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the Hook |
Why
Manufacturing Engineers Should Worry About Market Research
Invest More In Market Research
Than In Engineering For Success
Emerging
Technologies Weekend
1-2 PM. Friday, January 8, 1999
BU
Tyngsboro Corporate Education Center
Executive Masters in Manufacturing Engineering
By Ralph E.
Grabowski
"Manufacturing is not important, although you must have manufacturing. The only important requirement is, 'Are there customers for what it is that you are going to make?' Who is going to buy the darn thing?" - Robert J. Shillman, Ph.D.; President, CEO, and Chairman of Cognex in Natick, MA.
Manufacturing engineers should worry about market research because products and companies where little is done become failures. Successful technology-based enterprises invest twice as much in market research (exclusive of promoting and selling) as in engineering.
Students will hear evidence of more than $400 Billion in value creation by the successes, or in capital squandering by the failures. The human impact has been more than 200,000 jobs created by the winners, or lost by the basket cases.
Manufacturing people serve on product development teams with marketing. Twenty questions are posed as a method to inquire not only about the quantity of marketing, but also about the relevance of the market research, the caliber of the market research staff, and the quality of their activities.
Real-life examples illustrate what marketing should be doing, how to go about it, and how good market research relates to the product development process.
"Manufacturing is not important." Bob Shillman, Cognex.
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More than $1 Trillion is represented either in value creation by the successes, or in capital squandering by the failures. The human impact has been more than 400,000 jobs created by the winners, or lost by the basket cases; and more than 150,000 engineering slots fashioned or vanished. The data are consistent from the 1940s into the 2000s, from startups to Fortune 500 firms, in both new fields and in old ones, and across a broad range of technology-based enterprises. Click for an enlarged chart with the evidence; listing company names, products, and dates. Opens in a new window. Download a 1-page printable version of the evidence - PDF, 0.1 Mb.
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Ask yourself, "Who is going to buy the darn thing?" Evidence is now available. The implication for technology-based enterprises is a fundamental shift in management attention and investment commitment toward decisive, upstream marketing.
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| GO | Invest more in Marketing than in engineering, M/E >1 | |||||
| CAUTION | Invest more in engineering than in Marketing, 0.1 < M/E < 1 | |||||
| WARNING | No investment in market research, M/E Ratio™ <0.1 |
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| semiconductor fab particulate detector > $100 K price |
medical, clinical lab PAP smear automation > $100 K price |
| established product established market established company established field ------------ LOW risk |
new product new market new company new field ------------ HIGH risk |
| $.3 million spent in engineering $.5 million additional productizing |
$43.6 million Venture Capital financing $177.4 million total financing |
| after-the-fact market research | upstream market research, concurrent with early engineering |
| FAILURE yet marketing exposes the real customer need, leading to an acquisition bid |
SUCCESS and marketing surfaces the real customer needs and correct technology |
| M/E Ratio = 0.07 abandoning $.3 million engineering investment | M/E ratio = 1.5 compelling $43.6 million VC investment IPO and $3.65 Billion market capitalization |
"Strategy must be based on facts, not on wishes." Dr. Barry Unger
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"Markets don't buy products, customers do." Jim Geisman
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[papers/_include/i-team6p.htm] [papers/_include/i-rankwt.htm]
| rank | weight | benefit |
|
brand X |
| ----- customers WILL spend money ----- | ||||
| red is BAD | green is GOOD | |||
| 1 | high | sensitivity, 0.3 micron now 0.1 micron in 18-36 months |
.3 micron in 18 months |
.3 micron now .1 micron in 18 months |
| 2 | high | repeatability | 3 % | 3 % |
| 3 | mandatory | thruput, 60 wafers per hour minimum | 30 wafers per hour | 60 wafers per hour |
| 4 | coming | patterned wafers | NO | in development |
| 5 | coming | thin films | NO | in development |
| ... | benefit ... | |||
| ----- customers will NOT spend money ----- | ||||
| N | benefit N | |||
| ----- customer attitude on spending money ----- | ||||
| other | high | Price. Will spend 3x to 5x for more sensitivity and repeatability | half price | full price |
M/E Ratio = 0.07
| Veeco
suffered from a Marketing/Engineering Investment Ratio (exclusive of promoting or selling)
of 0.07 for this particulate detector project, a model of failure. While the story is
of a market research success, the project was a financial failure in the sense that Veeco
invested $300,000 and had no return on their investment. See the investment evidence. To Veeco's positive credit, their management recognized the need for additional market research input and took decisive action. They knew that they had to make an investment decision among several opportunities that was based on facts, not on wishes; and proceeded to gather the information. Note that this M/E Ratio data point has been narrowly measured on one product at one time in Veeco's history. That does not mean that Veeco in 1999 is either an overall success or a failure. This vignette constitutes neither an endorsement nor an indictment by this writer. |
Click for more details on the Veeco example.
| woman | |||
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| doctor | |||
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 3rd
party payercytotech school |
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| Mead-Johnson (Bristol-Myers Squibb) strategic alliance | |||
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| Cytyc | |||
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| consumables |
Your market = sum of purchase intent; one customer at a time, "bottoms=up"
| Top customers | #1 | #N | ... | Purchase intent |
| # of machines | ... | n | ... | X @ Price = $ for machines |
| # million PAP's per year | ... | 3 | ... | $ million per year consumables |
Payback = price of unit / savings per year
Rich's rule: less than one year payback means a sure sale
| Process step | Present method | Proposed method | Savings (loss) $X-Y |
| 1 | $ X | $ Y | $ + |
| ... | $ X | $ Y | $ (-) |
| N | $ X | $ Y | $ + |
| Savings per year = | Bottom line | ||
M/E Ratio = 1.5
Cytyc enjoyed
a Marketing/Engineering Investment Ratio (exclusive of promoting or selling) of 1.5 during
their first twelve months, while the entrepreneur was still in his basement.
