Introduction

The maintenance function and its relationship with production operations is often a neglected area of lean production systems design, yet the skills of this department, when harnessed correctly, add a new dimension to the competitive arsenal of the firm (Willmott and McCarthy, 2000; McCarthy and Rich, 2004). In truth, maintenance engineering and its associated skills, has been neglected for many years. However, as early as 1970, the exemplar Just-In-Time (JIT) supplier companies to the ‘world class’ Toyota Motor Corporation had already spotted and were closing this ‘missing link’ of sustainable high productivity management and had begun to ‘blur the edges’ between the operations and maintenance functions so as to integrate both departmental improvement efforts. These businesses included the Aisin corporation and the world renowned Denso (then known as Nippondenso) and the approach was demonstrated to be so powerful that it has been promoted by the Japanese Institute of Plant Maintenance ever since (Nakajima, 1988). These early pioneers, Denso and Aisin, were quick to understand that with a lean production system of no stockpiles of inventory and shop floor problem-solving groups, the performance of the factory maintenance engineering needed to be improved. These businesses therefore set in process a chain of events which would later lead to the development of the total productive maintenance (TPM) approach to high performance manufacturing or total productive manufacturing as it is now more popularly known.

Despite including the term ‘maintenance’, TPM is far from a functionally driven maintenance improvement initiative (Rich, 1999).

Introduction

At LERC we frequently receive enquiries about sustainability of lean programmes. Specifically managers want to know what can be done to maintain the improvements already made and continue the drive to improve. What we would like to reply is, ‘Take these three simple steps and you will have guaranteed sustainability.’ Sadly all our experience and research shows that different organisations and even different activities within the same organisation have varying problems with sustainability and so a more contingent, less prescriptive approach has to be adopted.

This chapter will look at what we mean by sustainability, and how we know when we achieve it. At LERC we have also conducted some research in this area with the Society of Motor Manufacturers and Traders' (SMMT) Industry Forum (IF) and we will be outlining the findings of this research and some additional findings from our Learn 2 companies (Bateman, 2001). The Learn 2 companies were aware of the IF findings and had the opportunity to implement them. We conducted some research to see how effective they had been and explore the opinions of the change agents at each of the companies. The outcome of this research was less definitive and highlighted some of the difficulties with applying a formal model to sustainability of improvements. The chapter concludes by exploring how the research findings can be used by managers in their own organisations.

Box 9.1 shows some definitions used in this chapter.

Introduction

This chapter describes and assesses the new-product development (NPD) process, including organizational and leadership perspectives. Successful products are generally efficient in resource utilization (easy to produce), have effective product delivery mechanisms (easy to deliver), and are beneficial to customers (easy to use).

The “standardized” NPD process includes idea generation, concept development and selection, program definition, design and development, validation, pre-commercialization, and launch. Rapid product development requires close coordination, cooperation, and linkage between all of the participants, whether virtual or actual.

Innovation is difficult to mandate but it can be fostered. It is derived from dedicated people using creativity to discover new ways of thinking and solving problems. Cross-functional team integration is the organizational structure that allows collaborative behavior in a creative environment. It is essential for ensuring that the contributions of engineering, marketing, manufacturing, finance, and the other functions are in strategic alignment. The emphasis is on teamwork, information sharing, communication, and participation at all levels in the decision process. Creating a spirit of high performance is pivotal for success.

Management encourages, motivates, and inspires the organization to discover innovative solutions that lead to pre-emptive positions and outcomes with significant competitive advantages.

Chapter 3 includes the following topics and learning objectives:

• Understanding the management system (process management) for new-product development.

• Defining the “standardized” NPD process with its “phases and reviews” construct.

• Determining how to measure the potential risks and rewards of NPD programs using selected metrics.

• Describing the six phases of the NPD process.

• Understanding the organizational aspects of product innovation and how cross-functional teams are tailor-made for process management.

Product Innovation: Leading Change through Integrated Product Development defines and discusses a comprehensive, state-of-the-art framework for managing product innovation and the related new-product development (NPD) process in complex and challenging business environments. Product innovation involves the conceptualization, design, development, validation, and commercialization of new products and processes that provide superior solutions to the needs and expectations of customers, stakeholders, and society. Product innovation is an essential strategic approach for creating competitive advantages in the dynamic, global business environment.

