Getting the Process Right
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- Dylan Warner
- 3 years ago
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From this document you will learn the answers to the following questions:
Where did the Bestin - Class report believe that PLM would be better for customers?
What is the top challenge to improving the process development process?
What aspect of the process is considered to be a key to the best - in - class performance?
Transcription
1 A Fresh Look at PLM and Product Development September 2008 Amy Rowell
2 Page 2 Executive Summary Process Change. While the goal is to find new ways to enable people to get their jobs done in a better way, the words incite dread in management and staff alike. Yet getting the process right - with respect to not only how a company engineers and builds its products, but how well it aligns its product development efforts with its overall business objectives - is where companies often stand to make the greatest gains. With this in mind, the question then becomes - how should companies go about improving their product development processes? Which areas should they target for improvement? And what benefits can they expect to see as a result? Research Benchmark Aberdeen s Research Benchmarks provide an indepth and comprehensive look into process, procedure, methodologies, and technologies with best practice identification and actionable recommendations Best-in-Class Performance According to their performance along five product development metrics - respondents were classified into one of three tiers, the top 20% (Best-in- Class), the middle 50% (Industry Average) and the bottom 30% (Laggards). Based on this analysis, the research showed a very strong correlation between process improvement and success in the marketplace. Specifically, the Best-in-Class reported that: the ability to achieve success in the marketplace with new products or services was improved or significantly improved nearly 80% as a result of a process improvement initiative the ability to deliver more new and innovative products was improved or significantly improved 70% as a result of a process improvement initiative Competitive Maturity Assessment So, how do they do it? Survey results show that the firms enjoying Best-in- Class performance share several common characteristics. Specifically, top performers: Focus on increasing transparency and harmonization between R&D, finance, engineering, marketing and manufacturing Increase the level of collaboration between design, engineering, manufacturing, marketing, suppliers, and customers Find ways to improve ability to identify ways of enhancing existing products These three priorities manifest themselves among the Best-in-Class in a comprehensive approach that incorporates process change, business process change, a wider view of product development, and how they leverage tools such as product lifecycle management.
3 Page 3 Required Actions In addition to the specific recommendations in Chapter Three of this report, to achieve Best-in-Class performance, companies should: Seek to integrate PLM with customer-facing applications like CRM to gain greater visibility into the marketplace Make use of industry-based templates or solutions to shorten development cycles Capitalize on collaboration technologies such as: 2D/3D visualization, community forums, and joint score-carding to improve communication between design, engineering, manufacturing, marketing, suppliers and customers Embrace DRM digital rights management as one way to protect intellectual property Take advantage of requirements management tools to capture and track product requirements Employ product portfolio management to select and manage products in development Make greater use of performance metrics to drive process improvement
4 Page 4 Table of Contents Executive Summary... 2 Best-in-Class Performance... 2 Competitive Maturity Assessment... 2 Required Actions... 3 Chapter One: Benchmarking the Best-in-Class...6 Business Context: Meeting the Needs of the Market...6 The Roadblocks to Successful Process Improvement...6 The Maturity Class Framework... 7 The Best-in-Class PACE Model... 9 Best-in-Class Strategies...10 Chapter Two: Benchmarking Requirements for Success...13 Competitive Assessment...13 Process Change Capabilities...13 Business Process Capabilities...14 The Product Development Process - Beyond Engineering and Design...16 Best-in-Class PLM / PDM Capabilities...18 Chapter Three: Required Actions...21 Laggard Steps to Success...21 Industry Average Steps to Success...21 Best-in-Class Steps to Success...21 Appendix A: Research Methodology...22 Appendix B: Related Aberdeen Research...24 Figures Figure 1: The Maturity Class Framework... 8 Figure 2: Impact on Product Development: Improved or Significantly Improved...9 Tables Table 1: Top Four Pressures Driving Process Improvement...6 Table 2: Top Five Challenges to Successful Process Improvement...7 Table 3: The Best-in-Class PACE Framework...10 Table 4: Best-in-Class Strategies for Product Development Process Improvement...10 Table 5: Competitive Framework: Organizational Capabilities for Process Improvement...13 Table 6: Competitive Framework: Business Process Capabilities...15 Table 7: Competitive Framework: The Product Development Process - Best-in-Class Key Competencies...17 Table 8: Competitive Framework: Best-in-Class PDM/PLM-based Capabilities...19
5 Page 5 Table 9: The PACE Framework Key...23 Table 10: The Competitive Framework Key...23 Table 11: The Relationship Between PACE and the Competitive Framework...23
