MAN 568 Entrepreneurship & Innovation

Management

WEEK-4, OCT. 9, 2020

PRODUCT DEVELOPMENT

Case: Automotive Industry

 Course Schedule
Week Topic Case Speaker
Sept. 18 Introduction, Basics -  
Sept. 25 Sustaining vs. Disruptive Technologies Computing Industry  
Oct. 2 Scope of Innovation Global Innovation
Oct. 9 Product Development Automotive Industry
Oct. 16 Innovation Ecosystem Silicon Valley
Oct. 23 Intellectual Property & Patents NORTEL (Northern Telecom)
Nov. 6 Financing of Innovation Google
Nov. 13 Government Policy for Innovation Israel, the Start-up Nation
Nov. 20 Science vs. Industry Nanotechnology & MEMS
Nov. 27 Innovation in Telecommunications Nokia
Dec. 4 Innovation in Pharma Biotechnology
Dec. 11 Innovation in Aerospace & Defence General Atomics
Dec. 18 Innovation in Business Formats Uber, AirBnb, PayPal, Pegasus
Dec. 25 Business Case Presentations -  
 Case Study Groups
1 Bilkent ID Surname Name 1st Case 2nd Case 3rd Case
1 21903795 Bardakçı Kadir Sept. 25 Computing Industry Oct. 16 Silicon Valley Nov. 6 Google
2 21200512 Can Onur Sept. 25 Computing Industry Oct. 16 Silicon Valley Nov. 6 Google
3 21402094 Dedeler Elif Gamze Sept. 25 Computing Industry Oct. 16 Silicon Valley Nov. 6 Google
4 21901092 Kontik Mehmet Sept. 25 Computing Industry Oct. 16 Silicon Valley Nov. 6 Google
2
5 21102443 Altaş Hande Oct. 9 Automotive Industry Nov.27 Nokia Dec. 18 Uber, Airbnb, Paypal, Pegasus
6 21501020 Canbek Ahmed Taha Oct. 9 Automotive Industry Nov.27 Nokia Dec. 18 Uber, Airbnb, Paypal, Pegasus
7 20901783 Köşger Bahadır Oct. 9 Automotive Industry Nov.27 Nokia Dec. 18 Uber, Airbnb, Paypal, Pegasus
8 21100540 Terzioğlu Pelin Oct. 9 Automotive Industry Nov.27 Nokia Dec. 18 Uber, Airbnb, Paypal, Pegasus
9 21903799 Fanoodi Saeed Oct. 9 Automotive Industry Nov.27 Nokia Dec. 18 Uber, Airbnb, Paypal, Pegasus
3
10 21601895 Kemahlıoğlu Ege Nov. 13 Israel the Startup Nation Oct.23 Nortel Dec. 4 Biotechnology
11 21302644 Kılıç Koray Nov. 13 Israel the Startup Nation Oct.23 Nortel Dec. 4 Biotechnology
12 22001095 Tran Anh Tu Nov. 13 Israel the Startup Nation Oct.23 Nortel Dec. 4 Biotechnology
13 21200555 Yeltekin Yasemin Nov. 13 Israel the Startup Nation Oct.23 Nortel Dec. 4 Biotechnology
4
14 21903797 Dağlı Nilüfer Oct. 2 Global Innovation Nov. 20 Nanotechnology / MEMS Dec. 11 General Atomics
15 21300816 Derinöz Zeynep Oct. 2 Global Innovation Nov. 20 Nanotechnology / MEMS Dec. 11 General Atomics
16 21101529 Özlü Kerem Tuna Oct. 2 Global Innovation Nov. 20 Nanotechnology / MEMS Dec. 11 General Atomics
17 21903805 Yılmaz Damla Oct. 2 Global Innovation Nov. 20 Nanotechnology / MEMS Dec. 11 General Atomics
This Week’s Case – Automotive Industry
Key Questions
• What are the key stages of product development in the automotive industry?
• How are the R&D departments of auto companies organized?
• Analyze historical evolution of product development in the automotive industry.
• Describe the current global competitive landscape in the industry.
• What are some of the mega trends that are shaping the future of the industry?
• Analyze technological, regulatory and marketing prospects of electric and
autonomous cars.
Research & Development

Technology Development Product Development

• Unstructured Methods • Structured Methods
• Difficult to Plan • Generally Planned
• Unpredictable • Predictable
 Generic Product Development Process

Concept System Level Testing &

Planning Detail Design Production
Development Design Refinement

• Economic Analysis • Customer Needs • Product Architecture • Hardware Design • Verification • Configuration Control
• Benchmarking • Target Specs • Module Specs • Software Design • Qualification • Quality Control
• Test Prototypes • Product Concepts • Interface Definitions • Integration • Certification • Life Cycle Management

Continious Development
The «V Cycle»
Software Development Process
Product Development Performance

