The Business ChallengeThe Business Challenge

““Can Industry and Academia survive Can Industry and Academia survive a VBB/BB Development?” a VBB/BB Development?”

By Ian StandleyBy Ian Standley

Kinemetrics, IncKinemetrics, Inc

The Industry Concerns Simplified!The Industry Concerns Simplified!

Can we as individual companies make a Can we as individual companies make a profit from these developments?profit from these developments?

Is this “profit motive” a concern to the Is this “profit motive” a concern to the research community?research community?

• I believe yes! – a robust commercial base of I believe yes! – a robust commercial base of instrument manufacturers provide the products, instrument manufacturers provide the products, support, and future instruments the research support, and future instruments the research community needscommunity needs

What will industry be considering?What will industry be considering?

The Industry ProcessThe Industry Process

Marketing Assessment and Financial Marketing Assessment and Financial FeasibilityFeasibility

Product DevelopmentProduct Development

ProductionProduction

Marketing Assessment & Financial Marketing Assessment & Financial FeasibilityFeasibility

Assess the market sizeAssess the market size Evaluate Competitors OfferingsEvaluate Competitors Offerings Work out the market DifferentiatorsWork out the market Differentiators Produce Target Specifications Produce Target Specifications

VBB/BB Market SegmentationVBB/BB Market Segmentation

REGIONALOBSERVATORY

GRADE

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ower

WISH LISTPRODUCT!

VBB

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BB

Longer Period

PostholePackage

BoreholePackage

Industry Standardization?Industry Standardization? Why not put together a committee of interested parties to Why not put together a committee of interested parties to

develop an Industry Standard for Seismometers?develop an Industry Standard for Seismometers?

Not appropriate in this industry – we can and have in the past Not appropriate in this industry – we can and have in the past ensured inter-operability at the interface without the constraints ensured inter-operability at the interface without the constraints of a standard.of a standard.

Why not?Why not?• Standards stifle innovationStandards stifle innovation

• Standards dictate technologiesStandards dictate technologies

• By definition they limit new and innovative featuresBy definition they limit new and innovative features

• Provide no advantage to those who offer superior Provide no advantage to those who offer superior features/performancefeatures/performance

Why?Why?• Cost only becomes the driver (good for the user in the short term Cost only becomes the driver (good for the user in the short term

more questionable in the long term)more questionable in the long term)

• Provide guaranteed interoperabilityProvide guaranteed interoperability

The “Served” MarketThe “Served” Market

Which area of the Market will our Which area of the Market will our product serve?product serve?

Why will it be successful in this Why will it be successful in this market area?market area?

The Market SizeThe Market Size

What is the market size – how many What is the market size – how many units at what price per yearunits at what price per year

Although we can amortize our Although we can amortize our development costs over the total development costs over the total sales, sales in the future generate sales, sales in the future generate less of “today’s dollars”.less of “today’s dollars”.

Production costs relate much more Production costs relate much more closely to sales per year than total closely to sales per year than total sales over the product lifetime.sales over the product lifetime.

The Time Value of MoneyThe Time Value of Money

A dollar in the hand is A dollar in the hand is worth more than a worth more than a dollar in the future!dollar in the future!

The discount rate The discount rate depends on what you depends on what you are doing!are doing!• Investing in T-BillsInvesting in T-Bills

• First Hotel in OrbitFirst Hotel in Orbit

VBB development may VBB development may be closer to the be closer to the second than the first!second than the first!

Risk & ReturnRisk & Return Basically the more risk the Basically the more risk the

higher return that is required higher return that is required by Investors to justify this risk.by Investors to justify this risk.

Quantified in the Capital Asset Quantified in the Capital Asset Pricing Model (CAPM)Pricing Model (CAPM)

VBB/BB Development using VBB/BB Development using new technologies is at a higher new technologies is at a higher risk level than existing risk level than existing technologiestechnologies

Due to the time value of money Due to the time value of money returns in the future are worth returns in the future are worth less than money in your less than money in your pocket!pocket!

