Improving Product Development Processes to Manage Development Risk

Abstract

To create new products, firms employ a product development process (PDP) to generate new product concepts, to translate the best of these concepts into quality products, and to manage the risks inherent in bringing such new products to the market. A well-designed PDP is necessary to reduce development time, create better products, increase market share, and generate profit. This paper investigates the relationship between product development risk and PDP management and seeks to help companies improve their processes. We begin by discussing product development risks and describing a spectrum of different PDPs. We compare the traditional, rigid, staged PDP with the alternative, flexible, spiral PDP and other variants. We then propose several iteration- and review-based metrics by which PDPs can be effectively identified and compared. Data from ten company case studies exemplify a wide variety of actual PDPs, demonstrate the utility of iteration and review metrics in distinguishing PDPs, and illustrate how different processes manage different risks. Case study findings indicate that software companies face rapidly changing markets, generally perform quick iterations and tests, and are likely to employ flexible PDPs. In contrast, manufacturing companies that face greater integration difficulties and technical risks are likely to employ more rigid PDPs. We find that a company's risk profile is instrumental in determining the applicability of different PDPs. We employ the case study lessons to propose a method for improved PDP design based on risk management. To demonstrate the method, it is applied to redesign one company's PDP. We conclude that PDPs vary more than previously documented; that the proposed metrics are useful in distinguishing PDPs; and that companies facing different risk scenarios can effectively tailor their PDP designs to suit their own unique circumstances.