6 Page 6 Chapter One: Benchmarking the Best-in-Class Business Context: Meeting the Needs of the Market Not surprisingly, the top pressures driving companies to improve their product development process relate to time to market and cost pressures (Table 1). The need to achieve these business objectives is at the top of the list for all manufacturers today, especially in the midst of such economic uncertainty. What is compelling is that we see the corporate goal to improve innovation coming in close to the top of the list at, as well - an indication that the leadership within these companies values the role of innovation as a business driver as well. This is aligned with another everpresent pressure facing companies today - shareholder demand for growth. Altogether these pressures form the basis for a corporate strategy that is focused on aligning product development, process improvement and technology adoption with key business objectives. Aberdeen research has identified this correlation between process improvement and considerable top line benefit previously. The July 2007 Profiting from PLM: Strategy and Delivery of the PLM Program found that top performing companies view a PLM implementation as an opportunity to improve the efficiency of product development operations, and see an average 28% improvement in product profit margins, while their competitors report only a 5% improvement. Table 1: Top Four Pressures Driving Process Improvement Fast Facts In addition to realizing a standard of product development performance that is consistently out of the reach of their competitors, the Bestin-Class report: The ability to achieve success in the marketplace with new products or services was improved or significantly improved nearly 80% as a result of a process improvement initiative the ability to deliver more new and innovative products was improved or significantly improved 70% as a result of a process improvement initiative All Respondents Need to improve time to market 42% Profit margin / cost pressures 30% Corporate goal to improve innovation 27% Shareholder demand for growth 18% The Roadblocks to Successful Process Improvement As is so often the case, the top challenge to improving the product development process is not related to technology at all, but rather - to how technology and process change is implemented (Table 2). More specifically, survey respondents name a cultural resistance to change - in terms of user acceptance of new processes - as the top challenge for manufacturing organizations seeking to improve their processes, as reported by 41% of respondents. What this suggests is that in order for any process improvement initiative to be successful, an effort to help users to embrace and adapt to change is a key part of the equation.
7 Page 7 Table 2: Top Five Challenges to Successful Process Improvement Cultural resistance to change, in terms of user acceptance of new processes All Respondents 41% Inability to agree on best practices, obtaining company / department consensus 27% Lack of a clearly defined process improvement plan 24% Lack of an existing formal product development process 23% Difficulty in determining how to effectively calculate payback on process improvement efforts 20% Another key finding is that in a quest to improve their processes, companies also note that not only do they lack a clearly defined process improvement plan (24%), but may not even have a clear understanding of their "as-is" product development process (23%). Without either, it becomes difficult not only to determine what needs to be changed (the second most common challenge), but to identify a mechanism that can be used to mark progress from the "old way" to the "new way." The technology we implemented was relatively simple. We had sites that had a very well developed product development process. Virtually the only issue we ran into was resistance to change. We implemented a sound plan, persistence and good communication. We had topdown support from upper management. Even then, it was somewhat difficult to get people on board." ~ Engineering Director Automotive Supplier Additionally, with something as far-reaching as a product development process change, it can be difficult to determine how to effectively calculate payback on process improvement (20%). Should success be measured by how much more efficient the organization can become as a result of process improvement? Or should increased profitability be the key measure of success? As will be seen below, leading companies are looking beyond standard engineering-centric measures like reducing ECOs (Engineering Change Orders) and instead, are looking to identify the ways that process improvement can be linked to increased profitability and success in the marketplace. The Maturity Class Framework Which areas of product development does process change have the greatest impact on? How do you execute that change in a way that sees easy adoption across the product development organization? In order to answer these questions, Aberdeen surveyed over 160 enterprises between August and September Participating companies were benchmarked according to five key performance criteria. These criteria evaluated their ability to meet crucial product development targets, including the percentage of the products they bring to market that meet the following: Product revenue targets Product cost targets
8 Page 8 Product launch dates Quality targets Development cost targets Using these metrics, Aberdeen categorized respondents into the top 20% (Best-in-Class), the middle 50% (Industry Average) and the bottom 30% (Laggard) of performers. Figure 1displays the performance gaps that define each category. Figure 1: The Maturity Class Framework 100% 50% 87% 93% 87% 78% 74% 70% 46% 44% 36% 96% 91% 83% 71% 54% 43% 0% Product Revenue Targets Product Cost Targets Product Launch Dates Quality Targets Development Cost Targets Best-in-Class Industry Average Laggard It is important to note that the largest gaps between the Best-in-Class and their competitors fall in the areas that measure the top driving pressures of product development process improvement: 'need to improve time to market' and 'profit margin / cost pressures.' Specifically, the Best-in-Class meet direct product cost and development cost targets more than twice as often as Laggard organizations. More over, the products these leaders develop products that meet product launch dates 2.3 times as often as those of their competitors. The Best-in-Class have taken the steps that enable them to be on top of managing their product costs as well as addressing time-to-market pressures. Having said that - one question that all manufacturers need to ask themselves today is this: are their product launch dates aggressive enough to compete in a worldwide market? Fortunately, we see a corollary between those that are on track with product launch dates and product cost and revenue targets - and overall success in the marketplace. The Impact of Improvement The high level of operational success reported by the Best-in-Class has a direct correlation with the market success of their products (Figure 2). Specifically, our research indicates that as a result of process improvement efforts, Best-in-Class companies are experiencing both greater success in the marketplace and an increase in the number of new, innovative products
