Find the Rhythm

Volume 3 Letter 9

New product development is a dance between marketing and R&D.

In 1957 Earl Bakken patented the first heart pacemaker and in so doing improved and lengthened the lives of hundreds of thousands of people worldwide. The pacemaker was declared one of the ten most outstanding achievements over the last 50 years along with the digital computer and the Apollo 11 Moon landing.

The company grew dramatically through the 1960’s enjoying greater than 70% market share. However in the 1970’s two major product recalls and quality problems damaged the company badly. During this period investments in new technologies stayed at a high level but as one manager stated …It’s “not that we were working on bad ideas. Most of them were technically sound and made market sense. We were trying to do too many things and no project got the focus and attention needed to get it done right.”

The manager went on to say “It was taking too long to get anything to market. We never got good at releasing new products because you only get good at things you do a lot. Those that we did introduce often followed the lead of competitors. That’s what happens when you continually try to respond to every new idea to come along”[1]

Problems fed on themselves – engineering would never get anything done on time because marketing kept changing its mind on product specs. At the same time marketing complained about the time it took engineering to complete anything. By the time products did make it to market it was often too little too late. The deadly combination of slow innovations and poor product quality dropped market share to less than 30% by 1986. Clearly things needed to change.

A new manager was brought in to turn around the product development group. He put into place a new process based on the following principals.

1. Speed to market was recognized as essential: The major bottleneck in the product development process was deciding what to develop. Management developed a business strategy which set clear criteria for matching corporate goals with customer requirements.

2. A platform strategy was developed: Developing products on common platforms allowed for derivative products to be developed without significant design costs.

3. Old products were removed: New products had lower costs than the older products they were replacing. Company policy was to reduce the price on the older technology selling it to the more price sensitive segments. The result of this strategy was that old (high unit cost) products clogged production lines and ballooned costs as demand soared in the low end segments. Instead new products with fewer features (and much lower unit cost) were introduced to the low tier segments.

4. Information was shared across product lines: Previously each product line had its own independent development team. Ideas were protected – (not shared) sometimes leaving the solution to tough problems to be rediscovered by another team.

5. Detailed documentation: Before a project could be initiated clear design requirements including a market appraisal with potential financial benefits were developed. (The old method of verbal contracts often led to misunderstandings and disagreements.)

6. Regular project reviews: All projects were scrutinized on a regular basis against their technical progress and potential economic benefit.

7. Market inputs: The company had always consulted industry on product development. There was a tendency to stack the panel with industry experts rather than normal cardiologists who used and programmed heart pacemakers everyday. The business unit manager stated that “taking the pulse of the less demanding end of the market is actually a huge challenge”. Taking their pulse also made a huge difference in getting the product design right.

Applying these principles had a significant impact on the company between 1986 and 1996. Time to develop a new product was reduced by 75%. Product costs fell by 30%, manufacturing defects fell 4x and field failures over the life of the product dropped by 90%. Market share increased from 29% to 51% and the company was the leader in every segment of the market (and remains so today).

Get your marketing and R&D people dancing together – feel the rhythm – win the market.

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[1] For the full story see HBS Case Study 9-698-004 We’ve Got Rhythm, C Christensen 1997

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