ETM 5391 – New Product Development and Commercialization Spring, 2004

1. ETM 5391 – New Product Development and CommercializationSpring, 2004 Instructor: Mr. C. Michael Carolina Date: March 25 – April 22

2. ETM 5391 Web site: http://www.okstate.edu/ceat/msetm/courses/etm 5391/.

3. ETM 5391 – New Product Development and CommercializationAssignment 2 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: 04/15/04

4. ETM 5391 – New Product Development and CommercializationRecap of Session II • NPI Alignment to Business Strategy and Values • Characteristics of Successful Innovation Companies • Portfolio Management • The Continuum (Checklist) Exercise • Linkage to Business Strategy • Metrics and Tools • Cross-functional Teaming • Discipline and Commitment

5. ETM 5391 – New Product Development and CommercializationRecap of Session II (cont’d.) • Finding Solutions in the Face of Constraints/Challenges • Capital/Budgets • People Resources • Market Dynamics • Return On Investment • Economic Fluctuation • Benchmarking

6. ETM 5391 – New Product Development and CommercializationRecap of Session II • Product Lifecycle: Entry, Growth, Maturity, Decline, Exit • Strategic Inflection Points on the “S” Curve • The Fundamental Responsibility of Scientist and Engineers: • Create Value/Improve the Quality of Life • Understand Technology Evolution • Understand Marketing and Market Trends • Understand the Full Stream Process of NPI (“C to C”)

7. ETM 5391 – New Product Development and CommercializationRecap of Session II(cont’d.) • Characteristics of Successful Innovation Companies • Vision/Mission/Values • Alignment Around Values • Understand Core Competence (Maintenance/Acquisition) • The Checklist/Continuum Process • Competitive Benchmarking • The Search for Best Practices • The Quest for Superior Performance • Focus of Process and Continuous Evolution of the Process

8. ETM 5391 – New Product Development and CommercializationRecap of Session II(cont’d.) The Heavyweight Team Concept • Subject Matter Experts (SME’s) • Communication and Collaboration • DFX • Resource Allocation • Keeping the Project on Schedule, Within Budget With the Right Quality • Tee Up (HBR) Case Study 1 – Living on Internet Time: Product Development at Netscape, Yahoo, NetDynamics, and Microsoft

9. ETM 5391 – New Product Development and CommercializationTypes of Development Teams Functionally Organized Team Structure - Work divided among functional disciplines and no one person has overall responsibility - Leadership occurs primarily with the specialized groups or disciplines - Projects tend to be narrow in scope Lightweight Team Structure - Work of functions coordinated via coordinator and team of representatives from the functional areas - Representatives pull together information and facilitate interaction - Project coordinator not responsible for overall project but has opportunity to display diplomatic leadership to keep project on schedule

10. ETM 5391 – New Product Development and CommercializationTypes of Development Teams (cont’d.) Heavyweight Team Structure - Project leader has overall responsibility for project and responsible for integrating the work of the functional pieces - Project leader supported by a core team of functional leaders - Focus on system solution - Team provides leadership within the functions as well as across entire project effort Autonomous Team Structure - Dedicated team that is smaller; thinks “out of the box” - Entrepreneurial/start-up mentality - Leader has overall responsibility - Individuals working on project are removed from their normal functions

11. ETM 5391 – New Product Development and CommercializationThe 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

12. ETM 5391 – New Product Development and CommercializationThe 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?

13. “We are living in a period of time that will produce more change for humanity than any previous era in history.” John Peterson

14. ETM 5391 – New Product Development and Commercialization Lecture 3 4/08/04 GE (Jack Welch) 10 Minute Video

15. ETM 5391 – New Product Development and Commercialization GE’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

16. ETM 5391 – New Product Development and Commercialization GE’s Two-Decade Transformation: Jack Welch’s Leadership (cont’d.) • 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

17. ETM 5391 – New Product Development and Commercialization Four Types of Product/Process Development Projects • Research or Advanced Development Projects • Breakthrough Development Projects • Platform or Generational Development Projects • Derivative Development Projects

18. ETM 5391 – New Product Developmentand CommercializationReasons for Benchmarking

19. ETM 5391 – New Product Developmentand Commercialization Benchmarking The payoff: knowing your strategic and operational strengths and weaknesses and those of your competition = GROWTH

20. ETM 5391 – New Product Developmentand Commercialization Benchmarking Strengths Weaknesses Opportunities Threats

21. ETM 5391 – New Product Developmentand Commercialization Innovation An economic, social, and environmental responsibility.

