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Strategic Innovation Planning for Tomorrow's Products

Steve RogersSenior Consultant Research and Application DevelopmentSopheonJuly 2008

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Food/Bev Chemicals Consumer Goods

A&D, AutoHigh Tech, Services

Customer Examples

Sopheon – Who We Serve

Fortune 50 Bank

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MAKING PROCESS “OBVIOUS-TO-USE”

“One of the key strengths of the Accolade product is its simplicity. Our users have picked up the technology easily and so are able to concentrate on the benefits it brings—principally, our ability to share the content of our innovation pipeline."

Chief Information OfficerCadbury Schweppes plc.

 

Track record

BUILT-IN DOMAIN EXPERTISE

“We benefited from Sopheon’s domain expertise in product-development best practices and the fact that they have installed and supported similar, successful systems for a substantial number of CPG companies. Their industry-specific know-how gave us an important leg up in developing a process in which we can have confidence.”   Vice President of R&DLand O’Lakes

“The most meaningful outcome has been the access and visibility into the entire portfolio of new products and product change projects for all of our associates, including key resources in marketing, research and development, quality assurance and operations.”

Senior Portfolio / Process Manager

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Agenda

• How Product Portfolio Management makes Business Strategy work

• How the "Decision Exchange" funnels strategy into operational decisions

• Using a Product Innovation Masterfile to underpin corporate compliance

• How to develop a company wide knowledge base

• How to: Product Portfolio Analysis in practice

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Industry Challenges

• 68% Loss in Share Value in Past 12 Months

• Manufacturer of chemicals for construction materials did not anticipate dramatic decline in housing market

• Instead of creating organic growth, GGC financed $1.5B to acquire a housing materials producer before market sank – now they are at threat of defaulting on loans

Chemical Industry• 75% Loss in Share Value in

12 Months

• 13 consecutive quarters of losses

• Over-expanded in midst of market shift to “low-carb” and low-trans-fat foods

• As Krispy Kremes became easy to find, novelty wore off & consumer interest declined

• Unable to compete with increasingly broader breakfast offerings of Dunkin’ Donuts

Food Industry• Sold out to Whirlpool; Iowa-

based HQ, R&D Center, and manufacturing plants shut

• Not prepared for market that shifted from local appliance dealerships to discount “big box” distributors

• High-end product focus meant business model not able to respond to inroads from new low-cost Asian competitors

Consumer Goods Industry

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Industry Challenges

Sales

Manufacturing

Marketing

Finance

R&D/Engineering

Senior Executives

Market Roadmapping

Market Roadmapping

Product Roadmapping

Product Roadmapping

Technology RoadmappingTechnology

Roadmapping

Resource Planning

Resource Planning

Portfolio Management

Portfolio Management

Product StrategyProduct Strategy

Technology DevelopmentTechnology

Development

Idea Generation

Idea Generation

Product RetirementProduct

Retirement

Stage-Gate® Process

Stage-Gate® Process

Competitive Threats

Competitive Threats

Economic TurbulenceEconomic

Turbulence

Customer Trends

Customer Trends

Regulatory Changes

Regulatory Changes

Supply Chain Evolution

Supply Chain Evolution

Disruptive TechnologyDisruptive

Technology

New Market Pressures

New Market Pressures

Geo-Political Shifts

Geo-Political Shifts

Changing Demographics

Changing Demographics

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The WorldThe WorldMarketMarket

How Competent is your Innovation to deliver to the World Market?

The Enterprise

The Enterprise

Stage-Gate® Processes

Ideation

Business Case

Scoping

Development

Testing Launch Post-Launch

Reti

re

New Product Concept

Idea Campaign

Market Assessme

nt

Cash

Flow Analysis

Market Validati

on

MFG/Supply Chain Plan

Product Definition

Technical

Assessment

CAD Design/ Recipe/BOM

CAD Design/ Recipe/BOM

Product Sales

Forecast

Actual Sales

Deliverables for Re-Use

Customer Feedback

Market

Launch

Project

Plan

Development

Project

Plan

Testing

Project Plan

Business Case &

Scorecard

Business Case &

Scorecard

Business Case

& Scoreca

rd

New Product Strategy

Product Life- Cycle Plan

Gate 3 Present

ation

Gate 2 Present

ation

Gate 5 Present

ation

Gate 4 Present

ation

Gate 1 Present

ation

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Resource and cost savings

Best-Practice Companies Quickly Eliminate Losing Projects

Source: PDMA, PDI, Cap Gemini

Best-Practice Companies

% of ideas that make it to feasibility

% of Ideas that make it to development 2.5%

Ideas In Typical Companies

Ideas In

12%

5%23%

46% 20%Overall % of resources spent on project failures

25% 49%% of revenue from products introduced in the past 5 years

Does your company have a Stage-Gate® system or a “Flood-Gate” system”?

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Portfolio Management: what’s it for?

