New product development benchmarks: The Japanese, North American, and UK consumer electronics...

Journal of High Technology

Management Research 15 (2004) 249–265

New product development benchmarks: The Japanese,

North American, and UK consumer electronics industries

Nick Olivera,*, Isabelle Dostalerb, Emma Dewberryc

aCentre for Business Research, Judge Institute of Management Studies, University of Cambridge, Cambridge CB2 1AG, UKbConcordia University, Montreal, Canada

cGoldsmiths College, London, UK

Available online

Abstract

This paper presents the results of a study into new product development (NPD) in the high-end audio industry

in Japan, North America, and the UK. A total of 38 companies were visited and interviewed, and detailed

benchmarks of product development performance and practice were obtained from 21 companies and 31 NPD

projects. Performance was gauged by several measures including lead times, cost and schedule adherence, internal

and external quality, and product profitability. The organization of the development process was assessed through

measures of project team composition, linkages between key constituencies of the development process (e.g.,

development, manufacturing, and suppliers), and processes of information capture and exchange. UK projects

were generally executed more quickly than those in Japan and North America, but displayed a higher incidence of

postlaunch problems. Japanese lead times were the longest, and Japanese companies performed relatively poorly

on measures of development productivity. However, their manufacturing performance was vastly superior to that

of Western companies. The paper concludes that organizational and national context significantly shapes NPD

practice and that this is reflected in patterns of product development performance.

D 2004 Elsevier Inc. All rights reserved.

Keywords: New product development; Benchmarks; Consumer electronics industries

1. Introduction

Many observers claim that pressures of global competition, the fragmentation of markets into smaller

segments, and the rapid pace of change in many industries mean that companies’ product development

capabilities are crucial determinants of business success (Brown & Eisenhardt, 1995; Clark & Fujimoto,

1047-8310/$ - see front matter D 2004 Elsevier Inc. All rights reserved.

doi:10.1016/j.hitech.2004.03.006

* Corresponding author. Tel.: +44-1223-338179; fax: +44-1223-339701.

E-mail address: [email protected] (N. Oliver).

N. Oliver et al. / Journal of High Technology Management Research 15 (2004) 249–265250

1991; Schilling & Hill, 1998). As organizational success often depends on the timely and consistent

introduction of new products, it is unsurprising that the new product development (NPD) literature

contains many prescriptions for high-performance product development (Brown & Eisenhardt, 1995;

Clark & Fujimoto, 1991; Crawford, 1992; Griffin, 1997; Lee, Lee, & Sonder, 2000; Loch, Stein, &

Terwiesch, 1996; Parnaby, 1995).

However, there are many difficulties in assessing the effectiveness of development activities (Loch et

al., 1996; Schumann, Ransley, & Prestwood 1995), aside from the difficulty of defining the concept of

success in NPD itself. For example, recognizing that innovation has multiple dimensions, Gopalak-

rishnan (2000) distinguishes between rapid new product introduction, namely, innovation speed, and the

number of new products introduced, that is, innovation magnitude. However, speed and magnitude do

not capture the full extent of successful NPD. For example, an engineering function may be very good at

rapidly developing numbers of new products, yet, these products may fail to meet customers’

expectations and/or generate significant revenues and profit. Although studies have examined the

relationship between product development processes and product success (Clark & Fujimoto, 1991;

Cooper & Kleinschmidt, 1996), difficulties in assessing success have meant that the focus is often on

process performance, as indicated by measures such as lead times, engineering hours, and late design

changes. Indicators of how the product is received in the market are often neglected in such studies.

This paper reports the findings of a study into NPD performance and practice in the consumer

electronics industries in Japan, North America, and the UK. The study focused on two main issues. The

first of these was the problem of measuring the performance of NPD processes. This study specifically set

out to take multiple measurements of performance and to investigate the associations between them. The

results question whether it is sensible to adopt a unitary conception of good NPD and imply that product

development performance may be better conceived as a profile, where high performance on some

elements, perhaps of necessity, means lower performance on others. The second issue addressed by this

paper concerns national differences in of NPD performance and practice. Much of the literature on NPD is

preoccupied with identifying prescriptions for universal best practice and consequently tends to neglect

how practice—and performance—may be shaped by national and institutional context. This paper

proposes an integrative conceptual framework combining various levels of analysis, such as the national

and institutional contexts, that should be considered when studying NPD. The paper thus explores some of

these differences by comparing patterns of NPD in Japanese, North American, and UK companies in the

consumer electronics industry. In contrast to the picture of Japanese superiority in innovative performance

in the 1980s, the results present a mixed picture. This points to a need to conceive of the product

development process as one in which there are trade offs between various performance dimensions. While

some commentators believe in the existence of a global formula for successful NPD (Lee et al., 2000), the

results presented here question the existence of universal best practices and indicate that different

companies, in different contexts, resolve NPD performance trade offs in different ways.

