To improve the success of new products, Johnson & Johnson has made several organizational changes to its new product development process. It creates internal startups to replicate venture capital firms and promotes greater input from doctors and insurers. It also appointed a Chief Science & Technology Officer to oversee R&D. One notable success from these changes was the $2.6 billion CYPHER drug-coated cardiac stent. Stage-gate systems and cross-functional teams are two common approaches used by companies to organize their new product development. These systems divide the process into stages with checkpoints to review projects, helping companies focus resources on the most promising ideas.

1. ORGANIZATIONAL
ARRANGEMENTS

2. MANY COMPANIES USE CUSTOMER-DRIVEN
ENGINEERING TO DEVELOP NEW PRODUCTS,
INCORPORATING PREFERENCES IN THE FINAL
DESIGN.

3. CONSIDER JOHNSON &
JOHNSON
To improve odds for new-product success, J&J
made a number of changes:
1. It is trying to replicate the dynamic venture-
capital world within the company by creating
internal startups.
2. Its also pushing for greater input from doctors
and insurers to provide stronger assurance for its
durability. (Eg, surgical clips)
3. Puts one of its most successful scientists the
newly created position of Chief Science &
Technology Officer.
One of its notable success: $2.6 Billion CYPHER
drug-coated stent

5. R&D OUTCOMES ARE SO UNCERTAIN
THAT ITS DIFFICULT TO USE NORMAL
INVESTMENT CRITERIA WHEN
BUDGETING FOR NEW-PRODUCT
DEVELOPMENT.
Budgeting for New-Product Development

6. HOW A COMPANY CALCULATES THE COST OF NEW-
PRODUCT DEVELOPMENT?

7. ORGANISING NEW-PRODUCT
DEVELOPMENT
MANY COMPANIES ASSIGN ASSIGN RESPONSIBILITY TO PRODUCT
MANAGERS.
KRAFT AND JOHNSON&JOHNSON EMPLOY NEW-PRODUCT MANAGERS
WHO REPORT TO CATEGORY MANAGERS.
WESTINGHOUSE HAS GROWTH LEADERS.
SOME HAVE HIGH-LEVEL MANAGEMENT COMMITTEE CHARGED WITH
REVIEWING AND APPROVING PROPOSALS.
LARGE COMPANIES HAVE NEW-PRODUCT DEPARTMENT HEADED BY A
SUBSTANTIAL AUTHORITY.

8. EXAMPLE: ADOBE SYSTEMS INC.
Established a task force to identify the
obstacles its employees faced in trying to
develop new products.
the team discovered that ideas needing a new
sales channel, new business model, or even
new packaging failed due to corporate
hierarchy.
Adobe established a New Business Initiatives
Group mimicking the venture capital model.
The ideas are vetted by Adobe
Entrepreneurs-in-Residence and the best
ideas are given a first round of funding.

9. CROSS-FUNCTIONAL
TEAMS
Assign new-product development to venture teams, cross-
functional groups charged with developing a specific
product.
Intraprenuers are relieved of other duties and given a
budget, time-frame, and “skunkworks” setting.
Cross-functional teams can collaborate and use concurrent
new-product development to push new products to market.

10. STAGE-GATE SYSTEMS
Divide the innovation stage into
stages, with a gate or checkpoint at
the end of each.
The project leader, working with a
cross-functional team, must bring a
set of deliverables to each gate
before passing the project to next
stage.
Senior managers review the criteria
at each gate to make one of these
decisions: go, kill, hold or recycle.

11. ANSELL HEATHCARE,THE
WORLD’S LARGEST
MANUFACTURER OF
PROTECTIVE GLOVES AND
CLOTHING,ADOPTED A
STAGE-GATED PROCESS
AND FOUND THE
CONTRIBUTION OF NEW
NEW PRODUCTS TO
OVERALL SALES JUMPED
FROM 4.5% TO 13% IN
LITTLE OVER 2YEARS!
EXAMPLE…

12. HYDRO QUEBEC, ONE OF THE
WORLD’S LARGEST
HYDROELECTRICITY UTILITIES,
IMPLEMENTED A STAGE-GATE
SYSTEM THAT FOCUSSED
RESOURCES ON THE MOST
VALUABLE PROJECTS AND
REAPED OVER $1 BILLION IN
BENEFITS.
ANOTHER EXAMPLE