Markham, S and Lee, H, Product Development and Management Association's 2012 Comparative Performance Assessment Study J PROD INNOV MANAG 2013 30 (3) - 408-429

Comparative Performance Assessment Study, 2012
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Product Development and Management Associations
2012 Comparative Performance Assessment Study

Stephen K Markham, PhD
Management, Innovation and Entrepreneurship
Poole College of Management
North Carolina State University
Raleigh NC, 27609
919 539-9941
stephen_markham@ncsu.edu

Hyunjung Lee, PhD
Center for Innovation Management Studies
Poole College of Management
North Carolina State University
Raleigh NC, 27609

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BIOGRAPHICAL SKETCHES

Stephen Keith Markham is a professor of Management, Innovation and Entrepreneurship at
North Carolina State University. He received a B.S. and M.S. in Psychology at Brigham Young
University. He received an M.B.A. from the University of California, Irvine and a Ph.D. in
Organizational Behavior from Purdue University. His research explores the roles people play in
the front end of innovation. Dr. Markham serves as President of the PDMA Foundation. He
consults with numerous Fortune 500 companies and founder of several high technology startup
companies.

Hyunjung Lee is a research scholar at North Carolina State University in the Center for
Innovation Management Studies. She received her Ph.D. in Management Information Systems
and her M.A. and B.A. in Management from Ewha Womans University in Seoul, South Korea.
Her research interests include new product development, knowledge management, information
technology, culture, and innovation.
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ABSTRACT

Results of PDMAs Comparative Performance Assessment Study (CPAS) are presented from
453 companies. In addition to baseline questions from previous studies, new sections on culture,
social media, services, sustainability, open innovation, and global product development practices
are introduced. Extensive comparison between the Best performing companies and the Rest of
the sample reveal numerous practices that lead to higher product performance in the market.
Comparisons are also made between this study and previous PDMA best practices studies. In
addition, geographic differences among North America, Europe and Asia are explored. Practices
leading to higher commercial performance are identified.

KEYWORDS: Best Practices, Product Development, Innovation
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AKNOWLEDGEMENTS: The authors would like to thank the Product Development and
Management Association for access to their members and the PDMA Foundation for permission
to use the data. We gratefully acknowledge the many people who participated in this study and
to Steve Uban for managing the data collection, Mark Adkins, Jong-in Choi, Fred Langerak, Jin
Yong Park, Questback, and Lei Tao for collecting the data. We wish to thank Abbie Griffin for
reviewing the data.

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The product development function has escalated in its complexity and its importance to
company profits and survival. Gone are the days when a single individual could manage the
innovation function. Sophisticated processes and methods must be used to assess markets,
customer needs, technology readiness, company capabilities, distribution and product
management. Possessing current knowledge about how the Best performing companies conduct
product development offers a great advantage in our hyper-competitive global market.
The Product Development and Management Association (PDMA) conducts best practice
research on new product development (NPD). Since the first best practice study in 1990 (Page,
1993) additional studies have been undertaken in 1995 (Griffin, 1997) and 2004 (Barczak,
Griffin, and Kahn, 2009). This fourth study, conducted in 2012, is called the Comparative
Performance Assessment Study (CPAS). Each study expanded and extended the previous work
as business environments continued to change.
Since the 2004 study, dramatic changes in product innovation have occurred,
necessitating significant changes in this study. In this fourth best practices study the following
new areas have been added: 1) In collaboration with leading practitioners and academics in NPD,
this study added a section on innovation culture. Culture for innovation promotes the creation
and implementation of new ideas (Denham and Kaberon, 2012) and encourages individual
learning. Experimenting with highly innovative ideas contributes to new product success
(McLean, 2005). 2) A new section on strategy expanded the number of questions in the area of
product strategy. 3) Recent social changes spotlight sustainability as a potentially important
product feature. 4) For the first time, the use and impact of intellectual property is assessed as
part of NPD best practices. 5) Questions assess how open innovation has emerged as an
important topic for companies as a source of innovation. 6) New questions assess information
about products and customers found in rapidly evolving social media sources. 7) Services
development is recognized as profoundly different from goods (Ettlie and Rosenthal, 2011). This
new study examines how services are developed and perform relative to goods and mixed
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product strategies. 8) Questions about NPD tools were expanded as a burgeoning number of new
tools and methods are introduced to improve NPD.
The previous study introduced assessments on the levels of innovation (radical, more
innovative, and incremental innovation) and found a series of relationships contrary to
commonly held beliefs (Holahan, Sullivan, and Markham, 2013). Therefore, we replicated and
broadened those questions to measure different levels of innovativeness for more in-depth study.
A significant change in 2012 CPAS is that for the first time the study included a global
sample; completed surveys were received from 24 countries. Comparisons are made in this
article among North America, Europe and Asia. This allows us to analyze leading companies
around the world and to compare NPD practices globally.
Finally, for the first time, all the data for this study was collected electronically.
Although paper based and data capture PDF files were made available to all participants, all but
the Asian responses were done on the website.
Although the 2012 CPAS add substantial new topics and uses different methods and
samples it also retains a critical base of information about product performance and practices.
Replicating these questions in this study allows us to compare results across time. This article
makes numerous comparisons to previous studies to explicate continuing and changes in trends.

History

The PDMAs interest in providing best practices in product development dates back more
than 20 years. The first research project, Best Practice 1 (BP1), in 1990, identified norms
describing product development practices (Page, 1993). BP1, obtaining 189 responses, found
that companies had adopted a variety of new techniques in NPD, and enjoyed moderate success.
Out of eleven projects that started in the product development process only one successful
product emerged. Notwithstanding, 58% of the products that these companies introduced in the
past five years were successful. BP1 found that only 54.5 % of the 189 companies had a well-
organized NPD process and 56.4% had a new product strategy.
The PDMA performed the second Best Practices project (BP2) in 1995. This research
expanded and updated BP1 and gathered data from 383 respondents. The practices of the Best
versus the Rest firms in NPD were differentiated and various product development tools were
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investigated. The success rate was stable at 59%, but the big change was the required number of
ideas for new product success was only 6.6, which was associated with projects being terminated
in the earlier development stages. More firms, 61.5%, used a formal NPD process and 55.6%
had a specific NPD strategy. rather than doing one or two things different, the Best used many
practices significantly more than the Rest: formal NPD processes, specific NPD strategy,
measuring NPD outcomes and expecting more out of NPD efforts, cross-functional development
teams, qualitative market research tools, engineering design tools, and closing NPD projects with
completion celebrations for participants.
In 2004, the PDMA Foundation conducted the third Best Practice study (BP3). Surveys were
received from 416 respondents in a variety of industries. Since the business environment had
changed and the competition had continued to intensify during the eight years between the
second and third best practices studies the breadth and depth of questions were expanded.
Questions about the fuzzy front-end and portfolio management were new and the questions about
the number of tools supporting product development were significantly broadened. The biggest
difference from the previous study was that responses were separated into radical innovations,
more innovative projects, and incremental innovations. The success rate of new product
development continued to be stable: 58% in 1990, 59% in1995, and 59% in 2004. However, the
percentage of sales and profits from new products declined; 28% for sales and 28.3% for profits
in 2004 compared with 32.4% and 30.6% in 1995 and 32.6% and 33.2% in 1990.
Since the last study, the boundaries between firms and the environment have become more
permeable; innovation transfer became more open. The interdependence of world markets,
advancement in technology and improved communication boosted globalization and changed
competitive dynamics. Social media and service development became pressing issues even
though companies have little empirical research to guide their use. This research is designed to
identify NPD practices across a large sample of diverse industries to provide a comprehensive
view of current NPD best practices.

