New Products Development: Implementation

This post outline several issues that are required to be analyzed with deeper detail and suggest some guidelines to implement an open platform for the development of new products under a collaborative environment. A review to the existing literature about theoretical knowledge and empirical experiences regarding virtual organizations, mention there is two principal roles, the business orchestrator and the team members. If you consider the project under an entrepreneurial approach, the participant seems to be the more feasible role, this allows to integrate our project into an existing networks building on our own  strengths and expertise, but if we have in mind a more academic perspective or we have in mind access to a big budget for implementation, the role of orchestrator is the one to consider. Along the post the orchestrator role is going to drive our thoughts.

“Clospen” approach

The open nature of the process, integrating a big number of actors like, potential customers, suppliers, designers, manufacturers, etc. some of them competitors among them on other projects, some of them with different interest on the project, place the platform in a sensitive situation. Is everybody able to contribute in the same way? Will be everybody granted with access to all the information? Is the platform or the management team able to handle a big number of people and enterprises? There is several questions like this that induces to consider an hybrid approach, open and close at a time, “closepen”. It will be one of the project goals to find out a balance between openness and control and this is a key value of the project hen defining the architecture of the business network, the participants and their reward mechanism.

Information Technologies Platform

There is no doubt IT is the tool that makes possible integrate at the lower transaction cost the people, companies and resources required to make possible this concurrent a collaborative way of develop new products, but IT is a broad territory to explore. Within this project we have to evaluate the existing collaborative software platforms and their suitabliness to the project, furthermore, to analyze the philosophy of the platform, issues like:

• Build a complete new platform from scratch?
• Integrate existing tools better suited to our product types?
• Use open software or proprietary solutions?

Some existing tools we have to consider, evaluate pros and cons are:

• Proprietary ERPs like SAP NetWeaver :

• Open code ERPs like Openbravo:

• Collaborative tools like Webex from Cisco, Basecamps or Groove from Microsoft:

The right way to evaluate the tools is verify if they can perform the business process the open platform we are developing requires.

Business Network Members

In fact we are defining what is called also a “virtual corporation” where some activities are considered “core”, usually they are the marketing or brand management, the R&D and the global management, in this case the orchestrator. Other activities are “critical” but not core, like sales, manufacturing and logistics, and other are only required like administrative, general facilities, etc. Along the project we have to review what activities and members fit into each category.

Regarding the nature of the products to develop we can define at a first glance the following core activities which could be addressed by a corporate team or core network member:

• Marketing Team
• Medical Team
• Electronics Team
• Materials Team

Along the project we have to detail the capabilities and expertise of the referred teams or network members.

Business Network Processes

Inspired by the Lean Design For Six Sigma techniques we have to define the relations among expert team members and network enterprises.

The project goal would be to define the activities flows among different teams or functional network members and how they are related with the collaborative tools we decide to use.

Innovative Reward Mechanism

There is a lot of contributors, and we have to evaluate non standard reward mechanism like dynamic allocation of shares ,  reputation, shared interest, etc.

I think a key success factor of the loose coupled network we are defining is the way the contribution of each member is going to be performed. All participants need to be committed with the project accordingly the relevance of their task and rewarded in the same degree. Some also innovative formulas could be considered, like:

“Liquid property”, this is to find a mechanism to distribute shares dynamically according the contribution of each participant. Something between the capitalist and cooperativist models.

“Sponsor an artist”, is a new way to finance new artist by joining through a website the required number of people to pay the disc edition. The rights of the song will be shared proportionally. Examples: “El cosmonauta” film and the saga “The lord of the rings”.

Open Platform for New Products Development

Current Situation

Major Complications

Proposed Solution

Succeed Metrics

New Products Development: Proposed solution

The difficulties outlined before could be diminish with the help of new technologies and enterprise practices that are gaining momentum today. The widespread of telecommunications and broadband, the virtualization of services, the acceptable level of performance of the knowledge management tools, the growing of enterprise networks, etc. are becoming tools the trigger the acceptance of a “collaborative” way to address problems and work in a “concurrent” way rather than linear.

Lets describe a little bit some of the key features the “new Supply Chain” we are proposing has to integrate.

Concurrent: The previously mentioned “linear approach” fits with the most usual up to day department structure of the companies, the fully independent units one, were inputs and outputs from a given department were clearly defined and planned in advance, “slowering” and “bureaucracing” the whole creation and development process because the mismatch of the input/output needs among different departments and the suboptimum solutions reached. The rational behind this is that the optimum of the whole chain is not the optimum of each stage. The concurrent approach is a more “collaborative” development process, were all the implied agents work together pursuing a global optimum. We have a practical example in the way the European Space Agency is facing the development of new satellites by the use of the Concurrent Design Facility.

The concurrent development practices will solve the lack of relevant information at different stages of the project and of different actors.

