Presentation on Lean Innovation held at "Virtual Powertrain Creation Conference" in Munich (English language), Oct 2008

1. Lean Innovation
Implications of Lean Management for Automotive Innovation
Virtual Powertrain Creation
Munich, 23 October 2008
© WZL/Fraunhofer IPT

2. Lean Thinking and innovation management –
a fundamental contradiction?
Ideas Projects Products Market Profits
€
11 Profit
1.919 369 176 52 11 17 +/ -
24 Loss
Source: Prof. Gassmann, HSG
© WZL/Fraunhofer IPT Seite 2

3. “More input = more output” – is increasing innovativeness that easy?
18
16
Average R&D spending p.a.
2003-2006 [% from sales]
14
12
10
8
6
4
2
0
-10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28
Average growth in sales p.a. 2003-2006 [%]
n=86 producing companies
Source: Annual reports and publications of companies from time period 2003-2007
© WZL/Fraunhofer IPT Seite 3

4. “Champions” generate much more sales growth per ‘R&D-dollar’
than the average of their competitors
18
16
Average R&D spending p.a.
2003-2006 [% from sales]
14
12
10
8
6
4
2
0
-10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28
Average growth in sales p.a. 2003-2006 [%]
n=86 producing companies
Source: Annual reports and publications of companies from time period 2003-2007
© WZL/Fraunhofer IPT Seite 4

5. 10 Lean Innovation Principles
Motivation
Product Identity Value System
Target Hierarchy
Derivation
Release Management
Design Sets
ely
St
Str
ur n
ec re
r
Design Space Management
u
uk
ct
t S tie
uu
t re
ap ap
riE
Ad d
ea
Product Architecture
Lean
A
rrl
Perfection
e
y
n
Technology- and Function Model
Innovation
Robustness Model
Product Line Optimisation
Feature Clusters
Synchronise Easily
Synchronisieren
Synchronization
Rhythm Process Optimization
Value Stream Mapping
Capacity Planning
Balancing Model
© WZL/Fraunhofer IPT Seite 5

6. 10 Lean Innovation Principles
Motivation
Product Identity Value System
Target Hierarchy
Derivation
Release Management
Design Sets
ely
St
Str
ur n
ec re
r
Design Space Management
u
uk
ct
t S tie
uu
t re
ap ap
riE
Ad d
ea
Product Architecture
Lean
A
rrl
Perfection
e
y
n
Technology- and Function Model
Innovation
Robustness Model
Product Line Optimisation
Feature Clusters
Synchronise Easily
Synchronisieren
Synchronization
Rhythm Process Optimization
Value Stream Mapping
Capacity Planning
Balancing Model
© WZL/Fraunhofer IPT Seite 6

7. Vague objectives and unclear product specifications hold the largest
efficiency improvement potential in innovation management
50 Vague project
objectives Challenges of
45 operative and
strategic
Intransparent and
40 innovation
changing specifications
management
35
Technical
Share of companies [%]
Unexpected technological
problems
30 challenges
Deficits in project management
Collaborational difficulties Missing resources (skills and Employee- and
25 manpower) resource-related
Ø21,5
problems
Deficits in merging existing
20 competencies and know-how Motivational problems
Interface
and deficits
15 problems
Difficulties in
Difficulties with new
market access
technologies
10 Late definition of services to
n = 253
accompany the product Problems with external
5 partners
Open legal
questions
0
0 2 4 6 8 10 12 14 16 18 20 22 24 26
Ø14,8
Average improvement potential of development lead time [%]
Source: Fokus Innovation, Prof. Bullinger, 2006
© WZL/Fraunhofer IPT Seite 7

8. Value system at Apple: Operating and handling comfort are
priority #1 and rank as top objectives!
How effective prioritize your requirement specifications product values from customer perspective?
Source pictures: Apple, 2008
© WZL/Fraunhofer IPT Seite 8

9. Transparent value system and consistent target hierarchy =
Basis for exploiting the market potential
Easy transparency of
target hierarchy
Over Value System  Transparency of
fulfilment
customer values
Exploitation of  “Translation” of
market values for all project
potential team members
 Consistent
Under
Target Hierarchy prioritization
fulfilment
of project
objectives
Overengineering: Underengineering:
Too high costs Poor market chances, Legend
imitations, market Offer
withdrawal Expectation
© WZL/Fraunhofer IPT Seite 9

