Open Product Development CPD-WP-001 v2.0.docx coalesce.co.uk 1
Contents 1. Introduction... 3 2. Common barriers to effective outsourced product development... 4 Inflexible teams... 4 Stunted associate relationships... 4 Outmoded financial and operating systems... 5 3. Eliminating barriers: Open Product Development... 6 How we do it... 6 Team... 6 Client and associate relationships... 7 What about IP and confidentiality?... 7 Financial and operating systems... 8 4. Conclusion... 9 Appendix: Some contrasting principles... 10 coalesce.co.uk 2 of 10
1. Introduction Coalesce combines proven capability and experience in product development with external specialists to ensure that it can design efficiently and without compromise. We call this Open Product Development (OPD). We started with serious product development experience in established technical consultancies and a blank sheet of paper. We combined elements of accepted methods, systems and structures that we knew to be effective and replaced those that are less effective or counterproductive with fresh approaches that would be uncomfortable for an established business to adopt. This allowed us to configure our financial and operating systems to promote behaviours that are in the best interests of our clients. OPD allows us to select from the best resources in the marketplace and, by applying our experience of managing product developments, to form these resources into effective and efficient project teams who deliver successful products. coalesce.co.uk 3 of 10
2. Common barriers to effective outsourced product development Inflexible teams A typical product development project relies on a broad range of skills, some of which are specialised and only used at certain stages of the development process. We believe that it is inefficient, inflexible and expensive for an outsourced product development company to maintain such resources in-house. There may be insufficient work to keep specialised internal resources busy and it is all too tempting to use excellent but idle resources on tasks they are not suited to, resulting in poor quality or efficiency. Furthermore, the required recruitment process can be protracted and may not identify the most capable and motivated people. Stunted associate relationships Companies that provide outsourced product development can find it hard to work with third parties. They will work with sub-contractors who are not deemed to be a threat, but are nervous of working with companies or individuals who could conceivably steal their clients. Working with a direct competitor would be out of the question. This limits their choice. The motivation to work with contractors is often that external resource is cheaper (although savings are not necessarily passed on to the client), the emphasis being on reducing costs rather than on finding ways to deliver better work. When they do work with subcontractors, they may not reveal this to their client. This keeps things simple, avoids the risk of the client approaching the subcontractor directly, and prevents client concerns about confidentiality. The subcontractor is often contractually forbidden from approaching the client directly for a period of time. If the client's in-house R&D team has a specific need for 8 hours of Finite Element Analysis for an unrelated project, where is the benefit in forcing that work to go through a product development company who may not add any value? This lack of openness and flexibility is protectionism and is not in the interests of the client. In addition, this default mistrust can result in associate relationships that fall short of their productive potential. coalesce.co.uk 4 of 10
Outmoded financial and operating systems The Coalesce team has worked within other outsourced product development companies. Despite the high quality and dedication of many of their staff, these companies often suffer from the limitations arising from their internal configurations. Their structures and financial and operating systems can encourage behaviours that do not optimally serve the client. The interests of the client can be swept away in a flood of key performance indicators and shortsighted metrics. Projects are undersold by salespeople intent on their commission or bonus. Arbitrary, distorted value systems mean that internal project budgets run out prematurely and misguided priorities mean that work is delivered that is lacking in quality, depth or documentation. The systems are based on misleading and artificial metrics. coalesce.co.uk 5 of 10
3. Eliminating barriers: Open Product Development How we do it OPD is a business philosophy. It manifests itself in a set of attitudes and mechanisms that result in behaviours that are different to the practices of most outsourced product development companies. It aims for congruence between the agendas of Coalesce, its associates, and its clients. For example, OPD rejects traditional notions of competition and project management, where companies attempt to position themselves to be the only possible provider, where competitors are excluded, where projects can be undersold, and where budgets run out. These are counter-productive. OPD results in the sharing of information so that all involved parties can collaborate more effectively. It embraces the notion that the best resource may be outside. And it uses novel internal accounting systems that encourage profitable behaviour whilst putting client satisfaction first. We take this approach because we believe that optimising client satisfaction leads to mutually richer, and more productive relationships. Team Our core team has a wealth of experience, both technically as engineers and designers, and as project managers in consultancy organisations. We have the skills to configure and manage teams, we have good insights into what works at an organisational level in outsourcing companies, and we are all motivated by a desire to create successful products for our clients. In order to build teams with all of the skills required to develop products, we select external specialists. We have the freedom to choose the very best associates and establish close working relationships with them. They are motivated to provide excellent services in order to maintain their reputation and income. Whilst it can be difficult to find good independent associates, we already have a formidable network, seeded by our founders' existing contacts. coalesce.co.uk 6 of 10
