Product Development Speed
in the Internet Age

By : Jim Pinto,
San Diego, CA.
USA

In the last century, new products took 3 years to develop. In the Internet age Time is critical and clearly a competitive weapon. With accelerating technology, some products are obsolete within months.

Move fast, or become history….

The original version of this article was published in
Controls Intelligence & Plant Systems Report, June 2000.

This article has been translated to Serbo-Croatian language
by Vera Djuraskovic from Webhostinggeeks.com.

Good, cheap and fast

Remember when new products took 3 years to develop? Well, that was the last century - we have now arrived in the Internet age where Time is critical and clearly a competitive weapon. Today, with accelerating technology, some products are obsolete within months. Move fast, or become history….

I recall a fundamental tenet that was preached in the past by a technical guru I respected. His axiom was Products can be developed Good, Cheap and Fast - pick any two. In today’s competitive environment, the prizes go to those who can deliver all three, without compromise. Sadly, the larger companies do not, or cannot see the point - and lose market share to those who can. And happily, there are start-ups and visionaries who recognize the possibilities and become the new leaders of tomorrow.

The difference today in technology development is technology itself. - ever cheaper, faster and more effective. The 3 technology laws - Moore's (doubling of computer power), Gilder's (doubling of bandwidth) and Metcalfe's (exponential value of connectivity), bring new options and choices that make yesterday's impossibilities possible.

Digital cameras - market-share

Now, there is no trick to what I am pointing out - just plain, Internet age common sense. Let me relate a real-life example: Kodak, the photo giant. George Fisher, the then relatively new CEO, recognized back in ‘96 that Kodak had better come up with a good digital camera fast, or risk losing market share to Casio, Sony and a hundred others. Fisher asked the Kodak development group how long it would take to develop a new digital camera and they said 3 years - quite reasonable in a conventional sense. Fisher gave the job to a rookie - who came up with a new digital camera in 6 months and put it into high-volume production to be available on the shelves by Christmas ’97. Today Kodak is still a player in the burgeoning digital camera business. Without that first high-speed development, it would be toast.

How was it done? The results came through round-the-clock, internet-based project management and product development teams at several Kodak development centers and alliance partners around the world. While some slept, others were working and handing off results to others in the chain. Modern technology and new concepts of marketing alliances provide the answers.

I bet you'll never guess who has the largest market-share in digital cameras today - about 50%, which is more than all the competitors put together. No, it's not Kodak, or Sony, or Casio. It is Sanyo, the Japanese product manufacturer. When they lost the battle for market share in video cameras to Sony and others, Sanyo recognized that they had a lot of talented electronics and imaging people on their hands. Rather than lose them to competitors, they invested heavily in digital camera development, and came up with several significant advances. And then, rather than invest in promoting the relatively unknown Sanyo name, they figured that recognized cameras such as Olympus and Nikon could probably outsell the Sanyo brand - so they made alliances, which quickly got results. With resolution improvements, expanded memory capabilities and plummeting prices, the market for digital cameras will exceed that of conventional film cameras within the next couple of years. Kodak and Polaroid are at great risk from a technology twist that came about in less than a decade.

Innovation comes from small groups

Large businesses recognize that their bureaucracy does not stimulate innovation or fast-moving technology development. Product development, while vital to future growth and success, clearly does not yield short-term results. (In today's financial markets, for "short-term" read "quarterly".) When growth slows, R&D is typically cut back to a sustaining level, with a different new-product strategy in mind: Buy small-company stars. Why waste R&D dollars with an uncertain outcome, when you can improve the yield by buying only the winners? As a corollary, the clear exit for those small companies that succeed is to be bought at an attractive valuation by the larger acquisition-orientated market-leaders.

How do you think CISCO got to the top rank of market-caps in the world - rivaling that of GE, Microsoft and all the other big names? Not by developing all their own new products; they buy about 40 development-stage technology companies a year. The CISCO talent lies not only in recognizing which companies to acquire, but also in absorbing and stimulating the people in those new companies and marketing their products to attain dizzying heights.

Hewlett-Packard has long recognized the stultifying effects of size and typically splits off a division when it gets to more than about 300 people. Beyond about 1,000 people, bloated bureaucracy seems to be unavoidable and engineers - being by nature analytic - cannot seem to avoid stretching schedules, with a CYA (cover-your-uh… behind) mentality.

How many engineers in a large company work 15 hours a day on a new product? Where in a large organization can you find the innovation and passion that typifies the start-up? Carly Fiorina, the new CEO of HP, has recognized this propensity in a company that has strong engineering roots, and is preaching "back to the garage" as the new HP way. The new (old) attitudes are taking root; HP and Agilent, its new splinter, seem destined for new growth and success.

Small is beautiful

In the fast moving next decade, look for most major new developments to come from start-ups and small companies. In large organizations, the death-knell is ringing for corporate R&D and bloated central engineering staffs, as the power shifts to small, independent and feisty divisions. While the conglomerates are conglomerating and divesting the dogs, the winners are wisely left alone to continue their track record of success. The parent provides fuel for further growth through additional investment capital and leveraging of worldwide sales channels.

The incubation of start-ups is currently at the highest level in history - for good reason. Technology executives are turning their backs on plush office and high salaries to become entrepreneurs, with stock options that could possibly propel them to the ritzy ranks of the rich and famous within two shakes of a tail. The risk/reward ratio is ridiculously low - if the start-up fails, they have the experience that earns them a berth on the next budding bonanza.

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