Would getting your product to market twice as fast as the competition give you an edge?
Is there a competitor who knows something you don’t about slashing R&D and marketing research costs? Chances are, yes-because the rules of the competitive marketplace are changing, and some CEOs are only now realizing it. No longer are products able to win the day on quality and service alone, especially in technology-based industries. Niche markets provide only short respites from head-to-head competition, as more and more established players seek out and enter them.
Success increasingly hinges on how fast and how well a company can get its products into a market segment. Acting quickly provides an opportunity to establish a defensible position and consolidate a prime customer base.
A good example of how an R&D partnership paid off occurred in 1986, when BMW turned to a General Electric Automotive factory automation and production system unit to help it design a new model automobile. To be successful, BMW believed the usual five-year development cycle would have to be pared drastically. The assembly system designed by GE Fanuc allowed the new BMW model to reach the showroom floor in only two years.
The fight to be first plays itself out almost daily in the pages of the business press, where, for example, we see IBM-compatible personal computer makers jockey to produce the first machine based on IBM’s PS/2 line of computers.
One way manufacturers can get a product to market faster is to form a strategic partnership with a new product development (NPD) firm. Such a partnership goes beyond the usual vendor-customer concept, creating a synergy in which the total effect is greater than the sum of the two organizations. This sets the stage for the marketer to achieve a strategic, competitive advantage.
THE EVOLUTION OF A STRATEGIC PARTNERSHIP
The story of the relationship between Theta Resources and Bisosearch illustrates how the formation of a strategic partnership between a manufacturer and a new product development firm resulted in substantial savings in R&D costs and development time that allowed Biosearch to establish an important beachhead in a crowded marketplace.
It began in mid-1986 when Biosearch, a $10 million San Rafael, California manufacturer of DNA synthesizers and other scientific instruments that automate genetic engineering processes, needed to get a new product on the market quickly.
The smaller laboratories and academic institutions were finding the average $40,000 price tag of most DNA synthesizers beyond their reach. Biosearch realized this market segment represented a key opportunity, and one that could be easily lost unless it was able to quickly introduce a lower-priced product.
FOUR MONTH GOAL SET
Biosearch set a goal of getting a less expensive synthesizer on the market in just 120 days. The new synthesizer also had to be engineered so that almost anyone could operate it-another feature designed to capture the lower end market segment by freeing scientists from the more mundane and time-consuming aspects of DNA synthesis. (Historically, a trained biochemist was needed to use a DNA synthesizer.)
Biosearch had recently been acquired by New Brunswick Scientific, a publicly-held $40 million scientific instruments company based in New Jersey. Although the company was strong in manufacturing engineering, it needed support in new product engineering (industrial design plus human, product, and mechanical engineering) to quickly produce the new synthesizer. Biosearch sought out an NPD firm that combined front-end product design skills with the detailed technical abilities required to handle the project. Since Biosearch was seeking a significant business partner, it looked beyond experience and technical expertise for an optimistic, can-do attitude.
Theta Resources, equipped with the latest in high-technology product design tools, was chosen to develop the synthesizer. The San Francisco-based firm immediately assembled a team of engineers, product designers and other professionals accustomed to working in an intensive, cross-disciplinary effort. A comprehensive new product development program was launched within the week. The four-month “concept to construct” objective was met, and the resulting instrument-dubbed “Cyclone” achieved Biosearch’s goal of gaining the critical foothold in the new market segment.
Since its introduction, 100 Cyclone units have been sold, boosting company sales by nearly 30 percent. By working with Theta Resources, Biosearch saved several hundred thousand dollars and at least three months of project time, eliminating the need to hire the development staff and equipment necessary to do the project in-house. Theta Resources is currently working on three additional product development projects for Biosearch, effectively serving as its internal engineering group.
Successful alliances will be the key to U.S. competitiveness in an environment of truncated product life cycles, narrower market windows, rapidly emerging technologies, and intense offshore competition. In the time it can take a company relying on its own resources to get a product to market, a competitor allied with a hard-charging new product development partner can make a quantum leap, gaining market position at the expense of a slower competitor. This applies to technology-based industries, where many Asian companies have been setting a blistering pace, forcing their American counterparts to rethink the new product development process in order to stay competitive worldwide.
