2015

Roadmap Your Way to R&D-Product Development Innovation

Intestinal fortitude for innovation is on the decline in most industries. The lackluster economy has made many companies skittish to embrace risk in their product portfolios. How bad has it become? In the 1990s, almost 60% of R&D budgets were allocated to New-To-The-World, New-To-The-Market, and New Product Lines (Robert G. Cooper, Reference Paper #46: Creating Bold Innovation In Mature Markets). Today, that number is below 40%.

Nielsen recently did a study of innovative products (Taddy Hall and Rob Wengel, Nielsen Breakthrough Innovation Report:  June 2015). Nielsen examined 3,522 initiatives and identified 12 “Breakthrough Winners.” Ten of the winners were edibles of some type. Other winners included Duracel’s Quantum battery and Paris’ Advanced Haircare from L’Oreal. What happened to all the other categories of products you and I buy? For the time being, the innovation tent has been rolled-up in most industries.

Alas, 30 years of corporate focus on the bottom line has left many companies challenged when it comes to attacking top-line initiatives with confidence (The Journey To Mastering Innovation, Machine Design, November 2015). How will companies overcome the current conundrums of flat to small revenue growth and shrinking profits that have been pervasive for the past few years? Perhaps “roadmaps” might help instill the confidence necessary to once again take on additional risk.

In a recent article, I discussed the need for companies to manage four distinct but integrated portfolios. The best practice is to use four multi-year roadmaps, of the same names, to create those four portfolios.

Four Dynamic Roadmaps Yield Four Dynamic Portfolios

Roadmap Your Way to R&D-Product Development Innovation [Machine Design – December 2015] discusses how properly managed roadmaps can drive targeted and successive improvements in the four portfolios that most companies manage in this day and age.

The 5 Types of Manufacturing Processes

It may be surprising to learn that many engineers with great talent and a depth of experience have a hard time answering questions regarding the type(s) of manufacturing environments that exist in their company.   Hopefully, this article will help practitioners to better categorize what often appears to be shades of gray.

Most manufacturing environments fit into one of five general categories: Repetitive, Discrete, Job Shop, Process (batch), and Process (continuous).

In the diagram below, each letter represents a different product.   “White space” indicates set-up, tear-down, or a changeover activity of some type.   Product is not being produced when there is white space.  Some white spaces take longer than others.  The white space time depends on both the clean up time for the product just produced and on the preparation time for the next product to be produced.

The Five Types of Manufacturing Processes

Most companies use more than one of these environments to get a single product out the door.   This is certainly true if one includes today’s use of the supply base, versus the historical practices of vertically integrated companies.   One of the factors that drove the outsourcing movement was that vertically integrated companies often had all five environments in house, and the associated expense to maintain proficiency across this broad spectrum.

The 5 Types of Manufacturing Processes [Machine Design – September 2015] describes each of the five distinctive manufacturing environments, and the similarities and differences between them.

Product, Project, Technology, and IP Portfolios

In the 1990s, life was simple. Marketing, or Product Management, maintained the “product portfolio.” In the largest companies, there was perhaps also a technology portfolio. The “R” part of the R&D organization would work with marketing to plan future products based on the projected availability of technologies still in development.  Today, having both a technology and a product portfolio is considered the rock-bottom minimum regardless of company size. Just about all companies actively maintain these soft assets—only the degree of formality differs.

Over the past decade, these portfolios became more closely tied together with the advent and acceptance of roadmapping (which charts the path new technologies and products take as they evolve into commercial readiness). In between each and every portfolio snapshot in time, the roadmap provides guidance on the activities needed to reach the portfolio’s next incarnation.

It would be great if we could just call it a day with two portfolios and the roadmaps that tie them together. But that is no longer best practice. We now also need a project portfolio and an intellectual property (IP) portfolio to be a best-practices company.

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Project Portfolio: The need for project portfolios has been partially driven by the tremendous growth in project managers and project management organizations. These now-large organizations need to prioritize and sequence their inventories. There are other equally important reasons.

