New Product Development Structures: The Effect of Customer Overload on Post‐Concept Time to Market

Abstract

In corporate policy statements, seminars, journal articles—even in television commercials—the message comes through loud and clear: To remain competitive, we must do a better job of listening to our customers. Through close contact with customers, designers can more accurately identify market requirements, quickly refine product specifications, and thus reduce time to market. However, too much customer input can create confusion and duplication of effort, which ultimately increases time to market. In other words, some firms run the risk of over‐listening to their customers. In a study of three global players in the electronic component industry, Srikant Datar, Clark Jordan, Sunder Kekre, Surendra Rajiv, and Kannan Srinivasan explore the effects of having too much input from customers. Specifically, they examine the relationship between a company's new product development structure and the volume of customer input, which in turn can affect time to market. The high‐tech, fast‐cycle firms examined in this study employ two distinct new product development structures: concentrated and distributed. A concentrated structure locates all product designers in one facility. This facilitates cross‐product learning among designers, but limits designers' contact with customers and process engineers. A distributed structure disperses new product development among numerous manufacturing sites, giving designers close contact with customers and process engineers. However, a distributed structure limits designers' opportunities for cross‐product learning. Analysis of 220 new product efforts reveals that the distributed structure offered a time‐to‐market advantage as long as these firms efficiently managed the level of customer interaction. When designers received input on the product design from no more than 25 customers, the distributed structure provided shorter time to market than the concentrated structure. Beyond the 25‐customer level, time‐to‐market performance of the distributed structure degraded quickly and at an increasing rate. In such cases, more effective management of customer interaction might allow firms employing a distributed structure to enjoy the benefits not only of customer input, but also of improved coordination between product designers and process engineers.