Got Metrics? So What. L. Michelle Jones Stage-Gate Inc.

Transcription

1 Got Metrics? So What. L. Michelle Jones Stage-Gate Inc.

2 Product Metrics: The True Measure of Success What product metrics do you track? Do you ask yourself so what? Are you winning? Cooper and Edgett Benchmarking Study: Top Performers Keep Score

3 Overview of Presentation Benchmarking the Use of Metrics: How the Top Performers differ from the Worst Performers Best Practices of Top Performing Businesses How Product Managers can use metrics to spot product innovation opportunities and drive winning new products

4 Top Performers Keep Score: Key Business Metrics % of revenue coming from NPs 9.0% Bottom 20% of Businesses 27.5% Average Business 38.0% Top 20% of Businesses % of profits coming from NPs 9.1% 28.4% 42.4% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Percentage of the Business s Sales Revenues & Profits Coming from New Products Launched in Last 3 Years Source: APQC Best Practices study

5 Top Performers Have Strong Portfolios of New Products Portfolio contains high value-to-the-business projects 0.0% 21.2% 37.9% Worst Performers Average Business Best Performers 0.0% Portfolio has excellent balance in project types 19.4% 31.0% Resource breakdown reflects Business's strategy 8.0% 30.7% 65.5% Good job of ranking/prioritizing projects 12.0% 25.0% 41.4% Good balance between number of projects & resources 4.0% 24.0% 37.9% Projects are aligned with Business's strategy 46.2% 57.2% 65.5% Formal & systematic portfolio management process in place 3.8% 21.2% 31.0% 0% 10% 20% 30% 40% 50% 60% 70% 80% Percentage of Businesses Where Each Portfolio Management Practice is in Place Note: All are significantly different at 0.01 level or higher Best vs. Worst Performers

6 Top Performers Measure Objectives: Key Business Objectives % of projects meeting profit objectives 26.9% Bottom 20% of Businesses 56.0% Average Business 77.1% Top 20% of Businesses % of projects meeting sales objectives 29.6% 55.4% 74.5% % of projects meeting market share objectives 29.3% 54.3% 73.4% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percentage of Business s NP Projects Meeting Objectives Source: APQC Best Practices study

7 Top Performers Are Accountable: Executive and Product Project Levels NP metrics part of management's annual objectives 14.3% 34.3% 50.0% Worst Performers We keep score - NP overall results are measured 29.9% 45.2% 62.1% Average Business Best Performers Project teams are accountable for project's end results 7.7% 32.4% 55.2% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percent of Businesses Where Metrics Are in Place Source: APQC Best Practices study

8 Breakdown of Projects by Project Type Best vs. Worst Performers Promotional developments & package changes Incremental product improvements & changes Major product revisions New to the business products New to the world products Best Performers Worst Performers Average Business 5.89% 12.31% 9.45% 28.21% 40.42% 32.74% 25.00% 19.15% 21.97% 24.11% 20.00% 24.16% 15.89% 7.42% 10.23% Note: Does not add quite to 100% down a column due to a small percentage of other projects.

9 Product Metrics: So What? Top performing businesses keep score - and they are winning. Top performing businesses focus more of their efforts on high value, high impact new product development projects is this a coincidence? You can t manage what you don t measure!

10 Why keeping score is a best practice Focuses behavior on the actions that will impact the metrics Instills accountability Enables data-driven decision-making Diagnostic: alerts when there is trouble Communication tool: from product lifecycle management to product launch Be careful what you ask for you just might get it!

11 Selecting Product Metrics: Recommendations Few but meaningful metrics (one single metric won t do) Business level (e.g. % sales from NPs) Product level (e.g. profitability, market share) New Product Project level (e.g. profitability) Process level (e.g. time to market) Ensure consistency of metrics (reporting and decision making) is driven through entire innovation program: From Product Management (PLC) To New Product Launch Ensure requirements to ask so what are built into decision processes

12 A World-Class Approach to Product Innovation How Product Managers can use metrics to spot product innovation opportunities and drive winning new products

13 STAGE-GATE INNOVATION FRAMEWORK Business Strategy Product Innovation & Technology Strategy PORTFOLIO MANAGEMENT Portfolio Management Process Discovery Portfolio NP Project Portfolio PLR Portfolio Technology Intelligence Technology Development Process Discovery Stage Market Intelligence 5-Stage New Product Development Process Stage-Gate Lite Process Product Life-cycle Management Successful Product Launches $$$ Post Launch Review

14 Product Lifecycle Analysis Sample Metrics for Spotting Innovation Evaluate Current Portfolio of Products Maximum Value, Strategic Fit, Balance Evaluate Individual Product Performance Market Share, Profitability, Revenue, Units Stage in Product Lifecycle Leading indicators (future performance) Consider both strong and weak performance More Importantly, Ask yourself So What?

15 Product Lifecycle Analysis Spotting Innovation Opportunities Potential to impact every stage of your Product s Lifecycle: Introduce a new product to replace one that is in decline Enhance/extend a product to accelerate growth Improve a failing product Revitalize a maturing product Improve a product to extend it s life Don t limit your opportunities to Decline only.

