1 MSETM 5110 – New Product Development Purpose Connectivity Relevancy Application Science: “what is” Engineering: “creating what has never been”

2 MSETM 5110 – New Product Development Recap of Session II NPI Alignment to Business Strategy and Values The Concept of Functional Maps (Power in the Process) Portfolio Management GE’s Two-Decade Transformation: Jack Welch’s Leadership The Continuum (Checklist) Exercise –Linkage to Business Strategy –Metrics and Tools –Cross-functional Teaming –Discipline and Commitment Finding Solutions in the Face of Constraints/Challenges –Capital/Budgets –People Resources –Market Dynamics –Return On Investment –Economic Fluctuation

3 MSETM 5110 – New Product Development GE’s Two-Decade Transformation: Jack Welch’s Leadership Jack Welch’s View On: Inheriting GE From Predecessor Product Exit Strategy Workout (Town Meetings, Departmental Meetings) Globalization People Development Compensation practices Managers as Teachers, Coaches, Mentors Promotion Practices (Values vs. Results) Capturing Employee Ideas Customer Focus (Increasing the Customer’s Intellect and Helping the Customer Win) E-Business (Spans Employees, Suppliers, Customers) People with Energy and People Who Can Energize Others

4 MSETM 5110 – New Product Development Why Do It? Competitive Advantage/Staying Competitive Short-term and Long-term Viability/Sustainability Fund More Research To Improve the Quality of Life To Solve Technology-based Problems New Platforms and Derivative Products Improve Productivity and Efficiency Protect Installed Base Protect Customer’s Investment Create Brand Loyalty Vehicle for Strategic Partnership Meet Stakeholders’ Expectations –Customers –Employees –Investors Renewal and Transformation of the Organization

5 MSETM 5110 – New Product Development Successful Innovation Companies Vision/Mission/Values Alignment Around Value People Systems Around Values Organize for Success Effective Integration and Communication Clarity of Responsibility and Accountability Focus on Results Thru Flawless Execution Technology Platform Leader –Provide the Technological Foundation on Which Other Products Are Built –Interoperability –Encourage Other Companies to Develop and Build Complementary Innovations

6 MSETM 5110 – New Product Development Successful Innovation Companies (cont’d.) Entrepreneurship/Intrapreneurship/”Venture Capitalist” Focus on Continuous Improvement –Marketing/customer Requirements and Expectations –Research, Design, and Development –Manufacturing and Provisioning –Strategic Suppliers Celebrate/Reward Success

7 MSETM 5110 – New Product Development Developing a Radical New Innovation Agenda Continuous Reinvention (Transformation) Avoiding “One-Vision” Wonders Harnessing the Imagination of Every Employee Developing New Financial Measures That Focus on Creating New Wealth Creating Vibrant Internal Markets for Ideas, Capital, and Talent Reference: Gary Hamel, Leading the Revolution.

8 MSETM 5110 – New Product Development Applying Development Strategy and Resources to Stay Ahead of the Power Curve Preemptive Proactive Maximum Value

9 MSETM 5110 – New Product Development The Continuum Exercise Checklist Are strategy and goals clearly defined, understood, communicated, aligned, executed? Is there a documented NPI process? Are there the right metrics around the process? –Time to market/development cycle (e.g., from concept to customer or from design freeze to ready-to-order) –Status vs. project schedule –Recovery plan in place –Quality and reliability –Change activity –Target cost –Percent revenue from new products Poor 0 Average 5 Flawless Execution 10

MSETM 5110 – New Product Development The Continuum Exercise (cont’d.) Is there a mechanism to benchmark your organization vs. recognized best-in-class performance standards? Is there a mechanism to capture learnings from each introduction that can be used to improve project after project? Are the right tools available for project tracking? Is there effective integration and communication across the functional teams (design, mfg., marketing)? Are there the right skills on the team? Is there the right commitment and passion for flawless execution? Poor 0 Average 5 Flawless Execution 10

