class 16
DESCRIPTION
TRANSCRIPT
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CLASS 16:Medtronic
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AGENDA
• Platforms and the Aggregate Project Plan (**)
• Medtronic (**)
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The Role of Product Platforms in the Aggregate Project Plan
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Motivation: Three Nightmares
• Unexpected Delays: Coming to the market with the right technology at the wrong time
• Unexpected Consumer Needs: Coming to the market with the wrong technology at the right time
• Unexpected Success: Coming to the market with a single version of a technology which turns out to have multiple potential uses
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The Aggregate Project Plan is a tool for pursuing a portfolio approach to product development…
Radical
Off the shelf
Producttechnology
Breakthrough
Platform
Derivative
ProductSupport
Entirely newbenefit Improvement No change
Marketing Impact
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A Technology Platform Provides a Linkage from Breakthrough Technology to Derivative Products through Investment in a Common Architecture
B
B1
B2
B3b30 b31
b40
X1*
X2A*X2B*
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Do Platforms Help Address Product Development Problems?
PROBLEM
Unexpected Delays
Unexpected Consumer Needs
Unexpected Success
Does a platform help? Examples
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A Platform-Based Approach Might Address Some of the Key Incentive Problems in Product Development…
The Problem
Engineering Enthusiasm
Reporting Failure?
Short-Term Managerial Focus
Responsive Salesforce
How does a platform-oriented approach help?
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Platform strategies are designed to facilitate diffusion, effective commercialization, and standard-setting
Diffusion Strategy
Commercialization
Standard-Setting
Does a platform help? Examples
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Product development must be aligned with (and responsive to) overall firm strategy and positioning….
Key Issue Firm A Firm B Firm C
Strategy First mover withinnovative, highperformanceproducts
“Best Overall” High variety atlow cost: focuson marketniches,customization
Timing, Rhythm FAST!12-18 months?
Moderate:Generationslast 3-5 years
Fastcustomization
Capability High poweredtechnical team
Linkingcustomers andopportunities
Understandingcustomer needsin depth
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While most platform development has taken place under a “traditional” stage gate approach, recent work emphasizes a more flexible process of iteration and coordination
Concept Development
Launch
Lead Time
Traditional Approach
Concept Development
Launch
Flexible Approach
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“Internet Time” Product Development yields at least three key benefits….
KEY BENEFITS
Sensing the Market
Testing Technical Solutions
Integration
How? Examples
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We’ve Got Rhythm!
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What Went “Wrong” at Medtronic?
Other Examples?Problem Source
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A New Management Philosophy
What? How?
Sacred Commitments
A Sense of Urgency
Productive employeesare happy (not reverse)
Managing means responsibility, not status
You only get what you measure
Focus on market share
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Measuring Product Development Performance
Measure? Accuracy?
Speed
Cost
Innovativeness
Product Quality
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A New Incentive Scheme
Implementation Challenge?
IncentiveScheme
Goal
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Product Concept Definition
• Environmental Assessment• Technological Assessment (Unarticulated Customer Needs)• Environmental Assessment (Articulated Customer Needs)• Brady Business Objectives (??)
Feature Definition Process
• Feature Tradeoff Process• Market Value Assessment• Feasibility Assessment Process• System Definition
A “Balanced” Product Design Process
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Processes & Practices
Benefits Implementation Challenges
Speed
Platform Strategy
Documentation
Phase Definition
Rhythm!
Market Input
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How did the Medtronic plan change?
Radical
Off the shelf
Producttechnology
Breakthrough
Platform
Derivative
ProductSupport
Entirely newbenefit Improvement No change
Marketing Impact
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A Strong Platform Strategy Enables…
• A Novel Customer Value Proposition….
• In New (and Fast-Growing) Markets….
• Protected from Direct Rivalry….
• Achieved at an Effective Cost….
• And Reducing the Cost of Future Development Activities…
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Does Medtronic’s strategy encourage cumulativeness?
ExampleTypes of Cumulative Innovation
Encouraged by Platform Strategy?
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Managerial Implications Cool-Down!!
• Over the past two decades, platform-based strategies have become powerful weapons for leveraging innovation investments across markets, facilitating diffusion and commercialization strategy
• Rather than a focus on budgets or technical details, platform strategy links resource allocation, platform architecture and firm strategy
• Overall, development strategy should encourage "ownership“• Translating new technology into competitive advantage requires linking
commercialization to the firm’s overall strategy• NB: Derivative innovation results in, at best, incremental profit.
• Challenge lies in implementation• Using a strategy to make choices requires commitment to a process and
philosophy at the most senior levels• Effective product development requires sacrifice in effort, risk, and design