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The Power of Product Platforms
By Alvin P. Lehnerd and Marc H. Meyer
Table of Contents
About The Book
Most companies know that long-term success does not hinge on any single product but on a continuous stream of value-rich products that target growth markets. Yet many firms inexplicably develop one product at a time, and by doing so fail to embrace commonality, compatibility, standardization, or modularization among different products and product lines. At last, in this timely book, Marc H. Meyer and Alvin P. Lehnerd provide a formula for turning products into profits, enabling companies to design technologically superior products more easily. Their solution is, in two words, PRODUCT PLATFORMS. They argue that firms must focus their energies on developing families of products simultaneously which share common components and technology.
The authors describe how the champions of product development separate themselves from less sophisticated companies by building entire families of strong products from a single "platform" of common product structures, technologies, and automated product processes. These successful companies recognize and respond to new market opportunities by integrating core skills and technology in the form of new products. In this easy-to-read and practical book, the authors masterfully elucidate this dynamic and forward-thinking strategy which enables companies to develop innovative products faster, more cheaply, and with less effort.
Drawing on in-depth case studies and personal experience with successful companies such as Hewlett-Packard, EMC, Black & Decker, and Boeing, Meyer and Lehnerd show managers how to create extraordinary products and thereby set the standard for combined value and cost leadership in their products. They argue that when a company's products are robusthighly functional, elegant in their design, reasonably priced, and a pleasure to usethe corporation will be equally robust. More importantly, The Power of Product Platforms reveals the methodology and organizational approach for designing, developing, and revitalizing strong products that enable the firm to make the transition from one generation of technology to the next. The authors also explain how well-designed product platforms can generate streams of derivative products through a continuous systematic process of renewal.
Meyer and Lehnerd apply this methodology to a broad range of industries; manufacturing in both consumer and industrial markets, software firms, and Internet information services providers.
This clear prescription for transforming the bottom line by aggressively managing product development and innovation will become required reading for large and small corporations alike, including entrepreneurs, all of whom depend on the excellence of their new products for growth.
The authors describe how the champions of product development separate themselves from less sophisticated companies by building entire families of strong products from a single "platform" of common product structures, technologies, and automated product processes. These successful companies recognize and respond to new market opportunities by integrating core skills and technology in the form of new products. In this easy-to-read and practical book, the authors masterfully elucidate this dynamic and forward-thinking strategy which enables companies to develop innovative products faster, more cheaply, and with less effort.
Drawing on in-depth case studies and personal experience with successful companies such as Hewlett-Packard, EMC, Black & Decker, and Boeing, Meyer and Lehnerd show managers how to create extraordinary products and thereby set the standard for combined value and cost leadership in their products. They argue that when a company's products are robusthighly functional, elegant in their design, reasonably priced, and a pleasure to usethe corporation will be equally robust. More importantly, The Power of Product Platforms reveals the methodology and organizational approach for designing, developing, and revitalizing strong products that enable the firm to make the transition from one generation of technology to the next. The authors also explain how well-designed product platforms can generate streams of derivative products through a continuous systematic process of renewal.
Meyer and Lehnerd apply this methodology to a broad range of industries; manufacturing in both consumer and industrial markets, software firms, and Internet information services providers.
This clear prescription for transforming the bottom line by aggressively managing product development and innovation will become required reading for large and small corporations alike, including entrepreneurs, all of whom depend on the excellence of their new products for growth.
Excerpt
Chapter 1: The Power of Product Platforms
Product-making enterprises -- the ones that survive, that is -- are evolutionary entities. Their product portfolios change through periodic enhancements to basic product and manufacturing technologies. Some of the changes are true breakthroughs, while others are merely incremental. The appropriate changes lead to market success; those that are not appropriate lead to failure.
The long-term success of an enterprise depends on a stream of new products -- some replacing older ones, others pioneering new markets. As the world economy becomes more integrated, many new products have to be global products, satisfying worldwide customer needs and regulatory requirements. The stream of new global products, exploiting advances in both product technologies and technologies used to manufacture, distribute, and provide support, is what provides the fuel for corporate growth and renewal.
FOCUSING ON SINGLE PRODUCTS
Regardless of the importance creating streams of new products, traditional methods for managing this vital business function usually fail to deliver in the long run. That is because companies typically design new products one product at a time. The single product must compete for resources against other projects in the corporation's portfolio. Every product team must justify its own existence repeatedly throughout the process of development and commercialization. Approval gates swing open and shut as single development projects move forward. Budget, break-even, and cycle-time measures are all typically calculated on the basis of single products.
The end result of this single-product focus is a failure to embrace commonality, compatibility, standardization, or modularization among different products and product lines. For a given company, the evidence for lack of commonality is found in the products themselves and their component parts. One will observe that the products use different materials for the same purposes; different switches when one kind of switch would do; a technology developed in-house at great expense to serve a single product; components with the same technical specifications but different sizes (so they cannot be interchanged); and on and on. That is where a product portfolio can easily end up when it is developed and managed one product at a time.
Now ask yourself: Would it not be better to build an entire family of products that leverage a common market understanding, common product technologies, and a common set of highly automated production processes? Rather than have separate development teams each working on single products, wouldn't it be better to have them join forces in building a common platform or a design from which a host of derivative products could be effectively and efficiently created? In short, might not the entire product portfolio of a business segment be tackled en masse?
To see that this alternative to a single-product mentality is not so far-fetched, but rather highly feasible and operationally viable, let us reach back to the experience of Black & Decker. Most readers probably own a Black & Decker power tool. There is a very good reason for this. Black & Decker drove most of its competitors out of the consumer segments of the power tools business by developing effective product platforms for its major product families.
RENEWING THE PRODUCT PORTFOLIO AT BLACK & DECKER
In the early 1970s Black & Decker's consumer power tool product portfolio was broad and deep, consisting of eighteen power tool groups. Eight groups contributed 73 percent of sales and 91 percent of units sold: drills, jigsaws, shrub and hedge trimmers, power hammers, circular saws, grinders and polishers, finishing sanders, and edgers -- 122 different models in all.
As with most established companies, Black & Decker's product portfolio had evolved over many years; by 1970 it was a collection of uncoordinated designs, materials, and technologies. Its power tools relied on thirty different motors, each manufactured by a different set of tooling. Sixty different motor housings were needed to accommodate variations in power and application (e.g. a drill versus a saw or sander). Besides, the company relied on 104 different armatures, the part that connects the motor to the "business end" of the tool (e.g., to the drill bit or the saw blade). Each of those armatures, in turn, required its own tooling. Dozens of different switches and buttons populated the company's parts bins and bills-of-materials.
The vast majority of Black & Decker's products had crept into the power tool portfolio one at a time, with little thought given to how economies might be achieved through shared components and manufacturing processes. The thousands of parts needed for the products required thousands of square feet of stockroom space and hundreds of people to order, shelve, and inventory them. Each unique product design required either a dedicated production line or frequent and time-consuming line changeovers. Inelegant designs translated into high labor inputs.
Despite those impediments, Black & Decker had grown into a major player in consumer power tools, perhaps because its competitors also followed the same one-at-a-time approach to product development. Its products worked as well as those of rivals and were priced competitive with those of other domestic manufacturers. Circa 1970, Black & Decker controlled about 20 percent of market share worth about $200 million annually in revenue. Despite its comfortable situation, management saw three dark clouds on the horizon:
* Offshore manufacturers were making inroads into the North American market and attacking emerging markets overseas.
