Revision as of 05:14, 9 August 2017

Big Idea

n many organizations the pressure on the Product Development Process (PDP) has increased through the demand of greater product varieties and shorter lifecycles. Organizations aim for a structured way of speeding up the Product Development Process while not loosing effective scoping in the identification of market needs. Often they have succeeded in structuring the procedure using the Stage Gate Process - or a customized version of it. [1] Yet the application of the Stage Gate Process has shown that it depends largely on the tools applied. Since all innovations, incremental and radical, bring market, technological and organizational uncertainties, which only vary in their intensity, it is key for the project manager to select suitable tools to manage them.[2] Especially during the initial stages of the Product Development Process - the Fuzzy Front End - the uncertainties are highest accompanied with the severeness of the decisions taken during this period. To release some pressure from the project management in the Fuzzy Front End the application of the Delphi Method, Quality Function Deployment and Risk Assessment is proposed. If applied in a flexible way and in combination with other tool these methods can answer to each type of uncertainty and guide the project management to success in effective and efficient product development.

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The Management of Innovation can be divided roughly into 4 stages:

1. Search - Finding opportunities for innovations
2. Select - Selecting the ideas to pursuit
3. Implement - Development of the product and launching it on the market
4. Capture Value - Capturing value from the innovation

On one hand most of the parameters for the later success or failure are set in the first two stages. On the other hand project managers are reluctant to make fast decisions because these stages are characterized with the highest risk and uncertainty levels of the whole process of innovation. The Search phase involves detecting signals in the environment like e.g. technological opportunities or changing requirements in the market. Here opportunities can be easily overseen. In the Select phase the inputs from the Search phase are distilled and very few converted into innovation concepts. Based on these concepts the whole organizational mechanism can now implement the innovation and capture value. [4] Hence in Innovation Management the Fuzzy Front End is considered the period between when an opportunity for a new product is first considered, i.e. the Search Phase, until the concept if the innovation enters the formal product development process, i.e. the Select Phase. [5]

Innovation management distinguishes two types of innovations: incremental and radical. Incremental innovations are characterized by minor changes in existing products which cumulatively improve their performance. [6] The Fuzzy Front End is characterized by a comparably low level of uncertainties since; an earlier version of the product is already on the market, the market is known to the company and risks like the technical feasibility or market adaption can be estimated therefore quite well. [7]

Radical Innovations on the other hand, also breakthrough innovations or discontinuous innovation, completely change the nature of the product and bring a very high degree of novelty. These innovations often change the rules of their industry through opening up new opportunities but also challenging the existing players to reframe their operations. Therefore the Fuzzy Front End of this type of innovation is characterized through a high degree of market and technological uncertainties. Furthermore they often have to "fight" for the internal acceptance within the company and bring therefore organizational uncertainty.[6][8]

Project Management

Definition and Relevance for Innovation

The aim of Project Management is that projects are properly planned and controlled so that the risks are limited, opportunities seized and project goals reached on time, quality and within budget. It is defined as a set of management tasks, organization, techniques and materials for the development of a project. [9] Typical for product development projects is that in the very initial stages the resource commitment is still low, while there is a very high degree of uncertainties. Throughout the project the uncertainties decrease but the resource commitment increases strongly. In many cases high resource commitment can create a "lock-in" effect and leads organizations into pursuing projects which will fail in the end hoping, since they have invested heavily already for a high return on invest. [1] To avoid costly "lock-in" effects project management is highly relevant not only for the successful execution of the goal within quality, costs and time, but also regarding the correct setting of the goal. In terms of the project management in the field of product development this means to choose the "right" ideas to implement and launch as innovations on the market.

Challenges of Project Management in the Fuzzy Front End

In both cases, incremental and radical innovations, project managers need to cope with market and technology uncertainties as well as potential internal resistance from the organization. However individual projects differ in the degree of severity of these uncertainties. What is more is that innovations are not divided into incremental or radical only - all kinds of steps in between are also possible. Hence project managers in the Fuzzy Front End need to find a way to deal with individual severity of uncertainty in his/her project. In general it can be said: the higher the amount of planning is in the beginning of the project, the higher the success. But planning refers not only to the time-scheduling, the detailed definition of work-packages to be done and the assignment of resources to the project. In this case planning also refers to the extinction of uncertainties or assessing them as risks. Therefore the planning work of the project manager in the Fuzzy Front End determines the later success.

Project Management of Innovations in the Fuzzy Front End

The Stage Gate Process

Many organizations succeeded in structuring the project execution of an innovation. The most typical way to orchestrate the innovation process is through the Stage Gate Process - or an individualized version of it. It resembles a structured process with milestones - the "Gates" - which force the team to make stop/go decisions at each of them. Along with the "go" decisions comes an increased resource commitment. The further the project develops, and the higher the resource commitment gets, the more seniority will have the staff to make the stop/go decisions.

