Koren Y. The Global Manufacturing Revolution: Product-Process-Business Integration and Reconfigurable Systems
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I’ve seen first hand these soda machines and thought them odd until it was explained
here in this text.”
Keep in mind the rule:
New product development must address multicultural and multi-regional factors.
Each variant of the product should fit the culture and regulations of the target market.
For greatest success, the global product design goal is a line of products with
similar basic functionality and key components, but with different features to fit
various regional markets. As shown in Figure 2.6, most houses in the United States
have a laundry room into which a large washer and dryer fit easily, side by side. In
Europe, by contrast, although most cities have infrastructure and lifestyle expecta-
tions similar to those in the United States, European houses and apartments are
typically much smaller. To save space, the dryer is more commonly positioned on top
of the washer. In China, where apartments are even smaller, and where power to run an
electric dryer is more expensive (proportional to income), most families just have a
washer and they hang their clothes out to be dried in the sun.
“When Unilever and P&G first entere d into t he market in my country, Peru,
they introduced the detergent in big quantities,” wrote our student Rocio Diaz.
“While these sizes work well in the United States, the experience in Peru is different.
Houses are small and people do not have the money to pay for 5lb detergent
bag. After getting to know how the Peruvian market r eally behaves, these com-
panies launched mini-size laundry bags, which r esulted in a substantial increase in
their sales.”
Product pricing is another obvious crite rion for product regionalization and
must be in line with the purchasing power of customers in each target country.
India may w ant automobiles with si milar basic functionalit y as in the United
States or Europe, but they cannot afford to pay U.S. prices and are willing to do
Figure 2.6 Product design for globalization—product variants fit culture and living
conditions.
PRODUCT DEVELOPMENT FOR GLOBALIZATION 61
without luxury add-on features that their average buyer cannot afford. For
example, the price of the Tata Nano in India is $2500. The price of the Buick
LaCross, a typical mid-size American car, is over $25,000 in the United States.
Both cars provide the basic mobility function, but, as shown in the table below,
they have very differ ent engines, dimensions (in millimet ers)
*
, and performance
expectations.
Car Engine Length Width Height Max Speed
Buick LaCross 3800 cc, V6 5032 1854 1458 >200 kmph
Tata Nano 624 cc, 2 cyl 3099 1495 1652 105 kmph
To meet this price, the Tata Nano and other Indian cars that sell below $4000 do not
have many luxury features (e.g., air conditioning, adjusting power seats) or safety
devices (e.g., airbags) that would be standard on European and American cars.
However, for Indian drivers the cars are affordable and they do fit the congested traffic
conditions and roads in India.
2.5.2 Manufacturing in the Global Paradigm
To be cost-effective, global products should be manufactured in regionally distrib-
uted factories, which can make product design even more challenging. Ideally,
factories should be located close to their target customers, especially for products
that are large or require long shipping times. Regionally placed factories may
supply several regions but to do so they must be able to produce the many variants
that fit the region’s customers, cultures, and local regulations. To supply the exact
quantities needed for each region they serve, these factories will need flexible
and reconfigurable manufacturing systems that will al low rapid response to demand
changes across the market range, to be able to quickly switch between product
variants. For “globalized” product to be successful, all of the above imperatives
must be considered.
2.6 THE PRODUCT DEVELOPMENT PROCESS
Products eventually defin e the mission and success of m anufacturing companies,
and therefore product d evelop ment is a critical proce ss. A successful product’s
marketable l ifetime curve has a sigmoid (S) shape consisting of a growth phase
period, followed by a high-sale p eriod, and eventually a nearly inevita ble phas e of
decline. If the idea is good and the timing is right, the average product will get to
*
Note the large head clearance of the Nano. It’s the “pet” project of Mr. Ratan Tata, Chairman of the Tata
Group, who is 183 cm (6 feet) tall.
62 PRODUCT INVENTION STRATEGY
the growth phase, but inevitably, product sales will eventually g o into decline.
(There are only few exceptions.) In preparation of this, a manufacturer should
start to develop the replacing product when the current product is ramping up as
shown in Figure 2.7. Successful companies always have a flow of products spread
over different phases of the product life cycle. The set of stages of activity required
to bring a new product concept to marke t readiness is called the product develop-
ment process.
