COMMERCIALIZATION

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Copyright © 2011 by Dr. David M. Anderson

    Commercialization is the process that converts ideas, research, or prototypes into viable products that retain the desired functionality, while designed them to be readily manufacturable at low cost and launched quickly with high quality designed in.  Commercialization also involves formulating the manufacturing and supply chain strategies, devising implementation plans, and implementing such plans.   Commercialization may be a necessary step for commercial success for innovations coming from startup ventures or company research efforts (see below for discussions on how not to do commercialization).

WHAT HAPPENS WITHOUT COMMERCIALIZATION

Without Commercialization, there is usually the temptation to simply take a research that “works” and then “draw it up and get it into production.” And that might appear to be progress and may temporarily please managers and investors. However, this will bring about several vulnerabilities, some potentially severe:

THE REAL TIME TO MARKET. The biggest vulnerability of not commercializing research is that the “product” 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 about functionality, which itself can be compromised by poor manufacturability).
    The real time-to-market will be delayed, or the chances of product success will be compromised, if no commercialization activities are commenced 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, possibly when demand is building.

QUALITY. Research that is not commercialized may very likely have quality and reliability problems because the research prototypes that “work” are built by highly skilled technicians 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 works?). However, the design must be robust enough to be consistently built in production environments and perform well in all anticipated user environments.

COST. As shown at www.design4manufacturability.com, 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 can not be 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, a commercialized product starts with thorough searches and selections of Off-the-Shelf Parts and then the product is 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 parts is a key element of commercialization to achieve the fastest time-to-market, the lowest cost, and the highest quality.

HOW TO DEVELOP COMMERCIALIZED PRODUCTS BY DESIGN

    The ideal way to commercialize products would be to design them 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 any aspect of the design, which may be tempting when everyone is looking at a physical proof-of-principle that “works.” Be sure to use generic words like “means to accomplish ___________.”  As discussed more below, the development team should 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.

• Implement all the principles of the book, “Design for Manufacturability & Concurrent Engineering How to Design for Low Cost, Design in High Quality, Design for Lean Manufacture, and Design Quickly for Fast Production.”  If the whole company 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.  Supplement this training and reading with the closest corporate parallel to these principles: "The Toyota Product Development System:" Chapter 3 (front-load projects), Chapter 7 (the team leader), and Chapter 10 (fully integrate vendors early) (2006, Productivity Press).

• Management must understand and support these principles by reading these books and attending this training, or, better, attending a product development strategy class for executives and managers.

• Quantify Total Cost. The more import 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 half-cost 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, but only the specific overhead charges that are appropriate.

HOW TO COMMERCIALIZE PROTOTYPES & RESEARCH

    The strategy to commercialize prototypes, breadboards, or existing applied research in any form should start with 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, the parts 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.
     The science would be the same, but the hardware, software, materials, and controls would be commercialized to be more manufacturable. Similarly, the physics would be the same; the chemistry 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 “doesn’t know the difference.” Here are several examples: the light rays don’t know the difference; the fluid doesn’t know the difference; the sample doesn’t know the difference; the sound doesn’t know the difference; the electrons don’t know the difference; the silicon wafer doesn’t know the difference; or fill in your own blank: the ____________ doesn’t know the difference.
     The scale of the product should not be based on an arbitrary size, output, capacity, that corresponds to some round number. Rather the scale 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 & Concurrent Engineering.” This optimization may result in multiple units being used together for certain markets, but this would still be the lowest cost per function while possibly opening up new markets at the low end of the market.

Dr. David M. Anderson (who authored this site) can help new ventures and existing companies 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 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.  This training 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 or resistance to changing entrenched ways of developing products.

• Workshops to focus on the commercialization of a specific product to brainstorm for ideas on how to best to 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 advanced 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 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 company 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.

HOW NOT TO DO COMMERCIALIZATION

Without commercialization, ventures may use less effective approaches to attempt to get innovation to market:

Launch the prototype into production. Typically, as soon as a prototype works, there is pressure to “draw it up and get it into production.” Unrefined products not designed for manufacturability will inevitably have problems with production launches, quality assurance, consistent functionality, and actual production costing 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.

Mass Production. 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 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 and have to deal with many problems, like those cited above.  And, since it is so hard to make an inherently expensive product 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 at www.build-to-order-consulting.com.  Mass Production is being superceded 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 uncommercialized product
    
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, which may not be a problem for complex long-life parts like engine blocks.
    Ironically, if products are designed very well for manufacturability, they may not even need any automation for assembly and part fabrication could be easily "automated" by flexible automation that is inexpensive to buy off-the-shelf and widely available in 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.

Robotics. 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 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 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.  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.   

Prototype cost reduction. 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 cost time, especially if requalifications 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.  And the worst consequence of cost reduction is that committing valuable resources to do 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.
 

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

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