1 ETM 5391 – New Product Development and Commercialization Spring, 2004 Instructor: Mr. C. Michael Carolina Date: March 25 – April 22

2 ETM 5391 Web site: /.

3 “The significant problems we face cannot be solved at the same level of thinking we were at when we created them.” Albert Einstein

4 Course Syllabus ETM 5391 – New Product Development and Commercialization Scope The elements of NPI--marketing, design, development, manufacturing, provisioning, and support NPI as an integral part of business strategy and business planning NPI as a vehicle to create competitive advantage for the organization and its customers The environment for sustaining NPI consistency and realizing improvement project after project

5 Course Syllabus ETM 5391 – New Product Development and Commercialization Scope (cont’d.) The tools and metrics of new product development and introduction The order realization infrastructure needed to get new products to customers in a manner that meets or exceeds their expectations, and that delivers the desired financial and overall business objectives

6 Course Syllabus ETM 5391 – New Product Development and Commercialization Spring 2004 Schedule Week 1 (3/25): Introduction, Objectives, Class Profile, Technology Evolution, Current Engineering vs. New Product Engineering, and Review of Strategic and Business Planning Processes Week II (4/01): The NPI Process: Traditional vs. Contemporary Approach Assignment: Case Study 1 (“Living on Internet Time”)

7 Course Syllabus ETM 5391 – New Product Development and Commercialization Spring 2004 Schedule (cont’d.) Week III (4/08): Benchmarking, Project Planning, Cross-functional Integration, Systems and Tools Week IV (4/15): Building Development Capability, and Creating an Environment for Invention and Innovation Assignment: HBR Case Study 2 Week V (4/22): Review and Wrap-Up

8 ETM 5391 – New Product Development and Commercialization Assignment 1 Individual profile including organizational affiliation, job responsibilities, career aspirations and other pertinent information

9 ETM 5391 – New Product Development and Commercialization Assignment 2 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: 04/06/04

10 ETM 5391 – New Product Development and Commercialization Starting Premise Innovation is key to the long-term vitality of all enterprises Innovation means more than just new products; it also means new services and ways of doing business While the key to innovation is originating new ideas, time is at the core of successful innovation Timely execution is very demanding

11 ETM 5391 – New Product Development and Commercialization Purpose Connectivity Relevancy Application Science: “what is” Engineering: “creating what has never been”

12 ETM 5391 – New Product Development and Commercialization Environment Technology evolution Shorter product lifecycles Globalization Increased competition Downsizing/rightsizing Entrepreneurial/intrapreneurial Virtual corporation Corporate corruption Workforce/workplace/worktools

13 ETM 5391 – New Product Development and Commercialization Competing Through Innovation Changing Business Climate Globalization Increased competition Technology revolution/evolution Fragmented, demanding markets Shorter product lifecycles Virtual organizations E-business

14 ETM 5391 – New Product Development and Commercialization Competing Through Innovation (cont’d.) Competitive Factors Speed Efficiency Quality/reliability Supply chain/distribution channels Translation: Creating Value for Customers

15 ETM 5391 – New Product Development and Commercialization Full Stream Lifecycle Management (ISO 15288) Design Build Operate Dispose

16 ETM 5391 – New Product Development and Commercialization The Role of the Engineer in Product Development D B O D Create sustained value for customers and stakeholders Do no harm (product safety and environmental protection) Do the right things to meet objectives for top-line revenue and bottom-line profitability

17 ETM 5391 – New Product Development and Commercialization Joint Strike Fighter (JSF/X-Plane) Competing defense contractors (Lockheed Martin and Boeing) Innovative engineering (products and process) Multi-modal platform (conventional, hover, carrier) Fewer parts/commonality of parts Hardware/software integration Human factors engineering

18 ETM 5391 – New Product Development and Commercialization The Language of NPD Disruptive technologies Core competence Benchmarking Traditional vs. emerging markets Mergers and acquisitions (M & A) Full stream life cycle management (ISO 15288) Exit strategies “Hurdle” rates (ROI) Percent revenue from new products

19 ETM 5391 – New Product Development and Commercialization The Language of NPD (cont’d.) Green technology Value engineering Multi-disciplinary solutions Sustainable development Mission Vision Strategic priorities Implementation plan Performance metrics

20 Disruptive Technologies (Some Examples) - Analog to Digital- Wireline to Wireless - Cu to Fiber- Albums/Tapes to CDs - Voice to Data- VHS/VCRs to DVD Improved Productivity/Efficiency

21 “…at some point in the future, all scientific knowledge may be completed.” Stephen Hawking “A Brief History of Time: From the Big Bang to Black Holes”

22 ETM 5391 – New Product Development and Commercialization Moore’s Law Transistor count (power) will double every 18 months and will continue for many years.