2. Theoretical background

2.1. NPD practices

Practices supportive of successful product development, whether judged by product or process

performance, may be analysed at a number of levels, the two main levels being the company and

N. Oliver et al. / Journal of High Technology Management Research 15 (2004) 249–265 251

the individual development project (Clark & Fujimoto, 1991; Wheelwright & Clark, 1995). Good

practice has been characterized by team-based organization and product champions (Markham &

Griffin, 1998; Wheelwright & Clark, 1995), formalized (but flexible) design and development

processes (Iansiti, 1995), cross-functional integration (Cooper, 1995; Dimanescu, 1992; Keller,

2001; McDonough, 2000; Tatikonda & Montoya-Weiss, 2001), and high autonomy and authority

on the part of project leaders (Clark & Fujimoto, 1991; Crawford, 1992; Jassawella & Sashittal,

2000).

The organization of development teams within the NPD process has received extensive attention

(Wheelwright & Clark, 1995). In particular, relatively autonomous, multifunctional teams have been

advocated as routes to effective product development. However, it is recognized that although project

team organization is significant, so are appropriate techniques of planning, controlling, and communi-

cation (Clark & Fujimoto, 1991; Munns & Bjeirmi, 1996). Concurrent engineering has been widely

advocated as a tool for reducing time-to-market, as has the related practice of overlapping different

stages of the development process (Birou & Fawcett, 1994; Haque & Pawar, 2001; Iansiti, 1995;

Thomke, 1997), although McDermott and Handfield (2000) have recently suggested that concurrent

development activities are not suitable for radically new projects.

Given that many products comprise a high proportion of components from suppliers, the ability to

manage interactions with external parties is also clearly important. Good practice is said to involve the

early integration of customer requirements into the design process (Gruner & Homburg, 2000; Huang,

Soutar, & Brown, 2002; Khurana & Rosenthal, 1997; Neale & Corkindale, 1998; Souder, Buisson, &

Garrett, 1997), the extensive involvement of suppliers (Birou & Fawcett, 1994; Handfield, Ragatz,

Peterson, & Monczka, 1999; LaBahn, 2000; McGinnis & Vallopra, 1999), and the early inclusion of

manufacturing personnel in concept generation (Ettlie, 1995; Srinivasan, Lovejoy, & Beach, 1997;

Swink, 1999). Such actions facilitate the inclusion of downstream information at the front-end of the

process, thereby decreasing the probability of problems later in the project, when solutions may be much

more costly.

Strong supplier relationships, it is claimed, are linked to growth and profitability (Karlsson &

Ahlstrom, 1996). There are a number of reasons for this. Supplier involvement in the cost-determining,

early stages of the design process allows for customer access to suppliers’ technological and design

expertise. Long-term commitment from a buyer to suppliers encourages suppliers to be more creative, to

accept risk, and to make investments in technology and R&D relevant to that buyer. Close relationships

facilitate communication of greater quality and consistency between buyers and suppliers than do

distant, antagonistic ones (Birou & Fawcett, 1994).

Cusumano and Nobeoka (1998) emphasize the need to consider product development projects as part

of a portfolio. They argue that good practices at project level, such as those described above, should be

combined with a multiproject thinking, allowing organizations to make the best out of potential

connections between projects that share technologies and components.

Some authors have combined the above practices to create integrative models of NPD. The Academy

of Management article of Brown and Eisenhardt (1995) is probably the best-known example of this and

has inspired a large amount of research (e.g., Song & Montoya-Weiss, 2001). Similarly, Cusumano and

Nobeoka (1998) distinguish between what they call ‘‘lean product development,’’ a model which

combines many of the practices described above, and the more traditional ‘‘functional product

development,’’ in which there are lightweight project coordinators, high levels of in-house engineering,

and less need for cross-strong functional integration.

2.2. NPD performance

In this paper, NPD performance is conceived as a multidimensional concept that includes the

performance of the development process itself, the performance of the product, and financial

performance. The latter is considered as an outcome of both process and product performance (Brown

& Eisenhardt, 1995). Product performance refers to the success of the product in the market place and

addresses whether the product development process has led to the creation of a product that is attractive,

functional, and reliable. This is what Brown and Eisenhardt (1995, p. 34) call the ‘‘fit with market

needs.’’ Product performance can be gauged by indicators such as sales and market share, the number of

awards received, and the number of customer returns. In their study of NPD in the automotive industry,

Clark and Fujimoto (1991) used a ‘‘total product quality’’ indicator based on general measures of

customer satisfaction. In their recent review of research in product development, Krishman and Ulrich

(2001) argue that different academic fields differ in the emphasis that they place on different metrics of

product development performance. For example, research conducted from a marketing perspective tends

to focus on the fit to market, while engineering design is primarily concerned with the form and function

of the product. This study attempts to integrate these perspectives.

