Annals of Business Administrative Science 8 (2009) 43–54
Available at www.gbrc.jp

Online ISSN 1347-4456 Print ISSN 1347-4464©2009 Global Business Research Center

New Product Development and Evaluating Capabilities:
The Case of the Material Industry

Junichi TOMITA
Faculty of Business Administration, Toyo University
E-mail: tomita@toyonet.toyo.ac.jp

Abstract: Effective new product development (NPD) is one of the most important processes
firms should undertake in order to achieve a competitive advantage This paper will analyze the
NPD process and explore organizational capabilities by presenting two case studies of thematerial industry. These analyses demonstrate that it is significant for material suppliers toevaluate not only material specifications but also the production process of their users and theperformances of the users’ products (system products). We call this “evaluating capabilities”
and propose that knowledge beyond the business domain is necessary to achieve acompetitive advantage.
Keywords: new product development (NPD), organizational capabilities, evaluating
capabilities, material industry

1. NPD and evaluating capabilities1

NPD is one of the most important processes
firms should undertake in order to achieve a

The purpose of this paper is to analyze the newcompetitive advantage. How does a firm develop a

product development (NPD) process and to explore

new product effectively? In addition, what types oforganizational capabilities, especially “evaluatingorganizational capabilities help achieve competitive

capabilities,” which aid in achieving competitive

advantage?

advantage, and how to build them in the material
industry.

Research on NPD management began in the
1960s, where it focused on common factors for
success in NPD projects across the manufacturing* This article is an English version of Tomita (2007) withcertain modifications.

industry. It also focused on the NPD process and the43Tomitaeffective NPD patterns and organizational structures

supplier management in the automobile industry andin certain industries, such as the automobile,

discovered that it was effective for automobile

electronics, or software industries, since the 1980s

manufacturers to build and evaluate organizational(Fujimoto, 1989; Fujimoto & Yasumoto, 2000;

capabilities or the so-called “evaluating capabilities”

Kuwashima, 2002).

of suppliers.

On the other hand, there has also been some

Evaluating capabilities are also important for

empirical research on the organizational capabilities

suppliersof the NPD process. For example, Henderson andsuppliers. Barnett (1990) empirically analyzed

Cockburn (1994) empirically analyzed the source ofeffective NPD in the material industry and discovered

competitive

pharmaceuticalthat it was effective for material suppliers to evaluate

industry. They analyzed five thousand NPD projects

the users’ production process or products in which

and revealed that it was a source of competitive

materials are embedded, technologically.

advantageintheadvantage to build “architectural competence,” which
could

combineor

integrate

Nonaka,and“component

Nagataascomponentormaterial

This result is also consistent with our analysis of
the chemical industry (Fujimoto, & Kuwashima,

competence,” to solve a routine task problem.
Kusunoki,such

2002; Fujimoto, Kuwashima, & Tomita 2000;(1995)

Kuwashima&

Fujimoto,2001) wherein we

empirically analyzed the organizational capabilities

empirically analyzed the success factors of NPD

of Japanese firms. They indicated that organizational

projects in the chemical industry. Successful projects

capabilities are

had a higher average rate of technologically building

consisted of three layers ofknowledge. The lower layer consists of “local

evaluating capabilities than did failed projects.

capabilities” that are based on the individual

Thus, previous research indicated that it was

knowledge of the engineer. The middle layer consists

important for a firm to build their evaluatingof “architectural capabilities” that aid the engineer incapabilities. However, there has been little in-depth

designing the organization or implementing task

discussion on this matter and about how a firm

partitioning based on “local capabilities.” The higher

accumulates these capabilities. Therefore, this paper

layer consists of “process capabilities” that combine

explores evaluating capabilities in detail and tries toexisting knowledge and translate it into new

determine how to build them in the NPD process inknowledgethethe material industry. We analyze the following two

engineers. They concluded that the source of

NPD cases: material for high refractive plastic glasses

competitive advantage lay in the developing oflenses, named “MR-6” and superabsorbent polymers“process capabilities.”

for disposable diapers, named “AQUALIC CA.”

throughinteraction

among

Takeishi (2003) empirically analyzed effective
44

New product development and evaluating capabilities

molecule structure of the material increases its

2. Case study A: NPD of “MR-6”

refractive index. However, the heavy metal atom had

2.1. Producta defect due to its high gravity. Therefore, most

In 1987, Mitsui Chemicals Inc. launched “MR-6” into

researchers

the market as a material for high refractive plastic

approaches. Tokuyama achieved a refractive index ofglasses lenses (HRPGL). It was used not only locally

