Benchmarking the Firm's Critical Success Factors in New Product Development

Abstract

Managing new product development (NPD) is, to a great extent, a process of separating the winners from the losers. At the project level, tough go/no‐go decisions must be made throughout each development effort to ensure that resources are being allocated appropriately. At the company level, benchmarking is helpful for identifying the critical success factors that set the most successful firms apart from their competitors. This company‐ or macro‐level analysis also has the potential for uncovering success factors that are not readily apparent through examination of specific projects. To improve our understanding of the company‐level drivers of NPD success, Robert Cooper and Elko Kleinschmidt describe the results of a multi‐firm benchmarking study. They propose that a company's overall new product performance depends on the following elements: the NPD process and the specific activities within this process; the organization of the NPD program; the firm's NPD strategy; the firm's culture and climate for innovation; and senior management commitment to NPD. Given the multidimensional nature of NPD performance, the study involves 10 performance measures of a company's new product program: success rate, percent of sales, profitability relative to spending, technical success rating, sales impact, profit impact, success in meeting sales objectives, success in meeting profit objectives, profitability relative to competitors, and overall success. The 10 performance metrics are reduced to two underlying dimensions: program profitability and program impact. These performance factors become theX‐and Y‐ax.es of a performance map, a visual summary of the relative performance of the 135 companies responding to the survey. The performance map further breaks down the respondents into four groups: solid performers, high‐impact technical winners, low‐impact performers, and dogs. Again, the objective of this analysis is to determine what separates the solid performers from the companies in the other groups. The analysis identifies nine constructs that drive performance. In rank order of their impact on performance, the main performance drivers that separate the solid performers from the dogs are: a high‐quality new product process; a clear, well‐communicated new product strategy for the company; adequate resources for new products; senior management commitment to new products; an entrepreneurial climate for product innovation; senior management accountability; strategic focus and synergy (i.e., new products close to the firm's existing markets and leveraging existing technologies); high‐quality development teams; and cross‐functional teams.