The indicators of NPD process performance typically include schedule and budget adherence (Keller,

2001), as well as lead time (or speed) and productivity (Brown & Eisenhardt, 1995; Clark & Fujimoto,

1991; Eisenhardt & Tabrizi, 1995), with Iansiti (1995) distinguishing between concept and development

lead time. As mentioned above, external quality is a key indicator of the performance of the product

developed. However, internal failure rate can also be regarded as a measure of the performance of a

development process. Indeed, it has been estimated that as many as 85% of manufacturing problems


Fig. 1. Integrative framework.


have their genesis in poor initial design (Schonberger, 1982). A consistent NPD process should result in

fewer manufacturing problems and, thus, in fewer requests for engineering changes.

2.3. An integrative framework

Fig. 1 illustrates the conceptual framework used for this research. Integrating three levels of analysis,

the proposed model focuses on factors that the literature suggests: the process, product, and financial

performance.

The first level of analysis focuses on the NPD process itself. This level covers practices supportive of

high performance, such as concurrent engineering, the early inclusion of the views of manufacturing,

colocation, stability of team membership, good communication, project planning and control, strong

project leadership, and so on. However, a product development project is conducted in a specific context

and will be shaped by this context. The dotted border of the product development process performance

box in Fig. 1 illustrates the porous barrier between product development projects, the general approach

to NPD in the company (second level of analysis), as well as the institutional and national context (third

level of analysis) in which the projects are conducted. This framework questions the concept of universal

best practice by recognizing that national and organizational characteristics shape product development

practices, which, in turn, drive NPD performance.

3. Methods

Data to test this research framework were gathered during a benchmarking study of the NPD

processes of 38 consumer electronics firms in Japan, North America, and the UK. The study followed

the style and approach of the study of Clark and Fujimoto (1991) of the automotive industry but focused

on consumer electronics (specifically, high-end audio equipment for home use). The emphasis was on

like-for-like comparison across NPD projects.

As the focus of the research was on the organization of the NPD process, the study targeted products

sufficiently complex to require a range of specialist skills to develop and produce them. Audio products

comprise internal functional electronic components, requiring the skills of electronics, software,

mechanical, and acoustic engineers, as well as those of industrial designers; there are therefore

significant coordination and integration challenges. Audio products also require a substantial number

of bought in parts; hence, they are also suitable for investigating supplier involvement in the

development process. Being manufactured products, high-end audio products also reveal issues around

the manufacturing/development interface.

The identification of audio companies in each of the three regions was undertaken using a variety of

methods—contacts with trade associations, address lists from trade fairs and other sources, discussions

with industry observers, and examination of products in the marketplace. Companies with 50 employees

or more, who developed and produced amplifiers and loudspeakers, were targeted; in very small

companies, much of the process is embedded in the heads of a small number of people and is therefore

difficult to investigate. Companies were identified, approached, and an initial meeting and interview

requested. These interviews typically lasted between 2 and 3 h and reviewed the nature and character-

istics of each firm’s NPD process. They were usually conducted with the Product Development Director

or the Manager. In line with the integrative research framework, a protocol containing open-ended


questions about the company’s general approach to NPD was used to conduct these initial interviews.

These open-ended questions were also used as triggers to uncover the factors that shape the process,

thereby giving clues to the institutional and national characteristics that influence the NPD process.

As Table 1 shows, a total of 38 companies participated in the first stage of the research, comprising

8 companies located in Japan, 14 in the UK, and 16 in North America. At the end of this process,

recently launched products were identified for inclusion in the subsequent and more detailed data

collection process, and the companies were invited to take part in a full benchmarking exercise.

Participation in this exercise involved the completion of two questionnaires. The first of these covered

company characteristics (in the case of large multidivisional companies, this typically referred to an

appropriate business unit within the whole corporation) and the characteristics of the product

development process in the company or business unit as a whole.

The second questionnaire covered a recently completed NPD project and comprised measures of

development performance and practice. Each company provided data on one or two projects; a separate

questionnaire was completed for each project. A total of 21 companies participated in the full

benchmarking exercise, comprising a total of 31 NPD projects. Companies were given several weeks

to complete the benchmarking questionnaire. The research team then returned to each site for a second

visit and reviewed the completed questionnaires on site. Following data analysis, each company was

issued with a benchmarking report, showing its position on over 100 measures of NPD performance and

practice.

3.1. The questionnaires

While the higher level of the integrated framework were covered during the initial interviews, the

benchmarking questionnaires operationalized the lower levels of the framework. The questionnaire on

company or business unit characteristics contained a total of 43 items. The questionnaire took measures

such as annual value of sales, number of employees, profitability, and so forth, over the preceding 3

years. It covered issues of NPD, using indicators such as the breadth of the product portfolio, production

volumes, expenditure, and headcount on NPD, market share, patenting activity, and percentage of sales

going to export. This questionnaire also reviewed the company’s emphasis on, and management of,

NPD, covering issues such as the percentage of revenue derived from recently launched products, the

number of NPD projects active at any one time, NPD organization and leadership, the presence or

absence of a formal NPD process, and information flows and staff exchanges between the development

function and other functional areas.

