Technology Management

ADM 80012
Semester 1, 2018
Week 12
Lecture Notes

25-May-16 J.A. Miller 1

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Summary
• Technology Management - Course Revision
– Definitions & Influences – The Path to Commercialisation
• Technology, Products and Processes • The Project Commercialisation Plan
• Innovation, Invention and Novelty • Value Propositions
• Intellectual Property • Routes to Market
• Energy, Environment & Economy • Design for Manufacture and Assembly
• Core Competencies for Technology • Manufacturing Systems
• Principles of Competitive Strategy • Advanced Manufacturing Technologies
• Distributed Manufacturing
– Theories, Models & Methods
• Life Cycle Theory
• S-Curves and Market Penetration
• Dominant Design
• The Valley of Death
• Program/Project Management
• Risk Management
• Decision Analysis
25-May-16 J.A. Miller 3
 Definitions & Influences

14-May-2015 J.A. Miller 4

Technology, Products & Processes
• Technology is “the application of knowledge for practical purposes.” - Google
• Technology is created in the minds of humans.
• Technology can be in the form of products and/or processes.
• Technology is derived from good ideas that are intended to solve a problem and/or need.
• Technology is integral in enabling other technologies (fractal in nature).
• Technology has had a diverse influence on society and has both good and bad effects.
• Products represent a set of benefits that customers perceive as valuable (are willing to pay for).
• Processes are used to transform resources and effort to create valued products and/or services .

Knowledge

Technology

Products/Processes
& Services
Time & Time & Time &
energy energy energy
Money
25-May-16 J.A. Miller 5
Innovation, Invention and Novelty
• To be innovative is to “feature new methods; advanced and original”,
“introduce new ideas: original and creative thinking.” – Google
• Innovation is applying knowledge and technology in a new and creative way.
• To be inventive is “the ability to create or design new things or think originally.” – Google
• An inventor is one who creates the original concept or idea for a technology.
• Novelty is something “interestingly new or unusual.”
• For a patent to be granted the invention must be both inventive and novel.

http://www.ipaustralia.gov.au/understanding-intellectual-property/

http://goo.gl/Lx4c7
25-May-16 J.A. Miller 6
Intellectual Property
• Intellectual property includes:
– Inventions (patents), registered designs, confidential information (trade secrets), trademarks,
plant breeder rights, circuit layouts and copyright.

• Patents provide a monopoly right to the applicant (invention owner) for ~20 years from the priority date.
• Patents are granted by the government in return for public disclosure.
• Patents are intended to encourage innovation by reducing the risk associated with return on
investment and by enabling others to create complimentary technologies.
• Patents are used to protect against competitors manufacturing or importing the patented technology
in the market where the patent is granted.
• Consideration needs to be given as to whether the protection is required in location where
manufacturing is taking place or where the market is… these may not be the same for global
enterprise.
• Patents are defined by a background, summary of the invention, detailed description including
illustrations and schematics and tables, and most importantly, the claims.
• Patent claims are hierarchical and define the scope of what is to be protected.

25-May-16 J.A. Miller 7

Intellectual Property
• For an invention to be patentable it must be novel and include an
inventive step.
• Not novel if:
– Prior art information makes the invention available to the public before
filing a patent application (e.g. prior art document such as a publication
or journal, or use of the invention in the public domain).
– True if: “I find all of the features/steps of a patent claim in a single prior
art document?”
– Prior art is defined by the priority date; concepts that where publicised
prior to the time when the patent application is accepted.

• No inventive step if…

– It is obvious for an uninventive person, with common general
knowledge in the relevant field, to have arrived at the invention alone
or by consulting one or more pieces of prior art information (i.e. prior
art documents).
– True if: “I find all of the features /steps of a patent claim in a
combination of prior art documents?”
http://goo.gl/P1ASVq

25-May-16 J.A. Miller 8

Intellectual Property
• The art of patent drafting is to define claims with as few features as possible and in the broadest
language possible to provide the broadest monopoly and prevent infringers from designing around
the patent.
• For a product or process to infringe a patent it must have each and every feature of at least one of
the claims.
• The omission of one feature will avoid infringement.
• Patentable inventions include a device, substance, method or process. Computer programs can be
patented but only by definition of the way they are applied – process. Computer software – source
code is covered by copyright.
• Artistic creations, mathematical models, plans, mental processes and naturally occurring phenomena
are not patentable.

25-May-16 J.A. Miller http://goo.gl/vFErHS 9

Intellectual Property
• Copyright is an automatic protection on textual and image based creative works and
records … such as journal articles, reports and databases, computer, program source code,
engineering and design drawings and recorded images such as photographs and video.
• Copyright lasts for ~70 years from the year of the author’s death or year when the content
was published after the author’s death. Similarly published media (e.g. broadcasts, TV and
movies) has copyright protection for ~70 years from the year it is published.

• By default, employers are the owner (applicant) of intellectual property such as patents
and copyright, not the employee. Unless it has been specifically agreed otherwise in the
contract of employment.
• By default students and contractors (or the contracting employer) is the owner of
intellectual property such as patents and copyright. Unless it has been specifically agreed
otherwise in the contract of engagement.

