From idea to Ecoflair
An analysis of new product development within Uniflair
By Manfred van Heiningen
Idea
Ecoflair
From idea to Ecoflair
An analysis of new product development within Uniflair
Author : M.L. van Heiningen
Student number : 1140930 RijksUniversiteit Groningen
Faculteit Bedrijfskunde
Cluster Small Business and Entrepreneurship First tutor : Drs. N. Campbell Second tutor : Drs. D. Maccow Enschede, January 2005
The author is responsible for the content of this final thesis.
The copyrights are deposited with the author.
Management summary.
This research is performed within Uniflair, a leading producer in Raised access flooring, Close control air-conditioning, and Air-conditioning systems. As Uniflair indicates on their website, new product development is the mainstay of the company. Considerable company resources have been invested in research into new application solutions intended to assure product excellence. Uniflair is a relatively small company in the air- conditioning industry. The scope of operations is very broad, they operate world-wide with exception of the U.S.
Today Uniflair has been developing a very innovative product, which combines the three product groups of Uniflair into one product. This new product will be brought on the market under the name of “Ecoflair”. Despite the innovativeness of the product some people within Uniflair are not secure about the market potential of Ecoflair, because there has not been any market analysis yet. The absence of any market analysis indicates another issue, namely the position of the market analysis within the new product development process. People in the company feel that that the way a new product is developed will have influence on the way the product will perform in the market place.
They want to know what a successful new product development is. For this reason the company wants to have a critical look on the new product development within Uniflair. To analyse the new product development the following research objective is formulated:
“To analyse the most important determinants of successful new product development in order to provide Uniflair with recommendations for design.”
The research question follows as a logical result from the research objective.
“What are the most important determinants for a successful new product development, analysed by using the development of Ecoflair as a case, and how are they executed within Uniflair?”
To research this question the success factors for new product development of Cooper (1994) and Cooper and Kleinschmidt (1995) are used. Five factors are selected that offer the best opportunity to answer the research question. These five factors are: the organisation of new product development, market orientation of new product development, the market environment, relative product advantage, and the process of new product development.
Comparing literature on these aspects with the actual situation within Uniflair analyses the organisation of new product development, the process of new product development and the market orientation of new product development. This comparison is made according to internal documents and interviews with employees.
External information is used to analyse the market environment. This external information is compared with models from the literature that offer a tool for analysing markets. The models are compared with newsletters and other news from the market, like media, annual reports, research centres, area managers, and regulations from the government.
The customer analysis is based partly on literature and partly on external and internal information. The literature used, is general literature on the construction industry and the buying process in business-to-business markets. This literature is compared with information from other companies and internal documents from Uniflair.
Sending questionnaires to potential customers is used to analyse the relative product advantage. Also other products are compared using brochures from other companies. To provide the necessary technical skills handbooks about air-conditioning are looked at in order to understand the product better.
The analyses show a couple of important things. The first important finding is the absence of cross-functional teams, there is no right functional mix and mechanisms to co-ordinate activities and share learning between teams are absent.
The analysis on the process shows a lack of gates in the new product development process. The marketing related activities are ill performed or not performed at all. The clear formal product definition has been not worked out very well in Uniflair. There is a formal product definition, but this definition is not very clear.
The technical knowledge systems like procedures, manuals and tools are weak or even not present in the market orientation of new product development. Also at some points the knowledge and skills about when to acquire what information and how to use it can be improved.
The market analysis shows that the trend in the market is to produce energy friendly systems and systems that put less pressure on the environment. The market for UFAD systems is slowly growing, but the specific requirements for these systems, suggest that the market will remain a niche market. The macro-economic environment is not favourable for launching new products, the expectation is that this will improve in 2005, but the expectation is that business will come from replacement projects the next couple of years, and Ecoflair is not readily retrofit. The hesitation of buyers to adopt new things is worrying.
The conclusion of the customer analysis is that it is very difficult to determine the activities of the customers. The information obtained is sufficient for this research, but not enough for Uniflair. In the future it will be important to have more information about the customers and their activities.
The analysis on product advantage shows that customers find reliability, energy consumption, noise level, and the ease of installation, the most important elements of system quality. The comparison with the competition shows that Ecoflair has the best energy saving potential in the UFAD segment. In noise level the system did not prove to be the best, but the sound levels are within the building regulations. Also the system is easy to install and reliable.
Based on the analyses in this research some important recommendations are made for Uniflair. The most important recommendation for Uniflair is the use of tools for new product development, like quality function deployment, databases, questionnaires, customer visits and perceptual maps. The use of these tools helps in collecting information, translating this information and disseminating this information. The second important recommendation is the use of clear gates in the new product development process, the use of gates makes the chance smaller that products without a market or without return on investment will be developed. The third important recommendation is that considering the mission and the goals of Uniflair it is best to work with cross- functional teams. Further the market analysis showed that the market for Ecoflair is not a very big one. For future products it is advisable to select markets where sufficient revenues can be earned in relation to the investments made. For the product itself it is best to look at the ease of cleaning the units and the noise level as an addition to the excellent quality the product already has.
Foreword.
Finally it is time to write the foreword. After months of hard work I am able to present the final research. Written as the final research project before graduating on the faculty of Business administration, specialisation Small business and Entrepreneurship. The research was conducted within Uniflair, were I analysed the new product development process of Uniflair.
The research has been a very educational experience and I would like to thank my tutors miss Campbell and mister Maccow for their guidance and support during the research. A lot of thanks go out to signor Marchetti and signor Frizziero for their guidance and support within Uniflair.
The person who made my stay in Italy a lot more fun and from time to time shared his insights on the research with me is Mario Moscatelli, many thanks go out to him. Also my father, Hennie van Heiningen, shared often his professional opinion on items discussed in this research. His technical knowledge about air-conditioning helped me tremendously in analysing air-conditioning systems. My parents also helped and supported me during the past five years.
The people who made my study a lot more fun deserve a place in this foreword as well, I will not mention individuals, because there are so many of you. I hope you will all know that I am talking about you.