The project questionnaire covered two main areas, namely, (a) the NPD practices used during the

chosen project and (b) a portfolio of performance measures relating both to the product itself and to the

Table 1

Companies and projects

Total number of

companies interviewed

Number of companies

(benchmarking data)

Number of

NPD projects

Japan 8 3 4

UK 14 7 10

US/Canada 16 11 17

Total 38 21 31


process which created it, as illustrated in Fig. 1. Product profitability was taken as a major performance

indicator, measured by revenues generated by the product in relation to its development costs. Product

characteristics include desirability, functionality, and reliability. Desirability and functionality were

gauged by sales performance, and reliability by warranty data. Process characteristics were covered by

measures such as concept to production time, engineering hours and cost adjusted for product novelty,

and complexity and accuracy of forecasting (of costs, lead times, sales, etc.).

For NPD practice, the questionnaire covered issues such as the size and composition of development

teams, the frequency of interaction between the members of the team and others in the organization, the

methods of information recording and capture, the concurrency of the process, and the closeness of the

linkages with other constituencies, for example, manufacturing, suppliers, and so on. In combination, the

data from the business unit and project questionnaires yielded a dataset of 473 fields per case.

3.2. Data analysis

Comparison between the two product areas (loudspeakers and amplifiers) revealed a number of

significant differences on the performance measures due to inherent differences in the characteristics of

the products. Performance measures were therefore converted into standard (z) scores for each product.

Simple regression analysis between these multiple performance indicators indicated some clusters of

intercorrelation. However, it was striking that overall, there did not appear to be a single common

performance factor with which all the performance measures correlated. This initial result questions the

assumption of a common underlying performance construct for NPD. A factor analysis of the multiple

performance measures was then performed to investigate whether the multiple measures could be

reduced to a set of common factors. Two main factors emerged, a ‘planning and control’ factor and a

‘profitability/efficiency’ factor. The planning and control factor comprised five items:

� time for productivity to settle to target levels,� the deviation in actual concept to production time from planned,� the deviation between actual and forecast costs,� the deviation between actual and forecast sales, and� external defect rate.

The profitability/efficiency factor comprised four items:

� development hours per new part,� development cost per new part,� product cost as a percentage of recommended retail price (RRP; an indicator of gross margin), and� development cost as a percentage of gross profit in the first six months of the product’s life.

The presentation of the results is therefore grouped around these clusters.

The next section of the paper presents the results broken down by region—Japan, the UK, and North

America. These comparisons are based on the objective measurements taken with the benchmarking

questionnaires and on the qualitative material collected during the interviews. We see how the various

regions performed in terms of planning and control and in terms of profitability and efficiency. We then

proceed to identify the NPD practices typically used in the three regions, uncovering the company


approach to NPD and the more general institutional and national context in which the NPD projects

studied were conducted.

4. Results

4.1. Company characteristics

Table 2 shows the characteristics of the companies in the three regions covered by the research.

Although Japan is generally known for mass market, rather than high-end, products in the audio

industry, many of the major corporations also produce high-end products. In Japan, high-end audio

products are typically produced by specialist divisions of the major electronics corporations. These

divisions are relatively self-contained and autonomous within their parent companies. Even so, the total

production volumes of these divisions were much higher than in the UK or North America—

approximately 25 times higher than that of the United States and 75 times higher than that of the

UK. As we shall see shortly, these greater volumes are largely due to the greater product ranges of the

Japanese divisions, rather than much higher volumes of individual products. The annual sales showed a

similar pattern, as did the number of employees.

In terms of growth and profitability, the North American companies showed both the strongest growth

and the highest profit margins. A number of Japanese companies had been making a loss in the 2 to 3

years preceding the study, and the overall average of profit margin on sales for Japan was 0.9%,

approximately one-seventh of the figure for the United States. The relatively buoyant condition of the

U.S. economy at the time that the study was conducted may be one explanation of this, as the North

American firms were relatively dependent on a domestic market, with the lowest export ratio of the three

countries. This illustrates the significance of the third level in the framework, the national/institutional

level, in shaping performance and practice.

Table 3 summarizes the general patterns of NPD found across the three regions. The Japanese

companies clearly show more innovative activity than their UK or North American counterparts,

specifically, percentage of sales from recently launched products, patents, and the number of people—

and products—in development.

