Technology Management Class 2: Product Development Models – part 1

1. Technology ManagementClass 2: Product Development Models – part 1 John A. Hengeveld April 7, 2003

2. Subjects to Hit today • Product Policy Decisions • W&C Discussion (inc New Logic) • Stage Gate • Examples • Problems with Stage Gate • More flexible models • In class exercise

3. Product Policy Decisions- Hallmarks of effective processes • Involvement of marketing, manufacturing and engineering in a coordinated way. • Marketing’s role is insure the voice of the customer is represented and heard throughout development • Old: Market research New: Sensing.. Empathic Design • Coordinated cross functional process involves substantial work prior to product design. • The process has real go/no decision points. • Objective: Process which delivers superior value to the target customers

4. Product Policy Decisions- Success rate of products • Me Too products – 18.4% • Hengeveld’s first law: • Never innovate (a very great deal) for a me too product. • Products with Moderate Advantage – 58% • Differentiated Products – 98% • Key to differentiation is to draw on companycompetencies and not only assess market/product fit, but also product-company fit. • “it’s the right product.. But not for our company”

5. Product Policy Decisions-Managing Existing Product Lines • Product-line strategy.. “a time-phase CONDITIONAL plan for the sequence of developing products”* *McGrath, Product Strategies for High Technology Companies, McGraw-Hill, 1995 emphasis added

6. W&C Discussion Highlights of Chapter 1,2

7. Excerpts from W&C, Exhibit 1-5

8. Technology Assessment and Forecasting PostProjectLearning MarketAssessment and Forecasting Development Strategy Framework Technology Strategy DevelopmentGoals and Objectives Aggregate Project Plan ProjectManagementand Execution Market Strategy

9. Critical Issues in Technology Strategy • Separating Invention from Application – ex 2-4 • Product and Mfg Process Integration – New Logic of High Tech R&D article

10. Marketing Engineering Manufacturing Service HP Pizza Bin Approach (W&C Exh 2-4) Business Strategy Division Strategy FunctionalStrategies Pizza Bins of Proven Technology A B C D Concept DevelopmentProjectPhases Ongoing Improvement Eng Pilot Prod Production LearningAcross Projects

11. Critical Issues in Product/Market Strategy • Number, timing and rate of change of platforms • Number, timing, frequency and relationship to the product/market strategy of derivative products

12. Exhibit 2-10: 4 types of projects Research& AdvDevelopment Process Changes New CoreProcess Next GenProcess 1 DeptUpgrade Tuning Product changes New CoreProduct Next GenProduct Additionto Prod Family Add-ons &Enhance Breakthrough Platform or Next Gen Derivative(Enh, Hybrids and CostReduction) Question: Why does this model make financial sense ????

13. Increasing Costin Development Research& AdvDevelopment Process Changes New CoreProcess Next GenProcess 1 DeptUpgrade Tuning Product changes New CoreProduct Next GenProduct Additionto Prod Family Add-ons &Enhance Breakthrough Platform or Next Gen Derivative(Enh, Hybrids and CostReduction) Question: Why does this model make financial sense ???? Exhibit 2-10: 4 types of projects Increasing RISK!! Increasing Delivery of NEW Valuein the Market

14. W&C Discussion Highlights of Chapter 3-5

15. Essential Point in Management Strategy Product, Process and ResourceRoadmap Projects People

16. W&C Chapter 3 • Functional Maps • Useful analysis tools in the management of technology oriented business • Gap from strategy to operating plan over long term • Examples (Essential for Technology Mgmt) • Product Roadmap (see book) • Feature Spidergram • Price/Performance Map (see book) • Engineering Skills (see book) • Technology Gap Analysis

17. Map Example: Feature Spidergram

18. Map Example:Technology Gap Analysis

19. Strategy to Action: Pure Fiction VISION STRATEGY GOALS COMPENTENCIES Action Domain Deliver Superior Customer Value to Gas Analysis Customers around the world. Platform Rationalizationand Inst Connectivity Modernize Legacy to Common Platforms Leverage our strong #1 position in chemical sensors Software and Platforms Interfaces. Strong position inChemical Sensors Differentiated Component Technology Component SCA initiative Spect Measurement Competency SpectoscopicMeasurement DSP Enter Biomedical Gas Applications Develop Full Portfolio of Biomedical Products Digital Signal Processing technology Processors Develop Key products Analyze internet based gas measurement Remote gas measurement prototype

20. W&C Chapter 4 • The aggregate project plan as a tool for management of commitment and resources • Underlying assumption..

