40 Long Range Planning, Vol. 25, No. 6, pp. 40 to 47, 1992 0024-6301/92 $5.00 + .OO Printed in Great Britain Pergamon Press Ltd

Concurrent Product Development for Fast-Track Corporations

R. Ray Gehani

Fast- Track corporations take strategic initiatives in responding quickly even to weak signals from their external environments. Implementation of this strategic intent demands an effective mobilization of the organizations internal resources and configuration. This paper begins by discussing the evolving micro-economic relationship between producers and con- sumers of goods and services in globalized economy, and explores the origins of organizations product development programmes. Then classicaland current approaches to product development are reviewed. with respect to understanding the anatomy of a concurrent approach. Three different modes of integration, with stress on hardware, humanware and soft- ware, are discussed. A portfolio of alternative routes to achieving concurrence is proposed.

Fast Tracks for Corporations The 1980s have forced three major competitive trends on business corporations in manufacturing indudstries world-wide. These are: internationaliz- ation of technology-driven competition, globaliza- tion of of manufacturing due to faster transnational flows of materials and money, and a compression of product life cycles with increasingly sophisticated customers. Not all high-tech firms have been able to adapt well to these dynamic environmental influcnccs. Business organizations which were leaders for decades in their industrial sectors now can lost their positions in a few years. Some high-tech products, which were in high demand for years, now can disappear in a few months.

For example, Xerox, the pioneer of photocopying technology, had over 80 per cent of the market share of copiers in 1978, but lost its overall lead, with its market share falling to under 45 per cent in 1982. Xerox then took 4 to 5 years to develop a new product, while its more nimble competitors entered their products in the market in under 2 years.Xerox

Dr R. Ray Gehani teaches Technology Management, International Business, and Strategy & Policy at College of Business of Rochester lnsititute of Technology. He is actively involved in RITs Center for integrated Manufacturing Studies. This study is related to Theory of Integration Research Project, stimulated by Center for Integrated Manufacturing Studies (CIMS) at RIT, Rochester, New York.

recognized its slackness and recovered some of the lost ground in market by modifying its approach to develop its new lo-series photocopier products in a matching shorter time frame. By 1984, Xerox slashed its cycle time for product development by ha1f.j

Role of Product Development in Business According to Drucker, in the Post modern factory of the 1990s manufacturing is [going to be] seen as an integrated process that converts goods . . . into economic satisfactions. Druckers systems approach embeds the physical process of making things, that is manufacturing, in the economic process of creating business value. According to a 1982 study by Booz, Allen and Hamilton, U.S. organizations are likely to derive one third of their profits from their new products.S In todays tech- nology-governed competitive-highways, only the organizations which innovate their added-value products and processes frequently and speedily are likely to survive.

Japanese manufacturing organizations did a particu- larly good job of this. For instance, the Japanese producers of projection television gained world- wide market shares by developing a new television in one-third of the time taken by their counterparts in the U.S.A. The Japanese plastic injection moulders developed their moulds at one-third the cost and one-third the time required by their counterpart U.S. moulders. In the world-wide auto industry, the key factor cited behind the success of Japanese auto makers is their shorter time required to develop a new car model.

Several technology-driven U.S. companies have also recognized and accepted this market challenge. In 1989, Fortune reported that Motorola reduced its throughput time for a pager from 3 weeks to just 2 hours, and that AT&T cut its design time for a new tclcphone by half, to 1 year. Bell Atlantic cut a

Concurrent Product Development for Fast-track Corporations 41

major corporate service from several weeks to 2 days. Compaq Computer Corporation, one of the fastest growing Fortune 500 companies in the U.S., achieved its super-fast growth by reducing the computer industrys average product development cycle time of 12 to 18 months, to less than 6 to 9 months. Compaq took only 15 months to intro- duce its DeskPro 386 microcomputer after Intel introduced its 80386 microprocessor chip in the market. Compaq worked very closely with Intel, its chip supplier, and developed compatibility of its new product development process with that of Intels new product development process.

