms use lead users is provided in the accompanying
Theory in Action section: The Lead User Method of Product Concept Development.

Theory in Action   The Lead User Method of Product
Concept Development

Hilti AG, a European manufacturer of construction
components and equipment, turned to the lead user
method in its development of a pipe hanger (a steel
support that fastens pipes to walls or ceilings of buildings). The firm first used telephone interviews to identify customers who had lead user characteristics (were
ahead of market trends and stood to benefit disproportionately from the new solution). The lead users were
invited to participate in a three-day product concept
generation workshop to develop a pipe hanging system that would meet their needs. At the end of the
workshop, a single pipe hanger design was selected
as the one that best met all the lead users’ objectives.
The company then presented this design to 12 routine
users (customers who were not lead users but who

had a long, close relationship with Hilti). Ten of the 12
routine users preferred the new design to previously
available solutions, and all but one of the 10 indicated
they would be willing to pay a 20 percent higher price
for the product. Not only was the project successful,
but the lead user method was also faster and cheaper
than the conventional market research methods the
firm had used in the past to develop its product concepts. Hilti’s typical process took 16 months and cost
$100,000, but the lead user method took 9 months
and cost $51,000.
Source: C. Herstatt and E. von Hippel, “Developing New Product Concepts via the Lead User Method: A Case Study in a
Low-Tech Field,” Journal of Product Innovation Management 9
(1992), pp. 213–21.

Involving Suppliers

crowdsourcing
A distributed
problem-solving
model whereby a
design problem
or production
task is presented
to a group of
people who
voluntarily
contribute their
ideas and effort
in exchange for
compensation,
intrinsic rewards,
or a combination
thereof.
260

Much of the same logic behind involving customers in the new product development
process also applies to involving suppliers. By tapping into the knowledge base of its
suppliers, a firm expands its information resources. Suppliers may be actual members
of the product team or consulted as an alliance partner. In either case, they can contribute ideas for product improvement or increased development efficiency. For instance,
a supplier may be able to suggest an alternative input (or configuration of inputs) that
would achieve the same functionality but at a lower cost. Additionally, by coordinating with suppliers, managers can help to ensure that inputs arrive on time and that
necessary changes can be made quickly to minimize development time.23 Consistent
with this argument, research has shown that many firms produce new products in less
time, at a lower cost, and with higher quality by incorporating suppliers in integrated
product development efforts.24
Boeing’s development of the 777 involved both customers and suppliers on the
new product development team; United employees (including engineers, pilots, and
flight attendants) worked closely with Boeing’s engineers to ensure that the airplane
was designed for maximum functionality and comfort. Boeing also included General
Electric and other parts suppliers on the project team, so that the engines and the body
of the airplane could be simultaneously designed for maximum compatibility.

Crowdsourcing
Firms can also open up an innovation task by directing an innovation challenge to
third parties such as the general public, or specific, targeted groups of innovators
from different networks. Sometimes firms work with third parties directly, and other