* Inflation and the rising cost of labor, materials, services, and capital goods were devouring Black & Decker's margins. To maintain constant labor-cost content in its products, management calculated that about one-third of the labor cost would have to be removed from products over the next three to four years. While that would be difficult for any single product, it would be impossible for the company's entire power tool line without making use of design standardization, automation, better use of materials and floor space, and intelligent capital planning.
* Consumers and regulators would be requiring higher standards of safety -- specifically, adding a backup barrier of insulation around the power tool motors to protect the users from electrical shock if the existing insulation system failed. Regulatory mandates for double insulation had already taken hold in Europe and were expected to surface in the American market. This would create havoc for Black & Decker's production process. Its management estimated that redesigning all its power tools for double insulation one product at a time would take nearly a decade.
Black & Decker's Board and its management team understood that those threats could not be met with small measures. They also understood that their competitors faced the same problems. "If we can respond more rapidly and effectively," they reasoned, "the threats we face as an enterprise might be turned into opportunities to dominate our industry."
f0 The Double Insulation Program
The need to adopt double insulation turned out to be the catalyst for renewal of the entire Black & Decker power tool portfolio. Management started the Double Insulation Program with a clear mission: (1) redesign all consumer power tools at the same time; (2) redesign manufacturing simultaneously so that all the new products could be manufactured at substantial cost advantage; and (3) offer double insulated products at no increase in price to the consumer. The implication of this mission was that current consumer power tool lines would have to be abandoned!
Management established five powerful objectives for its power tool renewal:
* Develop a clear, distinctive "family" look across all products so that the customer could pick up any given product and, without reading the label, know that it was a "Black & Decker."
* Simplify product offerings, replacing customized gadgetry with standardized parts, interfaces, couplings, and connections.
* Dramatically reduce per unit manufacturing costs through automation and the use of new materials. While a number of other power tool companies had already introduced double insulated products, they had done so at a 20 percent premium in material and labor costs. Black & Decker would aim to introduce double insulation at less than the single insulation costs of its current product line.
* Use design to improve power tool performance and make it possible to add new features (such as more power or variable speeds) with minimal costs.
* Make global products -- i.e., products that would meet worldwide customer needs and regulatory requirements.
Getting Started
The most important decision made by the company's senior managers was made at the beginning of the effort: The resources of the company would be concentrated on the Double Insulation Program until the transition was complete. Only a token force would be left to carry out development efforts on existing power tool designs. That was clearly a high-risk, "bet-the-company" decision. The best talent and the weight of capital investment would be shifted to the new program. One retired Black & Decker executive remarked, "We bet the company, but if we hadn't, there wouldn't have been a company by the end of the decade."
Development of new products was placed temporarily on hold while a focused "hit team" sought to create a new common product platform for all the company's major power tool groups. They began to search the industrial world for the best product components and new advances in both materials and manufacturing processes.
Since manufacturing was to be the key enabler of a radical new product platform design, the traditional company barrier between engineering and manufacturing would have to be bridged. Black & Decker established that link by placing advanced manufacturing engineers in residence at headquarters where they would work elbow to elbow with the product design group. The manufacturing engineers were directly involved from the start in tooling machine development, process development, value and cost product design engineering, purchasing decisions, and packaging. A "war room" was created where people from many functions could meet to hammer out new product designs over the three-year duration of the project.
The basic structure of the company was also changed to prevent higher level organizational politics from interfering with the renewal effort. Instead of having one general manager of the consumer power tools business with two vice presidents for engineering and manufacturing respectively, a new "vice president of operations" position was created to combine product development, manufacturing engineering, and manufacturing operations under one vice president.
Perhaps as important as anything, management and Board members committed themselves to a long-term planning horizon. They allocated $17.1 million (in 1971 dollars) -- a substantial investment for the company at that time -- and break-even was not anticipated until nearly seven years after the program's launch. Capital expenditures, largely for new plant and equipment, were $6 million. Tooling, i.e., setting up the production facilities, was another $6.5 million. Manufacturing technology engineering and development engineering were each to receive $1.7 million. Inventory and other miscellaneous expenditures were budgeted at $1.2 million.
Building a Common Product Platform
Black & Decker had the good fortune to possess an unbridled fascination with the details of creating better product function and price for the consumer power tools user. The Double Insulation initiative supported that fascination with resources and direction. Its goal was to create a product platform to support a new generation of power tools. A product platform is a set of common components, modules, or parts from which a stream of derivative products can be efficiently created and launched. The most common part across all power tools is the motor. Key product parts, such as the motor in a power tool, represent a major subsystem of the product platform. Figure 1-1 illustrates the before and after design of the universal motor field assembly, one of the key subsystems of Black & Decker's universal motor.
To appreciate just how inelegant product designs were in Black & Decker's power tools prior to the Double Insulation Program, note the various wires. These wires were the connections between the motor field and the power supply. We refer to connections such as these as the interfaces between subsystems in a product platform. Across its major product groups, the company manufactured thirty different motors. They were not simply variations of a single design, but specific architectures developed for different power requirements within and across the power tool groups. Each motor had a unique manufacturing process, and those processes were only semiautomated. For example, technicians manually attached the wires between the motor fields and the power supply.
To solve that problem, a team went to work designing a universal motor, one that could serve a broad range of products: drills, sanders, saws, grinders, and so forth. The team was guided by the principles of standardization and modularization. The principle of scalability was also important. Their goal was to create a single basic motor design that could be adapted to produce a broad range of power to serve infrequent household users, frequent household users, and even professional tradesmen.
The result of their work is shown in the "after" part of Figure 1-1. Note the simpler interface architecture of the redesigned motor -- "plug-in" connections that could be inserted automatically into the power tool housing. Manual wiring of the motor to the power supply was eliminated. The motor design was fixed in its axial diameter, allowing variation only in length. Such standardization offered several important advantages. First, designers could create a common housing for the motor. The fixed diameter of the entire motor assembly also allowed engineers to create a standardized housing diameter for all power tools in the product family. The housing of the power tool would be the same for a drill, a sander, a jigsaw, or a grinder.
Another advantage of the new motor design was that power could be increased by simply adding length. By increasing the length of the motor from .8" to 1.75", as shown in Figure 1-2, stacking and wrapping more copper and steel around the laminations, a range of 60 watts to 650 watts could be achieved.
The standardization and modularization achieved in redesign of the basic motor platform made it possible for Black & Decker engineers to make important breakthroughs in manufacturing automation. The team designed a single process wherein variations (in length) of the basic motor could be produced untouched by human hands. The laminations (the backbone of the motor) could be placed at the head of a mechanized line and then stacked, welded, insulated, wound, varnished, terminated, and tested automatically.
Figure 1-3 shows that at the 1974 volumes of 2,400 motors per hour, the new double-insulated motor system required sixteen operators, whereas the previous motor design required 108 operators -- an 85 percent reduction in labor costs! Material, labor, and overhead costs were 31 cents per unit in the new design, as against 51 cents in the old design, a 39 percent reduction. The labor content itself was only 2 cents per unit in the new, down from 14 cents per unit in the old! Further, all motors could be produced on the same line because of the fixed axial dimension. Labor cost was therefore the same for a 650 watt motor as it was for a 60 watt motor. The only costs that varied were lamination steel and copper wire. The company realized savings of $1.28 million annually (in 1974 dollars) in making its power tool motors. That more than covered the capital investment of $1.22 million to purchase and integrate new equipment.