Special thanks go out to my girlfriend, Linda. Who helped me, supported me and also had to put up with my, sometimes unpredictable, moods.
Manfred van Heiningen Enschede, January 2005
Table of contents.
Management summary 3
Foreword 5
Table of contents 6
List of figures, tables and diagrams 9
Table of contents
Chapter 1. Introduction. 10
1.1. Uniflair. 10
1.2. Organisation structure. 11
1.3. New product development within Uniflair. 12 Chapter 2. The research design and methodology. 14
2.1. Problem definition. 14
2.2. The research objective. 14
2.3. Research question. 14
2.4. Sub-questions. 15
2.5. Research limitations. 15
2.6. Conceptual model. 15
2.7. Methods of investigation. 17
2.8. Data sources. 17
2.9. Measuring and observation methods. 18
2.10. Type of research. 19
2.11. Extra methodology. 19
Chapter 3. Internal analysis. 22
3.1. Introduction. 22
3.2. Strategic Posture. 22
3.3. Review. 24
Chapter 4. Literature review. 25
4.1. Introduction. 25
4.2. The organisation of new product development. 25
4.2.1. Cross-functional teams. 25
4.3. Execution of New Product Development. 27
4.3.1. Stage and Gate model. 28
4.4. Market orientation. 31
4.5. The market environment. 33
4.6. The typical customer of Uniflair. 36
4.6.1 Decision making unit. 37
4.7. Product advantage. 38
4.7.1. Perceptual maps. 40
Chapter 5. The organisation of new product development. 42
5.1. Introduction. 42
5.2. The organisation of new product development. 42
5.2.1. Task design. 42
5.2.2. Group composition. 42
5.2.3. Organisational context. 43
5.3. Review. 44
Chapter 6. The process of new product development. 45
6.1. Introduction. 45
6.2. The stages of new product development. 45 6.3. The activities of new product development. 46
6.4. The business case. 47
6.5. Review. 47
Chapter 7. Market orientation. 48
7.1. Introduction. 48
7.2. Market orientation in general. 48
7.2.1. The stage of opportunity identification. 48 7.2.2. The stage of design of new products. 49
7.3. Review. 50
Chapter 8. The market. 51
8.1. Introduction. 51
8.2. The business environment. 51
8.2.1. Economic analysis. 51
8.2.2. Technology. 51
8.2.3. Ecology. 52
8.2.4. Socio-demographic. 52
8.2.5. Political. 52
8.2.6. Opportunities. 53
8.3. Industry analysis. 53
8.3.1. Rivalry amongst firms. 53
8.3.2. Size of the market. 54
8.3.3. Growth potential. 55
8.3.4. The threat of new entrants. 56
8.3.5. Threat of substitutes. 56
8.3.6. Power of suppliers. 57
8.3.7. Buyer power. 57
8.4. Review. 57
Chapter 9. The Customer. 58
9.1. Introduction. 58
9.2. The supply chain. 58
9.3. The decision making unit. 59
9.4. Review. 60
Chapter 10. Product advantage. 61
10.1 Introduction. 61
10.2 Basic needs for UFAD systems. 61
10.2.1 Articulated needs. 62
10.2.2 Exciting needs. 63
10.3 Competition. 64
10.4 Results. 66
10.4.1 Energy consumption. 66
10.4.2 Noise levels. 67
10.5 Perceptual maps. 68
10.5.1 Price/ value map. 68
10.5.2 Ease of installation. 68
10.6 Other findings. 69
10.6.1 Applications. 69
10.7 Core benefit proposition. 69
10.8 Review. 69
Chapter 11. Recommendations for design. 71
11.1 Introduction. 71
11.2 The organisation of new product development. 71
11.3 The new product development process. 72
11.3.1 Stage and gate. 72
11.3.2 The activities. 74
11.3.3 The business case. 74
11.4 The market orientation of new product development. 74 11.4.1 The market orientation in general. 75 11.4.2 The stage of opportunity identification. 75
11.4.3 The stage of design. 76
11.5 The market environment. 78
11.6 The customer. 78
11.7 Product advantage. 78
11.8 Review. 79
Chapter 12. Conclusions. 80
12.1 Introduction. 80
12.2 Revisiting chapter 2. 80
12.3 Conclusions of the analysis. 81
12.4 Conclusion for Uniflair. 83
12.5 Review. 83
Bibliography. 84
Appendix 1. Glossary of concepts Appendix 2. Description of Ecoflair Appendix 3. Questionnaire
Appendix 4. Competition
List of figures, tables and diagrams.
Figure 1.1 Structure of the holding. 11
Figure 1.2 Organisational structure. 11
Figure 2.1 Conceptual model. 16
Figure 2.2 Ballentent van onderzoek. 17
Figure 4.1 A model for new product development. 28
Figure 4.2 Cognitive and behavioural perspective on new product development. 32
Figure 4.3 Five forces framework. 34
Figure 4.4 Typical supply chain in the construction industry. 37
Figure 4.5 “Lens” model. 39
Figure 6.1 Model of new product development of Uniflair. 45
Figure 8.1 EU regulation on refrigerants. 53
Figure 8.2 European market. 54
Figure 10.1 Illustration off the differences between transporting media. 65
Figure 11.1 Warming up paper. 73
Figure 11.2 Quality check. 73
Table 2.1 Measuring and observation methods. 18
Table 4.1 Five success factors for cross-functional teams. 26
Table 4.2 Expected costs without skipping. 28
Table 4.3 Activities and differences between small and large firms. 29
Table 4.3 Free interpretation of Cooper. 29
Table 5.1 Review. 44
Table 6.1 Review. 47
Table 7.1 Review. 50
Table 8.1 Review. 57
Table 9.1 Definition of distributor segments. 58
Table 9.2 Decision makers. 60
Table 10.1 Five different design elements competition. 65 Table 10.2 Different primary transporting media. 65
Table 10.3 Energy saving potential. 67
Table 10.4 Noise levels. 67
Diagram 10.1 Perceptual map. 68
Chapter 1. Introduction.
