GETTING IT RIGHT THE FIRST TIMEMARK MUNDAY, CTO ELSTER GROUP

April 20th, 2012

DisclaimerEcclesiastes 1:9

“What has been will be again, what has been done will be done again; there is nothing new under the sun.”

An interesting quote for an innovation conference – hopefully there are a few new things under the sun, however…

Not much today, Much of this presentation is not original with me, but unfortunately I do not remember on whom I am building, or from whom I am stealing.

Also Note: I will use some hyperbole today to provoke thought… Please don’t hold it against me.

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GAS

globalmarket share

Elster Group (NYSE ELT)Major global provider of Electricity, Gas, and Water Measurement & Control

in cumulative shipments

globalmarket share

ELECTRICITY

globalmarket share

Metrology, Control, and Utilization

Smart Metering, AMI, and SmartGrid

Communications & Energy Management

2010 REVENUES: $1.8B, R&D: over $100M

Enabling Conservation,

Efficiency,Choice

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Why Innovate?

Make a product?

Cost Improvement?

Use new technology?

Complete a project?

Have something to sell?

Keep up with competition?

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Why Innovate?

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Innovating under Tight Resources or Financial ConstraintsAlmost all innovation in today’s business is under tight

resources and financial constraints

The days of huge corporate R&D centers are gone Investment impacts are measured in financial quarters

Investment is still good, but payback needs to be clear and almost certain

Need to get it right the first time!

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Get it right the first timeCommon complaints;) Specifications were too thorough Development estimates minimal development cost Development included too many features Development was too fast Development costs came in below projection Product did not require enough changes in manufacturing Product cost came in below projections Product/system is too simple to use Product is just what the customer told us

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Get it right the first timeWhy? Market windows do not stay open long IP windows are defined well ahead of the market window The greatest cost/time impacts is doing something again

Making an engineer 10% more productive is great, but it is not a matter of life or death for most businesses

Missing a market or IP window can be a matter of life or death for a business

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Getting it right the first time!Hinges on the definition of “It” and “Right”

“It” A commercial product is great, but… The focus is on sustainable profitable business growth “It” is processes that align the business to sustainable offerings

(as budget and timing permit)

“Right” Similarly, perfect is great, but striving for perfection is dangerous The target is to Be Sufficient, but Not Less!

This is not mediocrity! This is ultimate knowledge of the market and the business

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Getting it right the first time!Target to Be Sufficient, but Not Less!

Some of you are still thinking I am talking about a product I am not!!! I am talking about your innovation that will drive your business

However, products (including systems) should have… Features target customers will value and no more! Quality target customers will value and no more! Schedules meeting the targeted IP and market windows! Flexibility for reasonable requirement changes and no more! Maintainability for reasonable changes and no more! Cost target customers will pay for and no more!

Generally; Features, Quality, Schedules, Flexibility, Maintainability, Cost, and even Process must be optimized with each other

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Waterfall Development Process?? New product idea Start requirement process

– Detail commercial requirements– Look for technology– Research any new technology– Detail technical requirements– Start the design– Early testing

Validate Requirements– Prototypes– Talk with customers

Design finalizes– Massage and complete design– Finalize testing , qualification, and any certifications

Determine how to market the product Determine how to make the product Source tools and parts Product succeeds or fails in the marketplace

Process improvement focus: Concurrent manufacturing and marketing engagement

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Market Offering, Not a Product Development

Business DirectionMarket Opportunity Identification

Product or Project Opportunity DefinitionOpportunity Approval & Prioritization

Resource Allocation

Market Exploration

System/Product Introduction Requirements / Plans: Systems, Services, Products, Logistics

Software

Firmware

Hardware

Detailed Spec.Design

Component TestProduct Test

DocumentationCertification

Review

Systems Test

Technical Requirements / Systems Engineering: Architecture, Rough Design, Make or Buy?, Logistics

Integration (Pilot)

Life Supply Planning, Resource Adjustments

Manufacture, SupportReleases, Improvements, StylingField Issues, Customer Support

Software

Firmware

Hardware

Detailed Spec.Design

Component TestProduct Test

DocumentationCertification

Review

Obsolescense

SupplyLogistics(Manufacturing)

FacilitiesPersonnelSuppliersTooling

DocumentationMaterialsTraining

MarketingLogistics

Sales/SupportFacilities

PersonnelIntroduction Plan

AdvertisingSamples

ABB TrainingCust. TrainingDocumentation

InformationLogistics(IS)

StylingPricing

Order EntryCustomer Specs

LabelingThird Party InfoCust. Reports

Admin Reports

Supply Verification

Market Introduction

Detailed Product Requirements / Plans

Release / Development Hand-off / Introduction Completion

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Product Introduction

System/Product Introduction Project

Development Project(s)

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Verbalized Top ComplaintsDevelopment: Is taking/took to long! Had too many bugs! Designed the wrong product! Wants me to give them a prioritized list!

Sales/Marketing: Doesn’t know what it is doing! Keeps changing their minds Can’t manage the customer! Requirements come from the competitor’s latest brochure! Will not give me the priorities!

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Agile Development Process?? New product idea Start product development

– Generate core requirements – Look for technology– Research any new technology– Start the design– Early testing

Requirements refinement– Prototypes– Talk with customers

Design iterates– Massage design, and retest on fly– Complete design and any certifications

(May re-start development. May abandon the development) Determine how to market the product Determine how to make the product Product succeeds or fails in the marketplace, but iterated enough to succeed???

