Once time was money. Now it is more valuable than money. A McKinsey study reports that, on average, companies lose 33% of after-tax profit when they ship products six months late, as compared with losses of 3.5% when they overspend 50% on product development. More and more, advanced manufacturers are learning that the time required to develop a new product has more influence on its success than its costs.
Little wonder, then, that senior managers are working hard to reduce their new product development cycles. At Hewlett-Packard, well over 50% of sales come from products introduced during the past three years, and more than 500 product development projects are going on at any given time. Even enterprises that develop just a few new products over several years, like Boeing Commercial Airplane Group, are focusing on reducing the time required to develop them.
It is a common belief in management practice today that one of the most effective ways to shorten development cycles is through the collaborative work of cross-functional development teams. But if anything is easier said than done, it is that marketing people, development engineers, and manufacturing engineers should collaborate rather than “throw product specifications over the wall” to one another.
Collaboration among people from different functions is difficult, uncertain, and suffers from too little mutual understanding. New product development teams are typically composed of people who do not have the experience or qualifications to criticize each other’s judgments or performance – certainly not while the project is evolving. They do not, and cannot, know all that their colleagues from other functions know. And uncertainty comes in many forms. What features do customers want? How do features translate into sales? Is the technology available to develop the features? Will the product be manufacturable at the desired price? Much of the challenge of new product development is centered on people from different functions finding answers to, and getting agreement on, just such questions.
Obviously, the more team members understand the work of other funtions and the interrelationships among all functions, the more likely they are to make intelligent decisions that will enhance the success of the product. But what constitutes understanding? Bill Hewlett, a founder of Hewlett-Packard, used to say, “You cannot manage what you cannot measure,” and his corollary was “What gets measured gets done.” By inference, the real challenge for teams is to develop measures that will help individuals assess how well they are doing what they agree must be done. Advanced manufacturers must create new products that will make the most profit in the least time, but what metric can managers of interfunctional teams use to direct their employees’ efforts toward this outcome?
Ideally, such a metric would encourage the ongoing monitoring of a new product development project. It would allow people from different disciplines to assess the impact of their decisions and their colleagues’ decisions on the entire project.
“The Return Map: Tracking Product Teams”, Charles H. House and Raymond L. Price, Harvard Business Review, January-February 1991. Visit CJPS-Enterprises for more information.