The PDMA handbok of new product development

THE PDMA HANDBOOK

OF NEW PRODUCT

DEVELOPMENT

THIRD EDITION

Kenneth B. Kahn, Editor

Associate Editors:

Sally Evans Kay

Rebecca J. Slotegraaf

Steve Uban

JOHN WILEY & SONS, INC.

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Library of Congress Cataloging-in-Publication Data:

The PDMA handbook of new product development / Kenneth B. Kahn, editor. -- 3rd ed.

p. cm.

Includes index.

ISBN 978-0-470-64820-9 (cloth); ISBN 978-1-118-41549-8 (ebk); ISBN 978-1-118-41808-6 (ebk);

ISBN 978-1-118-43325-6 (ebk); ISBN 978-1-118-46642-1 (ebk); ISBN 978-1-118-46643-8 (ebk);

ISBN 978-1-118-46644-5 (ebk)

1. Product management—United States--Handbooks, manuals, etc. I. Kahn, Kenneth B.

II. Product Development & Management Association. III. Title: Handbook of new product

development.

HF5415.153.P35 2013

658.5'75—dc23

2012026245

Printed in the United States of America

10 9 8 7 6 5 4 3 2 1

iii

CONTENTS

Introduction vii

SECTION ONE: PREPARING 1

1 New Products—What Separates the Winners from the Losers

and What Drives Success 3

Robert G. Cooper

2 An Innovation Management Framework: A Model for Managers

Who Want to Grow Their Businesses 35

Paul Mugge and Stephen K. Markham

3 Service Development 51

Thomas D. Kuczmarski and Rishu Mandolia

4 Business Model Innovation: Innovation Outside the Core 68

Heidi M.J. Bertels and Peter A. Koen

5 Open Innovation and Successful Venturing 82

Rob van Leen and Marcel Lubben

The PDMA handbook of new product development. Edited by Kenneth B. Kahn

Copyright ©2013 by John Wiley & Sons, Inc. All rights reserved.

