Friday, February 13, 2009

Assessing NPD Efficiency

If you were asked to define the efficiency of your New Product Development efforts, how might you respond? It's not an easy question to answer and I am sure the variation of responses would be fairly significant, depending on which organizational disciplines were queried. Typical responses cover a broad range of answers that are primarily discussed in small groups over lunch, in the break room or at happy hour. These low visibility assessments are typically an emotional take of the situation, lack specific metrics and rarely lead to action.

Nevertheless, it is important to be able to present a succinct answer to the efficiency question. Not as a collection of individual answers but an organizational answer, one that is quantifiable and actionable. Without an agreed figure of merit to describe efficiency of NPD efforts it is impractical to expect anything will change. This is not about blame; it is about leading an organization down a managed path of change, culminating in measurable improvements. Accomplishing this requires the establishment of a baseline that describes current execution effectiveness. This figure of merit can then be utilized to identify a new target for efficiency.

This key metric must describe NPD efficiency by providing a fact-based judgment to define an organizations effectiveness at producing new product revenue. Consider that the primary objective for any project is realized revenue that meets a specified timing, figure and margin. Revenue is the only motivation for starting a project, therefor it must figure substantially into the measurement of success. A successful project is not a tapeout, first samples, a completed characterization or production release; it is sales that meet a planned date, margin and value. Any project success metric that is not tied to a revenue target is really of little value and may actually hinder improvements by providing a false passing grade.

Revenue generation as planned means that a proper market need has been defined and a product has been produced that fills that need. That's what will keep the stockholders happy and the paychecks coming. Many times the metrics are far too short sighted and everyone along the NPD path has small sub-organizational successes to report, however the big picture result is missed revenue; and that is unquestionably a failure, pure and simple. Emphasis on a big picture revenue metric makes everyone accountable and empowers each individual to challenge project assumptions. Now the question is this - how has your organization been doing on enabling project revenue and where deficiencies are noted, what is the game plan for mitigating them?

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