Preston Smith's Corner

Book Review: The Development Factory: Unlocking the Potential of Process Innovation

by Gary P. Pisano. Boston: Harvard Business Review Press, 1997. 343 + xii pages. $35.00.

This book covers a subject that should receive far more attention than it does from PDMA and this journal. Pisano’s subject is developing the manufacturing process that accompanies a new product. By studying one industry closely, he shows us how attention to manufacturing processes is a key to not only product success but also long-term competitive strength.

The Development Factory is an academic study of the pharmaceutical industry. This is not a textbook. Researchers and industrial product development and manufacturing managers in industries quite apart from pharmaceuticals will learn from it, as will those interested in new drug development. Although the book has clear research value, this is a review for managers in industry.

Manufacturing, along with marketing and R&D, is a key player in the development of a new product. The R&D-manufacturing linkage is just as likely to be weak in a given firm as is the marketing-R&D linkage. Yet, the latter attracts far more attention in the PDMA community than the former. Pisano shows us that manufacturing:

  • Is not trivial or assured of success (except for software products)
  • Involves central management issues much broader than the technical topics, such as design for assembly or concurrent engineering, with which it is usually associated
  • Is an essential ingredient in a firm’s new products strategy and a driver of its competitive advantage

In the conventional view of manufacturing, Pisano asserts, process development “tends to draw attention only in those mature industries or segments where product designs have standardized and low-cost manufacturing has become the primary source of competitive advantage” (p. 274). The objective of this book is to explain how manufacturing process options can contribute to new product development.

Pharmaceuticals turns out to be an excellent industry in which to observe current challenges in manufacturing. This industry is now facing major challenges on several fronts: increased regulatory control, price bargaining pressure by managed health care networks, greater competition in drug treatment options (yielding smaller, shorter-life markets), and the much greater complexity of modem drug molecules. Drug companies are healthy enough to respond to these challenges, and they are responding creatively.

The book centers on a study of 23 process development projects in 11 drug companies. Thirteen of the projects are for conventional chemical synthesis processes, the remaining 10 depend on biotechnology; this split provides some of the book’s key insights. The study depends largely on interviews and data collection, because the sample size is too small for most statistical approaches.

Although Pisano devotes little attention to expanding his findings to other industries, he does suggest that many other products depend on sophisticated manufacturing processes having substantial risk. Examples include semiconductors, disposable contacts, specialty chemicals, the Gillette Sensor razor, and Post-It notes.

Throughout the book, the author develops a construct of learning before doing versus learning by doing, the idea being that it is preferable to discover manufacturability problems before making commercial-size batches. Firms that chemically synthesize drugs have, over the years, been exposed to a rich base of experience. To the extent that a company has systematically collected such knowledge, it can benefit from learning before doing. In contrast, biotechnology processes are far from this state of knowledge, so they are limited to learning by doing. Besides the cycle-time advantages of getting the learning out of the way early, there are substantial product cost implications. Normally, a company works down the manufacturing learning curve as it learns by doing, but if most of the learning is out of the way before doing, the whole manufacturing learning curve essentially translates downward. Such early product cost reductions are clearly good news for product developers.

Professor Pisano is wise enough not to extend the construct far beyond the pharmaceutical industry, but I will venture to suggest one extension. In mechanical product development, recent advances in computerized tools have presented us with amazing capabilities to learn before doing, by analyzing a product’s performance before building it. Similar computerized tools are opening new abilities to learning by doing, by quickly manufacturing in modest lot sizes through so-called rapid tooling techniques. This book’s findings could help developers of such mechanical products to sort out effective computer analysis versus rapid tooling options.

The shortcoming of this book for the product development manager is that its gems are widely dispersed. Chapters 3-5 delve into pharmaceutical R&D in considerable detail to set the stage, but they offer few product development insights to those from other industries. However, those who skip these chapters may fail to comprehend some valuable points in later chapters. For instance, deep in the early chapters is some key industry jargon, such as new chemical entity (NCE) and the concept of route (see p. 125), neither of which is in the index.

The payoff for the persistent product developer starts in chapters 6 and 7. Then in chapter 8, the author covers a subject crucial to consistent improvement of one’s product development process: systematically applying the lessons learned from one project to succeeding ones. In Pisano’s fascinating case studies, Organizations A and B intentionally collect and apply what they have learned from previous projects, and their performance improves accordingly. Organizations C and D forfeit their opportunities to learn, and their performance remains inconsistent.

Pisano expands his scope in chapter 9, showing how his concepts apply to a range of process development decisions. He uses three case studies from pharmaceuticals and two automotive cases. A central theme illustrated here is that process development decisions may be taken as isolated events but in fact have a cumulative effect on future capabilities. “Any given process development decision has two effects: the intended first-order effects on performance (cost, flexibility, or quality) and the often-unintended second-order effects on the evolution of future capabilities . . . . Individual process R&D decisions are not discrete events; rather, they are part of a series of actions over which the firm’s capabilities are built” (pp. 270-271). The manager who recognizes these so-called second-order effects and builds on them will be in a stronger position to further improve performance tomorrow.

This is brand new material for the manager who wants to be aware of the latest thinking from Harvard Business School. Unfortunately, by the time it gets distilled for easy reading, it will no longer be new.

Preston G. Smith
New Product Dynamics

(Reviewed in the Journal of Product Innovation Management, March 1997, pp. 141-142.)

(c) Copyright 2013 Preston G. Smith. All Rights Reserved.

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