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GGI RapidNews R&D Product Development eZine: Volume 3, Issue 4- May 8, 2002
GGI RapidNews is published monthly

R&D SURVEY RESULTS

2000 Metric Survey "Special Cuts": GGI's 2000 Product Development Metric Survey Results (MR14) has just been released. The report analyzes data from an industry survey that targeted issues of R&D Linkages to Corporate Strategy, Product Portfolio Management, Product Selection Practices, Determination of Product Success, and an analysis of the most frequently used R&D metrics.

In addition to the main body of the report which analyzes the survey population as a whole, the report analyzed five 'special cuts" sections where the survey population was divided into subsections: Public vs. Private, Smaller vs. Larger, Higher vs. Lower Technology, More vs. Fewer Employees and whether companies are Process, Repetitive/Discrete and/or Job Shop. For further information on any of the three reports GGI published based on this survey, please visit http://www.goldensegroupinc.com/cgi/catalog.cgi.

These separate, stand-alone survey analyses reveal interesting aspects of industry measurement practices. GGI will discuss one section at a time over the next several issues of RN. Last month's RN highlighted Public vs. Private companies. Smaller vs. Larger companies is the this month. Back issues of RN are available at http://www.goldensegroupinc.com/GGI_RapidNews/Rnews.shtml.

Findings For Smaller vs. Larger Companies: Below are some differences between smaller ($250 million or less in annual revenues) and larger company (greater than $250 million/year) metric practices. There were 64 smaller and 50 larger companies in the 2000 survey sample, and 7 companies were non-respondent:

* Only 2% of Larger as opposed to 19% of Smaller firms said that their company "did not have a clearly defined set of (corporate) metrics, and that the number could not be derived."

* 18% of Larger as opposed to 31% of Smaller firms said that their company "did not have a clearly defined set of R&D metrics, and that the number could not be derived."

* 37% of Smaller firms, and almost one-quarter (22%) of Larger companies said they did not track or calculate product life cycles.

* 71% of Larger as opposed to 51% of Smaller firms had decreasing life cycles. 29% of Smaller and 15% of Larger firms reported that PLCs were stable, i.e. "neither increasing nor decreasing."

* 85% of Smaller firms allow older products to just fade away, with 15% of them possessing formal product retirement practices. Among Larger firms, 26% have formal retirement practices, while 74% just let products fade away.

* 20% of Larger companies, as opposed to 9% of Smaller firms, reported that they did not have a "One-Step" or "Two-Step" product approval process, but that "a single organization determines the R&D products/projects to be done. There is no cross-functional multi-disciplined management team making decisions."

* Among those firms that used post-launch reviews, and targeted such reviews on a per product basis, there were differences between Smaller and Larger firms as regards the time periods used for these reviews. 5% of Smaller firms and 22% of Larger firms conducted such reviews at 3 years after launch.

In summary, larger companies have more formalized metric practices than do smaller companies, which corresponds to conclusions reached about public/private companies in last month's "special cuts." Larger company management requirements probably account for their wider use of metrics.

MANAGEMENT PRODUCTIVITY

Managing the ECO Process: Engineering change orders (ECOs) are part of nearly all NPD processes. It has been estimated that ECOs consume one-third to one-half of all product development engineering capacity and represent 20-50% of tool costs. ECOs are traditionally targeted to correct mistakes and integrate or fine-tune product components, but can also reflect an information hiatus between upstream and downstream development parallelity. ECOs have a role in product improvement. To eliminate them entirely is neither desirable, nor realistic.

However, ECO lead times are critical to product success. What development processes create over-long ECO lead times, and what improvement strategies can assist managers to meet their product launch commitments? The negative consequences of ECOs can be reduced by four major strategies, the authors argue, only the fourth of which (discussed in more detail below) has a process, rather than a technical orientation:

* Avoid unnecessary product changes altogether (engineering)
* Reduce the negative impacts of necessary ECOs (engineering)
* Detect ECOs earlier in the development process (engineering)
* Speed up the ECO process (decision & support ECO management)

Over-long ECO lead time means that the time it takes between detection of a product change need, and the time an ECO is in-place is disproportionate to the amount of work it takes to perform the intermediate steps, i.e., non-value-added waiting time. What contributes to long ECO process times? How can one speed up the change process to reduce ECO lead times?

In a study of a European automobile climate control system (CCS), the authors* determined there were five key "process" problems resulting in over-long ECO lead times:

* A complex approval process, i.e., many people from different organizational units with inevitable meetings, problem/solution reviews and subsequent feedback loops, which resulted in the "need" for additional meetings.