IP Portfolio: The need for IP portfolios has been partially driven by the increasing ease of monetizing intellectual property as a commodity , in replacement of or in addition to including the IP in products for commercial sale.  There are other equally important reasons.

Product, Project, Technology, and IP Portfolios [Machine Design – August 2015] discusses the two newest portfolios, and some of their key attributes, that are necessary these days to be a best-practices company.

Measuring Project & Product Success

There are two fundamental categories of post-launch reviews.  The first we shall call “Team Self-Assessment Project Reviews.”  These reviews are primarily for product developers to explore their lessons learned from working together on a project that has just completed.  The second we shall call “Management Business Reviews of New Products.”  These reviews are primarily for management to explore the financial and marketplace results of the new product in both a relative and absolute sense, and to contrast the results to those that were promised when the project was approved.

Ideally, there is minimal overlap in the content of the two review categories. However, and this is especially true where the team that created the product stays together to enhance and service the product during its life cycle, much of what should be covered in structured Management reviews is often done in Team reviews.

Consider that management makes the business decisions. They could invest scarce R&D funds in many places. They choose to invest in certain projects because of the business plan that was presented to them, or sometimes just plain old gut feel.  If management does not involve themselves in a comparative analysis of promised vs. actual results, they diminish their capability to “see” similar or analogous estimating shortfalls in future business plans and decisions.  The learning loop does not get closed for management.

Manufacturing and operations professionals, in just about every company these days, have achieved closed-loop decision-making. The opportunity is still on the table for most engineering and product development operations and organizations to do this better.

In R&D, outcomes for the project are not always the same as the outcome for the product.  One could execute a great project, but the marketplace does not get excited about the resultant product(s).   Alternatively, one could execute a highly inefficient and prolonged project, but the resultant product(s) turns out to be a home run.  The important thing is to know about both the project and the product results, to position the organization to become ever better in the future.

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As well, outcomes are not always clear.  Some times they are neither a success nor a failure, but are somewhere in between.

Reviewing Project & Product Success, published by Product Design & Development Magazine, discusses the importance of project, product, and portfolio reviews; and the importance of comparing results to the original estimates and promises that lead to the decisions to move forward.

19th R&D-Product Development Metrics Summit, August 25-27, 2015

There are new techniques and metrics just introduced by McKinsey and CFO Magazine, and an industry-generated metric from Broadcom entitled “R&D Efficiency,” during the spring of 2015. They all focus on measuring overall R&D productivity, output over input. One of them has a good chance of becoming mainstream in the next five years, just as Return On Innovation (early 2000s) and the Vitality Index (1988) did. As well, there has been the equivalent of a sea change in the metrics companies use since the market crashed in 2008. It became evident in 2013 and is ongoing. Did you reorient your metrics, by about 25%, towards business and financial output in the past five years?

This Summit covers everything an executive needs to know relating to measuring R&D, Advanced Development, Product Development, Innovation, Technical and Functional Competencies, R&D Productivity, and R&D-related Intellectual Property. We will connect the numerous metrics going three levels deep into the R&D-Product Development organizations to the handful of KPIs needed by the CEO for financial reporting and investors in a single one-page portfolio.

The selections of metrics are different for every company, and highly strategy dependent. You get what you measure. Don’t worry, you’ll get to include any of the metrics you measure today in your final workshop solution. GGI is consistently told by leaders, who enter believing that they have strong metrics, that they have a great many things they are going to discuss doing and undoing when they get back to their office.

GGI has been a recognized thought leader in measurement since the early 1990s. We have introduced more than a handful of metrics that companies use today. We have played a role in making a number of great metrics, created by others, become mainstream across industries. For eighteen years we have done primary research on corporate, project, technical, functional, innovation, productivity, and IP metrics being adopted by corporations. For twenty-five years we have kept our finger on the pulse of what is being done by others, and on emergent metrics that haven’t significantly penetrated industry (yet). This enables participants to determine a competitive advantage set of KPIs and their necessary supporting measures. Our Summit is as close as you will get to internalize the metrics body of knowledge in a single event.  Every Summit is current.