Methodology

In 2011, the PDMA Foundation assembled an advisory committee to plan, organize and field
the fourth Best Practices study (BP4). The Foundation is a group of volunteers dedicated to
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NPD research that leverages the diverse PDMA membership of academics and practitioners in
the association. The committee developed the questionnaire to keep continuity with past studies
and to include critical new practices. The 2012 PDMA CPAS is a detailed in-depth
benchmarking survey that was 30 pages in length and with 562 different questions. The
questions are divided into ten categories as follows:
1. Innovation culture
2. Strategy
3. Portfolio management
4. New product process
5. The front end of innovation
6. Development tools
7. Measures & metrics
8. Outcomes
9. Background
10. Summary and comments

The survey was extensively tested before being fielded. A print copy of the questionnaire
was administered to 18 MBA students who checked for both content and clarity. A number of
modifications were made to clarify items and streamline the instructions. Hard-copy surveys
were then mailed to 32 NPD practitioners in the U.S. Several questions were modified to
improve respondents understanding. Next, the survey was transferred to an online format and
tested with another set of 30 practitioners. Again, question content and format were modified in
response to feedback from the test respondents.
An email invitation was sent to 3,391 practitioners in the PDMA and then reminders were
sent in two-week intervals resulting in 165 usable responses. A larger list of 21,588 PDMA
contacts was also invited to participate using email with reminders two weeks apart resulting in
78 responses. In addition 149 responses were collected from Asia and 61 from Europe. The
email invitations and reminders contained a link to obtain a code that allowed each participant to
fill out the questionnaire. The code ensured that only product developers could gain access to
the questionnaire. It also allowed participants to return to the survey after logging off without
losing any data they previously entered. An online glossary of terms and definitions was
available to participants by simply clicking on a link to find more information. From the email
invitation, participants could also download a pdf file and fill out the questionnaire on paper and
mail it to the researchers. Only one respondent used this method. In addition to email
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invitations, the PDMA also provided a link on their home page to the same source to get a code
for the survey.
In Asia, much of the data were collected by PDMA affiliates using a paper questionnaire and
then entered into the on-line version by the researchers. In Europe, PDMA affiliates also
facilitated data gathering, however the respondents used the online version themselves. Surveys
were received from twenty-four countries: US, Canada, Netherlands, UK, France, Belgium,
Denmark, Germany, Ireland, Sverige, Switzerland, South Korea, China, India, Malaysia, Hong
Kong, Japan, Taiwan, Saudi Arabia, Brazil, Columbia, Ecuador, Mexico, and New Zealand. For
each non-English language, a native speaker translated the survey into that countrys language.
The Foundation paid for the survey to be translated back into English by a professional
translation service. English versions were compared and discrepancies in translation were
resolved.
In exchange for completing a questionnaire, participants were offered a copy of the results
and invited to attend webinars that would review the results. If they chose, they would also be
entered into a drawing for an iPad.

Sample and Summary Demographics
Codes were sent to 1,167 individuals with instructions on how to fill out the survey.
Three hundred and thirty-two people opened the survey but did not provide any information. Of
the 835 people who provided information, 382 were eliminated from the final data set because
they did not complete the survey. Four researchers reviewed the data and decided which
responses were kept and which were eliminated.
Sent with the codes were instructions that asked the participants to act as key respondents
for their business unit. Participants were instructed to gather information from multiple people
in their business unit to answer the questions, if necessary. The length of time to complete the
questionnaires ranged from 2 hours to six weeks. Completed surveys were gathered from the
North America (198 surveys), Asia (149), Europe (61), and others (45) (Table 1). The
distribution of industries was: capital goods (97), chemicals and materials (74), industrial
services (63), software and services (59), consumer services (51), technology hardware (62),
health care (41), and fast-moving consumer goods (26). Table 2 indicates the demographics of
the sample. Goods manufacturers make up 56% of the sample with technology companies
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comprising 45.4% and business-to-business companies accounting for 56.4% of responding
companies while companies with less than $100 million in revenue make up 63.3% of the sample.

Table 1. Country Distribution
Country
North
America
Asia Europe Others Total
Number 198 149 61 45 453
% 43.7 32.9 13.5 9.9 100

Table 2. Sample Demographics
Number %
Product Type Primarily Goods 224 56.0
Mix 68 17.0
Primarily Services 108 27.0
Technology Base Primarily High Tech 200 45.4
Mix 114 25.9
Primarily Low Tech 127 28.8
Market Primarily Primarily Consumer 130 29.5
Mix 62 14.1
B2B 248 56.4
Sales < $100M 286 63.3
> =$100M 166 36.7
B2B, business-to-business.
As in 2004 and 1995 new product best practices studies, the 2012 sample was split into the
Best and the Rest based on multiple performance variables. The Best companies were defined in
terms of 1) the most successful or in the top third in their industry for NPD success, and 2) being
above the mean for their new product program success, and 3) being above the mean for sales
and profit success from NPD. There are 88 (24.6%) Best firms vs. the Rest of the 270 firms
(75.4%). Ninety-five companies did not provide enough performance data to be classified and
were not used in the Best vs. Rest calculations.
To avoid redundancy, when there is a statistical difference between means at the p<0.05 it
is indicated by a * behind the variable name.

Results

The first results reported are NPD outcomes, including success rates, sales, on time and
schedule performance, technical objectives, market objectives, profitability, project mortality and
cycle time. We then report practices that contribute to the outcomes including culture, strategy,
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technology monitoring, sustainability, intellectual property, globalization, portfolio innovation
strategy, new product process, NPD drivers, team practices, front end of innovation, social media,
new product development tools, and services and goods.

NPD Outcomes
Product success rates inched up in 2012. After slight increases in previous studies, BP4
found 61% of launched products succeeded in the market (Table 3); all other performance
indicators increased slightly. North American companies increased even more to a 67.5%
success rates. The Best firms are significantly more successful (Table 4). More than 82% of the
new products introduced into the market during the last 5 years were successful in the Best firms,
versus 52.9% in the Rest. In profitability, the Best companies have a 78.2% success rate versus
47.9% for the Rest. About 47.9% of sales and 48.5% of profits come from new products in the
Best companies versus 25.4% and 25% for the Rest. These results are stable from 2004 to 2012,
with the exception that the Rest of the companies in 2012 showed an increase in sales and profits
from new products.