Chapter 11 Managing the New Product Development Process 261

times they use a professional crowdsourcing service provider with their own network of ­innovators. For example, one professional crowdsourcing service provider,
­NineSigma, manages innovation challenges using a network of more than two ­million
scientists and engineers globally. Similarly, Topcoder helps firms access a community of more than one million software coders. Some of these service providers
(such as ­InnoCentive) operate their service as a closed network where the firm seeking the innovation does not know the details of the solution provider. Others (such as
­NineSigma) operate open networks where the firm seeking the innovation solution can
see all the solution proposals submitted, as well as all contact details of all solution
providers that submitted a response to the challenge.
Crowdsourcing challenges typically go through a four step process:
1. Need translation. A clear, concise, and compelling need statement is articulated
that reduces industry jargon to a minimum, and that brings the challenge down to
its most basic science. For example, NineSigma helped a client seeking ways to
reduce wrinkles in shirts coming out of a dryer by producing a statement that read:
“Our client is seeking ways to reduce surface tension of an organic material.” The
advantage of such a statement is that the specific application is removed, which
invites interest from solution providers from seemingly unrelated industries. In
this example, a professor doing integrated circuit research had developed a special
polymer that was the solution most favored by the client. The need statement is
usually a short one- to two-page document, often called a Request for Proposal.
Andy Zynga of NineSigma notes, “It is very important to have a very clean and
concise need statement to trigger interest. There may be a temptation to put two
needs into one statement, but that is highly discouraging to solution providers and
will reduce the chances of success.”25
2. Connecting. The innovation challenge must be broadcast to the network of potential solution providers that have been selected as most suitable to respond.
3. Evaluation/Selection. Submitted proposals get an in-depth review, and the most
interesting solution proposals get selected and collated in the form of a report.
4. Acquisition. The firm engages with the solution provider and negotiates an agreement to transfer knowledge, a license, patent, and so on. This usually involves a
monetary or other compensation scheme. It may also be necessary to adapt the
incoming solution to the specific needs of the firm.
Thousands of companies and many public bodies have used crowdsourcing to solve
challenges that seemed almost impossible to solve. For example, reducing plastics in
our oceans, or addressing the opioid crisis are “Grand Challenges” that are being tackled with crowdsourcing approaches right now.
People participate in crowdsourcing for a variety of reasons that often do not include
monetary rewards. For example, Ben & Jerry’s asked its customers to invent new varieties of ice cream flavors—the submitters of the best flavors were given a trip to the
Dominican Republic to see a sustainable fair trade cocoa farm. However, individuals
also often participate for the sheer excitement and challenge of solving the problem,26
or for social or reputational benefits.27 For example, Fiat Brazil used crowdsourcing
to develop a new concept car called the Fiat Mio (“My Fiat”). Fiat created a Web site
inviting people to create the car of the future. More than 17,000 people from around

262 Part Three Implementing Technological Innovation Strategy

the world submitted over 11,000 ideas—and not just in the design. Participants were
invited to contribute solutions at every stage of the development process, including
solving problems related to fuel efficiency and production. Participants received no
rewards from their participation other than the pleasure they derived from interacting
with Fiat and with each other, and the satisfaction they felt at having their ideas incorporated into the car. Hundreds of Fiat Mio’s co-creators turned up at the unveiling of
the car at a Sao Paulo motor show.

TOOLS FOR IMPROVING THE NEW PRODUCT
DEVELOPMENT PROCESS
Some of the most prominent tools used to improve the development process include
stage-gate processes, quality function deployment (“house of quality”), design for manufacturing, failure modes and effects analysis, and computer-aided design/computeraided manufacturing. Using the available tools can greatly expedite the new product
development process and maximize the product’s fit with customer requirements.

Stage-Gate Processes

go/kill
decision
points

Gates established
in the development process
where managers
must evaluate
whether or not to
kill the project
or allow it to
proceed.

As discussed in a previous section, escalating commitment can lead managers to
support projects long after their expected value has turned negative, and the cost of
pushing bad projects forward can be very high. To help avoid this, many managers
and researchers suggest implementing tough go/kill decision points in the product
development process. The most widely known development model incorporating such
go/kill points is the stage-gate process developed by Robert G. Cooper.28 The stagegate process provides a blueprint for moving projects through different stages of development. Figure 11.2 shows a typical stage-gate process.
At each stage, a cross-functional team of people (led by a project team leader)
undertakes parallel activities designed to drive down the risk of a development project.
At each stage of the process, the team is required to gather vital technical, market, and
financial information to use in the decision to move the project forward (go), abandon
the project (kill), hold, or recycle the project.
In Stage 1, the team does a quick investigation and conceptualization of the project.
In Stage 2, the team builds a business case that includes a defined product, its business justification, and a detailed plan of action for the next stages. In Stage 3, the team
begins the actual design and development of the product, including mapping out the
manufacturing process, the market launch, and operating plans. In this stage, the team
also defines the test plans utilized in the next stage. In Stage 4, the team conducts the
verification and validation process for the proposed new product, and its marketing
and production. At Stage 5, the product is ready for launch, and full commercial production and selling commence.29
Preceding each stage is a go/kill gate. These gates are designed to control the quality of the project and to ensure that the project is being executed in an effective and
efficient manner. Gates act as the funnels that cull mediocre projects. Each gate has
three components: deliverables (these are the results of the previous stage and are the
inputs for the gate review), criteria (these are the questions or metrics used to make

Chapter 11 Managing the New Product Development Process 263

FIGURE 11.2
Typical StageGate Process,
from Idea to
Launch

Source: R. G. Cooper,
“Stage-Gate Idea
to Launch System,”
Wiley International
Encyclopedia of
Marketing: Product
Innovation & Management 5, B. L. Bayus
(ed.), (West Sussex
UK: Wiley, 2011).