9 Page 9 - both of which are excellent indicators of global competitiveness. We also see an impact on new product time to market and product quality, as a result of process improvement among the Best-in-Class. Figure 2: Impact on Product Development: Improved or Significantly Improved 100% 50% 0% 79% 40% 28% Success in the marketplace w ith new products / services 69% 35% 28% Number of new, innovative products 63% 63% 44% 42% 40% 40% New product time to market Best-in-Class Industry Average Laggard Product quality Here; the message is clear. As a result of process improvement efforts, companies across the maturity class framework report that they are experiencing an improved presence in the market with new and innovative products. This demonstrates the overall business impact of process improvement. However, the Best-in-Class are far more likely than their competitors to report that they improved or significantly improved in each of these areas. What's their secret? We have streamlined the Product Development (PD) process, decreasing the time required per project, and increasing the number of projects, all with a very low cost per project and high turnover of projects to sales. At this point, 80% of all product development is customer driven. The impact is that sales have increased 300% over five years, and margins have increased twofold. ~ Director of Research and Development, Food and Beverage Manufacturer The Best-in-Class PACE Model Any attempt to improve product development processes requires more than the decision to make a change. Product development is a highly complex and interdependent environment. Successful execution of a change that results in the performance improvements similar to those reported by the Best-in-Class requires a combination of strategic actions, organizational capabilities, and enabling technologies that can be summarized as shown in Table 3.
10 Page 10 Table 3: The Best-in-Class PACE Framework Pressures Actions Capabilities Enablers Need to improve time to market Profit margin/cost pressures Corporate goal to improve innovation Improve ability to identify ways of enhancing existing products Increase collaboration between design, engineering, manufacturing, marketing, suppliers and customers Increase transparency and harmonization between R&D, finance, engineering, marketing and manufacturing Assessment of formal and informal enterprise and workgroup information sharing processes (both manual and IT-based) Formal training programs in place for business/conceptual, as well as technical/software training Performance metrics for process improvement agreed to and being used to drive improvement efforts Process in place to effectively map customer requirements to product definition Centralized process in place to effectively support knowledge capture and reuse PLM to support centralized data access and knowledge capture and reuse PLM integrated with CRM / MES systems Industry-based templates or solutions Requirements management to capture and track product requirements Product portfolio management to select and manage products in development Collaboration technologies such as: 2D/3D visualization, community forums, joint score-carding, etc. DRM digital rights management to protect intellectual property Best-in-Class Strategies The strategies that an organization brings to their process change and improvement initiatives fall among two categories: those focused on bringing product development department in line with business goals and those designed to improve the organization's ability to perform its role within the organization: the design and development of products. Table 4 highlights the strategies that drive the process improvement programs of the Best-in-Class. Table 4: Best-in-Class Strategies for Product Development Process Improvement Best-in- Class All Others Business Strategies Increase transparency and harmonization between R&D, finance, engineering, marketing and manufacturing Increase level of collaboration between design, engineering, manufacturing, marketing, suppliers, customers, etc. 66% 49% 78% 64% Improve ability to identify ways of enhancing existing products 78% 62%
11 Page 11 Best-in- Class All Others Product Design and Development Strategies Implement design for compliance initiatives 78% 48% Increase level of collaboration between design, engineering, manufacturing, marketing, 78% 64% suppliers, customers, etc. Implement design for manufacturability initiatives 66% 52% Implement design for Six Sigma initiatives 41% 37% Improve the ability to capture and protect intellectual property (IP) 61% 59% Business Strategies In the first case, we see process improvement strategies centered around business objectives - i.e. improving the product development process in order to achieve greater success in the marketplace - either through improved products or services, more differentiated products, or more competitively priced products. Fundamentally, the Best-in-Class are more adept at alignment of product development efforts with business objectives and determining the kinds of product enhancements that will lead to increased revenue. To accomplish this, they are both more likely to focus on increasing the transparency and harmonization between R&D, finance, engineering, marketing and manufacturing as well as to support collaboration more closely within those departments, and with customers. The key here is that product development process improvement is related to much more than becoming more efficient at delivering products to the marketplace. Indeed, the real measure of success is how well products map to customer needs and requirements. "One of the best pieces of advice I got about PDM was, ''Implementing a PDM system without changing your processes will only help you make the same mistakes faster. Clean up and redefine your processes BEFORE implementation. The PDM system is not a silver bullet." ~ Engineering Manager Automotive Supplier Product Design and Development Business objectives not withstanding - it is still important for engineering and manufacturing organizations to stay on top of the more traditional kinds of engineering and design process improvements. After all, in order to deliver the right product to market in a timely manner, there must be a balance between addressing business needs and achieving engineering/design efficiency. To this end, on the product design and development side we see an importance being placed on collaboration among engineers, designers and other stakeholders, as well as an emphasis on design for manufacturability, and design for Six Sigma. Additionally, the ability to capture and protect intellectual property remains an important goal, not only for the Best-in-Class, but for all manufacturers.
