Welcoming the Customer to the R&D Lab

The notion that the Internet changes everything has finally penetrated the old-as-time area of product design. In the past few months, all things online have started seeping down to the nuts and bolts of creating, designing and building new products, as well as tweaking existing product lines.

The manifestation of this trend is the continued emergence of online collaboration software and services that allow players from multiple stops along the supply chain to participate in how products are put together all the way from concept to build. And significantly, there's a increasingly hefty amount of direct customer feedback being mixed into this process.

As for the design collaboration piece of the puzzle, though still an extremely early market, it's what AMR Research in Boston is calling the new product development and lifecycle management and what the Aberdeen Group, also in Boston, has referred to as collaborative product commerce. Essentially, these online design systems, provided by such players as e-VIS and MatrixOne, which recently formed a partnership with Ariba, allow companies to upload computer-aided drafting or CAD documents to a secure Web site. Then those who contribute anything from a bolt to the steel for a car door can take a "look-see" at the first concept of a product and start interacting. All that's required is an Internet connection and a browser.

For those companies that have grown up with the Web, this may not sound particularly revolutionary. However, extending the design process outside the four walls of the company
using a public communications system was unheard of until a year or so ago.

"For years, product development was mostly contained
inside of a company's engineering group, but the Web has helped to change that considerably," says Mike Burkett, an
analyst with AMR Research. "Now companies have moved ahead and said people outside of engineering and outside the company need this information, so we can build the best products."

The benefits of working this way are clear. For starters, by conducting all communications regarding product specifications, the availability of necessary parts and ideas for improving the product online, businesses can save a small fortune in courier charges and several small forests in fax paper. But perhaps more importantly, these online collaboration services provide a centralized repository that provides a tracking mechanism for any and all changes to a design--something that's often hard to follow in the old-line world.

However, one of the most beneficial byproducts to the market at large is that by increasing efficiencies and bringing parties together, corporations open the door to innovation, which means better products for all. By involving suppliers, and in some cases internal sales and marketing departments, from the very beginning of a product's design and strategic positioning, organizations stand a much better chance of maximizing their collective brain power.

"Just as early adopters of enterprise business applications, such as enterprise resource management, supply-chain management and customer relationship management achieved a competitive edge," says Jack Maynard, an analyst at the
Aberdeen Group, "this is the next business solution that will increase market dominance."

From Whence It Came

Whether you call this nascent phenomenon new product development or collaborative product commerce, it's a direct reflection of several powerful new forces that are driving change across all industries. The first of those is a definite need for speed in getting quality products to market. The serial step-by-step approach that companies have used for years to conceive of and spec out their products in which suppliers were secondary players is no longer good enough. To compete in a timely fashion, companies have to be absolutely certain that their supply chains are lean, mean fighting machines.

Consider the case of Trek Bike. Though small, this bicycle manufacturer's two-wheelers are ridden by the likes of two-time Tour de France winner and Olympic medalist Lance Armstrong and Russian champion Viacheslav Ekimov. As you might gather with names like this, being first to market with the hottest and lightest weight bicycle is crucial for this company, which produces somewhere in the neighborhood of 100 new designs per year. But, according to Kevin Clayton, the company's manager of product development systems, Trek's product-design and build process was getting bogged down by a nightmare of a supply-chain process.

Instead of using an automated system, Trek was entering all information into what's called a bill of materials, which is basically a list of all the materials needed to build a new cycle manually. The obvious result was that errors were made, which translated into suppliers not getting accurate information for parts demand. And that, of course, means bikes don't get built and money doesn't get made.

A little less than two years ago, the company implemented a Web-based design collaboration system to eliminate the
tedious hunting and pecking required to get information into the bill of materials. Basic typographical errors have dropped by 43 percent, which has made a huge difference in terms of getting products built quickly. And recently, Trek went all the way by using the information to manage the entire product
design and build process, which helps when things go awry.

"A two-cent nut [from Asia] could keep us from producing a $2,000 bike," said Clayton. "But now we can look at the attributes of a particular component and how it is used, and we can adapt and find compatible substitute parts."

Trek is using software from the aforementioned MatrixOne, which, as noted, formed a partnership with Ariba. According to Nick Solinger, Ariba's director of product marketing, Trek's
issues and concerns are typical of many of Ariba's customers who are worried about beating the competition.

"We have had customers like Dana Corp. come to us asking for anything that could help them improve the process and quality efficiencies in their design process, which basically amounts to streamlining and maximizing the supply chain," says Solinger. "But what's driving all of this is the fact that almost every company out there is worried about how they can get their product to market faster and how they can make sure that product is in line with what customers want."

Where It Will Go

Clearly, the idea of allowing partners, customers, and suppliers to participate in an Internet-based collaborative
design process is in its infancy. But this could grow to be a pretty big baby, especially considering some of the radical new pushes are already under way in this nascent space. The decidedly quiet but biggest of those new ideas is a concept called design-to-order, which is being pioneered to some extent by Alventive, a decade-old company that recently raised $32 million to reposition itself in this emerging area via software and a hosted service.

At its most basic, design to order can mean something as simple as tweaking an existing product line to address the needs of a subset of customers. However, on a much grander level, it can mean allowing larger customers to order one-off products that can be specifically designed to fit their needs, and in a hurry. Think of Dell Computer's famous build-to-order system in which a company, in this case Dell, takes an existing product, in this case a desktop computer, with well-known parts and parameters and configures it based on the demands of an individual consumer. Now take it a step further. What if Dell could build a machine for you that hadn't previously
existed out of parts that hadn't existed based on your specific requirement, and then you begin to get a sense of the power of this whole idea.

"Traditionally, companies have forced standard products down the throats of every one of their customers, because it was just too hard to get specific feedback into their offerings," said John Bruggeman, Alventive's vice president of marketing. "But we are quickly moving to a place where customers can request one-off products more easily, or where companies can tweak a product line to fit the needs of an
entire vertical segment like government or education, and that is exciting."

Implicit in Bruggeman's words is the notion that more and more often, the creative engine behind new product concepts and strategies is direct feedback from customers. Making better use of that means finding a way to fully integrate CRM systems and data with tools like those from Alventive and MatrixOne. Some extremely progressive companies are exploring creative ways to do this (see Siebel sidebar, above); however, most are struggling with it. That being said, the spoils will definitely go to those who figure it out first.
"There's a huge opportunity here for whoever figures out the best way to integrate customer feedback from CRM systems on both the front and back end with engineering, research and development," says AMR's Burkett. "That would allow companies to capture market information directly from those who are out there selling to customers and from people who are using the product, which could be incredibly powerful."