While the new motor design was under way, several members of the team turned their attention to the armature, another key subsystem in the structure of the product platform for power tools. The armature connects to a set of gears, which in turn drive the "business end" of the power tool, be it a drill bit, saw blade, or sanding surface. The armature rotates between 20,000 and 50,000 revolutions a minute in a typical power tool. Thus, anything connected to it has to be attached very securely. The armature consists of iron, laminations to the iron, more copper wrapping, a commutator, a shaft leading to the gears that drive the drill bit, sander, or blade, and insulating end caps. The armatures must also be balanced, like a car wheel.
Another layer of insulation had to be added around the armature shaft to meet the double insulation requirement. In the old armature design, the laminations had to be fitted precisely onto the shaft. The shaft and the laminations would be assembled with special fixtures. The layer of insulation would also have to be measured and then pressed onto the shaft. Defects in the insulation were experienced when the armature had to be balanced and tested.
The manufacturing engineers wanted to simplify this process to enable increased volumes. They searched the world across a wide range of industries, looking for a process that would make it possible to avoid mechanically fastening the laminations to the shaft. Fortunately, one engineer identified a new adhesive called Loctite, made by a small firm in Connecticut. Loctite had the unique feature of curing in the absence of air and in the presence of metal. That was precisely what the team needed to automate armature production fully. All subassemblies could be attached to the shaft with Loctite and, as the Loctite was curing, could be aligned properly.
Machines were developed to automate the entire process, including the fine art of balancing the entire subassembly -- a first in the power tools business. The team also developed a unique double insulating material, a special type of paper tube that was formed into a sleeve placed around the armature with Loctite adhesive. The new automated process of armature production made it possible to produce the same number of armatures with one-fourth as many operators. Costs were reduced to one-fifth of their former levels. Key aspects of the new armature design were patented by Black & Decker.
Motors and the armatures were just the start. Standardization, modularization, and automation became the pervasive thought architecture guiding the team. Each major subsystem of the power tools product platform was attacked by the Black & Decker team. Gears were standardized. The decision was made to switch from beveled gears to spur gears made from powdered metal. That eliminated the need for gear cutting, heat treating, and gauging, all of which added labor cost and material cost, as well as high levels of materials waste in the old process. Subsequent volumes soon allowed the company to vertically integrate, bringing the fabrication of powdered-metal gears in-house at a lower cost.
Even the lowly drill "chuck" became an object of the design team's scrutiny. The chuck is the little gear-faced device used to tighten drill bits. Despite their size and simplicity, chucks were expensive relative to the drill itself: 29 percent of the total cost of the drill. Black & Decker had sourced chucks from outside vendors. This cost alone made the chuck an important subsystem in the overall design. The team redesigned the chuck for cost-effective manufacturing, cutting its cost almost in half.
Purchasing was approached in a similar manner. For each purchased part, such as power cords, the team standardized selections to a narrow few and then searched the world for the best suppliers. The increased volume achieved through standardization allowed Black & Decker to secure good pricing from vendors immediately.
Quality improvements also benefited the company, its dealers, and its customers. Failure rates for all small appliances in the hands of consumers during this period had been in the range of 6-10 percent. Black & Decker's experience with field failures had fallen within that range as well; its scrap rate inside the factory took an equal toll. Thanks to the new product platform and manufacturing process design, those losses plummeted: Field failures dropped to near 1 percent, and internal scrappage fell below 5 percent!
THE BUSINESS IMPACT OF THE DOUBLE INSULATION PROGRAM
Seventeen million dollars and three years after starting the program, Black & Decker had completed the common platform for its power tools. It proved to be a robust platform from which the company introduced a multitude of derivative products with power ranges from 60 to 750 watts. As new concepts for power tools emerged, much of the work in design and tooling was eliminated because so much of any given products had been standardized in the new platform: motors, bearings, switches, gears, cord sets, and fasteners. Designers had to concern themselves only with the "business end" of a new product, i.e., a new type of drilling, sanding, or cutting attachment, and to perfect its intended function. In other words, their job was one of understanding customer needs, integrating modular subsystems, and perfecting the incremental attachments.
Cycle times for new derivative products were greatly accelerated. For a number of years, the rate of new product introductions averaged one per week! Further, as those products reached maturity and had to be dropped, massive writeoffs and scrapping of special tools and equipment was avoided simply because there were minimal special tools or equipment for any single product. Such flexibility allowed marketers and managers to pivot quickly and avoid being tied to dying products.
The financial payoff from the program was substantial. In a retrospective review done in 1976, management estimated that the 1976 requirements for motor manufacturing would have been nearly six hundred people, whereas the new production system required only 171 people. The labor cost difference in motor manufacturing alone was $4.6 million (in 1976 dollars).
Black & Decker took its cost advantage directly to the marketplace in the form of aggressive pricing. A customer could go to his local store and buy a great drill for less than $10. The company played its price advantage to the hilt, and between 1971 and the early 1980s its market share soared. Figure 1-4 shows the enduser prices of Black & Decker's newly designed power tools compared to prices for the older designs in constant 1973 dollars. The price reductions were over 50 percent in some instances. Demand soared, fueled by a strong advertising campaign. Even at those low price points, however, Black & Decker consistently maintained a gross margin of 50 percent over its cost of goods sold.
Competitors in consumer tools were blind-sided by Black & Decker's innovations. Competitors' product designs and manufacturing processes were costly. Attempts to match Black & Decker's prices diluted their profitability and undercut their ability to fund fundamental product redesign of their own. Furthermore, Black & Decker had patented many of its product and process innovations, making reverse engineering difficult if not impossible. Competitors would have to figure out their own proprietary solutions and the vast majority had neither the time nor the resources to do so. One competitor charged Black & Decker with unfair pricing practices, claiming that its tools were being dumped onto the market below the cost of production to gain market share. A plant tour of Black & Decker's motor and armature production line quickly laid that charge to rest. That competitor soon exited the consumer segment of the business.
Over the next five years a great shakeout occurred. Stanley, Skil, Pet, McGraw Edison, Sunbeam, General Electric, Wen, Thor, Porter Cable, and Rockwell all left the consumer power tool business. Only Sears Roebuck was able to stay in the domestic consumer market with Black & Decker. Foreign competitors such as Bosche and Makita were buoyed by their brand names in their own domestic markets, but even there Black & Decker competed aggressively with them. Black & Decker's breakeven period for the product line renewal, initially expected to be seven years, turned out to be about half that time.
A THOUGHT ARCHITECTURE FOR EFFECTIVE PRODUCT LINE RENEWAL
Black & Decker's approach to revitalizing its consumer power tools brought it tremendous success in the marketplace. In effect, Black & Decker did three things right:
* It avoided a piecemeal, single-product focus. Instead, management dealt with the power tool product line as a whole.
* It bridged the traditional divide between engineering and manufacturing with the result that both products and the processes for creating them were simultaneously redesigned.
* Senior management adopted a long-term horizon and made the initiative a top priority.
We believe that these approaches represent a "thought architecture" for management that is powerful and generalizable for any product-making company. That thought architecture has five basic principles.
pard
Principle 1. Product Family Planning and Platforms
Companies should plan and manage on the basis of the product family, which we defined in the Preface as a set of products that share common technology and address a related set of market applications.