The effect of scale is clearly discernible in these figures. However, if the number of development

projects in progress is divided by the number of development staff, the Japanese firms show more

modest levels of activity—less than one development project per member of development staff

compared with two in the UK and three in the Unite States. Expenditure on R&D as a percentage of

Table 2

Company characteristics

Japan UK N. America

Production volumes (units) 8,199,402 130,794 337,801

Annual sales (average for last 3 years) [US$] 621,248,816 20,799,864 45,967,232

Profit margins (averaged over last 3 years) [%] 0.9 5.4 6.5

Number of employees (averaged over last 3 years) 1082 115 174

Mean annual growth (average over last 3 years) [%] + 2.5 + 9.1 + 15.4

Percentage of sales exported 59.2 69.5 43.4

Table 3

New product development patterns

Japan UK N. America

R&D expenditure as a percentage of sales 5.7 4.8 5.7

Percentage of sales from products launched in last 2 years 84.7 68.8 44.5

Number of people in development 208 12 19

Number of development projects started in last 3 years 162 25 16

Development projects started per member of development staff 0.7 1.8 3.0

Average number of patents per company (registered in last 3 years) 430.0 0.9 13.9


sales is identical for Japan and the United States, at approximately 6%, with the UK lagging

approximately one percentage point behind the other two regions.

4.2. Product development performance

The initial data analysis led to a combination of the various performance measures into two clusters:

planning and control and a profitability/efficiency clusters. This section compares how the various

regions performed in terms of planning and control and in terms of profitability and efficiency and

explores the association between them.

Table 4 shows that the Japanese and North American projects both overran their original schedules by

a margin of 15% to 16%. The UK projects were also late, although by a much smaller margin. This

picture is reversed for deviations between actual and forecast product costs, with the UK showing the

largest deviation of just over 4% over target and Japan the lowest, with less than 1% over. It appears that

firms are trading off schedule against cost adherence, with the U.S. and Japanese firms spending longer

on development than they had anticipated to stay closer to product cost targets. Projects in all three

countries exceeded their forecast sales by 20% to 30%, indicating that overall, these products had

achieved greater success in the marketplace than had originally been envisaged, although the UK and

U.S. deviations were larger than those in Japan. This is probably a function of sampling, as each firm

was asked to put forward an example of what it considered to be a good project.

The two measures that really separate Japanese projects from their UK and North American

counterparts both concern the development/manufacturing interface. Productivity in Japan takes a mere

2.5 weeks to settle to target levels compared with 6 weeks in the UK and over a month in North

America. Similarly, the external defect rate (as indicated by the number of returns under warranty in the

first 6 months of production) is approximately 20 times greater in North America and the UK than in

Japan. It was clear that the Japanese paid great attention to manufacturability, with, in one case, nearly

Table 4

Performance data I: planning and control

Japan UK N. America

Percentage deviation from schedule 15.5 4.6 15.4

Actual vs. forecast costs (%) + 0.9 + 4.3 + 3.1

Deviation between forecast and actual sales (%) + 21.7 + 29.8 + 28.7

Time for productivity levels to settle (weeks) 2.5 5.8 4.4

External defect rate (ppm) 716 15,419 13,969


50% of development hours going into manufacturing engineering issues. National differences on these

measures may be tangible manifestations of this difference in emphasis, which may have its genesis in a

culture of uncertainty avoidance and consequent up-front effort in problem solving.

Table 5 compares the projects in the three regions on the measures of profit and efficiency.

Engineering hours per new part is a measure of the total number of engineering hours involved in

each project, corrected for outsourcing, in relation to the number of new parts in each product. (New

parts serve as a proxy for the novelty of the product and, therefore, project scope.) The very high

Japanese figure of over 100 engineering hours per new part stands in stark contrast to the more modest

20 h of the UK and 40 h of the North American companies. These differences are also broadly reflected

in the cost per new part, which show a similar pattern. The implication for this is that for a project of a

given complexity, many more hours are spent on activities such as planning, designing, developing,

testing, and refining in Japan than in North America or in the UK. We shall see some of the

consequences of this in the sections that follow.

Product cost as a percentage of RRP was used as an indicator of gross margin per unit. Overall, the

companies in the study were selling their products at roughly four to five times the cost of producing

them. Development cost as a percentage of gross profit is an indicator of the rate at which companies

recoup their investment in product development, and here, the picture was consistent across all three

regions, with development costs representing 15% to 20% of gross profit during the first 6 months of the

product’s life. UK companies recouped their development costs more quickly, a testament to the fact that

UK development costs were much lower in the first place.