25-May-16 J.A. Miller 10

Intellectual Property
• TRADE NAME is the name of the manufacturer (e.g. Nokia Inc.)
• Trademark is effectively the name of a product, its logo and brand name.
• A trademark must be registered and normally needs to be used on or directly in association with
the sale of goods, such as on a store/exhibition display
• Examples:
– Coca Cola… is always associated with a registered trademark logo
– “Hoover Ltd” is a trade name however the word “Hoover” is a registered trademark logo and brand name.

http://goo.gl/rkhxI5
http://goo.gl/GZ62MU

http://goo.gl/OsmBDp

• Unlike patents, trademarks have indefinite protection in many countries.

• Trademarks apply not just to names, but also to logos, drawings, marketing artwork and other
such symbols and depictions of products and services.

25-May-16 J.A. Miller 11

Energy, Environment & Economy
• Everything is fundamentally influenced by the availability of

Energy
• It’s impact on the

Environment
• And how it interacts (affects and is effected by) the

Economy

Ref: Chris Martenson http://www.peakprosperity.com/about

25-May-16 J.A. Miller 12

Energy, Environment & Economy
• Energy Returned on Energy Invested (EROEI)
– What amount of energy input is required to transform/produce useful energy

– If the ratio (Ein:Eout) is less than 1:1 it is a net energy loss and by definition “un-sustainable”
in pure energy terms
– In a given time period, any system that produces less energy than what is put in must be
subsidised by some other net positive energy source else it will diminish to zero.
– Energy conundrum: what is the solution ..? How many renewable power stations does it take to
support the construction, supply, maintenance and decommissioning of another renewable
power station (total infrastructure)?
– The time value of energy, storage and portability are key to defining energy quality. e.g. fossil
fuels have millions of years invested, therefore is high value. EROEI should be considered in
context of time and convenience.
25-May-16 J.A. Miller 13
Energy, Environment & Economy
• The environment, that we live in, is finite and subject to the limits of growth.
• The exponential growth function describes a condition where there is an increase in the rate of
change of a system…
• Fossil fuels, land, water, food and other mineral resources are finite resources…

Exponential growth Doubling time is given by

Collapse td = ln2 /R
x Exponential decay ≈ 0.693/R
Steady state Example…
~7% annual growth means
Normal curve population doubles
every 10 years

time
• The economy is defined by production and exchange of goods and services
… utilising predominantly finite resources .
• Fiat currency and debt based (Keynesian) economic systems are the basis of exchange and are
defined by perpetual growth… debt must be payed back plus interest and inflation.
25-May-16 J.A. Miller REF … http://www.peakprosperity.com/crashcourse 14
Core Competencies for Technology
• Government
– National policy to support the access and allocation of resources
for innovation with the incentives to keep them productive in
the local economy National Capacity

• Infrastructure
– The people, organisations and institutions with the right assets
to take action

• Skills Productivity
– Training and education that is focused on the present and future
needs

• Practice
– Capability = access to the infrastructure and skill
– Competency = ability to put it into action
… and affect positive results Prosperity

25-May-16 J.A. Miller 15

Principles of Competitive Strategy
• Why not optimise and have it all?
– You can but it’s difficult to achieve… High Price

– Cost leadership
• lean operations,
Miracle Luxury
• efficient designs, Brand Product
• tight supply networks
e.g. category killers Low Value High Value
Pick any two
– Differentiation costs Commodity Miracle
• risk of failure and development effort Product Product

• acquire/develop new technology

• incubation period Low Price

– Focus Strategies Commodity Corner

Unrealised value (profit potential)
• pick a niche and do it well

– Stuck in the middle (trying to do it all)

• Caught up in conflicting priorities – un-competitive compromises
25-May-16 J.A. Miller 16
Principles of Competitive Strategy
• First Mover Advantage
– Technological leadership – use IP protection or unique knowledge advantage
– Pre-empt scarce assets – use superior information to buy up assets / resources
– Switching cost barrier – establish user investment and reluctance to change
– Build brand – develop reputation for greatest experience and dependability in new tech

• Fast Followers Advantage “the second mouse gets the cheese”

– Free ride – can exploit development risks taken by the first mover / pioneer
– Safety in numbers – can invest in majority preferred option http://goo.gl/hUosEh
(wait n see who captures the distribution channels … e.g. BluRay vs HD DVD)
– Set up rival option – play to consumer’s mistrust in monopoly organisations

