Strategic Partnering for Developing New Products

Abstract

A four-stage process can help management answer the questions it must answer when forming partnerships to develop new products. OVERVIEW: New product development (NPD) is becoming increasingly complex and costly. One consequence of this is that more companies are using various partnering arrangements to accomplish their innovative goals. This article presents process that can impact the important decisions relating to the successful development of new products by partners. NPD partnering is not discrete event but maturation process involving several stages including awareness, exploration, commitment, and dissolution. Issues that require consideration during this partnering process include identifying both the originating firm s needs and the partners needs, understanding the likely consequences of the relative size and capabilities of partners, and selecting the appropriate alliance strategy. The study of new product development (NPD) typically focuses on activities within single firm. Important exceptions include the work done by Urban and von Hippel in which they discuss employing new product ideas developed by customers as lead users (I) and the examination of large-scale RD (2) the increased reliance on corporate mergers and acquisitions to obtain growth via new products often creates problems of fit; (3) many firms neglect or perform important NPD activities poorly; and (4) even though innovative new products are identified by customers, suppliers and other outside organizations, such new product information is not heeded. We contend that these and other NPD problems are often amenable to partnering solutions. With innovation so important to most firms' survival (8), why don't some firms pursue new product development more actively? One explanation is that these firms lack the resources or personnel to carry out NPD activities. Although firms in this situation understand that they have significant NPD deficiencies, they may lack either the knowledge, capabilities and/or the desire to pursue corrective measures. Another problem relates to those firms that recognize they have NPD deficiencies and attempt to buy their way into new product arena. Such firms appear to either desire great deal of control over their NPD efforts or do not recognize alternative NPD options (e.g., partnering). Therefore, to enter market with new product, these companies choose either to merge with other organizations that are developing new products or to acquire other companies that have recently launched new products. These actions can solve NPD problems but they often create additional, more severe, challenges related to integrating new personnel, handling financial burdens, and redundant functional departments. A third NPD problem relates to firms that develop new products internally but ignore or poorly perform particular activities in their nominally sophisticated NPD processes. These firms either do not possess the requisite skills to achieve high level of proficiency in certain NPD tasks or else they are rushed by competitive pressures to speed up their NPD processes. In either case, these firms jeopardize their new product's success because a more complete new product process appears to make difference (6). An additional NPD problem is that many firms either do not develop new products or develop them poorly because they do not utilize important information and resources offered by external organizations such as customers and suppliers. …