The Black & Decker case illustrates the concept of product families very well. We can see the same product family principle at work in some of today's leading companies. Intel's dominant share of the microprocessor market has grown through successive generations of chip designs, each more powerful than the last. Each basic design, be it the 8086 developed and marketed almost twenty years ago or the Pentium or its successors that come to our attention today, has then been tailored to provide different speeds at different price points. The automobile industry is also noteworthy for its product family successes. Honda's Accord and Civic lines have kept their edge through a combination of new "platform" designs from which three or four derivatives of increasing power and luxury are always made available. Microsoft excels on the desktop not only because of its operating systems but because of its continuously growing family of software applications for word processing, spreadsheets, database, presentations, home entertainment, software development, and Internet usage.
One can also find a product family approach in successful companies before Black & Decker's time. The venerable DC-3, for example, was first developed during the 1930s to carry passengers for the fledging commercial airlines. It was then modified to serve as a troop carrier in the South Pacific. The DC-3 was also modified to serve as a cargo plane -- three different derivative planes based on the same product platform. The remarkable part of the DC-3 story is that the lead engineers completed the basic design of the plane over the course of several weeks: two engines versus the three of earlier planes, an aluminum skin as opposed to fabric wrapped around wood structures, new navigational systems, robust landing gear, and seating capacity large enough to make commercial traffic profitable for the first time. Today, more than fifty years later, thousands of DC-3's are still in use, proving it to be an efficient and durable plane for short haul cargo traffic. It is a story, we are told, that inspired the lead designers of the new Boeing 777 to "clean sheet" their own aircraft designs, embracing both commonality in components and systems, and planning in advance a multiple element product family.
Thus, developing robust product families has been and continues to be one of the cornerstones of sustained corporate success. Find a successful product-making company today, and it is hard not to find the presence of a diverse, feature-rich product family.
Product family planning means looking forward not only to the market applications for derivative products, but also planning the successive generations of the product platforms beneath those derivative products. Black & Decker embraced product family planning when it decided to redesign its entire product portfolio in a single stroke.
Principle 2: Simultaneous Design for Production
The design of new products is often constrained by existing capabilities in plant and production equipment. In high-volume manufacturing situations one frequently finds very complex, intricate machines that lack the flexibility to accommodate variations to existing product designs. It is a classic case of the tail wagging the dog: Manufacturing engineers guide product design decisions to match the capabilities of their existing factories and subcontractors. Manufacturing managers participating in reviews of new product developments heed the inner voice: "We already have millions of dollars tied up in this equipment, so design something that's like our existing products." This can be one of the greatest barriers to product innovation and helps explain the incrementalism found in many industries.
Simultaneous design for production is the early and continuous integration of product design with manufacturing design. It means getting manufacturing personnel to work elbow to elbow with product designers, engineers, and marketers, from the beginning and for the duration of the development program. Collocation is essential.
The power of simultaneous design is clear from the Black & Decker story, where such major subsystems as motors, armatures, and gears were designed in conjunction with such process innovations as Loctite, automated armature balancing, and powdered metal fabrication.
Principle 3: Global Product Design and Market Development
Development teams must assume a global perspective for sourcing technology for new products. Teams should be intimately familiar with market research on customer needs and preferences, distribution channels, support requirements, and technical and product safety requirements beyond domestic borders. Failure to meet those requirements through design locks products out of important markets.
Standardization of subsystems is clearly a key part of the global solution. When Black & Decker redesigned its power tool line, it adopted the metric standard for all of its subsystems. That facilitated global sourcing of components and helped ensure that the common product platform could accommodate local needs for manufacturing, the addition of various accessories, and packaging.
Principle 4: Discover Latent, Unperceived Customer Needs
New product development must be the able to intuit, test, and ultimately discover latent, unperceived customer needs. Good market research can identify the perceived needs and preferences of customers. Most companies readily understand how to do this type of research. Far more difficult, but more powerful as a source of competitive advantage, is the ability to identify needs that customers have not yet learned to articulate. Finding latent needs is as much art as science in the context of product development. Management should cherish individuals who do it well. New product platforms designed to address those latent needs can generate renewed excitement and sales, even in dormant, unexciting industries. Safety concerns were a latent need in the Black & Decker power tool case. So was a $10 power drill. Discovering and acting upon latent needs will undoubtedly drive the success of companies that offer Internet applications in the years ahead.
Principle 5: Elegance in Design
The norm in industry is to add functionality to existing designs. If a product is selling, you can bet that a "new and improved" version will appear with various bells and whistles. For example, a popular software package might contain tens of thousands of lines of programming code. Each new version adds features, more code, and more complexity. In scanning the voluminous documentation required to understand all the features of the product, the user justifiably wonders, "Who is making this product, and for whom?"
Customers' resistance to complexity is observable even as companies raise the level of complexity in their products. Japanese producers of personal "organizers" and VCRs have run up against customer complaints that the products have too many features and that the effort to master them is not worth the trouble. High levels of product variety constitute another form of complexity against which consumers have rebelled in recent years. Automobile companies that ask the buyer to choose among a dozen different steering wheels, two dozen styles of wheel covers, more than a hundred carpet types, and so forth, have discovered that complexity can be a sales killer.
Simplicity, on the other hand, is a virtue. And simplicity in product design can often be attained through modular construction. Top-flight software developers, for example, generally avoid monolithic programs in favor of functionally focused modules that are coupled through standardized interfaces. Or, the Dustbuster™, another successful consumer product, is at its essence marvelously simple yet useful.
Herb Simon, the 1978 Nobel Prize winner in economics, tells the story of two Swiss watchmakers, Bios and Mekhos, both of whom made fine, expensive watches. While their watches were in equal demand, Bios prospered while Mekhos struggled. The watches consisted of about one thousand parts each. Mekhos assembled his watches bit by bit -- rather like making a mosaic floor out of small colored stones. Thus, each time he was disturbed in his work and had to put down the partly assembled watch, it fell to pieces and he had to start again from scratch. Bios, on the other hand, made watches by constructing subassemblies of about ten components, each of which held together as an independent unit. Ten of the subassemblies could then be fitted together in a subsystem of a higher order, and ten of those constituted the whole watch. If an interruption caused Bios to put down or even drop the watch he was working on, it did not decompose into its elementary bits. Instead of starting all over again, he had merely to reassemble that particular subassembly. Bios's watches were also incomparably more resistant to damage and much easier to repair.
Simplicity, when combined with a richness of features, represents elegance in product design. The renewal of the Black & Decker power tool motor demonstrates this principle and indicates how elegance in product design translates into market power.
TOWARD CONTINUOUS RENEWAL
The five principles just cited represent a thought architecture to guide managers in creating powerful and profitable products and services. The chapters that follow expand on these principles and provide tools for applying them.
Victory in the contest for market leadership can be attained through these principles, but long-term success and survival require continuing innovation and renewal. While our story of Black & Decker assures us that entire families can be revitalized in a bold stroke and that financial success indeed follows, one victory is not the end of history. Renewal must become a habit of mind and action. The Double Insulation Program revitalized Black & Decker's consumer power tool business and brought the company years of prosperity. For a number of years the thought architecture was adhered to and reapplied to new situations. For example, the company identified a new opportunity in the automotive aftermarket. Using the lessons of the Double Insulation initiative, the company developed a new product family for that market that used many of the product technologies and manufacturing processes of its consumer power tools.
