Analyzing Product Development

by Lorraine Cosgrove Ware

April 5, 2001 —

Product development strategy can have a measurable impact on revenue growth, according to a recent survey conducted by Waltham, Mass.-based management consultancy Pittiglio Rabin Todd & McGrath's (PRTM) Performance Measurement Group. The study surveyed 120 subscribers to PRTM's online benchmarking service from seven industries (aerospace and defense, automotive, chemicals and applied materials, computers and electronic equipment, medical products, semiconductors, and telecommunications). Results show that companies achieving portfolio management excellence, or Stage 3 in PRTM's product development model (see "Average Annual Revenue Growth Rate," below), experience more than 50 percent faster revenue growth than Stage 2 companies, based on data collected from 1996 through 1999. Companies that have reached only the functional management stage lag Stage 2 companies by 33 percent in revenue growth. No companies in the study reached Stage 4.

Best Practices

Assess your entire product portfolio. Most companies are moving from Stage 1 to Stage 2 by focusing on customizable processes and cross-functional teams, according to Michelle Roloff, chief analyst for PRTM's Performance Measurement Group. To get to Stage 3, Roloff says, "Companies must make decisions with the entire product portfolio in mind, not individual projects."
Use Web-enabled tools to involve everyone. Incorporating such technology will supply consistent information (like accurate roll-ups of resource availability and project status updates) to all parties. Top companies work to create a cross-functional decision-making process, involving all company functions (from marketing and customer service to engineering) in the product development effort.
Allow for process changes. Top performers believe that product development processes continually evolve and allow for quick changes. "Design processes used to be much more rigid," Roloff says. "Today companies should provide guidelines for product development, but leave room for customization of individual steps and tasks."
Learn from the experts. It can take one to two years for new practices to take hold in an organization. Don't try to learn everything internally. Start by comparing your current capabilities to peer companies and by identifying gaps in performance between your company and best-in-class performers in your industry.

Source: Product Development Benchmarking Series, PRTM Performance Measurement Group, 2000

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