This chapter aims to introduce the organisation where the research takes place. Another aim of this chapter is the presentation of the problem as it exists in the minds of employees who perceive it as a problem, they will referred to as the problem owners (De Leeuw, 1997) from now on. This chapter will end with a short preview on how we will try to tackle this problem.
1.1. Uniflair.
Uniflair was founded in 1988. Initially the company has been a manufacturer of raised access flooring (for a complete description see appendix 1). Nowadays, after years of explosive growth, the company is a leading producer in raised access flooring, close control air-conditioning, and air-conditioning systems. Specialised in the design, production and supply of access flooring, precision air conditioners and cooling systems that supply advanced and reliable technological solutions for Telecommunications- Internet systems, the Construction Industry, Office and industrial Cooling. Uniflair¹s Precision air conditioning and cooling systems represent 70% of the company’s annual turnover; modular access floor products represent the remaining 30%.
Uniflair is a relatively small company in the air-conditioning industry. The scope of their operations is very broad, they operate world-wide with exception of the U.S. But especially in the U.S. some of the biggest competitors have their base. The annual turnover of Uniflair is approximately 60 million Euro a year. Other companies operating in this industry like Carrier have an annual turnover of 12,010 million Euro a year. But Uniflair, with their innovative process and their continuous focus on customer needs, they have gained an important place in the market. As Uniflair indicates on their website, new product development is the mainstay of the company. Considerable company resources have been invested in research into new application solutions intended to assure product excellence with an unbeatable level of reliability.
Like mentioned the Uniflair holding operates all over the world. Approximately 200 employees are stationed in Italy, were the headquarters of Uniflair are stationed. Uniflair is active in Europe but also in India, China, Africa and New Zealand. The exact structure of the present organisation can be found in figure 1. As can be seen in the figure the Uniflair can be separated in five different groups. The five groups differ in the way they approach the distribution chain. Uniflair Italia for example, works with salesmen, some of these salesmen are employees of Uniflair, and others are working on their own. The salesmen who are employed by Uniflair have the ability to provide Uniflair with accurate information about the customers of Uniflair. In most of the other countries Uniflair sells through distributors. Most of the distributors sell more brands and not only Uniflair.
Acquiring information about their customers is very difficult, because the value chain is longer and they want to protect their own shop.
Figure 1.1. Structure of the holding (Internal documents) 1.2. Organisation structure.
The organisation of Uniflair is a so-called “process” organisation. In Uniflair this goes by the name of IFM, which stands for integrated flow management, commonly better known as the process organisation. The formal organisation structure of Uniflair is not like traditional structures. It is a relatively new type of structure. Traditional companies are structured vertically, around products, regions or divisions. The process organisation, on the contrary, is organised horizontally focusing on central processes in the company. As showed below, the layout of the formal organisation chart looks rather different.
Figure 1.2. Organisational structure (Barabba, 1995; Internal documents, 2003) UNIFLAIR
Holding
UNIFLAIR Italia
UNIFLAIR China
UNIFLAIR
branches
Panther
Technologycentre
Milan
Naples
Rome
Singapore Germany
India New Zealand
UK South Africa
Spain
Management
New products
Order obtainment
Order fulfilment
After sales
Demand creation
C U S T O M
E
R
S
The organisation has been organised around five core processes, which have been formulated by management. The five processes are:
(1) New product development (2) Order obtainment
(3) Order fulfilment (4) After sales (5) Demand creation
The experiences Uniflair has with the new process organisation are impressive. In the new product process Uniflair reduced the time to market of new products with 39% and noticed an improved customer satisfaction. Also communication between functional areas improved. At the other side of the organisation the co-operation with suppliers became more intense after implementing a process approach to the organisation (internal presentation on new product development).
1.3. New product development within Uniflair.
Today Uniflair has been developing a very innovative technological product, which combines the three product groups of Uniflair into one product. This new product will be brought to the market under the name of “Ecoflair”. This product gives users the opportunity to create their own personal climate even when they are in a room with several other people (A complete and detailed description can be found in appendix 2).
The company has been working on this project for the past three years and the product is now ready for launch in the market. First they will launch it in a small test market namely the south of Europe. If the product proves to be a success here than plans will be made to launch it on a bigger scale.
As an introduction to the problem, this paragraph will provide an analysis of the problem owners (De Leeuw, 1997). Problems are always subjective. The goal of the problem owner will not be in line with reality. The goal of the problem owner is the situation like the problem owner wishes to see reality. Goals don’t have to be complete, constant or explicit. The problem is a feeling of discomfort. The problem is always a problem in the perception of the problem owner. According to De Leeuw (1997) problems first of all exist in the minds of the owners of a problem. A problem will only be a problem if someone notices this as a problem and has the desire to act upon this problem (De Leeuw, 1997). This definition calls for the need to describe the problem owners in order to understand their Real Life System, how they see reality. In this research there are two problem owners. The first problem owner works in the process of demand creation.
Demand creation has as a goal to search for the needs of the customer and translate these needs in a product. In reality the job of an employee in demand creation is more the job of a product manager. This job can best be described as the responsibility to launch a product into the market and make this launch a success. This first problem owner is the product manager for Ecoflair. His job is to make the introduction of Ecoflair a success. In his effort to do this he notices that there has not been any assessment of the market yet, this he perceives as a problem so he can understand how Ecoflair will perform on the market and how this market functions. His goal is to have a market analysis. Some questions he has are: why would the customer buy Ecoflair? The second problem owner is an employee from the R&D process. His job is to develop new products and new technologies. His goals are more focussed on processes. In his opinion the position of the market analysis for Ecoflair is not the correct one. To his opinion the development of a product should have an assessment of the market in the beginning of the new product development process. The position of this market analysis is what he perceives as a problem. Some questions he has are: what is the correct way to create a winner in other words what is a successful new product development, how does this fit with the process from need to idea, from idea to product? There is a similarity between the two problems. The first problem owner notices that there is no market analysis, this is for him a problem. The second problem owner doesn’t perceive the lack of a market analysis as a problem, but the position of the market analysis, in other words when they
perform the market analysis. He points at the process of new product development as a problem. They both feel that that the way a new product is developed will have influence on the way the product will perform in the market place. This implies that the success of a new product will say something about the way the new product was developed. It is possible to analyse the market and see lacks in the new product development process.
