Systems Thinking in New Product Development

Abstract A case study of a tech start-up reveals some of the challenges associated with implementing systems theory in new product development. This area of study hold promise, but there are some implementation issues in the real world that have been identified and perhaps in need of further exploration. Introduction Systems thinking focuses on the interrelatedness of different systems, different roles and different disciplines.

The system is not simply a set of parts, but it is how the parts work together, how they interact with one another, that forms the system. By focusing on the integrated whole, systems thinking is a natural fit for new product development. Most new product development is overseen by a project manager who works with the different teams involved to drive the new product from concept to market. The reality is that this role should naturally involve a level of systems thinking.

Yet, there is scant literature on the relationship between systems thinking and new product development. There is ample literature on systems thinking, and on new product development, but this intersection is seldom explored. This is to the detriment of business. Most companies need new product development as a means of exploiting market opportunities, and driving both growth and profitability. The focus for new product development cannot simply by on project management or innovation studies. Systems thinking can play a bigger role than it has to this point.

This study will focus on the role that systems thinking plays in new product development to this point, but also will explore how systems thinking can be applied to new product development going forward. The focal point of this paper will be a case study, featuring a software company that is working on a new product. While confidentiality agreements preclude me from naming the company or its product, this is the company's second product. The first has been a tremendous success, but there was no process for the first.

Only with the second new product launch has the company started to consider the role of process. Thus, this makes for a good case study as to what companies do today with respect to incorporating systems thinking , but more importantly how they can incorporate systems thinking to a greater degree going forward, as they solidify their processes for new product development.

Background to the Topic Systems thinking has been described as a management discipline "concerning an understanding of a system by examining the linkages and interactions between the components that comprise the entirety of that defined system" (Institute for Systemic Leadership, 2017). This would seem to make systems thinking a natural fit for project management of all types, including the development and launch of new products.

Where traditional management sees a company as a set of individual departments, each doing their own thing, systems thinking takes the view that the company is a system, and all of those departments are integrated into the system. New product development focuses on a couple of different things, first the identification of new product opportunities, and then developing products to exploit those opportunities.

If the traditional view of management is applied to new product development, there would be a department focused on identifying opportunities, then another team that might design and build the product, and then another team would market it. If marketing and sales talk to each other, that alone would be considered a victory, let alone the other teams.

New product development can actually occur just within the development team, which then dumps it onto marketing and says "Here, sell this." There are a lot of problems inherent in taking the view of the company as a set of individual departments. Systems thinking can and should play a critical role in new product development. Yet the links between systems thinking and new product development appear to be underdeveloped.

Optimally, this would be because it is fait accompli that systems thinking has been incorporated into new product development, but we know that this is not the case. The reality is that there is a lot of room for systems thinking to be incorporated into new product development. Thesis Incorporating systems thinking into new product development will improve the quality and marketability of new products.

Outcomes for organizations should be better – new products developed in companies with systems thinking should have a better success rate than new products developed in companies without systems thinking as a core philosophy. Research Hypothesis The research hypothesis for this study is that products developed using systems thinking are on average more successful than products developed without systems thinking. Originality There is a fairly sizable body of literature on systems thinking and a lot of literature again about new product development.

Yet, there is little literature that links the two. This, even though in practice there should be significant linkages. There are many companies that actually utilize systems thinking, and apply it to their new product development, yet again there is a paucity of direct study on this subject. This particular study therefore cuts into some new ground in exploring how systems thinking can impact the new product development process.

The underlying logic of systems thinking is a good fit with the objectives of new product development, namely to bring products to market profitably. When one thinks about these requirements, they point to lowering the cost of developing viable products, and increasing the viability of the products that are developed.

This study should begin to explore how this works in a small company that wishes to bring a new product to life, but is operating without a lot of established processes, as the product in question is only the second product that the company produces. Contribution to the IE/IEM Profession This paper contributes to the profession by adding to the slender body of literature on the subject to applying systems thinking to new product development.

There are findings within this study that highlight some of the benefits of utilizing systems thinking, and the pitfalls that can occur with new product development without systems thinking. This study's use of a real world example highlights the value of taking the theories that we work with and examining them in the context of the real world. The practice of IE/IEM is inherently practical, so there is significant value in a study that not only examines these subjects in theory but also in practice.