12 Page 12 Aberdeen Insights Strategy It is worth noting here that the Best-in-Class place particular importance on design for compliance. Indeed, the Best-in-Class are over 60% more likely than their peers to have a design for compliance initiative in place. This is significant for a number of reasons. For one, as a result of being pro-active about compliance - companies typically encounter not only fewer product recalls but a reduction in product failure rates, as well. These findings are specifically cited in an earlier Aberdeen report on this subject, The Design for Compliance Benchmark. However, in addition to these benefits, we also see a potential link between design for compliance and the trend towards the successful design and development of eco-friendly or energy efficient products. Specifically, environmentally friendly products often translate into market differentiation and greater product profitability, as reported by 35% of respondents to the Greening Today's Products study. As noted in Aberdeen's August 2008 Greening Today's Products: Sustainable Design Meets Engineering Innovation, for example, design for compliance is a common strategy of 'green' product development, as reported by 39% of respondents. Translated, this means that organizations that have design for compliance capabilities in place are one step closer to designing, delivering and profiting from a safer, more eco-friendly, or more energyefficient product or solution. In the next chapter, we will see what the top performers are doing to achieve these gains.
13 Page 13 Chapter Two: Benchmarking Requirements for Success Competitive Assessment Aberdeen Group analyzed the aggregated metrics of surveyed companies to determine whether their performance ranked as Best-in-Class, Industry Average, or Laggard. Based on this analysis, Best-in-Class capabilities were identified across four key categories related to process improvement: Best-in-Class process change capabilities Best-in-Class business process transformation capabilities Best-in-Class Product Development Process "areas of competence" The PLM/PDM capabilities of the Best-in-Class which can serve as a product development process improvement roadmap for others Process Change Capabilities In regard to process change, we make several observations regarding the capabilities for product development process improvement employed by the Best-in-Class (Table 5) versus their peers. Fast Facts The Best-in-Class adopt a comprehensive approach to process change that takes the business and product development needs into account. To this end, these leaders are: 2.3 times as likely as Laggards to implement formal training programs to ease staff adoption of change Over 2.5 times as likely as Laggard to leverage formal metrics to drive continuous improvement Table 5: Competitive Framework: Organizational Capabilities for Process Improvement Organization Best-in-Class Industry Average Laggards Definition of 'as-is' and to be product development process 66% 53% 42% Assessment of current enterprise and workgroup information sharing processes (both formal and informal) 83% 58% 52% Assessment of current enterprise and workgroup IT-based information sharing processes (both formal and informal) 72% 53% 39% Formal program in place for technical/software training 71% 51% 32% Champions or coaches available to help users with new processes or solutions 61% 50% 46% Performance metrics for improvement agreed to and being used to drive improvement efforts 89% 52% 35%
14 Page 14 With respect to Getting the Process Right and in terms of addressing the number one challenge faced by companies engaged in process change - overcoming a cultural resistance to change our research data indicates that Best-in-Class performers: are ahead of their peers in terms of defining their as is and to be processes are focused on process assessment of both formal and informal information sharing processes excel at providing the necessary training and putting champions or coaches in place to help users adapt to new processes, and make extensive use of performance metrics to drive process improvement. Together these capabilities help to address several key challenges facing manufacturers seeking to improve their processes: lack of an existing formal product development process, and lack of a clearly defined process improvement plan In essence, effective assessments provide organizations with a baseline or "as is" picture; and best practices or lessons learned serve as a foundation for the "to be" processes, paving the way for a process improvement plan. "We trained one or two employees at first. We attended some on-line seminars, and added more advanced training classes. Once we felt we had these employees comfortable with the software we rescheduled the initial training class for other designers and used the more advanced software users to assist in training. The time span allowed users to become aware of the software's capabilities and ask intelligent questions during the advanced level training, while also learning new practices." ~ Lee Jay Scriber Engineering and Technology Roll Forming Corporation The lesson here? A successful process improvement program must take into account the impact on those most affected by the change. The assessment phase is key and provides the necessary foundation for change, but Best-in- Class organizations also demonstrate the importance of training and the role of champions or coaches in helping users to achieve their new goals and objectives. The use of performance metrics is also a key differentiator between Best-in-Class organizations and their peers - here we see the Bestin-Class 1.7-times as likely as the Industry Average and over 2.5-times as likely as Laggards to drive improvement efforts through the use of performance metrics. Business Process Capabilities Another aspect to the product development process improvement discussion is how to best manage the change process itself - or what is commonly referred to as business process transformation. Here, we see the Best-in-Class taking a very structured, logical approach to this challenge - employing proven business process and tools and methodologies that cut across all the business layers - process and organizational as well as knowledge and performance management capabilities (Table 6).