Unfortunately, our story does not have an entirely happy ending. The thought architecture behind Black & Decker's success did not "stick" as a way of thinking and managing. In pursuit of ever lower costs, the company sought a way to reduce the physical size of its electric motors further. That was accomplished through the development of new manufacturing equipment. But in its rush to bring out a new line of products featuring this reduction, it abandoned many of the lessons learned earlier. The shared architecture of the motor housings, handle, and gearbox interfaces was lost; every product using the new motor was required to have a unique housing and peripherals. Over time, the development of new products reverted to the old piecemeal practices. Although some of the Double Insulation Program designs can still be found in the company's products today, the preponderance of its offerings no longer share significant componentry. Even the number of fasteners in its power tools has proliferated.
Institutionalizing the rules, tools, and disciplines of shared architecture is especially difficult as organizations change and new managers come into power. If Black & Decker momentarily lost its edge, it was not the first industry leader to do so. The failure to sustain success is a story that repeats itself in every industry and with every generation. The conclusion of this story, however, is not preordained. Managers who understand the need for longer-term evolution of the product family can create a much different ending which is what we consider in the next chapter.
Copyright © 1997 by The Free Press
Product-making enterprises -- the ones that survive, that is -- are evolutionary entities. Their product portfolios change through periodic enhancements to basic product and manufacturing technologies. Some of the changes are true breakthroughs, while others are merely incremental. The appropriate changes lead to market success; those that are not appropriate lead to failure.
The long-term success of an enterprise depends on a stream of new products -- some replacing older ones, others pioneering new markets. As the world economy becomes more integrated, many new products have to be global products, satisfying worldwide customer needs and regulatory requirements. The stream of new global products, exploiting advances in both product technologies and technologies used to manufacture, distribute, and provide support, is what provides the fuel for corporate growth and renewal.
FOCUSING ON SINGLE PRODUCTS
Regardless of the importance creating streams of new products, traditional methods for managing this vital business function usually fail to deliver in the long run. That is because companies typically design new products one product at a time. The single product must compete for resources against other projects in the corporation's portfolio. Every product team must justify its own existence repeatedly throughout the process of development and commercialization. Approval gates swing open and shut as single development projects move forward. Budget, break-even, and cycle-time measures are all typically calculated on the basis of single products.
The end result of this single-product focus is a failure to embrace commonality, compatibility, standardization, or modularization among different products and product lines. For a given company, the evidence for lack of commonality is found in the products themselves and their component parts. One will observe that the products use different materials for the same purposes; different switches when one kind of switch would do; a technology developed in-house at great expense to serve a single product; components with the same technical specifications but different sizes (so they cannot be interchanged); and on and on. That is where a product portfolio can easily end up when it is developed and managed one product at a time.
Now ask yourself: Would it not be better to build an entire family of products that leverage a common market understanding, common product technologies, and a common set of highly automated production processes? Rather than have separate development teams each working on single products, wouldn't it be better to have them join forces in building a common platform or a design from which a host of derivative products could be effectively and efficiently created? In short, might not the entire product portfolio of a business segment be tackled en masse?
To see that this alternative to a single-product mentality is not so far-fetched, but rather highly feasible and operationally viable, let us reach back to the experience of Black & Decker. Most readers probably own a Black & Decker power tool. There is a very good reason for this. Black & Decker drove most of its competitors out of the consumer segments of the power tools business by developing effective product platforms for its major product families.
RENEWING THE PRODUCT PORTFOLIO AT BLACK & DECKER
In the early 1970s Black & Decker's consumer power tool product portfolio was broad and deep, consisting of eighteen power tool groups. Eight groups contributed 73 percent of sales and 91 percent of units sold: drills, jigsaws, shrub and hedge trimmers, power hammers, circular saws, grinders and polishers, finishing sanders, and edgers -- 122 different models in all.
As with most established companies, Black & Decker's product portfolio had evolved over many years; by 1970 it was a collection of uncoordinated designs, materials, and technologies. Its power tools relied on thirty different motors, each manufactured by a different set of tooling. Sixty different motor housings were needed to accommodate variations in power and application (e.g. a drill versus a saw or sander). Besides, the company relied on 104 different armatures, the part that connects the motor to the "business end" of the tool (e.g., to the drill bit or the saw blade). Each of those armatures, in turn, required its own tooling. Dozens of different switches and buttons populated the company's parts bins and bills-of-materials.
The vast majority of Black & Decker's products had crept into the power tool portfolio one at a time, with little thought given to how economies might be achieved through shared components and manufacturing processes. The thousands of parts needed for the products required thousands of square feet of stockroom space and hundreds of people to order, shelve, and inventory them. Each unique product design required either a dedicated production line or frequent and time-consuming line changeovers. Inelegant designs translated into high labor inputs.
Despite those impediments, Black & Decker had grown into a major player in consumer power tools, perhaps because its competitors also followed the same one-at-a-time approach to product development. Its products worked as well as those of rivals and were priced competitive with those of other domestic manufacturers. Circa 1970, Black & Decker controlled about 20 percent of market share worth about $200 million annually in revenue. Despite its comfortable situation, management saw three dark clouds on the horizon:
* Offshore manufacturers were making inroads into the North American market and attacking emerging markets overseas.
* Inflation and the rising cost of labor, materials, services, and capital goods were devouring Black & Decker's margins. To maintain constant labor-cost content in its products, management calculated that about one-third of the labor cost would have to be removed from products over the next three to four years. While that would be difficult for any single product, it would be impossible for the company's entire power tool line without making use of design standardization, automation, better use of materials and floor space, and intelligent capital planning.
* Consumers and regulators would be requiring higher standards of safety -- specifically, adding a backup barrier of insulation around the power tool motors to protect the users from electrical shock if the existing insulation system failed. Regulatory mandates for double insulation had already taken hold in Europe and were expected to surface in the American market. This would create havoc for Black & Decker's production process. Its management estimated that redesigning all its power tools for double insulation one product at a time would take nearly a decade.
Black & Decker's Board and its management team understood that those threats could not be met with small measures. They also understood that their competitors faced the same problems. "If we can respond more rapidly and effectively," they reasoned, "the threats we face as an enterprise might be turned into opportunities to dominate our industry."
f0 The Double Insulation Program
The need to adopt double insulation turned out to be the catalyst for renewal of the entire Black & Decker power tool portfolio. Management started the Double Insulation Program with a clear mission: (1) redesign all consumer power tools at the same time; (2) redesign manufacturing simultaneously so that all the new products could be manufactured at substantial cost advantage; and (3) offer double insulated products at no increase in price to the consumer. The implication of this mission was that current consumer power tool lines would have to be abandoned!
Management established five powerful objectives for its power tool renewal:
* Develop a clear, distinctive "family" look across all products so that the customer could pick up any given product and, without reading the label, know that it was a "Black & Decker."
* Simplify product offerings, replacing customized gadgetry with standardized parts, interfaces, couplings, and connections.
* Dramatically reduce per unit manufacturing costs through automation and the use of new materials. While a number of other power tool companies had already introduced double insulated products, they had done so at a 20 percent premium in material and labor costs. Black & Decker would aim to introduce double insulation at less than the single insulation costs of its current product line.
* Use design to improve power tool performance and make it possible to add new features (such as more power or variable speeds) with minimal costs.
