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Cover. Product Development at Dell Computer Corporation. Annus Horribilus. Uh-oh…. 1993. Minimal R&D Spending. CRM Backfire. Varied Teams. Unsettled Developers. Dell’s Near-Death Spiral. Recall!. Title. Increased Industry Pace. Sour Portables.

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  1. Cover Product Development at Dell Computer Corporation

  2. Annus Horribilus Uh-oh… 1993 Minimal R&D Spending CRM Backfire Varied Teams Unsettled Developers Dell’s Near-Death Spiral Recall! Title Increased Industry Pace Sour Portables

  3. Let’s Not Miss the Opportunity… Growth of Portable PC market compared to Desktop PC market

  4. Headed in the Wrong Direction…

  5. Can You Find Dell…?

  6. Top 10 Customer Criteria for Laptop Purchase Incidence (%)

  7. E(PM) = $485 M • 100% Confidence in Technology NiHi Option 1: Continue with NiHi • Pros: • Proven product • No delays • Occupies less space • Deliver “good” Dell product • Cons: • Limited differentiation • E(PM) not highest of options

  8. E(PM) = $444 M • 60% Confidence in Technology LiOn Option 2: Go with LiOn • Pros (assuming success): • Attain differentiation • Deliver “superb” Dell product • Lock out competitors from supply • Cons: • Uncertain technology • Delay to market • Compounded delay to market upon failure • Failure would taint brand image of quality; spillover to desktops • Occupies more space • E(PM) lowest of options

  9. E(PM) = $542 M • 60% Confidence in Technology Dual Development Option 3a: Dual Development • Pros (assuming success): • E(PM) highest of options • Delay decision/maintain flexibility – “real option” • Isolate volatility in design and minimize the independence • Cons: • Additional fixed cost of $2.5 million to “buy” this option • Opportunity cost of pulling people away from other projects • Discarding half the craftsmanship in the final product

  10. E(PM) = $533 M • 60% Confidence in Technology Over-design Option 3b: Over-design • Pros (assuming success): • E(PM) 2nd highest of options • Delay decision/maintain flexibility – “real option” • Piecewise commitment versus binary choices • Cons: • Additional variable cost, expected to $11 million, to “buy” this option • Occupies even more space than option 2 and less attractive to customers • Not transferable to next product line even LiOn is successful

  11. Comparable Sensitivity Analysis

  12. E(PM) = $485 M • 100% Confidence in Technology • E(PM) = $444 M • 60% Confidence in Technology • E(PM) = $542 M • 60% Confidence in Technology • E(PM) = $533 M • 60% Confidence in Technology NiHi LiOn Dual Develop Short Term Recommendation Over Design The Proof Lies in More Than Just the Numbers….

  13. E(PM) = $542 M • 60% Confidence in Technology Dual Develop Short Term Recommendation • Pros (Dual Development): • Creates a high barrier to entry by locking in all of Sony’s LiOn supply • Eliminates the need to forecast future market preferences and reduces projects risk of success • Able to better capture the VoC • Empirical evidence has shown the ability to make changes close to product launch is positively correlated to increased customer quality and firm performance • IBM was successful in adopting this strategy during initial launch of their personal computers. • Economic benefit outweighs economic cost The Proof Lies in More Than Just the Numbers….

  14. Long Term Recommendation: Benchmark to Best-in-Class Overall performance difference resides in the first three stages of development: • Design Specification: Spending too much time upfront trying to predict customer requirements • Design Development: Spending too much time designing the perfect prototype • Design Verification: Spending too much time in simulation testing instead of being able to modify actual prototypes

  15. Flexibility: Essential in Rapidly Evolving Competitive Environments 1 Maintain project fluidity – avoid the “Freeze/Thaw” syndrome 2 Provide decision support tools that aid designers and managers in making decisions correctly and efficiently 3 Make piecewise commitments and avoid the “one-release approach. 4 Apply process metrics to ensure process control Focus on the Management Process not the Development Process

  16. Questions?

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