DISCOVERY: Idea Generation
Gate 1: Idea Screen
STAGE 1: Scoping
Brief, preliminary scoping of the project, utilizing easy-to-obtain information that enables
narrowing the list of potential projects.
Gate 2: Does idea justify more research?
STAGE 2: Build the Business Case
More detailed research (both market and technical) to build business case: product definition,
project justification, and plan for project.
Gate 3: Is the business case sound?
STAGE 3: Development
Detailed product design, development, and testing. Plans are also developed for production and launch.
Gate 4: Should project be moved to external testing?

STAGE 4: Testing & Validation
Testing of proposed new product and its production and marketing. May include production trials and trial selling.
Gate 5: Is product ready for commercial launch?

STAGE 5: Launch
Full production, marketing and selling commences.
POST-LAUNCH REVIEW
How did we do versus projects? What did we learn?

the go/kill decision), and outputs (these are the results of the gate review process and
may include a decision such as go, kill, hold, or recycle; outputs should also include an
action plan for the dates and deliverables of the next gate).
Because each stage of a development project typically costs more than the stage
preceding it, breaking down the process into stages deconstructs the development
investment into a series of incremental commitments. Expenditures increase only as
uncertainty decreases. Figure 11.3 shows the escalation costs and cycle time for each
stage of a typical development process in a manufacturing industry.
Many companies have adapted the stage-gate process to more specifically meet the
needs of their firm or industry. For example, while managers at Exxon were strong
advocates of using a stage-gate process to track and manage development projects,
they also felt that the standard five-stage system did not adequately address the needs
of a company in which basic research was a primary component in generating innovations. Exxon managers created their own extended stage-gate system to include
directed basic research. The resulting stage-gate system included two basic research
stages (Stages A and B in Figure 11.4) and five applied research and development
stages. In Stage A, the company identifies the potential business incentives and competitive advantages of an envisioned technology. The company then develops a basic
research plan that establishes specific scientific deliverables, the methods of achieving

264 Part Three Implementing Technological Innovation Strategy

FIGURE 11.3

Escalation of Development Time and Costs by Stage
Source: Adapted from F. Buggie, “Set the ‘Fuzzy Front End’ in Concrete,” Research Technology Management 45, no. 4 (2002), pp. 11–14.

Stage
0. “Here’s an idea!”
1. Formulate–describe and sketch
2. Conduct preliminary investigations
3. Design and define specifications
4A. Develop prototype and test
4B. Market research
4C. Strategic fit evaluation and NPV
risk analysis
5A. Scale up, build pilot plant
5B. Market test
6A. Build plant
6B. Promote, launch, market

Time

Cost

1 week
2 weeks
1 month

$100
$1,000
$10,000

2 months

$100,000

8 months

$1 million

16 months

$10 million

$11,111,100

Cost

Time
28 Months

FIGURE 11.4

Exxon Research and Engineering’s Stage-Gate System
Stage A
Opportunity
Identification

Stage 1
Lead
Definition

Gate A

Stage B
Enabling
Science &
Idea Growing

Gate B

Gate 1

Stage 2
PreDevelopment
Assessment

Gate 2

Stage 3
Development

Gate 3

Stage 4
Validation

Gate 4

Stage 5
Commercialization

these deliverables, and the required resources. In Stage B, Exxon’s research division
begins to execute the plan developed in Stage A, using scientific methods to generate
leads for addressing the business opportunity. Stage 1 then identifies the best leads,
using “proof-of-principle” assessments to establish whether the leads are feasible.30
Stages 2 through 5 proceed according to a typical stage-gate process.
According to studies by the Product Development and Management Association,
nearly 60 percent of firms (including IBM, Procter & Gamble, 3M, General Motors,
and Corning) use some type of stage-gate process to manage their new product development process. Corning has made the process mandatory for all information system
development projects, and Corning managers believe that the process enables them
to better estimate the potential payback of any project under consideration. They also
report that the stage-gate process has reduced development time, allows them to identify projects that should be killed, and increases the ratio of internally developed products that result in commercial projects.31