Table 3. Success Rates
2012 2004 1995 1990
North
America
Asia Europe
Number of Firms
Successes
Success-Profits
Sales from New Products
Profits from New Products
Number of Ideas for One Success
453
61.0%
56.2%
31.1%
30.8%
8.7
416
59.0%
54.2%
28.0%
28.3%
7.2
383
59.0%
54.6%
32.4%
30.6%
6.6
189
58.0%
N/A
32.6%
33.2%
11.0
198
(43.7%)
67.5%
62.5%
28.0%
28.2%
6.4
149(32.9
%)
48.6%
44.5%
38.9%
36.7%
14.9
61
(13.5%)
56.8%
51.8%
29.2%
31.5%
10.2
N/A, not available.

Table 4. Success Rates

2012 2004
The Best The Rest The Best The Rest
Number of Firms
Successes
Success-Profits
Sales from New Products
Profits from New Products
Number of Ideas for One Success
88 (24.6%)
82.2%
78.2%
47.9%
48.5%
4.5
270 (75.4%)
52.9%
47.9%
25.4%
25.0%
11.4
96 (24.1%)
75.5%
72.4%
47.6%
49.1%
4.0
303 (75.9%)
53.8%
47.9%
21.4%
21.2%
9.2
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As Table 3 indicates, North American firms have higher success and profitability rates
than European and Asian companies. Firms in Asia only have a 48.6% success rate and a 44.5%
profitability rate. Over two-thirds of the Asian sample consists of small companies so we
analyzed the differences between large and small companies in Asia. About 67.3% in success
and 60% in profitability are observed in large companies whereas only 45% in success and
41.2% in profitability in small Asian firms. On the other hand, sales and profits from new
products are the highest (38.9%, 36.7%) in Asia.
The Best companies started only 4.5 ideas to generate one product success versus 11.4 for the
Rest (Figure 1). North American firms need only 6.4 ideas for one success on average while
10.2 ideas in Europe and 14.9 ideas in Asia are needed. In Asia, large companies need 7.8 ideas
while small companies need 18.7 ideas for one market success. As found in BP2 and BP3, there
is no significant difference in the number of new products commercialized over the last five
years between the Best and the Rest. This shows that being the Best is more important than
simply introducing a large number of products.

Figure 1. Initial Number of Ideas to One Success

How radical or incremental projects are dramatically influences their performance and
contribution to profit. BP4 added outcomes questions about being on time, being on budget,
meeting technical objectives, and meeting market objectives for radical, more innovative, and
incremental projects (Table 5). The more radical the project the less well it does on all
performance variables. Companies across all levels of innovativeness do best at meeting
technical objectives followed by meeting market objectives. In comparison to meeting technical
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and market objectives firms struggle to be on budget and on time. Only about one third of
radical projects meet schedule and budget objectives and less than half of the more innovative
projects do.

Table 5. Project Performance

On time
(%)
On budget
(%)
Met technical
objectives (%)
Met market
objectives (%)
Radical 29.2 31.7 53.1 46.3
More Innovative 43.6 49.1 66.3 58.7
Incremental 57.9 62.3 72.9 68.0

This research also found that incremental projects (48%) generally contribute more to total
profit than do radical (18.9%) or more innovative projects (33.2%). The Best firms, however,
derive significantly more profits than the Rest for radical (22.9% vs. 18.6% ) and more
innovative projects (38.2% vs. 31.8%) while the Rest derive more profits than the Best
performing firms for incremental project (49.7% vs. 39%). The poorer performing firms rely on
incremental products for half of their profits.
The project mortality curve measures how many projects are dropped from one stage of
development to the next and is an important efficiency metric. Since the advent of product
development processes in the mid 1980s the percent of ideas progressing from one stage to the
next has been remarkably stable (see Figure 2). A 1982 study shows a large number of ideas
being progressed that ultimately did not succeed. The percent of projects screened out remain
virtually unchanged from 32% in 2004 to 33% in 2012. Each stage in the 2012 data shows a
lower percent of projects progressing from stage to stage, suggesting that NPD is becoming a
little more efficient over time. The commercialization rate was 19% in 2012 while it was 24% in
2004. Companies are more discriminating in the percent of projects being commercialized. It is
interesting to note the mortality curves for North America, Asia and Europe are similar although
North America has a measurably higher success rate than Asia and Europe.

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Figure 2. Project Mortality Curves

The last outcome variable we report is that cycle time to develop new products from concept
to formal market introduction for radical innovation and more innovative continues to shorten.
Table 6 shows that radical innovation development decreased to 82 weeks in 2012 compared
to104 weeks in 2004 and 181 weeks in 1995. More innovative projects took 57 weeks in 2012
compared to 62 weeks in 2004 and 78 weeks in 1995. However, incremental projects showed an
increase to 33 weeks in 2012, from 29 weeks in 2004 and 33 weeks in 1995.
In Asia, the cycle time for radical innovation (40 weeks) is shorter than for more innovative
(41 weeks). This seems to be an anomalous finding. This is less than half the time of North
American firms and less than one third of European firms. We further examined the size
difference between Asian firms. The cycle time for radical innovation in small Asian firms is
much shorter (36 weeks) than for large Asian firms (51 weeks). In small Asian companies,
radical innovation (36 weeks) is still shorter than more innovative (42 weeks). The cycle time
for radical in large Asian companies (51 weeks), however, takes longer than for more innovative
(36 weeks) and incremental innovation (25 weeks). Respondents may have misunderstood the
question or there may be a fail fast culture in small Asian firms for risky projects.

Table 6. Cycle Time (weeks)

NPD Trends: Innovation Culture
A firms innovation culture has been identified as critical to product development (de
Brentani and Kleinschmidt, 2004). BP4 included the questions about innovation culture, use of
2012 2004 1995
North
America
Asia Europe
Radical
More Innovative
Incremental
82
57
33
104
62
29
181
78
33
97
67
36
40
41
32
135
66
33
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technology, and the cooperative climate among participants in the NPD activities in teams,
between teams and between organizations. Figure 3 shows the results of eight elements of
innovative culture between the Best and Rest. The Best exhibit all eight cultural elements over
55% of the time and the Rest exhibit all but one of those elements less than 50% of the time.
The Best recognize that constructive conflict (68.8%), and that failure is understood as part of
innovation (57%) and that risk taking is valued (63.3%) among others are cultural artifacts
important to innovation.
Literature on how people of different nationalities handle conflict suggests that those in
individualist cultures, such as the United States, are more likely to be confrontational in their
conflict resolution than people in collectivist cultures such as Korea, China, and Japan (Kirkbride,
Tang, and Westwood, 1991; Triandis et al., 1988; Ting-Toomey, Yee-Jung, Shapiro, Garcia, and
Oetzel, 2000).
The data collected in this study do not support these generalizations for NPD. Geographical
differences do show that Asian companies spend significantly more time establishing objectives
and using objectives in the performance review process than North American companies. They
are more likely to formalize objectives and review performance. European companies are more
likely to focus on communications as a cultural approach to innovation. Surprisingly, North
American firms are lower on all but one dimension of innovation culture. North America is also
lower on all dimensions of what we would consider cultural dimensions that support innovation.
North American firms are not more understanding of failure, do not value risk more and dont
engage in more open innovation than either Asia or Europe. There may be a difference in NPD
cultural that explain these numerical results. If these findings hold in other research we must
rethink cultural difference in regard to innovation.

