actually doing technology & product strategy. course outline: first day: why have a strategy? ...
TRANSCRIPT
Actually Doing Actually Doing Technology & Product Technology & Product
StrategyStrategy
Course Outline:Course Outline:
First Day:First Day: Why have a strategy?Why have a strategy? The Evolution of Technologies and Markets The Evolution of Technologies and Markets Making Money from Innovation: Understanding CompetitionMaking Money from Innovation: Understanding Competition
Second Day:Second Day: The Strategic Management of Organizational CompetenceThe Strategic Management of Organizational Competence Actually Actually DoingDoing Strategy Strategy
Is This Your Project Pipeline?
Overcommitment destroys Overcommitment destroys productivityproductivity
Average
Value-Added
Time on
Engineering
Tasks
Number of Projects per Engineer
100%
80%
60%
40%
0%
20%
65431 2
Source: IBM Development Efficiency Study
The Timing and Impact of Management The Timing and Impact of Management Attention and InfluenceAttention and Influence
Phases
Index of Attention and
Influence
High
Low
ACTUALMANAGEMENTACTIVITYPROFILE
KnowledgeAcquisition
ConceptInvestigation
BasicDesign
Prototype Building
PilotProduction
Manufacturing Ramp-Up
ABILITYTO INFLUENCEOUTCOME
Making Choices Making Choices In TheoryIn Theory
& In Practice& In Practice
OutlineOutline
A process for doing technology strategyA process for doing technology strategy
Tools for making decisionsTools for making decisions
Given to Small Groups of Managers Given to Small Groups of Managers at Company XYZat Company XYZ
1. Identify the salient characteristics of your 1. Identify the salient characteristics of your organization’s innovation funnelorganization’s innovation funnel
2. Draw a diagram of the innovation funnel that 2. Draw a diagram of the innovation funnel that captures these characteristicscaptures these characteristics
Group AGroup AQualityQualityControlControl
ResearchResearch
CustomerCustomer
MarketingMarketing
StrategicStrategicPlanningPlanning
OEMOEM
Group BGroup B
Screen 1
Marketing Inputs
Senior Management Injector
Screen 2
Department Changes
Final Evaluation
10-minute exercise: Funnels You 10-minute exercise: Funnels You Have KnownHave Known
What does the innovation funnel you have been What does the innovation funnel you have been involved in look like?involved in look like?
Making Choices in Making Choices in PracticePractice
Technology Strategy in PracticeTechnology Strategy in Practice
Strategies are worthless unless they are Strategies are worthless unless they are linked to real resource allocation decisionslinked to real resource allocation decisions
DecideDecide Who will make the decisionsWho will make the decisions How oftenHow often By what criteriaBy what criteria
Understand CapacityUnderstand CapacityIdentify the Functions Most
Involved in New ProductDevelopment and Understand
their Staffing Structures
Estimate the Demandsof Product Supportand Administration
Efforts by Functions over Time
Estimate the ResourceRequirements of a
New Product DevelopmentProject by BreakingOut Project Tasks
Consider the CurrentPortfolio of New Projects
and the Continuing Demandsof non-NPD to Determine
Overall Demand forDevelopment Resources
Understand the Impact of Current Commitments UponResource Supply, Identify Bottlenecks and Over-
Commitment
The ideal innovation funnelThe ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel:The Ideal Innovation Funnel:
Defined separation between stages: Clearly defined Defined separation between stages: Clearly defined criteria: a way to kill “living dead” projectscriteria: a way to kill “living dead” projects
Senior managers engaged Senior managers engaged at the right timeat the right time
Capture ideas from everywhere, manage ideas in an Capture ideas from everywhere, manage ideas in an organized way so that they turn into productsorganized way so that they turn into products
A continuous process: A continuous process: Does this fit with our strategy?Does this fit with our strategy?
A picture of the business: an overview of the shape of A picture of the business: an overview of the shape of the pipelinethe pipeline
Give teams the freedom they need between gatesGive teams the freedom they need between gates
An Innovation Funnel Example An Innovation Funnel Example
Initial marketing and technical
concepts
Idea
Generation
CharterContract
Launch Proposal
Post Launch Review
GatekeeperGatekeeper
Gatekeeper
Gatekeeper
Feasibility
Concept refinement and
prototype creation
Product optimization
Commercialization Production & Distribution
CapabilityLaunch &
Rollout
One page description of proposed project including objective, rationale and development routes. Early Commercial Assessment
Cross-functional development plan including project plan as contract between team and Gatekeeper.
Launch Plan including CEP approval request.
Tracks success of and key learnings from launched products
KEY
= GATE
= DOCUMENT
Example: The Key Questions Example: The Key Questions Answered By Each PhaseAnswered By Each Phase
PhaseReview 1 Phase
Review 2 PhaseReview 3
PortfolioReview
Phase 1:Concept
Investigation
Phase 2:Feasibility
Phase 3:Development
Phase 4:Post
Release
CurrentProductSupport
ENTER
EXIT
•Does the product make sense from marketing, technical & financial perspectives?
If yes, thenconcept
approved& full teamallocated
•What is the product spec?
•Can we develop it within budget and schedule?
•Can we produce it at the required cost & volume?
If yes, thenprototypeapproved
& full teamallocated
•Has the product been fully verified and validated?
•Have production objectives been met?
