R

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RD Management

• Henry C. Co
• Technology and Operations Management,
• California Polytechnic and State University

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Product v. Process Innovation
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The Model T

• For 4 years, Ford developed, produced, and sold
  five different engines (2-6 cylinders) in a
  factory of trade craftsmen working with GP
  machines.
• Out of this experience came a dominant design,
  the Model T.
• Within 15 years, 2 million engines of this single
  design were produced each year in a
  mass-production facility. During that period,
  there were incremental (no fundamental)
  innovation in product.

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Product v. Process Innovation

• The fluid-pattern stage
• During the early stages of the products life
  cycle, the level of prototype innovation is high.
  This is because firms modify, change, and update
  the product in an effort to establish a dominant
  design.
• The transitional-pattern stage
• Once a dominant design is established, emphasis
  shifts to process innovations in order to provide
  the capability to mass-produce the product. This
  typically requires a shift from GP to specialized
  equipment. During this period, the level of
  product innovation falls dramatically.
• The specific-pattern stage
• At this stage, incremental process innovations
  further specialize the production process to
  reduce cost, enhance quality, and make further
  improvements. This leaves firms with a rigid
  process and an aging product (highly inflexible,
  difficult to adapt to environmental changes).

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Innovation and Development
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Windows of Opportunity
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Life Span of the Computer

• First generations (1950s) of IBM computers had a
  useful market life of more than a decade.
• IBM 360 (mid 1960s), IBM maintained its dominant
  market position until the arrival of
  minicomputers. Then companies like Digital, Data
  General, etc., started challenging IBM from the
  low end of the business.
• Useful market life of computers shrank from 10
  years to 8 years, then only 5 years, then 3, and
  2.
• Desktop PCs and laptops useful market life
  dropped to less than a year.

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The Classic Product Cash Flow

• Window of opportunity the period in which the
  new product faces no or low competition in the
  market place.
• The window of opportunity for market exploitation
  is constantly shrinking as the competition brings
  new products more and more frequently.

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The High-Tech Product Cash Flow

• Project A, which was introduced before the
  competition came up with an equivalent or better
  product, has been able to generate a positive
  cumulative cash flow, with a good return on
  investment during the RD cycle.
• Project B was introduced at a time when some
  competition already existed, results in a
  negative cumulative cash flow.

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Case Studies

• The Case of the PowerPC
• Somerset, a joint venture by IBM, Apple, and
  Motorola in 1991 to develop the PowerPC.
• Time May Have Passed the PowerPC (Business
  Week, 4, March 1996), Ira Sager wrote
• As it is, Somerset hasnt even come close to its
  goal of posing a serious challenge to Intel
  Corp.s dominance in microprocessors Somerset
  fell behind schedule on more powerful versions of
  the PowerPC chip Three years ago, they had it
  in their hands, says Jon Rubinstein, president
  of Firepower Systems Inc., one of the few
  companies outside the Somerset trio to use the
  PowerPC But technical difficulties, internal
  bickering, and management upheavals delayed
  successor chips by 18 months. Says Sun CEO Scott
  G. McNealy The PowerPC is on really shaky
  ground.
• The case of the vanishing need
• Stacker to double the hard disk space.

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Issues in RD Management
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RD

• Why does a company undertake RD?
• Defend, support, expand business
• Drive new business
• Broaden and deepen technological capabilities
• Problems faced by RD managers?
• What, when, why, how much?

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Types of Development

• Market Pull Market needs create new product
  opportunities which in turn stimulate RD to
  determine if a solution is possible
• Market Need? Marketing? RD? Production
• Problem Find new technology to fit need!
• Technology Push New discovery triggering a
  sequence of events
• RD? Production? Marketing? Market Need
• Some innovations may have no market potential.
• Problem Find or create a market!
• Platform products
• Build new products around same technological
  expertise
• Process intensive
• Product that is highly constrained by process
• Customized
• Family of products

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Organizations

• Functional organizations
• Centered around functions (plastics, chemistry,
  material science, manufacturing)
• Can be a barrier to innovation
• Project organizations
• Organized around a project
• May not have deep specializations
• Matrix organizations
• Hybrid of previous two
• Requires many managers

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Locating RD Activities

• Corporate level
• Time horizons are long,
• Learning feedback loops slow,
• Internal linkages (with production and marketing)
  weak,
• Linkages to external knowledge sources strong,
  and
• Projects relatively cheap
• Business-unit level
• Time horizons are short,
• Learning feedback loops fast,
• Internal linkages (with production and marketing)
  strong,
• Projects relatively expensive

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Locating RD Activities A Rule of Thumb

• RD supporting existing business (products,
  processes, divisions) should be located in
  established divisions
• RD supporting new business (i.e., products,
  processes, divisions) should initially be
  located in central laboratories, then transferred
  to divisions (established or newly created) for
  exploitation
• RD supporting foreign production should be
  located close to that foreign production, and
  concerned mainly with adapting products and
  processes to local conditions.