Or to analyse the new product development process and predict the result of the market analysis.
There is no doubt that new product development is very important. But new product development is also very risky business. The funds usually committed to new products are substantial. Despite these efforts new products often fail in the market place. For this reason it is of great importance to be very critical at ones own new product development process.
Chapter 2. The research design and methodology.
2.1. Problem definition.
This chapter will provide an outline of the research. Problem statement is the first and most important step of the research. It gives structure and direction to your research project.
In the problem statement you will give an answer to the questions: Why, what, where, how, how much and when (Verschuren, 1999, p. 26). The problem statement consists basically of three parts: the objective, the research question and the limiting conditions.
The most important to start with is the objective of the research. The objective is a definition of the (desired) end result and is a base for the rest of the research. When the objective is clear, a conceptual model can be drawn of the situation. All the variables, based on preliminary information, which play a role or have an influence on the problem situation, will have to come back in the conceptual model. This model gives an overall picture and shows the relations between the variables and the problem, but also shows the interrelations of the variables. Finally the methodology and planning of this research will be discussed.
The location of my period in Italy will be in the New Product Development process. More specific; in the process of Demand Creation. This process is on paper the initial starting point of every new product being developed in Uniflair.
Since the process consists exclusively of engineers at the time of research, there is a clear need for an opinion from a marketing-related point of view.
2.2. The research objective.
Akio Morita, the founder of the very successful SONY corporation said: “Our plan is to lead the public to new products rather than ask them what they want. The public does not know what is possible, but we do” (Barabba and Zaltman 1991, p. 31). At this moment Uniflair is on her way for launching a new innovative product. But has not been any systematic measurement for market potential of this product yet.
Considering the words of Akia Morita that indicates that market research is not needed and will be misleading reflects a technology-driven viewpoint. When SONY in the past did apply market research, they maybe would not have had the big disaster with BETAMAX, which was technologically superior to VHS.
Like indicated in the previous chapter the fact that Ecoflair did not follow a standard new product development procedure is a problem for the problem owners.
In one of the initial discussions with the tutors in the company, a list of steps was made to take in the coming six months. from these steps two final steps were selected as the input for the goal of this research, these two steps are:
1. Ecoflair is a case for creating a process for developing novelties.
2. Creating a guide for new product development.
These two steps together lead to the formulation of the following main objective for this research:
“To analyse the most important determinants of successful new product development in order to provide Uniflair with recommendations for design.”
2.3. Research question.
The research question follows from the research objective. After having a clear statement of the research objective, the question should be raised what it is you are going to search. The research question is the formulation of what it is you are going to look for.
“What are the most important determinants for a successful new product development, analysed by using the development of Ecoflair as a case, and how are they executed within Uniflair?”
Further the research has some restrictions. First of all the research will focus mainly on the marketing related activities such as market study, marketing testing, preliminary
market analysis, suggested is that the technical activities like technical analysis, production analysis and product testing are performed well. The research will only look at the first two stages of new product development as described by Urban and Hauser (1993). This means that the research will look at the stage of opportunity identification and the stage of design, a more detailed description can be found in chapter 4, paragraph 4.3.1. No judgements will be made about the price. There is no analysis of the social interactions of people involved in the process. The relevant market will be the European market.
2.4. Sub-questions.
The central research question will be complemented with a number of sub-questions. The sub-questions help in answering the central question. Also they help structuring the research and mapping the research activities.
• What are the most important determinants for successful new product development?
• How are these determinants executed within Uniflair, using Ecoflair as a case?
• How do the recommendations for design look like?
2.5. Research limitations.
This research project has a term of six months. The research is conducted within, the new demand creation process at Uniflair in Italy. This research is a final thesis for the business administration studies (specialisation Small Business & Entrepreneurship) of the faculty of management and organisation.
2.6. Conceptual model.
Around new product introduction a lot of uncertainties exist. Especially in this case, where the product has already been developed. A lot of aspects surrounding the new product will be of influence on this new product. But which aspects influence a new product the most?
The pattern of thought behind the conceptual model is that aspects in the market place do not only determine the success or failure of Ecoflair, but also processes in the organisation, for example the new product development process. Success can not only be measured by financial revenues, but also by the time it takes to develop the product, the innovative character of the product, the technical success, and the value it offers customers better than other products.
For the conceptual model a preliminary literature study was necessary. The choice of using the literature of Cooper (1988, 1994, 2001) and Cooper and Kleinschmidt (1995) as the point of view for this research is because they approach success in the broadest sense. They look at factors that influence lead-time, success in the market place, etc.
This broad measurement fits perfect with the research goal.
Cooper (1994) identified the following factors as being crucial for new product success:
unique superior product, market orientation of the organisation, up-front homework, sharp, early product definition, cross-functional teams, clear decision points in the process, and quality of execution.
Cooper and Kleinschmidt (1995) have investigated these items further. In their research of 1995 they identified the following items: (1) Real product advantage. A new product must really offer new or different advantages to the customer. (2) Cross-functional teams with dedicated members, the new product must be developed by people from different disciplines in the organisation, (3) The quality of execution, the process must be done thoroughly, it is best to not neglect parts in order to speed up the process. Most of the time this will cost more time (Urban and Hauser, 1993), (4) Marketing tasks, detailed market study and customer field trials are often neglected but are key drivers for new product success, (5) Up-front homework coupled with early sharp product definition.
Good understanding of all the factors influencing new product performance is essential, because than you can anticipate on them. (6) An attractive market is also an important
determinant of new product success. It is possible to make profit on matured markets but the chances are far less than on a growing market. (7) The final determinant is speed. But caution has to be taken because speed only helps when all the other tasks, like market research and design have been performed right. It is best that companies don’t neglect tasks in order to gain speed, this will be a disaster for new product performance.
A number of these factors are strongly related. For example speed is strongly related to the quality of execution. The market environment is strongly related to up-front homework and the quality of execution. Cross-functional teams are related to the organisation of new product development.
