6.1 Introduction

Reference was made in Chapter 2 to the tension between two fundamental aspects of the engineering process:

• The fact that it is essentially a creative activity, developing new ideas to solve problems and to improve people's well‐being. As such, it is also the source of the innovation that drives business and economic growth in an industrial context.
• On the other hand, there is an element of conservatism in that those new engineering solutions must be reliable, robust, and not create harm, danger, or adverse environmental impact. In this respect, the world is becoming increasingly critical and risks or problems must be identified and fully overcome before a new technology or product is launched.

This chapter is concerned with the first of these points – the development of new concepts. This stage of work brings together three parameters: future market needs, possibilities in terms of new technology and engineering, and economic viability. A constant balance has to be struck between these competing requirements, as illustrated in Figure 6.1.

As an essentially creative process, it is not one which can be readily codified or proceduralised. However, the concept of good practice does apply and business school research (Ref. 1) into this front‐end process has given some useful guidance, which is worked into the material below. The emphasis here is on early‐stage work, ahead of the deployment of relatively large‐scale engineering teams undertaking the more detailed stages of commercial delivery, which is covered in Chapter 9.

6.2 Key Elements of the Process

The first element of the process is the generation of ideas that might have some useful purpose in the eyes of potential customers. The ideas could come from any of the following:

• Company engineers or salespeople, who understand the products currently being sold and can see their shortcomings or their scope for improvement
• Market feedback, warranty, and complaint information, and customer surveys
• Long‐range technology forecasts – such as the technology roadmaps described below
• New recruits to companies, bringing ideas from other sectors of industry
• Research engineers who are developing new technologies in university or corporate laboratories
• Start‐up or spin‐out companies, often linked to a university
• Suppliers to the company, noting that supplier companies are given far more responsibility and involvement than was the case in former times
• Less likely but not unknown, private individuals in their garages and workshops

Spillover from one sector to another is one of the most fruitful sources of innovation. It often occurs through exchange of ideas, interaction, and sharing. The ideas mix and mutate, resulting in new versions of established ideas (Henry Ford admitted he had invented nothing new. He said he ‘simply assembled the discoveries of other men behind whom were centuries of work’). The pace of such change has definitely accelerated as a result of greater personal mobility (both in terms of travel and movement from one employer to another), better communications and a conscious effort on the part of some governments to promote knowledge transfer networks.

The second element of the process is knowledge of the marketplace and the spotting of gaps or opportunities that could be of interest to customers and that could form the basis of future business opportunities. There may also be the possibility of creating new markets although this is more unusual.

The third element is then the iterative synthesis of these ideas, in the context of the market opportunities and their economic feasibility, to form a workable concept.

At this point, it is worth drawing distinctions between different levels or forms of innovation: they could vary from the modest, incremental improvements (which is the most frequent) through to radical, break‐through or disruptive changes. The former are relevant to existing market structures and represent the progressive, and probably annual, improvements that consumers expect of their cars, washing machines, or mobile phones. The latter are the less frequent but radical changes that create completely new markets such as those that did not exist 30 years ago for personal computing or mobile phones.

In reality, new ideas will sit on a spectrum with these as the two extremes, as shown in Figure 6.2.

A further dimension is what is sometimes referred to as ‘adjacent’ development, where an existing technology or solution is applied to a different market sector. It is easy to underestimate the effort required to move into a different market where the operating environment and usage patterns can be quite different. For example, automotive solutions have often proved quite unsuitable for rail applications as a result of the much harsher mechanical and electrical environment (such as 25 kV overhead lines), the heavier and rougher use in the rail sector, and the 30‐ to 40‐year life requirement. Nonetheless, spillover between sectors is the basis of many innovations, provided that problems of the type indicated can be overcome.

