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Limitation of BAH Model
Limitation of BAH Model
Joris Beerens
beerens_joris@bah.com
Georg List
list_georg@bah.com
Peter Mensing
mensing_peter@bah.com
Steven Veldhoen
veldhoen_steven@bah.com
1) A clear product development strategy driving all product development activities A clear product development strategy is a prerequisite to provide clear focus and priorities to a companys product development activities. The product development strategy should be driven by the companys specific corporate strategy and be clearly linked to the available capabilities and resources. A good product development strategy will be pragmatic, realistic and focused on the bottom line: only a limited number of companies per industry will have the resources and/or capabilities to be innovation leaders and create breakthrough products (technology forward see Figure 2).
the search for the next killer idea. To make a fast follower strategy a success, the ability to flexibly manage a network of partners/subcontractors and suppliers is in many cases an essential prerequisite. 2) Adherence to an actionable product development roadmap Regardless of which of type of innovation strategy best supports the overall company strategy, companies require a well thought-through roadmap to guide their product development activities. A product development roadmap translates a companys business strategy and priorities into a market-driven agenda for product (and process) development. As such, a product development roadmap is an essential element in improving control over product development activities. A first rule for any product development roadmap is that if a product is not on the roadmap it will not be developed. This basic rule creates immediate transparency amongst all stakeholders about the scope of the companys product development activities at any given time. It eliminates resource-draining pet projects and contributes to avoiding frustrating and costly reprioritisation of projects. The roadmap
Only a limited number of companies per industry will have the resources and/or capabilities to be innovation leaders
For most companies a fast follower strategy is sufficient, which results in a completely different set of required capabilities and resources: for the fast followers, the key to success in product development lies more in focus and pragmatic trade-offs than in
allows companies to make informed choices, and results in more efficient use of the available budget and resources. The complexity and structure of a companys roadmap (e.g. how to prioritise product development activities, how to create a balanced selection of different types of ideas, how to continuously update the roadmap) will be driven by the chosen product development strategy. In general, it is advisable to make a clear distinction between new product/process development and more incremental enhancements, and between products and services and the underlying enabling technologies or platforms . The roadmap should be sufficiently flexible to allow a company to react to new market developments and ideas, and at the same time rigid enough to provide focus and avoid a continuous battle for resources.
Figure 2
Overview of Different Product Development Strategies
A product development roadmap translates a companys business strategy into a market-driven agenda for product development
In our experience, most companies do have something that serves as a product development roadmap. In many cases this is an annual wish list of product development activities, which is outdated even before it is circulated. As such, these roadmaps do not offer a sound enough base for management and control. An effective roadmap should not be created once per year by a product development manager with the objective of maximising his product development resources. Instead, it should be the result of a company-wide effort, following a transparent process and applying
Description: Create breakthrough products then put them out there and see which stick Product Development Strategy: Intensive R&D; lab-focused; discovering protectable new technologies Consumer Insights: Minimal; customer feedback Marketing: Rely on early adopters, technoand fashion-geeks; word of mouth and niche marketing Examples: Bose, Philips
Description: Make a product then make a market Product Development Strategy: Invest in new technologies; continually refine existing products Consumer Insights: Focus on wants (aspirational) rather than needs (productspecific) Marketing: More aspirational; creating a strong brand umbrella; not focused on product specifics Examples: Nike, Coca-Cola, Vodafone, Apple
Innovation Approach
The Follower
The Listener
Description: Copy whatever the market leaders are doing Product Development Strategy: Duplicate successful product innovations of market leaders Consumer Insights: If any, focused on quick surveys to identify vulnerabilities of market leader Marketing: If any, intended to build awareness; no emphasis on differentiation, features; announcements Examples: Pepsi, Kia cars
Description: Find a consumer need then make a product Product Development Strategy: Develop products to meet identified consumer needs Consumer Insights: Focus on needs (productspecific) rather than wants (aspirational) Marketing: Focused on features/functionality of the new product; head-to-head testing against competition Examples: Lexus, Dell, P&G