In an era where marketing has become the critical factor in business success, the economies of scale formerly achieved by bringing resources vertically “in house” have reversed. Relying on internal resources alone can now result in increased costs in the form of lost market opportunities and unnecessary overhead.
Corporate America can combat competition by pooling productive assets and by forging alliances with organizations that can provide necessary resources, whether in product design, marketing, or manufacturing. We must look at our organizational strengths and weaknesses with clear, wide-open eyes, and search for partners to complement them.
The team approach adds considerable speed to the transition from prototyping to developing manufacturing specifications. When problems arise, delays are less likely to occur because project team members can harness the talents of fellow members to resolve them. The company can also call in consultants if appropriate.
Team members, driving toward a common goal on a short deadline, are able to reach a higher level of creativity, productivity, and commitment than that usually found in the more rigid environment of departmentally-organized companies. By being cooperative, we can become more competitive. Or, as author Robert H. Waterman advises in his book, The Renewal Factor, “we should be willing to guide the process yet distribute responsibility and control.”
A partnership with an external new product development organization is a strategic alliance of talent-of both the NPD firm and the in-house group. The process can be compared to a hospital bringing in a team of specialists to handle a difficult operation that the hospital does not normally perform. Even though the facility already has a talented surgical staff, it would be impossible to bring the staff up to speed quickly enough to perform the operation in time to save the patient.
In today’s highly competitive business environment, the ability to get the right product to the marketplace at the right time can be a key factor in determining a company’s future competitive health.
CHOOSING A PARTNER IN IHNOVATIOH
The number of independent industrial design/product development houses and specialty design and engineering firms is growing. As with any new industry or service, customers have questions, not the least of which are: “How do I tell the good from the bad?” and “How do I choose the right partner in innovation?” Below are six guidelines to consider when choosing a partner:
1. Ensure active participation by both parties. Don’t expect magic by just throwing a firm a project or an idea and then waiting for the billion-dollar product design. A good marriage requires the active participation of both parties, and it should “feel right” before you take the plunge.
2. Are the players technically competent? Investigate the expertise of key personnel and make sure they can handle the job. However, prior experience in your particular product areas isn’t necessarily a decisive criterion. Someone who has been looking at the same problem for the past 20 years may now have the counter-innovative tendency to approach your problem in the same old way, rather than bringing a fresh viewpoint to the drawing board.
3. Be certain your potential partner uses the best tools available. Would you go to your local community hospital for a heart transplant? Cutting edge technology isn’t only for products themselves; it’s for “making” products as well. Does your prospective partner have the latest design capabilities in computer imaging? In CAD/CAM? In telecommunications? In plastics molding or modeling materials? How about internal communications techniques? Will he save you money with the latest techniques of “soft” prototyping? In the Big Leagues of contemporary product design, sophisticated tools are the price of admission.
4. What about the internal chemistry between the principal people in your partner’s firm? Do they communicate well among themselves? Do they act like a team? Are they oriented toward solving problems or merely studying them?
5. Optimism counts. Look for positive attitudes. Such as the welcoming of opportunities, an eagerness to compete and confidence that the job will get done.
6. An equitable fee. We rank this criterion last because, if each of the above conditions aren’t met, any price will be too high. Arriving at a fair fee-driven solely by the importance and complexity of your project-will be your most accurate barometer for determining whether you want to do business in the first place. Incorporating a performance incentive or a bonus tied to the success of the project into the compensation package may in spire added energy toward achieving your goals.
In the global marketplace, the successful company of tomorrow will consist of players within the ranks of the organization as well as experts from the outside who join the group and help maximize the team’s resources.
Be prepared to spend money. Experts aren’t cheap but, as with most services and products, “you get what you pay for.” Creating a “win-win” situation with a team that looks for answers to old problems in new and unusual places will produce significant returns of time and money on your investment.
Accept innovation as an attitude, not a piece of hardware.
JaLies R. Goldbek.g is president and CEO of Theta Resources Inc., a San Francisco-based industrial design and mechanical engineering new product development consultancy. He has twenty years experience in the field of industrial design and product development.
Stan Yakatan is president and CEO of Biosearch, the $10 million San Rafael California-based manufacturer of DNA synthesizers and instruments that automate genetic engineering processes. Biosearch is the leading manufacturer in laboratory equipment and chemical reagents utilized in the biotechnology field.