If yes, thenfull manufacturing
approved& sub-team
allocated
•Does the idea fit roughly with our strategy and resource availability?
If yes, thenconcept documentapproved
& sub-team allocated
•Is the product meeting safety, efficacy and business targets in the market?
If yes, thencloseoutapproved
& handoff toproduct support
PhaseReview 4
IdeaGeneration
The Innovation Funnel in the Total The Innovation Funnel in the Total Business SystemBusiness System
D
ivisional S
trategy
Toolbox
Overall Business Strategy
Business Review
Idea generation
ProjectManagement
(ProjectExecution)
APP
Innovation Funnel
PortfolioManagement
MilestonesManagement
Launch
Regional mixesand rollout todefined countries
PostFunnel
Feedback
Technologystrategy
Marketingstrategy
CategoryArchitecture
(Boundaries,Movements,roadmap etc.)
Gates:Gates: are major milestonesare major milestones
are intended to allow passage of the projects are intended to allow passage of the projects more more likely to succeed likely to succeed by sacrificing projects by sacrificing projects more likely more likely to fail to fail as early as possibleas early as possible
focus decision-making. At a gate, a decision is focus decision-making. At a gate, a decision is made to either:made to either: Continue working on the project, moving it along Continue working on the project, moving it along
to the next stage in the funnel; orto the next stage in the funnel; or Stop working on the project, shelving it or Stop working on the project, shelving it or
canceling it; orcanceling it; or Get additional information and reconsider the Get additional information and reconsider the
project for passage through the same gate once project for passage through the same gate once that information becomes availablethat information becomes available
Example: Gate Selection CriteriaExample: Gate Selection Criteria
Idea
Generation
CharterContract
Launch Proposal
Post Launch Review
GatekeeperGatekeeper
GatekeeperGatekeeper
Feasibility
Capability Launch & Rollout
SELECTION CRITERIASELECTION CRITERIA
• Key consumer needs identified.
• Product ideas meet identified consumer need, can be successfully communicated and delivered, and are perceived to be unique and different by consumers
• Ideas pass strategic fit assessment:
• Fits portfolio
• Potential to strengthen a priority brand
• Potential to be deliverable
• Can pass minimum financial criteria (NPS, PBI,Margin Contribution)
• Project fits product line architecture.
SELECTION CRITERIA
• Concept, product and packaging meeting agreed quantified action standards.
• Satisfactory assessment of practical feasibility, and financial viability of safe formulation, packaging, supply chain, customer and total project
• Capex proposal ready
• Human resource and other resource requirements are acceptable.
• Defined and agreed action standards for consumer tests to pass Stage III.
• Product and Marketing mix elements successfully meet previously defined action standards.
• Safety requirements satisfied.
• Capital proposal has been implemented.
• Key functional areas approve launch plan.
• Total project is commercially viable and fits company plan.
Criteriamay changedepending on strategic intent!
The Reality?The Reality?
Redesigning the stage/gate processRedesigning the stage/gate process
Organic Flexible(target for client)
Phase-GateDeg
ree
of
mar
ket
dy
nam
ics
an
d t
ech
no
log
y u
nce
rtai
nty
Degree of program complexityLow High
High
Low
Dynamicprocesspaced by experiments
Staticprocesspaced bytasks
loose processinformal mechanisms
tight processformal mechanisms
A supplier of communications hardware, software and services was finding that it’s customers were struggling to be first to market themselves, so their needs changed rapidly and frequently over the course of a development project.
The client needed to upgrade it’s NPSD system to be both fast and flexible.
Different Types of NPSD Systems
CustomerEvents
InternalReviews
Phase 0
Concept
MarketInterest
ConceptReview
Phase I
Charter
Lead CustomerEnrollment
CharterReview
MarketRelease
Market ReleaseReview
Phase II
Design and Development
Ramp Up & Manufacturing
Distribution
(multiple) Customer Confirmations
(multiple) Design and Functional Planning Reviews
Phase III
Market Release
MarketFeedback
ClosureReview
Phase 0: 1-2 weeks, low investment, concepts sourced from ongoing marketing & engineering activityPhase 1: short, time-bounded, low investment, significant % of concepts will be discardedPhase 2: process flexes to accommodate different customer needsPhase 3: team hands off product only after receiving sufficiently positive market & internal feedback
Customer Needs & Deadlines
Internal Reviews
A More Flexible ProcessA More Flexible Process
Use Multiple Paths to MarketUse Multiple Paths to Market
Integrated Product Development Process
New Ventures
Group
EPL
PLs
Spinout Out
Product Concept
Business case or Product Concept
Concept Charter Development
Additional New Product Creation Path
“Traditional” Product Creation Path
Source of Idea C
on
tin
uo
us
pro
du
cts
Dis
co
nti
nu
ou
s p
rod
uct
s
Product Ideas
Ideation Process
Making a funnel work:Making a funnel work:
Formally:Formally: Pacing the funnel to the needs of the business, not Pacing the funnel to the needs of the business, not
the other way aroundthe other way around Involving key decision makers earlyInvolving key decision makers early
Informally:Informally: Leadership: tolerating “high respect, high conflict” Leadership: tolerating “high respect, high conflict”
debatedebate Trust: “but this would only work if we told the Trust: “but this would only work if we told the
truth…”truth…” ConsistencyConsistency
Analytical Tools for Analytical Tools for Making ChoicesMaking Choices
Analytical Tools for Making ChoicesAnalytical Tools for Making Choices
Financial Tools:Financial Tools: IRR & NPVIRR & NPV Risk vs ReturnRisk vs Return OptionsOptions
Portfolio Concepts: Portfolio Concepts: The Aggregate Project PlanThe Aggregate Project Plan
Scenario AnalysisScenario Analysis
IRR and NPV:IRR and NPV:
StrengthsStrengths
A focus on the A focus on the quantifiable costs and quantifiable costs and benefits of the projectbenefits of the project
Allows for easy ranking Allows for easy ranking and comparisonand comparison
WeaknessesWeaknesses
Forces a focus on “the Forces a focus on “the numbers” numbers”
Neglects the role of Neglects the role of uncertaintyuncertainty
Neglects strategic Neglects strategic considerationsconsiderations
Ignores interdependency Ignores interdependency between projectsbetween projects
A great place to begin but a terrible place to finish?
