Creating new products is becoming more challenging, as companies face tighter cycles and target ever-narrower customer segments. Here’s how you can make better products taking less time and resources:

Product development is getting tougher. Most companies are pressured to launch new products more rapidly, and firms in many sectors must strive harder to meet the needs of increasingly narrower customer segments. Product development demands are especially rigorous in high-speed markets, such as those for medical, consumer and technologically advanced goods, and in competitive markets for expensive, complicated products, such as cars and airplanes.

Thus, it’s become extremely urgent to improve the process of product development. And the solution doesn’t lie in building upon previous process innovations, including established time lines, exacting design reviews and cross-functional development teams. While these process improvements have significantly boosted the efficiency of new product development, they are now bringing shrinking gains. An entirely new approach is needed—one that focuses on information rather than just process. Sounds easy? It actually represents a complete revamping of product development for most companies.

This unconventional approach is already yielding dramatic results for some early adopters. These companies have been able to bring new products to market with greater speed while significantly increasing their sales of new products and their market share. Essentially, such firms have completely changed the way they make product development decisions—responding to information continuously rather than at prescribed moments and in clusters. They concentrate on improving the quality, timing and fusion of information throughout the development cycle, and as a result, they have transformed a rigid process into a flexible, information-driven one.

By emphasizing information as opposed to process, these companies are able to remain open to alternatives longer than most of their competitors, responding to fresh data about markets, suppliers and production capabilities deeper into the development cycle. They make decisions when they have taken stock of all their options, not at strictly set meetings that herald the beginning of the next stage of development. As a result, such companies can make more informed decisions at each juncture and thereby minimize the misunderstandings, bottlenecks and rework that can make product development so cumbersome. Consuming less time and resources, these companies make more profitable products.

This new approach can be likened to the lean manufacturing techniques that have optimized and brought flexibility to mass production lines. Just as lean procedures have helped companies boost their manufacturing efficiency by 30% or more, this information-driven approach can improve workflow and deliver comparable gains. Some analysts find that up to one-third of development time is typically wasted on unnecessary work or waiting for data or decisions. By monitoring the flow of information, companies can get rid of these productivity drains. Rather than being tied to a fixed sequence of activities—including market research, product concept, design specification, testing, etc.—companies can more effectively develop products by organizing work around the flow of information.

A Different Approach

Any team creating a new product must first figure out what features are essential for it to succeed. Under the information-driven approach, the team takes an extra step and pinpoints the information that it will need to make each crucial decision throughout the cycle. Companies then rearrange the development process around these information needs, making sure that high-quality information is collected at the appropriate time and reaches the correct people.

If costs, for example, are a top priority then the product team should configure the workflow around setting and fulfilling cost targets, instead of letting costs become an unmonitored outcome. As a result, the development process may shift. For instance, team members can procure cost estimates for design features from suppliers and operations people uncommonly early in the process, instead of attempting to reduce costs after a concept has been determined. Thus, under this information-driven approach, the sequence of steps is far from being set in stone and is responsive to new information.

By organizing work in this manner, a global company that makes medical devices was able to launch a successful new product much more quickly, nearly doubling its market share in that product category. While its old approach had teams deciding on new product features and functions with limited input from market research, suppliers and operations people, the new approach allowed for much more informed decision-making. Three subteams were created, with each focusing on a different workflow—one addressing customer needs and product design features, another emphasizing cost, and a third concentrating on reliability. The three subteams were able to take a more penetrating look at market research, realizing what their customers truly valued most—cost and reliability.

Even more importantly, the subteams were able to react quickly and more effectively to information from the marketing department, customer service and operations. They could modify product design and then determine how these changes would affect cost, reliability and the response of potential customers. Using this information-based approach, the team was able to define the product’s concept and features—a process that used to take half a year—in only two months. Moreover, it was able to create a new machine that was 20% cheaper to manufacture than previous models. And the product was also more reliable.

Aside from organizing workflow around information, the new approach also calls for just-in-time decision-making. In the old approach, a team would arrive at a decision and then build other decisions upon the first one. In the new approach, a team makes a decision when it has gathered all the necessary information and understood all the options. Information-driven teams address problems continuously and synthesize their findings regularly. In this manner, they can make the best decisions instead of committing to hastily formed ones. They can postpone the point when product designs must be determined and can thus remain responsive to information longer, evaluating a wider scope of solutions. They may spend more time on developing a concept, but they will accelerate the pace of later stages.

New Challenges

This unconventional approach does present challenges, however. To reap the advantages of this information-based strategy, companies must identify and foster skilled project leaders, who are even more crucial in this approach than in conventional product development. Under this new strategy, project leaders determine performance by pinpointing the most important activities, forgoing unnecessary steps and configuring the team and the workflow around information. Thus, companies are charged with the task of spotting promising potential leaders and honing their skills.

Moreover, this new approach also demands that firms develop new organizational capabilities and new ways of measuring the performance of project teams. Companies must be able to provide resources to each new product team in a flexible and dynamic manner to support the adaptability of this approach. They can do this by building their reserves and fostering multi-skilled employees. Additionally, to gauge performance, companies must adopt metrics for the quality of the information they collect and the efficiency with which they respond to it. In other words, they must ensure that teams are gathering the right information and allocating enough time to review it.

By following this new approach and meeting its challenges, product developers can bring their performance to a new level and satisfy the mounting demand for better products developed in less time and targeted at ever-smaller customer segments. While the current, process-oriented approach can no longer keep up with these performance pressures, the information-driven strategy can dramatically boost the efficiency of the process. Companies using this approach can more quickly and effectively launch products that better meet the market’s needs, thus gaining an advantage over rivals.

Source: The Future of Product Development
Richard Holman, Hans-Werner Kaas, and David Keeling
The McKinsey Quarterly, 2003 Number 3
www.mckinseyquarterly.com