ETM 5391 – New Product Development and
Commercialization
Spring, 2004
Instructor: Mr. C. Michael Carolina
Date: March 25 – April 22
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ETM 5391 Web site:
http://www.okstate.edu/ceat/msetm/courses/etm 5391/.
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“The significant problems we face cannot
be solved at the same level of thinking we
were at when we created them.”
Albert Einstein
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Course Syllabus
ETM 5391 – New Product Development and
Commercialization
Scope
• The elements of NPI--marketing, design,
development, manufacturing, provisioning, and
support
• NPI as an integral part of business strategy and
business planning
• NPI as a vehicle to create competitive advantage for
the organization and its customers
• The environment for sustaining NPI consistency and
realizing improvement project after project
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Course Syllabus
ETM 5391 – New Product Development and
Commercialization
Scope (cont’d.)
• The tools and metrics of new product development
and introduction
• The order realization infrastructure needed to get
new products to customers in a manner that meets
or exceeds their expectations, and that delivers the
desired financial and overall business objectives
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Course Syllabus
ETM 5391 – New Product Development and
Commercialization
Spring 2004 Schedule
Week 1 (3/25): Introduction, Objectives, Class Profile,
Technology Evolution, Current Engineering vs. New
Product Engineering, and Review of Strategic and
Business Planning Processes
Week II (4/01): The NPI Process: Traditional vs.
Contemporary Approach
Assignment: Case Study 1 (“Living on Internet Time”)
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Course Syllabus
ETM 5391 – New Product Development and
Commercialization
Spring 2004 Schedule (cont’d.)
Week III (4/08): Benchmarking, Project Planning,
Cross-functional Integration, Systems and Tools
Week IV (4/15): Building Development Capability,
and Creating an Environment for Invention and
Innovation
Assignment: HBR Case Study 2
Week V (4/22): Review and Wrap-Up
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ETM 5391 – New Product Development and
Commercialization
Assignment 1
Individual profile including organizational
affiliation, job responsibilities, career
aspirations and other pertinent information
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ETM 5391 – New Product Development and
Commercialization
Assignment 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 mid90’s—the time frame in the case study.
DUE DATE: 04/06/04
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ETM 5391 – New Product Development and
Commercialization
Starting Premise
• Innovation is key to the long-term vitality of all enterprises
• Innovation means more than just new products; it also means
new services and ways of doing business
• While the key to innovation is originating new ideas, time is
at the core of successful innovation
• Timely execution is very demanding
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ETM 5391 – New Product Development and
Commercialization
Purpose
Connectivity
Relevancy
Application
Science: “what is”
Engineering: “creating what has never been”
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ETM 5391 – New Product Development and
Commercialization
Environment
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Technology evolution
Shorter product lifecycles
Globalization
Increased competition
Downsizing/rightsizing
Entrepreneurial/intrapreneurial
Virtual corporation
Corporate corruption
Workforce/workplace/worktools
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ETM 5391 – New Product Development
and Commercialization
Competing Through Innovation
Changing Business Climate
• Globalization
• Increased competition
• Technology revolution/evolution
• Fragmented, demanding markets
• Shorter product lifecycles
• Virtual organizations
• E-business
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ETM 5391 – New Product Development
and Commercialization
Competing Through Innovation (cont’d.)
Competitive Factors
• Speed
• Efficiency
• Quality/reliability
• Supply chain/distribution channels
Translation: Creating Value for Customers
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ETM 5391 – New Product Development and
Commercialization
Full Stream Lifecycle Management (ISO 15288)
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Design
Build
Operate
Dispose
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ETM 5391 – New Product Development and
Commercialization
The Role of the Engineer in Product Development
D B O D
• Create sustained value for customers and
stakeholders
• Do no harm (product safety and environmental
protection)
• Do the right things to meet objectives for top-line
revenue and bottom-line profitability
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ETM 5391 – New Product Development and
Commercialization
Joint Strike Fighter (JSF/X-Plane)
• Competing defense contractors (Lockheed Martin
and Boeing)
• Innovative engineering (products and process)
• Multi-modal platform (conventional, hover,
carrier)
• Fewer parts/commonality of parts
• Hardware/software integration
• Human factors engineering
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ETM 5391 – New Product Development and
Commercialization
The Language of NPD
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Disruptive technologies
Core competence
Benchmarking
Traditional vs. emerging markets
Mergers and acquisitions (M & A)
Full stream life cycle management (ISO 15288)
Exit strategies
“Hurdle” rates (ROI)
Percent revenue from new products
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ETM 5391 – New Product Development and
Commercialization
The Language of NPD (cont’d.)
