Product Creation

The Heart Of The Enterprise From Engineering To Ec

Philip H. Francis

• Publisher: Free Press
• Year: 2010
• Print ISBN: 9781416576396
• eBook ISBN: 9781439136560
• Topic: Business
• Subtopic: Business generale
• Index: Business

Now more than ever, a company's success -- indeed its survival -- depends on a firmwide effort to create the best products and bring them to market quicker than competitors. Going beyond the traditional focus on design and production exclusively, product development expert Philip H. Francis provides senior managers with the methods and tools to orchestrate the entire enterprise for creating a legacy of product excellence. For the first time, Francis presents a holistic view of product creation--not just the core elements of engineering and industrial design, but also design's interface with manufacturing, the customer's voice and quality commitments, and the essential functions of technology management and leadership. From his unique vantage point as a former professor and researcher as well as a chief technology officer and director of advanced manufacturing technology, Francis presents the nine key business functions of new product development (NPD): manufacturing strategy, IT systems, issues of leadership and culture, customer satisfaction, quality, operations and measurement, intellectual property, the management of research and development, and technology. In immensely readable prose, Francis devotes a chapter to each function, explaining how managers can implement and manage each of these nine NPD functions. Francis enriches his arguments with real-world examples of triumphs and failures in a variety of industries, from consumer products such as furniture to business products such as networking software. He offers hands-on suggestions and strategies for every stage in the product development process, including "Ideas for Action" sections containing killer questions that can eliminate a product at any stage. Special sections of the book elaborate on the steps to take during key NPD processes. Written for those trained in technology as well as business-oriented industrial managers, Product Creation will be timely and necessary reading for CEOs, engineers, designers, marketing managers, IT officers, as well as anyone concerned with product development from conception to market.

How to Excel at Product Development

Since the beginning of the industrial age, land, labor, and capital have been the engines that drove economic progress. However, the role of these factors in new product and market creation has yet to be fully understood. For example, why is it that despite a slowdown in one or more of these three inputs, some economies still can accelerate?

Recently Stanford’s Paul Romer, a developer of the “new growth” economic theory, shed some light. He’s shown that technology, systems and software, is in fact a fourth ingredient of growth and is the factor responsible for economic acceleration. Technology can raise returns on investment and make these investments even more valuable because of legal monopolies such as patent and other forms of intellectual property. Technology has an immense effect on developed countries’ economies. How much land, labor, or capital do you need to launch a new e-commerce business? Entrepreneurism mixed with a dash of technology now creates not just companies but markets and industries! We now see clearly that the process of innovation is essential to a nation’s standard of living. And it leads inevitably to more innovation, more technology, and shorter product lives. Society’s challenge today is to cope with and capitalize upon these four forces.¹

We see abounding change as we get ever closer to our customers, divide our markets more finely, and exploit the enormous potential of Internet services and Web-based technologies. In fact, all signs point to more robust global markets, especially for research-intensive industries such as aerospace, computers, electronics, communications equipment, and pharmaceuticals. The National Science Foundation estimates that products from these sectors will grow at more than twice the rate of most other manufactured goods. These sectors in turn will pull through new products from their supplier chains. The winners will be those who can marshal innovation in their R&D, product concepts, and production processes.

At the enterprise level, the creation of new products and services is the fuel needed to feed our growth and competitive appetites. Such products and services are the very basis for any successful company. Shareholder returns, service to customers, opportunities for employees, contributions to the communities in which the enterprise operates—all depend upon serving the right markets with an ongoing stream of valuable new products and services.

You’ll see my penchant for the term “product creation” throughout this book. Although this term is relatively new, it could as well have been used a century ago, when it would have been synonymous with “manufacturing.” Back then, creating a new product simply meant coming up with a product idea that met someone’s need, then designing it and producing it. Customers would come knocking at your door. Today such a primitive approach would likely be a path toward business failure.

Yes, product creation today is far more complex than in the days when all that was needed was to design it and make it. Now it consists of all the elements involved in bringing a product to market: R&D, customer inputs and market analysis, design, production, and all the supporting systems—such as information technology quality and intellectual property and after-sales product support—that are part of a new product launch. Taking a new product from conception to market involves many interconnected steps. It relies upon marketing and marketing intelligence, product definition, planning and approval, research and engineering development, process development, product launch, and of course, after-sales services. Rigorous design and product reviews need to be conducted at critical points in each project’s development to ensure that all requirements are being properly met, on time. All these efforts need to orchestrated and managed with precision. Indeed, new product creation must not be looked upon so much as a series of steps but as an organic process of interconnected functions.

Customers, whether for internal use or for external sales, should inspire every new product. Therefore, step one must be to understand thoroughly the market dynamics. What opportunities lie within the market for products or services that will attract and keep your customers? Pay close attention to how you best can exploit these opportunities. The central idea is simply this: maintain and continuously improve the product creation process. If this is done properly, the products will take care of themselves in the marketplace!

