Commercial New Product Development: Rules of the Game

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The new new
product development
game

Stop running
the relay race and
take up rugby

Hirotaka Takeuchi and
Ikujiro Nonaka
In today's fast-paced, fiercely competitive
world of commercial new product development, speed
and flexibility are essential. Companies are increasingly
realizing that the old, sequential approach to developing
new products simply won't get the job done. Instead, companies in Japan and the United States are using a holistic method—as in rugby, the ball gets passed within the team
as it moves as a unit up the field.
This holistic approach has six characteristics: built-in instability, self-organizing project teams, overlapping development phases, "multilearning," subtle
control, and organizational transfer of learning. The six
pieces fit together like a jigsaw puzzle, forming a fast and flexible process for new product development, fust as important, the new approach can act as a change agent: it is a vehicle for introducing creative, market-driven ideas and

processes into an old, rigid organization.
Mr. Takeuchi is an associate professor and
Mr. Nonaka, a professor at Hitotsubashi University in fapan. Mr. Takeuchi's research has focused on marketing and global competition. Mr Nonaka has published widely in
Japan on organizations, strategy, and marketing.

The rules of the game in new product
development are changing. Many companies have discovered that it takes more than the accepted basics of high quality, lov^ cost, and differentiation to excel in
today's competitive market. It also takes speed and
flexibility.
This change is reflected in the emphasis
companies are placing on new products as a source of
new sales and profits. At 3M, for example, products less
than five years old account for 25%* of sales. A 1981
survey of 700 U.S. companies indicated that new products would account for one-third of all profits in the 1980s, an increase from one-fifth in the 1970s.'
This new emphasis on speed and flexibility calls for a different approach for managing new product development. The traditional sequential or
"relay race" approach to product developmentexemplified by the National Aeronautics and Space Administration's phased program planning (PPP)
system-may conflict with the goals of maximum
speed and flexibility. Instead, a holistic or "rugby"
approach-where a team tries to go the distance as a
unit, passing the ball back and forth-may better serve
today's competitive requirements.
Under the old approach, a product development process moved like a relay race, w ith one group of functional specialists passing the baton to the
next group. The project went sequentially from phase
to phase: concept development, feasibility testing,
product design, development process, pilot produc-

Authors' note: We acknowledge the
contribution of Ken-ichi Imai in the
development of this article. An earlier
version of this article was coauthored by
Ken-ichi Imai, Ikujiro Nonaka, and
Hirotaka Takeuchi. It was entitled
"Managing the New Product Development
Process: How Japanese Companies
Learn and Unlearn" and was presented
at the seventy-fifth anniversary

Colloquium on Productivity and
Tbchnology, Harvard Business School,
March 28 and 29,1984.
1 Booz Allen & Hamilton survey
reported in Susan Fraker,
"High-Speed Management
for the High-Itch Age,"
Fortune,
March 5,1984, p. 38.

Harvard Business Review

138

tion, and final production. Under this method, functions were specialized and segmented: the marketing people examined customer needs and perceptions in
developing product concepts; the R&D engineers selected the appropriate design; the production engineers put it into shape; and other functional specialists carried the baton at different stages of the race. Under the rugby approach, the product

development process emerges from the constant interaction of a hand-picked, multidisciplinary team whose members work together from start to finish....
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