A company's capability to conceive and design quality prototypes, and bring a product to market quicker than its competitors is increasingly the focal point of competition, according to the authors of this book. At the core of a successful new product launch is management's ability to integrate the marketing, manufacturing, and design functions for problem solving and fast action, particularly during the critical design-build-test cycles of prototype creation. Companies that consistently "design it right the first time" have a formidable edge in the crucial race to market.
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Steven C. Wheelwright is the Class of 1949 Professor of Business Administration at the Harvard Business School.
Wheelwright and Clark are co-authors with Robert H. Hayes of the best-selling Dynamic Manufacturing (Free Press, 1988).Excerpt. © Reprinted by permission. All rights reserved.:
Chapter 1: Competing Through Development Capability
In a competitive environment that is global, intense, and dynamic, the development of new products and processes increasingly is a focal point of competition. Firms that get to market faster and more efficiently with products that are well matched to the needs and expectations of target customers create significant competitive leverage. Firms that are slow to market with products that match neither customer expectations nor the products of their rivals are destined to see their market position erode and financial performance falter. In a turbulent environment, doing product and process development well has become a requirement for being a player in the competitive game; doing development extraordinarily well has become a competitive advantage.
The New Industrial Competition: Driving Forces and Development Realities
The importance of product and process development is not limited to industries or businesses built around new scientific findings, with significant levels of R&D spending, or where new products have traditionally accounted for a major fraction of annual sales. The forces driving development are far more general. Three are particularly critical:
* Intense international competition. In business after business, the number of competitors capable of competing at a world-class level has grown at the same time that those competitors have become more aggressive. As world trade has expanded and international markets have become more accessible, the list of one's toughest competitors now includes firms that may have grown up in very different environments in North America, Europe, and Asia. The effect has been to make competition more intense, demanding, and rigorous, creating a less forgiving environment.
* Fragmented, demanding markets. Customers have grown more sophisticated and demanding. Previously unheard of levels of performance and reliability are today the expected standard. Increasing sophistication means that customers are more sensitive to nuances and differences in a product, and are attracted to products that provide solutions to their particular problems and needs. Yet they expect these solutions in easy-to-use forms.
* Diverse and rapidly changing technologies. The growing breadth and depth of technological and scientific knowledge has created new options for meeting the needs of an increasingly diverse and demanding market. The development of novel technologies and a new understanding of existing technologies increases the variety of possible solutions available to engineers and marketers in their search for new products. Furthermore, the new solutions are not only diverse, but also potentially transforming. New technologies in areas such as materials, electronics, and biology have the capacity to change fundamentally the character of a business and the nature of competition.
These forces are at work across a wide range of industries. They are central to competition in young, technically dynamic industries, but also affect mature industries where life cycles historically were relatively long, technologies mature, and demands stable. In the world auto industry, for example, the growing intensity of international competition, exploding product variety, and diversity in technology have created a turbulent environment. The number of world-scale competitors has grown from less than five in the early 1960s to more than twenty today. But perhaps more importantly, those twenty competitors come from very different environments and possess a level of capability far exceeding the standard prevailing twenty-five years ago. Much the same is true of customers. Levels of product quality once considered extraordinary are now a minimum requirement for doing business. As customers have grown more sophisticated and demanding, the variety of products has increased dramatically. In the mid 1960s, for example, the largest selling automobile in the United States was the Chevrolet Impala. The platform on which it was based sold approximately 1.5 million units per year. In 1991, the largest selling automobile in the United States was the Honda Accord, which sold about 400,000 units. Thus, in a market that is today larger than it was in 1965, the volume per model has dropped by a factor of four. Currently over 600 different automobile models are offered for sale on the U.S. market.
Similarly, technological change has had dramatic consequences. In 1970, one basic engine-drive train technology (a V8 engine, longitudinally mounted, water cooled, carbureted, hooked up to a three-speed automatic transmission with rear wheel drive) accounted for close to 80 percent of all automobile production in the United States. Indeed, there were only five engine-drive train technologies in production. By the early 1980s that number had grown to thirty-three. The growing importance of electronics, new materials, and new design concepts in engines, transmissions, suspensions, and body technologies has accelerated the pace and diversity of technological change in the 1980s. Simply keeping up with those technologies is a challenge, but an often straightforward one in comparison with having to integrate them in development efforts.
Similar forces have been at work in other traditional, mature industries. In textiles and apparel, for example, firms such as Benetton and The Limited have used information technology to create a production and distribution network which links retail outlets directly to distribution centers and back into factories and suppliers in the chain of production from fiber to finished product. The thrust of these networks is the ability to respond quickly to changing customer demands at relatively low cost. Fueled in part by availability and in part by growing demands for differentiated products, product variety has expanded significantly. In plant after plant, one finds vast increases in the number of styles produced and a sharp decline in the length of production runs. These are not changes of 10 or 20 percent; in the 1980s, it was common for apparel plants to experience a four- to fivefold increase in the number of styles produced. These increases in garment variety have pushed back into the textile plants as well. For example, the average lot size for dying at Greenwood Mills, a U.S. textile firm, declined in the 1980s from 120,000 to 11,000 yards.
Changes in markets and technologies for automobile and textile firms have accentuated the importance of speed and variety in product development. But changes in competition, customer demand, and technology have also had dramatic effects on newer, less mature industries in which product innovation has always been an important part of competition. In industries such as computer disk drives and medical equipment, already short life cycles have shrunk further and product variety has increased. In addition, competition has placed increased pressure on product reliability and product cost. In disk drives, for example, the market for Winchester-technology hard disks has expanded from a base in high-end systems for mainframe computers to include a spectrum of applications ranging from notebook personal computers to large-scale supercomputers. Even within an application segment, the number of sizes, capacities, access times, and features has increased sharply. In addition to this explosion of variety, firms in the hard disk drive industry have had to meet demands for dramatic increases in reliability (tenfold in five years) and decreases in cost (5 percent to 8 percent quarterly). These have been met in part by incremental improvements in established technologies and in part through the introduction of new design concepts, production technologies, materials, and software.