Of the factors Cooper (1994) and Cooper and Kleinschmidt (1995) mention in their researches, five factors have been selected that offer the best opportunity to answer the research question and the sub-questions, listed earlier in this chapter.
The five factors selected for further analysis are: (1) The organisation of new product development, (2) market orientation, (3) market environment, (4) relative product advantage, (5) activities of new product development. These factors are also discussed by others authors like: Biemans (2000); Kok, 2003; Lukas (2000); Urban and Hauser (1993). These authors will be discussed in more detail in the next chapter on the theory review.
Shown below is the conceptual model that emerged after several discussions together with Miss Campbell. The five selected factors form together the following conceptual model: Showed in the conceptual model below is the descending in aggregation level.
Figure 2.1. Conceptual model (2004)
The organisation of new product development, the market orientation and the process of new product development are shown in the upper level of the pyramid. These
Market environment
The process of new product development
Relative Product advantage
Market orientation of
new product development Organisation of
new product development
Organisation level
Environment
Product level
Measure and observe
Data sources Problem
statement
Useful Concepts Methods
of analysis
determinants can be organised by the organisation. They are related but don’t really influence each other, what they do influence is the market for the new product. The arrows show this. As a result of the activities in the process and the market orientation a certain market will be selected for introducing a new product. After the selection of the correct market a certain product will prevail that serves the needs of the market best.
This is why the arrows flow from the upper level to the market and finally to the product.
This has nothing to do with the sequence of new product development, but only the relation they have with each other.
An important addition to the conceptual model and the research process is that a lot of literature on new product development is oriented on big companies with a lot of resources that can be dedicated to the new product development process. Uniflair is not a very big company. Especially not in the industry in which they are operating (see chapter 1). This makes it necessary to look different at Uniflair. When analysing the important determinants for Uniflair it is important to keep in mind that Uniflair maybe does not have the resources other, bigger, companies do have.
The differences in size and their effect on new product development will be discussed in more detail in chapter 4, 5 and 6 on the activities in new product development.
2.7. Methods of investigation.
This paragraph will explain what methods will be used in the research. What Data will be needed and where this data can be found. And what tools can be used to transform the data in understandable and useful information.
To assist in doing a systematic research the concept of the “ ballentent” or tent of balls of De Leeuw (1996) has been used. This concept approaches research as a set of related decisions about different issues. This he refers to as the “balls”.
Figure 2.2. “Ballentent van onderzoek” (De Leeuw, 1996: 88) 2.8. Data sources.
According to De Leeuw (1996), there are six different kinds of Data Sources. The field, documents, media, the simulated field, databases and the experience of the researcher.
Searching and finding enough information is very important to secure the validity of the research. The sources have to be selected based on their validity, in other words; can you “rely on them”.
Documents are perhaps the most important source. Documents consist of books, magazines, reports and articles that you can find in the library, archives of companies and secondary sources; for example the thesis of someone else.
The documents attainable from the library were restricted in some way, because the research was performed in Italy and not in the Netherlands. This made it difficult to search in any library. But online databases offer the possibility to search in digital libraries on the Internet. Especially EBSCO-host is a very useful source. Reading a thesis of someone else is also helping to a great extent, it helps structuring the research and some research results others have found can help as well.
The second data sources; media, consist of a huge amount of information. This information has to be filtered and some times checked on their validity, but if used wisely it is possible to find a lot of useful information in them. Using the concept of triangulation can validate second data sources. Different forms of triangulation can be distinguished (Denzin, 1977): Data triangulation, methods triangulation, research triangulation and theoretical triangulation. In this case data triangulation has been used. Data triangulation can be explained by combining different sources of data to better estimate how the reality will look like. Better is it to have a number of not-perfect measurements than only one not perfect measurement. The third data source is the use of databases. Databases can provide you with accurate, useful information.
2.9. Measuring and observation methods.
After having decided where information can be found. It is important to know how to extract data from the sources. Extraction of information is possible by measuring and observation.
Measuring is done by conceptualise the object to be measured, gathering data and make useful information of this data. In the next table this has been made clear in defining each activity for my research combined with the information needed and the use of this information.
Research Activity Data sources Measuring and observation
Organisation of the process of new product development
• Literature about new product development
• Employees new product development
• Literature on organizations
• Literature on teamwork
• Data research
• Interviews
• Organisation chart
• Compare literature with findings
Quality of execution of the new product development activities
• Literature about new product development
• Literature on processes
• Compare literature with findings
• Data research
• Interviews Market orientation of the new product
development process
• Literature about market orientation
• Literature on new product development
• Data research
• Interviews
• Compare literature with findings
The market environment • Media
• Annual reports
• Research centres
• Literature about Industry analysis
• Area managers
• Government
• Data research
• Interviews
Product advantage • Literature about customer analysis
• Customer measurement
• Brochures of air-conditioning
• Literature on air-conditioning
• Questionnaires sent to (potential) customers
• Comparing other products
• Data research Table 2.1. Measuring and observation methods.
Shown in the table are the methods to obtain primary data and secondary data. The method for obtaining primary data will be discussed in paragraph 2.11 in this part additional information on obtaining secondary data will be provided. For the first three important determinants for success, the organisation of new product development, the process of new product development and the market orientation of new product development scientific literature has been sought in order to compare the theoretical findings with the reality within Uniflair, the literature review can be found in chapter 4.
The real situation has been composed by interviewing employees and looking at internal documents. The first interview held within Uniflair posed questions about the organisation structure, the market, the products, the strategy of the company with respect to new products and the process of new product development. In following interviews each aspect like the market, the process and the organisation have been probed in detail with several employees of Uniflair.
2.10. Type of research.
The first part of this research, where the important determinants for success of the organisation of new product development, the process of new product development and the market orientation of new product development are analysed, can best be described as problem-solving research. It aims to analyse the feeling of discomfort within the new product development process the customer feels to have and to provide recommendations for a different design of the new product development. This is the solving part. Meant by the customer are the problem owners within Uniflair. The word
“customer” indicates that there are agreements between the researcher and the customer. The second part of this research can best be described as a policy supporting research (De Leeuw, 1997, p. 205). It supports and aims to solve part of the knowledge gap the customer has. This makes this research a combination of two types of research.
