Pdma Product Development Metrics May 2000

Metrics for New Product Development:

Leveraging the Works of Others

Background• A billion $ company

•The World Leader in Electronic Security•Over 5700 employees worldwide

Growth•Founded in 1966•1976 - 10 million in revenue•1986 - 100 million•1996 - 1 billion

Outgrew Systems & Processes

•Product Development slowed down

•Quality issues rose

•Teams were established •Investments were made in systems

•Positive impact

System & Program Initiatives

But It Wasn’t Enough!

Sensormatic’s Journey To New

Product DevelopmentSuccess!

Roadmap•Borrowing approaches

•Assessment, project selection, implementation

•Key Metrics

•A metrics toolkit

Inspirations & New Goals

TTM Process (structured team-based problem solving)

Motorola’s Six-Sigma Program

Design for Manufacturability Program

Xerox-based Baldridge Award criteria

Assessment[Where are we?]

Self-Assessment of Development Processes

Mechanical CAD Industrial Design

Rapid Prototyping

Electrical Analysis

Technical Communications

Needed Improvement•Integrating advanced manufacturing & procurement into design

•Use metrics to drive everyday activities

•Create a problem management system

•Include more quality metrics

Product Quality Baseline•4% Out-of-box failures•1 in 4 failed final factory tests•8% monthly warranty call rate

Development Cycle Data Gathering

•Development programs overran schedules because they were under-resourced, poorly defined and not schedule-managed.

•A team was formed

•We were not learning from our mistakes

Selection Criteria[What Do We Tackle First?]

ChampionsProduct Delivery Council (PDC)

Continuous Improvement Advisory Council (CIAC)

Few Programs Selected

•Self-Assessment score

Criteria Included:

•Cycle time reduction

•Product quality•Cost of implementation•Resources/skills available•Ease of implementation•Timeframe

Implementation

Organizational Changes

•Product Delivery Teams were created

•Combined core team members

Temporary Teams Formed

•Rapid Action Teams (RAT’s)•Continuous Improvement Teams (CIT)

Requirements for both RAT’s & CIT’s

•Charters (including ROI)

•Executive Sponsor

•Trained, independent facilitator

Recognition & Reward of team efforts

•Badge pins and promotional items

•Quest competition

•Trips and more!

Our New Toolkit•Product Quality Data & Benchmarking

•New Product DFM•Development Process Self-Assessment

•TTM 7-step Continuous Improvement Process

Product Quality Data & Benchmarking

We needed measurable and justifiable

targets for new product quality

TDPU

.027

95%

90%

97.3%**

Industry AverageTarget Range -Old Products

100%

PLANT FPY*

Source: Industry Week 1998 World Class Performance Metrics

Best in ClassTarget Range - New Products

Below Industry Average

0

.05

.1

Plant Benchmark

*First pass yield**True BIC=99.7% Median BIC= 97.3%

2.6K

14.9K

1K

Industry Average

PPM

Out of Box Benchmarks

Source: Industry Week 1997 Benchmark Electronic Equipment companies over 1000 employees

Best in Class

Target Old Products

Target New Products

15K

4.2K

Industry Average

Target - New Products

MTBF = 5 Years(18% Annual failure rate)

MTBF = 20 Years(5% Annual failure rate)

Warranty Benchmarks

Monthly PPM

Best in Class

95%

90%

97.3%

100%

PLANT FPY*

Best in ClassTarget Range - New Products

TDPU

0

.027

.05

.1

1 YEAR

Plant Benchmark — New Product Introductions

*First pass yield

2600

1K

Best In Class

PPM

Out of Box Targets — New Product Introductions*

Target New Products3939 34% Reduction

6 Months *NPI curve developed by Dell

4.2K

1K

PPM

Target New Products5.6K 25% Reduction

Warranty Targets — New Product Introductions

6 Months

Best In Class

New Product DFM…(Preferred fastener set)

Number of total fasteners in the system 4000Number of fasteners active in the system 1200

Number of fasteners in original Preferred Set 74

Date Preferred Set was implemented July 1, 1998Number of additions to the Set 2

Number of one-time exemptions to the Set 14

Development Process Self-Assessment

Rating Results Approach Pervasiveness

1 Anecdotal or generalizationor guess

Anecdotal, no system evidentor documented

Anecdotal, isolated, may notbe true at all levels

2 Sporadic trends Sloppy or over bureaucratic Theory not practice

3 Some positive trends insome of the areas deployed

Beginnings of systematicprevention basis (or process)

