Basic principles of product development with experiences in HVAC and other B2B products)
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1) The document discusses seven principles of lean, rapid, and profitable new product development (NPD), as outlined in research by Dr. Robert Cooper and Dr. Scott Edgett. 2) The principles include being customer focused, front-end loading with market research, iterative ("spiral") development with customer feedback, using cross-functional teams, establishing NPD metrics and accountability, maximizing productivity, and using a stage-gate innovation system. 3) Following these principles can help increase NPD success rates and productivity, which are often low due to factors like lack of customer input, unclear project scope, and functional silos within organizations.
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Basic principles of product development with experiences in HVAC and other B2B products)
- 1. 1 A.T.E. Enterprises Private Limited (Business Unit: HMX) V2.2 Jul 2019 Basic Principles of Product Development Experiences in HVAC and other B2B products Kalpesh Karnik, 1 November 2019 Technozion 2019, NIT, Warangal
- 2. 2 Contents HVAC in industry Importance of new product development and innovation Root causes of NPD failure* NPD productivity* A.T.E. and HMX Seven principles of lean, rapid, and profitable NPD* * ‘Lean, Rapid, and Profitable New Product Development’ by Dr Robert G Cooper, who has studied 3000 NPD projects over 30 years, and Dr Scott J Edgett, who has 20 years research and observation of best practices in NPD
- 3. 3 A.T.E. at a glance 8 business areas 9 group companies 6 core technologies 11 locations 50+ renowned principals 500+ world-class products 5000+ happy customers
- 4. 4 Our core technologies Textile Spinning Print Control and Vision Systems Heat Exchange Internet of Things Static & Ink Control Wastewater Management
- 5. 5 Business Unit: HMX (cooling) Unique, energy-efficient, and eco-friendly products for space and process cooling Over 60 million CFM installed and more than 12 million sq. ft. of area cooled worldwide! Established in 1998 Designs and manufactures unique, energy efficient, and eco-friendly cooling solutions based on Indirect Evaporative Cooling (IEC) Unique, patented technology with patents granted in India, US, Australia Manufacturing unit spread over 30,000 square feet in Bangalore, India Installations in 9 countries worldwide Products Evaporative air cooling Treated fresh air systems Hybrid air-conditioning Industries served Automobile & auto ancillaries Commercial buildings E-commerce and fulfillment centres Engineering Food and beverages FMCG Footwear and moulding Pharmaceuticals Print and packaging
- 6. 6 HVAC product/solu tion Application • Comfort • Process Costs (capex and opex) Customer Buyer User Operator HVAC in industry Heating, Ventilation and Air Conditioning • In most Indian conditions it is about cooling and ventilation • In most applications it is about human comfort At its CORE, it is about productivity and health!
- 7. 7 Importance of product development and innovation
- 8. 8 INNOVATION Research & Development Fundamental Research Applied Research Product Development Markets, Business, Expense Academics, Institutions Companies and Organisations
- 9. 9 Growth And SUCCESS! Profitability Innovation ability Top performing companies have 5 times more effective NPD than poor performers 30% of company sales in the preceding 3 years is the result of NPD* Importance of new product development (NPD) in industry * ‘Lean, Rapid, and Profitable New Product Development’ by Dr Robert G Cooper and Dr Scott J Edgett
- 10. 10 Only 1 in 7 concepts becomes a winner 44% NPD projects fail to achieve the profit targets 28% of businesses do not measure NPD productivity Development and innovation is a challenge BUT!
- 11. 11 One of the most obvious ways to develop a more economical or price competitive product is through cost cutting. However, cost-cutting can only be used to an extent Acquisitions are a fast method to acquire technology, but they are not cheap and the ‘hoped for’ innovation may not happen Thus: INNOVATE OR DIE! Management’s dilemma: faster and better vs. cheaper
- 12. 12 Root causes of NPD failure Me-too product No-front end homework Lack of customer inputs Project scope creep Functional silos and no real project team (no cross functional team or CFT) Far too many projects – no focus Lack of competencies
- 13. 13 Usually companies do not report NPD productivity as a business metric NPD productivity is usually low because of the reasons of NPD failure Measuring NPD productivity Industry Best Average Worst Consumer goods 80 14 5 Utilities 10 5 3 NPD productivity* = New product sales as % of sales R&D spending as % of sales *Usually a 5-year moving average
- 14. 14 Seven principles of lean, rapid, and profitable NPD
- 15. 15 Productivity = Profit achieved Cost and time to do project Can ‘lean’ approach be applied to NPD? Lean approach will try to reduce the denominator which can be damaging Only emphasis on cost and time reduction may lead to shift towards small, low risk, easy to do projects. Fail to generate significant profit that has gain in productivity.
