Box 2, Folder 49 – General Speeches
February 28, 1962, What Management Wants to Know About New Product Proposals, AMA, Chicago
2/28/62, Typewritten speech on above subject given by Packard.
“There is no subject more important for the manager of today than the problem of generating good new products unless it be long-range planning, and the two subjects are hardly separable.” Packard feels this interest in new products “has implications of larger significance. The survival of the free enterprise system will probably depend in the end on its ability to provide a better life for the people in the society which supports it. There has been much talk about the need for accelerating the growth of our economy. Behind this lies the need to continually improve the conditions for all of our citizens here at home – to demonstrate to the doubting part of the world that a free society can accomplish this mission better than can a socialist society….In this regard the ability of American management to improve its efficiency in translation of the advancing storehouse of new knowledge being generated from research into profitable new products could well be the major factor in accelerating the growth of our economy.”
Following this opening Packard says his “experience in this specialized area is limited to the new product program at the Hewlett-Packard Company and so I would like to tell you something about what we have been doing there, and then attempt to give you some general idea of how we go about the job.” Packard explains that HP activities are “devoted exclusively to the development and manufacture of general purpose electronic measuring instruments. About 20% of our sales are to the government agencies, largely in defense and now space. At least 25% of our sales go to prime contractors for the government, about 15% go to foreign markets, mostly Europe, while the remaining 40% goes to a wide variety of commercial customers generally in the industrial field.”
“Our sales have grown from an annual rate of 2.3 million in 1950 to the current annual rate of 100 million in 1962.” Packard acknowledges that some of this growth was from acquisitions but “all of the companies we have acquired are making the same general class of product, and have had most of their growth from new products generated during this same period.” Packard says that “most of the products we were making in 1950…we are still making today. But those products including a few which have been redesigned will account for only about 5% of our total sales in 1962. To maintain even this level of sales from technical products over a 12 year period has required some redesign, considerable quality improvement, strong effort in sales and service – and of course a good group of products to begin with. But with what might e considered a reasonable good job in management other than new product development our sales would, as I see it, have increased from 2.3 million to 5 million in more than a decade. This means over 90 million in sales we expect in 1962 will come from new products developed during the past 12 years. The general pattern of each new product – if it is a good one – and we will have to admit to a failure now and then – but each good new product will build up in volume over about a two year period and then reach a sales level that will remain relatively steady over a useful product life of often ten years or more…”
Packard describes the criteria they use in evaluating new product proposals and summarizes these in question form:
“1. Is it our main field of interest – is it a measurement device?
2. Is it a general purpose instrument – is it likely to have a broad market?
3. Is it a significant contribution to the field of measurements?”
Packard explains that “As a company grows it is not possible for the President or the top vice-presidents to continue to be in on the consideration and approval of each new product – this responsibility can be delegated to the division management,” but he adds that they must use the above criteria and top management will take part in continuing evaluations of the project.
Packard says “There are some more specific criteria which we use to test each project which is proposed.”
“First as to policy – we believe that a good research and development department must be established on a stable long-term basis. For that reason we establish a level of activity which we believe can be maintained over a long period of time this entire activity is supported out of current income and is established in the general range of 6% to 8% of our sales dollar. This determines the number of scientists and engineers we have in the company and we add new people for this activity on the theory – and likelihood – we will have a long term opportunity for them.”
“The management responsibility here then is to see that this group of people are working on the most promising projects. Toward this end we make the best guess we can as to the probable development cost. Although we do not keep budgetary control, we do keep accurate cost records on each project. We also estimate the sales volume over a five year period and the profit we think we can establish. Our experience shows us that we should expect to obtain at least five dollars profit ever a five year period for each dollar we spend on development.”
“We have often considered the question of putting a large task force on a given project and hopefully accelerating the development, versus putting a smaller task force and allowing extra time. There seems to be no general rule that works best although we are tending to use larger groups today than we felt necessary”
“Another specific consideration we give to each project is whether we have the total capability to put the project through all stages of engineering. Often we find that we have a bottleneck in tooling or in some special production techniques, and we are anxious to see that these matters are properly considered on each individual project.”
Another important consideration which Packard discusses is that “…there be thorough communication between the people who understand the requirement, usually your marketing people, and the people who are going to do the development – your scientists and engineers. ….It is a major responsibility of management to establish the structure and atmosphere for this communication to be maintained during the course of each project.”
“And finally the matter of motivation. The new product process is a creative endeavor. Your people are being charged to do something that has not been done before. After all they aren’t sure how they are going to do the job when they start. This is especially true on products that involve important contributions to the field. Enthusiasm goes a long way and must be sustained if the project is to be really successful Often the simple fact that you top management people take an interest in a project – a continued interest – can be an important factor in generating the enthusiasm and sense of importance to the development team that will spell the difference between success and failure – or in the time necessary to get the job done.”
“This job of producing a continual stream of outstanding new products for the future is probably the most important and most challenging job in management today.”
March/April, 1962, Two letters from Packard and ten from his Secretary, Margaret Paull, sending copies of the above speech to people who requested same.
Box 2, Folder 50 – General Speeches
November 8, 1962, What the President Wants to Know About Technical Programs, AMA,
11/8/62, Handwritten notes by Packard for this speech.
Packard makes some general observations about American Industry.
“a. We have progressed from [an] economy based on raw materials and energy of manpower to an economy based on brainpower. No only new devices, but also service.
“b. We do ourselves a disservice to measure our growth in GNP- steel production – carloadings – etc. [There is] much evidence to demonstrate that our standard of living has grown faster than GNP or conventional indicators.
