Innovation Management Part II

Transcription

1 Innovation Management Part II Practical Applications PIMA Conference, June 28 th 2004 Iain King, NPDP

2 Agenda What are the challenges for managing innovation? A framework for managing innovation Tools to support management of innovation Successful Implementation

3 Case Study Glatfelter Global specialty paper / engineered materials manufacturer Before Accolade Strong growth goals, with focus on increased revenue from new products. And yet: 140-year-old company with outmoded product development process Decline of traditional markets increased pressure to create new products and enter new markets Resources spread across too many initiatives Needed Stage-gate, but daunted by effort required to implement a manual process Results In 2003, Glatfelter saw a 30% increase in revenue from new products over Narrowed product investments from 200 to 10, focusing resources on highest revenue potential 10-15% increase in ideas evaluated per year Time to market to be cut 25% by 2004 Increased adherence to their Stage-Gate process Increased number of ideas evaluated per year We We simply simply wouldn t wouldn t have have done done Stage-Gate Stage-Gate had had we we not not been been able able to to use use Accolade. Accolade. It It just just wouldn t wouldn t have have worked worked if if we we had had tried tried to to do do it it manually manually we we have have too too many many projects projects to to try try to to manage. manage. Scott Scott Mingus, Mingus, Ph.D. Ph.D. Director Director of of NPD NPD

4 Economic Environment Why is innovation such a hot topic? Commoditization Shrinking Profits Requires Innovation New Products Our focus today Higher Profits

5 The NPD Revenue Gap Companies have to take a long term view of NPD investment to meet future revenue expectations $xxbn Stated Target REVENUE $xbn? New New Products M&A New Markets Inflation With With the the pace pace of of innovation heating heating up, up, any any enterprise that that fails fails s to to replace 2003 replace 10% 10% of of its its revenue stream TIME stream annually is is likely likely to to be be out out of o 2008 of business within within five five years. years. The The Economist Magazine (2003) (2003) Current Products in Current Markets

6 Overview of the APQC-PDI Study Surveyed 105 business units, with over half of the respondents coming from manufacturing sector Median size: 1500 FTEs Median revenue: $400MM US Median R&D spending as % of sales: 3.6% Median annual R&D spending: $14MM US Average time to market for companies was 18.4 months An interesting statistic: 74% of the companies have a formal NPD process, but only 52% of companies have an NPD process that is really used.

7 Examples of Companies in the Best Practice Category Air Products and Chemicals Bausch & Lomb EXFO Electrical-Optical Engineering ExxonMobil Chemical Company Kraft Foods

8 Best-Practice Companies: New Products Align With Strategy % of new products that are New to the World / Major product revisions Worst Performers 26% Best Practice 41% % of new products that are incremental product improvements 40% 28% Source: APQC, PDI

9 Best-Practice Companies: More Investment in Idea Evaluation Typical Companies Ideas In Best-Practice Companies Ideas In # of ideas that make it to feasibility 23% 5% # of Ideas that make it to development 12% 2.5% How do they do it? Only 8% of resources spent on assessment of ideas 20% of resources spent on assessment of ideas Source: PDMA, PDI, Cap Gemini

10 Best-Practice Companies: Fewer Resources Wasted Typical Companies Ideas In Best-Practice Companies Ideas In Resource and cost savings Overall % of resources spent on project failures 46% 20% Source: PDMA, PDI, Cap Gemini

11 Average vs. Best Practice Companies: Impact on Performance % of projects that are launched behind schedule Average 49% Best Practice 21% % of projects that go over budget 43% 21% Lesson: best-practice companies get to to market faster and spend less money to to do do so so Source: APQC, PDI

12 Average vs. Best Practice Companies: Impact on Performance % of revenue coming from new products* % of profits coming from new products* % of new products that are commercial successes *A new product is a product that was launched in the past three years. Average 28% 28% 60% Best Practice 38% 42% 80% Lesson: best-practice companies achieve greater returns on on their NPD investments Source: APQC, PDI

