Performance forecasting in new product development: Case European consumer goods company

Abstract

This Master's thesis examines whether and how financial measures can forecast the performance of the new product development (NPD) project during the NPD process. The study strives to find out factors affecting the forecasting of successful and unsuccessful projects. The estimated financial measures were compared against the post-launch calculation to observe, how well the financial measures calculated during the NPD process reflect the actual outcome.

This study uses a case-study method. The case consists of six different projects within a division of a European mid-sized consumer goods company. In addition, to the case data interviews of e.g. project managers are conducted during the study. Case material is used from different phases of the projects as well as actual sales data of the projects.

The results show that performance forecasting of a NPD project is challenging as it requires cross-functional co-operation between the NPD team and other functions. The NPD team and the project manager gather information from different functions and form a comprehensive picture of the forecasted successfulness of the project performance.

The information should be transparent to be able to forecast the performance of the NPD project with financial measures. In addition, the information should be validated somehow. Further, the team members of the NPD project should have sufficient time to carry out the validations. The estimation of the product sales is found out to be the most problematic part of NPD performance forecasting and that also affects the project cash flow calculation and internal rate of return (IRR).