This page intentionally left blank Product Innovation Increasing pressure to produce new products faster and more cheaply is resulting in huge efforts to streamline and restructure the traditional new-product development (NPD) process The purpose of this book is to describe, assess, and apply the latest constructs, methods, techniques, and processes to enable managers, professionals, and practitioners to be more effective in designing, developing, and commercializing new products and services It provides guidance and support in formulating and executing NPD programs for business practitioners and MBA students The book is written from an integrated product development (IPD) perspective, linking all aspects of marketing, costing, and manufacturing into the development process even before the first prototype is built It covers the advanced tools necessary to achieve this, such as virtual prototyping and fully integrated business systems, and explains the changes needed to organizational structure and thinking David L Rainey has over 30 years of experience and leadership in industry and academia He is a Professor of Management and the Chair of the Hartford Department of the Lally School of Management and Technology at Rensselaer Polytechnic Institute, Troy, New York He is a leading, internationally known authority on global enterprise management, sustainable development, technological entrepreneurship, and product innovation I would like to dedicate this book to my wife, Elizabeth and my sons, Jonathan, Christopher, and Timothy Without their love and support, I would not have been able to devote the time and energy to the book Product Innovation Leading Change through Integrated Product Development David L Rainey Lally School of Management and Technology Rensselaer Polytechnic Institute Cambridge, New York, Melbourne, Madrid, Cape Town, Singapore, São Paulo Cambridge University Press The Edinburgh Building, Cambridge , UK Published in the United States of America by Cambridge University Press, New York www.cambridge.org Information on this title: www.cambridge.org/9780521842754 © D Rainey 2005 This book is in copyright Subject to statutory exception and to the provision of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press First published in print format 2005 - - ---- eBook (EBL) --- eBook (EBL) - - ---- hardback --- hardback Cambridge University Press has no responsibility for the persistence or accuracy of s for external or third-party internet websites referred to in this book, and does not guarantee that any content on such websites is, or will remain, accurate or appropriate Contents Preface Acknowledgements Part I Product innovation and strategic logic Introduction to product innovation and new-product development Strategic logic of product innovation The new-product development process and organizational aspects Part II Establishing the foundation: the conceptual level page vii xiv 53 102 147 Identifying new-product opportunities: Idea Generation (Phase 1) Concept Development and Selection (Phase 2) NPD Program Definition (Phase 3) 149 189 223 Part III Methods and techniques for analysis and decision making 281 10 Product/market considerations, integrated product design, and product architecture Marketing strategies and methods: conceptualizing and designing the new-product marketing campaign Production strategies and methods: operational and manufacturing implications Financial applications and implications 283 353 394 432 Part IV The operational level and concluding remarks 467 11 12 13 471 514 548 v Design and Development (Phase 4) Validation (Phase 5) Pre-commercialization (Phase 6) and the launch vi Contents 14 Concluding remarks and insights about product innovation in the twenty-first century 568 Glossary References Select bibliography Index 586 599 602 605 Preface 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 construct1 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 There are many problems, pitfalls, barriers, uncertainties, and risks due to the ever-changing landscape of demanding customers, concerned stakeholders, and government mandates, and the turbulence in the business environment The successful development and commercialization of a new product or service2 are the principal objectives and desired outcomes of product innovation Product innovation is driven by the strategic context of the organization and the necessity to improve business prospects continuously in the light of the changing business environment Anticipating change, and expeditiously responding to the dynamics of the business vii viii Preface environment via product innovation, are important precursors for achieving sustainable competitive positions and exceptional performance Changing business conditions and trends require a higher level of management sophistication to keep pace with a rapidly evolving world Innovation and leadership are essential means for turning challenges into opportunities, mitigating existing problems, and inventing the world of the future Product innovation is the theoretical construct linking the strategic context with NPD programs Product innovation addresses the why, what, who, and how It is the overarching framework for planning, developing, implementing, and evaluating new products, and for translating opportunities into realities using state-of-the-art processes, practices, methods, and techniques Product innovation focuses on integrating the capabilities and resources of the organization into an agile and creative entity for developing new solutions that exceed customer and stakeholder expectations Product innovation is the broad perspective (strategic) on creating new products New-product development involves the