* Scarce capacity and system congestion, i.e., engineer capacity overload, a problem which has been cited to be as high as 240% of NPD engineering capacity.

* Setups and batching, i.e., the economies of batching change orders has the downside of the time a task waits for its batch "cohorts" to be available for processing.

* Snowballing changes, i.e., couplings between the modified component(s) and related product components or other development activities.

* Other organizational issues, such as the "dominating culture of cost management," rather than time management, as seen through organizational incentive mechanisms, as well as differences between the cultures of detailed vs. integrating engineering.

The first three above are related to management of business process flows or re-engineering, now well-accepted in manufacturing processes, but not yet as well-accepted within product development. Some of the author's process recommendations are:

* Approval Processes:

- eliminate unnecessary steps (oversight, reconciliation of data).
- obsolete old technologies for electronic data transfer, computer simulation, etc.
- permit engineers to manage ECOs from start to finish, i.e., no check-offs.

* Capacity & Congestion:

- reduce system utilization through flexible capacity (overtime, limited pooling)
- employ better data processing systems and simulation (automation).

* Setups & Batching:

- engineer training to split batches.
- force response time, i.e., "synch-and stabilize" process in software development.

* Snowballing:

- identify the key couplings (process knowledge).
- ensure fast engineering feedback and turnaround for key couplings.
- high prioritization of resulting ECOs.

* Organizational Issues:

- broaden engineering knowledge to include impacts on whole project costs.
- broaden engineering knowledge to include time cost considerations.
- broaden engineering knowledge to include cross-cultural communications.

* "Managing the Process of Engineering Change Orders: The Case of the Climate Control System in Automobile Development" Christian Terwiesch & Christoph H. Loch, JPIM, Vol. 16, No. 2, March 1999, Pages 160-172.

NEW WEB CONTENT

Home Page Redesign: Many of you will have by now seen the new look to our Home Page. It went up on 5/1/02. We hope you like and find it more convenient. We believe it will make it easier for you to access information on our site. The redesign is part of a longer-term effort to more substantially change the organization of information on the site. If you have a specific suggestion, we would like to hear it. Please send your suggestions to Jon Gilmore at ars@goldensegroupinc.com. Thank you.

MEGA Newsletter Gateway: We have significantly upgraded our MEGA Gateway of popular industry newsletters, and added many more. Additionally, this Gateway was redesigned to match the architecture of our popular MEGA Calendar Gateway: strategic management, marketing and sales, product development, manufacturing, software and Internet, project management and metrics. In addition, Marketing, product development and manufacturing have a dual focus on either mechanical, electro-mechanical, electric and electronic or pharmaceutical, biotechnology and life science newsletters. Some may be applicable to both interests. The MEGA Newsletter Gateway is located at http://www.goldensegroupinc.com/gateway/news.shtml. The URL is the same.

CRM/Sales Management Gateway: Click on the following URL to find a recently updated list and learn about suppliers of Customer Relationship Management and Sales Management software products: http://www.goldensegroupinc.com/gateway/tech_salesmanagement.shtml. In the 1990s, it was said that it cost 10 times as much to find a new customer as it did to retain an existing customer. In the early 2000s, it is now said to cost 20 times a much.

Knowledge Management Gateway: Click on the following URL to find a recently updated list and learn about suppliers of Knowledge Management software products: http://www.goldensegroupinc.com/gateway/Tech_KnowledgeMgmt.shtml

UPCOMING TELEVISION EVENT

Alexander Haig's World Business Review: Bradford Goldense has been invited to discuss new product development on Alexander Haig's World Business Review (WBR) in the near future. The show will air on both PBS and CNBC.

General Haig hosts an informative, fast-paced, magazine style technology and business series called World Business Review. On WBR, he features topical stories through field reports taped on location, illustrating solutions to industry problems.

The series targets an affluent and educated audience of approximately 80 million television households on CNBC, as paid programming, typically airing on Saturday or Sunday afternoon. In addition, WBR currently airs on PBS's The Business & Technology Network and on United Airlines' In-Flight programming, which targets business travelers on International flights. We will advise RN readers when the program airs.

BOOK REVIEWS

Good to Great: Why Some Companies Make the Leap ... And Others Don't*: Jim Collins wrote Built to Last: Successful Habits of Visionary Companies in 1994 with Jerry Porras. Out of that, Mr. Collins grew interested in how some companies transitioned from being just good to being great.

He started with an analysis of 1,435 companies, examined their performance over 40 years and found 11 companies that he believed had become great. How did they do it? How does the author conceive greatness? Collins defined great companies as those with cumulative stock returns of at least 300% above the market for a minimum of 15 years! The 11 companies studied averaged over 700% above the market. Good to great companies, according to the author are therefore longer-term business performers, not flashy "wunderkind."

