Goldense Group, Inc. -GGI- Determines Companies Improve New Product Management, But Have a Long Way to Go!

Business Editors

NEEDHAM, Mass.--(BUSINESS WIRE)--April 15, 2003

Global competition continues to increase, with research and development (R&D) beginning to move offshore along with manufacturing. Pressure to develop and bring to market products more quickly than competitors is rising, since those new products bring premium prices and higher profits. Deliberate managing and measuring the R&D processes that produce the designs for the new products are beginning to be an accepted practice, but it is nowhere near as common as it should be. Most companies have a huge gap to fill that could markedly improve their performance. This finding is from the recent study by the Needham-based management-consulting firm Goldense Group, Inc. (GGI) http://www.goldensegroupinc.com/.

GGI collected data on management approaches and metrics used by product R&D centers throughout North America with some input from Europe as well. Their third biennial study of these practices involved participation of 83 companies that produce products ranging from defense systems to industrial components to medical devices to consumer goods. Complete results from this 2002 Product Development Metrics Survey are available from GGI, as are the complete results from the 1998 and 2000 surveys.

A significant majority of the respondents use a disciplined 2-Step process to decide which projects to advance along the path to full product development, cross-functional participation has grown significantly and the vast majority use some type of metrics. The survey results also document the following opportunity areas: (1) all companies contract out some engineering work, but most contract for a small percentage of total engineering resources, (2) R&D capacity management lacks sophisticated tools to balance resources and plan for pipeline flow, (3) many companies lack a well-defined and understood set of metrics, and (4) there is minimal use of common measures across industries to assess R&D value and performance.

Survey Shows Progress

"Companies that apply a disciplined approach to deciding on which projects should enter development make better use of their resources," said Bradford L. Goldense, president of GGI. "The companies that follow that discipline get more products out of their R&D process quicker, and avoid the choking 150-300% overloads that many firms experience." For example, 80% of the respondents report using a 2-Step or 2.5-Step process with a new sense of discipline that approves only 29% of the projects all the way to final product development. Because of this improved up-front discipline, the number of projects in the backlog is lower, product development resources are focused, and more products move along faster.

Cross-functional participation in new product development (NPD) has improved significantly. Disciplines such as purchasing, manufacturing engineering, quality and production now report spending upwards of 1/3 of their time on NPD. This is higher than ever reported and indicates a new recognition of the importance of moving smoothly and quickly from engineering design to efficient and profitable production.

Weaknesses Still Apparent

"All companies prepare financial statements that show standardized measures of sales, profits and financial position," said Goldense, "but they do not view NPD and R&D with any sense of standardization. The 2002 survey found even less commonality in metrics than we have seen in the past." Respondents were asked to choose from a list of 60 metrics which were in use in their companies. Only two (R&D Spending as a % of Sales and Total # of Patents) were used by 50% of the companies! Noteworthy is that those two were not really "owned" by the R&D Departments, but by the Finance and Legal departments.

"Managing the capacity and loading of R&D resources is a catch as catch can prospect," says Goldense. "The simple spreadsheet, not integrated with any other system, is still the most common tool in use. Despite advances in Enterprise Resource Planning systems that have improved manufacturing management tremendously, no such initiative has begun to take hold for R&D management." The result of this absence is a seriously reduced ability to use an extremely valuable resource, engineers and key product developers, in an efficient way.

"In the vast majority of companies metrics, capacity management systems, and project management systems are not tied together in a coherent system of managing a resource and process that is vital to business prosperity," Goldense said. "A common, well-understood set of metrics across a multi-project environment is a fundamental requirement for optimal performance of an NPD system."

Research Reports Available

The 2002 Product Development Metrics Survey focused on resource and capacity management practices and metrics. Results of the research are offered in three reports of increasingly detailed description and analysis: Research Highlights, Research Summary, and Research Results. These three separate reports provide, respectively, an executive summary, middle-management-level, and detail-level view of the survey data. The first two reports analyze the survey population as a whole, while the third report segments the population as follows: Public vs. Private Companies; Smaller vs. Larger Companies; Process vs. Repetitive/Discrete vs. Job Shop Companies; Higher vs. Lower Technology Companies; and Companies with More vs. Fewer Employees. Each report summarizes the overall survey results and provides details on the profiles of the survey respondents; loading the RD&E capacity pipeline; providing capacity for RD&E activities; balancing cross-functional resources (staffing ratios); systems, tools, and metrics used to manage capacity; and RD&E metrics used in industry. For more details and to purchase any of the reports, go to GGI's website at: http://www.goldensegroupinc.com/cgi-bin/catalog.cgi?display_p355

About Goldense Group

Goldense Group, Inc. (GGI) is a consulting and educational firm that specializes in leading edge management techniques and technologies used by line management functions. GGI focuses on process and technology integration between product strategy, R&D, design engineering, product development, manufacturing and material management.

For more information go to the Goldense Group, Inc. website at http://www.goldensegroupinc.com/ or contact Brad Goldense, President, Goldense Group, Inc., 1346 South Street, Needham, MA 02492. Telephone: [phone], Fax: [phone], Email: [e-mail].