There has been worldwide academic support for the proposal to establish a new, independent, non-commercial body that can fund highly-advanced research into Product Lifecycle Management. (2PLM August 25).
The PLM-IRF Survey of researchers at leading universities received 44 responses from 28 countries, and identified 21 areas in which the PLM of the future could transcend today's constraints.
It is now time for industrial companies to show that they have the vision and ambition to take advantage of these new possibilities. Current progress in PLM is flattered by the effects of social and internet technology. If these are stripped away, then the PLM of ten years' time will be little better than it is today.
PLM is a business improvement discipline for industrial companies; and industrial companies are always looking to advance, be more effective, compete or even transform. To say that "the future will be the same as today" is to stagnate.
When the PLM International Research Foundation is funded it will create a single PLM research programme that unifies the globe. This force needs to be directed for the good of the manufacturing and product-related companies that will benefit from it.
That is why industrial companies should engage with this initiative. Academic vision will not be enough. There needs to be some clear industrial engagement and direction so that the new research is real and valuable. If you would like to know more, you can obtain a Overview of the Survey via the email link below. This will give you the background information, and a new Proposal will be published in the next few days.
The July 7, 2014 issue of 2PLM introduced the scope and focus of recent Goldense Group Inc. (GGI) research on R&D Operating Environments, Organic Innovation, Open Innovation, Intellectual Property, and "The Top Corporate Metrics used to measure R&D and Product Development".
At GGI, our goal in each primary research effort during the past fifteen years has been to focus four areas of the research effort on emerging new practices, or on rapidly evolving or changing existing practices, to learn rates of change and/or growth.
In our recent research effort, the "2014 Product Development Metrics Survey", the four topics of R&D Operating Environments, Organic R&D Innovation, Open R&D Innovation, and R&D Intellectual Property Practices were chosen as they satisfy those parameters. In addition, they are having an impact on the R&D metrics that corporations use.
The July 21, August 4, August 25 and September 8 issues of 2PLM addressed the research findings regarding these four areas.
In this sixth and final piece of the six part series, the research purpose is more akin to benchmarking than to discovering new and changing industry practices. In each research effort of the past fifteen years, our researchers have presented a list of the "metrics that CXOs are most likely to use to oversee R&D output, productivity, effectiveness, and efficiency." Respondents are asked simply to put a check mark next to any metric that is generally part of management team and corporate reviews. The "Most Frequently Used Corporate R&D Metrics" results from tabulating the responses. The list of metrics is far from static over the past fifteen years.
Metrics Are More Abundant: The cost of a metric has been steadily decreasing as computers continue to penetrate every aspect of life. As an information society, people's tolerance for how many numbers cross their path in a day has grown accordingly. There has been an explosion in the daily use of numbers, codes, acronyms; and, there is more to come. R&D and Product Development metrics are no different. In the mid 1990s, there were 30-50 CXO-level R&D metrics that essentially covered all companies. In 2013, a pared-down list of 101 metrics was presented to respondents.
Innovation Metrics Have Increased: Aside from computers and the advent of an information society causing a growth in R&D and Product Development metrics, there are a number of other dynamics at play. There has been a growth in the ways corporations innovate. Companies are finally finding a way after decades to develop meaningful CXO-level business metrics for research and advanced development organizations. Open Innovation and Intellectual Property are increasingly becoming ways to generate revenue and profit, and they need metrics. Functional and technical competencies are becoming more important to meet increasingly refined and specific product needs that must be delivered at minimum cost. The increasingly complex world is affecting measures of corporate risk. Before innovation, measures for lean, six sigma, and flexible/agile took their place this past decade. Today, approximately 200 CXO-level R&D metrics "cover all companies."