13 Managing Innovation The best practice companies our successfully managing innovation Best Practice Companies are achieving results, as shown in the latest research findings 1 : 38% of revenues and 42.4% of profits come from new products. 79.5% of all products launched are commercially successful. Companies that are doing well today invariably have an enviable stable of new products. Innovativeness drives a company s investment value. 1. Source: APQC Benchmarking study, 2003

14 Some Bad News Too! However, new products management is in trouble in many companies 44% of firms PD projects fail to meet profit objectives 1 Only one in seven concepts is a winner Performance ratings 1 : 32% of businesses rate their NPD speed and efficiency very poor Only 27% rate their NPD profitability relative- to- spending as high 28% of businesses don t even measure their NPD performance results! 1. Source: APQC Benchmarking study, 2003

15 NPD in the Paper Industry The following slides describe common themes/issues we have encountered during our work with clients in the Paper industry. Note, Pulp Co is a fictitious company to illustrate common issues we have encountered.

16 New Product Development Review Our Findings Issues fell into four broad categories: Lack of Strategic Direction Poor process management Severe problems with product development resource allocation No control or accountability over product development

17 New Product Development Review Lack of Strategic Direction The big picture strategic aims were not being translated into achievable NPD programs Executives felt that they did not have sufficient information to make critical NPD decisions R&D Managers felt that they had no authority to make big strategic NPD decisions PulpCo had a great business strategy, but no method to execute it. PulpCo executives and managers made no decisions.

18 New Product Development Review Poor PD Process Management PulpCo had a good Stage-Gate NPD process Well-designed in the best Dr. Bob Cooper manner Excellent manual explaining how it should work All projects passed through a full NPD process PulpCo found the process impossible to manage. This included 494 custom projects.

19 New Product Development Review Poor PD Process Management No project prioritisation and poor gate keeping so all projects were given the go. No visibility of the whole pipeline, therefore no one knew what was going on. Product portfolio looked like a tunnel instead of a funnel, many projects entered the process stretching resources to the limit. PulpCo attempted to use their ERP system to automate metric gathering, but a transaction-based system did not work well in a knowledge-intensive business process.

20 New Product Development Review Problems with Resource Allocation NPD was viewed as being R&D Budgeting was conducted on a historical and functional basis Priorities were not set A clear focus on the high volume of small customisation projects When considering all functions involved, PulpCo did not know how much they were spending on NPD. R&D had a large gap in the requirements for new products that impacted their ability to deliver.

21 New Product Development Review Problems with Resource Allocation Common scenario estimating where NPD resources were being spent : Project Type # Projects Spend $000 New to Market New to Us Product Improvement Cost Improvement Process Improvement Customizations Total Nearly 50% of R&D spend was on customisation projects and only 4% was on New-to-Market Products

22 New Product Development Review Problems with Resource Allocation R&D was getting squeezed from all directions: Sales took up huge amounts of resources getting customised projects for customers High R&D effort low incremental margin! Projects would get delayed as other functions involved had different priorities Manufacturing was measured on up-time, disliked piloting projects. Marketing was measured on shortterm revenue goals, little time for longer-term projects There was always pressure to cut costs Not finished?! We ve promised to deliver it by tomorrow! *!!#*

23 New Product Development Review Problems with Resource Allocation Projects suffered from a lack of resources: There was no way of managing the total resource pool involved with NPD projects No one considered non-r&d staff There were constant disagreements between functions involved regarding priorities Project Managers had little authority over assigned resources Projects were every slow to get to launch

24 New Product Development Review No Control/Accountability in NPD PulpCo had no handle on what was being spent on NPD VP of R&D was held accountable for NPD, but did not have the authority to cover all resources Senior management did not have a way of ensuring that money was spent in the strategically important areas Unable to measure project profitability

