How to Make Good Decisions in New

Product Development
Those who have participated in new product development (NPD) know that making good
decisions is critical. New information is constantly gathered, and knowing what actions to take
based on that information determines the success or failure of the product. For example, what are
the risks and how should they be dealt with? Does manufacturing have the necessary capacity?
Once costs are better understood, do the financial assumptions still hold? Will unexpected
technical challenges cause delays? Have changes in the marketplace made a new product
development project less viable? Timely and sound decisions for each of these questions is
essential for ensuring that a new product development project flows smoothly, launches on time,
and provides the expected returns.
While making good decisions alone will not guarantee a successful new product development
project, poor decisions will always result in undesirable outcomes. See if any of these complaints
are familiar:

We had to completely redo the _______ [fill in the blank with: stability testing, graphic
design, product testing, etc.] because management changed their mind.

I am running two back-up plans because management cant make up their mind.

Manufacturing pulled resources for this project because it doesnt meet the target profit
margin, but my boss wants to launch anyway because otherwise we wont meet our sales
target.

We finally got a decision on the graphics, but now were so far behind that we have to
airship.

The product test showed that the customer doesnt like our prototype, but we dont have
time to develop anything else, so were going with it.

Causes of Poor Decisions in New Product Development

Why are good decisions so hard to make? Shouldnt intelligent leaders be able to make good
decisions? The answer is, of course, yes, but often the organizational systems in which people
work actually encourage poor decision making. Lets look at the most common drivers of poor
decisions.
Bias toward short-term results. With increased competition and customer sophistication,
companies are under pressure to deliver new and improved products at an accelerated rate. If
they do not act quickly, competitors will beat them to market. This drives:

Unrealistic timelines. Often product launch dates are determined before the customer
requirements or the technical challenges are understood. In many cases, the new product
development project is behind schedule before it even starts. In order to meet deadlines,
teams skip key steps and hope that it does not come back to haunt them. They do not have
the time to develop more than one idea, and if the one idea they pick fails, then they are
in real trouble. They must make decisions quickly with limited or no data. Additionally,
they frequently downsize the idea (i.e., decrease customer benefits) in order to meet the
aggressive timelines. Overworked team members make bad choices and fail to recognize
issues that would normally be obvious to them.

An unwillingness to take a stand. Because the short term is so important, leaders are
reluctant to make decisions that may risk the launch. If they are given two options, and
they pick the wrong one, then their project is in jeopardy of failure or missing the
timeline. So, instead of making firm decisions, they delay decisions to keep their options
open as long as possible. While this approach has merit when part of a well thought-out
strategy, it causes problems when it results from lack of planning. New product
development teams are forced to keep multiple options alive longer than necessary or to
move forward at risk (i.e., in order not to fall behind, they move forward based on
assumptions. If they guessed right, their gamble pays off; if not, their work is wasted and
they fall further behind).

A launch at all cost attitude. Launching anything, even an inferior product, is better
than launching nothing. If the product is less profitable than first projected or if some of
the product benefits must be sacrificed in order to make the timeline, its still preferable
to launching nothing. In their single-mindedness to launch something, companies fail to
consider trade-offs such as, Is it more profitable to rush to market with an inferior
product or to delay launch with a superior product? Or, What additional costs do we
incur by rushing to market? Or, Does it make more sense to fix production issues
before or after launch? While rushing to market sometimes pays off (like when being
first to market provides a clear market advantage), in other cases it clearly does not (like
when launching an inferior product could alienate customers). The important thing is to
ask the question; otherwise the bias is generally toward launch at all costs.

Unclear decision-making criteria. In many cases, a company does not have standardized and
well-defined criteria to make decisions. One project is evaluated based on its projected sales,
another project is evaluated based on its risks, while yet another project is moved forward only
because it is an executives pet project. When no clear criteria exist, several undesirable things
happen:

New Product Development teams dont know what information management needs to
make a decision, which:
o causes confusion, extra work and unnecessary stress. New Product Development
teams are forced to decide for themselves what information is important to share.
Invariably key information is left out and teams spend time gathering and

providing information that management does not care about. How can a team
succeed when the target is unclear?
o leads to inconsistent information. Some New Product Development teams may
provide a thorough analysis of the risks while another team may focus on the
financial benefits. Management is left to compare apples to oranges.

In organizations where bad news is discouraged or a launch at all cost attitude exists,
teams spin the information or present it in the best light. They may even hide risks and
problems.

Poor decisions are inevitable as they are based on biased, partial, inadequate and/or inconsistent
information.
Functional Silos. Many companies are organized functionally so that individuals align
themselves with their department rather than with a cross-functional team. Although a
functionally-aligned organization has its advantages, it creates problems in New Product
Development, where cross-functional collaboration is critical to success.

Conflicting objectives. When an organization is functionally structured, different

functions have different incentives. For example, marketing may be rewarded based on
the number of new products they launch, while Research and Development (R&D) may
be rewarded based on the number of novel new technologies they develop, and
Operations may be rewarded based on how much money they save.When new product
development team members are rewarded based on different criteria, each will make
decisions based on his/her own self interest. Conflicts predictably arise as any decision
creates winners and losers within a team, setting teammates against each other. A new
product development team that works cohesively has a much higher chance of success
than one that bickers over who is right or wrong. While some tension within a team is
useful in generating better ideas and greater innovation, having fundamentally different
incentives will not lead to constructive solutions.
o Note: In one rare case I encountered, one team member consistently made
decisions that hurt his own performance rating, but he did so for the greater good
of the new product development team. This was the rare case of a selfless person,
but no employee should be forced to choose between whats good for him and
whats good for the team.

Failure to consider downstream stakeholders. The perspective of cross-functional

partners is often not considered early enough or at all. In the early stages of a new
product development project, marketing may work in isolation, only sharing their idea
once a marketing concept is fully developed. R&D may then conclude that the idea is not
technically feasible. If R&D input had been incorporated earlier, perhaps they could have
partnered with Marketing to develop a product idea that was both compelling and
feasible. Similarly, if R&D develops a product without consulting their Manufacturing

partners, they may be in for the unwelcome surprise that their product cannot be
manufactured.

Missed opportunities. In addition to these downsides, new product development teams

also miss the potential upsides of partnering with their cross-functional partners. For
example, if the Sales department works closely with its retailers, they can bring forward
insights gleaned from the retailers. Similarly, packaging is a purchase driver for many
consumer products and early incorporation of the Packaging groups input may create
unique and differentiated selling points.

How to Make Good Decisions in New Product Development

Solutions to these common causes of poor decisions, including how Design for Lean Six Sigma
(DLSS) can be used to help make better decisions, will be discussed in a later article.