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Failure is not fun.
Just ask any veteran NPD professional. Sure, you will hear explanation of what was "learned" during the failure, or what experience was gained, or how some technical option was created. But the bottom line is that organizations need to avoid NPD failures. The problem is that NPD managers often have little idea as to the level of risk (of failure, that is) that they may be dealing with on their projects.
Failure may either be absolute or relative. In many organizations, a new product may be a definitive financial failure, yet remain in the market. Most often, this occurs in business-to-business market. It seems the logic for accepting such failures is compelling:
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Sunk costs are irrelevant, so as long
as the product has a positive contribution margin and is satisfying
a customer, we might as well keep it in the market.
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Sure we loose money on each unit sold,
but that will only happen until we drive the per-unit cost down low
enough to make money... and we need volume to lower the cost.
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Yes, these are legitimate reasons for keeping products in the market. The question is how to manage the risk that such project pose before the risk is incurred, not after. Some teams judge success or failure simply by whether deadlines or milestones such as launch dates are met. Risk, though, can play out in several ways on a project. One is that the expected or desired response in the market does not happen. For example, New Coke was an abysmal failure. This is the kind that ends up with the CEO's picture on the cover of Fortune Magazine, along with a headline like "What Went Wrong?"
Abysmal failures are definitely not fun.
Risk, though, does not always link directly to market failures. Very often, risk plays out in a time dimension. In the simplest explanation, uncertainty (a component of risk) causes time delays for task end-points or causes rework of project tasks altogether. New products may eventually launch, but because of risk, they are late to market. But no matter the case, the consequence of risk always nets out in financial terms… a greater likelihood of less than desirable cash flow. This, once again, is not very much fun.
Learning Your Project's Risk
Every NPD team needs to deal with project risks. Many tackle this straight on. Working together, the team may come to consensus on the level of technical risk and then on the level of commercial risk for their project. They then multiply the two answers to come up with overall project risk. This is a good step forward. Fortunately, we know a lot more than this about risk. We can break down both technical and commercial risk into much finer components.
Many gurus in NPD suggest that, from a project management point of view and a quality management orientation, you can determine risk by creating probability distributions. Each distribution skewed in one direction or another, would reflect the influences (cost, market demand, competitive response, etc.) on a project. Risk is determined by "simulating" many outcomes through what is know as a Monte Carlo simulation. Products like @Risk, CrystalBall, and iDecide help enormously with such simulations. SmartOrg offers what is know as Decision Advisor, and provides superb support for NPD professionals wishing to create such models.
A more direct approach to NPD project risk assessment is through pre-determined algorithms. The way this works may be compared to how banks assess whether they want to give you a loan or not. To make their decision, the bank request information on salary, work history, home value, age, credit ratings, etc. Undoubtedly they care about each one of these factors. More important, though, is the result that they get when they plug these factors into an expensive algorithm that they purchased from a service. The algorithm tells the bank the likelihood that your loan will fail. This is calculated by plugging the information you gave into an equation.
NPD RiskAssessor
In the 1980's, Dr. Robert Cooper created the first such algorithm for new product development through his research entitled "NewProd". The research spawned a handful of academic papers. One paper spelled out the first algorithm, or model, for assessing new product development projects. The model was translated into software code and took on software names like NewProd and ProCon.
The software and the underlying algorithm have changed and improved over the last fifteen years. But their purpose and benefits to project teams remain the same. Such models help teams peal away complex layers of a project and determine where and how risk may impact its development.
The NewProd research identified nine major factors that influence the likelihood of success or failure of a project. More important, it revealed the degrees of influence on success of each factor. This enables the team to spot what issues are affecting their project negatively and to rank-order these issues. In turn, the team can address the negative influences with specific actions, and thereby mitigate specific risks. Its simple, but it is effective.
The Adept Group has used the research-based algorithm for many years, first along side of Dr. Cooper, then on our own. We have made many advance in terms of the algorithm, the software, and it use within the organization. NPD RiskAssessor comes in three forms:
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Click Here for Information and Pricing on NPD
RiskAssessorTM
Click Here for Information and Pricing on PortView
Click Here for Information on the Portfolio, Pipeline
and Platform Management Workshop
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Wokshop on Portfolio and Pipeline Management
Designing and deploying Portfolio and Pipeline Management practices are significant undertakings for even the most nimble organization. The challenge is to build maturity in each of several capability areas. It is from such "capability maturity" that notable benefits accrue. For most, the first step is simply to gain an understanding of what Portfolio and Pipeline Management is and then share this understanding across the top of the organization
If you or others in your organization wish to learn more about Portfolio and Pipeline Management and its implementation, consider attending our important 2-day Workshop on the topic. Attendees will:
- Learn how to overcome too many projects coming into an already full pipeline
- Apply best practices in deploying and improving Portfolio and Pipeline Management
- Align strategic mix-management with resource throughput-management
- Learn how to leverage a Spiral-up Implementation for fast gains
- Learn how to engage top management for sustained "buy-in" and participation
- See the top tools and practices for Portfolio and Pipeline Management
- Learn how to integrate project management and portfolio management into a seamless system
- Learn how to amplify NPD output by integrating front-end activities into Portfolio and Pipeline Management
To download the brochure and learn more, click
here.
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