GGI RapidNews R&D Product Development eZine: Volume 2, Issue 6 - July 30, 2001
GGI RapidNews is published monthly

GGI's 2000 R&D Metrics Survey was quantitative and targeted at advanced R&D practitioners. Many companies did not participate because their metric processes were not mature enough to generate the information sought by the survey questionnaire. As a result, one could say that the survey's respondents constituted a "self-selected sample" of advanced R&D practitioners.

In addition, 55% of respondent companies have sales revenues less than $250 million and less than 1000 employees. 90% of respondent companies sell, develop and manufacture in North America. Two-thirds also sell globally. One-third of respondent companies develop and/or manufacture globally. 90% of respondents were from corporate or R&D management.

• Achieving Time-To-Market and Target Product Cost goals are the two most important criteria for realizing financial success on any development project. 35% of respondent companies said Time-To-Market was most important. 33% responded that Target Product Cost was most important. Only 5% responded that Development Cost was most important. In 11% of respondent companies the most important criteria changes, and is project dependent.
• For all respondent grouped projects, the "Two-Step Product Selection Process" is becoming commonplace. The "One-Step Product Selection Process" has been the norm. In order to manage R&D capacity, companies cannot undertake all recommended projects. Some must be killed. The "fallout" can be described mathematically as "yield rate through the decision point." That result may be used to manage R&D capacity. When all "One-Step" projects were totaled, 59% were approved. When all "Two-Step" projects were totaled, the "net yield across the two decision points" was also 59%. The "net yield" of the "Two-Step" is the same as the "yield" of the "One-Step" if companies are eliminated, but total project are summed. Therefore, the "Industry Rate At Which R&D Projects Are Adopted Is 59%."
• For the average of each respondent, companies with traditional "One-Step Product Selection Processes" approved 64% of all products/projects proposed. Respondent companies with "Two-Step Product Selection Processes" approved 62% of products/projects proposed at the first selection milestone, and 67% of products/projects proposed at the second selection milestone. Therefore, the "net yield" for the "Two-Step Process" is 42% (.62 x .67).

Our next R&D Metrics Survey will be conducted early in 2002. If you would like to participate at that time, please send me an e-mail indicating your interest.

NEW WEB CONTENT
Technology Providers: This MEGA Gateways To Knowledge off our Home Page contains three broad subject areas: Hardware/Mechanical Providers, Electrical/Electronic Providers and Software Providers. New Gateways this month from the first of the above three categories are in the metalworking industry: Welding, Brazing and Soldering at http://www.goldensegroupinc.com/gateway/tech_welding.shtml and Workholding and Toolholding at http://www.goldensegroupinc.com/gateway/tech_workholding.shtml. Gateways from the Electrical and Electronic category are Analytical Instruments at http://www.goldensegroupinc.com/gateway/tech_analytical.shtml and Data Acquisition and Software at http://www.goldensegroupinc.com/gateway/tech_dataAcquisition.shtml. I will describe new Software provider Gateways next month.

FUTURE TRENDS
Software Patenting: According to a survey conducted in 2000 by an independent research firm under The Affiliates, a staffing service specializing in attorneys, Intellectual Property (IP) is expected to be the hottest legal practice over the next ten years. The polled attorneys from the nation's 1200 largest law firms believe that IP is the practice with the deepest future market potential. IP received 48% of their vote while the runner-up, Corporate Transactional issues received 15%. See http://www.affiliates.com and http://www.prnewswire.com.

That survey seems to reflect what has been happening in recent US Department of Commerce Patent and Trademark Office (PTO) decisions. In the March/April issue of MIT's Technology Review, Seth Shulman, author of Owning The Future, suggests: "..., the PTO may be granting ...software patents in error, simply because it can't keep current with advances in the field." The issue raised is that through a proliferation of PTO-granted patents for e-commerce business processes; processes enabled by software, some entrepreneurs have exclusive use of certain business processes; a competitive business dynamic not conceivable in the non-digital world.

Patents are supposed to be granted for "novel," "useful" and "non-obvious" inventions, which would be recognized as such by an expert in that field. The PTO is receiving more than 2,500 annual applications for "business method software" patents. The PTO apparently views many of those software patent applications as "actual, describable, discrete inventions" that meet the above criteria. Patents are granted for 20 years, and are renewable.

Shulman cites a number of broad e-commerce business process patents and their allegedly adverse impacts to web businesses:

• Company Broad Patent Impact
• Amazon 1-click purchasing Changes to Barnes & Noble site
• Cybergold Attention brokerage Rewards to pay attention to web ads
• Netcentives On-line incentives Reward system for web purchasing
• Open Market Shopping carts Infringed by many e-commerce sites
• Priceline.com Buyer-driven sales Sued MS Expedia for copying process
• Sightsound.com Music downloads Demanding 1% royalty for downloads

In contrast, other observers of patenting in the digital marketplace have argued that e-commerce patents represent a logical extension of the patent system. A 1998 U.S. Appeals Court decision between Signature Financial Group and State Street Bank seems to confirm that perspective. Signature held a patent on an accounting system called "hub and spoke," used by many banks around the world. State Street argued that mathematical alogorithms and business methods were not patentable. The high court disagreed, solidly supporting Signature's patent claims.