Policy supporting research supports by delivering useful knowledge. Useful means that the knowledge has to be relevant and valid (De Leeuw, 1997). The goal of this research is to provide useful information to the new product development team about the market and the market needs for Ecoflair, also it aims to indicate and solve problems within the new product development process.
2.11. Extra methodology.
In the previous paragraphs the methodology has already been discussed, but for clarity it is necessary to provide additional information on the method of measuring the customers. This part will give an extra explanation of the methodology used with the questionnaires for the customer analysis.
The customer analysis was performed in order to gain better knowledge about the wishes and needs of potential customers. The scope of this analysis was the European market.
About 100 potential customers got a questionnaire about air-conditioning products and especially questions about the new product of Uniflair. These questions were posed without providing additional information about the new product. This has been done in order to prevent the questionnaire being a cheap commercial and to keep the research objective. Different potential customers in different European countries received the questionnaire. The selection consists more of architects than building engineers, because the new system is not very good applicable in retrofit applications. Architects will define the requirements a new system has to fulfil. For this reason more architects than building engineers where selected.
After the archival search conducting an interview will continue the customer measurement. According to Urban and Hauser (1993) samples that support new product design should at least consist of 100 to 300 people. For this reason a sample size was selected of 100 people. Urban and Hauser (1993) also comment that judgement, norms, and experience are the best ways of determining sample size and processing the results of the research, because new product processes are often very complex and difficult to approach through formalised procedures (p. 188).
According to Urban and Hauser (1993) the mail format for questionnaires is often a very good trade off when time and money is limited (Urban and Hauser, 1993, P. 189).
Customers were remarked as potential when they: had a job description as an Architect or a building engineer, had Europe as their work field and when they installed installations in commercial applications. We thought of the architect as a customer by archival search (Terranova, 2001) and the marketing policy for this new product of Uniflair
The searching for potential customers started with looking on the Internet in online databases. The search was for architects, building engineers and HVAC consultants.
Finally an English database of architects connected to several other European databases.
Not all companies in the databases could be used, but the selection took place based on the portfolio of their projects. If they had designed at least two office buildings they were omitted to the list of potential respondents.
The method to question potential customers was a questionnaire, which has been sent by mail to the selected parties. The potential customers were asked to fill in the questionnaire and send it back by mail. In the appendix one questionnaire has been included. The questionnaire has been sent to 100 Companies, 10 companies returned the questionnaire. The questionnaire has been sent in English, Dutch and French. The questionnaire has been send in Dutch and in French to the Dutch and French companies.
The Questionnaire started with some questions about the market and the activities the companies employed in the market. Later the questionnaire continued with some more in-depth questions about certain product characteristics the new product contains and the opinion of the respondents about these characteristics compared to other products with other options. Although customers may evaluate products on many needs, assumed was that these evaluations can be summarised strategically by a smaller number of dimensions. The complete questionnaire can be found in appendix 3. The difficulty with questionnaires in business-to-business situations is that the questions have to be relevant and the questionnaire can not be to long, otherwise respondents will not respond because it will take them to much time. The potential customers were spread across Europe and this means that you will have two reasonable options: (1) send them fill-in-yourself questionnaires, (2) interview them by phone. Interviewing by phone appeared not to be a good option. Calling across Europe is a very expensive activity and a lot of people want to fill in a questionnaire if they can do it in their own time.
Barabba (1990) gives a big range of possibilities to get primary information from customers. The first possibility is by mail /e-mail, the benefits of sending a questionnaire by mail /e-mail are: least expensive probabilistic method, wide geographic coverage, large sample sizes. Questions that are a little bit sensitive with the respondent can be asked and also questions that need additional information. The disadvantages are: list quality can vary, low response rates, introduces potential for bias, long field time, limited length and complexity of questionnaires, limited control over who completes survey, high potential for item non-response, no chance for interviewer to probe In order to increase the percentage of respondents, the respondents need to be encouraged to fill in the questionnaire. The second possibility to get primary information is by telephone, the benefits are: fastest method, permits moderately lengthy questionnaires, flexible, lower item non-response rates, control over who responds, low chance of misinterpretation of questions. The disadvantages are: limited time, potential bias if topic is correlated with characteristics of no-phone households or unlisted numbers. The third possibility is in- person, the benefits are: highest response rates, permits longer; more complex interviews, lower item non-response rates, low chance of misinterpretation of questions, enables interviews on personal issues, can use available computers and products themselves. The disadvantages are: large field staff or long data-collection period required, potential for interviewer bias, outdated names, addresses, and phone numbers may reduce list quality, expensive to control quality of interview. The fourth possibility is the mixed mode, the benefits are: combines advantages of different methods, creates
flexibility in amount and detail of information collected. The disadvantages are: difficulty of getting high quality list, potential of losing respondents between waves, potential for differential impact of mode on responses, combines expenses of two modes. The fifth possibility is taking convenience samples, the benefits are: probably less expensive than other methods, fast. The disadvantages are: high proportion of unrepresentative responses, information collected is more directive and suggestive than projective, ability to generalise results is limited, survey must be short and simple. The sixth possibility is by using focus groups, the benefits are: group synergy generated, encourages brainstorming, respondents discuss issues in their own words. The disadvantages are:
information collected is more directive and suggestive than projective, facilitator, vocal participants can dominate the results, ability to generalise results is limited. Finally the seventh and last possibility is by central location interviewing, the benefits are: gives product feedback from static or dynamic evaluation under controlled conditions, allows respondent exposure to actual product, under certain conditions, a representative sample can be obtained and statistics generalised to the entire population. The disadvantages are: very expensive, responses in this critical environment may not reflect responses in the market, complicated logistics, development of test product can be time consuming and expensive.