Literature Review Systems thinking dates back quite a way, one author saying Kant, with the idea that systems thinking evolved as a means to understanding the world (Reynolds, 2011). As systems thinking evolved away from that realm and towards business practice, it provided value context to managers.

If a company operating in a traditional management system applied systems thinking, departments would have a better sense of how different elements of their business piece together, and would even be able to gather feedback about their actions as the result of this greater understanding. Best and Holmes (2010) discuss highlight the value of systems thinking.

Writing in the health care context, they argue "the way we think about research, policy and practice inform and interact with each other shapes our efforts." This approach is basically systems thinking – the research and the practice are linked with each other and with policy, in order to generate superior outcomes. They describe systems thinking as a cycle where information begins in the research stage, moves to policy and then into practice. But these linkages are two-way at times, and then the practice step informs research.

Conceptualized for business, business sets out policies that test the findings of research, and this testing informs the need for further research. Such an approach, applied to new product management might mean that marketing informs product what the market needs, product and development work together to bring something to market before turning it over to marketing and sales.

Through their contact with the target market, these groups can then circle back with feedback for product and development teams to generate further ideas A critique of systems thinking holds that systems thinking without learning is incompatible between theory and practice, but the authors weaken their stance by basing their argument on the explicitly positions that organizations have no mechanisms for learning, and that if this is true they cannot learn (Caldwell, 2012); both somewhat spurious assumptions. Ulrich (2012) discusses the application of systems thinking to operational research.

The study of operations informs the practice of operations, so there is value in applying systems thinking to operations research. Critical systems thinking, the author notes, will benefit both operations research and practice. Valerdi and Rouse (n.d.) point out, however, that for many individuals and businesses, systems thinking is "not a natural act." There are many people who struggle with being able to conceptualize entire systems.

The value of systems thinking, therefore can be extracted by training people about systems thinking, and helping them to improve their skills in this area. In fact, the benefits of such an approach seem quite evident – when everybody within an organization is on board is aligned with the systems thinking approach, its integration into new product development will arguably be easier –some of the pushback that exists in organization today, where managers can be protective of their silos, could be eliminated with greater application of systems thinking.

Systems thinking is applied in business to things like sustainability. Sustainability study recognizes the links between different elements in a system and therefore any manager attempting to improve sustainability measures will necessarily have to have a systems mindset (Nguyen et al, 2011). The same is true for new product development, just with a different objective, even if traditional management practice has not recognized this.

Systems thinking has also been linked to IT, in the sense that information systems are ultimately combinations of hardware and software, the different component pieces of which must inherently learn to work together (Petkov, et al, 2008) One of the recent developments in systems thinking that can readily apply to new product development is the expansion of the concept to a more global terrain – focusing on larger, more complex problems (Davis et al, 2014).

New product development has often been viewed as a narrow focus, but there are certainly examples of transformative products and innovations that have a larger, more holistic impact on society at large. New product development with those sorts of ambitions exists – think Google, or Apple, among others – which opens the door for the application of broad, global systems in new product development, knowing that the world's largest and most successful companies have been able to reach such heights in recent years.

One of the best cases for systems thinking comes from Skazauskiene (2010), who made the argument that the complexity of modern business is such that systems thinking is almost mandatory.

" Effective decision making and learning in a world of growing dynamic complexity requires leaders to become systems thinkers – to develop tools to understand the structures of complex systems." One of the biggest concerns of the author is that cognitive intelligence competency is important in being able to apply systems thinking, so there is a societal need to develop this.

From a business perspective, what this means is that the companies that can recruit for systems thinking and can master its application to new product development should be able to deliver more, and better, products that their competitors who lag on systems thinking. The author argues that systems thinking can serve as a catalyst for higher levels of organizational performance. Sheffield, Sankaran & Haslett (2012) further explore systems thinking and complexity.

They studied project management, and found that a lot of project management gets bogged down in complexity, but that there are opportunities to apply systems thinking to "tame" this complexity. They argue that even project managers often "do not seem to use simple systems thinking tools", despite the obvious value of those tools to the project management role.

Modern management, they argue, should incorporate systems thinking, if even at a basic level, because of the benefits that it brings with respect to understanding and managing complexity, given that complexity is inherent in the modern business environment. When systems thinking is applied to innovation, the antecedent of new product development, it can yield powerful results. A case study of Australia was done where the country's approach to improving innovation was rooted in systems thinking.