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Click for more details on the Cytyc example.
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© 1999-2005, Ralph E. Grabowski
all rights reserved
Boston University logo is © Boston University and used with permission.
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Ralph Grabowski is a MIT-trained Electrical Engineer who focuses on the upstream marketing process for technology-based enterprises. He has helped launch new products, new companies, and new fields that gainfully employ thousands of his fellow engineers; and which have become worth more than ten Billion dollars. Additional information is at http://marketingvp.com/practice.
Mr. Grabowski is an Adjunct Professor in the Marketing Department of Suffolk University's School of Management, teaching in Suffolk's Executive MBA Program. Ralph has delivered more than ninety papers, talks, and courses for universities, institutions, and professional societies. He is the co-founder of the world's first IEEE Robotics Chapter, co-founder of MIT's annual entrepreneurship program, and co-founder of Technology Capital Network (TCN) at the MIT Enterprise Forum.
This is Ralph's eleventh Boston University guest lecture since 1991, mostly in BU's Master's program in Administration with concentration in Innovation and Technology.
BU Manufacturing Engineering Masters Program
Boston University's program emphasizes product and process design, and is for people who are already in industry. Students and their companies commit to two class days every other week, Friday and Saturday, for a Master's Degree in sixteen months.
Emerging Technology and Practices Weekend
Boston University runs a special two-day seminar, three times a year, for its Manufacturing Engineering Masters students to increase their liaison with industry specialists. Emerging Technology and Practices is the focus of this particular weekend. There will be five speakers on Friday, January 8; and a closed-door session for BU students only on Saturday, January 9.
Five speakers On Friday, January 8, 1999
(1) "Cryogenic Processing"
presented by Bruce Norian, VP of Applied Cryogenics Inc. 9:15 - 10: 15 AM
Cryogenic processing is an emerging technology as an adjunct to conventional heat treatment that can enhance manufacturing productivity. Topics to be addressed include the historical development of the technique, the metallurgical basis for observed property changes, and the benefits and economics of cryoprocessing. Applications to non-metals and novel applications will be presented.
(2) "Alignment: Beyond TQM and Reengineering"
presented by Victor Rosansky, Executive VP, Organizational Dynamics Inc. 10:30 - 11:30 AM
The presentation will examine the post-TQM, post-Reengineering world in order to understand what world class companies are doing in order to stay ahead of their competition. We will start by analyzing the reasons that TQM and Reengineering failed to live up to expectations, and how Alignment appears to be the competency that is helping organizations move into the next millenium. Alignment is a systems approach to managing strategy, customers, people and processes - all simultaneously. We will explore how organizations can rapidly deploy strategy, create readiness for implementing strategies, and create value chain advantage.
(3) "Why Manufacturing Engineers Should Worry About Market
Research"
presented by Ralph E. Grabowski from 1 - 2 PM
(4) "Advanced Process Development for Gillette"
presented by Ioannis Pandelidis, Manager, Advanced Manufacturing and Mechanics 2:15 - 3:15
PM
In this talk I will talk about the process of process innovation in Gillette that my Manufacturing and Technology Processes group for Corporate R&D is responsible for. The talk will address organizational issues that encourage long term process innovation, and will outline a specific methodology of how we go about identifying and developing long range strategic plans for process innovation. Some aspects of process development related to our new razor MACH3 and other products will be also addressed.
(5) "Brookfield Group: An Ongoing Case Study in Merging Five
Jobshops"
Chris Nesbit, CEO, and Steve Ettelson, President and COO 3:30 - 4:30 PM
Five local jobshops providing complementaryservices have merged to provide higher levels of service. The merger facilitates one-stop-shopping, from prototypes to production. The strategy, benefits and challenges will be discussed from a business and technical perspective.
Registering for Emerging Technology and Practices Weekend
Boston University has graciously opened the first day of this seminar to the business community. There is no charge for participation. Although this announcement is on my web site, we ask that you contact one of us in advance. Tuition-paying BU students and BU alumni will be seated first. If you would like to attend, please call or e-mail first. You will be notified by e-mail or phone if there is a place available.
Professor Michael A. Gevelber, Ph.D.
Boston University
Manufacturing Engineering
15 St. Mary's Street
Boston MA 02215
617-353-9693 office
617-353-9572 lab
Ralph E. Grabowski
978-470-3930 or
bu-lecture@marketingvp.com.
Directions to BU's Corporate Campus in Tyngsboro
The Boston University Corporate Education Center is thirty-four miles northwest of Boston, off Route 3 in Tyngsboro, Massachusetts. Take Exit 34 of Route 3 near the New Hampshire border. At the end of the ramp, bear right if coming from Boston (left if from NH) and go one mile to a traffic light. Right onto Route 3A for one mile. BU's Corporate Education Center is on the right.
Boston University
BU College of Engineering
BU Manufacturing Engineering Department
BU Executive MS in Manufacturing
Engineering
BU Corporate Education Center
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