15 Page 15 Table 6: Competitive Framework: Business Process Capabilities Process and Organizational Capabilities Knowledge and Performance Management Technology Enablers Best-in-Class Industry Average Laggards Conference Room Pilot (a small scale deployment) 44% 32% 21% Formal Change Management / Training Program 53% 48% 35% Executive Steering Committee Guiding Efforts 89% 60% 40% Early Success Stories Openly Celebrated 59% 41% 29% Requirements Gathered Across Enterprise 56% 48% 29% Best Practices Identified 72% 53% 27% Benchmarks / References Reviewed 72% 57% 28% Lessons Learned Captured / Reused 61% 60% 21% Supporting Technology Currently in Use 76% Data Model Templates 50% Industry Templates (or Solution) 28% Hosted Pilot Environment 61% Meeting Collaboration / Virtual Presence 39% Data Model Templates 21% Industry Templates (or Solution) 21% Hosted Pilot Environment 48% Meeting Collaboration / Virtual Presence 28% Data Model Templates 20% Industry Templates (or Solution) 13% Hosted Pilot Environment 42% Meeting Collaboration / Virtual Presence With one of the greatest challenges experienced by companies seeking to improve their processes being an inability to agree on best practices - it's worth noting that the Best-in-Class are nearly 1.4 times as likely as the Industry Average and over 2.6 times as likely as Laggards to have successfully identified best practices as part of their process improvement efforts. The Best-in-Class are also more adept at gathering requirements across the enterprise and in taking advantage of benchmarks and references to aid them in their process improvement efforts. These leaders also outperform their peers in the use of pilot programs, securing executive sponsorship, and celebrating early successes. Formal change management and training programs are also seen more often among the Best-in-Class than their poorer performing peers, as well. This ties back to the message that training, along with a focus on managing the impact of process change on the organization as a whole - can help companies
16 Page 16 overcome a cultural resistance to change and to be more successful at achieving their process improvement objectives. Finally, although the message clearly is that process improvement is linked much more closely to organizational change rather than to technology, the research does suggest that industry templates or solutions, along with data model templates - both of which capitalize on an understanding of best practices or standard practices - can provide an advantage to manufacturing organizations seeking to achieve product development process improvement. Here, we see the Best-in-Class nearly 1.5 times as likely as their poorer performing peers to be taking advantage of industry templates or solutions, and nearly twice as likely as the Industry Average to be making use of data model templates. The Product Development Process - Beyond Engineering and Design As part of our research to better understand Best-in-Class product development, we defined the product development process as being comprised of four (4) key areas: 1 - Ideation and Product Planning; 2 - Integrated Design and Engineering; 3 - Manufacturing Planning; and 4 - Product Information Management. "We started to prepare the implementation of our PLM by looking at industry specific templates; we work in the automotive industry and some patterns are almost compulsory. We would have probably found the same value in PLM without the templates, but they sped up the process and gave us the confidence that our customer would not get upset when auditing our process for new product development. ~ Marco Pasquandrea Product Development and Planning Manager Dell'Orto SpA The objective here was to gain a glimpse into the extent to which manufacturers are beginning to look beyond the traditional design and engineering phase of the product development process to include a connection to both up-front ideation and product planning, as well as downstream manufacturing process planning efforts. Most notably, Aberdeen's research revealed that the Best-in-Class are generally more focused on improving Ideation and Product Planning than their peers; however - like their peers, they have not yet achieved significant gains from this effort. One area that Best-in-Class companies do seem to excel is in having an effective resource planning process in place. More specifically, 66% of the Best-in-Class compared to 45% of the Industry Average indicate having a process in place that allows them to effectively allocate resources based on product portfolio optimization (Table 7). Contrasting this to the Integrated Design and Engineering Phase - we see that the Best-in-Class are clearly leading the way in a number of areas - from cross-functional design (87% of the Best-in-Class versus 71% of the Industry Average versus 62% of Laggards) to early design validation (83%, 61%, 52%, respectively.) Similarly, in the area of Manufacturing Planning, we see the Best-in-Class are nearly 60% more likely than their Industry Average peers and nearly twice as likely as Laggards to recognize the importance of integrating design with manufacturing process planning efforts. Finally, in the area of product information management - an area most closely aligned with the more traditional product data management view, we see the Best-in-Class significantly ahead of their peers in knowledge capture and reuse (Table 7). "Some of the voice of the customer input that we gather upfront shift the requirements of the design. We applied these improvements to the products and are seeing the kind of impact we wanted to see. This specifically has driven the introduction of some very innovative products." ~ Marketing Manager Industrial Equipment Manufacturer
17 Page 17 Table 7: Competitive Framework: The Product Development Process - Best-in-Class Key Competencies Ideation and Product Planning Ideation Generation - Have a process in place that effectively supports product idea creation based on input from R&D, design, engineering, manufacturing, customers, etc. Resource Planning - Have a process in place that enables the organization to review resource options based on portfolio prioritization to prevent resource over assignment Integrated Design and Engineering Cross-Functional Design - Have a process in place to systematically drive cross-functional product design and development Early Design Validation - Have a process in place that effectively supports up-front design analysis Advanced Simulation and Test - Have a process in place that effectively supports advanced engineering analysis, simulation and test Manufacturing Planning Manufacturing Process Planning - Have a process in place to effectively integrate design with manufacturing process planning Quality Control Management - Have a process in place to effectively track, manage and maintain product quality, from design through manufacturing Product Information Management Program/Project Management - Have a process in place to effectively track and monitor engineering project status - milestones, missed deadlines, etc. Knowledge Capture and Reuse - Have a centralized process in place that effectively supports the capture and reuse of product data and information Best-in- Class Industry Average Laggards 58% 54% 48% 66% 45% 32% Best-in- Class Industry Average Laggards 87% 71% 62% 83% 61% 52% 72% 54% 42% Best-in- Class Industry Average Laggards 79% 50% 39% 83% 69% 46% Best-in- Class Industry Average Laggards 84% 64% 41% 72% 38% 24% More specifically, the Best-in-Class are nearly 90% more likely than their Industry Average peers to report having a centralized process in place to effectively support the capture and reuse of product data and information. This is somewhat surprising, considering the maturity of product data management (PDM), in general. What it suggests is that for many manufacturers, even the most fundamental aspect of product data management- the ability to store, capture, and reuse data - remains an