Research has suggested (see Ref. 2) that the optimal split between these forms of improvement in a large and successful company, with a balanced portfolio of technology developments, is:

• Incremental – 70%
• Adjacent – 20%
• Breakthrough – 10%

The corresponding financial returns on successful projects are then the opposite of these – 10%/20%/70%, but of course the 70% return on breakthrough innovations carries a much higher risk. In fact, breakthroughs, or ‘disruptive’ changes cannot really be achieved to order and may not be recognisable as such changes for some time after their invention and often outside the field for which they were originally intended, lasers being a good example of this.

6.3 Technology Roadmapping

One of the policy tools used by large corporations, public bodies, and research funding organisations is technology roadmapping. It is used to guide their early‐stage investments. The form described here was developed originally in the 1970s by Motorola as a means of overseeing and managing its considerable portfolio of technologies in the field of electronics. Since then, it has been widely adopted by the range of organisations noted above. It is also relevant to small and medium‐sized companies, either for managing their own work or as a source of guidance about the trends in markets and technology.

The approach is used to navigate the complex field of new technological opportunities by mapping out the opportunities and help choose which options to follow. It also provides a framework for reviewing decisions as new circumstances arise or as new information becomes available.

The results of this planning work are usually presented in the form of a chart with time as the horizontal axis, covering anything from a 3‐year to a 20‐year horizon. Figure 6.3 is a typical example. Planning is best carried out in a facilitated workshop environment and there are some highly structured methods for running workshops of this type. This approach enables the combined expertise of the organisation, its partners, and independent experts, to be brought into play.

The chart typically would have between three and six interconnected levels covering, from the top downwards, such topics as:

• Business drivers
• Market requirements
• Products and services
• Technologies
• R&D programmes
• Resources

The point of the process is to link the business and market drivers, at the higher level of the chart, to the technology programmes placed lower in the chart. In summary, the objective is one of aligning technology investments with market needs. As with all processes of this type, much of the value comes from the process of discussion, rather than the end result, although the highly visual form of roadmaps also makes them excellent communication tools.

This is especially relevant to a single‐company environment and can drive key decisions such as when a new technology will be sufficiently mature for it to be launched on a new product development programme. The weakness of the process may come when a new technology creates a new market.

Roadmaps are also a favourite of public bodies, although they are often presented in narrative, rather than pictorial, form. A search of the internet will produce documents on every new technology where there is government interest: solar power, nano‐technology and nuclear power being just three examples. Roadmaps also often define the areas where research‐funding bodies will, or won't, provide funding.

For all organisations, small or large, technology roadmaps are a good, visual, and easy‐to‐understand way of communicating the direction of the organisation in the field of technology and products. More can be found in Ref. 3.

6.4 Open Innovation

The points above consider innovation as a largely internal activity, carried out within the boundaries of a company and its partners. Looking more broadly, the term ‘open innovation’ was coined by Henry Chesbrough (see Ref. 4) in his 2003 book describing new models of innovation, which could potentially accelerate the pace of development of new products and services and involve a wider community in the process. It is sometimes presented as a paradigm shift, i.e. a fundamental and revolutionary change of practice resulting in radically different results. In reality, it is more of a progressive trend over a long period in which organisations place more reliance on external sources of ideas, rather than depending entirely on their own resources.

The trend is manifested in a number of ways. Engineering companies, for example, are placing more reliance on their suppliers and on university collaborations, where some large corporations designate certain university laboratories as the sources of defined low‐technology readiness level (TRL) technologies. Pharmaceutical companies are using start‐up or spin‐out companies as the initial source of new products.

The software industry has progressed furthest in this field, some software being developed in an entirely collaborative, or open, manner within a defined framework.

However, there are competing trends on this topic: more open models of innovation are being used, but at the same time, intellectual property (IP) protection is being tightened up by many organisations.

6.5 Concept Development

Moving onto the work itself, the focus of these early‐stage activities is the development of a defined concept, which can then be evaluated for its merits and its feasibility as a potential business proposition. It is too early at this stage to speak of a full business plan, but the elements of ideas, technology, manufacturing feasibility, and value to the market must be there.

The process can be characterised as a series of divergent/convergent iterative loops, as shown in Figure 6.4.