25-May-16 J.A. Miller 17

 Theories , Models & Methods

14-May-2015 J.A. Miller 18

Life Cycle Theory
• Abstract Entity (inputs and outputs are cognitive and mostly virtual)
– The product is conceived by identified need & opportunity
– Needs are translated into concept and then designs
Consider
• Physical Entity (inputs and outputs are material) technology that
– Quantities of physical material are transformed to make the product enables reuse
– The product delivers value to the user or repurposing The irreversible
nature of time!
– When value is less than cost the product is disposed
Event Progression

need concept design production use disposal

Driving Force – Markets & Economies

Development Cycle Applied Cycle

abstract entity physical entity

Life Cycle of Whole Entity

26-Mar-2015 J.A. Miller 19

Life Cycle Theory
• Platform Technologies

– Leveraging investment in R&D for extended product lifecycles

– Standardisation and mass production
– Facilitates “plug and play” modular architectures
– More sophisticated modular systems enable mass customisation

pure research applied research innovation development business

breakthrough platform incremental

domain domain domain

10 + years 2 – 5 years 1 – 2 years

15 – 30 years
25-May-16 J.A. Miller 20
Life Cycle, Cash Flow & Platform Technology
• Extending an existing product design extends the revenue period
• Investment in design and development is carried forward
• An added bonus period of profit is realizable since cost is already recovered
new product platform new product next product

profit curve overall profit

SALES

introduction

maturity

decline
growth

TIME

break even, sooner

26-Mar-2015 J.A. Miller 21

Technology S-Curve
• Richard N. Foster – determined a
way of predicting discontinuity
associated with disruptive
technologies Introduction of New Technologies
• Advancement of a new technology
may be slow in the beginning whilst Technology hits it’s

Adoption and Advancement

capability and competence builds effectiveness limits and declines
Technology

Cumulative measure of
B
in revenue generation New curve may have
• As knowledge and experience for the specific application e.g. jet
aircraft
different profile of
develop the technology reaches a advancement
breakthrough point that qualifies it Representing a different
as an recognised enabler of new Discontinuity technology with a more
greater benefits advanced approach to
Technology achieving the same or
• The technology goes through rapid A similar benefits
advances as it matures and creates e.g. propeller
aircraft
new markets Pioneering efforts in
engineering and development
• At late stages, minor incremental until breakthrough is achieved
changes have limited impact on
generating revenue Time and Effort

25-May-16 J.A. Miller 22

Product and Process – Dominant Design
• The Abernathy – Utterback model
postulates that small,
entrepreneurial organisations are Abernathy – Utterback model (1994)
more able to innovate new
products, and

• Large, rigid, cost driven

Product innovation

Rate of major innovation

organisations tend to focus on
process innovation… hence are at
opposite ends of the innovation
spectrum. Process innovation
• Is this why product inventions and
innovations happen more often in
small companies?

• Consider the scale of capital

investment in process technology. Fluid phase Specific phase
Predominant Design
Transition phase
Shift to process cost focus Post dominant design
(R&D outputs) Revised design for cost
• How will rapid manufacturing
technology effect this? Time from introduction of technology

REF… http://innovationzen.com/blog/2006/08/29/innovation-management-theory-part-6/

25-May-16 J.A. Miller 23

Disruptive Technology
• Helps create new markets by displacing existing Clayton M. Christensen Model
technology with new functions, features, efficiencies and
cost structure (valued – benefits). Quality
• Businesses that are locked into a value network are
Incumbent
vulnerable to disruptive technology.
• Due to the investment barrier associated with a new
technology survival often means focus shifts to competing
on a cost reduction basis and options become very limited
leading to the commodity corner. Need

Incumbent Disruptor
cassette tape  compact disc Disruptor
ICE powered cars  electric powered cars
fixed wire phone  mobile phone, VOIP
photographic film  CMOS, CCD, digital imaging
paperback books  internet, ebooks Time
REF… http://innovisio.blogspot.com.au/2013/02/disruptive-technologies-as-new-games.html
http://goo.gl/8HxXFa
http://www.claytonchristensen.com/key-concepts/#sthash.1aQFRVbp.dpuf
http://en.wikipedia.org/wiki/Disruptive_innovation

25-May-16 J.A. Miller 24

 The Valley of Death - Negative Cash Flow
Cash Flow Formal Scale Up
NPD

Funding Primary Research Development Friends & Angel Early Stage Private Equity IPO, Merger
Grants Grants Founders Investors Venture Capital Financing or Acquisition
example $50-500k $50-500k $50-500k $50-500k $500k-2M $2M-50M $25M+

Valley of Death
Time

Stages of
Venture Development

Basic Research Applied Proof of Working Engineering Start of Revenue

Research Concept Prototypes Prototypes Production Growth

Business Plan Founding Supplier Channels of Marketing

Ref… http://goo.gl/YatrU7
Team Contracts Distribution Campaign

25-May-16 J.A. Miller 25

The Valley of Death - Who Builds The Bridge?

Gatekeeper
Champion Sponsor
Relative Influence

Existing
Acceptance &
Existing Demonstration Commercial
Transfer Phase
R&D Awareness & Resources for
Phase
Activity Recognition Formal NPD
Phase
http://goo.gl/vNrbLx
http://goo.gl/yRtWqH

Knowledge → Technology Technology → Product Concepts Product Concepts → Market

The Champion The Sponsor The Gatekeeper

• Discover the real commercial • Provides resources to establish • Sets standards and goals for
value of the research output potential acceptance and continuing
• Manifest the discovery as a clear • Monitors resources to reduce support
and strong focused risk • Makes decisions on whether the
product/service outputs are delivering per
• Enables evidence to support
• Communicate the potential with approval to proceed with formal expectations
a compelling case (evidence is development
stronger than speculation)

