Understanding the nature of market interaction in the new product development process and its impact on performance

This study examines how Research and Development teams use and incorporate market learning when considering opportunities for new products/technologies. Research and practice have shown that enhancing communication and cooperation between R&D teams and the marketplace is a critical part of the innovation process. While market research departments play this boundary-spanner role for conventional new product development projects, recent research finds that direct interaction between the development team and the market is preferred for potential breakthrough innovation, where market and technical uncertainty are both very high. The recognition of this fact has led to a surge of research focused on relationships between R&D and the market. Most studies have found that communication between NPD team members and key outsiders influences team performance as well as the outcome of the project. Successful companies interact with market representatives, to some degree and in some fashion, to gain a better understanding of customer-related information. However, for the development of advanced technologies, we do not yet understand much about ways for R&D teams to interact with the market most successfully. The main purpose of this study is to explore the impact of R&D teams' direct interface with customers on team learning and project success, and whether these relationships differ for given levels of project innovativeness. Given this backdrop, the Market Interaction-Performance Model that recognizes market interaction as a tool to reduce uncertainty and create dynamic capability is developed. This model realizes the need to balance the exploration of new knowledge with the exploitation of what has been learned as developers probe into various application markets and interact with different market representatives. The findings of the study will help R&D teams identify what types of customers are most useful as lead customers early in the development process, what kinds of interactions with these customers are most productive, and what mechanisms are best suited to learn about market applications of new technologies. Overall, these findings will help reduce the market and technical uncertainty surrounding the early phases of development of most new technologies.