Accelerating product value realization with Product Effectiveness
Rapid introduction of reliable, compelling products is the lifeblood of product companies. Also, successful new product launches are highly rewarding in terms of higher margins they promise. However, the reality of product innovation is that the failure rate of new products is high. This is not affordable or sustainable, given the pressure on scarce resources. Imagine the impact if the new product success rate were to increase only a few percentage points – benefits would flow straight to the bottom line.
PLM solutions have been offered by technology vendors as a panacea for all product development ills. However, these solutions have seen limited adoption compared to enterprise applications for a variety of reasons:
- While there are many systems available today, organizations still lack a direction on what solution to choose and how to implement across global extended enterprise to address their specific needs, accelerate value realization and provide sustainable governance
- Implementation is done at a departmental level, typically at engineering design centers, rather than managing the product information at an enterprise level
- Solutions until recently have not contained portfolio management and product intelligence capabilities, with linkage to financials and dynamic resourcing functionality
- Product development process maturity is not as mainstream as areas like supply chain, and correspondingly has not received appropriate management attention
- While individually the process may be well defined for each product function, there are significant areas of ambiguity across groups that are not effectively addressed under the conventional stage-gate process
Part of the problem with traditional approaches has been an emphasis on process, without considering other dimensions of change. There needs to also be robustness, collaboration, repeatability, and synchronization of effort by all product functions. Companies need a broader, perhaps transformation view to the product development process. The term Product Effectiveness has been coined to describe this multi-dimensional framework and approach. Business leaders seek to go beyond conventional product development to create better product value through multiple dimensions – new product introduction capabilities, dynamic management of products to generate profitable portfolio, ironing out post-sales product performance issues, and most importantly, Voice of the Customer. Some refer to this as Extended PLM, since it can be implemented in organizations with or without a PLM implementation in place.
The Product Effectiveness framework is made up of 12 components Product Effectiveness incorporating industry operations references models from the Supply Chain Council, PDMA, and leading academic institutions. The framework address a matrix of process (product management, product development and product sustenance) and domain (customer needs management, NPDI program management, product portfolio, and product performance). The following 12 components comprise the framework:
- Product strategy
- Product value management
- Portfolio decisions
- Product intelligence
- Product requirements
- Lifecycle management architecture
- Product innovation management
- R&D testing and laboratory management
- NPD knowledge management
- Process harmonization
- Diagnosis and root cause analysis
- Compliance
These 12 components are not meant to be all inclusive – rather, they are the areas to ‘get right’ when describing the product lifecycle and offer a starting point when defining and planning improvement initiatives.
Beyond the components, it is also useful to consider tools and aids for performance improvement. Tools can provide the rigor and consistency to drive change throughout the enterprise, and tools are needed to make the change permanent by enabling maintenance as things change over time. Following are standard tools that leaders should consider for performance improvement:
- Capability maturity profiles
- Data models
- Product roadmaps
- Process reference models
- Metrics libraries
- Workflows
- Business intelligence and reporting
To bring these ideas together, companies should take a holistic approach. Many failed improvement initiatives have been caused by a piecemeal approach and lack of the bigger picture. Here are some leading practices for improvement initiatives in the area of product development and management:
- Assessment to determine NPDI maturity level to develop an initiatives roadmap
- Adhere to industry standard process models, product data models and KPI
- Reduce decision making time by enabling quick go-kill-hold decisions
- Improve enhance productivity through accelerators embedded as part of the new process model
- Determine product value and track portfolio profitability over periods of time
- Provide executive window into broader dynamics of cross-functional product development cycle
The ideas above may not be the total story. However, they should provide leaders in product companies a starting point to refine their existing approach or perhaps shape planned improvement initiatives. One thing is for sure: with the intense pressure to simultaneously increase innovation and reduce cost, anything that can improve product effectiveness will help companies compete more effectively and reward their stakeholders.