* Make global products -- i.e., products that would meet worldwide customer needs and regulatory requirements.
Getting Started
The most important decision made by the company's senior managers was made at the beginning of the effort: The resources of the company would be concentrated on the Double Insulation Program until the transition was complete. Only a token force would be left to carry out development efforts on existing power tool designs. That was clearly a high-risk, "bet-the-company" decision. The best talent and the weight of capital investment would be shifted to the new program. One retired Black & Decker executive remarked, "We bet the company, but if we hadn't, there wouldn't have been a company by the end of the decade."
Development of new products was placed temporarily on hold while a focused "hit team" sought to create a new common product platform for all the company's major power tool groups. They began to search the industrial world for the best product components and new advances in both materials and manufacturing processes.
Since manufacturing was to be the key enabler of a radical new product platform design, the traditional company barrier between engineering and manufacturing would have to be bridged. Black & Decker established that link by placing advanced manufacturing engineers in residence at headquarters where they would work elbow to elbow with the product design group. The manufacturing engineers were directly involved from the start in tooling machine development, process development, value and cost product design engineering, purchasing decisions, and packaging. A "war room" was created where people from many functions could meet to hammer out new product designs over the three-year duration of the project.
The basic structure of the company was also changed to prevent higher level organizational politics from interfering with the renewal effort. Instead of having one general manager of the consumer power tools business with two vice presidents for engineering and manufacturing respectively, a new "vice president of operations" position was created to combine product development, manufacturing engineering, and manufacturing operations under one vice president.
Perhaps as important as anything, management and Board members committed themselves to a long-term planning horizon. They allocated $17.1 million (in 1971 dollars) -- a substantial investment for the company at that time -- and break-even was not anticipated until nearly seven years after the program's launch. Capital expenditures, largely for new plant and equipment, were $6 million. Tooling, i.e., setting up the production facilities, was another $6.5 million. Manufacturing technology engineering and development engineering were each to receive $1.7 million. Inventory and other miscellaneous expenditures were budgeted at $1.2 million.
Building a Common Product Platform
Black & Decker had the good fortune to possess an unbridled fascination with the details of creating better product function and price for the consumer power tools user. The Double Insulation initiative supported that fascination with resources and direction. Its goal was to create a product platform to support a new generation of power tools. A product platform is a set of common components, modules, or parts from which a stream of derivative products can be efficiently created and launched. The most common part across all power tools is the motor. Key product parts, such as the motor in a power tool, represent a major subsystem of the product platform. Figure 1-1 illustrates the before and after design of the universal motor field assembly, one of the key subsystems of Black & Decker's universal motor.
To appreciate just how inelegant product designs were in Black & Decker's power tools prior to the Double Insulation Program, note the various wires. These wires were the connections between the motor field and the power supply. We refer to connections such as these as the interfaces between subsystems in a product platform. Across its major product groups, the company manufactured thirty different motors. They were not simply variations of a single design, but specific architectures developed for different power requirements within and across the power tool groups. Each motor had a unique manufacturing process, and those processes were only semiautomated. For example, technicians manually attached the wires between the motor fields and the power supply.
To solve that problem, a team went to work designing a universal motor, one that could serve a broad range of products: drills, sanders, saws, grinders, and so forth. The team was guided by the principles of standardization and modularization. The principle of scalability was also important. Their goal was to create a single basic motor design that could be adapted to produce a broad range of power to serve infrequent household users, frequent household users, and even professional tradesmen.
The result of their work is shown in the "after" part of Figure 1-1. Note the simpler interface architecture of the redesigned motor -- "plug-in" connections that could be inserted automatically into the power tool housing. Manual wiring of the motor to the power supply was eliminated. The motor design was fixed in its axial diameter, allowing variation only in length. Such standardization offered several important advantages. First, designers could create a common housing for the motor. The fixed diameter of the entire motor assembly also allowed engineers to create a standardized housing diameter for all power tools in the product family. The housing of the power tool would be the same for a drill, a sander, a jigsaw, or a grinder.
Another advantage of the new motor design was that power could be increased by simply adding length. By increasing the length of the motor from .8" to 1.75", as shown in Figure 1-2, stacking and wrapping more copper and steel around the laminations, a range of 60 watts to 650 watts could be achieved.
The standardization and modularization achieved in redesign of the basic motor platform made it possible for Black & Decker engineers to make important breakthroughs in manufacturing automation. The team designed a single process wherein variations (in length) of the basic motor could be produced untouched by human hands. The laminations (the backbone of the motor) could be placed at the head of a mechanized line and then stacked, welded, insulated, wound, varnished, terminated, and tested automatically.
Figure 1-3 shows that at the 1974 volumes of 2,400 motors per hour, the new double-insulated motor system required sixteen operators, whereas the previous motor design required 108 operators -- an 85 percent reduction in labor costs! Material, labor, and overhead costs were 31 cents per unit in the new design, as against 51 cents in the old design, a 39 percent reduction. The labor content itself was only 2 cents per unit in the new, down from 14 cents per unit in the old! Further, all motors could be produced on the same line because of the fixed axial dimension. Labor cost was therefore the same for a 650 watt motor as it was for a 60 watt motor. The only costs that varied were lamination steel and copper wire. The company realized savings of $1.28 million annually (in 1974 dollars) in making its power tool motors. That more than covered the capital investment of $1.22 million to purchase and integrate new equipment.
While the new motor design was under way, several members of the team turned their attention to the armature, another key subsystem in the structure of the product platform for power tools. The armature connects to a set of gears, which in turn drive the "business end" of the power tool, be it a drill bit, saw blade, or sanding surface. The armature rotates between 20,000 and 50,000 revolutions a minute in a typical power tool. Thus, anything connected to it has to be attached very securely. The armature consists of iron, laminations to the iron, more copper wrapping, a commutator, a shaft leading to the gears that drive the drill bit, sander, or blade, and insulating end caps. The armatures must also be balanced, like a car wheel.
Another layer of insulation had to be added around the armature shaft to meet the double insulation requirement. In the old armature design, the laminations had to be fitted precisely onto the shaft. The shaft and the laminations would be assembled with special fixtures. The layer of insulation would also have to be measured and then pressed onto the shaft. Defects in the insulation were experienced when the armature had to be balanced and tested.
The manufacturing engineers wanted to simplify this process to enable increased volumes. They searched the world across a wide range of industries, looking for a process that would make it possible to avoid mechanically fastening the laminations to the shaft. Fortunately, one engineer identified a new adhesive called Loctite, made by a small firm in Connecticut. Loctite had the unique feature of curing in the absence of air and in the presence of metal. That was precisely what the team needed to automate armature production fully. All subassemblies could be attached to the shaft with Loctite and, as the Loctite was curing, could be aligned properly.
Machines were developed to automate the entire process, including the fine art of balancing the entire subassembly -- a first in the power tools business. The team also developed a unique double insulating material, a special type of paper tube that was formed into a sleeve placed around the armature with Loctite adhesive. The new automated process of armature production made it possible to produce the same number of armatures with one-fourth as many operators. Costs were reduced to one-fifth of their former levels. Key aspects of the new armature design were patented by Black & Decker.
