Applying Industrial Design and Cost Engineering to New Product Development in Early-Stage Firms

For early-stage firms, successful commercialization of each new product is critically important, given the shortage of financial resources, the limited product portfolio, and small staffs typical of such firms. This paper investigates two key contributing factors for new product success in entrepreneurial firms: designing products that are appealing to target users in both form and function and designing products that can be manufactured at an attractive margin so that the new enterprise can generate much needed positive cash flow. These two practices-industrial design and cost engineering-are well studied in the context of larger, established corporations but have not been explored in the context of new ventures. This study focuses on the intensity of individual and combined adoption of design and cost engineering as measured by product development efficiency and effectiveness. The study was conducted on a homogeneous sample of early-stage firms that develop physical, assembled products where design plays a role. The data collection focused only on the first product developed by each firm respectively. The results show that when implemented together, industrial design and cost engineering enhance both the effectiveness and efficiency of new product development in early-stage firms, to greater effect than each does individually. Intensive individual adoption of practices had a negative impact on development efficiency measures such as development cost and duration. Only cost engineering individually had a beneficial impact on development effectiveness as measured by product margins. When combined, these two practices had a beneficial impact on both development duration and cost for the company's first commercial product, thereby reducing time-to-market and precious cash expenditures while maximizing project breakeven timing. The most successful firms in the study achieved a balance between creative innovation and cost discipline in the NPD process with third-party design and manufacturing resources. It was found that integrating third-party design firms into the development process can challenge, simplify, and add additional creative resources to the core entrepreneurial team, maximizing the ability to catalyze beneficial tension between creativity and cost discipline.