Friday, December 16, 2011

Competitive Advantage through Commonality: Finding Sustainable Benefits in Execution Challenges

By Eric Smalley

Bruce Cameron
Commonality seems like an obviously good thing. Why incur the cost of making different parts for different products if the parts do the same thing? As it turns out, however, commonality is not always the right thing to do. And even when it is right, it can be difficult to achieve. SDM's Bruce Cameron is using a healthy dose of systems thinking to tease out when commonality makes sense and how to get companies to pull it off.

Cameron, a lecturer in the Engineering Systems Division at MIT who teaches System Architecture (ESD.34), led a study of 16 companies' platforming strategies. Platforms are collections of technologies, components, and manufacturing processes that are used to produce sets of related products. One of the major benefits of platforming is commonality: using as many of the same parts and processes as possible across multiple products. This both reduces costs and makes it easier to go after niche markets, which can increase revenue.

"There's a lot of evidence out there that firms that do this very well see a lot of competitive advantage," said Cameron.

So an important question is, why do so many companies fail when they attempt to implement commonality strategies? A classic example is the Joint Strike Fighter program. The program target was to share 80 percent to 90 percent of parts across three variants of the aircraft, but in the end only 30 percent to 40 percent were shared, said Cameron. "That type of behavior and phenomenon is seen in studies that we did in automotive, consumer products, and transport," he said.

If commonality is such an obvious cost saver, why do companies struggle with it? First, it isn't right for everyone. It has "a downside as it turns out," said Cameron.

Commonality may inhibit the development process and make it hard to adjust to changes in the market that call for greater product differentiation, said Cameron. In other words, it's important that companies avoid having commonality become a straitjacket that limits the flexibility of their product development process.

Second, even when commonality is warranted, achieving it is more difficult than it appears.

One common counterproductive force is competition between product lines within a company over resources and control, said Cameron. A second counterproductive force is the intentional pursuit of uniqueness: the tendency of engineers and designers to come up with different results for the same task. Even slightly different designs can mean a company must stock more parts than if the designs were identical, he said.

Systems thinking helps tease out whether commonality is the right thing to do and how best to do it, said Cameron. Systems thinking allows companies to take a holistic view of the benefits of commonality, said Cameron. "This is much more difficult in a corporation because some departments will see big advantages, while other departments will be forced to invest in costly parts management schemes."

Once a company determines that commonality makes sense, systems thinking can help companies achieve it through platforming. Platforming is classic systems thinking, said Cameron. "If you look at each product line individually, you would make a different set of decisions. But, if you look at them globally and allow trade-offs between them, then you start to see how the benefit emerges," he said.

Cameron's current research examines how aware companies are of the positive and negative aspects of commonality and how systematically they make trade-offs. He's also studying the control mechanisms and incentive schemes available to companies for finding the right level of commonality.

Cameron is slated to deliver an SDM webinar in March on platforming and commonality. The presentation will include examples from the 16 case studies in Cameron's platforming study.

Monday, December 5, 2011

Wednesday, November 2, 2011

Systems Thinking Conference Highlights Practical Applications in Healthcare, Education, Product Development

By Lois Slavin, SDM Communications Director

Whatever your profession, systems thinking is critical for success in the global economy, according to speakers at the 2011 MIT SDM Conference on Systems Thinking for Contemporary Challenges.

The annual event, sponsored by MIT's System Design and Management (SDM) program, drew almost 300 attendees from across MIT and around the world on Oct. 24 and 25. This year's conference, which highlighted SDM's 15th anniversary and featured several SDM alumni speakers who are now senior executives, focused on addressing complexity and innovation in healthcare, education, and product development.

Dr. Katharine Frase, VP Industry Solutions and Emerging
Business, IBM Research, discussed Watson and its
implications for industry and society.
Photo: Dave Schultz, SDM
Speaking live from Moscow, Russia, via remote videoconferencing, keynote presenter and SDM co-founder Edward Crawley first defined systems in order to give attendees a common understanding of the term. "A system is a set of interrelated entities that perform a function," said Crawley, the Ford Professor of Engineering in the Department of Aeronautics and Astronautics. The function that emerges, he said, is greater than what could come from any single entity — and the overall system's "emergent properties" are what produce value.