An Analytical Approach In this article, we comprehensively analyse different aspects of a concurrent product development pro- cess. We discuss the internal and external benefits of an accelerated product development process. This is coupled with an analysis of the anatomy of a product development process. New processes for product development are compared with the con- ventional approaches used to develop new products. Three alternate approaches to product development are described. These are: a serial relay race approach, an iterative ping-pong approach, and a parallel rugby approach. We then discuss three different ways organizations bring about integ- ration. These include hardware-based integration, humanware-based integration, and software-based integration. And finally, managerial implications of a faster concurrent product development process are discussed.

Concurrent Product Development: A Systemic Weapon Simultaneous engineering, or organization-wide concurrent product development process, is a systemic weapon that can be depolyed by high-tech companies to accelerate their new product develop- ment programmes. Eastman Kodak Company of Rochester, New York, used concurrent engin- eering to develop its single use Funsaver cameras to gain competitive advantage over its international competitors. Eastman Kodak used Computer- Aided Design (CAD) tools and a close co-operation between its product development group and pro- duction group. This resulted in shortening of the journey from a concept to commercially market- able product to a record 9 month period.8 Eastman Kodak also used a similar concurrent product development programme to develop its sharper Kodak Ektar film in one-fourth of its usual film development cycle time.

It is thus clear that most companies in the 1990s and particularly those that are technology driven, must create, design, and develop products faster; produce them faster; and service their customers faster. Customers want their needs satisfied just-in-

time-as they conceive them. They do not have patience for producers to start and conclude their product development programmes months or years later. The new globalized market place can be compared to viewing a television, as customers zap through different products and services until they get what they want.

Before we discuss how organizations can accelerate their product development programmes, let us first set the stage by reviewing some recent develop- ments in micro-economic environments facing technology-driven organizations.

Evolving Producer-Consumer Relationships In recent years, the relationship between producers of goods and the consumers of goods, has gone through a major metamorphosis. For decades a majority of customers was forced to accept what- ever goods were handed down to them by the producers. And, due to a lack of alternatives, the customers typically paid the asking prices.

About 6 decades ago, Henry Ford innovated the auto assembly line for producing automobiles in large volumes to offer them at lower prices and reach a larger number of customers. Ford thus gained competitive leadership by coupling standar- dization of parts and economies of scale, and reducing the price of an automobile drastically. Ford proclaimed that any U.S. customer could have a car of any color provided it was black.

Later Henry Fords product standardization was outdated by Alfred Sloan of General Motors, who recognized and responded to the diversity of customer preferences in a segmented market. Sloan created different divisions in his holding auto company to cater to choices of different customers, and then developed over-arching structures to help head-office to co-ordinate between those divisions. Sloans General Motors, however, still relied on a supply driven approach. Typically, the U.S. auto companies also took many years, sometimes decades, to develop their new car models. During this period customers waited patiently for these new products to arrive in showrooms.

Japans Entry In the 1970s as the oil shocks sent the price of petroleum oil sky high, the Japanese auto makers quickly entered the world markets with their more fuel efficient, compact cars. To retain their new found foreign customers, and to improve their market shares further, the Japanese auto makers relied heavily on their high product quality and quick response to fast changing customer prefer- ences. The Japanese auto makers cut in half the time

42 Long Range Planning Vol. 25 December 1992

taken by the U.S. auto makers for dcvclopment of a new car model, and thus penetrated deep into the U.S. and the world-wide automarkets.

The Japanese auto makers achieved this by using new forms of organizational structures in their manufacturing activities. According to Stalk, new product development programmcs in most West- ern organizations are carried out by functional ccntrcs, whereas their Japanese counterparts used cross-functional team cells to do the same tasks.

Anatomy of a Product Development Process To understand the characteristics of diffcrcnt prod- uct devclopmcnt proccsscs, we will next consider how a typical product development process origi- nates, and what are the various stages in such a process.

Ori&ins of Product Development Process In an organization, the process of product dcvclop- mcnt programme can begin in one of two ways. Shanklin and Ryans consider technology driven markets as either supply-side driven or dcmand- side driven processes. In the supply-side approach for product dcvclopmcnt (sometimes referred as technology push), the ideas for product dcvclop- mcnt originate in the organizations research and development (R & D) dcpartmcnt, whcrc scientific discoveries lead to new product concepts. Sony Corporation of Japan represents an organization with such a supply-side approach. In 1950, Sony lauched its tape-rccordcr, even though the general public did not feel a need for recording their own or other pcoplcs speech. The general public initially treated Sonys new tape-recorder like a toy and not as an appliance for any significant daily usage. With a technology push driven process, organizations like Sony create entirely new markets in an entrcprc- ncurial manner.

