New product introductions (NPIs) are a tricky nut to crack. According to a 2018 LNS Research report the average manufacturer invests 25% of its personnel into new product introductions (NPIs), yet only “56% of new products meet all NPI success criteria.” With increasing pressure to deliver products to market faster and cheaper, biotechnology and medical device companies are looking for new ways to innovate. One way to achieve this goal is to speed up the NPI life cycle.
In a life sciences environment, day-to-day operating costs are significant. Even at the smallest of companies, the cost of doing business adds up quickly. There’s payroll, of course, but there’s also the cost of lab instruments, materials, real estate, and IT to consider – and that’s just for starters! There’s a reason for the old adage that time is money: the longer it takes for a company to deliver a product to market, the more costs it incurs before it begins seeing a return on its investment in the NPI cycle.
Consider a company with a $5 million annual operating budget. Let’s say there are approximately 250 working days in a typical calendar year, give or take (5 working days/week x 52 weeks/year, minus 10 standard holidays). That operating budget averages out to approximately $20,000 per working day. Now, obviously, costs aren’t flat; no company is spending exactly $20,000 day in and day out. But for the purposes of this thought experiment, imagine the lumpy costs any organization experiences are smoothed out to a clean $20,000 a day. If this company can speed up its NPI life cycle by just one week, that’s $100,000 worth of savings they can realize. Speeding up the NPI life cycle by a full month can translate to nearly half a million dollars in savings.
While the math above is an oversimplification of the complex world of organizational financial management, it nonetheless highlights an important truth: faster NPI life cycles mean greater savings. Of course, an organization doesn’t stop operations once an NPI reaches the end of its life cycle. Instead, the operating capital that would have been dedicated to finishing out the NPI can instead be rolled over into the next NPI or strategic internal project. Successfully completing an NPI means quicker returns on the corporate investment in this product. On the other hand, shifting away from an NPI that does not appear likely to succeed means avoiding sunk costs. Either way, faster NPI delivery (while adhering to appropriate quality controls and standards) leads to greater business value delivery.
As we discuss faster NPI delivery, another important concept to cover is the phase gate review. A phase gate is an intentional checkpoint in a project where the team takes stock of progress, reviews deliverables, and obtains approval regarding procession to the next phase of the project. When well-planned, phase gate reviews can help organizations ensure they fail fast when it comes to their NPIs. Reviews with well-articulated success criteria ensure that projects unlikely to meet NPI success criteria are stopped early, and resources are transitioned to new endeavors. There’s a delicate balance in finding the right number of phase gates – enough to ensure issues are identified early, but not so many that NPIs are mired in red tape that slows down their progress.
Getting products to market as quickly and as cost-effectively as possible is a key goal for most biotechnology and medical device companies. Maintaining a streamlined and efficient NPI process is one important way to achieve this goal. Speeding up your NPI life cycle by eliminating unnecessary red tape, implementing thoughtful phase gate reviews, and relying on a strong project management team to guide the team can deliver compounding impact to your organization’s bottom line.