Open: Traditionally research and development activities were conducted inside the company, this is what is described by H.W. Chesbrough like the “close innovation paradigm”. The advent of several factors like the increasing availability and mobility of skilled scientist, the mature and widespread of venture capital markets and the increasing capabilities of external suppliers, leads to a new status where the silos approach was not the best fitted to address new innovation challenges and as Chesbrough highlighted the “open innovation paradigm” appears. We are in an abundant knowledge landscape where we can do a great work by searching and integrating external knowledge in new and different ways to create new products and services that fits our own particular goal.

The openness will contribute to integrate real customer needs from the early beginning, target niche markets and be open to existing solutions from all over the world and integrate the latest and more appropriate technologies.

Interactive and iterative: The development of a new product is a inherent trial and error process, and in the same way in the software development industry there has been a widespread transition from the “Waterfall model” (linear or sequential process) described before to the “Spiral model” (iterative process) we can translate this experience to other industries. The trick is to systematize in an agile way the traditional “trial an error” process, and their inherent learning nature.

Lean: We are designing innovative products that has to be  manufactured in a reliable, fast and cost effective way. This principles has to be accounted from the early beginning, this mean the pertinent Lean Design For Six Sigma tools has to be considered and integrated in the framework we are defining.

LDFS practices will be the way to an acceptable level of market performance at first attempt, which by the interactive and iterative nature of the process will led to an continuous improvement.

Virtual: The open nature of this new approach implies to join the effort of a big amount of people spread all over the world. Some like “WEB based” platform has to be used to integrate interaction and information flow. The approach of “virtual corporation” or “knowledge broker” relying on the intensive use of information technologies and knowledge management tools is a key enabler to implement the previously mentioned open and concurrent features.

Virtually is the key to minimize transaction cost, be agile and flexible to build custom supply chains to address a particular project.

Reward: The open nature of the approach means some clear and reward mechanism has to be conceived. There are several agent involved with different commitment. Reward has to be accordingly.

I think this new way to develop new product is going to be the main trend in the industry in the coming years, the earlier we start to apply this design practices into existing organizations or the new ones, the higher chance to be on a privileged position to address the market. The aim of this project proposal is to integrate all this factors in a unique model and give the design guidelines to build a software platform or configure an existing one to support this open design activities into a virtual framework.

Open Platform for New Products Development

Current Situation

Major Complications

Proposed Solution

Implementation

Succeed Metrics

New Products Development: Major complications

Under some circumstances, even what was highlighted as an advantage could potentially become a disadvantage besides the inherent inconveniences of working sequentially. Let’s consider the mere relevant ones:

Change on the requirements: Although ideally the design is “frozen”, the customer needs are really evolving because of two factors: first, the customer doesn’t specify clearly and completely what they want and second, competitor are proposing different and sometimes perceived better for the customer. The linear and siloed structure makes difficult to introduce changes on real time during the process.

Technology changes: At present days there are so many players that new technologies are available more often. It is highly risky to introduce a new technology during the development process of a new product without placed the project into a technical risk (if the promised solution is not so) into a planning risk (trials use to take more time than scheduled in advance) and into a financial risk (the former referred issues are strong capital consumers).

Process coupling: The linear structure assumes there is no coupling among functions, but real projects, real products use to be interdisciplinary and interfunctional in a way that a change into …. Although we have to strongly rely on modularity, until an industry has not maturate, which use to be the case of many innovative products, the interfaces that makes possible uncoupled modules are not well defined. Even at this stage customization sometimes requires a certain degree of coupling.

The “wicked problem”: This is, a problem whose requirements and limitations cannot be entirely known before completion.

Time consumption: To proceed in a sequential way requires to finish one stage before starting the next.  this produce an accumulation of delays that makes the overall

Real projects that develop real products has to face daily with that issues, and the result is that we do not get the best result a the first attempt and most frequently several iterations are required. The “time consumption” phenomenon gain relevance and a key success factor nowadays suffer, the “time to market”. The following factors drive new product development today:

• Develop according real customer needs.
• Short “time to market”.
• Integrates latest technologies.

The drawbacks of the “linear” or “sequential” model outlined above makes really difficult to achieve that goals.

Open Platform for New Products Development

Current Situation

Major Complications

Proposed Solution

Implementation

Succeed Metrics

Open Platform for New Products Development

I am going to address an online  exercise, which is to define a supply chain architecture to accomplish in a novel way – open and collaborative – the “conception, design and manufacturing” of new  products. But what kind of products we are speaking about? Defined on this way the scope of the project is too broad, so with didactic purposes and based on a preliminary market research we are going to concentrate on products for a couple of   “promising areas”, the sport market and the health markets. Attached an examples of the type of products that fit the referred markets:

Products for the sports market

Example: Nike’s  shoe with an accelerometer implanted  which measures distance and velocity and sends that data to an iPod nano.

