As a human being, we all consume products and/or services all the time. This morning you got up and ate your breakfast, e.g., eggs, milk, bread, fresh fruits, and the like. After the breakfast, you drove your car to work or school. At your office, you used your computer, perhaps equipped with 27” LCD monitor. During your break, you drank a cup of coffee and played with your iPhone. So on and so forth. You probably take it for granted that you can enjoy all of these products. But if you take a closer look at how each of these products can be made and eventually delivered to you, you will realize that each one of these is no short of miracle. For example, which fruit do you like? Consider fresh strawberries. In order for the strawberries to be on your breakfast table, there must be numerous functions, activities, transactions, and people involved in planting, cultivating, delivering, and consuming strawberries. Moreover, all of these functions, activities, transactions, and people are connected as an integral chain, through which physical products like strawberries themselves and virtual elements such as information and communication flow back and forth constantly. By grouping related functions or activities, we have a supply chain, comprised of four primary functions such as supplier, manufacturer, distributor, and finally consumer. A supply chain is essentially a value chain. For the society or economy as a whole, the goal is to maximize value, i.e., to create satisfactory value without spending too much. In order to create the maximum value for the strawberry supply chain, every participant in the chain must carry out its function efficiently. In addition, all of the members must coordinate with each other effectively in order to ensure value maximization. We have to face the same issues for almost all the products and services we take for granted in our everyday life, e.g., cars, hamburgers, haircuts, surgeries, movies, banks, restaurants, and you name it! In this course, we want to understand fundamental principles of value creation for the consumers or the market. We try to answer questions like how the product or service is made, how the value-creating activities or functions are coordinated, who should play what leadership roles in realizing all these, and so on. As our course title hints, we approach all of these issues from a learning perspective, which is dynamic in nature and emphasizes long-term capability building rather than short-term symptomatic problem solving.
NPD Process - Two Approaches Part 2
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Do curso por Korea Advanced Institute of Science and Technology
Gestão da cadeia logística: uma perspectiva investigativa
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Korea Advanced Institute of Science and Technology
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New Product Innovation
New product innovation is the key to firm's success. In order to sustain successful business, the firm must design and manage its new product process effectively and efficiently. In this chapter, we will learn new product innovation and new product development process. Especially, we will look into and compare two approaches, traditional approach and cross-functional approach.
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Bowon KimProfessor
KAIST Business School
I want to compare these two approaches, traditional new product
development approach or sequential approach,
and flexible or cross-functional team approach.
I already talked about unique characteristics
of each one of these approaches.
The first one is how many functions get involved at a time.
So, the traditional approach involves only one function at a time, whereas
flexible new product innovation involves multiple functions simultaneously.
And we also talked about the communication pattern.
And in the traditional approach, it's
one directional communication from upship to downship.
There is you know, there is not much communi, interaction.
There is not much interaction between these two functions.
Whereas in the flexible approach, there
is constant feedback and feed forward communication.
And therefore, I said that the
communication and interaction is kind of continuous.
Now, I want to talk about this advantages and disadvantages.
Advantages.
We already know that the reason why there was a concurrent
engineering was that the time based competition
became an important strategic you know, condition.
And as you can see, the original benefit envisioned by
people in you know, early, early, early period is this
reduction in for the, development of project lead time.
Now there is there is you know, huge reduction in terms of lead time.
And obviously, that was the original motivation,
that was the original motivation that was, you
know, which was considered as the most important.
Well, benefit we can have by using this cross-function to [INAUDIBLE] engineering.
But obviously, that's not the best one.
But, the lead time reduction is one advantage for flexible approaches.
Whereas traditional approach, in traditional approach,
it is a simple, very clear.
In other words you don't have to worry about some other functions, you just
give one direction communication.
Just you know, mention that you need to do this.
You need to this, and so on and so forth.
So, it is very simple.
Simplicity is one benefit we can expect from or traditional approaches,
and some people might say that there is
enhanced accountability because it seems like very clear.
It seems like very clear that everyone knows what he or she is expected to
do, and therefore when something goes wrong,
it's easy to identify who's responsible for what.
In the surface, I want to agree with
that statement, but somehow I'm not comfortable with that
as one of these advantages of the traditional approach
because its their accountability is right kind of accountability?
Or is it kind of accountability for the convenience, right?
I mean that you know, if we use this traditional approach, is
it true that everybody feel responsible,
everybody feels responsible for what they're
doing?
It's not clear.
Maybe the accountability, accountability may go down.
