How to combine Project Management and New Product Development
Published in Product Management, Project Management.
Breakthrough innovation creates a legal monopoly and helps to gain a competitive advantage. Increased accessibility to alternative suppliers through the Internet intensifies global competition and encourages organizations to optimize innovation processes. Companies develop new products to enter new markets, suit customer needs, stay ahead of the competition, or replace outdated products. New Product Development is a well-defined area of Product Management, but at the same time, companies initiate Projects to develop new products. For this reason, Project Management and Product Management overlap. How to combine these two disciplines when developing new products?
New Product Development (NPD) process includes several complex actions with a high degree of interaction between the functional areas of the enterprise (RnD, Operations, Financial management, HR, Marketing, Distribution, etc.) It is highly scalable, adaptive, customer-focused, and iterative. Moreover, it can be integrated with the Agile software development model.
However, in some areas, project management incompletely meets the needs of NPD. NPD is characterized by complex interrelated activities and large uncertainties about precisely which solution path will be taken. As a result, the full scope of the Project can often not be anticipated beforehand.
Whereas Cost is the primary focus in Project Management, with NPD there is a need to consider Cost and Income (from product sales) in making strategic decisions. Communication and Human Resource Management play a huge role in NPD success, but existing Project Management perspectives have little to say about organizational culture, team dynamics, and leadership styles. There is a poorly understood intersection between Project Management and Knowledge Management for innovation processes. For practitioners, it means that the Project Management method provides a basic, but imperfect, tool for managing NPD.
The Project includes the scope of the Project (an innovative product or an innovative decision), Constraints (schedule, cost, quality), and Resources (human, financial, material, and technical).
Innovation projects in small teams rely on open communications and trusting relationships to prosper. Information sharing and decision-making must be done on a business-centric rather than a project-centric basis to foster the continuity of strategic intent into strategic integration.
Cooper et al (1993, 2001) have developed a Stage-Gate approach for the New Product Development process. Management of each stage can be accomplished using traditional Project Management techniques.
Project Management and New Product Development share a similar step-by-step action algorithm. Typical NPD stages are Initiation, Planning, Execution, Analysis, Management, and Closing. At the same time, Project Management includes several phases in the Project Lifecycle such as Initiating, Planning, Executing, Monitoring and Controlling, and Closing. These stages and phases can be logically aligned.
To pass a Project Phase Gate, the Project Manager must answer several questions: was the previous step executed in a quality fashion, does the Project continue to look like an attractive idea, and are the proposed action plan and the requested resources reasonable and sound? Depending on the answers, a go/no go choice is made.
In NPD, between every two Stages, a Gate is used to validate and test the outcome of each Stage and ensure it meets the requirements. The process at each Gate includes the evaluation of the deliveries of the previous Stage against metrics and the KPIs.
Companies that combine tools & techniques of Project Management and NPD, design Innovative Project Roadmap and balance it according to Project Constraints. In such a situation, Phase Gate criteria are the achievement of optimal Project Metrics regarding Quality, Schedule, and Budget.
Based on this synthesis, a step-by-step procedure for managing an innovative project can be developed. However, such a procedure will vary a lot across industries and must be tailored to a specific organization.
Step 1. Research – Initiation. We ensure the Project is aligned with the company strategy. New products must target perspective markets and contain significant competitive advantages.
The Product Manager decides how to produce the proposed product and how to sell the product. To do such, he uses NPD tools such as Quality Function Deployment diagrams. He filters ideas, chooses the most optimal, and shares the information with the Project Team. Project scope, goals, and risks are updated accordingly.
Step 2. Business Case Planning. The Project Manager designs the Project Plan and assesses the required resources. Project Quality, Schedule, and Cost are specified to be used as KPIs for measuring the Project’s success. It’s recommended for the Project Manager to design a Work Breakdown Structure (WBS).
The Product Manager forecasts Costs and Revenues and Calculates NPV, PP, ROI, IP, and IRR Metrics.
These numbers are combined in the economic feasibility study.
Given that Innovation Projects are characterized by a high degree of uncertainty, special attention must be paid to Risk Management.
Step 3. Development – Execution. Development-execution. During the development phase, it is important to complete the design of the product, determine all the technical characteristics, and create a functional prototype that best meets the Business Requirements. These processes can be implemented using the Design failure mode and effect analysis (DFMEA) and Design for Manufacture and Assembly (DMFA) methodologies. At this stage, it is important to carry out tests of performance, service life, and quality of the developed product. Some companies provide prototypes to customers and collect their feedback.
Stage 4. Check-control. At this stage, the readiness of the product, equipment, technology, and personnel to go LIVE is checked.
Stage 5. Release-closure. The release stage is the phase in which the distribution is launched. Much of it depends on the effectiveness of marketing procedures. The task of finding marketing intermediaries and logistics organizations is solved. It is necessary to build an effective system of technical support, warranty service, and after-sales service, to improve the reputation of products and the company in the face of users.
After the release, it is necessary to evaluate the results of the project, assess the degree of deviation of the actual parameters from the planned ones, work on the errors and institutionalize the experience gained (Lessons Learned).
To conclude, the methodologies of Project management and New Product Development (NPD) can be successfully combined. Traditional Project Management procedures are complemented by modern NPD tools such as Stage-gate, QFD, WBS, DFMEA, DFMA, and others. The development of a new product implemented based on Project Management becomes more structured and stable, as there is constant Monitoring of the achievement of sustainability in terms of Quality, Timing, and Cost of the Project, a clear relationship of functions between Stakeholders, and a focus on producing Deliverables.