Time to market is a critical consideration - Embedded.com

Time to market is a critical consideration

Ever wonder why deadlines in embedded projects are so important? When good project managers sweat over every detail to make sure the project doesn't slip, do you wonder why it was perceived as so important? After all, from the perspective of the engineering lab, a few days of slippage on a task will slip the project by only a few days—and there is always another show to launch the product.

Getting your OEM product to market in the right time frame is one of two critical factors in the success of your product after development kickoff. The second critical factor is product quality. If your organization is obsessed with meeting these self-imposed deadlines for product launch and maintaining quality, it's likely because you work in a great products company.

The reason that time to market is so important is because being late erodes the addressable market that you have to sell your product into. If you initially target a market segment of ten million units, with a market lifetime of 18 months, and you are six months late, the addressable market will likely be in the range of three million units. Not only will the market be smaller, the competition will be much more intense because others have an established base to sell from and the early growth is starting to flatten.

What happens when the addressable market shrinks? Your smaller market means that your volume of sales goes down in direct proportion to the loss of market size. The decrease in volume of sales is critical to your company's business model. Now you have lost economies of scale in manufacturing and purchasing, and will suffer loss of experience effect relative to your competitors. This will directly affect the company's profitability and if you do this too often, being late will directly affect your job and those of your colleagues.

Two of the four models with which we view time to market costs are based on product lifecycle adoption. In the chart, you see a product adoption curve over time. The area under the curve represents the total number of units which can be sold. Being late erodes the market in two ways. First, you don't get to sell product for as long. Second, you lose market share early and can't regain it later, so the number of available prospects is smaller.

A second model was popularized a few years ago in books like Crossing the Chasm and Inside the Tornado, which talk about a product adoption curve. You can also view this as moving the product adoption curve that your company and product must go through later in time. The delay now limits your market penetration and the size of the market and, as you would expect, produces the same curve as in the chart.The two other models that are used to generally understand the effects of time to market delays are experience effect and economies of scale. Economies of scale mean that if we make a large number of something, we benefit from making it cheaper. Volume enables volume purchasing, more specialized equipment and managers, lower borrowing costs, and better marketing efficiencies. Time to market delays reduce addressable market size and directly erode economies of scale which in turn reduces profits.

Experience effect is the decrease in production costs that occur when you make a lot of similar items over time. This refers more to production of a line of products over time rather than a single product. By learning about the production of units over time, and how to make them better at lower cost, you can make them cheaper. The simple equation that is used to model this is:

Cn = C1 n **-z

where C1 is the cost of the first unit; Cn is the cost of unit n; n is the cumulative volume of production; and z is the elasticity of cost which ranges from 75% to 95%. Graphing n or the cumulative volume against Cn log scale gives a straight line of slope z. With this value, you can calculate the experience effect in your operation and compare to your competitors.

What does time to market delay mean to your costs due to experience? Being late erodes your market share which in turn reduces your volume. If you are early in the market's life, this can critically cripple your cost structure because you will fall behind and never catch up. If it's later in the market when market shares have generally been established, delay becomes much less critical because the number of units is measured on a log scale. Also, if your industry has a steeper experience curve (75% rather than 95%), the effects of being late will be more pronounced.

Time to market delays can't be separated from quality issues for several reasons. First to market with a completely new product is generally worth a 30% marketshare independent of quality. Time to market matters. The German philosophy of “be second but be substantially better” also works and can explain in part Germany's great product success in world markets. In many embedded markets, there's also third, but after that, the term “insignificant market share” will summarize the rest of the players and profitability is most strongly correlated with market share.

Time to market and quality often come into play in embedded products in two other ways. First, software is often the bottleneck, and unlike hardware where the gerbers and schematics are the deliverable, software does not have to be documented. As such, software documentation is the first element discarded to preserve delivery schedules, and one could argue, rightly so. It really depends on your situation.

Software quality is all about meeting specific requirements, error rates, and the effects of errors (or reliability), design flexibility and rigorous testing at all levels. Discarding documentation compromises future quality and future time to market. Face facts: documentation is never done after the fact once discarded. The alternate choice of discarding features compromises the product in today's market. Careful choices must be made at the management level to trade off time to market for the current product and future products. Time to market and quality are core to long term profitability.

Kim Rowe has more than 30 years of experience in business management and systems engineering and holds both an MBA and an MEng. He has been instrumental in the startup of several companies and several business units in the computer systems and services areas. Rowe has published approximately 35 papers and articles in various journals and magazines.

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