Product development starts with the invention of a new product concept, followed
by market analysis, product design process, and eventually preparing manufacturing
plans. Competing products already on the market must be analyzed in terms of
differentiation and cost. Before resolving to develop a new product, you have to spend
time on a pre-design effort—analyzing critical issues that enable you to have a
reasonable expectation of success.
2.6.1 Four Critical Issues in Deciding to Develop a New Product
There are four difficult, but critical issues that go into making a decision to develop a
new product:
1. Identifying a Market Opportunity: The most basic issue is to decide whether
there is a real market opportunity and whether a new idea can be translated into
revenue. You are making a decision in an uncertain environment, and the
window of opportunity will not stay open very long. Therefore, it is imperative
Figure 2.7 Product development stages.
THE PRODUCT DEVELOPMENT PROCESS 63
that you effectively calculate whether your efforts fit the time and resources
available. To make this decision, some basic critical questions are:
.
Is the product unique? What are the advantages of competing products?
.
Who are the potential customers?
.
Does your firm have the development capability and the skills needed?
.
Who are your competitors and what are their technical capabilities?
.
What is your risk level? If the product fails, will the company survive?
.
Do you have the facilities needed to manufacture the product?
.
Do you have the resources to market and sell the product on a global scale?
2. Product Development Timing: Design lead-time is a measure of the re-
sponsiveness of the firm to a new market opportunity. I t is highly dependent on
the firm’s experience and infrastructure. You cannot afford to risk extending
the time to market , and therefore it is critical to have a realistic estimate of the
time a team needs to comple te the product design and development effort.
Remember—not completing the product development on time not only
increases your expenses, it may even p ut the entire project at risk. Some
critical questions are:
.
How quickly can the firm complete the product development?
.
If your product development takes longer than expected, will you lose the market
opportunity and risk the whole investment?
3. Development Cost: A rea listic estimate of a project’s develo pment cost is
also crucial to success and is usually based on experience. You have to
consider both the requirements and any tradeoffs. For example, to increase the
car’s fuel efficiency it can be made lighter, but the cost of conversion to other
materials might be enormous and the resul ting fuel saving might be negligible
(and sales increase only marginally). Furthermore, changing the material may
reduce protection from collisions a nd this creates new challenges. You have
to consider cross-effects of your choices and requirements. Organizing the
requirements into a hierarchical list may help in weighing the tradeoffs.
10
The questions are:
.
What is the estimated product development cost?
.
Are there design tradeoffs (e.g., materials) and what is the associated devel-
opment cost for each choice?
.
If you need to assemble a cross-disciplinary team, will that substantially increase
the development cost?
64 PRODUCT INVENTION STRATEGY
4. Product Cost: The final product cost, which includes the material,
manufacturing, and development costs per unit, will be the major determinant
of the product price. Therefore, it is critical to have a real estimate of the product
cost at the outset. You have to take into account the cost of capital equipment,
tooling, labor, as well as materials and logistics. Sometimes the choice of a
single particular element can make a big difference in your costs, and therefore
you have to pay attention to the detailed design. Your checklist should include
the following questions:
.
How much will the product cost?
.
How do design tradeoffs affect the product cost?
.
Have you included all manufacturing and overhead costs in your estimate?
.
Will potential customers be able to buy your product at your estimated price?
Self-examination is never a pleasant exercise, but before beginning any major
product development process, you must consider the issues that have been highlighted
in this section. Enough resources should be committed to the new product develop-
ment, and even to product marketing on a global scale. The question of risk the project
entails and how the company can sustain it are both critical and unavoidable.
As we have said, to have any chance for success you must have a competitive
advantage over your competition. You should examine your competitors’ products, as
well as their manufactur ing technology, marketing, and distribution methods. And, it
is especially risky, and sometimes economically fatal, to venture into areas that are not
in your main area of expertise.
2.6.2 Stages of Product Development
Before proceedi ng with development of a product, perform market researc h
(Section 2.2.1) to:
.
Define the potential market
.
Define the characteristics of the product family
.
Identify competitive products
.
Review available data (consumers repor ts, etc.) for related products
.
Identify potential customers (e.g., interviewing customers, consulting experts,
etc.)
.
Clarify how customers will use the product and how do they benefit from
using it.
