Risk sharing tech dvpt

1. Risk sharing tech dvpt • Rs with suppliers . Relying on supp can yield huge benefits but compound problems of IP ownership and competitive behaviour. • Chrysler liberty advanced vehicle prog shows both the benefits and probs . Libertry is the umbrella prog that Ch is using to develop tech that will be used in the nxt prod vehicles over the nxt decade. • Some 600 engrs frm suppliers and 70 frm chry working together . Closely working reduces dvpt time and improves product performance by facilitating better performance matching of components and sub-assemblies. • However – who- owns anyone T is not clear as all parties are involved in its dvpt. For this not to matter the supplier –cust relation shd be changed. • INsstead LT relation is needed in supplier works with cust business to develop the optimum sol secure in the knowledge that the T investment will be rewarded. This approach calls for a shift from the traditional approach to procurement follow governed by price and with regular competitive rebidding . The change to the principle of LTR is one business find hard to adopt quickly . • As no of T used rises complexity and cost of dvpt of each T escalate.

2. Alliances and JV • Ad hoc A are normally used to develop a T that is critical to 2-3 business. Toshiba,IBM,Siemens formed and A to develop the 1 Megabyte DRAM chip –The obj of this A was to save time ,money share skills and mfg eequiment . The prob these co faced was speed of innnovation in DRAM . New gen DRAM devpd every 3 yers with commercial lifecycles which are only 4 yrs.

3. With each successive gen costing more to develop and needing new capital invest ,A are the only route forward/ • Siemens found that annual prdn plant cost was equivalent to annual sales DRAM / Hence S wanted A b/w competitors and across strong national cultures.

4. In this the str of participating co helped them to set de facto worldwide stds by providing them with the scales to impose their approach on the rest of industry . • T,S,IBM maybe close allies in memory chip dvpt. But they are fierce competitors in other areas. • This A help them pool resources and generate synergy . • Eg- apple- with H/W and S/W and sony- with minitiaturisation and mfg T .Together the two business are a powerful force.

5. Complex A are used to enabnle business with str mkt position to gain access to pacing T in which it is weak . A b/w automobile co and plastic co to explore use of plastics in auto body panels is an illustration. – this type of A is longer term and more wide rainging .-leads to more collaborations - can also be a prelude ot closer cooperation and ultimately merger.

6. JV • Is a variant of complex alliance in whch area of coop is well defined and LT enough to merit the creation of separate legal entity. Eg- JV b/w BICC &corning • Corning had glass fibre tech but lacked understanding of telcom industry . Together the two created optical fibres ltd- whichis europes biggest producer of OGF

7. Acquistion is the most certain way of securieng T and preventing others. From acquiring it. Bu Acq brings it own prob and post aq integ of 2 co can be slow and difficult. T is rarely a good enough reason on its own to justify Acq. • The only time T is good enough reason to justify acq is when the target is a small focused grp that can be readily absorbed . Eg north west water ‘s acq of ICI ‘s small ceramic membrane filter grp

8. Each bilateral rel shd fulfil needs fo each party and combined business benefits • In a supplier partnership -supp offers tech and guaranteed supply of parts in exchange for secure order stream. • I f all works well , such network can yield immense benefits . If all works well such networks are very fragile - they rely on a series of interdependent . – the collapse of any one partnership or A as a result of changes in market needs and competitive position can change needs of partners

9. Because of fragility businesses must take steps to maximise the chances of success. • Top mgmt must take time and invest the resources needed to decide • - which T to O/S frm whom and why • - what form of A are most appropriate • Where A boundaries lie in terms of scope and time • What exit options and fall back positions are allowable to the partners.

10. LT Collaboration • LT emerging t dvpt is O/S where the cost of each T are often low but the choice of T to back is vast ,their relative merits are unclear and timescale long. Such dvpt often seems to require disproportionate management time and attention.inthis O/S makes a lot of sense.

11. Many of Europe”s leading comp follow this approach . Hence outcome is a lot of research published ,some patents ,the occasional breakthrough and an enormous waste to time and money.

12. Sadly when co realise that they have wasted their efforts their response is to swing to other extreme ,stopping all LT activity and focus on s.t dvpt. – and understandable response but short-sighted.

13. Direct bene of O/S are • Reduced cost thru sharing and direct govt or EC support. • Greater influence over standards discussions thru increased knowledge and increased credibility • Exposure to related T activities in other arenas (competitors ,universities ,other industry sectors) again increasing the chances for real result • Access to complementary T skills and specialist facilities owned by others so reducing learing time and increasing the likelihood of real results

14. Measurement and BM • Consider one example___ • One corporate manageer keen to keep both to compare the performance of various busines unsits in the group and to raise the overall profile of technology and product dvpt. Set top 5 top level dashboard • 1- no of new products launched as a % of current product portfolio • 2-no of new products launched divided by the development investment . • 3-% of new produts launched on time • 4-% of new products l launched on budget • 5- impact on sales of the new products • At first sight ,this selection of measures appears reasonable. One year later all was going well . No of new products had gone up ,costs were held static ,time and cost dely performance had improved. Hence sales rose. • 2 year later ,the picture was less rosy.

