But Independent Ink's Brucker is supported by a variety of service dealer associations, tire manufacturers and large consumer advocacy organizations. Albert Foer, president of American Antitrust Institute, a non-profit think-tank that filed an amicus brief in favor of Independent Ink, said the case essentially would shift the burden of proof in determining whether a corporation has market power onto smaller players rather than on the patent holder.

"Shifting the burden could do tremendous damage to what competition is," he said. "A lot of manufacturers held their punches because under traditional law, they knew they'd be facing antitrust issues. But now we have conservative economists and attorneys who want to strengthen IP law at the expense of competition. For smaller players, the financial burden alone of trying to prove market power in court could be devastating. And if small business were forced to shutter its doors, consumers would be left with fewer options to choose from which could the pave the way for higher priced goods,” Foer said.

New OEM Product-Services Offerings

• Stratasys Launches Redeye RPM: An Online Service for Rapid Prototype and Manufactured Parts Made from Production-Grade Plastics.

The ultimate form of Product-Services where the OEM is 100% accountable for product productivity performance

Stratasys, Inc. (Nasdaq: SSYS), a rapid prototyping OEM, announced the launch of RedEye RPM™, the world's largest rapid prototype and part building service. RedEyeRPM.com is an online extension of Stratasys' existing BuildFDM service, which builds prototypes and parts using the FDM process for customers in North America. RedEye augments this existing service by allowing automated, instant quoting and ordering around the clock, seven days a week.

RedEye employs a proprietary, secure quoting-and-ordering engine. It preserves user confidentiality by analyzing design-file data without uploading it. Users are assured that neither the web engine nor RedEye personnel will view their design file until the quote is accepted or saved.

Site visitors receive an automated price quote in about 30 seconds. They need only to log-in, browse to select their file, and choose a build material. When an order is placed, RedEye provides quick turnaround for either a single part or high volumes, with most customers receiving their order in 3 to 5 days.

"Prior to using RedEye, prototypes ordered from other sources had limitations in strength and flexibility," says beta customer Rick Gilpatrick, engineering manager, Cleaning Systems, Briggs & Stratton Power Products. "Now we get durable prototypes made from the same plastics we use in production."

"Stratasys is offering unparalleled FDM capacity," says industry consultant Terry Wohlers, president of Wohlers Associates, Incorporated. "I was impressed that the company had produced 60,000 parts for customers over the past three years and now has over 60 machines dedicated to its operation. With this initiative, Stratasys is targeting a services sector estimated at $213 million."

"We've become an extension of many of our customers' in-house production capabilities as well as a fulfillment partner for many service bureaus," says RedEye director of RPM services Eric Lindberg. "We will be introducing an offer to partner with existing service bureaus to allow them to bid on larger FDM jobs than they otherwise could. There is a growing need for a trusted source that can handle part development and production needs — no matter the volume, and RedEye has the ability to deliver."

Stratasys Inc., Minneapolis, manufactures rapid prototyping systems and 3D printers for use by OEMs such as aerospace, automotive, defense, medical, and consumer product makers. Stratasys patented the rapid prototyping process known as fused deposition modeling (FDM®). The process creates functional models directly from any 3D CAD program using ABS plastic, polycarbonate, PPSF or other materials. The company holds 175 granted or pending prototyping patents. Stratasys systems are also used for rapid production and rapid tooling. On the Web: www.Stratasys.com. RedEye is at: www.RedEyeRPM.com

Stratasys experienced a strong 4Q 2005, by sales growing more than 21% from 2004.
"What I think is most important is that they had a record quarter of consumables as well as parts-making services," said Brion Tanous, an analyst with Merriman Curhan Ford & Co. "Those are two high-margin areas of the business," he said. "They're expected to grow aggressively and I think we're starting to see that."


• Pratt & Whitney (A Division Of United Technologies) Will Produce Parts for Rival GE's Jet Engine: UAL Is the First Customer

The battle moves up a notch for service parts market supremacy. With product-services offerings, the customer doesn’t care where the parts come from, as long as the solution’s promised productivity performance is achieved.

