Cost Reduction Strategy (home page) Seminars Consulting Articles Books Site Map
The “Valley of Death” between concepts and viable products
The official page of the Breakthrough Energy Coalition (led by the most famous high-tech leaders) is quoted as saying
“Experience indicates that even the most promising ideas face daunting commercialization challenges and a nearly impassable Valley of Death between promising concept and viable product. Neither government funding nor conventional private investment can bridge this gap.”
Well, commercialization principles can bridge that gap. Read on:
Definition:
Commercialization is the process that converts
ideas, research, or prototypes into viable products and production systems that retain
the desired functionality, while designing them to be readily
manufacturable at low cost and launched or implemented quickly with high
quality designed in.
Commercialization
also involves formulating effective manufacturing and supply chain strategies
early,
devising implementation strategies, and implementing those strategies. Commercialization may be
a necessary step for commercial success for innovations coming from startup
ventures, research efforts, acquired technology, patents, and so forth..
Here are common causes that include their false assumptions (see more fallacies below) and counterproductive practices::
“Get something working fast, regardless of manufacturability and cost.
They can all be fixed later.”
“Get it working quickly with whatever parts you can find now, built with
whatever process you have access now.
They can easily be changed later.”
“Make sure the prototype will work now, at any cost, by specifying tight tolerances and using
highly skilled labor.”
The ideal way to commercialize products and production
systems would be to design
them "right the first time" for the optimal manufacturability, cost, quality, time,
and
functionality. Commercialization of research should include with following:
• View research results generically so that research does not specify, limit, or
imply product architecture or production strategy or any aspect of the design, when everyone is looking at a physical proof-of-principle or experiment that “works.” Be sure
to use generic words like “means to accomplish ___________.”
An important exercise for a Commercialization Workshop would be to create a generic description of the innovation. The team would identify the "crown jewels" and express them in the most generic terms, such as “means to do ___________” As Patent Attorneys will tell you, the words “means to. . . . .” are the most powerful words in patent law and if an invention has a Claim starting with “means to,” that would a very broad claim, thus resulting in a very broad and powerful patent. The generic words should be documented in real time in the workshop on a word processor that is projected onto a screen. If done right, the generic description will contain only the crown jewels, and may even surprise the team with its brevity and conciseness. And the points are that:
• valuable resources and time should be focused on the identified crown jewels
• everything else can then be optimized for manufacturability, quality, reliability, part availability, and fast ramps to stable production.
• and much of that can be procured off-the-shelf, thus freeing more resources to focus on the crown jewels.
As discussed more below, the development team should identify, isolate, and
preserve the “crown jewels” -- the actual basis of the innovation and then
optimize the designs around that. Similarly, make sure that the product
requirements express the “voice of the customer” generically.
• It is important to incorporate manufacturability from the very beginning, as
outlined in the seminal book on the subject, “Design for
Manufacturability; How to Use Concurrent Engineering to Rapidly Develop
Low-Cost, High-Quality Products for Lean Production. " If the whole
venture needs to learn this or needs a
culture shift (and is receptive to it), arrange training on the same principles
through DFM training and
product-specific workshops. For products or services that need to
built on-demand or mass customized, implement the
principles of "Build-to-Order
& Mass Customization; the Ultimate Supply Chain Management and Lean
Manufacturing Strategy for Low-Cost On-Demand Production without Forecasts or
Inventory."
• Management must understand and support these principles by reading these
books and attending this training attending a
product
development strategy class for executives and managers.
• Quantify Total Cost. The more important cost is, the
more important it is to measure it properly. For ambitious cost goals, cost
measurements absolutely must quantify all costs that contribute to the
selling price. Until company-wide total cost measurements are implemented, the
design team needs to make cost decisions on the basis of total cost
thinking, or for important decisions, manually gather all the costs. Since a
large portion of cost savings will be in overhead, the costing must
ensure that new products are not burdened with the averaged overhead charges of
other products,
but only the specific overhead charges that are appropriate for the innovative
product.
The strategy to commercialize prototypes, breadboards, or applied research in any form should start with
identified and preserving the “crown
jewels” -- the technology that is the basic premise of the innovation or the
essence of what has been proven. Without changing the proven functionality,
everything surrounding the core technology and supporting systems would be designed
or redesigned for the best manufacturability, cost, quality, and time-to-market
while being integrated into an optimal product architecture and production
strategy.