In the first divergent area of development, markets are understood and ideas are generated, analysed from an engineering and manufacturing perspective, and discussed with customers. After reworking them, they are pulled together as complete, but draft, proposals to see whether they make sense as a whole. There could be some level of formal review at this stage with people outside the development team, or the team itself might reach its own conclusions and start another round of development.

Documenting the work at the end of each loop has some important advantages. First, the discipline of writing things down enforces organised thought and the tying up of loose ends that might otherwise be left unresolved. Second, the proposal will have to be sold to someone: a senior person in an organisation, a product policy or technology development committee, or an external investor, who will require more than verbal information. Third, it keeps track of what has been done so that the learning can be used in later stages of the project in question or on other, future projects.

At a relatively early stage, it may be helpful to draft a value proposition in the form outlined in Chapter 4, including a completed example, and repeated as shown in Figure 6.5.

As noted previously, the most important element of value proposition development is the headline statement, which acts a guide and focal point for the new technology or product. This statement can also be built on by adding, in more detailed product definition material, further information about how customer needs will be met, as indicated in Section 6.11, ‘Linking Detailed Design to Customer Needs’.

As implied, these activities are best conducted in a small‐team environment using experienced leadership well connected to the marketplace and to the senior management of the company, in the case of a corporate environment. More thoughts about development teams, their composition, and their leadership are given in Chapter 9.

The process described above could take an incremental improvement to a technology readiness level of ∼TRL 5 and a more radical technology to ∼TRL 3. The more radical the proposal, the more iterations will be required and the more analysis, physical testing, and market discussions will be needed. The aim should be to achieve a position where the proposition can be evaluated sensibly from a broader, business perspective, and then a decision taken whether to proceed further with more detailed, and more expensive, stages of work. For this to be successful, there must be an open flow of ideas and the ability to test these ideas with the market.

6.6 Industrial Design

Although not stated specifically, the concept development process outlined above is usually understood as describing the early stages of ‘engineering design’, with the emphasis being on technical performance and function. It is also the period when the principles of ‘industrial design’ should be applied. This latter term is generally used to describe development of the aesthetics, styling, appearance, ergonomics, and feel of the product, as opposed to its engineering development, although the boundaries between the two is not hard and fast.

Different products will strike different balances between engineering and industrial design. Factory equipment, for example, will emphasise engineering function whereas domestic appliances will have much more emphasis on creative industrial design as defined here. Cars have long struck a balance between styling and function. Devices such as mobile phones, tablets, and laptops have become almost an extension of an individual's persona and must therefore have the functionality, feel, and appearance required for this role.

Development of the industrial design of a product can involve an interesting dialogue between the engineer and the industrial designer, often people with rather different personalities and outlooks on life. But it is not a ‘zero sum’ game. Whereas there is always some trade‐off between industrial and engineering design, the best products achieve the best of both worlds, performing well and being aesthetically appealing – ‘form follows function’. Industrial design is always very user‐centric, an important element of product success, as noted below.

The critical point is that industrial design is an important element of concept development, and the principles to be adopted on a new product should be built in from the outset and not as some afterthought.

6.7 Key Success Factors

The drivers of new product success have been researched by a number of academic organisations (Ref. 5), and the three most important factors in this respect have been shown to be:

1. The superiority of the product in terms of the features it embodies and how the product then compares with the competition
2. The extent to which customer needs have been investigated in detail and then built into the product
3. The amount of effort invested in early‐stage product development and the thoroughness with which this early work has been undertaken

None of these points comes as a surprise but they do reinforce the importance of investing generously in those early stages – a point made in Chapter 3 when discussing NASA's findings and their findings are worth repeating. Their historical cost analyses had shown that there was a direct link between the success of a technology and the amount spent on its early‐stage development – the more the expenditure the less likelihood there was of subsequent cost and timescale overruns.