16 Driving winning new products to market Focus on Product Metrics Business Strategy Metrics (e.g. % Growth) Product Innovation & Technology Strategy Metrics (e.g. % Growth from New Products) A Word on Strategic Buckets Portfolio Management Metrics (e.g. Prioritized List Metrics NPV, Likelihood of Commercial Success) A Word on Value Maximization, Balance and Strategic Alignment Project Metrics (e.g. Gate Criteria and Post Launch Reviews) A Word on Project Deliverables to Gates

17 Popular Product Innovation Metrics Percent of business's revenue from NPs 68.6% Percent of growth in sales from NPs 50.5% Percent of business's profits from NPs 32.4% Overall profits generated by NPs 40.0% Number of major launches per year 34.3% Return on investment on R&D spending 27.6% Success rate of launched/developed products 27.6% Other 3.8% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percentage of Businesses Using Each Metric to Gauge the Performance of the Business s Total NPD Effort Source: APQC Best Practices study

18 Popular New Product Project Metrics Time to market 40.0% Development cost vs. revenue 26.7% Customer satisfaction 64.8% Percentage of repeat customers Time to profit/be time 19.0% 25.7% Profitability (NPV, op profits) Revenue vs. forecasted revenue 70.5% 70.5% Profitability vs. forecasted profits Market share Performance to schedule (on time launch) Performance to budget 48.6% 45.7% 41.0% 36.2% Other 8.6% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percentage of Businesses Using Each Metric to Gauge the Success/Performance of a NPD Project/Product Source: APQC Best Practices study

19 Coopers Recommended Post Launch Review Metrics Involves a complete retrospective analysis of the project Actual results versus forecasted at Gate 3, 5 NPV or EVA IRR or ROI Payback Period or Break Even Time Product sales (units, dollars & volumes) Manufacturing costs Customer satisfaction measures Returns, complaints, warranty frequency or costs, survey results Review of steps & actions idea through to launch What we can learn how to do it better The path forward (new variants, continuous improvement) Provides essential organizational learning

20 Best Tip of the Day Cooper s #1 Critical Success Factor The number one success factor is a unique, superior product: a differentiated product that delivers unique benefits and superior value to the customer But me-too, ho-hum, copy cat, tired products tend to be the rule rather than the exception! Engineers/scientists build monuments to themselves The quest must be fore real product advantage

21 Driving winning new products The strong impact of Product Advantage Main benefits are important to customer 23.1% 60.0% 86.2% Offer customer new & unique benefits 7.7% 34.3% 62.1% Better value for money for customer 19.2% 44.1% 65.5% Superior to competing products in meeting customer needs 15.4% 38.8% 58.6% Superior quality vs. competitors 28.0% 40.6% 58.6% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percent of Businesses Whose New Products Have Product Advantage vs. Competitive Products Worst Performers Average Business Best Performers

22 Wrap Up Benchmarking the Use of Metrics: How the Top Performers differ from the Worst Performers Best Practices of Top Performing Businesses How Product Managers can use metrics to spot product innovation opportunities and drive winning new products

23 For Additional Information and Complimentary Copies of Articles visit Benchmarking report: Best Practices in Product Innovation: What Distinguishes Top Performers, by R.G. Cooper, Edgett, S.J., & Kleinschmidt E.J, Book: Portfolio Management for New Products, By Cooper, Edgett & Kleinschmidt (Perseus Books, Reading, Mass). Provides a look at the best portfolio methods, and their use in industry. Articles: R.G. Cooper, S.J. Edgett, (2002) The Dark Side of Time and Time Metrics in Product Innovation, Visions, Vol. 26, No. 2, pp R.G. Cooper, Edgett, S.J. and Kleinschmidt, E.J., (2002) Optimizing the Stage-Gate Process: What Best-Practice Companies Do II, Research Technology Management, Vol. 45, No. 6, pp R.G. Cooper, S.J. Edgett, and E.J. Kleinschmidt, Portfolio Management for New Product Development: Results of an Industry Practices Study, R&D Management, 2001, 31, 4, R.G. Cooper, S.J. Edgett & E.J. Kleinschmidt, New problems, new solutions: making portfolio management more effective, Research-Technology Management, 2000, 43,2, R.G. Cooper, S.J. Edgett & E.J. Kleinschmidt, New product portfolio management: practices and performance, Journal of Product Innovation Management, 16,4, July 1999, pp (winner of T.P. Hustad Best Paper award, 2000) R.G. Cooper, Edgett, S.J., & Kleinschmidt E.J., Best practices for managing R&D portfolios, Research-Technology Management, 41, 4, July-Aug ,

24 L. Michelle Jones Vice President, Product Management and Innovation Stage-Gate Inc. L. Michelle Jones is Vice President, Product Management and Innovation at Stage-Gate Inc. and is responsible for leading the transformation of some of the world s best practice research on product innovation into state-of-the-art products and services for companies striving for innovation excellence. Some of Michelle s recent successful product launches include the best selling Lean, Rapid and Profitable New Product Development book authored by Cooper and Edgett, a new line up of worldclass innovation seminars and SG Navigator Web Format the widely implemented, authentic Stage-Gate innovation system. Formerly the head of consulting services at Stage-Gate Inc., Michelle has worked with an impressive portfolio of companies and has experience across several industries including Aerospace, Automotive, Chemical, Consumer Packaged Goods, Defense, Electronics, Food, Financial, and Medical. Michelle holds a Masters of International Business Administration degree from the University of Western, a Bachelors of Business Administration degree and Specialist Certificate in Project Management from McGill University. Michelle is also a certified New Product Development Professional (NPDP) with the PDMA, an author and instructor. Prior to join Stage-Gate Inc., Michelle was Manager, Business Transformation Consulting Services at KPMG (now BearingPoint) where she specialized in the implementation of complex, organization-wide change projects including product innovation programs, post merger integration and mission-critical business process improvements. Michelle can be reached by [email protected] or by telephone