The Optimal Split in Project Types

A major strategic question is, "What's the best mix or balance of development projects—for example, incremental developments versus true innovations?" Certainly, a business's new product strategy ideally should be reflected in the breakdown of types of product developments it undertakes—that is, where the funds are invested. In addition, breakdowns of new products and projects by type are a predictor of the business's new product development performance. For example, too much emphasis on short-term small projects might point to an underachieving business. Table 7.2-1 shows the breakdown results

Figure 7.2-5 Familiarity Matrix Bubble Diagram: Resources Split Across Market and Technology Newness Categories

New But Unfamiliar n wn

Ne New But t Familiar e

Base Markets

O

Oo°

o o

O O

°o

Base New But New But

Technology Familiar Unfamiliar

Technology Newness to the Business

Base New But New But

Technology Familiar Unfamiliar

Technology Newness to the Business from the APQC benchmarking study. Incremental product changes is the dominant category, representing 32.7 percent of all projects on average. Next are new products to the business, accounting for 24.2 percent of projects. Then are major product revisions, making up 21.9 percent of projects. There is an even balance among projects across these three most popular categories. And on average, fairly noninnovative products—incrementals, revisions, and promotional developments—together account for about 64 percent of projects. By contrast, new-to-the-world products—true innovations—represent a minority of development projects (10.2 percent).

Table 7.2-1. Breakdown of Projects by Project Types: Best versus Worst

Average

Best

Worst

Business

Performers

Performers

Promotional

developments and

9.45%

5.89%

12.31%

package changes

Incremental

product

improvements

32.74

28.21

40.42

and changes

Major product

21.97

25.00

19.15

revisions

New to the

business

24.16

24.11

20.00

products

New to the

world products

10.23

15.89

7.42

Note: Columns do not add up to 100 percent due to a small percentage of other types of products.

Note: Columns do not add up to 100 percent due to a small percentage of other types of products.

Sources: R. G. Cooper, S. J. Edgett, and E. J. Kleinschmidt, Best Practices in Product Innovation: What Distinguishes Top Performers (Product Development Institute, 2003) [www.prod-dev.com]; R. G. Cooper, S. J. Edgett, and E. J. Kleinschmidt, New Product Development Best Practices Study: What Distinguishes the Top Performers (Houston: American Productivity and Quality Center, 2002) [www.apqc.org].

Do the best performers adopt a different mix of project types, and is there an optimal portfolio of project types? Consider how the average business compares to the best- and worst-performing businesses in Table 7.2-1. What is noteworthy is the shift toward much more innovative and bolder projects as one moves from worst to best performers. For example, more than half (53 percent) of worst businesses' projects are the small, incremental ones—promotional or package changes or incremental product improvements and changes. By contrast, just over one-third (34 percent) of best performers' projects are these small, incremental ones. Top performers take on a higher proportion of larger, more innovative projects: 40 percent of best performers' projects are either new to the business or true innovations (new to the world). By contrast, only 27 percent of worst performers' projects are these bolder projects. Best performers undertake twice as large a proportion of true innovations (new-to-the-world products) than do worst performers: 15 percent of their projects are true innovations (versus 7 percent).

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