Crawley then explained that systems thinking is a way of looking at problems in context, in order to more successfully predict what will emerge to ensure value. "This is the real art and the real goal of systems thinking — training yourself in the domain in which you work to look at an unprecedented system, predict outcomes, and add value," Crawley said. In essence, using systems thinking helps make complex challenges less complicated.

Several speakers subsequently outlined complex challenges in healthcare. In Tuesday's keynote, Dr. Julian Goldman, who directs the Program on Medical Device Interoperability at Massachusetts General Hospital, described some of the problems hospitals have in managing incompatible medical devices.

The result, Goldman explained, is that most medical devices are not interoperable and cannot be synchronized or networked. This can cause "alarm fatigue" in medical professionals who must monitor multiple devices simultaneously, often while managing a medical crisis. The consequences can be dire. "We have many well-reported incidents of adverse results and patient deaths due to alarm fatigue," he said.

Goldman believes that the root of this problem is the failure of manufacturers to consider each device as part of a wider system. A main reason is the complexity involved in developing devices that connect to those produced by other manufacturers, because this would complicate a wide range of considerations at every level of the system, from user instructions to liability.

Other conference speakers highlighted applications and the need for systems thinking in fields as diverse as aeronautics, engine control, flu prevention, and food safety.

For example, John Helferich, SDM '10, former senior vice president of R&D for Mars Inc. and currently a PhD student in MIT's Engineering Systems Division, noted that although thousands of deaths from food-borne illnesses occur annually in the United States, the food industry does not have consistent safety standards along the supply chain from farm to table. "Think about all the things we do to fly safely," he said. "We don't have that stringency in food safety."

A panel titled "Watson, Analytics, and the Implications for Industry and Society" brought together IBM Vice President Katharine Frase, SDM alumnus and Bank of America executive Doug Hague, and healthcare consultant David Hartzband, who discussed computing in banking and healthcare.

The conference also emphasized education, from MIT Professor Richard Larson's discussion of technology-enabled learning around the world to new universities launching in Singapore and Moscow led by SDM co-founders and conference keynotes Institute Professor Thomas L. Magnanti and Crawley.

"The need is for people who understand systems and people who understand information technology," said Magnanti, the founding president of Singapore University of Technology and Design, which will open in April. "Future success will depend on educating more people in systems thinking."

Visit to view videos of presentations delivered at the 2011 MIT SDM Conference on Systems Thinking for Contemporary Challenges.

Next year's conference will be held at MIT on Oct. 22 and 23, 2012.

Armando Hurtado, SDM '11: Managing the Complexity of Global Products

By Eric Smalley

Armando Hurtado
Photo by
Kathy Tarantola Photography
At first glance, you might think that someone who sells diapers has little need for systems thinking. Look a little closer and you'll see that in today's world of global brands, localized markets, and globalized supply chains, a deceptively simple object like a package of Pampers embodies a wealth of complexity.

Armando Hurtado's seven years in product development at Procter & Gamble have taught him that developing global products involves a host of challenges that the term "supply chain" only begins to hint at. Hurtado, SDM '11, is a senior engineer in product development. He worked on Pampers for emerging markets and now works on Gillette razors for Latin America and Asia.

One of Hurtado's tasks is cost engineering to make the products affordable in developing countries. He has to ensure that his global suppliers are not only inexpensive but will remain inexpensive for at least three years. This involves assessing political stability and currency exchange issues, as well as the usual measures of good suppliers.

Hurtado also analyzes consumer needs to tune products for different markets. He has to find the right balance between producing products that appeal to both the Brazilian and Turkish markets, for example, and producing products that can be aimed at different markets without reinventing the wheel for each one.

The key is thinking in terms of product platforms. "You're not just designing a product, you also need a manufacturing technology for that product," Hurtado said. "Plus, you need that manufacturing technology to be flexible enough to be able to change and make products that you don't even know you're going to need."

The complexity of managing a global product platform isn't well understood, which is a key reason Hurtado came to SDM. "I saw that in order to progress as a good technical leader, I needed to learn so much more than what I could just get from work experience."

Hurtado was looking for a program that linked business and engineering, and that could expand on his engineering training to help him manage complexity. He was also looking for a program that could help him reach his ultimate goal: becoming a CTO or vice president of research and development. "I saw that SDM was unique in that," he said.

