The power of product platforms: Building value and cost leadership

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0000 Book Reviews Book Review Editors: Milton

Books reviewed

D. Rosenau, Jr., CMC, FIMC,

in this issue:

Mark H. Meyer and Alvin Lehnerd The Power of Product Platforms: Creating and Sustaining Robust Corporations R. G. Cooper, S. J. Edgett, and E. J. Kleinschmidt Portfolio Management for New Products C. von Braun The Innovation War John P. Kotter Leading Change Robert Burgelman, M. A. Madique, and Steven C. Wheelwright Strategic Management of Technology and Innovation

Brief notes in this issue: John R. Schulyer Decision Analysis in Projects: Learn to Make Faster, More Confident Decisions James Shaw Customer-Inspired Quality: Looking Backward Through the Telescope

Books received for possible review in a future issue: Karen Ayas Design for Learning for Innovation: Project Management for New Product Development Edwin E. Bobrow The Complete Idiot’s Guide to New Product Development J PROD INNOV MANAG 1997;14:526-534 0 1997 Elsevier Science Inc. All rights reserved. 655 Avenue of the Americas, New York, NY 10010

and Robert R. Rothberg

Mario W. Cardullo Introduction to Managing Technology Clayton M. Christensen The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fall C. M. Creveling Tolerance Design: A Handbook for Developing Optimal Specifications Geert Duysters The Dynamics of Technological Innovation: The Evolution and Development of Information Linsu Kim Imitation to Innovation: The Dynamics of Korea ‘s Technological Learning Alexander Laufer Simultaneous Management: Managing Projects in a Dynamic Environment Susan Walsh Sanderson and Mustafa Uzumeri The Innovation Imperative: Strategies for Managing Product Models and Families Robert E. Stevens et al The Marketing Research Guide Michael L. Tushman and Charles A. O’Reilly, III Winning Through Innovation: A Practical Guide to Leading Organizational Change Vijay K. Verma Human Resource Skills for the Project Manager: The Human Aspects of Project Management

The Power of Product Platforms: Building Value and Cost Leadership, by Marc H. Meyer and Alvin P. Lehnerd. New York, NY: The Free Press, 1997.267 + xiv pages. $35.00. 0737-6782/97/$17.00 PI1 SO737-6782(97)00059-l

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This is an important book for senior product development practitioners and for executive management of any company that depends on new product or service development for it’s success in the marketplace. Meyer and Lehnerd have taken a relatively old product design concept and made it a compelling mandate for managing whole families of products and services with the goal of achieving sustainable marketplace dominance. The book’s strengths are numerous: Definitions-crisp, simple descriptions of terms that have become ambiguous in practice including product platforms, product families, and product architecture Examples-rich examples of every major concept, employed generously in each chapter Methodologies-simple, high-level prescriptions for applying product platform concepts at both a strategic and tactical level Metrics and diagnostics-new appro,aches for quantifying the impact of product platforms and for assessing the value they might have if implemented Extendibility to non-manufactured products-explicit focus on applying the product platform concept to manufactured products as well as software and information services The book is targeted to both manufactured and nonmanufactured product industries and to executive management as well as mid level management and product team leaders. Marc Meyer and Al Lehnerd combine their respective backgrounds well in this collaborative effort. Lehnerd brings an in-depth manufacturing and operations perspective from Black & Decker, Sunbeam, and Steelcase while Meyer brings a strategic marketing and non-manufactured goods perspective from several successful software startups. Just as many of the most successful new products are a blend of multidisciplinary perspectives, this book has that kind of cross-functional advantage. The Power of Product Platforms is organized into nine chapters. The first chapter provides a compelling case for the platform concept through it’s in-depth examination of Black & Decker’s successful platforming of its entire power tools family in the 1970s. The second chapter provides a strong conceptual foundation (or “thought architecture,” as described in the book) for managing product platforms lover time. These first two chapters effectively set the stage for the next four chapters that outline platform strategy,

