Product manufacturers are continually challenged to deliver the "right" product to the right market in a timely manner, but the majority fail to do so consistently due to an inability to fully capitalize on their product development and innovation efforts. In fact, our research suggests that across industries, only about 25% of research projects result in a product that reaches the market, and of those that reach the market, two-thirds fail to meet the original expectations. Staggeringly this research suggests that almost 45% of resources allocated to product development and commercialization are potentially wasted! To help companies address these challenges, IDC Manufacturing Insights has introduced a new vitality-stability framework for portfolio management that is intended to help companies achieve a balance between the vitality driven by innovation to exploit new markets and product opportunities, and the stability facilitated by reuse which benefits from well-established business practices and an experienced workforce.
There are a number of reasons why companies experience such lackluster results in their product development efforts, including:
- Ineffective R&D/innovation management and underutilized strategies that exploit the opportunity to enter new markets using existing products and IP
- Poor stage-gate selection and portfolio planning/balancing
- Lack of a truly integrated product development environment and the inability to leverage PLM to connect systems and regions via a common "digital thread"
To address these challenges, companies must embrace a broader and more holistic approach to product development: one that emphasizes achieving a balance between innovation and the creation of new product concepts and ideas, and the ability to leverage and reuse existing knowledge and IP - one that takes a more comprehensive view of the product development process and that enables a multidisciplinary approach to decision making.
Fig. 1 Vitality-Stability Balance in Portfolio Management (Source: IDC Manufacturing Insights, 2013)
This framework underscores that both vitality and stability are essential, but to differing degrees depending on the organization's business objectives (see Fig.1). In some cases, product manufacturers should focus on reuse of parts, components, and processes (and/or intellectual property, or IP) to drive greater profitability. In other cases, a greater emphasis on "pure" innovation - one that is perhaps bolstered by an "open innovation" strategy, whereby customers or others outside of the organization contribute to the innovation process, may be in order. Either way, organizations must continually seek to support productive forms of innovation, as well as to leverage existing knowledge, products, and processes to drive business value. Perhaps most importantly, organizations must seek to leverage IT to capture, manage, and apply existing IP in new and different ways.
In short, in order to drive productive innovation, organizations will need to invest in IT-enabled methods and tools and will benefit from embracing a product life-cycle economics strategy - one that supports a multidisciplinary decision framework and enables companies to effectively examine critical financial, performance, marketing, and manufacturing criteria and to evaluate trade-offs throughout the product life cycle.
Such strategies will enable companies to achieve powerful market-driven innovation without the heavy costs - financial and otherwise - of misdirected or wasteful innovation efforts.Comments? Feedback? We'd love to hear from you. Please post below or write to me at firstname.lastname@example.org. Subscribers can also access the full report, "Creating New PLM Economic Models - Balancing Innovation and Reuse."