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The role of financial control in new product development: empirical insights into project managers’ experiences

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Abstract

This paper explores financial control in new product development (NPD) project managers’ work. To supplement previous literature on controlling innovation activities, the paper focuses on NPD project managers’ versatile role of being under control (about meeting NPD project objectives), in control (about actually fulfilling those objectives by mobilizing the project team), and in a central role in further developing the NPD project management practice. This paper is an exploratory interview study based on in-depth interviews with eight NPD project managers in seven organizations. NPD project managers’ viewpoints need to be acknowledged, as they have a significant influence on NPD project performance; the support of financial control should be designed and utilized accordingly. Examining a versatile managerial role, such as that of an NPD project manager, potentially unveils fundamental questions in management control practices, e.g., how could financial control better support innovation activities. In this paper, we contribute to management control research by (1) highlighting the role of financial control in supporting NPD project managers’ work both in project model execution and wider reflections on the business impacts; (2) identifying the extended list of units of analysis of financial control needed to ensure that NPD objectives are met; and (3) showing that project managers desire a more active role from financial control in NPD project management. If more comprehensive accounting information was provided and used for project management purposes, this would imply new tasks to NPD project managers, controllers, and other parties involved in NPD projects—possibly shifting focus towards more comprehensive, long-term business impacts. Finally, based on our exploratory results, we provide six propositions to inspire future management control studies.

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Notes

  1. The formal project model refers here to the explicated rules of NPD project execution in companies. The formal project model may follow the principles of theoretical project models, as applied in a particular company context. In addition to the formal project model, there is the actual way of executing the NPD projects, which may or may not be in line with the formal model. The practices that de facto differ from the formal project model or are not included in it represent the informal project model and NPD project management practice.

  2. Codes: Product content/features, schedule, customer value, cost reduction, budget, standardization/platform, new idea, strategy, effectiveness, quality.

  3. Codes: Project budget, product cost, price, profitability, investment/pay-back, volume, BIA calculations, after-sales, cannibalization, life-cycle calculation, share of new products (of revenues).

  4. Codes: Data analyses and use for control, data integration and usability, estimates and planning, life-cycle orientation, BIA calculations, cooperation within organization, availability of data, learning from ex post data, value analyses, cost consciousness, need for flexibility and risk appetite, avoiding sub-optimization, systematic measurement, easier data interpretations, overcoming dominant technical orientation, long-term perspectives, real-time data, personal knowledge and understanding.

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Acknowledgements

Funding was provided by the Centre for Technology and Innovation in Finland (TEKES) (grant no. 40199/11) and the Academy of Finland (250668). We gratefully acknowledge the insights provided by the interviewees of this study. Moreover, the constructive feedback and comments provided by the Guest Editors and the two anonymous Reviewers have been extremely valuable throughout the review process.

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  1. Cost Management Center, Tampere University of Technology, PO Box 541, 33101, Tampere, Finland

    Emmi Tervala, Teemu Laine, Tuomas Korhonen & Petri Suomala

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  1. Emmi Tervala
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  2. Teemu Laine
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  3. Tuomas Korhonen
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Correspondence to Teemu Laine.

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Tervala, E., Laine, T., Korhonen, T. et al. The role of financial control in new product development: empirical insights into project managers’ experiences. J Manag Control 28, 81–106 (2017). https://doi.org/10.1007/s00187-016-0241-6

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