The science would be the same, but the hardware,
software, materials, controls, and production systems would be commercialized to
be more manufacturable. Similarly, the physics would be the same; the chemistry
would be the same; the biology would be the same; the thermodynamics would be the same; the basis technology
would be the same. One way to think of this is that whatever is being affected
by the product or service “doesn’t know the difference.” Here are several
examples: the light rays don’t know the difference; the flow of electronics don't know the difference; the fluid doesn’t know the difference; the cells
don't know the difference; the sample
doesn’t know the difference; the sound doesn’t know the difference; or fill in your own blank: the ____________ doesn’t know the
difference.
Elon Musk, CEO of Tesla Motors and Space-X, said: "(Physics is) a good framework for thinking . . . Boil things down to their fundamental truths and reason up from there." - from the Tony Rohn book: "Elon Musk; 100 Success Lessons"
This analysis will quickly reveal what is not the
crown jewels, including cabinetry and power supplies, which can be bought
off-the-shelf quickly at lower cost and higher quality, provided this is
considered before arbitrary decisions preclude there use. For
instance, if an electronics module is designed to be 20" wide, it will not fit
into a standard 19" rack system.
If early architecture decisions ensure that
routine electronic functions can be performed by off-the-shelf circuit boards,
then they can be done well at low-cost with the best availability, leaving you
to focus on the crown jewels. If not, then custom circuitry may need
to be designed, which can take a lot of resources and may complicate other parts
of the design. For instance. if custom circuit
designs arbitrarily select whatever voltages everybody wants, then a custom power supply may be needed, instead
of picking a proven power supply and designing around the voltages that
are readily available off-the-shelf. This approach will free the design
team to focus on the crown-jewels instead of wasting precious time and resources
on boilerplate.
The format and size of the product or production system should not be based on an arbitrary size, output, capacity, that corresponds to some arbitrary value or round number. Rather the format and size of the product should be optimized to correspond to the best cost/performance ratio for the system, which may be determined by the lowest cost/performance ratio for key purchased parts and subassemblies, as shown in the section titled “Optimizing Architecture/System Design” in the book, “Design for Manufacturability.” This optimization may result in multiple units being used together for certain markets, but this may still be the lowest cost per function while possibly opening up new markets at the low end of the market.
Without Commercialization, there is usually the temptation to simply take research that “works” and then “draw it up and get it into production.” And that
might appear to be "early progress" and may temporarily please managers and investors,
or satisfy arbitrary deadlines that may be counterproductive.
However, this will bring about several vulnerabilities, some potentially severe
in the following areas:
THE REAL TIME TO MARKET. One of the biggest vulnerability of not
commercializing research may be that the product or process will not be ready to produce in production
quantities in production environments and this will result in delays, during
which many resources will be wasted fighting fires and implementing change
orders, which Toyota says, “always compromise both product and process
integrity” (this is a warning to scientists and managers who are only concerned
only about functionality, which itself can be compromised by poor manufacturability).
The real time-to-market would be delayed, or the chances of
product success may be compromised, if commercialization is not attempted until all testing is done or clinical trials are completed. Then,
the company has the dilemma of choosing between two unpleasant alternatives: (a)
try to go into production without adequate commercialization or (b) delay the
product launch to do the commercialization, and then have to re-introduce the
product and maybe re-qualify the
product/process or even repeat clinical trials.
COST. As shown in the
DFM article,
60% of a product’s cost is determined by the concept/architecture, but the
opportunity to achieve the lowest possible cost is missed when the product
architecture is based on the research prototype, or worse, the breadboard.
Further, after the parts are designed around that, cost is not easily reduced, but trying by change-order wastes valuable resources,
doesn’t really reduce cost, and, again, compromises product and process
integrity.
A big opportunity missed by research scientists is
Off-the-Shelf parts. Usually, scientists design only to “optimize” functionality
and then make the parts fit into “the” architecture, which precludes standard
Off-the-Shelf parts and usually requires very unusual parts, sometimes with cost
and availability problems (which in turn delays the real time-to-market). By
contrast, commercialization should start early with thorough searches and
selections of off-the-shelf parts and sub-systems and then the product would
be literally designed
around the off-the-shelf parts. This is enough of a paradox for engineer,
but quite a foreign concept to research scientists. However, off-the-shelf part
strategy
is a key element of commercialization to focus efforts on the crown jewels.
QUALITY. Research that is not commercialized may very likely have quality
and reliability problems because the research that “works” is often done
by highly skilled technicians, scientists, and engineers who know how to make things work
(despite manufacturability shortcomings) with sample sizes probably not
statistically significant (what does it mean when one prototype or
experiment works?).
