Andrew Herrington
Pateo Consulting
www.pateo.com
email:x  pateo.com
UK - Mobile - 077 36717312 / Canada: (519) 635-5308

Excellent communication during a product development can make a business successful; bad communication can break a business. This article seeks to illustrate these extremes by comparing what might happen in two similar companies competing in the same market. The article shows how the style of the businesses management influences communication within the business and how communications effects the collection of information and the translation of that information into proprietary knowledge for the business. The article is a distillation of practical experience from many product development situations.

Most businesses have structures or processes for initiating, justifying, defining, starting, executing and finishing projects. These explicit processes use a variety of methods - waterfall, concurrent, RAD, theory of constraints etc - for organizing and running projects. There are specific roles and titles associated with the people who lead or manage projects - for example Project Leader, Project Manager and Program Manager. These people use a variety of tools for planning and recording progress (for example Microsoft Project). These processes, people and tools are the components of product development management systems that provide the structures around which the communication between the people in product developments occur.

Rarely, however, is the Communication between People Explicitly Managed, even though the whole product development management system is wholly dependent upon interpersonal communication and intergroup communication.

In my opinion successful team-based product developments rotate around:

- the effectiveness of the transfer of the description of the projects objectives to the people involved, and their consequent perceptions about the project.
- the consequent evaluation of the nature of the projects objectives made by the project team members
- the strength of motivation, and the level of excitement, felt by the individuals in the team as a result of the perception and personal evaluations of the project as translated into interest, knowledge, creativity and work output through the course of the project.
- the degree of team synergy that occurs during the course of the project - the extent that the team becomes 'greater than the sum of the individuals' - through-out the entire length of the project, through all its stages.
- the negotiation of compromises to the projects objectives as understanding of the demands of the project emerge and as the project progresses.

All of these individual and team characteristics are strongly modulated by the effectiveness of communications between team members, the project team as a group, and between the team and the employees, leaders and executives who are outside the product development team. (The list is not exhaustive - there of course also have to be adequate physical resources, budgets etc for successful projects to happen. However a highly motivated team can minimize the need for these material resources through its efficiency and creativity.)

The article looks at the communication that happens during two stages (Product Incubation and New Product Definition and Justification) in a product development project using, as vehicles, "Mediocre" and "Superior" quality of communication scenarios. It describes the resulting outcomes from the viewpoint of the business as a whole. To emphasis differences between the two business I paint a deliberately black and white picture.

Situation 1: Communication in the New Product Incubation Phase.

In the "Mediocre" communication business there is a vague Vision statement that has been developed because the business thought it fashionable. The statement, which has not changed in two years, appears mainly in material prepared for customers. The business has a Business Plan prepared primarily for investors and shareholders; it is not distributed to employees. There is also a frequently updated Operating Plan assembled by the Chief Financial Officer with inputs from the senior individuals. It is dominated by inputs prepared by the executive currently feeling pressure from the CEO - either the VP of Sales, VP of R and D or VP of Production. It is not shared with employees. The business believes in minimizing R and D by "milking" existing products for as long as the VP of Sales believes there is a market for them; new products are regarded as a threat to be put off for as long as possible.

In the "Superior" communication business the new product has been generally anticipated in the Practical Business Vision and in the Business Plan, reflecting the desire of the business to grow, as well as competitive developments, technology changes and customer knowledge carefully collected from current and earlier generation products. The outlines of the "Necessity Statement" (a type of Requirement Specification) are, at this time, still gelling in various minds.

The Mediocre Communication Scenario

A salesman is going on a trip to meet existing and potential customers. His only brief is to 'move current product'. He has some knowledge about competitors current product from discussions with other sales people and his own research and has some knowledge of how the customer uses the product from his initial sales training and from previous trips. He has been shielded from R and D by his boss, the VP of Sales and Marketing, who feels that 'R and D is always late and they must not be distracted'. The Salesman travels on his own, talking to customers and making notes about possible future sales, pressing customers on these possibilities. He listens to customers likes and dislikes of the existing product and makes notes of these issues but does not know how to respond to the customers concerns because he has not been briefed about the views of customers outside his territory, other than by word of mouth from other sales people. He makes irregular reports of sales possibilities to his boss.

The salesman spends relatively little time with each customer and feels that he is something of a nuisance to the customer, sometimes being able to see only purchasing people, rather than the people who make the critical buying decisions for his product. His expensive 5 day trip nets him a total of 15 contact hours with 9 people, two of which are senior.

