The new product development process in the mechanical industry: evidences from some Italian case studies

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1 MultiCraft International Journal of Engineering, Science and Technology Vol. 5, No. 2, 2013, pp INTERNATIONAL JOURNAL OF ENGINEERING, SCIENCE AND TECHNOLOGY MultiCraft Limited. All rights reserved The new product development process in the mechanical industry: evidences from some Italian case studies Barbara Bigliardi 1*, Eleonora Bottani 1, Marta Rinaldi 1 1 Department of Industrial Engineering, University of Parma, Parma, ITALY * Corresponding Author: barbara.bigliardi@unipr.it, Tel , Fax Abstract New product development (NPD) refers to the process of bringing a new product or service to market and involves several steps. NPD involves cooperating with organizations within and outside the primary manufacturing company, consequently, interaction between NPD and supply chain management (SCM) is understood to be a crucial success factor. The aim of this paper is to explore the relationship between NPD and SCM in the specific context of the Italian mechanical industry. Based on analysis of the extant literature on NPD and SCM, an NPD framework was first developed; then, a case study-based research was carried out, with the purpose of investigating whether the companies analyzed adopt the NPD framework proposed, or at identifying different phases to be included in the framework, as well as phases to be deleted. Findings from this study provide managers with a preliminary picture of the NPD framework that the mechanical companies adopt, as well as with some useful guidelines for companies wishing to perform better in terms of NPD. Keywords: new product development, supply chain management, mechanical industry, Italy, case study. DOI: 1. Introduction In order to compete in today s hyper-competitive marketplace, manufacturing organizations are forced to focus on a series of factors that may influence their profitability. The extant literature identifies the three most important factors as quality, cost and delivery of products and services. Moreover, both practitioners and managers recognize that only few organizations can compete for long without successful new product (or service) development and supply chain management (Patil et al., 2002). Thus, improved management of these two processes should allow companies to create greater customer value, achieve higher market share, as well as enjoy improved profits. NPD refers to the process of bringing a new product or service to the market and involves several steps, namely idea generation, product design, product engineering, market research and marketing analysis, etc. Companies typically see NPD as the first stage in generating and commercializing new products within the overall strategic process of product life cycle management. In today s environments, NPD is regarded as a key factor, mainly due to three reasons: first, the increasing international competition; second, the fragmenting and demanding markets; third the diverse and changing technologies (Bigliardi et al., 2010). Therefore, greater focus has been placed on NPD and organizations have been forced to embrace NPD as an integral part of their corporate strategy, as well as on offering products that are adapted to the needs of target customers in order to create a sustainable competitive advantage and to stay ahead of the competition (Calantone et al., 1995; Damanpour and Gopalakrishnan, 2001; Scarborough, 2010). Proficiency in NPD is thus recognized to contribute to the success of many companies (Sun and Wing, 2004). During the last decades, companies have been forced to focus more on product quality than on internal efficiency, and to quickly identify changing customers needs, to develop more complex products to satisfy those needs, and to provide higher level of customer supports and service (Sheperd and Ahmed, 2000). SCM describes the discipline of optimizing the delivery of goods, services and related information from supplier to customer (Gibson et al., 2005). It is concerned with the effectiveness of dealing with final customer s demand by the parties engaged in the

2 2 provision of the product as a whole (Cooper et al., 1997). An efficient supply chain includes a firm s internal functions (that is, all transformation processes), but also its upstream suppliers, and its downstream distribution channels reaching the end customers (that is, distributors and retailers). Thus, since NPD involves collaborating with organizations within and outside the primary manufacturing company at all stages of the process, interaction between NPD and SCM is now understood to be a crucial success factor (Ken et al., 2007). On the basis of the premises above, the aim of this paper is to explore the relationship between NPD and SCM in the context of the Italian mechanical industry, and specifically to develop a model that describes the NPD process in mechanical companies. The choice of this specific industry was motivated by the fact that it is a primary industrial sector of Europe, as demonstrated by the high level of employment and the turnover generated (European Commission, 2011). Europe, in fact, is the world's largest producer and exporter of machineries. The competitiveness of the industry relies, inter alia, on excellent, innovative products, know-how and skills and the ability to comply with customers' wishes. Mechanical engineering is a very wide and diverse sector, covering machinery and equipment; machinery for the production and use of mechanical power, except aircraft, vehicle and cycle engines; agricultural and forestry machinery; machine tools and special purpose machinery. Moreover, the mechanical industry represents the second sector for importance in the Emilia Romagna region, where the study has been conducted. The paper is structured as follows: section 2 reviews the literature on NPD in general and on the interaction of NPD and SCM. Section 3 details the research methodology adopted and reports the preliminary NPD framework for the mechanical industry as emerged from the literature review phase. Section 4 presents the results from the case studies, while section 5 presents a summary of the results and proposes the final NPD process as emerged from the results from the case studies. Finally, section 6 concludes the paper discussing the main results derived from the study as well as the main limitations and future research. 2. Literature review NPD is a broad field of the management literature dealing with the design, creation, and marketing of new products, mainly focused on developing systematic methods for guiding all the processes involved in getting a new product to market (Cohen et al., 2000; Hilletofth and Eriksson, 2010). Companies typically see NPD as the first stage in generating and commercializing new products within the overall strategic process of product life cycle management (Cooper et al., 2002). The design of the NPD process has evolved throughout the years, and various NPD frameworks have been proposed, both normative and descriptive. Specifically, identify three main generations of NPD models can be identified. A first generation (up to the 1980s) refers to the sequential models : here, NPD process was seen as a series of phases to be conducted sequentially, in order to simplify innovation activities. Klompmaker et al. (1976) and Hanan (1970), proposed a 27-steps model of NPD and a 24- activities flow diagram suitable for non-industrial goods respectively, while McGuire (1973) proposed a similar model for industrial goods. Lately, during the first half of the 1990s, the concurrent engineering approach was proposed: according to this approach, the NPD steps were carried out in parallel or simultaneously (Clark and Fujimoto, 1991). Cooper (1990, 1994), proposed a third generation of NPD models, and described this process as a model for moving a new product from idea to launch mainly integrating discipline into a process, thus allowing the improvement of effectiveness and efficiency. The stage-gate process consists of a series of stages, where essential activities are carried out, that are complemented by gates, where interim achievements are evaluated and that function as stop/go and prioritization points where decisions for the future of the project are made. As per the previous generation of NPD models, stages are typically cross-functional and each activity is undertaken in parallel with others so as to enhance speed to market. A further characteristic of this model is the role of cross-functional groups of senior managers, called gatekeepers, who manage the gates and evaluate projects on the basis of quality of execution, business rationale, and quality of the action plan. Today, researchers observe the adoption of the so-called stage-gate NPD process as a methodology that is recognized and widely embraced in companies all over the world (Gronlund et al., 2010). As regards the phases to be carried out within the NPD, it emerges from the extant literature that not all steps are common to all NPD projects, nor those steps are necessarily undertaken with the same relative emphasis. Booz et al. (1965) proposed a NPD model composed by six steps, namely: (1) exploration, (2) screening, (3) business analysis, (4) development, (5) testing, and (6) commercialization. Kotler and Armstrong (1991) proposed a sequential eight-phase NPD process, that starts from the (1) idea generation and through the (2) idea screening, (3) concept development and testing, (4) marketing strategy development, (5) business analysis, (6) product development, (7) test marketing, concludes with the (8) commercialization of the product developed. Graf and Saguy (1991), by analyzing the NPD in the food industry, proposed the subdivision of the NPD process in 5 steps, as listed below: (1) screening; (2) feasibility; (3) development; (4) commercialization; (5) maintenance.

