Guest author Kevin Prendeville is a global managing director with Accenture’s Product Lifecycle Services practice.
The tables have turned on many large high-tech companies – market leaders have become followers while followers have become leaders. What’s behind the seismic shift? The ability of those former followers to leverage investments in product development processes to deliver more innovative and successful products. These processes, known as Product Lifecycle Management (PLM), extend from idea gener¬ation through product launch to product retirement.
An analysis by Accenture has found that large high-tech companies can spend $1 billion or more per year on Product Lifecycle Management in hopes of substantially boosting revenues and cutting costs. But Accenture also found that many C-suite executives view PLM as the engineering department’s black box – a critical enterprise business process poorly understood, measured or managed.
Today’s competitive business environment requires that top management see PLM as a strategic corporate asset, a cross-functional, enterprise-wide business discipline that augments innovation, helps drive revenue growth, and reduces costs of everything from engineering rework to regulatory compliance.
What Is Product Lifecycle Management (PLM)?
PLM integrates a multitude of critical cross-functional activities, such as:
- product strategy
- portfolio management
- product management
- idea and requirements gathering
- product design
- product engineering
- product validation and compliance
- product costing
- product quality
- direct material sourcing
- after-market services product retirement
PLM capabilities support PLM activities to drive activities, decisions and data within the end-to-end PLM process. Examples include
- intellectual property management
- product structure and reuse
- engineering changes
- stage-gate approvals
- ideas and requirements
- software configuration
- quality tests and defects
- product costs
- development project status
For global enterprises to maximize the business impact of PLM, they need to examine two dimensions: effectiveness and efficiency.
Large high-tech companies are making substantial investments – often 5% to 25% or more of revenue – in PLM. But according to Accenture’s analysis, nearly half of PLM ends up wasted on products that do not meet market needs or timing. High-tech enterprises have thousands of highly skilled and well-paid designers, scientists and engineers working inside global PLM processes across hundreds of current and future products. But due to lack of central coordination, prioritization and integration of processes, systems and data, they’re often working on essentially useless or redundant tasks. That means there’s a huge opportunity for improvement.
Technology can help improve PLM – if it’s implemented with an integrated plan focused on a distinct business process. Most global companies have deeply fragmented PLM systems comprising 20 or more applications. PLM software vendors provide powerful and field-tested applications – but not the kind of end-to-end business process coverage available in leading customer relationship management (CRM) and enterprise resource planning (ERP) applications. Most high-tech companies use three or more PLM vendors to span the various PLM capability areas.
Four Ways To Improve PLM
True enterprise PLM requires building an end-to-end framework that spans multiple solutions and accom¬modates business processes and data from marketing, design, product portfolio management and more. A one-size-fits-all answer does not exist, but Accenture has identified four best practices to get the most out PLM:
Step 1. Create an enterprise-wide framework to define PLM capabilities. Define what is and is not PLM, then formally break down and re-evaluate current PLM capabilities. Review all processes, applications, metrics, organization and data that underpin product development process flow from initial concept to product retirement. Then examine the performance and maturity of each as objectively as possible. High-performance businesses structure PLM as a hierarchy of capabilities that span the process, represent various organizations and competencies, and connect all corners of the PLM landscape with each another. Most companies that go through this exercise are surprised by how disjointed and fragmented their overall PLM approaches are and by how many gaps and redundancies they uncover. And they are often alarmed to find how few metrics and how little docu¬mentation supports their PLM activities.
Step 2. Link the PLM framework’s capabilities to key corporate and product priorities. Settle on five-to-ten business metrics that track the effectiveness and efficiency of innovation and product development outputs, transcending any one department or function. They might relate to pipeline throughput, cost of engineering, reuse of platforms or components or resource use. For instance, if plans call for more new products to be developed in lower-cost countries, the PLM framework would link that objective to the corresponding capabilities and metrics.
Step 3. Use the prioritized PLM framework As An investment planning tool. It is relatively straightforward to turn the results of these exercises into a powerful tool for ongoing planning activities. The organization’s varied constituents can more easily analyze trade-offs, guide investments in product development improvement projects, and measure the impact of those projects over time. For example, one high-technology company used this framework to concentrate its future PLM focus and investment to improve software product development processes rather than mechanical design. Basically, the firm chose to improve the productivity of its thousands of software designers instead of its hundreds of mechanical designers.
Step 4. Establish a group to own and update the PLM framework and corporate roadmap. As with CRM, ERP and supply chain management, there has to be a single, formal organization to advance and support PLM. That organization should have visible, unambiguous sponsorship from a senior executive. This helps ensure PLM becomes part of the company’s innovation fabric rather than a one-time project.
Three PLM Success Stories
Using these best practices, several high-tech companies have made significant progress with their PLM strategies:
1. One version of the truth. A provider of servers and storage equipment re-designed its business processes to better leverage PLM technologies. The firm created “one version of the truth” for a single engineering change process for all its hardware products including several from large acquisitions.
2. Integrating hardware and software. A provider of electronic gaming equipment developed new processes, data models and a central application to manage the relationship between its hardware designs and corresponding software designs, as they evolved through development and change processes.
3. Increasing re-use. A global consumer electronics company implemented a streamlined portal and graphic user interface – providing a fast and visual way for designers and engineers to search, find and re-use components, solutions and information stored in its PLM databases.
The good news is there are many cross-industry cases proving the merits of improving PLM. The better news is that many industries have already blazed PLM trails, providing proven strategies, lessons learned and methodologies for high-tech companies to leverage.
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