Innovation as an output was fostered by focusing on a number of different variables, even when the interrelationships between the variables were not known. But there was enough study to realize, for example, that there are a number of different conditions for innovation, and so any strategy to foster greater innovation needed to be built around fostering all of the different conditions individually, but also understanding the linkages between them (Dodgson, et al, 2009). The literature on new product development covers some areas of interest to this study as well.

Bhuiyan's framework for new product development (2011). One of the key success factors identified by Bhuiyan is that the new product development must fit with the firm's overall strategy. Where firm strategy is clearly defined, it is easier to align new products with that strategy. Specific focus is important here – and when the different departments of the company are aligning their activities towards overall objectives, then doubtless that creates the opportunity for new product development to also align with the overall objectives.

Leeuwis and Aarts (2010) examine the focus on communication in innovation studies. They note that high levels of communication are typically conducive to higher levels of innovation. But innovation that is focused should naturally require communication between different departments within an organization. This more integrated communications approach is half the way to full systems thinking – communication being one of the critical linkages that drives systems.

One form of communication that, when applied to new product development, has proven to be essential, is creating linkages between consumers and the companies they buy from. When a company has regular communications with consumers, they create an opportunity for consumers to inform the business as to what products they need. This can conceivably yield end results significantly different than the company would have otherwise arrived at.

The inclusion of the consumer perspective is part of systems thinking in new product development, because the product and development team have linkages with the end user that help them to develop better products (Hoyer et al, 2010). Aarikka and Sandberg (2012) support this, noting that commercialization of new products is an essential part of the new product development process.

They argue that "the innovating firm needs resources to engage in consumer education, distribution, marketing communications, relationship mediation and credibility building." When innovating organizations are able to create these linkages with the end user, those linkages will better inform the new product development process. Furthermore, if the customer is engaged in the process to a greater degree, this can have the effect of a flourishing of innovation. The teams that interface with customers are often not involved much in the new product development process.

As such, there is a wasted opportunity to apply their knowledge to making the product better, or to identify new product opportunities. The linkages between the company and its market are often unexplored, but evidence from the financial services sector indicates that there is much to be gained from creating linkages between different departments that interact with the end customer, and those that are responsible for new product development (Chien & Chen, 2007).

Another strong case for the use of systems thinking in new product development comes from Barton (1992), who outlines that companies often focus new product development on their core competencies, as they understand them. But companies also have core rigidities, the preconceived notions or ideas that ultimately constrain their new product development.

Maybe they are locked into a particular vertical, or product line, and even if they have a competency that can be applied elsewhere, they develop a certain myopia that prevents them from fully leveraging their competencies in new product development. Systems thinking would certainly serve as a way to overcome such rigidities – other parts of the organization, when working together with the development teams, would recognize certain opportunities that might otherwise have gone unnoticed during the brainstorming parts of new product development.

Systems thinking, therefore, should be applied to all of new product development, not just at the part when the product is coming to market. An area of systems thinking application to new product development that has been explored is the area of decision-support systems (Chan & Ip, 2011). DSS typically intake data and then produce outputs that help managers make decisions. A new product development process will often be faced with a number of different go/no-go decision points.

A decision support system can help with making those calls, based on models. The models, and indeed even the data input into the models, have to come from somewhere. The reality is that a model embedded in a decision support system is not really worth that much if it does not contain insight from a number of different departments regarding the potential market for a new product, and the costs associated with bringing it to market.

While not explicitly discussing systems thinking, the article touches upon a common tool in new product development that ultimately to have value relies on the use of at least rudimentary systems thinking and processes. Driessen and Hillebrand (2010) also explore this them, focusing on the multi-stakeholder approach. They caution, however, that the involvement of multiple stakeholders does increase complexity. This might be one of the things that holds back organizations from applying systems thinking to their new product development – systems thinking like the multiple stakeholder approach is inherently complex.

It requires a lot of work and expertise at handling complexity in order to properly execute, and as such there are barriers to the universal adoption of this approach. Yet, there is definitely a thread in the literature about new product development that notes the value of incorporating a lot of different stakeholders, teams, customers and voices into the new product development process. Methodology To further explore the theme of applying systems thinking to new product development, a case study was chosen.