11 MSETM 5110 – New Product Development Competitive Benchmarking The Search of Those Best Methods, Practices, and Processes That Will Lead to Superior Performance Pioneered by Xerox and Other Corporations in the Early 80’s Essentially Means Studying Major Competitors to Discover Their Strengths and Weaknesses Typically Looks at Design, Marketing, Manufacturing, Customer Support, Distribution, etc. Information Gathering Not Clandestine But Available in Public Financial Statements, Industry Analysis and Trade Journals There Is A Defined Benchmarking Process

12 MSETM 5110 – New Product Development Reasons for Benchmarking WITHOUT BENCHMARKINGWITH BENCHMARKING Becoming Competitive Internally FocusedConcrete Understanding of Competition Evolutionary ChangeNew Ideas of Proven Practices/Technology Low CommitmentHigh Commitment Industry Best Practices Not Invented Here (NIH)Proactive Search for Change Few SolutionsMany Options Average of Industry ProgressBusiness Practice Breakthrough Frantic Catch Up ActivitySuperior Performance

13 MSETM 5110 – New Product Development Reasons for Benchmarking (cont’d.) WITHOUT BENCHMARKINGWITH BENCHMARKING Defining Customer Requirements Based on History or Gut FeelMarket Reality PerceptionObjective Evaluation Low FitHigher Conformance Source: Robert C. Camp,Benchmarking.

14 MSETM 5110 – New Product Development Key Metrics for World Class Manufacturer Manufacturing Cycle Time D:P Ratios (Determines Build to Order or Build to Stock) Setup Times Material Availability Material Velocity (Distance of Material Movement During Production) Machine Up-time Customer Service Time

15 MSETM 5110 – New Product Development Metrics Simple Actionable and Attainable Drive the Right Behavior Assumptions: There Is A Defined Process/System There Is A Recognition That the Process/System Is Never the End There Is Commitment to Continuous Improvement of the Process/System Excellence Is Embraced As A Vision and Journey

16 MSETM 5110 – New Product Development Maintaining Schedule Control Resource Commitment – Head Count, Fixed Costs, Expenses Pricing For Major Customers and Major Accounts Potential Slips in Major Milestone Dates (the executive sponsor wants early warning and recovery plans) Plans for the Transition from Development Project to Operating Status Thorough Reviews at Major Milestones or Every Three Months, Whichever Occurs Sooner Review of Incentive Rewards That Have Company-wide Implications for Consistency and Equity Cross-project Issues Such as Resource Optimization, Prioritization, and Balance Source: Wheelwright and Clark, pg. 212

17 MSETM 5110 – New Product Development Heavyweight Team Contract Book – Major Sections Executive Summary Business Plan and Purposes Development Plan –Schedule –Materials –Resources Product Design Plan Quality Plan Manufacturing Plan Project Deliverables Performance Measurement and Incentives Source: Wheelwright and Clark, Exhibit 8-3

18 MSETM 5110 – New Product Development Responsibilities of Heavyweight Core Team Members Functional Hat Accountabilities: Ensuring Functional Expertise on the Project Representing the Functional Perspective on the Project Ensuring That Subobjectives Are Met That Depend on Their Function Ensuring That Functional Issues Impacting the Team Are Raised Proactively Within the Team

19 MSETM 5110 – New Product Development Responsibilities of Heavyweight Core Team Members (cont’d.) Team Hat Accountabilities: Sharing Responsibility for Team Results Reconstituting Tasks and Content Establishing Reporting and Other Organizational Relationships Participating in Monitoring and Improving Team Performance Sharing Responsibility for Ensuring Effective Team Processes Examining Issues From an Executive Point of View (answering the question, “Is this the appropriate business response for the company?”) Understanding, Recognizing, and Responsibly Challenging the Boundaries of the Project and Team Process Source: Wheelwright and Clark, Exhibit 8-5

20 MSETM 5110 – New Product Development Assignment 1 Case Study 1 (HBR ) – Living on Internet Time: Product Development at Netscape, Yahoo!™, NetDynamics, and Microsoft® In approximately 400 words, (a) compare and contrast the development philosophy, process and culture at Netscape, Yahoo!, NetDynamics, and Microsoft; and (b) rank the companies (1 through 4) in terms of year-over-year growth (e.g. market share, revenue, profitability, dividends, etc.) since the early and mid-90’s—the time frame in the case study. DUE DATE: Friday, July 12, 2002