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Figure 3: Innovation Culture

Culture is related to how much companies utilize new technologies. As Figure 4 shows,
technology monitoring is a strong indicator of success. The Best are twice as likely to monitor
external sources that result in breakthrough products (67% vs. 35.3%). European companies use
technology to find breakthroughs 49.2% of the time with Asia 45.6% and North America 36%.

Figure 4. Technology in Innovation

The 2004 CPAS suggested that cooperative team environments predict knowledge sharing
that in turn leads to higher performance. The 2012 survey added the concept of we-ness to
understand teams more deeply. We-ness is a sense of togetherness that members feel toward
each other in terms of psycho-social relationships (Choi and Choi, 2001; Reid et al., 2007; Seider
et al., 2009). In this study, we-ness was observed to be highest inside teams (63.4%), next
highest between-teams (55.8%) and lowest between-organizations (49.6%). We expected that
we-ness would be different between individualist society and collectivist society. Surprisingly,
there are no significant differences between countries. All countries emphasize the importance
of increasing the bond among group members. It is not surprising that the Best performing
companies have a significantly higher level of we-ness in their teams, 72.3% of the time and
between teams at 64.4%. However, even the Rest of the companies have relatively high levels of
we-ness in their teams and between teams (60.9% and 53.7%).

NPD Trends: Strategy
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The percent of the firms that have specific new product strategies decreased from 74% in
2004 to 60% in 2012. The Best have a higher percent (76%) of new product strategies that direct
and integrate their entire NPD programs. The Rest has only 54%. There is an insignificant
difference between the large and the small companies (65% vs. 57%). In geographical
comparison, Asian companies have specific strategies 63.8%, then 62.3% of firms in Europe and
61.7% in North America. .
Overall, firms followed a fast follower strategy most often in 2004 (36.7%) and again in
2012 (33.7%). In BP4, about 31.5% of the firms use a first to market strategy, valuing being first
with new products, markets and technologies and respond rapidly to early signals concerning
areas of opportunity. About 26% use a niche strategy, and a reactive strategy is used 9% of the
time (Figure 5).
The stability of these numbers over time masks the competitive difference between
companies. The Best are almost twice as likely to pursue a first-to-market innovation strategy as
the Rest (47.7% vs. 24.8%). About the same percent of the Best and Rest companies use a fast
follower strategy. Significantly fewer Best companies now use a niche or reactive strategy.

Figure 5. NP Strategy

Management involvement is an important part of many firms innovation strategy.
Companies that have an executive with ultimate responsibility for the NPD strategy at the
business unit level decreased to 62.6% in 2012 from 75.6% in 2004. An executive at the
corporate level also slightly decreased to 64.2% in 2012 from 66.8% in 2004. Table 7, however,
indicates that the mix of managers engaged in NPD strategy is shifting to include more senior
managers. In BP4, the Best firms also show that senior managers are significantly more
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involved in and support collaborative projects and innovation than the Rest (75.3% vs. 53.8%,
see Figure 18).

Table 7. Managerial Participation in NPD Strategy
` 2012 (%) 2004 (%)
Almost all senior
75% senior/ 25% other managers
Each managers develop their own strategy
9.9
32.9
33.8
18.5
5.0
4.6
26.3
40.8
24.9
3.4
NPD, new product development
N0%) not available.
iness.

Sustainability has become more popular in product development. A 2011 Sustainability
and Innovation Global Executive Study (Haanaes et al., 2012) reported that 70 % of the
companies surveyed included sustainability permanently on the management agenda and invest
in it, and a third of the companies responded that sustainability contributed to their profits.
BP4 added questions about how sustainability affects product development strategy.
Figure 6 shows the Best use sustainability more than the Rest over half of the areas. About 50%
of the companies report having and following sustainability policies for developing new products.
Furthermore, about 20% of the firms consider sustainability as extremely important and 10%
implement and manage sustainability policies seriously.
Significantly more companies in Asia implement sustainability policies than companies in
Europe. In turn, firms in Europe implement more NPD sustainability policies than firms in
North America.

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Figure 6. Sustainability
NP, new product

BP4 also added a set of questions concerning intellectual property in NPD, which includes
patents, trademarks, trade secrets, and copyrights. A large percent of firms established and used
intellectual property strategies for their new product activities. The Best perceived and used
intellectual property significantly more (66%) than the Rest (50%) (Figure 7).

Figure 7. Intellectual Properly

Globally, this study found that companies operate in about 31 countries on average. The
operations are distributed in North America (70%), Europe (65.8%), Asia (69.5%), South
America (47.2%), Middle East (42.9%), and South Pacific (38.8%). Figure 8 shows that
ethnocentric approaches was used the most (30%), then regiocentric (28%), geocentric (22%),
polycentric (15%) and others (5%). However, the Best and the Rest follow different global
strategies. The Best firms are almost twice as likely to use geocentric strategy (36.1%) as the
Rest (18.5%). The Rest use ethnocentric (34.7%) and regiocentric strategies (30%) while the
Best only use 24.1% and 20.5% of those strategies.
While firms in North America and Asia are ethnocentric (31%, 34%), the most used strategy
in Europe is regiocentric (36%). The companies in Asia use geocentric strategies only 13.2% of
the time, which is even less than the Rest (18.5%), this may be a function of company size.
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Figure 8. Global Strategies for Markets and Operations

Even though globalization strategy is new to this version of the best practices studies, it is
used extensively to gain a competitive edge and profitability in today's turbulent business
environment (Kleinschmidt, de Brentani, and Salomo, 2007). In managing NPD global strategy,
companies use a variety of approaches to address the world-wide market and competition. The
Best firms use all the methods significantly more than the Rest (Figure 9).

Figure 9. Global Strategy Methods
NP, new product; NPD, new product development; VOC, voice of the customer.

NPD Trends: Portfolio Management
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To complement the extended strategy section of BP4, new questions about portfolio strategy
decision-making were added. The Best companies used portfolio innovation strategies over 60%
of the time while the Rest used them at or below 50% of the time (Figure 10).