25 New Product Development Review No Control/Accountability in NPD We found lots of data on individual projects Stored in project binders, in different formats Little information to help managers make decisions There was too much detail in too many different places Control was micro-managed Senior managers struggled to make decisions on matters that did not require their attention There were standards, but nobody applied them! Different parts of the organization did things their own way

26 Research Findings In summary the following issues are consistently found to be impacting the return on investment from NPD: 1. Inability to make effective product prioritization decisions 2. Inability to align resources with priorities 3. Lack of innovation / ideas 4. Poor communication among teams, vendors, suppliers or customers 5. Lack of process or adherence to processes 6. Too much time spent on administrative tasks

27 Agenda What are the challenges for managing innovation? A framework for managing innovation Tools to support management of innovation Successful Implementation

28 NPD Framework The NPD Framework consists of 4 major components used to manage the innovation process Strategy What markets, technologies & products will be required to achieve business goals? Portfolio Management What specific projects will be funded within the strategic roadmap? Development Processes Are the projects being executed using a quality business focused development process? Idea Generation Do we have a pipeline of new ideas aligned with strategic goals?

29 New Product Development Market/Technology Intelligence Direction Product Innovation Strategy Results Idea Generation Selection Ideas Goals Project Portfolio Management Data Decisions Product Development Processes

30 NPD Funnel Idea Generation Scoping Business Case Development Qualification & Pre-Production Launch 7 Ideas for every successful Product Launched Gate 1 Gate 2 Gate 3 Gate 4 Gate 5 Increasing Investment

31 Innovation Engine Market/Product Innovation Strategy Strategic Bucket Strategic Bucket Strategic Bucket Strategic Bucket Strategic Bucket Strategic Bucket Idea Portfolio Project Portfolio Product Portfolio Portfolio Management Idea Generation Selection Brainstorming, Focus Groups, Market Intel, Technology Intel, Idea Forum, Customers, Suppliers, Distributors Technology Development Standard NPD Process Fast Track NPD Process

32 Definition of Roles in NPD Process NPD Champion NPD Process Manager Gatekeepers Team Leaders Team Members Provides leadership for New Product Development. Facilitates strategy development for New Products, chairs Portfolio Reviews, resolves resource issues, responsible for meeting NPD goals. Provides coordination of new product development process activities, acts as facilitator between gatekeepers and projects, ensures smooth execution of gate meetings. Supports ongoing mentoring of project teams. Senior Managers serving as voting members at Gate meetings. Responsible for rendering decisions at Gate meetings and approving resources for approved projects Responsible for leading cross functional project team through the development process, ensures deliverables are completed. Responsible for specific deliverables and activities within specific projects.

33 Decision Making Decision making is a critical success factor for managing new product development. Strategy Producing a product road map with clearly articulated goals and objectives for the group/division in terms of markets, technologies and products Portfolio Prioritizing and selecting projects based on balancing risk with returns within the articulated strategy Product Development Rigorous gate meetings rendering decisions based on objective criteria Identifying and killing weak projects early Idea Generation Supporting idea generation activities (time and resources)

34 Agenda What are the challenges for managing innovation? A framework for managing innovation Tools to support management of innovation Successful Implementation

35 Tools for Managing Innovation Managing Innovation requires a structured development process and automation tools for enabling the process. 1. Development / Management Processes Stage or Phase Gate Process Portfolio Management Process 2. Automation Tools PLM Space Project Portfolio Management Tool

36 SG Navigator A Stage-Gate TM Best Practice module SG Navigator is the Stage-Gate Process manual that will provide your organization with a complete new product development (NPD) process. It is based on the best practices in NPD identified by Drs. Robert G. Cooper and Scott J. Edgett from over 25 years of research and consulting with leading companies. SG Navigator provides everything you need to launch your Stage-Gate process, including: Executive Gate Presentation Template in PowerPoint Guidelines for customization Implementation framework Project plan for implementation Microsoft Word document format is easy to use, easy to customize and easy to configure in Sopheon Accolade. The Critical Success Factors for new product success, as identified by Drs. Robert G. Cooper and Scott J. Edgett s research, are built into the process. Best-in-class Gatekeeping improves decision making by focusing gatekeepers on decisions for each stage of the process. Copyright Sopheon 2004, 2003 All Rights Stage-Gate Reserved. Inc.