specific processes and methods (tactical) for achieving results and success NPD methodologies have evolved over last 20 years from simple, sequential, slowpaced, uncoordinated methods to highly integrated, fully articulated processes using sophisticated management techniques to achieve creativity, learning, speed, quality, performance, reliability, and value creation New-product development uses processmanagement or project-management methods for identifying, analyzing, selecting, developing, and launching new-product opportunities Integrated product development (IPD) is the prevailing product-innovation approach used by most global corporations IPD is the concurrent development of new products and processes using cross-functional teams that enable collaboration and coordination between all of the participants within the organization and are strategically aligned with the needs of customers and stakeholders IPD has evolved over the last decade to include many sophisticated management processes and practices such as “design for six-sigma,” enterprise management, stakeholder-based (social, economic, and environmental considerations) methodologies, lean business management, mass customization, and the concepts of the balanced scorecard Today, customers, stakeholders, and society expect and demand superior products and services that meet the needs of all constituents The book uses a multi-dimensional approach for developing new products and services in a business environment of rapid changes and high expectations The basic methodologies incorporate an integrated perspective linking the external dimensions and the internal capabilities for formulating and implementing flexible and effective NPD programs The NPD framework discussed in the book is based on an enterprise-management model used to describe and analyze the business environment and the essential dimensions of customers, markets, stakeholders, competitors, supply networks, related industries, and the infrastructure Enterprise management involves the integration of strategic management and the operational aspects of an organization with all of the 611 Index equipment 447 capital 507 equity 267, 272 common 270, 271, 272, 274 total shareholder 268 equity ownership 272 estimates cost 238, 239 market 444 evaluation 105, 181, 287, 486 design 481, 482 financial program 511 net present value 277 performance 234, 263 program 105, 494, 511 systematic 41 execution 223 expectations 26 customer 31, 85, 109, 161, 202, 246, 289 customer and stakeholder 27, 44, 471 stakeholders 36, 108, 149 expenditures advertising 383 capital 447, 451 expenses interest 448 marketing 368, 391, 484 operating 445, 447, 448, 450, 452 production 447 experience, accumulated production 415 experience curve 368, 415, 435 expert opinion 173, 444 extensions 506 factors business 82 critical success 289 ecological external 61, 82 internal and external 289 non-market-related 200 strategic 75 factory focused 411 lights-out 402 of the future 402 failure new-product 40 failure mode 326 failure mode and effects analysis 284, 325, 501 design FMEA 325, 326, 330, 481 process FMEA 325, 343, 345 systems FMEA 325 Fairchild Semiconductor 136 fast-food business 20 features 29, 193, 205, 359, 395 Federal Aviation Authority 177 Federal Register 158 feedback 105, 482, 486 Feigenbaum, A 290, 291 finance 55, 152, 265 financial equation 368 financial feasibility 217 financial implications 24, 29 financial management 265, 448 financial-management practices 507 financial models 436, 503 capital asset pricing 272 discounted cash flow 241, 276, 456 dividend growth 272 internal rate of return 45, 451, 455, 456, 457, 504, 505 net present value 45, 451, 455, 456, 457, 503, 505 financial-program development 504 financial statements 268, 448 balance sheet 455 cash-flow projections 506, 511 cash-flow statements 445, 448, 451, 452, 453 income statement 448, 450, 451 income-statement projections 506 pro forma 392, 507 pro-forma cash-flow statement 451 pro-forma income statement 448 fit, technical 213 Firestone 456, 459, 460, 461 Wilderness tires 460 flat-panel display industry 412 flat-panel displays 412 flexibility 23, 25, 27, 143, 231, 242, 285, 395, 396, 407, 408, 418, 428, 473, 486, 489, 495, 496, 499 Florida 63 flow 405 batch 396, 397 continuous 396 operator-paced 397 repetitive 396 flow charts 35, 118, 153, 190, 254, 292 process 255, 477, 483 focus 71 focus group 172, 173 follower 485 Food and Drug Administration 61, 384 forces external 40, 47, 67, 69, 297 market-related 249 social, political, economic, and technological 45 612 Index Ford, Henry 21, 96, 398, 403 Ford Motor Company 14, 72, 80, 107, 299, 314, 338, 350, 364, 403, 417, 419, 459, 460, 461, 464, 508 design 107 Escape hybrid 165 Explorer 107, 456, 459, 460 Jaguar S-type 80 Lincoln 80, 357, 508 Model “T” 19, 72, 96 Mustang 464 Taurus 107, 162, 163, 424 Volvo 70 80 Volvo XC90 80 forecast model 444 forecasting 440 adaptive model 443 adoption technique 444 forecasts 40 Fortune 500 121 framework 228, 475, 503 comprehensive 24 integrated 25 management 54, 79, 223 NPD 11, 25, 254 procurement management 178 program 227 standardized 226 strategic 355 strategic and operational 195 Fry, Art 38 fuel cells 509 alkaline technology 509 proton exchange membrane 509 functionality 160 functions 29, 193, 359 funding 269 Gantt chart 230 Gartner Group 168 Garvin, D 395 gasoline 32, 84, 243, 285, 459 leaded 459 gasoline stations 254 gates 109 Gates, Bill 136 General Electric 121, 122, 199, 293, 475 GE MicroGen 509 General Mills 197 Cheerios 197 General Motors 14, 19, 72, 299, 407, 408, 412, 417, 424, 464, 507 Cadillac 299, 357, 489 Chevrolet 72 Cutlass Supreme 408 General Motors Acceptance Corporation 507 Oldsmobile Intrigue 