Title: Management, Organisation and product planning
Pages: 38 - 40
Author: James Pilditch and Douglas Scott
Organisation and product planning
by James Pilditch and Douglas Scott
You can't beat good ideas, and good ideas are essential to firms that want new products. But how are they to come? Who is to think of them? This article, which is a chapter from the authors' recent book,* suggests positive action that management can take to ensure that it has adequate flow of new product ideas. It suggests that this vital aspect of business can be organised, and describes how some companies do it.
It is axiomatic that commercial life depends on new products. Until now, though, the approach to finding them has been haphazard. Just as companies have depended on the intuition of their leaders, so new products have been the children of opportunism. But today risks are so much greater that a firm of any size must have some kind of organised attitude towards new product development. At the same time, it should be said that to plan intuition and hunch out of business life could be an equally great error.
Fortunately, the concept of 'product planning' has been recognised long enough "Particularly in the United States) for us to judge the value of a rational approach, and to spot some of its weaknesses. Broadly speaking, product planning can be thought of as the full process of redesigning old products and developing new ones to suit company policy and profitability goals. Numbers of American and other companies have established a specific product planning function. It is a new job, with new responsibilities. In practice, this boils down to an administrative method for co-ordinating the various strands of technical knowledge needed to ensure the flow of good products.
The product planner is an administrator. Although the exact work he does varies from firm to firm, he is almost always seen as a key man in organisations that have such a function. Generally, he is responsible for (a) the flow of new ideas, (b) evaluating them, (c) initiating consumer research, (d) liaising between engineering, sales and industrial design, (e) product development, (f) product testing, (9) product evaluation, and even, in some companies, (h) establishing production schedules and time schedules.
* The Business of Product Design, Business Publications Ltd. £2
Because this is a new job, it is worth looking at how a few successful companies have handled it.
Product planning in practice Capitol Products, in the United States, makes doors and windows, and is expanding into other forms of light metal fabrication. With a vice-president of product planning, this company grew in four years from nothing to a turnover of $16 million. A former assistant professor of industrial design, the product planner set up design and engineering departments under him. His concept of the product planner is to create unique products based on economically feasible marketing plans. He believes in the complete designer. Each of his engineers and designers is responsible for inventive ideas, detailed engineering plans, cost estimates, parts specification and construction of the working prototype for tooling by production engineers. In the fast growing company, the product planner is the president's right hand man. Company growth is based on product planning.
Ekco is another company with a product planning function. Again, the man responsible for this job is a vice-president of the company. His responsibility is to advise the executive director on design and merchandising policies, and to keep him supplied with a stream of new product ideas. The product planning department consists of three former merchandising men (each responsible for groups of products), the design department, and an engineering services group. This last group acts as liaison with factory engineers. Thus, product planning embraces all the major functions of merchandising, design and engineering. It is interesting to note that the product planner is the equal of the heads of finance, manufacturing and sales.
Philco, too, has a product planning function. The need arose when the company faced exactly the position many British companies are now in. It needed to switch emphasis from production to marketing. The product planner reports to the general manager. He has two tasks. He joins with sales, advertising and promotion managers to form a merchandising team to plan products in terms of demand and competition; and he directs designers who work with engineers to "guide products towards strong competitive objectives". Design has been separated from engineering (the product planner has the same rank as the vice-president in charge of engineering). But the two work together from the first initiation of a new product idea. This means designers are not simply stylists, who make things look nice when all the basic decisions have been taken. They have a major influence on product development. At the same time, the sales department is kept out of the picture once the direction of work is set. This, by the way, is a result of experience, and is echoed in other companies. One product planner at General Electric (in the USA) only invites sales people into the last of his five scheduled product planning meetings on any new development. (Ironically, the reason for this exclusion is to avoid conservatism. These American product planners claim that sales people are reluctant to change when they're selling something. Our experience, on the other hand, is that in British industry sales people are seldom the most conservative. In Britain, therefore, we would think it unwise to lose the counsel the sales department can bring to new product development.)
General Electric is thought to have good product planning systems. But because the
company is so large, and its manufacturing is spread across the American continent, it is, in some ways, hard to draw simple parallels of use to other companies. At the Bridgeport division of housewares and commercial equipment there are two product planners. One looks after the "home care and comfort" department. The other is for the portable appliance department. Each goes to quarterly meetings at the manufacturing plants. There, new technological developments are presented by production development engineers. In turn, the engineers are told of new customer wants discovered since the previous meeting. At Bridgeport also, there is a small group of advanced engineers in daily contact with the product planners. The product planners receive monthly reports from sales people. These reports give statistics to show how current products are selling. And they describe customer preferences and dislikes. On top of this, product planners receive reports from market research, and often these test the feasibility of new ideas thrown up at the quarterly meetings with engineers.