15. 2-no of new products were still rising but sales perf was bad. Many of the previous products had failed to deliver and latest products was about to repeat the pattern.T he company seemed to be drowning in proliferation of new products that lacked differentiation and were not sustainable in the market. Worse the increase in the no of products was overloading both factory and sales and marketing organisation ,increasing costs and reducing profits.

16. What went wrong? • Problem with the measures chosen is that the first two focus on the number of new product delivered from given resources. – Clear message to dvpt --- go for quick win focusing on incremental improvements. • 3rd ,4th measures reinforce the theme,stress on projects you know can deliver on time and budget.

17. Comparative measures • Consider Tellyco – a second tier global TV maker that wants to compare its development performance with that of the 3 giants – Philips,Sony,Matsushita . • The TV industry is mature . With new products differentiated basically by styling and minor innovations such as easier to use remote controls. In the medium term ,wide screen TV will capture more market share and and in the long term flat screen displays and projection TV will become more important. Hi-definition digital TV products are also likely once arguments over broadcasting standards can be resolved. • So although industry is mature and stable ,big change could be on the way.

18. In that context ,Tellyco appears to be doing well. • It launched many new product and market share is growing. Although margins are light. • But Tellyco products are mainly incremental and stylistic ,whereas Sony”s new products incorporate more radical tech dvpt. Providing foundation for the next generation of products.

19. Problems arise in measuring tech dvpt spend. • Spend can be expressed as an absolute value as a % of sales or as a % of costs. • If Tellyco is assessing the competitive strength of its own creative horsepower ,absolute value may be best. If its more concerned with efficiency of dvpt process in view of difference in size b/w it and its competitors % measures may be a better indicator . Market share growth measures may be also misleading depending more on company history ,brand positioning and market channel access than on product and technology .

20. Tellyco”s size and immaturity are likely to indicate a better return on technology investment that the competitors will achieve but the return may underestimate the dominance of big players.

21. Micro measures • Operational managers apply micro measures within the technology dvpt activity to track a weakness and indicate progress in remedying it. • Typically they only use a few measures at a time always linked to an internal customer need. Once an improvement has been made the relevant measure can be dropped and replaced with another that tackles a different problem.

22. Eg- you may want to encourage one of your regional tech grps to give more support to subsidiary businesses outside its own region. One way to do it is to make support given one of the perf objectives of the regional technology head. • These measures could look at the split of the regional work, identifying the % of value or the number of projects undertaken outside the region. Micro measures you chose depend on the improvement you are looking for.

23. Manufacturing Need Micro measures Manufacturable product - Manufacturable Index Consistent design - No of unplanned changes Rapid response to problems - Respone time Technology Development Marketing and sales Need Micro –Indicator - On time - Slipped milestone High product performance - Achieved feature content Senior Management Need Micro –Indicator Efficient R&D spend Hit rate Lead time Product age Micro measures

24. Micro measures are used to help local mgmt in the drive for continous improvement. – these measure have to be simple and communicated widely.

25. Micro measures broadly divide into 2 categories .Some have specific targets. Linked to business objectives. Eg – If mean length of projects at 15 months is excessive set a target of 12 months . Bast the target on BMarked companies and your gut feeling. • For other measures. A half life target maybe best. This target type is used when goal is to eliminate waste and reach perfect performance . If 10% of development time arises from unplanned iterations set a target at 5%.Once you hit the target,reset to 2.5 % and keep resetting it until deviations from perfection are negligible. Once can start with 0 target . But such target appears to be unrealistic to local managers who will not take it seriously . • Half life targets are more effective means of getting to where you want to be.

26. Micro measures • Micro measures need corresponding performance targets. Eg if regional tech group devotes 80% of its efforts to regional work when you would prefer 60% ,make 60% target.

27. BM against best practice • Managing tech dvpt is a complex multi –faceted task. It makes sense to keep learning more about it. The logical place to start is by learning from your own business.

28. BM against best practice • BM is not just a comparative tool- it stimulates questioning and learning . If you BM within your own business widely ,sharing objectives and pooling best practice understanding you can achieve performance improvement without looking outside at other companies . • With a good foundation of internal BM you can begin to look outside. One can BM at different levels. • Most companies do it by stressing on measures of output to identify areas of weakness relative to direct rivals.