The Risk vs. Return MatrixThe Risk vs. Return Matrix
Return (IRR)
Ag
gre
gate
Pro
ject
Ris
k
MOD
HI
LO
MORE ATTRACTIVE
LESS ATTRACTIVE
0% 100% 250%150%50% 200% 300% >500%
Forecast Project
Expense
<$1Mi
$1-5Mi
>$5Mi
N Latex Ferritin Liquid
N Latex lgE
N latex SSA
SW V 2
CRP mono
Bence Jones OEM
Procalcitonin
Homocystein
N Latex B2m neu
lgG SubklassenCDT
TTS Cystatin C
SRT 8,9,10
ISD Group
VivaLiquid conversion program
DAT Improvement
6-Acetyl Morphine
BCT/Software 2.0
Cuvette rotor
Software 3.0Liquid PT
ImprovementFibrinogen standards
Heparin
Controls for Lupus test
Protein S
Tick Borne Ezyphalitis
Pro C
aPTT reagent
HTLV/I/IIHIV p24 Ag
FAST
Pharma
CAQ*/Update
rev. C reactive Pro
DOAs
DM Cyclosporin
Glyc HB
rev cTNI
PP (4)
Lithium
SCS Digoxin
Carbonate Sensor
Homocysteine
Cystatin-C (PP)
-Direct LDL
Tacrolimus
DM CEA
IMS
Chemilum
TLA Interface
ex-Lock-Out
US Update
Why is an option valuable?Why is an option valuable?
Thinking of investments as options values Thinking of investments as options values uncertainty more appropriatelyuncertainty more appropriately
Delaying investment until there is more Delaying investment until there is more information can be very valuableinformation can be very valuable
C0
C1
C2V2
V1
p
1-p
When is thinking of a project as an When is thinking of a project as an “option” likely to be fruitful?“option” likely to be fruitful?
When the future is very uncertainWhen the future is very uncertain
When investing now will create unique When investing now will create unique opportunities for the firmopportunities for the firm
When failing to invest now means that it will When failing to invest now means that it will be very expensive to invest laterbe very expensive to invest later
How much is an option worth?How much is an option worth?
Risk adjusted NPV Decision TreesSimulations
e.g. Monte CarloClosed Formulas e.g. Black-Scholes
Differential Equations
Pros• Established
methodology widely accepted and understood
• Relatively easy and quick to implement
• A building block for more complicated valuation methods
• Incorporates decision making and uncertainty
• Determines optimal decisions
• Transparent and easy to understand.
• Building block for other more complicated valuation methods.
• Allows for complicated and multiple uncertainties spanning both discrete and continuous outcomes.
• Easier to model non-standard uncertainties
• Elegant, easy to implement with formula in hand
• A numerical solution incorporating optimal decisions and (possibly) both continuous and discrete uncertainties.
Cons• Does not allow for
contingent decisions
• Collapses many decisions and outcomes down to a single scenario
• Does not account for managerial ability to react to information.
• Trees can become complicated with many decisions and uncertainties.
• Essentially limited to discrete decisions and discrete characterization of uncertainties.
• Methods do not determine optimal policies.
• Programming becomes complicated with many decisions and uncertainties.
• Less transparent than trees
• Limited to relatively simple decisions and uncertainties.
• Many simplifying assumptions usually have to be made to obtain closed form solutions.
• Extremely difficult, if not impossible, to implement in realistic situations.
• Time Consuming• Does not allow for
many different uncertainties.
