6.5.1 Defining outcomes

At the end of each stage of the PD Process, the top management requires for its two outcomes:

     product form to that stage of development;

     report on which to base its decisions.

The product form will develop in the project from a product concept, to product design specifications to prototype products, to commercial product, to final launched product. The report can vary from many pages with detailed knowledge to a one page executive summary, dependent on what top management feels it needs to know. The areas listed in the reports in Table 6.2 are important areas of knowledge in product development for decision making but the top management may not wish to see any details, especially in incremental product development where there is not a great risk of making wrong predictions.


Table 6.2 Outcomes (knowledge needs) for decision making

Outcomes (knowledge needs) Decisions Stage 1: Product strategy development Product/innovation strategies Product development programme Project aim, objectives and constraints Product design specifications (or product concept) Product report:     • technical feasibility     • marketing suitability     • consumer acceptance     • project costs, risks Strategies acceptance Programme acceptance Project acceptance Resources for initial investigation Product idea acceptance Resources for product design, process development Timing of programme Harmony with business Stage 2: Product design and process development Final prototype product Feasibility report     • target consumers     • product qualities     • processing method     • marketing strategy     • predicted sales     • predicted costs     • project costs, risks Acceptance as new company product Resources for commercialisation Total company involvement Harmony with business Stage 3: Product commercialisation Commercial product Commercial report     • production plan     • distribution plan     • marketing plan     • financial plan     • risk analysis     • capital investment     • human resources     • effect on company     • effect on society Acceptance as new product into product mix Launch agreement Capital investment Acceptance into company organisation Setting market and financial targets Stage 4: Launching and post-launch evaluation Marketed product Final evaluation report     • product quality and position     • production and distribution       efficiency     • costs against targets     • sales against targets     • indicative return on investment     • effect on company     • market acceptance     • society acceptance Long-term acceptance into product mix Feedback to future business strategy Future product development Resources for future product development

Source: From Earle and Earle, 1999, by permission of Chadwick House Group Ltd.


Some of these critical decisions may be made by the middle management before the final executive summary is prepared for the chief executive and the directors. A summary of the knowledge and a decision direction is made by the middle management for top management. In simple incremental product development, the Board may have set an overall budget for the product development programme; the decisions on the product concept acceptance and the resources for the individual projects are made by the middle management.

There is no question that the decisions about the product/innovation strategies and the product development programme are set by top management, but it is also important that middle managers, and even the project leaders in large projects, are involved in deciding on the knowledge needed in the outcomes. Only they have the detailed understanding and skills to know what knowledge is really needed, and what knowledge can be created with the capabilities of the company and available outside sources. The final decision is by top management but the knowledge basis for it is from the collaboration of all the people in the product development group (Jassawalla and Sashittal, 1998). Strategic planning for new products and new product selection are the most critical issues in product development management (Scott, 2000). It is important to align the business strategies with the technology strategies. This can be difficult where the technology strategy may be very long term, say 10 years, and the business strategy is shorter, usually 5 years. So the strategic knowledge outcomes are not set in concrete but are studied yearly, and are designed so that they anticipate, but are also reactive to, change.

The linking at all levels of management of anticipation and reaction are important in the early stages of the PD Process: project plan, product concept, product and process specifications, product design choices and process design choices. There needs to be recognition (Verganti, 1999) of both:

     anticipation capabilities - the capabilities to anticipate information into
        the early phase of product development;

     reaction capabilities - the capabilities to introduce changes late in the
        PD Process at low cost and time, to cope with unexpected
        constraints and opportunities.

The early decisions, and their related desired outcomes identified in the early stages of the PD Process, play a central role in the further development of the product development project. This is why there has been much emphasis in recent years on spending more resources on the 'fuzzy' front end, so that the future development of the project can lead more surely to product success. But, especially in the innovative and long-term projects, it is not possible to anticipate everything that is going to happen. In aiming for integrated product development performance (that is shortest time to market and optimum product quality) with new product lines and new product platforms, Verganti (1999) found that companies used different mixes of anticipation and reaction between the extremes:

     Detailed approach. Companies devote great efforts in the early stages
        to reduce uncertainty about downstream constraints and opportunities,
        and tend to keep reaction to a minimum. They try as far as they can
        to anticipate what is going to happen.

     Postponing approach. In this fully reactive approach, companies
        simply start the implementation of product development without
        anticipating knowledge about downstream opportunities and constraints.

Other companies aim at reducing the probability of running into serious unexpected events, through selective anticipation of critical areas and reactive capabilities that can handle inevitable late corrections at low cost and time. The ratio of anticipation to reaction depends very much on the company philosophy on risk-taking but also on the level of innovation of the project.

There is a need to combine anticipation of decisions/outcomes with planning of the ways to react to new knowledge developed in the PD Process, so necessary changes can be introduced late in the PD Process without too much cost in resources and time. Because making changes in the later stages is more costly in time and resources, there needs to be a balance in anticipation and reaction in the early decision-making as shown in Fig. 6.5.

Fig. 6.5 Anticipation and reaction capabilities in product development (Source: After Verganti, 1999).
(- click to enlarge)

Flexibility in product development (the cost and time for late corrective actions in a project) may be seen as consisting of two major components: structural flexibility and planned flexibility. Structural flexibility is the reaction capability that unfolds through long-term practice, project after project; planned flexibility is the project-specific flexibility, built through decisions taken in the early phase of the particular project. Anticipation capability is the capability to identify, clearly and early, specific critical parts of the project and plan the trigger reaction measures to manage these critical parts of the project. Decision making at the early stages of the PD Process is a balance of anticipating predicted outcomes and setting up possible reactions to uncertain outcomes later in the project. This balancing of the anticipation and reaction capabilities is related to the level of innovation of the project, and to the company's capabilities and resources.

Outcomes can be set in general strategic terms by the top management, but they have to be developed into much more specific outcomes by the product development manager and the project leader. Designers are given product design specifications and these are the blueprints for their development of a prototype product. Process development engineers are given product qualities from the designer's outcomes and design a process to produce these product qualities. Production engineers are given the production specifications from the process engineers' outcomes and have to design a production system. The different outcomes may be developing in sequence or in parallel. For example the marketing strategy development and the process/production development both start from the product prototype and its qualities, and end at the same time, as the production plan and the marketing plan. This integration of times for outcomes is very important so that there are no waiting periods in the project. A problem is sometimes caused by ranking tangible outcomes higher than intangible outcomes, for example the process design before the consumer attitudes. Product development often goes astray because a great deal of time and money is spent on developing a technical product and process, only to discover that the product is not what the consumers or customers wanted. The technical product is a tangible outcome, the consumers' concept of their ideal product is intangible, but it is actually the true outcome.

Think Break In Table 6.2 are some of the outcomes required by top management to make decisions at critical points. The product development manager is required to produce these outcomes for top management, in turn the product development manager has to identify for the project leader, the specific outcomes from the activities in each stage. 1. For Stages 2 and3 in the PD Process, identify the specific outcomes     needed by the product development manager from the project leader     to build up the outcomes needed by the top management. 2. Draw an outcome 'tree' to show the relationships between the two levels     of outcomes - for top management and for the product development     manager. 3. In some past product development projects in your company identify     the critical outcomes for top management decision making. What     outcomes were unimportant to the decision making of top management?     Discuss how this could affect the identification of critical outcomes in     future projects.