Active / Aggressive
Figure 3:
Product Development Roadmap Key Principles and Guidelines
Roadmap
The roadmap defines a market-driven, 18 month agenda for Product & Process Development derived from the business strategy and priorities The roadmap guides product and process development, but is not an exhaustive project list. The roadmap is the basis for management and control of development activities (e.g. budgets, resources, progress measurements) Resources and budget are split over three project categories to ensure a balanced selection of different types of ideas: New Product & Process Development, Product Enhancements, and Process Enhancement
The roadmap is approved and owned by the Managing Board Products/services and capabilities that are not on the roadmap will not be developed The roadmap is updated regularly (on a six-month basis) to reflect development progress and new market insights, and thus is dynamic Effective roadmap use will increase the transparency of the product development process, allowing betterinformed choices to be made (e.g. enabling quick track changes)
clear financial, commercial and technological criteria to prioritise the development efforts. For a roadmap to be truly effective it must be driven by the companys strategy and owned by top management, it must be dynamic and continuously kept up to date, and it must be rigorously maintained as the sole source for product development activities within the company. A roadmap should also be realistic and hence must be strictly linked to the companys total product development resources both in terms of capacity and available skills. As stated above, a product that is not on the roadmap will not be developed. A properly maintained roadmap is a highly effective instrument for aligning product development activities with a companys overall strategy. 3) Rigid and strict process discipline Whereas a roadmap ensures that all product development activities support the companys overall strategy, disciplined product development processes ensure these activities are realised efficiently and effectively. Although product development processes will inevitably differ across companies, some common process best practices exist that facilitate continuous control over product development activities and their output.
In general, innovative companies tend to have a welldefined and formalised product development process with frequent decision gates (see Figure 4 for an example). As such, the product development process helps to ensure that projects are executed to plan (time, budget, quality). Most companies recognise the importance of a disciplined product development process and spend significant amounts of time and money in (re)designing their processes.
Individual stages and gates are defined in detail, with consistent and specific goals Project resources are strictly allocated per phase a project manager needs to pass the decision gate to obtain the budget and staff to execute the next phase of the project Projects are not allowed into a next phase of the development process if the previous phase has not been fully completed
However, process steps within a given phase may be run in parallel to allow for a faster flow and therefore reduced time-to-launch
Projects that no longer meet the original requirements and/or budget are reviewed and killed off when necessary Post-launch assessment closes the loop and helps to explicitly identify key lessons
4) Clear accountability through an end-to-end project manager and a business owner The involvement of a broad range of (internal and external) stakeholders in the product development process often results in confusion, especially about
who is accountable for project specifications and for project execution. This typically results in repeated budget overruns and costly delays. Two roles are crucial for proper project execution: the end-to-end Project Manager and the Business Owner.
Most companies have project managers responsible for project execution and delivery but they are often responsible for only part of the development process. In our experience, handovers within the development process are bound to result in inefficiencies, fundamentally due to diminished ownership and accountability for the end-to-end project.
Successful companies create clear accountability for project execution and commercial success
End-to-end responsibility for project execution and delivery with a single project manager creates transparency over project ownership, reducing delays and budget overruns. The Project Manager with overall project responsibility remains the same throughout, while the make-up of his team may vary over the lifetime of the project depending on the varying needs for specific (technical) expertise.
that are developed (often at great cost) but never launched, or in product specifications that increasingly deviate from the original project requirements. Appointing a Business Owner to provide business sponsorship throughout the project ensures the project has continuous and full support from the end-user organisation, and creates clear accountability within the project organisation for the commercial success of product development. Ideally, the manager who will assume responsibility for the product P&L post-launch assumes the role of Business Owner during product development.