1.595 by introducing benzene and the halogen atom

but also in other countries because of its superior(bromine) simultaneously.

tried

three

alternative

features such as high refraction, easiness of molding,

Mitsui Chemicals also has experience in theand easiness of dyeing. It also contributed to thedevelopment of materials for plastic glasses lenses

diffusion of the plastic glasses lenses market in Japan,(PGL) for developing fine chemicals since the lateUS, and Europe. Mitsui Chemicals was a leader in its

1970s. However, they were developing material for

global market, and its share of MR series including

HFPGL for the first time. The researcher and engineer“MR-6” constituted about 70% of the material market

tried to introduce benzene and a halogen atom butfor HRPGL in 2004.

were unable to develop materials that would achieve
the target performance for three years. They faced

2.2. Background of the NPD

some resistance from the management board, but the

In 1982, Tokuyama Corp., the rival of Mitsuiresearch manager encouraged them to conduct further

Chemicals, became a worldwide pioneer in the

research and shouldered the responsibility for thedevelopment of materials for HRPGL in collaboration

result.

with

Seiko

manufacturer.

Epson
However,

Corp.—athelens
2.3. Material concept

monopoly-supply

contract between Tokuyama and Seiko Epson

In the meanwhile, a researcher at the Omuta factory

prevented other lens manufacturers from obtaining

tried to apply for the patent of the material for

the

lens

PGL. His research results revealed that the use of

manufacturers ordered the material for HRPGL frompolyurethane in the formation of PGL was

Mitsui Chemicals. In 1982, a researcher at the central

successful. Mitsui Chemicals had accumulated theresearch institute and an engineer in the development

technology of polyurethane since a long time. It was

section of Mitsui Chemicals began to develop thesuitable for PGL because of its superior resistancelenses.

against being crushed but was not sufficient to ensurematerial.

Subsequently,

other

major

Theoretically, the introduction of benzene or

the transparency and high refractive index of the

halogen atoms, without fluorine or sulfur atoms, or

PGLs. The researcher focused on these two points.

the introduction of the atom of a heavy metal into theFirst, he improved the transparency by using
45

Tomitanon-yellowing monomers (isocyanate). Second, hecharacteristic of “MR-6” was also changed before

increased the refractive index by introducing thepouring it into the lens cast when combined with asulfurusing

polymerization catalyst. It was also difficult topolythiol. Therefore, it was called “thiourethane

remove the lens after polymerization because its

material.”

adhesiveness to the cast was very strong.

atom,

in

other

words,

byThe researcher at the central research institute

Therefore, Mitsui Chemicals proposed a newand the engineer from the development section also

cast polymerization system by drawing up evaluation

focused on this concept and repeatedly createdcontracts

prototypes. As a result, they discovered that acause-and-effect knowledge from “MR-6” to HRPGL

combination

monomers

by supplying prototypes to their users and obtaining

Pentaerythritol

their feedback data. They solved these problems intetrakis β-thio-propionate) was most suitable forthe following manner. First, they solved the bubbles

HFPGL.

generation problem by proposing a method wherein itof(Isocyanatomethyl

two

types

benzene

and

of

with

each

user.

They

accumulated

would be unnecessary to include water. Second, they
2.4. Market cultivation

solved the liquid characteristic changing problem by

In 1987, Mitsui Chemicals succeeded in developing

using the catalyst with slower polymerization. Third,

the material for HRPGL. They named it “MR-6” andthey solved the difficulty of removing the lens bysupplied prototypes to lens manufacturers. Some ofadding a special mold release material. Thesethem evaluated its high refractive index of 1.594 andsolutions enabled the users to mass-produce HRPGL.

decided to buy it because its balance among highrefractive index, high abbe’s number (low chromatic

2.5. Market globalization

aberration), and resistance to crushing was superior to

Mitsui Chemicals also planned to sell “MR-6”

the material provided by rival companies.

globally because of the lack of users in Japan, thereby

However, the users of “MR-6” faced several

increasing its competitiveness.

problems in their production process. It was molded

After one of the major users adopted “MR-6,”

by cast polymerization similar to the existing

Mitsui immediately sold the product to other users“CR-39” material, but their chemical characteristics

and increased their domestic market share. They

were quite different from each other.

learned from their rival who was part of the

For example, some bubbles were generated

monopoly-supply contract and did not increase theinside the molded lens by including only a little watermarket share. They also succeeded in increasing theirin the case of “MR-6,” but this did not pose a big

global market shareproblem in the case of “CR-39.” The liquid

In 1991, they developed the “MR-7” with a46

New product development and evaluating capabilities

higher refractive index of 1.67. Subsequently, in 1998,

3. Case study B: NPD of “AQALIC CA”

they developed “MR-8” with a higher abbe’s
number. They also got more than 200 patents. As a3.1. Productresult, Mitsui Chemicals captured the top share of the

In 1983, Nippon Shokubai Co., Ltd. launchedglobal market for a while.

