New Product Development Techniques in Spain

NEW PRODUCT DEVELOPMENT TECHNIQUES IN SPAIN. Bañegil Palacios, Tomás Manuel Universidad de Extremadura E-mail: [email protected] Miranda González, Francisco Javier Universidad de Extremadura Complete address: Universidad de Extremadura. Facultad de Ciencias Económicas y Empresariales. Avda. de Elvas, s/n. 06071 Badajoz (SPAIN). E-mail: [email protected] Tfno: 924-289300 (ext 9184). Abstract The trend in the marketplace is toward ever shorter product lives. The products themselves may last indefinitely, but their marketing windows are becoming narrower as the rate of technology advancement makes them obsolete. This turbulent environment requires new tools and techniques to bring successful new products to the marketplace. Much attention has focused on new development techniques but little empirical research has been conducted to validate these techniques. In this exploratory study, we test some of the reasons that explain the low usage rates observed in previous research. Our findings, based on data from 54 Spanish firms, suggest that the lack of awareness of some techniques can explain these rates. Implications for researchers and managers are also discussed. 1 NEW PRODUCT DEVELOPMENT TECHNIQUES IN SPAIN. Introduction Numerous articles in the academic and popular presses argue that firms who rapidly develop new products enjoy substantial competitive advantages. Introducing new product faster than competitors allows firms opportunities such as setting product standards, higher margins, product superiority, extended sales life, reduced development costs, etc. (Reinertsen, 1992; Pawar et al., 1994; Ittner and Larcker, 1997). Product development cycle time has become a strategic competitive weapon for a company and a focus for research on product development management (Karlsson and Ahlström, 1999). Several factors drive a compression strategy, including multifunctional teams, early involvement of customers and suppliers, committing human and financial resources to the project, increasing communication and planning, eliminating some steps and conducting certain steps simultaneously (Clift and Vandenbosch, 1999). There are probably circumstances where accelerated new product development (NPD) is not appropriate (Crawford, 1992; Martínez, 1996), but speeding-up NPD has been and remains a top priority for managers. A review of the recent literature on new product development reveals a lengthy list of techniques that have been introduced to reduce the NPD cycle time (Cordero, 1991; Pawar et al., 1994; Langerak et al., 1999). Although academics and practitioners have widely published about these techniques, Mahajan and Wind (1992) report low usage rates for most tools in their exploratory study among U.S. Fortune 500 firms. The purpose of this paper is to identify the most used techniques in Spanish firms context and the main reasons for the low usage rates of some of them. We begin by summarizing the acceleration techniques described in the literature. Then we discuss the survey research design used to identify the reasons for the low usage rates reported in previous studies. Finally, our results are presented and implications discussed. Acceleration techniques A broad set of new product tools and techniques have been developed over years to reduce NPD cycle time. These new approaches include techniques, as well known as Quality Function Deployment (QFD) and Product Data Management (PDM). If we consider all possible versions and modifications of these techniques, over 600 different types can be identified (Nijseen and Lieshout, 1995). Despite the numerous articles that deal with the content of specific tools and techniques, there is only a small number of studies which classify them from a broader perspective (Millson et al., 1988; Cordero, 1991; Pawar et al., 1994; Nijseen y Lieshout, 1995; Langerak et al., 1999). Taking the previous classifications as a starting point, we try to create a systematic approach to the tools and techniques used by firms in their NPD process. The results of our classification1 are presented in Figure 1. The available techniques may be clustered into five generic categories: - Design techniques. - Organizational techniques. - Information technologies. - Manufacturing techniques. - Supplier involvement in NPD. The findings from research into the management of the NPD process indicate that when these tools are effectively used problems are identified earlier and the product 1 Only the tools and techniques most often cited in the literature are included in our classification. 2 development cycle time is comprised. However, previous researches have shown that designers do not make full use of the techniques available to them (Schelker, 1976; Mahajan and Wind, 1992; Nijseen and Lieshout, 1995). Figure 1.- Product development techniques classification. DESIGN TECHNIQUES MANUFACTURING TECHNIQUES Quick product specification Manufacturing Resource Planning (MRP) Quality Function Deployment (QFD) Conjoint Analysis Optimal Product Technology Design for Excelence (DFX) Statistical Process Control Robust design Design optimization Modular design Incremental innovation Rapid design transfer Group Technology (GT) Rapid prototyping and tooling Failure mode effect analysis (FMEA) Just in Time INFORMATION TECHNOLOGIES Computer Aided Design (CAD) Computer Aided Manufacturing (CAM) Computer Aided Engineering (CAE) Computer Integrated Manufacturing Internet and Intranets Electronic Data Interchange (EDI) Expert systems Groupware ORGANIZATIVE TECHNIQUES Concurrent activities management Stage-Gate process Multifunctional design teams Product Data Management (PDM) SUPPLIER INVOLVEMENT Between the reasons for the low usage rates reported from previous studies may be that potential users are unaware of the existence of these tools and techniques or they have decided not implement them owing to shortcoming of the tools. This paper reports the results of a study conducted