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underlying platform composite design, platform organization models, and platform metrics. Of these, the only weak point is in the chapter on organization, where the often simplistic recommendations of the authors do not provide the same level of practical advice as the other chapters. Chapters seven and eight focus on extending the platform concept to non-manufactured products with a compelling chapter on software and an interesting chapter on information products for the Internet. The final chapter is a reprise of the second chapter on platform management written as a call to action for senior executives. Unfortunately, in order to be provocative, the authors suggest that management throw out their stage-gate processes because of their focus on point (i.e., single) products rather than the larger product family. While it is true that a stage-gate system can reinforce a point project mentality, it is not the root cause. The authors are correct in that the product platform concept is a powerful product planning and decision-making construct that can be used to launch the right projects into the development pipeline. However, those projects still need the support of a welldefined project execution process and ongoing management involvement in order to move rapidly and successfully to market, especially in dynamic, competitive markets and resource constrained development organizations where project tradeoffs will need to be made, no matter how well conceived they are. A well-implemented stage-gate process combined with the systematic use of the platform concepts illustrated in this book would be a winning combination. Throwing out the stage-gate process would leave robust product planning without the execution mechanism to realize the overall vision established. Possibly the most important contribution made by this book is its practical and approachable treatment of the product platform concept. There have been relatively few books for practitioners that have described this concept. McGrath [l] effectively illustrated the platform concept along with product strategy vision and product line strategy as the necessary focus for businesses seeking to create and sustain winning hightechnology product families. Meyer and Lehnerd offer an entire book focused on this key concept, drilling deep on topics such as platform architecture, platform metrics, and platform design. Platforms are defined as “a set of subsystems and interfaces that form a common structure from which a stream of derivative products can be efficiently and effectively produced” (p. 39). The combination of subsystems and interfaces is

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defined as the architecture. The authors effectively illustrate the point that these subsystem interfaces can be strategic and that “clearly defined interfaces between subsystems of products and between products and users provide product designers with the degrees of freedom needed for rapid and cost-efficient creation of derivative products” (p. 40). The examples from Black & Decker and HewlettPackard in chapters 1 and 2 provide a convincing argument for the platform concept, demonstrating “the cost efficiencies, technological leverage, and market power that can be achieved when companies redirect their thinking and resources from single products to families of products built upon robust product platforms” (p. 23). Chapter 2 further argues that this idea is not just a one-shot approach to product improvement. Instead, it can be the means for continuous renewal, maintaining innovation across multiple generations of a product family. This requires executive attention, insist the authors, and they offer an integrative conceptual model called the Power Tower for managing product platforms. This model helps management to continuously evaluate how its product platforms enable the company to serve market needs by segment and how they draw on the company’s competencies in product technology, manufacturing processes, organization and customer understanding. Chapter 3’s treatment of platform strategy has three useful sets of ideas. The first is a simple Platform Market Grid that helps illustrate and diagnose how a company’s platforms are serving a given market by segment. The second is an insightful description of the various strategies that might be employed in attacking a market, depending on the extendibility of the platform across the grid. The chapter concludes with a five-step prescription for defining platform strategy. Chapter 4’s focus on composite design offers a step-by-step guide for product platform design. Six steps are described starting with establishing the goals of the system and classifying subsystems of the current design and those of competitors, moving to measuring design complexity and indexing the designs competitively in terms of function and cost, followed by determining the degrees of freedom needed for product line expansion and integrating manufacturing or operations processes to achieve lowest cost. Each step is well described and then supported with an end-toend integrated example from Sunbeam. Chapter 5 addresses the issue of organizing for product platform management and development. The authors effectively argue that platform renewal should

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be managed by experienced, multi-functional, collocated teams. While they offer several useful tips for how the team should organize their work, the chapter avoids some of the thornier issues involved in implementing these teams such as accountability for the product family P&L versus individual products. The net result is a recommended approach that might support a one-shot platform renewal but does not address how to organize product platform management and development teams on an ongoing basis. Chapter 6’s treatment of platform metrics offers companies a way to quantify the internal and external impact of using product platforms. Specifically, the authors define Platform Efficiency and Cycle Time Efficiency as measures to assess the cost and time leverage that derivative products derive from a given product platform. They also define Platform Effectiveness and the Cost Price Ratio as measures of the sales leverage and customer value leverage harnessed by derivative products. The authors insightfully recognize that many companies will not be able to easily produce the data needed to calculate these metrics and offer helpful diagnostic approaches for undertaking this important, yet difficult exercise. Chapters 7 and 8 on non-manufactured products are very important additions to the overall treatment of the product platform concept. All too often product development texts ignore the different challenges posed by software products, service products, and information products. That this book takes these on makes it far more complete, extends its usefulness to all product developers, and provides even hard good manufacturers with a new perspective on platform thinking. By far, the stronger of the two chapters is chapter seven on software. In particular, much can be learned about strategic platform and market thinking from the Visio case example. The final chapter on bridging to the future is a call to action for senior executives. Despite the authors’ overly simplistic and potentially misleading bashing of stage-gate processes discussed above, the message about breaking through point project thinking to create powerful, elegant solution families for customers comes through loud and clear. The authors suggest that while all successful companies will ultimately face discontinuities in their markets that will threaten their ongoing success, they can bridge these chasms with platform strategy, composite design, platform teams, and product family-based performance metrics. They insist that top management’s role is to provide the vision for, involvement in, and commitment to