Seeking to grab a piece of rival General Electric Co.'s service-parts business, United Technologies Corp.'s Pratt & Whitney jet engines announced that it will become the first engine maker to produce parts for its competitor's best-selling jet engine.

The initiative, which will be called Global Material Solutions will supply parts for about 200 UAL CFM56-3 engines. The move by Pratt & Whitney could intensify competition within the jet-engine manufacturing business, in which the company has seen its share of the market shrink in recent years.

Third-party manufacturers have for years made simpler spare parts for jet engines, which they sell to airlines and maintenance facilities. But this marks the first time that a major engine company has chosen to make new, more-integral parts for a competitor's engine. Pratt & Whitney says it has invested tens of millions of dollars to re-engineer 55 safety-critical parts that until now have been the sole domain of the OEMs. The first parts are expected to be available in early 2007

The CFM56 engine is built by GE and its French partner, Safran SA's Snecma Moteurs, through an alliance known as CFM International. Introduced in the 1980s, more than 15,000 of the engines have been sold, making it one of the most successful engine models of the jet age.

Although the $500 million in yearly revenue that Pratt & Whitney hopes to generate from the venture within five years is small in terms of the overall market, the move will likely spark a response from GE and its partners, particularly if Pratt is successful at making inroads with other major airlines. Matthew Bromberg, the Pratt & Whitney vice president in charge of the new business, said the airline industry has been making "loud cries" for lower-cost alternatives. A GE spokesman said company officials are accustomed to third-party suppliers entering the market and believe that "constantly upgrading the engine" is the best defense. "The best our competitors can do is replicate for a cheaper price what exists today," he said.

Pratt declined to offer a competing engine to the CFM56 in the 1980s, ceding the market for the Boeing 737 entirely to CFM. The blunder enabled GE to pass Pratt & Whitney as the world's dominant engine maker. Pratt & Whitney Chief Executive Louis Chênevert, and the CEO-designate of United Technologies, said the company considers the new business a "big, bold move" that will signal to airline customers world-wide that Pratt & Whitney is serious about remaining a competitor. He said selling spare parts to CFM customers "should help us rebuild relationships that have softened" over the years.

Note: GE currently overhauls more P&W engines than does P&W.


• Motorola Launches a Suite of Product- Services

Motorola is extending the life of its products through product-services offerings. This is a new approach for telecommunication OEMs.

Motorola, Inc. (NYSE: MOT), a $36B/year wireless and broadband communications products company, launched a suite of product-services to assist telecom OEMs to manage the product lifecycle output stage of the Motorola communications servers employed in their products. Motorola provides product-services such as repairs and supply chain services that afford end-users greater control of the productivity of their assets. Jorge Magalhaes, Solution Services Director, Embedded Communications Computing said, “These services can extend a customer’s investment beyond the traditional five years to provide 10 years or more years of product life.”


GE, The Leader In Innovative Product-Services, Is Always Seeking People Of Quality To Manage Aspects Of Its Product-Services Businesses

Below are a few positions that reflect GE’s approach at Product-Services

Position: Services Sales Leader
Business Unit: GE Industrial, Equipment Services
Location: Chicago, IL
Job #: 484594 Posted: Jan 31, 2006

Responsibilities:
Develop / Launch / Achieve the operating plan for the Services model (revenue, margin, capture rate / retention, customer satisfaction.) by developing both regional /local sales strategies for the Services Model
Direct sales responsibility for the Services sales activities and leads the Services Account Managers to exceed the Operating targets Drives the business to achieve Revenue, Margin and Customer NPS targets
Effectively leads the Services Account Managers Engages the entire GE Rail commercial team on Service Sales prospect identification Effectively communicates the Services Sales strategy across all Functions to maximize growth potential Coaches and trains the Services Account Manager on pricing, value proposition and customer satisfaction) Identify/Establish /Develop strong relationships with customers.

