Chapter 5

Summary

From this chapter, we learn the basic steps to product development. It’s actually surprisingly simple and comprises of only 4 steps: Design, Build, Run and Analyze. In breaking down the 4 steps, I will attempt to explain and give analogies to building a new car:

In the design phase, firms use existing designs to create a new and novel solution. The existing designs do not have to be flawed, but little improvements over time could be made. In this phase of our imaginary car building, a car design firm uses a newly refined metal for the car’s body to reduce its weight, and subsequently, its fuel efficiency. Next comes the build phase, where models or prototypes are created to be ran in experiments. Our car firm then sends blueprints and schematics to the nearest laboratory and a prototype is built. The run phase consists of the test model or prototype is simulated for use in real environments. This is where all the experiments occur, and raw data is recorded. The analyze phase is when the findings are assessed and improvements are made.

Throughout the entire process, we stumble onto the idea of ‘Sticky’ information. The idea of sticky information comes from the cost to transfer one piece of knowledge or information to another place; the greater the cost to transfer the information, the more sticky it is. The important role of sticky information comes from the idea of private knowledge and information: millions of dollars are spent every year on research, and many companies are not so eager to give away their private knowledge for free. For example, the stickiness of information creates a ‘catch-22’ of sorts for a small upstart circuits company: if a firm doesn’t know much about circuit design, they would have to pay for sticky information to get a start, but if the firm does not have the budget, then they are at a dead end.

Reflection

Through reading the chapter, I’ve realized that sticky information is almost everywhere. Last summer for example, my parents owned an old Panasonic TV in their bedroom that cut out parts of the image. Being the technology wiz in the house, I promised that I would help fix it. After spending an entire afternoon researching the model of the TV, I found out that the service manual was readily available online – except at the cost of $24.95. It seemed ridiculous to me that a 500kb pdf file would set me back $25!

In the end, I did purchase it under my parents’ rationale that spending $25 to be able to service the TV through a set of keycodes was better than spending $250 on a newer TV. I knew the practice of costly information existed but I never thought it would affect me, albeit in a small, trivial fashion.