Value is a function of risk and return. Every decision either increases, preserves, or erodes value. Activities undertaken to launch new products can cause risks which need to be effectively managed if the return of business growth is to be achieved. Risk management is integral to the pursuit of product launch excellence and strategic minded organisations do not strive to eliminate risk or even to minimise it, a perspective that represents a critical change from the traditional view of risk as something to avoid. Rather, these organisations seek to manage risk exposures across all parts of new product launch processes. To do this, organisations require a risk management process that is practical, sustainable, and easy to understand. The process must proceed in a structured and disciplined fashion. It must be correctly sized to the organisations size, complexity, and geographic reach.
Many organisations assume that establishing stretch objectives and accepting challenges from its customer is enough to achieve better, faster and more profitable products. Yet in reality implementation teams for new product launch are not always clear on what needs to be done. In the pursuit of “Faster”, teams can cut corners in following the process and can miss key steps in early product development and introduction stages. The result is a multitude of risks introduced during product launch and uncontrolled change implementation, leading to poor “right first time” quality and eroded profit margins, due to money spent on correcting errors. Moreover considering the complexity of collaborating with engineering, supply chain, quality assurance, and manufacturing, planning and executing seamless risk management in a new product launch environment is always challenging.
Casting a wide net to understand the universe of risks is a good starting as long as they are assessed and prioritised to help and focus attention of both the team and senior management. This would require a common set of assessment criteria to be agreed. Typically risks are assessed in terms of impact and likelihood. Something else to remember is that risks do not exist in isolation and risk interactions need to be managed. Even seemingly insignificant risks on their own have the potential, as they interact with other events and conditions, to cause great damage or create significant opportunity. The results of the risk assessment process then serve as the primary input to risk responses whereby response options are examined, cost-benefit analyses performed, a response strategy formulated and risk response plans developed.
Over 60 percent of Industry Forum’s NPI and Lifecycle management client engagement had risk management as an improvement topic. You may start by asking below questions related to risk management practices within your teams responsible for launch of new products:
- How do we identify risks during project implementation?
- How do we record and categorise risks?
- How do we prioritise risks and select an appropriate response action?
- How do we communicate NPI risk management methodology and practices within our organisation?
If you would like to discuss any of the responses to above questions please get in touch.