37 Stage-Gate Process Discovery Scoping Business Case Development Testing Launch Gate 1 Gate 2 Gate 3 Gate 4 Gate 5 PLR Stages & Gates Stage define required work to enable decisions at the Gate Flexible Process Managing diversity of projects: New to Market Product Improvements/Cost Reduction projects Risk Management Incremental investment Gates criteria used to identify risks Teams Project Managers and dedicated cross functional teams Teams empowered to execute project

38 Stage-Gate Overview Discovery Scoping Business Case Development Testing Launch Purpose Gate 1 Gate 2 Gate 3 Gate 4 Gate 5 To gather input for new or enhanced product ideas A relatively quick, qualitative assessment to determine whether the project is worth further investigation. To conduct a detailed investigation to develop a product definition and a business case. To develop a prototype product, validated with customers. To provide final and total validation of the entire project: the commercial product, its production, and its marketing. Implement production and marketing launch plans. Key Deliverables Inquiry Form Screened Idea Preliminary Business Case Business Case Product Definition Prototype Testing & Validation Plan Business Case Validated Product Launch Plan Commercialization Post Launch Review Stages and Gates define the high-level roadmap and decision points Investment increases from stage to stage Each gate authorizes the investment for the next stage.

39 The Stage-Gate Game Plan Each stage is preceded by a Gate Gates = Decision Points or GO/KILL Points Gate 1 Stage 1 Gate 2 Stage 2 Gate 3 Stage 3 Ideas Stages Successful Product Each Gate opens or closes the road for the project to move on to the next stage Gates are the quality control check points in the process

40 Stages: Each stage consists of a set of prescribed and concurrent activities, such as Stage 2: undertake a detailed market assessment undertake a detailed technical assessment perform a detailed financial analysis etc. Each stage is multi-functional: Engineering, R&D, Marketing, Production, etc. requires resources/people from many functions no such thing as a Marketing or Production Stage! Each stage typically costs more than the preceding stage: incremental commitment (buying options) as resource commitments increase, uncertainties must come down a risk management model Copyright Sopheon 2004, 2003 All Rights Stage-Gate Reserved. Inc.

41 Gates: Preceding each stage is a decision point or gate which is a project approval meeting, and serves as a Go/Kill and prioritization decision point. The gates are where poor projects are weeded out, and where scarce resources are allocated to the best projects. Gates are the quality control checkpoints in the process. The structure of each gate is similar: A set of required deliverables: what the project leader and team must bring to the Gate Meeting (e.g., the results of the integrated analysis). Criteria against which the project is judged: projects are scored on questions to determine their attractiveness. Outputs: a decision (Go/Kill/Hold/Recycle), an approved project plan for the next stage (complete with people required, estimated money, and a time schedule), a list of deliverables for the next gate and the date of the next Gate Meeting. Copyright Sopheon 2004, 2003 All Rights Stage-Gate Reserved. Inc.