Immediate Outcome: The salesman feels on his own and out on a limb, because he is not integrated into the business. His attitude is sensed by customers who gain the impression of a badly managed key supplier. The sales trip does not land many new orders and acquires little new information - meaning that the trip was a waste of money, as well as customer time. The trip has only served to create uncertainty in the market, as well as in the salesman's mind. When he returns from the trip he avoids people outside the sales department because he does not want to communicate his concerns to them. His trip report avoids the negative aspects of the trip because of his need to avoid creating negative feelings in the head of his boss; he starts looking for another job because of lack of confidence of the business future direction and concern for his security.

The VP of Sales, looking at order bookings and sensing the attitude of the sales force reluctantly realizes that he is seeing the writing on the wall - he needs new products soon or there will be a decrease in sales. He discusses the issue with the CEO, and starts to prepare the CEO for the need to invest in new product R and D. Because he does not understand R and D and has been previously effected by delays in new product introduction he decides that he must minimize risk by severely limiting the VP of R and D's room to maneuver. This is, in his view, reinforced by the businesses overall strategy of being 'market driven'.

The Superior Communication Scenario

A salesman is going on a trip to meet existing and potential customers. His brief is to 'move current product', to gather as much information about the customers usage of the existing product and the purposes of the new customers anticipate using the product for, and to ask customers about competitive activity. He is financially rewarded for selling existing product and feels part of the business because he regularly briefs engineering and product definition groups about customers comments and receives support from these groups. He has been trained in the application of the product and is aware of competitors recent moves. On this trip he is taking with him an engineer, who is job is to listen carefully to all customer comments and offer assistance to customers. This engineer is a key R and D person who makes one or two such trips a year, as do all senior R and D people in the business. The engineer has a specially printed business card that identifies him as a customer support person. He has been trained to be confident with the customer and in how to leave the ownership of the customer contact with the salesman. He is often able to help customers and will personally support specific key accounts if the sales department requests this.

On this 5 day trip the salesman has set-up 7 meetings with a total of 43 people, using the companies communication strategy of making a presentation describing the companies current product line, with the engineer making an outline presentation of new products anticipated in the next 9 months. The salesman has worked for the preceding three weeks to obtain non-disclosure agreements for this presentation from major customers to build interest in his visit.

The salesman knows his visits will be well received and therefore presents a good image to the customers. He is able to quickly update his sales forecasts with senior managers and to readily confirm that the customers are satisfied with most aspects of the current product. The engineer identifies a minor, irritant product problem present at three customers. He arranges for a quick fix to be developed and supplied to these customers in the next 2 weeks, with strong support from the VP of R and D who understands the businesses customer support-customer understanding strategy that his department co-developed with Sales department, who are responsible for customer support.

In the discussions with these customers the engineer hears two customers indicate that plant floor space was becoming a problem. He asks why this is a issue and is told that the customers end product now requires the use of new, space consuming, environmentally friendly cleaning processes. This is new information that the engineer recognizes because he is familiar with the customers application of his companies product, having received training from customer support engineers.

The Salesman and the engineer prepare a joint email each day summarizing information received and outlining possible orders. The email is widely distributed in both Sales and Marketing, and R and D.

On his return to the home base the engineer and the salesman give a presentation on their trip to a group of sales people and a multi-discipline group of engineers from across the company, during an on-site lunch hour information exchange meeting that is set-up following many such sales trips. Attendance at the meeting is voluntary; the company pays for lunch. Discussion after the meeting in the central coffee-discussion area of the facility leads a mechanical engineer to suggest the development of a space-saving vertical variant of the next product. At the weekly sales meeting the salesman mentions this possibility to another salesman who knows that floor-space at customer locations is very expensive and is able to place a dollar value on saving floor space.

Outcome: A higher margin vertical variant of the product is included in the new product necessity statement as 'desirable'. The mechanical engineer has time to consider different design approaches and is able to create a basic design approach that is usable conventionally or vertically at little extra cost. On the salesman's next visit he is able to pre-sell the new vertical product at three customers by briefly mentioning it. One customer is prepared to be the launch customer because he is able to avoid moving to a new facility.

Situation II: Communication in the New Product Definition and Justification Phase.

The "Incubation" phase has passed and the two businesses are pressing ahead urgently with defining a major new product.

The Mediocre Communication Scenario

The Sales and Marketing group is assigned the task of defining the new product by the CEO in a one-on-one conversation with the VP of Sales. In a separate conversation the VP of R and D is advised that the definition of a new project is underway, in accordance with the companies strategy of being market driven.