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The original Stage Gate Process was developed by Cooper in 1993 and included the following five stages:

1. Preliminary investigation - a fast examination and scoping of the project
2. Detailed investigation - detained analysis which results in a business case, a project definition and project plan
3. Development - design and development of the actual product
4. Testing and Validation - trials on the marketplace and laboratory to test the market and technical feasibility to reach a product validation
5. Full Production and Market Launch - commercialization, full production, marketing and sales [11]

Nowadays many companies have changed the nature of their innovation process however from a linear process to a model of feedback systems between the individual stages - creating "learning loops" and enabling later adjustments. [12] With respect to the Fuzzy Front End the first two Stages - Preliminary Investigation and Detailed investigation - are of interest since they set the scope for the following development project. In terms of project management it is key to identify the most promising ideas. Since, as described above, this period is characterized through market, technological and organizational uncertainties tools like the Delphi method, Quality Function Deployment and Risk Assessment can be applied. In the context of the Stage Gate Process they help the project manager to control the spending of resources and to ask frequently "Should we go on?".

Reduction of market, technological and organizational uncertainties

Delphi-Method

Customer Market surveys, Internal Analysis (e.g. Brainstorming), Scenario Development based on computer simulations and external assessment like the Delphi Method are only a few examples of how organizations try to gain insight into potential markets and henceforth reducing market uncertainties. However each of the methods has its restrictions. Sometimes a consumer does not know what he wants exactly since he only speaks and desires what is known to him. Therefore it is difficult to gain valuable insight from customer surveys about potential innovations, which deviate from known solutions. A similar effect can be observed by the internal analysis or the computer based scenario development. Creativity and knowledge about markets and their needs are limited within the organizations and therefore employees see the problem through the internal "lens". To find unusual solutions organizations have started to search outside of the company-boundaries through e.g. the application of the Delphi method or in a broader context, open innovation.

The Delphi method can either be used in cases of high uncertainty or for long time horizons and is typically applied in the "search"-phase of the Stage-Gate Process. Because it bases on the opinion of experts it is key to choose them carefully and be fully aware of their level and area of expertise. Based on the type of experts present the facilitator of the Delphi method can choose and structure the questions accordingly. The initial step of the Delphi method is a postal survey about what the experts identify as the future key issues and their future developments. The results are then analyzed and a more tailored questionnaire is send out to them again. This procedure is repeated until some kind of convergence in the answer of the experts is revealed. The process typically ends if a range of experts agrees upon the probability of certain events by a quoted time. If no consenus can be reached this method can still provide important information. Special attention should be payed to the cases which differ dramatically from the common opinion since these experts could have valuable information for their stand-point. Using this method direct contact between the experts can be avoided. This way mutual power or reputation influence on each other, reluctance to admit errors or the need to conform with a group can be avoided.

Although the Delphi-Method has shown to be very useful a project manager cannot rely alone on this tool. It should be used in an individual composition together with other tools to gain a holistic insight into the market and the current technological possibilities. Furthermore since it is a tool that relies strongly on human capabilities the outcome of the Delphi-Session depends a lot on the experts invited and the moderator being able to extract their knowledge from them. Furthermore special attention needs to be payed to the design of the questionnaires to NOT influence the outcome through a certain form of asking. In poor cases key customer needs can be missed because the experts invited do not have the necessary insights into the customer, the group collaboration suppresses opinions of members or the moderator is not able to see the value in the contributed suggestions of the members and hence the idea is dismissed. With sufficient experience of the project manager, suitable design of the questionnaires and resources all the shortcomings of the Delphi method can be overcome however and represent a powerful tool.

Quality Function Deployment

After the market has been investigated, the needs identified and the technology for the development generally defined it is the task of the project team, guided by the project manager, to assure that they are translated into a tangible product. First the gathered information needs to be translated into functions and then integrated into the product concept. Literature finds multiple ways to realize this step however in practice organizations which apply the concept of Quality Function Deployment (QFD) reach high success rates with their products.

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The QFD translates required customer characteristics by means of a matrix into technical specifications. Hence it is applied in the "Selection-Phase" within the Fuzzy Front End to concretize the innovation concept. The development of the relationship matrix - the House of Quality - requires a high amount of technical and market research. It is important to understand potential trade-offs which the customer might have to accept and how he would decide in that case.[14] In this method it has shown to be highly successful to include as many knowledge fields related to the product during the QFD-sessions as possible. Especially the collaboration between the technical staff and the marketing employees succeeds in translating the customer needs into technical specifications best. [15]The application of the QFD matrix involves the following steps:

1. Identification of the customer requirements, dislikes and how he would react in case if trade-offs (left column)
2. Ranking of the requirements according to their importance (left column)
3. Translating of customer requirements into technical requirements (upper row)
4. Establishment of a relation between customer requirements and technical requirements, and estimation of the strength of their relation (Center of the House of Quality)
5. Selection of KPIs and determination of target values (technical, financial, qualitative based on customer perceptions) based on customer requirements and competitor benchmarks (bottom row and right column) [14]

Key of applying QFD after the Delphi-method is that the gained insights regarding market and technology uncertainties can be used in this step. It is obvious however that a real market survey is indispensable. Since the whole process is very interdisciplinary it also stimulates communication within the project team. It has been proven highly effective to use QFD in combination with rapid prototyping. [15] Thus a "close-to-final" version of the product can be created and tested as fast as possible. Furthermore tangible products often appear more convincing and can enhance the internal support of the organization of the project.

Limitations of the QFD are that it is very time consuming, requires a lot of preparation and the collaboration between e.g. the technical and marketing staff is not always easy. With a project manager of high emotional intelligence to manage potential conflicts the QFD process can turn out highly successful. If the project manager is aware of the time of the QFD it is additionally a good tool to focus all gathered information about the innovation concept and synthesize it to a product.

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