Challenges in fuzzy front-end of new product development within...

Halmstad University

School of Business and Engineering Strategic Management and Leadership

Technical Project and Business Management

Master of Science Degree

Challenges in fuzzy front-end of new product development

within medium-sized enterprises

A case study on Swedish manufacturing firms

Dissertation in TPA, 15 ECTS

1st June 2010

Authors:

Agnesa Korityak 850809 - 5166

Yue Cao 871125 - T143

Supervisor: Henrik Florén

Examiner: Bernd Hofmaier

Challenges in fuzzy front-end of new product development within medium-sized enterprises

ii

ACKNOWLEDGEMENT

In writing this dissertation, we have received support and encouragement from our

supervisor, Henrik Florén and we want to particularly thank him. He helped us

greatly in overcoming the challenges that occurred during this process and gave

us valuable suggestions and advices.

We also want to thank to Joakim Tell, our colleagues and other teachers who

provided us valuable feedback and comments in our seminars, helping us to make

this process and its related decisions easier.

We appreciate the help received from the personnel from school who helped us in

contacting the companies that are subject of our research.

The three respondents from the companies in Halmstad that took part in this

research were very open and cooperative with us, making the process of collecting

the field data very interesting.

Our families have been of great support, emotionally and materially, during the

whole master program and, especially, during the period we were focusing on

writing this dissertation.

Halmstad, 2010

Agnesa Korityak

Yue Cao


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ABSTRACT

The business environment is changing rapidly, becoming very competitive and challenging for

all firms, and particularly for small and medium enterprises (SMEs). As innovation and new

product development represent valuable sources for SMEs’ future sustainability and

development, making these processes more effective is essential. Previous literature, with the

focus on large firms, underlined the importance of efficiently managing the early period of new

product development (NPD), as this can reduce the product’s time to market and increase its

performance. For this reason, contributing to a developed understanding of the challenges of

medium-sized firms in managing this phase, the fuzzy front-end (FFE) of NPD, is the aim of this

study.

The theoretical framework of this study combines prior theories that relate to the difficulties,

shortcomings, challenges that SMEs meet during the whole NPD process, including FFE, and

theories that resulted from research on FFE in large firms. The structure is based on four

elements referring to managing the idea generation process, new product development team,

evaluation of product concept feasibility, and the organization of FFE.

A qualitative strategy and a research design with two case studies on high-tech, medium-sized

manufacturing firms were used in reaching the purpose of this study. This methodology choice

reflects the explorative purpose of this research. The empirical data are mainly primary data,

collected during three interviews with development managers and a product developer,

completed as well with secondary data like general company information, collected from

companies’ websites.

The analysis of empirical findings revealed some relevant conclusions, which can bring value to

the research area, and also to the practice. Our findings show that lack of communication with

customers during the whole FFE phase, collecting limited or inaccurate information to be

processed during this phase, finding the right formalization degree of FFE activities, determining

the complexity of the product concept, and assessing external technology and expertise, represent

the main challenges faced by medium-sized firms in the FFE of NPD.

The study’s practical relevance consists in the advices and solutions suggested to managers for

overcoming the challenges of the FFE phase and improving their results in the development

projects. The theoretical implications reflect the importance of organizational size variable in

association with the challenges of FFE.

The sample of only two cases and the quality of the empirical data collected from two high-tech

Swedish manufacturing firms which have a large focus on innovation are the main limitations of

this study, as these medium-sized firms have gained some experience to face the specific

challenges of FFE of NPD and the data they provide may be influenced by this aspect.

Keywords: fuzzy front-end, new product development, small and medium-sized enterprises,

innovation


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Table of Contents

1. INTRODUCTION .................................................................................................... 1

1.1 Background ........................................................................................................1

1.2 Problem discussion ............................................................................................2

1.3 Research purpose ...............................................................................................4

2. THEORETICAL FRAME OF REFERENCES .................................................... 5

2.1 Managing the idea generation process ...............................................................5

2.2 New product development team ........................................................................7

2.3 Evaluation of concept feasibility .......................................................................8

2.4 Organizing the FFE phase ..................................................................................9

2.5 Challenges of FFE within SMEs......................................................................11

3. METHODOLOGY ................................................................................................. 13

3.1 Research approach ...........................................................................................13

3.2 Research strategy .............................................................................................14

3.3 Research design ...............................................................................................14

3.4 Data collection .................................................................................................15

3.5 Data analysis ....................................................................................................15

3.6 Research validity and reliability ......................................................................16

4. EMPIRICAL FINDINGS ...................................................................................... 18

4.1 Company A ......................................................................................................18

4.1.1 General company information .....................................................................18

4.1.2 Managing the idea generation process .........................................................18

4.1.3 New product development team ..................................................................20

4.1.4 Evaluation of concept feasibility .................................................................20

4.1.5 Organizing the FFE phase ............................................................................21

4.2 Company B ......................................................................................................22

4.2.1 General company information .....................................................................22

4.2.2 Managing the idea generation process .........................................................22

4.2.3 New product development team ..................................................................23

4.2.4 Evaluation of concept feasibility .................................................................24

4.2.5 Organizing the FFE phase ............................................................................24

5. ANALYSIS ............................................................................................................. 26

5.1 External linkages ..............................................................................................26

5.2 Formalization of FFE phase .............................................................................28

5.3 Information collection and processing .............................................................29

5.4 Construction of product concept ......................................................................30

5.5 Challenges of medium firms in FFE ................................................................33

6. CONCLUSIONS AND DISCUSSION ................................................................. 35

6.1 Conclusions ......................................................................................................35

6.2 Practical implications .......................................................................................36

6.3 Theoretical implications...................................................................................36

6.4 Shortcomings of the study ...............................................................................37

6.5 Further research ...............................................................................................38

LIST OF REFERENCES .......................................................................................... 39

APPENDIX 1 .............................................................................................................. 44


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Table of Figures and Tables

Figure nr.1. The predevelopment activities…………………………….………….………...2

Figure nr.2. Disposition of theoretical frame of reference…………………………………...5

Table nr.1. The expected main challenges in FFE of NPD within SMEs in rapport to success

factors of FFE ……………………………………………………………………………...12

Figure nr. 3. Analysis process for pre-structured case……………………………………...16

Figure nr. 4. Organization of Product Development Department…………………………..23

Table nr.2. Comparison summary of the analysis…………………………………………..31

Figure nr.5. Challenges of medium-sized firms related to FFE of NPD…………………...32


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1. INTRODUCTION

1.1 Background

Innovation capability and new product development represent in these times very important tools

for firms to survive and grow in a highly competitive environment. In conditions of constant

market and technical changes, new product development allows firms to successfully adapt,

renew and maintain their competitiveness (Brown & Eisenhardt, 1995). The capacity to innovate

and its pace depend on the intensity of industry competition, technological change, strategic

orientation, organizational resources, and directly affect the costs and success of a newly

developed product (Kessler & Chakrabarti, 1996). Nevertheless, developing new products can

often be a restrictive matter, as the cost of production and marketing can be high and the positive

results are not predictable or certain (Cannon, 2004).

Rothwell (1994) considers that innovation and development activities became, especially for

small manufacturing companies, the foundation for their resistance against the rapidly changing

environment, the shortening of product life cycle and the increasing industrial change and

complexity. Strategic integration of their innovative capabilities and the development of

collaborative networks are often the way these difficulties are overcome and through which

small firms acquire the essential resources and knowledge for innovation (Rothwell, 1994;

Dickson & Hadjimanolis, 1998).

Companies often perceive innovation as being their originator of good profitability and

performance. In order to advance their effectiveness in innovation, companies frequently create

synergies between their product, process and market strategies of innovation, and complement

them with suitable management styles (Otero-Neira, Lindman & Fernandez, 2009). Moreover, an

internal and external orientation towards innovation and a combination of learning capabilities,

customer knowledge and technology, can lead companies to higher performance rates through

innovation. (Salavou, 2005).

Cooper and Kleinschmidt (1987), in their study regarding the critical success factors for new

product development processes, report that product advantage, internal organization,

predevelopment planning and market characteristics are the most important contributors. They

emphasize the role of pre-development activities for NPD, and also conclude that less

competitive, large and growing markets, determine in great measure the success of a new or

developed product.

The manner and effectiveness of executing the pre-development activities and the capability of

defining a project and a product before the actual development part is vital for companies to

distinguish themselves from their competitors (Cooper & Kleinschmidt, 1988). As argued by

Kim and Wilemon (2002), the efficient management of pre-development activities can lead to a

competitive advantage, or may constitute a core competence for those companies which

understand the importance of this early phase in the success of NPD.

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javascript:void(0);


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1.2 Problem discussion

The front-end stage of innovation, often referred to as fuzzy front-end, represents the period

which lasts from the moment when an opportunity is first seen as being suitable for a new

product development and the actual start of the development (Kim & Wilemon, 1999). It is the

stage consisting of those informal activities performed before the well-defined and structured

process of product development (Koen et al., 2001). FFE can be, as well, divided into sub-phases

or parts, as follows: idea generation, also called “pre-phase zero”, evaluation of the environment

(technology, market, level of competition) as “phase zero”, and validation of a new development

project as “phase one” (Khurana and Rosenthal, 1998). Along the same lines, Herstatt, Verworn

and Nagahira (2004) see the main activities or parts of FFE as the first two phases of the process

of product development: (I) idea generation and assessment, (II) concept development and

project. In an earlier study, Cooper (1990) describes pre-development activities in three stages,

as represented in the next figure: idea generation, which implies finding a product idea;

preliminary assessment, which deals with defining product’s advantages, design or position, and

concept definition, which represents the stage when potential market success or actual

development of the new product is analyzed.

.

Figure nr.1. The predevelopment activities (Cooper, 1990)

There are several previous studies underlying the idea that front-end period is dominated by

uncertainty, unclear vision, lack of proper organization (e.g. Khurana & Rosenthal, 1998;

Herstatt et al., 2004; Frishammar, Florén & Wincent, 2009). In such conditions of uncertainty,

lack of structure and formalization, effectively organizing the FFE requires firms to gain more

systematical and applied knowledge about the FFE in order to face the challenges of this phase,

and create a positive system for rapid results by using different types of leaders and project team

structures (Kim & Wilemon, 2002). Furthermore, to construct and create formality in the FFE, so

that effectiveness and stability of following product development is improved, this phase needs

to be largely recognized in the firm, be unequivocal, with proper decision-making processes and

with specific measurement of performance (Khurana & Rosenthal, 1997). However, some

studies (e.g. Freel, 2000; Kaminski et al., 2008) suggest that a high degree of formalization

during the innovation process proves to be more efficient for large firms, whereas for smaller or

medium firms, this has not been yet verified and researched.