Chapter 11 Managing the New Product Development Process 265

FIGURE 11.5

Correlation between
Technical Specifications

Quality
­Function
Deployment
House of
­Quality for a
Car Door

–

Stays Open on Hill

10

3

9

Does Not Leak

35

Isolates Occupant
from Road Noise

20

1

Crash Protection

20

9

Relative Importance of Each Engineering
Attribute

365

135

7

4

6

7

9

9

7

6

9

9

4

7

4

7

495

Evaluation of
New Design

3

Competitor B

9

Competitor A

15

Tightness of
Window Seal

Stiffness of
Hinge

Easy to Open

Tightness of
Door and Seal

Weight of
Door

Customer
Requirements

Importance

Engineering
Attributes

495

Design Targets

Quality Function Deployment (QFD)—The House of Quality
QFD was developed in Japan as a comprehensive process for improving the communication and coordination among engineering, marketing, and manufacturing
­personnel.32 It achieves this by taking managers through a problem-solving process in
a very structured fashion. The organizing framework for QFD is the “house of quality”
(see Figure 11.5). The house of quality is a matrix that maps customer requirements
against product attributes. This matrix is completed in a series of steps.
1. The team must first identify customer requirements. In Figure 11.5, market
research has identified five attributes that customers value most in a car door: it is
easy to open and close, it stays open on a hill, it does not leak in the rain, it isolates
the occupant from road noise, and it protects the passengers in the event of crashes.
2. The team weights the customer requirements in terms of their relative importance
from a customer’s perspective. This information might be obtained from focus
group sessions or direct interaction with the customers. The weights are typically
entered as percentages, so that the complete list totals 100 percent.
3. The team identifies the engineering attributes that drive the performance of the
product—in this case, the car door. In Figure 11.5, four attributes are highlighted: the
weight of the door, the stiffness of the door hinge (a stiff hinge helps the door stay
open on a hill), the tightness of the door seal, and the tightness of the window seal.
4. The team enters the correlations between the different engineering attributes to
assess the degree to which one characteristic may positively or negatively affect
another. The correlations are entered into the matrix that creates the peaked roof

266 Part Three Implementing Technological Innovation Strategy

5.

6.

7.

8.

9.

of the house. In this case, the negative sign between door weight and hinge stiffness indicates that a heavy door reduces the stiffness of the hinge.
The team fills in the body of the central matrix. Each cell in the matrix indicates
the relationship between an engineering attribute and a customer requirement.
A number (in this example, one, three, or nine) is placed in the cell located at the
intersection of each row (customer requirements) with each column (engineering
attributes), which represents the strength of relationship between them. A value
of one indicates a weak relationship, a three indicates a moderate relationship and
a nine indicates a strong relationship. The cell is left blank if there is no relationship. The ease of opening the door, for example, is strongly related to the weight
of the door and moderately related to the stiffness of the door hinge, but is not
related to the tightness of the door seal or window seal.
The team multiplies the customer importance rating of a feature by its relationship
to an engineering attribute (one, three, or nine). These numbers are then summed
for each column, yielding a total for the relative importance of each engineering
attribute. For example, the stiffness of the hinge influences how easy the door
is to open, and whether the door stays open on a hill. Thus to calculate the relative importance of the stiffness of the hinge, the team multiplies the customer
importance rating of how easy the door is to open by its relationship to the stiffness of the hinge (15 × 3 = 45), then multiplies the customer importance rating
of the door staying open on a hill by its relationship to the stiffness of the hinge
(10 × 9 = 90), and then adds these together for the total relative importance of
the hinge stiffness (45 + 90 = 135). These scores indicate that the tightness of the
door and window seals is the most important engineering attribute, followed by
the weight of the door.
The team evaluates the competition. A scale of one to seven is used (one indicating a requirement is not addressed, and seven indicating a requirement is completely satisfied) to evaluate the competing products (in this case A and B) on each
of the customer requirements. These scores go in the right-hand “room” of the
house of quality.
Using the relative importance ratings established for each engineering attribute
and the scores for competing products (from step 7), the team determines target values for each of the design requirements (e.g., the door’s optimal weight
in pounds).
A product design is then created based on the design targets from step 8. The team
then evaluates the new design that was created. The team assesses the degree to
which each of the customer requirements has been met, entering a one to seven
in the far right column of the house of quality, permitting it to compare the new
design with the scores of the competing products.