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Two Dimensions in Locating RD Activities

• Physical location, determined mainly by the
  importance of the main organizational interface
  the corporate laboratory towards the general
  development of fundamental fields of science and
  technology, and the divisional laboratories
  towards present-day businesses.
• Its funding, determined by where the potential
  benefits will be captures by the established
  divisions or by the corporate as a whole.

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Location and Funding of RD
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Location and Funding of RD

• Four categories of RD activities
• Quadrants 1 and 4 activities funded and
  performed by corporate-level laboratories, and
  those funded and performed by division-level
  laboratories.
• Activities in Quadrant 3 reflect the attempt to
  ensure stronger linkages between the central and
  divisional laboratories by strengthening the
  financial contribution of the divisions to the
  corporate laboratory, thereby encouraging the
  interest of the former in the later, and the
  sensitivity of the later to the former.
• Activities in Quadrant 2 recognize that the
  full-scale commercial exploitation of radically
  new technologies do not always fit tidily within
  established divisional structures, so that
  central funding and initiative may be necessary.

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Factors Influencing RD Location

• The firms major technological trajectory.
• The degree of maturity of the technology
• Corporate strategic style

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Locating RD Global versus Local

• The geographic location oaf large firms
  innovative activities leading to patenting in the
  U.S.A., 1985-90.

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• The worlds large firms performed about 11 of
  their innovative activities outside their home
  country. The equivalent share in production was
  about 25.
• Firms based in the leading RD spending countries
  (U.S.A., Japan, Germany) perform more than 80 of
  their innovative activities at home.
• Most of the foreign innovative activities reflect
  their own and their home countrys strengths in
  specific technologies, and not host countrys
  strengths.
• Increases in large firms foreign innovative
  activities in the late 1980s came mostly from the
  acquisition of foreign firms especially, U.S.
  IT and biotechnology firms by large European and
  Japanese firms.

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• With the exceptions of pharmaceuticals and
  chemicals, industrial sectors with relatively
  high degrees of internationalization of their
  firms RD activities, were on average in
  traditional sectors, whereas those in aircraft,
  motor vehicles, computer, and electrical products
  have a relatively low degree of
  internationalization of their RD activities.
• Within each industrial sector, business firms
  innovation intensity was negatively correlated
  with the share that was located in a foreign
  country.

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Shortening the RD Cycle
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Length of RD Cycle

• Size of innovative leap desired.
• Experience and talent available.
• Risk Uncertainty

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Risk Uncertainty

• Technological Uncertainty Innovation Risk
• Supply of Critical Materials Parts
• Bottlenecks in the RD Organization

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Technological Uncertainty Innovation Risk
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• Early identification of risk areas.
• Reducing risk by measuring and monitoring.
• Parallel development.
• Simulation and rapid prototyping.

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Identification of Risk Areas

• At the end of the concept definition phase, the
  following are roughly known
• Product architecture,
• Its work structure,
• List of components and materials,
• Processes, and technologies
• At this time, managers should establish a formal
  list of uncertainties and risk that have a strong
  impact on the products performance, compared to
  that of the competition.
• Make a critical examination of the resulting list
  of uncertainties. Identify alternatives for each
  item on the list.
• Quantify risk areas by subjective probabilities.

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Measuring and Monitoring

• Formal tracking and monitoring of risk until it
  is decreased to zero.
• The total project success probability is the
  joint probability of being able to resolve the
  problems in all risk areas.

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• A formal risk-management procedure allow the
  company to cut investment in projects that remain
  risky too long.
• A Non-successful risk reduction

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Parallel Development

• Sony reportedly launched 10 different options in
  developing the VTR program.

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• The Mitsubishi ESR
• Mitsubishi tried a number of parallel approaches
  in its work to develop an environmentally clean
  car.
• An improved vertical vortex engine.
• An innovative electronic control engine with
  modulated displacement.
• An efficient electric power engine.
• When we set out to create an extremely
  low-emission, energy efficient car to meet 21st
  century standards, we knew there were many
  obstacles ahead. So we tried many approaches.
  What we found, after years of researching and
  testing various technologies, was that not one of
  them worked. All of them worked. Together. The
  result is a high performance, spacious car that
  is practically as clean as an all-electric
  vehicle. An infinitely more practical.

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Simulation and Rapid Prototyping

• CAD (Computer-Aided Design)
• Computer modeling and simulation
• Usually done by one group of people under the
  close supervision of the chief designer.
• During the simulation process, if some parameters
  need to be relaxed to optimize others and achieve
  optimum product performance, the decision can be
  made on the spot.
• Computer modeling and simulation generates, as
  by-products, all the tools necessary for the
  manufacturing and testing of the elements
  designed.