3 3 Urban and Hauser (1993) proposed in their study a sequential and proactive NPD process, composed of 5 steps: (1) opportunity identification, (2) design, (3) testing, (4) introduction, and (5) life-cycle management. In 1994, MacFie proposed a 7-step NPD process, stressing the importance of time as key factor in the NPD. The steps are: (1) concept generation; (2) concept screening; (3) product development; (4) product testing; (5) packaging development (including advertising material); (6) first production run; (7) launch. A similar process was proposed by Fuller (1994), including the following 6 steps: (1) getting ideas (based on the company's objectives and consumer needs), (2) screening of ideas (financial review/feasibility), (3) development, (4) production, (5) consumer trials, and (6) test market. Pitta (2007), stressed the importance of the concept screening and economic analysis steps in the traditional NPD process: (1) concept generation, (2) concept screening, (3) economic analysis, (4) development, (5) test marketing, and (6) commercialization. More recently, Bigliardi et al. (2010), according to the findings obtained from a case study, propose a 7-step NPD process, including: (1) identification of the market need and generation of the idea of the product; (2) development of the technological solution; (3) pre-testing of the product with selected customers; (4) innovation protection through Italian patents; (5) innovation protection through international patents; (6) product manufacturing and launch in the food packaging market; (7) expansion in different markets. As emerged from the literature review reported above, a general model of NPD process has not been developed yet. However, most of the models proposed in literature agree in the identification of a series of phases. In the early stages, activities generally focus on discovering opportunities and generating ideas, while the later stages focus on concept development, testing, and commercialization. A summary of the results from the literature review is reported in Table 1. Table 1. The main phases of the NPD process. Objective Step Main references (1) exploration, (2) screening Booz et al. (1965) (1) idea generation, (2) idea Kotler and Armstrong (1991) screening, (1) screening Graf and Saguy (1991) (1) opportunity identification Urban and Hauser (1993) (1) concept generation, (2) concept MacFie (1994) Discovering opportunities and generating idea screening (1) getting idea, (2) screening of Fuller (1994) ideas (1) concept generation, (2) concept Pitta (2007) screening (1) identification of the market need Bigliardi et al. (2010) and generation of the idea of the product (3) business analysis Booz et al. (1965) Economic and strategic evaluation (2) feasibility Graf and Saguy (1991) (3) economic analysis Pitta (2007)

4 4 Table 1 (cont d). The main phases of the NPD process. Objective Step Main references (4) development, (5) testing Booz et al. (1965) (3) concept development and testing Kotler and Armstrong (1991) (3) development Graf and Saguy (1991) (2) design, (3) testing Urban and Hauser (1993) Development and testing of the (3) product development, (4) product MacFie (1994) product concept and/or of the final product testing, (5) packaging development (3) development Fuller (1994) (4) development Pitta (2007) (2) development of the technological Bigliardi et al. (2010) solution, (3) pre-testing of the product with selected customers (4) marketing strategy development, Kotler and Armstrong (1991) (5) business analysis Development of the marketing (5) test marketing, Pitta (2007) strategy (3) pre-testing of the product with Bigliardi et al. (2010) selected customers, (4) innovation protection (6) commercialization Booz et al. (1965) (6) product development, (7) test Kotler and Armstrong (1991) marketing, (8) commercialization of the product developed (4) commercialization, (5) Graf and Saguy (1991) maintenance (4) introduction, (5) life-cycle Urban and Hauser (1993) Product launch and management commercialization (6) first production run, (7) launch MacFie (1994) (4) production, (5) consumer trials, Fuller (1994) (6) test market (6) commercialization Pitta (2007) (6) product manufacturing and launch Bigliardi et al. (2010) in the food packaging market, (7) expansion in different markets Numerous studies have investigated the factors that may influence the results of the NPD process. These factors are various, but among others, the involvement of supply chain players in the NPD process starts to attract relevant attention in both NPD and SCM fields. Collaboration between two or more companies has been identified as a way of achieving benefits in the NPD process, in terms of reduced costs and decreased risk of failure (Parker, 2000). In particular, literature on these matters suggests that a company will perform better if it collaborates with suppliers and customers (Lau, 2011; Lin et al., 2010). Thus, the role of suppliers and customers and their involvement in the NPD process has been investigated both researchers and practitioners. In literature, various definitions of supplier and customer involvement in the NPD process have been proposed. Handfield et al. (1999) and more recently van Echtelt (2008) defined supplier involvement as the resources (i.e., capabilities, investments, information, knowledge, ideas) that suppliers provide, the tasks they carry out and the responsibilities they assume regarding the development of a part, process or service for the benefit of a buyer s current or future product development projects. Suppliers, due to their greater expertise and knowledge regarding the specifications, parts and components, may provide companies with different benefits: first, suppliers involvement can help firms incorporate the expertise and their different perspective to improve solutions or create new methods for product development. Second, suppliers involvement also allows firms to identify potential technical problems and speed up the NPD process (Sun et al., 2010). As far as customers involvement is concerned, its importance is particularly recognized in the early stages of NPD process (Tan and Tracey, 2007). The involvement of customers in the NPD process may lead to better firm performance and new product success (Gruner and Homburg, 2000), as well as to also speed up the process of adoption necessary for success (Johnson and Filippini, 2009). From the above discussion, it may be argued that the NPD process on the one hand enables management to coordinate the flow of new products efficiently, on the other hand it allows to assist in the ramp-up of supply processes and other related activities