ISBN: 978-1-118-46642-1

iv Contents

6 Success Factors of New Product Development for Emerging

Markets 100

Anna Dubiel and Holger Ernst

SECTION TWO: STARTING 115

7 Effective Practices in the Front End of Innovation 117

Peter A. Koen, Heidi M.J. Bertels, and Elko Kleinschmidt

8 Getting Lightning to Strike: Ideation and Concept Creation 135

Christopher W. Miller

9 Portfolio Management for Product Innovation 154

Scott J. Edgett

10 Identifying Signifi cant New Business Opportunities:

The Magellan Process 167

Deborah A. Mills and Paige Siempelkamp

11 We-ness, Knowledge Sharing, and Performance in New Product

Development Teams 181

Hyunjung Lee and Stephen K. Markham

12 Virtual Teams in New Product Development: Characteristics and

Challenges 195

Nicholas S. Lockwood, Mitzi M. Montoya, and Anne P. Massey

SECTION THREE: PROGRESSING 211

13 Obtaining Customer Needs for Product Development 213

Abbie Griffi n

14 User Research for Product Innovation: Qualitative Methods 231

Gary R. Schirr

15 Market Analytics 244

Brian D. Ottum

16 Forecasting New Products 265

Kenneth B. Kahn

Contents v

17 Social Media and New Product Development 282

Amy Kenly

SECTION FOUR: ACHIEVING 295

18 Developing Intelligent Products 297

Serge A. Rijsdijk and Erik Jan Hultink

19 Strategies to Improve NPD Governance 310

Steven Haines

20 Managing the Supply Chain Implications of Launch 325

Roger J. Calantone and C. Anthony Di Benedetto

21 Post-Launch Product Management 339

Steven Haines

22 Managing Innovation Paradoxes for Organizational

Ambidexterity 356

Marianne W. Lewis and Constantine Andriopoulos

23 Understanding the Most Common Types of Intellectual

Property Rights and Applying Them to the Product

Development Process 368

Rel S. Ambrozy

SECTION FIVE: PDMA RESEARCH 385

24 Lessons Learned from Outstanding Corporate Innovators 387

Sally Evans Kay, Douglas Boike, Wayne Fisher, Thomas Hustad, Stan

Jankowski, Deborah A. Mills, Barry J. Novotny, Albert Page,

and William M. Riggs

25 The Difference between Goods and Services Development:

A PDMA CPAS Research Study 405

Stephen K. Markham and Thomas Hollmann

26 The Emergence of the Product Innovation Discipline and

Implications for Futher Research 416

C. Anthony Di Benedetto

vi Contents

Appendix: About the Product Development and Management

Association (PDMA) 427

New Product Development Glossary 435

Author Index 477

Subject Index 481

vii

INTRODUCTION

I

n today ’s world, where innovation is critical to corporate success and sur￾vival, the third edition of the PDMA Handbook of New Product Development

provides the premier guide for the identifi cation and execution of critical

new product development (NPD) practices. The editors ’ intent is that

readers of this Handbook will gain insights into how to make improved

decisions when traveling through the diffi cult landscape typical of NPD.

Modeled after the previous two editions, the third edition of The PDMA

Handbook of New Product Development presents updated core content chap￾ters and new chapters covering those topics deemed important to NPD

practice. While the term product is used, the material in this Handbook is

intended for product and/or service development situations.

The Intended Audience for This Book

This Handbook is written for people involved in the development and

management of new products and services who have a keen interest in

increasing their knowledge of the topic.

The following excerpt from a reader ’s review of the fi rst edition on

Amazon.com provides insight into who will benefi t from this book:

The PDMA handbook of new product development. Edited by Kenneth B. Kahn

Copyright ©2013 by John Wiley & Sons, Inc. All rights reserved.

ISBN: 978-1-118-46642-1

viii Introduction

To whom can I recommend this book? To anyone who wants to increase

his or her own scope of knowledge of NPD. Especially to a person who

has already gained some experience in this fi eld and is able to compare

his or her own experience to this book.

Accordingly, the overarching goal of this handbook is to help

new practitioners of product development as well as those with some

experience to better understand and apply critical practices in product

innovation.

How To Use This Book

No NPD guidebook can anticipate the uncharted terrain into which a

new productdeveloper may occasionally stumble. While this Handbook

offers concise, map-like detail about individual topics, it is also similar to a

compass. As a compass, it will enable you to fi nd your bearings no matter

where in the topography you unexpectedly fi nd yourself.

Of course, each reader of this Handbook will have different interests.

We recommend that fi rst-time readers skim the Contents to learn about

the content of each of the Handbook’s fi ve sections. Once oriented, they

can explore the topics that interest them or where they feel they need

guidance.

The Book ’s Organization

The Handbook begins with Section One, which presents an overview of the

nature of innovation and the NPD endeavor to prepare for this under￾taking. The next three sections then follow the general fl ow of NPD in

most fi rms, recognizing that this fl ow in practice is not compartmentalized

or often linear, and that the tasks associated with one set of activities may

overlap with the tasks of another set of activities. Section Two addresses

topics surrounding the front end of the NPD process—the starting point.

Section Three presents techniques and tools as one progresses through

the NPD process. Section Four discusses the back end of the NPD process,

as well as the means to achieve NPD success. The last section, Section Five,

provides a view of the PDMA and its efforts to create new knowledge that

closes the gap between NPD theory and practice.

Introduction ix

The Appendix provides a description of and contact information

for the Product Development & Management Association (PDMA). The

New Product Development Glossary contains terms commonly used

in NPD.

In summary, the PDMA Handbook is organized as follows:

Section I Preparing (page 1)

Section II Starting (page 115)

Section III Progressing (page 211)

Section IV Achieving (page 295)

Section V PDMA Research (page 385)

Appendix: About the Product Development & Management

Association (PDMA) (page 427)

New Product Development Glossary (page 437)

Acknowledgments

Writing and editing this Handbook has been, in common with other PDMA

projects, an all-volunteer activity. All the authors and editors volunteered

their time and talent, taking time from already full professional calendars.

Responsibility for a chapter ’s content lies with each author, but the editors

played a key role in managing the review process and providing on-target

comments and suggestions.