The SDM program has given Hurtado tools that he's able to bring back to his job. He's been able to use statistical tools for predicting a design's robustness, and he's learned techniques for managing large complex projects. And simply being at MIT has helped him keep up with new technologies and trends, he said.

Being able to continue working while in the SDM program is a major advantage. "I didn't have to quit everything I was doing for a year or two," said Hurtado. "I'm still very much involved with my work. I love developing products and bringing them to market. And I plan to continue to do that in a leadership position, and influence the product development chain for Procter & Gamble," he said.

Tuesday, October 18, 2011

Conference Panel: IBM's Watson and the Rise of Analytics

By Eric Smalley

Irving Wladawsky-Berger
When IBM's Watson supercomputer bested the top two human competitors in a widely viewed bout of the Jeopardy TV game show in January, many observers saw an example of technology displacing people. Irving Wladawsky-Berger, however, saw the dawning of an age when powerful analytical tools like Watson will augment virtually every facet of human intellectual endeavor.

Wladawsky-Berger, vice president emeritus at IBM and a visiting lecturer in the Sloan School of Management and MIT's Engineering Systems Division (ESD), is scheduled to lead a panel discussion on information analytics at the 2011 MIT SDM Conference on Systems Thinking for Contemporary Challenges this month. The discussion, titled "IBM's Watson, Analytics, and the Implications for Industry and Society," will explore the impact such highly advanced tools are likely to have on a range of disciplines, including healthcare, finance, and education.

In the last few years we have seen incredible advances in information analytics, which involve processing large amounts of information with sophisticated algorithms running on powerful supercomputers, said Wladawsky-Berger. "The implications of having these powerful new analytic tools are really deep, and they go everywhere," he said.

When any powerful new technology arises, the key questions are how people use it and how it changes what people do, said Wladawsky-Berger. "How can we leverage these incredible advances in technology for business value, to raise the standard of living and the quality of life in our societies, to empower individuals so they can do a better job?"

These tools can have a big impact in healthcare. "Capture the world's top medical centers' expertise and distribute it via tools like Watson to a large number of physicians and healthcare workers, and you can significantly improve the overall quality of healthcare," said Wladawsky-Berger.

Katharine Frase, vice president of Industry Solutions and Emerging Business at IBM Research, will begin the panel discussion with an overview of Watson, including its application in healthcare.

Visiting ESD scholar David Hartzband will talk about advanced analytic tools in healthcare. Hartzband has a long history in academia and industry. His current work focuses on healthcare information technology.

SDM alumnus Doug Hague, small business analytics executive in Consumer and Small Business Banking at Bank of America, will talk about advanced analytic tools in finance. Hague leads a team that analyzes business performance, client behaviors, and strategic initiatives.

Financial services companies have long had an interest in analytic tools. "Risk management, identity management, security, those are all incredibly important questions to the world of finance," said Wladawsky-Berger.

Building these complex tools, not surprisingly, requires systems thinking. "The only way this can truly work is to take a holistic view of the problems we're trying to attack," he said.

Building these tools is as much about people as technology, concluded Wladawsky-Berger. "A lot of the design is about the interplay between the technology and the people who use it. What kinds of technologies and capabilities are the most useful? What kinds of tools would help [people] do a much better job?"

Wednesday, October 5, 2011

Addressing Blindness via Cell Phones - SDM Pulse, Fall 2011

Prototype phone with
EyeCatra device attached
and results shown on screen.

Problem statement: According to the World Health Organization, cataracts are the leading cause of blindness in mid- and low income countries. India has the largest number of blind people globally—15 million—yet there is only one doctor for every 100,000 people, leaving the majority of cataract cases undetected.
Goal: To improve early cataract detection and free up the limited number of ophthalmologists to concentrate on surgery.
Solution: EyeCatra, a portable self-evaluation eye diagnostic tool that attaches to a cell phone and uses a light-scattering technique to scan and map the eye for cataracts. It can be used in rural homes, schools, pharmacies, and health clinics.
SDM contribution: SDM ’11 students Vivin Nath, Nirmalya Banerjee, and Rupreet Singh Soni are part of the EyeCatra team.
This cell phone display shows two maps of a patient's eye created
by an EyeCatra scan. The first is an opacity map that shows
binary information (does or does not have) regarding cataracts
for each section of the lens. The second is an attenuation map
created by measuring the brightness of two alternating
paths of light through the lens.

