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Technology integration: Turning great research into great products
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current state of technical knowledge and capabilities is presented to the whole company, and market trends are discussed. Senior project managers then assist R&D. manufacturing and marketing personnel in developmg timeliness and resource requirements for projects at both home-base-augmenting and -exploiting sites. Managers at the central lab are responsible for constantly monitoring new pockets of knowledge and assessing whether additional sites are needed. Applying Total Quality to R&D at Coors Brewing Company, Hugo Patifio, Research-Technology Management (September-October 1997), pp. 32-36. There have been many barriers to the applications of total quality (TQ) principles to R&D. Among these are the fear that a TQ system would stifle inventiveness, ingenuity, or creativity. The creative process involves learning from mistakes, which would seem to run counter to the “do it right the first time, every time” credc of TQ. The author, vice president of R&D at Coor:< Brewing Company, argues that there needs to be a clear definition of what is meant by “quality in R&D” such that TQ can become a working model for daily R&D operations. He writes that, at Coors, the vision of the R&D department is to be the most effective and efficient R&D organization in the industry, and its mission is “to anticipate, develop, implement, and ,assure value-added products that meet. . . customers’ needs.” In accordance with this vision and mission, R&D quality is defined this way: 1. Doing it the right way the first time. 2. Learning from and improving it each time. 3. Getting the results the company needs. In the remainder of the article, PatiAo analyzes and discarsses the elements of this definition of R&D quality. 1. What is “it” that needs to be done the right way the filat ti~ze? This is what R&D should be working on, and requires a careful planning process. At Coors, tl:is process begins with idea generation, overseen b;;/ functional area groups. The ideas are evaluated and reviewed by area management and finance, using a common set of evaluative criteria. For example, product quality improvement projects are e’ialuated according to quality of consumer data, criticality of consumer or distribution channel concern, potential for sales increases, likelihood of technical success, and profit impact. New product/
ABSTRACTS
market development projects are assessed in terms of concept fit, quality of data, growth potential, likelihood of technical success, and uniqueness/ difficulty to copy. Multi-functional teams evaluate each product category, and generate a prioritized project list. Projects are then screened in terms of risk, term (short to long), and impact. A top management review team including the COO is presented with an overview of this procedure and will provide its own input prior to implementation. 2. What is the “right way?” Doing things the right way in this context will mean several things. Projects need to be managed such that objectives, potential benefits, and major milestones are clear. Personnel management is also important, and feedback on team performance needs to be provided by management. Processes (including new product development) are documented and reviewed. 3 What is “learning from and improving it?” An important implication of TQ for R&D is a focus on continuous improvement. This means not only improving results in future periods, but also improving processes and systems. One way to accomplish this is through identifying, and conducting audit sessions on, key departmental processes and projects as part of periodic personal performance assessments. Also valuable in identifying gaps and opportunities are mid-performance feedback from peers and customers, benchmarking versus best practices, and observing competitors’ product performance. 4. What is meant by “the results the company needs? ” Results drive the firm’s performance, and R&D is an investment the firm makes in order to reach goals. While annual performance appraisals are obviously a key measure, it is important to also measure “what got done,” that is, how researchers performed relative to targets. The three-point definition of TQ proposed in this article is easier for R&D managers to relate to than the familiar “doing it right the first time.” As a result, R&D personnel are more likely to “buy into” the value of TQ and use it to improve daily R&D operations. Technology Integration: Turning Great Research into Great Products, Marco Iansiti and Jonathan West, Harvard Business Review (May-June 1997), pp. 69-79.