On the other hand, the demand-side approach to product development (also rcfcrrcd as marketing pull) begins the process in the marketing dcpart- mcnt of the organization. The marketers identify some unfulfilled need of a critical mass of customers. They then involve the organizations R & D department to dcvclop a product to respond to the specific market need defined by the marketing department.

In the 1950s and early 1960s while the market environment and production technologies were stable for most of the products and organizations, the technology push for initiating a product dcvclopmcnt process worked quite cffcctivcly for opening new business avcnucs. In this manner, E. I. du Pont, a leading U.S. ,chemical manufacturer, successfully introduced a scrics of polymer-based synthetic materials such as rayon, nylon, polycstcr,

aramid, etc. to create many new business streams. Many of thcsc products are still quite profitable because of their significant technological edge over competition.

But later in the 1980s and particularly for emerging technologies, such as in the microcomputer industry, the competitive advantage gained by an organization .with technology push approach disap- pearcd quickly because its competition caught up with it in a very short time. For example, first Apple and later IBM gained growth with introduction of their personal computers, but this was quickly eroded by a follower organization such as Compaq. Compaq, a relatively new entrant in computer industry, quickly gained competitive advantage over IBM and Apple in personal computer segment by fast introduction of its new product based on a newly emerging Intel 80386 microprocessor chip.

With time, as the market environments have become more dynamic and turbulent, the tech- nology-driven organizations have to stay closer to their customers to take cues from their changing needs or prcfercnccs. Thus, the stimulus for initiat- ing the process of a new product development programme has increasingly shifted from the inter- nal R 8~ D ccntrc to the external marketplace.

Stages in Product Development Process In cithcr cast, whether the new product develop- ment process was initiated in R & D or marketing department, it generally traverses through a set of milcstoncs in its journey from conception to commercialization.

For a continuous chemical process manufacturer like Eastman Kodak of Rochester, New York, a new product development programme comprises of six distinct stages. These are:

(1) Conceptual design,

(2) Technology demonstration,

(3) Feasibility demonstration,

(4) Process capability demonstration,

(5) Design review, and

(6) Production readiness.

Each stage is dcfincd by a set of rccommcnd ,d actions and specific deliverables. For instance, the conceptual stage must define the basic concept and manufacturing technology for a new product, establish the financial requirements and returns, and identify whether the risks for developing the new product arc high or low. Similarly, the down- stream process capability demonstration stage involves study of process capabilities on prototype equipments, completion of the preliminary produc- tion system design, and meeting requirements for product-process interactions. The dcliverablc of this stage is a confirmed production process and

Concurrent Product Development for Fast-track Corporations 43

product product time in process, stages.

design. A programme to reduce the years, different departments involved in a product development cycle time reduces the idle development process functioned independently and each stage of the product devclopmcnt sequentially like in a relay-race or a bucket- but does not lessen the number of these brigade of fire-fighters (Figure 1).

The typical process for a product development programme of a new car model also involves a similar set of six different activities. These include: design of the product concept; research and de- velopment of materials and mechanisms; analysis of market and profit potential; product design; pro- duction planning; and finally development of market strategy and product launch in market. Each of these stages take different time periods. Typically, the U.S. auto makers take a total cycle time of 60 months, whereas the Japanese auto makers take only about 36 months to develop their new auto models. The delays for the U.S. auto makers are caused by a number of factors related to the way they use their machines, deploy their manpower, or the way they structure their organiz- ations. Factors for accelerating product devclop- ment cycle will be discussed later.

Dis-integration of Product Development Process Traditionally, to develop new products and to run day-to-day business operations, most organizations were organized by functional departments. These departments were organized to work independently and carry out individual functional operations such as marketing, manufacturing, design, research and development, logistics or distribution. In many organizations, departments are still formed by collecting employees with similar educational or skill backgrounds, and making them work together to do only parts of overall business operations.