The product development process has six basic stages (Figure 2.7):
Stage 1. Establish a Project Plan
Stage 2. Develop product specifications
THE PRODUCT DEVELOPMENT PROCESS 65
Stage 3. Create a conceptual product design
Stage 4. Generate detailed product design
Stage 5. Build and test the prototype
Stage 6. Review and address production issues
We will elaborate on each of these stages below.
2.6.2.1 Stage 1. Project Plan Develop a detailed project plan with established
subordinate goals (milestones) usually at the completion of major phases of the
project’s development. Stages 2–6 are based on a project plan and require a project
manager (see Figure 2.4) who has to establish milestones and guarantee their
accomplishment. Milestone goals are critical to keeping the project on schedule.
Milestones in the project plan may include:
.
Important accomplishments and deadlines that define the project critical path
.
Demonstrations and reviews
.
Delivery of project sub-systems
.
Payment schedule
The project manager should keep the project focused on the original goal and
make the link between progress and profit clear to the project staff. Insuring the
speed to market may bring higher sales early in the product life (e.g., Chrysler earned
$2.4 billion from early sales of its innovative mini-van in 1984).
2.6.2.2 Stage 2. Product Specifications Translate customer requirements (such
as light weight, small size, and fast performance) to engineering product specifica-
tions (such as weight in kg, size in mm, and speed in m/s). Methods, such as QFD can
assist in translating the requirements to specifications.
2.6.2.3 Stage 3. Conceptual Product Design This phase is made up of three
steps: (1) consider alternative concepts, (2) select the concept to be developed, and
(3) develop cost models for the chosen concept.
1. Concept Alternatives:
.
Generate alternative concepts that achieve the desired function ality.
.
Analyze tradeoffs between values and cost.
.
Explore the perceived range of product options and product family variants.
.
Evaluate tradeoffs between product architectures: modular versus
integrated.
.
Incorporate product modularity to facilitat e mass customization.
.
Estimate development time and manufacturing costs for each concept.
66 PRODUCT INVENTION STRATEGY
2. Slect the Concept to be Developed:
.
Define major sub-systems.
.
Identify the manufacturing processes required.
.
Calculate the number of possible product variants in the product family.
.
Consider product-servicing issues (ease of part replacement, specialized
tools neede d for maintenance, etc.).
.
Identify key suppliers for parts (outsourcing).
3. Cost Model:
.
Develop a cost model that includes a rough estimate of the man ufacturing
cost.
.
Consider product variants switchover strategies in mass-customization
manufacturing.
A Preliminary Design Review (PDR) is conducted at the end of Stage 3.
The PDR is a major milestone. Its participants should include the product
development team, as well as representatives from manufacturing, marketing, and
business units.
2.6.2.4 Stage 4. Detailed Product Design The detailed product design deter-
mines the final features of the product and results in a series of detailed engineering
drawings. This stage includes:
Detailed Design of the Selected Concepts:
.
Define product geometry.
.
Prepare engineering drawings.
.
Establish cost-effective levels of customization (for mass-customized
products).
.
Consider design for delayed differentiation
.
Perform analysis and simulation tests.
.
Choose materials.
.
Assign tolerances.
Bill of Materials (BOM): Develop a BOM. This is a list of all the parts needed
and an estimation of their purchase price or fabrication cost.
A Critical Design Review (CDR) milestone is conducted at the end of Stage 4.
THE PRODUCT DEVELOPMENT PROCESS 67
2.6.2.5 Stage 5. Prototype and Testing
.
Build an experimental prototype.
.
Test the performance of the prototype.
.
Make design changes
.
Prepare field testing program.
2.6.2.6 Stage 6. Production Preparation In this stage, you must make decisions
about the type of manufacturing system that will be needed for producing the product.
To do this, you must consider all the product variants and options, as well as the
customization process and possible product changes indicated by the market or
dictated by the designer. Once a manufacturing system has been selected, you can
begin to prepare the factory for manufacturing.
The production preparation stage includes selection of the:
.
Manufacturing System: Dedicated, flexible, reconfigurable; and the level of
reconfigurability and flexibility of the equipme nt and tooling.
.
Material Handling System: A conveyor, an overhead gantry, and autonomous-
guided vehicle (AGV), or robots.
Selecting the type of manufacturing system is the most important decision in
Stage 6 and it impacts the:
- Skill level of the work force; prepare a training plan.