We encourage readers to consider PDMA ’s other products. These in￾clude the PDMA website at www.pdma.org , the award-winning Journal of

Product Innovation Management, the award-winning Visions magazine, the

PDMA ToolBooks (published by Wiley), New Product Development Pro￾fessional Certifi cation, and conferences and workshops. In addition, the

PDMA Foundation creates and delivers actionable knowledge, such as the

Comparative Performance Assessment Study for better decisions in new

products management. Additional information on the PDMA is presented

in the Appendix.

Finally, we appreciate the support that our publisher, John Wiley &

Sons, has provided. Robert L. Argentieri and his assistants gave timely

counsel and ably shepherded this multi-authored manuscript through the

editorial process.

x Introduction

PDMA Handbook Third Edition Editorial Staff

Editor

Kenneth B. Kahn

Virginia Commonwealth University

Associate Editors

Sally Evans Kay

Strategic Product Development

Rebecca J. Slotegraaf

Kelley School of Business, Indiana University

Steve Uban

Kenneth B. Kahn, Ph.D. is a Professor of Marketing and Director of the

da Vinci Center for Innovation at Virginia Commonwealth University in

Richmond, Virginia. His teaching and research interests address product

development, product management, and demand forecasting of current

and new products. He has published in a variety of journals, including the

Journal of Product Innovation Management, Journal of Business Research, Busi￾ness Horizons, Journal of Forecasting, Journal of Business Forecasting, Marketing

Management, and R&D Management. He also has authored the books Product

Planning Essentials (Sage Publications, 2000; 2nd ed. by M.E. Sharpe, 2011)

and New Product Forecasting: An Applied Approach (M.E. Sharpe, 2006) and

served as Editor of The PDMA Handbook of New Product Development, 2nd ed.

(Wiley, 2004). Dr. Kahn ’s industrial experience includes serving as an in￾dustrial engineer and project engineer for the Weyerhaeuser Company and

as a manufacturing engineer for Respironics, Inc. He has consulted with

and conducted training sessions for numerous companies, including Ac￾centure, Acco Brands, Coca-Cola, ConAgra, Harley-Davidson, Honeywell,

John Deere, Lego, McNeil Nutritionals, Procter & Gamble, and the SAS

Institute. He has been a PDMA member since 1989.

Sally Evans Kay spent 36 years with The Dow Chemical Company and

GlaxoSmithKline Consumer Healthcare. After assignments in R&D,

fi nance, sales, and marketing, her career was focused on various areas of

Introduction xi

innovation and new product development. In 2004 she started her own

consulting business, Strategic Product Development, which focuses on the

front end of the innovation process. Ms. Kay has been active in PDMA

since 1988 both nationally and at the chapter level. She currently chairs

the Outstanding Corporate Innovator Award Committee and is on the

Board of the Cincinnati chapter. She has a degree in Biology/Chemistry

from the University of Pittsburgh.

Rebecca J. Slotegraaf, Ph.D., is Associate Professor of Marketing and Whirl￾pool Faculty Fellow at the Kelley School of Business, Indiana University.

Her research on innovation addresses the infl uence of a fi rm ’s resources,

capabilities, and brand equity on the competitive advantage generated

from its new products. She has published in numerous journals, includ￾ing the Journal of Marketing, Journal of Marketing Research, Organization

Science, Decision Sciences, and International Journal of Research in Marketing. She

currently serves on the editorial boards of the Journal of Marketing, Interna￾tional Journal of Research in Marketing, Journal of Product Innovation Manage￾ment, and Journal of the Academy of Marketing Science and her research has

achieved award recognition, including the PDMA Research Competition.

Dr. Slotegraaf ’s insights are built from several industries, including auto￾motive, consumer durables, fast-moving consumer goods, high-technology,

and pharmaceuticals.

Steve Uban, PE, NPDP, has been a practitioner in research and new prod￾uct development for almost 40 years. His new product involvement has

been as a practitioner for companies such as Ecodyne, Neptune, UOP,

Allied-Signal, Waste Management, Wheelabrator, U.S. Filter, Vivendi, and

Weatherford. A recent product was an architectural curtain-wall product

for the fi rst reconstructed building at 7 World Trade Center in New York

City. He is a former general manager of an international division of Vivendi

and has spent most of his career protecting the waters of the world. He is

still an active inventor in water, wastewater, industrial fi ltration, and infra￾structure management areas and is currently working as an independent

product developer for a new startup company, Informational Data Tech￾nologies, in the areas of satellite data gathering and water management. He

fi nds great joy in creating jobs for people through new products.