42 E.g. Stage 2: Feasibility Purpose Develop a sound justification to take the project into development including a project definition, project justification, target market and technical feasibility Key Deliverable: Business Case Key Worksheets: Integrated Product Definition, Financial Worksheet Accountability Project Manager Cross functional team Resources People External market research costs Time will vary depending on scope of project

43 E.g. Stage 2 Feasibility Worksheets for Stage 2 Detailed Market Assessment Detailed Technical Assessment Detailed International Opportunity Assessment Detailed Manufacturing and/or Supply Options Assessment Detailed Environmental, Health & Safety and Regulatory Assessment Detailed Integrated Product Definition Preliminary Market Launch Assessment Detailed Financial Analysis Detailed Integrated Risk Assessment Deliverables to Gate 3 Gate 3 Cover Sheet Business Case Development Plan Project Plan for Stage 3 Executive Gate Presentation Gate 5 Scorecard

44 Process Variants Different processes are required to manage different types of projects depending on risk, investment and return 5 Stage (Standard) Process Used for innovative, higher risk new product development projects 3 Stage (Fast Track) Process Used for lower risk projects typically product improvement, cost reduction or customer driven Technology Development Process Used for Projects focused on developing knowledge, technology or competency RFP Process Used to manage RFP derived projects (sales generated)

45 Impact of Portfolio Management Portfolio contains high value-to-the-business projects 0.0% 21.2% 37.9% Worst Performers Average Business Best Performers Portfolio has excellent balance in project types 0.0% 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 Copyright Sopheon , All Stage-Gate Rights Reserved. Inc.

46 Portfolio Management Dynamic decision making process for prioritizing, selecting and allocating resources to projects Uncertain Information, Dynamic Opportunities, Multiple Goals, Strategic Considerations Metrics Project Metrics (Financial, Resources, Risk) Process Metrics (Cycle-time, timeliness, quality etc.) Three Goals of Portfolio Management Value, Balance & Strategic Alignment Tools Charts and Reports Smart Docs (e.g. Scorecard, Financial Workbooks) 3 rd Party Data Integration

47 Three Goals of Portfolio Management Achieve a balance of projects Active Portfolio Link to the Business Strategy Maximize the value of the Portfolio

48 Maximize Value of Portfolio To maximize the value of the portfolio against the company s goal Long-term profitability Against an Internal Rate of Return Against Net Present Value Against Return on Investment

49 Portfolio Balance Between Long and Short-term projects Between High Risk and Low Risk projects Between the different target markets Across different technologies Across different project types Maximizing all resources

50 Link to Business Strategy Ensures projects fit strategic direction Projects will help to deliver the strategy Projects fit into attractive markets for the business Projects develop technologies that meet with future needs of the company Projects develop the future core competencies to move the company forward Projects are prioritized and funded according to their strategic importance

51 Software Tools

52 PLM: An Integrated Approach Product Portfolio Management % of Revenue from New Products % of Investment per Target Market # of Highly Innovative Ideas Innovation Process Execution Average Cycle Time Per Stage % of New Product Kills per Stage # of Deliverables Skipped/Delayed # of Projects Per Stage # of Recycle Gate Decisions Time to Development Product /Packaging Costs $ Actual Sales Development Schedule Actual Mfg Costs Req s/claims Validation $ $ $ $ $ Customer Complaints Product Failures $ FTEs & Budget Ideation Scoping Business Case Development Testing Launch Post-Launch Retire SPEC Product Data Management Recipe/Formula Management Shared Visualization CAD/CAM Engineering Change Mgt, SCM Time to Manufacturing Engineering Change Cycle Time Formula/Component Re-use Time to Select Supplier Raw Materials Costs Formulation Cycle Time ERP, CRM Accounts Receivable # of Sales Opportunities Open Customer Queries % of Repeat Customers Technical PLM Applications

53 Gartner s View Gartner s Product Lifecycle Management Framework: Strategy Planning Management Execution Foundation Product Portfolio Management Project Management, Financial Analysis, Resource Management PDM, Document Management, Knowledge Management Applications Design to Retire Life Cycle Applications (Computer-Aided Design, Engineering and Management), Collaboration Enablers, Visualization Shared Services, Web Application Servers Product Data Exchange Architecture Middleware Communications Layer Network Storage, System Services Source: Gartner Sopheon Research 2004, All Rights (June Reserved. 2002)

