10/19/2014 (c) 2012 John W.

Priest 1
Lecture 1

Product Development
IN THE CHANGING WORLD

The Times They Are A-Changing
Bob Dylan - 1964

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Cover and Preface

The course and book was developed at Texas
Instruments and is intended for all engineers,
managers, designers, and support personnel who
need to be collaboratively involved in the
product life cycle.
Our approach is a systematic application of best
practices that focuses on reducing technical risk
Also entrepreneurship (Reality Check) and self
promotion (How to Wow)



Turmoil in World Economy
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World recession
Currency fluctuations
Wars and religious conflicts
Powerful vs. others (companies, countries)
Rich vs. poor
So want is new?
Fundamental Change
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1. Emerging countries
2. Technology
Instant communication
Product development tools (CAD)
World outsourcing
3. Speed
4. New processes
Pervasive Computing
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Embedded wireless intelligent sensors
everywhere including people
Smart phones, IPAD, apps, GPS, flying bug
cameras
Smart homes with talking toasters?
No consensus how pervasiveness will change our
life and our company

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Product development starts with an idea
Learning Objectives for lecture 1
Know what is changing in our world in order to be
successful
Knowledge of trends, language, semantics, and
acronyms (How can you be successful in France if
you do not speak French?, you need to speak the
tech language)
Engineers and others use acronyms
Know the language!
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RPM
GB
ROI
PAT
EBITDA
API
MTBF
HALT
TAAF
LCC
OLAP
LOL
Topics
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1. Product metrics
2. Strategies and change
3. Innovation and change
4. Trends
5. Outsourcing
6. Best practices
Much of this material may seem to high level at this time,
however, you need to understand managements
thinking
Also, some of you may want to entrepreneurs or work in
small businesses where you will have to do many of
these high level tasks


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What makes a successful product?

Why do you buy a Casio/HP/TI calculator vs. a
different brand?

Note we will use the term
product but it can also mean
designing a process, service,
software etc.
Successful Product Metrics VI
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Todays focus on metrics/measures Lord Kelvin quote
Innovation and Intellectual Property (IP) patent,
secrets
Cost
Performance/functionality
Availability
Reliability/Quality
Styling or aesthetics
Brand name reputation or store position
Others (previous experience, most popular, already in
use)
You (your idea/product) must be successful in at
least one of these!
Our 5 Engineering PD Design Metrics (VI)
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Performance includes reliability and innovation
Cost
Schedule, lead time (impacts availability)
Technical risk
Intellectual property (protection)
Where is innovation and styling? These are hard to
measure quantitatively so we combine these into
performance
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Company success is measured by
parameters such as sales ($), profit ($),
market share (%) and customer acceptance (#
of new customers, % share of early adapters
or other customer classifications).
Also stock price, which may or may not be
affected by the above metrics
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Key Terms of why consumers buy a certain
product (VI)
Consumers buy or not buy based on
perceived value
Value is the relative worth/need or perceived
importance of a product to the customer.
Customers define value in relation to their
personal expectations e.g. needs or wants
Customers are often classified into types,
early adopters/ lead user, cost driven (cheaps),
followers, etc.

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LIGHT SPEED CHANGE
If things seem under control, youre not going fast
enough.
Time is a scarce resource.
First to market is extemely important, but not always!!!
The bleeding edge of technology,
Bomar calculators, Sony betamax
Flat World
Resources
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Todays World
Breakthroughs in technology make new industries and
can make industries obsolete
Flat world
Fundamental changes in products, services, and how
they are delivered. (EBay, PayPal, newspapers)
Customized products with more performance and
options at a lower cost. (order your own)
Resources that organizations need; knowledge, people,
equip, facilities, capital, and energy: can be scarce or
more costly. (shortage of Nano experts, welders)


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NEW BUSINESS MODELS (VI in business)
Business models document the strategy and process
for executing a business plan (definition of
companys operations)

Successful companys business models are:
1. innovative and/or 2. expertly executed

Respond to change/trends more quickly and more
effectively than their competitors.


Business Plan/Model (1 of 4)
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1. General Outline
What is the companys business mission?
Target market
What are its objectives regarding sales, growth,
market share, profits, new product development,
R& D etc.?
Business Plan/Model (4 of 4)
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Marketing
Budget
At a minimum, the current budget and the next budget
should be presented.
(If possible) What is the profit margin, Break Even
point, and expected level of profits?
Implementation, Evaluation and Control
Who is going to what?
When and how will we measure the results


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Examples:
Dell: low cost, high quality, made to order, no
stores, quick delivery
Federal Express: direct pickup, overnight
delivery, no government subsidy
Wal-Mart: lowest cost, no matter the methods
or results, logistics
Southwest Airlines: no frills, non-hub,
profitable in a non-profitable industry,
hedge fuel prices
Google: search engine providing other
services
E Bay: used goods, old fashion auctions

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Reality is:
Most companies have similar technologies
and abilities to their competition
Most designs and services can be copied or
outsourced
Companies can get access to equal resources,
same vendors
Some countries have fundamental cost
advantages
What is unique (innovation) or better (our 5
design metrics) about your company?

