The applicability of management accounting techniques when launching a new product

Abstract

Purpose: The aim of this research was to investigate the main stages participating companies went about in developing a new product, and the role of management accountants in the process. This study also sought to determine the different management accounting (MA) techniques that were used throughout the stages of the new product development (NPD). This study also strove to examine if other departments, apart from the accounting department were involved in the NPD process, and if there were any conflicts between the departments, who were involved in this process. Design: A qualitative methodology was adopted. Sixteen semi-structured interviews were conducted with participants who worked in ten manufacturing companies, and who had from time to time, been involved in a NPD process. Findings: All those interviewed stressed the importance of generating new innovative ideas. This study indicated that during the NPD process, most of the participating companies did not followed a specific model such as the Booz, Allen and Hamilton model, but they followed a set of activities that catered for the specific needs of their company. However, all the processes described bore striking similarities to each other and to the Booz, Allen and Hamilton model. Moreover, all the respondents pointed out the key role played by management accountants in their company, and its relevance to the decision-making process. Additionally, the MA techniques that were generally applied during the NPD process were listed and discussed. The findings also show that the NPD process did not involve a single department but engaged the contribution of several departments. Conclusion: Although the NPD procedure in most organisations were not formalised, they were largely similar. Moreover, the NPD process involved constant decision-making to ensure a successfully developed product. Additionally, the consensus among respondents was that MA featured prominently throughout the whole NPD process, particularly in providing accurate data to all departments and ensuring that the information provided would not be misinterpreted. The cross-functional integration was also found to be a key factor for an effective and an efficient NPD process. Most of the participating companies expressed concern about the conflicting interpretations different users in different departments might give to the information derived from the use of MA techniques. To mitigate the risk of misinterpretation, management accountants are required to assist the other departments in understanding the data correctly so that accurate data would be used to inform the right decisions. Value: In today’s highly competitive world, the survival of an organisation heavily depends on a constant flow of innovative and upgraded products being launched. However, not all these products will be crowned with success. Indeed, due to the number of risks and uncertainties related to the NPD process, businesses continue to develop new products that fail. In that respect, management accountants can help organisations make the right decisions during the NPD process, so that the NPD process would result in the launching of a successful product on the market.