A Range of ToolsA Range of Tools
Portfolio Concepts:
Aggregate Project Planning Tools
The Aggregate Project Plan (1)The Aggregate Project Plan (1)
Radical
Off the shelf
Product Reach
Breakthrough
Platform
Derivative
ProductSupport
Entirely newprocess Improvement No change
Process Impact
The Aggregate Project Plan (2)The Aggregate Project Plan (2)
Radical
Off the shelf
Technology Reach
Breakthrough
Platform
Derivative
ProductSupport
Entirely newbenefit Improvement No change
Marketing Impact
Consumer/Technology Matrix: Consumer/Technology Matrix: An ExampleAn Example
LowResource
HighResource
ModerateResourceConsumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Radical
Incremental
Base
NextGeneration
Derivative
Platform
Breakthrough
No ChangeImprovement Variant
Brand Support
BxxxxExtension
CxxxxLangnese
VxxxxxImprovement
Sxxxx
Fruit
LxxxxExport
Natural
Fxxxx Face
Cxxxx 2000
SuperCxxxx
Txxxx
RxxxxFruit
CxxxxFruit
Benefits of an Aggregate Project Benefits of an Aggregate Project Plan:Plan:
Explicit choice of projects balances the long Explicit choice of projects balances the long and short term, allows for the explicit and short term, allows for the explicit discussion of the match to strategydiscussion of the match to strategy
Match between project type and Match between project type and organizational form allows for a focus on the organizational form allows for a focus on the generation of competencegeneration of competence
Focus builds speed and productivity for the Focus builds speed and productivity for the individual and the organizationindividual and the organization
New Core
Product
Next generation
of Core Product
Addition to
Product Family
Add-Ons and
Enhancements
No Change
Process Changes
New Core Next Single Tuning and NoProcess Generation Dept. Incremental Change
Process Upgrade Improvement
ProductChanges
DERIVATIVE / CPS
ALPHA
FINCH
CLEO
SIGMA
ROLAND
B-THROUGH / PLATFORM
HAWK
CROW
DELTA OLEO
ROME V ROME I
OAK
ROME III
ROME IV
CEDAR
PINE
EARTH
WATER
FIRE
CALIFORNIA
NEW YORK
ROME VI
SOLSTACE
KENYA
SPRING
WINTER
FALL
SUMMER
DALLAS
AUSTIN
SANTA FE
SPARROW
OWL ROME II
FLAGSTAFF
GEMINI 1-10 (10 PROJECTS)
Before: Medical Products Co. Before: Medical Products Co.
After: Medical Products Co. After: Medical Products Co.
New CoreProduct
Next generationof Core Product
Addition toProduct Family
Add-Ons andEnhancements
No Change
Process Changes
New Core Next Single Tuning and NoProcess Generation Dept. Incremental Change
Process Upgrade Improvement
ADVANCED DEVELOPMENT
ProductChanges
DERIVATIVE / CPS
ALPHA
VENUS
DELTA I
MARS
ZEUS
CLEO
SIGMA
ROLAND
B-THROUGH / PLATFORM
ATLANTIS
DELPHI
GAMMA
BETA
DELTA IILEO
ROME V
ROME I
OAKROME II
ROME III
ROME IV
CEDAR
PINE
DELTA
Less Is More: Medical Products Co.Less Is More: Medical Products Co.
Before After Before After
# of Projects in Portfolio
# of Projects Launched /Year
36
21
5
8
What is a Project?What is a Project?
An organized activity with a finite time span An organized activity with a finite time span which consumes Development, Marketing which consumes Development, Marketing and/or Research resources and yields either:and/or Research resources and yields either: A new or revised product that meets the A new or revised product that meets the
business’s strategic needs orbusiness’s strategic needs or A new capability applicable to current or future A new capability applicable to current or future
products or processes which will support future products or processes which will support future business needsbusiness needs
A project is A project is notnot:: Ongoing cost savings programs with no end pointOngoing cost savings programs with no end point Promotional packagingPromotional packaging Administrative programsAdministrative programs
Consumer Value Perception
Consumer Value Perception -- Consumer Value Perception -- DefinitionsDefinitions
Fills previously unknown, unmet needs.
First introduction of a revolutionary new product in the market. Stimulates new consumer usage and purchasing habits.
Fills previously unknown, unmet needs.
First introduction of a revolutionary new product in the market. Stimulates new consumer usage and purchasing habits.
New Core Product
Fills known but as yet unmet needs.
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market.
Fills known but as yet unmet needs.
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market.
New Benefits
Better meets needs or meets more needs.
Significant, consumer discernible improvement, amplification, or enhancement relative to existing product benefits in the market.
Better meets needs or meets more needs.
Significant, consumer discernible improvement, amplification, or enhancement relative to existing product benefits in the market.
Improvement
Meets same needs differently.
Minor revisions, adjustments, and alterations with relative parity to existing product performance, claims, features, or market positioning.
Meets same needs differently.
Minor revisions, adjustments, and alterations with relative parity to existing product performance, claims, features, or market positioning.
Variant
??
No Change
Meets same needs with no change.
No consumer-perceived market activity, but involving improved processes that result in cost reductions or meet legislative mandate with no change in product quality or other benefits.
Meets same needs with no change.
No consumer-perceived market activity, but involving improved processes that result in cost reductions or meet legislative mandate with no change in product quality or other benefits.
Enabling Technology-- DefinitionsEnabling Technology-- Definitions
EnablingTechnology
First use of a Technology that is new to the industryFirst use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window Pushes existing Technologies into a completely different operating window
Exploits current standard Technology without extending the operating window Exploits current standard Technology without extending the operating window
Radical
Base
Next Generation
Extends existing Technologies beyond the normal operating windowExtends existing Technologies beyond the normal operating window
Incremental
C/T Matrix - Balancing the portfolioC/T Matrix - Balancing the portfolioPortfolio clustered top leftThis portfolio contains a significantly high proportion of projects in the high-risk upper left hand area of the matrix. This does not it well with a strategy for an existing business as it exposes the business to the risk of potential launch failures and, at the same time, fails to support existing brands through less ambitious brand support projects.
Portfolio clustered bottom rightThis portfolio could potentially illustrate a scenario in which a business follows, rather than leads, the market and / or does not invest adequately in support of its brand through technology or product innovation.