25-May-16 J.A. Miller 26

Roadmapping Process
• The V - Model Requirements
Implementation
(strategy)

Market Market

Past Future
Product Product

Technology
The development funnel - screening / qualifying

– Based on the V-model commonly used in systems engineering

– Corporate strategy determines the context of the V model based on capabilities and risk/return
– Requirements/strategies are identified and broken down to sub-set levels
– Implementation solutions should be developed and iterated via “the development funnel”
– The development funnel applies a stage gate process to screen and qualify the good from the bad

25-May-16 J.A. Miller 27

Roadmapping Process
Sequence of workshops
– Regular workshop and review processes
– Roadmaps are built up and maintained as live documents
Consolidated Roadmaps
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Workshop Product
Segment
Business Strategy Product
Market
Technology
Environment
Social

record Political
Economic
Competition

Workshop Diversification

Review
via Markets
decision
criteria record

Workshop
Review
via Products
decision record
criteria

Track progress
via Workshop
Review
Program via
Technologies
Stage Gates decision
criteria
25-May-16 J.A. Miller 28
Product Development Framework
Strategic Roadmap
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Translate Requirements to Products
Product

Market characteristics

attributes
Technology components

character
Voice of processes

components
Environment the controls

processes
Customer
Social House of Quality

Political Design Matrix

Operations Matrix
Economic Control Matrix
Competition

Diversification
Statements
Of
Requirements
Design
Plans
Manufacturing
Plans
Process
Control
Plans
product launch

opportunity

Choice Action
take it to the
possibility market

Decision Analysis Development Funnel

Existing Market New Market

Existing Product

New Product

25-May-16 J.A. Miller 29

Product Planning
• The Ansoff Matrix is commonly used to define strategic choices
to achieve business, product and market objectives.
Ansoff Matrix
• These decisions will determine the Innovation and NPD
strategies.
Market

New
• Additionally, the specific characteristics and vision of the Development
Diversification
company will further define the approach:

Market
– markets
– products

Existing
– technology Generic Product
Growth Development

Existing New
• Top down planning
Product
– Vision, strategy, technology selection and alignment  best option for
competitive advantage
• Bottom up planning
– Incremental, cost focused, shooting for budget targets  often results in a race
to commodity corner
25-May-16 J.A. Miller 30
Product Lifecycle Management (PLM)
• Most manufacturing companies distinguish two main process chains: The operational process chain
and the technical process chain. ERP systems largely address the operational process chain,
whereas PLM systems automate and enable predominantly the technical process chain.

http://plmtechnologyguide.com/site/

26-Mar-2015 J.A. Miller 31

 Program vs Project Management
• Definition of a Program
– A program is a collection of related projects that share a common goal or purpose
– Is usually affected enterprise wide by the application of standard practices to achieve long term
strategic objectives
– Applies and manages resources across a broad range of disciplines from all functional
departments of the organization
– Involves management of finite resources, budgets, information and data across development life
cycles to achieve specified strategic goals and objectives.

fuzzy front end

funnel concept design process proof qualify and scale up

Technology Applied Commercial

REF… http://goo.gl/FQCJae development development development

25-May-16 J.A. Miller 32

 Managing the Scope
• The Scope Triangle is a project system in balance.
Risk

• The lengths of the three sides exactly bound scope

and quality.
The irreversible
nature of time!
– Scope: boundaries of activity
– Quality: product and process = expectations
– Cost: allocation of resources & material / time
– Time: window of opportunity
– Resources: people, assets, materials, funding Scope and Quality
– Risk: probability of failure * consequences

Risk Risk
• Change in the variables will cause
Resource Availability
the system to be out of balance.

REF… http://goo.gl/9cmCBK

25-May-16 J.A. Miller 33

Defining a Project
• Aim & Objectives
• Expected Outcomes
• Strategy & Scope (time +budget +resources → expected outcomes)
• Work Breakdown Structure (e.g. Pert Chart)
• RASIC Chart (Responsible, Approvals, Support, Inform, Consult)
• Milestones, Deliverables, Critical Path and Timing (Gantt Chart)
• Managing Resources
• Budget – track cost and measure Earned Value
• Monitoring – respond as needed
• Reporting

25-May-16 J.A. Miller 34

Information to Support a Management Decision
• Action plans /Open Issues Lists
– Captures critical actions identified in the review
– Indicates the priority of the action
– Identifies the responsible resource
– Captures date raised
– Commits to a delivery time
– Record of subsequent review
– Record of actual close
• Gantt Charts
– Progress is tracked
– Show the Work Breakdown Structure
– Task may linked to show dependencies
– Critical path tasks are monitored
• Failure Mode and Effects Analysis
• Design Validation Plan & Report (proof)

25-May-16 J.A. Miller 35

Management Fundamentals
Organisational structure

• Two main types of structure:

– Functional: employees are grouped according to specialization
tasks such as engineering, purchasing, manufacturing, finance
and human resources
• Pros: operational efficiencies and expertise within that group

• Cons: poor communications (optimised silos)

– Divisional: employees are grouped by product, customer or

market and have functional independence, e.g. each division
may have its own engineering, purchasing, manufacturing,
finance and human resources departments
• Pros: focused on specific business product or service

• Cons: duplication of functions across organisation and less likely

to transfer knowledge and practices across divisions

25-May-16 J.A. Miller 36

Management Fundamentals
Organisational structure

• Matrix structure: groups employees by both function and product and

can combine the best of both. It is the most commonly adopted structure
for organizations in the automotive industry.
– Weak: A project manager with only limited authority is assigned to oversee
the cross- functional aspects of the project. Functional managers are
responsible for employee performance

– Balanced: A project manager is assigned to oversee the project. Power is

shared equally between the project manager and the functional managers.