Qualifications:
5-10 years of Sales Management experience
Financial & Business management experience
BS/BA degree
Able to communicate clear vision with specific objectives across functions
Ability to work and interface with all levels of organization.
Strong analytical and negotiation skills

Desired:
MBA
Supply Chain Services Sales experience

General:
Rail Services is a leading service provider to the global rail industry. As a member of General Electric Company's (NYSE: GE) GE Equipment Services, Rail Services leases approximately 180,000 railroad cars and 150,000 inter-modal trailers, containers and chassis to regional and national rail lines and shippers.


Position: Life Cycle Manager
Business Unit: GE Healthcare
Function: Engineering/ Product Development
Location: Menomonee Falls, WI
Job #: 485780 Posted: Feb 01, 2006

Responsibilities:
Enhance processes to improve service parts management through the Product life cycle
This will include but is not limited to, developing, evaluating, and implementing new methods to handle new product introductions (NPI) and product end-of-life. Additionally manage major product alterations, manufacturing changes and identify and execute total supply chain optimization solutions that meet customer CTQs. This must be accomplished while balancing inventory reduction and cost improvement goals The position will play a key role in process improvements that are necessary to the yield continued success of the Global Service Parts and Operations team

Deliverables:
The primary deliverable is to develop new processes that contribute to the overall reduction of parts inventory, which will result in substantial cost savings. In addition, the process enhancements will improve parts availability that will lead to greater customer satisfaction.  Demonstrated excellence in personal leadership values and highest integrity w/ ability to energize team to perform at the highest levels.

Results-driven, with ability to think strategically and influence decisions with key business leaders
Demonstrated business, analytical, facilitation, communication and process skills.  Black/Greenbelt Certified (GE Employees Only) . Ability to work cross functionally with many departments and levels in the organization.  Knowledge of supply chain management including order processing, inventory control, logistics. Candidate must have aggressive, results-orientated focus on customer satisfaction and business process improvement

Qualifications:
B.S. Degree in Engineering, Business Administration, or related field or equivalent experience
5-7 years significant service management experience. Demonstrated excellence in leading organizational change, using Six Sigma, CAP, LEAN

Desired:
Strong analytical capabilities, problem solving ability, conflict resolution and communication skills are also necessary. Six Sigma experience is also a plus.

General:
The primary deliverable is to develop new processes that promote service experience and business growth. The position will drive overall reduction of parts inventory, which will in turn result in substantial cost savings.


Solutions Manager - Freight Telematics
Business Unit: GE Industrial, Equipment Services
Function: Marketing
Location: Barrington, IL
Job #: 500334
Posted: Mar 07, 2006

Responsibilities:
As a member of the GE Asset Intelligence Solutions & Services team, this individual will: Develop and Implement global transportation Supply chain solutions and Go-To-Market strategy for Food, Pharmaceutical and other industries where temperature and load conditions drive the value chain
Support business customer solutions & services (Value Added Services) strategy and tactics for market penetration to meet/exceed 2006 and future operating plan for, revenue, and volume. Subject matter specialist for Grocery and retail industry Solutions/Services offering, with responsibility for implementing plans for segment penetration. Provide Solution expertise (including branding & marCom) for current and future derivations of Refrigerated solutions through NPI/NSI process based on GE business product management MGPPs. Support solution & service cost strategy with internal & external stakeholders
Lead development of tools for Product and Sales management team to execute on commercial plan
Build and maintain a close relationship with GE businesses and key end customers. Work cross functionally with I/T, NPI/NSI, Quality, Technology, Engineering, Operations and other functions to implement & execute projects critical for Solutions & Services success. Implement strategies with customers in multiple segments that could benefit from Solutions offerings. Perform presentations to Commercial Vehicle customers and demonstrate how AI product will meet customer needs.

Asset Intelligence provides worldwide mobile-asset tracking and condition-monitoring products and services. This business unit responds to the market's desire for logistics productivity, remote asset condition information, supply chain information, and comprehensive homeland security systems that can track assets globally. Asset Intelligence currently tracks thousands of assets under its VeriWise technology platform, which has been identified as an "Imagination Breakthrough" at GE. The business is also focused on significant research and development. Asset Intelligence is also expanding its operating platform to support applications that meet the needs of a wider range of segments within the transportation industry. These new high-IQ products and services help customers increase productivity, reduce costs, and meet regulatory requirements.


