Company organisation for product development

Organisation and organisational changes were a significant part of food company management in the 1980s and 1990s; this management structuring and restructuring affected product development. Companies bought or amalgamated with other companies to obtain new brands and new products, and either brought together the product development and R&D groups in the two companies and then reduced the size, or dropped the product development group in one company. Then it was found that the various technologies in the conglomerate companies did not match, so they divested themselves of some areas and went back to their 'knitting' or core group. Other companies decided that they were only in marketing and sold off their processing plants and technologies; some decided that cost-cutting was the name of the game and divested or at least reduced their R&D departments. In all of this reorganising, the processing and marketing technologies were certainly split apart and in many cases were reduced, and product development was absorbed into one or the other. Today there is a need for a more dynamic management system that can grasp the idea of total technology and also be aware of changes occurring both technologically and in society.

There is no right or wrong structure for product development management. The place of product development will be determined for individual companies on the basis of:

• company strategies and objectives;

• industry environment;

• economic climate;

• company's existing product mix;

• level of technical orientation;

• level of market orientation;

• personnel involved;

and dare we say, the prevailing fashion in management! 6.8.1 Formal organisations

On the whole, product development is a misunderstood or perhaps underrated profession. This often results in the product development function becoming an appendage rather than central to company strategic thinking. This in turn leads to product development becoming the domain of marketing or technical, mainly because senior management does not realise what it is and what it can do. Product development can be made to work with almost any organisation providing there is a commitment to product development from top management and a product champion, but the type of product development and its effectiveness and efficiency vary. Marketing tends towards incremental product changes, production to cost reductions and R&D to radical innovations.

Technical

'Technical' is often the home for product development: this may be R&D, production, laboratory or engineering as shown in Fig. 6.14. R&D is often the home for product development in large multifunctional food companies, as it is the base for new scientific and technological knowledge in the company, and also in primary production because of the long time needed to breed new plants

Fig. 6.14 Technical product development.

and animals. The first problem is whether to organise product development within the individual scientific disciplines or to have separate product development groups, in other words split the R from the D (Urban et al., 1987). Within the scientific disciplines, there may be a lack of multidisciplinary research and it may be difficult to impose a tight time frame; the project group may have little real contact with the basic research, and none with consumers and production. A large multinational may try to get over this by having the incremental product development with the individual companies or areas, and the radical innovations in R&D. It is obviously a major problem as one sees the large companies cycling back and forth throughout the years.

Engineering is often the home in companies that are based on process development, especially food processing equipment systems. Process development is often strong in European food companies, because this can be an area for radical innovations. Usually the processes and the equipment are sold to food manufacturing companies, so there is not the same need for consumer input into product development. In the smaller companies, the laboratory or production can be the home for product development. The laboratory can be responsible for quality assurance and product development; product development usually emphasises incremental product improvements. Production controlled product development concentrates on raw material and processing changes, usually with the object of reducing costs, improving yields and improving quality. These are very general categories, and individual companies with different types of enthusiasts for product development can develop radical innovations from the laboratory of a small company.

Marketing

'Marketing' is also often the home for product development, especially in a strongly marketing-oriented company. There may be a product manager who is responsible for a product area, both established and new products or there may be product managers who are responsible for the established products and a product development manager for the new products. The product development manager is responsible for coordinating all the market and consumer research, and the complete marketing mix for the product, and cooperating with the technical and production people in developing the product and producing it. Marketing also has problems in setting up an organisation for product development as is seen in Fig. 6.15 which outlines the development of the product development organisation in a fictional company 'Rainbow Products'.

Fig. 6.15 Rainbow Products product development organisations.

The advantages of the product manager system are:

• familiarity with the product area;

• good connections with outside agencies such as advertising agencies, market researchers and retailers;

• real commitment to expanding the product area;

• involvement in all aspects of development;

• direct concern with day-to-day marketing.

Disadvantages of the product manager system for new products are:

• working under great pressure to produce short-term results for all products;

• difficulty in handling complex new products;

• little or no understanding of technological developments;

• difficulty in motivating people in other functional areas.

The product manager often has great difficulty in understanding the radical innovation and its relation to consumer needs and wants. Therefore they tend to produce minor product variations and product line extensions. This is also true when other people in the marketing department are responsible for product development.

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