The hierarchical division of work between workers and their supervisors is generally split according to the principles of scientific management proposed by Frederick Taylor. Around the turn of the nineteenth century, Taylors scientific management ushered in enormous growth and profitability in U.S. manufacturing organizations with the notion of one best way. This became very popular with managers because of its contribution to efficiency of production of standardized products for mature stable markets.

The relationship between different functional departments in industrial organizations is generally governed by Max Webers principles for ideal bureaucracy. With extensive rules and procedures in place, the different departments operate almost independently of each other, and the work moves from one department to another, across the organiz- ation. This can take place in different ways:

Serial Relay Race OY Bucket Brigade Approach Using the above mentioned principles, for many

Figure 1. Serial relay race approach

In this NASA (National Aeronautical and Space Agency) styled sequential phase programme, once the marketers have identified a customer need, they pass this idea over their departmental wall to the next door neighbour: development department. The developers use the received idea to develop a product concept and throw it over the wall to the engineering department. The engineers design a product and throw the blueprints over to the manufacturing department. The manufacturers produce the products and throw them over the wall to the marketing department. In this relay process, a particular department is rarely consulted by prcccding dcpartmcnt(s) and the department refuses to recognize the reason to involve the next department in its own decision making process. Managerially, this is a simple but time consuming organization design to control and monitor a product development programme.

Iterative Ping-Pong Match Very often, and particularly in the absence of a fire- like competitive crisis facing a business organiza- tion, the bucket or the relay baton does not always steadily move forward in the brigade or relay race. The designers and developers have a tendency to rcjcct the marketers suggestions for new products for being too idiosyncratic. The engineers tend to reject quickly the developers product concepts as impossible, or too idealistic, and insist that the designs must be fixed or revised. The product development process thus resembles more like a ping-pong match, where the task on hand goes back and forth between the interacting departments, with extensive delays in the progress of a task from one stage to the next stage in the product development programme, as shown in Figure 2 (below).

For many years the delay and the cost thus caused in

44 Long Kangc Planning Vol. 25 December 1992

Production &

I / Research & Operations Marketing & Development Management Distribution \ Figure 2. Iterative ping-pong match

development of new products did not hurt most companies bottom line very much. The customers generally waited patiently for new products to appear in the market. With few new organizations entering an oligopolistic and mainly domestic U.S. economy, there was no significant erosion in the customer base of an organization due to such delays.

But, with globalization of competition in the 1980s and ease of trans-continental movements of goods, money, and information, foreign competitors started entering as soon as some gaps appeared in the highly valued U.S. or European markets. Thus the U.S. customers had to wait no more for their domestic producers products to appear in the market. They had alternative products-often cheaper or superior to what they had been receiving for years from their domestic producers.

Parallel Rugby Approach To capitalize quickly on market gaps appearing in distant offshore markets in the U.S. or in Europe, the Japanese competitors structured their companies with more flexible organizational designs. In order to lower inter-departmental bureaucratic barriers and be able to respond quickly to customers changing needs, they organized teams which over- lapped or worked concurrently. The Japanese competitors transformed their operating style into a rugby approach, where the team members from different upstream and downstream departments are involved simultaneously in the product develop- ment process from the very beginning (Figure 3).

For example, when Fuji Xerox was developing its FX3500 photocopier, each phase from planning to production overlapped with other phases in a parallel concurrent manner. This concurrence in process compressed the total product development time to 24 months. Earlier a similar programmc with a linear and sequential relay-race approach took 36 months. The Big Three U.S. auto makers have also now adopted the parallel engineering programmcs to replace their earlier sequential approach for product development programmcs.

Figure 3. Parallel rugby approach

With the concurrent rugby approach for product development, marketers do not keep developers, engineers, and manufacturers in the dark until the very last minute. They share their information about customers needs, cvcn when customers preference patterns are not fully developed. This gives the downstream receivers in the organization enough lead time to prepare and position themselves for a future pass from their upstream teammates.

Furthermore, with a joint ownership in the final outcome, the downstream team players do not quickly reject ideas from their upstream partners as they did bcforc. And, the most significant benefit of such pre-emptive involvement and organization- wide sharing is in the rate of conversion of new ideas generated within an organization into more number of commercially successul new products launched into the market.

