J. Kent Harmon, VP, Training Services

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My personal journey to understanding and belief in the Toyota approach to product development was neither quick nor easy. For 22 years I had worked for Texas Instruments Semiconductor Division. The first ten years of my career were spent working my way up the engineering ranks to become a Product Development Manager for three product lines of computer chips. Along with the position came the responsibility for the revenue and profitability of those product lines.

In 1994, I was given an aggressive revenue goal for the product lines I managed. There was no room in the budget for additional headcount to develop more new products above those already planned. I had to make do with the resources I had and that meant we had to be more productive.

So my management team and I began a quest to discover and implement the best practices in product development. We searched out and experimented with a plethora of techniques from a wide range of disciplines: gated development processes, project management, queuing theory, quality function deployment, failure mode effects analysis and many others. We selected and deployed those that worked for us. Time-to-market dropped and engineering productivity increased.

Our successes were noticed and I was asked to deploy those best practices across 24 product development organizations in six countries, first as Co-leader of the New Product Development Methods Team and then as Director of R&D Effectiveness. With initiatives around product development processes, portfolio management, project management and metrics we increased schedule attainment by approximately 30% and reduced the average Time-to-Market by around 20%. These gains were not insignificant and offset the roughly five percent increase in overhead necessary to execute and sustain the processes. Overall, it was worth the effort.

When I met Michael Kennedy in the summer of 2004, I had left Texas Instruments to pursue a private practice deploying product development best practices in other companies. Michael, of course, immediately challenged me as to whether the traditional best practices I was deploying were truly the best. He maintained that Toyota’s approach as fundamentally better. This initiated a six month debate that was waged through email, by telephone, at conferences, and up and down the fairways of our local golf course.

From my perspective at the time, the traditional best practices were proven approaches. I had seen them deliver productivity improvement, although not on the factor of 4X which Michael claimed that Toyota enjoyed over the competition. I rather doubted the claim and suspected that any order of magnitude advantage Toyota had was derived more from institutionalized inefficiencies at their competitors than something special Toyota was doing. I also could not see how the Toyota practices increased the innovation rate. It seemed to me that it would actually stifle innovation.

Wanting to end the debate, I decided to put the Toyota principles to the test. I sat down in my home study and used the Toyota approach to design a subsystem of a simple product. The results were totally unexpected. The techniques worked, and they worked well. They almost totally eliminated all the issues we had struggled mightily with in the traditional gated product development processes. I could clearly see how Toyota, or any other company that practiced these techniques, would be tremendously more productive than those that didn’t. And I could see how the principals could be used to focus innovation and make the innovation process more effective and efficient. I actually felt angry with myself. I had spent more than a decade studying, thinking, and working to make product development more productive and I had overlooked these simple yet powerful fundamentals . . . all of which are based on common sense.

Since then I have worked with Michael Kennedy to implement the basic principles of the Toyota product development system in dozens of research and product development organizations across the world. Each of those organizations was unique. They each faced different market challenges and each engaged different technologies to deliver value to those markets. And while they all differed in the details, they all shared a common need: to be more competitive in the marketplace they all needed to be more productive in product development. And along the journey with these organizations another common theme emerged –– one that I had never encountered in my work on traditional product development processes. The rank and file engineers were saying, “We should do this. It just makes sense.”

There is one other common theme I have observed among organizations that are successfully taking the journey to Learning-First Product Development. They have visionary leaders at the helm. Ordinary management and cadres of process experts will not suffice. The reason why is simple. At the core of these powerful principles is the need to recognize that knowledge is the true value created by product development.

Despite the fact that most companies are spending five to fifteen percent of their annual revenue to create this knowledge, there is no line item on the company’s income statement that itemizes the cost of knowledge walking out the door, or the cost to recreate knowledge that can not be found, or the cost of solving the same problem time and again. Nor is there a line item for the revenue lost because the product didn’t satisfy the customers’ needs or the profit lost because the products developed were less than optimal. Generally Accepted Accounting Practices are great for counting the value after it is earned, but they will not reveal this lost productivity opportunity. It takes visionary leadership to understand the source of the value and to build the generating power.

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