23 ETM 5391 – New Product Development and Commercialization Successful Innovation Companies Vision/mission/values Alignment around values People systems around values Organize for success Effective integration and communication Clarity of responsibility and accountability Focus on results thru flawless execution

24 ETM 5391 – New Product Development and Commercialization Successful Innovation Companies (cont’d.) Technology platform leader –Provide the technological foundation on which other products are built –Interoperability –Encourage other companies to develop and build complementary innovations Entrepreneurship/intrapreneurship/“venture capital” Focus on continuous improvement –Marketing/customer requirements and expectations –Research, design, and development –Manufacturing and provisioning –Strategic suppliers Celebrate/reward success

25 ETM 5391 – New Product Development and Commercialization Some Examples (Visions/Missions) HP LU GE Others

26 ETM 5391 – New Product Development and Commercialization A New Paradigm for Innovation Invention and innovation A business imperative Sources of innovative ideas Building innovation capabilities The culture for innovation Ringing the “cash register”

27 ETM 5391 – New Product Development and Commercialization The Essentials of NPD/NPI NPI in strategic terms/linkage(What) NPI in tactical terms(How) The entrepreneurial/intrapreneurial mindset(Innovation) Baselining/benchmarking(Continuum) The new product development game(Competition)

28 ETM 5391 – New Product Development and Commercialization The Essentials of NPD/NPI (cont’d.) An imperative for a high performance team recognition(Excellence) DFX (manufacturability, testability, installation, supply chain, e-business, environment) (Integration)

29 ETM 5391 – New Product Development and Commercialization Business Planning and Business Case Marketing decisions Risk analysis/mitigation Resource requirements Financial projections Production demands Supply chain/provisioning Product support/technical assistance Personnel needs

30 ETM 5391 – New Product Development and Commercialization New Marketing Paradigms Fit both “Old World” and “New World” economy Total access IP/networked world Globalization Hypercompetition Virtual “always on” presence (anywhere/anytime) Relationship marketing Delivering value to customers, collaborators, company

31 ETM 5391 – New Product Development and Commercialization Design and Development Methodologies Quality Function Deployment (QFD) Design for Manufacturability (DFM) Computer-aided Design (CAD) Computer-aided Engineering (CAE) Computer-aided Manufacturing (CAM) Total Quality Management (TQM) System of Systems

32 ETM 5391 – New Product Development and Commercialization Creating Breakthroughs at 3M Step-by-Step Process Phase 1: Laying the Foundation –Identify target markets and involve key stakeholders in the company Phase 2: Determining the Trends –Identify experts in the field—people who have a broad view of emerging technologies and leading- edge applications in the area being studied

33 ETM 5391 – New Product Development and Commercialization Creating Breakthroughs at 3M (cont’d.) Step-by-Step Process (cont’d.) Phase 3: Identifying Lead Users –Identify and learn from users at the leading edge of the target market and related markets to shape preliminary product ideas and to assess the business potential and how they fit with the mission of the company

34 ETM 5391 – New Product Development and Commercialization Creating Breakthroughs at 3M (cont’d.) Step-by-Step Process (cont’d.) Phase 4: Developing the Breakthroughs –Move preliminary concepts toward completion…host workshops with several lead users, marketing and technical people to arrive at final design that fits customer’s and company’s needs. At conclusion, design team may disband; however, one team member should stay involved for continuity and help with related products and services. Source: von Hippel, Thomke, and Sonnack, Creating Breakthroughs at 3M. HBR, October, Reprint

35 “Progress lies not in enhancing what is, but in advancing toward what will be.” Kahlil Gibran

36 ETM 5391 – New Product Development and Commercialization Time and Innovation Innovation is key to the long-term vitality of all enterprises Innovation means more than just new products; it also means new services and ways of doing business While the challenge to innovation is originating new ideas, time is at the core of an innovation’s success Timely execution is very demanding Examples of fast, time-based innovators (Honda, Ford, GM, Sun Microsystems, Cisco, Toys “R” Us, UPS)

37 ETM 5391 – New Product Development and Commercialization Time and Innovation (cont’d.) Roughly right vs. “final product” The “hollowing of America” - transfer of manufacturing - long new product development and introduction cycles The price for being a slow innovator The rewards for being a fast innovator Becoming a fast innovator Source: George Stalk & Thomas Hout, “Competing Against Time.” The Free Press. ISBN

38 ETM 5391 – New Product Development and Commercialization Becoming a Fast Innovator I.Time is the key performance variable to be managed to attain improved cost and quality. II.Time benchmarks are set by the performance of competitors and, if faster, by what is technologically possible. III.The support functions necessary to advance the development process are actively managed to be “invisible.” Their need is to be anticipated; they are to be invested in and kept up-to-date. They are never to be allowed to slow the development process.