5 5 (such as for example marketing and sales), supporting the commercialization of the product (Carillo and Franza, 2006). Thus, companies have to coordinate and address these issues in parallel to enhance profitability (Van Hoek and Chapman, 2006; 2007), and this can be done by involving SCM from the beginning of product development (Gerwin and Barrowman, 2002; Morgan et al., 2001). However, the lack of research addressing NPD and SCM coordination is remarkable (Carillo and Franza, 2006; van Hoek and Chapman, 2007). For instance, recently, research by van Hoek and Chapman (2006, 2007) reviewed the misalignment between NPD and SCM, and argued that there is a need to improve the alignment between these activities in order to leverage supply chain capabilities and improve product launch effectiveness. They highlighted the lack of research examining how the different NPD and SCM activities influence each other, how they can be coordinated, what benefits that can be obtained by coordinating them, and what the requirements are to succeed with the coordination. This means that there is a need for research aiming to fill this gap in the literature and to increase the understanding of the whys and hows of NPD and SCM coordination. 3. Research methodology The research methodology adopted in this study consists of three steps, namely: 1. a preliminary analysis of the literature related to NPD and SCM, and the development of a draft of NPD process for the mechanical industry, composed by a number of phases (e.g., idea exploration and generation, idea screening, development of the product concept, etc); 2. the design of a questionnaire, including the steps of the NPD process previously obtained from the literature, to be used as a guideline for the following step; 3. the development of 7 case studies, involving as many companies from the mechanical industry, aimed at exploring the way the NPD process is carried out in real scenarios, as well as at identifying different phases to be included in the framework or those to be deleted, and at investigating the relationships between NPD and SCM in terms of resource consumption. From the analysis of the case studies, a preliminary picture of the NPD framework that the mechanical companies use to adopt was derived, together with some useful guidelines for companies wishing to perform better in terms of NPD. A detailed description of the research steps is provided in the subsections below. 3.1 Research step 1 The preliminary NPD process The first phase of the research was a detailed analysis of the literature related to NPD and SCM, including specific studies in the field of the mechanical industry. The purpose of this research step was to elaborate an NPD framework suitable to be adopted by mechanical companies. From the literature analysis, as well as from findings provide in Table 1, we built a preliminary NPD process, whose structure is shown in Figure 1. The framework consists of eight steps, ranging from idea exploration and generation to product launch ; a brief description of the NPD process steps is proposed below. Step 1. Idea exploration and generation. This step basically aims at discovering opportunities for NPD (cf. Table 1), and is a systematic search for useful new product ideas, which have potentials to generate business opportunities. The main activity is thus the collection of detailed pieces of information about potential new products; this can be performed by applying different techniques (e.g., market research, brainstorming, or focus groups). Moreover, the identification of the critical customer s needs is one of the main elements of this phase: it is thus necessary that a company shows good communications skills with their customers during the idea exploration. Step 2. Idea screening. Many authors suggest that the idea generation should be followed by a phase of screening (e.g., Booz et al., 1965; Kotler and Armstrong, 1991; Fuller, 1994; MacFie, 1994). Idea screening consists in evaluating and selecting the best ideas generated in the previous step, i.e. the business ideas which show the highest probability of being successful. As a result, during this phase unsatisfactory ideas will be eliminated. To judge the suitability of an idea, some specific criteria can be applied, such as, for instance (Booz et al., 1965; Graf and Saguy, 1991; Pitta, 2007): - the feasibility and engineering of the idea into a product design (engineering criterion); - the suitability of the idea to generate a product which will be required by the targeted market and will meet the business needs (marketing criterion); - the consistency of the idea with the business objectives and economic feasibility (management criterion). As a result of this step, the company s top management will be sure that only the appropriate ideas will be chosen for further exploration and elaboration. In fact, the main risk of this step is the possibility of choosing ideas that miss one of the above criteria (e.g., they are technically feasible but unattractive to the market). The role of the company s top management is to identify a balance between what has potential to be desirable by the customer and what is technically feasible. However, at this stage of the NPD process, it is often difficult to get precise information about the potential responses of the market to the new product, as well as on the technical requirements of the product (and thus on its technical feasibility). Hence, the company s managers may also