Idea

generation

Preliminary

assessment

Concept

definition


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Koen et al. (2001) emphasize in their study the FFE’s functionality and proficiency in several

large companies, analyzing elements like opportunity identification and analysis, idea genesis

and selection, and concept and technology development, the results showing that mainly highly

innovative companies are more successful in organizing the FFE. In addition, Reinertsen (1994)

supports that the fuzzy front-end period can be a valuable tool for firms in shortening their

product’s time to market and, thus, improve their performance. The author argues that a better

management of the front-end phase would reduce the development cycle time and, implicitly the

costs with product development. Moreover, Verganti (1999) claims that FFE needs to anticipate

and take into consideration aspects of future functionality, manufacturability or product design,

so that following development stages will not necessitate engineering changes implying new

costs and more time.

The main activities and actions which ought to be executed in the FFE period are represented by

idea generation, market and technology analysis, the construction of a product concept, product

strategy, feasibility testing, and project planning (Khurana & Rosenthal, 1998). High

performance of FFE, as analyzed by Kim and Wilemon (2002) who developed a framework

containing the main forces influencing the predevelopment activities, is determined by factors

like project team, FFE idea, and relations between the project team, senior management,

functional groups and external groups, all being extremely significant in providing a viable

concept of product.

Even though multi-functional teams in large firms are confirmed as being useful for FFE’s

performance and for diminishing the uncertainty (Verganti, 1997), as one of the earlier papers

describes, still one of the difficulties and challenges of the FFE of NPD consists of the incapacity

to create solid connections between the marketing and R&D functions, and to create a thorough

product concept (Kohn, 2006).

As becomes evident when studying the previous literature on NPD, most of the empirical

research on NPD and, specifically, on FFE, has been made in large companies or in different

sectors and industries without referring to the size of the company. The process of NPD in small

and medium-sized enterprises (SMEs)1 has, however, received some attention in earlier research

and the findings showed that the lack of skilled personnel, the low level of resources allocated

(Mohamad & Muhamad, 2000), the limited competencies of management and poor contact to

external information (De Toni & Nassimbeni, 2003) represent important barriers towards

innovation in small and medium firms. Furthermore, the association of the pre-development

period, the firm size and the success of NPD, has been made in some studies (e.g. Abeele &

Christaens, 1986; Murphy & Kumar, 1996; Ledwith, 2000), providing more knowledge on NPD

in SMEs. More precisely, the first two studies (Abeele & Christaens, 1986; Murphy & Kumar,

1996) acknowledged that small firms have fewer R&D projects and develop fewer new products

1 Small and medium-sized enterprises (SMEs): in the industry area, SMEs are characterized and

defined by European Union (2003) as being the organizations that fulfill the following characteristics: less

than 250 workers; a maximum annual turnover of 50 million euro; a maximum of 43 million euro annual

balance-sheet total. Further division of SMEs within this classification comprises micro-companies (0 to

9 employees), small companies (10 to 49 employees) and medium companies (50 to 249 employees).


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than the large firms, but show higher levels of market success than the large firms. Also, Ledwith

(2000) found that small firms register higher level of outsourcing and involvement with external

organizations in developing new products than the larger firms.

As the literature presents, organizing the FFE activities depends in large degree on the resources

and capabilities that the company has, thus, a differentiation between small, medium and large

firms may occur in terms of the challenges they encounter during FFE phase. Therefore, this

study, in connection to its main purpose, will try to find the possible distinctions in FFE aspects,

using the size factor as the basis for comparison.

A number of studies have analyzed the problems and challenges in the FFE of product

development (Khurana & Rosenthal, 1998; Zhang & Doll, 2001; Herstatt et al., 2004), but there

is still a lack of knowledge on what happens specifically in SMEs in this early phase of product

innovation. Whether similar problems may occur also for SMEs needs to be researched, and this

study will try to clear up this uncertainty, along with providing new information about specific

challenges in FFE of SMEs.

This is the reason why this study, sustained with empirical evidence, will try to provide new

valuable information on FFE in SMEs and, more precisely, will try to underline the main

difficulties that are faced during this phase. Showing the gap in theory and prior research on the

FFE with regard to the main challenges, incapacities and difficulties facing SMEs during the

fuzzy front-end of NPD, the research question of this paper is formulated as follows:

What are the challenges faced by medium-sized enterprises in the fuzzy front-end of new product

development?

1.3 Research purpose

The purpose of this paper is to explore the challenges encountered by medium-sized enterprises

in the fuzzy front-end of product development, as knowing these, can be very helpful for these

types of companies in improving their future processes of new product development. More

knowledge in the area of fuzzy front-end, particularly in the case of medium firms can lead to a

better management of this stage and, in the end, to increased success of development projects

and competitiveness of the firm.

The study is aiming to offer some specific advice for managers within medium-sized firms of

how to overcome and deal with the challenges occurring within fuzzy front-end phase.

Furthermore, this study’s objective is to see the relevance of the organizational size variable in

relation to challenges within the fuzzy front-end of new product development.


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2. THEORETICAL FRAME OF REFERENCES

The model that is presented below is a construction of four elements that follows to comprise the

main challenges within SMEs during FFE, by delimitating four sources of possible challenges. In

order to encompass a large variety of possible challenges within FFE, the success factors of FFE,

as presented and reviewed by Frishammar and Florén (2008) were considered a relevant point of

departure in separating related challenges in different constructions. Previous models of Cooper

(1990) and Kim and Wilemon (2002), mentioned in the introduction part of the paper, the former

describing the sub-phases of FFE and the latter the influencing factors of FFE, have contributed

to a better understanding of the subject and in creating these constructions. The model aims to be

the basis for a clear theoretical framework and to help structuring the reviewed literature, directly

or indirectly connected to the FFE area within SMEs.

Figure nr.2. Disposition of theoretical frame of reference

.

2.1 Managing the idea generation process

Frishammar and Florén (2008) reviewed the previous literature on FFE and found several

success factors for this part of product development. Their paper takes into consideration a large

number of studies on the area, making a comprehensive scanning of the relevant issues of this

Challenges in

FFE within SMEs

Managing the idea

generation process

New product

development team

Organizing the FFE

phase

Evaluation of concept

feasibility


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phase. Some of the success factors are related to idea generation process and the most important

ones are idea refinement, adequate idea screening and early customer involvement. Related to

these factors, some prior research for SMEs has been made, as further presented.

SMEs, and especially those in manufacturing areas, are currently facing multiple problems in

new product development processes as the resources are limited, the life cycle of products is

shortening and poor knowledge in NPD makes them more exposed to related threats (Woy,

2007). As highlighted by Hoffman, Parejo, Bessant and Perren (1998) in their review, one of the

main solutions for SMEs facing these problems is to create external linkages and networks with

firms from their supply chain, with institutions, and with research centers that can contribute

with a diversity of knowledge and complementary technological capabilities. Considering that

the level of allocated resources is high, the difficulty in this situation, as argued by the authors, is

to manage properly these linkages.

One proposed method for effectively generating new product ideas is to complete a business

environmental scan that includes information about market trends and needs (Kohn, 2005). The

focus in this screening, according to Kohn (2005), should be not just on collecting the data and

analyzing them, but more on interpreting them according to the company’s strategy and specific

competences. The author argues that, by using this method in evaluating new product ideas,

companies are putting more emphasis on identifying new opportunities rather than on reducing

the uncertainty specific for the FFE of NPD. Nonetheless, unlike large companies, SMEs often

lack complex market research to support their decisions and investment in new product ideas.

This is why the personal, in-depth knowledge of the product or even intuition, are frequently the

basis for starting a new development project (Trott, 2001; Lindman, 2002). From this point of

view, previous research shows that SMEs encounter difficulties in supporting their new ideas on

complex market research and on broad scanning of their business environment (Lindman, 2002).

It remains to be further explored what sort of methods are the basis for SMEs in scrutinizing the

environment for new ideas.

Ozer (2007) sees as one of the possible challenges for many companies, including SMEs, when

screening for a new product idea, the difficulty to predict customers’ behavior intentions and

market acceptance. Moreover, another issue stressed by Mosey, Clare and Woodcock (2002) is

related to the high degree of uncertainty in quantifying potential needs of customers. The authors

add that many small manufacturing firms, part of the category of “incremental improvers”, as

opposed to “radical innovators”, often neglect valuable external information or discuss it just

informally. Their findings showed that this information offered by customers about functionality

of a new product leads to a productive, multi-disciplined decision making when choosing the

development strategy.

Customer involvement, as discovered by Bala Subrahmanya (2005) in a comparative study, is

more encountered in the case of incremental innovations, when small improvements of the

product are suggested. Nevertheless, as the author presents, self-efforts of SMEs’ managers are

to a large extent, responsible for the technological innovations, external factors comprising

expressed customers’ needs are as well very motivating in starting incremental projects. The

long-term strategic partnerships of SMEs with their customers follow to generate innovative

projects by identifying trends or product customization (Kaminski, de Oliveira & Lopes, 2008).

In addition, those companies which are able to integrate and act on customers’ needs in NPD,


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will develop skills in responding efficiently to growing demands (Souder, Buisson & Garrett,

1997). These findings suggest that SMEs need to communicate well with their customers and

incorporate their ideas, starting with the product concept developed during FFE.

Other findings related to product innovation in small firms and influencing the FFE, as illustrated

by White et al. (1988), can be summated as: ideas can be generated both internally and externally,

with the help of customers; within firms there is a diversity of idea originators, from managers to

workers; the uncertainty of customer demand can be an even a greater impediment than the lack

of financial resources; the dependence on local suppliers does not necessarily affect the process

of innovation, since external information from them and collaboration lead to successful projects.

In managing the idea generation phase, as presented by the prior literature, SMEs are expected to

face challenges in supporting the new product ideas with complex market research, in involving

external partners or keeping good contact with the customers. The relation and good

communication with customers are considered as being very important during FFE, as the

following customer demand for the new developed product may be uncertain.

2.2 New product development team

Some of the success factors of FFE related to the ability of the human factor to manage and

effectively coordinate the FFE of NPD, are highlighted by Frishamar and Florén (2008) as the

presence of idea visionaries or product champions, senior management involvement and cross-

functional integration, which underlines the importance of implicating more functions or

departments of the company in this process.

In his comparison of the success determinants of NPD between large firms and small firms,

Ledwith (2000) argues that organizational factors of small firms, including here project team

characteristics, project leadership, cross-functionality and top management involvement in NPD

process are not considered such important success factors since they regularly are the basis for

any small firm’s activity. Instead, the author underlines the fact that small firms, unlike the large

ones, due to their limited financial and technical resources, focus more on managing well their

external relations, consisting in outsourcing, collaborative R&D, networks. Implicitly, during

FFE these external relations would be advantageous, since a multi-functional group would

define more clearly a new product idea and would assess more easily the technology needed.