Further you have secondary data of customers, these sources are sources internally developed. The benefits of these sources are: small time delay in obtaining data, possibly low cost, many sources are consensus’s of information. The disadvantages are: generally does not include the exact questions and samples of interest, maybe of variable and unknown quality.
Chosen was a survey by e-mail with open ended and closed questions in order to find out the needs and wishes of the customers. Mainly because of the cost of the other ways of obtaining information. We wanted to cover a large geographic area and that can be very costly when trying to obtain information by telephone or normal mail. A lot of people checked and gave their opinion about the questionnaire before it has been sent to the concerning companies. Most questions are multiple choice and once in a while open questions have been added to give the respondent the chance to explain their answer.
After two months, calling some companies increased the response.
Chapter 3. Internal analysis.
3.1. Introduction.
There is no best way of organising New Product Development this means that there should be some kind of fit with the organisation, it’s mission, goals, and structure, in order to optimise the output of the process (Urban and Hauser, 1993). But all organisations need some basic ingredients (Huang et al., 2002; Wynarczyk, 1997).
Before starting to analyse the problems at stake it is very important to describe the organisation of Uniflair guided by literature. The strategic posture and the organisation structure of Uniflair have got influence on the choices made in this research.
Urban and Hauser (1993) mention the proactive New Product Development. Only so- called prospectors have a proactive new product development. A prospector is an organisation that anticipates on where the market is going or which is shaping the market direction. A prospector continuously searches for new products or technologies (Miles and Snow, 1994). In this chapter the process organisation and it’s mission and goals will be discussed, because this strategic posture influences choices that need to be made within the new product development process.
3.2. Strategic Posture.
A firm’s strategies, structures, and cultures embody the purposes and goals and reflect the values and commitments of a dominant group of managers (Miller, 1993).
If the strategies, structures, and cultures embody the purposes and goals of an organisation then the structure and strategy should follow the formal stated mission and goals of an organisation. At least the formal mission should reflect the strategy.
And according to Miles and Snow (1994) the environment and the strategic posture have influence on the way organizations organise.
The mission of Uniflair is:
To design, research and develop even more efficient and effective products. To provide outstanding service and support to the customers (internal documents Uniflair).
The mission consists elements of new products, better products and a customer orientation. The elements in the mission have big similarity with one definition of innovativeness.
For an outcome to be innovative it must be novel and appropriate (Amabile 1983;
Jackson and Messick 1965).
Novelty refers to the extent to which a concept, idea, or object differs from conventional practice within the domain of interest, appropriateness is the extent to which a given output is viewed as useful or beneficial to some audience (Jackson and Marwick 1965).
This definition of novelty fits with the elements in the mission of Uniflair. This has the implication that the choices made in this research have to be made with the aim of novelty in mind.
Comparing the mission with this definition of innovativeness has important implications for the entire research. The focus will be on innovativeness, which is the foundation of a proactive new product development strategy. The rest of this research will be conducted having a proactive new product development in mind.
A proactive strategic posture has influence on the structure of the organisation. Proactive strategic posture will increase the flexibility in the organizations’ structure. An increase in the flexibility of the structure will increase the innovativeness of the firm (Ozsomer et al., 1997). Organizations change and adapt their structures to the strategies they pursue (Miller and Friesen, 1983).
Congruent with Ashkenas (1995) and Hammer and Stanton (1999), Uniflair has identified its central processes. These central processes can be divided in sub-processes or activities (Shapiro et al., 1992), but an agreed hierarchical breakdown does not exist (Telem, 2001). Later on in this research the process of new products will be discussed in more detail.
The functional activities in the process organisation are not necessarily congruent with the relevant formal units (Telem, 2001). For example, the new product process (or function) is not performed by the new product department exclusively, but also by other units appearing in the formal organisational chart. It follows that all the units participating in the new product process, regardless if in the new product department or outside it, belong to the new product process system. From this stems, for example, that the directors of personnel, production, inventory, and other units also belong to the new product process system.
The formal organisation chart of the process organisation is not only designed of horizontal processes that end at the customer. Also vertical activities are present. The vertical activities are typical supporting processes, they have other processes as their customer.
This results in a configuration with multiple patterns. According to Telem (2001) four basic patterns may be ascertained:
1. Vertical: the hierarchical subdivision of the various administrative and specific processes which take place in the organisation.
2. Horizontal: the division of the organisation into the strategic, coordinative (management control) and operating (operational control) horizontal levels suggested by Anthony (1965).
3. Distributed: the operation of a given function that exists throughout the entire organisation, operating in all or part of its Processes. Because of their diffuse nature the patterns belonging to this type are of unlimited structural diversity.
They include the four super systems (administrative and specific, physical and information) discussed above, or the subdivisions of the organisation (operational, managerial, and information) suggested by Lee (1970).
4. Mixed: any of the four possible combinations of the above three pattern types:
4.1. horizontal-vertical: for example, the strategic, coordinative and operating processes (horizontal) of each of the administrative and specific processes (vertical) in the organisation.
4.2. vertical-distributed: for example, the managerial, information and operational processes (distributed) in each of the various administrative and specific (vertical) processes.
4.3. horizontal-distributed: for example. The strategic, coordinative and operating processes (horizontal) in each of the managerial, information and operational (distributed) processes.
4.4. vertical-distributed-horizontal: for example, the strategic coordinative and operating processes (horizontal) of each of the managerial, information and operational processes (distributed) in each of the various administrative and specific (vertical) processes.
The above indicates the complex and diverse nature of the process organisation. But the interrelations among the processes are not uniform. Some processes interrelate with all the others, and some with a larger or smaller fraction. Looser ties and less frequent contact among processes, as well as greater differentiation, autonomy and decision- making prerogatives, define a more “loosely coupled” organisation (Weick, 1976).
According to Hammer and Stanton (1999) process organisation has enabled companies to operate faster and more efficiently and to use information technology more productively. It has improved the jobs of employees, giving them more authority and a
clearer view of how their work fits into the operations of the enterprise as a whole. It has rewarded customers with higher-quality products and more responsive service. And it has paid dividends to shareholders, reducing companies’ costs, increasing their revenues, and boosting their stock values.