22. ETM 5391 – New Product Developmentand Commercialization Innovations built on: • Technological feasibility • Addressable market • Customer/supplier relationship • Multi-disciplinary, seamless solutions • Technology forecasting/roadmapping

23. ETM 5391 – New Product Developmentand Commercialization Innovation: a collaboration among • Academia – advancing knowledge through scholarly activity • Industry – creating wealth and jobs through the application of technology and business solutions • Government – providing regulatory framework/governance process

24. ETM 5391 – New Product Developmentand Commercialization Innovation Looking for: • documented and sustained successes • common themes • correlations • lessons learned

25. ETM 5391 – New Product Developmentand Commercialization “Why Good Projects Fail Anyway” (Nadim Matta & Ronald Ashkenas, HBR, Sept. 2003, page 109-114) The case for rapid-results teams to avoid: • “execution risks” – designated activities, won’t be carried out properly • “white space risks” – required activities won’t be identified in advance, leaving gaps in the project plan • “integration risks” – disparate activities won’t come together at the end

26. ETM 5391 – New Product Developmentand Commercialization “Why Good Projects Fail Anyway” Keys to success: • Results oriented – end state • Vertical – cross-functional effort • Fast – “100-day” approach (promote/creativity and sense of urgency)

27. ETM 5391 – New Product Development and Commercialization Becoming a Fast Innovator • Time is the key performance variable to be managed to attain improved cost and quality. • Time benchmarks are set by the performance of competitors and, if faster, by what is technologically possible. • The support functions necessary to advance the development process are actively managed to be “invisible.” Their need is to be anticipated; they are to be invested in and kept up-to-date. They are never to be allowed to slow the development process.

28. ETM 5391 – New Product Development and Commercialization Becoming a Fast Innovator (cont’d.) • Each program is to be managed and executed by a small, dedicated, decision-empowered, and experienced team. Team members have common goals and are measured and evaluated as part of a team. • The development programs are to have five steps, and company will organize itself around these steps: • Planning and preparation • Product definition • Design development • Manufacturing ramp-up • Product Improvement

29. ETM 5391 – New Product Development and Commercialization Becoming a Fast Innovator (cont’d.) • The objective of planning and preparation is to avoid having to invent in the middle of the development process—make unknowns be knowns. • After definition, the product specification is frozen. The definition is committed to and not allowed to be changed. The improvement phase is to be used for costs and feature enhancements.

30. ETM 5391 – New Product Development and Commercialization Becoming a Fast Innovator (cont’d.) • Functional expertise resides in the development program. Manufacturing and design resources are full-time participants in the definition team. Manufacturing resources are full-time participants in the design team. • Team members are collocated.

31. ETM 5391 – New Product Development and Commercialization Becoming a Fast Innovator (cont’d.) • Senior management reviews are few. The role of senior management is to ensure that the program teams have the appropriate resources, incentives and environment to execute their tasks quickly. • New programs are generated continuously, at regular market-driven intervals, and incorporate more incremental advances and fewer “great leaps forward.”