Moreover, the skills and competences of the owner manager in development projects are quite

important (Ledwith, 2000).

The above arguments reflect that, in the FFE phase, SMEs most often do not face challenges like

lack of cross-functional integration, top management involvement or presence of idea visionaries,

but most likely challenges occur in getting external support for a new product project. This

support may consist in prompt feedback to an idea from product beneficiary or from

components’ suppliers, or in putting at SMEs’ disposal the resources necessary for effectively

defining a new product, for creating a solid new product concept. However, as Nassimbeni (2001)

argues, it may often happen in SMEs that external opportunities are mistreated or ignored and

individualistic positions affect negatively the NPD process, starting with its early times.

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SMEs are frequently collaborating and creating interface management techniques with their

suppliers in product development, since they have limited resources (Koufteros, Cheng & Lai,

2007; Hartley, Zirger & Kamath, 1997). Koufteros et al. (2007) state that the integration of

SMEs’ development capabilities is necessary for a higher quality of product innovation. The

authors found that the selection of the suppliers, based on their product development potential,

affects positively the “gray-box” integration, expressed in the common involvement of the

suppliers’ and customers’ engineers in product development. In some cases, this collaboration

between buyer-supplier does not create positive results. The development project, as explained

by Hartley et al. (1997), can frequently be delayed due to suppliers’ faults. Even though the

communication is good and continuous, and the supplier involvement and its contribution to

design is considered even from the FFE of NPD, there is no clear evidence that time can be

saved by applying these management techniques (Hartley et al., 1997). Since actions like idea

selection, evaluation of technology necessary and concept feasibility need joint participation

within the FFE phase, lack of suppliers’ active and constructive involvement can lead to

extension of the FFE period and it can affect FFE’s outcomes.

In terms of the expected challenges during FFE of NPD related to the development team, the

previous literature underlines the importance of SMEs’ capacity to manage efficiently the

external relations. Common development projects with external partners or integrating buyer-

supplier competences are relevant in increasing the FFE’s performance, but the NPD team’s

capability to coordinate these relations remains a challenge.

2.3 Evaluation of concept feasibility

In order to reach success, starting with FFE, firms initially need to evaluate their technology

efficiently and well define the new product concept before continuing with its development

(Cooper, 1988; Cooper and Kleinschmidt, 1987). All firms should take into account their

technical capacity before starting the development of a new product, they should evaluate

whether the manufacture is possible, the cost is affordable and whether they posses all the

necessary technology (Cooper, 1988). Nevertheless, small manufacturing firms are often in

shortage of professional, technical or research competences and, due to this, they use external

networks and informal linkages for technical input (Macpherson, 1991). Thus, as highlighted

previously, it is difficult to manage the FFE and make a preliminary assessment of the

technology necessary for the new product, since the in-house technology is not enough and

external input is required.

Although, compared to large firms, SMEs have difficulties in achieving a high market

performance by offering lower relative prices and reducing their cycle time of NPD, they can

shorten their products’ time to market by focusing on maintaining the quality through simple

technical innovations (Ali, Krapfel, & LaBahn, 1995). It can be challenging during FFE to

conceive a product concept that fulfils the quality requirements but still keeps the technical

content simple and uses only SMEs’ available technology.

Information processing and sharing, including information about competitors, market standards,

is, according to Bacon, Beckman, Mowey & Wilson (1994), extremely valuable for a project


9

development team. In the case of SMEs, many studies (see Macpherson & Wilson, 2003;

Kaminski et al., 2008) assert that, beside competitor awareness, the information from their value

chain and other institutional sources are relevant in effectively managing product development.

Still, they found that some SMEs are deficient in competencies and abilities to integrate and

assess properly this information. This can be considered as an important challenge to be

overcome, even from the front-end of NPD, since often competitors, suppliers, dealers or final

users are the ones who provide the best suggestions or new ideas for a new product. Lack of

processing and assessing these ideas within FFE can lead to failed projects, waste of resources

for developing a less need-addressed product.

During the FFE, product developers are responsible for defining a new product concept,

including its relative design. According to De Toni and Nassimbeni (2003), it is a challenge for

SMEs’ developers to capture a vision, all the marketing requirements and innovation sources in a

new product design. Consequently, it is even more problematic for them to take into

consideration all these aspects when defining a concept of a new product.

In Montoya-Weiss and Driscoll’s (2000) study in which processes and tools for technology

support in FFE are elaborated, it is established that, during concept development phase, the ideas

generated previously need to be separately evaluated, assessed, compared, completely

documented and finally transformed in thorough concepts. Also, they argue that, during this

phase, formal decisions should be taken that can be both flexible and tolerant of change. From a

technological perspective, flexibility of the product concept is recommended to be considered by

any company, not just by SMEs.

In defining the new product during FFE of NPD, SMEs can meet challenges in making the new

product concept flexible and with an appropriate technical content. Besides that, the product

concept needs to be the result of a thorough information processing and of a complete evaluation

of the necessary technology for its development.

2.4 Organizing the FFE phase

Very important aspects to be considered when organizing this phase are associated with the

alignment of NPD with the firm’s strategy, starting with FFE, and with putting an adequate

degree of formalization in the activities performed in this period (Khurana & Rosenthal, 1997;

1998). Thus, by organizing the FFE activities which precede the NPD process, companies set a

clear strategy for the new product, choose the most effective way, formal or informal, to identify

market opportunities, to generate ad screen ideas, to discuss and analyze them or to define the

new product. Khurana and Rosenthal (1997) propose that the alignment between NPD and

product strategy needs to be considered, even from the FFE period when the product concept.

The authors assert that all the decisions need to be taken according to company’s overall strategy

and not based on specific conditions of the development projects. SMEs’ strategies can, however,

be less complex or differently conceived on a long-term in comparison to large companies. As a

consequence, the alignment of the FFE idea with the overall strategy may be, in a smaller

measure, challenging for SMEs.


10

The most important strategy, which directly affects the FFE phase within SMEs, concerns the

choice between open or closed innovation strategies (Lindman, 2002). By adopting an open

strategy, an SME uses not only in-house knowledge and resources for product development, but

remains flexible to any external collaboration which can improve the process. In contrast, the

closed strategy implies acquiring new knowledge only from own resources (ibid). Some

challenges of SMEs related to FFE when focusing on closed strategy, as found by Lindman

(2002), are that they miss in-depth market knowledge because they use just internal information

or from their distributors, instead of formal screening methods and advanced market research.

This deficit leads also to inability of positioning and defining specification for the product

concept according to customer preferences.

From the formalization point of view, the innovation process in SMEs is less structured and more

informal than in large firms, but this can, however, be an advantage since the decisions are taken

more rapidly (Freel, 2000). This would mean a reduced period of FFE and less time spent on the

process of evaluating generated ideas, on selecting the most viable ones and transforming them

in clear product concepts. A further description is provided in the literature review of Hoffman et

al. (1998) on SMEs’ innovation, in which it is stated that innovative capabilities are more likely

to be formally structured within larger SMEs and less organized in smaller SMEs where

development projects are conducted by few persons and not a department. More formality in the

development department of SMEs has proved to be very helpful for a better integration of the

NPD process with other partners and for an easier assessment of the market opportunities

(Kaminski et al., 2008).

Flint (2002) argues that ideation process can be more efficient if more formality, instead of

improvised decisions, is provided in the process of understanding customers’ current and future

needs. The author claims that many managers choose to develop wrong new product ideas

because they do not base their decisions on a more precise and organized process of idea

generation with customer focus. For this, creativity and scenario exercises, part of an integrative

process, should be employed for benefiting from customer intelligence. Thus, overall

organizational learning and market orientation of the firm actually improves the NPD process

and increases the chances for the developed product to be addressed for real market opportunities

(Flint, 2002). Organizational learning should be implicitly important, starting with the FFE phase

as, for generating valuable new product ideas, SMEs need to have insights of their customers’

expectations from them. Therefore, the challenge of uncertainty that the product idea and

concept are not addressed to customers’ preferences can be avoided.

Atuahene-Gima and Evangelista (2000) examine in their study the influence of marketing and

R&D departments on NPD performance, referring mainly to its idea generation stage. Their

results address also findings regarding the suitable degree of formalization. According to the

authors, the marketing function of a company, through its personnel, is more likely to influence

FFE results through informal networks rather than through formal procedures. From a product

development perspective, formalization gets in the way of marketing's positive influence but, for

R&D, it provides more benefits (Atuahene-Gima & Evangelista, 2000). Finding a balance in this

respect is often challenging, not only for large companies, but as well for SMEs.

To summarize, in organizing the FFE of NPD, SMEs can meet challenges in having an open and

flexible strategy towards external collaboration. Moreover, the FFE’s performance depends on


11

the level of structure, formalization that SMEs will use when taking decisions, when generating

and screening ideas or when doing market research.

2.5 Challenges of FFE within SMEs

In this part, the main challenges of FFE within SMEs that might be expected, from reading the

literature and presented in the previous sections of the theoretical frame of references, will be

outlined. The success factors presented in Frishammar and Florén’s (2008) paper were used as

departing points for looking into prior research evidence of problems, challenges met by SMEs

in the FFE of NPD. For each factor, some specific challenges were found. Thus, for each of the

four elements of the model presented graphically at the beginning of the chapter, some

challenges are recognized.

Main overall success factors

in FFE

Main expected specific challenges of FFE

within SMEs

Idea refinement

Adequate idea screening

Early customer involvement

Create external linkages and networks (Hoffman et al.,

1998)

Complete a business environmental scanning (Kohn,

2005)

Support of idea generation with complex market

research (Trott, 2001; Lindman, 2002)

Consideration of valuable external information, by not

discussing it just informally (Mosey et al, 2002)

Keeping good communication with the customers

(Souder et al., 1997)

Integration of customers’ needs in the product idea (Kaminski et al., 2008)

Uncertainty of customer demand (White et al., 1988)


12

Presence of idea visionaries

Top management involvement

Cross-functional integration

Managing external relations very well (Ledwith, 2000)

External opportunities are mishandled or ignored

(Nassimbeni, 2001)

“Gray-box” integration (Koufteros et al., 2007)

Applying management techniques that help integrate

buyer-supplier efforts (Hartley et al., 1997)

Preliminary technology

assessment

Information processing

Early and well defined product

definition

Assessment of in-house and external necessary

technology for the new product (Macpherson, 1991)

Processing information from the value chain and other

institutional sources (Macpherson & Wilson, 2003)

Fulfilling the quality requirements and keeping the

technical content simple in the product concept

definition (Ali et al., 1995)

Product concept flexibility (Montoya-Weiss &

Driscoll, 2000)

Alignment of NPD with firm

strategy

Adequate degree of formalization

Remaining flexible to any external collaboration,

adopting open strategy (Lindman, 2002)

Use of formal screening methods and advanced market

research (Lindman, 2002)

Taking formal decisions instead of improvised

decisions (Flint, 2002)

Organizing formally the process of idea generation

with customer focus (Flint, 2002)

Table nr.1.The expected main challenges in FFE of NPD within SMEs in rapport with the

success factors of FFE

It can be seen through listing the challenges from literature, it is expected that SMEs will

confront quite a number a challenges during the FFE of NPD. However, some of them may be

present more or less during FFE, as the literature attributed them to the whole NPD process and

just indirectly to FFE. The table makes more obvious that many problems and challenges are

related to degree of formality that SMEs adopt in facing FFE activities, to their flexibility in

managing external contribution, information, internal resources and competences.