Figure 10. Portfolio Management Strategy

Portfolio management is vital to successful NPD (Cooper, Edgett, and Kleinschmidt,
1999). In 2012, 71% of the respondents indicated they use a structured process for managing
their portfolio of new product projects compared to 55% in 2004. As in 2004, BP4 found a
statistical difference between how much the Best (80.7%) and the Rest (67.7%) managed their
portfolios. Both the Best and Rest increased their level of portfolio management with the Rest
catching up to the Best in this practice.
Companies use a variety of tools and techniques to manage their portfolios. It was
unexpected that even though portfolio management tools were used more in 2012 some portfolio
management techniques were used less than in 2004 (Figure 11). It is also important to note that
payback period was used the most by both the Best and the Rest and that it was used
significantly more by the Best companies. This is particularly interesting since Cooper (2011)
found that companies that focus on financial returns underperform firms with a balanced
approach to portfolio management.

22

Figure 11. Portfolio Management Tools

Across the entire sample, radical and more innovative projects are reviewed substantially less
than in 2004 (Figure 12). This is a significant retreat from formalized management processes. It
is surprising that more radical projects are reviewed less than incremental projects since radical
projects represent more risk for companies. On the other hand, even though there is an across-
the-board reduction in portfolio review over time the Best companies in 2012 still review
portfolio projects more than the Rest.

Figure 12. Degree Portfolio Management Review

NPD Trends: New Product Process
A formally documented process for NPD is a norm according to Barczak, Griffin, and
Kahn (2009). As Figure 13 indicates, the rate of the companies with a formal, cross-functional
process increased 58% in 1995 to 69% in 2004. In addition, firms that had no standard approach
to new product development decreased from 14% in 1995 to 6% in 2004, and fewer firms (15%)
had an informally documented process in 2004 than in previous best practice studies (25%). In
2012, however, only 49.1% of the respondents reported to have a formal, cross-functional
process for NPD. A formal process where one function completes a set of tasks, then passes the
results on to the next function, increased to 19.1% in 2012 compared with 10% in 2004 and 4%
in 1995. Even though formal, cross-functional processes decreased across the sample the Best
use them significantly more (67% in the Best vs. 41.8% in the Rest). At the same time the use of
23
informal systems by the Rest increased over time (27.2% in 2012 vs. 14% in 2004). The Best
are getting better and the Rest are slipping on this practice.
Some of these process decreases, however, can be attributed to firm size. In 2012, 71%
of the large firms used a formal, cross-functional process whereas the small firms used formal
processes only 36% of the time. In 2004, 77% of the large firms used formal, cross-functional
process whereas the small firms used 57% of the time. Large firms, however, also show a
decrease from 77% to 71% in the use of formal, cross-functional processes. Although small
firms are similar to large firms in most product development practices there is a substantial
difference with this practice. Since there is a larger percent of smaller firms in the 2012 sample
than in 2004 it skews the data on this item.
Some of the decrease in the total sample can also be due to geography. Table 8 shows small
Asian companies use a formal, cross-functional process only 20% of the time (North America:
51%, Europe: 44.4%). Geographical differences, however, are also evident in larger companies.

Table 8. Product Development Processes
North America Asia Europe
Small (%) Large (%) Small (%) Large (%) Small (%) Large (%)
Formal, cross-functional process 51.0 72.3 20.0 61.8 44. 72.0
Formal sequential process 13. 12.8 36.5 20.6 16.7 8.0
Informal process 22.5 10.6 33.9 11.8 30.6 12.0
No standard process 12.7 4.3 9.6 5.9 8.3 8.0

Figure 13. Product Development Processes

Continuously redesign the NPD process is an important differentiator. Across the whole
sample 32.5% of the companies redesigned their formal NPD process on an ongoing basis in
24
2012 vs. 30% in 2004. 47.7% of the Best companies redesign their NPD process on an ongoing
basis compared to 28.6% for the Rest (Figure 14).

Figure 14. Formal NPD Process Redesign

BP2 asked about structures and leadership used to conduct NPD and measured where
product development responsibilities were assigned: NPD staff departments, the strategic
business unit managers (SBU), NPD process owners, and a new product standing committees.
There has been a shift from functional to specialized NPD structures. In 2012, marketing,
research and development (R&D), engineering, and production were the drivers of NPD 44% of
the time, a decrease from 59% in BP3. In 2012, the Best firms use more specialized structures to
drive NPD: (1) a distinct division or venture with its own profit & loss statement, (2) a separate
new product department, (3) a new product committee, and (4) formal partnerships (Figure 15).
The use of the dominant functions in marketing and production between the Best and the Rest
was insignificant in 2012.

25

Figure 15. NPD Drivers
NP, new product; R&D, research and development.

As specialized structures increase the use of formally documented processes is decreasing
while flexibility is going up. In 2012, formal process owners attempts to help the cross-
functional teams, as well as project go/no go decisions at gates with specifically stated conditions
decreased from 50-72% in 2004 to 41-55% in 2012 for radical, more innovative, and incremental
innovation. Skipping stages or combining gates increased for radical and more innovative
projects. The Best facilitate process owner, skip stages, have conditional decision, and use
overlapping gates more than the Rest (Figure 16).

Figure 16. Process Flexibility

Closely related to processes and structure is how projects are led. Overall, all forms of
leadership practices increased in 2012 from 2004. Notwithstanding the increased use of
specialized structures, part-time project leaders who had other duties were still the most often
type of leadership in more innovative (48.3%) and incremental projects (50.8%). The role of
part-time project leader (50.8%), professional manager (38.8%), and self-directed (38.3%) were
the most important in incremental projects. Professional project managers were used in radical
innovation the most (41.8%).
The lower performing firms used three types of leadership practices (part-time leader,
professional project manager, self-directed team) for radical, more innovative, and incremental
innovation the most, but they used project champion, process owner, and full-time leader the
26
least for all three levels of innovation. The top three leadership methods used for radical
innovation by the Best are professional project manager, full-time leader, and project champion
(Figure 17).

Figure 17. NPD Leadership

Managers support of innovation by ensuring their people participate actively and effectively
on teams is decreasing in the areas of technology, manufacturing and supply chain, and
marketing (Figure 18). However, the time that senior business unit managers support innovation
slightly increased. Moreover, senior managers in the Best performing firms support innovation
(75.3%) significantly more than the Rest (53.8%). The differences between the involvements of
the managers in the Best compared to the Rest for technology, manufacturing, and marketing are
also significant.

Figure 18. Development Leader Practices

Leaders used a variety of incentives and rewards to motivate NPD teams. Overall, non-
financial rewards were used significantly more than financial rewards in 2012 and 2004 (Figure
19). The top three rewards and incentives are the same in 2012 and 2004. Financial based
27
rewards are still used the least but posted the largest increases in the amount they were used
between studies. In particular, the Best now use profit sharing 24.3% of the time. The gap of
incentives and rewards between the Best and the Rest are slightly increasing. BP4 found that
four types of rewards are used significantly more by the Best than the Rest: 1) project completion
celebration, 2) the opportunity to work on a bigger project, 3) recognition dinners, and 4) profit
sharing.