Products for the health market

Example: A jacket to wireless monitor electrocardiogram data.

All these kind of  products had a common base, they are based on the core capabilities of the multidisciplinary network of people and enterprises we try to integrate into what we call a “development platform”. The key members of the network or platform hold and strong knowledge on the following disciplines:

Wireless Sensors: Electronic devices that monitor physical parameters and spread them to where they are required by means of wireless transmissions.

“Textronic”: Textiles and Electronics that gives new functional properties to materials.

Composites: Materials with inherent properties that can be controlled at design time and be tailored to the application.

“Strange Diseases”: Doctors with expertise on how to address non common diseases.

Current Situation

Major Complications

Proposed Solution

Implementation

Succeed Metrics

Zara: IT for Fast Fashion

Zara, Inditex group, is a phenomenon on the garment retail industry and a reference for many Worldwide medium size companies that looks on Zara the way to a global succeed without leaving the business where they are, regardless how competitive it is and without leaving headquarter location regardless how away are form the hot hubs.

This post tries to highlight some relevant topics regarding the relation between Information Technology (IT) at Zara and their competitive strategy and the role innovation plays.

Where is the innovation at Zara? What is innovative about Zara’s approach?

At a first glance we are prone to say Zara innovation is on their business model, also in the way he arrange their supply chain, or in the way he collect customer needs to develop new products and many other surprising practices … it seems to be a company plenty of innovations.

But rather to address this question under a taxonomical perspective (application, product, process, marketing and business model innovation), we can rely on the conceptual framework provided by Geoffrey Moore when he compares the classical “product life cycle curve” with the “technology adoption product life cycle” and going an step further, declaring the kind of innovations can occur at each stage of the cycle when “aligning innovation with the life cycle”. In this way we can realize how impressive Zara approach is regarding innovation and explain why when we ask this question a branch of different answers appears.

Let start to apply the analogy.

In the early market, when a new technology is introduced, it is embraced by the early adopters, and if it succeed follows a fast and growing ramp of acceptance. In the same way, looking to the product itself, the garment, Zara follows the fashion trend innovatively, they generate new product “on the fly” with inputs from the customer aims (to follow Rock star dressing style) and customer practices (what at the end customers really buys). Zara collect this market inputs with design teams participating on relevant events all over the world and with the help of real time sells data from their stores. There is also fashion early adopters and Zara has the tools to track the trend. Furthermore, Zara has the trick to cross the chasm, product fertility and market fertility, this means produce a broad range of designs looking for the successful one (we will see later the way to this on a cost effective way – small batches– ) and test them on different markets (unsaturated logistic chain). This practices were not usual on the garment industry until Zara arrives, Zara innovates.

When there is a successful collection, we are at the early main street following G. Moore jargon, Zara innovates on the “process” to attend such a growing demand, at this stage we are speaking about procurement, manufacturing, distribution, etc. Here the innovation is on the application to the fashion and garment industry what previously was applied to the automotive industry by Japanese, this is to manufacture a product driven by the demand “pull” (Toyota techniques) instead of “push” products to the market based on demand forecast.

With mature products, Zara try the “experiential” and “marketing” innovation. That’s why the shops layout are carefully defined, the shops located on premium areas,  the shops redesigned every four years and created a rich portfolio of brands.

Zara don’t stop, when under a traditional point of view all the leverages had been attempted, Zara keeps innovating defining a new “business model” in the garment-fashion industry, that is changing from a model of “4 collections” a year (for seasons) to a “collection every 3-4 weeks”. In this way sales turnover could dramatically increase.

What strategic benefits does Zara get from its IT investments?

A  benefit is strategic  for a company if it is the enabler to provide superior performance to the company and is coherent with the company strategy. The Zara strategy is twofold,  it wants to be able of closing the loop between clothing design and sales in the shortest possible time and to differentiate offering new fashionable designs. To attend this challenge the company has to be agile and flexible. To achieve an outstanding level of agility and flexibility the company relies on the way people is organized and the way information flows inside the company, that’s why Information Technology plays a key role inside the company. Roughly, the IT Zara invest is the one that allows Zara to capture the customer demand on real time (PDA), is the one that allows to be fast on the logistics (POS and MODEM), is the one that allows to make fashionable designs fast and in a cost effective way (CAD), etc.

What are the most important aspects of Zara’s IT strategy?

Once we know Zara rely partially on IT to be a fast and flexible company, they will use an IT technology that solve – not creates – problems. Regarding the POS, which is the case gadget, it has to be upgradeable on a day by day basics, while the stores are open and selling, it has to be possible to set up a new device without technician presence, and because the business process are embedded  into the software applications, they know better than none how to fast attend the new needs, that’s why they have their own developments.

Zara manages the use of existing technologies and their application to their needs, and also manages a good tradeoff between in house developments and outsourcing.