Addressing Blindness via Cell Phones - SDM Pulse Fall 2011

Prototype phone with
EyeCatra device
attached and results
shown on screen.
Problem statement: According to the World Health Organization, cataracts are the leading cause of blindness in mid- and lowincome countries. India has the largest number of blind people globally—15 million—yet there is only one doctor for every 100,000 people, leaving the majority of cataract cases undetected.
Goal: To improve early cataract detection and free up the limited number of ophthalmologists to concentrate on surgery.
Solution: EyeCatra, a portable self-evaluation eye diagnostic tool that attaches to a cell phone and uses a light-scattering technique to scan and map the eye for cataracts. It can be used in rural homes, schools, pharmacies, and health clinics.
SDM contribution: SDM ’11 students Vivin Nath, Nirmalya Banerjee, and Rupreet Singh Soni are part of the EyeCatra team.
This cell phone display shows two maps of a patient's eye created by an
EyeCatra scan. The first is an opacity map that shows binary information (does or
does not have) regarding cataracts for each section of the lens. The second is an
attenuation map created by measuring the brightness of two alternating paths of
light through the lens.

SDM Education Delivers Value to Graduates and Their Employers

Editor's note: Whether sponsored by their employers or self-sponsored, SDM graduates find many ways to apply their master's degrees in engineering and management to add value to their companies—and to further their careers.
Bringing Start-up Mojo to an Established Company

Mark Moran, SDM '09
Manager of Portfolio Management and Marketing Operations for Enterprise Advanced Marketing
Sponsored by John Deere, major manufacturer of agricultural machinery

I have had opportunities to work on innovative projects throughout my career in information technology (IT) at John Deere. But, the new job I've taken on with my SDM education enables me to work on innovation at a global level while making meaningful contributions to the company's innovation strategy.

Many companies artificially decouple two key disciplines—marketing and engineering—but they are actually different sides of the same coin. Part of what makes start-ups successful is the interaction among different disciplines. Unfortunately, many big companies find it hard to maintain that interaction as they grow, because they must focus on specialization and efficiencies of scale and scope.

John Deere sponsored my SDM education to help improve its ability to innovate, and I am delighted that this new post gives me the chance to capture some of the energy of a start-up for the company. As a member of the Enterprise Advanced Marketing department, I am helping to identify and develop opportunities that our operational business units are unlikely to fund for various reasons, including being high in risk or cross-divisional in nature.

As an SDM graduate, I wanted a job that would take me far outside my comfort zone and my roots in enterprise IT. I also wanted a role with enterprise-wide, global responsibilities to stretch myself as a manager and a leader. Developing an enterprise capability that deeply integrates both marketing and engineering was also appealing. And, I believed I would never have a better chance to make a big change than after receiving my master's degree.

Already, I'm putting the skills, tools, and methods I learned in SDM to good use. For example:
  • Leading our project and program managers more effectively by utilizing the design structure matrix, critical path method/critical chain, and risk management tools from Associate Professor Olivier de Weck's System Project Management class.
  • Studying whether option theory is a better way to value an innovation portfolio than net present value.
  • Using system dynamics and causal loop diagrams to understand and explain the interactions of complex systems.
  • Drawing on what I learned under Professor of the Practice Deborah Nightingale and Ford Professor of Engineering Edward F. Crawley to deconstruct complex system architecture into its building blocks and analyze the subsystems.
The Next YouTube?

Blade Kotelly, SDM '10
CEO and Entrepreneur
1Minute40Seconds, a video content platform provider

If I hadn't gone to SDM, I would never have risked starting my own business. I had been teaching the subject of innovation for years—first at Tufts and later at MIT—but SDM gave me the tools to take an idea to the level of action. When I took Senior Lecturer Shalom Saar's course in leadership and shared my idea with him, he told me, "You've got to start a company." I took his advice.

1Minute40Seconds helps people create video content online easily and quickly. As CEO, I do everything—hire, strategize, figure out how to get investors, and create marketing materials. The job involves a lot of strategy work and execution, and it also requires systems thinking—a grounded, quantitative means of figuring out how to get all of the pieces working together effectively.

