Study: Faster not always better in product development
Study: Faster not always better in product development
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As last decade’s financial turmoil recedes into view, companies are doubling down on innovation, a strength that’s only growing in stature as key to long-term growth.
A 2015 PricewaterhouseCoopers report showed R&D allocations by the top 1,000 spenders on innovation around the globe neared $700 billion in 2015, up more than one-third since the beginning of the decade – and the fifth consecutive annual increase. At the same time, the global competitive landscape is shifting and the stakes for clinching first-to-market status are rising.
The natural response to these competitive pressures seems clear-cut: Shorten the time a product takes to reach the market, its so-called cycle time, and stay ahead of the game. New research from Fisher College of Business Associate Dean Elliot Bendoly, however, finds that faster isn’t always better.
An unanswered question
Bendoly’s research, co-authored by Rao Chao of the University of Virginia and published this year in Production and Operations Management, is a welcome breakthrough in the often-studied arena of the product development process. Prior research in the field treated cycle time as a single unit, from big idea to big debut, and was largely inconclusive on whether speeding up innovation could drive market gains.
“We didn’t really know what to tell people,” Bendoly said. “Our thought was that the mixed findings were, in part, an artifact of how aggregated the analysis is, looking at everything the same way. You miss these nuanced microcosms that exist in this fairly complex system.”
Bendoly’s research is the first of its kind to look closer at those microcosms, examining product development in eight distinct stages loosely grouped into three parts – and, crucially, what happens when each one is sped up. The first phase is the so-called “fuzzy front end,” where an idea forms and clears enough hurdles to be tested. The middle development phase entails the testing and analysis that get the product ready for the final commercialization stage, which culminates in market entry.
By scouring project records from more than 100 firms, Bendoly unearthed a crucial insight: Two of the eight product development stages can definitively leverage shorter cycle time into market value gains – though only to a certain point.
The sweet spot
The companies Bendoly studied – mostly electronics makers or industrial instrument manufacturers – all took up so-called product life-cycle management initiatives in an effort to streamline new-product development. By comparing their products’ market performance to broader industry trends, Bendoly was able to determine that companies improved market performance after speeding up the middle beta/market testing and technical implementation stages. How much of a payoff companies saw, however, depended upon how aggressively they innovated and how much time they cut.
Highly innovative, or “high-breadth,” companies that use a wide range of technologies could speed up the beta testing process only about 3 percent before market gains peaked. Gains diminished after this point, likely culprits being staff burnout and shortcut-driven quality problems, according to the research.
These same innovators have even less leeway in the technical implementation phase: Cutting cycle time here by scarcely more than 1 percent shows a falloff in market performance.
“For firms trying to strategically position themselves as leaders in groundbreaking innovation, still still need to worry about time to market. Unfortunately, they can also have a tendency to view certain tactical development activities as reducible or secondary to creative front end activity – and this is an easy place to fail,” Bendoly said.
By contrast, so-called “low-breadth” companies – those that used a limited range of technologies and largely pursued incremental innovation (e.g., an iPhone upgrade) – could speed up beta testing by about 9 percent and technical implementation about 12 percent before gains began to fade.
Many companies, however, exist in an area between high and low breath, not singularly focused on industry leadership or incremental innovation.
“The hardest prescription is for the guys in between,” Bendoly said. “They need to proceed with caution, and perhaps some degree of closely observed and documented experimentation, when trying to tighten their development cycles. They’re not off the hook.”
An easy target
Bendoly’s research might break new ground in how we view the product development process, but it also opens doors for future research at this more granular level. Bendoly and his co-author uncovered a connection between cycle-time speed and market gains in the middle, development phases, yet that doesn’t mean a similar relationship doesn’t exist for others.
“We still suspect that relationship exists somewhere for all product development stages. The firms in our sample just didn’t push those other boundaries enough for us to observe it.” Bendoly said.
In fact, most companies in this study often appeared to stay away from attempts to tighten cycle times in the “fuzzy front end” and final commercialization stages. This isn’t an isolated tendency as companies tend to view these bookends to the product development process as more free-flowing and hands-off to speeding up.
“That middle portion, people think, is more structured so it’s a good target for reducing time, but in some cases that’s a false belief,” Bendoly said. “When you’re highly innovative, it’s hard to foresee what one minor change in an attempt to reduce time can have on performance.”
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