|Book Review: Product Innovation|
Product Innovation: Leading Change through Integrated Product Development
Written by: David L. Rainey. New York: Cambridge University Press, 2005. 625+xiv pages.
With businesses becoming increasingly aware of the growing need for more innovation and the cost (and embarrassment) of new product failures, this very substantial text, covering most of the issues relating to product innovation, comes at an appropriate time. Product Innovation will appeal to practitioners and to academics alike. Although “geared toward sophisticated practitioners” (p. 7), the book has sufficient detail that even newcomers to the product innovation field will find it a worthwhile guide to setting up their own procedures for developing new products. As the author points out in the preface, the purpose of the book is also to serve M.B.A. students. In this regard,Product Innovation is so well written that it will likely become a standard text for new product and product management courses. There are chapter summaries, a substantial glossary, and boxed stories from companies such as Segway (human transporter), 3M, Motorola, and Dell that add interest and value to the text.
The book is composed of four parts of roughly equal length. Part I has three chapters dealing with the strategic aspects of product innovation. The three chapters in part II cover conceptual issues (e.g., idea generation). Part III has three chapters describing the methods and techniques of analysis and of decision making. The final part considers the operational stages of the new product innovation process, from design through to precommercialization.
Several supplementary chapters, written by colleagues of the principal author, cover specific topics in which their expertise is obvious. David Rainey wisely limits himself to the development process and eschews the commercialization aspects of new product management.
The basic premise of Product Innovation is that new product development (NPD) is the way to maximize customer value. If done correctly, not only the customer but also the company and perhaps even society in general will benefit. Product innovation should be regarded as a strategic issue for a business rather than a mere matter of supplementing the product line. What is needed, therefore, is a process in place, which if it cannot guarantee the success of every new product at the least reduces the risk of introducing ones that are likely to fail. This requires an understanding of all the elements of the NPD process and a systemic approach that ensures that each of these elements is given due recognition of its importance in the process. Also required is an understanding of the roles of individuals, particularly in the common case where cross-functional teams are created to manage the process. Herein lies the strength of this book. Rainey explains each element of the NPD process and the linkage between these elements to form a cohesive new product strategy. Unlike many other texts where the people factor is taken for granted, Product Innovation gives due regard to selecting and managing the optimal mix of people responsible for ensuring that the process runs smoothly. Rainey sees integrated product development (IPD) as providing organizations with the ability to improve market position in already served markets, as well as new ones, through innovative solutions to prevailing problems.
Part I, “Product Innovation and Strategic Logic,” introduces and provides an overview of product innovation. There is a detailed description of the standardized NPD process and of the basic types of new products—nothing new, but useful for those unfamiliar with these concepts. This approach to new product development served well in the twentieth century, but the author makes the point that in this new century, “IPD is the mainstream approach for developing new products” (p. 2). With customers expecting better value and product life cycles shortening, a more strategic approach is needed to product innovation. There will be an emphasis on superior product performance; high-quality, exceptional customer benefits; and speed to market. This requires the creation of a knowledge-based NPD system within the organization. Rainey proposes an enterprise management model (EMM), which would provide a framework for evaluating new product opportunities and for managing the NPD process and would enable the organization to link business strategies with product development to create better customer value.
Chapter 3 deals mainly with the organizational aspects of NPD, especially the selection and management of teams. For some readers this may be the most valuable chapter of the book. There is a detailed discussion of organizational planning and team selection. The choice of team leader, team structure, team development, and the use of virtual project teams are all considered.
Part II, “Establishing the Foundation: The Conceptual Level,” covers much the same material as most texts on such subjects as NPD, idea generation, and concept development. Chapter 6 introduces a new element, however: an NPD program definition stage, referred to as phase 3 of the process. Program definition encapsulates the philosophy, policies, and procedures behind this NPD philosophy. In effect, it is approaching NPD from a corporate standpoint, taking a holistic view of all of the participants, the consequences of the process, and the associated opportunities. A supplement to chapter 6, by Lou Gingerella, gives an overview some of the financial management aspects of NPD. This very useful add-on provides excellent coverage of issues not normally within the province of new product managers, such as the cost of capital, payback periods, and net present values.
The focus of chapter 7 is product design and architecture. Quality improvement methods, concurrent engineering, and total quality management TQM are some of the major concerns here. Additionally, techniques such as computer-aided design, computer-aided manufacturing, and the theory of inventive problem solving, among others, are introduced. Vignettes from leading manufacturers like BMW, Toyota, and General Motor's Saturn division provide real-life applications of these techniques. A supplement to this chapter, by Richard Picard, describes the strategic use of quality function deployment (QFD). The four phases for implementing QFD are spelled out in detail and make interesting reading.
Chapter 8 gives some good insights into the strategic marketing aspects of NPD. Pricing strategies and marketing communications (promotion) are particularly well covered. Chapter 9, by Edward Arnheiter, introduces the reader to production strategies and methods. This is a novelty in a NPD textbook. Most other texts seem to adopt the approach once trumpeted to me at the beginning of my career as brand manager to “stay away from the production people.” The feeling was that production managers would find a million reasons to resist the introduction of new products. Clearly, a holistic view of NPD requires the input of production and other manufacturing specialists. Arnheiter covers topics such as production-system characteristics, lean-production systems, process and capacity planning, and the new hot topic, supply-chain management. The chapter's emphasis is on manufacturing performance measures: cost, quality, delivery speed, and flexibility.
Chapter 10 gives a very detailed coverage of the routine financial aspects of NPD. Topics covered include cost structure of the product, estimating sales volume, and cash flow, together with other financial techniques to support decision making in NPD. This is a particularly good chapter. It recognizes that nearly all the financial methods used in NPD are flawed in some way, relying as they do on sales and other estimates as their input.
Part IV, “The Operational Level and Concluding Remarks,” refers to the translation of theories and concepts into reality. The concluding chapters are concerned with the practicalities of design and development, validation or testing, and the precommercialization phases of NPD. The design and development phase is the transition from what is referred to as “planning, analysis, and conceptual processes” (p. 511), which are investigative, to processes based on real-world issues. Thus, this phase covers new product design and positioning, matching the product attributes to needs of the customer, and designing a process that leads to successful commercialization of the new product.
Validation is the topic of chapter 11, including good coverage of the methodology of validation ranging from product-use tests (e.g., alpha and beta tests) to market tests and the reasons for their use. As Rainey points out, the primary reason for validation, of course, is to gain confidence in the product and the NPD process. A short supplement to this chapter, by Arnheiter, covers rapid prototyping, which, as the name suggests, is a technique for quickly making high-quality prototypes that can be introduced into markets to determine whether or not there is a demand for the product. Speed and cheapness are the operating factors.
Product Innovation is heavy reading. Aimed as it is to a dual market of M.B.A. students and practitioners, it covers a broad field of NPD issues in depth. Consequently, it goes into too much detail for the needs of the student. It is unlikely that all of the material in the text could be covered in the one-semester course usually offered in MBA programs on product management. At the same time, perhaps not enough information is provided to the practicing manager who is likely to be interested in more of the success stories of firms that have used the author's recommended approach to NPD.
Nonetheless, this is a worthwhile acquisition for those directly or indirectly concerned with both reducing the cost of new product failures and increasing the rate of new product success. That there must be a strategic approach to NPD should commend the book to upper management whose responsibility it is to determine future strategy.