January 2014

Predictive Metrics for Projects & Programs

/ Blogroll, Finance, Metrics, Process

Measuring Competencies In Lean & Innovative Companies, October 16, 2013, focuses on metrics that are part of the Functional/Technical subgroup of metrics. Projects/Programs, Improvement, and culminating Corporate-Level metrics are the other subgroups. Competency measurement, without yet being statistically shown, will be ultimately be shown to correlate with corporate success.

Another group of metrics that will ultimately be shown to correlate with corporate success are the metrics that are “Proactive & Predictive” for projects and programs. GGI is credited with codifying a group of metrics that precede a go-no go approval decision that take risk out of projects and their resultant products, and coining them as Proactive. In sequence, Predictive metrics begin at project/product approval and generally cease when an initial form and function prototype is realized. Predictive metrics compare updates against the approved plan to track deviation or convergence. Together, both Proactive and Predictive metrics are quite useful in eliminating risk and variation in the pre, early, and mid stages of R&D investments.

The vast majority of all R&D spending across the globe is directed to project and programs. Relative to all other categories and types of R&D measurement, excepting the same types of metrics for products, metrics that enable the ability to show what might, could, or will happen to the volume of spending on projects and programs are perhaps the most important. Practically speaking, if a company performs poorly on a project, it is immediately visible within the company. If less than desired performance continues across multiple projects over time, performance usually becomes visible in the products emanating from the company and begins to affect branding, reputation, and pricing. A company can typically recover from a single product that does not live up to expectations. But, when the “product development factory of projects and programs” falls short of expectations multiple times the impact on products and the portfolio is rarely escaped.

Will we ever get to the level of process control over WIP that we now enjoy in manufacturing and other operations functions? Certainly not, nor do we wish to do so. Necessarily we wish to have more probability and variability in product development or we would quash innovation.

Today though, we still suffer way too much air time discussing the metrics that account for “what has happened.” Yes, these “reactive” metrics have a place. It is necessary to measure and record what has or did happen. Reactive metrics also play quite well to the capabilities of North American professionals, who are generally world class problem fixers. A key remaining opportunity for project and program measurement is to develop better proactive and/or predictive correction abilities.

What should or can be measured, early in the cycle, that will give actionable indications that the promised results for the project or the product are deviating from or converging to plans and promises? Is there even one measure in existence today that can be taken early in product development that has been shown to have a 1:1 correlation with the promised plan or output? Not yet. Operations, finance, sales and other company areas have such measures though. Relatively speaking, the science of R&D project and program metrics and measures still has some greenfield in front of it in comparison to the measurement proficiencies that other business functions have attained for the monies and capital entrusted top them.

Predictive Metrics for Projects and Programs [Machine Design – November 7, 2013], delves more deeply into a subject that will be on the front burner of corporations in the years ahead. The corporations that are the first to master early correlating measures of plans and promises to actual outcomes will gain a competitive advantage until the management science becomes widely understood.

R&D Metrics For Manufacturers: Measuring Your Productivity

/ Blogroll, Finance, Metrics, Process, Strategy

On April 3, 2014, GGI will be presenting a webinar in conjunction with Lorman Education Services entitled “R&D Metrics For Manufacturers:  Measuring Your Productivity.”  A number of topics will be discussed, including “New Process-Ware Preceding Stage-Gate,” “Emergent Innovation-Age Metrics,” and “State-Of-The-Industry R&D Metrics Practices In 2013.”

GGI has just completed a primary research study of 200 companies in North America that will be published in early 2014.  This webinar will include information from several areas of the research related to “R&D Operating Environment,” “Organic Innovation,” and “Top Corporate Metrics Used In Industry R&D Practices.”

Some highlights of our planned discussion on April 3 will hopefully entice you to spend an hour with us starting at 1:00 PM CDT.  This blog post will be updated at the bottom of this post with the registration details and codes when they become available.

WEBINAR OVERVIEW

Globalization, business alliances, open innovation, and improved improved organic innovation initiatives to gain strategic advantage in this era of global competition are driving significant changes in measurement practices for innovative functions. The depth of the recent recession augmented the rate of change.

GGI has been tracking the R&D and Product Development metrics used by industry for twenty-five years, and regularly for the past fifteen years.  Our 2013 findings indicate that there is now a clear industry-wide focus for R&D metrics to address business results. That has not always been the case. “Business results” does not equate to conservative portfolios either. There are more risk monies being spent.  But, a plethora of newly developed processes to oversee risky and exploratory activities now keeps a business focus on these early stage activities; and is causing a need for new metrics. The sand box definitely shrunk in the past five years.  The entire pipeline portfolio is receiving increased scrutiny.

Shifts in the priority of a number of measures towards measuring business results have been on track since the 1990s at a slow pace.  Our 2008 findings indicated some type of inflection point in real priorities was nearing.  A comparison of the same twenty-five metrics between 2008 and 2013 shows a clear priority shift, that will likely be permanent.

Finally, intellectual property is increasingly being used as a revenue and profit generation tool; and as a revenue and profit protection tool.

In summary, R&D productivity improvements are being driven by a combination of “business environment” factors and the “maturation of the monetizable IP marketplace.”  Existing metrics are being elevated or demoted to support today’s needs and opportunities.  New metrics are being created to measure R&D areas that have not previously existed, or were not of a size or importance that warranted corporate measurement.

 

WEBINAR AGENDA

I.  R&D Management Evolution & Revolution

  • Timeline 1940-2025
  • Best Practice Process Execution
  • New Basic & Applied Research and Advanced & Product Development Practices
  • New Process-Ware Preceding Stage-Gate Is Spreading Across Industry

II. Emergent Innovation-Age R&D Metrics

  • Vitality Index
  • A Metric For The Hockey Stick and The Chasm
  • Return-On-Innovation
  • Research & Development Effectiveness Index
  • Advanced Development Return-On-Innovation
  • Applied Research Return-On-Innovation
  • Case Study: A Top 10 Global Innovator
  • Return-On-Capital

III. State-Of-The-Industry R&D Metrics Practices In 2013

  • Top Twenty-Five Corporate R&D Measures in 2013
  • Top-Twenty Five Comparison Pre-Recession 2008 to Post-Recession 2013
  • Continuing Commercialization Issues
  • R&D Metrics Penetration Changes 1998-2013
  • R&D Metrics Penetration In The Coming Decade

IV. Recommendations

  • Effectiveness Metrics Outperform Efficiency/Productivity Metrics In Value Generation
  • Sigma-Level Portfolio & Pipeline Control That Maximizes Business Value

 

WEBINAR REGISTRATION

Please check back.  The URLs for further information, registration codes and details, and possible discounts will be located here when they become available.  Thank you for your patience.

If you have been considering GGI’s Summits, this might be a good way to see if spending three days with us will help to achieve your goals.