The Sales and Marketing group draws on its knowledge to draw up a detailed Requirement Specification for a new product using the existing product as a starting point, including language that defines how the product should be implemented. It indicates a tight delivery schedule, to limit R and D freedom, expenditure and risk. The specification includes an amalgam of new features from competing products and limitations developed from complaints from customers handled by the VP of Sales. The target product cost is developed from the VP of Sales projections for following years and his view of the businesses margin objectives.

The VP of Sales and Marketing has the requirement specification approved by the CEO, and then passes it to the Research and Development VP.

Outcome: The Research and Development Group closely follow the Requirement Specification during the product development. The new product is somewhat late and buggy. During the development three significant engineers leave the business. Product introduction is lackluster, with traditional customers clearly disappointed and making only conservative purchases. The sales staff finds out that customers have established good working relationships with a mid-sized competitor but they are unable to find out what the competitor has developed until 4 months after the product launch when a salesman is shown a major installation of the competitor product that has significant new features that he does not understand. Within a year the company has lost 50% of its customer base to the competitors product line. There has been a high turnover of sales staff during the period of product development and market introduction, leaving the sales department with insufficient trained staff.

The Superior Communication Scenario

The CEO holds a discussion meeting with everybody in Sales and Marketing, R and D, Customer Support and Finance to present the newest iteration (3 updates per year) of the companies Practical Business Vision and to describe the Business Plan for the next 18 months. The discussion meeting starts at 12.00 noon with a catered lunch and extends well into the evening, continuing until questioners are exhausted. Everybody has been aware that a major new product has been anticipated by previous versions of the Vision and BP.

The CEO formally starts the business on the steps needed for the new product development to occur, describing the process to be followed and reminding the audience on the desirability of their participation. In the course of the discussion meeting the CEO uses a multi-media show prepared by an outside company to refresh everybody's understanding of the businesses direction and presents video-taped interviews with customers to demonstrate the importance of the business to its customers. The CEO answers many questions, directs questions back to the audience and encourages the audience to expand on points they make for the benefit of everybody present. He eventually closes the discussion meeting with an analysis of the recent performance of the company on the stock market, showing how the stock price has reacted to events in the companies marketplace and reminding everybody about how the value their stock options is tied to the companies performance.

The Product Definition Group (comprising people from across the company who will not directly participate in the product development) then develops a "Necessity Statement" that is intended to challenge the R and D people to produce an optimum product by giving them a very well defined set of freedoms and constraints as a 'sandbox'.

The statement clearly lists functions, parameters, features and constraints as "essentials", "desirables", "attractive", "would like to have", "if they can be done for free" and "hooks to the future", as well as well described and justified limitations. It does nothing to describe the implementation. In developing the "Necessity Statement" (NS) the group draws on every source of relevant knowledge across the business, ensuring that almost everybody in the business has an opportunity to participate. This automatically includes information that is collected from outside the company by every employee as a part of their formal responsibilities. The NS uses the language of the customer as far as possible and includes estimates of the dollar value placed on features by customers. The NS also includes information that guides the R and D group in trading cost, risk and specification against delivery time, taking into account likely competitor actions during the product development time.

Outcome: R and D people were excited by the opportunities presented by the NS and were able to rapidly identify a highly effective design strategy that fitted well into the development time-performance tradeoffs. During the time-pressured development R and D staff turnover was at a record low and the VP of R and D was able to use the new products technology as a drawing card to bring in fresh graduates and experienced people, despite the usual tight market for such people.

The new product that had the following characteristics:

- 35% lower manufacturing cost than before
- significant improvement in major performance parameters
- a group of major new features that proved attractive to all major market segments, together with a long list of improvements and less significant features
- built-in 'hooks' that would enable major variants to be introduced to market over the following 6 months following initial launch, allowing the rapid expansion of the company into new market segments
- new product was introduced to market with fewer problems than ever before because an important customer permitted installation of a pre-production prototype, permitting the customer to re-design his operating strategy and the company to debug the production product effectively

The companies market share doubled over the following year as the successful product introduction confirmed the stock markets view that the company was well managed and the already existing 'well managed' stock price premium increased. The success of the project left employees feeling good and ready for the next bigger objective. The business created a large group of excited and trained people ready for the next major growth stage; a group that is used to learning what the business next needs and responding to those needs.

Why did the Outcomes occur the way they did ?

Mediocre Communications Scenario

Actions of the CEO: These reflect a highly directive, non-participational approach that emphasizes the need for control over business efficiency. The one-on-one conversations prevent discussion of all the available information in the business and therefore ignore valuable knowledge in the businesses history as well as ignoring knowledge held in other parts of the business.