13

3. METHODOLOGY

3.1 Research approach

Qualitative research is considered to generate and develop new theories, whereas quantitative

research has the aim to verify and test previous theories (Bryman & Bell, 2007). In this paper,

the approach considered for research is abductive, a combination of the inductive and deductive

approach where empirical data are the basis for generating new theories, and previous theories

and literature serve as “a source of inspiration for the discovery of patterns that bring

understanding” (Alvesson & Sköldberg, 2009, p.4). Empirical facts and prior theories

complement and reinterpret each other while the research is carried out (ibid). The theories used

for the analysis of the empirical findings are structured around four themes which describe the

main problems and challenges of SMEs, analyzed in relation with the success factors of FFE

described in previous studies and grouped in Frishammar and Florén’s (2008) review. This

structure will simplify our analysis and find more easily the connection between categories.

However, we are not testing an existing theoretical model, but still we use previous studies to

enrich our knowledge on the field and to serve as support in our data collection and interview

guide’s construction. Thus, the deductive perspective of our abductive approach is reflected.

Nevertheless, the thesis studies a quite specific and narrow area, FFE within SMEs, and

empirical findings can provide us new knowledge about it. This knowledge can contribute to

generating new theories or a theoretical model and, from this point of view, our thesis’ approach

reveals its inductive side.

From the perspective of epistemological positions, qualitative studies are more related to

interpretivism and not to positivism which is the basis for quantitative research, as it employs the

same methods to test theories as in natural sciences (Bryman & Bell, 2007). In qualitative studies,

the researchers try with great attention to “capture data on the perceptions of local actors”

(Miles & Huberman, 1994, p.6). Our study aims to provide the perspectives of development

managers with regard to a period or phase preceding NPD process, which is often less structured,

chaotic, not delimited or without any formality. That is why an interpretivist approach allows us

to capture better the essential, interesting and subjective view of the participants about the

subject of this thesis. Furthermore, we can find ourselves in the position of generating new

theories, as the area of study still lacks knowledge and the empirical findings do not correspond

in large extent to existing data. Thus, the qualitative strategy could provide us the best results and

a deeper insight into what happens within SMEs, during the FFE.


14

3.2 Research strategy

In this thesis, we will use the qualitative research strategy, since this strategy suits better with

studying more in-depth social phenomena and facilitates the gaining of more knowledge and

understanding of a particular subject (Bryman & Bell, 2007). The explorative and interactive

features of research methods are representative of the qualitative strategy (Alvesson & Sköldberg,

2009). Since this paper's research problem is about an area in which there is still lack of data,

theories and empirical evidence, we consider that the qualitative approach will serve more

effectively in reaching the goal of this thesis. As the fuzzy front-end remains a complex topic

and to be further explored by other researchers, we chose to examine it through this strategy

because our focus on the challenges specific for this sub-part of new product development within

SMEs can represent a quite provocative and difficult subject to be described by the respondents.

In order for them to be able to describe the actual process of FFE, there are necessary extra

explanations and face-to-face meetings. Moreover, given the limited access to SMEs, the short

period for research and the complexity of the topic, we consider that the qualitative strategy is

more in line with our thesis’s purpose.

In qualitative studies, as Bryman and Bell (2007) argue, the emphasis is on the context and

details of the social setting of the phenomena being studied. Moreover, the authors say that the

processes and patterns over time of social events are important for qualitative researchers. This

reasoning is reinforced also by Miles and Huberman (1994) who assert that qualitative studies

capture better the context of the research. As this paper studies a phenomenon which is often an

informal process and differently perceived by companies, the contextual elements are very

important since they can provide us a deeper understanding and a clearer explanation of the

front-end activities. The respondents of this study are objective informants of the way this phase

is organized within their company.

3.3 Research design

For this thesis, we selected a research design consisting in two case studies because this choice

allows us to compare or find similarities and distinctions between the cases, according to the

variables expressed in the theoretical part and increase the generality of the study’s results

(Bryman & Bell, 2007). The comparability across cases is valuable in effectively analyzing the

collected data and in achieving warranted results and conclusions, in conditions of limited time

for research (Miles & Huberman, 1994). Using two cases only, can be considered by some to be

a limitation of our study. However, we think that comparison is possible between cases and

valuable conclusions can be drawn, as the sampling procedures were thought through.

For the sampling part in multiple-case studies, the conceptual framework and the research

question are the most important delimitation criteria and parameters in the sampling choices

(Miles & Huberman, 1994). Theoretical sampling in qualitative studies is made either through

minimizing or through maximizing the differences between cases and the technique used to

generate new theories is the comparison of data (Alvesson & Sköldberg, 2009). Our study has a

specific research question that limited from the start the sampling procedure, but still we needed


15

to consider criteria like the size of the SMEs, whether low-tech or high-tech industry, and the

level of emphasis that the company puts on the NPD activity. For allowing a greater flexibility of

the analysis, we chose two companies that have similar settings and fewer differences between

them. Both companies are situated in Halmstad, are medium-sized manufacturers, and are both

producing high-tech products, and they have a separate and well organized department for

product development within the company, so the focus on NPD process is high. As mentioned

before, due to the limited access and time for the research, we chose to focus only on mid-size

firms, as a first step towards opening the research on FFE within SMEs and for a better

understanding of how organizational size affects the challenges companies face during FFE. We

considered as relevant and important respondents for our study the product manager,

development manager or product developers. These persons are the most suitable for describing

what difficulties and challenges they encounter in managing the FFE activities, since they

coordinate the whole process of idea generation, technology assessment and conceptualization.

3.4 Data collection

The collected data in qualitative studies may consist of primary data like interviews and

observations or secondary data like documents, websites, etc. (Bryman & Bell, 2007). In our

research, the collection of data started with establishing the contact with the selected participants

and with the construction of the interview guide. The interview guide used in the collection of

data is semi-structured and follows the main sections from the theoretical framework. However,

the approach we undertook during the three interviews was to let the respondents to speak openly

about the FFE of NPD and its challenges within their company and then we used the questions

from the interview guide to touch upon different aspects of the FFE area that were not described

before.

In Company A’s case, we had two consecutive and separate interviews, firstly with the product

developer and secondly with the product manager. For Company B’s case, as the access was

quite limited, we took just one interview with the head of the R&D department, the development

manager. The discussions were recorded and transcribed, as these operations are helpful for the

further process of analysis (Bryman & Bell, 2007). Beside primary data, like face-to-face

interviews, we also used in the display of our empirical findings, observations made during the

interview and secondary data like information from the companies’ websites. This information is

about the organizational structure of the company and its departments and general data about the

company’s history, strategy, markets or innovational emphasis.

3.5 Data analysis

In our paper, the research question and the theoretical framework are well specified and the

sampling part is well outlined. Thus, we can say that we have a pre-structured case. In this

situation, as stated by Miles and Huberman (1994, p. 85), the analysis follows the next order:


16

A combination of within-case analysis and cross-case analysis will be used in examining the

empirical data. Cross-case analysis, according to Miles and Huberman (1994) presents numerous

advantages compared to analysis of single case study. It increases the level of generalizability, so

the findings are applicable to comparable settings; it deepens the understanding and explanation

of the phenomena by using multiple comparison groups, finding the negative cases that do not

follow the theory; it maintains uniqueness but still allows comparisons. There are two

approaches underlined by Miles and Huberman (1994) for analyzing multiple cases, case-

oriented or variable oriented. The former one provides specific and clear patterns for a small set

of cases, but the results cannot be generalizable to a large extent, whereas the variable-oriented

approach leads to probabilistic relationships valid for large populations, but does not take into

consideration causal complexities or multiple subsamples (ibid). In our study we have used the

variable oriented method, as this was more suitable in the context in which the focus is not so

much on finding particular challenges for some cases, but to attempt a generalization of the

challenges in the FFE of NPD, specific to a large population of medium-sized firms.

3.6 Research validity and reliability

In order to reach a high degree of quality, any qualitative research needs to fulfill several criteria

like internal and external validity and internal and external reliability (Bryman & Bell, 2007,

p.410). Internal validity represents the “match between researcher’s observations and the

theoretical ideas they develop” and the external validity refers to “the degree to which findings

can be generalized across social setting” (ibid, p.410). The findings of our study can be

generalized for populations that fulfill the same conditions as we have described in the sampling

part. The conclusions of the study will be the result of trustworthy and correct data obtained from

qualified people in the area, the development managers or product developers, who are regularly

dealing with FFE activities and confront the challenges specific to this phase. The data collected

from the interviews is valuable and precise, as the respondents described the FFE phase and its

challenges as they see it, but also answered researchers’ questions that were related to the

established framework of the research.

The external reliability consists of the capability to replicate a study, and to adopt a similar social

role to that of the initial ethnographic research. Researching FFE of NPD within SMEs can be

further a subject of other studies, as all the theories we used in our theoretical framework were

OUTLINE Field notes Coding Display data Conclusions Report

Pre-structured case

Figure nr. 3. Analysis process for pre-structured case


17

verified and tested before. The agreement between researchers over the observed events

determines the internal reliability of the qualitative study (Bryman & Bell, 2007). In our study,

both researchers took part at the interviews, at transcribing the collected data, and at the further

analysis. All the decisions, and the findings of the study, resulted from the agreement of both

researchers.


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4. EMPIRICAL FINDINGS

4.1 Company A

4.1.1 General company information

Company A is a medium-sized manufacturer, with 130 employees, located in the city of

Halmstad, on the west coast of Sweden. The company has a leading position within the

worldwide market in products like saunas, showers and steam baths, intended both for home use

and public facilities. The company has competitive advantages and strategic strengths in aspects

like breadth of product range, quality and design of the products and the level of technical

innovation incorporated in products. For assuring a high quality of the operations and of the final

product, Company A manufactures the components and assembles all the equipment within its

own production facility.