In this chapter I’ll use a couple of models that will help you in product creation. The first we’ll see underscores the interconnectivity of the various stages of new product creation. We’ll emphasize a process model that orchestrates events and information, resulting in superior, competitive new products. Then we’ll look at using virtual teams for globally dispersed operations, developing some useful tools, and using some of these process ideas in the creation of software.

2.1: A MODEL FOR COMPETITIVE PRODUCT CREATING

My objective in this book is to provide you with a road map for success in the rapidly changing, highly competitive arena of new product creation. Traditionally, this business subject has taken one of two paths: in the direction of product design (usually engineering-oriented) or in the direction of product strategy and the management thereof (usually business-oriented). I’ll be the first to agree that these approaches are important—in fact, vital to anyone with leadership responsibility for new product creation. It’s how we learned.

Yet today the subject is larger that that. New product creation is now being seen as the very heart of the enterprise—whether manufacturer or service provider. Creating excellence in new products/services means harnessing and integrating nearly all of a company’s functions to work in lock step. The goal is products via process. I’ll discuss throughout the book the importance of having a well-conceived process for new product realization—and also how to measure it and manage it. We’ll see why the process involves more than just R&D, product design and testing, and production operations. Yes, these factors are key. But it takes close communication with information technology, with quality systems, customer care, operations management, legal support, and—yes, with effective leadership and a skilled and dedicated workforce—to make your mission really flourish.

A good product development process—PDP—is your engine for creating the products and services that you’ll need to win in today’s highly competitive environment. It’s the creator of your future. To emphasize this point, let’s reach back in history to the engine that is credited with creating the industrial age: the venerable waterwheel. There happen to be a number of analogies between our current and this ancestral development engine, as we’ll see in subsequent chapters. They each consist of components having mutual dependencies. These ancient machines—like today’s well-conceived and integrated product development processes—have enormous leverage on productivity. The waterwheel will be our metaphor for the interconnectedness of NPD’s various components.

The New Product Creation Wheel

Figure 2.1 shows the New Product Creation Wheel. It depicts the principle of the vertical, “overshot” waterwheel—the most common of a family of waterwheel configurations. The wheel turns on a horizontal axis by the action of running water. As it turns, the wheel delivers useful work, such as mechanical action for milling and grinding or for driving an electric generator. Like its cousin the windmill, the waterwheel is one of human beings’ first and simplest machines for creating “free” energy. More accurately, it transforms naturally existing energy into making agricultural and other products, by delivering power.²³

FIGURE 2.1 THE NEW PRODUCTION CREATION WHEEL—ANALOG OF THE NEW PRODUCTION CREATION MACHINE

The waterwheel symbolizes how new product creation is best practiced today. In earlier times (and even today) power was used in irrigation and to produce products ranging from smelted ores to beer mash. It’s credited with broadening the commercial base beyond local townships by creating industrial and agrarian centers across the vast stretches of Europe and Asia.

I use the New Product Creation Wheel as a metaphor for new product development, for there are many analogies. The wheel draws resources from the energy of the marketplace in the form of creative ideas, market needs, and the supply chain. The organization focuses its energies through efficient processes to supply markets with the products it seeks. In the waterwheel it’s the water velocity and the “hydraulic head”—the difference in water levels on either side of the wheel—that provide the energy needed to produce products. Entrepreneurs, a skilled workforce, technology, and an understanding of marketplace needs measure today’s “business head.” These are the factors that can lead to valuable product launches.

The New Product Creation Wheel offers still further insight into the ingredients needed for superior product creation. Notice that the wheel itself is a structure, organized with individual spokes that share the load. These spokes gird the wheel so that it may do its work without failing. In this metaphor the spokes are the key business functions that support new product creation. These nine spokes—each representing a chapter in this book—are bound together at the hub and provide the strength, cooperation, and discipline of the enterprise. These key business functions are:

• Product development
• Manufacturing
• Information Technology Systems
• Leadership and Culture
• Customers
• Quality
• Operations
• Legal Issues
• R&D and Emerging Technologies

The ancient waterwheel does indeed describe fairly well the dynamics of thoroughly modern companies—large and small—those that “do new product development right.” Some top performers are known for superior strength in selected spokes. For example, they may excel at technological innovation or at production. Others are known for product quality and reliability. Still other companies are leaders in integrating and distributing information. Yet total perfection is a goal that seems always beyond our grasp. It requires mastery of all the spokes. No one seems to do it all, consistently. It’s a company’s weak spokes that make it vulnerable. But as you’ll see in the ensuing chapters, the New Product Creation Wheel metaphor provides a useful conceptual model for continually strengthening your business’s effectiveness.

2.2: TWO STEPS FOR DEVELOPING VALUABLE PRODUCTS

Product development is at once simple and complex. It’s simple because, as we’ll see, developing new products only has two distinct steps. Yet it’s complex because these two steps require thought, leadership, anticipation, patience, nurturing, and controlled speed. However, correctly implementing these two steps is worth every minute of your time and will give you a competitive edge like no other.

