Managing New Product and Process Development

Text Cases

Steven C. Wheelwright

• Publisher: Free Press
• Year: 2010
• Print ISBN: 9780029055175
• eBook ISBN: 9781451602319
• Topic: Business
• Subtopic: Industrial Management
• Index: Business

Argues that a company's capability to conceive and design quality prototypes and bring a variety of products to market more quickly than its competitors is increasingly the focal point of competition. The authors present principles for developing speed and efficiency.

CHAPTER 1

Competing Through Development Capability

Overview

This chapter introduces product development as a central focus of competition in the 1990s. While firms have developed new products since the Industrial Revolution, in industry after industry, the importance of doing product development well has increased dramatically in recent years. This chapter identifies the forces driving the importance of product development—changes in competition, customer demands, and technology. An important theme in the chapter is that these forces have created a competitive imperative for speed, efficiency, and high quality in the development process.

In reading the chapter it is important to establish a basic idea of what product development involves—both what makes it difficult to achieve, and the competitive power it creates when done well. To provide perspective on what we mean by product development, the chapter briefly summarizes the major sequence of activities involved in taking an idea from initial concept through prototype building and testing, and into commercial production. A key theme is that product development is a process involving all the major functions in a business. With the development process as background, we then use the example of the Northern Electronics Company and its problems with the A14 stereo project to illustrate the difficulties in development.

The problems on the A14 project—missed schedules, cost overruns, and a poorly designed product—reflect a mismatch between the way the project is organized and managed and the requirements of the development process created by the product’s complexity and the rigorous and uncertain competitive environment in which Northern Electronics competed. Exhibit 1–5 summarizes the characteristics of problematic projects as well as their consequences. The exhibit also identifies key themes that characterize outstanding projects—clarity of focus, integration across functions, a strong focus on time to market, doing things right the first time, and effective substantive leadership—thus summarizing many of the important themes developed in the book.

Our intent in this first chapter is not only to highlight the challenge and characterize what an outstanding project might look like, but also to illustrate the competitive power created in the organizations that do development extraordinarily well. To underscore that power we close the chapter with a review of the competitive interaction between Northern and Southern Electronics in the compact stereo market. Historically these two companies mirrored one another in terms of their market approach. But in the 1980s, Southern built a new strategy around superior capability and product development. In effect, Southern embarked on a strategy to become a fast-cycle competitor. In reading through this history, it is useful to note the way in which Southern linked its product development capability with its strategies in marketing and manufacturing. In fact, the way Southern exploited its advantage in speed and efficiency over its slower Northern rival was precisely by integrating its development capabilities with its actions in marketing and manufacturing. The history also sheds light on the A14 stereo project referred to above. Here, we see what happens when a senior management team attempts to achieve substantial improvements in performance without making basic changes in processes or in capabilities. The chapter closes with a summary of the advantages that effective product development capability conferred upon Southern.

CHAPTER 1

In a competitive environment that is global, intense, and dynamic, the development of new products and processes increasingly is a focal point of competition. Firms that get to market faster and more efficiently with products that are well matched to the needs and expectations of target customers create significant competitive leverage. Firms that are slow to market with products that match neither customer expectations nor the products of their rivals are destined to see their market position erode and financial performance falter. In a turbulent environment, doing product and process development well has become a requirement for being a player in the competitive game; doing development extraordinarily well has become a competitive advantage.

The New Industrial Competition: Driving Forces and Development Realities

The importance of product and process development is not limited to industries or businesses built around new scientific findings, with significant levels of R&D spending, or where new products have traditionally accounted for a major fraction of annual sales. The forces driving development are far more general. Three are particularly critical:

• Intense international competition. In business after business, the number of competitors capable of competing at a world-class level has grown at the same time that those competitors have become more aggressive. As world trade has expanded and international markets have become more accessible, the list of one’s toughest competitors now includes firms that may have grown up in very different environments in North America, Europe, and Asia. The effect has been to make competition more intense, demanding, and rigorous, creating a less forgiving environment.

• Fragmented, demanding markets. Customers have grown more sophisticated and demanding. Previously unheard of levels of performance and reliability are today the expected standard. Increasing sophistication means that customers are more sensitive to nuances and differences in a product, and are attracted to products that provide solutions to their particular problems and needs. Yet they expect these solutions in easy-to-use forms.

• Diverse and rapidly changing technologies. The growing breadth and depth of technological and scientific knowledge has created new options for meeting the needs of an increasingly diverse and demanding market. The development of novel technologies and a new understanding of existing technologies increases the variety of possible solutions available to engineers and marketers in their search for new products. Furthermore, the new solutions are not only diverse, but also potentially transforming. New technologies in areas such as materials, electronics, and biology have the capacity to change fundamentally the character of a business and the nature of competition.

These forces are at work across a wide range of industries. They are central to competition in young, technically dynamic industries, but also affect mature industries where life cycles historically were relatively long, technologies mature, and demands stable. In the world auto industry, for example, the growing intensity of international competition, exploding product variety, and diversity in technology have created a turbulent environment.¹ The number of world-scale competitors has grown from less than five in the early 1960s to more than twenty today. But perhaps more importantly, those twenty competitors come from very different environments and possess a level of capability far exceeding the standard prevailing twenty-five years ago. Much the same is true of customers. Levels of product quality once considered extraordinary are now a minimum requirement for doing business. As customers have grown more sophisticated and demanding, the variety of products has increased dramatically. In the mid 1960s, for example, the largest selling automobile in the United States was the Chevrolet Impala. The platform on which it was based sold approximately 1.5 million units per year. In 1991, the largest selling automobile in the United States was the Honda Accord, which sold about 400,000 units. Thus, in a market that is today larger than it was in 1965, the volume per model has dropped by a factor of four. Currently over 600 different automobile models are offered for sale on the U.S. market.

Similarly, technological change has had dramatic consequences. In 1970, one basic engine-drive train technology (a V8 engine, longitudinally mounted, water cooled, carbureted, hooked up to a three-speed automatic transmission with rear wheel drive) accounted for close to 80 percent of all automobile production in the United States.² Indeed, there were only five engine-drive train technologies in production. By the early 1980s that number had grown to thirty-three. The growing importance of electronics, new materials, and new design concepts in engines, transmissions, suspensions, and body technologies has accelerated the pace and diversity of technological change in the 1980s. Simply keeping up with those technologies is a challenge, but an often straightforward one in comparison with having to i...

Table of contents

• Cover
• Dedication
• Preface
• Chapter 1: Competing Through Development Capability
• Chapter 2: The Concept of a Development Strategy
• Chapter 3: Maps and Mapping: Functional Strategies in Pre-Project Planning
• Chapter 4: The Aggregate Project Plan
• Chapter 5: Structuring the Development Funnel
• Chapter 6: A Framework for Development
• Chapter 7: Cross-Functional Integration
• Chapter 8: Organizing and Leading Project Teams
• Chapter 9: Tools and Methods
• Chapter 10: Prototype/Test Cycles
• Chapter 11: Learning from Development Projects
• Chapter 12: Building Development Capability
• Notes
• Index
• Copyright
• Footnotes