6 6 rely on their personal intuition when judging new product ideas. This is why the ideas that do not meet the criteria mentioned above are not properly removed; rather, they are temporarily kept aside: at this time, such ideas will not be explored further, but it would be possible to wait for more favorable conditions to develop them. Step 3. Conceptual development of the product. Conceptual development consists in the definition of the product structure and its main parameters (Graf and Saguy, 1991; Kotler and Armstrong, 1991). The goal is to convert the business opportunities into a feasible solution that meets the needs of external and internal customers. The product idea is sketched by means of a picture or a verbal description, which should also include some preliminary ideas about materials and technologies that could be used during manufacturing. This phase is supported by marketing research, as well as by engineering, research and development and management business functions, who will work together to develop a preliminary model of the product. Step 4. Test of the product concept. During this step, the conceptual product is tested on a sample of potential consumers (Urban and Hauser, 1993, Booz et al., 1965). By collecting and interpreting the reactions of the customers to the product, the company will be able to understand whether or not the product concept has a potential market attractiveness, so as to justify the subsequent development of the product. Step 5. Development of the marketing strategy. During this phase, the company will first perform some detailed analyses of technical solutions, finance and market opportunities. On the basis of the outcomes from such analyses, the company will decide whether or not to continue with the product manufacturing phase. This step involves the exhaustive evaluation of several aspects of the market opportunities identified, including (Kotler and Armstrong, 1991; Pitta, 2007; Bigliardi et al. 2010): - the definition of the targeted market, market position, market share and distribution channels; - the available technological and financial solutions (e.g., materials, human resources, technical capabilities and manufacturing plants) and the related cost; - the analysis of the market risks. The above criteria aim at determining whether the product will reach the sales volume and profit margin targeted by the company s management. This step is completed by the development of a business plan for the product and manufacturing activities. Step 6. Product manufacturing. This phase involves the design and manufacturing of the physical prototype of the product, and can be supported by external co-makers (Fuller, 1994; Bigliardi et al., 2010). Prototyping is a main part of the NPD process, and aims at reproducing the real manufacturing process, as well as the final product. The final goal of prototyping is identifying possible design errors and removing them when the product is still in the early stages of manufacturing, meaning that only a limited amount of resources has been exploited. Prototyping activities bring relevant benefits to a company, including lead time reduction, cost reduction and quality improvement. Step 7. Product testing on the market. During this step, the company s top management must ensure that the product (or prototype) has been developed according to the defined technical settings (Fuller, 1994). Appropriate criteria that can be adopted for this evaluation refer to product quality and performance. Moreover, the company s top management should assess whether the efforts required for product development is consonant with the resource allocation plan of the whole NPD process. At this stage, the product (or prototype) is evaluated and tested by means of: - instrumental tests, to determine whether the product meets the targeted technical and manufacturing requirements; - market test of the prototype on a sample of potential customers, with the purpose of assessing their reactions to the new product. In the case of a positive result of those tests, the company s top management will proceed with the launch of the product on the market, while in the case the product fails one of the above tests, the manufacturing phase will be revisited and modified. Step 8. Product launch. During this step, the new product is launched on the market (MacFie, 1994; Booz et al., 1965; Pitta, 2007). After the launch, the company s top management will evaluate whether the new product meets the customer s expectations, and will identify potential gaps between product characteristics and market expectations, to remove them. The sales volume of the product is also monitored by collecting direct data. The NPD process steps described above are often consecutive; nonetheless, some loops can be introduced in the process in the case a step does not return the desired outcomes (cf. Figure 1). 3.2 Research step 2 - Questionnaire design In the second step of the research, we designed a specific questionnaire, with the purpose of testing the NPD process steps previously described and to collect further details about those steps. It is articulated into 2 sections. The first one includes questions related to the various stages of the NPD process; for each step, some specific questions are elaborated with the purpose of investigating how the NPD process is accomplished in a real scenario. Specifically, the following questions are asked for the

7 7 different steps: Step 1. Idea exploration and generation. In the questionnaire we asked companies about the tools and techniques used to gather information about the potential customers, as well as about the opportunity of collecting similar pieces of information about the competitors. For example, companies were asked if they carry out market research, focus groups, brainstorming or exploit other techniques. Step 2. Idea screening. We asked companies about the involvement of different business functions (e.g., marketing, engineering and design department, research & development, top management, etc.) in this phase of the NPD process. Step 3. Conceptual development of the product. We investigated the possibility of establishing partnerships with one or more suppliers during the conceptual development of the product, with the purpose of designing and developing specific components of the product. Step 4. Test of the product concept. Questions related to step 4 were mainly aimed at investigating whether the company uses to involve its potential customers in the phase of product testing. Step 5. Development of the marketing strategy. During the case studies we tried to understand whether mechanical companies carry out any specific analyses, such as risk analysis or feasibility studies, to evaluate the product and assess its characteristics. no no no Figure 1. Preliminary NPD process resulting from the literature analysis Step 6. Product manufacturing. At this stage of NPD process, during the case studies we asked companies about the opportunity of manufacturing directly the product prototypes or, alternatively, of exploiting external supplies during manufacturing. Step 7. Product testing on the market. Companies were asked about the implementation of some specific tests on the product, as well as about the involvement of potential customers during those tests. Step 8. Product launch. During the case studies, we tried to investigate whether the companies investigated undertake any specific monitoring activities (e.g., on the sales volume) after the launch of the new product. The second section of the questionnaire includes more general questions, focusing on the way the NPD process is implemented inside the company. Questions included in this section refer to the use of particular NPD techniques, such as cross-functional teams, concurrent engineering techniques, outsourcing of Research and Development (R&D) activities, partnerships with suppliers and patenting. Moreover, this section of the questionnaire also includes specific questions intended to investigate if the NPD steps

8 8 are undertaken sequentially or in parallel, as well as the use of specific resources (people, business functions, finance, technologies etc.) required to complete the process steps. The structure of the questionnaire presented above was validated through a roundtable discussion with 12 senior manufacturing managers operating in as many mechanical manufacturing companies. 3.3 Research step 3 - Case studies The questionnaire developed was finally exploited during the third phase of the research, as a guideline to carry out seven case studies involving as many mechanical manufacturing companies. Hence, the third phase of the study was based on a multiple case studies research, which, according to Voss et al., (2002), is an appropriate methodology to be adopted when trying to describe or explore relatively new phenomena. In the present study, the case study-based research was exploited with the purpose of: a. investigating whether the companies analyzed adopt (partially or totally) the theoretical NPD framework resulting from the literature analysis; b. identifying some additional phases to be included in the theoretical NPD framework, or, alternatively, some steps to be removed from the NPD process because they are not implemented in real cases; c. investigating the relationships between NPD and SCM in terms of resource involvement; d. validating a general NPD process for the mechanical industry. The number of case studies carried out can be considered as sufficient to give an accurate account in an empirical research when the purpose is mainly explorative (Rowley, 2002). The sample of companies participating to the case studies was obtained starting from a wider list of contacts of Italian mechanical industries, which was mainly derived from direct knowledge of the authors. Initially, and phone contacts were made with approx. 20 mechanical manufacturing companies, to punctually describe the scope of the study and the research steps, as well as to assess their willingness to participate in the study. After the initial contacts, 7 out of the 20 companies agreed to be involved in the research through the development of a case study. Case studies were carried out through direct interviews at the companies sites; during the interviews, as mentioned, we exploited the questionnaire developed in the previous step of the research, as a guideline. In fact, all questions of the questionnaire were open-ended ones, thus requiring an explanation by the interviewee, as well as his/her personal judgment about the topic addressed by each question. Questionnaire with open-ended questions are a typical tool to support case study-based research (Barnes, 2001). Interviews mainly involved representatives from the engineering and design department of the companies investigated, and lasted about 2 hours each. All sessions were taped and transcribed, to ensure that all relevant pieces of information were successfully collected. After the interview, further mail or phone contacts with the manufacturing managers could be taken, whenever additional details were required or clarifications were needed. All the organizations surveyed are mechanical manufacturing companies, and operate in Northern Italy. The phases of the literature review and questionnaire development approximately took from March to July 2010, while the multiple case studies realization took from September 2010 to December The elaboration of pieces of information collected during the case studies was performed in January and February The case studies 4.1 Overview of the sample The sample of enterprises surveyed includes companies that follow an engineering-to-order strategy, located in the Emilia Romagna region and all belonging to the mechanical industry. Their main features are presented in Table 2. As requested by the companies investigated, their names have been replaced with letter A, B. C etc. in order to preserve anonymity. According to the European Commission (2003) specifications, most of the companies surveyed are big enterprises, except Company B (120 employees), Company F (70 employees), and Company G (200 employees). Interviewees were, in general, administrators or owners of the companies examined (3 out of 7 companies) or R&D/Innovation manager (for 2 companies); in the remaining 2 cases, interviews were carried out with managers of the manufacturing and deputy technical director of the company. All the respondents declared that innovation is a key element for their companies. Similarly, the main objective of all the companies investigated resulted to be the customer satisfaction, thus guaranteeing them support until the post-sales services.