ABSTRACTS
Often, we look at the amount invested in R&D as the indicator of a firm’s competitive strength. Marco Iansiti and Jonathan West argue that the more relevant indicator is the company’s ability to choose and refine technologies in order to translate R&D efforts into products that satisfy market needs. Access to R&D is, of course, important; but the technologies selected by the company need to be able to work well together. They propose that a company needs to monitor its process of technology integration from the earliest phases of R&D through design, engineering and manufacturing. While technology integration has always been important, it has not always been practiced well. It has increased remarkably in importance in recent years, however, as the number of technologies available to any firm has rapidly increased. Firms may have succeeded in spite of poor technology integration; that is, until the 1980s when the nature of competition dramatically changed. Gone are the days when an IBM or AT&T could conduct research into every discipline relevant to its products. Computer workstation manufacture, for example, today requires state-of-the-art knowledge of nuclear decay physics, graph theory, and many other fields within mathematics and physics. The available sources of technology has also increased, and shortening product life cycles and greater marketplace uncertainties have added increased pressures. The authors note that competitive advantage now often goes not to the firm that creates technological options, but to the firm that is best at choosing from among these options. The authors conducted a long-term study of the global computer industry to understand the process of technology integration. They show, for example, that firms in the large mainframe business differed widely in technology integration processes, resulting in wide variations in R&D productivity and multi-year delays in product development. Weak technology integration also caused firms producing workstations to lag behind their competitors in bringing new products to market. An important finding was that no one technology integration process was “best.” Rather, the approach should be selected in consideration of company capabilities and local cultures and conditions. The most successful U.S. computer companies of the 1990s have abandoned the old R&D model and shifted to a newer one, focused more on applied science and dependent on a diverse base of technological sources: universities, consortia, and other companies. Teams of “process integrators” or “program manag-
J PROD INNOV 1998:15:184-196
MANAG
195
ers” were charged with developing new generations of products and processes, and provided with excellent resources for testing technological possibilities. This model worked well in the U.S., where employee churn was commonplace and there was a ready supply of new researchers from top universities. Because of these local conditions, there was little pressure to keep the teams intact through several projects: new people from other companies or fresh from university were constantly being brought in. The model that worked well in the U.S. would not be as successful in Japan, where long-term employment at one company is much more common and where there is a weaker tradition of university research. Rather than the intense, dedicated integration teams as seen in the U.S., Japanese “teams” tend to be actually a loose group of veteran employees, few of whom have Ph.D.s, who perform a variety of functions. These integrators generally get less resources for experimentation than do their counterparts in the U.S. Experience with previous projects is an important determinant of technology selection. As a result, there are more evolutionary, and less cutting-edge, technologies employed in Japan. The authors are quick to point out that neither approach is “better”: the point here is that an effective firm needs to construct an approach to technology integration most suited to national culture and assets. The authors then document the trends seen in the worldwide semiconductor industry over the last two decades. During the 1980s Asian semiconductor manufacturers became globally dominant. Japanese companies, led by Hitachi, NEC, and Toshiba developed new production technology and invested in technology integration and manufacturing. Korean scientists trained in the U.S. brought with them fundamental technology know-how and helped Samsung and other Korean companies get market share leadership in DRAMS by the 1990s. U.S. manufacturers, meanwhile, fell far behind and seemed headed to oblivion, though they made a dramatic turnaround in recent years. The U.S. (and Korean) firms that made the biggest inroads against the Japanese did not rely on increased research spending or technological breakthroughs. Rather, their success was due to their ability to choose technology that would work well together in increasingly complex production processes. The U.S. firms followed the model outlined above, creating dedicated integration teams and minimizing the role played by research and manufacturing in technology selection. Interesting, the Korean companies found a
196
.I PROD INNOV 1998:15:184-196
MANAG
middle path between the Japanese and U.S. models. While long-term employment was the norm in Korea (as ir Japan), and Korean companies relied on employees that had served on several generations of a production process (thus had a store of intuition to draw from in technology selection), they also had a much higher proportion of Ph.D.s (ironically, mostly from U.S. universities). As a result, Korean companies were much more likely to absorb external sources of knowledge than were Japanese firms. In sum, the authors found three models of technology integration, all effective in their own way in generating high performance. The Japanese model em-
ABSTRACTS
phasized high performance in integrated circuits through evolutionary development: getting more out of mature technologies. The U.S. model focused on early adoption of aggressive, revolutionary technologies. The Korean model was a middle ground between the other two. Consistent with these models, the authors showed that U.S. companies were quicker to make fundamental technology improvements than were the Japanese. The implication is that, with its unique network of universities and industrial labs to draw from, U.S. companies are in a prime position for global competitive leadership as technologies become even more complex in the future.
