New product introduction is always one of the riskiest bets any company makes. If we look at the risk management factors for new product development we can generally classify them as:
- Cost Management
- Supplier and Materials Management
- Schedule and Requirements Management
- Compliance Management
Companies only have a general view of risk when talking about new product development and it is typically a finance department function. The key to reducing risk is understanding these factors. It also helps to have the right information so that your team can make the right decisions.
We typically all rely on the “spreadsheet” from finance when trying to understand the costs associated with a new program. There are two major concerns with this. The first is whether or not we have all of the information from all the people involved in the program. The second is if we are missing any key pieces of data that may be tucked away somewhere, perhaps on an associate’s desk, that is capable of changing everything we think about when it comes to managing the project.
Supplier and Materials Management
Very few companies make everything that goes into a new product, so supplier and material management is extremely important to the success of a new product. The make verses buy decision is important in any new product development process and is nearly impossible without a detailed understanding of what vendor capabilities are and how those capabilities align with customer wants and priorities.
Schedule and Requirements Management
50% of high tech respondents to a recent Aberdeen Group study reported that they had problems with requirements where what was built was not what was needed. Furthermore, there was a lack of alignment between the customer and what producers had created. A 50% misalignment with customer requirements is stunning, but I think the important take away is that leaders in these companies recognize this as an issue and can now look at how to make improvements.
A law of new product development must state that there is an ever-increasing regulatory scheme for all new products. It is just a fact of life at this point, much like the sun rising in the east. New products must be designed with new requirements in mind. They must be engineered into the product. Engineering in compliance at a later date is always the most expensive way to develop a new product.
New product development is always a risky endeavor, but it’s critical to the success of every company. Getting the tools and information in the hands of product development teams is critical. Companies need to think about how to build their organizations around the information needed to make decisions. They must implement a risk management strategy that crosses departments. Finally, make sure everyone has access to all the data.
Good risk management is critical to both good product development and introduction.