A lack of communication among the marketing, R&D, and manufacturing functions of a company can be extremely detrimental to new product development. A lack of crossfunctional communication can lead to a poor fit between Product Attributes and customer requirements. R&D cannot design products that fit customer requirements unless it receives and attends to input from marketing regarding those requirements. The manufacturing/R&D interface is also of critical importance because of manufacturing’s role in determining two key attributes of a product—quality and price. By working closely with R&D, manufacturing can ensure that R&D designs products that are relatively easy to manufacture. Designing for ease of manufacturing can lower both unit costs and product defects, which translates into a lower final price and higher quality. Similarly, a lack of cross-functional communication between functions can lead to longer cycle times as a product iterates back and forth between different stages in the process.
Firms can rectify this problem by building cross-functional product development teams. Cross-functional teams include members drawn from more than one functional area, such as engineering, manufacturing, or marketing. For instance, in Chrysler’s “vehicle deployment platform teams,” team members are drawn from design, engineering, purchasing, manufacturing, product planning, finance, and marketing. Firms around the world rely heavily on Cross-Functional Teams for their new product development efforts. In 2000, 77 percent of U.S. firms, 67 percent of European firms, and 54 percent of Japanese firms reported using cross-functional teams.
Teams that are composed of people from diverse backgrounds have several advantages over teams that are drawn from only one or a few functional areas. A greater variety of specialists provides a broader knowledge base and increases the crossfertilization of ideas. Having specialists from different areas also allows the project to draw on a wider mix of information sources in the environment through scanning activities (for richer detail on this, see the accompanying Research Brief on boundaryspanning activities). Functional experts often actively read journals and are involved in associations that directly affect their trade. These activities can lead to the creation and improvement of innovative ideas, as well as provide solutions to product development problems. By combining members of different functional areas into one project team, a wide variety of information sources can be ensured.
A number of arguments also support other types of diversity. Individuals who enter the organization at different times (organizational tenure diversity) are likely to have different contacts outside of the team, enabling the team to draw from a wider mix of resources. Teams that incorporate cultural diversity should show better problem solving by incorporating multiple viewpoints, and teams composed of members who are diverse in terms of gender or age will also ensure a variety of viewpoints are considered and external resources are tapped. Studies have demonstrated that demographic diversity in teams can increase innovative outcomes and overall performance.
Diversity of team members, however, can also raise coordination and communication costs. Individuals tend to interact more frequently and more intensely with other individuals whom they perceive as being similar to them on one or more dimensions. This phenomenon is known as homophily. Research on homophily suggests that individuals prefer to communicate with others they perceive as similar to them because it is easier and more comfortable to communicate with those who have similar dialects, mental models, and belief systems. The perception of similarity can also be self-reinforcing—as individuals interact with frequency and intensity, they can develop a common dialect, greater trust, and greater familiarity with the knowledge each possesses. The common dialect, trust, and familiarity, in turn, make the individuals both more willing and more able to exchange information effectively in future interactions. When individuals perceive others as being very different from them, they may be less willing to interact frequently or intensely, and it may be more difficult for them to develop a shared understanding. Heterogeneous teams often have greater difficulty integrating objectives and views, leading to conflict and lower group cohesion. Research has also indicated, however, that the communication and coordination differences between heterogeneous or homogeneous teams diminish if the groups maintain long-term contact. Presumably, through extensive interaction, heterogeneous teams learn to manage their group processes better.
In sum, heterogeneous teams should possess more information, on average, than homogeneous groups. The heterogeneity of a team can also increase the creativity and variance in decision making, leading to more innovative outcomes and higher overall performance. However, to realize this potential performance advantage, heterogeneous teams may require long-term contact and incentives to foster communication and cooperation.
The ability of team members to communicate and cooperate effectively is also a function of the personalities of the individuals on the team. A study by Susan Kichuk and Willi Wiesner explored whether five personality factors (conscientiousness, extroversion, neuroticism, agreeableness, and openness to experience) influenced the likelihood of success in new product development teams. Kichuk and Wiesner found that the personality characteristics that enhanced the success of a new product development team were high extroversion, high agreeableness, and low neuroticism.
Research Brief Boundary-Spanning Activities in New Product Development Teams
To be successful, new product development teams must be able to manage relationships with groups that are beyond the team’s boundaries. Teams need to be able to collect information and resources both within and outside of their organizations, and they also need to represent the team to other groups in the organization to ensure that the team continues to receive support and that team members are not overloaded with nonteam- related activities. The most successful new product development teams have gatekeepers who provide important links to the environment.
Deborah Ancona and David Caldwell conducted a study to explore the full range of boundary-spanning activities in which teams engage and to identify which of these activities enhanced team performance. They interviewed 38 experienced product development team managers and collected data from 45 product development teams in five high-technology companies in the computer, analytic instruments, and photographic equipment industries. Ancona and Caldwell found that teams engaged in three primary types of boundary-spanning activity:
Ambassador activities—These activities were directed at representing the team to others and protecting the team from interference. For example, an ambassador might convince other individuals in the organization that the team’s activities are important.
Task coordination activities—These activities emphasized coordinating and negotiating the team’s activities with other groups. For instance, task coordination activities might include negotiating delivery deadlines with other divisions of the firm or obtaining feedback about the team’s performance.
Scouting activities—These activities were directed at scanning for ideas and information that might be useful to the team, enhancing its knowledge base. For example, scouting activities could include collecting data about what competitors were doing on similar projects or finding technical information that might be useful in the development project.
Ancona and Caldwell found that boundaryspanning activities affected the performance of the new product development team, and their impact depended on the timing of the activities. In particular, they found that scouting and ambassador activities were more beneficial if conducted early in the development project cycle, while task coordination activities were beneficial throughout the life of the team.