In the stressful mix of business management issues like corporate and functional leadership, business strategy, new product development and marketing, what attributes did his five years of company research indicate took these 11 companies from being merely good to great? Collins identified the following seven attributes of business greatness:

* Non-charismatic, self-effacing leadership, able to assume personal responsibility for company failures, and to credit others for company successes. Their effort is directed to secure business performance, not personal or ego rewards.

* Get the best company team, then put them into the right positions. Setting a company direction happens after the company secures the best people. Terminate or reassign those who are not best for the positions they hold.

* Rely on business facts, not fancy or denial. There must be an organizational propensity to confront brutal truth, to "keep the faith" and to see adversity as potential opportunity to change. People must feel free to speak their minds, to dialog and debate.

* The will to be the best at something; a single, simple idea that drives the company's economic engine, it is passionate about and can sustain it through the ups and downs of a la mode business thinking.

* Strong company discipline, which comes from shared values, not managerial control. The best people are motivated internally, and perform at their best when given the freedom and assume the accountability to achieve shared business objectives.

* Technology is a method. It can accelerate greatness, if used well, or failure, if not. It comes after, not before, the best people and core business concepts. Technology must fit the company. It is not a magic bullet, and comes later in business greatness!

* Greatness builds slowly! It is not a quick process. Like a heavy flywheel, it starts slowly and builds. Quiet and deliberate, it takes strong nerves to "stay the course" when daily business stress seems to demand a "quick fix," rather than a deliberate course.

If it sounds like the above characteristics of business greatness typify your company, then you may feel like you are running a marathon. It's not for everyone. Sprints are the glamor events, but there may be a dichotomy between the more self-referential values inherent in business glamor and the vision of greatness associated with sustained, collective achievement.

* HarperCollins Publishers, 320 pages, First Edition, October, 2001.

CONFERENCES OF INTEREST

Society of Concurrent Product Development 7th Annual Conference: May 29-30, Boston University Corporate Education Center, Tyngsboro, Mass. This year's conference, Aligning Culture to CPD Principles and Practices, is designed to help organizations break down the barriers to implementing CPD as an integral part of their business model. Keynote speakers on May 30th are Earl Werner, VP of Engineering at Harley-Davidson, who will discuss the impact of CPD on the company's latest product success story, the V-Rod Motorcycle; and Bob Filosa, Director of Engineering at Raytheon, speaking on cultural change through a center of CPD excellence.

On May 29th Preston Smith, co-author of Developing Products in Half the Time, will lead a seminar on proactive risk management. Keynotes and seminars are supplemented by papers and discussions that cover all stages of CPD implementation to ensure relevance no matter where you are in the process. Please visit http://www.scpdnet.org for full details, updates, and registration information.

Boothroyd-Dewhurst's 2002 International Forum on DFMA: This internationally respected conference will be held in Newport, Rhode Island on June 10-12, 2002. Mark your calendars. You will see the leading practitioners and thought leaders for DFMA, Design for Serviceability, Design for Disassembly, Design for Recycleability, Design for Environment, and Green Design. Brad Goldense will be presenting a newly written paper "Measuring R&D Projects: Best Practices" at the 2002 Forum. Please visit http://www.dfma.com for further updates and registration information.

"FEATURED" iSTORE PRODUCTS

MR4 - 1998 Product Development Metrics Survey Results: The largest and most complete of the three reports prepared on the 1998 Product Development Metrics Survey - "Research Results" (MR4) - has been "deep-discounted" to $1,965.00. Typically selling for $2,620.00, this 131 page report's price has been reduced 25%. Research "Results" is GGI's most complete of the three published 1998 survey reports. This report provides 104-pages of presentation slides, in addition to the text. The report focuses on four areas: Corporate Metrics, Project Metrics, Metrics Systems, and Links to Reward and Recognition practices. The survey population of 190 companies is analyzed as a whole. The survey's findings may surprise you.

In addition, this Results report is the only one of the three reports to contain the five "special cuts" sections that GGI employs in all our research: Public vs. Private, Smaller vs. Larger, Higher vs. Lower Technology, More vs. Fewer Employees and whether companies are Process, Repetitive/Discrete and/or Job Shop. The survey population is segmented and compared five ways.

Visit http://www.goldensegroupinc.com/cgi/catalog.cgi?display_promo for additional information.
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RapidNews is an e-mail publication from Goldense Group, Inc (GGI). Its subject matter includes survey findings, company news, book reviews, key industry conferences and R&D information of interest to clients and associates. Please send communications to rn(at)goldensegroupinc.com. Thank you.
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