Actions of VP of R and D: Excluding the R and D manager from discussions is de-motivating for him and for his department. No attempt is made by the company to motivate staff via challenging objectives so it is highly surprising that they are de-motivated and leave ! Modern technical people know that they must update their knowledge or loose their market value, so if they are placed in situations where they become stagnant they must leave the business for their own security - hence the staff turnover.

Actions of the VP of Sales: The VP of Sales reflects the Control orientation of the CEO when he attempts to manipulate R and D via schedule limitations and in his attempts to control the product implementation. His attempts to manipulate R and D will be recognized as such and will cause irritation and weakening of the business already limited 'team spirit'.

Effects on employees: The salesman became unhappy and insecure and with good reason - he was unsupported in the field and was not part of the business. He was simply a lonely individual, not part of a team, not part of the business. The R and D people were 'at arms length' - not really part of the business, badly motivated - they probably felt that they were an impediment to the business, instead of being at its heart. The atmosphere in such a business is usually highly political and chaotic, which eventually gives the business a bad reputation in the product-market and in the job-market.

Overall: The overall situation is reflective of a lack of understanding of the nature of knowledge based business, instead reflecting historical 'command and control' attitudes that assume that senior people know everything there is to know and that employees are essentially some kind of robotic extensions of their right hand. The senior managers assume that they are the business, where in fact their responsibilities are to facilitate the businesses successful operation.

The "Superior" Communications Scenario:

The Salesman in the field felt supported and connected to the business; he communicated information to the business and was able to see the businesses interest and response to the information. He positive attitude was felt by customers. None of this was accidental - the business arranged deliberately for these things to occur. Much of the communication was horizontal and it was uncontrolled by the VP of Sales, emphasizing the businesses real and critical trust in him.

The CEO treated the initial product development meeting as a 'led meeting' - one in which he facilitated the meeting in a deliberately planned direction whilst encouraging everybody to have a relevant and perhaps exhaustive 'say'. His objective was to draw everybody into the process and to encourage motivation by both financial and personal satisfaction routes. His attitude - explicitly stated - was to facilitate the achievement of the businesses objectives by whatever routes were available. He described to the employees how the Practical Business Vision and the Business Plan were been created by groups of senior and expert knowledge employees. The result was to make everybody feel involved and challenged. Similarly he explained the Necessity Statement development process, and in the process set-up the intellectual and business challenge for both the Necessity Statement development group and the R and D group. The process created a series of overlapping, informed teams that considered themselves as much the centre of the business as the senior people involved. In the process all the businesses information and knowledge was harnessed to achieve market success.

Summary:

This article seeks to emphasize:

Managing communication - deciding how to manage getting the messages (information and knowledge) that the business wants to get to its employees
Leading communication - showing everybody in the business how to take risks to identify and explore the value of information they frequently individually and uniquely have
the need for the perception of inclusiveness by everybody in the business - to get the best from everybody, everybody has to feel involved
The need to put resources into communication - it takes thought, and money and time to communicate to a diverse group of knowledgeable, involved employees
The role of communication in exploiting knowledge - the plusses that result from using planned, organized situations to communicate information across the business to transform that information into knowledge for the business
The permanently changed role of senior managers - senior managers have to acknowledge that they cannot know everything about the business and that they therefore cannot direct the business in the old hierarchical way. They have to facilitate taking the business in the direction that the businesses has chosen to go in. They provide leadership in creating the knowledge environment in which all the businesses micro-decisions are made daily by all the employees. A key point is that the number of senior managers involved is relatively small, hence changes in approach are initially confined to those people, who have to become evangelists for the new approach. (The process of choosing the direction and the role of communication in that process is, of course, a major topic in itself.)
The value of sharing information and knowledge across the business, in front of the whole business - making sure that information and knowledge gets the widest exposure so that all employees get an opportunity to use it and add to it, and because the process of exposing information and knowledge makes everybody feel involved.
The need to recognize that everybody in the business has a unique perspective, unique information and the ability to turn that perspective and information into valuable knowledge for the business - if they are motivated and connected to the whole organization by deliberately planned communication opportunities, systems and knowledge that has been distributed for the purpose of bringing everybody into relevant, informed communication.
The perception of the business as a system of people that has to be managed as a people system. The system has to be constantly designed and redesigned to reflect the business size and direction - and current design has to be 'sold' to every person in the system all the time.
The value of publicly trusting people - the recognition that people want to be relied on and that they are motivated by others reliance upon them.

© Copyright 1999-2004 Andrew Herrington Pateo Consulting

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© Copyright 1999-2004 Andrew Herrington Pateo Consulting