in the spring of 1998 to understand the role of new product techniques in supporting the NPD process in Spain and the reasons for the low usage rates of some techniques. In that respect, this study is unique and complements the earlier studies by Mahajan and Wind (1992) and Nijseen and Lieshout (1995), that analyze only the subset of market research techniques. The following section of the paper describes the research methodology employed in our study. Research Methodology The study was carried out by mean of a mail survey sent to 195 firms in Spain taken from the ARDAN register of Spanish firms. The sample comprised two main industries: Electric & Electronic Equipment and Transport Equipment Manufacturing. The choice of these two industries is justified because they are two of the Spanish industries in which the R&D expenditures are more important2. This survey is biased towards larger companies with sales over 6,25 millions ($); the choice was deliberated to ensure that the sample contained firms for which NPD was of utmost importance. 64'8% of the sample were industrial firms, whereas 20'4% operate in the consumer market and 14'8% operate in both kind of markets. The sample includes firms from all major industrial regions of the country. The cover letter for each company was addressed by name to an R&D, manufacturing 2 Both industries represent more than 35% of the total Spanish R&D expenditures. 3 or marketing executive, typically holding a rank of Director. The data collection instrument was developed from the previous surveys about new product development techniques and was pretested twice. The first involved 6 international experts and professionals in the new product development process and the second, with 12 companies in the selected industries. Both pretests yielded only minor suggestions for improvement, which were incorporated in the final version of the questionnaire. In total, 363 firms were contacted by phone and asked to participate in the study and 195 met the criteria to participate in the survey (having developed a new product in the last five years). These firms received a copy of the questionnaire by mail. One follow-up reminder letter was sent three weeks after the questionnaire was mailed. This was followed by a follow-up telephone call five weeks after the initial mailing. The final sample obtained consisted of responses from 54 firms, an overall response rate of 28%. There were no noticeable biases in the responding responses versus those in the original mailing (the responses reflect the population). Phone contacts were made with randomly selected non-respondent to establish the reasons for non-response. The main reasons for non cooperation with the research were: “the company’s policy is not answer this kind of questionnaires” (85%) and “no time to answer the questions” (7%). There are no significant differences in the response patterns between the two industries, thus, the two samples are combined and results are presented together. The median size of the companies was 200-500 employees (see table 1). Table 1.- Size of the companies in the sample. Industry Number of employees Electric & Electronic Transport equipment 1-50 6'8% - 51-100 10'3% 12% 101-200 34'5% 12% 201-500 20'7% 36% >500 27'6% 40% The use of the single key information technique resulted in a sample consisting of respondent with different functional background (table 2). To test the validity of the single informant technique, the respondent’s perceptions regarding various aspects of NPD process were studied. No significant differences seem to exist in these perceptions among respondents from different functional backgrounds. Table 2.- Functional background of respondents. Background Number R&D manager 21 Marketing manager 2 Manufacturing manager 3 CEO 16 Other 12 4 Research questions To obtain further insight into the awareness, use and effectiveness of the new product techniques, we emp loyed an assessment approach drawn on the work of Dale and McQuater (1997). This approach tries to help management recognise the symptoms, root causes and problems that are adversely affecting NPD with respect to the application of tools and techniques. We formulated three research questions: - Are companies aware of the existence of NPD techniques?. - To what extent do they use them?. - Are they satisfied using them?. To limit the length of our questionnaire, the research was restricted to 21 techniques and tools. These techniques were selected between those that had shown at least some degree of use by firms in previous research and some level of awareness within the two previous pretests. Awareness and use were asked for each technique using binomial scales (yes/no). The term use captured both formal and informal use and though one might expect a positive effect on the level of use, as respondents may have a tendency to admit to use new techniques to look well organized, we could not prove it. Satisfaction was measured using a five point Likert scale, from very low satisfaction (1) to very high satisfaction (5). Additional questions were asked in order to get a global vision of the NPD process in the different organizations. Five point scales were used in these additional questions. Analysis and results As mentioned earlier, the goal of this research is to analyze the reasons that can explain the low use of some NPD techniques. So, we try to find a relationship between usage rate and awareness level of the different techniques. Table 3.