Figure 19. Incentives and Rewards

Interest in open innovation and external collaboration has increased significantly (Barczak,
2012). The 2012 survey added several new questions to assess how open innovation is being
used (Figure 20). Companies use of open innovation activities ranges from 27% to 56% of the
time for different activities. Top management involvement appears to be the most important
factor for open innovation in BP4 and BP3, but the percent of involvement actually decreased
from 74% to 56%. This may be due to open innovation being more routine and practiced at a
lower level, however, the Best still involve top management at a higher level.
The Best are more likely to facilitate internal collaboration such as joint-team building,
sharing with partners, and involve top management. It is interesting to note that expected open
innovation activities such as facilitating external collaboration, sharing risk, finding key
problems and skills and collaborating with large companies were used at relatively low levels.
Additionally, the Best do not use them more than the Rest. According to these data, open
innovation is not working as is popularly believed.

28

Figure 20. Collaboration in More Innovative Projects

The use of teams is pervasive and systemic in product innovation and firms rely on teams for
new product development (Ancona and Caldwell, 1992). This study added several new questions
to capture how NPD teams are being managed in 2012. No set of variables is more clearly
related to higher performance than team management. As Figure 21 indicates, the use of team
management practices is strongly related to company performance. It is important to understand
why goal clarity and relationship to SBU strategy actually decreased in 2012 when they are so
strongly related to performance.
In addition to goal clarity, higher performing companies also equip teams with skills and
resources, engage in more cross-functional training and co-locate their teams. Firms in Asia
utilize cross-functional team training significantly more than the firms in Europe (43% in Asia vs.
28.8% in Europe) and they are more likely to be co-located than the firms in North America
(51% in Asia vs. 34.1% in North America). On the other hand, North American companies
(63%) have more skill set needed to be effective than Asian companies (55.3%). Two popular
team concepts, virtual teams and globally dispersed teams are used less than other team practices
and are the only two practices that are not related to higher performance. Virtual teams are not
used as often as expected in either 2004 or 2012 and are not related to performance.

29

Figure 21. NPD Team Practices
SBU, strategic business unit

NPD Trends: The Front- End of Innovation
The front-end of innovation has the potential to improve the entire new product
development process (Reid and de Brentani, 2004). Nevertheless, only about 30% of ideas were
generated by formally planned activities to fill identified gaps in the product portfolio in 2012
and 2004. Idea generation from informal activities is also stable for radical, more innovative and
incremental projects (12-18% in 2012 vs. 11-19% in 2004). As Figure 22 indicates, the biggest
difference between the Best and the Rest for idea generation is the use of formally planned
activities to fill identified gaps.
About 60% of the ideas for advancement into new product development were selected
using a formal process in 2012 and 2004. The Best firms use a formal process with a direct
budget to select ideas for advancement significantly more than the Rest (43.3% vs. 30.7%).
Firms in North America used an informal process with no allocated budget in radical innovation
(20.4%) significantly more than the firms in Asia (11.4%).
Notice that this trend toward formal processes in the front-end is opposite from the informal
trend seen in traditional development programs. This demonstrates that companies are able to
clearly differentiate the front-end from development and that they are able to independently
assess and modulate the amount and type of effort needed at different points along the
development continuum. Figure 22 also clearly shows that formally funded front-end activities
is clearly becoming the dominant method for managing early stage ideas.

30

Figure 22. Idea Generation and Idea Selection

A critical front-end activity is determining market needs (Markham, Ward, Aiman-Smith,
and Kingon, 2010). Across the full sample, companies assess articulated (stated) needs of
existing customers most frequently (66%), then the articulated needs of potential customers
(54.3%), and track trends for future needs of customers (52.5%). Assessing the unarticulated
(unstated) needs of existing customers (46.3%) and potential customers (41.5%) are done less.
The Best firms spend significantly more effort than the Rest in all areas to understand customer
needs (Figure 23).

Figure 23. Customer Needs

As firms increasingly adopt open innovation, social media becomes more critical to gather
external ideas (Barczak, 2012). Social media could be changing the way we develop and
manage products (Dunn, 2010). The 2012 survey added a section about how social media is
used to gather customer information and needs in the front-end. These data reveal that the Best
and Rest use social media differently. The Best firms gather information in the front-end by
using discussion forums, ratings and reviews, blogs, branded social network, innovation hubs,
and wikis significantly more than the Rest (Figure 24). Notice that the more interactive the
channel the more that practice is used for gathering needs.

31

Figure 24. Social Media Used to Gather Information About Customers and Needs

BP4 measured the market analysis tools using a frequency scale (1=never, 2=once every 5
years, 3=each year, 4=more than once per year, 5=continuously). The Best use all but one tool
significantly more than the Rest (Figure 25). Both of the Best and the Rest, however, use most
of the tools at least once per year. About 26% of the firms continuously use competitive
assessment for market analysis in the front end and 22% use pricing and feature analysis
continuously.

Figure 25. Market Analysis Tools

In the front end about 47% of the firms budgets are spent on general context and market
research and 36.5% of the research is outsourced. The Best companies outsource general
contextual/market research less (29.7%) than the Rest (38.1%). Only 25.8% of the budget is
used for generative research and 27.1% is used for evaluative research. Companies use more
32
resources to determine articulated needs of customers than unarticulated needs. Less budget and
time are used for uncovering unmet needs and discovering new opportunities.
Since 2004, over 65% of the firms changed their market and user research process to
emphasize the front-end of innovation with 35% of the firms not changing the process. Firms
make informal (34.5%) and formal (32.5%) enterprise feedback management systems available
to employees whereas only 22.5% of informal and 21.8% of formal feedback systems are
available for people outside the company to use. The Best are also more likely to use formal
feedback systems for employees than the Rest (Figure 26).

Figure 26. Enterprise Feedback Management System

NPD Trends: Development Tools
This study continued previous studies examination of market research tools, engineering
tools and technology tools, and added a section on social media tools.
In 2012 the three most often used market research tools were: 1) voice of the customer, 2)
customer site visits, and 3) beta testing for the radical and more innovative projects. In 2004
beta-testing was first but the top market research practices for the front-end has remained stable.
For 2012, voice of the customer and customer site visits were used about 50% of the time. The
Best use all the market research tools significantly more than the Rest except for two; gamma
testing and pre-test markets (Figure 27). BP4 added online market research tools such as online
focus groups/online surveys and online communities, which are used 31.5% and 20.5% of the
time. The study also explored combining qualitative and quantitative or qualiquant methods.
Fusing the methods is used about 23.8% of the time as a market research technique.