For completeness, Table 6 compares the three regions on a range of measures of process performance

that did not load onto the two factors described previously. Japanese lead times, in contrast to the

observation of Clark and Fujimoto (1991) in the automotive industry in the late 1980s, are longer than

those in the West, averaging 84 weeks from concept to production. The lead times of UK companies are

50% shorter, but UK projects suffer from a much higher level of postproduction problems, possibly as a

consequence of curtailed problem solving during the development phase. The Japanese projects show

relatively high numbers of changes in requirements, even quite late into the process, compared with their

Western counterparts. Although late changes typically increase product development costs (Clark &

Fujimoto, 1991), mainly because of the presence of couplings, resulting in a ‘‘snowball effect’’

(Terwiesch & Loch, 1997), late engineering changes are not always a sign of poor product development

process performance. There are obviously trade offs between the positive impact that engineering

changes may have on the attractiveness and functionality of a finished product and the cost of

implementing the changes in question. Authors, such as Iansiti (1995), who argue for a responsive

design process that ‘‘embraces’’ change instead of fighting it are implicitly suggesting that, at least in

turbulent environments, the costs of change are largely outweighed by the benefits of a better match

between the final product offered and market requirements.

Table 5

Performance data II: profit and efficiency

Japan UK N. America

Engineering hours per new part 106.1 19.5 41.1

Cost per new part (US$) 6105 1733 3027

Product cost as percentage of RRP (%) 21.2 22.6 25.9

Development cost as percentage of gross profit—first 6 months (%) 19.5 15.2 21.7

Table 6

Performance data III: miscellaneous measures

Japan UK N. America

Concept to production time (weeks) 84.3 48.1 70.6

Late changes in requirements 4.8 1.1 0.8

Time for quality levels to settle (weeks) 2.6 7.9 5.9

Self-reported success (1 = unsuccessful, 5 = highly successful) 4.2 4.1 4.1


The time taken for quality to settle down to target levels mirrors that for productivity, with quality

taking 2 to 3 weeks to settle down in the case of the Japanese firms and nearly 2 months in the case of the

UK firms.

It is interesting to note that despite considerable variations in the objective measures of project

performance across the companies in the study, self-reported success was uniformly high across all

companies, with most companies rating their projects as either quite or highly successful. This indicates

some of the limitations of using self-reports of success as performance measures.

4.3. Project characteristics and practices

Moving to the third level of analysis of the framework, this section compares the three regions in

terms of the characteristics of their projects and the ways in which the projects were managed. Table 7

shows a cross-section of indicators of project and product characteristics. These indicators are sensitive

to differences, such as product positioning, employment, and other managerial practices, that are shaped

(although not wholly determined) by national characteristics.

Typically, 30 to 40 months had elapsed since the previous generation product had been launched, and

the product life cycle is rather shorter in the UK than in Japan or North America. Compared with mass-

market consumer electronics products, these cycles are relatively long. RRPs lay in the US$3000 to 5000

unit range, with UK showing slightly higher prices, on average, than Japan or North America did. The

expected sales for the whole life of the product averaged from 10,000 to 15,000 units in Japan and the

UK, but were rather higher than this in North America, at over 30,000 units. Again, by standards of

mass-market products, these figures are modest. Companies expected products to be in production for 3

to 5 years, indicating no radical shortening of product life cycles in this sector of the market. The UK

stands out as having shorter product life cycles than Japan or North America do. There is an interesting

question of cause and effect here. Do UK firms spend less time on development because of a short

expected product life? Or does a more modest development effort inevitably lead to a shorter product

life?

Table 7

Project characteristics

Japan UK N. America

Months since previous project 38.7 31.7 36.1

Average recommended retail price (US$) 3570 4670 3516

Expected sales for life of product (in units) 10,684 12,644 34,553

Number of years production expected 4.2 3.7 4.7

Table 8

Project team characteristics

Japan UK N. America

Number of people involved: early concept 7.0 5.5 4.4

Number of members on core team 3.9 5.9 4.3

Number of members on wider team 8.2 10.0 9.2

Average number of projects live per member 3.3 5.6 6.2

Average years of experience in company 13.3 8.6 7.1

Average years of experience in the industry 14.0 12.2 11.6

Breadth of experience of project leader (0–100) 21 31 67

Concurrency ratio 29.2 41.9 45.9


Table 8 shows project team characteristics in the three regions. The general picture is of uniformity,

rather than variety, across the three regions, with relatively small tight development teams in evidence

everywhere. In all cases, a relatively restricted number of people were involved in early discussions of

the product concept, this number being slightly higher in Japan than in the West. However, as the

product moved into development, this picture reverses, with a smaller number of core members on the

core team in Japan, a picture mirrored for membership of the wider project team (i.e., the group who

have some involvement in the project, but who are not consistently involved all the way through, e.g.,

functional specialists). The smaller number of people involved in the Japanese teams may be indicative

of greater focus, as the number of projects that each team member was servicing was lower in Japan,

three to four live projects per team member compared with five or six in the UK and the United States.

The difference in size between the Japanese companies and their Western counterparts is significant here.