Balanced portfolioThere is no ideal but, generally a well balanced portfolio will tend to be distributed along the diagonal top left - bottom right.
Consumer Value Perception
Consumer Value Perception
En
ablin
g T
ech
no
log
y
Consumer Value Perception
En
ablin
g T
ech
no
log
y
APPINTR.ppt 6/1/95
Consumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Radical
Incremental
Base
NextGeneration
Improvement VariantNo Change
(Business benefit only)
Bubble Size IndicatesResource Demand orexpected NPS
Scale:
Breakthrough
Platform
Derivative
Brand Support
HighMed
Consumer/Technology Matrix
Low
APPINTR.ppt 6/1/95
Consumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Radical
Incremental
Base
NextGeneration
Improvement VariantNo Change
(Business benefit only)
Bubble Size IndicatesResource Demand orexpected NPS
Scale:
Breakthrough
Platform
Derivative
Brand Support
HighMed
Consumer/Technology Matrix
Low
APPINTR.ppt 6/1/95
Consumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Radical
Incremental
Base
NextGeneration
Improvement VariantNo Change
(Business benefit only)
Bubble Size IndicatesResource Demand orexpected NPS
Scale:
Breakthrough
Platform
Derivative
Brand Support
HighMed
Consumer/Technology Matrix
Low
C/T Matrix - Global vs. Local PortfoliosC/T Matrix - Global vs. Local Portfolios
Or: The local portfolio might position projects differently due to different local conditions
The local portfolio might reflect only those projects which have local significance
APPINTR.ppt 6/1/95
Consumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Radical
Incremental
Base
NextGeneration
Improvement VariantNo Change
(Business benefit only)
Bubble Size IndicatesResource Demand orexpected NPS
Scale:
Breakthrough
Platform
Derivative
Brand Support
HighMedLow
KEY: Green = Global
Red = Regional
APPINTR.ppt 6/1/95
Consumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Radical
Incremental
Base
NextGeneration
Improvement VariantNo Change
(Business benefit only)
Bubble Size IndicatesResource Demand orexpected NPS
Scale:
Breakthrough
Platform
Derivative
Brand Support
HighMedLow
KEY: Green = Global
Red = Regional
Creating the Aggregate Project PlanCreating the Aggregate Project Plan1. State and understand the business strategy
2. Characterize projects types and plot them on the C/T matrix
3. Provide a utilization plan for innovation efforts - resource consumption
4. Identify existing capacity to do innovation - resource availability
5. Define the set of future innovation projects and allocate resources to them
6. Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
The Firm: personal computer manufacturer• 50% of employees have < 1 year experience• rapid growth, but without the appropriate systems or infrastructure.
The Problem
Cycle Time Longer than Competition
Explosion in Resources
Months
050
100150200250300350400450
1992 1993 1994
TechnicalSupport
Engineers
-15 -10 -5 0
High EndDesk Top
Low EndDesk Top
Server
Portables
00.5
11.5
22.5
33.5
44.5
5
1991 1992 1993
New Product -Competitor
New Products -Client
Lagged Behind Competitors in New Product Introductions
Case Study: Computer ManufacturerCase Study: Computer Manufacturer
Computer Manufacturer: BeforeComputer Manufacturer: Before
Breakthrough
Platform
Derivative
Research & Development
Cost Reduction
New Core
Process
Next Generation Process
Single Department Upgrade
Process Changes
Product Changes
New CoreProduct
GenerationNext
Product
Addition to Product
Family
Derivatives and Enhancements
Tuning and Incremental Changes
Thyme
Poppy
Sage
Cumin
Cogen B
DD Bay AIIHamlet II
Ariel II
Othello II
Saffron
0%
20%
40%
60%
80%
100%
120%
140%
% o
f Res
ourc
es U
sed
Jul-9
5
Jun-
95
May
-95
Apr
-95
Mar
-95
Feb-
95Ja
n-95
Dec
-94
Nov
-94
Oct
-94
Sep
-94
Aug
-94
Jul-9
4
Jun-
94M
ay-9
4A
pr-9
4
Mar
-94
Feb-
94Ja
n-94
Dec
-93
Nov
-93
Oct
-93
Sep
-93
Aug
-93
Jul-9
3
Jun-
93
Admin
Managing
Advanced Dev.
Cost Reductions
Product Sustaining
Market Sustaining
SaffronCogen
ElectraPoppy
Hera
ChervilDD Bay
Cumin
Poppy Z
Poppy AZ
DD Bay
Othello
Othello II
Thyme
Zeus
Sage
Hamlet
… … But Resources Were ConstrainedBut Resources Were Constrained
By Tightly Linking Strategy, Opportunities & By Tightly Linking Strategy, Opportunities & Projects...Projects...
