Fixing The Late New
Product Problem (PDF
Version)
Apple
Computer's stock price dropped four percent
on the Monday after it failed to mention anything
about its newest iMac at its developer
conference. Wall Street was worried. The iMac
design was 30 month old and needed to be updated.
Later that week Apple broke the news, the new
iMac would be delayed.
Even
worse the company announced that it stopped
production of the old model. The delay
meant that Apple stores and resellers would
be without an iMac model to sell for all of
July and August and some portion of September.
The stock immediately dropped another four percent.
One billion dollars of market capitalization
vaporized due to the late product.
That same month in another
part of California, the senior sales executive
of a major motorcycle and ATV manufacturer complained,
"If only the new
bike was on time, we could sell so many more."
Only two months before launch, the new motorcycle's
planned release date had just slipped by two
months due to product development problems.
Customers who placed deposits to be first in
line to get the new bike were about to be disappointed.
Advertising that had been bought and paid for
would be promoting product that no one could
buy. Dealers would take the increased customer
traffic and push them to buy competitors bikes
that were in stock. The sales force was going
to be angry about lost commissions. A bad deal
for everyone, except the competition.
The motorcycle would go on
to win Bike of the Year awards in the press,
but because this
bike missed some of the key selling months in
the seasonal motorcycle business the company
had to cut back production.
The resulting sales were
33% lower than planned, and the sales forecast
for the next year was cut back because of uncertainty
about the true demand for the product. The bike
would never live up to its potential, and millions
of dollars in sales and profit were lost forever.
If you work in a business
were new products are important, you have probably
had a similar experience. New products are all
too often late and the consequences cascade
downstream to impact other products and future
sales. Resources that had been planned for other
products are diverted to getting the late product
finished and out into the market, meaning that
those other products will likely be late as
well.
The chronic lateness of new
products means that they miss some of the prime
selling months for the new product or season
leading to lower first year sales and consequently
lower forecasts for next year's demand.
In short, being late
is a slippery slope that prevents products and
entire business categories from ever reaching
their potential.
Why New Products Are
Late
While the reasons for new
products being late are many, they generally
fall into four categories: strategy, process,
organization and information.
Strategy.
The strategic issues
typically boil down to a lack of clear direction
and prioritization. Strategy should clearly
articulate where you are going, what you are
going to focus on and, perhaps more importantly,
what you are not going to do. Lack of clear
strategic direction at the outset of the development
process leads to significant rework later in
the process as management is forced to make
decisions because the product is beginning to
take shape. Lack of strategic prioritization
means that there are too many new products and/or
new features that need to be developed given
the resources available.
Process.
Flawed new product development
process design and poor process execution are
also frequent contributors to late new products.
The process may not sufficiently engage senior
management at the front end of product development
in order to make strategic decisions. Product
development plans and engineering capacity may
not take into account the need for rework or
the numerous pre-launch activities (government
approvals, QA, manufacturing ramp-up, etc) that
follow engineering.
Processes may be too
linear; failing to engage downstream functions
early enough to identify and avoid potential
problems before too much resource and time are
invested. Decisions to make changes to products,
particularly late in the development process,
may not be connected to the impact on resources
and the timing of the overall product pipeline.
Lack of process discipline
and milestone management leads to things getting
worse as products are late and 'shortcuts' are
taken. All of these contributors to poor process
design and execution are common drivers of late
products.
Organization.
The organizational issues
tend to be driven by senior management involvement
at the wrong time and by a mismatch of accountability
and resources. All too frequently, senior management
will see the product late in the process, sometimes
for the first time, and point out something
that could be better or different, leading to
rework by the development team and delays in
getting the product finished.
This is a classic example
of the perfect being the enemy of the good.
Further, there is often a mismatch between the
accountability and the authority for getting
the product to market on time. The pain of being
late is felt in Marketing and Sales, while the
budget and responsibility for being on time
are in Engineering.
Information.
Lack of information
about process status and performance can also
be major contributors to delays. All too often,
companies know what products have just launched
or are about to launch, but have no perspective
on how well original plans are adhered to or
the status of the rest of the product pipeline.
The old adage of what gets measured, gets managed
applies. Only in this case what doesn't get
measured doesn't get managed.
12 Opportunities
for Action
- Understand and
share the revenue and cost impacts of being
late
- If your products
are late right now, develop an explicit
game plan for 'catching up' in 1-2 years
that looks different than the ongoing product
development calendar in terms of scope of
development and/or resources employed
- Prioritize, prioritize,
prioritize - the number of products you
choose to develop, the priority of products
within that list, and the priority of features
within each product
- "Nail down" the
front end of product development by getting
senior executives aligned on the business
and product line strategy before development
work begins
- Discipline process
execution - stick to decision milestones
- Explicitly fix
the problem of senior executive meddling
by either keeping their involvement to strategy
issues or by getting them involved earlier
and more frequently and use the right staff
who have the capability to 'push back' and
manage their participation
- Redesign development
processes to be faster and on time - identify
major reasons for lost time and effort due
to rework and sequential activities, and
ensure that relevant functions are involved
early enough so that they can identify potential
issues early enough to avoid significant
rework and get started in parallel
- Utilize Critical
Chain project planning practices
- Schedule tasks
on an aggressive, but possible timing
- Consolidate task
based time safety buffers into a project
safety buffer
- Implement an
early warning process to notify the next
resource that they will be work soon
- Measure product
development on-time performance, establish
clear accountability and put in place incentives
or other rewards for achieving plan
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