-Awareness of the techniques Percentage of companies who know the technique Computer Aided Design (CAD) 96,3 Computer Aided Manufacturing (CAM) 88,8 Just in Time (JIT) 88,8 Internet and intranets 88,8 Electronic Data Interchange 88,8 Computer Aided Engineering (CAE) 88,8 Manufacturing Resources Planning (MRP) 68,5 Groupware 66,6 Rapid prototyping 66,6 Multifunctional teams 64,8 Quality Function Deployment (QFD) 62,9 Concurrent Engineering 57,4 Design for Manufac turability and Assembly (DFMA) 55,5 Product Data Mangement (PDM) 55,5 Modular design 51,8 Optimal Product Technology (OPT) 46,3 Incremental design 42,6 Group Technology 40,7 Rapid design transfer 38,8 Stage Gate processes 29,6 Conjoint Analysis 27,7 5 The awareness of the different techniques appears in table 3. The average familiarity of the respondents with the different techniques is 62'6%. Only six techniques have a low level of awareness (less than 50%). Computer Aided Design (CAD), Computer Aided Manufacturing (CAM), Just in Time (JIT), Internet, Electronic Data Interchange (EDI) and Computer Aided Engineering (CAE) are the best known, with awareness over 80%. In table 4 we present the results on the use of the different techniques. The average usage rate is 48'7%. Among the techniques that are mostly used are: CAD, Internet, EDI and CAE used by more than 70% of all respondents. On the other hand, Optimal Product Technology (OPT), Stage-Gate process and Conjoint Analysis are hardly used, with an usage level below 25%. Table 4.- Usage rate of the techniques. Percentage of companies who employ the technique Computer Aided Design (CAD) 96,3 Internet and intranets 77,7 Electronic Data Interchange 74 Computer Aided Engineering (CAE) 70,4 Just in Time (JIT) 64,8 Manufacturing Resources Planning (MRP) 59,2 Computer Aided Manufacturing (CAM) 57,4 Multifunctional teams 51,8 Groupware 50 Rapid prototyping 48,1 Concurrent Engineering 48,1 Modular design 48,1 Quality Function Deployment (QFD) 40,7 Design for Manufacturability and Assembly (DFMA) 38,8 Incremental design 37 Rapid design transfer 31,4 Group Technology 29,6 Product Data Management (PDM) 29,6 Conjoint Analysis 25,9 Optimal Product Technology (OPT) 24 Stage Gate processes 22,2 The level of satisfaction with the techniques employed to reduce the development cycle allows us to see how the techniques and tools perform. The results are reported in table 5. They show that most users are very satisfied. The users of CAD, Incremental Design and Design for Manufacturability and Assembly (DFMA) report the higher level of satisfaction. 6 Discussion and conclusion. The study has empirically explored the relationship between awareness of different NPD techniques and their usage rate, trying to explain the low usage rates reported in previous studies. However, as it is often the case with exploratory studies, this study raised more issues than it resolved. Table 5.- Average satisfaction degree. Satisfaction degree (1 a 5) Computer Aided Design (CAD) 4,29 Design for Manufacturability and Assembly (DFMA) 4,23 Incremental design 4,2 Computer Aided Manufacturing (CAM) 3,86 Concurrent Engineering 3,84 Group Technology 3,75 Electronic Data Interchange 3,73 Computer Aided Engineerin g (CAE) 3,73 Conjoint Analysis 3,86 Product Data Management (PDM) 3,68 Multifunctional teams 3,64 Rapid prototyping 3,62 Internet and intranets 3,54 Quality Function Deployment (QFD) 3,54 Modular design 3,52 Manufacturing Resources Planning (MRP) 3,48 Rapid design transfer 3,47 Just in Time (JIT) 3,41 Groupware 3,39 Optimal Product Technology (OPT) 3,3 Stage Gate processes 2,9 Our empirical results show a clear relationship between awareness and use (see figure 2). About 75% of all the firms who are aware of these techniques also apply them. However, some differences can be noted between the different techniques. The respondents tend to be satisfied with the techniques and tools they use. This outcome is in line with the previous findings (Mahajan and Wind, 1992; Nijseen and Lieshout, 1995). Our results indicate that some new tools present a low awareness level that can explain their low usage rates. Therefore, some techniques such as DFMA, PDM, Group Technology, Stage-Gate processes or Conjoint Analysis show very low usage rates, because firms are unaware of their existence (see figure 2). As with any exploratory empirical study, there are several limitations to our analysis. First, all data in the survey were perceptual and collected from a single respondent for each firm. While the respondents were shown to possess high degrees of relevant knowledge, they were still subject to respondent biases. A second concern with our study was the relatively small sample size, however the study represents one of the largest empirical studies about the relationship between awareness and use of NPD techniques. Despite these limitations our results suggest several managerial implication for best practice in product development. As users are generally satisfied, there seems no direct need 7 for improving the quality of existing techniques. However, we think firms and academical institutions should keep looking for better tools that could improve the NPD efficiency. There is also a job for universities and consulting firms to train and educate current and, especially, future managers about the new techniques and the advantages that their use can imply in the present competitive environment. Figure 2.- Relationship between usage rate and awareness level. Rapid prototyping Conjoint analysis Modular design Multifunctional teams QFD PDM DFMA Groupware Incremental design CAM Group technology CAE Rapid desegin transfer EDI Concurrent Engineering Internet and intranets Stage-Gate CAD OPT Use MRP JIT Awareness Additional research is needed to understand why many new techniques are hardly used and the relationship between their use and new product success. A large sample size research would be required to adequately answer these questions. We hope that our discussion o f this data lead to enhanced possibilities of success for new product developers and a better knowledgment of the different tools and techniques. 8 References 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. BOOZ, ALLEN & HAMILTON (1982). New product management for the 1980´s. Booz, Allen & Hamilton Inc., New York. BROWN, S. L. AND EISENHARDT, K. M. (1995). “Product development: past research, present findings and future directions”. 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