Understanding Global Engineering and Product development through India

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Agenda

• Understanding Global Engineering and Product
  development through India
• India assessment
• How did we develop our vision?
• How does the future look like in this space?

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The World Is Flat, Thomas Friedman, presents
seven rules that he believes are true for a
business to succeed in the flat world
Rule 1 When the world goes flat
Rule 2 And the small shall act big
Rule 3 And the big shall act small
Rule 4 The best companies are the best
collaborators.
Rule 5 In a flat world
Rule 6 The best companies outsource to win,
not to shrink.
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Caterpillar is a Global Organization

• 80 years old

• World leader

• Largest manufacturer of construction and mining
  equipment, diesel and natural gas engines and
  industrial gas turbines.

• Technology leader in construction,
  transportation, mining, forestry, energy,
  logistics and electric power generation.

• Caterpillar had sales and revenues of 41.5
  billion in 2006

• Approximately fifty percent of sales and revenues
  were to customers outside of the United States,
  thus making Caterpillar a global enterprise.

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Lines of Business
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Global Footprint
278 facilities in 40 countries on 6
continents 182 Cat dealers with 1,923 branches
and 1,587 rental stores
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Strategic VisionValues alignment

• Critical Success Factors
• People
• Quality
• Product
• Emerging Markets
• Trough

• Strategic Areas of Improvement
• New Product Introduction
• Encode 6 Sigma

• Our Values in Action
• Integrity
• Excellence
• Teamwork
• Commitment

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Lower Emissions RequirementsDriving acceleration
in NPI agenda
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Global Engineering opportunities
Core Vehicle level Systems Integration
Enabling Development
Generic Development
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Challenges

• Geographic differences
• Time zones
• Visa Issues
• Administrative

• Specific Training Skill set vs. product training

• Cultural differences ? Communication
• PRAM - Plan?Relationship?Agree?Maintain
• Just say no
• I dont know

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Our Values

• Integrity
• Continuous feedback in all directions
• Build relationships

• Excellence
• Establish roles
• Provide room to learn
• Create success stories

• Teamwork
• Change management
• Cultural Training

• Commitment
• Support at all levels ?Team and Management
  Long-term relationships
• Involve partners up front

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How did we develop the Vision ?
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Caterpillar Confidential Green (11/09/05)
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Vision

• High-performing Global Product Development Team
• Develops Superior Products through Set Based
  Engineering and Global Engineering Strategy
• Delivers Excellent Value to Product Group
  Customers

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PPD Global Engineering
105 Team Members In-house and offshore Cat India
Design center at Satyam
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Current Product Development
Point Based Concurrent Engineering
Iterate if required
Few Concepts each sub-system
Developing sub-systems independently and then
Integrating all at Machine level Unplanned
changes Fire fighting
Information extracted from Toyota product
development system-James Morgan Jeffrey Liker
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Vision for future Product Development Projects
Set Based Concurrent Engineering
Many Concepts each sub-system

• Evaluate against System Interactions
• Cost
• Interface studies
• Eliminate the weak, add knowledge and combine
  different ways

Information extracted from Toyota product
development system-James Morgan Jeffrey Liker
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Moving from Point-Based to Set-Based Engineering
Point-Based Engineering
3 Bicycles
3 Frames
Set-Based Engineering
3 Drives
3 Wheel sets
3 Brakes
3 Suspension
243 Combinations
Information extracted from Toyota product
development system-James Morgan Jeffrey Liker
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Traditional Model
Product Development Model
Global Model

• Resource constraints - Lack of proper balance
  between New product development Current product
  support

• Proper resource deployment across product
  development and current product support

• Not leveraging Caterpillar Core skills for core
  activities

• Better alignment between product development
  Generic/Enabling/Core activities

• Excessive dependency on single talent pool -
  career moves due to growth

• Multiple resource pool

• Lack of capacity and flexibility Project
  Peaks/Lows

• Resource flexibility for project Peak/Low needs

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Set-Based Engineering Operation Model
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How did we develop this model?

• Evaluated through pilot projects- Jan06 to
  March06

• Engagement started in April06

• Started with in areas where we can create
  success stories

• Change management through success stories,
  travel to STC to understand Satyam capabilities
  (Leadership Team, Team Leads)
• Product knowledge training through Team Leads

• Weekly planning meetings in U.S
• Quarterly governance meetings
• Outstanding mid-career recruitment from Satyam
• Took advantage of Satyams existing ODCs for
  Leadership recruitment
• Satyams world-class training for new recruits
  (3 months)

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Evaluation of Global Engineering Model- through
value chain
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What do we need to be successful?