The great strength of the house of quality is that it provides a common language and
framework within which the members of a project team may interact. The house of quality makes the relationship between product attributes and customer requirements very
clear, it focuses on design trade-offs, it highlights the competitive shortcomings of the
company’s existing products, and it helps identify what steps need to be taken to improve
them. The house of quality is used in settings as diverse as manufacturing, construction,

Chapter 11 Managing the New Product Development Process 267

FIGURE 11.6
Design Rules
for Fabricated
Assembly
Products

Source: Adapted
from M. A. Schilling
and C. W. L. Hill,
“Managing the New
Product Development
Process,” Academy of
Management Executive, vol. 12, no. 3,
pp. 67–81.

Design Rule

Impact on Performance

Minimize the number of parts

Simplifies assembly; reduces direct labor; reduces material
handling and inventory costs; boosts product quality

Minimize the number of part
numbers (use common parts
across product family)

Reduces material handling and inventory costs; improves
economies of scale (increases volume through
commonalty)

Eliminate adjustments

Reduces assembly errors (increases quality); allows for
­automation; increases capacity and throughput

Eliminate fasteners

Simplifies assembly (increases quality); reduces direct labor
costs; reduces squeaks and rattles; improves durability;
allows for automation

Eliminate jigs and fixtures

Reduces line changeover costs; lowers required
investment

police service, and educational curriculum design.33 Advocates of QFD maintain that
one of its most valuable characteristics is its positive effect upon cross-functional communication and, through that, upon cycle time and the product/customer fit.34

Design for Manufacturing
Another method of facilitating integration between engineering and manufacturing,
and of bringing issues of manufacturability into the design process as early as possible, is the use of design for manufacturing methods (DFM). Like QFD, DFM is
simply a way of structuring the new product development process. Often this involves
articulating a series of design rules. Figure 11.6 summarizes a set of commonly used
design rules, along with their expected impact on performance.
As shown in Figure 11.6, the purpose of such design rules is typically to reduce
costs and boost product quality by ensuring that product designs are easy to manufacture. The easier products are to manufacture, the fewer the assembly steps required,
the higher labor productivity will be, resulting in lower unit costs. DEKA Research
makes a point of bringing manufacturing into the design process early, because as
founder Dean Kamen points out, “It doesn’t make sense to invent things that ultimately
are made of unobtanium or expensium.”35 In addition, designing products to be easy
to manufacture decreases the likelihood of making mistakes in the assembly process,
resulting in higher product quality.
The benefits of adopting DFM rules can be dramatic. Considering manufacturing
at an early stage of the design process can shorten development cycle time. In addition, by lowering costs and increasing product quality, DFM can increase the product’s
fit with customer requirements. For example, when NCR used DFM techniques to
redesign one of its electronic cash registers, it reduced assembly time by 75 ­percent,
reduced the parts required by 85 percent, utilized 65 percent fewer suppliers, and
reduced direct labor time by 75 percent.36

Failure Modes and Effects Analysis
Failure modes and effects analysis (FMEA) is a method by which firms identify potential failures in a system, classify them according to their severity, and put a plan into

268 Part Three Implementing Technological Innovation Strategy

place to prevent the failures from happening.37 First, potential failure modes are identified. For example, a firm developing a commercial aircraft might consider failure
modes such as “landing gear does not descend,” or “communication system experiences interference”; a firm developing a new line of luxury hotels might consider failure modes such as “a reservation cannot be found” or “guest experiences poor service
by room service staff.” Potential failure modes are then evaluated on three criteria of
the risk they pose: severity, likelihood of occurrence, and inability of controls to detect
it. Each criterion is given a score (e.g., one for lowest risk, five for highest risk), and
then a composite risk priority number is created for each failure mode by multiplying its scores together (i.e., risk priority number = severity × likelihood of occurrence × inability of controls to detect). The firm can then prioritize its development
efforts to target potential failure modes that pose the most composite risk. This means
that rather than focus first on the failure modes that have the highest scores for severity of risk, the firm might find that it should focus first on failure modes that have less
severe impacts, but occur more often and are less detectable.
FMEA was originally introduced in the 1940s by the U.S. Armed Forces and was
initially adopted primarily for development projects in which the risks posed by failure were potentially very severe. For example, FMEA was widely used in the Apollo
Space Program in its mission to put a man on the moon, and was adopted by Ford after
its extremely costly experience with its Pinto model (the location of the gas tank in
the Pinto made it exceptionally vulnerable to collisions, leading to fire-related deaths;
Ford was forced to recall the Pintos to modify the fuel tanks, and was forced to pay
out record-breaking sums in lawsuits that resulted from accidents).38 Soon, however,
FMEA was adopted by firms in a wide range of industries, including many types of
manufacturing industries, service industries, and health care. A recent PDMA study
found that firms report using FMEA in 40 percent of the projects they undertake.39

