New Product Development

Some products…

What is product development all about? “Product development is the set of activities beginning with the perception of a market opportunity and ending in the production, sale, and delivery of the product” Ulrich & Eppinger, 2002

Market issues… “Rather than compete with the super jumbo (a 550-seat cruiser by Airbus), Boeing has decided to concentrate on a smaller, faster ‘sonic cruiser’. So the petty snipping of old has been replaced by a genuine battle of philosophies: on one side is size, on the other speed” The Economist, July 2001

Technical issues… … “advance fuel cell-vehicles, could have a profound effect on vehicle manufacturing - perhaps setting the stage for the reinvention of the automobile business. One of the biggest hurdles is the development of safe and effective on-board hydrogen storage.” L. D. Burns Vice President of R&D, General Motors

Resource issues… “AstraZeneca has to rein in some of its most promising drug candidates because of lack of resources to develop them simultaneously” Claes Wilhelmsson Head of R&D, AstraZeneca

Product quality –How good is the product? Product cost –What is the capital equipment cost and unit production cost? Development time –How quickly did the team complete the effort? Development cost –How much did the firm have to spend to develop the product? Development capability –Are the team and firm better able to develop other products? Characteristics of Successful Product Development

Trade-offs –Lightweight vs costly Dynamics –Technologies, customer tastes, competition change environment Details –Screws vs snap fits on enclosure of computer Time pressure –Decisions made quickly and without complete information Economics –Large investment – will it pay off? Organizational realities –Team composition, empowerment, functional allegiance, resources Challenges of Product Development

Product Development Strategy Task: Define a well-defined product development process and propose a product development organization that will allow your company to compete effectively over the next decade. Is there a standard development process that will work for every company? What milestones will be used to divide the overall product development process into phases? What role do experts from different functional areas play in the development process? Should the development organization be divided into groups corresponding to projects or to development functions?

Product Development Process Phase 0Phase 1Phase 2Phase 3Phase 4Phase 5 Planning Concept Development System-level Design Detail DesignTesting and Refinement Production Ramp-Up Ulrich and Eppinger 2004 Generate mission statement (target market, business goals, key assumptions and constraints) Example Mission: “design a better hand-held roofing nailer” Assumptions: The nailer will use nails (as opposed to adhesives, screws, etc.) The nailer will be compatible with nail magazines on existing tools The nailer will nail through roofing singles into wood The nailer will be handheld.

Product Development Process Phase 0Phase 1Phase 2Phase 3Phase 4Phase 5 Planning Concept Development System-level Design Detail DesignTesting and Refinement Production Ramp-Up Ulrich and Eppinger 2004 Identify needs of target market; Select several product concepts for further development and testing Example Needs of target market: The nailer inserts nails in rapid succession. The nailer is lightweight. The nailer has no noticeable nailing delay after starting tool. Product concepts: Rotary motor with spring and single impact Rotary motor with spring and multiple impacts Linear motor with a moving mass and single impact

Product Development Process Phase 0Phase 1Phase 2Phase 3Phase 4Phase 5 Planning Concept Development System-level Design Detail DesignTesting and Refinement Production Ramp-Up Ulrich and Eppinger 2004 Define product architecture Decompose product into subsystems and components Define final assembly scheme

Product Development Process Phase 0Phase 1Phase 2Phase 3Phase 4Phase 5 Planning Concept Development System-level Design Detail DesignTesting and Refinement Production Ramp-Up Ulrich and Eppinger 2004 Complete specification of geometry, materials and tolerances of all parts List of standard parts to be purchased Detailed drawings Process plans for fabrication and assembly

Product Development Process Phase 0Phase 1Phase 2Phase 3Phase 4Phase 5 Planning Concept Development System-level Design Detail DesignTesting and Refinement Production Ramp-Up Building of alpha- and beta- prototypes alpha: same material and geometry - does it work? - does it satisfy customer needs? beta: parts supplied by production process - tested internally and by customers - tested for performance and reliability

Product Development Process Phase 0Phase 1Phase 2Phase 3Phase 4Phase 5 Planning Concept Development System-level Design Detail DesignTesting and Refinement Production Ramp-Up Small volume production to train workforce and work out any remaining problems. Finally… LAUNCH!!

