Screening Overview
A classic NPD question is whether success is built on the quantity of ideas (making lots of "$2 bets") or fewer, higher quality ideas ("having better at bats").
As a general rule, "more" tends to be appropriate during the ideation stage when the goal is creativity bounded only by a modicum of practicality ("innocent until proven guilty"). But, successful companies are reported to put 10 times fewer new product ideas into development per successful product as unsuccessful companies.
So, an effective NPD process is, in effect, a funnel with a large number of initial ideas sequentially pared down to the chosen few with the highest potential. The screening stage is the first tollgate in the paring process.
In essence, the process of screening and prioritizing NPD ideas is a function of three factors:
(a) Strategic attractiveness: Does the initiative enhance the company's competitive position by leveraging existing (or prospective) strengths to capitalize on an opportunity, or neutralize a competitive or technological threat?
(b) Financial attractiveness: Are profits (long and short-run) sufficiently high relative to required front-end investment (ROI) when project risk is considered?
(c) Capability to execute: Does the company have the requisite skills and necessary resources to complete the project and support the launched product?
These factors - which are invariably blends of hard (quantitative, objective) and soft (qualitative, subjective) inputs - must be consolidated and critically assessed in absolute (vis-a-vis pre-defined benchmarks or hurdle rates) and relatively (project to project rankings).
Companies often fall for predictable traps during the screening process:
(a) Focusing disproportionately on financial attractiveness, favoring incremental initiatives with smaller investments and quicker apparent paybacks (and unfortunately high vulnerability to cleverly "managed" projections).
(b) Stressing questionable strategic attractiveness (e.g. "must match competition", "must offer a full line") when financials are unacceptable
(c) Overestimating execution skills and underestimating required time and resources, putting projects in a vulnerable position from the start.
(d) Succumbing to organizational politics and mangers' clout that polarizes judgments and biases project evaluations.
Again, the management key is to have a structured screening process in place that includes predefined evaluative criteria, rigorous fact-based scrutiny of inputs, and a formal method tracking of results (an "invisible hand" that may contain unwarranted initial optimism).