Strategic intent

Blueprints

Development

1. Portfolio Management links 1. Portfolio Management links StrategyStrategy with with OperationOperation

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Objectives of Portfolio Management?

• eliminate errors

• minimize delays

• maximize use of assets

• promote understanding

• ease of use

• customer friendliness

• adaptable to customer needs

• provide competitive advantage

• reduce excess head count

H James Harrington, Business Process Improvement  (1991)

Criteria for a good business process

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Agenda

• How Product Portfolio Management makes Business Strategy work

• How the “Decision Exchange" funnels strategy into operational decisions

• Using a Product Innovation Masterfile to underpin corporate compliance

• How to develop a company wide knowledge base

• How to: Product Portfolio Analysis in practice

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Finance & Business Planning

Q&A Process

Sales

Manufacturing / Production

The Portfolio Management ‘Decision Exchange’

Portfolio Portfolio ManagementManagement

Business Business StrategyStrategy

New Product New Product DevelopmentDevelopment

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Schematic: Strategic Business Planning, Portfolio Planning and Product Planning

timelineNOWStrategic horizon

Financial year

Stage-Gate NPD

Strategic Business Planning

Product Planning and roadmapping

Portfolio Rebalancing and Planning

plan the future portfolio and rebalance the current portfolio

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Dynamic decision process

• Cooper, Edgett and Kleinschmidt Portfolio Management for New Products (1998) – “dynamic decision process”, – whereby a business list of product investments

is continuously • updated, • revised, • rebalanced • and reprioritized

• This is not the process of NPD or Gate-Keeping

2. Portfolio Management is a 2. Portfolio Management is a processprocess in its in its own rightown right

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The portfolio management process

• Planning – short term horizon: How to deliver the strategic intent based on today’s reality. What Innovation and Development needs to be commissioned? What needs to be measured and what are the targets?

• Rebalancing – put the plan into action. Monitor the real state of affairs. Adjust the portfolio to meet strategic targets. Implement the decisions within Innovation and Development

• Assessment and Improvement – did we do what we agreed to do? What changed and why? Were we responsive? Was our information correct? How could we improve our decisions?

Methodology is not the key to successMethodology is not the key to success

Because all methodologies can fail.. Because all methodologies can fail..

if your information lets you down if your information lets you down your decisions will let you downyour decisions will let you down

un-implemented decisions are un-implemented decisions are worthlessworthless

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Agenda

• How Product Portfolio Management makes Business Strategy work

• How the “Decision Exchange" funnels strategy into operational decisions

• Using a Product Innovation Masterfile to underpin corporate compliance

• How to develop a company wide knowledge base

• How to: Product Portfolio Analysis in practice

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Financial data

PDMERP

SCM

Product Innovation

Product Innovation Gap

• IP management and knowledge-based information flows demand software support

• The Product Innovation Masterfile defines the information which needs to be right, i.e.

– Accurate

– Real-time

– Trustworthy

3. Information for 3. Information for Portfolio Management is Portfolio Management is a by-product of NPDa by-product of NPD

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Information Architecture - Internal

Finance & Business Planning

Q&A Process

Sales

Manufacturing / Production

New Product New Product DevelopmentDevelopment

Business Business StrategyStrategy

Portfolio Portfolio ManagementManagement

• Organizational information• Research information• Decision information• Planning information• Management information• Decision implementation information

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Information Architecture

Finance & Business Planning

Q&A Process

Sales

Manufacturing / Production

Portfolio Portfolio ManagementManagement

• Organizational information• Research information• Decision information• Planning information• Management information• Decision implementation information

New Product New Product DevelopmentDevelopment

Business Business StrategyStrategy

FTE r

equir

em

en

ts RO

I fo

reca

sts

Revenue t

arg

ets

Budg

ets

Sch

edule

s

Ris

ks

Status

Estimated valueDependencies

Market opportunitie

s

Business StrategyProduct Strategy

Decisions

Sup

ply

Chain

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Strategic planningStrategic planning

Project financialsProject financials

Risk ManagementRisk Management

Dependency ManagementDependency Management

What-if decision supportWhat-if decision support

Status Status

ScorecardsScorecards

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Resource CapacityResource Capacity

Resource demandResource demand

What-if decision supportWhat-if decision support

Resource poolsResource pools

Risk/RewardRisk/RewardScorecardsScorecards

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Agenda

• How Product Portfolio Management makes Business Strategy work

• How the “Decision Exchange" funnels strategy into operational decisions

• Using a Product Innovation Masterfile to underpin corporate compliance

• How to develop a company wide knowledge base

• How to: Product Portfolio Analysis in practice

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Information Architecture:Enterprise Knowledge Base

Finance & Business Planning

Q&A Process

Sales

Manufacturing / Production

Portfolio Portfolio ManagementManagement

• Organizational information• Research information• Decision information• Planning information• Management information• Decision implementation information

New Product New Product DevelopmentDevelopment

Business Business StrategyStrategy

4. 4. Grass-roots adoptionGrass-roots adoption is the foundation for is the foundation for successsuccess

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Agenda

• How Product Portfolio Management makes Business Strategy work

• How the “Decision Exchange" funnels strategy into operational decisions

• Using a Product Innovation Masterfile to underpin corporate compliance

• How to develop a company wide knowledge base

• How to: Product Portfolio Analysis in practice

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How-to’s?

