The Fuzzy Front End of

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The Fuzzy Front End of
Outsourced
Product Development
Brad Barbera, NPDP Director of New Product
Development and Innovation Blyth, Inc.
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The Fuzzy Front End of Outsourced Product
Development
Open Innovation vs. Outsourced Innovation
Outsourced Innovation should be considered a
subset of Open Innovation
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The Fuzzy Front End of Outsourced Product
Development
Introductions
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The Fuzzy Front End of Outsourced Product
Development
Almost all companies outsource some part of
their Research and Development (RD) work1
90
If so many companies do this, there must be a
good understanding out there of how to do it
right. Right?
1Visions Magazine, July 2004, Goldense Group
Survey
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The Fuzzy Front End of Outsourced Product
Development
Objectives of this presentation
1) Provide an understanding of what Best
Practices Theory suggests for outsourcing
innovative product development efforts
2) Share the Experience of actually implementing
an outsourced innovation project for a
New-to-the-World product
3) Recommend an Approach to outsourcing
innovation efforts based on what has been learned
from experience
4) Offer Contact with someone who loves to
theorize, experiment, discuss, debate,
pontificate and mutually grow through exchanging
knowledge
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The Fuzzy Front End of Outsourced Product
Development
Outsourcing Product Development Theory and
Practice
In theory, there is no difference between theory
and practice. In practice, there is. Unknown
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The Fuzzy Front End of Outsourced Product
Development
Outsourcing Product Development Why Outsource?
The best companies outsource to win, not to
shrink. Thomas Friedman, The World Is Flat
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The Fuzzy Front End of Outsourced Product
Development
Theory
Why Outsource?
Four potential reasons to consider outsourcing
1) Access to Technology and other Capabilities
2) Minimize Business Risk
3) Speed New Product Development cycle times
4) Internal Resource Alignment
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The Fuzzy Front End of Outsourced Product
Development
Practice
Why Outsource? The Sterno Flameless Experience
Assessment of our resources showed

• Needed market research

• Needed research and development

The critical needs were for expertise and capacity
Important note dont underestimate the internal
resource requirements when outsourcing!
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The Fuzzy Front End of Outsourced Product
Development
Outsourcing Product Development How to
Outsource?
It usually takes more than three weeks to
prepare a good impromptu speech. Mark Twain
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The Fuzzy Front End of Outsourced Product
Development
Theory
Preparation
Plan for Outsourcing

• What are the desired objectives from outsourcing?

• What core competencies are needed?

• What is the scope of the service being
  outsourced?

• What defines success? How is performance to be
  measured?

• Who will be the internal linkage with the
  external organization?

• What are the risks? How will they be mitigated?

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The Fuzzy Front End of Outsourced Product
Development
Theory
Outsourcing Best Practices2

• Executive Sponsorship

• Structured Co-Development and Project Initiation
  Process

• Co-Development Project Teams

• Partner Selection Process

• Partner Management Process

• Co-Development Metrics

2Rick Hoole and Ed Howland, Lessons Learned from
Outsourcing RD, PRTMs Insight, October, 2005.
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The Fuzzy Front End of Outsourced Product
Development
Theory
Selecting an outsource partner
What outsourcing model will be followed?

• Turnkey
• Transactional/Pay-for-Service
• Joint Development Partnership
• Licensing
• Other

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The Fuzzy Front End of Outsourced Product
Development
Theory
Selecting an outsource partner (continued)
Who will own the intellectual property?
The Outsourced Partner
The Company
Joint Ownership
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The Fuzzy Front End of Outsourced Product
Development
Theory
Selecting an outsource partner (continued)
What resources do they possess?

• Intellectual Acumen
• Technical
• Customer/consumer
• Business

• Capital/Financial

• Capacity

• Networks

• Reputation (Ethical considerations, working
  style/culture)

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The Fuzzy Front End of Outsourced Product
Development
Theory
Selecting an outsource partner (continued)
Sources to Consider
Note In todays global marketplace, you are not
limited with regards to geography, either!
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The Fuzzy Front End of Outsourced Product
Development
Practice
The Sterno Flameless experience unexpected
challenges

• Initial partner ran into financial troubles that
  ended our relationship

• Re-reviewed patent literature, found some IP with
  licensing potential

• That IP owner had sold rights, so contacted third
  potential partner

• Third supplier introduced us to an RD outsourced
  service provider

• Providers capabilities led us to consider
  developing our own design

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The Fuzzy Front End of Outsourced Product
Development
Practice
Selecting an outsource partner (continued)
The chosen RD partner was selected on the basis
of

• Technical Capability

• Business and Consumer understanding

• Cost of Services

• Cultural Fit

• References

The Market Research Firm was selected on the
basis of

• Familiarity with Industry

• Previous Experience

• Broad Service Capabilities

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The Fuzzy Front End of Outsourced Product
Development
Outsourcing Product Development When to involve
external resources in the process?
The keen spiritSeizes the prompt occasion,
makes the thoughtStart into instant action, and
at oncePlans and performs, resolves and
executes! Hannah More
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The Fuzzy Front End of Outsourced Product
Development
Theory
Factors Affecting When to Involve External
Resources

• Resource Requirements of the project

• Degree of Willingness to Share Confidential
  Information

• Cost (at least in theory)

