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There‘ve been many discussions about the slowing of innovation in large companies and conversely, how quickly small firms seem to create new ideas and products. There are 3 reasons that slow the development of new products in large firms. They are, in no particular order:

  1. “One size fits all” development model
  2. Matrix organizational structure
  3. Process is more important than results

One size fits all development model

This development model can be a great detriment to the small organizations within a large corporation. A senior executive in the department responsible for product development decides to simplify his divisions implementing common development processes no matter how different the products may be. The senior staff is satisfied because everything is uniform.

However, the general manager at the business unit level (aka “the profit center”) that the corporate product development departments are supposed to support can no longer meet his profit objectives because products that used to take 6 months to develop, now take 12, and cost more than before. To make matters worse, while his design cycle went to 12 months, the competition reduced their cycle to 6 months. In 5 years, the competition will release 10 new products; his group will release 5.

Matrix organizational structure

The matrix organization complicates product development and slows the pace of all phases of a program. Here is how this type of structure slows progress.

  • The project teams are committees with members placing their departments’ requirements ahead of the overall business’ needs
  • Decisions are required to be made at the highest levels in the organization adding weeks of time to the schedule to:
    • find time for meetings with decision-makers
    • educate the decision-makers on the background of the issue
    • investigate additional, tangential topics before the decision will be made. This is typically caused by the quest for the ‘perfect’ solution.

Process is more important than results

The product development team has little control over the processes they must follow, regardless the impact on project costs, revenue, and profit. It is the triumph of process over results.

           Bureaucracy:      MEANS  > 1

                                        ENDS

If time-to-market is important, then the lack of timely decisions cause missed opportunities. If product cost is the key goal, then meeting the requirements of all departments can prevent suitable profits. If a project is taking longer that planned, additional resources cannot be added or processes shortened to meet revenue targets. This is no different that asking a sales force to meet their targets selling under-performing, over-priced products.

Recommendations for Saving Your Firms Innovation Engine

Here are three recommendations that will resuscitate innovation in your organization.

  1. Give product development groups guidelines and let them make all decisions that fall within them. Have a single person responsible for making the decisions that fall outside these project guidelines. Require this person, or her delegate, make a decision within 48 hours. If not, the decision defaults back to the project team.
  2. Eliminate to the extent possible the negative effects of a matrix organization structure by requiring the project team to provide frequent updates to the head of the profit center (typically the GM). These should be separate from to the “stage gate” meetings that the project team provides.
    • These should be small, private meetings where the GM can ask direct questions and receive direct, unfiltered answers
  3. Make it clear to the development group that these projects represent the future of the entire business. This aligns the project teams to the needs of the profit center which is funding the project.

This guidance is simple to implement. All it requires is for companies to trust the processes they have in place, to trust their people to do right by the company, and to support instead of stymie their action plans. Challenge the teams if necessary, but make it clear to them that there is a path forward that is clearly marked.

Product Development & Marketing Expert
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