Global Engineering

Companies look for New Product Introduction (NPI) to expand their current market and to gain share within existing markets they operate. Generally large companies are divided into multiple Business Groups, which are further divided into multiple Business Units. A Business Unit (BU) spends most of its' time and resources in designing, and testing a product -- ensuring a robust and unique in demand product is launched, but doesn't stay connected closely with product launch.

Big companies have 2 major types of "Go To Market" channels: direct partners and 2 tier distributors. A direct partner doesn't hold the inventory and either sells products directly to end customers or consumes products internally, whereas a 2 tier distributor hold the inventory and sell products to end customers through multiple partners. Generally BU product managers and engineers are not connected to channels, resulting in product arriving late to market and missing demand.                

Based on experience, I would highlight 3 top areas which should be monitored closely to accelerate New Product Introduction:

Forecast:  It is hard to forecast demand when product is not even available in market. Managers will be tempted to create conservative forecast to avoid excess inventory, but this approach strangles the product supply once product is released. The initial phase of product lifecycle is the most profitable period, and supply constraint can create frustration throughout the value chain. The most practical process of forecasting in such cases is to identify existing comparables of the new product and setting up calls with direct partners and distributors and get existing sales of comparables.

Pricing: 3 ways a manager can set price: pricing by markup on COGS, pricing equivalent to competitive products or pricing based on values. In most of cases, pricing the new product equivalent to competitive products is the best way. Partners, distributors and end customers are very fast to compare newly launched product to its close competitors. Unless a product is revolutionary and unique, it is seen that new product experiences low demand if priced higher than a competitor.

Impact on existing Supply Chain: Lastly product managers should pay close attention to impact on existing supply chain for new product. Though most of manufacturing is completed in China or overseas, companies are increasing integrating channels in supply chain. For example, High Tech products are prone to obsolesce and these products command premium if lead time is shorter when compared with competitors. Companies are enabling their partners and distributors so that they can configure and create multiple variations of a base model leading to a short lead time. Whenever there is an impact on supply chain, product manages should ensure than partners and distributors are trained and certified for a perfect product launch.

Posted by Deepak Malik at 8:00 AM | Permalink | Comments (0) | TrackBacks (0)

Recessions are a key part of the business cycle as they can eliminate the waste in an industry by forcing less efficient companies out of business, or by trimming a company’s waste to focus on core competencies.  How a company reacts during a recession can impact if they will be around for the next one.  Survival is one thing, but the best companies in the world win in these economic turns by being more innovative than their competitors.  The less optimal method to innovate is to to increase R&D spend and place more bets, however the more effective method  is to make a company’s R&D machine more efficient.  The largest opportunity to do this is in idea management.

Many companies say they are committed to innovation but when studied, find that their frequency and speed of new ideas falls short of the company expectations.

So how does idea management help a company effectively innovate?

Companies today recognize that the key to having a successful product or even a “blockbuster” is having more ideas as well as a better process to evaluate these ideas.  If we dig deeper into the first area, the old model of hire the brightest minds and placing them into a think tank is dead.  The new model recognizes that ideas can come from anywhere.  They can come from anyone in the value chain from the tier three supplier to the end consumer, or even someone who historically has no connection to the company.  The biggest challenge is how to gather and normalize the ideas so that they can be evaluated and prioritized objectively.  Focusing on fixing this problem and setting up vehicles to gather a larger number of ideas will help yield the best results.  

There is a lot more to idea management, such as the question of how to incentivize the broad set of idea contributors to increase submissions.  Based on the fact that over 80% of the fortune 500 companies in the 1960’s went out of business because they couldn’t adapt, one of the worst things a company could do during a recession is to ignore R&D.