In smaller companies, with a narrower resource base, most people have of necessity to be involved in

most projects. This means that the Japanese companies offered individual development teams much

more focus than their Western counterparts did, despite the fact that they were running much larger

portfolios of projects.

Long-term employment, which has been so characteristic of the major Japanese corporations, is seen

in the number of years of experience in each company (approximately double in Japan compared with

the UK and United States), although this effect is weaker if one considers industry, rather than company-

specific, experience. The value of company- versus industry-specific experience was a matter of some

debate to a number of the Western companies interviewed. Does it matter if an engineer has not had a

long career in a specific company if she/he has extensive experience in that industry?

The breadth of experience of the project leader, which was gauged on a scale of 0 to 100 according to

how many different functional areas that the project team leader had worked on during his or her career,

showed Japanese project team leaders to have the narrowest experience and the U.S. team leaders the

Table 9

Information exchange and knowledge capture

Japan UK N. America

Importance of different media for information recording and retrieval (1–5)

Formal methods (technical reports, project reviews) 3.7 3.4 3.5

Informal methods (tacit knowledge, individual/group memory) 2.9 3.4 3.6

Electronic methods (intranets, email archives) 3.3 2.9 2.3

Frequency of formal meetings of project team (every x days) 25.2 14.3 7.7

Table 10

Supplier involvement

Japan UK N. America

Number of suppliers 27 26 19

Number of previous projects involving main supplier 13 5 10

Percentage of suppliers overseas 20.0 38.7 41.5


widest. This appears to be explicable in terms of a large/small firm effect, with the Japanese firms

showing greater specialization than their Western counterparts do, and consistent with this is greater

formalization in the coordination, control, and roles of these specialists.

Information exchange and information recording are major challenges in any nonroutine, iterative

process. Table 9 indicates that Japanese companies show greater reliance on formal methods of

information recording than their Western counterparts do and also appear to be more advanced in their

use of electronic methods, such as corporate intranets, for knowledge capture and retrieval. Formal

meetings, however, are less frequent in Japan, occurring on approximately a monthly basis compared

with fortnightly in the UK and weekly in the United States. Much of this pattern may be explained by

different organizational patterns. Even the relatively small and autonomous high-end divisions of

Japanese electronics firms tend to be much larger than their stand-alone Western counterparts, and this

difference in size tends to be reflected in differences in both the specialization and formalization of

processes.

As described in the literature review, the benefits of supplier involvement in the development process

have been forcibly extolled in the literature. As presented in Table 10, the characteristics of the supply

bases in the three regions were remarkably consistent in terms of the number of suppliers (approximately

20 to 30 in all cases), with Japan and North America showing longer track records of working with their

major supplier.

In some of the Japanese cases, key suppliers were divisions of the same company, a phenomenon

that was absent in the West. It was difficult to ascertain how big an advantage that such ‘in-house’

suppliers represented or, indeed, if it was an advantage at all. The percentage of suppliers located

overseas (with whom close relations were clearly difficult) was much higher for the UK and North

America than for Japan. It should also be pointed out that the Japanese figure was inflated by the

presence of some off-shore manufacturing, a practice that was becoming more commonplace in North

America, but was still unusual for the UK firms, who perceived a risk of brand erosion if their

products were manufactured in low-cost locations. However, there are signs that this was changing,

and some UK firms have, often controversially, shifted production to East Asia, while retaining design

and development in the UK.

5. Discussion

What are the implications of these results for the two main foci of the paper, namely, the problem of

measuring the performance of and the national differences in the patterns of the NPD process? As argued

previously, a number of studies have looked at the relationship between NPD performance and practice

but have focused on process performance, overlooking the question of how products are received in the


market. To address this, multiple indicators of process performance, product profitability, and product

performance were used in this study.

Initial data analysis showed no strong intercorrelations between the full set of performance measures

utilized here, indicating that product development performance is not a unitary construct. This lack of

intercorrelation points to the danger of an overly narrow focus on one or two measures of performance,

such as development lead times or design changes, both of which are obvious and much-used examples.

Using a large set of performance indicators grouped in different categories allows for the identification of

trade offs between some of the indicators of process performance, on one hand, and, on the other hand,

between process performance and, product performance and product profitability. For example, in the

international comparisons, the UK firms performed well on measures of speed and efficiency during the

development cycle itself. However, high process performance also means having a controlled consistent

process, and, in this respect, the UK firms appeared to pay a price for their quick process because they

suffer from more postlaunch problems than their Japanese counterparts do.

The idea of performance trade offs also applies to the relationship between process performance and

product performance and profitability. The development processes of the Japanese companies that took

part in the study appeared to be slower and less efficient. However, these companies were perhaps

sacrificing the speed of development against other performance parameters such as manufacturability

and reliability. Designing for manufacture, in the first place, and making changes for the sake of

manufacturability during development may add time to the development phase, but the benefits of doing

so become very clear once the product is in production.