Company A has a long-standing history in innovation, aesthetics and quality. Starting with its

founder who, in 1950, invented a machine with heating elements for heaters and appliances, the

company focused over the time on continuously innovating and improving its products.

Company A has, at present, its own product development department that is constantly seeking

to develop and perfect the existing products and set the benchmark for quality in its industry. The

company has engaged itself in developing not only heating systems for saunas and steam rooms,

but also on adjusting the component materials and the aesthetic aspects of saunas and steam

rooms. Due to its policy towards NPD and advanced technologies, the company managed to

reach high growth and market leadership.

The company sells its products in Sweden, as 15% of total sales, the rest being exported to more

than 80 countries, the most important markets being Germany and France. One part of the sales

is made directly to final users; the other part is made through dealers. The material purchases are

made mainly from Swedish suppliers. The company has collaborations with external partners

like engineers, test laboratories, universities and other institutions for being able to implement

the latest techniques in manufacturing processes, in safety developments and consumer

legislation. Moreover, Company A is part of a group of three companies, the other two being

from Finland and USA that have the same activity profile and share part of their knowledge and

experiences in different aspects including NPD projects.

4.1.2 Managing the idea generation process

The need for a new product within Company A grows when the old one does not work well, or

specific customer demand appears. Mostly indirectly, and through distributors, the customers

communicate to Company A that they should update the products, or add more functionality.


19

However, there are occasions when they generate new ideas within the company, without any

suggestion from outside the company. The marketing department of the company is occasionally

involved in the idea generation process, as they have a closer connection with the end-users and

constantly receive feedback from them. Moreover, the sales personnel, technical support and

production personnel, may also influence this idea generation phase.

In the FFE phase, the company has difficulties, to a large extent, consulting the customers

because, in this very early stage, the customers usually cannot give concrete answers. However,

they provide their suggestions after using a product for a longer time, and this represents a

constant input in all the NPD related phases. There are occasions when Company A invites the

customers to visit the company, so that direct contact with product developers is possible.

Furthermore, at the entrance in the factory, there is a showroom of saunas, so that clients can see

the old products and suggest their ideas. Besides that, they have meetings with customers every

year, when the company participates at exhibitions and fairs, where some new products are

presented, and customers can make comments and offer potential new ideas.

The company does not use market research for generating the new product ideas; this is not a

regular tool or method they employ. The company will make the strategy according to what is

happening in the market. A large part of the input of ideas comes from company’s dealers who

filter the information they receive and transmit it to the company when a competitor is ahead,

when costumers have complaints or when an older product reaches the peak point of its life

curve and starts declining. Nevertheless, this process is time-consuming and may delay decisions.

Benchmarking, magazines and catalogues in their business line are also used as sources for new

ideas.

The company focuses on a good relation with glass and metal suppliers, as these materials are

important components of the final products. Both Company A and the suppliers come with ideas

for upgrading and developing these materials. Moreover, as the company aims at providing well-

being to final users, they need to add extra-options like appealing fragrances, aromas, sounds or

lights. For this, they need to seek help from other specialists, who advise them how to

incorporate these options within the new product concept. Their collaboration is useful, as it

helps the company to define the new product in a shorter time.

The selection and evaluation of the potential ideas to be further developed is not made according

to some clear and pre-determined criteria, but still it is not completely random. This idea

screening process is quite natural, since they have a bunch of ideas written down and it is just a

matter of priority. They evaluate whether the new product can be profitable, the time needed for

its launch, the costs and the necessary technology to be incorporated. Lack of time or market

pressure is the biggest difficulty in this idea formulation stage. The company would engage in

developing many new products, but the constant high volume of work forces them to give up at

many new ideas.

Besides the customers and direct suppliers, the company has also relations with other external

partners like engineering students from Halmstad University, consultants, engineers, designers.

Their involvement and idea contribution is important, as they have the expertise and the specific

knowledge to program, set the software or conceptualize and create, the early design of the


20

different new functions of the product. As they are from outside the company, with less contact

with the older products, they have the advantage of presenting totally innovative ideas.

4.1.3 New product development team

The department of product development in Company A plays a great role within the company, as

it is in charge of managing all the new product ideas and coordinating NPD projects. The product

developer is responsible for project planning and the technical part of the development of heaters,

steam generators and control systems of the saunas. The product manager has a major role in the

organization and coordination of the product range; he follows which products have increased or

decreased in sales, he analyzes and evaluates these statistics and then takes the necessary actions

for implementing the changes.

The product developer, development manager, product manager, marketing manager, quality and

production manager are the ones that take part in the decision process regarding a new product

design, concept or functionality. If a new product concept implies future high investments, the

CEO of the company will also take part in the decision making. Their meetings are formal

meetings called “product council meetings”, occurring every sixth week, and in which they

discuss new ideas and put ahead the advantages and difficulties for implementing them.

The company does not have a specific person acting as a product champion to promote the new

ideas, or keep in track of the development of the new product. The whole department is

responsible for the part of idea generation and product definition. The product developers have a

long list of new ideas written down, but the lack of manpower, skilled people or production

capacity, limits the number of ideas transformed into real projects. There are key targets to be

reached constantly by the product development personnel, so they cannot start new projects

before finishing the old projects.

When new opportunities occur on the market, the product development team prioritizes which

project is more important by considering mainly the competitors’ actions. Many times, the

willingness to perfect the definition of a new product concept takes more time, thus it prevents

the team taking other, potentially good, ideas into consideration.

4.1.4 Evaluation of concept feasibility

For the product developers of Company A, the need to update of some functions, options or

materials of the products becomes evident as a result of the opinions they receive from different

sources. Even though they intend to make the product as simple and flexible as possible when

they work on the new product, what they must always keep in mind is making the product

competitive. Before developing the new product, the company sees what the competitors` are

producing and try to make their own products better. It is a changing market, so the company

regularly needs to make sure that they will create the correct design and the correct functions.


21

Drawing the line, or stopping some part of generated new ideas, is the most difficult part when

defining the new product concept. The product developers try to make the product concept

strictly for customers’ preferences and with the technical content simple. For this, they aim to

define it more narrowly but, as the costs of adding more functions or options are reduced and the

focus on competitiveness being so high, they often create a complex product concept. If in the

further phases, the complexity of the concept will becomes problem, the product developers will

redefine it.

Before defining the new functions, the company usually evaluates its own technology and

capacities, but also considers the necessary external support. The company’s products must

fulfill high quality standards and have durability, as the environmental conditions, like humidity

and heat, are extreme. This fact implies that the materials they use from suppliers also need

improvements and changes. Evaluating a supplier’s capacity and their technical ability to

develop the components necessary for the new final product is more difficult. Since, in a new

project, not all the features or functions are developed, the company will assess only that

technology that is currently needed.

4.1.5 Organizing the FFE phase

The high level of innovation is one of the strategies of Company A to get a top place in the

whole industry. The company has consistently a high demand to develop new products and

increase the brand influence, mainly due to competitors’ actions. The vision and overall strategy

of Company A highlights the large focus the company directs to continuous innovation,

developing better, new products and coming up with improvements to the old products.

In time, as the company has increased its sales in other external markets, it had changed its

process of NPD, including FFE, focusing on a more formal system of decision’s adoption and on

involving more departments in this process. When the company intends to start the development

of a new product or a new function, a formal meeting is organized with the personnel of the

product development department, with the responsible people with the quality control and with

the marketing function. They decide which external partners need to be involved and what

technology, and knowledge, should be imported from them. This kind of meeting is, however,

not organized very often. The most common discussions are the informal ones, between those

directly involved in NPD.

When a new product idea reaches the product conceptualization phase, the company usually has

a formal meeting to discuss it. They evaluate its design, functions, the technology needed for

producing it, the costs and the effect on the market. When they reach a consensus, then the

project can be effectively started.


22

4.2 Company B

4.2.1 General company information

Company B is a medium-sized, high-tech company, which has 110 employees in Sweden and 50

employees in countries like Germany, China, USA, Italy, and Japan. Thirty five employees are

full-time engaged with R&D. The company produces network interface cards and products for

connecting together different industrial networks. All development is conducted at the head

office in Halmstad as are the majority of the manufacturing processes. Now, the company is a

world-leading supplier of communication technology for industrial automation.

The company focuses on industrial network products based on internally developed technical

solutions. It has evolved into one of the leading independent global suppliers of communication

solutions for industrial networks. The R&D team of the company develops both software and

hardware products with a special focus on developing protocol software for all industrial

networks. The company`s development efforts can be divided into development of new products,

maintenance and improvement of existing products and custom design.

Operations are conducted in close cooperation with production, and sales and marketing, in order

to develop efficient solutions. Our interviewee is the development manager of the company; he is

responsible for coordination of R&D department. The company has a basic technology as its core

knowledge which is used in 50% of the projects where customized products are developed. This

technology is modified for each project, so that it fits the customers` needs.

4.2.2 Managing the idea generation process

The company has three ways main to generate the new product ideas: one is through their

customers` requirements; another is when the product manager communicates with the sales

people who meet different customers with new product ideas; and the third is when the company

conducts market surveys and market analyses which show if some new products can be enhanced,

or if some function can be added to meet a specific need. The product manager and external

consultant companies conduct the market research for some specific areas, markets or segments.

The internal product development starts with the creation of a working group, where the

specifications of the new product are discussed. The company puts its efforts into having a close

connection with the customers and for this they organize formal meetings with them every year

to get their ideas for product improvements. However, for non-customized products, working

closely with customers is rather difficult.


23

Company B does not receive any information from their suppliers or other external partners in

the FFE phase; the only suggestions are concerned with the manufacturing aspects. This lack of

closeness between Company B and its suppliers is due to the fact that idea generation is made in-

house, and because Company B aims at being self-sufficient, without needing to import or

outsource parts of their development process.

The selection of ideas is made in the product council meetings in which operating managers, the

development manager, other key account managers and the CEO, participate, and they discuss

the business case for each idea, the sales volume, similarities or overlapping with company’s

strategies, the evolution in 5 -10 years of the product and the technology required. The decisions

are taken by consensus. Some of the ideas are not further developed because there is a lack of

resources for transforming each idea into an attractive product concept and, later on, into a final

product.

4.2.3 New product development team

The development team represents a large part of the total number of employees, almost 35%.

The organizational structure of this department reflects how the company tries to have the

development process formalized and clearly defined.