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Green technology
Value engineering
Multi-disciplinary solutions
Sustainable development
Mission
Vision
Strategic priorities
Implementation plan
Performance metrics
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Disruptive Technologies (Some Examples)
- Analog to Digital
- Wireline to Wireless
- Cu to Fiber
- Albums/Tapes to CDs
- Voice to Data
- VHS/VCRs to DVD
Improved Productivity/Efficiency
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“…at some point in the future, all scientific
knowledge may be completed.”
Stephen Hawking
“A Brief History of Time: From the Big Bang to Black
Holes”
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ETM 5391 – New Product Development and
Commercialization
Moore’s Law
Transistor count (power) will double every 18
months and will continue for many years.
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ETM 5391 – New Product Development and
Commercialization
Successful Innovation Companies
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Vision/mission/values
Alignment around values
People systems around values
Organize for success
Effective integration and communication
Clarity of responsibility and accountability
Focus on results thru flawless execution
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ETM 5391 – New Product Development and
Commercialization
Successful Innovation Companies (cont’d.)
• Technology platform leader
– Provide the technological foundation on which other
products are built
– Interoperability
– Encourage other companies to develop and build
complementary innovations
• Entrepreneurship/intrapreneurship/“venture capital”
• Focus on continuous improvement
– Marketing/customer requirements and expectations
– Research, design, and development
– Manufacturing and provisioning
– Strategic suppliers
• Celebrate/reward success
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ETM 5391 – New Product Development and
Commercialization
Some Examples (Visions/Missions)
• HP
• LU
• GE
• Others
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ETM 5391 – New Product Development and
Commercialization
A New Paradigm for Innovation
• Invention and innovation
• A business imperative
• Sources of innovative ideas
• Building innovation capabilities
• The culture for innovation
• Ringing the “cash register”
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ETM 5391 – New Product Development
and Commercialization
The Essentials of NPD/NPI
• NPI in strategic terms/linkage
(What)
• NPI in tactical terms
(How)
• The entrepreneurial/intrapreneurial mindset (Innovation)
• Baselining/benchmarking
(Continuum)
• The new product development game
(Competition)
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ETM 5391 – New Product Development and
Commercialization
The Essentials of NPD/NPI (cont’d.)
• An imperative for a high performance team
recognition
(Excellence)
• DFX (manufacturability, testability, installation,
supply chain, e-business, environment)
(Integration)
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ETM 5391 – New Product Development and
Commercialization
Business Planning and Business Case
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Marketing decisions
Risk analysis/mitigation
Resource requirements
Financial projections
Production demands
Supply chain/provisioning
Product support/technical assistance
Personnel needs
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ETM 5391 – New Product Development and
Commercialization
New Marketing Paradigms
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Fit both “Old World” and “New World” economy
Total access
IP/networked world
Globalization
Hypercompetition
Virtual “always on” presence (anywhere/anytime)
Relationship marketing
Delivering value to customers, collaborators, company
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ETM 5391 – New Product Development and
Commercialization
Design and Development Methodologies
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Quality Function Deployment (QFD)
Design for Manufacturability (DFM)
Computer-aided Design (CAD)
Computer-aided Engineering (CAE)
Computer-aided Manufacturing (CAM)
Total Quality Management (TQM)
System of Systems
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ETM 5391 – New Product Development and
Commercialization
Creating Breakthroughs at 3M
Step-by-Step Process
• Phase 1: Laying the Foundation
– Identify target markets and involve key
stakeholders in the company
• Phase 2: Determining the Trends
– Identify experts in the field—people who have a
broad view of emerging technologies and leadingedge applications in the area being studied
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ETM 5391 – New Product Development and
Commercialization
Creating Breakthroughs at 3M (cont’d.)