10. The Apple iPod “skimmed the market potential” fully!
30 April 2007 29 June 2007 July – September 2007
Steve Ballmer in Market launch Smartphone market
USA Today Apple iPhone shares USA for Q III 2007
„There‘s no chance that
the iPhone is going to get
any significant market
share.
No chance.“
Steve Ballmer
CEO Microsoft
© WZL/Fraunhofer IPT Seite 10

11. Similar trend in 2009: For the new Golf VI, Volkswagen promotes its
„Wertigkeit“ above all else!
© WZL/Fraunhofer IPT Seite 11

12. 10 Lean Innovation Principles
Motivation
Product Identity Value System
Target Hierarchy
Derivation
Release Management
Design Sets
ely
St
Str
ur n
ec re
r
Design Space Management
u
uk
ct
t S tie
uu
t re
ap ap
riE
Ad d Lean
ea
Product Architecture
A
rrl
Perfection
e
y
n
Technology- and Function Model
Innovation
Robustness Model
Product Line Optimisation
Feature Clusters
Synchronise Easily
Synchronisieren
Synchronization
Rhythm Process Optimization
Value Stream Mapping
Capacity Planning
Balancing Model
© WZL/Fraunhofer IPT Seite 12

13. The key task in product development is the development and
successful assessment of alternative solutions
Alternative
Different
solutions within
requirements
design space
define the “problem
space”
abstract world
Problem space Design space
real world
!
Target hierarchy Solution
© WZL/Fraunhofer IPT Seite 13

14. Selection solutions too early in the process often leads to late
iterations and extended project milestones
1
No systematic exploitation of
degrees of freedom
Quantity of alternative solutions
2
Too early selection of
solution alternatives
3
Late expansion of design space =
significant shift of milestones
Legend
Design space
t
© WZL/Fraunhofer IPT Seite 14

15. The pro-active management of the design space helps to plan
creative tasks
1
Early planning of the design space
2
Quantity of alternative solutions
Integration of design space
management in milestone reviews
3
Capturing of knowledge about
de-selected solutions
Legend
Design space
t
© WZL/Fraunhofer IPT Seite 15

16. Suspension of Mercedes-Benz W201: Example for intuitive design
space management
 Strategic access of new market
segment
 Clear positioning: Differentiation
through unique driving comfort
for this vehicle class
 Assessment of 8 rear axle
baseline concepts with 77
physical variants between 1978
and 1980
 Result: New five-link rear
suspension (“Raumlenker-
Hinterachse”)
 Breakthrough innovation used
Mercedes-Benz W201 (“190”): Introduction of
five-link rear suspension (“Raumlenker-
up to today
Hinterachse”)
Five-link rear suspension today
“More comfort combined with an almost perfect handling performance were not
available in this vehicle class!”1)
1) Source: AutoBild, August 2007
Source pictures: Mercedes-Benz, 2008
© WZL/Fraunhofer IPT Seite 16

17. 10 Lean Innovation Principles
Motivation
Product Identity Value System
Target Hierarchy
Derivation
Release Management
Design Sets
ely
St
Str
ur n
ec re
r
Design Space Management
u
uk
ct
t S tie
uu
t re
ap ap
riE
Ad d Lean
ea
Product Architecture
A
rrl
Perfection
e
y
n
Technology- and Function Model
Innovation
Robustness Model
Product Line Optimisation
Feature Clusters
Synchronise Easily
Synchronisieren
Synchronization
Rhythm Process Optimization
Value Stream Mapping
Capacity Planning
Balancing Model
© WZL/Fraunhofer IPT Seite 17

18. Find out more about >>Lean Innovation<< at…
© WZL/Fraunhofer IPT Seite 18

19. Thank you
Michael Lenders
Department Manager Innovation Management
Laboratory for Machine Tools and Production Engineering WZL
RWTH Aachen University
Tel +49 – (0) 241 – 80 27436
Email m.lenders@wzl.rwth-aachen.de
© WZL/Fraunhofer IPT