408 Pontiac Grand Prix 408, 412 generations, future 26 Gillette Mach III 244 global warming 314 globalization 14, 19, 20, 91 global perspective 18 goals 65, 151, 360 enterprise 68 financial 152 marketing 483 overarching 151 strategic 232 goal setting 474, 483, 496, 504 Goldratt, E 284 goodwill 364, 487 governments 61 federal 270, 443 government agencies 61, 167, 176 GPS navigation systems 21 gross margins 75, 130, 199, 233, 237, 367, 433, 450, 488, 505 groups customer 174 demographic 357 environmental 61, 176, 177, 356 industry pressure 161 professional 176 special-interest 201, 478 stakeholder 244 group technology 400, 401 machining center 400 virtual GT 401 U-shaped manufacturing cell 400 Grove, Andy 136, 137 guidelines 36, 103, 140, 166, 223, 255, 263, 488, 497 NPD 254 Hamel, Gary 58, 77 Harvard Business Review 395 Harvard Business School 114, 299, 305, 395 Hauser, J 299 helicopter 231 Hewlett-Packard 120, 197, 299 Hicks, R 406 Hill, T 395 Hilmer 413 Hirschheim, R 416 Home Depot 422, 442 Honda 314, 414, 415 Civic hybrid 165 hybrid vehicles 165 Insight hybrid electric vehicle 161, 165, 194 Honeywell 121, 245 hurdle rate 276, 277 hydrocarbons 165 613 Index hydrogen 32, 509 hydrogen-rich fuels 509 IBM 72, 121, 138, 271, 299, 412, 414, 417 ideas 149, 171, 174 new-product 149, 153, 160, 168, 178, 181, 182, 189 out-of-the-box 163 sources of new-product 162 idea generation 10, 33, 111, 112, 149, 150, 151, 153, 172, 173, 179, 189, 195, 204, 205 Idea Generation Phase 119, 139, 149, 150, 151, 153, 155, 167, 171, 175, 179, 180, 181, 185, 186, 189, 221, 225 ideality 323 image 242 imagination 98 imitator 485 impacts 94 environmental 128, 129, 479 environmental, health, and economic 162 negative 94, 95 implementation 105 improvements 107, 233 continuous 227, 288 continuous process 292 incremental 34 leasehold 447 process 234, 241 quality 291 quality of life 136 radical 31, 32 incineration 356 income statement 266 indicators performance 234, 235 industrial goods 386 industry 63 industry associations 443 industry structure 55, 62, 63, 306 information system 59, 106 infrastructure 18, 19, 54, 55, 60, 62, 70, 160, 179, 180, 205, 249, 254, 356, 480, 502, 508 delivery 509 initiatives modularity 418 research and development 162 innovation 16, 18, 47, 102, 144, 150, 197, 198, 213, 357, 385, 512 hybrid technological 315 incremental 44, 56, 309, 315, 447 new-to-the-world 34 product and process 309 radical 44, 45, 310 innovativeness 395 insights 98, 114, 204, 358, 359, 376, 482, 494 inspiration 98 instructions 27 integrated product development 5, 6, 7, 21, 22, 23, 24, 25, 26, 28, 41, 98, 108, 134, 143, 284, 287, 354, 432, 462, 467, 468, 469, 473 holistic approach 26 synchronous development 25 integration 21, 26, 103, 212, 223, 309, 512 business 16 cross-functional 39, 102, 131, 132, 135 strategic 59, 97 Intel 19, 20, 58, 61, 72, 77, 93, 96, 136, 137, 214, 438, 487 Moore’s law 94, 214 Pentium 19, 20, 21, 61, 96, 128, 137, 202, 339, 340, 359, 487 intellectual properties 487 intensity 103 interest rate nominal 270, 271 risk-free 270, 271 interfaces 28 internal rate of return 241, 369 Internet 19, 62, 77, 78, 142, 150, 160, 161, 171, 204, 235, 245, 366, 368, 377, 389, 480, 488, 489, 492 communications 62 start-up companies 24 web pages 85, 168 interviews personal 173 telephone 173 inventiveness 323, 396 inventory 62, 451, 455 inventory levels 501 investment 40, 92, 95, 111, 130, 237, 239, 240, 265, 267, 269, 271, 374, 400, 432, 447, 452, 454, 455, 456, 457, 504 capital 447 strategic 499 total program 455, 505, 511 investment curve 456 investment index 505 Iraq 19 Ishikawa, K 290, 291 issues environmental, health and safety 176 stakeholder-related 252 J D Powers 251 jet engines 105, 164, 199, 435, 488 job shop 396, 397, 399, 400 layout 397 Johnson & Johnson 67, 384 CREDO 67 Dermabond 384 Ethicon Division 384 Jones, Daniel 21, 405 614 Index just-in-time 401, 402 Juran, J 290, 291 kaikaku 406 Kaizen 345, 347, 406 Kamen, Dean 33 Kano 339 Kano diagram/model 155, 339, 340, 368 Kaplan, Robert 68, 97 Khurana, A 112 Kmart 59 knowledge 12, 18, 21, 26, 47, 53, 54, 78, 79, 95, 129, 171, 246, 284, 293, 297, 305, 343, 361, 476 inventive 323 Kodak 299 Kracik, J 403 Kraft Food 423 Krispy Kreme Doughnuts 363 Kroger 59 Lacity, Mary 416 landfilling 356 Lantech 406, 407 launch 467, 472 laws 149 laws and regulations 176, 177, 223, 478 environmental 501 federal, state, and international 125 government 127 occupational safety and health 501 layouts fixed position 398 group technology 398 process 398, 399, 400 product 398, 399, 400 production 398 leader NPD 116, 138 quality management 290 team 138, 231 leadership 15, 18, 24, 26, 66, 106, 117, 136, 138, 144, 231, 512 cost 71 environmental 38 inspirational 138 new-product 89 strategic 66, 106 technological 72 lead-time 383 lead users 159, 367 learning 18, 457 learning metric 18 organizational 97, 210, 213 rapid learning 18 learning curve 435 learning rate 435 Lego Systems 445 Leonard, D 196, 203 lessons learned 36, 376 level conceptual 111, 112, 225, 228, 237, 281, 332, 512 enterprise-management 56 Level “0” 110 Level “1” 110, 111 Level “2” 110 operational 57, 111, 119, 332, 467, 468 strategic-management 57, 106, 110, 112, 116 liabilities 233, 330, 459, 460 life cycles 356, 451 potential 361 product 20, 81, 82, 91, 362, 428 shortening 22 technology and product 44 life-cycle assessment 304 life-cycle stages, product 362 life-style 195, 357 lines assembly 397, 398 batch-flow 397 connected-flow 397 equipment-paced 398 Lipton Tea 160 liquidity 270 Lockheed 135 logic 19, 27 logistics 253, 421 return 422 reverse logistics 62, 422 London Business School 395 Lotus 1-2-3 197 Lowe’s 442 loyalty, customer 487 Lucent Technologies 20, 91 Machiavelli, Niccolo 234 