– Strong: A project manager is primarily responsible for the project and

employee performance. Functional managers provide technical expertise and
assign resources as needed.

• Others include: network, virtual and organic.

25-May-16 J.A. Miller 37

The Stage Gate Process
• Preceding each stage is a point or gate review which serves as a Go/Kill and decision point.
• Gate reviews are where mediocre projects are culled out so that resources can be allocated
to the best projects.
– Ideally, troubled projects are brought to review before they are in crisis
– Problems are analyzed and corrective actions are issued
– Being too hasty in killing a project for purely financial reasons can wipe out potentially lucrative
business opportunities
– Recovery versus write off of a bad investment or overspend requires a judgment on whether a
saleable product is achievable. i.e. it may be better to accept a break even or minor loss with ROI
than get nothing from the investment.

• Quality of execution, business rationale, quality of action plan

deliverables criteria outputs

25-May-16 J.A. Miller 38

Design Reviews versus Gate Reviews
• Design/Engineering reviews assess the technical progress
– Understanding requirements
– Determining alternative solutions It is often best to keep the
– Understanding the compromises technical and business reviews
– Determining the optimal solution separate.
– Details of how the optimal solution is to be executed
– Details of any changes required to rectify an identified problem (ECR)
All design decisions are able to
– Details of the embodiment of the optimal solution
include design release information (ERN) ultimately be broken down to
– Details of the sensitivities / technical risk presented cost/ROI and strategic fit,
by the design solution however there are purely
– Proof that the design is what was expected / intended - verification technical decisions that must
– Proof that the design meets the be made first.
customer, legal and market requirements – validation
– Outputs and deliverables of design reviews are summarized
in gate reviews These decisions should be
determine by engineering
• Gate reviews focus more on the business metrics scrutiny or else we would never
– Is the money spent creating value
do anything new !
– Is the program meeting milestone and timing commitments
– What are the risk priorities
– Is the spend rate on track
– Is the program going to be profitable
25-May-16 – What are the appropriate next actions J.A. Miller 39
 Requirements Management
• A statement of expectations for business value

• Implementation free description of what

needs and wants are to be met
• Conditions of compliance
– Legal and compliance standards
– Market expectations / standards
– Social expectations / standards
– In-house expectations / standards

• Basis for a development / project contract

– Quotes are defined on a Statement of Requirements
– What happens if the customer changes the requirements ?
– The Contract must be revised…!
http://goo.gl/dMqM0f

REF… http://goo.gl/oVBiQY

25-May-16 J.A. Miller 40

Risk Management
• A risk is characterised by an event or condition that, if
occurs, will have a negative impact, cause harm or a loss.

• Risk is generally quantified in terms of likelihood of

occurrence and the consequences of the negative event.

Risk = Probability X Consequence

• Risk is inherent in all systems that are subject to the chaotic

conditions of cause and effect.

• Risk is an integral part of life and evolution. Even if you’re

completely isolated from the world you yourself are a
system of interconnecting subsystems, functions and
processes… any of which could behave unexpectedly.

30-Apr-2015 J.A. Miller 41

Risk Management
• The complete consideration of risk
takes into account:
Hazard or
Threat
– Likelihood (l) At Risk
– Outcome (o)
– Utility or significance (u) Exposure:
– Cause scenarios (c) population,
– Scope or extent of exposure (p) Vulnerability property,
environment

Risk ≡ {(li,oi,ui,ci,pi),…, (ln,on,un,cn,pn)}

30-Apr-2015 J.A. Miller 42

Risk Management
• Technological risk is the risk associated with a technology that
gives rise to possible adverse consequences when in development
and in a different context when deployed.

• It is difficult to distinguish between what may be defined as

organisational risk and the risk purely associated with a
technology.

– Social, cultural and multidisciplinary aspects

– Retained knowledge, dependability and reliability of information
– Managing uncertainty
• What is known … data available in the relevant context
• What is a known unknown … awareness of possible and probable outcomes
• What is an unknown unknown … absolute surprises, unpredictable outcomes

– i.e. what is the fundamental root cause problem / basis of risk

REF … http://goo.gl/eSoAZr
… human error or machine failure
30-Apr-2015 J.A. Miller 43
Risk Management
Potential risk treatments
• Once risks have been identified and assessed, all techniques to
manage the risk fall into one or more of these four major categories:

– Acceptance (do nothing and carry on)

– Reduce Uncertainty (get more data)
– Avoidance (eliminate the feature or function)
– Mitigation (reduce the occurrence or severity – improve design)
– Transference (outsource or insure)
– Retention (accept and make provisions and contingencies)