18 Page 18 elusive goal, reflecting - again - the need for manufacturers to focus on the process first, prior to any technology implementation. Case Study Bringing Marketing to the Design Table A large manufacturer with a significant presence across a number of industries, including industrial equipment, utilities, and aerospace, is currently implementing a new product development strategy designed to include voice of the customer input prior to design kickoff in order to ultimately achieve greater success in the marketplace. The organization recognized that the process they had in place to incorporate customer feedback was both informal and inefficient. A marketing manager reports, We listened to customers and tried to design to their specifications. We found that doesn t necessarily produce the best product. With marketing upfront, what you re going to do is identify, target, and segment the market. This way you can build products that will be more marketable. The organization has taken a measured approach to process change, implementing the new program over two years, providing one year to implement, and one year for training. A critical challenge of the change has been a strong engineering culture that was resistive to change. Previously, a final design had been identified before the marketing of a product began. The shift in roles has given marketing a seat at the design table, which has required the support and coordination of central leadership. As the marketing manager admits, Cultural change is the biggest challenge. It helps to have great leaders. Fortunately, one of our key strengths is developing leaders. While the transition is still underway, the manufacturer is seeing improvements already. Specifically, they report better tie-in to the development of marketing collateral and product capabilities. Benefits that are still expected include reduced variances in designs and higher revenue on products. Best-in-Class PLM / PDM Capabilities Lastly, with regard to the underlying PLM/PDM technology currently being employed by the Best-in-Class to achieve their product development goals and objectives, we see these top performers as being ahead of their peers across all categories of product information management -- from their use of project management tools to managing quality control. The Best-in-Class also excel in another key area: the use of their product lifecycle management (PLM) systems to manage product-related intellectual property. In doing so, these leading organizations are positioning themselves well for not only the capture and reuse of valuable product knowledge, but in potentially capitalizing on such IP as part of an open innovation initiative. Related to this, the Best-in-Class show greater use of PLM-based idea
19 Page 19 capture and innovation management capabilities, as well. More specifically, the Best-in-Class are over 60% more likely than their Industry Average peers and more than twice as likely as Laggards to capitalize on the idea capture and innovation management capabilities of their PLM systems. Further, the use of requirements management capabilities to both capture and track product requirements and the use of business intelligence and dashboard technology to summarize product development status and information also set the Best-in-Class apart from their peers. The practice of using Digital Rights Management (DRM) for protecting product data and information shows up as a key capability of the Best-in-Class, as well. Other compelling findings here reveal that regulatory compliance and quality management are both strongly supported by PLM solutions employed by the Best-in-Class, as well. Table 8: Competitive Framework: Best-in-Class PDM/PLM-based Capabilities Best-in- Class Industry Average Laggards Idea capture and innovation management 44% 27% 20% Intellectual Property management (i.e. patents, product and process 65% 43% 23% IP, etc.) Product portfolio management to select and manage products in 67% 21% 20% development Regulatory compliance and tracking management 61% 45% 27% Management of Approved Manufacturers, Vendors or Part Lists 89% 61% 20% (AML, AVL, APL) Digital Rights Management for product data and information 39% 10% 0% Quality management 83% 55% 29% Project management with Gantt chart and task tracking capabilities 68% 45% 42% Task management with individual task lists with deadlines 72% 44% 40% Requirements management to capture and track product 78% 30% 24% requirements Business intelligence and dashboard technology to summarize status and information 33% 24% 8% Perhaps one of the most interesting findings relates to product portfolio management (PPM), however. Here, we see that 67% of Best-in-Class organizations make use of PPM compared to 21% of their peers (Table 8). In other words, the Best-in-Class are more than 3 times as likely to take advantage of product portfolio management tools to manage products in development. Couple this with the fact that the Best-in-Class also report a 97% higher rate of success in the marketplace with new products and/or services than their Industry Average peers, and it's easy to see why executives are beginning to examine more closely how to best take