The Manufacturer’s Target The Manufacturer’s Target SpecificationsSpecifications

Manufacturer’s Target Specifications should not be a Manufacturer’s Target Specifications should not be a wish list!wish list!

They should be a mutually consistent set of They should be a mutually consistent set of specifications with regard to features, cost and specifications with regard to features, cost and development timedevelopment time

This is the difficult bit – these need to address the This is the difficult bit – these need to address the needs of the served market!needs of the served market!

Engineering DesignEngineering Design1.1. Negotiate on the Target Specs with regard to Negotiate on the Target Specs with regard to

Trade-offs, Performance, Cost & Time to Trade-offs, Performance, Cost & Time to MarketMarket

2.2. Try to mitigate the main development risksTry to mitigate the main development risks

3.3. Develop a development programDevelop a development program

4.4. Test the concepts early in the programTest the concepts early in the program

5.5. Work the development program Work the development program

6.6. Test as you goTest as you go

7.7. Refine the Development ScheduleRefine the Development Schedule

8.8. Final Tests and Release to ProductionFinal Tests and Release to Production

Entropy as related to product development (Ian’s Law of Project Dynamics), it’ll take longer, cost more and not

perform as well as you planned

Risk ReductionRisk Reduction

Development Projects have risk!Development Projects have risk! Risks should be identified and Risks should be identified and

evaluatedevaluated Risky areas should be addressed as Risky areas should be addressed as

early as practical in the development early as practical in the development and monitoredand monitored

Risk Reduction Risk Reduction (continued)(continued)

Try to avoid the following risk items:Try to avoid the following risk items:• Something no one has done anywhere in the world beforeSomething no one has done anywhere in the world before• Something a few people have done somewhere in the worldSomething a few people have done somewhere in the world• Something no one in your company/vendors/consultants has Something no one in your company/vendors/consultants has

ever doneever done• Multiple risks in one project – consider incremental Multiple risks in one project – consider incremental

development stepsdevelopment steps

Meeting the SpecificationsMeeting the Specifications Test the prototypes to determine the Test the prototypes to determine the

performanceperformance For the VBB/BB the testing is a difficult and For the VBB/BB the testing is a difficult and

time consuming step.time consuming step. Redesign or re-evaluate the specifications Redesign or re-evaluate the specifications

and proceed with revised planand proceed with revised plan

ProductionProduction

Build what is thrown across the wall from Build what is thrown across the wall from EngineeringEngineering

The product will be late because even if The product will be late because even if Engineering is on time Sales will have sold Engineering is on time Sales will have sold the product before it’s developed the product before it’s developed (See competitive pressure – Rapid Proto-typing and (See competitive pressure – Rapid Proto-typing and PhotoShop – Virtual Products) PhotoShop – Virtual Products)

Production Production (continued)(continued)

Meet the Standard Costs and the Meet the Standard Costs and the Production ScheduleProduction Schedule (What Learning Curve?)(What Learning Curve?)

Lot EfficiencyLot Efficiency Any production manager would much prefer Any production manager would much prefer

to build 100 units of the same product one to build 100 units of the same product one year than 20 units of the same product over year than 20 units of the same product over five years five years

Any production manager would prefer to Any production manager would prefer to build 100 of the same product rather than 5 build 100 of the same product rather than 5 lots of 20 of different versionslots of 20 of different versions

Versions are a real problem:Versions are a real problem:• They require accurate forecastingThey require accurate forecasting• They lead to small lots with different sizesThey lead to small lots with different sizes• They require more documentation and supportThey require more documentation and support• They preclude building to stockThey preclude building to stock

Sustaining EngineeringSustaining Engineering

A major challenge is the sustaining A major challenge is the sustaining engineering to maintain the ability to engineering to maintain the ability to make the product at a reasonable yield make the product at a reasonable yield throughout it’s lifetime.throughout it’s lifetime.

This “cost” is pretty much independent of This “cost” is pretty much independent of volume shipments and can be a real driver volume shipments and can be a real driver to discontinue a product line.to discontinue a product line.