- 16. 16 Can ‘lean’ approach be applied to NPD? Product development is: much more variable and uncertain project based and not in continuous flow less repetitive and less predictable, unlike manufacturing difficult to plan creative and abstract thinking required to deal with uncertain and incomplete information
- 17. 17 Principles of NPD Principle 1: Customer focused Principle 2: Front-end loading (homework) Principle 3: Spiral development (iterate) Principle 4: Holistic approach (CFT) Principle 5: Metrics, accountability, and continuous improvement Principle 6: Maximising productivity Principle 7: Stage-gate innovation system (break it down)
- 18. 18 Voice of customer (VOC) is not voice of salesperson NPD team should have face-to-face meetings Design the product based on inputs from the customer, not on what you think it should be Important decisions to be based on VOC Constant customer interaction Broaden base of customers Principle 1: Customer focused ‘Marketing is too important to be left to marketing people! Dr Robert G Cooper; Dr Scott J Edgett
- 19. 19 WHO IS A CUSTOMER? Customer, customer’s customer, till the level of user Solving customer’s problem is CRITICAL FOR SUCCESS Principle 1: Customer focused Air conditioning solutions are for whom? Developers? Contractors? Facility owners? Occupants? Are all occupants the same? IT office/shop-floor/packed classroom What about the operator? Residence – end user is operator Industry – Utility staff (skilled) Shops – unskilled staff/watchman!!!
- 20. 20 Small and medium commercial spaces Non-technical operators Single phase power Multi-speed Price sensitive For example: HVAC product serving a different market: Principle 1: Customer focused Improved cooling over direct evaporative systems, 4-5°C lower Lower humidity levels, option of sensible cooling also (indirect only) 40% lower operating costs than ACs 100% fresh air! Technology offering of 2-stage, Indirect Direct Evaporative cooling (IDEC): Technology available, but what about the product?
- 21. 21 Existing product for industry Redesigned product for small commercial spaces Principle 1: Customer focused Three phase Single phase Electrical terminals Easy Connectors PLC Simple controller Industrial panel No panel
- 22. 22 Preliminary market assessment Technical assessment – challenges, probable solutions, development route, risk, IP situation, outside technology required, alliances required Source of supply assessment Market research Concept testing – present to customer ‘Value to customer’ assessment Business and financial analysis Principle 2: Front-end loading (homework) Product definition High level specs Project scope Target market Product concept Positioning (including price target) Value proposition Benefits to be delivered Features, attributes, requirements
- 23. 23 Rigid and linear PD is wrong Black box development After initial inputs, development team doesn’t interact with the customer for feedback during the intermediate stages of development Time is utilised and product is launched BUT ‘Not quite what we had in mind’ Principle 3: Spiral development (iterate) After winning $10,000 as the runner-up in the MIT $100K pitch competition in 2007, co-founders Sorin Grama and Sam White decided it was time to visit their target market, Grama says. “The reality was a lot different than what we had put in our business plan,” Grama (pictured above, left) says. “So different, in fact, that nobody wanted this contraption we were building”—a system that would harness the sun’s energy to produce hot water and electricity. “We realized we were just another classic case of a solution looking for a problem to solve.” * Promethean Power Systems • Rapid milk chilling without a diesel generator for village farmers * https://xconomy.com/boston/2016/07/11/promethean-founder-returns-from-india-with-lessons-for-entrepreneurs/ Today Promethean is a promising enterprise with over 1200 installations
- 24. 24 Things have changed in recent times! New product launched by competition, thus change in landscape Get something in front of customer early without spending much Iterate based on feedback Principle 3: Spiral development (iterate) IN 4 MONTHS ! Metal exchanger Plastic exchanger Exchanger in a chassis Chassis around the exchanger Converter industry (print and packaging) Heat recovery from solvent-laden air at 60°C Payback target of 12-18 months and cross-contamination resolved by 3rd iteration
