14 March 2008

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How Organizational Culture Affects New Product Development

Project managers working on new product development projects (NPD) are well familiar with the complex challenges of managing such endeavors.  Global competition, shortened product life cycles and other critical issues are putting increased pressure on organizations to deliver new products on time, on budget and up to performance requirements.

A previous article – “Measuring Performance in Product Development,” PMI Community Post, February, 2008 – looked at the question of measuring performance in NPDs. An article in the December, 2007 issue of the Project Management Journal explores the related question of what factors influence project performance when new products are being developed.

Impact of culture on NPD project success. Many researchers have examined the effects of project-level factors on NPD performance.  In contrast, the article entitled “New Product Development Projects: The Effects of Organizational Culture,” by Wallid Belassi, PhD and Alex Z. Kondra, PhD, of Athabasca University, Canada, and Oya Icmeli Tukel, PhD, of Cleveland State University, USA, focuses on the largely overlooked question of organizational culture. The authors based their study on the premise that culture impacts strategy, processes and project outcomes.

Those project managers striving to identify specific initiatives that could improve NPD project performance may benefit from reviewing the researchers’ findings.

Key findings. By referencing a range of existing research and literature on organizational culture the authors tested the effects of culture on new product development projects. They used an approach designed to measure project performance in three independent areas—customer satisfaction, commercial (financial) success and technical success. They collected survey data from top managers at 95 U.S. manufacturing companies.

The researchers examined possible connections between NPD project success and organizational culture as measured in three areas—work environment, leadership and results orientation. They found the strongest evidence of connection in the first and second areas:

• Positive work environment. The more positive the work environment, the more commercially successful a company’s new products are.
  
  Organizations should foster a culture that encourages workers to make a maximum effort, makes them comfortable in unfamiliar situations and free to express their opinions to management. This culture is one of trust and full participation, and one where employees can discuss job-related and personal matters alike with their superiors.
  
  Organizations with a positive work environment also tended to be more technically successful and to achieve better customer satisfaction.
  
  When employees perceived their work environment positively, project performance outcomes tended to be better.
  
  This supports established research indicating that job satisfaction has a beneficial impact on worker commitment.

• Strong top management leadership. Organizations with strong top management leadership tend to be more commercially successful than those with weaker leadership.
  
  Managers must set clear goals, encourage employees to participate in decision making, delegate the task of finding ways to meet strategic goals, and encourage workers to explore new ideas. Leaders must value everyone’s ideas and demonstrate interest in their employees as human beings.
  
  Organizations with strong leadership are also more likely to be technically successful in their development of new products.

In general, then, the authors’ research supports the idea that organizational culture can affect the performance of NPD projects.

Consequently, any project manager charged with delivering improved product development project performance may find several useful and previously unexplored ideas to consider by reading the full text of the article in the Journal.

PMI’s Project Management Journal is a peer-reviewed journal “dedicated to advancing the understanding of project, program, and portfolio management through empirical investigation and theoretical research.”

PMI members may access the full text of the article when they logon as member to the new PMI.org and go to Resources > Publications.

To submit a manuscript, please refer to PMJ Submission Guidelines and send to PMJournal@pmi.org.