Select Projectswith Strategic
Fit
Lead Team
Concept Selection Screen
Product Development Process
Executive Staff Team
Document/Output
Process
Timing
QuarterlyQuarterly
Bi-w
eekly/Mo
nth
lyB
i-weekly/M
on
thly
As RequiredAs Required
AlternatePortfolios/Mix
Project IdeaSearch
StrategicAnalysis of
Markets
Align Projectswith Strategic
InitiativesDevelop List of
Projects
Revisit Strategy/Perform Gap
Analysis
Select Set ofProjects for APP
CapacityBaselines
ProjectCharter
InitialBusinessContract
Breakthrough
Platform
Derivative
Research & Development
Cost Reduction
New Core
Process
Next Generation Process
Single Department Upgrade
Process Changes
Product Changes
New CoreProduct
NextGenerationProduct
Addition to Product
Family
Derivatives and Enhancements
Tuning and Incremental Changes
CuminniousCuminnious
Alpha B
Alpha B2 Sparr Z
SaffyBrush II
Brush III
Brush I
Sage
Cher LM
DD BB LA II
DD BB AII
Othel II
Cher BP
DD Bay II
Computer Manufacturer: AfterComputer Manufacturer: After
Upside potential was $570MM over 18 MonthsUpside potential was $570MM over 18 MonthsIndexed Stock Price Increased
Relative Cycle Time Improved
Resource Growth Slowed
Incremental New Product Introductions Increased
0
50
100
150
200
250
300
350
400
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Time (Quarters)
Val
ue
of
$100
Inve
sted
in 1
992,
Q2
0
50
100
150
200
250
300
350
400
450
500
1992 1993 1994 1995 1996
Months-15 -10 -5 0 5
High EndDesk Top
Low EndDesk Top
Server
Portables
1996
1993
-4
-3
-2
-1
0
1
2
3
4
5
6
1991 1992 1993 1994 1995
New Product -Competitor
New Products - Client
OriginalTime Technical
Support
Engineers
Strategy and Scenario Analysis
Strategy and Scenario AnalysisStrategy and Scenario Analysis
Formulating a strategy requires judgment Formulating a strategy requires judgment about the futureabout the future
But the future is complex, hard to predictBut the future is complex, hard to predict
Scenarios provide a way to manage this Scenarios provide a way to manage this complexitycomplexity
Why use scenario analysis?Why use scenario analysis?
OilPrice
Time
Basics of Scenario AnalysisBasics of Scenario Analysis
What it is:What it is: A way of mapping the future, of focusing attention A way of mapping the future, of focusing attention
on critical uncertaintieson critical uncertainties A way of building “robust” strategiesA way of building “robust” strategies A means of generating a common languageA means of generating a common language
How it is done:How it is done: Generate a list of critical uncertaintiesGenerate a list of critical uncertainties Choose the two most criticalChoose the two most critical Draw a “map”Draw a “map” Iterate and exploreIterate and explore
Example: Mapping the future of MITExample: Mapping the future of MIT
List Key UncertaintiesList Key Uncertainties:: Will the technologies of distance learning be really Will the technologies of distance learning be really
successful: will they substitute for learning in successful: will they substitute for learning in person?person?
How much education will individuals need? When How much education will individuals need? When over the life cycle will they need it?over the life cycle will they need it?
Is research central to effective teaching?Is research central to effective teaching? What will happen to public support for higher What will happen to public support for higher
education?education? Is the residence experience a critical part of a Is the residence experience a critical part of a
university education?university education?
Example: Mapping the future of MITExample: Mapping the future of MIT
Choose Two:Choose Two: Will the technologies of distance learning be really Will the technologies of distance learning be really
successful: will they substitute for learning in successful: will they substitute for learning in personperson??
How much education will individuals need? When How much education will individuals need? When over the life cycle will they need it?over the life cycle will they need it?
Is research central to effective teaching?Is research central to effective teaching? What will happen to public support for higher What will happen to public support for higher
educationeducation?? Is the residence experience a critical part of a Is the residence experience a critical part of a
university education?university education?
Mapping the future of MITMapping the future of MITPublic support foreducation staysfirm
Public supportcollapses
Distance learning technologies clumsy, ineffective
Distance learningtechnologies “work”
Mapping the future of MITMapping the future of MITPublic support foreducation staysfirm
Public supportcollapses
Distance learning technologies clumsy, ineffective
Distance learningtechnologies “work”
“Education for Life” “The Official Future”
“Brand Name MIT” “Revenge of the Ivy League”
Why may scenario analysis be Why may scenario analysis be useful?useful?
It focuses attention away from “the official It focuses attention away from “the official future” and allows the future” and allows the robustnessrobustness of a of a strategy to be evaluatedstrategy to be evaluated
It focuses attention on critical uncertainties, It focuses attention on critical uncertainties, allowing the organization to track them over allowing the organization to track them over timetime
It may spark creativity, imagination and a It may spark creativity, imagination and a rethinking of core strategyrethinking of core strategy
Making choices in theoryMaking choices in theory: Summary: Summary
Financial tools are critically important, but Financial tools are critically important, but should not substitute for strategic thinkingshould not substitute for strategic thinking
Technology development may create Technology development may create optionsoptions -- so that paradoxically the more uncertainty -- so that paradoxically the more uncertainty there is, the more valuable they may bethere is, the more valuable they may be
Choices must be made as a Choices must be made as a portfolioportfolio, so that , so that different projects are explicitly traded off different projects are explicitly traded off against each otheragainst each other
It may be important to consider the It may be important to consider the robustnessrobustness of a strategy: what will happen if of a strategy: what will happen if the world looks very, very different?the world looks very, very different?
SummarySummary
Effective strategies rest on three Effective strategies rest on three foundations:foundations:
Technologies
Markets
Value Creation
ValueCapture
Value Delivery
Or Answer 3 Key Questions:Or Answer 3 Key Questions:
How will we Create value?