Some observers believe that the PTO simply cannot keep pace with the onslaught of pending software patent applications, and that they expedite application processing by cursory reviews of "prior art." No invention can be patented, which has already been patented, or which has been published prior to the time of patent application. That earlier patent or publication is called prior art. The issue is the often difficult and time-consuming process of "discovery" for prior art with any patent application. Software programming has the reputation of being particularly deficient in having a clearly published "paper trail" especially for software coding developed at the onset of the Internet.

However, there is some basis for optimism about the prospective number of IP lawsuits likely to be carried through to final court judgement. While there has been a significant increase in the numbers of IP lawsuits filed, many have never been adjudicated so that final court judgements have remained at about the same levels. With millions of dollars of e-commerce sales at stake, why are there not more court judgements? The American Intellectual Property Law Association places the cost for a typical IP adjudication at $1.2 million for even the simplest suits. Such cost disincentives make more attractive alternative payment of patent-holder royalties or of cross-licensing agreements, especially if the patent's viability is a legally defensible concern.

See http://www.techreview.com/magazine/past_issues.asp for additional information.

CONFERENCES OF INTEREST
The 2001 SmartOrg Conference: "Smart Decision-Making in the Current Economy--Creating and Preserving Value in Challenging Times." September 12 through 14. The economic downturn presents immense opportunities to leapfrog competition when things turn around--if a company makes the right strategic decisions in the interim.

Attendance is limited to 30 people to enable maximum participation and interaction with the speakers, SmartOrg staff and their peers from other organizations. Topics will be positioned toward the interests of management who make strategic decisions (i.e., important decisions that impact the success of the organization). Conference themes are:

Raising Organizational IQ:
Being smart-as an organization-sets the stage for everything, particularly in a challenging economy. When things are going well, you can get away with being less than the smartest. But, when things get tough, it is the smart organization that wins. Prior to attending the conference, you will be asked to fill out an Organizational IQ survey. The results will be analyzed and tabulated for discussion at the conference. Each individual will receive a confidential copy of the results. The aggregate results will be discussed in this session.

Gaining an Outside-In Strategic Perspective:
The swiftness of the current economic downturn has taken its toll on most companies. Executives know that Job 1 is to survive and hang on to financial health. But the truly resourceful executives know that the down cycle presents a tremendous opportunity for Job 2: to lead their companies to build strategic advantage now, so that they will emerge much stronger.

Creating Value:
Dick Lee and Tom Dillon, Senior Group Vice President at SAIC, lead a Research on Research subcommittee of the Industrial Research Institute focused on "Value Creation through Value Innovation." This team developed a value innovation process model, metrics and other tools to help companies understand the importance of value innovation in driving quantum improvement in a company's market cap. The team interviewed 28 companies identified as being true value innovators. These interviews provide simple and powerful insights into what you can do in your company to catalyze the cultural change required to become a true value innovator.

Mobilizing Resources to Create Value:
During the past year Jim Keirns has established a professional decision support activity within this large Germany-based pharmaceutical company. Jim will relate his experience, identifying issues and challenges that he has addressed in building internal capabilities. There are lessons here for anyone who has built, is building, or planning to build internal support systems.

Click here for further details: http://www.smartorg.com/Vancouver/Conference.htm
R&D Metrics Conference: The Management Roundtable will offer its 6th Annual Metrics Conference in Chicago on October 15-17, 2001. It's not too early to plan your attendance. Both Mssrs. Don Reinertsen and Robert Cooper will be in attendance for a program on Product Development and R&D Metrics: Quantifying and Justifying Product Portfolio Decisions.

The two-day conference will focus on how to assess the value of new products and the impact of R&D investments on corporate profitability. What are the latest metrics to link R&D and technology to a company's financial performance? Fostering company growth and profitability has become more critical to the engineering and non-engineering communities as a result of recent economic trends.

For more information go to: http://www.roundtable.com/Event_Center/MET01/Metrics01-brochure.pdf and visit GGI's Calendar at: http://www.goldensegroupinc.com/gateway/metricsconf.shtml.

UPCOMING PUBLIC SPEAKING
IQPC/San Francisco: On July 29-31, the International Quality and Productivity Center (IQPC) hosts a San Francisco-based conference on "Best Practices in Web-Enabled Collaborative Product Design: Leveraging the Power of the Internet to Streamline Product Design and Increase Speed-To-Market." Brad Goldense of GGI is the Conference Chairperson and first day (July 30) Keynote Speaker, and will present a July 29 afternoon seminar on "Measuring Product Development Effectiveness."

Supported by the Society of Concurrent Product Development (SCPD), this conference is the only event we are aware of that is focused on utilizing the best available digital technologies to streamline product development life cycles in order to reduce cost and times-to-market. Increased customer demands for specialized and intricate products have forced companies to adopt new web-enabled technologies to augment their potential for speed and collaboration. Organizations must now be able to integrate key e-business technologies, especially in product design and development, to achieve a more effective and efficient manufacturing environment.

For further information or assistance, please call 1-800-882-8684 or email info@iqpc.com. The IQPC web site is located at http://www.iqpc.com/. Search on Events for July 2001.