Computer-Aided Design/Computer-Aided Engineering/
Computer-Aided Manufacturing
Computer-aided design (CAD) and computer-aided engineering (CAE) are the use of
computers to build and test product designs. Rapid advances in computer technology
have enabled the development of low-priced and high-powered graphics-based workstations. With these workstations, it is now possible to achieve what could previously
be done only on a supercomputer: construct a three-dimensional “working” image of
a product or subassembly. CAD enables the creation of a three-dimensional model;
CAE makes it possible to virtually test the characteristics (e.g., strength, fatigue, and
reliability) of this model. The combination enables product prototypes to be developed and tested in virtual reality. Engineers can quickly adjust prototype attributes by
manipulating the three-dimensional model, allowing them to compare the characteristics of different product designs. Eliminating the need to build physical prototypes
can reduce cycle time and lower costs as illustrated in the accompanying Theory in
Action: Computer-Aided Design of an America’s Cup Yacht. Visualization tools and
3-D software are even being used to allow nonengineering customers to see and make
minor alterations to the design and materials.
Computer-aided manufacturing (CAM) is the implementation of machinecontrolled processes in manufacturing. CAM is faster and more flexible than traditional

Theory in Action   Computer-Aided Design of an America’s
Cup Yacht

Team New Zealand discovered the advantages of using
sophisticated computer-aided-design techniques in
designing the team’s 1995 America’s Cup yacht. The
team had traditionally relied on developing smaller-scale
prototypes of the yacht and testing the models in a water
tank. However, such prototypes took months to fabricate
and test and cost about $50,000 per prototype. This
greatly limited the number of design options the team
could consider. However, by using computer-aided-design
technologies, the team could consider many more design
specifications more quickly and inexpensively. Once the
basic design is programmed, variations on that design
can be run in a matter of hours, at little cost, enabling
more insight into design trade-offs. Computer-aided
design also avoided some of the problems inherent in
scaling up prototypes (some features of the scaled-down
prototype boats would affect the flow of water differently

threedimensional
printing

A method
whereby a design
developed in a
computer aided
design program
is printed in three
dimensions by
laying down thin
strips of material
until the model is
complete.

from full-scale boats, resulting in inaccurate results in
prototype testing). The team would still build prototypes,
but only after considering a much wider range of design
alternatives using ­computer-aided-design methods. As
noted by design team member Dave Egan,
Instead of relying on a few big leaps, we had the ability to continually design, test, and refine our ideas.
The team would often hold informal discussions on
design issues, sketch some schematics on the back
of a beer mat, and ask me to run the numbers. Using
traditional design methods would have meant waiting months for results, and by that time, our thinking
would have evolved so much that the reason for the
experiment would long since have been forgotten.
Source: M. Iansiti and A. MacCormack, “Team New Zealand,”
Harvard Business School case no. 9-697-040, 1997.

manufacturing.40 Computers can automate the change between different product variations and allow for more variety and customization in the manufacturing process.
A recent incarnation of computer-aided manufacturing is three-dimensional
printing (also known as additive manufacturing), whereby a design developed in a
computer-aided design program is literally printed by laying down thin horizontal
cross sections of material until the model is complete. Unlike traditional methods of
constructing a model, which typically involve machining a mold that can take several
days to complete, three-dimensional printing can generate a model in a few hours.
By 2018, three-dimensional printing was being used to create products as diverse as
food, clothing, jewelry, solid-state batteries, and even titanium landing gear brackets
for supersonic jets.41 Biotechnology firms were even using three-dimensional printing
for use in creating organs by depositing layers of living cells onto a gel medium.42 This
method has recently begun rapidly replacing injection molding for products that are
produced in relatively small quantities.