machinery 447 machines, computer numerically controlled 402 mail, direct 173 maintenance 242 make-versus-buy dilemma 413 management 24, 39, 73, 102, 105, 106, 151, 239, 263, 268, 349, 512 change 40 executive management 11, 12, 56, 65, 118 functional management 12, 137 higher-level 231 innovation 7, 44 inventory 253 logistics 253 NPD process 35 performance 35, 41, 44 product delivery management 15 program 223, 255 resource 35, 39 615 Index risk 40, 41, 217 senior management 23, 41, 44, 61, 65, 66, 105, 106, 116, 119, 231 stakeholder-based 68 strategic management 8, 15, 53, 57, 69, 92, 106, 162 supply-chain 421 supply-networks 178 management commitment 105 management models 14, 355 business 28, 78 corporate 16 Design for Six-Sigma 121, 122 enterprise 16, 54, 55, 56, 57, 58, 60, 70, 96, 97, 98, 157, 158, 189, 356, 501 hierarchical organizational 13, 14 multiple-dimensions enterprise 16 new-product development 284 product concept 15 strategic business planning 14 strategic management 15, 64 traditional management 12 two-dimensional 16 management systems 14, 15, 16, 26, 28, 39, 45, 53, 57, 58, 97, 102, 106, 116, 130, 246, 312 enterprise-management system 57 financial 504 product delivery system 9, 18, 28, 45, 46, 55, 57, 76, 78, 91, 92, 97, 163, 289 strategic-management system 25, 26, 54, 56, 57, 64, 65, 97, 112 managers, product 23 mandates 26 manuals 255, 488 manufacturability 289 manufacturer appliance 479 automobile 412 original equipment 418 printed circuit board 410 manufacturing 62 lean 403, 408 short-cycle 403 world-class 394 manufacturing cells 402 manufacturing outputs 394, 395 manufacturing systems, flexible 401, 402, 407 mapping product 475 NPD relationship 131 process 224 maps customer-value 206 process 410, 476 product 475 two-dimensional 206 market 28, 55, 241, 243, 358 dynamics of 283 government-related 194, 386 target 206 telecommunications 210 world markets 14 market acceptance 214 market attractiveness 214 market definition 86 market expansion 484 market leader 485 market research 72, 166, 169, 174, 194, 442 market segments 75, 82, 86, 114, 156, 157, 166, 174, 179, 190, 193, 194, 195, 207, 214, 251, 253, 358, 443 product market segments 39, 70, 151, 194 selected market segment 59, 71, 250 specialty 166 target 174, 190, 193, 195, 203, 206, 248, 358, 360, 361, 490 market selection 114 market share 413, 440, 484 sustainable 363 market size, target 127, 174, 244 market space 361, 463, 473 market value added 266, 267 marketing 353, 355, 359, 460, 471 green 462 professional 45 promotion campaigns 95, 361, 385 strategic 353, 354 marketing campaign 29, 357, 358, 360, 363, 385, 393, 442 marketing errors 458 marketing mix 354, 483 marketing model 358, 359 mass customization 19, 59, 419 mass production 20 Massachusetts Institute of Technology 159, 324 material hazardous and toxic 304 promotional 386 selection 477 strategic 202 mathematical algorithms 318 maximization, shareholder wealth 277 Maytag Neptune 198 Mazda 299 Mazur, G 337 McDonald’s 20, 398 McKnight, William 38 mean time between failure 301 measurement 105 program profitability 268 measures 126, 225 performance 131, 224, 229, 231, 232, 234, 246 media reports 204 mergers 56, 67, 68 616 Index messages 354, 361, 381 marketing 353 methanol 509 methodology “phase–review” 227 process-management 229 technological and product innovation 283 technological innovation 227 methods 281 batch and queue 403 communications 77 communications and promotion 376 discounted cash flow 276 just-in-time production 405 marketing 363, 485 net present value 276 passive research 169 sales 388 target pricing 367 telecommunications 389 total quality management 292 value-driven 366 metrics 103, 126, 129, 131, 231, 232, 234, 235, 236, 237, 239, 240, 242, 243, 244, 246, 360 financial 241 money 238 performance 233, 234, 241 risk 243 time 235 time-to-market 287 unit-cost 235, 239 Michelin 93, 354 microprocessor 19, 94, 96, 136, 160, 202, 474 Microsoft Corporation 19 milestones 230 Miller Lite 485 Miller, William 46 Minnesota Mining and Manufacturing Company (3M) 38, 120, 149 3M Pollution Prevention Pays 38 3M’s 15% rule 38 environmental policy 38 Post-it Notes 38, 149 Scotch-brand cellophane tape 38 mission 65, 67 Mitsubishi Heavy Industry 299, 336 modular assembly 417, 428 modularity 417, 418 modules 417 money 93, 232, 233, 237, 265, 276 Monsanto 166, 416 Moore, Gordon 136 Morris, Langdon 46 Motorola 19, 73, 121, 245, 293, 299 Iridium 23, 243, 244, 245 muda 405 name brand 363, 487 product 363 National Highway Traffic Safety Administration 460, 461 natural gas 509 NCR 426 needs 26 customer 23, 37, 150, 154, 155, 157, 174, 190, 195, 297, 298, 315, 355 customer and stakeholder 48, 77, 82, 246 latent 26, 196 market 149, 150 product/market 288 net present value 241, 278, 369 networks 62 new-product architecture 471 new-product development 21, 23, 28, 34, 39, 102, 281, 353 NPD processes 7, 10, 11, 12, 22, 23, 24, 26, 27, 35, 37, 40, 41, 44, 47, 53, 54, 55, 56, 61, 63, 64, 66, 68, 70, 71, 76, 82, 96, 102, 103, 105, 106, 107, 108, 109, 111, 112, 114, 115, 116, 117, 118, 120, 122, 125, 126, 129, 130, 132, 133, 134, 135, 136, 137, 138, 140, 143, 149, 151, 152, 160, 162, 167, 173, 176, 178, 186, 189, 191, 198, 199, 207, 210, 212, 219, 222, 223, 224, 225, 228, 229, 230, 234, 242, 243, 246, 252, 253, 255, 263, 281, 283, 284, 288, 290, 292, 305, 322, 325, 337, 353, 361, 432, 433, 461, 462, 467, 471, 482, 496, 504 Concept Development and Selection 10, 112 Launch 10 levels 108 “over-the-wall” approach 23 Pre-commercialization 10 Program Definition 10 reviews 10, 11, 41, 105 sequential approach 21, 22, 46, 284 standardized NPD process 10, 102, 108, 116, 143, 225 Validation 10 NPD programs 12, 21, 22, 26, 27, 29, 30, 32, 34, 39, 41, 56, 57, 