Risk management in prototyping phase.

Negoescu, Florin ; Axinte, Eugen ; Nagit, Gheorghe 等

Abstract: Scientists considers that the innovation processes are conventionally divided into a number of progressive steps. An important stage of a new product is the prototyping stage. This stage comports a major risk because the errors of this stages are transmitted and multiplied to the final product. This work presents some usual aspects of innovation processes, describes the prototype stage, describe the risk concept and the risk perception and give some solutions (guideline) for the risk management in prototyping phase of a product.

Key words: prototype; innovation; risk; management; guidelines

1. INTRODUCTION

Literature described the product innovation process as a steady progression of events which led systematically from research to production. For convenience, the process was broken down into a number of stages, but viewed purely as a management problem all stages were similar in that they were activities carried out by groups of people which had to be coordinated and guided, that is "managed".

The armour of management techniques which had been built up over the years was therefore expected to apply throughout.

2. PRODUCT INNOVATION PROCESS

In their genuine form the evolutionary stages of a new product are usually as follows (Bergwerk, 1988) There is a research or feasibility stage when various ideas are examined and alternatives are explored. The objectives are specified only in very broad terms and the staffs engaged in the work are allowed a good deal of discretion.

The work may include the construction of rigs and working models but their specification is largely left to their creators and there is no commitment by the company to take them further in this form.

The next stage is a decision by the company to use the work carried out so far to attempt to add a product to its range. A specification for the new product is drawn up and agreed by the various interested departments. The ideas and proposals are then converted into an engineering design, mainly on the drawing board but often aided by further experimentation and test work.

When the design is sufficiently far advanced the next stage can be started, namely the design, construction and evaluation of one or more prototypes.

These prototypes are quite different from the rigs or working models made during the feasibility stage because there is now a direct correspondence to the design of the product in marketable form.

The design of the prototype will be as close as possible to the design of the product but it will rarely be identical because manufacturing methods are likely to be different for small numbers. Depending on the circumstances the design of the prototype may proceed simultaneously with the design of the product, may follow it, or may even anticipate some part of it.

The prototype is then made and undergoes a number of evaluations which are likely to result in modifications to the design. It may have to be re-evaluated several times so that prototype work is a reiterative process which continues till a decision is made to go into production. The decision to take this final step may be divided into sub-stages, for example by limited releases, pre-production models, etc.

3. THE PROTOTYPE STAGE

The objectives of the prototype stage are considered to be so self-evident as not to require spelling out at all, but if pressed is generally put in terms of evaluating the design and its performance'. It may also include some reference to customer reaction or manufacturing methods but invariably it will be put in terms of a data-gathering process leading to a more refined design. It will be regarded as a continuation of the design phase, a sort of extended product development Unfortunately these objectives describe only very indirectly the overriding problem which is at the back of everybody's mind. The prototype is really a device for controlling the risk which will have to be taken when the time comes to go into full production and to put the product on the market. If it were not for the concern felt over this risk there would be no point in the delay and expense of prototypes. After all, the product specification was drawn up to the best of everybody's knowledge and the designers did their best to transform it into an attractive engineering design. The only reason for not going into production immediately is the very real risk that there is something wrong somewhere and that the mistake will incur greater costs than the cost of making and evaluating one or more prototypes, Individuals are also conscious at the personal level that they may have been in error and are keen to try out their designs before committing themselves and so risk losing face, or worse, their job.

The prototype stage is therefore not merely a way of obtaining some information-though it is of course that as well-but the group's way of dealing with risk. The true objective of the prototype phase is to manage risk and in order to realize the full implication of this assertion we must examine more closely what is meant by risk.

4. THE RISK

Risk is a concept which is used very loosely in everyday language. Although it is readily acknowledged that risk is an element of all human activities there is less agreement about what we mean by that statement.

It engenders fear, however, and has accordingly given rise to elaborate behaviour patterns to allow us to cope with it. The use of certain words in our language gives some indication of the rationalizations which take place in our perception.. For instance, when discussing the chance of a particular machine failure occurring in the future we may describe it as improbable, not expected, unlikely, impossible.

