Global Engineering/Product development through India

Understanding Global Engineering and Product development through India
India assessment
How did we develop our vision?
How does the future look like in this space?
Agenda:

“ The World Is Flat”, Thomas Friedman, presents seven rules that he believes are true for a business to succeed in the “flat world”: Rule #1: When the world goes flat Rule #2: And the small shall act big … Rule #3: And the big shall act small … Rule #4: The best companies are the best collaborators. Rule #5 : In a flat world Rule #6: The best companies outsource to win, not to shrink.

80 years old
Caterpillar is a Global Organization
World leader
Largest manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines.
Technology leader in construction, transportation, mining, forestry, energy, logistics and electric power generation.
Caterpillar had sales and revenues of $41.5 billion in 2006
Approximately fifty percent of sales and revenues were to customers outside of the United States , thus making Caterpillar a global enterprise.

Lines of Business

Global Footprint 278 facilities in 40 countries on 6 continents 182 Cat dealers with 1,923 branches and 1,587 rental stores

Strategic Vision Values alignment…
Critical Success Factors
People
Quality
Product
Emerging Markets
Trough
Strategic Areas of Improvement
New Product Introduction
Encode 6 Sigma
Our Values in Action
Integrity
Excellence
Teamwork
Commitment

Lower Emissions Requirements Driving acceleration in NPI agenda…

Global Engineering opportunities……… Generic Development Enabling Development Core Vehicle level Systems Integration Experience Complexity

Challenges
Geographic differences
Time zones
Visa Issues
Administrative
Specific Training – Skill set vs. product training
Cultural differences  Communication
PRAM - Plan  Relationship  Agree  Maintain
“ Just say no”
“ I don’t know”

Our Values
Integrity
Continuous feedback in all directions
Build relationships
Excellence
Establish roles
Provide room to learn
Create success stories
Teamwork
Change management
Cultural Training
Commitment
Support at all levels  Team and Management –Long-term relationships
Involve partners up front
Integrity Excellence Teamwork Commitment

How did we develop the Vision ?

Caterpillar Confidential: Green (11/09/05)

High-performing Global Product Development Team
Develops Superior Products through Set Based Engineering and Global Engineering Strategy
Delivers Excellent Value to Product Group Customers
Vision

PPD Global Engineering 105 Team Members In-house and offshore Cat India Design center at Satyam

Current Product Development Few Concepts each sub-system Developing sub-systems independently and then Integrating all at Machine level Unplanned changes Fire fighting Point Based Concurrent Engineering Iterate if required Information extracted from Toyota product development system-James Morgan & Jeffrey Liker

Vision for future Product Development Projects Many Concepts each sub-system
Evaluate against System Interactions
Cost
Interface studies
Eliminate the weak, add knowledge and combine different ways
Set Based Concurrent Engineering Information extracted from Toyota product development system-James Morgan & Jeffrey Liker

Point-Based Engineering 3 Bicycles Set-Based Engineering 3 Frames 3 Drives 3 Wheel sets 3 Brakes 3 Suspension =243 Combinations Moving from Point-Based to Set-Based Engineering Information extracted from Toyota product development system-James Morgan & Jeffrey Liker
Multiple subsystem alternatives explore more cheaply (allows platform projects)
Expanded subsystem learning feeds knowledge back for future projects

Traditional Model Global Model Product Development Model
Not leveraging Caterpillar Core skills for core activities
Excessive dependency on single talent pool - career moves due to growth
Lack of capacity and flexibility Project Peaks/Lows
Resource constraints - Lack of proper balance between New product development & Current product support
Better alignment between product development Generic/Enabling/Core activities
Multiple resource pool
Resource flexibility for project Peak/Low needs
Proper resource deployment across product development and current product support

Set-Based Engineering Operation Model Global Engineering capabilities Set-based concepts from Global Partners Specifications General Targets Sub-System Targets

How did we develop this model?
Evaluated through pilot projects- Jan06 to March06
Engagement started in April06
Started with in areas where we can create success stories
Change management through success stories, travel to STC to understand Satyam capabilities (Leadership Team, Team Leads……)
Product knowledge training through Team Leads
Weekly planning meetings in U.S
Quarterly governance meetings
Outstanding mid-career recruitment from Satyam
Took advantage of Satyam’s existing ODC’s for Leadership recruitment
Satyam’s world-class training for new recruits (3 months)

Evaluation of Global Engineering Model- through value chain Global -Inception Cultural Challenges Positional authority Power Distance Uncertainty avoidance Individualism Project Team Development Recruitment/Retention Communication Education &Training Management Style International Operations Difference of work ethics Buy-in from Parent operations Access & Technology