58, 67, 68, 70, 71, 78, 86, 90, 103, 105, 106, 109, 110, 111, 112, 114, 116, 117, 118, 119, 120, 126, 131, 135, 137, 138, 139, 143, 164, 175, 176, 181, 189, 190, 201, 202, 210, 212, 216, 219, 223, 224, 225, 226, 227, 228, 229, 230, 231, 232, 234, 236, 237, 238, 239, 242, 243, 246, 250, 252, 253, 265, 266, 269, 270, 275, 276, 277, 286, 316, 341, 353, 354, 358, 360, 362, 367, 370, 371, 375, 381, 433, 447, 462, 468, 469, 473, 474, 476, 483, 485, 488, 496, 498, 503 high-risk NPD programs 112 technology-focused 30 617 Index New York 19 Nike 414, 417, 420 nitrogen oxides 165, 436 Nokia 19 Norton, David 68, 97 Noyce, Robert 136 Nypro 419 objectives 14, 26, 27, 35, 65, 68, 103, 109, 151, 246, 263, 361 new-product 68 product/market 71 occurrence 326 Ohno, T 402, 403 operational mobility 407 operational range 407 operational uniformity 407 operations, machine-paced 109 opportunities 8, 18, 24, 39, 47, 66, 67, 70, 83, 111, 150, 152, 157, 166, 169, 174, 175, 178, 190, 201, 263, 368, 374, 379 business 189, 314 external sources of NPD 157 investment 265 market 236, 355, 502 market-driven 29 new-product opportunities 12, 23, 25, 54, 68, 77, 84, 87, 106, 149, 151, 154, 156, 157, 158, 162, 166, 173, 175, 185, 190, 207, 209, 210, 212, 215, 216, 237, 298, 331 new-to-the-world product 207 product/market 29 sources of new product 157 organizational aspects 131 organizational qualities 79 organizational structures 14, 25, 39, 102, 255, 293 organizations 20, 23, 26, 27, 28, 29, 39, 47, 67, 68, 77, 78, 86, 107, 131, 151, 152, 153, 163, 175, 181, 201, 203, 209, 210, 212, 213, 222, 225, 227, 229, 231, 242, 250, 306, 349, 353, 357, 361, 362, 443, 457, 474, 485, 487, 512 financial 176 functional 153 industrial 176 knowledge-based 66 NPD 163, 389 representative 388 research 168, 315 sales 388 outcomes 107 financial 233 value-adding outsourcing 394, 413, 414, 416, 417, 428, 499 Outsourcing Institute 417 package, product 193 packaging 364, 486, 488 parallel processing 103, 230, 468 parameter 297 design 294, 318, 477 critical-process 344 parametric solid models, three-dimensional 318 Pareto chart 292 participants 24, 133 downstream 22 internal and external 322 upstream and downstream 133 partnerships 18, 56 strategic 209 pathways 11, 40, 107, 359, 463 patterns, purchasing 357 payback 275 long-term 129 payback period 241 Pentagon 19, 245 people 11, 99, 224, 497, 512 people management 231 “Pepsi” 363 performance 23, 27, 40, 92, 107, 109, 128, 151, 233, 239, 283, 285, 298, 395 areas 27 evaluation 27 measuring 234 new-product development 131 organizational 41, 242, 243 product 23, 48, 198, 295 sustainable 18 performance to price 31, 129, 156, 165, 233, 239 performance-to-price relationship 76, 164, 366 Persico, A J 292 personal computer industry 164 personal digital assistants 197 personal selling 376, 379, 386 personality traits 357 pharmaceutical industry 360 phases 10, 11, 40, 41, 109, 110, 115, 231 downstream phases 110 front-end phases 111, 112 NPD 361 upstream phases 110 phases and reviews 103, 109, 226, 287 philosophies 14, 53, 223, 414 design 284, 285, 289, 295, 331, 424 DFM&A 426 guiding 505 marketing 360 six-sigma 121 stakeholder-based 61 total quality management 292, 293 Picker International 415 618 Index plan 98, 248 communications 485 comprehensive 27 contingency 193 financial 228 game 23, 70, 224, 226, 228, 230, 231, 234, 249, 250, 254 marketing 228, 353, 392, 472, 486 new-product development 73, 209, 255, 376 organizational 228 product/market 228, 250 production 228 program 228 quality 290 strategic 89 strategic financial 505 strategic marketing 485 strategic operations 497, 498 Plan–Do–Study–Act cycle 290 planning 105, 223 capacity 411 organizational 136 process 321, 338, 408 product 338, 340, 364 product/market 283 program 228, 229 quality 291 resource 230 plant and equipment 400 plastic container 160 plastics 304 platform 358, 487 platform concept 20 point-of-sales displays 376, 423, 490 poke yoke 346 policy 105, 223 management 223 political parties 176, 356 pollution 94 pollution prevention 38, 128 Porter, Michael 14, 16, 55, 57, 71, 72, 75, 84, 368 Five Forces 14 Porter’s model 14 portfolio balanced 44 product 79, 80, 89, 156, 158 product/market 80 portfolio approach 44 position competitive 233 competitor’s 367 cost 438 dominant product 309 low-cost 75 product 235 product/market 66, 73, 75, 221, 250, 485 strategic 69 unit-cost 505 positioning 253, 360 market share 484 product 297, 358 potato chips 295 potential 358 market 358, 359, 368, 443 sales 442 practices 105 lean-business 497 practitioners, NPD 65 Prahalad, C K 77 Pratt & Whitney 164, 199 precautionary principle 67, 459, 482 pre-commercialization 472 Pre-commercialization Phase 114, 360, 468 preference, customer 175, 370 pressure, competitive 367 prevention 44 price 95, 199, 233, 367, 370, 455 acceptable market 195 market 233 profit-generating 368 sale/selling 452, 455 target 367 price advantage 366 price level 455 Priceline.com 492 price sensitive 368 price-setting decision model 374 price structure 374 pricing 239, 353, 359, 369, 374, 375, 392, 489, 490 alternative 371 art of 114 everyday low 423 fixed internal rate of return 369 new-product 366 penetration 367, 368, 374, 392 skimming pricing 367, 392 value-driven 366 pricing model 435 pricing options 370 pricing scheme 366 pricing theory 368 principles 14, 26, 27, 36, 103 design 486 fundamental principles 26 guiding principles 26 lean business management 502 new-product development 354 quality 290 scientific 169 systematic design 324 Proactive Product Development, Inc 338 619 Index problems environmental 94, 96 identifying 156 market-related 36 problem solving 25, 290 procedures 105 standard work operating 345 process 98 budget review 494 CAD/CAM development 