Mr. Uban is a Professional Engineer and Certifi ed New Product Develop￾ment Professional and has been a member of PDMA for almost 30 years.

xii Introduction

He was a founding board member of the Minnesota chapter and a past

Vice President of New Products, and was Vice President of Publications

when PDMA created their fi rst website and fi rst Handbook. He is currently

Research Director for the PDMA Research Foundation and serves on the

board of the PDMA Foundation.

SECTION ONE

PREPARING

By failing to prepare, you are preparing to fail.

—BENJAMIN FRANKLIN (1706–1790), AMERICAN INVENTOR,

JOURNALIST, PRINTER, DIPLOMAT, AND STATESMAN

The PDMA handbook of new product development. Edited by Kenneth B. Kahn

Copyright ©2013 by John Wiley & Sons, Inc. All rights reserved.

ISBN: 978-1-118-46642-1

3

CHAPTER ONE

NEW PRODUCTS—WHAT SEPARATES THE

WINNERS FROM THE LOSERS AND WHAT

DRIVES SUCCESS

Robert G. Cooper

1.1 Introduction

Product innovation—the development of new and improved products

and services—is crucial to the survival and prosperity of the modern cor￾poration. According to a recent American Productivity & Quality Center

(APQC) benchmarking study, new products launched in the last three years

currently account for 27.3 percent of company sales, on average (Edgett,

2011), and a survey of executive opinion reveals that “enhancing innovation

abilities” is now the number one driver of corporate growth and prosperity

(a decade ago, it was “cost cutting”; Arthur D. Little, 2005). But many new

products do not succeed: The same APQC study reports that just over half

(53.2 percent) of businesses ’ new product development projects achieve

their fi nancial objectives and only 44.4 percent are launched on time.

The Quest for the Critical Success Factors

The keys to new product success outlined in this chapter are based

on numerous research studies of why new products succeed, why

they fail, comparisons of winners and losers, and benchmarking

(Continued)

The PDMA handbook of new product development. Edited by Kenneth B. Kahn

Copyright ©2013 by John Wiley & Sons, Inc. All rights reserved.

ISBN: 978-1-118-46642-1

4 The PDMA Handbook of New Pr oduct Development

The central role of product innovation in business strategy coupled with

the poor innovation performance results in many fi rms has resulted in a

quest for the factors that drive performance and lead to product innovation

success (see “The Quest for the Critical Success Factors”). Understanding

why new products succeed and why some businesses are so much bet￾ter than others at product innovation is central to effective new product

management: It provides insights for managing new product projects (for

example, are certain practices strongly linked to success?) and clues to new

product selection (what are the telltale signs of a winner?). This chapter

reports the fi ndings from myriad studies of what makes new products win￾ners and what makes some businesses more successful than others at prod￾uct development.

Some success drivers distinguish successful new products from unsuc￾cessful ones and thus are most relevant for managing individual

new-product projects (see “Why New Products Succeed—Eight Critical

Success Drivers”). Other success drivers explain why some businesses are

more successful at product innovation than others and hence are most

relevant at the business level (see “Why Businesses Excel—Nine Critical

Success Drivers”).

studies of best-performing businesses. Many of these investigations

have been reported over the years in the PDMA journal, the Journal

of Product Innovation Management. Some of the most revealing of these

studies have been the large-sample quantitative studies of success￾ful versus unsuccessful new products (for an excellent review, see

Cooper, 2011a; Montoya-Weiss and Calantone, 1994). They began

with Project SAPPHO in the early 1970s, followed by the NewProd

series of studies, the Stanford Innovation Project, and, subsequently,

studies in countries outside of North America and Europe (Mishra

and Lee, 1996; Song and Parry, 1996). More recently, several large

benchmarking studies of best practices have provided other insights

into how to succeed at product innovation (American Productivity &

Quality Center, 2003, Cooper, Edgett, and Kleinschmidt, 2003). This

long tradition of research has enabled us to pinpoint the critical

success factors—those factors that separate winners from losers—

that are outlined in this chapter.