Interestingly, I didn't know how I would use my SDM education when I joined the program. I figured that I'd learn some techniques and make some networking contacts—and I did. But, I have benefited more than I ever expected. For example, when I first started my business, there was a period before I signed my first investor that was very, very scary. At that time, it really helped to have the framework to recognize what was going on and to see the uncertainty unfolding—something I learned the very first week at SDM in a class called the Human Side of Technology with Senior Lecturer Ralph Katz.

I've also found that Sloan Management Review Professor in Management Michael A. Cusumano's lessons on the business of software have enabled me to speak credibly about the industry to my investors. Cusumano taught us how to understand the value of a platform, versus just an application, and that has shaped the way I have considered launching my product. In addition, my accounting class with Senior Lecturer Scott Keating has proved critical in determining how to charge for this software service. Of course, it's impossible to overstate the value of the MIT brand when it comes to getting venture capitalists (VCs) on the phone.

I have now secured 1Minute40Seconds' first round of VC funding. The next step is to raise more money, hire permanent employees, and start making sales. I'm jumping down on the diving board now, and we'll see how high up I can go. It's exciting.

Making Greater Contributions at Higher Levels

Matt Harper, SDM '10
Vice President, Products and Services
Prudent Energy Corporation, a clean energy storage company

At Prudent, my new job spans the company's entire set of products and services and encompasses the full product life cycle. My responsibilities include product definition, corporate development, customer alignment, sales support, and communications management.

To do my job properly, I need to maintain a holistic view of the company's goals at all times. This is the biggest lesson I learned in SDM: organizations and the products they deliver exist as part of an incredibly complex ecosystem—and the people in these organizations need to understand the whole product and business ecosystem to see where their greatest leverage lies within that landscape.

I've recently been spending time structuring Prudent's product delivery organization, relying heavily on the enterprise architecture framework taught by Principal Research Scientist Donna Rhodes and Professor of the Practice of Aeronautics and Astronautics and Engineering Systems Deborah Nightingale in SDM. Though my company is still fairly small, Prudent is a highly complex organization. Its workforce is dispersed across three continents and corporate functions that span fundamental materials research and development, systems engineering, chemical process design, hardware manufacturing, software development, and sales and market development.

To ensure that our organization functions correctly, we need to apply basic systems principles and evaluate how knowledge, products, intellectual property, culture, and customer value originate and flow through the organization. It's an interesting challenge!

Before coming to SDM, I managed the product development program for one of Prudent's product lines and supported marketing and sales initiatives primarily from a technical perspective. This new job has proved a great fit, particularly coming from SDM, as it depends on building links between technical and nontechnical disciplines and stakeholders—that is, the entire business ecosystem.

Transitioning to Agile Development

Avi Latner, SDM '10
Product Manager
Jumptap, a targeted mobile advertising company

As product manager at Jumptap, I am responsible for the success of the company's performance and network product, tapMatch. That means balancing the needs of stakeholders: customers, sales, engineering, business development, and finance; finding the best solutions to address those needs; and then setting priorities straight. My day-to-day work involves a combination of product design, data analysis, and general management tasks.

Jumptap is now in the process of transitioning to agile development, so I am relying on lessons I learned in SDM's class on engineering software concepts, taught by Professor Nancy Leveson. In that course, we examined software development processes, and I gained a much broader and balanced perspective on agile design than I would have by simply reading a training book. The material taught by Professor David Simchi-Levi in System Optimization has also proved very relevant, as optimization algorithms are at the heart of Jumptap's platform.

Before matriculating at SDM, I worked for big companies in a fairly mature industry—financial software. For example, I designed a system for Bank Hapoalim in Israel that aggregates millions of transactions to calculate profitability across all lines of business. Through SDM classes such as Technology Strategy, taught by Professor James M. Utterback, I learned that different industries have different phases of maturity and that most product innovation occurs in the early stages of industries that arise from a disruptive technology. Therefore, I decided to work at a start-up that was leaping into a new market. Targeted mobile advertising is in its early stages and is growing at an astonishing rate.

In addition, I am working evenings and weekends on a social medical device venture, a project that got started at MIT. After qualifying as track finalists in MIT's $100K Competition, my partners and I won MIT's Technology Dissemination Fellowship. We have since hired two interns, and our endoscope camera is already being used by a nongovernmental organization in Kenya. For this venture, the most useful course was Product Design and Development—taught by SDM Fellows Program Director Pat Hale and Robert N. Noyce Career Development Assistant Professor Maria C. Yang—which expanded my understanding of prototyping, patent research, and more. If I had not taken this SDM course, our team would not have won the fellowship.

