New product development 317
chapter; however, it is worth noting that the
initial change in philosophy from push to pull
has been reinforced by the practice of using the
retail setting to encourage ‘genuine product
innovations instead of inappropriate line
extensions’.
While NPD is central to long-term success
for companies, it is both expensive and risky,
and a majority of ‘new’ products and services
are not entirely ‘new’. The new product strat-
egy specifies how innovative the firm intends
to be in its NPD and how many new product
projects should be resourced at any one time.
The seminal work of Booz Allen Hamilton in
1968 and in 1982 revealed the importance of
this specification. In their 1968 study, an aver-
age of 58 new product ideas were required to
produce one successful new product. By 1982, a
new study showed this ratio had been reduced
to seven to one. The reason forwarded for this
change was the addition of a preliminary stage:
the development of an explicit, new product
strategy that identified the strategic business
requirements new products should satisfy.
Effective benchmarks were set up so that ideas
and concepts were generated to meet strategic
objectives. Seventy-seven per cent of the com-
panies studied had initiated this procedure
with remarkable success. Reporting ‘from
experience’, Riek (2001) emphasizes clear plan-
ning for NPD, including the development of
stages and the criteria for each stage being
thought out at the initial planning stages of the
development programme.
When ideas were generated in line with
strategic objectives, an extremely effective
‘elimination’ of ideas, which in the past clut-
tered and protracted the NPD process, occur-
red. Although written in the early 1980s, the
lessons to be learned from the work of BAH are
still relevant. For example, research by Griffin
(1997) showed that ‘Best Practice’ firms (those
which were above average in the relative
success of their NPD programmes, in the top
third for NPD in their industry and above
average in their financial success for NPD)
derive their NPD activities through explicit
attention to strategy, thereby becoming more
efficient as they require, on average, only 3.5
ideas for one success. The less proficient firms
in NPD terms (referred to in the Best Practice
Report as The Rest) need 8.4 ideas on average
to produce one success, ‘because they carefully
consider strategy first, they only initiate pro-
jects which are more closely aligned to strategy
and thus have a much higher probability of
success’ (p. 11).In a similar study carried out
amongst UK firms, Tzokas (2000) found that
more top-performing firms include strategy
development for NPD, which delineates the
target market, determines market need and the
attractiveness of the product or service for the
target market.
A consultant with PRTM, Mike Anthony,
describes a company manning 22 projects,
when it had capacity for only nine, and
typically would only turn out three new prod-
ucts which would make money. Clearly an
agenda – strategy – for cutting down on the
effort going into 22 projects would give rise to
the opportunity to increase the resources chan-
nelled into the remaining projects (Industry
Week, 1996, p. 45). Setting a clear strategy for
NPD also sets up the key criteria against which
all projects can be managed through to the
market launch. New product strategy, which
has also been called the ‘product innovation
charter’ and ‘new product protocol’ (Crawford,
1984; Cooper, 1993), has been shown to enhance
the success rates of the eventual market launch
(Hultinket al., 1997, 2000).
The PDMA survey showed that the aver-
age ratio of idea : success for the ‘best’ devel-
opers was 3.5, since only projects realizing
ideas that are aligned to strategy in the first
place are initiated (Griffin, 1997). These in turn
have a higher probability of success.
While it is often argued that NPD should
be guided by a new product strategy, it is
important that the strategy is not so pre-
scriptive as to restrict, or stifle, the creativity
necessary for NPD. In addition to stating the
level of newness, a new product strategy
should encompass the balance between