20 Page 20 advantage of these market-facing tools, as part of their overall product development process and PLM initiative. Aberdeen Insights Technology One of the most compelling findings of this study is that knowledge capture and reuse remains a key differentiator for the Best-in-Class. At the most fundamental level, the Best-in-Class have a centralized process in place to effectively support the capture and reuse of product data and information - which has been supported and enhanced through PDM/PLM technologies and methodologies. But the knowledge capture and reuse capabilities of the Best-in-Class don't stop there. The ability to successfully employ tools and methodologies that relate to intellectual property management, the secure sharing of product-related IP both within the organization and outside its walls, and the ability to employ idea/innovation management systems to track and manage ideas for new products and services - all point to the ability of these top performers to manage the most important resource within any organization - its brainpower. This is becoming especially critical in an era when we are experiencing an exodus of talent from many engineering and manufacturing organizations and an increasing need to replace that talent. Here, we expect to see a continued migration towards the adoption of tools and technologies that will enable organizations not to simply capture the "know-how" of its scientists and engineers - but to know how to tap into the knowledge of others - even those outside the walls of its organization to identify the insights of other experts regarding a particular technical or marketing challenge. Here, the paradigm has shifted to one that relies more heavily on the ability to locate and capitalize on information - rather than to own it and manage it. Even with this shift, however, we still see a great need - and perhaps an even greater need - to have an effective process in place for managing product knowledge and information. The fact is, even in it most advanced form - this effort still begins with "Getting the Process Right."
21 Page 21 Chapter Three: Required Actions Whether a company is trying to move its performance in process change from Laggard to Industry Average, or Industry Average to Best-in-Class, the following actions will help spur the necessary performance improvements: Laggard Steps to Success Make use of industry-based templates or solutions to shorten development cycles Define 'as-is' and to be product development process Take advantage of requirements management tools to capture and track product requirements Industry Average Steps to Success Make greater use of performance metrics to drive process improvement Seek to integrate PLM with customer-facing applications like CRM to gain greater visibility into the marketplace Employ product portfolio management to select and manage products in development Best-in-Class Steps to Success Embrace DRM digital rights management as one way to protect intellectual property Leverage intelligence and dashboard technology to summarize status and information Aberdeen Insights Summary Examining the product development processes of Best-in-Class manufacturers yields some valuable insights about what it takes to succeed in the marketplace today. In many ways - change - both the ability to recognize the need for it and the ability to adapt to it and manage it - is what has always set leading manufacturers apart from their competitors. Our data suggests that this is still true today. Indeed, where the ability to succeed in the marketplace was once linked closely to an manufacturer's ability to engineer its way to profitability, it is now increasingly important to be able to inject the Voice of the Customer into the engineering and design process, and to do so early in the product development process. Here, the Best-in-Class have adapted to this change, and demonstrate both a willingness and a readiness to make this shift - both from a cultural standpoint and a business readiness standpoint. In other words, the Best-in-Class are not only prepared for change, they welcome it. And, in an increasingly fast-paced, globallycompetitive environment, it is this business-friendly strategy that promises to serve engineering and manufacturing organizations well. Fast Facts As manufacturers approach changes in their processes, they should be mindful of the following practices of the Bestin-Class: Define 'as-is' and to be product development process Implement formal training to ensure employee buy-in on change Make greater use of performance metrics to drive continuing improvement "One of the things that we needed was better control of our processes. I started looking at electronic tools to help us to do that. We settled on one and had it working in roughly three months. Since, we ve redesigned a number of products that have included a whole number of quality issues. We are now able to track return rates and crack down a little better and execute corrective actions internally and for external suppliers. We decreased the return rates by 50%." ~ Gerrit Kruitbosch Vice President of Engineering Edge Products
22 Page 22 Appendix A: Research Methodology Between August and September 2008, Aberdeen examined the use, the experiences, and the intentions of more than 160 enterprises attempting to transform their product development processes. Aberdeen supplemented this online survey effort with telephone interviews with select survey respondents, gathering additional information on the strategies, experiences, tools used and results realized. Responding enterprises included the following: Job title / function: The research sample included respondents with the following job titles: procurement, supply chain, or logistics manager (29%); operations manager (27%); IT manager or staff (24%); sales and marketing staff (13%); senior management (7%). Industry: The research sample included respondents from both process and discrete manufacturing sectors. Those sectors seeing the highest representation include: aerospace and defense (5%), automotive (12%), consumer goods (9%), electronics and high tech (10%), industrial equipment manufacturing (20%), and mining and metals (6%). Geography: The majority of respondents (74%) were from North America. Remaining respondents were from the Asia-Pacific region (13%) and Europe (9%). Company size: Thirty-two percent (32%) of respondents were from large enterprises (annual revenues above US $1 billion); 33% were from midsize enterprises (annual revenues between $50 million and $1 billion); and 35% of respondents were from small businesses (annual revenues of $50 million or less). Headcount: Thirty-two percent (32%) of respondents were from small enterprises (headcount between 1 and 99 employees); 30% were from midsize enterprises (headcount between 100 and 999 employees); and 43% of respondents were from large businesses (headcount greater than 1,000 employees). Solution providers recognized as sponsors were solicited after the fact and had no substantive influence on the direction of this report. Their sponsorship has made it possible for Aberdeen Group to make these findings available to readers at no charge. Study Focus Responding executives completed an online survey that included questions designed to determine the following: What is driving manufacturers to improve their product development processes The areas manufacturers are focused on improving The challenges that prevent them from effectively making those changes The actions these companies are taking to execute on improvements The capabilities and technology enablers they have in place to support their efforts The study aimed to identify emerging best practices for process change and improvement usage in product development, and to provide a framework by which readers could assess their own management capabilities.