39 ETM 5391 – New Product Development and Commercialization Becoming a Fast Innovator (cont’d.) IV.Each program is to be managed and executed by a small, dedicated, decision-empowered, and experienced team. Team members have common goals and are measured and evaluated as part of a team. V.The development programs are to have five steps, and company will organize itself around these steps: 1.Planning and preparation 2.Product definition 3.Design development 4.Manufacturing ramp-up 5.Product Improvement

40 ETM 5391 – New Product Development and Commercialization Becoming a Fast Innovator (cont’d.) VI.The objective of planning and preparation is to avoid having to invent in the middle of the development process—make unknowns be knowns. VII.After definition, the product specification is frozen. The definition is committed to and not allowed to be changed. The improvement phase is to be used for costs and feature enhancements.

41 ETM 5391 – New Product Development and Commercialization Becoming a Fast Innovator (cont’d.) VIII.Functional expertise resides in the development program. Manufacturing and design resources are full-time participants in the definition team. Manufacturing resources are full-time participants in the design team. IX.Team members are collocated.

42 ETM 5391 – New Product Development and Commercialization Becoming a Fast Innovator (cont’d.) X.Senior management reviews are few. The role of senior management is to ensure that the program teams have the appropriate resources, incentives and environment to execute their tasks quickly. XI.New programs are generated continuously, at regular market-driven intervals, and incorporate more incremental advances and fewer “great leaps forward.”

43 ETM 5391 – New Product Development and Commercialization Four Types of Product/Process Development Projects 1.Research or advanced development projects 2.Breakthrough development projects 3.Platform or generational development projects 4.Derivative development projects

44 ETM 5391 – New Product Development and Commercialization Typical Events (Delays Can Occur at Virtually Any Point in the Process) Idea Final Product Review (FPR) Approval Design Specification Approval Preliminary Transfer Price Approval

45 ETM 5391 – New Product Development and Commercialization Typical Events (Delays Can Occur at Virtually Any Point in the Process) (cont’d.) Vendor selection Approval of quote Engineering sample approval Initial production Production sample approval Customer trials Approval Production ramp Source: Stalk and Hout, “Competing Against Time”

46 ETM 5391 – New Product Development and Commercialization Applying Development Strategy and Resources to Stay Ahead of the Power Curve Preemptive Proactive Maximum Value

47 ETM 5391 – New Product Development and Commercialization 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.

48 ETM 5391 – New Product Development and Commercialization 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

49 ETM 5391 – New Product Development and Commercialization 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

50 ETM 5391 – New Product Development and Commercialization 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.

51 ETM 5391 – New Product Development and Commercialization NPI: A Philosophy, Strategy and Discipline NPI Goal: Consistently Create Great Products on Time, Within Budget The HP DeskJet Printer Project Objective: Low Cost, High-Quality Printer, and Achieve Excellence in: 1.Functionality - Superior print quality based on HP’s proprietary ink-jet technology 2.Coherence - Seamless interface between marketing/design/manufacturing 3.Fit - Understanding of customer expectations - Evolutionary path/next generation or derivative products

52 ETM 5391 – New Product Development and Commercialization The HP DeskJet Printer Project (A Model for Collaboration, Integration and Success) An In-depth Review Timeframe: Mid-1980s Competitive Setting: Dominated by Epson with 80% Market Share Vision: Create a New Market Segment for the HP DeskJet High- quality, Low-cost Printer Target Market: Low-end Personal Computing and Small Offices Technologies: Ink-jet vs. Laser Time-to-Market Strategy: - Market Surveys/Customer Involvement - Face-to-face Meetings Between Engineers and Targeted Customers - Involve Manufacturing Early - Design for Easy Manufacturing - Design to Meet Cost Targets (Product/Process Synchronization)

53 ETM 5391 – New Product Development and Commercialization The HP DeskJet Printer Project (A Model for Collaboration, Integration and Success) (cont’d.) Sales and Sales Infrastructure: - Easy to Sell - Easy to Order Installation and After-sales Support: - Ease of Hook-up - Ease of Operation Successes: - Simple Concept, Easy to Grasp - Expanded HP Capabilities (e.g., Advanced Printhead and Manufacturing Process) - Created Excitement/Energy Around HP Products - Laid Foundation for Follow-on Products - Created Brand Loyalty - Strengthened Communication/Collaboration Between Design and Mfg.

54 ETM 5110 – New Product Development and Commercialization The HP DeskJet Printer Project (A Model for Collaboration, Integration and Success) (cont’d.) Successes: (cont’d.) - Expanded Customer Base - Forged Stronger Relationship with Customers Source: Bowen, Clark, Wheelwright et al., Make Projects the School for Leaders, HBR, September-October, (Reprint 94503)

55 ETM 5391 – New Product Development and Commercialization Intellectual Property “…the effect of a well-managed patent portfolio on a company’s market value will only increase.” James Oelschlager, Manager White Oak Growth Fund