Implementation of Concurrent Process: Alternate Integrating Mechanisms The faster, concurrent product development pro- cess, described above, requires a higher degree of integration across different parts of an organization for more simultaneous progress across the organiza- tion. By nurturing and generating synergies of integration across various subunits of a high-tech organization, the process of new product develop- ment can bc accelerated many times over. To integrate across different departments, different organizations tend to rely on different compcten- ties. These approaches involve organization-wide integration by introduction of integrating hard- ware, humanware, or software, which will be discussed next.

Organizations-wide Integration by Hardware Organizations can introduce hardware tcchno- logies, such as Computer Aided Design (CAD), Computer Aided Manufacturing (CAM), Com-

Concurrent Product Development for Fast-track Corporations 45

puter Aided Engineering (CAE), Computer Integrated Manufacturing (CIM), Flexibile Manu- facturing System (FMS), etc., to integrate and share common useful information and other resources across different departments. This is shown in Figure 4 (below). These integrating hardware technologies, sometimes called flexible or pro- grammable automation, have facilitated significant improvements in speed and delivery of products. Earlier an example was cited regarding use of CAD hardware in concurrent development of single use camera in Eastman Kodak, with significant improvements in cost and quality. Hayes and Jaykumar caution that generally, the integrating technologies such as CAE, CIM, FMS, cannot be profitably introduced in parts or on an incremental basis. Their high returns on investment are synergized only by their enterprise-wide introduc- tion and implementation. This is best illustrated by the hub-and-spoke transportation system pioneered by Federal Express, and emulated subsequently by commercial airlines in the U.S. Many other com- panies earlier tried to adopt only one or some of the integrating technologies used by Federal Express (in their islands of automation) and gained only limited im provements in their competitive advan- tages.

Figure 4. Integration by hardware

Organization-wide Integration by Humanware Whereas new technology-based hardware solutions can be brought into an organization relatively easily, their acceptance and success is slow. Acccpt- ancc is often delayed by the slow process of bringing about changes in long-entrenched human behav- iour and attitudes. The affected employees tend to resist any changes in technologies and organiza- tional processes because of their fear or lack of familiarity with the likely outcomes.

To successfully introduce and exploit the integrat- ing technologies listed above, employees in different parts of an organization have to be taken into confidence to perform their different tasks in unison. To do so, the organizations human resource may

have to be trained to share, communicate, and exchange ideas with team members from other parts of the organization in a non-confrontationary manner. Figure 5 shows a linking-pin arrangement where members from different departments are involved in cross-functional teams to do so.

Figure 5. Integration by humanware

In a traditional serial organization, product and process innovations may emerge independently in different parts of the organization. On the other hand, in an intregrated parallel organization, the product and process innovations in different parts of an organization develop and grow concurrently in a sharing and systemic manner.

AT&T and Ford of U.S.A. use cross-functional teams staffed with members from different disci- plines such as product engineering, manufacturing, marketing, and purchasing.* These multi-func- tional teams work together throughout the deve- lopmental phase, with real authority to make critical decisions regarding development of new telephones or new cars. By doing so these companies save enormous time and expense in their new product development programmes.

Organization-wide Integration by Software New management practices and processes may also be used to integrate and speed up a product development process. Collective decision making with open communication and information sharing across different parts of an organization can help to counter the bureaucratic effects of large industrial organizations (Figure 6). A cross-functional busi- ness team with responsibility sharing is increasingly becoming the effective unit of organizing in fast- track organizations.

For organization wide understanding needed in a faster product development process, Nonaka has postulated that information redundancy is funda- mental. Nonaka defines information redundancy in Japanese organizations as a condition where . . . excess information is shared in addition to the minimal amount of requisite information held by

46 Long Range Planning Vol. 25 December 1992

information and Physical Flows

Figure 6. Integration by software

every individual, department (group), or sub- organization involved in performing a specific function. Hc stresses that in the Japanese organiza- tions, the excess information helps to clarify the information held by different individuals, and stimulates . . . generation of information with new meanings. Information redundancy also implies that the new ideas arc not prematurely rejected, or considcrcd eccentric because of limited view of ones own role in the overall product dcvclopment process.

