Insights -- May 2004
Product Lifecycle Management (PLM) is receiving more attention at the leadership level and the value and benefits are being more deeply understood and appreciated. However, many companies are struggling to understand its innovative capabilities. Innovation, in its broadest sense, addresses the company's total view towards product, packaging, marketing and merchandising differentiation and creativity. Eventually this can include service (i.e., customer, field and sales) areas.
Innovation encompasses the processes, information, people, environment and techniques across most functions of the business that contribute to the development of the product and service offerings. It's transformational and as such, the strategies, capabilities and processes that must be enhanced are broad and span the total organization. PLM is then a critical element of this, specifically addressing the processes from product research through life cycle management. The outlook towards Innovation improvement is very encouraging and offers the
real potential of contributing to top line growth in these companies.
Ramping Up PLM Support
PLM is clearly becoming the on ramp to Innovation improvement. The supporting applications for these sets of processes are available, very capable and improving regularly. As such, several clients have evaluated the business case and are moving out on projects to implement. This provides a great foundation to build on towards the full Innovation potential. And as we said, clients are exploiting the value in improving innovation around other aspects of their business. 3M's packaging oriented PLM solution is clear evidence of this and broadens the impact of innovation initiatives.
Bearing Point is also working with a broad set of clients to better evaluate the potential and relevance of Innovation. The results of our study, to be published in the summer, will shed greater light on not just the issues but the performance levels to be realized and the associated market and revenue benefits. We see great potential for the fast movers to capture significant benefit and market results.
Innovative Focus
We're advising clients to simply begin with a look at the point in their innovation function where the performance is a problem. Do you not get products to market fast enough? Do you not get the right products to market? Does it cost you too much? Most companies we encounter have a feel for this, maybe not the hard facts but at least an instinct. Act on that instinct and isolate the problems and discover the opportunities. That should drive what you do first in Innovation and, perhaps, PLM.
The ability to efficiently and effectively understand market opportunities and respond quickly with robust market offerings, whether it be in new products, modified products, packaging or merchandising, will be valuable and competitively significant. A recent AMR study showed that an average time to market for new products is 27.5 months with less than 10 percent of the associated innovation and development functions supported by collaborative technology. More clients are telling us the margin lift from cost reductions is trailing off and the focus on growth and market success is the agenda. Many of our clients are the most creative, insightful companies in fulfilling and even creating consumer demand. We think improvements in the area of Innovation can support this and give them the edge to lead and dominate their markets.
The progression of Product Lifecycle Management
For the past six years, AMR Research tracked the progress of Product Lifecycle Management (PLM) technology. Research clearly indicates that PLM tools improve time to market, reduce product costs and tighten control over product quality and safety. Major findings from the AMR study include the following:
>Cycle times for new-to-the-world product development are down to 25.2 months in 2003 from an average of 41.7 months in 1995.
>72 percent of companies said that they have a formal, cross-functional process for product development in 2003, up from 56 percent in 1995.
>75 percent of companies said that they have a specific strategy for product development in 2003, up from 63 percent in 1995.