So, that's why I put here.
On the surface, in a superficial level, we might say that accountability will go up.
But, in reality, maybe the true accountability go down.
Okay, so we needed to
think about this for long time.
And then I want to look at the second advantage
of flexible approach, which is problem solving capability increases.
Let me explain what it is, okay?
Okay, let's say, again this is the general context of this to approach it.
Let's consider, let's consider, let's get
the sequence of the traditional approach first.
Support.
There is some mistake in the
concept.
Maybe it's not a big mistake, but let's say, you know,
concept people developed their own concept with the product and services.
But in fact, those products cannot be made by
the existing manufacturing system for whatever reasons, whatever reasons.
I mean that the, maybe there is
some incompatibility between the concept and manufacturing.
But if we use the sequential approach, the concept will be
delivered to design, and only design people look at the concept.
And they don't find any.
They don't find anything wrong in the concept.
Because they, they do not know anything about manufacturing at the same time.
Right?
So, design recognize no problem at all.
Complete this on design.
And it, the list is designed, or designed to a prototype.
And prototype, after deceiving design function
and without knowing what's, what's happening in manufacturing,
the prototype people complete prototype in their own way.
And then they deliver the prototype to manufacture.
But suddenly, when manufacturing people look at this old prototype, they realize
that with the current manufacturing system, they cannot make that.
In other words, they cannot realize the
concept 100% as expected by concept developers.
In other words, there is a
huge discrepancy between concept and manufacturing.
So, we cannot actually make the product using the current manufacturing system.
That's really a serious problem.
And therefore probably many faction of people want to fix the problem.
There are a couple of ways, there are a
couple of method they can use to fix the problem.
What is the most important?
What is the most fundamental solution?
The fundamental solution is you go back to concept again,
and then you fix the problem in the concept development.
So, you go back.
You actually go to the concept.
But
the thing is, is it possible?
Is it possible organizationally?
Concept people, do you think that the concept people will acknowledge their
mistake and they're happy to get these late notice from manufacture people?
Probably not.
And in the essence, I would just say that the accountability may go down.
Although it looks like very straightforward and very simple,
but in reality, they don't want to accept their own
mistakes.
That's too damaging to themselves.
So, there might be some resistance, some organizational
resistance, against this going back to the concept, right?
There are some other practical issues as well
because this is a sequential approach, sequential approach.
Once the concept finishes it's work for this particular project,
the concept people will move to another, to another project.
Or a different project, right?
So even if we go back to the concept, probably concept, the
original concept developers, not a value maybe, right?
It's pretty possible.
They work on other project, or it's a
long time ago, therefore they don't remember anything.
That might happen.
Or, there is a third poss, possibility.
We are already here.
In other words, we needed to introduce our
product very shortly, in short period of time, we
have to introduce our new product to the market.
But if you go back to the very beginning, it's too late, right?
It's too late.
So, it's not possible to go back to the very
beginning and to work step by step from the very beginning.
So there are couple of reasons why it's not feasible to go back to the concept
under this sequential traditional approach.
If they cannot go back to the concept to fix the problem
from the fundamental level, if that's not possible, what can they do?
They can do some ad hoc solutions.
Maybe informal and ad hoc incomplete solutions.
And that will actually increase the possibility of quality failure.
Especially we know that if the problem is not
resolved at the manufacturing stage, then the quality will go down significantly.
On
the contrary, in the flexible new product development approach,
when concept is developed, manufacturing people working together.
And therefore, whenever concept is done, manufacturing people have a chance to give
their own feedback, their own assessment, their own evaluation.
And therefore, concept can incorporate the
manufacturing ideas and feedbacks and manufacturing
suggestions in concept development, and therefore
they can actually identify the problem earlier.
In other words they can identify, identify these operations problems early,
and therefore we will just say the problem
solving, problem solving capability.
Enhances significantly, so I would just say that's very important
to benefit, very important to benefit using flexible approaches.
And then there is another advantage for flexible or
cross function to approaches relative to this, this exposure.
Let's define what the risk exposure means.
[BLANK_AUDIO]
We know that you probably heard about this, some
people say, let's say, there is engineering,.
Engineering freeze.
But
that's a need.
Or that you can say that there is a concept, concept freeze.
That means that after this time, after this concept
freeze point, you cannot make any change to the concept.
Another is concept is absolutely fixed in this point in time.
The concept freeze.
So just everything is frozen at the time, in that particular moment.
So, let's think about the time between the concept presets.