This chapter explains the significance of the first spoke on the New Product Creation Wheel—the new product development process. Successful new product development relies upon process, concurrent engineering, speed, and people. How a product is conceived, designed, distributed, priced, promoted, and supported is all-important. A new product delivery strategy involves carefully thinking through several vital strategic elements: product concept, product positioning, value offering, product art and design, market channels, and product promotion. My basic message here is that a process management approach for new product development should replace the traditional project management approach. We’ll see in this chapter that the focus should be to manage the overall process of NPD; valuable products will then be the by-product of a genuinely good NPD process.

The two steps to excellence in product creation are (1) a steady stream of innovative ideas and (2) the process that allows you to turn these ideas into profitable products servicing markets with economy and delighting your customers. Let’s have a look.

Step 1: New Ideas for New Products

Generally, new products are regarded as more tangible objects, which are ultimately bought by end customers. Products exist also as service components, as software, and as brand labels that command loyalty. Products, too, can be upgrades to internally developed business systems or processes that end consumers never see. Products can be advertising creations to promote products or to shape opinions. Generally, products are useful, intellectual creations, tangible or not, that are used inside or outside an enterprise.

Your road to successful product launches begins with continual market intelligence that identifies potential needs or opportunities. Once you understand what the market will welcome, your next task is the most fundamental of all: conceiving a valuable new product. Of course, having done your homework, you recognize that new product ideas often come from an outside opportunity and/or a need. But the job of translating those factors into an actual and effective product falls on you and your organization.

Therefore you should widely mobilize a continuing stream of new product development proposals from throughout the organization. Make it easy for people to float ideas, formalize, and submit them. All those who participate in these proposals deserve to be acknowledged and appreciated for their efforts. You should have a simple administrative procedure that encourages and facilitates new product proposals. This procedure ought to leverage the ideas across the entire company, not just those who run product-engineering functions. And those champions whose project proposals aren’t accepted deserve a personalized explanation as to why. As important as these matters are, it’s the easy part.

The hard part is how you can deal effectively with the blizzard of ideas and recommendations that (should) come from all corners of your organization. This leads us to “portfolio management.” You can’t—and shouldn’t—take all of them on. You need a rational, objective process to evaluate project proposals so you end up selecting only the “best.” Such an approach means not simply putting decision-making in the hands of one or two senior executives. There’s no room here for the politics of pet projects. Everyone has biases. Everyone knows which are the “best” projects and yet can disagree strongly among themselves about particular choices. What you have here is the challenge of managing your portfolio of new product proposals. Investment bankers, fund managers, and others in the financial services learned long ago how to create and manage portfolios consisting of many disparate holdings. We can learn from them.

New products are the lifelines to your future. They are all different, and you soon find yourself choosing within a basket of fruit, not just picking out the best apples. Some projects are risky, others not; some are strategically vital, others not; some are costly, others not. Some projects simply must be given the go-ahead for regulatory compliance requirements. These particular decisions must be made “ex-portfolio.” Otherwise, your goal is to select a collection of projects that, together, give you your best possible shot at a successful business future.

Keep in mind the four basic dimensions when managing a new product portfolio: strategic importance, financial return, likeliness of success, and urgency. All are more or less equally important. As “fruit” they’re all different; you can’t just add them up and pick those, say, with the highest revenue potential or the lowest risk. Rather, choosing requires a balancing act. You need a process for evaluating project proposals that, over the long run, will give you winners. These four dimensions of portfolio management provide the basis for such a process:

Strategic

• How, specifically, does the project align with your current and future product strategy?
• Does the project fill an important niche within the strategy?
• Is the project a new product or an extension of a current one?
• How likely is the project to spin off future new products or businesses?
• Will the project create or protect a competitive advantage?

Financial

• Do you fully understand the financial risks of not taking on this project?
• What are the expected costs, by project phase?
• What are the success factors for each phase of the project?
• What are the costs of bringing the project to market?
• What is the project’s expected life-cycle return based on net present value, internal rate of return, or payback?
• Are you prepared to exploit this product fully and successfully?

The Risks Accompanying Project Acceptance

• Do you fully understand the technology and the development risks, and can you cover them?
• What are the business and economic risks?
• Do you have the resources to manage these risks?
• Do you understand the competitive downsides of not taking on this project?
• What market forces might arise to interfere with the project’s success?
• Are there any other unexpected conditions (legal, regulatory, technological, etc.) that could arise to threaten the project’s success?

Timing

• the proposed time frame realistic for launch?
• Do you understand the strategic and competitive losses of delaying this project?
• What is the economic penalty of delaying or killing this project?

Your objective is to maintain the overall portfolio so that it aligns with your business strate...

Table of contents

• Cover Page
• Title Page
• Contents
• In Gratitude
• Preface
• A Briefing The Landscape for Cultivating New Products
• How to Excel at Product Development
• Manufacturing Strategy The Other Half of Concurrent Engineering
• Systems Making Information Technology Work
• Leadership Form Follows Culture
• Long Live the Customer
• Quality Really Counts
• Operations If You Can’t Measure It You Can’t Manage It
• Caveat Venditor—Beware of Their Lawyers
• Harnessing Your R&D and Emerging Technologies
• References
• Index
• About the Author