Figure nr. 4. Organization of Product Development Department

Development Manager

Product Manager

Design team1

manager

Hardware

manager

Design team2

manager

Embedded

design

engineers

Embedded

design

engineers

Hardware

designers

Core technology R&D

PC software designers

Test Engineers

Industrialization team


24

As the focus in company B is on developing high-tech products, many specialists are needed in

embedded design, hardware design, PC software design and in other areas. Thus, there is not just

one person that generates the new ideas and decides upon their transformation into concepts.

Other departments within the company are not largely involved, regularly consulted, in the FFE

phase, nor in the further stages of NPD.

The development manager, the product manager and the CEO are the highest decisional organs

in the FFE of NPD. The product manager, as is shown in the above figure, is the link between the

sales department, thus, the customers and the development department. He contributes a lot in

putting a customer-focused direction in the idea generation process.

4.2.4 Evaluation of concept feasibility

When the product council takes a decision about a product concept, usually this is quite complex

and firm, and not easily changed. If a small change is required, then it is not a problem to

redefine the product again but, if it implies greater efforts, then the council needs to reconsider

its decision, as the project schedule will be affected.

As almost half of the developed products are customized, clients’ needs are the most important.

The projects for specific customers have prior specifications established and, in this situation, the

concept feasibility is pre-determined and unnecessary. For own generated ideas, benchmarking is

a common method of examining whether a new product concept can register success.

Most of the technology is internal. When they evaluate ideas and conceptualize new products,

customers are not involved due to the fact, that, they cannot provide professional and specialized

suggestions. Only the product council meeting has the right to select ideas. However, Company

B needs also a lot of software which comes from outside the company. For this, previous

collaboration helps them to assess and be aware of the external technology needed for future

products. Still, the company does not want a major involvement of its partners in a new project.

4.2.5 Organizing the FFE phase

The company’s strategy is to grow through innovation, which is why each idea that can bring

high returns is carefully examined and formally discussed in council meetings, but also in

informal discussions within the R&D department and between departments. Using innovation

and product development is the main tool of Company B in expanding into other markets and

keeping their customers loyal. It has a very precise structure and delimitation of roles within the

development department. The new ideas have their foundation in consumers’ needs, expressed

either directly or through market surveys.

All decisions are made as a team after participants express their views of the new idea; individual

decisions are strongly avoided within Company B. The openness towards external collaborators


25

is limited, as a high-tech product development requires a very specialized input, and this can be

the best acquired by developing internal core technology and competences.


26

5. ANALYSIS

From our empirical findings we have deduced that the main categories of interest for analysis

which are related to the challenges that medium-firms encounter during FFE phase are different

from the categories we chose previous to collecting the data. Therefore, the analysis will be

structured in parts like external linkages, formalization of FFE phase, information collection and

processing, and construction of product concept. In the last sub-part, we summarize the result of

analysis and display them in a model.

5.1 External linkages

In Company A, the communication with customers on a general basis is quite good but, during

the FFE of NPD, when the new ideas for products are discussed, their involvement is rather

small. Furthermore, direct contact with customers is partly restrained due to the sales methods

the company mainly uses, through dealers. This may hinder the accuracy of the input ideas from

customers and can be later reflected in an uncertainty or lack of customers’ demand or market

acceptance for the developed product (Ozer, 2007; Mosey et al., 2002; White et al., 1988). In

Company B, since 50% of the total sales represent customized products, the connection and

communication with the customers are good. These close partnerships resulting from the

customization of products can be strategically used in identifying trends and developing skills for

market response (Kaminski et al., 2008; Souder et al., 1997). Nevertheless, in the actual FFE

phase of company’s own projects, the company does not communicate closely with its customers.

Therefore, from the perspective of good communication with the customers in the FFE period

(Souder et al., 1997), it can be argued that both companies use their customers as idea providers

for new products, but do not consult them in the further steps of evaluation of ideas or

conceptualization. This lack of communication, in some parts of the FFE phase, may result in

the further stages of NPD, in an increase of costs for developing wrong or unnecessary functions

or later on, in a poor market performance of the new product.

Both companies are open to external linkages and networks (Hoffman et al., 1998). Yet, these

linkages are employed to different extents by each company. In the case of Company A, besides

the connections with the customers, suppliers and distributors, they benefit from help in the idea

generation part from students, private consultants and engineers, and visitors at fairs. Its strategy

of openness towards any useful ideas and suggestions for improving its products is larger than

the one of Company B, in which the emergence of new ideas comes mainly from inside the

company, from customers or market research. Both for Company A and Company B, the

customers’ needs and wishes expressed through various channels represent the main factor for

starting to improve products through incremental projects (Bala Subrahmanya, 2005). Being

more open towards external contribution can be a tool of proactiveness for medium firms which

are often forced to import resources. Thus, collaboration and networking helps preventing FFE’s

problems to occur.

It can be noticed that comparing the two companies from the perspective of the management of

external relations, results are partly different from what Ledwith (2000) was describing. Since


27

both companies are medium-sized, with a less significant lack of resources and in a growing

trend, they are not in as much need of external and outsourcing as small firms so much external

help and outsourcing, even though they still engage partners outside the company and have some

collaborative R&D projects. Company A involves more outside resources and manages better the

relations created, whereas Company B focuses mainly on the networks it has with its customers

who are greatly involved in the development projects, especially in the idea production part. This

situation can be challenging for Company B, since internalizing FFE activities may lead to the

risk of using just pieces of information, and being unaware of the latest technology or capacities

that external partners use and thus, create a product concept that does not fulfils market’s

standards.

The above empirical facts can, be, however, be justified, as the products of Company B

necessitate more specialized and high-tech input which is harder to obtain from diverse sources.

For Company A, the saunas and the steam rooms are products which bring well-being, thus,

repeatedly consulting the final users prevents the failure of FFE’s results. From this point of view,

remaining flexible and open to all external help may seem challenging for some medium-sized

companies like Company B (Lindman, 2002).

In its relation with its suppliers, Company A is more involved than Company B, not just to the

extent of sharing the new ideas for improved materials, but also at the level of “gray-box”

integration, as this, Koufteros et al. (2007) argue, is helpful for SMEs in improving the product

development process. Company A has close relations with private consultants and engineers who

add their own capabilities in developing the new product concept. Instead, Company B uses just

the services of market research suppliers and some software suppliers. It does not involve other

suppliers or external collaborators so much in the FFE stage, since it has a large development

department and a more in-house approach towards NPD. Since Company A’s products reflect a

large focus on manufacturing, whereas in Company B, the products need to incorporate

advanced technologies and need several competences, it is explicable why the structure of the

relations with suppliers differs during FFE.

The management techniques used by Company A in the coordination of its relations with the

suppliers of materials or services during FFE include good communication, knowledge sharing

and use of supplier’s specific expertise. Hartley et al. (1997) assert that the efforts of buyers to

involve suppliers, and jointly to shorten the NPD period, including FFE, may not always turn in

positive outcomes. Yet, in the case of Company A, the development manager considers that the

collaboration with its suppliers improved their performance of FFE and reduced its period. In

Company B, as the main support from suppliers comes from consulting companies in market

surveys and software providers, this did not affect greatly the period of the whole NPD process,

but it helps to keep direct contact with the market and increase the performance of the new

product. Shortening FFE period is claimed to be a common challenge for all firms, thus

managing to reduce it with the help of suppliers can lead to an earlier launching of the new

product, and implicitly to a market advantage.


28

5.2 Formalization of FFE phase

The ideas that both companies receive from external partners are discussed formally in the

product council meetings (Mosey et al., 2002). In Company A, the participation of several head

departments like marketing, production, quality or product development, makes possible a

complete analysis of the new ideas, evaluation and screening of each one, and discussion over

the new product concept and its later functionality. Still, not all decisions and information are

formally approached. Within Company B, these formal meetings are organized in the same

manner. The analysis of the new product ideas and the feasibility of the concept are most often

discussed within them. However, these meetings involve fewer people than in Company A, the

product manager representing other departments as well. This fact may affect to some way the

FFE outcome, since the other departments are not involved in this formal structure of decision

making. Some important information may be left out, the feedback from customers or other

relevant data can be omitted.

From the perspective of formalization of FFE phase, it can be noticed that in the two medium-

sized companies, the process is more formal than informal, in several respects. The product

council meetings are organized on a regular basis, but not that often, every sixth week in

Company A and when needed in Company B. Flint (2002) presents that a more organized and

formalized idea generation and selection process which keeps, as the main priority, the

customers’ needs in mind, may influence positively the success of that product after launching.

In both companies, the generation of ideas is an informal process, whereas their analysis and

selection is formal. There are also informal discussions between the members of product

development department or with other departments like marketing and sales, but these are not the

premises for many of the choices made in this stage of NPD. From this point of view, finding a

balance between formal and informal approach is difficult for both companies. The empirical

findings reflect that these medium firms are still searching for the right formula of how to deal

with the FFE activities. Nonetheless, we notice that for high-tech innovative firms which are

developing products of high complexity, an approach towards more formalization is more

appropriate, but still challenging to reach.

In Company A, the formalization of the FFE phase has increased over time, as the company was

growing and expanding in more markets and became more competitive. In Company B, since the

emphasis on NPD is so high from the beginning, and the R&D department represents 35% of the

total number of employees, it had to implement a more precise and formalized system of

procedures for decision making, and internal and external collaboration. Yet, informal meetings

between members of the same or different department take place regularly within both

companies. These findings are in accordance with the theory of Atuahene-Gima and Evangelista

(2000) who argue that the R&D department’s collaboration with the marketing department

should be more informal rather than formal, the latter aspect being a barrier towards a positive

influence on NPD process. More cross-functionality within FFE in a formalized way will be

necessary for these two medium firms in the future, as they will expand. Until then, finding the

best combination of formal/informal systems of work within and between departments represents

a challenge.

As noticed in Company A and Company B, the FFE activities, the data analysis and the decision

process are formalized, since this allows the companies to better assess external information and


29

be aware of the market threats and opportunities (Kaminski et al., 2008). Both companies have a

separate, well organized department focusing on NPD projects. The companies are aware of the

importance of making the FFE process more formalized, as this will allow them to reduce the

uncertainty specific to this early phase, to screen the product ideas and analyze information more

efficiently. A more formalized approach towards NPD, including here FFE of NPD, is more

specific for larger SMEs rather than for smaller SMEs (Hoffman et al., 1998). Nonetheless,

within the product development department and other departments there are informal relations,

thus, the distribution of information and the decisions are made more rapidly (Freel, 2000).

Both companies are highly competitive and have good strategies for improving their market

position. Their key strategy involves continuous innovation and improvement of the products.

More formalization is required, argues Khurana and Rosenthal, (1997; 1998) in order to reach

the alignment of the product strategy with the overall strategy, starting with FFE of NPD. The

two medium firms already use formalization in some activities of FFE, but there is still the need

to organize more often the formal meetings and to involve more people from other departments.

