In a press release titled Secret to Successful New Product Innovation, the marketing firm Nielsen publishes shocking results that management involvement reduces the effectiveness of R&D:
Nielsen’s research of the innovation processes at 30 large CPG companies operating in the U.S. reveals that companies with less senior management involvement in the new product development process generate 80 percent more new product revenue than those with heavy senior management involvement. Companies that employ this and other best innovation practices derive on average 650 percent more revenue from new products compared to companies that do not.
Also interesting is a result that if the R&D team is located at the corporate HQ, the overall new product development results are poorer:
Nielsen’s research shows that simply being physically near corporate headquarters can stifle new idea generation. In fact, it turns out that having no Blue Sky innovation team at all is better than having a team on-site at corporate headquarters. The best place for your breakthrough innovators? Far, far away. According to Nielsen, companies with an off-site Blue Sky innovation team report 5.7 percent of revenues coming from new products, compared to 4.8 percent from companies with no Blue Sky team at all. Companies with Blue Sky teams on site report just 2.7 percent of revenues coming from new products.
Here is one key take away: R&D managers must manage R&D process, not interfere in the actual research or development:
Nielsen’s research shows that another important key to success is for senior management to precisely manage the new product development process, not the ideas themselves. According to Nielsen, CPG companies with rigid stage gates – – decision points in the process where a new product idea must pass certain criteria to proceed forward – – average 130 percent more new product revenue than companies with loose processes.
And a few more short takes:
• Two to three stage gates that are strictly followed across the organization. The first stage gate is typically designed to identify ideas that will then be developed into a concept and prototype, while the last stage gate is usually designed to determine whether a product should be committed to production and market.
• A development focus two to three years out
• A formal scorecard to provide structure to organizational learning
• A standardized and required post-mortem on all new product development efforts
• A knowledge management system to retain learnings from previous product launches.