“c. One of [the] most important characteristic of [the] American economy is its unique ability to convert new knowledge into products that have
1.Usefulness (in concept)
2. Quality (in practice)
3. And as a result real value to the buyer.
“And so in many ways the Technical Programs of our companies are the most important programs we have to insure Stability and Growth to our companies.
“The magnitude of R&D spending is not an adequate measure of the value to technical effort but it is important for any given business to have a technical effort commensurate with the level for its segment of the industry.
“And the range is wide.
[For] all manufacturing [R&D spending runs] 4% -1/2 Gov’t financed, 1/2 company financed.
Food less than 1%
Industrial Chemicals 6%
Scientific instruments 7% 1/2 [government funded], 1/2 [company funded]
Electronics & Communications 10% 2/3 Gov 1/3 Company
Aircraft 20% 7/8 Gov 1/8 Company.
“And as a final generalization it is important to recognize that:
The character and success of your technical programs todaydetermines perhaps more than any other factor the character and success of your business tomorrow.”
Moving to a description of the way things are at Hewlett-Packard Packard describes the business at HP as “Electronic Measuring Instruments. In terms of above classifications Scientific Instruments & Electronic & Communications.”
“We devote about 10% of sales dollar to R&D – more than 9% Company sponsored & less than 1% Government supported
“Sales without acquisition 1952 – 5 million
With acquisition 1962 – 100 million
“If we reconstruct acquisition back to 1952 [the sales would be] 18 million to 100 million or 5 times growth in 10 years.
“Growth has been primarily [the] result of new products from R&D. More than 1/2 of 1962 volume is from instruments developed & put into production since 1957 – 5 years.
“[There is] ample evidence that even the relatively good group of products we had in 1957 would have produced only minor growth… – not considering new products
“We have established some general criteria to guide this program
1. We concentrate all effort in area of electronic instrumentation – General Purpose.
2. We back up technical program directed electronic instrumentation with specialization in
a. Manufacturing – facilities know how – quality control emphasizing needs of this field
b. Sales Program – Selection of people – training – service oriented to the instrumentation area.
3. We place emphasis on making an important contribution in the field.
a. Example of oscilloscopes where [there was a] good market – [and we] tried to go in by “brute force” doing the job just as well – not successful.
b. Same area where we made a very important technical contribution – good value – good profit.
c. We have seen examples where competition has attempted to do same in our field – copy products – add frills – no success – now selling out on fire sale basis.
“The success of a technical program depends first on [the] selection of [the]right new product projects. We (WRH and myself) were very close to this & personally involved. Several years ago [it became] evident that we could not personally participate in [the] evaluation of each program.
[We] tried to have review meetings, [but it] took two days just to go over [the] briefest review of every project. King Solomon feeding all animals.
“As a result, established criteria [and] assigned responsibility on divisional basis for product areas. Criteria:
Profit over five year product life [divided by] the cost of development should average 5-6/1. May be reasons why 1 or 2/1 will be acceptable. A good product can be 10 – 20 to 1.
Group of people concentrating on all factors in a given product area. Close coordination between technology of that area – manufacturing capabilities and market problems.
Motivation that comes from small group of people having opportunity to do something where they can enjoy result of their success.
“In the matter [of ] the President
1. Establish well defined objectives
a. Concentration on instrumentation
b. Make important contribution
2. Provide environment where capable people can work toward those objectives with freedom and with enthusiasm.
“In answer to the question “What the President wants to know about technical programs:
He wants to know that they are at a level which will make it possible for his company to keep up with the industry.
He wants to know they are taking his company in the direction he wants to go.
He wants to know they are being accomplished with some measure of success in terms of adequate profits for each dollar of expenditure.”
10/29/62, Letter to Packard from Philip Marvin AMA, Asking if Packard would be willing to serve as chairman for the half-day session at the November 8 conference where Packard is to speak.
10/31/62, Copy of letter to Philip Marvin, AMA, from Packard saying he would be willing to serve as chairman for the half-day session.
11/19/62, Letter to Packard from Philip Marvin, AMA, thanking him for participating in the AMA California program.
Box 1 Folder 20 – HP Management
January 5, 1962, Sixth Annual Management Conference, Monterey
12/19/61, copy of a typewritten letter to Dean Ernest C. Arbuckle from Dave Packard expressing the hope that Arbuckle will be able to join the conference. Packard says they intend to spend most of the day discussing how various service functions fit into the total organization – particularly marketing and engineering. Packard expresses the hope Arbuckle can come.
1/5/62 Copy of the agenda for the conference.
Box 1, Folder 35D – HP Management
2/23/62, Copy of internal HP memorandum from Lee Seligson to Barney Oliver reminding him of his scheduled participation in a forthcoming two day conference for engineers. Seligson summarizes the speakers and topics.. Attached are some pages handwritten by Packard outlining his remarks.
Packard lists such topics as:
Balance sheet analysis
Engineering overhead – trends
General course for the future
General problems of Divisionalization
Opportunities for engineers
Importance of New Product Development on Growth of American Industry
Undated, early 1962, Handwritten notes by Packard titled: “Sales Meeting Speech”
“Thanks everyone for help in making 1961 a good year.
“1961 was a year of change
Time & Frequency
“New products – We intend to continue to push our capabilities into other areas in future.
“Our success this far has been the result of:
Excellent performance in the detail of day to day job.
The enthusiasm of everyone
A good sense of direction – a common purpose
We have developed a good ability to keep one eye on the ruts in the road and the other eye on the stars.
“Gentlemen, we intend to continue to build the Hewlett-Packard organization from the clerk to the scientist – from the janitor to the salesman – from transducers to systems – from audio oscillators to sampling oscillators – in every area in which we are engaged – into the best, hardest hitting, most capable company in the world.
“If there is anyone here in this room today who can’t help us get this job done – we’ill damn well find someone who can!”