2 management - School of International Business and ...

413 Production in the Global Environment – Analysis and Best Practices
2 PRODUCT DELEOPMENT
The starting point for each successful production and product is the development process, to
come up with new and innovative products and processes. On the other hand, the money spent
for Research & Development is low, as compared to the overall spending. So typical automotive
companies are spending around 4%, HiTech and pharmaceutical companies up to 12%. But as
described in Business Week of October 2009, it is the process and not the Pocket Book. Apple is
spending less R&D money as compared to the industry average, and is still considered the most
innovative company globally. Best Practice companies have a centrally managed development
process, with localization and adaptation to the local markets. Typical Development KPIs are
listed below and allow companies a comparison within an Industry Sector, and can be used as
Benchmark on the way to world class:
– Time to Market
– Development cost
– Engineering changes after manufacturing release
– Percent of projects turned into marketable products
– Part number reuse
– Warranty cost
– Market acceptance/ Sales in first year
Probably one of the most critical parameters is Time to Market, which depends on the type of
business and industry. For the Consumer Electronics Industry, which is hyper competitive with
low profit margins, the product lifecycle is 6-9 months and the price erosion is around 1% per
week. So being first on the market is key to the product success to assure good profit margins,
before the product becomes commoditized. In addition to Time to Market there are no compro-
mises allowed for cost and quality as well. All has to be managed in parallel, and that is the real
challenge. Just to name two examples, which became key for the success and significant im-
provements of product development over the last 20 years are: Platform Development and Digital
Mock Up. These will be described in more detail now.
In the past products were designed individually, based on the local market requirements, and
each engineer was proud of ‘his’ product. The problems were long development cycles, little part
number reuse and high development cost. Today many industries moved to a platform concept,
which means there are basic standardized building blocks, which will be used for many differ-
ent products. So the customer still gets an individual product, but it is derived from a platform
concept. Figure 2 shows the main advantage of this concept. A company pursuing this process
excellently, across all of its brands and markets, is Volkswagen.