Despite some differences, there are also remarkable similarities in how the companies in the different

countries went about the task of developing high-end audio products. The composition of the

development teams used were similar, although there were slight differences in terms of size, member

experience, and company tenure (the last of these, arguably, being primarily a national difference). The

ways in which information was recorded and exchanged throughout the NPD projects also differed, with

Japanese companies showing a greater use of formal methods but putting lower emphasis on formal

meetings. Supplier involvement in product development, despite the rhetoric in the literature, was

generally low in all companies, although less so in Japan.

Where differences in practice exist, it appears that these largely lie at the second and third levels of

analysis in Fig. 1. For example, the evidence indicates that the industry structure has an impact on how

companies develop new products. In Japan, high-end audio products are largely developed and

manufactured by specialist divisions of larger electronics companies. As a result, the Japanese high-

end audio business units in the research sample had higher volumes and wider product portfolios and

therefore conducted more development projects using more specialized development teams. They

typically interfaced with their markets through large and sophisticated marketing functions, who

presented them with the requirements of multiple markets that then had to be reconciled in the course

of the development process. The smaller UK and North American firms tended to be run by audiophiles,

who produced products that they themselves liked for consumption by fellow audiophiles.

Many studies have presented Japan as the incontestable champion of design for manufacture (Clark &

Fujimoto, 1991; Womack, Jones, & Roos, 1990). In keeping with those studies, the present findings

demonstrate that Japanese development teams put in the time and effort needed to ensure manufactur-

ability and smooth production launch. Similarly, much has been written about the tradition of long-term

employment in Japan. This tradition appears to be continuing because the present results show

cumulative, company-specific experience in Japanese teams to be much higher than in the Western


ones. This national characteristic has an impact on development team composition, with team members

having a higher number of years of experience in each company. This undoubtedly carries benefits in

terms of the capture and retention of tacit knowledge and assists in transferring learning from project to

project and may partly explain why the production of Japanese firms settled much more quickly did that

of the Western ones. Design engineers who have years of experience in their company will be more

aware of what can go wrong in production and, relative to engineers who have recently joined a

company, will be better equipped to prevent problems. However, company-specific experience may also

pose greater obstacles to more radical innovations than the more fluid Western model, in which labour

mobility across firms and across sectors is more commonplace.

While employment stability favours knowledge capture, which in turn determines how well issues

that span organizational boundaries such as Development/Manufacturing are managed, the use of formal

information recording tools adds to those benefits. However, formal mechanisms of information

recording have their limitations in terms of knowledge retention. Cusumano and Nobeoka (1998)

distinguish between two types of knowledge: the local knowledge, which is related to the development

of specific component, and the system or integrative knowledge, which is related to the integration of

different components. They argue that local knowledge can be recorded with archival-based mechanisms

such as the tools above. System or integrative knowledge, however, is much more complex to manage

because much of it is tacit knowledge embedded in people, developed through routines that they

perform, in which case, the more stable Japanese system may convey certain advantages. However, this

is a challenge that must be faced, according to Iansiti and Clark (1994), who argue that the integrative

capabilities of an organization are based on its ability to generate and merge and on its accumulation

knowledge. Indeed, there is a growing body of literature that argues that NPD is essentially a knowledge-

creation activity (e.g., Madhavan & Grover, 1998).

6. Conclusions

The paper has explored a number of product development performance and practice issues within a

particular industry, and although the strength of the findings is inevitably limited by the small number of

observations in each country, the results pose some important questions about NPD practice and

performance. First, the findings underline the multidimensional nature of NPD performance and, in this

sector at least, imply the presence of trade offs between different aspects of performance. It may be that

in the future, NPD performance may be better conceived as a profile, with individual projects high on

some indices and low on others, rather than as a unitary entity. This is in keeping with Lambert and

Slater (1999), who have questioned the correlation between schedule adherence in NPD and subsequent

profit and market share.

Moreover, in contrast to the picture of Japanese superiority in innovative performance in the 1980s, at

least in the automotive industry, this research presents a much more mixed picture. On the measures on

manufacturing performance, the Japanese companies in this study outperformed their Western counter-

parts by a significant margin; their products also came in much closer to their original cost targets. On

most measures of development productivity and speed, the Japanese lagged their Western competitors by

substantial margins. Perhaps, this is inevitable, given a product strategy emphasizing value and

reliability. This points to a need to conceive the product development process as one that is beset by

dilemmas and trade offs, which different companies, in different contexts, resolve in different ways.


Acknowledgements

Thanks are due to Professors Ikeda and Nakagawa of Chuo University, Japan, for their invaluable

work in setting up the field visits in Japan and to Geoff Gardiner and John Mills for their input to the

design of the study. The research was funded by the UK’s Design Council and EPSRC (Engineering and

Physical Sciences Research Council), whose support is gratefully acknowledged.

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