Client and associate relationships We are unusually transparent with our clients about the use of subcontractors - after all, they are one of the USPs of our business! If we introduce a client to one of our specialised resources during a project and they subsequently go on to work directly with that resource in the future, we regard that as a successful outcome, not a missed opportunity: we have helped our client and our associate. We add little value by forcing the work to go through Coalesce's books. In return, we trust our associates not to hold onto work that Coalesce would be better placed to carry out and ask them merely to let us know when they secure work as a result of being in our network. If an opportunity arises that does not fit Coalesce's offering, we will recommend any specialist associates that we believe may be able to help. We hope that this will build goodwill and trust in our relationships with both clients and associates. What about IP and confidentiality? Please see our policy on confidentiality on our website (see footer). As with Open Innovation, OPD does not have to make all information public in order to be effective. There are completely public, open source product developments out there that allow the general public to participate but this would be unacceptable to most commercial clients. Our clients can be assured that the spread of information will be controlled and kept within our trusted network of associates and that confidentiality is established contractually. In industries that are particularly sensitive, we are open to using our clients' own staff or external resources subject to a favourable assessment of their capabilities and methods. coalesce.co.uk 7 of 10
Financial and operating systems Coalesce sees profitability as a consequence of good business practice. This could be considered to be a rather vague basis for a business. We do have effective management systems in place but these are designed to allow us to focus on the bigger picture. These systems recognise that we have to trust our team to know what's best for our clients and for our business, and to work towards that without Big Brother sitting on their shoulder. They are not designed to incentivise or pressurise as such approaches can bias and distort behaviours in unhelpful ways. Instead, we give our team the freedom to ask, "How can we enhance our value to this client? Do we have associates who would improve the team's effectiveness? How can we exceed expectations?" It also allows us to carry out shared risk projects, taking on meaningful amounts of risk, should clients desire it. We don't think this is vague - we believe it gives us the flexibility to build the long-lasting relationships that underpin a thriving business. coalesce.co.uk 8 of 10
4. Conclusion Coalesce has configured itself, not by settling for me-too practices but by developing fundamentally more constructive business methods, so that it can listen to each client s needs, adopt an optimal strategy, and assemble and manage a bespoke team to meet those needs. Please get in touch if you'd like to discuss what OPD can do for you. We're also open to feedback that may help us to optimise OPD further. We believe that OPD is the next step in the evolution of product development outsourcing and Coalesce is leading the way. coalesce.co.uk 9 of 10
Appendix: Some contrasting principles Traditional outsourced product development companies Open Product Development Client takes all of the risk Internally-focussed Contracts that protect the consultancy s interests Individual and company success measured by income (rates times hours billed) Competition Protective of knowledge 1980s-style networking to extract information from others Impressive (expensive) premises, many tiers of management, heavy market presence Loyalty to the consultancy and its bottom line Marketing lock out competition through exclusive outsourcing agreements, multi-layered subcontracting, and direct sales techniques Worldview - a competitive world where every company must serve its own interests and distrust other companies Modus operandi seek advantage by withholding information. Faith in hierarchical dominance relationships Client Longevity seek highest short-term financial return. Exclusionary & manipulative tactics to get long-term engagements. Coalesce prepared to share risks with client Customer-focused Contracts the protect the interests of our clients and associates (Confidentiality and ownership of IP) Success measured by many parameters including income, project contribution and outcome, client feedback and referrals, skills acquisition & other factors Co-operation Controlled and protected knowledge sharing Information sharing. Networking as a two-way street Low overheads. Effective and efficient communication and IT, virtual networking, flexible systems, processes & collaborative tools Loyalty to the project team and successful project completion for the client Marketing Value-based. Professional accomplishment as a way to demonstrate expertise. Worldview - a network of knowledge, workers and enablers dynamically forging mutually beneficial working arrangements to meet client goals Modus operandi - work cooperatively with others by information sharing. Faith in trust relationships Client Longevity seek long-term relationships and trust the client to retain the partners who best align with their goals coalesce.co.uk 10 of 10