Globalization; social, political, and economic pressures; technological innovation; and turbulent market conditions and trends have shortened product life cycles and created demands for better, cheaper, cleaner, safer, and more-effective products. Product innovation involves developing new solutions that provide positive benefits to customers and stakeholders. Product innovation is the fundamental management construct used for creating new products, reinvigorating existing products, and solving product-related difficulties with customers and stakeholders.

With a dramatic surge in NPD programs, leading business corporations across the world are improving their NPD processes, capabilities, and approaches to enhance integration and to become more proactive in meeting the realities of changing business landscapes. Entrepreneurs usually launch their businesses based on the introduction of a new product or service. Existing businesses perpetuate themselves by commercializing new products to complement, improve, or replace existing products and product lines.

Product innovation and new-product development involve difficult journeys for most companies, especially those with limited resources.

Introduction

This chapter focuses on the financial methods and techniques used during the new-product development (NPD) process and their applications and implications. The purpose of the discussions is to provide an overview of the essential elements of selected quantitative methods to assess new-product opportunities and programs from a financial perspective. The theories and concepts outlined in the supplement to Chapter 6 established the foundations for the content discussed in this chapter. The content of the chapter covers several important financial techniques that are imperative for making effective decisions during the NPD process.

The chapter flows from the specifics of determining unit costs to the broader perspectives of assessing the financial implications of the NPD program. The essential question for any new product is: Does the new product generate and sustain sufficient value for the participants involved in the process and their constituents to justify the time, money and effort, i.e. the investment? Moreover, the question revolves around the overarching view of the “reward-to-risk” relationship. Are the rewards worth the risks? The answers are complex and depend on the circumstances of the business environment, and the capabilities and resources of the enterprise.

New-product development is inherently risky. Even the most well-understood NPD situations and well-articulated NPD processes have many unknowns and uncertainties. Every development decision has the potential to create problems and liabilities or, on the other hand, to achieve great successes.

Introduction

The new-product development (NPD) Program Definition Phase (also referred to as the Definition Phase) elaborates the purpose, philosophies, policies, and guidelines of the NPD program. It defines the plans, practices, and performance measures for managing the NPD process and the related program aspects from conceptualization to commercialization. The purpose of the Program Definition Phase is to formulate and articulate a management framework that highlights the essential requirements; identifies the activities, actions, and decision making elements; and spells out the expected outcomes. The aim is to provide a clear understanding of the flow of the NPD process for all participants and to ensure that the organization has or can obtain the necessary capabilities and resources to complete the NPD program.

Given the enormous variations in new-product types and market characteristics, the NPD process has to be tailored to the business situation, the organization, and its capabilities and requirements. The scope of the NPD program and the methods employed are generally based on the established practices of the organization as they relate to the business environment. However, for most companies, the NPD process is well defined and is used from program to program with only small modifications arising from lessons learned and insights gained about the business environment.

Program management usually relates to decision making authority and the integration of the elements through the alignment of the participants and resources. It sets the stage for planning, communications, execution, and control.

Introduction

This chapter examines the strategic marketing aspects related to new-product development (NPD); discusses marketing strategies and plans; and explores pricing, promotion and communications, and distribution techniques. From an NPD perspective, the marketing objectives, strategies, and programs must fit the realities of the business environment and the expectations of the selected market segment(s). The formulation and implementation of the marketing strategies and action plans have to be in alignment with the entire NPD program. The approach is to create a marketing plan that is tailored to the specific requirements of the NPD program and that will lead to a sustainable position.

The marketing plan is not only dependent on the business situation but on the capabilities and resources of the organization. Marketing of new products requires nuances that are different from the marketing of established products. The process for determining the marketing requirements involves the same cognitive considerations as the creative process for conceptualizing, designing, and developing the product itself. Marketing requirements for a new product are fraught with challenges and uncertainties, especially for new-to-the-world products. The market requirements and the appropriate marketing methods may be substantially different from those used for existing products where well-established techniques have been tried and proven in the market. For new products, using standard marketing mechanisms may represent a shotgun approach toward reaching potential customers, risking high expenditures and low penetration rates.