319 concept selection 228 decision-making 36, 64, 105 design 286, 288, 295, 296, 305, 475 design and development 293 downstream 163 front-end 112 labor-intensive 499 manufacturing 460 mapping 137 phase-tollgate 120 planning 105, 255 price-setting 370 product delivery 28 production 178, 460, 494 program-selection 510 screening 209, 210, 211 selection 219, 221 simplified linear flow 421 six-sigma 459 strategic 370 strategic-management 89, 162 systematic process 24, 25 technical design 473, 474 process capability 294 process management 14, 35, 36, 37, 102, 106, 107, 108, 116, 224, 226, 229, 230 inputs 11 inputs, downstream 22 outputs, intangible 36 outputs, tangible 36 process model 230 Procter & Gamble 59, 150, 161, 162, 266, 299, 363, 364, 365, 422, 423, 450 Luvs 161, 162 Pampers 59, 161, 162, 422 Tide 365, 488 Ultra brand 161 Prodigy 235 producers, volume 414 product 12, 79, 98 after-market 79 certifications 61 commodity type 367 consumer 386 core 79 evaluation 80 first-to-the-market 364 high-quality 361 long-life-cycle 235, 374, 496 mass-produced 435 new-to-the-world 9, 32, 45, 71, 86, 115, 135, 168, 200, 210, 227, 239, 310, 353, 367, 368, 441, 444, 447, 456, 477, 487, 496 new-to-the-world/new-generations types 34, 239 pharmaceutical 61, 105, 128 proprietary 166, 438 related 79 repositioned 86 short-life-cycle 127, 371 standardized 19 synthesis-type chemical 166 product architecture 283, 289, 297, 471, 475 product data management 322, 477 PDM software 322 product definition 319 product differentiation 367 product information 385 product innovation 5, 8, 10, 12, 15, 24, 28, 34, 40, 45, 46, 53, 54, 56, 68, 97, 182, 306, 315 product lines 79 product liability 30, 32, 201 product management 9, 80 product/market 29, 58 Product Safety Commission 61 production 29, 55, 152, 338, 344, 394, 471 craft 401 just-in-time 402 lean 394, 396, 401, 403, 405 mass 401 production development model 495 production problems 458 production processing 436 productivity 18, 130, 242, 318, 411, 496 profile, customer 174 profit 90, 91, 266 economic 266 profit maximization 90, 91 profitability 75, 90, 95, 96, 233, 268 short-term 90 program 99 advertising 383, 490 communications and promotion 375, 376, 379 environmental management 129 financial 503, 504 financial-management 506 formal training 377 marketing 353, 354, 356, 357, 358, 359, 360, 362, 367, 385, 472, 483, 485, 486, 489, 490, 493, 494 marketing and communications 486 promotion 490 research and development 160 world-class manufacturing 413 620 Index program definition 227, 254 Program Definition Phase 116, 119, 140, 152, 223, 225, 226, 248, 263, 379, 467, 475, 483, 485, 493, 496 programming machine 321 numerical controlled 321, 322 progress 232 projects breakthrough development 32 derivative development 32 platform or generational development 32 project management 47 Project Management Institute 108, 229 body of knowledge 229 Standards Committee 134 promotion 353, 359, 379, 386, 393, 483 promotions and marketing communications 385, 386 propane 509 protocols 229 prototypes 319, 342 prototyping 320 rapid 320, 321 public relations 376, 379 publications 168 publicity 385, 393 Pugh, S 342 Pugh concept selection 342, 343 pulp and paper mills 108 purpose 223 quality 23, 25, 27, 40, 60, 62, 76, 107, 108, 109, 128, 130, 131, 143, 151, 231, 233, 241, 242, 283, 285, 287, 288, 289, 290, 291, 293, 298, 318, 358, 367, 368, 395, 428, 499 conformance 395 critical to quality 242, 475 defects 76 design 396 fitness for use 291 house of quality 298, 299, 338, 340, 341, 349 management 394 of the design 283 perceived quality 48, 395 process 396 product/market 23 production 496 six-sigma quality 93, 122, 293, 403 total quality management 14, 93, 122, 241, 283, 289, 290, 292, 293, 403 quality assurance 483 quality control 291, 345 company-wide 299 total 291 quality-control circles 291 quality function deployment 196, 198, 199, 200, 283, 286, 298, 299, 301, 336, 337, 338, 340, 341, 343, 344, 345, 347, 348, 349, 350, 351, 460, 473, 475, 478, 480, 481 customer attributes 299, 300, 301 engineering characteristics 299, 300 relationship matrix 299, 340, 344, 345 QFD process 336, 337, 338, 344, 345, 349, 350 quality lever 337 QFD Institute 337 quality loss function 291, 294 quality tools 337 quality trilogy 291 questionnaire 171, 173 questions, open-ended 172 Quinn 413 radar scope 219 Radio Corporation of America 197 David Sarnoff Research Center 197 rate, capacity utilization 411 rate of return internal 278 required 130, 270, 454, 457, 462, 503, 504 rationing 423 Rayport, J F 196 realities, economic, social, political, legal, ecological, and technological 82 recognition 487 recycling 62, 422 aluminum recycling 60 reformulation 361 refrigerators 93 regulations 61, 149 clean air 161 environmental 128 government 488 health and safety 128 safety 177 regulatory agencies 61, 176, 355, 356 related industries 18, 54, 55, 62, 63, 70, 205, 254, 480, 502, 508 relationships, product/market 202 reliability 23, 40, 60, 62, 233, 241, 242, 289, 298, 301, 354, 359, 395, 495 replacement 361 replacement parts 488 replacements 506 reports annual 167 financial statement 266 10k 168 repositioning 30, 107, 156 reputation 242 requirements 353 customer 197, 284, 294, 496, 502 621 Index legal and regulatory 174 market 355 marketing 353 physical and aesthetics 294 product/market 354 recycling 305 stakeholder 315 supply-network 478 research scope of 169 university 168 research and development 21, 46, 90, 159, 296, 314 applied 295 R&D spending 315 researchers, market 361 resources 18, 26, 27, 39, 65, 216 allocating resources 12 deployment 39 financial 79 in-house manufacturing 394 organizational 358 strategic 58 responsiveness 27, 289 retailers 386 large book 78 return on assets 