However, the design must be robust enough to be consistently repeated
in production environments and perform well in all anticipated user
environments.
HOW
NOT TO DO COMMERCIALIZATION
A common cause of commercialization challenges is the
following 7 fallacies of commercialization,
which are all based on the author's observations or quotes in the
press.
Once people like something that "works", they throw it
over the wall to production,
in the naive hopes that the following fallacies will solve all the enivitable problems
that will arise:
Fallacy #1: Prototypes can be easily "cost reduced" later. For reasons cited in the article
“How Not to Lower Cost,” cost is very
hard to remove after a product is designed because 80%
of cumulative lifetime cost is committed by design and so much is cast in
concrete that systematic cost reduction will be difficult. In addition,
the changes will cost money, which may not be paid back within the life of the
product. And the changes will also cost time, especially if
requalificaitons
are required, which may delay the time-to-market, sometimes seriously. Further, the changes may
induce more problems, thus needing yet more changes, thus expending more
hours, calendar time, and money to do the subsequent changes, which, in turn,
could possibly compromise functionality, quality, and reliability. See the
article:
Seven
Reasons Why "Cost Reduction" after Design Doesn't Work.
And the worst consequence of cost reduction
is that committing valuable resources to try
retroactive DFM or cost reduction after design takes them away from other
more-effective efforts developing low-cost products by design and
improving manufacturing and
quality.
Fallacy # 2: Launch the prototype or experiment into production . Typically, as soon as a prototype or experiment "works," there is pressure to “draw it up and get it into production.” Unrefined products that are not designed for manufacturability will inevitably have problems with production launches, quality assurance, consistent functionality, and actual production will cost more than targets. Another variation of the same problem is when management or investors insist on “proven technology” and then won’t allow any changes in the “proven” prototype, which then goes into production without commercialization.
Fallacy # 3: Commercialization can be bypassed by Risk Management. Some may think an un-commercialized design can be “de-risked” by “proving success” which may just be “proving” varying aspects of functionality. However good that makes people feel, such a product may still not be manufacturable enough to ramp up quickly to stable production.
Fallacy #4: All that "young technologies" need is
maturity. Some people say what they are working on is "still a
young technology, so the costs are still high," which implies that costs
will naturally come down as it "matures," for instance, with the following very
common fallacies..
Fallacy #5:
Mass Production
alone will lower the cost. The venture may think it can depend on “Mass Production”
to provide “economies of scale.” In fact, many people believe the industrial
myth that the only way to get cost down is to get volume up, which may be
applicable to very high-volume commodity products that have little variation or few changes in
markets or designs. However, it
requires a large capital investment
to build such capability. If this capability is greater than firm orders, then
the venture is gambling that the economies-of-scale will lower the cost low
enough to generate enough demand to fill such a large factory. However, if the product has
not been commercialized, then this bet-the-company factory will be trying to
mass produce prototypes or unrefined products/services and have to deal with many
problems, like those cited above. And, since it is so hard to make an
inherently expensive product or service cheap, the actual cost reduction will result in a
very small return for the amount of money expended to set up a mass production
factory. Worse, the venture could be in trouble if the anticipated
cost savings don't materialize. Finally, mass production factories are so inflexible that it will be
hard to convert them to make a more manufacturable product later or any other
products for that matter. For this and many other reasons, mass production
is an obsolete paradigm for fast moving industries for reasons cited in the
mass
production article/ . Mass Production is being superseded
by the low-cost on-demand production in any quantity by
Build-to-Order
(for standard products) and
Mass Customization
(for custom products).
Ironically, a product designed with
Half-Cost principles will not depend on economies-of-scale to get the cost down,
thus minimizing the investment and the risk. Then ventures can focus resources to
commercializing products by design rather than all the effort it takes to
set up a mass production factory.
Thus, if the product was not commercialized, the
venture will be vulnerable to competitors who did commercialize their
products, especially if a lot of money and effort was invested to manufacture an un-commercialized
product
Fallacy # 6: Throw Automation at it. Automation is often viewed as a magic elixir that can bring down the cost
of anything. However, just like Mass Production, automation is expensive and, if
not done right, may be too inflexible to be useful for next-generation products
or other product variations. The most inflexible automation is fixed or
hard automation and tooling that only works for a particular product or
part.
Unfortunately, attempting automation will cost a lot of money now and may result in
little, if any, gain, unless there is a large demand for the chosen product...