Furthermore, the Japanese organizations nurture organization wide integration with an in-built multi-functionality. With long-term cmploy- mcnt, non-specific recruitment, and extensive job- rotation over the working life of a Japancsc cmploycc, a Japanese manager of a product de- velopment team is likely to bc much more multi- functional in his or her approach than his or her counterpart, a functional specialist in a Western organization.

With cross-functional team mcmbcrship, new tcch- nologics for multi-criteria decision making arc nccdcd for evaluation during the intcgratcd multi- functional process of new product development.? The ccntrc of gravity of decision making for intcgratcd product development must also move down the organizational hierarchy, from a supcrvis- ing manager to the active team players (such as a designer, an asscmblcr, or a salesman). With this new dcccntralizcd approach, many managers who typically relied on top-down decision making for short-term bottom-lint returns, may feel uncom- fortablc regarding the erosion of their power and control. They are forced to share information with lower cadres of their organization. On the other hand, such dclcgation by managers also relieves some of their time and attention for more innova- tive and creative contributions to the overall product development process.

Competitive Benefits of a Concurrent Process According to Gary Reincr, Vice Prcsidcnt of Boston Consulting Group, an accelerated product development process produces both internal as well as external benefits to an organization. The external or competitive benefits include market penetration due to faster customer responsiveness, premium pricing, precise flow of market research inform- ation, and ability to incorporate latest technology into a product.

The accelerated product development process also helps the organization internally by:

(1)

(2)

(3) (4) (5)

Rapid generation of economics of learning curve with lower overhead and labour costs;

More information sharing and problem solving across the organization;

Higher quality of goods and services;

Lower requirement of working capital; and

Less need for engineering and design changes due to enviromental variations.

One must however be careful that a faster product development process requires some zero-base im- provements in the way an organizations product development programmcs function. Managers have to genuinely try for zero-defects, remove all the bugs from their existing operations, and make their overall business process more streamlined for faster deployment of resources. A faster but ineffi- cient organization is likely to product a large volume of wastage with defective goods and poor service resulting in a devastating effect on the bottom line of the organization.

Managerial Implications of Concurrent Process The central question is: does concurrent product devclopmcnt process provide the much nccdcd elixir for growth and survival of corporations during the current cut-throat global competition of the 199Os? It is definitely not likely to be so, if it is implemented half-heartcdly and in a hurry. If that is the case, it will produce large quantities of sub- standard products which no customers want.

As the concept of concurrent product development is still relatively new to most organizations, the proponents of this strategy tend to extol the virtues of concurrent programmes in a one-sided manner. They rarely point out that not all cmployces arc mentally or physically geared to operate effectively in a team or group environment. Some individuals function better individually, moving on self assigned targets, and making progress in their own ways. The motivation levels arc also likely to vary

Concurrent Product Development for Fast-track Corporations 47

from one person to another. Some individuals are motivated merely by the excitement of seeing their design concepts patented or converted into real products in the market, whereas others wrust have quick and substantial monetary returns for their long hours of work.

And finally, in an integrated and inter-dependent chain of people linked together with the common objective of developing new products faster, the overall strength of the organizational chain is likely to be dctcrmined by the weakest element in the chain. Thus, if an organization has a weak market- ing function, then no matter how innovative its IX & D department is, and no matter how skilful its engineers are, the organization is likely to miss the weak but significant signals from customers. Such an organization is likely to fail in launching its new products successfully into the market.

Thus, the concurrent product development approach demands a balance in individual and departmental capabilities of different parts of an organization. In the absence of an intensive Japan- ese-like training and development programme in most of the U.S. or European organizations, the concurrent product development process will find no dearth of sites of friction generating inter- personal rifts that will interrupt or discontinue the concurrent product development programmcs. Or- ganizations must increase and distribute their train- ing efforts to avoid such premature conclusions.

We hope that the foregoing discussion and a comprehensive exploration of different elements of a concurrent product development process will be helpful in curtailing the employees anxieties and improving their comfort level with respect to adopting this new way to develop new products. A judicious evaluation of the portfolio of alternate ways to implement organization-wide integration in an organization, will also help organizations to reduce the probability of a premature failure.

This will result in improving chances for a steady and frequent stream of successful new products launched into their target markets.

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