9 9 Company name Year of foundation Number of employees Table 2. The sample of companies. Turnover (millions ) Main products Company A ,500 4,300 Complete bottling line, aseptic bottling lines, process technologies Company B N.A. Preforms and bottles unscramblers, storage silos, conveyors, preforms and bottles palletizers, depalletizers, pneumatic bottling conveying systems Company C 1947 N.A. N.A. Homogenizers and high pressure pumps Company D Machineries for primary and secondary packaging, depalletizers and palletizers, filling and labeling machineries Company E N.A. 5,000 1,000 Complete bottling lines for food beverage in plastic and glass bottles and cans Company F N.A. Plant and machinery for dry, fresh, frozen, gluten-free and special pasta, cous-cous, and prepared meals Company G N.A. High-speed milling and high power automated machining center Beverage Beverage Market segment Food, chemical Food, beverage, chemical, tissue, cleaning Beverage Food (bakery) Automotive, energy, mechanical 4.2 The NPD process As previously mentioned, in the second part of the interview, we first investigated the way the preliminary NPD process is implemented inside the company, as well as the use of specific NPD techniques (such as cross-functional teams, concurrent engineering techniques, outsourcing of R&D activities, partnerships with suppliers and patenting processes). As can be seen in Figure 2, most of the companies examined carry out all the phases of the NPD process proposed. Specifically, 3 companies (i.e. Company B, F and G) do not use to carry out the phase labeled Testing of the product concept. Similarly, 2 out of 7 companies (i.e., Company B and G) do not carry out phase 5 Development of the marketing strategy. Figure 2. Adoption of the preliminary NPD process.

10 10 The adoption of specific NPD techniques was thus explored. Findings from the interviews are schematically depicted in Figure 3, with the indication of the phase of the NPD process where they are applied. Figure 3. Adoption of NPD techniques. We investigated the adoption of the main techniques as resulted from the previous phase of literature review, namely market research, focus group, brainstorming, feasibility analysis, as well as product tests, risk or sensorial analysis. Results suggest that almost all the techniques investigated are adopted in the first step of the NPD process proposed (i.e., Idea exploration and generation ). As regards the analysis of competitors, all companies surveyed confirm the relevance of this point to the NPD process; some of them, however, do not carry out systematic and thorough analyses; rather, they examine competitors occasionally. Similarly, a particular attention is paid to the identification of the customer s needs. Six out of seven companies exploit direct relationships with customers to this purpose, while the remaining company (i.e., Company A) usually contacts customers in the phase of Idea screening. In addition to direct contacts with the customer, more than half the companies surveyed exploit appropriate techniques, such as focus groups, brainstorming and market research, with the purpose of collecting information about customers. Only one company (i.e., Company F), conversely, prefers to collect such pieces of information during exhibitions or trade fairs, or through its sales network. Finally, as far as product tests, only one company (Company D) uses to carry out feasibility analysis during the first step of the NPD process. Similarly, Company B uses to carry out risk analysis on the product during the phase of idea exploration and generation. Conversely, none of the companies investigated develop sensorial analysis during the first step of the NPD process. During the second step of the NPD process, only Company D develops a feasibility analysis, while none of the other techniques are developed. Interviewed highlighted the commitment of the different business units in the phase of idea screening (Figure 4). Specifically, most of the companies surveyed indicated that the company s engineering and design department and R&D department (6 and 5 companies respectively), as well as the top management (5 out of 7 companies) are directly involved in the Idea screening phase. Figure 4. The business units and customers involvement in the Idea screening phase.

11 11 External actors belonging to the supply chain, such as suppliers and customers, are generally involved in the third and fourth phases of the NPD process. As far as the Conceptual development of the product phase is concerned, two companies among those surveyed (Company C and D) indicated that they systematically involve trusted suppliers in the conceptual development of the product; conversely, four out of the seven companies examined (i.e., Company A, E, F and G) use to involve suppliers in this phase only occasionally. Only Company B does not use to develop partnerships with its suppliers. As for the NPD investigated, only Company G carries out feasibility analysis during this step. Conversely, customers are involved during the step of Testing of the product concept, even if this step is performed, as previously highlighted, by only two companies out of the sample of seven. Specifically, Company A and C usually involve their customers for the testing activities. Two additional companies (i.e., Companies D and E) occasionally collaborate with the customers during this phase, although the tests on the product are performed inside the company itself. During the Development of the marketing strategy, four companies (A, C, E and F) perform feasibility studies, while three companies (A, E and F) carry out risk analysis We also found that Company B, C and D do not perform feasibility studies and risk analysis respectively during the NPD process. All companies surveyed manufacture prototypes of the product during the Product manufacturing step. Two companies (i.e., Companies D and E) see the product prototype as the first example of machinery manufactured and sold to the customer. From the interviews, it emerged that all companies investigated acquire external supplies that mainly include components, standard parts, as well as machines to be integrated in the plant manufactured by the company. In some cases, companies may also purchase software from external suppliers. Specifically, Company C and G acquire almost all the components externally, while the remaining companies acquire only some components externally. None of the companies investigated use the NPD techniques investigated during this phase of the process. During the Product testing on the market phase, all companies surveyed directly involve customers to test the product. Often, customers ask for specific tests to be performed on products or plants before they are purchased. For some companies, customers also send raw materials to perform the test of the plant or machinery, so that the tests can be more realistic. Usually, all companies surveyed perform some instrumental tests in their internal laboratories, before the plant or machinery has been installed at the customer s site. More precisely, the plant or equipment is first turned on and operates for some months at the company s site; if these tests are satisfactory, the plant or equipment is installed at the customer s site and put on trial, for a final test that must be approved by the customer. In the final phase of the NPD process (i.e., Product launch ), none of the NPD techniques investigated is adopted. Most of the companies surveyed (4 out of 7, specifically Companies B, C, D and E) monitor the sales volume of the product, while only 2 companies (Company A and F) do not perform such analysis. Often, companies wait for negative feedbacks from the customer to decide whether the product needs to be modified. The product has a guarantee period, whose duration may vary depending on the business deal with the company. For instance, we found one company that offers up to 4-year guarantee depending on the customers request. All companies surveyed agree that the guarantee period is essential, since plants and machineries are complex products, which require direct assistance by the manufacturer to solve potential problems. Table 3 summarizes the outcomes obtained from the case studies, in terms of the techniques adopted by the companies surveyed in the different steps of the NPD process. Table 3. Summary of the results from the case studies. NPD process steps Techniques used Companies that adopt the techniques investigated 1. Idea exploration and generation Techniques for data collection from the customer: - marketing research A, C, E, G - focus groups A, C, E, G - brainstorming A, C, E, G - commercial agencies F - direct contact with customer B, C, D, E, F, G Competitor analysis - Systemic A, D, E, G - occasional (limited to the main project) B, C, F