Product planners also receive regular reports from the design departments. These comment on design trends that may influence the product line. Even so, designers are not kept in close enough touch with marketing and engineering policy to affect product planning until late in the day. This aspect of GE's system has been criticised.
The preliminary plan After facts have been gathered from sales, marketing, engineering, market research and design, a preliminary plan is prepared. This describes the new product in terms of performance and appearance, price category, volume needed, marketing potential and the state of competition. These plans are then put before a committee consisting of a representative of engineering, marketing sales and design departments (sometimes advertising and other specialists are present). The product planner is chairman. When these preliminary plans are approved, the designers get to work. Their designs, progressed at the same time as engineering designs, are reviewed regularly by the same committee. The final product recommendation is put before senior management as a tight and thoroughly calculated proposition, showing how it fits into the broad corporate policy and into the division's specific strategic objectives.
It should be noted that GE has a particularly heavy bias towards engineering. As a counterbalance, it also believes firmly in close contact with the public. Market research is in constant use. At the same time, by delegating design it runs the risk of becoming unimaginative.
For all its benefits, the product planning concept can easily deteriorate into archly conservative design by committee. The designer in charge of styling at the Radio Corporation of America puts his designs for new products before a 12 man committee. It is hardly surprising that, according to Industrial Design, he sometimes has to "use unorthodox means to get a product okayed".
The same journal commented, "Though traditional business conservatism and very legitimate cost considerations are always restraining influences on the introduction of radically new products, these influences can be counteracted to a degree by a strong product planner."
The great Swedish company, Husqvarna Vapenfabriks AB, also has a product planning committee, though no one man is invested with the title of product planner. There, the sales, production and production development managers form a committee to discuss and agree on product lines. They report to the company president.
Rightly, the precise form of organisation must depend on the individual company. But perhaps one can make some general comments. First, some kind of positive plan is necessary. Second, this should include all the major departments concerned with product development in its full sense. Third, it should probably be marketing-oriented. (One can imagine a few cases where this is not so, but they are very few.) Fourth, industrial design should be an integral part of the development programme. Fifth, any organisation should carry the weight of a principal director of the company. Sixth, any product planning system must aim to produce a continuous flow of new products checked for suitability from every critical point of view. Seventh, the broad system should leave room in it for quick opportunism. But great care must be taken to see that the steady approach is not shoved aside too often by the demands of the moment.
What product planners do Up to this point we have talked about product planning as a concept. And we have shown how a few firms organise it. Now let us ask what product planners do. What are the steps one needs to go through to develop new products on a rational basis ?
The first and major requirement is, perhaps, a surprise one: a clear evaluation of the company's overall strategy and objectives. Before any products are
developed, the company must decide its long term goals. These will be affected by resources and opportunities which exist.
Five areas of study were suggested by W. T. Benstead-Smith, the development director of Morphy-Richards (Cray) Ltd. in a talk he gave to the Institute of Directors. They shed light on how such a policy can be arrived at. He asked: 1 What are the trends and prospects for products in fields the company is at present engaged in ? Are external factors likely to affect the position ? 2 What are export opportunities ? How do products for export markets compai e with those for home markets ? Will they increase in variety, or will it often be possible to get large volume from a single model ? What marketing effort will be necessary to break into new overseas markets ? Can the brand image only be effectively established in a country if a complete range of products is available ? 3 What are the company's present strengths and weaknesses, in marketing, development, production and finance? 4 How stable is the company's present industry ? Is there a case for diversification into products of a completely different type ? 5 Taking all these into account, what are the reasonable alternative courses the company might follow, and what are their implications in terms of investment required, probable return and degree of risk ?
When appraisal of this kind is completed, a product policy can then be formulated. The policy statement should set out the company's objectives. It should say how to achieve them. It might, for instance, describe new product fields to enter. It should state the criteria by which new and existing products are to be judged. Given a clear policy statement, the product planning team can think actively of products necessary to achieve the objectives. The steps necessary are common to any rational development.
The first step is to find out what people want. The next is to get some ideas that will give them this. The third is to check the value of these ideas. Next, the best ideas should be developed, and checked again in detail. Then detailed marketing plans should be worked out. Finally, it is advisable to test the whole project before launching it.
Market research is an invaluable first move. It can tell you the state of the market, and spot openings for new products. It can suggest what people want, or would want if they thought of it. But this is not the only source of ideas. Many people connected with a company can, and do, suggest new products. Sometimes pure research throws
Management Organisation and product planning
up new possibilities. Because raw ideas are so vital and hard to find, companies sometimes employ independent designers, who are free from the day-to-day problems, to make suggestions. Advertising agencies and others have Brainstorming to find ideas, too. Ideas can come from many sources. None should be turned down too soon. Instead, they should be culled and guarded.