What do we need to be successful?
Leadership Team with “Driving” force to “Delight” Customers
Servant Leadership to remove “Fear of unknown” to Customers
Leadership Channeling their Ambition toward building Best in class
Leadership
E ngage and Develop Others S ee the Future R einvent Continuously V alue Results and Relationships E mbody Values

People/Culture:
Highly motivated People with Relentless Execution towards Time, Cost & Quality
Disciplined Thoughts , Confront the Brutal Facts of their current reality.
Towering Technical/Process/Project management Capabilities
World Class Core Competencies in functional areas of engagement
World class processes to deliver Superior Quality
Capacity through Peak Needs
Business model to Support customer needs on Product development Initiatives
Resource availability between 2 to 6 weeks
What do we need to be successful?

Challenges Process Knowledge, Quality & Governance Change Management Loss of core competency, Intellectual Property, Access,Security and Connectivity

Change Management among Leadership Team
Change Management
Change Management among CAT/Contract employees

Many reasons for the failure of Change Management initiatives. Lack of leadership Too many projects happening at once Not managing pain Losing focus on why changing Reward not in line with new order No direction, nobody willing to make the final decision Not communicating Trying to tackle too much at once Not managing risks No Leadership support Assumptions about the objectives have not been tested Losing sight of the end game Source: Global survey of > 100 PA change management experts Insufficient time spent on the right priorities

Employee response curve for change Time Response Sell the Bargaining benefits and Depression/ Acceptance Train develop the Provide resources Testing Sell Support the rewards the Denial Provide evidence Convert opinion Anger the formers

Increase urgency
Make change stick
Tips on Change management
Don’t let up
Create short term wins
Empower action
Communicate for buy-in
Get the vision right

IP Risks
Potential leakage of IP through existing project team member
Potential leakage of IP through resource Attrition
Potential leakage of IP when resource roll out from Cat’s project team and joins competitors project team.
Loss of core competency
Intellectual Property, Loss of core competency, Access,Security and Connectivity

Product development critical roles (10% of PD Resources)
xxxxxxxs
xxxxxxx
xxxxxxx
xxxxx
xxxxxx
Product development enabling roles (40% of PD Resources)
xxxxxxx
xxxxxxx
xxxxxxx
xxxxxxx
Product development generic roles (50% of PD Resources)
xxxxxx
xxxxxxxx
xxxxxxx
Categories of Product development (PD) Roles Maintain “As-Is” 94% Most critical tasks remain “As-Is” Portable to Off-Shore Portable PD Resources 6% 1% of PD Resources 40% Moderately critical tasks remain “As-Is” 60% 24% of PD Resources 10% Less enabler tasks remain “As-Is” 45% of PD Resources 90% + + = 70% PD Resources Hypothetical offshore model-example-Telecommunication industry

Looking at the Future

Rule # 6
The best companies outsource
Flattening of the world rules reviewed
To win, not to shrink.
They outsource to innovate faster and cost effectively
Gain market share
Hire more and different specialists

Every morning in Africa, a gazelle wakes up.
It knows that it must outrun the fastest lion or it will be killed…
Execution
Every morning in Africa, a lion wakes up. It knows that it must out run the slowest gazelle or it will starve…
It does not matter whether you are a lion or gazelle. When the sun comes up you had better be running

Current spending on engineering services world wide by the different industries ($750 billion in 2006) is projected to increase to $1.1 trillion by 2020. The market is highly fragmented by industry, Engineering services is a growth market.
Automotive at 19%
Aerospace at 8%
Utilities at 3%
Heavy Engineering 40%
High-Tech/ Telecom is the dominant and fastest growing sector, with 30% of the market.

Businesses are increasingly viewing off shoring as a way to counter market forces that are exerting pressure on engineering services. Key Future Trends
While cost control remains a concern
Companies are also seeking access to a high quality talent pool
For growing capacity
Increase productivity with Creativity and Process automation.

Indian IT and software industry proved that they can perform and meet Global Needs Accomplishments
Companies in India have developed capabilities
Skill sets
Leadership
Culture
Invested in technology platforms to leverage this opportunity

India’s current revenue base in the offshored engineering services market is about $1.5B
India is well-positioned to increase its market share of engineering offshoring
Business opportunity
By 15% to 30% by 2020.
The potential engineering market in India could exceed $60B by 2020.

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Global Engineering/Product development through India

by NASSCOM on Dec 03, 2007

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Global Engineering/Product development through India — Presentation Transcript