Step-by-Step Process (cont’d.)
• Phase 3: Identifying Lead Users
– Identify and learn from users at the leading edge
of the target market and related markets to shape
preliminary product ideas and to assess the
business potential and how they fit with the
mission of the company
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ETM 5391 – New Product Development and
Commercialization
Creating Breakthroughs at 3M (cont’d.)
Step-by-Step Process (cont’d.)
• Phase 4: Developing the Breakthroughs
– Move preliminary concepts toward
completion…host workshops with several lead
users, marketing and technical people to arrive at
final design that fits customer’s and company’s
needs. At conclusion, design team may disband;
however, one team member should stay involved
for continuity and help with related products and
services.
Source: von Hippel, Thomke, and Sonnack, Creating
Breakthroughs at 3M. HBR, October, 1999. Reprint 99510.
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“Progress lies not in enhancing what is, but
in advancing toward what will be.”
Kahlil Gibran
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ETM 5391 – New Product Development and
Commercialization
Time and Innovation
• Innovation is key to the long-term vitality of all
enterprises
• Innovation means more than just new products; it
also means new services and ways of doing business
• While the challenge to innovation is originating new
ideas, time is at the core of an innovation’s success
• Timely execution is very demanding
• Examples of fast, time-based innovators (Honda,
Ford, GM, Sun Microsystems, Cisco, Toys “R” Us,
UPS)
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ETM 5391 – New Product Development and
Commercialization
Time and Innovation (cont’d.)
• Roughly right vs. “final product”
• The “hollowing of America”
- transfer of manufacturing
- long new product development and introduction
cycles
• The price for being a slow innovator
• The rewards for being a fast innovator
• Becoming a fast innovator
Source: George Stalk & Thomas Hout, “Competing Against Time.”
The Free Press. ISBN 0029152917
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ETM 5391 – New Product Development and
Commercialization
Becoming a Fast Innovator
I.
Time is the key performance variable to be
managed to attain improved cost and quality.
II. Time benchmarks are set by the performance of
competitors and, if faster, by what is
technologically possible.
III. 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.
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ETM 5391 – New Product Development and
Commercialization
Becoming a Fast Innovator (cont’d.)
IV. 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.
V.
The development programs are to have five steps, and
company will organize itself around these steps:
1. Planning and preparation
2. Product definition
3. Design development
4. Manufacturing ramp-up
5. Product Improvement
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ETM 5391 – New Product Development and
Commercialization
Becoming a Fast Innovator (cont’d.)
VI. The objective of planning and preparation is to
avoid having to invent in the middle of the
development process—make unknowns be
knowns.
VII. 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.
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ETM 5391 – New Product Development and
Commercialization
Becoming a Fast Innovator (cont’d.)
VIII. 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.
IX. Team members are collocated.
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ETM 5391 – New Product Development and
Commercialization
Becoming a Fast Innovator (cont’d.)
X. 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.
XI. New programs are generated continuously, at
regular market-driven intervals, and incorporate
more incremental advances and fewer “great
leaps forward.”
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ETM 5391 – New Product Development and
Commercialization
Four Types of Product/Process Development Projects
1. Research or advanced development projects
2. Breakthrough development projects
3. Platform or generational development projects
4. Derivative development projects
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ETM 5391 – New Product Development and
Commercialization
Typical Events (Delays Can Occur at Virtually
Any Point in the Process)
• Idea
• Final Product Review (FPR)
• Approval
• Design Specification
• Approval
• Preliminary Transfer Price
• Approval
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ETM 5391 – New Product Development and
Commercialization
Typical Events (Delays Can Occur at Virtually Any
Point in the Process) (cont’d.)