.I PROD INNOV 1998;15:184-196
MANAG
current state of technical knowledge and capabilities is presented to the whole company, and market trends are discussed. Senior project managers then assist R&D. manufacturing and marketing personnel in developmg timeliness and resource requirements for projects at both home-base-augmenting and -exploiting sites. Managers at the central lab are responsible for constantly monitoring new pockets of knowledge and assessing whether additional sites are needed. Applying Total Quality to R&D at Coors Brewing Company, Hugo Patifio, Research-Technology Management (September-October 1997), pp. 32-36. There have been many barriers to the applications of total quality (TQ) principles to R&D. Among these are the fear that a TQ system would stifle inventiveness, ingenuity, or creativity. The creative process involves learning from mistakes, which would seem to run counter to the “do it right the first time, every time” credc of TQ. The author, vice president of R&D at Coor:< Brewing Company, argues that there needs to be a clear definition of what is meant by “quality in R&D” such that TQ can become a working model for daily R&D operations. He writes that, at Coors, the vision of the R&D department is to be the most effective and efficient R&D organization in the industry, and its mission is “to anticipate, develop, implement, and ,assure value-added products that meet. . . customers’ needs.” In accordance with this vision and mission, R&D quality is defined this way: 1. Doing it the right way the first time. 2. Learning from and improving it each time. 3. Getting the results the company needs. In the remainder of the article, PatiAo analyzes and discarsses the elements of this definition of R&D quality. 1. What is “it” that needs to be done the right way the filat ti~ze? This is what R&D should be working on, and requires a careful planning process. At Coors, tl:is process begins with idea generation, overseen b;;/ functional area groups. The ideas are evaluated and reviewed by area management and finance, using a common set of evaluative criteria. For example, product quality improvement projects are e’ialuated according to quality of consumer data, criticality of consumer or distribution channel concern, potential for sales increases, likelihood of technical success, and profit impact. New product/
ABSTRACTS
market development projects are assessed in terms of concept fit, quality of data, growth potential, likelihood of technical success, and uniqueness/ difficulty to copy. Multi-functional teams evaluate each product category, and generate a prioritized project list. Projects are then screened in terms of risk, term (short to long), and impact. A top management review team including the COO is presented with an overview of this procedure and will provide its own input prior to implementation. 2. What is the “right way?” Doing things the right way in this context will mean several things. Projects need to be managed such that objectives, potential benefits, and major milestones are clear. Personnel management is also important, and feedback on team performance needs to be provided by management. Processes (including new product development) are documented and reviewed. 3 What is “learning from and improving it?” An important implication of TQ for R&D is a focus on continuous improvement. This means not only improving results in future periods, but also improving processes and systems. One way to accomplish this is through identifying, and conducting audit sessions on, key departmental processes and projects as part of periodic personal performance assessments. Also valuable in identifying gaps and opportunities are mid-performance feedback from peers and customers, benchmarking versus best practices, and observing competitors’ product performance. 4. What is meant by “the results the company needs? ” Results drive the firm’s performance, and R&D is an investment the firm makes in order to reach goals. While annual performance appraisals are obviously a key measure, it is important to also measure “what got done,” that is, how researchers performed relative to targets. The three-point definition of TQ proposed in this article is easier for R&D managers to relate to than the familiar “doing it right the first time.” As a result, R&D personnel are more likely to “buy into” the value of TQ and use it to improve daily R&D operations. Technology Integration: Turning Great Research into Great Products, Marco Iansiti and Jonathan West, Harvard Business Review (May-June 1997), pp. 69-79.