12 12 Table 3 (cont d). Summary of the results from the case studies. NPD process steps Techniques used Companies that adopt the techniques investigated 2. Idea screening Business functions involved - marketing A, E, G - engineering and design department A, B, C, D, F, G - research and development A, B, C, E, F - top management A, B, C, F, G - product management E - sales department B, D, G - customer A, G 3. Conceptual development of the product 4. Testing of the product concept 5. Development of the marketing strategy 6. Product manufacturing 7. Product testing on the market Suppliers involvement for product development - always C, D - depending on the specific product A, E, F, G - none B Customer s involvement for product testing - always A (1 customer), C (2 customers) - occasional D, E Feasibility study: - performed in this step of the NPD process A, C, E, F - performed in a different step of the NPD process D (during phases 1 and 2), G (during phase 3) Risk analysis - performed in this/a different step of the NPD process A, E, F (in this phase), B (during phase 1) - not performed C, D Prototyping: A, B, C, D, E, F, G Involvement of external suppliers A, B, C, D, E, F, G Product testing - on a potential group of customers A, B, C, D, E, F - by means of instrumental tests A, C, D, E, F, G 8. Product launch Product monitoring after launch: - always B, C, D, E - never A, F We then explored the resources adopted by the companies surveyed during the NPD process, in terms of human resources, time, technical and technological resources. The companies have provided the data proposed in the tables below. Missed values are due to the difficulty the companies experienced in generalizing information related to the specific NPD process carried out, which can be very different and therefore require different levels (and kind) of resources. In the case of missing data, cells in the tables are left blank, while in the case companies did not perform a specific step of the NPD, a bar has been inserted in the corresponding cell. Finally, whenever companies provided a range of values, instead of a specific value, for resources, the upper bound of the range was inserted in the table, according to a conservative approach Time resources. Table 4 presents the numerical values related to the time resources, expressed in days, used by the companies surveyed along the different stages of the NPD process. No data are available as regards companies C and G.

13 13 Table 4. Time consumption during the NPD process. Time (days) A B D E F 1. Idea exploration and generation Idea screening Conceptual development of the product Test of the product concept 5 / 120 / 5. Development of the marketing strategy 5 / Product manufacturing Product testing on the market Product launch Figure 5 proposes the cumulated values of the time resources for each company. From that graph, the overall duration of the NPD process can be easily derived Time (days) Steps of the NPD process A B D E F Figure 5. Cumulated consumption of time resources. Results show that the last steps of the NPD process are particularly time-consuming, especially for Company A and E. A possible explanation for this outcome is that plants and equipment manufactured by the sample of companies surveyed are often characterized by high technical complexity, which makes assembly, testing and manufacturing particularly difficult to be accomplished. Company A spends significant time resources in the steps of manufacturing and launching the product. As regards this latter step, depending on the kind of product manufactured, the company may need from six months to one year to complete the installation and testing activities. For Company A, the last three phases of the NPD process consume most of the time resources. Company B is the one that requires less time to develop a new product. The NPD process steps which take most of the time to be accomplished are conceptual development and manufacturing. This can be justified in the light of the fact that Company B is a small enterprise, whose size is lower than that of the remaining companies; its agile structure ensures a quick time to market. Moreover, the NPD process is mainly grounded on the internal know-how, so that the company does not need to involve comakers or external suppliers. Company D spends much time in carrying out the first five stages of the NPD process, and, in particular, the screening phase requires significant temporal resources compared to the remaining companies. For that company, the last three stages of the NPD process are less time-consuming than the first ones. From the information collected, it emerged that, when developing a complex new product, Company D applies the Target Costing methodology, that allows performing a detailed analysis on several aspects of the new product, but whose application needs long time to be completed. This is why the company suffer from a high absorption of temporal resources during the first stages of the NPD process.

