A value-oriented approach to new product development using real options

Lean concepts are routinely used in manufacturing but are still relatively new to New Product Development (NPD) process. If manufacturing can be modeled as flow of material, an analogous model for NPD process would be flow of information. This paper addresses the issue of eliminating wastes in new product development process by bringing lean concepts through an assessment system. The paper first defines wastes in the context of NPD process. A large number of waste drivers which add to wastes in any NPD process are identified. Similarly lean enablers and lean tools which if implemented can reduce wastes are also identified. A model connecting wastes and lean enables is arrived which gives a holistic picture of relationship to address and assess wastes in any NPD process. In order to measure the effectiveness of NPD process five lean performance measures are used which include design cost overrun, product cost overrun, schedule overrun, knowledge capture and customer satisfaction. Industrial inputs are used to arrive at assessment system proposed in this work and a further feedback from industry is used to enrich the assessment system after it is developed. Though the proposed system is developed for machine tool development process, it is generic in nature and can be used to assess any new product development activity.KeywordsNew product developmentLean product developmentLeanness assessment

The high-tech companies in Taiwan began to improve and innovate their new product development (NPD) process since late 1980s. However, it is found that even if companies desire to strategically innovate their NPD process, for some companies, it is difficult to effectively implement it. This paper aims to explore why it is difficult in Taiwan for companies to innovate and implement their NPD processes. We use interview and questionnaire survey method to conduct our research. According to the result from our research, there is no significant difference in company size and R&D team member's educational background regarding to how much the R&D team member supports the innovation and improvement of NPD process. Aside from that, the result implies that the cost of NPD and concerns of multi-tasking in cross-functional team are the major concerns for rejecting the innovation of NPD process. The study provides implications for R&D team managers to deal with the implementation of innovating the NPD process in terms of the cost in the process and the pressure within team members.

More and more companies are actively involving their customers in the new product development (NPD) process. However, there is little consensus regarding the contribution of customer involvement to new product outcomes. A better understanding of this contribution can shed light on whether and when it is worthwhile to involve customers and thus provide firms better guidelines for making such decisions. This study examines the effects of two forms of customer involvement on new product outcomes: the traditional form of customer involvement as an information source (CIS) and the more active form of customer involvement as co‐developers (CIC). The authors offer a better understanding of whether customer involvement can lead to successful innovation by (1) identifying conditions that impact the effects of CIS and CIC on NPD outcomes, (2) contrasting the conditional effects of CIS and CIC to understand how they influence NPD outcomes differently, and (3) examining the potential substitutive relationship between CIS and CIC to understand their joint effects in improving innovation. They find that an experimental NPD approach that emphasizes trial and error learning moderates the relationship between customer involvement and new product outcomes. Specifically, the results reveal contrasting contingent effects of CIS and CIC: CIS is more beneficial for new product outcomes when firms take a more experimental NPD approach, whereas the effect of CIC is stronger when the NPD process is characterized with lower experimentation. CIS and CIC also substitute for each other in their contribution to new product outcomes. These findings suggest that each of the two forms of customer involvement has its unique advantages and is suitable for different conditions. When considering the adoption of CIC, firms should take into account their learning approaches as well as the effectiveness of CIS in the NPD process.

This paper aims to empirically study the management and activities of industrial design (ID) outsourcing in new product development (NPD) process in small and medium-sized enterprises (SMEs). The research uses a multi-case study methodology. Data were collected from six companies in various sectors. The study shows external ID is urgently needed in SMEs, it can effectively support the NPD process and promote innovation. The introduction and roles of design expertise diverse in different firms, few are involved in the early phases of NPD. And the interaction and communication between ID firms and SMEs in NPD are still at a relatively low level. It is implicated that SMEs should pay more attention to integrate outsourced industrial design as an innovation input in the NPD process to explore consumer and market. A mechanism with teamwork, collaboration of different staffs, and face-to-face communication is efficient for a successful design interaction.

Cross-functional intra-firm cooperation is crucial for a firm’s new product development (NPD) process and innovation success. Nevertheless, neither current innovation nor management control literature does provide empirical evidence on whether and how the cooperation between innovation and management control departments affects outcomes of the NPD process. Thus, this paper intends to close this research gap by studying the effect of innovation-management control cooperation (IMCC) across multiple NPD process stages on NPD process effectiveness and its consequences for a firm’s innovation and financial success. A multiple-informant data set was collected including 109 dyadic data sets from employees at project and top management level and combined with secondary data assessing financial success. The results show that IMCC exerts a positive effect on NPD process effectiveness. More specifically, the effect can be best described as u-shaped, being strongest in the concept development and implementation stage, but weaker in the product development stage of the NPD process. Furthermore, our findings show that innovation success mediates the relationship between NPD process effectiveness and financial success thereby explaining the contradictory findings of past research concerning the link between NPD and financial success.