• How to achieve dynamic portfolio decision making

• How to run a lean Portfolio Management process?

• How to support the interaction with other business processes?

• How to tighten the interaction with the down-stream Development process?

• How to achieve organizational adoption?

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How to achieve dynamic portfolio decision making?

• Generate real time management information – See the gaps between targets and today’s development

investments– Report in real time. The situation can change daily.

• Highlight trends – Evaluate capacity, capability and the closure of gaps over time– Monitor the success of development

• Smart tools for scenario evaluation – prioritization, rebalancing, scheduling and dependency analysis– Roll up management data from the actual development status– Insight to prepare decisions

• ‘Democratic’ or bottom-up support for decision making– Scorecards for reviewer-expert contribution– Feasibility, revenue potential, risks and liabilities

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How to run a Lean Portfolio Management Process?

• Minimise data and time. Identify the essential ‘masterfile’ data for Innovation and avoid double data entry. Best practice reuses knowledge, focusing on distinctive added value.

• Pre-structured management information on demand, in real time. Don’t lose time collecting information.

• Reduce the number of atomic systems: Remove isolated departmental applications – connect to central data repository.

• Deconstruct ‘Monuments’ and Silos. Rationalize process, tasks and ownership logically, not historically

• Make decision-making transparent and traceable: avoid expensive communication and meetings to keep the organization on track. Responsibilities are clear, everybody knows the focus and understands why.

• Provide rich process management tools for continuous business process improvement, measuring process effectiveness. Mature the process over time.

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How to support the interaction with other business processes?

• Embed the collection of knowledge from the current toolset on people’s desks

• Build information flows into the business process, from other systems via that toolset and on into the innovation repository. Make it part of the day job.

• Cross-system reporting views enabling real time report generation across applications.

• APIs formalise integration to collect and to feed other systems’ content

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How to tighten the interaction with the down-stream Development process?

• Run Portfolio Management and Development processes in parallel in one database. Ensure transparency and guarantee data quality

• Integrate information views from both processes for Portfolio Management decision making. Rebalance targets with actual data, considering dates, finances, resources and dependencies.

• Manage the decision implementation activities. Decisions are actioned at a human level; changes to development projects are immediately visible. New portfolio decisions may be based on a partially implemented scenario

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How to achieve organizational adoption?

• Look for a natural fit between processes, applications, behaviour and expectations.

• Support a growth path when rationalizing the Portfolio Management process: start simply, concentrate on key deliverables and metrics, slowly move to more advanced and smart functions

• Software configuration capabilities must be very flexible to be configured and re-configured by the organization itself

• Give users confidence to work with sensitive information in the system by applying security rules and access management

• Build on tools the users are familiar with – minimise training re-investment and dovetail with current good practices

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Summary

• The purpose of Portfolio Management is to link The purpose of Portfolio Management is to link StrategyStrategy with with OperationOperation

• Portfolio Management is a Portfolio Management is a processprocess separate from separate from Innovation and Development processesInnovation and Development processes

• Information for Portfolio Management is a Information for Portfolio Management is a by-by-productproduct of NPD of NPD

• Grass-roots Grass-roots adoptionadoption is the foundation of success is the foundation of success

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Case Study – Rich ProductsGlobal Food Manufacturer

Before AccoladeBefore Accolade

Accolade is now being leveraged within its North American and International Business Groups to manage all projects related to NPD and product changes

Rich has better access to info through a shared system to all NPD and product change projects

Are better able to manage resource requirementsmore effectively across projectsHave enhanced portfolio visibility and analysis

through enhanced reporting capabilities

ResultsResults “The most meaningful outcome hasbeen the access and visibility into theentire portfolio of new products andproduct change projects for all of ourassociates, including key resources inmarketing, research and development,quality assurance and operations.”

Trish Hudson,Senior Portfolio / Process Mgr.

“The most meaningful outcome hasbeen the access and visibility into theentire portfolio of new products andproduct change projects for all of ourassociates, including key resources inmarketing, research and development,quality assurance and operations.”

Trish Hudson,Senior Portfolio / Process Mgr.

• Developed Stage-Gate process in-house in 2002 to better execute manage NPD projects and manage resources

•Expanded processes and effectiveness with external consultants - Improved time-to-market by 66%

•Over next 18 months as business continued to grow:•Project owners spending 50% of time communicating status•Projects arriving late to market •Resources constrained on projects