Knowledge Based Product & Process Development: An Executive Overview

1. Knowledge Based Product & Process Development:An Executive Overview Presented to- CTMA Symposium April 18, 2005 Michael Gnam Lean Product Development Initiative (LPDI)

2. Industry Need • New Product Development lead times have been significantly reduced in recent years through CE and IPPD methodologies and the use of product design software. • Lately, though, the pace of improvement has slowed. • Best-in-class (auto) Domestic Lead Time-38 Months • Toyota Lead Time-18 Months and Decreasing • Needed: Great Leap Forward

3. Background Project Participants: • GM/Delphi - Champion • Cincinnati Milacron • Sandia National Laboratories • Ortech • Raytheon (TI DSEG) • UT/Automotive (now Lear) • Dr. Allen Ward (U of M)

4. Background • After initial research by the team, it became obvious that emulating other best practice pdp processes was not the answer. • Reason: Many of our team members had already done that-benchmarked it to death • Further research indicated that we needed to go to the paradigm level to find the answer • Result: Study paradigms, not processes

5. Why Study Toyota? • FASTER: half the time of US competitors • Ipsum minivan: 15 months, styling approval to full production. • Standard is now 18 months; may be aiming at one year. • One hour response to suggestion by tool builder. • BETTER: Consistently highest quality ratings. • A car in top 3 of every category (four of them #1) in 2003 Consumer Reports reliability ratings. • Lexus again #1 in JD Powers quality survey. • “Toyota’s not just good. It’s always the best.” —1995 Harbour

6. Why Study Toyota? (cont.) • CHEAPER: at least 4X the engineering productivity of US competitors • ~ 150 product engineers per car program at peak • not dedicated; ideal is two projects per engineer • vs. 600 total at Chrysler for almost twice as long • Sales per employee 2 to 4 times those of Chrysler (with similar vertical integration).

7. Why Study Toyota? (cont.) • “Toyota makes lots of money and is overtaking GM to lead the world’s car industry.” • Target: 15% of global car market • Market capitalization: worth 3x the American big 3 combined • Productivity grown 7x in last 25 years, Detroit 3.5x • The Economist, January 29, 2005

8. Why Study Toyota? (cont.) • Net profit (latest year, in $B) • ProfitMargin(%) • Toyota 11.0 6.7 • Nissan 6.8 6.8 • Honda 4.2 5.7 • GM 3.9 1.9 • Ford 3.8 2.4 • D/Chrysler 0.5 0.3 • Source: The Economist, January 29, 2005

9. The Toyota Paradox • No requirement to co-locate teams or dedicate engineers • Does not establish early design specifications • Delay, as long as possible, freezing the design • No “design factory” process — no hand-offs • Simple process, few “tools” — no reliance on QFD, FMEA, PERT, DFM • No Six Sigma corporate strategy • No standard development process – or an initiative to create one • Lots of prototypes – lots of parallel designs

10. Conversely, typical U.S. Companies • Product development excellence is based on compliance to company standards • Quality indices • Functional performance indices • Detailed processes A STRUCTURAL PERSPECTIVE

11. The “Structural” Assumption Compliance to rigorous design process / quality standards will yield great products on time Wrong!

12. Issues: Current Product Development System • Value-added productivity is 20 – 40% • Project management has become too administrative • Design reviews are focused on tasks, not results • Minimal learning between projects • Design engineers have little design experience • Planning and control systems are not maintainable • Design process loop-backs are systemic

13. The Nature of Product Development • Product development is an iterative, uncertain process: plans are results dependent • Learned knowledge during any operation is the only value added intellectual inventory • Activities based strictly on compliance will invariably create reams of non-value added information • wasted effort • informational clutter • costly maintenance

14. What if • All the knowledge gained throughout the design process, what works and what doesn’t work, could be captured and consistently applied for all future projects • That is the power of the Toyota development system

15. Lean Product Development • Is not a re-application of the principles of Lean Manufacturing!! • It is complementary to Lean Mfg principles and to DFSS principles • Product Development requires innovation and the open minded application of profound knowledge.

16. Lean Product Development • The Essence of Lean Development is the effective management of knowledge • Encouraging • Creating • Acquiring • Controlling • Sharing • Applying • Leveraging • Toyota is only an example of excellence

17. The Toyota Development System Creatingand leveraging knowledge to create an ongoing stream of great profitable products

18. The Toyota Paradigms • Leadership • Expertise based • Solution Exploration • Point based • Set based • Planning & Control • Task based (stage gate) • Responsibility based • Personnel • Foundation

19. CE integrates everything, is totally responsible Styling VehicleEvaluation Top management • product plan • concept • design architecture • targets and specifications • schedule • budget • drawing approval Body Manufacturing Chief Engineer Power Train Chassis R & D Customer judged on corporate objectives: profit, share, learning

20. Leadership by expertise • Technical expertise: Minimum 20 years experience as engineer • Deep grasp of engineering fundamentals (communication with any engineer) • Assignment(s) outside original area of expertise (ability to adapt and learn quickly) • System design skills and attitudes; strong personalities • Assignment(s) as assistant chief engineer (integration experience) • “Push very hard — but know when to stop” • Pinball — reward is to do it again • Communication skills and knowing the company

21. The Exploration Paradigms: point-based vs set-based

22. Point-based design: design as iterative improvement of point solutions generate concepts + + + + + pick one improve synthesize analyze More costly region

23. Set-based design 2. Integrate by intersecting minimum constraints. 1. Explore cheaply by mapping design sub-spaces. 3. Innovate and optimize without risk by controlled narrowing of redundant solutions. picture by Toyota GM of body engineering 4. Dominate markets and reduce costs through market and conceptual robustness.