Motors and the armatures were just the start. Standardization, modularization, and automation became the pervasive thought architecture guiding the team. Each major subsystem of the power tools product platform was attacked by the Black & Decker team. Gears were standardized. The decision was made to switch from beveled gears to spur gears made from powdered metal. That eliminated the need for gear cutting, heat treating, and gauging, all of which added labor cost and material cost, as well as high levels of materials waste in the old process. Subsequent volumes soon allowed the company to vertically integrate, bringing the fabrication of powdered-metal gears in-house at a lower cost.
Even the lowly drill "chuck" became an object of the design team's scrutiny. The chuck is the little gear-faced device used to tighten drill bits. Despite their size and simplicity, chucks were expensive relative to the drill itself: 29 percent of the total cost of the drill. Black & Decker had sourced chucks from outside vendors. This cost alone made the chuck an important subsystem in the overall design. The team redesigned the chuck for cost-effective manufacturing, cutting its cost almost in half.
Purchasing was approached in a similar manner. For each purchased part, such as power cords, the team standardized selections to a narrow few and then searched the world for the best suppliers. The increased volume achieved through standardization allowed Black & Decker to secure good pricing from vendors immediately.
Quality improvements also benefited the company, its dealers, and its customers. Failure rates for all small appliances in the hands of consumers during this period had been in the range of 6-10 percent. Black & Decker's experience with field failures had fallen within that range as well; its scrap rate inside the factory took an equal toll. Thanks to the new product platform and manufacturing process design, those losses plummeted: Field failures dropped to near 1 percent, and internal scrappage fell below 5 percent!
THE BUSINESS IMPACT OF THE DOUBLE INSULATION PROGRAM
Seventeen million dollars and three years after starting the program, Black & Decker had completed the common platform for its power tools. It proved to be a robust platform from which the company introduced a multitude of derivative products with power ranges from 60 to 750 watts. As new concepts for power tools emerged, much of the work in design and tooling was eliminated because so much of any given products had been standardized in the new platform: motors, bearings, switches, gears, cord sets, and fasteners. Designers had to concern themselves only with the "business end" of a new product, i.e., a new type of drilling, sanding, or cutting attachment, and to perfect its intended function. In other words, their job was one of understanding customer needs, integrating modular subsystems, and perfecting the incremental attachments.
Cycle times for new derivative products were greatly accelerated. For a number of years, the rate of new product introductions averaged one per week! Further, as those products reached maturity and had to be dropped, massive writeoffs and scrapping of special tools and equipment was avoided simply because there were minimal special tools or equipment for any single product. Such flexibility allowed marketers and managers to pivot quickly and avoid being tied to dying products.
The financial payoff from the program was substantial. In a retrospective review done in 1976, management estimated that the 1976 requirements for motor manufacturing would have been nearly six hundred people, whereas the new production system required only 171 people. The labor cost difference in motor manufacturing alone was $4.6 million (in 1976 dollars).
Black & Decker took its cost advantage directly to the marketplace in the form of aggressive pricing. A customer could go to his local store and buy a great drill for less than $10. The company played its price advantage to the hilt, and between 1971 and the early 1980s its market share soared. Figure 1-4 shows the enduser prices of Black & Decker's newly designed power tools compared to prices for the older designs in constant 1973 dollars. The price reductions were over 50 percent in some instances. Demand soared, fueled by a strong advertising campaign. Even at those low price points, however, Black & Decker consistently maintained a gross margin of 50 percent over its cost of goods sold.
Competitors in consumer tools were blind-sided by Black & Decker's innovations. Competitors' product designs and manufacturing processes were costly. Attempts to match Black & Decker's prices diluted their profitability and undercut their ability to fund fundamental product redesign of their own. Furthermore, Black & Decker had patented many of its product and process innovations, making reverse engineering difficult if not impossible. Competitors would have to figure out their own proprietary solutions and the vast majority had neither the time nor the resources to do so. One competitor charged Black & Decker with unfair pricing practices, claiming that its tools were being dumped onto the market below the cost of production to gain market share. A plant tour of Black & Decker's motor and armature production line quickly laid that charge to rest. That competitor soon exited the consumer segment of the business.
Over the next five years a great shakeout occurred. Stanley, Skil, Pet, McGraw Edison, Sunbeam, General Electric, Wen, Thor, Porter Cable, and Rockwell all left the consumer power tool business. Only Sears Roebuck was able to stay in the domestic consumer market with Black & Decker. Foreign competitors such as Bosche and Makita were buoyed by their brand names in their own domestic markets, but even there Black & Decker competed aggressively with them. Black & Decker's breakeven period for the product line renewal, initially expected to be seven years, turned out to be about half that time.
A THOUGHT ARCHITECTURE FOR EFFECTIVE PRODUCT LINE RENEWAL
Black & Decker's approach to revitalizing its consumer power tools brought it tremendous success in the marketplace. In effect, Black & Decker did three things right:
* It avoided a piecemeal, single-product focus. Instead, management dealt with the power tool product line as a whole.
* It bridged the traditional divide between engineering and manufacturing with the result that both products and the processes for creating them were simultaneously redesigned.
* Senior management adopted a long-term horizon and made the initiative a top priority.
We believe that these approaches represent a "thought architecture" for management that is powerful and generalizable for any product-making company. That thought architecture has five basic principles.
pard
Principle 1. Product Family Planning and Platforms
Companies should plan and manage on the basis of the product family, which we defined in the Preface as a set of products that share common technology and address a related set of market applications.
The Black & Decker case illustrates the concept of product families very well. We can see the same product family principle at work in some of today's leading companies. Intel's dominant share of the microprocessor market has grown through successive generations of chip designs, each more powerful than the last. Each basic design, be it the 8086 developed and marketed almost twenty years ago or the Pentium or its successors that come to our attention today, has then been tailored to provide different speeds at different price points. The automobile industry is also noteworthy for its product family successes. Honda's Accord and Civic lines have kept their edge through a combination of new "platform" designs from which three or four derivatives of increasing power and luxury are always made available. Microsoft excels on the desktop not only because of its operating systems but because of its continuously growing family of software applications for word processing, spreadsheets, database, presentations, home entertainment, software development, and Internet usage.
One can also find a product family approach in successful companies before Black & Decker's time. The venerable DC-3, for example, was first developed during the 1930s to carry passengers for the fledging commercial airlines. It was then modified to serve as a troop carrier in the South Pacific. The DC-3 was also modified to serve as a cargo plane -- three different derivative planes based on the same product platform. The remarkable part of the DC-3 story is that the lead engineers completed the basic design of the plane over the course of several weeks: two engines versus the three of earlier planes, an aluminum skin as opposed to fabric wrapped around wood structures, new navigational systems, robust landing gear, and seating capacity large enough to make commercial traffic profitable for the first time. Today, more than fifty years later, thousands of DC-3's are still in use, proving it to be an efficient and durable plane for short haul cargo traffic. It is a story, we are told, that inspired the lead designers of the new Boeing 777 to "clean sheet" their own aircraft designs, embracing both commonality in components and systems, and planning in advance a multiple element product family.
Thus, developing robust product families has been and continues to be one of the cornerstones of sustained corporate success. Find a successful product-making company today, and it is hard not to find the presence of a diverse, feature-rich product family.
Product family planning means looking forward not only to the market applications for derivative products, but also planning the successive generations of the product platforms beneath those derivative products. Black & Decker embraced product family planning when it decided to redesign its entire product portfolio in a single stroke.
