Recently, the American Productivity and Quality Center (APQC) teamed up with product management expert Robert Cooper to complete a cross-industry study on best practices in product innovation. Seventy-four percent of the companies participating in the study said that they have a formal process in place for developing new products. However, nearly half admitted that their process is not being used. What can your company do to avoid this fate?
Whether your organization is just beginning to think about developing a product life cycle management (PLM) process or is already in the early stages of implementing one, below is a list of considerations that will help ensure your process is a success.
PLM Is a Business Process
It is common to view PLM as a process that belongs to R&D and is used primarily by engineers. This misconception results in senior leaders paying little attention to execution of the process.
PLM is a business process. Its most important function is to facilitate product investment decisions. Everyone, including CEOs, finance, marketing, manufacturing, IT, and R&D, needs to understand the importance of the PLM process and have a stake in its outcomes. Organic growth of the business depends largely on broad stakeholder commitment to ensuring the PLM process’ success.
Products Equal Business Strategy
For PLM to succeed, there must be alignment between the goals and activities of project teams and process owners and the objectives of decision-makers at the top of your organization. One way to ensure alignment is by using criteria in the evaluation of product ideas that point directly to the company’s overarching strategies. Rating prospective products according to the anticipated effectiveness with which they will leverage core technologies, addressing high-growth market opportunities, or achieving strategic innovation targets will help fill the developmental pipeline with projects that match what’s important to your company.
It’s Not All About Financials
Many organizations struggle with defining the criteria for evaluating decisions at various points in the PLM process. This is especially true when it comes to product investment decisions. Too often, companies make choices based strictly on financial considerations.
The fact is, the calculation of such metrics as net present value (NPV) and internal rate of return (IRR) is more art than science. As useful as metrics are for gauging the value of innovation projects, they need to be balanced against other considerations. Does the product fit with corporate strategy? Is there an attractive market for the product? Will the product’s differentiation and value proposition ensure competitive success? Do we have the resources to produce it?
Of course, in the end, an effective PLM process will also generate financial benefits. Pall Corp., a $1.8 billion supplier of filtration separation and purification technologies, instituted a model for measuring the effect of its PLM efforts. According to the company, introduction of a PLM process has increased the net-present-value of its product portfolio by more than $26 million. This same analysis determined that Pall’s system, including its investment in automation software, paid for itself in just a little more than a year.
Train Executives for Success
Executives must engage in the PLM process. Unless senior decision-makers understand process fundamentals, their role in process implementation, and the importance of actively supporting process adherence, a PLM initiative has little chance of working.
At a minimum, executives should understand the purpose and benefits of the process, how to prepare for Gate decision meetings, the function and value of scorecard criteria that will be used to make go/kill decisions, and how to manage Gate meetings and the outcomes that should be expected.
Keep It Simple
Too many organizations attempt to put activities into their PLM processes that simply don’t belong there. A common reason is confusion over the distinction between “project” and “process” management.
Project management may entail tracking hundreds, if not thousands, of tasks related to a given product. For example, the design program for a new automobile may encompass 80,000 or more tasks. It’s inherently complex. The decision support needs of senior management, on the other hand, typically center on a few high-level business considerations such as the size of the market opportunity, the benefits a product will provide to customers and the expected impact of capabilities options on the overall value of the offering. These are the province of process management.
A well-conceived PLM process management system enables simple, on-demand access to data and information essential specifically to making investment decisions. The more straightforward this process, the better.
Performance: Do You Measure Up?
As important as outcome metrics are, process metrics are the leading indicators that enable assessment of the business impact of PLM. Process metrics determine how the PLM initiative is performing against key business criteria. These metrics need not be complex.
One company simply tallies which process deliverables have been completed and which are no longer required or incomplete. This enables the tracking of process adoption patterns across the organization. When usage issues arise, they are investigated, and adjustments are made to the system where needed to increase workability and value.
Communicate Goals and Benefits
Organizations embarking on PLM initiatives should give high priority to communicating process goals and benefits to stakeholders. The best practice for approaching the communications requirements surrounding PLM implementation is to construct an internal marketing plan. Such a plan includes a stakeholder analysis in which each stakeholder is identified and their role in the process defined. It also includes an execution and messaging timeline that defines each communication event, targeted stakeholders, key messages, communicators, and desired outcomes.
Give teams the tools they need
Once an organization commits to putting a PLM process in place, there are a variety of tools that can help users successfully adopt the new system. One increasingly popular way of enabling process adoption and adherence is the use of automation software.
Automation solutions include a broad set of capabilities, but they’re typically valued because they centralize business case information and product data, streamline communication and execution of the PLM process, save time by reusing data, distribute and share information, and leverage data for reporting.
PLM Process Foundation
A word to the wise for organizations intent on adopting a product portfolio management system before they have a PLM process in place: It won’t work.
Effective product portfolio management depends upon good quality technical and business data that can be gathered and analyzed on a regular basis to support smart project-investments decisions. Unfortunately, most organizations lack a dependable, systematic way of gathering and accessing needed information.
A viable technology-enabled PLM process makes data entry intuitive and easy. As a result, documents and other materials that previously took hours or days to prepare are completed in minutes. This represents practical value to end-users who, because the system makes their lives easier, are inclined to use it. Adoption rates are higher, and there is a corresponding increase in the quality of data in the