21. Ch 5: “Development Funnel” • Stage Gate model is broadly used. • It sometimes even works.

22. Screen 1 Screen 2 ship Phase 3:Rapid Focused development projects of multiple types “Model III: Structured Funnel” Phase 2: Detailing proposed products bounds and required knowledge Phase 1: Product/Process Idea Generationand concept development

23. Questions to ask about funnels: • Creating Development Projects • Where do ideas come from? • How are they selected for further work? • What criteria is used to select? • Converging the design/product • Are decisions made, if so how, who what process? • When are they made? • “pattern of convergence: ie: how many options,how long are they considered • Commitment to market • Criteria for introduction? • Who makes decision?

24. The structured funnel • W&C seem to like it a lot.. In fact they push it heavily.. But we can be more ummm neutral. • Foreshadowing:… • When would it work??? • Where would it fail???

25. The problem of product development cycle time MarketIntro Concept Development &Planning Implementation Project Start Concept Time Response Time Time to Market Concept Time is the window for applying new technology Response Time is when the ability to respond to changes in technology or market is severely limited. Developing Products on Internet Time, Iansiti et al, 1997

26. 4 1 2 3 4 1 2 3 2 4 3 1 2 1 3 4 Microsoft Product Development start User Feedback release Specification Vision/outline Design & Coding Integration Test Stabilize From Iansiti and MacCormack, Living on Internet Time, 1997

27. My Yahoo!! Development Process start First prototype release Internalbeta externalbeta Objectives Feature Design and Coding Integration System Redesign/Iterations Stabilize Designreview From Iansiti and MacCormack, Living on Internet Time, 1997

28. 4 1 2 3 4 1 2 3 2 4 1 3 2 1 4 3 Structure of Flexible Product Development start Sensing the market release Specification Design Integration Test Stabilize/Ramp up

29. Tradeoffs in Flexible models Netscape Microsoft Need for external testing YAHOO! Risk of external testing

30. Development model tradeoffs Garage Shop Flexible Novelty Its been done! Stage-Gate Complexity

31. Stop Sign: Shift underway • Product development focus • Innovation Stream Management • Technology Streams • External Technology Rapid change.. • Ext Technology is rarely source of competitive advantage • Internal Technology Investment to create sustained market advantage. • Market Streams • Slower change • Frequently source of longer term competitive advantage

32. Capability Pizza Bin Approach Business Strategy Product Execution “Capability Development Strategies” Engineering Strategy Manufacturing Strategy Service Strategy Marketing Strategy

33. In class exercise • Design a product development process forour sample firm in the handout.

34. Exercise Part II • Now lets change some technology assumptions: • Mattel and Barbie Dolls • Drug Company • Flat panel company

35. Mattel • Must be shown to buyers in August for Christmas • Must contain new variant of Barbie and all her friends and all relevant accessories • 9 months from the completion of a design until production ready to go for September 15. • Can only add one new Barbie set a year because of costs of marketing, and the availability of production lines

36. Drug Company • Identification of compounds • Clinical Trials in many phases • High cost of testing • Generally high profits for home run drugs.

37. Flat Panel Company • Strategy? • Issues? • Constraints?? • Process Elements

38. For Next Week • Read chapters 6-8, W&C • Doesn’t matter what product development process you use, these chapters are very important. • Prepare the Apple Case (Team) • “Apple did everything wrong, yet they succeeded, why?”