Management Science Failures & Successes: More experimentation is occurring as the cost of generating a metric continues to decline. Some experimental CXO-level metrics have risen in usage, and then fallen the past decade as corporations found the metric to have low utility. "NPV Efficiency" is perhaps an example. Another experimental metric went the other way, and experienced a meteoric growth in usage rivaling 3M's "Vitality Index" introduced in 1988. "Return On Innovation" evolved in the early 2000s as companies increased their emphasis on innovation. The metric has an acronym problem though. It's shorthand is therefore "ROInnovation." Without getting into what is a new product and what is not, the metric is "profits from new products divided by R&D spending for the new products." Deciding what spending to include in the denominator, like deciding the numerator, is sufficiently ambiguous. One does need to pay attention when examining reported figures to avoid the glare of overly bright and shiny numbers. Nevertheless, in some fashion of calculation, ROInnovation has risen from nowhere to now be the tenth most used metric by corporations for R&D. The Vitality Index, also on a meteoric rise since the 1990s, is now the third most used metric and the number one performance metric.
Monitoring vs. Performance Metrics: Metrics do not always measure output, productivity, effectiveness, efficiency or related performance parameters. The number one and two most used metrics are "R&D Spending as a % of Sales" and "R&D Headcount." These monitoring, or status metrics, must be present in a CXO metrics portfolio alongside performance metrics. Spending is an input metric. Headcount represents greater than half of R&D Spending at most companies. Status metrics related to capacity regarding people, projects, pipeline, and portfolio are also necessary.
The Top 10 R&D Metrics: The following table shows the frequency of use of the ten most frequently used metrics. For perhaps the first time ever, the top dozen metrics are mostly about business input to, and output from, R&D. Traditional R&D measures that focused on internal operations and projects are no longer the central focus of management oversight to attempt to increase understanding. R&D is becoming demystified.
Examination of the Top 10 metrics shows that there is little consistency across companies for R&D. The tenth most used metric has not yet achieved penetrating one-third of industry. If one compared operations and other transaction processing function metrics across companies, one would find greater penetration levels and more consistency across companies. R&D, more difficult to measure, is evolving at a much slower pace. Challenges about defining such items as "new products" and "what spending went in to them" are among the reasons.
The Top 100 R&D Metrics: The top hundred metrics range from experimental metrics that may or may not become generally used across companies, discussed above, to metrics that are needed to achieve specific R&D strategies. Companies that wish to be known as "innovators" measure items such as "New To The World" and "New To The Industry." Companies having "follower" and "aftermarket" strategies might measure "New To The Company" and "Time To Market After OEM Introduction." Intellectual property metrics for sales and licensing revenues and profits are also increasing in usage. As intellectual property becomes increasingly monetizable and liquid, expect to see some measures hit the mainstream. Research findings indicate significant corporate activity experimenting with the management science of intellectual property. Finally, all measures of portfolio and pipeline value have grown steadily in penetration; as have measures of profit per unit of time and by product category. Revenue is no longer the sole output metric being examined that is expressed in currency terms.
SUMMARY: As a whole, since the inception of the Vitality Index in the late 1980s, R&D measurement has generally been increasing in business focus as corporations better grasp how to manage R&D; without their leaders having to necessarily understand the technology within R&D. As a result, CXO-level R&D measurement is becoming mainstream and is increasingly expressed in business terms. R&D has always had a larger share of the CEO's metrics portfolio than any other business function, and this continues to be the case. These past few years, just about all analysts at the London, Euronext, Deutsche Börse, Swiss and other global stock exchanges are inquiring about new product revenues and profits, intellectual property values and rights, and the health of the product pipeline over a number of years. CEOs and CFOs are increasingly pushed to be specific about monetary expectations and the calculations behind their numbers. Market caps are rising and falling depending on the convincingness of their responses. Accordingly, it was observed in 2013, based on fifteen years of research, that business metrics for R&D are rising to overtake technical and operational R&D metrics as the most frequently used corporate-level metrics. R&D is becoming demystified and is more easily discussed by business leaders in financial terms.
A Note About The Research: The "2014 Product Development Metrics Survey" study was conducted by sending questionnaires to a wide range of companies developing products throughout North America. Participating companies had headquarters throughout the Americas, Europe, and Asia, but their response was for North American R&D-Product Development operations. Complete data sets were received from 200 companies. Consumer, industrial, medical, chemical, and automotive/vehicular products were the top respondent industries. Participants completed 31 questions across the five primary research subjects. The research period was September 2012 to October 2013. The results were published March 3, 2014 in a 138-page report. This research is statistically valid and provides a Margin Of Error for each research question.
It is very useful for the PLM Team to know how to produce quantified submissions for new projects, but it also helps if everyone else understands what is happening. It is much easier to push against an open door.