Some core areas of business management or employees

work the problem Process is being used where

it’s supposed to be

4 Positive trends in mostmajor areas

Evidence that some resultsare caused by approach(achieving desired results)

Measuring (metrics)Success criteria established(measurements can includesurveys)

Sound, systematic preventionthat includes evaluation /improvement cycles

Some evidence of integrationinto management process

Core areas of business Management or employees

work the problem Closed loop process is

universally used. Some evidence that results

are linked to rewards

5 Good in major areas Positive trends from some to

many areas Evidence that most results

are caused by approach

Sound, systematic preventionbasis with some evidence ofrefinement through evaluationor improvement cycles(Process not stagnate,continuos improvement)

Sound evidence of integrationinto management process

Core areas of business, plussome support areas

6 Good to excellent in majorareas

Clear evidence that mostresults are caused byapproach

Good integration (withsuppliers, customers, stakeholders).

Evidence of benchmarkingworld class processes at othercompanies

From some to many supportareas

7 Excellent (world class)results in major areas

Good to excellent in supportareas

Sustained result (2-5 years)

Sound, systematic preventionbasis refined throughevaluation/improvement cycles

Excellent integration Use of lessons learned Continuous benchmarking

world class processes

Core areas and support areas Full deployment (fully

integrated into SRMbusiness processes)

Management, employees andcustomers work the problem

TTM 7-Step Continuous Improvement Process

Our Metrics Roadmap

•Existing Product Quality•New Product DFM•Development Process Self-Assessment•Development Cycle Time•New Products Released•Financial (% of revenue from new products)

Existing Product QualityJune 1997 actual

June 1999 goal

Targeted % reduction

June 1999 actual

January 2000 actual

January 2000 % reduction

Warranty 83 dpm 37 dpm 58 28.8 dpm 11.2 dpm 87%Out-of-Box 41 dpm 4 dpm 90% 25.3 dpm 6.8 dpm 83%Factory .242 dpu .037 dpu 90% .070 dpm .048 dpm 80%

New Product DFM

Design for Manufacturability

SpeedDome SpeedDomeUltra

Mechanical parts 59 20Cables 9 5Fasteners 63 9Adjustments 5 1

Standalone UltraPostMechanical parts 69 18Cables 28 5Fasteners 214 24Miscellaneous 83 27

Development Process Self-Assessment

•November 1998: 53 development tools and processes resulted in a score of .42 [The average US company score is .40]

•July 1999: our assessment improved 10% to .46 [US BIC is .60]

Development Cycle Time

Average cycle time(calendar days)

FY97 FY98 FY99 FY2000Concept phase 166 146 103 64Development 448 264 244 205

New Products Released

Number of new products released

FY97 FY98 FY99 FY2000 FY2001Concept phase 8 17 20 35 TBDDevelopment 5 10 28 31 34

Financial Results

Percent of Revenue fromNew Products

30%

40%

50%

60%

FY98

FY99

FY00

Financial Results

Percent of Revenuefrom New Platforms

0%

5%

10%

15%

20%

25%

30%

FY99

FY00

Stock Price

Financial Results Stock Price By Quarter

0

5

10

15

20

25

Price

Financial Results

Earnings Per Share

Earnings Per Share By Quarter

-0.1-0.05

00.05

0.1

0.150.2

0.250.3

EPS

What did we learn…What do we still have to do?

Lessons Learned•The easy targets are easy to fix, yet minimal impact

•Make teams accountable, reward them

•Impossible to get accurate date

•Take advantage of a crisis and/or senior management advocates in other areas•Establish & stick to justifiable selection criteria

•Select your quality, proactive people, reward them

To go to the next level

Product Launch Process Must Improve

•Requires confidence in our ability to meet development schedule

•Requires confidence in our ability to deliver first-out product quality

•Need a next-gen metric - first year audit performance to plan

Eliminate NVA Time (sign-offs, logistics)

•Shipping & logistics constitute 10-25% of total development cycle time•Total supplier cost management•Web-enabled processes•Alignment of non-core team members

Better, Smarter, Faster Testing

•Field testing constitutes 45% of the total development cycle time•Fund, involve, develop customers

•Accelerate testing in-house

Expanded DFM•Eliminate of non-preferred fasteners in older designs•Design for Build-to-Install

•Expansion of Preferred Set to electrical components

Our Goal

Double Our Revenue In The Next 3 Years!