32. Teradyne Aurora Project(Automatic Test Equipment – ATE) Video Tape • Cross Functional Team/Internal Board of Directors • Market Concerns • Microcontrollers • ASICs • Technology Concerns • CMOS • Windows NT

33. Teradyne Aurora Project(Automatic Test Equipment – ATE) (cont’d.) Video Tape (cont’d.) • Discontinuous Change (Disruptive Technology) • Platform • Derivative • Core Competency • Business Plan/Business Case • Getting Engineers Close to Customer • Understanding the Customer’s Business and Operating Metrics • Asset/Resource Allocation

34. ETM 5391 – New Product Development and Commercialization Summary of the HP Deskjet Printer Project • Clear Product Definition and Market Segment • Clear Focus/Objectives (Low Cost, High Quality) • Created New Development Process Emphasizing Speed, Design for Manufacturability, and Teamwork • Effective Use of Early Production Tools (CAD, CAM, CAE, PDM, SAP Software) • Effective Use of Heavyweight Team Structure • Effective Use of Prototypes/Customer Involvement • Achieved Objectives for Cost, Quality, Customer Satisfaction • Reduced Cycle Time from 36-60 Months to 22 Months • Became the Model for Subsequent Development at HP Vancouver

35. ETM 5391 – New Product Development and CommercializationIntellectual Property Management • Risk Mitigation • Competitive Position/Advantage • The Cost of Not Investing in R & D • Optimizing Rate of Return • Creating Value for Stakeholders • Some Examples by Sector

36. ETM 5391 – New Product Development and CommercializationIntellectual Property Management (cont’d.) Generally, Biotechs/Pharmaceuticals Agree That Patent Position is A Leading Factor in Deciding Research Focus - Long Development Cycles - Complex Validation/Approval Process (Clinical Testing, FDA Approval) - Exclusivity - Legal - Etc. • Dell Computer/IBM

37. ETM 5391 – New Product Development and CommercializationManagement Roles and Responsibilities Senior Management • Choose and Prioritize Projects • Select/Empower Cross-functional Teams • Monitor Project Progress • Strategic Linkage Middle Management • Assign Resources • Project Champion/Advocate for Fast Development • Communicate/Collaborate with Other Middle Managers • Coach/Mentor/Develop Functional Team Members • Conflict Resolution • Celebrate Success

38. ETM 5391 – New Product Development and CommercializationManagement Roles and Responsibilities (cont’d.) Functional Team • Create • Think “Out of the Box” • Keep Project on Schedule and Within Budget • Know When to Ask for Help From Middle or Senior Managers

39. ETM 5391 – New Product Development and Commercialization 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

40. ETM 5391 – New Product Development and Commercialization Maintaining Schedule Control (cont’d.) • 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

41. ETM 5391 – New Product Development and Commercialization 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

42. ETM 5391 – New Product Development and Commercialization 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

43. ETM 5391 – New Product Development and Commercialization 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

44. ETM 5391 – New Product Development and Commercialization • Organization Vision/Mission/Strategy • Business Model/Architecture • Development Portfolio and Development Teams • Functional Integration (Wheelwright and Clark, Exhibit 8-1, p. 191) - Functional Team Structure - Lightweight Team Structure - Heavyweight Team Structure - Autonomous Team Structure • Tools and Methods

45. ETM 5391 – New Product Development and Commercialization So, What Does This All Boil Down To: • Mission/Vision/Strategy • Technology Solutions in a Knowledge-based and Global Economy • Customer- and Market-Focused • Creating Stakeholder Value • Speed, Flexibility • Repeatable, Sustaining NPD/NPI Process • Effective Use of People and Capital Resources • Being Competitive • Maintaining/Building Core Competency • Clock Speed

46. ETM 5391 – New Product Development and Commercialization Objective(s) Focusing on Things That Make a Difference (Value) Flawless Execution Continuous Improvement

47. Successful Execution “Strategy and planning by successful and losing teams are amazingly similar. The offensive and defensive theories both employed would be virtually identical. The amount of time they spend practicing wouldn’t vary by more than a few minutes and their practice format would be the same. The main difference would be their attention to detail. In the successful organization, no detail is too small to receive attention. No job is minor, and everyone takes great pride in realizing they are important and their responsibilities are critical to the unit’s success.” Lou Holtz Football Coach (Currently University of South Carolina; formerly Arkansas, NY Jets, Notre Dame)

48. ETM 5391 – New Product Developmentand Commercialization “In theory, there is no difference between theory and practice. In practice, there is.” Yogi Berra