• Vendor selection
• Approval of quote
• Engineering sample approval
• Initial production
• Production sample approval
• Customer trials
• Approval
• Production ramp
Source: Stalk and Hout, “Competing Against Time”
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ETM 5391 – New Product Development and
Commercialization
Applying Development Strategy and Resources to Stay
Ahead of the Power Curve
Preemptive
Proactive
Maximum Value
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ETM 5391 – New Product Development and
Commercialization
Developing a Radical New Innovation Agenda
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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.
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ETM 5391 – New Product Development and
Commercialization
Competitive 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
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ETM 5391 – New Product Development
and Commercialization
Reasons for Benchmarking
WITHOUT BENCHMARKING
WITH BENCHMARKING
Becoming Competitive
•Internally Focused
•Concrete Understanding of Competition
•Evolutionary Change
•New Ideas of Proven Practices/Technology
•Low Commitment
•High Commitment
Industry Best Practices
•Not Invented Here (NIH)
•Proactive Search for Change
•Few Solutions
•Many Options
•Average of Industry Progress
•Business Practice Breakthrough
•Frantic Catch Up Activity
•Superior Performance
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ETM 5391 – New Product Development and
Commercialization
Reasons for Benchmarking (cont’d.)
WITHOUT BENCHMARKING
WITH BENCHMARKING
Defining Customer Requirements
•Based on History or Gut Feel
•Market Reality
•Perception
•Objective Evaluation
•Low Fit
•Higher Conformance
Source: Robert C. Camp, Benchmarking.
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ETM 5391 – New Product Development and
Commercialization
NPI: A Philosophy, Strategy and Discipline
NPI Goal: Consistently Create Great Products on Time, Within Budget
The HP DeskJet Printer Project
Objective: Low Cost, High-Quality Printer, and Achieve Excellence in:
1.
Functionality
- Superior print quality based on HP’s proprietary ink-jet technology
2.
Coherence
- Seamless interface between marketing/design/manufacturing
3.
Fit
- Understanding of customer expectations
- Evolutionary path/next generation or derivative products
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ETM 5391 – New Product Development and
Commercialization
The HP DeskJet Printer Project
(A Model for Collaboration, Integration and Success)
An In-depth Review
Timeframe: Mid-1980s
Competitive Setting: Dominated by Epson with 80% Market Share
Vision: Create a New Market Segment for the HP DeskJet Highquality, Low-cost Printer
Target Market: Low-end Personal Computing and Small Offices
Technologies: Ink-jet vs. Laser
Time-to-Market Strategy:
- Market Surveys/Customer Involvement
- Face-to-face Meetings Between Engineers and Targeted Customers
- Involve Manufacturing Early
- Design for Easy Manufacturing
- Design to Meet Cost Targets (Product/Process Synchronization) 52
ETM 5391 – New Product Development and
Commercialization
The HP DeskJet Printer Project
(A Model for Collaboration, Integration and Success) (cont’d.)
Sales and Sales Infrastructure:
- Easy to Sell
- Easy to Order
Installation and After-sales Support:
- Ease of Hook-up
- Ease of Operation
Successes:
- Simple Concept, Easy to Grasp
- Expanded HP Capabilities (e.g., Advanced Printhead and
Manufacturing Process)
- Created Excitement/Energy Around HP Products
- Laid Foundation for Follow-on Products
- Created Brand Loyalty
- Strengthened Communication/Collaboration Between Design and Mfg.
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ETM 5110 – New Product Development and
Commercialization
The HP DeskJet Printer Project
(A Model for Collaboration, Integration and Success) (cont’d.)
Successes: (cont’d.)
- Expanded Customer Base
- Forged Stronger Relationship with Customers
Source: Bowen, Clark, Wheelwright et al., Make Projects the School
for Leaders, HBR, September-October, 1994. (Reprint 94503)
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ETM 5391 – New Product Development and
Commercialization
Intellectual Property
“…the effect of a well-managed patent portfolio
on a company’s market value will only
increase.”
James Oelschlager, Manager
White Oak Growth Fund
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