14 14 Company E, on the contrary, takes more time to carry out the last three steps of the NPD process, while the first phases are less time-consuming. Moreover, the development of the product concept is a particularly time-consuming steps, compared to the remaining companies. From the cumulative curve, it can be appreciated that company E is the company that requires the longest time to complete the NPD process. Company F provided only an estimation (not the punctual values) of the time resources required during the steps of idea exploration and generation, product testing and launch. Nonetheless, such data are in line with those provided by the remaining companies; in particular, the steps of the conceptual development and manufacturing take most of the time resources required during the whole NPD process. The whole time to market is lower than the corresponding value for companies A, D, E; a possible reason can be the small company size and high specialization on the machinery that it manufactures Human resources. Data related to human resources exploited during the NPD process are presented in Table 5. It can be seen from that table that companies C and D did not provide such pieces of information, and thus they are not listed in the table. The data collected are also presented in Figures 9 and 10. Table 5. Human resource consumption during the NPD process. Human resources (number of people) A B E F G 1. Idea exploration and generation Idea screening Conceptual development of the product Test of the product concept 5 / 3 / / 5. Development of the marketing strategy 5 / 3 7 / 6. Product manufacturing Product testing on the market Product launch Table 5 highlights that manufacturing activities are those that require the most relevant human resources, for all the companies considered. However, it should be mentioned that, as regards the human resources, it is not possible to directly compare the total amount of resources employed (in terms of the number of people), since most of those resources are interchangeable during the different NPD steps. Moreover, most of the companies surveyed approaches the NPD process by means of project teams, so that people belonging to the team will often follow the whole NPD process. In fact, in most of the cases examined, the phases of idea exploration and generation and of idea screening are carried out by the same people, and those people often collaborate also during concept development, concept testing and development of the marketing strategy (this is, for instance, the case of Company A, B, and G). The skills required to carry out the first five steps include technical and commercial capabilities, which are particularly useful during the conceptual development step (where the company s Technical Division is often involved). During the last three steps of the NPD process, most of the people involved are production managers, test managers, designers, manufacturing managers, and after-sale technicians Other resources. As regards the other (i.e., technical and technological) resources, we grouped the information collected in Table 6. Companies C and G were not able to provide detailed information as regards this kind of resources, and thus are not included in the table. Data in Table 6 are reported in percentage on the company s amount of the resources available for each step of the NPD process. Due to confidentiality, the total amount of the resources available is not reported. It can be first appreciated that the step of conceptual development requires a significant effort in terms of resources, for most of the companies surveyed. Moreover, Company A exploits most of the available technical resources for performing the first three steps of the NPD process, whose percentage of resource absorption is significantly higher than the remaining NPD process steps. Company B exploits the highest amount of resources when carrying out the conceptual development of the product while a further significant amount of resources is spent during the idea screening and product manufacturing steps. Company C uses less than 20% of the total resources available to carry out the phases of idea screening and development of the product concept, while a slightly lower percentage of resources is required to perform the tests on the product concept and the manufacturing activities. Company E exploits a wide amount of technical resources in the first phase of idea exploration and generation, while no resources are exploited, for the same phases, by Company F; on the contrary, most of the resources available to Company F are devoted to the product and market tests. In particular, for the product tests, Company F exploits an internal technical laboratory.

15 15 Table 6. Consumption of other (technical and technological) resources during the NPD process. Consumption of technical and technological resources A B D E F (on the amount of the resources available) 1. Idea exploration and generation 40% 5% 10% 52% 0% 2. Idea screening 50% 25% 20% 15% 0% 3. Conceptual development of the product 50% 50% 20% 15% 20% 4. Test of the product concept 2% / 15% 18% / 5. Development of the marketing strategy 2% / 1% 18% 5% 6. Product manufacturing 10% 30% 15% 10% 10% 7. Product testing on the market 5% 15% 5% 23% 60% 8. Product launch 4% 0% 3% 18% 0% Note: / indicates that the step is not carried out by the company, while 0% means that the company undertakes the NPD step but it does not use internal technical and technological resources. 5. NPD process and SCM: findings from the case studies On the basis of the outcomes described above, we can elaborate some findings related to the NPD process, as well as to the relationships between NPD and SCM, with a particular attention to the involvement of supply chain players and the resources in the different phases of the NPD process. Table 7 summarizes the main outcomes obtained from the case studies, with a particular attention to the different steps of the NPD process, the techniques adopted and the resources by the companies surveyed in the different steps. Company A NPD phases realized Idea exploration and generation Table 7. Summary of the results from the case studies. NPD techniques adopted marketing research, focus groups, brainstorming, competitors analysis time resources [days] human resources [# of people] technical resources [% on the amount of the resources available] % Idea screening none % Conceptual development of the product Testing of the product concept Development of the marketing strategy Product manufacturing none % direct contact with customers feasibility analysis, risk analysis 5 5 2% 5 5 2% none %

16 16 Company B Company C NPD phases realized Product testing on the market Table 7 (cont d). Summary of the results from the case studies. NPD techniques adopted instrumental tests and direct contact with customers time resources [days] human resources [# of people] technical resources [% on the amount of the resources available] % Product launch none % Idea exploration and generation direct contact with customers % Idea screening none % Conceptual development of the product Product manufacturing Product testing on the market none % none % direct contact with customers % Product launch none % Idea exploration and generation marketing research, focus groups, brainstorming, direct contact with customers, competitors analysis (limited to the main projects) N.A. N.A. N.A. Idea screening none N.A. N.A. N.A. Conceptual development of the product Testing of the product concept Development of the marketing strategy Product manufacturing Product testing on the market none N.A. N.A. N.A. direct contact with customers feasibility analysis N.A. N.A. N.A. N.A. N.A. N.A. none N.A. N.A. N.A. instrumental tests and direct contact with customers N.A. N.A. N.A.

17 17 Company D Company E NPD phases realized Table 7 (cont d). Summary of the results from the case studies. NPD techniques adopted time resources [days] human resources [# of people] technical resources [% on the amount of the resources available] Product launch none N.A. N.A. N.A. Idea exploration and generation Idea screening Conceptual development of the product Testing of the product concept Development of the marketing strategy Product manufacturing Product testing on the market direct contact with customers, competitors analysis, feasibility analysis feasibility analysis 90 N.A. 10% 60 N.A. 20% none 120 N.A. 20% direct contact with customers feasibility analysis N.A. N.A. 15% 30 N.A. 1% none 90 N.A. 15% instrumental tests and direct contact with customers 40 N.A. 5% Product launch none 60 N.A. 3% Idea exploration and generation marketing research, focus groups, brainstorming, direct contact with customers, competitors analysis % Idea screening none % Conceptual development of the product Testing of the product concept Development of the marketing strategy Product manufacturing none % direct contact with customers feasibility and risk analysis % % none %

18 18 Company F Company G NPD phases realized Product testing on the market Table 7 (cont d). Summary of the results from the case studies. NPD techniques adopted instrumental tests and direct contact with customers time resources [days] human resources [# of people] technical resources [% on the amount of the resources available] % Product launch none % Idea exploration and generation commercial agencies, direct contact with customers, competitors analysis (limited to the main projects) N.A. N.A. 0% Idea screening none % Conceptual development of the product Development of the marketing strategy Product manufacturing Product testing on the market none % feasibility and risk analysis (mainly technical, mechanical or safety risks) % none % instrumental tests and direct contact with customers N.A. 8 60% Product launch none N.A. N.A. 0% Idea exploration and generation marketing research, focus groups, brainstorming, direct contact with customers, competitors analysis N.A. 5 N.A. Idea screening none N.A. 5 N.A.