Process improvement focus: Completing subtasks Concurrent manufacturing and marketing engagement

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Six core issues impacting Innovation• Development working in a vacuum

– Developing what they think is right without a strong tie back to the market and business– Designing for current competitor products, and not future customer needs

• Commercial specifications are unrealistic or incomplete– Too much time working the impossible , typically results in development and product/system costs being

too high.– Or development doesn’t understand the details behind the customer use and hence misses critical needs

• Basic research not being done and a competitor surprises the industry– Fundamental research takes longer than most projects have– Fundamental research done within the project may be implemented incorrectly with field problems

• Development generates a product without planning the system– Needed tools are missed , delaying product acceptance– Or worse, the product is unacceptable and must be re-architected

• Development missing sufficient abstraction– Designs for a specific product with limited planning for future products or variations– Causes major redesigns of products and system with each new feature

• Many times there is no organization to handle the day-to-day issues of customers, sales, supply, manufacturing, and projects.

– Development is interrupted repeatedly in its projects– Many times with major issues taking weeks or months.

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Getting it right the first time!Requires Knowledge

Industry Business Technical

Vision Guts Preparation Process Flexibility Focus Engagement

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Customer Satisfaction (Prof Noriaki Kano Model)

Not enough to ask what customers want!

Must be there: Knowledge of their

business Matching offerings

to their unexpressed needs! F

eatu

res

Satisfaction

Expressed

Exciting

Expected

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Vision and DisruptionExample below: Mechanical produce with… Numerous enhancements and cost reductions over 60 years

Very happy customers, and dominated by 2 suppliers Very cost effective - Renowned for high quality and performance Intricate product with industry accepted compromises

Electronics came along, led by non-dominate player Reduced some industry compromises and added testing features Initially; more expensive, less reliable, and harder to read Shortly; eliminated original product by dramatically reducing compromises, adding features, and

reducing operational and first costs

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Mechanical Hybrid Electronic Fully Electronic

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Market Growth during Transition (Reagan Years?)

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Vision and DisruptionExample below: Disruption continues… Electronic products allowed

Lower costs Features not previously possible in the original product New Advanced products which expanded/displaced some of the original market

Previously Dominate players Scrambled to catch up in Hybrid Electronic space Led Fully Electronic and Advanced products Hybrid leader then scrambled to catch up

Market expandedElectronics allowed New Products New Products displaced Original Product

and significantly grew the market

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Vision and Guts – A roleA key someone must (at least for a product or product line)

Understand: What they don’t know, whether it is important, and

how to find needed answers The customers’ businesses Their processes, problems and costs Potential current and future solutions for their needs How to partition these needs into potentially profitable offerings Work across the organization and industry - communication

Take ownership of the offerings: Empowered to define the offerings Make tradeoffs to optimize the business from the offerings Champion the tradeoffs internally and externally

These are unique and rare people The role often defaults to the developer – good or bad!

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Vision and PreparationCompany Vision feeds Core Research Company should have a vision of its future industry and offerings These Products, Systems, and Services define the technological needs

Potential strategic suppliers Potential development or business partners Needed core research

Must select / prioritize core research Assure current offerings critical to the business future are protected Research potential adjacencies and future core technology needs Consider optional technologies or technology evaluations Consider acquisitions Partner where appropriate

Don’t expect most research to ever be used – so invest wisely Define intellectual property and protect appropriately Attempt to have core technology available ahead of market need

Process and FlexibilityThere is a process, it just may not be documented or very good! First and foremost, communicate

Share industry knowledge – sandwich seminars, intranet, defined mentors, etc. Force a time to dream - informal or formal cross-business industry/concept brainstorming Appropriately specify and prioritize Welcome change, but acknowledge impact Never forget the concept of sunk costs , ie, don’t be hesitate to stop a poor development

Every innovation is part of a system – architect the system Impact on advertising, channel partners, ordering, sourcing, manufacturing, support,

obsolescence Internal and external testing, configuration, control, lab & field tools, security, privacy, asset

management System applications

Every successful innovation will iterate – architect for easy modifications Within product, software, or system design in layers with as generic interfaces as possible Don’t design a specific product but an integration of defined functional blocks that can be

easily replaced Every innovation is not the same – manage risk appropriately

Consider all risks – time to market, impact on customer, quality, customer acceptance, future cost, etc

An offering for one of many customers usually has less risk than for the generic market Product in critical processes usually has more risk than a product for entertainment

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Focus and EngagementIsolate Development, but not too much Development personnel need to focus on the development at hand

Should engage with customers up-front in a development – clarify and gain customer endorsement

Minimize interruptions Are still required for highest level support issues

Separate Engineer(s) are needed to focus on customer, sales, supply, manufacturing, and project high level issues allowing development to focus Should be very capable technical decision makers (senior engineers) Must get their enjoyment from solving lots of problems May lead the qualification of the offering Support minor variants of existing offerings Are the contact for development on any high level support issues Development is not released until this engineer accepts the offering

Development personnel should support initial deployment of the offering See first hand any issues and address quickly Feel the field organizations’ and customers’ pain – gain empathy Remain engaged with the customers and their business needs

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Getting it right the first time! - PlanStrategicBusinessPlanning

StrategicDevelopment

Planning

TacticalBusinessPlanning

TacticalDevelopment

Planning

ManufacturingPlanning

Research

Development Opportunities

Minor Product Releases

Facilities / Capital / Resources

Inventory / Styling

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Appropriate actions at the right time!

Getting it right the first time! - PeopleHaving the right people…

in the right roles… on the right teams!

Developing the needed knowledge! Having vision! Communicating broadly! Making the hard tradeoffs and needed decisions!

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