How will weCapture value?
How will weDeliver value?
Understanding the life cycle is Understanding the life cycle is critical since it shapes strategic critical since it shapes strategic choices:choices:
Ferment
Takeoff
Maturity
Technology Markets
CompetitionOrganization
Value CreationValue Creation
Technologies
Markets
How will we create value?
Value CaptureValue Capture
How will we Capture Value?
EntrantsEntrants
SubstitutesSubstitutes
SuppliersSuppliers BuyersBuyersRivalsRivals
Complementary Assets
Appr.
Value DeliveryValue Delivery
How will we Deliver Value?
?
Technology strategy on one slide:Technology strategy on one slide:
Create
CaptureDeliver
What happens on Monday What happens on Monday morning?morning?
Or: Getting there from hereOr: Getting there from here
Two case studiesTwo case studies
MedtronicsMedtronics
Kirkham InstrumentsKirkham Instruments
Common expectations Common expectations
AveragePerformance
Time
Historicalperformance
Anticipated performance
Change
The reality of changeThe reality of change
AveragePerformance
Time
Historicalperformance
Anticipated performance
Change
Successful Implementation: Successful Implementation: Common LessonsCommon Lessons
Senior management commitment & involvementSenior management commitment & involvement Senior steering committee Senior steering committee Empowered championEmpowered champion
Diagnostic phaseDiagnostic phase Aligned with the marketAligned with the market As well as with the existing culture and organization As well as with the existing culture and organization
A designed implementation planA designed implementation plan Up frontUp front With appropriate expectationsWith appropriate expectations
Allocating resources to match the design. Allocating resources to match the design.
Typical Portfolio Planning and Product Typical Portfolio Planning and Product Development Phases and Execution TimesDevelopment Phases and Execution Times
DiagnosisDesign
and Pilot
OrganizationWide Roll-out & Implementation
Phase Duration
Who’s Involved
0.5-3 months
• Key stakeholders
• Senior management sponsor
4-6 months 6-12 months
• Dedicated project team
• Access to pilot teams
• Key stakeholders
• Senior management sponsor
Key Activities • Interviews w/key stakeholders
• Process mapping• Assessment of key
issues• Create steering team
• Customize and create process and tools
• Pilot and test tools/ process in “real time”
• Refine and enhance tools• On-going review and
assessment with senior management
• Training of new tools / processes
• Documentation of process
• Automation of process
• Organizational change and cultural alignment
Core Project Team (FTEs)
2-6 4-8 4-8
• Dedicated project team shifts members
• Whole organization
• Key stakeholders
• Senior management sponsor
Case ExamplesCase Examples
Medical Device Manufacturer (1)Medical Device Manufacturer (1)
Semiconductor Supplier Semiconductor Supplier
Medical Device Manufacturer (2)Medical Device Manufacturer (2)
Measurement Device ManufacturerMeasurement Device Manufacturer
Telecommunication Equipment ManufacturerTelecommunication Equipment Manufacturer
Medical Device Company – Extensive portfolio Medical Device Company – Extensive portfolio management implementation across 9 divisionsmanagement implementation across 9 divisions
• The urgency for portfolio management was felt throughout the organization• Lack of synergy and alignment to strategy across multiple divisions who were
making independent product development decisions
• The urgency for portfolio management was felt throughout the organization• Lack of synergy and alignment to strategy across multiple divisions who were
making independent product development decisions
Assessment & Program Design
Phase 1 Phase 2
Portfolio Planning Developed and Pilot
Portfolio Planning Implemented at Divisional,
Group & Corp. Levels
2 months 4 months 4 months
Phase 3
Co
nte
xtO
bse
rvat
ion
s
• Senior management played the critical role of champion and driver• Driven from top down; strong belief it would only work if implemented across all the
divisions• Involvement from the divisions was driven by incentives
• Once the process was piloted, divisions had more influence in the new decision-making process when their portfolio was presented and discussed using the new, common structures
• Senior management played the critical role of champion and driver• Driven from top down; strong belief it would only work if implemented across all the
divisions• Involvement from the divisions was driven by incentives
• Once the process was piloted, divisions had more influence in the new decision-making process when their portfolio was presented and discussed using the new, common structures
Semi-conductor Manufacturer – Semi-conductor Manufacturer – Transitioning to complete systemsTransitioning to complete systems
NPD Process
• Design
• Team Structure
• Implementation
Portfolio Management
• Design
• Implementation & Automation
0 42 6 8 10 12 14Months:
Co
nte
xtO
bse
rvat
ion
s
• New complexity in the business made it difficult to tolerate:• Inconsistent senior management role in decision making• Difficulty in making trade-offs between different project investments
• New complexity in the business made it difficult to tolerate:• Inconsistent senior management role in decision making• Difficulty in making trade-offs between different project investments
• Senior management lead the implementation supported by a cross-functional steering committee of eight.
• Implementation took longer then expected due to:• Management struggled to understand the causes of their problems• Lack of availability of senior management
• Senior management lead the implementation supported by a cross-functional steering committee of eight.
