PDMA Body of Knowledge: Chapter 3 Insights #4
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The kHUB Curator Team members have each been assigned a BoK section to own. This includes seeking, editing and sharing content related to that section. The curators are also sharing their perspective of various sub-sections of their chapter and contributing personal examples, experience, or related articles corresponding to the subject matter.
Chapter 3 – Product Innovation Process
NEW PRODUCT DEVELOPMENT IN AN ENTREPRENEURIAL COMPANY
New Product Development (NPD) is considered critical for the survival and growth of any organisation. Despite many studies, the market success rates in NPD are still appalling. According to a Product Development Management Association (PDMA) 2012 report, the ratio between the number of ideas that get generated and those that become successes in the market place is less than 15%. There is a big difference between the ‘best’ companies succeeding 82.2% of the time and the ‘rest’ of them succeeding only 52.9% of the time. The expenses, organisational effort, and energy associated with a high failure rate are tremendous.
Entrepreneurial orientation is said to be positively related to NPD (Açıkdilli and Ayhan, 2013). These organisations face specific challenges such as market uncertainty, limited resources and insufficient mentorship. Unmet market place needs are the inspiration for entrepreneurial activities but there are hardly any systematic studies done on how to harness the entrepreneurial’s innate risk orientation into a market place success.
NPD in an entrepreneurial company
Many NPD projects may be taken up due to the conviction of the entrepreneur alone. These are classified as ‘gut feel’ projects and the rest are those that fall into the pipeline in a regular manner. Typically, the ‘regular’ new product projects follow the Stage Gate process, whereas the gut feel projects do not. Gut feel projects may not undergo a few formal product tests such as prolonged product stability, storage and test marketing. They only undergo the usual front-end tests and business analysis.
An entrepreneurial company is almost never short of new ideas as that is the core of its origin and its existence. The ideas are ‘owned’ by the entrepreneur and this in many cases, affects the NPD process orientation of the organization as employees look to the founder during market emergencies, to bypass the test processes. This may affect the NPD quality and sustainability in the market place, However, entrepreneurial companies treat business analysis as a mandatory risk assessment step for their new products. This is the stage where all functions come together and commit a joint decision on the future of new product.
Once the new product is developed, test marketing exists in some form or the other in entrepreneurial companies. They may be done formally or informally, but a test launch prior to roll out is almost always done to estimate market potential. While many entrepreneurial companies do have formal market research procedures, during times of conflict between individual judgement and formal research findings, they prefer to go by their individual judgement.
Overall the key challenge in an entrepreneurial company seems to know how to balance the consumer knowledge that the entrepreneur may have (through their years of experience at the ground level, right from the start of the organisation) with ensuring how the other employees take ownership of the NPD process. By conducting review meetings with senior management more regularly and by dealing with process deviations more seriously, the entrepreneur can emphasise the process aspect significantly. New products are an important contributor to the revenues of any company and it is time for entrepreneurs to critically evaluate their NPD process, if they have to succeed consistently in the market place.
About the Author
Rajeshwari has authored three books (two-solo) - the first one was titled ‘My Life My Choice’-published by Macmillan in 2011 and was about mid-life career choices. The second one was a reference text book for B Schools and was titled ‘New Product development-a FMCG Perspective’, released in 2017. The third one is a recently launched one titled ‘The New Plan A’- and focuses on the various mid-life career challenges faced by working women. She recently won the Best Paper Award at an International Research Conference in Boston in 2017. She is also the recipient of numerous other Awards- Women Achiever and Distinguished Management Awards.
Rajeshwari has been a part of several professional organisations such as CII Task force for entrepreneurship, American Marketing Association, Institute of Research Bureau, Product development Management Association, IIM Ahmedabad Executive Committee, Empowering Women in IT industry etc.
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