Academic journal article Research-Technology Management

A Governance Framework for the Idea-to-Launch Process: Development and Application of a Governance Framework for New Product Development: Refining Controls in the Stage-Gate Process Can Lead to Significant Improvements in Project Portfolio Performance

Academic journal article Research-Technology Management

A Governance Framework for the Idea-to-Launch Process: Development and Application of a Governance Framework for New Product Development: Refining Controls in the Stage-Gate Process Can Lead to Significant Improvements in Project Portfolio Performance

Article excerpt

The global branded footwear and apparel industry, worth an estimated $300 billion annually, faces growing macroeconomic and industry-specific challenges. The key macroeconomic challenges are labor and material cost inflation from the predominantly Asian manufacturing base, a reduction in Asian manufacturing capacity as capital and labor move into different industries, and a lack of growth combined with retail price deflation in Western economies. Industry-specific challenges are the dynamic, volatile, and unpredictable nature of demand; short product life cycles; high levels of product variety and frequent product range changes; and complex, extended global supply chains requiring quick responsiveness to trends (Fernie and Sparks 1998; Bruce and Daly 2004). Against this complex backdrop, a significant and growing challenge for the industry is the increasing cost of excessive and underperforming innovation--innovation that does not enhance performance and hence is superfluous rather than functional (Bisbe and Otley 2004). This can happen when excessive new product development dilutes overall profit margins, design and development costs exceed the product margin, or large numbers of low-volume products significantly damage relationships with vendors.

To grow profits and avoid underperforming NPD, a firm managing large, complex product portfolios through a Stage-Gate NPD process needs to find the "sweet spot" that balances creativity and control (Peters and Waterman 1982, 318; Cowen and Middaugh 1988; Simons 1994; Bisbe and Otley 2004). Finding this balance is crucial to driving portfolio productivity and improving the financial returns on the design and development investment made in building the portfolio. This requires effective governance controls for portfolio management during the NPD process.

Governance in this context is defined as the management and control of the NPD control system. The effort to improve governance controls must recognize that different levels of quality and sophistication may be applied to evaluation and screening criteria, target setting, and alignment to strategy (Cooper and Edgett 2003). Consequently, the standard of governance is determined by the quality of the NPD control system. The challenge is to identify how the quality of the NPD control system, and therefore governance, can be improved.

Applying a systems perspective to the Stage-Gate process highlights the importance of feedforward controls such as planning and forecasting when making go/kill/hold/recycle decisions (Cooper 1990). By combining the idea of different levels of feedforward-control sophistication with management's validation of targets, we have identified a new concept, feedforward anticipatory control (FAC), that has a crucial role in the process. FAC can help management achieve a better balance of control and creativity in the portfolio to drive productivity and profit growth.

In this study, we develop a framework to assess an organization's level of sophistication in applying FAC and explore the role of FAC as an important element in the control system. We used a longitudinal study of a multinational and multibranded footwear and apparel business to assess the effect of different levels of sophistication of governance controls on performance. Our findings show that raising the levels of FAC when managing complex NPD portfolios helps avoid wasteful product development and grows overall cash profits. The aggregate portfolio cash margins of the six brands in this study increased by almost 15 percent, and the cash profit from each product improved.

Stage-Gate Meetings and Feedforward Controls

In the branded footwear and apparel industry, the typical key stages in product-range building are seasonal strategy planning, concept development, product specification development, physical prototype development, final range review, and launch to market. Because of the seasonal nature of the market, the stages follow a cyclical pattern. …

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