Nimble new product introduction: Collaboration and other myths
By Pamela J. Gordon, lead consultant, TFI -- Manufacturing Business Technology, 9/1/2008 12:00:00 AM
Technology Forecasters Inc. recently encountered a compelling new product introduction (NPI) scenario involving an OEM, a semiconductor company, and a printed circuit board (PCB) design firm seeking to bring the next generation of an existing product to market. The semiconductor company provides the memory parts requested by the original equipment manufacturer (OEM), and the PCB firm designs the board.
While the OEM is tooling up, its marketing department announces it has promised customers twice as much memory. OEM engineers ask the semiconductor company to provide a new memory module, and the PCB firm redesigns the board accordingly.
But the redesigned board doesn't fit the final package. Without knowing who the “other” is and communicating only through OEM engineers, the semiconductor company and the PCB firm try to find a solution. This collaborative effort—if it can be called that—takes too long, and a market opportunity is missed because the product ships late.
A manager at the semiconductor company blames the OEM's obsession with secrecy: “I have no idea who the PCB design firm was. It could have been one of a thousand companies. It would have been nice if all three of us could have sat down and talked.”
Our source admits to have encountered many similar situations, saying, “Secrecy and collaboration need to be in balance, and usually they're out of balance.”
Myth or reality?
Is collaborative NPI just a myth, as the semiconductor company case suggests? If it is, then the myth must become reality. The demands of launching new products are far too great for any one company to handle alone. The outsourcing model works best when the partners trust each other and are joined at the hip for the duration of the project.
The industry has many examples of successful collaboration. One recent illustration is the IBM Common Platform, an effort launched in 2002 between Chartered Semiconductor Manufacturing and IBM to jointly develop advanced technology and provide cross-foundry manufacturing capacity to mutual customers. Samsung Electronics joined in 2004. Infineon Technologies and Freescale Semiconductor also have some involvement.
By all accounts, the partners have successfully collaborated in joint development of the technology and process for making semiconductors at the smaller nanometer sizes.
The IBM example is about collaboration on a new manufacturing process—not new product introduction. But collaboration is collaboration. The industry has a number of other successful collaborations in NPI and other areas, proving it can be done.
Communication, organization, the right people skills—these are essential to collaborative NPI, but aren't necessarily the skills one finds in the best engineers.
To shed light on some of the fine points in successful collaborative NPI, Brian Fukumoto agreed to share lessons learned at Sunnyvale, Calif.-based Palm Inc., where he is senior director of product operations.
Among Palm's products for the mobile handset market are the well-known Treo and Centro—smart phones that were the result of collaborative NPI with original design manufacturers (ODM). Palm isn't the biggest OEM in its space, but it has a thriving business. Revenue was $1.32 billion for the fiscal year ending May 2008, and Palm's U.S. smart phone market share was 13.4 percent the first quarter of calendar 2008.
With a workforce of 1,200, Palm relies on ODMs to bring products to market. Palm's NPI model involves outsourced design, manufacturing, supply chain management, and fulfillment. This is a popular model for midsize OEMs, so Palm's experience has broader applicability.
Proper partnering
Successful collaborative NPI begins with vetting and selecting partners, Fukumoto says. The OEM must understand how well the potential ODM or contract manufacturer aligns with the needs of the particular project—i.e., the partner's technology capabilities, supply chain partners, quality management systems, cost, IP licensing arrangements, and the like.
“Palm's strategy is to team with ODMs highly capable in design and manufacturing,” Fukumoto maintains.
In selecting a partner, “There must be good relationships across the entire organization from top to bottom,” he adds. “You especially need executives willing to participate in this process and establish dialogue as things go along. We try to build deep relationships because the ODM is truly an extension of Palm.”
Once the partner is chosen, the focus is on terms of the engagement. Palm uses development & license agreements and manufacturing agreements tailored for its joint development model. Fukumoto says the partners also must agree on a statement of work, including deliverables, roles and responsibilities, quality and performance standards, and milestones backed by payments and penalties.
Palm believes the last point is crucial, but as Fukumoto points out, according to Palm's ODM partners, it is rare for OEMs to spell out specific partner incentives, other than the possibility of future work.
“You'd be surprised that milestone/performance management isn't that common with other OEMs, which could be a unique aspect of Palm's joint development model,” he says.
The OEM and its partner must work from the same set of structured development processes for everything from phase-gate reviews, design for manufacturing, failure analysis, and configuration and change management. They need to decide which of them will head up the design-for-environment decisions. This action is still new enough that OEMs are typically taking the lead, Fukumoto says. Asian ODMs are still coming up the curve, but he anticipates this will change as design-for-environment checklists are more widely adopted, and ODMs add eco-design competency to their offerings.
Let the OEM drive
Managing the partnership is the job of the OEM. The execution of the management function is especially crucial for small and midsize OEMs like Palm because they don't have an extensive staff to throw at problems, Fukumoto argues.
TFI has noticed that in some cases, midsize OEMs are better than larger OEMs at managing these collaborative projects because it is so important to their success.
“You need very capable people on your side to keep the ODM engaged,” Fukumoto says. “They need to share enough of your success that they feel the project is a win-win.”
Palm and the ODM typically have dedicated NPI project teams. Palm positions some staff to work onsite at the ODM, and the ODM assigns some staff to work onsite at Palm during appropriate phases. Palm is ultimately accountable for delivering the new product, but the ODM shares the responsibility, Fukumoto notes.
Senior management from both partners must continue to stay abreast of the programs. And project team members must maintain a steady flow of communication through weekly program level meetings, virtual meetings of the manufacturing team, written status reports, and quarterly business reviews with bilateral scorecards. There's also a formal path for problem escalation and resolution.
Fukumoto also stresses the importance of a solid product life-cycle management process and system to keep partners in sync on crucial product data, allowing them to manage changes across Palm's supply networks. Software for tracking bug management, and wiki technology for less formal communication among partner engineers are indispensable tools, he adds.
Before adopting any of these tools, however, Palm had the good sense to let those who would be using them the most try them out. “Our engineers looked at various tools and concluded which ones would work,” Fukumoto says.
Rank-and-file engineers are good at selecting the right tools to use for collaboration, but they don't always make the best project managers. Collaborative NPI demands excellence in all aspects of project management, TFI clients say.
Naperville, Ill.-based Tellabs, a midsize telecom equipment supplier, relies heavily on the proper execution of its outsourcing model with contract manufacturers. That's why the NPI organization at Tellabs evolved its understanding of the best skill set for NPI program managers.
John Quast, group program manager for NPI operations at Tellabs, has identified skill areas his program managers must have. First is a solid grounding in all aspects of program management—i.e., how projects are initiated, planned, executed, and controlled; as well as change management and bringing project to close.
These generic program management skills are similar to those required for IT project managers and production managers. But Tellabs recognizes its NPI program managers need different technical experience from managers in other areas of the company. Quast seeks NPI program managers with experience in at least one of three areas: materials, manufacturing/process engineering, or test engineering.
Finally, Tellabs NPI program managers must have some supply chain experience and management with a technical focus. “This experience is key for someone to excel in the NPI role,” he notes.
When push comes to shove, experts like Quast say leadership capability is more important than any functional area of expertise. NPI program managers must be especially skilled in getting stakeholders involved and influencing others over whom they don't have direct responsibility.