6.8 Identifying and Meeting Customer Needs

As already indicated, customer input is critical to the development of new concepts. The ‘voice of the customer’ is a common term in many areas of business, defined by American Production and Inventory Control Society (APICS) as the ‘actual expressed desire for product functions and features’. And there are many ways of establishing what customers would like.

A widely used approach in this respect is the model developed by Professor Noriaki Kano of the University of Tokyo and winner of the Deming Prize for individuals. In his work in the 1970s and 1980s, he drew attention to different aspects of customer satisfaction, as summarised in the model in Figure 6.6.

The model plots customer satisfaction as a function of the standard of product execution and draws a distinction between three groups of attributes:

1. Basic. These are the standard features that customers expect of a product and take for granted, whether they explicitly specify these features or not. For example, we all expect our cars to start at the first attempt, even on a cold morning. This is not something we would mention to a car salesperson when describing desired features, but it would be highly dissatisfying if the new car did not have this capability. ‘Basic’ requirements do not cause satisfaction or additional satisfaction, as such, but will cause dissatisfaction if not met. Identifying basic features is not always easy as customers tend to assume that they will be present.
2. Performance. These attributes provide more satisfaction the better they are executed (or less satisfaction if executed poorly). For example, a light travel bag causes satisfaction and a heavy bag causes dissatisfaction, other things being equal and assuming both function properly. Performance attributes are keenly watched by customers and form the basis of buying decisions.
3. Excitement. These factors are unexpected and come as surprises to customers who didn't expect them. They might be categorised as ‘unique selling propositions’. Backup or reversing cameras on cars were in this category some time ago but are now regarded as standard – excitement factors quickly lose their edge as everyone adopts them.

The usefulness of this model, beyond interest or curiosity, lies in how it might guide data gathering from potential customers.

6.9 Customer Data Gathering

Understanding customer needs and drivers is critical to the early stages of product development and studies have shown that one of the most frequent causes of new product failure is poor understanding of customer needs. Early‐stage technology and product development is usually perceived as the domain of engineers, who, to be fair, are often the sources of new ideas. However, if the marketing input is weak, it is easy to be carried away with new technology ideas that may have potential but may be somewhat off‐centre from the customer's perspective. Once an idea is established, it can be difficult to shift, as natural defensiveness on the part of the originators comes into play. Marketing work is therefore not something that is used to check an idea after it has been expanded but should be regarded as an integral part of the early processes.

In terms of how information can be gathered, there are multiple ways in which this can be done. These are just some possibilities:

• In‐depth interviews
• Extended observation of customers
• Clinics
• Social media
• Work directly as a customer, e.g. drive a delivery van
• ‘Ethnography’, involving in immersion in the consumer group under study to understand the culture of that group
• Testing of ideas through physical models, mock‐ups, CAD models, and virtual reality
• Test runs with customers with prototype systems
• Data measurement to understand quantitatively the operating environment
• Warranty and complaints information from existing products

A point to make is that customers will find it difficult to react to radically new ideas that go beyond their current experience, and they will therefore be more comfortable responding to incremental improvements to existing products. It should also be noted that different customers have different needs and will use the same product in different ways. It is therefore important that a range of different customers are studied to understand the full spectrum of needs. This is particularly the case with engineering products where the range of applications and duty cycles can vary widely from customer to customer and from country to country. There may also be conflict of requirements where one attribute operates at the expense of another. In this case, developers may need to back one priority, and hence one customer, at the expense of another, recognising that no product can meet every requirement.

The actual process of customer observation and data gathering will always benefit from a structured and disciplined approach. Wherever possible, it should be tackled in the same way as a scientific or engineering experiment with:

• Defined methodologies and questions
• Trained staff or observers
• Structured data gathering and documentation of results
• Direct observation of use in the real environment (not through an intermediary ‘expert’)
• Range of situations observed
• Significant sample sizes
• Statistical analysis of results

The emphasis of work of this type is to understand what functions they want the product to perform rather than the features (i.e. the solutions) that may provide those functions and, critically, whether they are prepared to pay for those functions. It is best carried out by members of the development team itself, so they have direct experience, rather than a specialist group.

