Flexible Friend: The Role of Project Management in the Development of Products Destined for the Financial Services Sector

By Phil Edwardson, Managing Consultant at PIPC

Project, June 2009

New product development is often considered the domain of the creative set; concept to implementation – and, therefore, success or failure - controlled almost entirely by the Marketing function. In reality many organisations find that their most creative employees are not necessarily good at putting the required structures in place to turn ideas in to reality. A lack of structure can lead to wasted time, effort and spiralling costs. As a result, many organisations are turning to project management methodologies and experienced project managers to deliver the right balance between creativity and discipline in new product development.

Project management methodologies offer organisations a logical and proven way of structuring new product and service development initiatives. Such methodologies have been utilised extensively within IT and business transformation programmes for many years and are now part of the fabric of many commerce operations. However, for new consumer product and service development this is a relatively new phenomenon. That is not to say that project management skills have not previously been applied here, but points to the fact companies have typically relied more on the abilities of creative teams, less on structured processes or the support of a seasoned project specialist. As companies look to reduce costs and get more out of their R&D efforts, this is changing.

There are three ingredients for successfully developing new products and services: carefully tailored market and product research; customer testing at critical points during product development; and structured delivery processes that convert designs and ideas into tangible results. Finding all three ingredients within an organization is a challenging task. Blending them together adds additional complexity. Here, we shall explore how each element can lead to better new product and service outcomes.

In the development of a new pre-paid credit card product from a major European bank, market conditions including competitor activity meant that the company needed to move fast in developing a competitive customer product from scratch. It was a new and unproven initiative, which meant that there was also internal scepticism over the business benefits of such a product. It was incumbent on the project team to generate powerful arguments to persuade the executive management of the bank to invest money and resources in the product. It also needed to produce these fully researched and validated arguments within aggressive timelines.

The use of project management methodologies allowed the new product development team to mobilise quickly, setting key deadlines and ruthlessly managing deliverables against them to ensure timelines, even at this early stage, were met. It further ensured that a clear framework was developed that led to the creation of a compelling business case based on sound analysis that stood up to executive scrutiny. More specifically, the framework allowed the team to identify the commercial arguments, validate which were the most attractive market segments, and develop clear descriptions of the product for later use at the marketing stage once the product was launched. The result was executive buy-in and progression of the new product to the next stage - a result that most likely would not have been achieved without the use implementation of robust projects methodologies.

When setting timeline expectations for this early stage of market and product research, as indeed any stage, it is important to remember that not all products will require equal scope. The above example is from retail financial services, which in itself covers a range of activities. In some financial services cases, simply changing an interest rate or fee could be described as a product development. More demanding may be to bring together and link products and services to offer bundled packages. And most sophisticated of all would be to develop mass customisation of the service so that each customer has a personal experience which is tailored to his or her needs. The identification, selection, targeting and development of entirely new services will require the most time; 6 months would be a reasonable timescale for these first stages of truly new customer proposition.

Indeed, in applying project and programme methodologies to any consumer product development, at any stage, it’s important to remember that there’s no “one size fits all” solution that can be applied universally across organisations, across all industries. Instead, tailored approaches are needed with consideration of the organisation’s internal and external circumstances, looking at specific details such as product lifecycles of existing products. Market and product research needs to be carefully tailored to suit the culture, capability and maturity of the organisation.

A second case study, also from the financial services sector, involved a new player in the industry, which had grown quickly and established itself as a market leader in a short time. The young management team was justifiably proud of their achievements and in particular of the fact that they were regarded as a company that was fast, responsive, fashionable and quirky. However when it came to developing new products to sit alongside their original product set, management found that they limited capabilities.

Furthermore, the parent company – a slower more structured institution – wished to use this new channel to market established products of its own. The project team’s mandate was to find a way to put a structure in place for the purposes of new product development that would provide the parent company a degree of control whilst allowing the innovative child to have the necessary freedom to innovate.

In both cases, project disciplines have benefited the organisations in their new product development endeavours. It is clear, though, that in each case, the need to understand project management methodologies was only a part of the solution and, arguably not so important as understanding how best to mix the most appropriate parts within the existing corporate framework to achieve the best results.

A tailored solution allows a new project discipline to embed much easier in to an organisation. Often, when introducing such a tailored new product solution in to an organisation, it forms part of a temporary project framework. This is a sensible first step, but, ultimately, a project framework should form part of ongoing business operations. This enables new product initiatives to tap into existing, appropriately tailored, resources and processes more easily for long-term value.

The second ingredient for successfully developing new products is the enabling of rigorous customer testing at critical points during product development. Again this needs to be structured so that the reaction to proposed products and services can be captured and played back into the development activity but is most successful when it relies on existing channels of customer feedback and contact. This can range from the look and feel of websites, for instance, to the structure of fees and charges. Allowing time in the development cycle for a series of customer reaction and feedback sessions can enhance the product offering at first launch or in later phases.

A clear goal would be to embed the customer experience and feedback loop into the culture of the organisation so that product development is a natural part of the management process driven by customer needs.

The following chart depicts a desirable process whereby a virtuous circle of feedback exists, allowing the organisation to predict likely customer behaviour. The chart demonstrates how outcomes of a new product, such as increased sales, product relevance and revenue can be identified. As more customers’ needs are being met, this drives them to modify their behaviour and the loop starts again. At each turn in the cycle, robust operational processes are designed to systematically develop propositions.

The final ingredient is to enable a structured delivery processes. This is an area where project management techniques are ideally suited. The effective delivery of the new products/services will quickly come to depend upon the efficiency of the sales function, the delivery channels, operational support and monitoring areas.

Central to all these activities is gaining the support of internal stakeholders in order for new business and operational models to be created. In most situations detailed business cases will be developed to draw together the cost and benefits of each new product. Once the go ahead for the delivery of the new product/service has been secured, structured governance will ensure timescales and budgets are met. This should include progress reporting and risks and issues management procedures.

Where budgets are concerned, the cost of a project will always be a function of time and resources required. The speed of product development (the time to market) is the key to commercial success. Each month lost in delivery of new services is a month of extra development cost and another month for the competition to catch up and get ahead. This is where project management structures really come into their own for the development of new products and services as they allow business leaders to map out key milestones and the critical path along which the project must move to be successful. This helps significantly with highlighting the important role internal stakeholders play in bringing all aspects of the new product together and show how a delay by one area can have a critical impact on the overall project. Furthermore, these techniques also assist with the identification of the skills and resources that will be needed to successfully deliver the project and enable the organization to identify internal resources and consider external options where necessary.