Evaluating new ideas When ideas have been generated, they should be sifted. One approach is to put the new ideas before a committee consisting of major interested departments. But this should be treated cautiously. It is all too easy to kill a good new idea before it is given a fair chance. Even with this proviso, some kind of evaluation is necessary. Among the criteria might be: Marketing What share of the market might the new product get ? Will it increase the total market ? What marketing resources will be needed ? Development How long will it take to develop the product ? How much would development cost ? Are sufficient resources of time and money available ? Production Does it fit into existing resources ? If not, what new resources are necessary ? Are they available ? Financial What capital will be required to develop and market the product ? What would be the return ? Are the resources available ? How would the new product affect the company's financial position ? Policy Doesthis new product meet the company's overall objectives ? How does this project compare with other possibilities ?
Product ideas which pass through this screening should be evaluated in considerably more detail. The key question to answer is this: is the cost of further development justified ? If it is, then a detailed specification should be prepared. We think it wrong to prepare too defined a specification too soon. It can inhibit creative thinking. The British Productivity Council suggests that one committee investigates the first phase, and a second project assessment' committee looks at the second. Project approval by this committee, it says, should involve approval of the basic principles to be used in the design, and approval of cost and development time.
Designers and the development department can now work to a specific brief. When product designs are prepared, the project should be evaluated again. Now there is an actual product to test. Tooling costs and other costs can be worked out in detail, consumer acceptance can be checked. It can again be seen in detail whether it suits the requirements of policy, marketing, production, finance and the rest. The marketing department, who will have been thoroughly in touch with development to date, should have prepared broad plans. These may now be refined, and packaging prepared. The full product will need to be put before the board or executive director. When approval is gained, the product can be tooled, promotion material prepared and the whole scheme timed. It is in the nature of some products that they cannot adequately be tested among consumers until they are properly produced. In these cases, such tests should be conducted before the article is launched.
Even then, the product planning function is not over. All the planning and preparation does not guarantee success. It cuts down risk, but uncertainty remains. Part of the product planner's function should be to watch what happens, and to try to decide why it happens. His job is a continuous one. He should watch the whole product mix and be prepared to adjust it when necessary. This may mean dropping items, or changing them, as well as introducing new ones.
We have said nothing about timing, yet this can be the most delicate and critical factor of all. It is the product planner's responsibility to have the right products available at the right time, capable of being produced in the right quantity for the right price. He cannot be, nor should he be expected to be, an expert in all the skills necessary to achieve this happy state. He is a co-ordinator of available resources.
Despite the successful practice of many firms, it seems unreasonable to hope that men concerned with day-to-day performance (production, sales, marketing, advertising, etc) can have sufficient time available to give to new product development. Something will suffer. Neither can the design department be expected to carry the major responsibility for new product development unless it is given both the resources and authority to be thorough. The answer, therefore, lies in a product planner, whatever you call him.
As Mr Benstead-Smith claimed, "Product planning can not only help, it is an essential process." At the same time, it is clear that any system we have described is charged with hazard. All the tedium of committee bound conformity is likely to emerge. Results run the risk of being slow and dull. To meet these points the British Productivity Council recommends two more committees! One, it states, should be responsible for progress, the other for design organisation. The progress committee should relate actual to estimated progress. "An important function," it claims, " . . . is to watch for potentially
serious time and cost overruns." This is one way to overcome the tendency to allow development to run on until some crisis, generally serious over-expenditure, occurs. The organisation committee's function should be "to ensure that projects in hand are obtaining the most efficient services; to see that these services are used to maintain company design standards and procedures."
The role of the designer Where, one might ask, does the designer fit into all this ? His role can be of prime value. More than anyone else, he can ensure that the final product is imaginative. This should be his special skill. But he cannot fulfil this duty unless he is early on the scene. He needs to be deeply involved. On the other hand, one must take care that he does not end up as the co-ordinator. In fact, there are numerous cases where independent design organisations have guided product policy. A few have the broad experience to be capable of doing so, and can provide practical help to manufacturers who face such problems for the first time. But in most cases it is enough if the designer is called in in sufficient time to be able to affect resuIts. Too often he is called in at the end merely to make things look pretty. No advantage is taken of the broad experience and fresh outlook he offers. Indeed, it can be said that there is a direct link between the stage at which the designer is brought in and the value of his contribution.
Here, then, is the product planning system:
1 Have a clear product policy.
2 Make product planning someone's responsibility.
3 Take a total approach to new product development.
4 Approve each step before moving on to the next one.
5 Use market research and objective criteria to check each stage.
6 But take care to stay flexible, fast and imaginative.
We have written in terms of developing engineering and consumer products. The principles hold true for other kinds of product. Each company will know best where the principles of product planning fit into its existing structure.