AQUALIC CA into the market as a superabsorbent
polymer (SAP) product. AQUALIC CA is a type of

2.6. Building evaluating capabilities

powdered polymer that is a light cross-linked acrylic

The key factors for success of the MR series wereacid polymer. It was used not only locally but also in

product superiority itself, the development of aother countries because of its superior features suchsuccessive series of products, and a large number ofas free absorbency, high maintenance capacity, highpatents. Besides, Mitsui Chemicals built evaluatingcomplementarities, and low cost. Nippon Shokubai

capabilities in close communication with its users.

was one of the leading suppliers in its global market;

Initially, they did not have knowledge about theits share was about 25% in 2004.

molding of lenses. Hence, they tried to accumulatecause-and-effect knowledge from the use of “MR-6”

3.2. Background of the NPD

in lenses in the molding process of the users by

Nippon Shokubai began to develop a new material for

drawing up an evaluation contract.

sanitary napkins after an order from one of the major

For example, they supplied prototypes to thesanitary manufacturers in the late 1970s. However,users and obtained relevant feedback data. Often,

they could not develop it because of a problem thatengineers directly visited the users’ factories andhad occurred at the mass production stage.

attempted to solve the problems. They also evaluated,in-house,

not

the

objective for disposable diapers. Three researchers

characteristics of “MR-6” but also the functions of the

who had tried to develop material for sanitary napkins

lens,also started to develop a new material.

such

only

as

the

opticalknowledgeof

In 1978, they changed their development

uniformity

andtransparency. They learned the necessary conditions

In the initial stage of development, SAP was also

under which to precisely and efficiently mold theused in a method wherein it was mixed withlens. As a result, they succeeded in developing theflocculent

successive MR series and sustained their competitive

diapers. First, the manager proposed a method ofadvantage.

immersing an acrylic acid monomer into theflocculent

pulp

pulp

in

by

manufacturing

employingdisposableaspecialmixer. However, due to certain problems in theprocess, the method was not successful.
47

Tomita

Subsequently, one of the three researchers
discovered

another

methodinvolving

sanitary product manufacturer. The production ofthe

10,000 tons of SAP was extremely large for mass

polymerization of a monomer-water solution alone

production in the functional polymers industry where

using a special mixer designed for different purposes;

an annual production of a mere 1,000 tons was

the process was successful. This was in 1980. Thisconsidered large.

aqueous-solution polymerization method was anepoch-making

manufacturingmethodThe researchers attempted to find a newthat

manufacturing

dramatically improved the productivity of SAP.
However,aprobleminthemethodtofurther

improveproductivity. They began to develop a continuous

absorption

polymerization

methodusing

variousmechanism was soon detected. Specifically, theapproaches. Subsequently, one of the researchers

disposable diaper became wet and sticky at a single

suggested applying an automatic sushi-making robot

point subjected to the weight of the baby after it had

technology and developed a prototype polymerization

absorbed

system, which turned out to be highly practical.

urine,

makingproperabsorption

impossible. In order to ensure that the urine was

Nippon Shokubai shipped prototypes to theirabsorbed properly, it was necessary to disperse theusers for evaluation of the performance of AQUALIC

urine evenly throughout the diaper.

CA produced by the continuous polymerization

One of the researchers suggested making themethod and received approval with regard to thesurface of the gel particles “as hard as an eggshell”;

specifications

of

their

user

in

February

moreover, he proposed a method of cross-linking the1984. Subsequently, they contracted an agreement togel by adding a food additive to the polymerized

deliver 10,000 tons of AQUALIC CA and beganparticles. If the surface of the gel, which absorbed

constructing a new production facility at the Himejiwater, is solid, gaps between the gel particles are

Plant.

easily created making uniform dispersion easier. As a

However, their user requested Nippon Shokubai

result, the surface was successfully cross-linked using

to increase the order by an additional 10,000 tons

this method, thereby considerably increasing its

bringing the order to a total of 20,000 tons, 3 months

absorption capacity.

later. A majority of the Nippon Shokubai directors
opposed this request, insisting that the risks were too

3.3. Chance and risk for a large contract

high. Finally, the president of Nippon Shokubai

In 1983, Nippon Shokubai succeeded in developing a

received the approval of the board and contracted the

new SAP for disposable diapers, and they named it

agreement for an additional 10,000 tons.