Great New Book That Validates The Macrotrend Leading To Capital Good OEMs Evolving Into Suppliers Of Product-Services…Or If Not OEMs, Then Third-Parties Will Provide Product-Services…But It Will Happen!

Lean Solutions : How Companies and Customers Can Create Value and Wealth Together,
by James P. Womack, Daniel T. Jones (Same authors as “The Machine That Changed The World” and “Lean Thinking”)

The structure of Lean Solutions centers on 6 requests that the authors believe customers implicitly demand from their suppliers:

  1. Solve my problem completely
  2. Don't waste my time
  3. Provide exactly what I want
  4. Deliver value where I want it
  5. Supply value when I want it
  6. Reduce the number of decisions I must make to solve my problems

The authors believe that a massive disconnect exists between customers and suppliers today. Capital goods end-users have a greater selection of higher quality products to choose from and can obtain these items from a growing number of sources: OEM-direct, distributors, integrators, leasors… each promising to solve our every need. So why aren't customers any happier? Because everything surrounding the process of obtaining and using all these products causes us frustration and disappointment. Why is it that, when products fail to satisfy our needs, virtually every interaction with help lines, support centers, or any organization providing service is marked with wasted time and extra hassle? And who among us hasn't had a technician leave, and the problem still hadn’t been resolved?

In their bestselling business classic “Lean Thinking,” James Womack and Daniel Jones introduced the world to the principles of lean production -- principles for eliminating waste during production. Now, in Lean Solutions, the authors establish the groundbreaking principles of lean consumption, showing companies how to eliminate inefficiency during consumption.

The problem is neither that companies don't care nor that the people trying to fix our broken products are inept. Rather, it's that few companies today see consumption as a process -- a series of linked goods and services, all of which must occur seamlessly for the customer to be satisfied. Buying a capital good, for example, involves researching, purchasing, integrating, maintaining, upgrading, and, ultimately, replacing it.

In this landmark new book, James Womack and Daniel Jones deconstruct this broken producer-consumer model and show businesses how to repair it. Across all industries, companies that apply the principles of lean consumption will learn how to provide the full value customers desire from products without wasting time or effort -- theirs or the customers' -- and as a result these companies will be more profitable and competitive.

Lean Solutions is full of surprising success stories: Fujitsu, a leading service company for technology, has transformed the way call centers solve problems -- learning how to eliminate the underlying cause of current problems rather than fixing them again and again. An extremely successful car dealership has adopted lean principles to streamline its business, making for dramatically reduced wait time, fewer return trips, and greater satisfaction for customers -- and a far more lucrative enterprise.

Lean Solutions will inspire managers to take the first steps toward perfecting their company's process of giving customers what they really want….and that is what Product-Services is all about!


Capital Good End-Users Want Product-Services That Provide Lean Solutions To Manage A Product : They Want To Focus On The Truly Value-Added Process Of R&D

A recent op-ed piece in the Wall Street Journal, from House Minority Leader Nancy Pelosi, entitled "R&D Democrats" says it all: "America has always been committed to being number one. Every scientific advance once thought impossible that has been achieved--splitting the atom, landing a man on the moon, mapping the human genome--has been achieved by Americans. We accomplished these extraordinary goals, and then benefited from the jobs, industries and successive innovations they have yielded because our country was willing to make two critical commitments. We invested in the education and ambition of the American people, and we promoted an entrepreneurial culture that supports long term, high risk ideas."

Where do some of the things we take for granted, the every day items like Pyrex cookware, or Velcro fasteners, or light emitting diodes come from? All around us, from color laser printers to mass spectrometers, from the computer mouse to or open-sided MRIs, from satellite radio to all aluminum engines (which save weight and improve performance), from Teflon pans to "natural light" bulbs... we stand in awe of the products churned out by research and development efforts of companies around the world. Even the ability of our Captain Crunch cereal to stay crunchy for at least fifteen minutes is a testament to the research and development capabilities of General Mills!