Even though, more formality can prove to be advantageous for these medium firms in some way,

there is the risk of inhibiting the creativity of employees. This is why, finding a balanced

approach towards formalization can represent a continuous challenge.

5.3 Information collection and processing

The main sources of information for Company A for the FFE phase are the distributors, the

customers, the private consultants and engineers, the students, the glass and metal suppliers and

the other members of their group. The information received from them is analyzed and processed

and the most valuable suggestions, ideas, proposals are discussed within the product council

meetings. In Company B, the main information providers are the customers, the consultant firms

and the competitors, through benchmarking. Thus, we can state that both companies proceed in

accordance with what the literature advocates by processing and sharing various information

from their value chain or other sources (Bacon et al., 1994; Macpherson & Wilson, 2003;

Kaminski et al., 2008). Still, depending on much external help makes the medium firms

vulnerable in terms of the amount and accuracy of information received.

As shown by previous studies (Kohn, 2005; Trott, 2001; Lindman, 2002), scanning the business

environment and doing market research are important actions to be taken before starting a new

project in product development, since these can increase its subsequent success. In practice, as

we discovered in the two medium-sized companies, Company A and Company B, these actions

are partially completed. In the first case, of Company A, it is more difficult to complete a market

research, as the product buyers, like hotels, spas or different sports facilities, are different from

the final users, people. That is why for Company A, a scanning of the environment to see the

trends and consumers’ preferences, seems more appropriately made by participating at fairs and

exhibitions, by reading in magazines or catalogues about the newest technology and innovation

in the specific area of business or by keeping a close relationship with distributors, who are in

contact with the market and are aware of the competitors’ positions. On the other side, Company

B collects the information for FFE from the projects in partnership with its customers, from its

sales offices, through market surveys and annual meetings with its main customers. The data


30

analysis in both firms during the FFE phase needs to be based on complete and actual

information but, as the companies do not have the resources to collect it by themselves, there

appears the problem with the quality of data.

The literature indicates that SMEs often mistreat or ignore information about opportunities

(Nassimbeni, 2001), which are usually the trigging factor for the start of a new project, implicitly

the start of the FFE phase. The first medium-sized company, Company A, even though it sees

many opportunities in the market, has to focus just on some of them, due to a lack of resources,

mainly of manpower which could facilitate more projects in the same time. Also, high

competitiveness forces the company to choose only those opportunities that will bring them a

better market position. Since Company A does not have its own sales offices abroad and works

with distributors, it may lose or ignore some occasions due to lack of clear information

transmitted by distributors or their incapacity to analyze the business environment. In the case of

Company B which has its own sales offices in several countries, it is easier for it to collect the

relevant information about the market shifts, customer demand or other situations which may

constitute opportunities. However, working with consultants in market research and focusing on

the work with one category of customers, may limit the company’s access to a variety of

information.

5.4 Construction of product concept

In terms of the results of FFE phase, underlined in the literature (Cooper, 1988; Cooper and

Kleinschmidt, 1987) as being represented by a new product concept, the two medium-sized

companies deal with problems in finding a balance in the number of options, functions to be

included, in assessing the necessary level of technology incorporated in the new product and in

establishing the quality standards to be fulfilled. Most of the development projects that both

companies organize are incremental ones, when small or larger changes are made to older

products, thus the challenge emphasized by De Toni and Nassimbeni (2003) of not capturing all

the marketing requirements and innovation sources within a new product definition is less

pronounced.

Company A tries to include as many customers’ options and preferences possible in the product

concept, either by considering their suggestions and feedback received through distributors, by

direct contact when visiting the company headquarters or by meeting at fairs and exhibitions.

Company B, through its large market surveys, its annual meetings with customers and through its

orders for customized products, gets the necessary input of the functions and options that

customers request, in order to be included within the product concept. Therefore, when

developing the product concept and its specifications, both companies take into consideration the

customers’ needs and preferences, transmitted through different channels (Kaminski et al., 2008;

Lindman, 2002).

In defining the future products, Company A is aiming to keep the quality and competitiveness

high (Ali et al., 1995), but still the product concept comprises many options and functions, since

these do not involve extra costs. For Company B, defining the concept implies the same

procedures of considering the quality standards and its effect on the market. However, both


31

companies create a product concept with a complex technical content, despite the fact that

research claims the opposite as being more effective and less challenging for SMEs, as they often

do not own many of the resources to develop complex products (Ali et al., 1995). The two

companies create complex concepts due to the fact that both are high-tech firms, and these extra

functions are targeting for market advantage. Regarding the flexibility of the product concept,

both in Company A and in Company B, the definition of the product allows future changes or

redefining (Montoya-Weiss & Driscoll, 2000), except when the formal decision was made for

proceeding with the project.

Previous research of Macpherson (1991) shows that, in evaluating the technology needed for the

actual development of the new product, smaller firms, unlike large firms are often required to

consider also external participation. In our findings, we discovered that the two medium-sized

companies, during the FFE period, also need to make a preliminary assessment of own and

external technology and capabilities, since besides in-house technology, they necessitate external

services, expertise and knowledge. In Company A, the quality of the services of private

engineers and consultants needed in incipient phases must be evaluated, whereas in Company B,

the capacity of software providers is assessed when creating the concept for improved industrial

networks connectors and interface cards. From the perspective of needing to assess external

competencies, both companies share difficulties. They do not know precisely the quality of the

services and technology provided by partners before working with them. Therefore, it is

challenging and in the same time important for these firms to evaluate the external contribution,

as the risk of low feasibility of the product concept may affect the further activities of NPD.

The next table will summarize the above analysis aiming to emphasize the comparison between

the two cases on the four dimensions that are the basis for the analysis and research’s findings:

Company A

Company B

Result of

comparison

External linkages

- Customers act as

idea providers, but

are not involved in

idea evaluation or

concept

construction;

- It involves in the

FFE activities

external partners

like suppliers,

distributors,

students, private

consultants and

engineers

- The connection

with customers is

better when the

company has

customized products

than for its own

products, where

customers are

involved just at the

beginning of FFE;

- The new ideas

come mainly from

inside the company,

customers, and

market surveys, less

from external

partners;

- For both A and B,

the lack of

communication with

customers during

the whole FFE

period can result in

an extension of this

phase, increased

costs of the NPD or

poor market

performance of the

new product;


32

Formalization of

FFE phase

- The evaluation and

screening of the new

ideas are made

within regular

product council

meetings in which

the heads of

departments

participate;

- Product council

meetings are

organized every six

weeks, whereas

between these

meetings, informal

discussions are

common;

- Formal product

council meetings are

organized when

necessary during

FFE, whereas

informal

- The people who

are involved in these

formal meetings do

not represent all the

relevant

departments, this

may lead to

important

information being

left out;

- Both companies

have a formal

approach towards

analysis and

selection of ideas,

but for distribution

of information

within FFE and

idea-generation

process, they use no

formal structure;

- Finding an

effective balanced

way towards

formalization of

FFE remains a

challenge for the

two companies;

Information

collection and

processing

- The main sources

of information are

the distributors;

- The company uses

benchmarking,

participates to fairs

and exhibitions for

collecting necessary

information for

developing the new

products;

- The main sources

for collecting the

information are the

own sales offices,

distributors, market

surveys and

customers;

Both companies are

dependent on

external parties,

mainly distributors,

for collecting

information, thus

the challenge of

processing limited

or inaccurate

information occurs

during FFE;

Construction of the

product concept

- The company

needs to assess the

external technology,

competences and

expertise before

defining the new

product;

- The market

pressure forces the

company to create a

complex product

concept, comprising

many options or

specifications;

- The company

needs to evaluate

within FFE phase

the software

suppliers’

contribution for

NPD project;

- It usually creates a

firm and complex

product concept as it

aims to reach high

quality standards

and strong effect on

the market;

Both companies

face challenges in

assessing, during

FFE, the external

input necessary for

developing the new

product; the

companies meet a

challenge when

defining the new

product, in

determining the

complexity of the

product concept;

Table nr.2. Comparison summary of the analysis


33

5.5 Challenges of medium firms in FFE

Many of the authors who made studies on NPD with a focus on SMEs, including Woy (2007),

state that these types of firms usually face more challenges than the large firms, since they lack

resources for a proper NPD process and the market conditions are more restrained at present. In

this study in which two medium-sized companies are analyzed, the lack of human capital,

knowledge and specific expertise seem to be the basic cause for many of the challenges and

difficulties met in the FFE of NPD activities.

From the list of the expected challenges presented in relation with the success factors of FFE

illustrated by Frishammar and Florén (2008) on a general level, including for large firms, we can

state that for the two medium-sized companies, the most significant ones are related to

communication with the customers, following the opportunities on the market based on

information, keeping the technical content simple in product definition, and formally organizing

the idea generation process. In other aspects, Company A and Company B are quite different in

how they handle the FFE phase, thus the challenges they encounter differ.

In aspects of external linkages, the two medium firms face communication problems with their

customers. They cannot be consulted on an ordinary basis during the whole FFE phase, as they

are not able to offer specialized advice. When processing the information during FFE, these

medium firms often encounter the difficulty of lacking accurate or sufficient information, and

this occurs mainly because they do not have the resources to collect by themselves valuable

market data and so they need to use intermediaries, such as external agents for these activities.

The outcome of the FFE of NPD process is a new product concept, including some descriptions

of the functions, specifications, design or manufacturability. However, the companies A and B,

in order to develop a product concept that will be the basis for a competitive new product, need

external help, expertise, competences, in many cases, thus the construction of product concept

implies challenges in finding its appropriate complexity and assessing this external contribution.

Regarding the organization and the level of structure of the FFE activities, these medium firms

meet challenges in finding the right level of formalization, balancing between informal and

formal approaches. Decision making and data analysis are formalized activities, whereas

information distribution and assimilation are made informally between and within departments.

The result of our analysis is reflected in the next figure. The main challenges that medium firms

face in FFE phase belong to four categories, found as the most relevant after analyzing all the

data.


34

Figure nr.5. Challenges of medium-sized firms related to FFE of NPD

Challenges in

FFE phase within

medium-sized

firms

Information

collection and

processing ◊ Processing limited or

inaccurate information

Formalization of

FFE phase ◊ Finding a balance

between formal and

informal structure and

approach

Construction of the

product concept ◊ Determining the

complexity of product

concept

◊ Assessing external

technology and expertise

External linkages ◊ Communication with

customers during FFE


35

6. CONCLUSIONS AND DISCUSSION

6.1 Conclusions

Based on our research findings, we have deduced that there are several challenges met by

medium-sized enterprises during FFE of NPD process. As reflected in the analysis part, the main

challenges encountered by these types of companies are related to the external linkages used for

increasing the FFE performance, to formalization and structure of the FFE activities, to the

collection and processing of information from different sources, and to the value and quality of

product concept’ construction.