2 Prevalent Strategy Models
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1. Maintaining strategic fit
Search for advantages that are sustainable
Leads to search for nich markets (something their
competitors cannot do well)
2. Leveraging resources to dominate
Accelerate organizational learning to outpace
competitors in building new advantages
Quest for new rules/technology that can devalue
incumbent's advantages

Weakness in Competitive Analysis
and Strategy
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Traditional approach in competitor analysis
Focus on resources, technical and financial aspects of
competitors
Resourcefulness, pace that new competitive advantages
are being built is ignored
Traditional competitor analysis is like a snapshot of a
moving car
Sun-tzu
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All men can see the tactics whereby I conquer,
But what none can see is the strategy out of which
great victory is evolved

facebook
Lessons
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Assessing current tactical advantages of
known competitors will not help you
understand the resolution, stamina, and
inventiveness of potential competitors
Companies that have risen to global
leadership invariably began with ambitions
that were out of proportion to their resources
and capabilities
Your biggest enemy may not be obvious e.g.
Dell overtaking IBM, Honda taking over
lawnmowers, Google vs. Microsoft and Yahoo,
YouTube
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Design team members are selected (hired)
for specific areas of expertise such as
knowledge in circuit design,
programming, six sigma, lean, modeling
skills, composite materials, electronic
assembly, financial markets, supply chain
rather than for their generalized degrees
in business, electrical, computer,
mechanical, industrial, manufacturing
engineering.
New Topic- Role of Specialists

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Key is to insure effective collaboration between
these many different specialists even though
each has unique skills
Essential that each member is communicating
and knowledgeable of the entire development
process.


Career Tips from Nations Top Engineers
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What if specialists are not there?
Its very difficult to become successful today
by focusing only on his or her specialty, must
deal with lawyers, business, other engineers
etc.
The most important skills you can learn in
school are creative problem solving and
discipline of life long learning (active
learning)
Design news.com
New Topic - Cultural Differences
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Lactose intolerant Europe 80%, US 65%,
Africa 30%, US Indians 0%
Packages and names are the same but:
In USA, Kraft Philadelphia cream cheese has
14% more calories than in Italy
US used for cheese cakes, Italy spreads and
dressings
Heilmans real mayonnaise has 50% of the
saturated fat in London (soy oil in US, veget )
Kelloggs all-bran bar has 300% more sodium
than the Mexico version
Europe resists genetically modified
ingredients
Government Differences and More
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Denmark bans vitamin enriched cereals
England is cutting sodium intake by 50%
For lunchables, Extra sodium in US extends the
shelf life to 90 days compared to 70 in England
McDonalds introduced low salt chicken McNuggets
Cadbury for China makes its chocolate less
milky and less sweet (lactose intolerance
China government wants more calcium, so
Kraft adds to Ritz crackers

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1. Innovation (first of many) -VI
Innovation is something new or unique
Developed from 1. new idea, 2. new
technology/trend/process/service, or 3. new use
of existing technologies, etc.
Can be incremental or disruptive/radical
(facebook)
Critical factor in the success of many products
and a core competency for many companies.
Often the nemesis of technical risk

Letter To President Andrew
Jackson
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The canal system is being threatened by the
spread of railroads, if this is not stopped
Serious unemployment will result, captains, cooks,
drivers, hostlers, etc.
Boat builders, tow line makers, etc. will suffer
Canal boats are essential to the defense of the U.S.
Railroads endanger passengers, setting fire to
crops. Scaring livestock

Yours truly, Martin Van Buren, Gov. of New York, 1829
What ever happened to ?
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Elevator operators
Gas station attendants (except for Portland
Oregon and New Jersey)
Train fireman
Calculating change at a cash register
What else?
What is next? Low level programming?
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Innovation
Can take as many as 250 raw ideas to yield one
major marketable product. (Peters, 1997)
A company that is committed to innovation
should have a high tolerance for many failures.
First is not always best, called the bleeding
edge of technology (Creative MP3 was first by
3 years to Ipod)
Bomar calculators, IBM robots, Atari, name
some others

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For many Software is often becoming the
focused area for innovation that
differentiates their product from its
competitors.