3.3 Review.
This chapter showed that the goal of Uniflair is to produce innovative novel products. This goal has some implications on choices made further on in this research. Also the possibilities and impossibilities of the process organisation set the boundaries for this research. The analysis of the organisation shows that Uniflair is more like a prospector, this calls for a proactive new product development process. Important to note is the autonomy of the different processes, the loose ties between functions and the interdependence between functions. The next chapter will introduce the literature used in this research, but with the conclusion of this chapter in mind.
Chapter 4. Literature review.
4.1. Introduction.
There is no doubt that the continuous development and market introduction of new products is an important determinant of sustained company performance (Blundell et al.
1999; Brockhoff 1999b; Capon et al. 1990; Chaney and Devinney 1992; Urban and Hauser 1993). Many authors wrote about the new product development process, and the critical steps to take in order to create successful new products (Cooper and Kleinschmidt 1995; Urban and Hauser, 1993). All literature describes the process based on a certain sequence of activities, especially Urban and Hauser describe in Design and marketing of new products (1993) a phased approach to new product development.
This process can of course be understood as iterative, but there is no article or book that describes the critical steps if the product has already been developed, but not yet launched. If the product has already been developed the process of new product development has not been executed right.
In the previous chapter the theory of Cooper (1994) and Cooper and Kleinschmidt (1995) has been briefly discussed as the underlying framework for this research. In this chapter every factor will be discussed separately in more detail.
The factors will also be discussed in descending order, this means that the first factor discussed will be the organisation, and the organisation of new product development.
4.2. The organisation of new product development.
According to Cooper and Kleinschmidt (1995) how those involved in the project are organised has an impact on new product success. For example, the use of cross- functional teams (versus a functional approach) and headed by a project leader with authority was seen as a more appropriate organisational design (and was also tied to project success) (Larson and Gobeli, 1988).
Cross-functional teams are fundamental to both financial performance and on-schedule, time-efficient projects. But the truly successful cross-functional team is a multi-faceted concept: it means having players from different functions within the organisation, but as dedicated players, not merely as occasional attendees at a project meeting. It means having an accountable team (for the whole project and all parts of it) and a project led by an empowered and dedicated project leader or champion; and it means having top management support and commitment to the project and the team (Cooper, 1994). The structuring of the organisation is an aspect that can not be overlooked when looking at the organisation of the projects. These concepts are inevitably connected with each other.
4.2.1. Cross-functional teams
.
Before explaining the importance of cross-functional teams, it is necessary to have a good definition of cross-functional teams. According to Holland et al. (2000, p. 233) a cross-functional team is:
“A group of people who apply different skills, with a high degree of interdependence, to ensure the effective delivery of a common organisational objective”.
To complement this for a more workable and “real-life” definition, the work of Olsen et al.
(1995) has been used. They state that a cross-functional teams consists of: Employees from different functional areas such as: marketing, engineering, manufacturing, and purchasing.
Empirical research of Cooper and Kleinschmidt (1995) has indicated that the use of cross-functional teams really leads to significant improvements in new product performance. Also Griffin (1997) indicates that effective implementation of cross- functional teams is crucial to success. Cross-functional teams allow to let decisions be made lower in the organizations hierarchy. Cross-functional tend to shorten the lead time of product development and to increase the success rate of new product development,
but most of all cross-functional teams tend to combine varied sources of expertise to create innovative outcomes (Cohen and Ledford, 1991; Donellon, 1995; Katz, 1982; Katz and Allen, 1985; Pelz and Andrews, 1976; Takeuchi and Nonaka, 1986).
According to Denison et al. (1996) cross-functional teams differ from conventional teams in three different ways. First of all cross-functional teams consist of members with competing social identities and loyalties. Individuals tend to identify more strongly with their function, both socially and psychologically, than with their organisation as a whole (Ashforth and Mael 1989; Kramer 1991). Second cross-functional teams are often temporary task teams undergoing significant pressure and conflict. Third cross-functional teams often face high performance expectations, with aspirational goals of compressing development times, creating knowledge and enhancing organisational learning. These pressures create specific issues which need to be addressed correctly by organizations.
The table below shows the five critical success factors for cross-functional teams according to Holland et al. (2000).
A. Task design. B. Group composition.
1. The cross-functional team needs to be designed as an autonomous team.
1. The first important notion is that there needs to be a right functional mix. Cross-functional teams are particularly prone to the problem of becoming too large to be effective (Katzenbach and Smith, 1993).
2. The focus will have to be on the customer. 2. The second notion is the selection of a team-leader. The team leader needs to be:
1. generating appropriate and sustained involvement.
2. eliminating unnecessary and unproductive digressions.
3. maintaining high standards for decision-making.
4. managing conflict constructively.
5. achieving continuous levels of satisfactory group output without excessive burnout or rancour.
3. Formal integrative processes, formal but also flexible.
3. The third notion is that the team needs to be accountable from beginning to end. The end can be situated best some time after launch.
4. Challenging tasks, an exciting task that is important to career, company or
department leads to higher team effectiveness.
4. The fourth notion is that there needs to be clear roles and responsibilities.
5. The fifth notion on group composition is that the team tenure should not exceed five years.
C. Organisational context. D. Internal processes.
1. There needs to be a clear mission from senior management.
1. Overarching team goals.
2. Strategic alignment between function. 2. Team leader skills and vision. See team leader selection.
3. Senior managers as champions. 3. Frequent genuine communication.
4. Climate supportive of teams. 4. Creative problem solving.
5. Project leader power. 5. Sharing and use of uncertain information.
6. Resources /time. 6. The team needs constructive conflict.
7. Training in team process skills.
8. Team-based accountability. E. Boundary management.
9. Team-based rewards and recognition. 1. Boundary management is the information gathering function of the group.
10. Team co-location.
11. Mechanisms to co-ordinate activities and share learning between teams, a product normally has several cross-functional teams for different aspects of
development, co-ordinated by an overall team (Henke et al. 1993).
Table 4.1. Five success factors for cross-functional teams (Holland et al., 2000).