Principle 2: Simultaneous Design for Production
The design of new products is often constrained by existing capabilities in plant and production equipment. In high-volume manufacturing situations one frequently finds very complex, intricate machines that lack the flexibility to accommodate variations to existing product designs. It is a classic case of the tail wagging the dog: Manufacturing engineers guide product design decisions to match the capabilities of their existing factories and subcontractors. Manufacturing managers participating in reviews of new product developments heed the inner voice: "We already have millions of dollars tied up in this equipment, so design something that's like our existing products." This can be one of the greatest barriers to product innovation and helps explain the incrementalism found in many industries.
Simultaneous design for production is the early and continuous integration of product design with manufacturing design. It means getting manufacturing personnel to work elbow to elbow with product designers, engineers, and marketers, from the beginning and for the duration of the development program. Collocation is essential.
The power of simultaneous design is clear from the Black & Decker story, where such major subsystems as motors, armatures, and gears were designed in conjunction with such process innovations as Loctite, automated armature balancing, and powdered metal fabrication.
Principle 3: Global Product Design and Market Development
Development teams must assume a global perspective for sourcing technology for new products. Teams should be intimately familiar with market research on customer needs and preferences, distribution channels, support requirements, and technical and product safety requirements beyond domestic borders. Failure to meet those requirements through design locks products out of important markets.
Standardization of subsystems is clearly a key part of the global solution. When Black & Decker redesigned its power tool line, it adopted the metric standard for all of its subsystems. That facilitated global sourcing of components and helped ensure that the common product platform could accommodate local needs for manufacturing, the addition of various accessories, and packaging.
Principle 4: Discover Latent, Unperceived Customer Needs
New product development must be the able to intuit, test, and ultimately discover latent, unperceived customer needs. Good market research can identify the perceived needs and preferences of customers. Most companies readily understand how to do this type of research. Far more difficult, but more powerful as a source of competitive advantage, is the ability to identify needs that customers have not yet learned to articulate. Finding latent needs is as much art as science in the context of product development. Management should cherish individuals who do it well. New product platforms designed to address those latent needs can generate renewed excitement and sales, even in dormant, unexciting industries. Safety concerns were a latent need in the Black & Decker power tool case. So was a $10 power drill. Discovering and acting upon latent needs will undoubtedly drive the success of companies that offer Internet applications in the years ahead.
Principle 5: Elegance in Design
The norm in industry is to add functionality to existing designs. If a product is selling, you can bet that a "new and improved" version will appear with various bells and whistles. For example, a popular software package might contain tens of thousands of lines of programming code. Each new version adds features, more code, and more complexity. In scanning the voluminous documentation required to understand all the features of the product, the user justifiably wonders, "Who is making this product, and for whom?"
Customers' resistance to complexity is observable even as companies raise the level of complexity in their products. Japanese producers of personal "organizers" and VCRs have run up against customer complaints that the products have too many features and that the effort to master them is not worth the trouble. High levels of product variety constitute another form of complexity against which consumers have rebelled in recent years. Automobile companies that ask the buyer to choose among a dozen different steering wheels, two dozen styles of wheel covers, more than a hundred carpet types, and so forth, have discovered that complexity can be a sales killer.
Simplicity, on the other hand, is a virtue. And simplicity in product design can often be attained through modular construction. Top-flight software developers, for example, generally avoid monolithic programs in favor of functionally focused modules that are coupled through standardized interfaces. Or, the Dustbuster™, another successful consumer product, is at its essence marvelously simple yet useful.
Herb Simon, the 1978 Nobel Prize winner in economics, tells the story of two Swiss watchmakers, Bios and Mekhos, both of whom made fine, expensive watches. While their watches were in equal demand, Bios prospered while Mekhos struggled. The watches consisted of about one thousand parts each. Mekhos assembled his watches bit by bit -- rather like making a mosaic floor out of small colored stones. Thus, each time he was disturbed in his work and had to put down the partly assembled watch, it fell to pieces and he had to start again from scratch. Bios, on the other hand, made watches by constructing subassemblies of about ten components, each of which held together as an independent unit. Ten of the subassemblies could then be fitted together in a subsystem of a higher order, and ten of those constituted the whole watch. If an interruption caused Bios to put down or even drop the watch he was working on, it did not decompose into its elementary bits. Instead of starting all over again, he had merely to reassemble that particular subassembly. Bios's watches were also incomparably more resistant to damage and much easier to repair.
Simplicity, when combined with a richness of features, represents elegance in product design. The renewal of the Black & Decker power tool motor demonstrates this principle and indicates how elegance in product design translates into market power.
TOWARD CONTINUOUS RENEWAL
The five principles just cited represent a thought architecture to guide managers in creating powerful and profitable products and services. The chapters that follow expand on these principles and provide tools for applying them.
Victory in the contest for market leadership can be attained through these principles, but long-term success and survival require continuing innovation and renewal. While our story of Black & Decker assures us that entire families can be revitalized in a bold stroke and that financial success indeed follows, one victory is not the end of history. Renewal must become a habit of mind and action. The Double Insulation Program revitalized Black & Decker's consumer power tool business and brought the company years of prosperity. For a number of years the thought architecture was adhered to and reapplied to new situations. For example, the company identified a new opportunity in the automotive aftermarket. Using the lessons of the Double Insulation initiative, the company developed a new product family for that market that used many of the product technologies and manufacturing processes of its consumer power tools.
Unfortunately, our story does not have an entirely happy ending. The thought architecture behind Black & Decker's success did not "stick" as a way of thinking and managing. In pursuit of ever lower costs, the company sought a way to reduce the physical size of its electric motors further. That was accomplished through the development of new manufacturing equipment. But in its rush to bring out a new line of products featuring this reduction, it abandoned many of the lessons learned earlier. The shared architecture of the motor housings, handle, and gearbox interfaces was lost; every product using the new motor was required to have a unique housing and peripherals. Over time, the development of new products reverted to the old piecemeal practices. Although some of the Double Insulation Program designs can still be found in the company's products today, the preponderance of its offerings no longer share significant componentry. Even the number of fasteners in its power tools has proliferated.
Institutionalizing the rules, tools, and disciplines of shared architecture is especially difficult as organizations change and new managers come into power. If Black & Decker momentarily lost its edge, it was not the first industry leader to do so. The failure to sustain success is a story that repeats itself in every industry and with every generation. The conclusion of this story, however, is not preordained. Managers who understand the need for longer-term evolution of the product family can create a much different ending which is what we consider in the next chapter.
Copyright © 1997 by The Free Press
About The Authors
Courtesy of the author
Alvin P. Lehnerd has held executive positions at Black & Decker, Sunbeam, and Steelcase. He has led several well-known developments and innovations resulting in new product successes, including Black & Decker's Dustbuster, Sunbeam's first electronic auto-shut off and global iron product lines, and the complete redesign on Black & Decker's double insulated consumer power tools. He teaches at Northeastern University, University of Pennsylvania, and at the MIT Sloan School of Management.
Courtesy of the author
Marc H. Meyer is Associate Professor of Management at Northeastern University's College of Business Administration, Research Director of the College's Center for Technology Management, and has been a Visiting Associate Professor at the MIT Sloan School of Management. Dr. Meyer is also a co-founder of three software companies and consults actively to leading manufacturers in high-tech industries.
Product Details
- Publisher: Free Press (November 1, 2011)
- Length: 288 pages
- ISBN13: 9781439137444
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