LEAD TIME

PRODUCTIVITY COMPETITIVENESS

TOTAL QUALITY
Product Complexity
• Typical US Supermarket today holds upto 50,000 unique products vs. 15,000 in
1990’s. A quarter of these products sell only one unit per month.
• Similar product proliferation trends are everywhere, from car manufacturing to
food industry.
• As more products are created, per unit revenues and profits fall.
• A differentiated product strategy can pay big dividends if companies have the
right analytics in place to truly understand profitability.
COST (Operations View)* VALUE (Sales View)
Higher stock levels Conquer new customer groups
Smaller purchasing lot sizes Have a complete product porftolio
More changeovers in production Improve brand image
More complexity in logistics New product profits

*Mastering Product Complexity, RolandBerger, November 2012.

Product Development Timelines & Budgets
• Smart Phone Apps  3 months$10K
• Consumer Electronics  6 months$100K
• Smart Phones  9 months$100M
• New Car Platform  24 months $1B
• Operating System Software  3 years $1B
• Medical Equipment  5 years $1B
• New Drugs  10 years $1-2B
• Commercial Aircraft  10 years $5-10B
• Military Aircraft 20 years $10-50B
Variability in Development Work

• Companies more familiar

with repetitive processes like
manufacturing
• Processes with high
variability behave differently
• As utilization increases delays
lengthen dramatically
• «20% off time» rule of
Google
 Agile & Lean Product Development*
Customer &
Development

Rapid & Iterative Modular Early Risk

Supplier
Process

Development Architecture Identification

Involvement
• Early prototyping • Breaking product • Prioritize risks • Early input of all
• Cross functional teams concept into modules • Risk reduction planning stakeholders
• Rapid iterations • Chief architect • Routine test events • Design critique sessions

Reusable Just-in-time
Lean Supplier Responsive
Platforms & Information &
Product
Launch

Integration Change Control

Modules Resources
• Maximize re-use • Expert cells of engineers • Critical-to-quality • Reduce changes in
• Design libraries • On-demand design parameters development
• Intelligent customization • Demand planning tools • Six sigma tools • Responsive change control

*Next Generation Product Development, strategy+business, May 2011.

 Measures of Success (% Survey
70
Respondents)*
60

50

40

30

20

10

0
Customer % Sales from Overall Higher Number of New Product Innovation ROI Projected vs Time to Patents
Satisfaction New Products Revenue Margins New Products Success Ratio Actual Market
Growth Performance

*The Most Innovative Companies 2014, BCG.

Product Life Cycle
 R&D Intensity of Sectors (% of Sales)
16

14

12

10

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Top R&D Spending Companies (2015)
Automotive Pharmaceuticals
1 VW 15.3B 3 Roche 10.8B
Toyota 9.2B Novartis 9.1B
Daimler 7.6B Johnson & Johnson 8.5B
GM 7.4B Pfizer 8.4B
Ford 6.9B Merck 7.2B

Computing & Electronics Software & Internet

2 Samsung 14.1B 4 Microsoft 11.4B
Intel 11.5B Google 9.8B
Cisco 6.3B Amazon 9.3B
Apple 6.0B Oracle 5.0B
IBM 4.9B SAP 3.1B
Up and Coming Innovators – Half from
Asia*
Up & Coming 1-5 Up & Coming 6-10
Xiaomi Technology China Oxo US
WhatsApp US Great Wall Motors China
Square US GungHo Japan
Rakuten Japan Oculus VR US
Wipro India Splunk US

*The Most Innovative Companies 2014, BCG.

Change in R&D Spending by Region
(2014-15)*
31.60%

9.50%
7.10%
4.00%

China RoW North America Europe Japan

-6.30%

*Strategy& 2015 Global Innovation 1000 Study.

Ford Model T: First Affordable
Automobile
• Innovation: First mass
production car
• «Any customer can have
a car painted any color
that he wants so long as
it is black», Henry Ford
• 15 Million sold (1908 –
1927)
Product Pipeline Concept – FiatChrysler
Tesla Model S: First Full Size Luxury
Electric Car
• Innovation: First company solely
betting on electric cars
• 360,000 sold (2012 - Q1 2018)

Scalable Clean
Electric Vehicles Storage Products
Energy
• Roadster • Solar Panels • Powerwall
• Model S • Solar Roof • Powerpack
• Model X
• Model 3
• Tesla Semi (Truck)
Shift from Atoms to Bytes

* Jeff Desjardins, World Economic Forum, 11 October 2018.

Next Week’s Case – Silicon Valley
Key Questions
• What are the key stages in the historical development of the Valley?
• Give examples to creative destruction in the history of the Valley.
• Describe the fundamental drivers of innovation in Silicon Valley
ecosystem?
• Which are the other comparable innovation regions in the US and the
World – what are the common characteristics?
• What is the annual value created by the Silicon Valley in market
terms?