ABSTRACTS
Often, we look at the amount invested in R&D as the indicator of a firm’s competitive strength. Marco Iansiti and Jonathan West argue that the more relevant indicator is the company’s ability to choose and refine technologies in order to translate R&D efforts into products that satisfy market needs. Access to R&D is, of course, important; but the technologies selected by the company need to be able to work well together. They propose that a company needs to monitor its process of technology integration from the earliest phases of R&D through design, engineering and manufacturing. While technology integration has always been important, it has not always been practiced well. It has increased remarkably in importance in recent years, however, as the number of technologies available to any firm has rapidly increased. Firms may have succeeded in spite of poor technology integration; that is, until the 1980s when the nature of competition dramatically changed. Gone are the days when an IBM or AT&T could conduct research into every discipline relevant to its products. Computer workstation manufacture, for example, today requires state-of-the-art knowledge of nuclear decay physics, graph theory, and many other fields within mathematics and physics. The available sources of technology has also increased, and shortening product life cycles and greater marketplace uncertainties have added increased pressures. The authors note that competitive advantage now often goes not to the firm that creates technological options, but to the firm that is best at choosing from among these options. The authors conducted a long-term study of the global computer industry to understand the process of technology integration. They show, for example, that firms in the large mainframe business differed widely in technology integration processes, resulting in wide variations in R&D productivity and multi-year delays in product development. Weak technology integration also caused firms producing workstations to lag behind their competitors in bringing new products to market. An important finding was that no one technology integration process was “best.” Rather, the approach should be selected in consideration of company capabilities and local cultures and conditions. The most successful U.S. computer companies of the 1990s have abandoned the old R&D model and shifted to a newer one, focused more on applied science and dependent on a diverse base of technological sources: universities, consortia, and other companies. Teams of “process integrators” or “program manag-
J PROD INNOV 1998:15:184-196
MANAG
195
ers” were charged with developing new generations of products and processes, and provided with excellent resources for testing technological possibilities. This model worked well in the U.S., where employee churn was commonplace and there was a ready supply of new researchers from top universities. Because of these local conditions, there was little pressure to keep the teams intact through several projects: new people from other companies or fresh from university were constantly being brought in. The model that worked well in the U.S. would not be as successful in Japan, where long-term employment at one company is much more common and where there is a weaker tradition of university research. Rather than the intense, dedicated integration teams as seen in the U.S., Japanese “teams” tend to be actually a loose group of veteran employees, few of whom have Ph.D.s, who perform a variety of functions. These integrators generally get less resources for experimentation than do their counterparts in the U.S. Experience with previous projects is an important determinant of technology selection. As a result, there are more evolutionary, and less cutting-edge, technologies employed in Japan. The authors are quick to point out that neither approach is “better”: the point here is that an effective firm needs to construct an approach to technology integration most suited to national culture and assets. The authors then document the trends seen in the worldwide semiconductor industry over the last two decades. During the 1980s Asian semiconductor manufacturers became globally dominant. Japanese companies, led by Hitachi, NEC, and Toshiba developed new production technology and invested in technology integration and manufacturing. Korean scientists trained in the U.S. brought with them fundamental technology know-how and helped Samsung and other Korean companies get market share leadership in DRAMS by the 1990s. U.S. manufacturers, meanwhile, fell far behind and seemed headed to oblivion, though they made a dramatic turnaround in recent years. The U.S. (and Korean) firms that made the biggest inroads against the Japanese did not rely on increased research spending or technological breakthroughs. Rather, their success was due to their ability to choose technology that would work well together in increasingly complex production processes. The U.S. firms followed the model outlined above, creating dedicated integration teams and minimizing the role played by research and manufacturing in technology selection. Interesting, the Korean companies found a
196
.I PROD INNOV 1998:15:184-196
MANAG
middle path between the Japanese and U.S. models. While long-term employment was the norm in Korea (as ir Japan), and Korean companies relied on employees that had served on several generations of a production process (thus had a store of intuition to draw from in technology selection), they also had a much higher proportion of Ph.D.s (ironically, mostly from U.S. universities). As a result, Korean companies were much more likely to absorb external sources of knowledge than were Japanese firms. In sum, the authors found three models of technology integration, all effective in their own way in generating high performance. The Japanese model em-
ABSTRACTS
phasized high performance in integrated circuits through evolutionary development: getting more out of mature technologies. The U.S. model focused on early adoption of aggressive, revolutionary technologies. The Korean model was a middle ground between the other two. Consistent with these models, the authors showed that U.S. companies were quicker to make fundamental technology improvements than were the Japanese. The implication is that, with its unique network of universities and industrial labs to draw from, U.S. companies are in a prime position for global competitive leadership as technologies become even more complex in the future.