NDAs and other contractual arrangements can
mitigate both information-sharing risk and cost
risk.
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The Fuzzy Front End of Outsourced Product
Development
Practice
DEFINITIONS3 Opportunity A business or
technology gap, that a company or individual
identifies Idea A high-level view of the
solution envisioned for the problem identified by
the opportunity. Concept A well-defined product
or service description, that includes the primary
features and customer benefits combined with a
broad understanding of the technology needed.
3Adapted from Peter A.Koen, Greg M.Ajamian, Scott
Boyce, Allen Clamen, Eden Fisher, Stavros
Fountoulakis, Albert Johnson, Pushpinder Puri,
and Rebecca Seibert, Fuzzy Front End Effective
Methods, Tools, and Techniques
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The Fuzzy Front End of Outsourced Product
Development
Practice
When to Involve External resources
For Sterno Flameless, both Market Research
provider and a Research and Development provider
were involved in the Fuzzy Front End
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The Fuzzy Front End of Outsourced Product
Development
Practice
The Sterno Flameless Idea
Food Container
Water
Reactant
A container of exothermic reactant and water is
placed below a food container.
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The Fuzzy Front End of Outsourced Product
Development
Practice
The Sterno Flameless Idea
Food Container
Chemicals mix and begin to react
Mix the reactants . . .
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The Fuzzy Front End of Outsourced Product
Development
Practice
The Sterno Flameless Idea
Food Container
Food Container
Food absorbs transferred heat from pouch
Reaction continues to generate heat as long as
desired by the customer
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The Fuzzy Front End of Outsourced Product
Development
Practice
When to Involve External resources (continued)
We chose to involve our outsourced partners
throughout the concept development process
But first

• Enacted Non-Disclosure Agreements (NDAs) with
  all parties prior to market research and concept
  development

• Contracted for IP ownership

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The Fuzzy Front End of Outsourced Product
Development
Practice
When to Involve External resources (continued)
Concept development was truly a team effort

• Internal cross-functional team members
• Marketing, Sales, Sourcing, and RD

• External Market Research, RD, Key Component
  Suppliers

• Potential End-Users from a variety of backgrounds

• Facilitated by an external ideation expert

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The Fuzzy Front End of Outsourced Product
Development
Practice
When to Involve External resources (continued)
The Sterno Flameless Fuzzy Front End Development
Process

• Conducted concept development in multiple cities

• Full Team Involvement Superior Output

• Generated hundreds of raw, simple concepts

• Honed to dozens of more defined and refined
  concepts

• Used a hybrid Delphi/voting process to get to
  most promising concept

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

• Marketing Director was key contact for Market
  Research firm

• RD Director was key contact for RD firm on
  technical issues, Marketing Director was key
  contact on business issues

• Additional support was added as necessary through
  NPD process, with Marketing Director as key
  contact

Important!

• Dont underestimate the value of co-location

• Dont underestimate the internal resource
  requirements
• project management
• knowledge transfer

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The Fuzzy Front End of Outsourced Product
Development
Practice
The Sterno Flameless NPD Process
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The Fuzzy Front End of Outsourced Product
Development
Practice
How to manage the NPD process Procedures

• Existing Stage-Gate system was followed

• Outsourced contracting was done on a
  Stage-by-Stage process

• Additional outsourcing was done
• Safety and Regulatory
• Graphic Design
• Public Relations

Current Status customer excitement is high
resolving some final technical issues before
broad distribution
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The Fuzzy Front End of Outsourced Product
Development
Summary and Lessons Learned
A learning experience is one of those things
that says, You know that thing you just did?
Don't do that. Douglas Adams
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The Fuzzy Front End of Outsourced Product
Development
Summary of Theory The Seven Habits of Highly
Effective Outsourcing in the Fuzzy Front End

• BE PROACTIVE Understand your culture,
  capabilities, customers, and competition, then
  establish clear objectives

2) BEGIN WITH THE END IN MIND Plan the work
then work the plan through NPD process
3) PUT FIRST THINGS FIRST Protect intellectual
property

• THINK WIN-WIN Develop a relationship from which
  you can both benefit

1Shamelessly adapted from Stephen Covey, The
Seven Habits of Highly Effective People
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The Fuzzy Front End of Outsourced Product
Development
The Seven Habits of Highly Effective Outsourcing
(continued)

• SEEK FIRST TO UNDERSTAND, THEN TO BE UNDERSTOOD
  Open, effective communication is critical to a
  successful partnership

6) SYNERGIZE Even in the fuzzy front end, the
partnership should yield more fruit than the
parties working separately

• SHARPEN THE SAW Take time to review the process
  with your partner(s)

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The Fuzzy Front End of Outsourced Product
Development
Summary of Practice Learn from What We Could Do
Differently

• More Rigorous Up-Front Preparation and Planning

• Dont underestimate the Internal Resource
  requirements

• Do smaller, easier projects first, to Work Out
  the Process

• Dont underestimate the power of Co-Experience

• Ensure Crystal Clarity on deliverables and
  expectations

• Fully Open Communication with your partners

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The Fuzzy Front End of Outsourced Product
Development
Summary of Practice Learn from What We Did Right

• Executive Sponsorship and corporate coordination

• Know Thyself strategically sound decision to
  outsource

• Conscientious Partner Selection well researched
  and evaluated

• Involve Outsourced Partners as Teammates

• Follow a Structured NPD Process

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The Fuzzy Front End of Outsourced Product
Development
Questions and Answers
It is not the answer that enlightens, but the
question. Eugene Ionesco