Insight: The Importance of Innovation and New Product Development
As the number of vehicle variants proliferates and the demand for innovative vehicles and components grows, a company’s ability to successfully identify and launch new products has become one of the most important criteria for success. There are two aspects to this activity, the product development process itself and the higher-level skill set of maintaining the necessary level of innovation to support long-term success. The former is an execution capability and the latter is a strategic mindset supported by process.
Over the last five years, IRN has been very vocal on the importance of new program launch capability. The number of new vehicles launching over the next five years has reached historic levels. This is placing enormous pressure on the OEMs’ abilities to successfully launch new vehicles, particularly given the dismal track record for many recent launches. Suppliers are equally impacted by this trend, particularly the Tier Ones, which are increasingly responsible for more complex and sophisticated assemblies. The typical supplier track record over the course of 10 new program launches, for example, is to have two terrific launches, three good launches, four okay launches, and one “launch from hell.” The problem with this lack of consistency is that the only launch the customer remembers is the last one.
While there is no easy solution to the issue of improving program launch, there are some universal “themes” that are characteristic of successful program launch processes. One of the biggest issues is to have a better ability to truthfully assess program launch capability, including how many types of projects can be handled simultaneously; what staff to use on what projects; what is customer driven and what is internal; and how to expand program launch capacity. Some best practices in this domain include:
Don’t try to use the same process for every project. Make your process flexible so that it can apply to multiple kinds of projects, including quick customer requests; fast-track projects; and full-scale projects, with variable levels of effort and resources. This has become more important as the number of vehicle variants off of base platforms proliferates.
Create clear ranking criteria. Prioritize projects in each category. These criteria need to be outcome-based (e.g., the importance of the customer/program to the business) and not activity-based (e.g., the scale of complexity of the project). They also need to avoid being “who-screams-the-loudest” based.
Engage senior management. Most of their work needs to be done on the front end, assisting in prioritizing resources and ensuring that the right people are used on the right projects. Business leaders need to act as sponsors and resource providers and avoid attempting to micro-manage the process.
Impose discipline on the gatekeepers. They must hold meetings and attend them; come to the meeting prepared; make decisions based on the criteria; make decisions promptly; and inform the team of all decisions.
What Does Innovation Mean?
While it is critical to have good program launch capability, it is equally important to be able to identify the right products to launch and to foster an environment of innovation that keeps a company out of the commodity trap. Why, for example, did the New Domestics get into the large-scale production of crossover vehicles so much earlier than the Big Three? We would argue that they are much clearer about their overall strategic intent and that, at least in this instance, they did a much better job of predicting future product trends. They also took a lot of existing concepts and combined them to accelerate the development of this new product segment.
In its most basic form, the concept of innovation is hard to define. In an engineering- and technology-driven industry like auto, the temptation is to assume that innovation relates specifically to the product. While new product innovation is critical (e.g. crossover vehicles), there are many other aspects of innovation that are equally important. To help illustrate this point, we identified four types of innovation: Products and Services; Manufacturing Processes; Materials; Business Practices (see chart).
|Different Dimensions of Innovation|
|Category||Opportunities for Innovation||Examples of Successful Innovation|
|Product and Services|
|• Adjustable pedals|
|• Features||• Electrochromic mirrors|
|• Technology||• Telematics|
|• Quality||• Tire pressure monitors|
|• Price||• Fold-flat seats|
|Manufacturing Processes||• Equipment||• Hydroforming|
|• Technology||• Fineblanking|
|• Laser welding|
|• Digital prototyping|
|Materials||• Composition||• Powder metal|
|• Properties||• Quiet steel|
|• Nano structure plastics|
|Business Practices||• Management practices||• Lean enterprise|
|• Business design||• Customer relationship management|
|• Strategic alliances|
|• Corporate development|
|• Value chain realignment|
These are all illustrations that are easy to name, but there are countless other instances where the creativity to execute a modest change in a design, process, etc., results in an incremental improvement that creates value; improved performance; lower cost; better quality; and so on. The right culture will yield an array of innovations on the spectrum from continuous improvement to breakthrough products.
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Numerous studies have identified manu-facturing processes as being one of the most sustainable competitive differentiators. Applying lean to the total enterprise (vs. just thinking of it as a manufacturing approach) is a huge competitive advantage. Much of the new activity in powertrain and chassis is primarily material substitution driven vs. true new product development. The overall message is that companies need to simultaneously improve their launch execution capability and raise their level of innovation activity. Companies that do this successfully will be able to also simultaneously grow their top and bottom line.