The trend of vertical disintegration in semiconductor industry promotes more and more collaborative e-commerce applications for interchanging business information and facilitating timely and efficient communication between the specialized firms. While previous literature focused on the operational performance enhancement of e-commerce system (ECS) usage, this study contributed to increase understandings on the performance of using ECS to facilitate new product development (NPD) process through combining qualitative and quantitative methods in a two-phase case study. This study found that the specialized firms mainly leveraged the collaborative e-commerce systems to facilitate the ”technical dialogue” between design and process engineers to conquer the technological knowledge integration issues in NPD process. With support by real transactional data, ECS usage has positive impacts on NPD performance and the design-related ECS accounts for the most of performance variance. In general, the integrated device manufacturing and the fabless customers have different effects of using ECS on NPD performance. With respect to the firm's location, the eastern companies obtain better NPD performance than the western companies by using those ECS. This study suggests that a foundry company should develop different ECS services to support various customers in terms of organizational type and geographical location.

Integration of Suppliers’ Workflows in the OEMs’ New Product Development Process

Purpose– This study deals with waste in New Product Development (NPD) processes of SMEs. The purpose of this paper is to reveal opportunities for SMEs to overcome resource constraints in their NPD process.Design/methodology/approach– The authors employed qualitative key informant interviews. This design was chosen because research in this field is still limited. The authors performed 49 interviews in engineering-oriented German SMEs to examine the dimension of waste in NPD processes. The data were collected by conducting semi-structured, face-to-face interviews.Findings– The study highlights substantial waste types such as waiting times, rework and duplication of work. In contrast to contemporary literature, waste of material is considered to be relevant in particular for NPD processes of SMEs. In addition to that, the authors found that waste drivers differ to a great extent between the study and the hitherto literature on larger companies.Research limitations/implications– The overall outcome of this study can help organisations to address waste in NPD more thoroughly. The research presented was not specifically designed to draw statistical generalisations. For this reason, the results may not be applicable to all SMEs.Practical implications– Based on waiting times as the major waste type in NPD processes of SMEs, the authors claim that firms should pay special attention to disruptions of these processes.Originality/value– The paper gives insights into current waste types in the NPD processes of SMEs. Moreover, it uncovers the NPD activities which can lead to waste.

Lean thinking has been successfully applied to manufacturing and operations environments and many case studies and research papers have extensively been published. The same remark cannot be made for lean application to the New Product Development (NPD) process. Some efforts in Lean Product Development exist, but, until today, with the tools available, it is impossible to say if a NPD process is lean or not, and actually how much lean is. A kind of gap exists in the applicability of lean into the NPD process and this chapter aims at filling this gap, contributing to NPD performance measurement getting a leanness process. The paper proposes a Performance Measurement System, derived from the Balanced Scorecard approach, for measuring a NPD and its leanness. The proposed framework is under development within the LeanPPD European project.

Many of today's products are so complex that no single company has all the necessary knowledge about either the product or the required processes to completely design and manufacturing. The customer-supplier relationship has undergone substantial transformation over the past 30 years, from a traditional relationship centered largely on the customer towards a current focus on partnership and lean supply. Some of the benefits of Early Supplier Involvement (ESI) in New Product Development (NPD) process include : reduced development cost; higher quality with fewer defects; reduced time to marker; supplier-oriented innovation; and so on. This paper discusses the strategic integration between customer and supplier in NPD process. We typify the customer/supplier collaborative activities in NPD process. Then, an implementation perspective for realizing computer-supported ESI in NPD process are presented, based on our ANetCoDE which is a hybrid multi-agent architecture for distributed collaborative engineering environment. Some key features are discussed, including collaborative specification establishment, solid model-based communication and agent-based collaboration through the medium of "guest agent" and "site agent".

The objective of this chapter is to provide an analytical tool to assist organizations in their implementations of Intelligent Knowledge Management Systems (IKMS) along the new product development (NPD) process. Indeed, organizations rely on a variety of systems using Artificial Intelligence to support the NPD process that depends on the maturity stage of both the process and type of knowledge managed. Our framework outlines the technological and organizational path that organizations have to follow to integrate and manage knowledge effectively along their new product development process. In doing so, we also address the main limitations of the systems used to date and suggest the evolution towards a new category of KMS based on artificial intelligence that we refer to as Intelligent Knowledge Management Systems. We illustrate our framework with an analysis of several case studies.