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• Semiconductor RD
• Thousands of miniaturized components (complex
  ICs, mass memories, and microprocessors) packed
  into a minuscule surface.
• Computer simulation take into account a huge
  amount of information about the
• Electrical performance of different components,
• Possible couplings and resulting interference
  between a number of elements on a given
  substrate, and
• Other effects.

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Supply of Critical Materials Parts
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• Basic Difference Between RD and Mass Production
• In RD, many steps are being performed for the
  first time. Nothing is stable, and changes and
  variations are not only permitted but necessary.
• In RD, the product consists of a few prototypes
  and a considerable amount of information and
  documentation. Labor cost is much higher.
• Personnel working in RD are highly qualified and
  hold academic degrees.

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• Points to consider when establishing an inventory
  policy for RD
• Low cost of components and materials 15 in
  RD versus 85-95 in typical manufacturing
  environment.
• Lead time of nonstandard components is long and
  uncertain.
• The RD cycle is not finished until the last
  product component is assembled and successfully
  tested.
• Cost of waiting for the last component can easily
  exceed the component cost by a factor of 100,
  1000, or more!

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RD Inventory Policy

• Maintain in stock all inexpensive, frequently
  used standard components. An RD project should
  never have to wait for such components.
• Keep a reasonable, minimum amount of more
  expensive, but moving, non-obsolescent
  components in stock. Adjust the quantity to keep
  the holding cost low, but monitor the stock to
  ensure that no shortage of such components
  occurs.
• Order as soon as practicable all state-of-the-art
  components and any other component with uncertain
  delivery time.
• Periodically dispose of all stock that is not
  moving or is dead.

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Bottlenecks in the RD Organization
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• Output of any organization is no greater than the
  throughput of its most stringent bottleneck.
• In RD, often the critical bottleneck is not a
  machine or a process, but the know-how and the
  particular experience of specific individuals.
• Methods to open know-how bottlenecks
• Add people with similar knowledge and skills.
• Relieve the bottleneck specialists from routine
  tasks that can be performed by others.

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From RD to Production
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Classical Transition Problems

• A product goes through 5 stages
• Concept definition of a product is accomplished
  by close collaboration between marketing and RD.
• Production development RD, in close cooperation
  with the reliability and quality department, is
  responsible for producing working prototypes
  documentation
• Manufacturing is responsible for mass-producing
  the product, overseen by the reliability and
  quality department.
• Marketing is responsible for distribution and
  sales, and
• After-sales service and support.
• Organizational walls of responsibilities exist
  between RD and manufacturing
• Frequently causing delays in the introduction of
  a new product to the market.

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Quarrels and Disputes

• Often, RD lose interest in a product once the
  prototype successfully demonstrate the principle
  of operation and reached the desired level of
  performance.
• They see the subjects of cost of fabrication, the
  use of readily available parts and materials,
  etc. as of secondary importance.
• They see work related to problem-free
  manufacturing as trivial, that all tasks related
  to manufacturing are none of their business.
• Manufacturing expects to receive a fully
  developed and de-bugged product from RD, with
  all necessary error-free documentation and
  drawings
• Any mistake in the documentation or
  inconsistencies in the drawings provided by RD
  can be a major cause in interrupting the
  manufacturing process.

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Case Intel, the Pentium flaw

• Driven by the desire to meet a promised delivery
  date to a customer or by the need to make best
  use of the window of market opportunity, many
  high-technology companies launch their new
  product prematurely.
• Often as a result, a large number of engineering
  changes are necessary before the manufactured
  product reaches the degree of performance and
  reliability required.

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Smoothing the Transfer

• Organizational methods.
• CAD and manufacturing methods.
• Adapting OPT and JIT methods to high technology.
• Concurrent engineering.
• Kaizen.
• TQM.

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RD Organizations
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Shusa

• Leadership -- shusa big boss/ project named
  after shusa
• Teamwork -- member assigned to project for its
  life (continuity)/ retain ties with functional
  area but under control of shusa. How they
  performed will be evaluated by shusa, will
  determine their next assignment.
• Communication -- team members signed pledges to
  do exactly what everyone has agreed upon as a
  group/ resolve critical design trade-off early.
• Organization -- number of team members are
  highest at outset of project. As development
  proceeds, number dwindles as specialties (e.g.,
  market assessment) are no longer needed.
• Concurrent engineering (CE)

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Concurrent Engineering at Honda, Marysville

• Honda at Marysville, Ohio designs cuts dies of
  stamping steel sheets into car bodies
• Die production begins at same time as body
  production
• Die designers body designers in direct,
  face-to-face contact/ most likely have worked
  together in previous product-development teams.
• Die designers know approximate size of new car,
  number of panels (thus can begin to make rough
  cuts)/ they understand body design process can
  anticipate final design (sometimes incorrectly).