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these four elements. Done well, this will lead to new technologies, new platforms, streams of derivative products, and expanded markets. Mark Deck Pittiglio Rabin Todd & McGrath

(PRTM)

Reference Michael E. Product Srrategy .foor High-Techn,ology Compnnies: How to Achieve Growth, Competitive Advantage, and Increased Prqfits. Burr Ridge. Illinois: Irwin Professional Publishing, 199.5.

1. McGrath,

Porfolio Management for New Products by R. G. Cooper, S. J. Edgett, and E. J. Kleinschmidt. Hamilton, Ontario: McMaster University, 1997. 131 + xi pages. $35.95 (paperback). This book addresses an important and timely topic in product development management: how to manage a portfolio of new-product projects for maximum competitive impact. Many managers struggle with allocating their increasingly tight resources to many product opportunities under multiple objectives. These authors provide clear and helpful guidance to such managers in setting up a portfolio management system. Several books and countless papers address specific techniques for managing the development portfolio, but this book stands out because it covers a variety of techniques and shows how they can be combined to build an effective management system for a real company. Although it is written by academics with a style that is at times academic, this book is clearly intended for managers. It applies to all types of products and services and uses a variety of them as examples. The examples are biased toward chemical and materials companies, however. This volume is based on a study of the portfolio management practices of 35 companies that apparently are leaders in building a comprehensive approach to portfolio management. The authors point out the dilemmas that these companies face, and they emphasize that none of the companies studied is yet satisfied with its current solution. The book includes many detailed examples from these companies, and in the last chapter the authors build a comprehensive composite example to illustrate how the pieces described in previous chapters can be assembled into a complete portfolio management system. At the same time, they state clearly that each of the companies studied uses a different approach, and, indeed, it appears that each

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company will need to develop a system tailored to its unique needs. There is no universal solution to portfolio management. Thus, the material provided here can be applied quite flexibly. It fits well with Cooper’s well-known stage-gate process [l], but it is not dependent on having a stage-gate process. The authors use an effective framework for laying out the basics, based on their three objectives of a portfolio management scheme. The first objective is maximizing the value of the portfolio, which can either be done on an absolute (bang) or a normalized (bang for the buck) basis. It can also be financially based or more qualitative in nature. Their second objective is balancing the portfolio, so that it reflects a desirable mix of long- and short-term opportunities, technology risks, geographical areas, or other attributes. The third objective is alignment with the corporate strategy. After covering the three objectives in Chapters 2-4, respectively, they discuss several complications in Chapter 5. For example, should resource commitments made to projects be firm? If management makes firm commitments to a project and does not alter them, mediocre projects can run through their gates, “like an express train,” without being stopped. On the other hand, if management constantly reshuffles resources among projects, developers become demoralized and waste their effort in shifting to the new assignments. Although this book is reasonably free of typographical errors, it does not reflect the level of review and editing that one would expect in a commercially published book. It does not have an index, and its preface is just a list of acknowledgments. It is quite short, especially considering its price. Even so, it is a bit repetitive, so with some tightening up, it would be even shorter. However, if we consider this book as Cooper, Edgett, and Kleinschmidt’s new product, then this is a perfect opportunity for them to apply incremental innovation [2], Chapter 4. Rather than take the time that a commercial publisher might have needed, they were apparently able to publish it faster through their institution. Now they can upgrade it in response to their readers’ initial feedback, then target it much more precisely through a commercial publisher than would have been possible for the first edition. And even though the initial edition is rather expensive, it still represents good value to those lead-readers who are genuinely interested in improving their portfolio management. Management of the new-product portfolio can be