MSETM 5110 – New Product Development

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

2. MSETM 5110 – New Product DevelopmentRecap 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 DevelopmentGE’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 DevelopmentWhy 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 DevelopmentSuccessful 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 DevelopmentSuccessful 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 DevelopmentDeveloping 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 DevelopmentThe 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

10. MSETM 5110 – New Product DevelopmentThe 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?

11. MSETM 5110 – New Product DevelopmentCompetitive 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 DevelopmentReasons for Benchmarking

13. MSETM 5110 – New Product DevelopmentReasons for Benchmarking (cont’d.)

14. MSETM 5110 – New Product DevelopmentKey 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 DevelopmentMetrics • 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 DevelopmentAssignment 1 Case Study 1 (HBR 9697052) – 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