6.10 Who Is the Customer?

The foregoing material skates round the question of ‘who is the customer?’ In consumer markets, customers are numerous and varied but are typically single individuals. Hence, most products are targeted towards a specific customer group or segment. A balance has to be struck between numbers and fully satisfying particular customers' needs. The earlier references to niche‐driven, differentiated, and cost‐driven markets illustrate the different approaches that can be taken. A conscious choice has to be made as to what customer group to target and analyse.

In the case of business markets, clients tend to be fewer in number but more difficult to pin down. For example, a commercial vehicle may be owned by a leasing company or operated by a logistics firm but in the livery of a retailer. Who is the customer in this situation? In reality, multiple customers exist in this situation, all of whom have to be satisfied to some degree. In other business situations, the true customer may be less obvious. For example, the formal link between a supplier and a customer may be a purchasing officer. However, the choice of a supplier may be made by a design engineer who specifies a component on a drawing and who may not realise he is also choosing the supplier. Some thought is therefore needed in analysing these situations in terms of who makes the purchasing decision and who can say no.

6.11 Linking Detailed Design to Customer Needs

Having established in detail the customer's requirements, these then need to be translated into product engineering terms. (This is not a linear, or sequential, process with requirements cleanly preceding engineering work. In practice, the two will proceed in parallel).

An established way of doing this is through the ‘quality function deployment’ (QFD) structure. This approach was developed in Japan by Yoji Akao (also a Deming Prize winner) in the 1960s and 1970s and first used on shipbuilding projects in Mitsubishi's Kobe shipyard.

Called Hoshin Kanri in Japanese, the English translation of ‘quality function deployment’ is not the best. The concept refers to taking customer requirements (the ultimate measure of quality), translating them into engineering features (functions) and cascading them into the organisation (deployment).

At its simplest level, this linkage can be created in a tabular structure with customer requirements on the vertical axis and engineering characteristics on the horizontal. The two are then linked together – some customer requirements will relate to more than one engineering characteristic and vice versa. This linkage process is best accomplished in a team environment using a ‘Post‐it’ note style of workshop. Wherever possible, requirements and characteristics should be quantified, which may prove difficult initially but which can generally be built up over time.

This simple matrix is the core of the full QFD approach but could not be described as a ‘proper’ QFD analysis (see Figure 6.7).

There is a practical limit to the complexity of matrix (number of rows × number of columns) which can be handled by one individual or group. And, of course, it would be quite impracticable to describe a complex product such as a car, train, or aircraft on one single matrix. In this situation, a hierarchy of matrices can be constructed and the approach generally seems better suited to components or small systems rather than more complex products.

The more widely known ‘house of quality’ adds more structure, detail, and insight into the process of linking customer requirements to engineering characteristics, but at the expense of making the process look more daunting.

Illustrated in Figure 6.8, the process for developing this form of analysis is:

1. Document the customer requirements as above, including any regulatory requirements.
2. Assess the priority, which the customer places on these requirements and how the customer views the company's solutions relative to competitors, as a competitive evaluation, both on a 1–5 scale.
3. Enter the engineering characteristics (product design requirements) data both in descriptive form and as numerical targets (target value).
4. Perform a technical evaluation of the proposed product versus the competition, again on a 1–5 scale. To do this well will need access to the products of the competition and, ideally, some form of teardown analysis.
5. Analyse the relationships between the customer requirements and product design requirements, distinguishing strong, moderate, and weak relationships. This helps to understand which engineering parameters might be adapted to provide a better match with customer requirements.
6. Analyse the interactions between the engineering requirements, which can be both positive and negative (e.g., there is usually a negative relationship between low weight and high strength).

As with many team‐based activities of this type, the value of a completed QFD matrix lies more in the process for arriving at it, rather than the finished article. However, the completed matrix does represent one possible solution to a customer's needs which can then be adapted. All solutions have some level of compromise and trade‐off, which are brought out in the matrix. Alternative solutions can be developed and analysed in the same way. Several competing QFD models can then be used to assess which provides a better balance of compromise and hence is more competitive.