This report was compiled by Kathryn O'Neill, managing editor, SDM Pulse.

Tuesday, October 4, 2011

SDM Timeline - SDM Pulse Fall 2011

The MIT System Design and Management (SDM) program is co-founded by Professor Thomas L. Magnanti of the MIT Sloan School of Management and Professor Edward F. Crawley of the MIT School of Engineering. The program is piloted with 11 students.
SDM admits inaugural class of 35 students. It is MIT's first master's program with an option for distance learners, who are able to take MIT classes using videoconferencing, videotape, and web-assisted instruction.
Toyota begins sales of the Prius, the world's first mass-produced gasoline-electric hybrid car.
This year was the deadline set by the Institute of Medicine for implementation of electronic medical health record keeping. While such records are now widespread, they are not yet universal.
The first class enters the SDM Graduate Certificate in Systems and Product Development program. Initially a partnership between SDM and United Technologies Corporation, the certificate program has expanded over the years to serve students from other companies and interests.
Novartis receives FDA approval to market Gleevec, a targeted cancer therapy that becomes a blockbuster drug.
SDM alumni hold their first conference, themed “Leadership in a Complex and Changing Business Environment.”
John Deere enters partnership with Home Depot to sell its signature green and yellow lawn tractors via a mass channel for the first time.
Apple launches iTunes, leading to the concept of integrated music delivery and use. This fundamentally changes the music business for both the industry and consumers.
SDM begins providing career services to its self-funded students.
Pat Hale is appointed director of the SDM Fellows Program.
SDM marks 10th year. Initially grounded in engineering, the program has expanded to include students from the financial, business, high-tech, and military sectors.
Nintendo unveils the Wii home video game console, making a distinct departure from previous video games by introducing a wireless controller along with games that get users up and moving.
Apple releases the iPhone, essentially a pocket-sized computer with a revolutionary touch-screen interface.
Pat Hale becomes president of the International Council on Systems Engineering.
Keio University in Japan launches its Graduate School of System Design and Management patterned on SDM.
SDM sponsors the MIT Conference on Systems Thinking for Contemporary Challenges, an outgrowth of the alumni-only conference now open to all.
The Society of Women Engineers presents SDM with a certificate of appreciation.
MIT SDM Systems Thinking Webinar Series launched.
SDM joins the Master of Engineering Management Programs Consortium.

Monday, October 3, 2011

Reflecting on 15 Years of System Design and Management - SDM Pulse Fall 2011

By Pat Hale, Director, SDM Fellows Program

Late in 1995, just after becoming Otis Elevator Company’s first director of systems engineering, I was told that our parent company’s corporate director of education wanted me to meet someone from the MIT Sloan School of Management to talk about educating product development engineers. That was the start of my personal journey with the System Design and Management (SDM) program.
Professor Thomas L. Magnanti explained that he and Professor Edward F. Crawley of the MIT School of Engineering were gathering stakeholder needs for a new career-compatible graduate program called “System Design and Management”—the first graduate-level, degree-granting program at MIT to include a distance education option. The program would partner with industry to educate future leaders in product development, with a curriculum that combined system-level engineering content with management courses adapted from the MIT Sloan MBA program.
As an MIT alumnus myself, I knew that an MIT graduate program would be a terrific option for my high-potential product development engineers at Otis, a division of United Technologies Corporation (UTC). I also had some thoughts about what the new degree should include. Magnanti and I spoke for about an hour, and I was soon able to confirm that Otis would send students to SDM’s inaugural class.
Since that time, UTC has sent 45 students to the degree program and 164 students to the certificate program. Seventy-five percent of Otis’s degree students and one of its certificate students rose to executive positions within a few years, as did many of the students from other UTC divisions.
After seven years at Otis, I left to start my own consultancy, and was hired through my company to run the SDM Graduate Certificate in Systems and Product Development program with Helen Trimble, who is now SDM’s director of career development. In 2004, I joined MIT as the director of the master’s degree program, and I have since discovered that I love teaching and mentoring the students and working with the staff.
It feels as if I am home now, after being associated with SDM since before the beginning.
Happy 15th birthday, SDM!