30-Apr-2015 J.A. Miller 44

Risk Analysis and Reliability

Design Identify and correct weaknesses

FMEA

Capable confirm performance with testing

Design

Reliable objective durability data

Design

Capable &
Reliable
Design

30-Apr-2015 J.A. Miller 45

Reliability Engineering
Bathtub Curve
• Infant mortality period:
– characterised by an initially high failure rate which
decreases rapidly
– failures are due primarily to poor manufacturing techniques Infant Useful life Wear out
and quality control mortality

Failure Rate
• Useful life period:
– characterised by a nearly level failure rate
– failures are random and are due primarily
to inadequate design

• Wear out period:

time
– characterised by an increasing failure rate
– failures are due to natural aging, sometimes
poor maintenance

30-Apr-2015 J.A. Miller 46

Economies & Diseconomies of Scale
• Internal economies and
diseconomies of scale are associated Example Reducing Example Increasing
Incremental Costs Incremental Costs
with the expansion of a single Facilities and Services Utilities tariff rate thresholds
operation (1 factory). Labour efficiency Labour overtime/extra shift
Machine efficiency Machine maintenance
• The long run cost curve for most Purchasing discounts Logistics double handling
firms is assumed to be ‘U’ shaped, Logistics efficiency Information flow disruptions/errors
Business process efficiency Communications time lag
because of the impact

Cost & Revenue

of internal economies and Long run
diseconomies of scale. average cost
curve
• As overhead costs are spread over a Economies Diseconomies
of Scale of Scale
larger volume the incremental cost
reduces… to a point (A) where the A
incremental costs rise again as the C
operations begin to exceed
optimum capacity.

Q Quantity

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Simple Break Even Analysis
• Recap… simple break even analysis is intended to find the volume of saleable units that are needed to achieve to
recovery of an investment required to make the units in-house as compared to purchasing (outsourced).

• Selling Price (P) … determined by market supply and demand

• Quantity (Q) is the volume of units sold $
• Fixed Cost (FC) is generally associated with the capital Profit TR
cost or investment in development and production
capacity such as manufacturing infrastructure/assets
• Variable Cost (VC) is the cost associated with
each unit produced, usually consists of the TC
cost of labour, materials and consumed resources
• Total Cost (TC) = FC + VC
Loss
BEP
• Total Revenue (TR) is the income from sales (P x Q )
VC
• Break Even Point (BEP) is the point where revenue matches
the total cost… beyond which a profit will be realised
• Because there is no profit ($0) at the break-even point, TR − TC = 0, FC
and then P × Q − ( FC + VC × Q ) = 0. Therefore, Q = FC / ( P − VC )
• However, it may be more useful to know the quantity necessary
to generate a desired level of profit (Z). Q
TR − TC = Z
P × Q − ( FC + VC × Q ) = Z
Then … Q = ( FC + Z ) ÷ ( P − VC )
http://goo.gl/nf73pW
http://goo.gl/bt0tIK

25-May-16 J.A. Miller 52

Decisions Analysis
Uncertainty, Expected Value and Expected Opportunity Loss

• Maximin (risk averse): find minimum payoff for each alternative, then the maximum of those
• Maximax (risk taker): find maximum payoff for each alternative, then the maximum of those
• LaPlace (average - realist): find the average payoff for each alternative, then the maximum of those
• Minimax Regret (conservative): for each scenario, find the maximum payoff, and subtract each of the
payoffs from it to compute the lost opportunities (regrets). Then find maximum values for each
alternative, and the minimum of those
• Expected Value (when probabilities are known): Compute a weighed average of payoffs, called the
Expected Value, for each alternative and choose the maximum value.
• Expected Opportunity Loss (sore loser, when probabilities are known): Compute the weighted average
of the opportunity losses (regrets) for each alternative and select the minimum.

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Decision Trees
• How to…
– List options (include all possible action alternatives!)
– List uncertain events (mutually exclusive and collectively exhaustive)
– Construct a decision tree along a time line

decision nodes (list of choices)

event nodes (list of events)

– Evaluate endpoints (outcomes for each end branch)

– Assess event probabilities
– “Expect-out and Fold Back” = Backwards Induction
– Do sensitivity analysis on variables

• Consider what the result means in context of the bigger picture decision making?
… are you backing the right horse?

30-Apr-2015 J.A. Miller 54

Decision Trees - Example
• A high technology business is in the midst of developing a diversification strategy to broaden it’s
market share and build greater scope in the product portfolio. A decision must be made on whether
to make or buy the product of their newly developed technology. The choices and probabilistic
outcomes have been mapped as described in the decision tree below… Which is the best option?

