An Exploratory Investigation of NPD Practices in Nonprofit Organizations*

Abstract

Studies of practices in new product and service development have focused predominantly on for‐profit organizations, whereas attention to the nonprofit sector has been minimal. Such attention is needed given that nonprofit organizations are unique in their structures and are growing with regards to impact on the world economy and society in general. Moreover, such disparate attention suggests a void in this discipline's understanding of new product development (NPD) practices of nonprofit organizations. Two particular research questions are posed: (1) To what extent are the practices of for‐profit organizations employed in nonprofit organizations? (2) How do the practices of nonprofits compare to those of for‐profit organizations? In the course of answering these questions, the present study reviewed literature and the Product Development and Management Association (PDMA) certification work. The study subsequently identified six dimensions of successful NPD efforts: strategy, portfolio management, process, market research, people, and metrics and performance measurement. These dimensions were applied via an in‐depth case‐study methodology to six large, U.S. nonprofit organizations: American Association of Retired Persons (AARP), American Cancer Society, American Heart Association, American Red Cross, Boys and Girls Club of America, and Goodwill Industries. The dimensions assisted in categorizing and analyzing the responses of 40 respondents across the six organizations. Results show that some NPD practices of large nonprofit organizations are similar to for‐profit organizations, but other practices are more distinctive and related to the nature of nonprofit organizations. Large nonprofit organizations tend to be very good at articulating their mission, embedding it throughout, and using it to drive programs and activities. These organizations tend to view product development as a tactical endeavor versus a strategic one and do not engage in portfolio management practices for their new programs. Instead, broad criteria such as fit with mission, funding availability, and presence of a champion are used for evaluating programs. The NPD process tends to be informal with little structure, and individual departments and local chapters tend to undertake their own NPD initiatives and have their own process for doing so. Nonprofits place a heavy emphasis on ideation and less emphasis on other activities such as concept development and testing, project evaluation, and business analysis. Pilot testing is the most used type of market research. These results suggest that NPD processes within large nonprofit organizations share some of the same weaknesses as those of for‐profit organizations, with NPD metrics being a particularly weak area. The NPD practices of nonprofits also have some unique characteristics that include the following: a heavy emphasis on the mission, a desire for flexibility, strong influence of external sponsors, and difficulty in assessing long‐term program success. Management of nonprofit NPD and directions for future research are discussed.