User interfaces (GUI)
Iphone apps
Apps
Innovation Electrified
American Way 10-1-03
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Tidbits from Sharon McDonald
Great ideas come at odd times (Velcro)
Most are unexpected
Many a brilliant idea is sparked by a chance remark,
accident, stray bit of knowledge from an unrelated
field

Innovation Electrified
American Way 10-1-03
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Patience bar codes took 20 years!
Howard Shultz was a house wares salesman,
impressed at how popular espresso bars were in
Milan, switched to high-quality coffee bars and it
became Starbucks. Who would have thought of
paying $3.00+ for coffee?
A Lesson From Popeye By Robert Malone
http://www.managingautomation.com/maonline/magazin
e/read.jspx?id=3571734
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Armour in Chicago invented automated cattle and pig
food processing assembly lines 50 years or more before
Ford
Prior to 1980, many of us sat in offices with electric
typewriters, transistor radios, TV sets and telephones,
and did not have the insight become the IBM and
Apple personal computers. Some people did put these
separate devices into a new context.
The typewriter became the keyboard, the TV the monitor,
the transistor the core of the microchip and the phone the
eventual access to the WWW.
Hamel continued
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Truly enhancing innovation takes 3 to 5 years,
too long for executives
Risky Starbucks started customers to prepay
for coffee. Few did that. Tested at a couple of
stores, no problem
About big ideas Did eBay think it was $100
million innovation when it first started?
Where to Get New Technology
& Innovation
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1. Corporate research departments
traditional method
2. Purchase research/patents/IP from small
companies, universities, etc.- trend
3. Alliances Companies, universities, gov.
4. Vendor Driven research Intel technology
pushes Dell
5. Entrepreneur spirit
6. You
Functions of Corporate Research
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Support existing businesses
New strategic directions
Effectively use output of corporate research



Entrepreneurship Approach for
Innovation Within a Company
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Very popular
Much harder to implement than thought
People in a traditional company structure have trouble
being entrepreneurship
Problems
Jealousy
Independence (out of control)
May leave firm
Bigger than rest of department
You
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Only takes one good idea
Some are better at it than others
Do not think that others will understand your idea
IBM saw PC hardware as the future and no value in
software, Bill Gates knew better
Innovation Case Studies
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Xerox PARC
Business line was Xerox copy machines
Unfortunately, R & D was focused on information
processing
Texas Instruments
Kilby had no concept of the potential
Speech synthesis and DLP engineers on their own
Mark Cuban
Broadcast.com, HDTV
Implementing Change
From transition (minor impacts) to disruption (fundamental
change)
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Many Innovatons
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1. Technology push
Intel develops new technology (architecture) or new
process (line width) that allows new product, and
then pushed Dell computer to use
Focus on basic research
2. Need pull
Have need, find solution
Intel needs to reduce line width, find a new
technology
Lead User or Early Adopter
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The first and most critical customer
If not successful here, will probably not be
successful
We tailor our design for this group
Lead user methodology, structured but still
depends on expert opinion and its limitations and
problems

Phases for Technology Maturity
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Very interesting process for new technology
Phase 1 Every product is different, functionality is most
important, early adopters
Phase 2 Defined modular interfaces, standardization
Phase 3 Functionality surpasses customers, change in
product development, increasing functionality brings
little reward, cost is important
Phase 4 Cost is most important
Why People Resist Change
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Loss of face
Loss of control
Uncertainty
Surprise
Can I do it?
More work
Past resentments
Real threats
Competing commitments
Conners Responses to change
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Phases of positive response
1. Uninformed optimism, 2.informed pessimism, 3.
hopeful realism, 4. informed optimism, 5. completion
Negative response
1. Immobilization, 2.denial, 3. anger, 4. bargaining, 5.
depression, 6. testing, 7.acceptance
Similar to stages of grief by Elizabeth Kubler-
Ross
On Death and Dying
Classic Mistakes in Managing Change
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1. Mgt believes that employees resist change
because they want to. Mgt. addresses
symptoms without addressing its cause.
Such as overlooking problems with the
innovation, lack of training/skills, etc.
2. Change takes time, need persistence
3. Focus on finish line instead of how to get
from point a to point b
4. Scarcest resource is time
5. As time runs out, using coercive techniques
rather than inclusive techniques

Jack Welch
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1. Empower people to change
2. Help them to focus their energies on new ways of
doing things
Your Role in Innovation and
Implementing Change
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For you to be successful, you need to be innovative
in every job.
Be a leader in implementing change
Wikinomics
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Don Tapscott and Anthony D. Williams,
Wikinomics; How Mass Collaboration Changes
Everything, 2006

