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2015-06-11 03:20:04
Stefan Thomke
June 10, 2015
Advanced tools for creating and testing new products and the operations that
will make them are all around us. They are not only changing the economics of
innovation and operations, they are also pushing the frontier of what s
possible.
Airplanes and cars are designed, modeled, and simulated on computer-aided
software before the first prototypes are tested. Complex architectural
structures undergo virtual stress tests before concrete is poured. Engineers
can walk through digital factories before workflows are finalized. The CRISPR
tool, which has electrified the scientific community, lets scientists easily
disable genes or change their function by replacing DNA letters; its many
applications include the development of new drugs. And in a recent HBR article,
my coauthor and I wrote about advances in running disciplined business
experiments, assisted by complex analytical tools.
While it is encouraging to see this rapid progress, tools no matter how
advanced do not automatically confer benefits on organizations. They must be
integrated into systems and routines that are already in place. Tools are
embedded within the organizations that deploy them as well as the people that
use them. When integrated incorrectly, they can actually inhibit performance.
In my research, I have uncovered some pitfalls for organizations that adopt
such tools and ways that they can avoid them.
Don t use tools merely as substitutes. When new modeling and simulation tools
became available, their proponents initially argued that substituting virtual
prototypes for physical ones could save millions of dollars. Indeed, companies
did save money with such simple substitutions. But they failed to address the
bigger opportunities that such tools offered: fundamentally rethinking and
reorganizing the flow of product-development activities. One manager explained
this by using the analog of morning traffic. Even if he had a Ferrari, his
commute wouldn t be faster unless he could find a new route that took advantage
of the car s speed and acceleration. Similarly, companies can t unlock the full
potential of new tools unless they find new ways to operate.
In a project with an analog chip company, I worked with senior management and
engineering to find innovative ways to leverage detailed performance data of
its equipment and the integrated circuits that it manufactured. We used the
data to develop sophisticated statistical models of its manufacturing
capabilities and embedded these models in design and simulation tools that were
used by upstream design engineers. Previously, these engineers had to design
with wide safety margins that ensured that their devices could be manufactured,
which lowered performance and increased cost. Now, with manufacturing
capabilities integrated in the design tools, they could tighten safety margins
significantly. The result: higher performance and lower costs without lowering
the manufacturing yield.
But it also required fundamentally new ways for design and manufacturing to
work together. First, manufacturing had to collect and frequently update the
data for the benefit of upstream design. Second, both had to trust that the
models embedded in the tool were accurate and would not result in lower yields.
Third, manufacturing had to immediately communicate and coordinate any changes,
such as process tweaks, with other groups because its actions affected the
tools that these groups used.
Build trust. In my research, I have observed that the rate of technological
change often exceeds the rate at which people can change their behavior. That
is, when the knowledge base of an organization depends on the use of particular
materials and tools, engineers will not easily dismiss much of what they know;
nor will they change how they work overnight.
In the chip company I discussed above, manufacturing was very reluctant to
acknowledge that tighter safety margins in design tools would not affect
production quality. To be sure, the company didn t know what the overall effect
would be, but the company s CEO wanted to run some experiments because, if it
worked, it would give them a performance edge over competitors. (Many
competitors were fabless and thus didn t have access to detailed
manufacturing data.) Once the manufacturing folks saw the impressive results
from some design projects, they were sold.
Similarly, when simulation tools were introduced to engineering organizations,
people had trouble accepting the results of a simulated test when they had
spent years or even decades learning from physical models. This led to bizarre
outcomes: In one company, I found that the introduction of computer simulation
tools ended up increasing overall product-development costs. Because people
didn t trust the new tool that was supposed to replace expensive prototypes,
they ended up building more prototypes to verify that the simulations were
accurate. In some cases, the skepticism was well founded because virtual tests
were poor substitutes. But in many cases, management failure to build trust led
to wasted resources.
Find new ways to create value. Advances in tools can open up new ways of
interacting with partners and creating value. By putting analytics tools into
the hands of customers, Google has changed the face of advertising. Apple s app
developer tools have turned many users into software suppliers and created a
huge marketplace that Apple controls and benefits from. Indeed, new value can
be created by findings ways that customers and users can play a more active
role in innovation and operations. This is done by putting a company s know-how
into tools and empowering customers to design and even manufacture solutions
for themselves, thus fundamentally changing value creation and capture. I ve
seen this in engineering and software industries, but new tools are now being
adopted more broadly.
Credit Suisse created a platform through which customers can design their own
financial products. By automating routine safety and robustness checks and
shifting the design work to customers, the cost has dropped by approximately
95%, massively increasing profitability and freeing resources to focus on
innovating instead of execution. More importantly, hundreds of unique products
are generated each day, and the volume of trading on the platform has soared.
By rethinking how they have provided value to their customers, the bank and its
customers are now creating solutions that didn t exist before.
Advanced tools can transform the way you run innovation and operations. But it
s the way you manage the tools and the people that use them that will unlock,
or hold back, their potential.
Stefan Thomke is the William Barclay Harding Professor of Business
Administration at Harvard Business School.