Senior executives wishing to put themselves and their colleagues in a better position to direct and drive product creation and commercialization should strongly consider attending. Many participants have said, “this Summit covers everything an officer or senior manager needs to know on the subject of Metrics.”

Product Development Metrics Summit 19

Learn More or Register.

Participant Companies.

Press Release.

Post-Launch Reviews Improve New Product Performance

Does your R&D organization have closed-loop decision making?  If not, increasing the robustness of your post-launch reviews may help.

Manufacturing and operations professionals, in just about every company, have achieved closed-loop decision-making over the past three decades.  When the yield of any work center is lower than expected, engineers track down the root causes and fix them.  At the business level across the entire factory, when there is not enough finished goods inventory on hand and orders are short shipped, management tracks down the root causes and fixes them.  The opportunity to do the same is still on the table for most managers and executives who direct engineering and product development professionals and organizations.

The yield of a work center is a much different animal in product development so let’s not address engineering work centers at this time.  However, at the business level across the entire product development organization(s), there are several opportunities to improve both the development team’s and management’s ability to learn from the project/product and better decision making the next time around.

A “project” is a temporary organization vehicle used to develop new products. Companies don’t sell projects; they sell products that result from projects. Team reviews should have a heavy project emphasis. Management reviews should have a heavy product emphasis. Of course there is overlap, but it is not that difficult to draw a fairly clean line as to what in a product should be part of a team project review and what in a project should be part of a management product review.

Post-Launch Reviews Improve New Product Performance [Machine Design – June 2015] discusses the similarities and differences between team and management post-launch reviews, and offers suggestions for how each type of review might be improved.

Maximizing Revenues from the New Product Pipeline

Does your company tightly control its manufacturing operations and work centers? If so, each work center is measured and the company knows exactly how much good and bad product the center produces. These figures are the center’s “yield.” Of course, companies aim for 100% positive yields from each center. And, products which have been manufactured for a long time often approach that ideal.

Now, let’s take this same basic concept of a center’s yield and apply it to product development. There are series of centers that take new product concepts and bring them to market. But for these, 100% yields are not expected, nor would we wish them to be. Product development is much more probabilistic. Not every product brought to market is expected to be a financial success. If it were, innovation would dry up as companies would take no risks.

Many studies over the past five decades have found that somewhere between 35% and 55% of products are not financial successes. That figure can be as high as 90% in high-tech and consumer products. Those high failure rates create an opportunity to improve yield without risking the loss of innovation.

 

New Product Pipeline Yield Example

New Product Pipeline Yield

 

There are opportunities in most companies to get more revenues and profits from the product pipeline without increasing investment or headcount. Those opportunities have one common element, better decision making.

Maximizing Revenues from the New Product Pipeline [Machine Design – May 2015] discusses decision making in corporate environments that have too many ideas to choose from, too few ideas to choose from, and the financial results of both good and bad pipeline management. Bettering management of the pipeline often results in double digit percentage increases in revenues and profits from new products.

Test Suite Rebalancing Reduces Time-To-Market

Has your company been around for a long time? Did your products start off as purely mechanical, then evolve to electro-mechanical, then to electronic, and are now software-driven hardware? Are the historical underpinnings of your testing and quality organizations rooted in manufacturing operations and validating physical products? If so, then rebalancing the test suite may shorten your time-to-market.

Rebalancing a test suite is not easy. It requires much thought and patience, and it is not inexpensive. But lengthy time-to-market is also not inexpensive if the revenue streams of all products could be brought forward a number of weeks or months. ROI justifications are unique to each company. So, rebalancing will be worth it for some firms and not others.

Test Suite Rebalancing Reduces Time-To-Market [Machine Design – April 2015] discusses the complexities and merits of a systematic examination of a company’s test suite, with the goal of discovering bugs earlier and reducing time-to-market across all new products.