Effective implementation of the new product development (NPD) process not only enables management to coordinate the efficient flow of new products, but will also assist to support ramp-up of various supply chain activities and other related activities supporting the commercialisation of the product. Thus, companies need to address all these issues in parallel to be successful and this requires some kind of integrative product development approach. The purpose of this research is to increase the understanding of how NPD is connected to supply chain management (SCM) by investigating how the NPD process is structured and executed in two international manufacturing companies seeking to realise an innovative, predictable and efficient product development. Several essential linkages between NPD and SCM have been derived from case study findings concerning important issues for successful product development.

New product development (NPD) is expensive as well as risky endeavor for any organization owing to high product failure rates. A holistic risk management (RM) model may play a significant role in identifying, analyzing and mitigating the risks involved in NPD process, enabling a reduction in product failure rate. This paper aims at developing an integrated approach to assess and effectively manage risks in NPD process. A holistic methodology based on quantitative tools is proposed for assessment of the risk factors prevalent in the NPD process. The proposed approach is a three-stage holistic methodology for overall management of risks underlying the NPD process. The risk identification stage involves thorough exploration of risk elements acting in various phases of NPD process; and usage of factor analysis tools which render a pool of key risk factors. Interpretive structural modeling is applied on the risk factors in each functional risk domain and NPD risk taxonomy is established. The risk assessment step involves quantification of the criticality of the identified risk factors for prioritization. The evaluation of risk degree of the factors is based on probabilistic likelihood of occurrence and severity of the risk factors, to measure the criticality of the risk factors. The authors suggest usage of fuzzy theory to reduce subjectivity and vagueness in the assessment process for calculating the risk degree of the factors. A technique is developed to capture the riskiness of the entire NPD process into a single ‘risk score’ value. This approach may be used to develop ‘Product Development Risk Reference Model’ as a comprehensive guideline for assessing risk factors occurring in the NPD process in an organization. The approach leads to calculation of a single numerical value which could be easily comprehended by the product developers and help them in assessing their NPD initiatives and take ‘Go-Kill’ decisions in accordance with the prevalent riskiness in their project as per the risk profile of the organization. Further studies would be directed towards analyzing the change in risk situation over a period of time due to the changing market scenarios and the related risk factors.

Does the development of really new products require a different approach from that of incremental new products? Current research and management practice seem to suggest that any successful new product development (NPD) process comprises a set of key activities, regardless of a product's innovativeness. It seems almost foolhardy to suggest that NPD could proceed without proficiency in all of the following tasks: strategic planning, idea development and screening, business and market opportunity analysis, technical development, product testing, and product commercialization.Suggesting that the difference may be in the details, X. Michael Song and Mitzi Montoya‐Weiss present the results of a study that examines the development of 163 really new products and 169 incremental new products. The study's objective is to compare the NPD processes and performance outcomes of really new and incremental products. In other words, the study examines the interplay between a product's innovativeness, the NPD process, and the product's performance in the marketplace.For the firms in the study, four sets of NPD activities—strategic planning, market analysis, technical development, and product commercialization—are key determinants of new product success for both really new products and incremental products. However, strategic planning and business and market opportunity analysis activities play contrasting roles for the two types of products. Working to improve proficiency in business and market opportunity analysis may be counterproductive for really new products, but it can increase the profitability of incremental products. Conversely, improving the proficiency of strategic planning activities has a positive effect on the profitability of the really new products, but it has a negative effect for the incremental products. Overall, the really new products in the study surpass the incremental products in meeting profit objectives.Comparing current practice to best practice, the firms in the study have room for improvement. For both really new and incremental products, the firms in the study do not place sufficient emphasis on product commercialization activities. The participants also need to reassess the relative emphasis they place on strategic planning activities. The projects involving really new products do not place sufficient emphasis on strategic planning, while the incremental projects exhibit a relatively high level of proficiency in this area—exactly the opposite of the order that this study recommends.

The following case study evaluates the New Product Development (NPD) techniques utilized by Forest City Technologies, Incorporated (FCT). Through insight gathered via interviews conducted with the company's product development and materials purchasing management teams, and supported by literature, this study attempts to show how Forest City Technologies, Inc. integrates specific components into its product development process to: 1. Meet its NPD goals, and 2. Achieve better supplier and customer relationships. This study focuses on the components of: NPD models employed by FCT, early customer and supplier involvement, NPD-innovation integration techniques, demand change factors during the NPD process, and risk-mitigation strategies implemented by FCT during the NPD process. The study is segmented into three main sections: Introduction to NPD and FCT, the components of FCTs new product development process, and NPD implications on FCTs supplier and customer relationships.