The full QFD process is used quite widely in the automotive industry promoted, in particular, by the Ford Motor Company and may be mandated as part of a supply agreement.

6.12 Ensuring a Robust Design – Taguchi Methods

At this early stage of development, it is wise to invest in analysis that will make the product less sensitive to the method of manufacture or to environmental factors when in operation – how it can be put together in a way where it works readily and does not require constant ‘fiddling’ to make it function, or keep it functioning, correctly. The leading thinker in this field was Dr. Genichi Taguchi (1924–2012) who worked in both Japan and the United States. The author was taught his approach by his son, Shin Taguchi, who is still active in this field at the time of writing (see Ref. 6).

Taguchi's initial work came from involvement in the design and manufacture of telephone switching systems, which at the time of his involvement were complex electromechanical devices. His approach revolves around three concepts:

1. A loss function, which describes how losses to the manufacturer, customer, or society more generally increase as a parameter, such as a dimension or a voltage, deviate from their ideal value. His definition of quality is, ‘the loss imparted by the product to the society from the time the product is shipped’.
2. Development of the robustness of a design in the early stages of development as a form of off‐line quality management. This is complementary to on‐line methods such as inspection and statistical quality control.
3. The design of statistical experiments to investigate, efficiently and numerically, the two points above and thus provide hard data that can be used to reduces losses and increase robustness.

The loss function, illustrated on Figure 6.9, is at the heart of this thinking.

Taguchi's approach draws a distinction between traditional tolerance bands, where something is 100% acceptable if within the band and 100% unacceptable if outside it, and a more progressive, continuous approach where losses, or problems, increase the further the parameter is away from the ideal. Ford Motor Company had practical experience of this in the 1980s when they compared automatic transmissions made by themselves and Mazda to identical specifications. The components in the Mazda transmissions used up less of the available tolerance bands and had better whole‐life costs despite being slightly more expensive to make.

Investigating the sensitivity of, say, the performance of an electro‐mechanical mechanism or the output of a TV power supply, to parameters and variabilities within them is a way of understanding how the design and the processes can be set up to provide a reliable overall result. Multi‐parameter studies can be used to investigate different sources of ‘noise’, or variation, ahead of production. These sources of noise could include, for example, the operating environment, human errors, or piece‐to‐piece variation. The term ‘signal‐to‐noise’ ratio is used to describe robustness.

He did a lot of work on ‘design of experiments’ (DOE) to find ways of conducting experimental analysis of situations where there are multiple variables but where there is simply not enough time or money to experiment by varying one parameter at a time, as would classically be done. Examples are available for such applications as ceramic tile manufacture, control valve performance and copier mechanism jamming.

Taguchi put in some considerable mathematical work to support his approach and there is some debate about his methods amongst the statisticians' community. It is probably fair to say that his approach has been used more as a conceptual tool ahead of production than as a detailed methodology. However, there are companies who use DOE as part of their development processes. The mathematics of experimental work can be complex but where a new concept design is proving difficult to put together in a way that gives reliable results, the experiments can be a powerful way of understanding the causes of variability and hence making the product more robust. A conceptual understanding of Taguchi's approach is a useful element of the engineer's armoury.

6.13 Technology and Manufacturing Development at the Concept Stage

The technology activities and outputs that take place during development of the concept include typically:

• Schematic or general arrangement CAD models or drawings
• Performance specifications
• QFD models
• Taguchi models
• Narrative descriptions and illustrations
• Mathematical simulation models
• Test pieces and laboratory test results on critical areas of the product
• Mock‐ups
• Intellectual property searches and initial IP protection of critical areas
• Initial risk analyses and/or design failure modes and effects (FMEA) studies
• Initial cost studies

Manufacturing work will follow a similar pattern and could include:

• Initial manufacturing feasibility studies and outline process definitions
• Outline facility plans
• Test work on critical processes or process FMEA studies
• Some assessment of supply chain requirements

This early‐stage technical work forms the foundation of future development. On the one hand, it develops a concept that will appeal to customers. On the other hand, it must identify critical issues and risks and do sufficient work on them to provide confidence that they can be overcome in subsequent project phases.