Press Release: 19th R&D-Product Development Metrics Summit, August 25-27, 2015

NEEDHAM, Mass. — (BUSINESS WIRE) — March 23, 2015 — GGI will be holding our 19th Summit on Metrics for corporate, business, research, and product development executives during the last week of August at the Four Points by Sheraton – Norwood Inn & Conference Center. The location of all GGI Metrics Summits, this conference center is conveniently equidistant between Boston and Providence airports.

The 19th Summit consists of two seminars, and a workshop that is interspersed with micro seminars. In three days, we will cover the wide range of topics necessary to comprehensively measure corporate investments in research and development. The culminating workshop will result in a take home draft, using GGI’s Linked Metrics Portfolio™ method, of a portfolio of metrics that measure three levels into R&D and produce a handful of metrics for the CEO’s needs. Numerous corporations use our approach that meets the specialized needs of project-based environments while producing business-level metrics that feed into corporate scorecards and financial statements.

Tuesday focuses on the hardest to quantify corporate innovation measurement issues: Risk & Complexity, Hurdle Rates, Trade-Off Analysis, Capacity & Pipeline Management, and the few Metrics that capture the financial performance of R&D as a whole. It concludes with a review of the Top 101 metrics that corporations use to oversee their R&D investments.

Wednesday morning we generate “Proactive” forward-looking R&D metrics to guide the culture of the innovation environment. Discussion then switches to early metrics that are “Predictive” of the outcomes of R&D investments.

The Workshop begins in the afternoon and continues Thursday. Participants organize into teams based on the commonality of their corporate R&D strategy. A common strategy is more important than a common industry at the financial reporting level of corporations. Innovator, Platform, Balanced, and Follower strategy metrics differ. Teams determine their “must have” metrics. Then, a series rounding-out topics are interspersed into the workshop. These micro seminars cover metrics for Applied Research, Advanced Development, Intellectual Property, Technical & Functional & X-Functional Disciplines, Software, and Supplier Management.

The Summit wraps-up with team presentations of their draft Metrics Portfolios, and their explanations on how their metrics support their chosen R&D Strategy. A discussion on Implementing Metrics concludes the event.

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NOTE:  Inadvertently, the actual Business Wire press release title was issued with the dates August 27-29.  The correct dates are August 25-27, Tuesday to Thursday, as the title in this blog post correctly indicates.

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19th R&D-Product Development Metrics Summit

Early Bird Rates conclude at the end of business Pacific Time on Friday, June 26.

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Does Engineering Work for Sales or Management?

Strategy is a wonderful word. It sounds great in meetings, as does its adjective form, strategic. Everyone’s mind snaps to attention the moment either word is used. Then everyone nods, saying we have got to have the right strategy. And if some plan is called strategic, then we must certainly do it.

Management and consultants throw the s-word around casually all the time. Too much of the time, these folks are actually talking about tactics; or even worse, operational levels. There are instances in which both tactics and operational items are strategic. But, usually they are not.

Certain companies and service firms do understand how to create strategies and then put them into effect. People who have worked for those companies see it immediately and their thought processes are changed for the rest of their careers.

Product road maps and product portfolio strategies, and their enforcement, are important. The only companies that systematically prosper without a good portfolio strategy either out-service their competition, sit at the top of the heap in operational excellence and cost management, or are lucky enough to be in a high-growth industry where management can do no wrong.

Does Engineering Work for Sales or Management? [Machine Design – March 2015] discusses the four primary product portfolio management strategies that companies utilize, and the degree to which management polices adherence to its’ stated strategy. Strategies used by Apple, Microsoft, and Harley-Davidson aftermarket suppliers illustrate the key points.

Do Your Innovative Products Need Market Development?

