Introduction
Learning is not compulsory . . . neither is survival.
W. Edwards Deming
This book is written with one purpose in mind: it is intended to
help you improve the effectiveness and efficiency of your product
development system. The objective of this book is to provide you
with the insights necessary to develop more new products of higher
quality in less time with your existing organization. This is the story
of my personal journey of learning and discovery and is intended to
encourage you on your improvement journey, or perhaps persuade you
to embark.
In 2003 Harley-Davidson was awarded the Outstanding Corporate
Innovator (OCI) award by the Product Development Management
Association (PDMA). The OCI award was won based on
conventional phase gate thinking.1 Through the application of lean
principles to product development, the same organization reduced
their development time by half and quadrupled new product development
throughput. This book provides the organizational learning practices
and the knowledge-based development principles to enable your
organization to achieve similar or better results.
This is a true story, not a novel. Some poetic license has been
taken in the chronology of events to make the story meaningful to the
reader because, as with any good road trip, the learning journey does
not necessarily happen in a neat and orderly fashion. Any learning
journey has its fair share of wrong turns and dead ends. To convey the
message in a readable fashion our experience is abbreviated and presented
more linearly than it actually happened. All of the people in the
story are real people. In some cases real names have been used to
recognize and acknowledge their contribution. In other cases names
have been changed to protect identities.
All of the information presented in this book is actual data. If the
information is discoverable through publicly available sources, then the
actual numbers are presented unchanged. However, if the actual numbers
are not generally available through public means, then the numbers
have been modified to convey the message without providing
actual values to maintain confidentiality.
Overview
The story has three parts: The current state of product development,
the learning environment and organizational learning fundamentals,
and the principles of knowledge-based product development. The
book is structured to first allow you to see product development as an
integrated system and recognize that improvement of the system is
only achieved through a learning journey, then provide you with means
to take the journey for yourself.
In Chapter 1 the story begins with the current state of product
development, based upon firsthand experience working at a car company
I’ve chosen to call ‘‘Roaring Motors.’’ It is the way I was taught
to develop products. It is the way almost everyone I know learned to
develop products. It is what I see at nearly every company I visit. The
current state of product development lays the foundation for frustration,
and subsequent motivation to find a way to work smarter rather
than harder.
Chapters 2 through 7 describe the learning environment that was
present at Harley-Davidson and which allowed this journey of discovery.
These chapters present principles of organizational learning neces-
sary to improve product development. They describe how system
dynamics and organizational learning enable continuous improvement
in product development. The foundational elements for effective product
development necessary to build a knowledge-based development
system are also described in these chapters.
Chapters 8 through 16 describe the learning and discovery journey
in the application of lean principles, which resulted in knowledge-based
product development. These chapters describe the principles necessary
to make product development effective and the improvement outcome
you should expect.
The Importance of Product Development
Product development is the lifeblood of our companies and it fuels the
economy. Product development is the road that innovation travels on
the way to market. It is the key which unlocks dreams and the spark
which ignites the future. A recent survey by the Product Development
Management Association (PDMA) identified that the top performing
quartile of companies in their study derive nearly 48 percent of their
sales revenue from new products and nearly half of the company’s
profits from new products (products in the market five years or less).2
As the effective life span of products and services in today’s market
decreases, it drives the need for shorter product lifecycles. In some
cases the development time for new products exceeds the life expectancy
of the product in the market. The innovation rate necessary for
a company to be successful is rapidly accelerating. The driver for business
success is evermore becoming a company’s ability to innovate.
The Boston Consulting Group (BCG) conducts a global survey of
senior business leaders annually to identify the strategic direction of
firms. The results reinforce the importance of innovation; recent findings
from these surveys indicate that innovation is consistently a top
strategic priority. In 2007 the BCG survey polled 2,500 senior executives
from fifty-eight countries across all industries and found that 66
percent of the companies identified innovation as one of their top three
strategic initiatives. The study also determined that over 50 percent of
the senior executives polled believed that their company did not innovate
well in spite of this strategic focus. Most of the respondents indicated
that their company did not receive the return on investment of
innovation they expected. A similar study by the Economist Intelligence
Unit sought to understand the connection between innovation
and company success.3 In this study, 87 percent of the senior executives
polled identified innovation as either important or critically important
to the success of their company. The study identified that the beneficial
impact of innovation efforts goes far beyond corporate performance
and actually drives the national economy. The development of
new products and services is increasingly being identified as the engine
for growth and prosperity.
Former Commerce Secretary Carlos Gutierrez has said, ‘‘Innovation
is a driver of our economy.’’4 The role that innovation plays in the
economy is so important that the United States Commerce Department
has made the creation of a universal system of metrics to evaluate
the impact of innovation on the economy their top priority. The importance
of innovation is echoed in a recent Council on Competitiveness
report, which identified that as manufacturing capacity becomes
globally available at low cost, the competitive value of manufacturing
declines.5 This global competitiveness study emphasizes that innovation
is now the primary source of value for United States companies
and American workers. The president of the council, Debora Wince-
Smith summarized the report by saying, ‘‘The only driver for productivity
growth for the U.S. is our innovation capacity.’’
The need for innovation to drive economic growth goes well beyond
the United States or the primary developed nations. China and
India have recognized the importance of innovation and are beginning
to break out of their position as members of the underdeveloped world
through investment in knowledge creation and innovation. These
countries are embracing a culture of new product development by establishing
favorable laws and regulations promoting learning and product
development. China has recently become the second largest
investor in R&D spending, surpassing even Japan. Only the United
States continues to outspend the rest of the world as a single nation.6
According to Dirk Pilat, head of the Organization for Economic
Co-operation and Development’s (OECD) Science and Technology
Policy division, ‘‘The rapid rise of China in both money spent and
researchers employed is stunning. To keep up, OECD countries need
to make their research and innovation systems more efficient and find
new ways to stimulate innovation in today’s increasingly competitive
global economy.’’7
Innovation has become the driver for productivity and growth for
every developed nation, as well as for every company that is attempting
to grow its business and control its own destiny. Whether country or
company, innovation is the differentiator for success. Those who do
not innovate will fall behind and will have their fate determined by
those who do. This book shares lessons and principles to allow your
organization to bring more innovation to market faster with fewer
problems through a more effective and efficient product development
system.
For more information about the principles enunciated in this book,
see www.theleanmachine.org.