Design Research and new product development methodologies for auto OEMs:

Abstract

The aim of this report is to elucidate the New Product Development (NPD) process being followed in automobile organizations in India, under both indigenous and outsourced models. Academic literature advocates two fundamental product development philosophies in automobiles. First is a “stage-gate” approach whereas the second philosophy is “lean product development”, both of which have been detailed, and compared at great length. Going further, through one-on-one interviews and secondary research, we have managed the fundamental differences between R&D and NPD in the auto industry: where R&D is aimed at innovation and discovery, NPD is aimed at achieving cost efficiencies, the organization’s strategic goals and most importantly delivering value to the customers. Our study also establishes why R&D is increasingly being outsourced by the organizations who no longer view it as their core competence as against NPD which is increasingly becoming more internalized and is kept under huge secrecy. We have then tried to present a deep dive view on the NPD practices being followed in the Indian auto sector at large, with special references towards Mahindra Auto and GM. The genesis of NPD process is the preparation of a detailed business case involving collaborative efforts of the strategy and conceptualization teams to come up with an execution-able version of the techno-commercial draft of the New Product Concept. Post the approval of the business case, the development of this New Product passes through a comprehensive stage gate review process which is universally followed by almost all automobile companies. An exhaustive stage gate review model has provisions for both technical review of the New Product (micro) and a broad level Program Progress Review (macro). However, despite following the same procedures of lean product development, there still remains a wide disparity in the levels of efficiency achieved across organizations, a case in point being the rate of new product development at Ford which lags far behind that of Toyota’s. Thus, even though the similar combinations of stage-gate + lean NPD philosophies are being followed across the industry, there is still a wide disparity between NPD results achieved by industry leaders when compared to the industry average. We then introduce the concept of “World Platform Concept” under which big global automobile firms are restricting themselves to markets around the world that are not so significantly different so as to not require completely new business plans and hence achieve a rapid rate of Global Product Development. Towards the conclusion of the report, we have tried to highlight and discuss the importance of some of the key qualitative issues like customer understanding, rigour in Business Case Preparation/Review Process, business leaders’ risk appetite, lean expertise/selection of the Program Manager and quality of his education that affect the New Product Development Practices in Indian firms.