268 return on equity 268 return on investment 241, 268, 269 return on sales 505 revenue 448, 484 revenue generation 494 reverse engineering 159, 438 reviews 109, 118, 119 compliance 482 end-of-phase 118, 119 management 105 marketing program 494 risk 494 technical risk 481 reward 34, 45, 225, 241, 265, 370, 432, 433, 463 Reynolds Metals 60 risk aversion 67 risk management 200 risk mitigation 18, 19, 462, 469 risk premium default 270 inflation 270 liquidity 270 maturity 270 risk priority number 326 risk taking 67 risk-to-reward 34, 432 risks 34, 40, 41, 45, 116, 124, 130, 213, 217, 232, 233, 241, 243, 265, 362, 370, 385, 413, 432, 433, 456, 457, 458, 459, 460, 462, 463, 501, 506, 511 financial 244, 462 health and safety 128 inherent 459 market 243, 244 perceived 359 product-related 243 program 175, 233 second-level 243 technical 175, 243, 506 risks and rewards 224 roads 62 roadway 180 robotics 402 Roos, Daniel 21 Rosenthal, S 112 rubber, recycled 129 Rubbermaid 120 Russell 2000 273 safety 354 sales 158 sales force 388 salespeople 388 sales promotion 376 sales representatives 389 Sarnoff, D 197 satellites 23 satisfaction customer 18, 61, 97, 98, 124, 166, 201, 285, 287, 288, 289, 293, 358, 478, 484, 500 customer and stakeholder 26, 512 employee 292 scanning, environmental 82 schedule development 230 scholars, academic 168 scope 224 screens alignment 212 capability 213 competition 215 financial 217 marketing 216 production capability 216 program 217, 218 resource availability/capability 212, 213 risks 217 stakeholder impact 214 stakeholder, infrastructure and related industries 215 strategic fit 212 strategic logic 212 value creation and market 213 screening 189, 207, 209, 210, 216, 221 concept 191, 209, 218 “S” curve phenomenon 392, 443, 444 seasonal effects 445 622 Index seasonality 174, 445, 448 securities, government 271 segmentation 357 behavioristic 357 demographic 357 geographic 357 market 356 psychographic 357 segmentation scheme 361, 490 segments 357 Segway Human Transporter 33 selection concept 190, 219, 221 final 219 marketing program 493 NPD process 227 operations program 503 process 502, 503 program 355 sensitivity 130 price 174 serviceability 395 services 79, 488 severity 326 shareholder value 90, 91, 92 Shatner, W 492 sheets operation 408, 409 routing 434 Shingo, S 402 shortage gaming 424 Sierra Group 94 Sikorsky Aircraft 202 S-92 202 simplification 302 Six Sigma Forum Magazine 324 skills leadership 246 market-related 79 Skinner, C W 395 Skunk Works 135 Sloan, Alfred 21 Smale, John 365 Smith and Wesson 16 Smith, L 324 social responsibility 508 society 61, 92, 94, 95, 176, 243, 459 software, spreadsheet 197 solutions 29, 36, 285, 331 high-technology 18 sustainable 285 technological 150 Sony CD player 254 sources, customized 168 specifications 127, 293 customer 292, 319 design 202, 471 for the process 225 product 189, 193, 198, 199, 201, 205, 206, 228, 284, 288, 433, 475, 476, 494 product and process 355 refined 206, 212 target 198 speed 23, 25, 27, 40, 62, 103, 143, 144, 225, 229, 231, 495 stages 109 stages and gates 109 stakeholders 18, 28, 44, 54, 55, 60, 61, 70, 92, 94, 95, 97, 98, 161, 176, 177, 190, 201, 205, 209, 214, 233, 244, 248, 249, 252, 288, 292, 309, 355, 356, 359, 362, 440, 462, 472, 473, 475, 489, 501, 507 government 125, 478 groups 61 requirements 77 standards 225 industry and government 477 Standard Industry Code 86 Standard & Poors 273 500 273 standardization 76, 302 Stanley Works 120, 121 Starbucks 30 steering committee 116, 117, 118, 119, 231 stock preferred 270, 271 stock index 273 stock price 273 stockholders 272 preferred 272 stoichiometry 436 strategic alignment 26, 28, 89, 90, 97, 102, 103, 355, 492 strategic business units 57 strategic context 106, 223 strategic deployment 362 strategic intent 250 strategic logic 10, 53, 64, 166, 181, 210, 212, 474 Strategic Logic Phase 110, 138, 150, 151, 155, 483 strategic positions sustainable strategic positions 15 strategic weapon 371 strategies 14, 35, 65, 356, 360, 362, 414, 483 best price 75 best quality 76 business 76, 97 communications 485 communications and promotion 375, 376, 392 core 58, 71 corporate 54, 69 design 283 623 Index design and development 304 design for the environment experience-based 416 financial 506 functional 152 generic 71, 75 highest-value 76 low-cost 75 marketing 216, 353, 356, 379, 392 media mix 383 new-product 53, 54, 65, 69, 70, 71, 73, 75, 76, 90, 97, 98, 151, 202, 250 NPD program 371 operations 394 penetration 368 pricing 95, 239, 358, 361, 365, 366, 367, 368, 369, 371, 374, 375, 392, 489, 505 process 498 product 363 product/market 66, 70, 75, 253, 283, 361, 371 product positioning 354 technology development 315 unique feature/benefits 76 value-driven 285 strategy formation 69, 73, 75 strength of materials 477 structure external 60 process flow 395, 396 Subaru Outback 80 submarine, fast-attack 316 success probability of success 24 Suh, N 324, 325 Sun Microsystems 21, 414 suppliers 18, 57, 58, 59, 60, 152, 202, 203, 250, 417, 418, 419, 508 supply and demand 15 supply chain 202, 252, 421 supply-chain management 253 supply networks 18, 54, 55, 57, 58, 70, 91, 160, 178, 249, 252, 394, 412 surveys 168, 171, 204 mail 173 telephone surveys 173 sustainable development 128 synchronization 23 system balanced 427 distribution 491 make-to-order 419 measurement 246 operating 499, 502 performance evaluation 234 production 394, 395, 396, 398, 400, 428 quality 290 systems integration 302, 321, 483 Taguchi, G 290, 291, 292, 294, 344 Tamagawa University 336 target 442 tax 448 team development 140 adjourning stage 140 forming stage 140 norming stage 140 performing stage 140 storming stage 140 team formation 137, 139, 140 team selection 136 team structure 136, 