Are all new product ideas ready to go into your company product development process? Certainly not! For some products, the technical and feasibility risks are still too great to have any hope of estimating an accurate schedule. But other products, that are deemed feasible but may entail market risk, are immediately put into a product launch timeline and the chips left to fall where they may for commercialization.

Do Your New Products Sell Like Hockey Sticks? [Machine Design – January 2015], addressed numerous scenarios in which products do not get purchased for a number of months after their launch. This “no or low sales period” puts a drag on a company’s development culture and extends the time frame to meet a product’s financial goals.  One of the causes of hockey stick sales is not addressing the need for market development for certain products.

While some market-related scenarios are hard to avoid, like capital budgeted products that must wait for “funded years” to start, many product launches with no or low sales can be avoided. At the least, they can be mitigated.

Decision makers are much better at identifying products that need additional technology development than they are at identifying products that need additional market development.

Do Your Innovative Products Need Market Development? [Machine Design – February 2015] discusses approaches to mitigating slow market acceptance; and offers insight that this may be a more frequent concern in the next five years than the past five years.

Do Your New Products Sell Like Hockey Sticks?

Have you heard the term “hockey stick sales” before?  This means that there are relatively few sales right after launch.  Then, some weeks or months later, sales start to increase.  The blade of the hockey stick represents the flat sales period, the handle represents the rise [Figure 1].

Figure 1

New Product Launch With “Hockey Stick Sales Curve”

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Hockey-stick sales reduce developer satisfaction as market acceptance is delayed. They also slow down company sales and profits while giving customers pause for thought as they wait for others to take the plunge. The best business hockey stick has no blade, only a handle.

Do Your New Products Sell Like Hockey Sticks? [Machine Design – January 2015] discusses the many scenarios under which new product sales curves may look like a hockey stick. For the scenarios that can be avoided, or at least mitigated, suggestions on how to do it are offered.

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Note: Starting in 2015, Machine Design will no longer have a specific day of the month that an issue is published. Going forward, there will be the January issue, February issue, and so on.

Is Engineering Ready To Standardize Innovation?

Heads up, but don’t panic. It will be a while yet before something lands on your desk to which you will be asked to conform. But, an initial rail car has been put on the tracks and it is leaving the station.

Innovation is a relatively recent front and center corporate focus, right around a decade at this time. How can standards possibly be set, or even in development just yet? The truth is, innovation has been a subject of study and analysis for the past five decades. Best practices are currently being culled out, and many are nearing the ready point to enter the corporate mainstream.

Edward DeBono’s first book “The Use of Lateral Thinking” was published in 1967. By the 1980s, a number of large companies had used the “Lateral Thinking®” technique. There were enough positive results from the approach that corporations wanted more alternatives. Leading thinkers saw the opportunity to service an emerging market for innovation. Roger von Oech’s created his “Creative Whack Pack™” in 1989. This deck of sixty-four cards in four suits, four fundamentally thinking approaches, also gained corporate traction. There were only a handful more of “early providers” in this time frame, but corporate experiences were sufficient to make the case that innovation levels could be improved by external service providers.

Henry Chesbrough published his first work on “open innovation” in 2003. This seminal work opened up the traditional domain of innovation from being an internal-to-the-company initiative to making any and all things possible to better enable a company’s ability to innovate. When Boston Consulting Group teamed up with Business Week in 2004 to rank the most innovative companies on an annual basis, and companies could see their market cap rise or fall based on their movement in this annual list over the next several years, the innovation market took off. What resulted was a critical mass of companies that now wanted external tools and influencers to help themselves get better at innovating. Sufficient money could now be made servicing corporate demands. By 2008, GGI identified some two hundred seventy-five tools and/or service offerings available to corporations for the purpose of improving creativity and innovation [MD August 15, 2013]. Many of these offerings were from newly formed companies.

Is Engineering Ready To Standardize Innovation? [Machine Design – December 11, 2014] discusses the evolution of the innovation body of knowledge that has now resulted in the announcement of an “Innovation Management Framework [IMF]” by the Product Development & Management Association [PDMA].