54 Gartner PLM Magic Quadrant

55 Evolution of the Product Development Process 74% of all companies have a formal process Because of this burden, only Administrative 52% have a burden process that is really used Knowledge-Centric Smart % of Revenue from NPD Structured Gated Automated Reduced overhead Increased reuse and reduction of duplication Pre-populated documents reduce administrative time Unstructured Process inconsistencies Higher risk, fewer decision points Decision processes established Priorities understood Resource allocation managed Priorities and efforts easily managed Processes monitored without interference Improved go/no go decision making Enhanced collaboration strengthens productivity Elementary Effective Advanced Enhanced Increasing Process Efficiency

56 Why Automate the Process? Executives Portfolio Management: Real time Project Pipeline Reporting Single information source Strategic Decision making (Real Data) Process Managers Project Leaders Resource Managers Process Management & Adherence Standardized Project Metrics & Templates Portfolio mgmt. time savings Training Manage Team Deliverable & Assignments Cross Functional Resource Planning Responsible for Organizing all Project Information Lack of Standards, Best Practices & Templates Team Collaboration Team Training Visibility to Project Resource Demand Resource Management Communication Issues and Lack of Coordination Team Members Limited Access to all Project Information Access to Assignments and deadlines Team Collaboration

57 Example Tool Following slides describe how a tool (Accolade ) is used to manage the NPD Framework Web based application, accessible throughout enterprise Allows processes to be managed Track progress of projects through process Provides collaborative workspace for managing projects Provides metrics to be collected Portfolio Reporting Resource Management Idea Capture

58 TRACKING PROJECT STATUS The Gate Line-Up view enables process managers to assess multiple projects level of readiness for upcoming gate meetings. Symbols and Notifications are used to communicate pending deliverables, completed deliverables or projects at risk. To view the details of the project, simply click on the project name to go to the project home page.

59 Benefit: Fewer skipped gate meetings. Reduction of risk in NPD investment decisions. Improve Process Discipline: Accolade enables you to apply best-practice decision processes, such as Stage- Gate.

60 Benefit: Ensure process adherence by using predefined models (stages, gates, deliverables) to consistently create new projects.

61 Benefit: Save hours each week, per project, by monitoring project changes via notification. notifications communicate information about project updates, scheduled meetings, projects ready for review or projects at risk. Links enable the user to go directly to a project in question.

62 Benefit: Less time preparing for meetings. Consistent information considered every time.

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64 APPLY MARKET-DRIVEN CRITERIA Project is assessed on strategy, competitive advantage, market attractiveness, synergies, and financial reward, in addition to technical fit. Benefit: NPD investment decisions based on consistent, market-based criteria.

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66 Benefit: Increased alignment with strategy. Increased value of portfolio.

67 Agenda What are the challenges for managing innovation? A framework for managing innovation Tools to support management of innovation Successful Implementation

68 Implementation Methodology Implementing process change and introducing new tools should be managed through a structured methodology Phase 1: Assessment Determine current state of NPD Phase 2: Preparation Educate core design group Conduct design exercise to apply NPD Processes and Tools to NPD organization Phase 3: Training and Rollout Train End-Users Roll existing projects into process and supporting tools Phase 4: Mentoring Closely support teams through initial gate-meetings and portfolio reviews

69 Implementing Change Change should start with senior management support with active cross functional participation TOP Down / Bottom Up Will not work from the bottom up, needs sustained senior management attention Define the measures for success Focus on building Lighthouse (Best Practice) Implementations Cross functional buy in to the process important Core team to support implementation Mentor teams and Gatekeepers Initial Gates Portfolio Management Reviews

70 Implementation Process Assessment Education Preparation High Level Design Detailed Design Finalize Process Configuration Design Design Implementation Technical Preparation Software Configuration Technical Training Launch Load Projects End User Training Launch Change Management / Mentoring

71 Thank you! Iain King Sopheon plc Telephone: