Product Development Continuum

As product life cycles shorten, the need for faster product development increases. And as
technological
sophistication of new products increases, so do the expense and risk. For instance,
drug firms invest an average of 12 to 15 years and $1 billion before receiving regulatory approval
for a new drug. And even then, only 1 of 5 will actually be a success. Those operations managers
who master this art of product development continually gain on slower product developers.
To the swift goes the competitive advantage. This concept is called time-based competition .
Often, the first company into production may have its product adopted for use in a variety of
applications that will generate sales for years. It may become the “standard.” Consequently, there
is often more concern with getting the product to market than with optimum product design or
process efficiency. Even so, rapid introduction to the market may be good management because
until competition begins to introduce copies or improved versions, the product can sometimes be
priced high enough to justify somewhat inefficient production design and methods.
Because time-based competition is so important, instead of developing new products from
scratch (which has been the focus thus far in this chapter), a number of other strategies can be
used. Figure 5.6 shows a continuum that goes from new, internally developed products (on the
lower left) to “alliances.” Enhancements and migrations use the organization’s existing product
strengths for innovation and therefore are typically faster while at the same time being less risky
than developing entirely new products.
Enhancements may be changes in color, size, weight, taste, or features, such as are taking
place in fast-food menu items (see the OM in Action box “Product Development at Lego” on
the next page), or even changes in commercial aircraft. Boeing’s enhancements of the 737 since
its introduction in 1967 has made the 737 the largest-selling commercial aircraft in history.
Boeing also uses its engineering prowess in air frames to migrate from one model to the
next. This allows Boeing to speed development while reducing both cost and risk for new
designs. This approach is also referred to as building on product platforms . Similarly, Volkswagen
is using a versatile automobile platform (the MQB chassis) for small to midsize frontwheel-
drive cars. This includes VW’s Polo, Golf, Passat, Tiguan, and Skoda Octavia, and it may
eventually include 44 different vehicles. The advantages are downward pressure on cost as well
as faster development. Hewlett-Packard has done the same in the printer business. Enhancements
and platform migrations are a way of building on existing expertise, speeding product
development, and extending a product’s life cycle.
The product development strategies on the lower left of Figure 5.6 are internal development
strategies, while the three approaches we now introduce can be thought of as external