0.4 Exceed target volume

Expected Return $ 10,700,000 * 0.4 = 4,280,000
$ 6,020,800 0.3 Achieve target volume
$ 7,400,000 * 0.3 = 2,220,000
Outsource
1 0.2 Less than target volume
$ 1,104,000 * 0.2 = 220,800
0.1 Program failure
-$ 7,000,000 * 0.1 = - 700,000
6,020,800
0.5 Exceed target volume
Expected Return $ 13,800,000 * 0.5 = 6,900,000
Expected Return $ 7,490,000 0.2 Achieve target volume
$ 7,490,000 $ 8,400,000 * 0.2 = 1,680,000
In-house
1 0.2
Less than target volume
$ 300,000 * 0.2 = 60,000
0.1 Program failure
-$ 11,500,000 * 0.1 = - 1,150,000
7,490,000

$ -
Do nothing

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Decision Trees – your turn…
0.4 Exceed target volume
Expected Return $ 2,675,000
$$ 1,505,200
1,505,200 0.3 Achieve target volume
$ 1,850,000
Outsource
0.2
Less than target volume
$ 276,000
0.1 Program failure
-$ 1,750,000

0.5 Exceed target volume

Expected Return $ 2,450,000
Expected Return $$ 1,530,000
1,530,000 0.3 Achieve target volume
$ $ 1,530,000
1,530,000 $ 1,950,000
In-house
0.1
Less than target volume
$ 75,000
0.1 Program failure
-$ 2,875,000

$ -
Do nothing

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 The Path to Commercialisation

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The Project Commercialisation Plan

Technology Value Route to

Market Profile Bottom Line
Demonstration Proposition Market

Have a sound
Show the Understand who
Provide the Getting the business case
technology and where the
initiative and the technology out that addresses
works in the target market is.
motivation to there and raising positive cash
application Understand the
proceed the profile flow as early as
context competition
possible

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The Value Proposition
• A value proposition must clearly and concisely communicate…
– What the value is that your product/service technology provides
– To whom it provides value
– Why your product/service technology is uniquely better than all others
– That the product/service technology addresses a real need in a real market

• DEFINE Blatant
– the problem set… is it worth solving? Latent
– Is it BLAC and White? Aspiration
al Critical
• EVALUATE
– whether the technology is unique and compelling Identify target customers and market size
– discontinuous, defensible and/or disruptive Acknowledge the current alternatives
Clarify why this is a new product technology
• MEASURE
– the likely response to your technology Highlight key problem-solving capability/benefit
– is there a steep learning curve? Point out why it’s unlike the technology alternatives.

• BUILD
– the compelling case

25-May-16 J.A. Miller REF… http://goo.gl/4QDFg 59

The Routes to Market with New Technology
• Sell – when you have good IP and demonstrated value but lack access to the market
• License – 2-5% of $millions is better than 100% of nothing… be the specialist in demand
• New Venture – if you must have the control and can access the core competencies
• Strategic Alliances & Joint Ventures – find partners to share the risk and add competencies
• Outsourced – pay an independent organisation to productionise and distribute

• Equity Investments and Spin-off Companies

• Vertical integration / disintegration
• Initial Public Offering

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The Value Chain
• A value chain, first described and popularized by Michael Porter, is a set of activities that a firm operating in a
specific industry performs in order to deliver a valuable product or service for the market.
• Systems that transform money, time, energy, and raw materials into products and services
• Technology is the enabler for transformation processes and the product embodiment

• But who is determining the value?

– the stakeholders… Organisation Infrastructure

ACTIVITIES
SUPPORT
Human Resource Management
– Customers (end users) Technology
– Designers Procurement
– Suppliers
– Manufacturers
Inbound Outbound Marketing
– Shareholders Logistics
Operations
Logistics & Sales
Service
– Communities

– Who are you selling to? PRIMARY

ACTIVITIES
– Who has the most power and influence?

REF… http://goo.gl/Mc3oJ
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Design for Manufacture and Assembly (DFMA)
The key principles of DFMA:
1. Reduce the number of parts
– Does the part move relative to all other parts in the assembled product?
– Must the part be a different material to all other parts in the assembled product?
– Does the part need to be separate for the purpose of assembly or disassembly of the product?
2. Make parts multi-functional
3. Eliminate/reduce the separate joining parts (screws, rivets, etc.)
4. Facilitate parts handling
5. Use standard parts and hardware
6. Encourage modular assembly
7. Use stack assemblies/don’t fight gravity
8. Design parts with self-locating features
9. Minimize number of surfaces
10. Assemble in the open (ensure the assembly is accessible)
11. Simplify and optimize the manufacturing process
12. Eliminate interfaces
13. Design for part interchangeability
14. Design tolerances to meet process capability
15. Reduce the number of parts (it’s worth saying again !!!)

14-May-2015 J.A. Miller 62

Selection of Materials & Processes (DFM)
• Manufacturing processes are usually selected to achieve as many of the required attributes as possible
in the first sequence of operations. Casting, forging and injection molding are examples of these
processes.
• Following processes usually focus on generating the features or refine the features. e.g. cutting and
grinding processes
• Final sequence processes generally do not affect the geometry of the part and often focus on the
surface finish and appearance.