Variations to Product Development Process Market pull products –Market opportunity to technology, e.g. sporting goods, furniture –Uses generic process Technology push products –Technology to market opportunity, e.g. teflon, gore-tex –Concept development takes technology as given Platform products –Built around existing platform, e.g. consumer electronics, printers –Concept development assumes proven technology platform Process intensive products –Product constrained by production process, e.g. semiconductors, chemicals –Product and process developed from start Quick build products –Rapid modeling and prototyping, e.g. software, cell phones –Many design-build-test cycles Complex systems –System includes many subsystems and components, e.g. airplanes, jet engines –System and subsystems developed by many teams working in parallel

Cost and Duration of NPD Projects

Stanley Tools Jobmaster Screwdriver Rollerblade In- Line Skate HP DeskJet Printer VW New Beetle Automobile Boeing 777 Airplane Annual Production volume Sales lifetime Sales price Number of unique parts Development time Internal development team (peak size) External development team (peak size) Development cost Cost and Duration of NPD Projects

Stanley Tools Jobmaster Screwdriver Rollerblade In- Line Skate HP DeskJet Printer VW New Beetle Automobile Boeing 777 Airplane Annual Production volume100,000/year 4M/year100,000/year50/year Sales lifetime40 years3 years2 years6 years30 years Sales price$3$200$300$17000$130M Number of unique parts ,000130,000 Development time1 year2 years1.5 years3.5 years4.5 years Internal development team (peak size) 3 people5 people100 people800 people6800 people External development team (peak size) 3 people10 people75 people800 people10,000 people Development cost$150,000$750,000$50M$400M$3B Cost and Duration of NPD Projects

Plot development cost against the other rows and see if there is any correlation. Why or why not? Cost and Duration of NPD Projects

What drives product development costs? # parts development cost

What drives product development costs? Internal team size x duration development cost

What drives product development costs? Total team size x duration development cost

Design Changes over Time What drives product development costs?

Quality Function Deployment A method to translate customer requirements into engineering specifications Aims to get design, engineering and production people involved early on in the process

Quality Function Deployment

Quality Function Deployment (QFD)

Marketing –Mediates interactions between firm and customers –Identifies product opportunities –Defines market segments –Identifies customer needs –Oversees launch and promotion of product Design –Lead role in defining physical form of product to best meet customer needs –Includes engineering design and industrial design Manufacturing and supply chain –Designs and operates the supply chain in order to produce the product from procurement to distribution Who is Involved in Product Development?

Organizational challenges How should the product development team operate?

Project-Based Organization MarketingEngineeringOperations Project Manager Project Managers have more power “Heavy Weight” Project Manager Project 1 Project 2

Functional-Based Organization Marketing managerEngineering Functional managers have more power Operations manager Project 1 Project 2 Project 3 Project 1 Project 2 Project 1 Project 2 Project 3 Project 4

Matrix Organization Marketing managerR&D manager Project 1 Project 2 Engineering Project Manager

Pros and cons FunctionalMatrixProject StrengthFosters specialization and expertise Provides integration and speed benefits Optimal resource allocation, quick trade-off resolution WeaknessCoordination among groups can be slow Requires more managers and administrators Difficulty maintaining functional capabilities ExampleSlight variations to custom design Many recently successful projects in automobile, electronics, aero Start-up companies, dynamic markets, to achieve breakthroughts Major issueHow to integrate different functions to achieve a common goal. How to balance functions and projects. How to evaluate project & functional performance. How to maintain functional expertise over time

Final Word… Phase 0Phase 1Phase 2Phase 3Phase 4Phase 5 Planning Concept Development System-level Design Detail DesignTesting and Refinement Production Ramp-Up Product development is a process and it can be managed!!