“AQALIC CA.” In the same year, an inquiry for

By then, the new facility at the Himeji Plant,

10,000 tons of SAP arrived from another major global

which had a production capacity of 10,000 tons, was48

New product development and evaluating capabilities

almost complete. Subsequently, they received a telex

1988. Subsequently, in 1990, Nippon Shokubai beganfrom their user reporting that they had detected a

production abroad. The global demand for SAP

serious problem. The message stated that theincreased at an annual rate of more than 10%; Nippon

performance of Nippon Shokubai’s SAP was inferior

Shokubai expanded its production capacity to meetto that of its rival products.

this rising demand. The company boasts the world’s

Nippon Shokubai faced the risk of losing theirlargest production capacity, amounting to 320,000

new 10,000-ton facility investment leaving the entire

tons, annually, from facilities that include a plantcompany in a difficult situation. The researchunder construction in China and other plants in Japan,

manager immediately instructed his staff to improve

Europe, and the United States that are currently being

the continuous polymerization method without any

expanded.

changes to the production facility. As a result, they
discovered that the productivity could be improved

3.5. Building evaluating capabilities

by using the conventional batch-polymerization

As mentioned above, the production of AQUALIC

method.

CA increased with the growth in demand. The key

The user repeatedly implemented a prototype

factors for success were the product superiority itself

test using babies as test subjects and this proved thatand developing various production methods such as

AQUALIC CA was overwhelmingly superior inaqueous solution polymerization method and surface

performance to the rival products.

cross-linking method. Besides, Nippon Shokubai
built evaluating capabilities that the company had

3.4. Becoming a de facto standard

developed ahead of its competitors.

Since their user—the world’s largest sanitary product

The simplest evaluation method used for testing

manufacturer—had decided to use AQUALIC CA,

disposable diapers is the teabag method. In thismajor material suppliers throughout the world

method, a teabag is first emptied and is subsequently

followed Nippon Shokubai’s methods with regard tofilled with the prototype polymer and immersed in

the use of acrylic acid as a raw material, the adoption

water. Then, its weight is measured to determine itsof the aqueous solution polymerization method, andabsorption strength. This method was first developed

the surface cross-linking method. Thus, AQUALIC

by Nippon Shokubai and is now widely used

CA became the de facto standard in terms of boththroughout the world.

production and manufacture.

The test of absorption strength under constant

The production of AQUALIC CA has steadilypressure is considered as most important forincreased in Japan since 1985. Production capacity

disposable diapers. A diaper is subjected to pressure

grew at a rate of 10,000 tons annually until

when a baby is lying down; therefore, it should be49

Tomitaable

toproperly

absorb

urine

under

such

capacity to only 300–400 times its volume.

pressure. Further, the absorbed urine has to uniformly

Even if the specifications provided for thedisperse throughout the diaper. Nippon Shokubai

polymer are met, it does not necessarily guarantee

focused on such functions in the initial stages ofthat the performance of the diapers will be

development and developed the surface cross-linking

satisfactory. Since diapers are used over extended

technology

periods, they need to repeatedly absorb urine insteadwellbeforediapermanufacturers

requested for such specifications.

of only once. Specifications generally define values

Using this pressure test, the analyses by Nippon

that apply to momentary use; however, it is also

Shokubai proved that the request by diaper

necessary to collect evaluation data pertaining to

manufacturers for faster absorption speed was, in fact,

long-term use.

erroneous. The absorption speed was generally

Subsequently, Nippon Shokubai developed andconsidered as “the faster, the better.” However, a

improved its SAP by understanding the potential

polymer that hardens within a short period, if used inneeds of babies with respect to disposable diapers;a diaper, will intensively absorb urine at only one

moreover, it offered these new features andpoint where the urine has directly seeped into theimprovements to disposable diaper manufacturers

diapers. This decreases the life span of the diaper,

while building their evaluating capabilities byeven though the absorption speed increases. Nippon

collecting feedback data.

