CLASS 16:Medtronic

AGENDA

• Platforms and the Aggregate Project Plan (**)

• Medtronic (**)

The Role of Product Platforms in the Aggregate Project Plan

Motivation: Three Nightmares

• Unexpected Delays: Coming to the market with the right technology at the wrong time

• Unexpected Consumer Needs: Coming to the market with the wrong technology at the right time

• Unexpected Success: Coming to the market with a single version of a technology which turns out to have multiple potential uses

The Aggregate Project Plan is a tool for pursuing a portfolio approach to product development…

Radical

Off the shelf

Producttechnology

Breakthrough

Platform

Derivative

ProductSupport

Entirely newbenefit Improvement No change

Marketing Impact

A Technology Platform Provides a Linkage from Breakthrough Technology to Derivative Products through Investment in a Common Architecture

B

B1

B2

B3b30 b31

b40

X1*

X2A*X2B*

Do Platforms Help Address Product Development Problems?

PROBLEM

Unexpected Delays

Unexpected Consumer Needs

Unexpected Success

Does a platform help? Examples

A Platform-Based Approach Might Address Some of the Key Incentive Problems in Product Development…

The Problem

Engineering Enthusiasm

Reporting Failure?

Short-Term Managerial Focus

Responsive Salesforce

How does a platform-oriented approach help?

Platform strategies are designed to facilitate diffusion, effective commercialization, and standard-setting

Diffusion Strategy

Commercialization

Standard-Setting

Does a platform help? Examples

Product development must be aligned with (and responsive to) overall firm strategy and positioning….

Key Issue Firm A Firm B Firm C

Strategy First mover withinnovative, highperformanceproducts

“Best Overall” High variety atlow cost: focuson marketniches,customization

Timing, Rhythm FAST!12-18 months?

Moderate:Generationslast 3-5 years

Fastcustomization

Capability High poweredtechnical team

Linkingcustomers andopportunities

Understandingcustomer needsin depth

While most platform development has taken place under a “traditional” stage gate approach, recent work emphasizes a more flexible process of iteration and coordination

Concept Development

Launch

Lead Time

Traditional Approach

Concept Development

Launch

Flexible Approach

“Internet Time” Product Development yields at least three key benefits….

KEY BENEFITS

Sensing the Market

Testing Technical Solutions

Integration

How? Examples

We’ve Got Rhythm!

What Went “Wrong” at Medtronic?

Other Examples?Problem Source

A New Management Philosophy

What? How?

Sacred Commitments

A Sense of Urgency

Productive employeesare happy (not reverse)

Managing means responsibility, not status

You only get what you measure

Focus on market share

Measuring Product Development Performance

Measure? Accuracy?

Speed

Cost

Innovativeness

Product Quality

A New Incentive Scheme

Implementation Challenge?

IncentiveScheme

Goal

Product Concept Definition

• Environmental Assessment• Technological Assessment (Unarticulated Customer Needs)• Environmental Assessment (Articulated Customer Needs)• Brady Business Objectives (??)

Feature Definition Process

• Feature Tradeoff Process• Market Value Assessment• Feasibility Assessment Process• System Definition

A “Balanced” Product Design Process

Processes & Practices

Benefits Implementation Challenges

Speed

Platform Strategy

Documentation

Phase Definition

Rhythm!

Market Input

How did the Medtronic plan change?

Radical

Off the shelf

Producttechnology

Breakthrough

Platform

Derivative

ProductSupport

Entirely newbenefit Improvement No change

Marketing Impact

A Strong Platform Strategy Enables…

• A Novel Customer Value Proposition….

• In New (and Fast-Growing) Markets….

• Protected from Direct Rivalry….

• Achieved at an Effective Cost….

• And Reducing the Cost of Future Development Activities…

Does Medtronic’s strategy encourage cumulativeness?

ExampleTypes of Cumulative Innovation

Encouraged by Platform Strategy?

Managerial Implications Cool-Down!!

• Over the past two decades, platform-based strategies have become powerful weapons for leveraging innovation investments across markets, facilitating diffusion and commercialization strategy

• Rather than a focus on budgets or technical details, platform strategy links resource allocation, platform architecture and firm strategy

• Overall, development strategy should encourage "ownership“• Translating new technology into competitive advantage requires linking

commercialization to the firm’s overall strategy• NB: Derivative innovation results in, at best, incremental profit.

• Challenge lies in implementation• Using a strategy to make choices requires commitment to a process and

philosophy at the most senior levels• Effective product development requires sacrifice in effort, risk, and design