- 25. 25 Principles of NPD Talents of people from different functions are important for success True CFT is required; the CFT must include members from marketing, engineering, R&D, sales, operations, finance, and purchase CFT reduces cycle time – silos cause delay Principle 4: Holistic approach with cross functional teams or CFT Popular metrics: revenue, profits, customer satisfaction, market share, on time performance, time to market, performance to budget Principle 5: Metrics, accountability, and continuous improvement Do the right projects for maximising productivity – while principles 1-5 focus on ‘doing the projects right’, the focus of Principle 6 is on ‘doing the right project’. Principle 6: Maximising productivity Break the development into a series of manageable and simple stages with increasing resource requirements. Activities are conducted in parallel within each stage via CFTs. Principle 7: Stage-gate innovation system (break it down)
- 26. 26 Successful product development requires individuals to have not just a multitude of technical competencies but also the ability to think like entrepreneurs. One needs to work with, understand, and sometimes practice, cross functional domains like sales, marketing, finance, and operations. Starting with the highest level of customer focus and front-end homework, the product development efforts should result in satisfied customers and growth of the organisation in a reasonable time. To conclude…
- 27. 27 THANK YOU
Notes de l'éditeur
- Elaborate on Productivity and Health Air purifiers is the new in thing Photos Three factors influencing HVAC products
- What comprises R&D At HMX 30% Applied research Laboratory, UL Research helps stretch the boundaries PD helps to implement technology
- Difficult decision to work against your existing products
- Because of the uncertainty of PD and hunger to show top line growth – acquisitions In the name of ‘synergy’ GE acquisitions M&M Sangyong, Peugeot Tata motors ; Jaguar and Landrover John Deere innovation
- Me too product Products with no competitive advantage| Management doesn’t demand to stand out| Aversion to risk from sales-force| Stress only on extensions| Modifications and tweaks only 2) No front end homework No due diligence – market study, technical assessment, financial analysis | If homework done, it is many times superficial | Excuses: No time, no money, too busy on other tasks 3) Lack of customer inputs Poor or little ‘voice-of-customer’ work done| No visits to users| Voice of salesperson is not a substitute to voice-of-customer| No attempt to listen to customer’s customer| Very few customers visited| No customer validation / or until its too late| CUSTOMER NOT AN INTEGRAL PART OF DEVELOPMENT PROCESS 4) Project scope creep Goal post is moved and scoring goal is next to impossible| Different people influencing project keep adding features even until completion| Changes due to ‘new information’ which should have come at the beginning – lack of front end homework. 5) Functional silos and no real project team (CFT) Relay race – department to department| Dysfunctional team rather than CFT| Wrong team leader| Lack of cohesiveness and common vision| Lack of commitment, accountability | Late joiners 6) Far too many projects – no focus Every project under-resourced| In-efficiency due to multitasking| Time wasted in switching from project to project| Projects take longer time or quality suffers 7) Lack of competencies – more the better
- Lean – time and cost
- Solve major customer problems Offer compelling value proposition Not easy to customers unmet and unarticulated needs In-the-field voice of customer work Understanding what is quality to customer – different than what quality dept. thinks Customer must be integral part of development process – scope, definition, development, validation and beyond Reduces time-to-market Often desired features and performance are opinion-based and turn out to have no benefit at all Acid-test : will the customer pay for it? Low price is a key advantage Work with innovative or lead customers on ideation Voice of customer research (before concept testing) Understanding unmet needs – NOT JUST REQUIREMENTS AND SPECS Hidden needs 2 types: Avoid or solve problem, point of pain To gain or seek benefits or values Find big problem, seek big solution Marketing is too important to be left to marketing people! Voice of customer is not voice of salesperson NPD team should have face-to-face visits Begin early, not for confirmation Important decisions will be based on VOC Constant customer interaction Broaden base of customers
- Difficult for companies to transcend markets
- Front-end homework actually saves time but often skipped to save time at start of the project! Build a project definition (project charter) - agreement on deliverables and resources, signed by all Avoid project creep – moving goal post! Some changes are unavoidable but not everything!
- Selling 100 -150 a year – export also