Shokubai learned through the tests that the polymer

Thissuggeststheimportance

of

such

used in a diaper should gradually absorb and disperse

perspectives as an end-user oriented approach

the liquid throughout the diaper and facilitate the(Tomita & Fujimoto, 2005) or “customers ofdrying up of the absorbed liquid.

customers” strategy (Kuwashima, 2003), which takes

Later, Nippon Shokubai came across anotherinto consideration the hierarchical nature of customer

myth concerning absorption capacity, which was

relationships. Specifically, in developing its products,

represented by claims such as “absorbs 1,000 times

Nippon Shokubai, a SAP supplier, not only had toits volume.” A polymer is generally considered better

attend to the requests from diaper manufacturers—its

if a larger amount of liquid can be absorbed by a

immediate customers—but also had to consider thesmaller

performance of the diapers that were actually used byquantityofpolymer.

However,

after

absorbing the liquid, a polymer with high absorption

babies—the end-users of the diapers.

capacity will swell and the liquid will become gel-like,

4. Discussion

similar to tofu. This gel-block problem prevents
further liquid from being absorbed into the diaper. For

This section discusses the evaluating capabilities inthis reason, Nippon Shokubai reduced the absorption

detail. Case study A showed that one of the key
50

New product development and evaluating capabilities

success

factorswas

Prencipe (2001) indicated that a firm, without

molding

integrating the total system of a product, could notprocess. Mitsui Chemicals tried to build evaluating

succeed in the NPD of an aircraft engine, forcapabilities by supplying prototypes and obtaining

example. They further insisted that a firm also

feedback data. This logic is consistent with the fact

required to accumulate technological knowledge

that it is important for material suppliers to evaluate

beyond its business domain.

increasing

the

for
yield

developingin“MR-6”

thelens

the production process of the user’s product in which

It could be also helpful to consider adequate

the material is embedded (Barnett, 1990).

division of labor between suppliers and system

Case study B showed that the key success factors

product

manufacturers.

New

systemproducts

for developing AQUALIC CA included not only thedevelopment requires both component knowledge

high performance of the product, but also theand architectural knowledge, which integrates

increasing performance of disposable diapers undermulticomponents or equipments (Henderson andpressure when used by babies, by understanding the

Clark, 1990).

requirements of SAP in advance. Nippon Shokubai

Generally speaking, component suppliers have

tried to develop their evaluating capabilities bycomponent knowledge, while system manufacturers

supplying

feedback

have architectural knowledge. However, if innovative

data. This logic is consistent with the fact that it istechnology is required for system product innovation

important for material suppliers to evaluate thelike in the case of the auto industry, broader andperformance of the user’s product in which the

deeper knowledge is required for components

material is embedded (Barnett, 1990).

innovation (Takeishi, 2003). Therefore, component

prototypes

andobtaining

These two cases imply that since users do notbuild

sufficientevaluating

capabilities

suppliers also have to build evaluating capabilities intoclose communication with their users from the early

appropriately evaluate and use raw materials

stages of NPD.

embodying a novel technology, material suppliers

As mentioned above, both the case studies

have to build evaluating capabilities by maintaining

involved NPDs by the follower firms, but theirclose communication with their users from the earlytechnologies were innovative enough for thestages of NPD in order to gain a competitive

suppliers and system manufacturers. Therefore, bothadvantage. These cases should prove to be valuableparties required knowledge beyond their products orin helping material suppliers implement effective

business domain. As a result, there was close

NPD management.

communication between them.

In other words, they require the knowledge andThis logic implies that it could be effective forexpertise beyond their business domain. Brusoni andsuppliers to build their evaluating capabilities and51

Tomitaaccumulate knowledge beyond the business domain

This paper also clarified the dynamic process ofin the early stage of innovative NPDs. For example,

evaluating capabilities in the form of two case studies,

supplyingsince there had been little discussion earlier.

prototypes

andobtaining

feedback

data. They also sustain their competitive advantage
byimproving

their

product

performance

Of course, this paper analyzed only two cases,or

therefore, our conclusion was limited to generalize

developing the following products based on thethe cause-and-effect relationships between theevaluating capabilities

competitive advantage and evaluating capabilities of

It could also be important for the systema firm. We should try to empirically analyze

manufacturers to differentiate between their new

evaluating capabilities in detail as organizational

products through close contact with the suppliers andcapabilities and explore the relationships withby building their evaluating capabilities from thecompetitive advantage by collecting quantitative

early stages of NPD.

data.

5. Conclusion

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ABAS: Annals of Business Administrative ScienceVol. 8 December 2009

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