In terms of external linkages, our findings show that the most significant challenge for high-tech

medium-sized companies is to communicate closely with their customers during the whole FFE

phase, not only in idea generation aspects. Because of the fact that the technology they employ is

advanced, it is rather difficult to consult and involve customers, as they often do not have the

knowledge and the capabilities for providing valuable suggestions. This represents a problem, as

the new developed product needs to be fully addressed to customers in order to register success

on the market.

From the formalization perspective, our findings show that in managing the FFE phase, medium-

sized enterprises tend to formalize the decision making and data analysis process, but still keep

the informal approach in the collaboration between departments and within development

department. The informal aspects help them to be more flexible in information distribution and

sharing, and in taking decisions more rapidly. Nonetheless, finding a balance in this combination

of formal and informal aspects is challenging during FFE phase, as the market pressure is high

and stressing the companies to take rapid decisions. Our findings imply that the higher the

technology used in new product development process, the more formalized and structured the

FFE activities are.

The challenge in collecting and processing information during FFE depends in great measure on

the resources of medium-sized firms. If a medium firm is not resourceful enough to use its own

means for collecting the information about market, then it will face the challenge of processing

limited or inaccurate information, which will lead to missing opportunities.

One challenge in the construction of product concept is to determine its complexity. Finding the

right options, functions, specifications to be included or considered for the new product is

difficult. The quality of the product concept can be affected by the in-house technology and

internal resources, which are more easily assessed during FFE, are not always enough for

medium-sized companies. This is a challenge that occurs in connection with another challenge,

assessing external resources. These appear because medium-sized companies producing high-

complexity products cannot evaluate so well in such an early stage the external technology or

expertise, thus the product concept can be less precisely defined.


36

6.2 Practical implications

This study has managerial implications, providing more information and knowledge about the

FFE phase within medium-sized firms and, more specifically of the challenges, difficulties,

deficiencies that these firms deal with in the early times of product development. Our findings

can be helpful for all managers or heads of departments who want to increase the effectiveness of

the FFE period, to shorten the time to market of the new products and to reduce the costs of the

NPD projects.

We can suggest managers take some actions in order to avoid these challenges. With regard to

the problem of communication with the customers during the FFE, medium firms should try to

organize more projects in close collaboration with them and consult them repeatedly during FFE

period. Even though their support does not involve professional or specialized input or ideas,

they can contribute with feedback by describing their needs and expectations form the new

product. Furthermore, we consider that a higher level of formalization is more appropriate for

those medium firms which register high rates of growth, and less effective for incremental

projects in firms which use less advanced technology. When collecting and processing the

information within the FFE phase, in order to assure a good quality of information, medium-

sized firms can try, as they register growth, to internalize more the activities that affect the FFE’s

performance.

When medium firms intend to open up own sales offices, they should consider that this would

improve the quality of the information collected and thus, increase the efficiency of FFE phase.

It would help them to perform their own market scanning and collect precise data. In terms of the

challenges related to the construction of product concept, the same measures can be helpful,

acquiring more expertise and internal competences will help them to clarify the level of

complexity and to avoid wrongly assessing the technology needed for further development.

6.3 Theoretical implications

For the academic area, the results of our study bring additional value. The contribution we make

to the research of FFE is relevant since our findings show that organizational size is a

determinant of the management and challenges of FFE activities. We found that medium firms

meet several challenges during FFE phase that occur mainly due to the specific limitations that

SMEs have in resources, information, knowledge.

In accordance with what the literature shows, we can state through our study that the larger the

size of the company is, the more formalized the structure and FFE process will be. We know

from the literature that large firms face uncertainty, lack of structure in FFE activities and the

tendency is to formalize them more. The literature suggests that SMEs are more informal in their

FFE and NPD processes, but more formality would improve their performance (Freel, 2000;

Kaminski et al., 2008). However, in our research, we found that medium-sized companies use

formalization quite largely in this period, more than expected. This may be explained in the


37

context in which the medium firms have their strategic focus on innovation, using it as the main

source for growth. Furthermore, as Paasi et al. (2007) argue, in incremental innovations, the

uncertainty of information is smaller than in radical innovations, thus firms which move

important decision making in earlier phases of FFE can manage better the uncertainty specific to

this phase. This means that medium firms having incremental projects can formalize more easily

the early phases of FFE, starting with opportunity identification or idea generation, and increase

the success of product launching. When it comes to small firms, we can speculate that the level

of formalization of the FFE phase is smaller than in medium firms, due to the fact that there are

just few people working with NPD, and more structure can reduce their flexibility in decisions.

The literature highlights that necessity of external resources and linkages appears to be more

stringent in the case of small and medium-sized firms rather than in the large firms. Bala

Subrahmanya (2005) argues that communication with customers should be very good in

incremental innovations, but our study shows that, during the FFE phase, this is a challenge, at

least in some aspects. This, however, makes sense as the customers do not have the ability to

provide professional help when medium firms develop complex products. We can assume that,

for small firms this challenge may be avoided since their customers are often local and reduced

in number, and they usually try to focus on developing products which require less advanced

technologies.

The results of our study show that medium firms are often “stuck in the middle”, since their

objectives are often to achieve growth through NPD, but their access to resources and

information is limited. That is why creating a complex concept, sustained with accurate and well

processed information, is often a real challenge for this size of firm. Complex product defining is

more specific for large firms, whereas medium-sized firms focus instead on more simple

products (Ali et al., 1995). Once more, these findings can be interpreted in the light of the

industrial and technological context in which medium firms operate. We can assume that in

similar environments, small firms, the same as medium firms, aim to grow through innovation,

therefore this challenge can occur in their case as well.

6.4 Shortcomings of the study

One shortcoming of our study is reflected by the fact that the two Swedish manufacturing firms

chosen in our sample come from a more innovative environment, compared to other medium-

sized enterprises from other regions. It is known that many Swedish firms operate in an

innovative medium and that they are highly specialized and use advanced technologies. The fact

that both companies are high-tech manufacturing firms may also constitute a shortcoming since

their focus on innovation and new product development has made them evolve and learn to avoid

many of the challenges and problems specific to the early phases of these processes.

Another limitation may be our focus just on medium-sized firms, whereas the literature we have

reviewed for this research refers also to small firms. Furthermore, our empirical data describe the

challenges that medium firms face during FFE of incremental innovations and not radical ones.

As we have mentioned in the methodology as well, our intention is to open up the research on

this topic, while future research can study other aspects of the FFE stage within SMEs.


38

Since the analysis and interpretation of the data collected have been made from the researchers’

own perspectives, the trustworthiness of the study might be affected. The design chosen for

reaching the purpose of the study, two case studies, could also represent a limitation over the

reliability and degree of generalizability of the results.

6.5 Further research

The shortcomings of our study may well represent a starting point for future research. Even if

this study attempts to fill a piece of the gap in the research over what happens within medium-

sized firms in the “fuzzy” times of new product development, there are still a lot of gaps of

knowledge to be covered on this matter. Since our study focuses on high-tech medium-sized

manufacturing firms, future research may examine small-sized manufacturing or service firms or

the differences and similarities between low-tech SMEs and high-tech SMEs from different

environments, stable or dynamic. In addition, an interesting study can be made on the challenges

in FFE of radical innovations within SMEs, as a comparison to our research results can reveal

new relevant findings. Other studies can be based on the organization and challenges of FFE

activities in SMEs from other geographical areas or in SMEs where the interest in the innovation

of firms is lower.

There are many other aspects, beside challenges, to be examined within the FFE phase in SMEs.

The connection between the management of this phase and performance of NPD, between

leadership styles and proficiency in FFE, can be the subject of other research. Moreover,

quantitative studies can be made in order to increase the generalizability and the reliability of the

results we found in our study and to strengthen the relation between organizational size and the

management of FFE activities.


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APPENDIX 1

Interview Guide What is your position within the company?

Can you shortly describe company’s activity profile and its policy towards NPD?

A. Managing idea generation process

How do you generate the new product ideas? Do you have any help or contribution from outside

the company? What do you see as problematic, hard to deal in this situation?

When ideas were generated, who or what kind of team or individual could promote the idea to

stakeholders to seek and establish commitment (and is commitment important in your firm in

order for NPD to be efficient)?

What is the background (education, the position within the company, the years he has worked in

the company, or even the shares) of the one who serves as Project Champion(s)?

Do you use any tools or methods, like market research for deciding what product idea needs to

be further developed? If not, how do you do it?

What role are your customers playing in NPD projects? Are you consulting them even from the

beginning (idea generation, technology assessment, concept)? How does this work? Challenges?

Do you think that your selection and evaluation of the potential ideas to be further developed is

made accordingly to some clear and pre-determined criteria? Is this done formally or informally?

How do you weed out the potentially good from the bad when ideas have been refined? How do

you screen?

Do you coordinate your relations with external partners in the NPD projects, and how? Do you

find these relations necessary for NPD’s success even from the time when you have the idea of a

new product in mind?

B. NPD team

Who is conducting and participating in the product development projects in your company? Are

there employees from other departments of the company or external partners who normally take

part in the decision regarding a new product design or concept? If there is no team, who does the

work?

Do you have any common projects in NPD with your supplier, customer or other agencies,

institutions? If so, what are the difficulties you encounter in the early part of the project?


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Do you particularly focus on maintaining a good relation with the suppliers? What challenges

you see in their feed-back when it comes to early NPD activities?

Are there any occasions when individual decisions in regards to a product idea, its potential

design and conceptualization prevail over common formal decisions?

Do you consider your company is regularly following the opportunities that occurred on the

market starting with developing the product concept to fit that opportunity? What are the

challenges with this kind of activity?

C. Evaluation of concept feasibility

What do you take into consideration before developing a new product? Do you take into

consideration only your company’s technological, professional capacities before developing a

new product or also your partners’?

When developing the concept of the new product, do you leave room for future changes? Do you

have any way that you consider the future aspects of product functionality, manufacturability?

How?

Are your customers’ needs the most important aspects considered when your company develops

a new product concept?

D. Organization of FFE

Do you think your company normally has a formal or informal approach towards the early times

of NPD? Do you have any time planning or organized activities within this phase of NPD?

How do you take a decision regarding a product idea, possible design, and product concept? Is it

formally, with consulting other departments or just a decision on a moment?

What difficulties do you find when defining the new product concept, its design and

specifications?

Does your company formally organize the process of generating ideas?

Are your customers’ needs assessed and integrated in the new product idea through formal

processes?

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