Typical Sequence of Manufacturing Processes

Feature
Geometry Finishing
Detail

14-May-2015 J.A. Miller 63

Design for Assembly (DFA)
• As with DFM, DFA should also be applied at the earliest stages of the development phase of a new
product development program.
• Apart from the benefit of optimising the product design for ease of assembly the DFA tool is an
effective means of improving communication between design engineering and manufacturing.
• The analysis of a product design for ease of assembly depends largely on the type of assembly process
that is expected to be applied – manual, automated or a combination of both.
• The main criteria for these decisions comes from the business case outlining the same set of
constraints as with the DFM analysis:
– Product life volume
– Permissible tooling expenditure levels
– Possible part shape categories and complexity levels
– Service or environment requirements
– Appearance factors
– Accuracy factors

14-May-2015 J.A. Miller 64

Manufacturing Systems
Flexible Mass
Small batch
Manufacturing Customization

Customized
PRODUCT FLEXIBILITY

Mass
Production

Continuous
Process

Standardized
Small BATCH SIZE Large/Unlimited

25-May-16 J.A. Miller 65

Technology Review Of Mass Customization
Challenges
• keeping costs low to match those of standardized items,
• achieve high quality production of high variety of products,
• making these products available in a timely manner to customers

Enablers
• modularisation of products and processes
• knowledge based software systems
for assembly configuration
• flexible automation in
manufacturing – improved
low cost technologies
– computational,
– communicational and
– information processing

REF… https://goo.gl/nY7r1H
14-May-2015 J.A. Miller 66
Advanced Manufacturing Technologies
• Rapid Prototyping → Rapid Tooling → Rapid Manufacture
– Additive methods: LOM, SLA, FDM, SLS, DMLS, EBM, Thermal Spray
– Subtractive methods: EDM, ECM, EBM, photochemical, ultrasonic, water jet and laser
Discharge Chemical Beam
– Other methods: incremental forming, electromagnetic pulse forming, laser assisted riveting

• Advanced Manufacturing Systems

– Multi axis CNC, robotic transfer systems, multi mode systems - cut, pierce, form, fold, etch and join

• Flexible Manufacturing aims to:

– maximise productive machine time
– minimise materials handling and WIP
– enable networked flexible real-time scheduling for a family of products
– enable computer controlled predictive maintenance and capacity planning

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Distributed Manufacturing – Vision of the Future
Problem
• Current manufacturing paradigm is based on global economies of scale
• Not a sustainable model considering E3 issues
– particularly considering climate, resources and limits to growth

A
A Proposed Solution
• Centrally managed platform designs B
• Components sourced both locally and globally
• Leverage economies of scope
• Sub-systems assembled in region
• Final assembly at point of sale XYZ
– Modular kit based systems
– Enabler for multiple standard configurations
– Mass customisation
C E
– May be re-configured and re-manufactured

• Embedded diagnostics to aide compliance (AI configurators)

• Rapid manufacture of custom options
– Aesthetic and HMI features
D
– Service and wear items

25-May-16 J.A. Miller 68

Centralised vs Distributed Manufacturing
Differentiating Factors Centralised Mass Production Distributed Manufacturing
Logistics High aggregate logistics cost Low aggregate logistics cost
₋ bulk quantity freight, large vehicles ₋ small quantity and size – more agile
₋ large distances covered ₋ local supply reduces risk where quality
₋ remote supplier networks are a high risk liability responsiveness is premium
for quality and lead-time ₋ local labour/machine costs are offset by time saved
₋ benefit of lowest global labour cost is offset by in shipping
inventory holding cost and long lead times

Total Manufacturing Cycle Time Long inter process cycle times Short inter process cycle times

Capital Investment High capital investment Low-medium capital investment

Unit Cost Low unit amortisation cost High unit amortisation cost

Waste (emissions, scrap Bulk quantities of materials, packaging and extra Small quantities (minimal inventory) and additive
material) handling as well as subtractive processes create manufacturing processes minimise transport
high levels of waste. packaging and inventory.

Design Strong requirement for standardised subsystems Safety critical subsystems and components are limited
and components based on platform designs and based on compliance requirements. However product
preference for incremental improvements and cost systems are more open to integration and
reductions. Design freedom is very constrained by customisation yet leverage a platform design
large engineering change control burdens. knowledge.

J.A. Miller 69
Centralised vs Distributed Manufacturing
Differentiating Factors Centralised Mass Production Distributed Manufacturing
Key Value Stream Benefits Value-add processes are specialized and More value-add close to the final point of sale in the
concentrated (centralised). market zone.
High % time wasted in moving and storing material. Less time wasted in moving material.

High up-front investment is required many months Speed to market enables earlier positive cash flow and
or years prior to break even and ROI goals can be fast tracks the ROI on production facilities that have
achieved on a very fixed and limited market access to a broader range of market opportunities.
opportunity.

Societal impact Promotes mono culture and segregation based on Promotes an integrated and mixed culture where
concentration of low skill labour/employment. various skill levels and expertise are required.
- high levels of dependence on single organisation - many independent and co-dependent businesses
for economic durability enable high levels of economic resilience.

Innovation Fixed infrastructure and dedicated manufacturing Higher degrees of freedom enable speed to market
systems for specific product classes will cause a lag with new product concepts. As a result, regional
effect on implementation of new innovations based markets are constantly renewed and invigorated with
simply on ROI models. constant innovation. The market penetration curves
for product and process technology converge.

25-May-16 J.A. Miller 70

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