Ironically, if products are designed very well for
manufacturability, they may not even need any automation for assembly.
Similarly, part fabrication could be easily "automated" by inexpensive flexible
automation that is available inn thousands of factories or job shops. The most
common example is programmable CNC machine tools, which can automatically
fabricate a wide range of parts at low cost, while being flexible enough to
quickly change over to build many different parts or improved variations.
Fallacy # 7: Robotics will lower the cost of anything. Although robots are great for creating buzz and look very
impressive in action, they are an expensive way to
try to lower cost, except for high-volume tasks where the work is dangerous, ultra clean, or
has very many difficult steps. Although the robots themselves are flexible
and can be reprogrammed for other jobs, the robot itself is only half the cost of its
whole system. The rest is the installation, programming, tooling, and
end-effectors (grippers), which are usually not very applicable to different
parts or the next job.
Good
design for manufacturability can eliminate most of
their need, for instance, making assembly so easy that robotics can’t even be
justified, thus saving much effort and cost.
Commercialization Clients of Dr. Andersn:
who were taught commercialization principles and had workshops
• Atricure called in Dr. Anderson to help commercialize pioneering
medical devices for minimally invasive heart surgery for atrial fibrillation
known as "A-Fib.."
• Hyradix, a division of Koch Industries which had a DFM seminar to help
commercialize hydrogen reformers to convert natural gas to hydrogen for
fuel-cell buses.
• Idatech needed DFM seminar and cost/steel reduction workshop to help
commercialize fuels-cell powered generators.
• GE Transportation in Erie, PA; scheduled DFM seminar and a
commercialize workshop for their Tier-4 Diesel Locomotive Engine. After that
they sold 1,000 Tier 4 locomotives and drove a competitor out of the business.
• Silicon Light Machines, subsidiary of Lucas Films had a DFM
seminar to help commercialize digital film projection.
• PRI Automation brought Dr. Anderson in for 6 years consulting and
training, which included commercializing his own concepts of an ultra-low-cost
and ultra-clean robot for semiconductor fab clean rooms, which was based on
clever linkages that had no motors or rolling/sliding bearings near the wafer.
• Siemens where Dr. Anderson’s concepts relieved serious tolerance
overconstraints, thus helping to commercialize very large structures for postal
sorting facilities.
The author of this site, Dr. David M. Anderson, has extensive experience designing robotics and implementing automation, including seven years at his own company, Anderson Automation, Inc. . . ..
. . . . but then he shifted to Design for Manufacturability (DFM) because that can reduce cost more.
Dr. David M. Anderson (who authored this site) can show new ventures and existing companies how to commercialize research and prototypes into viable products that will be manufacturable enough for rapid ramps that can quickly reach even best-case-scenario demand volumes. He can help in the following ways:• Seminars and webinars to train companies how to concurrently engineer products for manufacturability. This could be applied at the beginning of a venture or to the commercialization of an existing prototype or research. These classes and workshops would give startup ventures an advantage over established companies because their venture could start out using these principles and wouldn't be inhibited by inertia, counterproductive policies, or resistance to changing entrenched ways of developing products.
• Workshops to focus on the commercialization of a specific product to brainstorm on how to best commercialize the product and insure these methodologies are applied.
• Consulting with product development teams to help them with on-going consulting advice to apply the most effective product development principles and make the best decisions throughout their projects.
• Design studies. Dr. Anderson applies all the principles he teaches and writes about, coupled with his Doctorate in Mechanical Engineering, thesis research on bio-mechanics mechanisms, four patents, and 35 years of design and manufacturing experience, to offer leading-edge development work ranging from concept studies to innovative product architecture development studies. The deliverables from this work will allow client companies to easily complete the inherently manufacturable design work.
Dr. Anderson’s bio-sketch is presented on the
"Credentials" page. He can be reached at
anderson@build-to-order-consulting.com or
1-805-924-0100.
| Call Dr. Anderson at 1-805-924-0100 to discuss implementing these techniques or e-mail him at anderson@build-to-order-consulting.com with your name, title, company, phone, types of products, and needs/opportunities. |
Copyright © 2018 by Dr. David M. Anderson
Dr. David M. Anderson, P.E., fASME, CMC
www.HalfCostProducts.com
phone: 1-805-924-0100
fax: 1-805-924-0200
e-mail:
anderson@build-to-order-consulting.com
Seminars Consulting Credentials Client List Articles Books Site Map