TOOLS FOR MEASURING NEW PRODUCT
DEVELOPMENT PERFORMANCE
Many companies use a variety of metrics to measure the performance of their new
product development process. In addition to providing feedback about a particular
new product, such performance assessments help the company improve its innovation
269

Theory in Action   Postmortems at Microsoft
At Microsoft, almost all projects receive either a postmortem discussion or a written postmortem report to
ensure that the company learns from each of its development experiences. These postmortems tend to be
extremely candid and can be quite critical. As noted by
one Microsoft manager, “The purpose of the document
is to beat yourself up.” Another Microsoft manager notes
that part of the Microsoft culture is to be very self-critical
and never be satisfied at getting things “halfway right.”
A team will spend three to six months putting together
a postmortem document that may number anywhere

from less than 10 pages to more than 100. These postmortem reports describe the development activities and
team, provide data on the product size (e.g., lines of
code) and quality (e.g., number of bugs), and evaluate
what worked well, what did not work well, and what the
group should do to improve on the next project. These
reports are then distributed to the team members and to
senior executives throughout the organization.
Source: M. A. Cusumano and R. W. Selby, Microsoft Secrets
(New York: Free Press, 1995).

strategy and development processes. For example, evaluating the performance of its
new product development process may provide insight into which core competencies
the firm should focus on, how projects should be selected, whether or not it should
seek collaboration partners, how it should manage its development teams, and so on.
Both the metrics used by firms and the timing of their use vary substantially across
firms. In a survey by Goldense and Gilmore, 45 percent of companies reported using
periodic reviews at calendar periods (e.g., monthly or weekly) and at predetermined milestones (e.g., after product definition, after process design, post launch, etc.).43 Microsoft,
for example, uses postmortems to measure new product development performance, as
described in the accompanying Theory in Action: Postmortems at Microsoft. Measures
of the success of the new product development process can help management to:
∙ Identify which projects met their goals and why.
∙ Benchmark the organization’s performance compared to that of competitors or to
the organization’s own prior performance.
∙ Improve resource allocation and employee compensation.
∙ Refine future innovation strategies.44

270

Multiple measures are important because any measure used singly may not give
a fair representation of the effectiveness of the firm’s development process or its
overall innovation performance. Also, the firm’s development strategy, industry, and
other environmental circumstances must be considered when formulating measures
and interpreting results. For example, a firm whose capabilities or objectives favor
development of breakthrough projects may experience long intervals between product
introductions and receive a low score on measures such as cycle time or percent of
sales earned on projects launched within the past five years, despite its success at its
strategy. Conversely, a firm that rapidly produces new generations of products may
receive a high score on such measures even if it finds its resources are overtaxed and
its projects are overbudget. Additionally, the success rate of new product development can vary significantly by industry and project type. Some authors argue that even
firms with excellent new product development processes should not expect to have a
greater than 65 percent success rate for all new products launched.45

Chapter 11 Managing the New Product Development Process 271

New Product Development Process Metrics
Many firms use a number of methods to gauge the effectiveness and efficiency of the
development process. These measures capture different dimensions of the firm’s ability
to successfully shepherd projects through the development process. To use such methods,
it is important to first define a finite period in which the measure is to be applied in order
to get an accurate view of the company’s current performance; this also makes it easier
for the manager to calculate a response. The following questions can then be asked:
1. What was the average cycle time (time to market) for development projects? How
did this cycle time vary for projects characterized as breakthrough, platform, or
derivative?
2. What percentage of development projects undertaken within the past five years
met all or most of the deadlines set for the project?
3. What percentage of development projects undertaken within the past five years
stayed within budget?
4. What percentage of development projects undertaken within the past five years
resulted in a completed product?

Overall Innovation Performance
Firms also use a variety of methods to assess their overall performance at innovation. These measures give an overall view of the bang for the buck the organization is
achieving with its new product development processes. Such measures include:
1. What is the firm’s return on innovation? (This measure assesses the ratio of the
firm’s total profits from new products to its total expenditures, including research
and development costs, the costs of retooling and staffing production facilities,
and initial commercialization and marketing costs.)
2. What percentage of projects achieve their sales goals?
3. What percentage of revenues are generated by products developed within the past
five years?
4. What is the firm’s ratio of successful projects to its total project portfolio?

