A presentation given at the 2007 Portfolio Management for New Products and Services Conference

1. The Fuzzy Front End of Outsourced Product Development Brad Barbera Director of New Product Development and Innovation Blyth, Inc.

2. The Fuzzy Front End of Outsourced Product Development Objectives of this presentation: 1) Provide an understanding of what best practices theory suggests for outsourcing innovative product development efforts 2) Share the experience of actually implementing an outsourced innovation project for a New-to-the-World product 3) Recommend an approach to outsourcing innovation efforts based on what has been learned from experience 4) Offer contact with someone who loves to theorize, experiment, discuss, debate, pontificate and mutually grow through exchanging knowledge

3. The Fuzzy Front End of Outsourced Product Development Introductions Blyth, Inc.: The World’s Largest Home Expressions Company The Sterno Group ® : A century+ old company Founded on portable heat Sterno Flameless ™: A new-to-the-world product, bringing safe, portable food-service heating without a flame

4. The Fuzzy Front End of Outsourced Product Development “ Almost all companies outsource some part of their Research and Development (R&D) work…” 1 90% 1 Visions Magazine, July 2004, Goldense Group Survey If so many companies do this, there must be a good understanding out there of how to do it right. Right?

5. The Fuzzy Front End of Outsourced Product Development Open Innovation vs. Outsourced Innovation Outsourced innovation should be considered a subset of Open Innovation Outsourcing is very similar to the “Supplier Development” model of Open Innovation, but with the supplier providing New Product Development services instead of raw materials or other tangible supplies.

6. The Fuzzy Front End of Outsourced Product Development Outsourcing Product Development: Theory and Practice “In theory, there is no difference between theory and practice. In practice, there is.” ~Unknown

7. The Fuzzy Front End of Outsourced Product Development Outsourcing Product Development: Why Outsource? “ The best companies outsource to win, not to shrink.” ~Thomas Friedman, The World Is Flat

10. The Fuzzy Front End of Outsourced Product Development Outsourcing Product Development: How to Outsource? “ It usually takes more than three weeks to prepare a good impromptu speech.” ~ Mark Twain

19. The Fuzzy Front End of Outsourced Product Development Theory To effectively use an outsourced product development partner, a company must be willing to share confidential information The degree of willingness helps guide when to bring in external resources – the more willingness, the earlier to bring them in. When to Involve External resources Cost will play an obvious role in determining when to bring in resources – costs can be minimized by delaying when resources are brought in ( at least in theory ) NDA’s and other contractual arrangements can mitigate both information-sharing risk and cost risk.

20. The Fuzzy Front End of Outsourced Product Development DEFINITIONS 1 Opportunity: A business or technology gap, that a company or individual identifies Idea: A high-level view of the solution envisioned for the problem identified by the opportunity. Concept: A well-defined product or service description, that includes the primary features and customer benefits combined with a broad understanding of the technology needed. 1 Adapted from Peter A.Koen, Greg M.Ajamian, Scott Boyce, Allen Clamen, Eden Fisher, Stavros Fountoulakis, Albert Johnson, Pushpinder Puri, and Rebecca Seibert, “ Fuzzy Front End: Effective Methods, Tools, and Techniques” Practice

21. The Fuzzy Front End of Outsourced Product Development Practice For Sterno Flameless ™, both Market Research provider and a Research and Development service provider were involved in the later stages of the Fuzzy Front End: Opportunity identification Ideation Concept Development Screening External Resources Brought in here NPD Process The Fuzzy Front End

22. The Fuzzy Front End of Outsourced Product Development The Sterno Flameless Idea: Reactant Food Container A container of exothermic reactant and water is placed below a food container. Water Practice

23. The Fuzzy Front End of Outsourced Product Development The Sterno Flameless Idea: Chemicals mix and begin to react Food Container Mix the reactants . . . Practice

24. The Fuzzy Front End of Outsourced Product Development The Sterno Flameless Idea: Reaction continues to generate heat as long as desired by the customer Food Container Food absorbs transferred heat from pouch Practice

28. The Fuzzy Front End of Outsourced Product Development Outsourcing Product Development: How to manage the NPD process?

29. The Fuzzy Front End of Outsourced Product Development Theory How to manage the NPD process Contracting – clearly define goals, objectives, deliverables. Define what, how it is to be measured, by whom, and when. Communication – process, schedule, points of contact, timing. Make as much tacit knowledge as possible transferable or explicit Internal project management – Resource planning, organizing, tracking, reporting, analyzing, and reviewing Maintain an Effective and Rigorous Process – follow your product development process and governance systems

31. The Fuzzy Front End of Outsourced Product Development Practice How to manage the NPD process (continued) Existing Stage-Gate system was followed Outsourced contracting was done on a Stage-by-Stage process Additional outsourcing was done to cover areas encountered later in the process, such as Safety and Regulatory review, Graphic Design, Public Relations, etc. Current Status: post-launch technical issues have the product on hold, but customer excitement is high

32. The Fuzzy Front End of Outsourced Product Development Summary and Lessons Learned

36. The Fuzzy Front End of Outsourced Product Development Summary Learn from What We Did Right “Know Thyself” – understand your capabilities and fill in the gaps identified as strategically important