Much the same has been true in the market for new medical devices. Innovation has always been important in the creation of new medical devices, but by the 1980s success required the ability to follow an innovative product with sustained improvements in performance, application to new segments, improved reliability, and lower cost. In the case of devices for angioplasty (a procedure using a balloon on a small wire to expand clogged arteries), the initial innovation was followed by a variety of developments that offered the physician greater control of a smaller device, making access easier and creating additional applications. In concert with process changes that substantially improved or reduced variability of performance characteristics, changes in the product have opened up new applications and treatment of a more diverse set of clinical problems and patients, worldwide.
The Competitive Imperatives
Rigorous international competition, the explosion of market segments and niches, and accelerating technological change have created a set of competitive imperatives for the development of new products and processes in industries as diverse as medical instruments and automobiles, textiles, and high-end disk drives. Exhibit 1-1 identifies three of these imperatives -- speed, efficiency, and quality -- and suggests some of their implications. To succeed, firms must be responsive to changing customer demands and the moves of their competitors. This means that they must be fast. The ability to identify opportunities, mount the requisite development effort, and bring to market new products and processes quickly is critical to effective competition. But firms also must bring new products and processes to market efficiently. Because the number of new products and new process technologies has increased while model lives and life cycles have shrunk, firms must mount more development projects than has traditionally been the case utilizing substantially fewer resources per project. In the U.S. automobile market, for example, the growth of models and market segments over the last twenty-five years has meant that an auto firm must mount close to four times as many development projects simply to maintain its market share position. But smaller volumes per model and shorter design lives mean resource requirements must drop dramatically. Effective competition requires highly efficient engineering, design, and development activities.
Being fast and efficient is essential but not enough. The products and processes that a firm introduces must also meet demands in the market for value, reliability, and distinctive performance. Demanding customers and capable competitors mean that the ante keeps going up -- requirements of performance, reliability, ease of use, and total value increase with each product introduction. When competition is intense firms must attract and satisfy customers in a very crowded market. More and more this means offering a product that is distinctive; that not only satisfies, but also surprises and delights a customer. Moreover, attention to the total product experience and thus to total product quality is critical.
The Opportunity and the Challenge
Firms that step up to the challenge and meet these competitive imperatives enjoy a significant advantage in the market place. The development of outstanding products not only opens new markets and attracts new customers, but also leverages existing assets and builds new capability in the organization. Getting a succession of distinctive new disk drives or a string of new medical devices to market quickly and consistently requires the solution of technical problems that builds know-how. Moreover, it stimulates the creation of greater capability in problem solving, prototype construction, and testing that can be applied in future projects. All of these skills and capabilities enhance a firm's ability to compete. But there is more. Successful new products also unleash a virtuous cycle in reputation and enthusiasm within and outside the organization. Inside, successful new products energize the organization; confidence, pride, and morale grow. The best employees remain challenged and enthused. Outside, outstanding new products create broad interest in the firm and its products, enhance the firm's ability to recruit new employees, and facilitate the building of relationships with other organizations. The organization's momentum builds and reinforces itself.
While the potential opportunities to be realized in developing new products and processes are exciting, making them happen is a demanding challenge. New product or process development entails a complex set of activities that cuts across most functions in a business, as suggested by Exhibit 1-2, which lays out the phases of activity in a typical development project -- a new product. In the first two phases -- concept development and product planning -- information about market opportunities, competitive moves, technical possibilities, and production requirements must be combined to lay down the architecture of the new product. This includes its conceptual design, target market, desired level of performance, investment requirements, and financial impact. Before a new product development program is approved, firms also attempt to prove out the concept through small-scale testing, the construction of models, and, often, discussions with potential customers.
Once approved, a new product project moves into detailed engineering. The primary activity in this phase of development is the design and construction of working prototypes and the development of tools and equipment to be used in commerical production. At the heart of detailed product and process engineering is the "design-build-test" cycle. Both products and processes are laid out in concept, captured in a working model (which may exist on a computer or in physical form), and then subjected to tests that simulate product use. If the model fails to deliver the desired performance characteristics, engineers search for design changes that will close the gap and the design-build-test cycle is repeated. The conclusion of the detailed engineering phase of development is marked by an engineering "release" or "sign off" that signifies that the final design meets requirements.
At this time the firm typically moves development into a pilot manufacturing phase, during which the individual components, built and tested on production equipment, are assembled and tested as a system in the factory. During pilot production many units of the product are produced and the ability of the new or modified manufacturing process to execute at a commerical level is tested. At this stage all commercial tooling and equipment should be in place and all parts suppliers should be geared up and ready for volume production. This is the point in development at which the total system -- design, detailed engineering, tools and equipment, parts, assembly sequences, production supervisors, operators, and technicians -- comes together.
The final phase of development is ramp-up. The process has been refined and debugged, but has yet to operate at a sustained level of high-yield, volume production. In ramp-up the firm starts commerical production at a relatively low level of volume; as the organization develops confidence in its (and its suppliers') abilities to execute production consistently and marketing's abilities to sell the product, the volume increases. At the conclusion of the ramp-up phase, the production system has achieved its target levels of volume, cost, and quality. In this phase, the firm produces units for commercial sale and, hopefully, brings the volume of production up to its targeted level.
An obstacle to achieving rapid, efficient, high-quality development is the complexity and uncertainty that confronts engineers, ma
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