Summary
of
Chapter

1. Successful new product development requires achieving three simultaneous objectives: maximizing fit with customer requirements, minimizing time to market, and
controlling development costs.
2. Many firms have adopted parallel development processes to shorten the
development cycle time and to increase coordination among functions such as
R&D, marketing, and manufacturing.
3. Many firms have also begun using project champions to help ensure a project’s
momentum and improve its access to key resources. Use of champions also has its
risks, however, including escalating commitment and unwillingness of others in
the organization to challenge the project.
4. Involving customers in the development process can help a firm ensure that its
new products match customer expectations. In particular, research indicates that
involving lead users can help the firm understand what needs are most important

272 Part Three Implementing Technological Innovation Strategy

to customers, helping the firm to identify its development priorities. Involving
lead users in the development process can also be faster and cheaper than involving a random sample of customers in the development process.
5. Many firms use beta testing to get customer feedback, exploit external development of the product, and signal the market about the firm’s upcoming products.
6. Firms can also involve suppliers in the development process, helping to minimize
the input cost of a new product design and improving the likelihood that inputs are
of appropriate quality and arrive on time.
7. Stage-gate processes offer a blueprint for guiding firms through the new product
development process, providing a series of go/kill gates where the firm must decide
if the project should be continued and how its activities should be prioritized.
8. Quality function deployment can be used to improve the development team’s
understanding of the relationship between customer requirements and engineering
attributes. It can also be a tool for improving communication between the various
functions involved in the development process.
9. Failure Modes and Effects Analysis can be used to help firms prioritize their
development efforts in order to reduce the likelihood of failures that will have the
greatest impact on the quality, reliability, and safety of a product or process.
10. Design for manufacturing and CAD/CAM are additional tools development teams
can use to reduce cycle time, improve product quality, and control development costs.
11. Firms should use a variety of measures of their new product development
effectiveness and overall innovation performance to identify opportunities for
improving the new product development process and improving the allocation of
resources.

Discussion
Questions

1. What are some of the advantages and disadvantages of a parallel development process? What obstacles might a firm face in attempting to adopt a parallel process?
2. Consider a group project you have worked on at work or school. Did your group
use mostly sequential or parallel processes?
3. Name some industries in which a parallel process would not be possible or effective.
4. What kinds of people make good project champions? How can a firm ensure that
it gets the benefits of championing while minimizing the risks?
5. Is the stage-gate process consistent with suggestions that firms adopt parallel
processes? What impact do you think using stage-gate processes would have on
development cycle time and development costs?
6. What are the benefits and costs of involving customers and suppliers in the development process?

Suggested
Further
Reading

Classics
Clark, K. B., and S. C. Wheelwright, Managing New Product and Process Development (New York: Free Press, 1993).
Cooper, R., and E. J. Kleinschmidt, “New Product Processes at Leading Industrial
Firms,” Industrial-Marketing-Management 20, no. 2 (1991), pp. 137–48.

Chapter 11 Managing the New Product Development Process 273

Griffin, A., and J. R. Hauser, “Patterns of Communication Among Marketing, Engineering and Manufacturing,” Management Science 38 (1992), pp. 360–73.
Loch, C., and S. Kavadias, Handbook of New Product Development Management.
(Oxford, UK: Elsevier Ltd., 2008).

Recent Work
Chang, W., and S. A. Taylor, “The Effectiveness of Customer Participation in New
Product Development: A Meta-Analysis.” Journal of Marketing, 80, no. 1 (2016),
pp. 47–64.
Cooper, R. G., “Agile-Stage-Gate Hybrids,” Research-Technology Management, 59
(2016), pp. 1, 21–29
Lawson, B., D. Krause, and A. Potter, “Improving Supplier New Product Development Performance: The Role of Supplier Development.” Journal of Product Innovation Management 32 (2015), pp. 777–92.
Piezunka, H., and L. Dahlander, “Distant Search, Narrow Attention: How Crowding
Alters Organizations’ Filtering of Suggestions in Crowdsourcing,” Academy of Management Journal, 58 (2015), pp. 856–880.
Prpic, J., P. P. Shukla, J. H. Kietzmann, and I. P. McCarthy, “How to Work a Crowd:
Developing Crowd Capital Through Crowdsourcing,” Business Horizons, 58 (2015),
pp. 77–85.

Endnotes

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274 Part Three Implementing Technological Innovation Strategy

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Chapter 11 Managing the New Product Development Process 275

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Engineering and Manufacturing,”

276 Part Three Implementing Technological Innovation Strategy

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45. Ibid.

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