“Virtuous circle — A process in which a good action or event produces a good result that also causes the process to continue so more good results happen”
“Our goal is to have more at-bats per unit of time and effort than anyone else”
Eric Schmidt, CEO, Google
A virtuous circle can boost a steady flow of new product successes
We’ve met Matt before. He’s a new product development manager who has come up with a high productivity product development process.
His new process produces twice as many successful new products in the same unit of time as the old process. It achieves this without an increase in the cumulative cost for a successful product. If his company exploits this process they can dominate a growing market sector.
Matt’s process follows recommendations of a recent best practices study of product development. This peer-reviewed study used an unprecedented amount of data and statistical rigor. 1, 2, 3
Key elements of Matt’s high productivity development process are:
1. Verifying major assumptions about an idea’s market potential and,
2. Assembling a development portfolio containing less than six product ideas.
To begin the virtuous circle, the fresh new cash flow from Matt’s process needs to be fed back into the process. This needs a positive decision to do so by members of the C-Suite.
Persuading the C-Suite to reinvest cash flow into product development
Matt’s boss, Ron, is Chief Technology Officer of the company. Ron sees the new process as giving them a competitive advantage. This advantage, coupled with their unique technology skills, would would increase market leverage.
Ron knew two key members of the C-Suite were on-board with reinvestment to begin a virtuous circle. Matt’s development process captures profit and revenue faster.4 This quantitative evidence impresses the Chief Financial and the Chief Marketing officers.
But, the Chief Operations Officer needed more information. The COO reminded Ron that the manufacturing sites in Matt’s division were at full capacity. Investment was needed to increase capacity.
The COO asked that the decision to begin the virtuous circle be postponed for a month. During this month his staff would explore outsourcing production of Matt’s new products.
Operation’s exploration discovered three potential sub-contractors with immediate capacity available.. The expense of outsourcing was small compared to cash flow from the high margin of the new products.
At the end of the month the CEO approved Ron’s request. The request was a low-hanging fruit opportunity for growth. It was well documented and consistent with the company’s existing strategic boundaries.
Elicitation interviews help set up virtuous circles in product development
Since 1985 I’ve used voice of the market and technology interviews to: a. verify a B2B product idea’s economic value; b. estimate the cost of delaying its development; and c. to gauge market dynamics in the idea’s ecosystem. I elicit undiscovered data, information, and insights from strangers. I only use the phone.
Among the benefits of phone elicitation are:
– Quick to reach knowledgeable people for elicitation conversation
– Openness of the conversation
– Much lower cost
- (2012) Markham, S. K. and Lee, H. Product Development and management Association’s 2012 Comparative Performance Assessment Study Journal of Product Innovation Management. 30 p408-429 Best companies (25% of all companies studied) are those who are:
– In the top third of their industry for NPD success,
– Above the mean for their new product program success
– Above the mean for sales and profit success from NPD.
2. (2012) Markham, S. K. and Lee, H. Winning At NPD: Success Drivers From the 2012 CPAS Study http://www.pdma.org
3. (2013) Markham, S. K. The Impact of Front-End Innovation Activities on Product Performance JPIM 30 p77-92
Markham defines front-end activities as work done to develop a product concept before the NPD project enters the commercialization phase of a formal product development system. Such work includes simple demonstration of technical feasibility, a sensible understanding through VOC of how, why and when a concept’s acceptance the marketplace will occur, and a back-of-the-envelope financial viability analysis.
4. (2009) Reinertsen, Donald The Principles of Product Development Flow: Second Generation Lean Product Development Celeritas Publishing, Redondo Beach CA 90277
In Reinertsen’s view, queues of product ideas in a development process are the root cause of the majority of economic waste in product development. Reducing batch size of ideas in the process reduces cycle time. This enables developers “to shorten cycle times, often by an order of magnitude or more, without changing capacity utilization.”