137, 231 teams 133, 135, 137, 138, 142 autonomous 134, 135 cross-functional 26, 39, 103, 120, 132, 133, 143, 225, 231, 338, 343 functional 134, 135 heavyweight 134 interdisciplinary 132, 229 lightweight 134 management 246 marketing 444 NPD 116, 137, 195, 213, 229, 255, 286, 297, 298, 322, 330, 357, 367, 475, 476, 497 operational 14 QFD 341, 342, 343, 345, 346 virtual project 142 teamwork 102 Technical Institute of Munich 171 technical qualities 358 techniques 281 design 283 DFM&A 426 financial accounting 266 investment 265 project-management 108, 227 value-creation 95 technological innovation 7, 8, 19, 20, 45, 46, 68, 128, 306, 310 dynamics of 91 radical 315 technological obsolescence 82 technological sophistication 213, 288 technology 12, 20, 21, 32, 45, 150, 175, 176, 423, 447, 456 automotive manufacturing 415 development 28 disruptive 310, 314 fuel-cell 315, 509 hybrid 315 innovative 16 624 Index technology (cont.) integration 20 leading-edge 16 management of 213 microprocessor 150 new-generation 31 new-to-the-world 108, 115, 227, 308, 310 platform 31 thin-film transistor-liquid crystal display 412 telecommunications 62, 159, 160 telecommunications industry 508 telephones cellular 19, 210 wireless 308, 508 templates 126, 255, 263 marketing plan 493 NPD process 254 testing 126 beta testing 482 concept 207, 209, 221, 462 market 482 product-use 462, 481, 482 Texas Instruments 121, 424 theory of inventive problem solving 284, 323, 324 thermos 364 thinking creative 358 enterprise 91, 92, 95 out-of-the-box 150, 312 quality-management 238 thoroughness 225, 229 threats 83 time 93, 166, 232 cycle time 40, 224 time compression 19, 20, 91 time dimension 20 time horizon 34, 228, 236, 237, 370 time required to obtain a positive cash flow 237 time to breakeven 233, 237 time to market 127, 128, 232, 233, 235, 237, 452, 484 timing 27, 71, 235, 298, 381 first to market 71 follow the leader 72 imitator 72, 73 strategic delay 72 tires, scrap 129 titanium 203 tolerance 293, 294, 320, 424, 425 bilateral 425 design 294 unilateral 425 tolerance limits 425, 426 Toshiba 412 total preventive maintenance 345 toxic substances 61, 161 Toyota Motor Company 16, 31, 32, 80, 84, 137, 299, 306, 308, 312, 314, 315, 336, 371, 403, 418 Camry 316 lean-burn internal combustion engine technology 31 Lexus 357 Prius 31, 32, 80, 84, 165, 285 Toyota production system 402, 403, 428 toys 235, 383 trade associations 167, 389, 440 industry 440 trade journals 168, 383, 385 trade shows 85, 160, 171, 204, 383, 386 trademark 363, 364, 486, 487, 488 traffic control system 314 Trani, John 120 trends evolutionary trends 15 trust 285 types new-product 223 new-to-the-world 358 Ulrich, Karl 112 uncertainty 40, 41, 116, 129, 227, 243, 310, 330, 362, 458, 482, 496, 511 Underwriters Laboratory 251 United Auto Workers (UAW) 418 United Parcel Services 491 United Technologies Corporation 475 Green Engine 475 UTC Fuel Cells 509 University of California at Berkeley 136 University of Houston 416 University of West Virginia 287 The Concurrent Engineering Research Center 287 US Congress 460 US Department of Commerce 86, 167, 383, 440 US Department of Labor 167 US Department of Transportation 461 US Environmental Protection Agency 127, 167 US Government Treasury Bills 273 US Military 127, 164 US Navy 316 Virginia design program 316 USS Virginia 316, 320 validation 286, 472 Validation Phase 114, 360, 468, 482, 494 value 23, 27, 37, 94, 95, 96, 108, 143, 151, 206, 239, 242, 285, 288, 330, 354, 356, 367, 405, 496, 512 creating value 18 long-term 359 market 266 perceived 368 value-contribution perspective 18 value chain 14, 59 625 Index value creation 16, 35, 37, 70, 97, 214, 218 value engineering 286, 287, 342 value equation 92, 318, 489 value generation 512 value maximization 92, 95, 96, 122 value networks 18, 56, 62, 91 value proposition 90, 95, 151, 164, 205, 239, 353, 354, 440, 487 value streams 331, 405 value system 14, 16, 55, 57, 62 values 66, 67 core 64 corporate 65, 67 customer-derived 233 variation 292 vehicle 285 Verma, Vijay K 139, 140, 142 viability 452 demand 403 financial 361 long-term 359 manufacturing 403 supplier 403 videotapes 64 view, enterprise 263 views, cross-sectional 320 virtual company 414, 417, 420 virtual integration 419 virtual testing 320, 321 vision 64, 65, 67, 312 visualization 320 voice of the customer 196, 298, 337, 338, 339, 341, 342, 344, 345, 346, 348, 349, 350, 475 Volkswagen 418 volume, sales 452, 484 VW Beetle 19 von Hippel, Eric 159 vulnerabilities 511 Wall Street 413 Wal-Mart 59, 416, 442 wants 26 Washington, DC 19 waste environmental 36 hazardous 161 waste minimization 128 waterways 62, 180 wealth 266 Welch, Jack 121 Western Electric 403 Wheelwright, Steven 25, 35, 66, 134, 253 whiplash effect 422 Wildermann, Horst 171 Winchester 16 window of opportunity 237, 370 Wiremold Company 347, 348, 349 Wolmack, James 21, 401, 405 work breakdown structure 476 work-in-process 401 worksheets 255 workstations 397, 415 World Trade Center 19 World Wide Web 161 World Wildlife Fund 94 Xerox 16, 121, 299 Yahoo Finance 273 yield 129, 242, 407, 436, 437, 496, 499, 500 theoretical 436 zero-sum game 95 ... Acknowledgements Part I Product innovation and strategic logic Introduction to product innovation and new -product development Strategic logic of product innovation The new -product development process... 602 605 Preface Product Innovation: Leading Change through Integrated Product Development defines and discusses a comprehensive, state-of-the-art framework for managing product innovation and... Introduction to product innovation and new -product development r Chapter Strategic logic of product innovation r Chapter The new -product development process and organizational aspects Product innovation