24. Planning and control paradigms • Task based • Responsibility based

25. Task-based Plans Decompose • Centralized planning. • written by staff • standard • high detail • Built around tasks: begin and end at information hand-off points A Push System

26. Responsibility-based Plans Integrate Finance • Process designed with the product. • written by team leader • simple • subordinates fill in thedetails • Responsibility streams and integrating gates • clear, “whatever it takes” responsibility for subsystems • gates bring everyone together • everyone starts when they must to meet the gates, seeks information as needed • known acceptable variation for each gate Mktg. resources Styling Body Eng. Production Eng. Concept Clays P1 time A Pull System

27. Knowledge paradigms • Model oriented • Learning oriented

28. US: complex models as oracles • No change without measurable benefits. • Computer modeling is the key. • finite element models by engineers who don’t know beam equations. • process improvements through analytical prototypes “to be created.” • expert systems will allow continued rapid rotations of inexperienced engineers and managers. • Decisions based on accounting and marketing data, even though we know it’s wrong.

29. Toyota: Tools or models as simple servants • Data informs, not substitutes for human judgment. “ The chief engineer [not marketing or accounting models] decided not to paint the Corolla bumper.” — A CE “Good intuitive sense is crucial... [and] is something we need to foster. Marketing data leads to designs that are too conservative.”—Exec VP of R&D • Everyone is constantly sketching relationships, problems, and solutions. TOC’s, A-3’s

30. Engineering “Checksheets” • Toyota’s manufacturing engineers maintain design standards. • Part by part, tool by tool. • Describe current manufacturing capability. • Contain solutions to past problems. • Working-level engineers update regularly. • Everyone can access them. • Every project begins with the design standard.

31. Tradeoff curves are the visual representation of basic product and process physics and economics They are the Toyota’s engineer’s primary tool to Understand Communicate and negotiate between specialties and functions Train new engineers Record knowledge Negotiate and communicate between customer and supplier Conduct design reviews Communicate between developers and managers Design quality into the product Exhaust system family Trade Off Curves: The Power of Visible Knowledge Noise level Safe region Infeasible Back pressure

32. Personnel Management Paradigms • Boss based • Market based • Qualification based • System based

33. Results-oriented personnel management • In the job long enough to acquire real expertise, acquire a reputation for results • Managers competent to judge engineering work • Evaluated based on reputation by a council of senior managers • Deliberate effort to ignore appearances, where schooled in what • Non-value added is anything that doesn’t directly please customers (such as reporting)

34. Developing engineer/managers at Toyota breadth • min. 5 years in one specialty. • min. 5 years in related specialty. • assist. manager (5 years) in similar specialty (player/coach for five engineers) • manager (5 years) in similar specialty (player/coach 5 assistant managers) depth 5 yrs 5-10 yrs

35. Foundation Paradigms Hands-on Entrepreneurship Advocacy “Other people control my life” persuasion is the most important skill Goals, programs, “taking care of people” “I control my life” Hands-on creation is the most important skill “Yankee know-how” “Rugged Individualism”

36. US Japan Can Culture Change? US Software Before WWII After WWII

37. PDP Project Findings • Difference is in their set of Paradigms • Counterintuitive to our thinking • Delay, as long as possible, making decisions • More and more prototypes, both real and virtual • Pursue sets of solutions, not answers • Analogous to JIT in late 70’s • 58 Paradigms catalogued & discussed

38. PDP Excerpts • Top Toyota Engineer (equiv to CTO) spends 90 % of his time solving technical problems. • Ford engineers suggested 3-4 layers down before any technical problem solving done • Toyota Chief Engineer feels he is a people person--Mentoring

39. PDP Excerpts • Beware of: • GM- Aim, Aim, Aim!! • Plans to produce plans • High level people very busy but doing nothing of value to customer • Compliance for the sake of compliance • Deviation from simplicity • Ambiguous phraseology

40. Structure Based People selected & promoted based on perceived potential (fasttracking) People selected & promoted based on presentation skills People selected & promoted based on promises and plans Knowledge Based People selected & promoted based on knowledge, wisdom, and experience People selected & promoted based on results People selected & promoted based on teaching and mentoring skills PDP Excerpts

41. PDP Excerpts-Knowledge Hierarchy • Perceptions-Our first impressions • Data-Stored in a base • Facts-What is really happening • Information-Collection of focused data & facts • Knowledge-Proper application of useful information • Wisdom-Providing the best solutions

42. Structure Based Organize Check Monitor Approve Support Plan Plan to Plan Ensure Compliance Oversee Knowledge Based Perform Do Design Create Solve Teach Mentor PDP Excerpts—Action Verbs

43. The Gain Potential • 2-4X increase in development productivity • 2-3X decrease in development cycle time • 2-4X decrease in development cost • 2-5X increase in innovation • 2-5X decrease in development risk

44. Knowledge-based Product Development The Implementation Perspective

45. The Change Process • Focus initially on one product family – or a subset • Assign clear knowledge / change ownership • Complete progression to set based within year • Expand to other product families as comfortable • Modify corporate infrastructure elements as you go Expand to other product areas Leadership Alignment Principles of Learning Based Development 1 2 Capture Knowledge 3 Focus on one product family Design by Knowledge 4 Set based Development 5

46. How We Can Help – A Series of Kickoff Workshops Activity Plan Outcome

47. Assessing the Risk of Change • The potential is huge • 4X productivity gain • Extensive cross project learning • Company wide knowledge and experience • Increased innovation • Time-to-market decrease • Consistency in development performance • The risk is minimal - any progress toward a learning environment is positive

48. Knowledge Based Product Development Paradigms: • Questions ? • Comments ? • For additional information contact Mike Gnam at NCMS • mikeg@ncms.org • 734-995-4971 • http://lpdi@ncms.org