6.14 Economic Evaluation

Whilst the bulk of the work in developing a concept is market‐led engineering, it is also important to be able to assess whether the proposal being developed will work from a financial point of view. At this stage in a development programme, rigorous financial analysis will be difficult but it should be possible to make some level of financial judgement. In principle, this requires estimates of sales volumes and prices, product cost, and one‐off investment and launch costs.

In an established market or where an incremental improvement is being made, this can often be done by reference to existing costs or from experience of previous, similar projects. This will indicate whether a project makes sense or, if not, what should be done to achieve financial viability.

Analysis will be more difficult in the case of a breakthrough technology where there is no clear point of reference in terms of markets or prices. Costs can be built up with the help of suppliers. Volumes are more difficult, but any estimate should be very realistic – don't say ‘72 million cars are produced annually worldwide and if we can get on just 0.5% of those, that's 360 thousand units’.

Prices may come from analysing the market and judging what, logically, customers might pay to be attracted to the new product. A more rigorous approach is to work analytically through the product, function by function, to confirm that the customer will pay for it and to estimate its value. In the case of industrial products, this would be linked to the cost and commercial benefits of the new solution.

The method of analysis would then simply be to judge the profit from the sales against the original investment to establish whether there is a sensible payback period. Given that later stages of product development, after completion of the concept work, are increasingly expensive, it is important that this initial, simple analysis is based on realism. It is better to have a simple but realistic set of estimates than a more sophisticated analysis based on unsound assumptions. In later stages of a project, a timed, discounted cash flow analysis would be more appropriate. A word of warning at this stage: research (Refs. 7,8) suggests that only 28% of new products meet their profitability targets and usually fail as a result of a poor match between what is being offered and what the customer will pay for.

6.15 Protecting Intellectual Property

Intellectual property (IP) is a collective term that is used to describe patents, design rights, copyrights, trademarks, and confidential information. New intellectual property is frequently generated during the concept phase of work; in fact, the generation of new ideas is the principal aim of the work and now is the time to protect it. Any drawings, diagrams, prototypes, and software code do create intellectual property rights as they are created and may be patented for protection. The scope for protection may be greater than realised in the sense that even new combinations of existing technology may qualify for protection – the ideas don't have to be radically new. However, if protection is to be sought, care must be taken not to disclose the ideas publicly before the protection process has started. Marketing pressures may encourage early disclosure at conferences or in discussions with potential clients to show that an organisation is innovative, but this could prejudice formal protection.

The various forms of IP protection include (Ref. 9):

• Patents. These protect novel inventions that can be used in a practical way. They are important to consider in relation to engineering projects as they provide a monopoly right that can be used to recoup R&D investment over a period of exclusivity
• Trade secrets. These include know‐how and confidential information. Maintenance of trade secrets can be important to engineering disciplines where there is significant know‐how, for example, in manufacturing processes.
• Copyright. This protects a wide range of content and materials relevant to engineers such as documents, design drawings, and software.
• Design rights. These protect the appearance of a product.
• Database rights. These protect collections of data and are important where there has been significant investment made in collating data that is to be made publicly available.
• Trademarks. These can be protected through registration or through actions for passing off. They are particularly important for engineering businesses where the value of the brand may lie in a reputation for safety or innovation.

The whole subject of intellectual property is quite specialised. Engineers working in fields that develop new IP need to be aware of the principles of IP protection but should work with IP lawyers to put appropriate protection in place.

The cost of patent protection can be quite significant for small companies, running into several tens of thousands of pounds or dollars per year for worthwhile protection of new technologies. This often leads to selective drafting of patents covering the really significant core areas of the technology rather than taking a broad‐brush approach. There are some (large) companies who patent very little and rely on speed to market and the ability to stay ahead of the competition as an alternative to formal IP protection. They also argue that patent applications can alert the market to a general idea that competitors then try to develop themselves but working around the exact details of the patent.

