Large corporations in the United States must do something differently. For more than 25 years, manufacturing corporations tried to improve operations irrespective of their size-be it GM, Ford or a small company in a remote area. However, outsourcing of manufacturing continued and was followed by outsourcing of non-manufacturing operations.
This transferring of business functions is called business process outsourcing (BPO). BPO included service operations as well as some aspects of design functions. This outsourcing of any process should get attention, first for excellence and second for innovation. Unless processes have been optimized for excellence, they must not be outsourced.
Dumping one’s problems on somebody else is going to cost more than solving them in-house. My experience shows that outsourcing problems results in a higher-than-planned cost. Such outsourcing saves peanuts, costs many jobs and limits growth.
Outsourcing the design function bothers me. First, our design processes have not been perfected. Typically, the success rate is quoted below 10%. Secondly, diminishing design capability is not a good sign for any economy. Unless we design and manufacture, it is difficult to create wealth or jobs. These days, innovation has been used as a crutch for developing new products or services and, therefore, everyone is trying to innovate. My experience shows that most corporate innovations do not bring profit first. It is understood that initial versions will have bugs.
One of the reasons for early failures of newly designed products is jumping directly from development to commercialization. We lack sufficient information about customer preferences before we start designing new products. Then we jump to developing a functional model to verify the concepts and, very soon before we realize that, the functional model becomes a new product.
The challenge is that the functional product may not be the best solution to delight customers. The first solution also may not be the most cost-effective or easily reproduce error-free products. Simply dumping the marginally designed product to manufacturing clears the design area, but it sure clutters the manufacturing area.
With this scenario, manufacturing tries to produce the product and experiences many problems that cost a lot more than perfecting the design. It has been stated that the cost of an issue that can be fixed in design may cost 10 times more to fix in manufacturing, 100 times more in the field, and 1,000 times more in loss of customers or growth opportunities. If excellence cannot be achieved in design by the most qualified people, how can we expect excellence in manufacturing?
What can be done to turn our creative solutions into great innovations? We must first practice excellence in design as in any other function.
How can we make sure that our new innovative products succeed in the marketplace? After extensive research, I have formulated a framework called Breakthrough Innovation, or Brinnovation. The associated innovation methodology is called TEDOC, which stands for: target, explore, develop, optimize and commercialize.
Companies must start with a clear knowledge of what customers love to have-research what has already been done in order to create something unique, and develop multiple solutions to select the best option. The first three phases of the methodology promote out-of-the-box thinking for profitable growth. The latter two phases make sure that the innovation is profitable.
In order for an innovative solution to be profitable, it must be economized in the design stage. Recognizing customers’ perceived value of the product, pricing, defect-free manufacturability, number of parts and quality of parts are critical considerations for ensuring the profitability of innovations. Customers do not like a product built with the cheapest parts. Instead, they pay more for the best value determined by the design. After the product has been economized, the product must be sold in large numbers in order to be called innovative. One must remember that customers can recognize innovation and this is a value proposition.
One of our challenges is that we have been practicing development and commercialization, and not achieving excellence in innovating what customers love to have.