33

Figure 27. Market Research Tools

Five engineering, R&D, and design tools are used for improving new product development
over 30% of their time in 2012: (1) Critical Path, PERT, GANTT, (2) failure mode and effect
analysis, (3) design for manufacturing, (4) Lean NPD, and (5) Six Sigma analysis. Project
management tools such as Critical Path, PERT, or GANTT are used 56% of the time. These five
tools are also used significantly more by the Best than the Rest (Figure 28). Lean NPD is a new
tool in BP4 and is the fourth most used (37.3%). The use of Six Sigma increased in 2012
compared in 2004 (33.3% vs. 21 %). TRIZ is also new in BP4 and companies only used it
19.3% of the time, but it significantly discriminates between the Best and the Rest.

Figure 28. Design Engineering Tools
NPD, new product development.

34
Figure 29 indicates that there is a greater variety of tools being used more often in 2012 than
in 2004, however, the tools used with the highest frequency are also the tools most often
associated with higher performance. Project management, rapid prototyping systems,
performance modeling & simulation systems, and product data management systems are used
most often in 2004 and 2012. The least used tools are customer needs, virtual reality, and remote
collaborative design systems. Virtual reality is less likely to distinguish between the Best and the
Rest.

Figure 29. Technology Tools

The use of team support tools ranged from 23%-51% in 2012. The Best firms use the top six
team-support tools for improving new product development significantly more than the Rest
(Figure 30). Dedicated project intranet is not only used the most often by all firms but also is the
strongest indicator of the Best performing companies.

Figure 30. Team Support Tools and Methodologies
35

Just as there are added questions about the use of social media for the front-end of innovation,
the 2012 survey also examined social media use for later product development to solve problems
and gather technical information. Interestingly, even though widely touted as important, most
social media tools are only used 10% to 20% of the time for radical and more innovative projects,
except discussion forums at 29%. This indicates that social media is more widely used to gather
information about market and customers in the front-end (14%-31%) than to gather technical
information (11%-29%). Figure 31 illustrates that four tools; discussion forums, wikis, ratings
and reviews, and innovation hub are used significantly more by the Best than the Rest. It is also
interesting to note that YouTube, monitor content distribution, and Flickr/Photobucket are used
more by the Rest than the Best.

Figure 31. Social Media Tools to Gather Technical Information and Solve Problems

The last set of development tools examined in the 2012 survey was barriers to adopting more
innovation tools. The three biggest barriers that prevent business units from adopting more
product development tools are 1) questionable return on investment (ROI) (56%), 2) insufficient
budget (53%), and 3) implementation difficulty from a resource, culture, and process perspective
(44%). On the other hand, implementation difficulty from a technical perspective (19%), too
much training needed (18%), and bad experience (14%) are ranked relatively lower. These
findings indicate that financial issues hinder the adoption of new product development tools
rather than the nature of the tools themselves.

36
NPD Trends: Measures and Metrics
In addition to examining dozens of front-end and development tools the 2012 survey
explored how NPD activities and performance is measured. We compared the length of time
spent on each development activity in each NPD stage in 2012 and 2004. Table 9 shows that
specific stages were shortened significantly in 2012 compared in 2004 and some were not. For
example, radical projects design & development decreased from 45 to 27 weeks, test and
validation from 21 to 15 weeks, and manufacturing development from 21 to 16 weeks. Asian
companies spend only 10 weeks on design & development, 6 weeks on test & validation, and 10
weeks on manufacturing development for radical innovation while 37 weeks, 18 weeks, and 18
weeks in North America and 46 weeks, 27 weeks, and 28 weeks in Europe. Asian companies
have faster time, more projects and more profits from new products. Similar reductions were
seen for more innovative projects.
On the other hand, activities in the front-end showed little change in time spent. Firms are
relatively more careful in the front-end and spend more time relative to later development stages
in 2012 than 2004. This results indicates where time can be saved. It also indicates that time for
incremental projects are probably optimized.

Table 9. Typical Length of Time on NPD Activities (# of weeks spent)
2012 2004
Rad. More
Inn.
Inc. Rad. More
Inn.
Inc.
Product Line Planning 8 6 5 7 6 4
Project Strategy Development 8 6 4 7 5 3
Idea/Concept Generation 7 5 4 9 6 3
Idea Screening 4 4 3 5 4 2
Business Analysis 6 5 4 7 5 3
Design & Development 27 18 11 45 27 13
Test and Validation 15 11 7 21 15 8
Manufacturing Development 16 11 8 21 14 8
Commercialization 15 11 8 23 17 9
Process Review 6 5 5 N/A N/A N/A
Results Monitoring 11 10 9 N/A N/A N/A
Other 3 2 2 15 11 8
N/A, not available; NPD, new product development.
BP4 assessed which indicators are most important for the business units to use to measure
results. Profit from new product sales and new product sales as a percent of total sales are the
top two indicators. Net margin ROI, market share trends, project cost vs. budget, and total cost
of new product effort as a percent of revenue are also marked as important issues to measure
37
results. Figure 32 indicates that the sheer numbers of projects and people are not different
between the Best and the Rest. The Best, however, have significantly more innovative projects
and patents than the Rest.
For some time, product developers believed companies that focus on financial measures of
product performance did not perform as well as others (Cooper, 2011). These data suggest just
the opposite. It is important to note that financial measures are not only the most important
measures to all companies they are also more likely to be related to the higher performing
companies.

Figure 32. NPD Indicators

Goods and services are manufactured and delivered quite differently (Ettlie and
Rosenthal, 2011; Griffin, 1997). Some research has shown potential differences in how goods
and services are developed (Drejer, 2004; Menor, Tatikonda, and Sampson, 2002; Gallouj and
Weinstein, 1997). Services play a dominant and growing role in most developed economies
(Ettlie and Rosenthal, 2011). Drawing on recent research, BP4 added an extended section on
services development.
Companies spend more of their budget on goods (61.4%) than on services (38.7%)
development. The number of new products commercialized is much higher for goods (173.4)
compared to services (18.8) or mixed goods/services offerings (10.9). New product sales and
profits are also higher for goods (58% sales, 59% profits) than services (both 28.1%) and mixed
products (14.2%, 13%). Compared with the number of new product commercialization,
however, the portion of NP sales and profits are relatively lower in goods firms than services or
38
mixed firms. For the mixed goods/services it was found that the offering is composed of 65.4%
goods and 34.6% of services. The number of service projects is higher for the Best than the Rest
(30.5 vs. 14.3). Table 10, however, indicates that the distribution of sales and profits from
services are higher for the Rest (29.5%, 29.4%) than the Best (24.4%, 23.1%). The percent of
goods and services in mixed product are 71% vs. 29% for the Best and 63.8% vs. 36.2% for the
Rest.