• Leadership

• Leadership Team with Driving force to
  Delight Customers

• Leadership Channeling their Ambition toward
  building Best in class

• Servant Leadership to remove Fear of unknown to
  Customers

See the Future
Engage and Develop Others
Reinvent Continuously
Value Results and Relationships
Embody Values
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What do we need to be successful?

• People/Culture
• Highly motivated People with Relentless Execution
  towards Time, Cost Quality
• Disciplined Thoughts, Confront the Brutal Facts
  of their current reality.

• Towering Technical/Process/Project management
  Capabilities
• World Class Core Competencies in functional areas
  of engagement
• World class processes to deliver Superior Quality

• Capacity through Peak Needs
• Business model to Support customer needs on
  Product development Initiatives
• Resource availability between 2 to 6 weeks

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Challenges
Change Management
Loss of core competency, Intellectual Property,
Access,Security and Connectivity
Process Knowledge, Quality Governance
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Change Management

• Change Management among Leadership Team

• Change Management among CAT/Contract employees

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Many reasons for the failure of Change Management
initiatives.
Not communicating
Too many projects happening at once
Insufficient time spent on the right priorities
Trying to tackle too much at once
Lack of leadership
Not managing risks
Assumptions about the objectives have not been
tested
Not managing pain
No direction, nobody willing to make the final
decision
No Leadership support
Losing focus on why changing
Losing sight of the end game
Reward not in line with new order
Source Global survey of 100 PA change
management experts
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Employee response curve for change
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Tips on Change management

• Increase urgency

• Get the vision right

• Communicate for buy-in

• Empower action

• Create short term wins

• Dont let up

• Make change stick

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• IP Risks

• Potential leakage of IP through existing project
  team member

• Potential leakage of IP through resource
  Attrition

• Potential leakage of IP when resource roll out
  from Cats project team and joins competitors
  project team.

• Loss of core competency

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Hypothetical offshore model-example-Telecommunicat
ion industry
Portable to Off-Shore
Portable PD Resources
Categories of Product development (PD) Roles
Maintain As-Is
Product development critical roles
(10 of PD Resources)
1 of PD Resources
94 Most critical tasks remain As-Is

• xxxxxxxs
• xxxxxxx
• xxxxxxx
• xxxxx
• xxxxxx

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Product development enabling roles
(40 of PD Resources)

• xxxxxxx
• xxxxxxx
• xxxxxxx
• xxxxxxx

24 of PD Resources
40 Moderately critical tasks remain As-Is
60

Product development generic roles
(50 of PD Resources)
45 of PD Resources
10 Less enabler tasks remain As-Is
90

• xxxxxx
• xxxxxxxx
• xxxxxxx

70 PD Resources
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Looking at the Future
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Flattening of the world rules reviewed

• Rule 6
• The best companies outsource

• To win, not to shrink.

• They outsource to innovate faster and cost
  effectively

• Gain market share

• Hire more and different specialists

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Execution

• Every morning in Africa, a gazelle wakes up.
• It knows that it must outrun the fastest lion or
  it will be killed

• Every morning in Africa, a lion wakes up. It
  knows that it must out run the slowest gazelle or
  it will starve

• It does not matter whether you are a lion or
  gazelle. When the sun comes up you had better be
  running

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Engineering services is a growth market.
Current spending on engineering services world
wide by the different industries (750 billion
in 2006) is projected to increase to 1.1
trillion by 2020.  The market is highly
fragmented by industry,

• Automotive at 19

• Aerospace at 8

• Utilities at 3

• Heavy Engineering 40

• High-Tech/ Telecom is the dominant and fastest
  growing sector, with 30 of the market. 

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Key Future Trends
Businesses are increasingly viewing off shoring
as a way to counter market forces that are
exerting pressure on engineering services. 

• While cost control remains a concern

• Companies are also seeking access to a high
  quality talent pool

• For growing capacity

• Increase productivity with Creativity and Process
  automation.

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Accomplishments
Indian IT and software industry proved that they
can perform and meet Global Needs

• Companies in India have developed capabilities

• Skill sets

• Leadership

• Culture

• Invested in technology platforms to leverage this
  opportunity

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Business opportunity

• Indias current revenue base in the offshored
  engineering services market is about 1.5B
• India is well-positioned to increase its market
  share of engineering offshoring

• By 15 to 30 by 2020.

• The potential engineering market in India could
  exceed 60B by 2020.

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