The Business Owner is responsible for the (continuously updated) product business case (both revenue and cost) during all phases of the development process The Business Owner signs off the project content at each decision gate, thus ensuring that project requirements remain in line with business priorities The Business Owner is responsible for the final product (incl. business case results)
The Project Manager has end-to-end responsibility for the entire project from feasibility to commercial launch The Project Manager owns the project budget and resources committed to his project for a specific phase of the project development process. The Project Manager can make decisions within the project boundaries (i.e. requirements, resources, timing, budget) The Project Manager is accountable for all elements of delivery (quality, time, budget)
End-to-end Project Managers facilitate accountability for project execution; they do not facilitate accountability for the content of the project, and in particular the evolution of product/service requirements and specifications during project execution. This all too frequently results in products
5) Clearly-defined and enforced roles and responsibilities at different levels within the organisation Enforcing the best practices described here requires a transparent organisation with clearly defined roles and responsibilities. Diffuse roles and responsibilities often result in confusion, lack of collaboration and (in the most extreme form) inertia from which many companies suffer. Unguided product development can become an area of endless trench warfare between the technical, commercial, purchasing and financial departments involved. We typically distinguish four organisational elements that play a crucial role in driving product development:
a) The Management Board The Management Board is directly responsible for setting the overall direction and boundaries for all product development activities. It does this through defining the companys product development strategy, signing off the product development roadmap and determining the overall company resources available for product development activities. In addition, senior management involvement in product development provides the formal authority required to negotiate and to obtain resources and information from different parts of the organisation. b) The Innovation Board A cross-company Innovation Board, consisting of relevant department heads, is responsible for realisation of the company roadmap. The Innovation Board effectively holds (delegated) decision-making authority for budget and resource allocation to projects (always in line with the roadmap). It is for example the Innovation Board that makes the Go/No Go decisions at each stage of the product development process. c) The Product Development Department The Product Development Department is responsible for overall project execution, guided by the Innovation Board. Bringing the end-to-end execution of the product development process (i.e. project management and product development factories) together in a single Product Development Department creates clear process ownership with accountability for the quality of the entire product development process and its output. In addition, the Product Development Department ensures transparency of the product & process development process to the rest of the organisation, allowing rapid decision-making and reprioritisation. d) The end-to-end Project Manager The end-to-end Project Manager is located within the Product Development Department and is responsible for the day-to-day execution of a single project, as discussed under point 4.
Conclusion Booz Allen Hamilton has helped companies to improve product development performance across a range of industries often by applying the five best practices discussed above to the clients specific market and organisational context. Typically, the complexity of enhancing innovation effectiveness lays not so much in identifying improvement levers and creating tools, but rather in making the change happen in an inherently complex environment that spans multiple departments/business units. Companies who have successfully enforced discipline and control in their product development activities have reported significant reductions in time-to-market, and make more effective and efficient use of resources. Furthermore, these companies have realised a significant freeing-up of management time due to increased clarity and accountability within the product development process. In our experience, the cost of missed growth due to late or absent product development is too high to ignore for many companies, while at the same time improving innovation effectiveness is less painful and more lucrative than most other improvement initiatives a company could undertake. Bottom line, improved effectiveness of a companys product and process development activities results in both a revenue increase (due to more and timelier successful product launches) and in cost savings on the total product development budget.
Joris Beerens is a Principal in Booz Allen Hamiltons Amsterdam office. He consults primarily with clients in telecom, media and fast moving consumer goods. He specialises in demand-side effectiveness improvement with a focus on marketing and innovation. Alexander van Boetzelaer is a Project Leader in Booz Allens Amsterdam Office. Alex advises clients in the telecom, food and financial services industries on formulation and execution of innovation strategies. Georg List is a Principal in Booz Allen Hamiltons Amsterdam office. Georg is specialised in driving strategic transformation programmes for clients in the automotive, aerospace and other industries with high engineering content, with a focus on innovation strategy and effectiveness.
Peter Mensing is a Senior Vice President and Managing Partner of Booz Allen Hamiltons Amsterdam Office. He has served major corporations across a range of consumer and service companies on strategy and organisation related topics. Steven Veldhoen is a Vice President with Booz Allen Hamilton based in the Tokyo Office. Steven primarily serves clients in the automotive and aerospace industries on strategic transformation programmes, with a particular focus on innovation strategy and costdriven engineering. Also contributing to this report were Booz Allens Alex Kandybin (kandybin_alex@bah.com) and Christian Koehler (koehler_christian@bah.com).
Downloadable digital versions of this article and other Booz Allen Hamilton publications are available from www.boozallen.com.
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