Table 10. New Product Performance from Services and Goods
The Best The Rest
Services Mix Goods Services Mix Goods
Number of new products
commercialized
New product sales
New product profits
30.5

24.4%
23.1%
14.4

11.6%
12.3%
98.8

64%
64.6%
14.3

29.5%
29.4%
9.9

16.0%
14.4%
211.6

54.7%
56.2%

The characteristics of services products are distinct from goods products. Services are: 1)
Less tangible, 2) Heterogeneous since service products are created and delivered new every time
(delivery process), 3) Simultaneous since service products are both created and consumed at the
same time (delivery time), and 4) Perishable since service products cannot be stored or saved and
delivered later (Parasuraman, Zeithaml, and Berry, 1985; Ettlie and Rosenthal, 2011). We
expected that the Best in services would use development practices unique to services more than
the Rest. We also expected that the Best in goods firms would use service development practices
less than the Rest. Table 11 reports the time for the use of services development practices.
There were, however, no significant differences for intangibility, delivery process, delivery time,
and perishability between the Best and the Rest in service firms. In fact, the Rest use more time
than the Best for the variables except for delivery time. For example, the Best services
companies used development practices suitable for developing intangible products (services
product characteristic) 38.9% of the time while the Rest of the service firms used 48.4% of the
time.

Table 11. Use Services and Goods Development Practices (% of the time)
Higher =
Intangible
Higher =
Heterogeneous
Higher =
Simultaneous
Higher =
Perishable
Services The Best
The Rest
38.9
48.4
50.2
52.1
54.3
53.3
56.8
59.6
39
Mix The Best
The Rest
19.9
42.2*
50.0
45.8
57.0
44.0
51.9
50.4
Goods The Best
The Rest
16.8
23.0*
41.5*
33.1
42.0
36.6
55.8*
48.4
*= p<0.05 for difference between the Best and the Rest.

Discussion and Summary of Outcomes and Trends

Product success rates are increasing, particularly in large North American firms. Small
Asian firms have the lowest product success rate. There is a stark difference between the Best
succeeding 82.2% of the time and the Rest succeeding 52.9% of the time. The cost associated
with about a 50% failure rate is enormous compared with about a 20% failure rate. Clearly,
firms have much to gain by studying and implementing best new product development practices.
There is a trend away from formal processes and toward flexibility in product
development, yet at the same time, there is a trend to use more specialized structures. The use of
formal processes may have reached its potential for formal development environments and
companies are now testing the use of less formality. The amount of process formalization is
declining for both the Best and the Rest companies. It is significant to note, however, that the
Best firms still use more formal processes than the Rest.
The retreat from formal processes is accompanied by an increase in specialized structures
for NPD. More formal structures and full time NPD managers allows more judicial use of
processes. In the past, as ad hoc multidisciplinary teams came together, they would follow a
ridged process because they did not have the experience to know when to follow or skip a
process step. Rigid rules around process often reinforced blind adherence to non-value adding
activities.
There is a very different story in at the front-end where there is still a trend towards using
more formal processes. At the same time companies are eschewing formal processes in the
formal development programs they seem to be adding process to the front-end.
In these data we see a reduction in formal processes, such as less formal, cross-functional
process, less portfolio review, less use of portfolio management techniques, and less new product
strategy. For example, only 29.5% of Asian companies have a formal, cross-functional process
compared to 61.2% of North American and 55.7% of European companies. North American
firms use these variables the most, including: 1) portfolio management review: North America
40
(60%), Europe (53%), and Asia (46%); 2) cross-functional formal process; 3) portfolio
management technique use: North America uses the most discounted cash flow, payback period,
rank ordering projects, and strategic buckets. All the North American, Asian, and European
companies, however, use a new product strategy about 60%.
Across the majority of practices the Best performing companies executed each technique
at a higher level. This gap is widened, as the formal processes seemed to be declining in the Rest
of the companies.
The sheer number of new NPD tools, techniques and practices introduced since 2004 is
staggering. Results of the 2012 survey show that not only are these new practices conducted on
a regular basis, they are also related to firm performance. It is startling to see whole new sets of
practices not only come into use but also discriminate between company performance in just a
few years.
Limitations of this Research. Care must be taken when interpreting these data. This is
the first international set of data so differences in process formality in this sample may exist due
to lower levels of formality between geographical areas. Similarly, this sample has more small
firms that could be less formal as well. In cases where large differences were observed we
analyzed these alternative interpretations of the data and where they existed we reported them.
Nevertheless, the patterns of results over time and between the Best and Rest could be an artifact
of the sample. It is critical that each firm assess where they are and what they need to do for
their specific competitive situation.
This is also the first PDMA best practices study that was conducted on the internet.
While coding and transcription errors are reduced when data are imported directly to a file,
capturing the data on-line could bring with it systemic bias; there are certain types of people who
may not use the internet. The sample consisted primarily of PDMA members in North America
but mostly non-PDMA members in Europe and Asia. Although a glossary and definitions were
provided, non-PDMA members may understand the terms in the survey differently than PDMA
members who have shared a common source of information over time.
The data were collected by a single source inside each business unit. While detailed
instructions were given to key informants about how to collect and report data, they may not
have followed directions or may have been unable to obtain correct information or may have
been unable to capture the nature of the NPD activities in their companies using these questions.
41

Future Research
In addition to the many new sections and questions that were added to this research, there
are many new concepts, techniques and tools. This research could not assess all the new topics
that could be thought of. For example, an open-ended question about what other tools and
techniques respondents used yielded over 100 responses with very detailed descriptions. The
depth and variety of product development practices is more complicated than even such an
ambitious survey as this one is able to capture. Any given firm may have practices significantly
different from the practices described here and still be effective at product development.
The accelerating pace of new product development practices dictates that future research
on best practices must be conducted on a more frequent and ongoing basis. Some NPD practices
are introduced without evidence showing their actual impact on performance. Best practices
research needs to keep pace with emerging concepts and practices used by leading product
development companies.
A number of concepts may not actually work as popularly believed. For example, top
performing companies use financial measures more than other measures and the use of financial
measures is a strong indicator of higher performance. Further research should examine
commonly held beliefs about product development practices. Even if these practices were in fact
correct at the time, the value of these data suggests popularly held beliefs about best practices
may not keep up with actual practices.
Best practices have only been assessed in terms of their correlation to other activities and
performance. Each section of best practices must be theoretically linked to a firms level of
performance in order to provide proscriptive statements rather than simple descriptions of best
practices. Without theoretical connections between predictors and outcomes, firms could be
misinformed about what to focus on to improve performance. For example, if sales are
correlated with shorter cycle times one would expect to do everything possible to reduce cycle
time. But if you also know that cycle time reduction should be achieved in some areas and not in
the front-end then practitioners know not only what to do but also what not to do. Theoretical
examination of the relationships about the data in this article will be necessary to make full use
of these data.
42
Although this was a lengthy survey, respondents still maintained the enthusiasm to
extensively explain additional ideas about other practices they were using. As much as we
learned in the last decade about product development these results suggest a modicum of
modesty. Given the pace of NPD innovation we may know less now as a percentage of actual
practices than we did a decade ago. This research indicates that practices are moving faster than
we are able to recognize, understand and codify. Our efforts to understand best practices must
rely on faster more focused research efforts.

References

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Barczak, G. 2012. The future of NPD/Innovation research. Journal of Product Innovation Management 29 (3): 355-
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