BASF, the German chemical company, has a commercial that states "we don't make the things you buy, we make the things you buy better." Increasingly that is becoming truer of OEMs. In the book “Our Brave New World,” three broad functions of companies are described:

  • to design a product
  • to manufacture a product
  • to distribute a product

And successful companies in the Western world are deciding to focus their resources on the first-- designing products.

In the legacy business model, US manufacturing firms achieved growth by physically producing, with company owned assets, more of the same products. Improvements in effectiveness, especially in quality, were not of primary concern (anyone who owned an American made car in the 1970s or 1980s can attest to that). Increases in volumes, without damaging pricing, were easily achievable with proper planning because there wasn't an abundance of supply relative to demand. With the Cold War, trade restrictions and Federal Reserve monetary policies, global markets were less efficient and a pricing model of: this is my cost, this the profit I want to make, so this is my price, was easier to realize.

In the 1980s, with the backdrop of a falling rate of inflation and freer trade, vertically integrated companies realized they could enhance profitability by locating productive assets in places like Japan and Korea--they began the process of no longer being a vertical integrated manufacturer. This relocation of fixed assets drove profitability by allowing companies to shed capital consuming functions and focus on profit producing ones.

Then, in the early 1990s, the opportunity to outsource the manufacture of an entire product availed itself as global borders opened and capital flowed more freely around the world. Highly efficient producers that could fulfill any order with impressive quality and speed sprang up everywhere, from Southeast Asia to Korea, from Central America to Eastern Europe.

The technology revolution was an accelerant to this trend of outsourcing, as far- flung participants in a supply chain could be connected and efforts coordinated. Just-in-time inventories, supply chain management and business process outsourcing became part of the lexicon of business.

OEMs realized that in a deflationary boom environment, characterized by plentiful physical fulfillment, to sustain profits and to grow, they had little choice but design new features, improve existing products and create whole new products or product categories. In short, they had to become more than a build-and-sell enterprise.

And this meant a different kind of investment. Today, less capital is being invested in the expansion of physical capacity and more capital is being invested in the expansion of intellectual capacity. Below is a cross-section of some of America's largest companies. From technology to auto manufacturers, from drugs to aerospace... And everywhere that is analyzed, the following trends in R&D expenses relative to capital expenditures are observed:

  • They have grown much faster
  • They were unaffected by recessions, mid-cycle slowdown or financial crises
  • The rate of increase, in some cases, is accelerating
  • The trends really diverged in the early 1990s (the beginning of the explosion in the trade deficit)
  • They have led to strong productivity gains

Let us start with an industry in which R&D is crucial: pharmaceuticals. R&D expenditures for Pfizer in 1991, at $1 billion, were only 25% bigger than Capex (capital expenditures) of $800 million. But after growing since then at a near 15% compound rate, R&D is now almost 3x the size of Capex.

At Johnson and Johnson, the surge in R&D relative to Capex is more pronounced as the two costs began the 1990s at parity. But in the past 15 years, R&D has grown at a 12% compound rate while Capex has grown at a 6% rate. Now annual R&D expenses are 2.5x annual capital expenditures. Neither a mid-economic cycle slowdown, nor recession, affected R&D, though it definitely affected Capex.

And the same is true of OEMs. Boeing's R&D doubled over the last decade and a half while Capex has been halved. The acceleration in R&D from 2000 to present in the face of a recession and a stock market crash is rather impressive. A similar trend is witnessed with United Technologies.

For the first time in its history, Dupont, spent more on R&D last year than it did on Capex. Capex is currently a fifth the level it was in 1991.

Ford spent more on R&D last year than on Capex; almost $500m more. Capex has been flat for 15 years while R&D has doubled.

Another example of stagnant Capex and vibrant research and development can be found at Proctor and Gamble. In the next recession, Capex will likely fall to levels permanently lower than R&D.
Looking at capital spending numbers gives a very incomplete picture of the health, and innovation, prevalent across the US corporate sector. What appears to matter most is R&D, not Capex. And those who do not keep in mind the R&D trends will continue to miss an important piece of the puzzle.

For suppliers of Product-Services, end-users want lean solutions sooner, rather than later!

Excerpted from “The Innovation Boom,” by Steven Vannelli