In smaller companies this is a real burden In smaller companies this is a real burden on the Engineering group as one tends to on the Engineering group as one tends to “own” a product “cradle to grave”“own” a product “cradle to grave”

Selling the UnitsSelling the Units The Final Test is will people buy the The Final Test is will people buy the

product at a sales price and volume product at a sales price and volume that makes money!that makes money!

Technology Friend or Foe?Technology Friend or Foe?

As we explore new “bleeding” edge technologies As we explore new “bleeding” edge technologies we need to worry about the “dying” edge ones!we need to worry about the “dying” edge ones!

EOL (End of Life) – Commodity electronics EOL (End of Life) – Commodity electronics revolves round very short product cycles – this is revolves round very short product cycles – this is where the money is. We work on long product where the money is. We work on long product cycles with incremental improvements.cycles with incremental improvements.

Complex Mechanical Mechanisms are the first Complex Mechanical Mechanisms are the first target to replace in any mass market product as target to replace in any mass market product as they have high labor costs and limited economies they have high labor costs and limited economies of scale. This means materials such as NiSpan, of scale. This means materials such as NiSpan, and Thermelast are becoming increasingly and Thermelast are becoming increasingly difficult to obtain. difficult to obtain.

Technology Friend or Foe? (2)Technology Friend or Foe? (2)

Arcane knowledge on heat treatment, machining, Arcane knowledge on heat treatment, machining, may be about to retire out of existence.may be about to retire out of existence.

Electronics continues to follow Moore’s Law. Electronics continues to follow Moore’s Law.

"I never said 18 months. I said one year, and then two years ... Moore's Law has been the name given t everything that changes exponentially. I saw, if Gore invented the Internet, I invented the exponential" (Gordon Moore quoted from Yang 2000)

There's There's PlentyPlenty of of RoomRoom at the at the BottomBottom … we’d like some at the Top … we’d like some at the Top

Power Rails have to reduce as feature size decreases.

Standard Analog Rails have decreased from +/-15V, to +/-5V, to single +5V, and now +3.3V. This increases the difficulty of making high dynamic range circuits.

Optimization of designs for the audio band leaves us buried in 1/f noise

Mask shrinks, process changes, can all lead to changes is specifications especially if you use the “Typical” numbers!

Older bipolar process are particularly vulnerable as older Fabs close and are moved to 200mm lines

Academic/Industrial Academic/Industrial Collaboration (1)Collaboration (1)

University developed Technology can be University developed Technology can be used in a commercial applicationused in a commercial application

Transition to Industry needs to ensure Transition to Industry needs to ensure knowledge and expertise transferknowledge and expertise transfer

Financial arrangements such as license Financial arrangements such as license fees need to match the time of income fees need to match the time of income and expenditureand expenditure

Matching funds from Federal or State Matching funds from Federal or State government can leverage both partners government can leverage both partners fundingfunding

Academic/Industrial Collaboration (2)Academic/Industrial Collaboration (2) Test FacilitiesTest Facilities operated by Academia or operated by Academia or

Government Labs can be very valuable to the Government Labs can be very valuable to the Industrial Base for verifying performance - Industrial Base for verifying performance - allowance needs to be made for the private allowance needs to be made for the private versus public phases of testing.versus public phases of testing.

Academia is driven toAcademia is driven to Publish or Perish Publish or Perish, , Industry by Industry by Produce or PerishProduce or Perish. To work . To work together we need to provide Intellectual Property together we need to provide Intellectual Property Protection so the collaborative axiom should be:Protection so the collaborative axiom should be:• PATENT – PUBLISH – PRODUCEPATENT – PUBLISH – PRODUCEThis satisfies the needs of both partiesThis satisfies the needs of both parties

Push backPush back from commercial companies to from commercial companies to Academia for small niche markets may be a Academia for small niche markets may be a viable plan for developing specialized equipmentviable plan for developing specialized equipment