Product Development - Time to Return to Basics?

By Ken Westray, PE, NPDP

Are the world economies entering a new phase of poor quality and product safety concerns? The recent contamination of milk in China with melamine is just another example of supply chain maniacs pushing for lower cost and thereby sacrificing product quality, user safety and their brand reputations. Ouch!
 
Before the milk poisoning there was the wheat germ gluten contamination, and prior to that there were salmonella problems with spinach and lettuce. Have we allowed the U.S. food supply to become captive to lean methods, elimination of waste, and a calculated equation of profit to death, sickness and ill health?
 
Consider that while imports account for about 44% of all consumer products sold in the U.S. today, they comprise over 75% of all product recalls administered by the Consumer Product Safety Commission.  Just to be clear, consumers do "get it" over time. Poor quality is poor quality and opportunistic supply chains that rely solely on lowest cost ultimately lead programs to reduced quality and the debasing of brand equity.  If you think winning new customers is tough, try winning back customers whom you've lost due to poor quality.  Good luck with that one!
 
Isolated situation?
 
At the risk of sounding like an alarmist, consider the meltdown of the housing and credit markets in the U.S.  What looked to be an isolated, industry-specific downturn has morphed into a global slowdown of serious proportions.  Clearly, this is a decline of once-in-a-generation magnitude.
 
The point here is that excesses created during prosperity breed complacency and disregard for the fundamentals that created growth and prosperity in the first place.  But, students of business cycles and product life cycles recognize one over-riding reality: when business cycles play out, marginal companies and products fall by the wayside.  More importantly, businesses return to basics. 
 
Consider investor Warren Buffet.  His style is to invest in companies that demonstrate fundamental value.  And that is the lesson to those of us in the new product development (NPD) field.  Our focus should be on delivering value to customers.
 
One Approach to Resurgence
 
In an essay in Entreprenuer.com, Indiana University professor Mohammad Meybodi discussed the prospect of using principles borrowed from just-in-time manufacturing to improve new product development processes.  He cited several measures of successful new product development that merit repeating.
 
1.    Design quality: Dr. Meybodi contends that design quality problems often result from incomplete information and miscommunication among different functions in a business.  Design quality needs to focus on satisfying customer needs and then minimizing the number of design changes during the development process.
 
2.    Development time: Think of this criterion as the length of time from first idea generation to the time a new product is ready for its market debut.  Shorter development time increases competitive value of a new product relative to optimal price, greater market share, and higher profit margin.
 
3.    Developing competency: This means that an organization is able to develop future products better, faster, and cheaper as a result of their experience in prior product development.  This is the hallmark of a learning organization.  (More about that later.)
 
4.    Development cost: This is the total cost to develop the product. It includes expenses from early idea generation through being ready for manufacturing.  Effective companies manage this cost in light of existing budget realities and timing of budget allocations.
 
5.    Manufacturing cost: This is obviously the cost to produce the product. It includes initial investment on equipment and tools plus incremental cost of manufacturing the product.  These costs can be affected by design changes so here is another reason to get design clear and fixed at the outset to avoid cost over-runs at the end of the process.
 
Takeaways
 
Excellent execution is often the implementation of good fundamentals.  This means that we must be committed to lifelong learning. Sometimes that learning involves re-learning or revisiting basics.
 
A business downturn offers an opportunity to re-examine what our corporate strengths are and how well prepared our NPD team is to develop new, effective products going forward. What better investment can there be than to increase the skills and abilities of the NPD through formal training?
 
It has been said that tough times don't last but tough people do. To borrow from a song title of the Broadway show Annie, "The sun will come out tomorrow."  Indeed. Let us, as NPD professionals, make sure that it's shining on our well-conceived plan that focuses on meeting customer needs with value-oriented solutions.

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