There are many misconceptions about PLM metrics, and it is important to start from the right basis. There are also many people who need to be involved, from all parts of the organisation, and they all need a common understanding of what the PLM Team is trying to achieve.
The PLM Financial Primer provides the answer. Newly-updated to Version 2.0, it provides a high-level overview of PLM financial management for everyone who needs to be involved in a PLM feasibility or justification activity.
The Primer is a companion document to the PLM Project Justification Handbook (2PLM Sept. 08). It enables the PLM Team to educate stakeholders in a new PLM deployment to understand the principles and issues that are involved, before the detailed project justification methodology is applied.
Roger Tempest is co-founder of the PLMIG. Membership of the PLMIG is available via membership@plmig.com.
SAP announced that the International SAP Conference on Product Lifecycle Management (PLM) 2014 will be held on 17-18 November, 2014 in Düsseldorf, Germany. The Conference Theme is "Drive Sustainable Innovation across Your Full Product Lifecycle".
The two day customer-centric event has been specifically designed for process and discrete manufacturing industries. Attendees will gain a 360 degree view of all product related processes - from product conception and design, through to manufacturing and service. They will learn first-hand how major international organizations are utilizing SAP PLM to integrate business processes end-to-end, foster innovation for competitive differentiation and ensure compliance to maintain profitability.
The agenda will be jam-packed with customer case studies, the latest news and updates from SAP, networking opportunities, and workshops featuring best practices for product lifecycle management.
I just saw a report on a study that showed that more than half of new product introductions [NPI] fail.
There are many components of introducing a new product and in most cases there is not a formal process in place.
Someone will come up with an idea for a new product or service. The idea can come from a customer or anywhere else.
Marketing and others will determine if this new product or service makes financial sense for the company. If they create this product or service, can they make a profit? Is there a demand for it? It needs to make business sense to pursue it.
If they determine that it does make business sense, many departments will begin working on their part of the 'whole' project.
Marketing will begin identifying all of the marketing communications [marcom] that needs to be created to support the roll out. The list includes things like brochures, flyers, demonstrations, web pages, Email campaigns, naming your product or service, branding, white papers, webinars, pricing, sales channels, sales training, packaging and more.
Depending on the size of the company, there could be many people involved in the development of new products. Each will go through a process to produce their deliverable. That process will go through the following steps at a minimum: create, edit, approve and release.
There is a person responsible for overseeing these activities and they will need to make sure that everyone is telling the same story.
At product introduction, the many departmental parts must come together to form the 'whole'.
An NPI project includes managing the many different processes and managing the information created by all of these activities. Most of you have seen that sometimes there is not a formal plan for bringing all of the parts together and someone is inevitably late.
PLM software is designed to manage these kinds of activities. It can help each department work collaboratively as well as provide the control and visibility to help departments complete their work on time.
It can be particularly effective in managing the marketing tasks of new product introduction. I can't see how it wouldn't reduce the failure rate.
According to Google Scholar, as of September 19 2014, Product Lifecycle Management: Paradigm for 21st Century Product Realisation was the PLM publication most frequently cited in journal articles, technical reports, books and theses.
Way back in the Sherpa days, our president used to always tell us that our software was designed to get the right information to the right person at the right time. At the time, I wasn't excited about this being the best way to describe what our software did. However, this description has stood the test of time. It's loaded with lots of implied information.
Information is any electronic file. The 'right' information is the version of that information that is needed by a person performing a task. Access controls make sure that it is the 'right' information.
Person is anyone in a process. The 'right' person is the person that needs that information to perform their task. Based on where the process is within its progression, the software knows who the 'right' person is.
The right time is when they need it. Typically, this is a process that you want completed in a timely fashion so the software makes sure the information arrives when it is needed.
Let's look at one example. The most expensive process for a manufacturing company is their engineering change process.
Since most PLM software today has robust business process management capabilities, it can have a huge impact on the time it takes to turn around engineering change requests.
At one of my customers, ECRs were taking an average of 45 days to turn around. After implementing this process in their PLM, their ECRs were taking an average of 5 days and emergency changes could be completed in an hour.
PLM software can really make a difference.