• Implementation took longer then expected due to:• Management struggled to understand the causes of their problems• Lack of availability of senior management
Medical Device Manufacturer – Medical Device Manufacturer – Prior understanding makes a differencePrior understanding makes a difference
Product Mapping
Capacity Analysis
NPD Process & Initial Implementation
• Design Process• Team Structure• Prototype
0 42 6 8 10 12 1614
Full Process Implementation
Months:
• Organization was struggling with on-time product launches and stagnant revenue growth
• New products typically late to market and over budget by 2 or 3 x• Stagnant market share, while aggressive No. 1 and No. 3 players grow quickly
• Organization was struggling with on-time product launches and stagnant revenue growth
• New products typically late to market and over budget by 2 or 3 x• Stagnant market share, while aggressive No. 1 and No. 3 players grow quicklyC
on
text
• Directors of functional areas lead the implementation, while senior management provide oversight, focus, and implementation priority
• NPD Process – 8 member, director level client team dedicated 20% of their time• Senior management steering committee
• Implementation progressed according to well-defined steps, sometimes separated in time
• Directors of functional areas lead the implementation, while senior management provide oversight, focus, and implementation priority
• NPD Process – 8 member, director level client team dedicated 20% of their time• Senior management steering committee
• Implementation progressed according to well-defined steps, sometimes separated in time
Ob
serv
atio
ns
Measurement Device Manufacturer – Measurement Device Manufacturer – Uses multi-phased iterative approachUses multi-phased iterative approach
Phase I Phase IIIPhase II
Portfolio Process
Assessment/Design
Portfolio Process Piloting and Testing
Roll-out and Implement New Development Process
Phase III+
Solidify Implementation of Process – Drive Organizational Change
2 weeks
Design and improve Design and improve
Implement
8 months3 months
Co
nte
xtO
bse
rvat
ion
s
• Product development cycle time too slow – competitors gaining market share• Product development cycle time too slow – competitors gaining market share
• Implementation of portfolio tools tied to meeting customer needs• New customer focused approach involved early/rapid prototype with lead customers
– reduced redesign efforts post launch• Senior Management ability to fast-track new innovative products enhanced
• New identification processes developed to rapidly assess potential products – allowed senior management to fast track new products and services
• VP level, cross-divisional steering committee helped to drive rapid implementation during phase III and III+
• Implementation of portfolio tools tied to meeting customer needs• New customer focused approach involved early/rapid prototype with lead customers
– reduced redesign efforts post launch• Senior Management ability to fast-track new innovative products enhanced
• New identification processes developed to rapidly assess potential products – allowed senior management to fast track new products and services
• VP level, cross-divisional steering committee helped to drive rapid implementation during phase III and III+
• Division heads responsible for driving alignment between development efforts and strategy
• Implementation process scheduled to coincide with current standing senior management review processes
• Strong focus on “tools” for driving new processes and organizational change
• Division heads responsible for driving alignment between development efforts and strategy
• Implementation process scheduled to coincide with current standing senior management review processes
• Strong focus on “tools” for driving new processes and organizational change
Telecommunication Equipment Manufacturer – Telecommunication Equipment Manufacturer – Used implementation of portfolio toolsUsed implementation of portfolio tools SevenOne Two Three Four Five Six
MgtRev
MgtRev
MgtRev
MgtRev
MgtRev
MgtRev
Define Strategic Tools
Enhance toolset for Port. Mgt.
Roll-out and Implement Portfolio Mgmt Process
•Agreed actionable Strategic Goals
•Develop Portfolio Mgmt Tools
•Agreed actionable Strategic Goals
•Develop Portfolio Mgmt Tools
• Develop complete suite of portfolio tools
• Test tools and Portfolio Mgmt process through pilot programs
• Develop complete suite of portfolio tools
• Test tools and Portfolio Mgmt process through pilot programs
•BU staff trained in Tool methodology & population process•Business Unit - data rich portfolio review•Implementation plan for final portfolio review
•BU staff trained in Tool methodology & population process•Business Unit - data rich portfolio review•Implementation plan for final portfolio review
MgtRev
Pilot process for portfolio mgmt
Months
Ob
serv
atio
ns
Typical Portfolio Planning and Product Typical Portfolio Planning and Product Development Phases and Execution TimesDevelopment Phases and Execution Times
DiagnosisDesign
and Pilot
OrganizationWide Roll-out & Implementation
Phase Duration
Who’s Involved
0.5-3 months
• Key stakeholders
• Senior management sponsor
4-6 months 6-12 months
• Dedicated project team
• Access to pilot teams
• Key stakeholders
• Senior management sponsor
Key Activities • Interviews w/key stakeholders
• Process mapping• Assessment of key
issues• Create steering team
• Customize and create process and tools
• Pilot and test tools/ process in “real time”
• Refine and enhance tools• On-going review and
assessment with senior management
• Training of new tools / processes
• Documentation of process
• Automation of process
• Organizational change and cultural alignment
Core Project Team (FTEs)
2-6 4-8 4-8
• Dedicated project team shifts members
• Whole organization
• Key stakeholders
• Senior management sponsor
Successful Implementation: Successful Implementation: Common LessonsCommon Lessons
Senior management commitment & involvementSenior management commitment & involvement Senior steering committee Senior steering committee Empowered championEmpowered champion
Diagnostic phaseDiagnostic phase Aligned with the marketAligned with the market As well as with the existing culture and organization As well as with the existing culture and organization
A designed implementation planA designed implementation plan Up frontUp front With appropriate expectationsWith appropriate expectations
Allocating resources to match the design. Allocating resources to match the design.
Good Luck!Good Luck!