23 Page 23 Table 9: The PACE Framework Key Overview Aberdeen applies a methodology to benchmark research that evaluates the business pressures, actions, capabilities, and enablers (PACE) that indicate corporate behavior in specific business processes. These terms are defined as follows: Pressures external forces that impact an organization s market position, competitiveness, or business operations (e.g., economic, political and regulatory, technology, changing customer preferences, competitive) Actions the strategic approaches that an organization takes in response to industry pressures (e.g., align the corporate business model to leverage industry opportunities, such as product / service strategy, target markets, financial strategy, go-to-market, and sales strategy) Capabilities the business process competencies required to execute corporate strategy (e.g., skilled people, brand, market positioning, viable products / services, ecosystem partners, financing) Enablers the key functionality of technology solutions required to support the organization s enabling business practices (e.g., development platform, applications, network connectivity, user interface, training and support, partner interfaces, data cleansing, and management) Table 10: The Competitive Framework Key Overview The Aberdeen Competitive Framework defines enterprises as falling into one of the following three levels of practices and performance: Best-in-Class (20%) Practices that are the best currently being employed and are significantly superior to the Industry Average, and result in the top industry performance. Industry Average (50%) Practices that represent the average or norm, and result in average industry performance. Laggards (30%) Practices that are significantly behind the average of the industry, and result in below average performance. In the following categories: Process What is the scope of process standardization? What is the efficiency and effectiveness of this process? Organization How is your company currently organized to manage and optimize this particular process? Knowledge What visibility do you have into key data and intelligence required to manage this process? Technology What level of automation have you used to support this process? How is this automation integrated and aligned? Performance What do you measure? How frequently? What s your actual performance? Table 11: The Relationship Between PACE and the Competitive Framework PACE and the Competitive Framework How They Interact Aberdeen research indicates that companies that identify the most influential pressures and take the most transformational and effective actions are most likely to achieve superior performance. The level of competitive performance that a company achieves is strongly determined by the PACE choices that they make and how well they execute those decisions.
24 Page 24 Appendix B: Related Aberdeen Research Related Aberdeen research that forms a companion or reference to this report include: The Best Kept Secret of Top SMB Product Developers? Finding the Shortest Path to PLM Value; July 2008 The Engineering Executive's Strategy Agenda; June 2008 Best Practices for Migrating from 2D to 3D CAD; May 2008 Integrating the PLM Ecosystem; April 2008 Product Innovation Agenda 2010; December, 2007 Profiting from PLM: Strategy and Delivery of the Program; July, 2007 Information on these and any other Aberdeen publications can be found at Author: Amy Rowell, Research Analyst, Product Innovation and Engineering (amy.rowell@aberdeen.com) Since 1988, Aberdeen's research has been helping corporations worldwide become Best-in-Class. Having benchmarked the performance of more than 644,000 companies, Aberdeen is uniquely positioned to provide organizations with the facts that matter the facts that enable companies to get ahead and drive results. That's why our research is relied on by more than 2.2 million readers in over 40 countries, 90% of the Fortune 1,000, and 93% of the Technology 500. As a Harte-Hanks Company, Aberdeen plays a key role of putting content in context for the global direct and targeted marketing company. Aberdeen's analytical and independent view of the "customer optimization" process of Harte- Hanks (Information Opportunity Insight Engagement Interaction) extends the client value and accentuates the strategic role Harte-Hanks brings to the market. For additional information, visit Aberdeen or call (617) , or to learn more about Harte-Hanks, call (800) or go to This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies provide for objective fact-based research and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc a
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