So, here I'd say this is concept
freeze, and then this is sales starts or, you know,
manufacturing stocks or you put is in traditional market.
Then, what is this period from this
concept freeze to the actual market launch date?
I quote it as risk exposure period.
Why is the risk exposure?
This is pretty vulnerable period for the company.
In other words, what if something happens during that time period?
You
cannot change your concept.
You cannot incorporate, you cannot incorporate what's happening in the
market during that period of time into your, your product.
What might happen?
There are two things can happen.
First, customer's, first customer
requirement, or customer needs might change, right?
You know when the first, when the concept was developed,
yellow was the choice of, you know, yellow
was the color chosen by the company because they
believed that the company believed that yellow will be
a huge hit when they introduced the new product.
But what happened?
Think about it.
It might happened that during this period of time, because there was
some unknown factors, because there was some unknown events, people
changed their taste and there it becomes more popular than yellow.
So, during this period of time,
customer's requirements and customer needs changed, but
the company cannot incorporate the that change
into its new product because they already
froze everything down.
Let's look at the flexible new product development approach here.
The concept is frozen at this period of time, at this time.
And then there is a risk exposure period
which is much shorter compared with this one, okay?
Compared with this traditional approach.
The risk exposure period is much shorter.
That means that if the company uses flexible new product
development approach, they don't, they don't have
much risk, where actually their risk level is very smaller.
Much smaller compared with that of sequential approaches.
That's what's happening here.
Right?
So, risk exposure goes down.
Therefore, incorporating changing.
Customer requirements, possible.
And incorporating cutting edge technological innovation, what's possible.
What does that mean?
That means that you know, customer requirements changes during this period.
And also it's possible that there might be some huge technological innovation.
Technological innovation occurs during this risk exposure period.
And similarly, if the company uses traditional approach,
if the company uses traditional approach, it's not easy
to incorporate this technological innovation that happens during
this risk exposure period into the new project development.
And in that sense flexible approaches huge advantages, right?
Using flexible cross functional approach, you
can incorporate the changing customer requirements faster.
More effectively, and like was the
possibility to incorporate the cutting edge
technological innovation to a new product, is possible it will increase as well.
And as a result, the product quality might go up and
the, you know, the product performance eventually might go up as well.
And now, let's think about this disadvantages.
Disadvantages for a traditional approach is, most of
the cross function teams are the advantages, right?
In other words, lead time will go up, this
exposure will go off, and problem solving capability goes down.
That's major disadvantages for this traditional or sequential approach.
What about the disadvantages of flexible or cross function team approaches?
[BLANK_AUDIO]
Some people actually said that there's this
huge confusion and complexity will go up.
It's kind of this number because there are multiple functions get involved.
So, as a particular point in time,
many functions communicate with each other, many
functions work with each other, and therefore,
confusion goes up, and complexity goes up.
Some even say that it's not concurrent ingenuity, it's concurrent chaos.
Of course, if the company fails to manage this whole
process reasonably, then the company must face concurrent chaos.
Because of the confusion, because of this complexity increase,
the communication load increases, and coordination costs will go up.
And also we can see that resource waste and duplication increases as well.
Maybe because many functions work together simultaneously.
Some of them might do the same thing,
maybe even without knowing what the function is doing.
So, there is some form of waste and duplication
goes up, and that will actually increases the cost over the cost.
And we might want to say that accountability will go down.
But again, you know, what kind of accountability?
Is it true accountability or it's superficial accountability?
And I also get some feedback from my students just saying
that in reality, in the actual situation, in the actual situation,
when they apply this approach, employee
exhaustion and employee morale went down significantly.
I'm not sure whether this is actual cost or you
know dejourn due to the risk from failure, okay?
Failure to managing, failure to managing, you know, correspondent to
more approaches effectively, then you can have this kind of consequences.
Anyway, I think that this
advantages and dis, disadvantages are kind of obvious.
Obvious.
It seems like it's reasonable.
We can expect this kind of things occur.
So, now it's really interesting to note that there are many advantages
and also there might be many disadvantages.
So whenever the company, whenever the company has to decide whether it should
adopt flexible approaches or it should adopt a traditional approaches.
The company must compare cost and benefit.
Disadvantages and advantages.
So, it is a cost benefit analysis is the key.
Cost benefit analysis is the key when we try to decide
which approach is most appropriate for our company.
And let's look at how we can do, at least conceptually,
how we can do this cost benefit analysis in an effective way.
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