A further issue can arise in certain fields, such as biotechnology and telecommunications, where there is such a high level of existing IP protection that developers of new ideas have to hack their way through a ‘patent thicket’ – see Ref. 10 – incurring significant time and cost in the process. This has led to debate as to whether international patent legislation strikes the right balance between protecting inventors and stifling innovation. An IP assessment, and ideally IP protection, may be necessary to obtain external funding for an innovation.

Newton once wrote: ‘if I have seen further it is by standing on the shoulders of giants’. Most engineering innovation is an extension of what has gone on before, relying on several centuries of intellectual property, from which the real innovation must be distinguished.

6.16 Funding of Early‐Stage Work

Funding of early‐stage work is a subject in its own right and one that is quite complex. Reference has already been made in Chapter 3 to the so‐called ‘valley of death’, referring to the difficulty of moving from a demonstrated concept to the point where sales revenue is being generated. Chapter 10 covers this topic in more detail, particularly the different sources of potential funding and where they might come into play.

6.17 Concluding Points

The concept phase of development is the period when new ideas are put forward and fleshed out to understand whether they have merit as marketable, and financially viable, propositions. The activity will be technically led but should be conducted in a rounded manner, taking full account of wider business factors. Subsequent phases of work could be a lot more expensive and may build up some customer expectations, so it is important that the right concept is selected and developed. The work is best conducted in a multifunctional team environment where numbers of people are kept quite small – the work is not easily subdivided and is fast changing, so keeping a larger team coordinated can be difficult. Formal documentation of the work is helpful as a means of capturing what has been done and as a discipline to ensure that the concept has been fully thought through with no inconsistencies.

References

This article provides useful insights into successful practices with early‐stage development:

1. 1 Koen, P.A., Bertels, H.M.J., and Kleinschmidt, E. (2013). Effective practices in the front end of innovation. In: Essay in the PDMA Handbook of New Product Development, 3e. Hoboken, NJ: Wiley.

The concept of having (in a large company) a portfolio of new ideas is covered in this HBR article:

1. 2 Nagji, B. and Tuff, G. (2012). Managing Your Innovation Portfolio. Harvard Business Review .

This book introduced the concept of ‘open innovation’:

1. 3 Farrukh, C.J.P., Phaal, R., and Probert, D. (2010). Roadmapping for Strategy and Innovation: Aligning Technology and Markets in a Dynamic World. University of Cambridge, Institute for Manufacturing.

There are many books and articles on technology roadmapping. This one presents a good overview and is published by an organisation with plenty of experience in the field:

1. 4 Chesbrough, H.W. (2003). Open Innovation: The New Imperative for Creating and Profiting from Technology. Boston: Harvard Business School Press.

This book is a very comprehensive survey of practice, focussing on the automotive industry:

1. 5 Clark, K.B. and Fujimoto, T. (1991). Product Development Performance. Boston: HBS Press.

Published some time ago, Taguchi's principles are described in this publication:

1. 6 Taguchi, G. (1986). Introduction to Quality Engineering. Asian Productivity Organization.

Pricing of innovations is an important but not a widely discussed topic, and these two references provide some useful insights:

1. 7 (2014). Global Pricing Study. Simon‐Kucher & Partners.
2. 8 Ramanujam, M. and Tacke, G. (2016). Monetizing Innovation. Hoboken, NJ: Wiley.

The first publication is a good, short introduction to intellectual property whilst the second deals with some of the issues with IP protection:

1. 9 Intellectual Property Guide for Engineers ‐ Bird & Bird LLP, in collaboration with The Institution of Mechanical Engineers, 2015
2. 10 Navigating the Patent Thicket, Cross‐Licenses, Patent Pools and Standard Setting – Carl Shapiro, University of California at Berkeley, 2000. ISBN 0–262‐60041‐2