19 19 NPD phases realized Conceptual development of the product Product manufacturing Product testing on the market Table 7 (cont d). Summary of the results from the case studies. NPD techniques adopted feasibility analysis time resources [days] human resources [# of people] technical resources [% on the amount of the resources available] N.A. 6 N.A. none N.A. 10 N.A. instrumental tests N.A. 5 N.A. Product launch none N.A. N.A. N.A. As a result from the case studies, it emerged that, in general, the preliminary NPD process was suitable for implementation in all companies examined; however, not all companies precisely follow all the steps proposed in the theoretical NPD process. Specifically, the Test of the product concept (step 4) turns out to be applied by only 4 companies out of 7, while 3 companies do not consider this step as essential to the NPD process. This result could be justified in the light of the fact that the companies mentioned mainly work on an engineering-to-order basis; hence, the decision to develop a new product often does not stem from the conceptual development, but rather it results from a direct collaboration with the customer, who required a specific innovative solution. Consequently, there is no need to test the conceptual product, as the companies can be almost sure that the customer will purchase the new product once manufactured. A similar outcome was observed for step 5 of the preliminary NPD process, i.e. the Development of the marketing strategy. This step is included in the NPD process by 5 companies out of the sample of 7 companies, while 2 companies surveyed do not implement this phase. Both companies, in particular, usually carry out risk analysis and other similar evaluations (e.g., feasibility studies) during step 3 of the NPD process. Those companies prefer to evaluate the technical and economic feasibility of the solution before its conceptual development, because this latter step is often more consuming in terms of resources. In addition, companies operating on an engineering-to-order basis often do not need to define a specific marketing strategy, as do traditional make-to-stock companies (Easton and Rothschild, 1987). In fact, under an engineering-to-order strategy, the demand for the final products directly stems from a customer s need; hence, companies are confident that the new product will be purchased by the customer. The remaining steps of the preliminary NPD process are implemented by all companies surveyed during this study, and can thus be considered as validated. The resulting (final) NPD process is proposed in Figure 6. Specifically, findings from Table 7 suggest that in the first step of the NPD process (i.e., Idea exploration ) a particular attention is paid to the identification of the customer s needs. This confirms that companies working on an engineering-to-order basis should pay particular attention to the customer s needs at the early stage of the NPD process. As suggested by some of the companies surveyed, the customer often asks for innovative solutions, or for products more performing that existing ones. Hence, companies start a close collaboration with those customers, and, during the Idea generation phase, they collect their ideas and needs, trying to propose consistent solutions. In addition to direct contacts with the customer, more than half the companies surveyed exploit appropriate techniques, such as focus groups, brainstorming and market research, with the purpose of collecting information about customers. As regards the analysis of competitors, all companies surveyed confirm the relevance of this point to the NPD process; some of them, however, do not carry out systematic and thorough analyses, but rather they examine competitors occasionally. During the second step of the NPD process, most of the companies surveyed indicated that the company s engineering and design department and R&D department are directly involved in the Idea screening phase. In fact, for mechanical companies, the Idea screening phase is primarily a technical activity, since the product manufactured is a plant or machinery; consequently, the marketing or sales business functions are rarely involved in this phase. The Conceptual development of the product involves several people inside the companies examined, mainly including design engineers and technicians. Partnerships with suppliers are often motivated by the need of discussing the technical requirements of the product, as well as to identify any gap between customer s requests and technical solutions available. As a result from the partnership, companies are able to develop more complex products, at the same time solving possible technical or design gaps. During the Development of the marketing strategy, four companies perform feasibility studies, while two companies carry out such studies during preliminary phases of the NPD process (such as the phases of Idea generation and Conceptual development of the product ). Probably, the rationale behind this choice is that these latter companies prefer to test the technical feasibility of the

20 20 project before the product has been developed, in order not to spend unnecessary resources. All companies surveyed manufacture prototypes of the product during the Product manufacturing step. It emerged from the case studies that the companies surveyed rely extensively on external supplies for product prototyping. External supplies mainly include components, standard parts, as well as machines to be integrated in the plant manufactured by the company. In some cases, companies may also purchase software from external suppliers. The need to involve external suppliers in the product prototyping activity is often motivated by lack of specific know-how related to external technologies. During the Product testing on the market phase, all companies surveyed directly involve customers to test the product. Often, customers ask for specific tests to be performed on products or plants before it is purchased. For some companies, customers also send raw materials to perform the test of the plant or machinery, so that the tests can be more realistic. Usually, all companies surveyed perform some instrumental tests in their internal laboratories, before the plant or machinery has been installed at the customer s site. In the final phase of the NPD process (i.e., Product launch ), most of the companies surveyed monitor the sales volume of the product. Often, companies wait for negative feedbacks from the customer to decide whether the product needs to be modified. All companies surveyed agree that the guarantee period is essential, since plants and machineries are complex products, which require direct assistance by the manufacturer to solve potential problems. As for the resources, data in Table 7 show that the last steps of the NPD process are particularly time-consuming, especially for companies A and E. A possible explanation for this outcome is that plants and equipment manufactured by the sample of companies surveyed are often characterized by high technical complexity, which makes assembly, testing and manufacturing particularly difficult to be accomplished. As far as human resources are concerned, results highlight that manufacturing activities are those that require the most relevant human resources, as well as that most of those resources are interchangeable during the different NPD steps. Moreover, most of the companies surveyed approaches the NPD process by means of project teams, so that people belonging to the team will often follow the whole NPD process. The skills required to carry out the first five steps include technical and commercial capabilities, while during the last three steps of the NPD process, most of the people involved are production managers, test managers, designers, manufacturing managers, and after-sale technicians. Finally, as regards the technical and technological resources, results show that the step of Conceptual development requires a significant effort in terms of resources, for most of the companies surveyed. no no no Figure 6. NPD process resulting from the case studies (Note: dashed contours indicate phases that are not implemented by all companies surveyed)