Introduction

Production and supply-chain considerations are essential requirements that must be examined during the conceptual level and turned into definitive approaches during the operational level. The choices are dependent on the new-product development (NPD) situation. While the trend is toward best practices and “world-class manufacturing,” the downstream activities of actually producing the product(s) or providing the service have to be determined through inputs from the entire NPD team as the new-product opportunity makes the transition from concept to commercialization. Once the initial design for a new product is complete, manufacturing capability is typically required to bring the product to market. Whether using in-house manufacturing resources, buying the product entirely from a supplier, or using a combination of these two approaches, the enterprise must produce the new product in larger quantities. Frequently, a product previously made only in small quantities in a controlled laboratory environment must be made in large quantities on the more “uncontrolled” factory floor.

This chapter describes important production strategies, methods, and applications; the use of supply networks and outsourcing; and the techniques for improving designs to make products easier to produce, and more appealing to customers. Production and operations strategies for new products combine flexible production with an easy to manufacture and assemble design, resulting in products that consistently meet or exceed customer expectations. By designing and establishing the most efficient and appropriate production system for a given product, manufacturing can be a strategic weapon and a competitive advantage, thus minimizing vulnerabilities to competitors.

Introduction

This chapter discusses product/market considerations, product architecture, and product design. The concepts, methods, and techniques described and assessed provide a foundation for the approaches used to link the product/market conceptual aspects with the elements of product design and development. The discussions focus on the product/market and the technical basis for selecting, analyzing, and implementing product- and market-related techniques.

Given that the techniques for market analysis were covered in Chapter 2 and that Chapters 4 and 5 provided a general overview of the conceptual aspects of the new-product development (NPD) process, this chapter examines how product/market planning and design strategies are essential parts of the NPD process; the aim is to achieve product quality and performance and to minimize potential defects and burdens.

The key to creating outstanding new products is to understand the opportunities and challenges of the business environment, the dynamics of the markets and the external dimensions, and the consequences of the decisions made during the NPD process. Integrating product/market strategies with the selection of the appropriate technological- and product-innovation methodologies provides a linkage between the technical and market-related requirements, and the marketing, production, and financial elements. Design techniques focus on analyzing the product requirements and selecting the best market-based design approaches.

Appropriate design strategies satisfy the social, economic, technical, and functional objectives of the product/market design, and meet the requirements of the design philosophies and the program priorities and realities.

Introduction

Validation is an integral part of the new-product development (NPD) process. It is embedded within the NPD process and serves as a mechanism to verify that the decisions are appropriate and in line with objectives and expectations. The reviews at the end of each phase and the Validation Phase itself are the main methods for improving the probability that positive outcomes will be achieved.

During the Validation Phase, decisions made during design and development are evaluated and tested to ensure that the new product meets customer and stakeholder expectations. The validation process includes examining the most significant elements of the NPD program, proving that the product meets specifications, and reducing defects and burdens.

The reduction of uncertainties during the Validation Phase provides management and practitioners with the confidence that critical success factors have been duly considered and that barriers to implementation have been mitigated. The Validation Phase focuses on major risk-reduction methods that require time, effort, and money to complete. Such methods are usually necessary for obtaining management's commitment to fund the Pre-commercialization Phase and Launch. The Validation Phase provides evidence that the potential of the new product is worth the investment and that there are no undue concerns about spending the money to launch the product. This is particularly appropriate where most of the investment is incurred just before commercialization, or if there are significant strategic, market, technical, or financial risks and uncertainties. For example, non-durable consumer products require a significant expenditure in advertising during the Pre-commercialization Phase.

Introduction

Exploring new-product opportunities involves the generation, development, and evaluation of ideas for new products. The fundamental steps include understanding the needs for new products, discovering existing and potential sources of ideas, describing internal and external requirements, and assessing the opportunities. The steps include reflecting on goals and priorities, examining guidelines, resolving problems and conflicts, evaluating ideas, and selecting candidates for further development.

Idea generation represents the genesis of the new-product development (NPD) process. While new-product development is a continuum in many organizations with ideas constantly flowing from individuals, teams, and business units, the Idea Generation Phase is the formal starting point of the NPD process where the ideas are identified, assessed, evaluated, ranked, and screened. New-product ideas are obtained from every facet of the business environment and the organization.

