John:
"Friction" surrounding new product development is very common in growing companies, and executives need to address it, even though it may seem vague and hard to pin down. In addition to causing management headaches, the problem has a negative impact on new product ROI because it leads to unclear product definitions, erratic development schedules, and clumsy releases.

Product innovation is a critical business operation that spans the whole enterprise, applying resources and skills from across the company to convert technical and market knowledge into economically valuable products. As the company grows, interactions among people and groups become more important than the skills of a few individuals. The friction that executives sense indicates that something is wrong with these interactions. 

Mary:
This kind of friction is a symptom of lack of alignment among functions or individuals in the company -- like a car with its wheels going in different directions. The first step on the road to alignment is to be sure that everybody has a clear and common understanding of company goals.

So, the friction and the headaches show that it is time to get to work on a straightforward statement of company goals that is understandable and meaningful to all. 

A high level model like this isn’t precise, but it shows the quantitative links among the key parameters of a new product program. For example, it shows how much growth will improve by increasing R&D funding and what ROI would be needed to meet growth targets. It will also give an ROI threshold value for selecting new product opportunities. 

Mary:
Thinking of critical business operations as horizontal, company-wide flows in which the interfaces are as important as the functions is a great habit for a growing company to adopt early and keep forever. When product innovation drives company success, the entire executive team needs to be actively involved in building the NPD model and owning the result.

The benefits of the "executive team approach" are significant. It brings together and dynamically balances the interests, expertise, viewpoints, and learning experiences from all the knowledge domains in your company. (Be sure that those who interact with the "external world" of suppliers, customers, markets, channels, etc. inject those viewpoints into the mix.) Every time the executive team works together like this, members increase their understanding of each other’s mental models, improving their ability to collaborate.

Specifically, the collaborative work of developing the product innovation model will help all members of the executive team understand that NPD is not about just the engineering function. This is the first step toward connecting – and aligning -- the work done in every function to earn superior innovation ROI.

Many companies use project level financial models as business cases to evaluate new opportunities, but they don’t revisit the model after the development starts. By keeping the models current and using them to compare tradeoffs throughout the product’s life, everyone involved with the project can make more consistent decisions with better financial results. 

Mary:
A set of financial and project models produced and owned by the entire executive team is a good beginning, but it can only bring the desired results when it is communicated throughout the organization -- another leadership task for the executive team. Executives must prepare and deliver messages to both motivate every employee and help them understand corporate goals, particularly how they impact decisions and change the way work is done. 

Implementing new practices that support enterprise-wide thinking and workflow is a significant change effort, even for a company whose culture is already open, participatory, and flexible. If the existing culture won’t support the new practices, the change effort will be more complex. In any case, don’t underestimate the planning, coaching, and training needed to accomplish this step, and don’t miss the opportunity to incorporate employee and stakeholder feedback. 

Executives have three very effective tools to use in implementing necessary organizational changes. First, key employees at all levels of the organization should be enlisted to support the change, particularly in demonstrating a positive attitude. Second, the company should provide plenty of classroom and on-the-job training, so that all employees know how to do their jobs in new ways. Finally, company leaders must be sure that formal and informal reward systems both motivate and reinforce the behavior that not only brings the company into alignment, but also drives it to higher profits.