- Production throughput and manufacturing system economics.
- Manufacturability of any product design changes.
- Ease with which product design changes can be handled.
2.7 HEAD IN THE SKY, FEET ON THE GROUND—BE A DREAMER ON A
SOLID FOUNDATION
Product innovation is important to the success for established and start-up companies
alike. Inventing ways to improve your current products, as well as periodically
introducing new ones, is a vital growth strategy in a competitive market. We have said
that, although customers’ input is critical, relying only on customer-driven new
products is problematic because customers do not always know what they will want to
buy in the future. Conversely, a product idea that is merely borrowed from, or
incrementally built upon, the idea of a competitor is by definition not new. The
company that is first to introduce a truly NEW product can charge the highest prices
for it (the Apple iPod and iPhone, for example). And, if they have developed it
properly, they will garner profit from their idea for a consi derable interval while the
competition is forced to develop products of their own.
What is ideal is a consumer who has some knowledge of what is required to
produce a product. Therefore, the best method of getting to new and successful
68 PRODUCT INVENTION STRATEGY
products is from the people at your company itself. Characteristics of a true inventor
are curiosity, inspiration, and a willingness to reach out for new ideas—the dream
of creating new products. But your dreams must have a technolog ically valid base.
To create new practical realities, the dreamer’s feet must be on solid ground.
Turning thes e dreams into new p rod uc ts requires a rigorous a nd systematic
approach, as the one described in Section 2.6. The challenge is to get people to
think beyond their daily experience, to think “outside of the box” to “dream up”
future products.
However, you have to know the boundaries of the box, its requirements and
limitations, to move successfully beyond it. Your company needs a lot of common
sense, but it also needs to nurture “uncommon wisdom” as well to keep a steady
stream of viable new ideas coming. Many companies empower their employees to
innovate or at least suggest new product ideas. Without a const ant flow of ideas for
new products, a company is destined to become obsolete.
Companies, and especially start-ups, should nurture sensitivity f or changing
needs and seize the opportunity in a timely manner. An entirely new kind of security
industry was established in response to 9/11/2001. Companies quickly grabbed the
opportunity and formed this new industry bringing a wide range of innovative new
products. Remember, the ambitions of the start-up company should reach into the
imagination (into dreamland), but its foundations must remain firmly on the ground
to be realistic.
As C.D. Jackson
*
said: “Great ideas need landing gear as well as wings”
Our model of a start-up company is taken from Jacob’s Dream in the Bible
[Genesis Chapter 28; #12]: “And he [Jacob] dreamed, and behold a ladder set
up on the earth, and the top of it reached into heaven.” Jacob’s ladder is a good
metaphor for innovative product development. The goal (your dream) reaches the sky.
However high the ladder goes, it is based on reality and stays on a good engineering
foundation.
PROBLEMS
2.1 Imagine a possible paradoxical product, describe it, and answer the five
questions in Section 2.1.1 for this new product.
2.2 Can you insert total ly new functions to (a) a hat and (b) a boot? See discussion in
Section 2.1.2.
2.3 Can the high-tech capsule (Section 2.1.3) be defined a s a disruptive
technology?
*
C.D. Jackson (Charles Douglas Jackson) served as Special Assistant to President Dwight D. Eisenhower.
PROBLEMS 69
2.4 The time is November 2001 and you are the CEO of GM. Having a limited R&D
budget, you have to make a decision what percentage of your budget to invest in:
(1) conventional combustion engines, (2) hybrid engines, (3) electric cars, and
(4) fuel-cell technology. (Based on a true story.)
(a) How would you divide your budget? Explain why.
(b) If your budget allows you to invest just in two of these four technologies,
which two would you chose ?
(c) Would you define hybrid, electric, and fuel cell as disruptive
technologies?
2.5 In response to a new challenge—no electricity source available—the person in
Figure 2.8 developed a new way to provide the functionality of a battery charger.
How would you classify the invention in this picture? Is it classified as:
A modified product that better fits the needs of people and society (class 6).
New fun ctions that are added to existing products (class 7).
A new application that is achieved by defining new ways to use an existing
product (class 8).
Figure 2.8 A new way to charge laptop battery.
70
PRODUCT INVENTION STRATEGY