A young technology company with one product is developing a second product. The first product was not developed with a formal process, so there was no legacy process. The company sought to apply systems thinking as part of its new product development process. Ultimately, there were roadblocks. The company requested that it not be named, for strategic reasons as the product in question is still a few months away from launch.

The study would conducted through interviews with several of the key internal stakeholders – the heads of the product, development and marketing teams respectively. The interviews were conducted at around the point in time that the launch was expected. The launch was delayed – evidently one of many delays that have occurred – and as a result the product`s success in the marketplace could not be included. A follow-up study would actually do well in that respect.

Interviews were open-ended, and without firm sales figures the responses were almost entirely qualitative in nature. The managers were asked about their knowledge of systems thinking, their impression of the degree to which systems thinking was implemented during the new product development process, and their thoughts on the new product development process overall. All of the senior managers that were interviewed indicated that they had experience with other product launches that they could use as a comparable.

The study is qualitative, rooted in interpretation of the impressions that the managers gave, and some of the anecdotes that they related with respect to systems thinking and the new product development process as they experienced it. Findings The three managers who were interviewed demonstrated varying degrees of systems thinking. All had heard of it, but only the head of Product seemed to fully grasp what systems thinking is, and how it would be applied to new product development.

While he indicated that the entire senior management team at the company had been briefed on systems thinking and instructed to leverage its tenets during the new product development process, he also indicated that there was actually relatively poor uptake. The new product in question has still not launched. It was beset with delays, and ultimately there were many questions as to the commitment of the senior management team to the systems thinking philosophy.

The CEO and head of Sales in particular were felt by all three interviewees to have not bought into systems thinking; the CEO in particular because he felt that he alone could make decisions, without worrying about the input of others. One of the main causes of delay was that the project continually shifted in scope. There were many different ideas about what the product should be. This alone indicated that the marketing team was not adequately consulted to share their market knowledge to define an opportunity.

Moreover, the input from teams, when it came, came randomly. There was no process for gathering, processing or handling information between the different teams. As a consequence, not only was there little evidence of systems thinking during this new product development, but there was little evidence that any sort of structure was put in place to encourage it. The result was fragmented effort, inconsistent communication, and a total lack of coordination at the highest levels of the company.

The marketing head reported that they had received one description of the final product, told it was almost ready, only to have it delayed and then two months later an entirely different vision of the product emerged, one for which there had been no indication of the need from the client base. All three managers cited a lack of communication as a key issue.

One of the major tenets of systems thinking is that the different areas of the organization are linked, so that the activities of one affect the others. The reality is that to apply systems thinking requires not only recognition of this fact, but building communications structures around it. There was, apparently, no formal application of systems thinking in the new product development process in question. Rather, it was indicated to the interviewer that systems thinking existing only in the abstract.

Devoid of adequate means to coordinate efforts, the ongoing failure to launch the product stands testament to the value of systems thinking. When asked if systems thinking could help the project now, this is something that was indicated by the managers surveyed. They felt that if the CEO was on board with systems thinking, that would have set the tone for the organization.

This actually concurs with the research on organizational change – to change the way an organization does things requires buy-in at all levels, but especially at the CEO level, because everybody else in the organization takes cues from the leadership. Further, the role that the CEO and other leaders play in resource deployment decisions means that they are critical cogs in the system. Discussion Systems thinking, in the abstract, helps to analyze a scenario, as well as helping those within that scenario to perform better.

This company, despite expressing a desire to implement a systems thinking approach, ultimately conducted this new product launch more like a traditional style development process, complete with information silos. The links for communication were not as strong as they should have been, given the small size of the company, let alone as strong as they would have needed to be to leverage systems thinking in the product development process.

A new product development process that properly leverages systems thinking would at the minimum start with teams that have direct communication with the clients seek to identify pain points that the clients have. These would then be aligned with the competencies of the organization to see if there were any areas where the organization could use its competencies to solve a pain point. In the abstract, each of the managers interviewed seemed to understand this part of the process.

The teams responsible for actually building the project would have feedback loops that would allow them to add or subtract elements to the product based on the expertise of those with direct market knowledge. Yet, it was clear from the interviews that merely wanted to bring systems thinking into the new product development process was not going to be enough.

There needed to not only be buy-in from the CEO in order to spur the rest of the management team into action, but there also needed to be formal structures put into place. What we know of systems is that something done in one part of the system will affect the other parts of the system. As such, the failure to build out formal communication structures including regular meetings and items to be communicated between the different actors meant that they retreated to their respective silos.

