Are Methods the Key to Product Development Success? An Empirical Analysis of Method Application in New Product Development

Abstract

This article analyzes method application in the context of new product development. Based on a study of 410 new product development projects, it is shown that applying methods in new product development leads directly to superior financial performance of the developed product (by reducing product costs, for example) and also leads indirectly to a greater degree of innovativeness, better cross-functional collaboration, and shorter time to market. The optimal combination of different method categories is examined and two key determinants of the successful adoption of new product development methods are analyzed, showing how firms can actively improve on what in some cases are very high failure rates of new products.

Appendix: Investigated Methods

Method/approach	Description
Research and development
Simultaneous/concurrent engineering	Simultaneous, distributed development, e.g., involving different development teams and/or locations
Design for manufacturing/assembly (DFM/DFA)	Attention to or improvements in the “manufacturability” of the product (or of product costs) during the development phase
Computer-aided engineering/design (CAE/CAD)	Use of computers as new product development tools, e.g., for design and technical drawing activities
Quality function deployment (QFD)/house of quality	Method of identifying and evaluating product components that affects customer benefits (what does the customer want and how can it be realized on a technological level?). To this end, the benefit that a product component yields for customers (e.g., long standby times for mobile phones) is translated into technological and quality requirements (e.g., requirements placed on the battery and the display)
Standardization/modular design	Standardization of product components and, where appropriate, use of modular building blocks to increase the number of identical parts (with the aim of reducing complexity and cutting costs)
Collaborative supplier integration in product development	Active involvement of suppliers in product development, e.g., by running ideas competitions
(Rapid) prototyping	Various manufacturing methods for the rapid production of prototype parts (e.g., 3D printing or laser deposit welding)
Marketing research
Customer interviews and observations (e.g., monitored test markets)	Structured observation of customers (e.g., in the context of a video-monitored test market) or the conduct of interviews with customers (e.g., personal, on-site interviews or questionnaire-based telephone interviews) with the aim of identifying and better understanding what customers need/want
Product (design) test (e.g., home-use tests)	Getting customers to try out products, e.g., in the context of home-use tests (where a product is supplied to customers who subject it to everyday use and provide feedback on their experience of the product) or product design tests (e.g., by demonstrating and evaluating different product designs)
Price test/price sensitivity analysis	Method of determining the ideal price or price range
Conjoint analysis	Market research method to identify the importance of individual product functions. To this end, several different combinations of products are showed to the test person and evaluated (comparison of pairs)
Purchasing
Target costing	Calculation of the maximum cost of a product or component in light of its market price or target price (or how much the customer has been found to be willing to pay)
Specified tenders	Eliciting of tenders from several suppliers based on detailed product specifications for each component that adds value and that must be purchased in order to manufacture the new product
Total cost of ownership (TCO)	Calculation of all costs, from the development of a product to its withdrawal from the market (e.g., including downstream costs for the spare parts provisioning)
Low-cost/best-cost country sourcing (L/BCCS)	Systematic sourcing in countries with low labor costs (e.g., in Eastern Europe)
Quality and logistics
Supplier management and development	Direct intervention in the activities of suppliers and/or direct support for suppliers’ operations with the aim of improving suppliers’ skills and performance
Design for six sigma (DFSS)	Quality management method with the aim of achieving zero-defect products and processes wherever possible
Failure mode and effect analysis (FMEA)	Analytical method used in reliability engineering with the aim of identifying and evaluating potential weaknesses in a product at an early stage. To this end, potential sources of defects are weighted and assessed. This form of risk analysis is intended to identify and eliminate potential defects before they materialize
Project management
Critical path analysis	Project milestone planning (“who is to do what by when?”) in which individual steps are coordinated and the “critical path” is defined (delays in these project steps lead to delays in the overall project)
Product value/profitability analysis (break-even analysis, net present value, return on investment)	Structured project feasibility analysis, e.g., based on a break-even analysis or on the return on investment
Project controlling (time and budget)	Regular project controlling to ensure that deadlines and budget targets are met and to monitor compliance with project milestones (e.g., by designated project controllers)
Project risk controlling/project risk matrix	Visualization and monitoring of project risks (e.g., delays and quality considerations)
Common methods
Creativity techniques (brainstorming, brainwriting, mind mapping, synectics, etc.)	Methods deployed to find creative solutions, e.g., intuitive methods (such as brainstorming) and discursive methods (based on logical reasoning sequences, such as morphological boxes)
Benchmarking (competitive intelligence)	Structured comparison with both in-house products and products (or solutions) made by competitors
SWOT analysis (strengths, weaknesses, opportunities, and threats)	Structured juxtaposition and analysis of the strengths, weaknesses, opportunities, and risks associated with a product or a possible
Scenario planning and analysis	A method of strategic planning designed to analyze the scope of potential events and their impacts (e.g., best-case, worst-case, and typical-case scenarios)