Get other people to do the product
Boeing 787 Lego Block Airplane
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o The modular approach will allow Boeing to cut
the final assembly process down from thirteen to
seventeen days required for the 777 to as few as
three days for the 787.
o Many of the subassemblies will be wholly
designed and manufactured by partners from
various parts of the globe. Boeing has changed
from a manufacturer to a systems integrator.
o Risk that Boeings extensive partnering and
sharing of data may cause it to lose its
engineering edge. Boeing manages this by
keeping a little bit of everything just for expertise,
for example it has chose to keep the design and
construction of the vertical fin in-house.
BMW Fabless Car Company
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Close to 70 percent of a BMW is designed, built,
and assembled by a worldwide network of
suppliers. (Magna International)
Not long ago BMW spent most of its R&D dollars
on improving the mechanical infrastructure of its
cars.
BMW estimates 90 percent of its new innovations
will come out of electronics and software. These
systems already account for more than half the
vehicles value. By 2015, suppliers, not the
automakers, will conduct most of the R&D and
production.
More focus on the conceptual and design stages,
and then on the customer experience and related
downstream services.
Lessons Learned
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Focus on the critical value drivers
Install rapid, iterative design process
Harness modular architectures
Outsourcing is a way to gain speed,
innovation, and knowledge.
Suppliers increasingly act as partners
across the supply chain
Share the costs and risks

Outsourcing
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Outsourcing, the result of companies focusing on
1. quick cost reductions and/or 2. core
competencies is a rising trend.
Historically, companies have tried to manufacture
almost all of a products parts and software in-
house.
This increase in outsourcing places more
importance on vendor selection and supply chain
management
Constant need to lower cost, etc.
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Options: 1.outsourcing, 2. efficiency/lean
(change process), or 3. automate
Many issues
Domestic vs. foreign
Tactical (short term, lower cost now) vs. Strategic (long
term, focus on core)
Vertical vs. horizontal organization
Intellectual property
We will start with history, tactical, future


Shocking Outsource
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Toyota is world class quality
Toyota is world class manufacturing
Toyota pushes older workers into management,
support or to vendors


Toyota outsources more of their cars than any major
car manufacturer
Outsourcing Pros and Cons
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Pros
Focus on core competency
Lower cost
Reduce investments in non-critical areas
Need help, cannot compete
Required to enter new markets (joint building of jets in China)
Cons
Loss of control (including intellectual property)
Loss of expertise and knowledge
Loss of potential future revenue and future opportunities (may
be highest profits in future)
Communication problems
Can help or hurt for profits, quality, speed, etc.

Discussion
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Strategic thought, whether to remain vertically
integrated
Downside of modularity, loss of knowledge, etc.
Once outsourced, almost never comes back
Loss of profitability, automotive suppliers vs. mfg.

Ancient History of Outsourcing
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Not new, started in England during Industrial
revolution Boat building
Mostly in manufacturing


1950 1990s USA Before India and China
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Change from vertical integration (make it all) to
horizontal integration (core competency)
Entire Semiconductor Industry, TI used to make
manufacturing equipment, now does not make
any. IBM, Intel, Applied Materials
Focused more on getting out of areas rather than
cost reductions (Getting out of DRAM memory,
Taiwan and Korea enter market, GE -TVs)
Cost reduction centered on simple assembly
tasks (Mexico, Philippines)
1990 Now: Domestic, China and India
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Domestic outsourcing
Human resource, IT, contract labor for expertise
Foreign Trend towards Partnerships and
Alliances
India
Computer programming, call centers, construction
drawings
China
Everything (low cost and high tech)
Government policy to directly help/control

Current Types of Outsourced Jobs
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Non core (IT, human resource)
High volume
High touch content labor
Well defined tasks (software)
Large demand in low-cost countries*
Developed base of suppliers*
Standard manufacturing processes*
* Boston Consulting Group, 2004
Where It Does Not Often Work
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Poorly defined problem
Interpretation of requirements required
Talking to people (language)
Touch labor (Nursing)
Emerging technologies, innovation, high
knowledge content, IP risk
Valuable IP*, extreme logistic challenges, low
growth potential, Super high tech, co-location
requirements (like Toyota suppliers) Boston
Consulting Group 2004

Future Outsourcing
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What is next
Engineering 360,000 China graduates, 65,000
USA graduates in 2003
Electrical engineering More EE graduates in
China than U.S. by a huge %, also seeing a shift
to EE from India students
China Major player in complete Industries,
complete knowledge of all aspects? S/C, Space,
Automotive, Aerospace?
Outsourcing Innovation: Reality or Myth
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Innovation is and will continue to be driven by
research laboratories, infrastructure, and
research universities in U.S. and Europe
Therefore:
Creativity and innovation will come from these groups
Highly intellectual and art work will remain in USA
Scenario innovation starts in U.S. and is slowly
transferred to other countries


Which Industries?
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What happens in one industry (consumer products,
electronics, computer programs, S/C) may not
happen in another (pharmaceutical, bio-, nano-,
entertainment)
Your task
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Stay flexible
Learn basic and new skills
Learn to learn active learning
Think strategic
Plan to work for more than one industry or in one
country
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In summary
1. Most companies have similar technologies to
their competition
2. Most designs and services can be copied or
duplicated.
3. What is unique (innovation) or better
(performance, cost, quality etc.) for your product
4. What is your company and personal
strategy?