If asked to associate numerical odds with each of these descriptions, different individuals will give quite different numbers and even the same individual will give different values depending on the circumstances and his or her frame of mind. A distinction must therefore be made at the outset between the risk as defined by the statistical probability of an event and the perception of risk as experienced by individuals (Bergwerk, 1988). "Risk" is usually divided into two factors generically named hazard and harm. Hazard refers to the exposure to risk which is taking place. In the present context it would include the degree to which the product incorporates untried engineering features or the extent to which it needs a revolutionary marketing concept to sell it. Harm refers to the effect which may result or the damage which may be caused if things go wrong. Risk is experienced as a complicated function of hazard and harm and the two factors should be discussed in turn when discussing the risk involved in a proposed course of action. In addition we remember that we only accept risk in order to gain some benefit. The balance between acceptable risk and benefit is by no means a straightforward cost/benefit analysis but the principle is there all the same. A balance must be struck between risk and benefit and a decision made accordingly.

4.1 Industry' risk perception

Most risk judgments made in industry are based on judgment of previous projects. (Lee, 1981) Historical figures are usually not available so no serious statistical analysis can be attempted, even if managers could be persuaded to act on the results. Good industrial managers regard risk as a normal part of industrial activity and expect appropriate risk taking in the behaviour pattern of their employees. During the prototype stage of the innovation process, the risk perception of a large number of employees of all ranks becomes of importance. A great number of studies have taken place in relation to the safety of the nuclear power the chemical industries. In industry the risk of failure is considered a "necessary bad " (Turner & Leech, 1981).An industry with high risk is the assurance industry and here exists sophisticated mechanisms to evaluate and to manage the risks.

5. ORGANIZATION OF THE PROTOTYPE STAGE

Industry usually regards the making and evaluation of the prototype as primarily an engineering task. It is carried out either within the engineering group of the task force is established, the leader generally has strong connections within the design and engineering departments. Although the production and marketing groups of the company have to make very significant contributions they are often placed in a subsidiary role and provide a service to the project group by carrying out certain tasks to an agreed programme.

Manufacturing departments has to manufacture the prototype and must contribute to a decision how the new product must be designed, manufactured and assembled.

The programme is usually in the form of a list of dates by which the prototype has to be made and various tests carried out. More elaborate programmes may allow for a series of modifications and retesting as well as for stage authorization of expenditure.

The final outcome is generally a report to the senior management group which can authorize the next phase of the project. The following guidelines (Pinchot III, 1985; Bergwerk, 1988) are put forward on the assumption that the conventional engineering company organization is retained. (Table 1)

6. CONCLUSIONS

The prototype is no longer regarded as a continuation of the development process but as a means of managing the business risk. Risk can never be eliminated entirely and the effort devoted to the prototype and the degree of risk which is regarded as acceptable is a fine business judgment.

The prototype is not the prerogative of the project team. It is related to the business as a whole and all departments must make their contribution to risk control because they all have to carry their share of the risk inevitable in a new product. (Fox, 1981)

The difficulties associated with the prototype are part of the larger problem of maintaining the spirit of innovation in large companies. Even in cases where project initiation is left to individuals or very small groups, the complexity of most engineering products requires the resources of large organizations so that the crucial step of drawing them into the project has to be faced at some time.

This step should be taken with accept and in a way which takes the natural understand of the rest of the organization.

7. REFERENCES

Bergwerk, W, (1988), The role of prototype in managing product innovation risks, Proceedings of the Institution of Mechanical Engineers, vol. 203, ISSN 0954-4054, London

Turner, B. T. & Leech, D. J. (1981) Management of engineering change. Chart. Mech. Eng., 28, June, 58-61, .London

Peters, T. J. & Waterman, R. H. (1982) In search of excellence, Lessons from America's Best-Run Companies, Harper and Row, ISBN: 0-446-37844-5., London

Bannister, R. (1986) Product champions needed for industrial jousting. Chart. Mech. Engineering., September, 33. 70-72. London.

Pinchot III, G (1985) Intrapreneuring,, Harper and Row, ISBN: 0060153059 New York, US

Lee, T. R. (1981) The public's perception of risk and the question of irrationality. Proceedings of the Royal Society of London, 376A, 5-16., London

Fox, A. J. (1981) Mortality statistics and the assessment of risk. Proceedings of the Royal Society of London. Series A, Mathematical and Physical Sciences, Volume 376, Issue 1764, pp. 65-75, ISSN 1981RSPSA, London

Table 1. Guidelines of risk management (adapted from
Bergwerk, 1988)

No.
crt. Common principles of risk management

1. Risk management is the main objective
2. Senior management must set the tone on risk taking
3 Select the project leader for risk management ability
4 Unify risk perception throughout the company by suitable
 rewards and training
5 Ensure that decisions based on risk perception are made at the
 right level
6 Allow 'service' departments formal access to prototype decision
 making
7 Do not proceed till all departments have committed themselves
8 Treat health and safety risks in a separate category