The literature on new product development is fairly agreed that it is necessary to have strong communication links, and a clear plan for new product development, at a minimum. There is some indication that neither were in place – the new product was born of a desire to have a new product.

This is ok as a base idea to allocate resources to innovation, but it seemed that without feedback from other teams, there was a breakdown and the development team pretty much ran with the idea that sounded best to it. The actual marketing feasibility of the product was never really taken into consideration into much later in the process, when it was realized that the expected price point did not align with the vision of the product that the development team had.

This is certainly a case where the literature supported a particular approach that the reality never quite matched. Whether CEO buy-in was the critical element for the failure to implement systems thinking can be speculated, but there were definitely other issues that arose in the course of the interviews. The somewhat vague sense of what systems thinking actually looks like in practice shows that most of the managers in question did not fully understand what it was.

As a result, the new product development process was not actually mapped out at all, let alone mapped out in a way that would have built in the tenets of systems thinking. So when the product was developed without any marketing or customer service input and was poorly received in what little testing was done, this really should not have been a surprise. The other issue that arose in the course of this was whether or not systems thinking is appropriate at a small or mid-sized company.

These companies should have an easier time implementing systems thinking because of the physical proximity of the different people within the organization. But in the absence of someone who is definitely in charge of the new product development process, systems thinking fell by the wayside almost immediately. Some managers forgot about the project altogether for a while, others dismissed opportunities to provide input. Still others struggled with the basic principles, so could not do their part to implement any of the linkages that drive systems thinking.

A systems thinker would immediately recognize that when links don`t exist, the system is unlikely to function well. The interdependencies that comprise any system should be capable of delivering feedback quickly and clearly to the other elements of the system. Without that feedback, appropriate action is less likely to take place. So the first thing that should have been done is that whoever was the champion of systems thinking should have been proactive in building out the structures that would have better facilitated systems thinking.

It is unfortunate that the lesson learned from this case are mostly in the negative – that the systems thinking was a failure and the product has yet to see the light of day. This does not, however, invalidate the value of systems thinking in new product development. Far from it. That could not be invalidated because it was never really implemented. This case study instead provides some cautionary lessons with respect to how not to incorporate systems thinking into new product development.

The orthodox view of new product development as benefitting from the input of multiple stakeholders, in recognizance of the fact that systems are comprised of entities that work together. Getting those entities to work together better is the area where systems thinking can be best applied to new product development. There is a lot of value that can be extracted when the different components of an organization are working together.

This is where the concept of the cross-functional team comes into play, and where such cross-functional teams are often used at various stages of new product development. This case study may be a cautionary tale of one thing – that when an organization does not take into account that it is a system, and that new product development is an art that relies on the different elements of a system working together towards a common objective, with roles properly defined, then the outcome simply will not be as good.

Thus, systems design was a critical element that was missing from the case study. There may well have been the assumption that the organization is a system, and therefore systems thinking is basically a fait accompli. That is not the case, however. The system in place was designed to make and sell a product. It was not designed to develop a new one. Thus, a new system needed to be implemented, one that was specifically oriented towards that particular objective.

Any system is only really likely to do what it has been designed to do, and so there was this lack of recognition among any of the managers that were interviewed that they actually had a system, but it was the wrong one, designed for another task and the fact that there was no purpose-built new product development system is why the new product has yet to be developed.

This seems like common sense and certainly the literature is clear that goal and task alignment are needed to optimize a system, but in this case the real world practitioners seemed to overlook this logic when the set out to develop their new product. Conclusions The best conclusions that can be drawn from the case study really do focus on the 'what not to do' arguments. But the most glaring issue is that there was no serious, meaningful attempt at systems thinking.

The literature makes clear that systems exist whether they are recognized or not, and that in order to build systems thinking into new product development it is required that the organization understands the systems it has in place, and ensures that it develops a system that is oriented specifically towards new product development. Being a young company, the case study firm did not fully understand its own systems, and therefore was unable to recognize that its systems, as presently constructed, were ill-designed for new product development.

To optimize new product development requires that the systems put into place are built for that task. These systems will need full buy-in from the top, adequate resources, structure, and planning. That there was no plan to develop a system for the.