The exploration of new-product opportunities requires an extensive study of external business conditions and trends including understanding market needs and wants, and stakeholder expectations. It also requires a thorough assessment of the internal strengths and weaknesses with respect to the existing product portfolio and capabilities. Occasionally, luck plays a role as well; ideas simply become apparent or occasionally mistakes in the laboratory turn into opportunities. 3M's Post-it Notes are an example of a product line that evolved from the failure to develop a super adhesive. The semi-sticky substance that resulted from the experiments became the perfect material for making detachable notes.

Introduction

This chapter adds insights on how leading organizations are improving their processes and techniques for developing high-quality, superior-performance, and low-cost products having superior reliability and durability. The demands are not only on the products, but also on the processes and the people involved. Effective companies have to create and launch new products with outstanding attributes and in record times. They have to create a positive climate for being the best and achieving superior outcomes.

Product innovation has evolved dramatically over the latter part of the twentieth century. Leading corporations have integrated product development into their organizational constructs and have progressed from the linear flow of project-management thinking to a more-dynamic and interactive process-management framework, attempting to maximize synchronization of the activities and speed to market. On a global basis, most large companies are using some form of integrated product development (IPD) and are incorporating contributions of their customers, stakeholders, supply networks, strategic partnerships, related industries, and stakeholders into the new-product development (NPD) process.

Product innovation in the twenty-first century continues to evolve as new methods and techniques become available. Nevertheless, the near-term challenges include how to maintain continuous improvement and to discover even better ways of leading and managing product innovation. Leading companies are exploring the means to develop products virtually and to improve further the effectiveness of their NPD programs.

Innovation involves changes and improvements to technologies, products, processes, and services that result in positive contributions for customers and other constituents of business organizations. An innovation is a creative new solution to the prevailing conditions and trends, and fulfills the expressed and latent needs and wants of customers and stakeholders.

Innovation management involves the means, mechanisms, and methods for leading change through developing new technologies, products, and processes. It includes changes in business models and organizational structure. Innovation management is imperative for improving product portfolios, enhancing and developing new products, and achieving customer and stakeholder satisfaction in the fast-paced world of globalization, technological change, and pressures from the business environment.

Innovation is pivotal for sustaining the prosperity of most organizations. If cash flow is the life-blood of a business enterprise, then innovation is the prescription for reinvigorating the organization to compete more successfully in a demanding world.

Product innovation concentrates on improving the strategic position and product-delivery capabilities of the organization through creativity and leadership. Product innovation includes several essential aspects.

1. Examining the needs for new products, processes, and services.

2. Determining the proper direction and fit for new products.

3. Establishing the appropriate game plan of the entire management system for developing and commercializing new products.

4. Selecting new-product opportunities for investment.

5. Enhancing the organizational capabilities to create successful new products.

6. Creating the new product and executing the new-product development (NPD) program.

Product innovation is a dynamic construct requiring managerial and organizational leadership and skills; it is a far-reaching term.

Introduction

Managing new-product development (NPD) includes developing a model or framework, creating an effective NPD process, understanding the organizational implications, and determining and using the methods and techniques for analysis and decision making. Part III provides a schematic presentation and discussion of the essential mechanisms for analyzing the decisions and solutions required for maintaining the flow of the NPD process. The various methods and techniques are divided into the fundamental categories used for developing new products from an internal perspective. The areas include: product/market considerations, marketing strategies and programs, production strategies and programs, and financial applications and implications.

The methods and techniques discussed in Chapters 7 to 10 are typically the more-sophisticated approaches used during the later phases of the NPD process. However, some of the methods and techniques may be applied during the conceptual level as well. As discussed earlier, the applications depend on the type of new product and the complexities involved in the program. The more complex the NPD program, the more likely it is that sophisticated methods will be used during the earlier phases of the NPD process.

These chapters are intended to provide a broad understanding of the methods and techniques so that practitioners understand the fundamentals of their discipline as well as those of their colleagues. It is imperative that the specialists in each of the main disciplines have a working knowledge of the approaches used to make decisions.