Product Portfolio Management:: Hitachi Consulting

Hitachi Consulting
Product Portfolio Management:

Launching the right products at the right time
Michael Burkett Vice President AMR Research April 11, 2006 Keith Williams PLM Competency Leader Hitachi Consulting
Inspiring Your Next Success!
Hitachi Consulting
Agenda
New product launch is a business imperative Product Portfolio Management and PLM Benefits realized from improved product launch

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Hitachi Consulting
Product launch success is a CEOs concern

GE Innovation is key to growth
Were all just a moment away from commodity hellthe only reason to invest in companiesis their ability to innovate.
Jeffrey Immelt, Chairman & CEO, GE
Pfizer New product shortfall blamed for issues competing with generics
Net income falls 3.3%...revenue declined 8.9%...rising pressure from generics, a shortage of new drugs to replace fallen blockbusters and pressure on prices around the world (WSJ 01/20/06)
Motorola Speed getting cell-phones to market

Execution is not what it should bea great productshould have been out a while ago, and we should have been marketing the heck out of the thing. Ed Zander, CEO Motorola (WSJ 12/17/03)

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Hitachi Consulting
Balancing act of profitable growth

High
Market Growth Risk
High margins Low market acceptance
Sustainable Business Growth
Shareholder Value ROI

ROA High Risk Declining Business
Profit Growth Risk Rapid sales increase

Unacceptable margins
Low
Product Superiority Customer expectations Reliability & performance
High
Source: AMR Research, 2005

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Hitachi Consulting
Top reasons why product launches fail
Late to market / missed demand Pricing Product quality Doesnt meet customer needs Commercialization or promotion No clear product differentiation Inadequate distribution channel Product availability issues Regulatory issues Other
4% 22% 20% 17% 17% 15%
32% 31% 30% 30%

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Hitachi Consulting
Poll Question?
Who owns success or failure of NPI in your company?
1. 2. 3. 4. 5. Marketing Product Development Supply Chain Program Management Office Other

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PLM: The Applications
Product Lifecycle Management CEO Facing

Product Portfolio Management
NPDI Intelligence Program Management Project Management Reporting
Supplier Facing
Direct Materials Sourcing

Strategic Sourcing Component & Supplier Management RFx Management Change Management
Customer Needs Management
Creation
Requirements Management Preference Analytics ETO/BTO/DTO
Customer Facing
Collaborative Product Design

Product Design Tools Process Engineering Visualization CAD-to-CAD integration
Product Structure (BOM) Document Management Engineering Change Mgt
Product Data Management
Product Data Publishing Service Parts Records Configuration Management
Product Information Repository

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Fuzzy-front-end through product launch

Customer Driven Input
Program / Product Portfolio Management Project Dashboard & Portfolio Analytics
Idea Discovery
Concept
Feasibility
Design
Launch
Internal / Technology Driven Input
Platform Roadmap Concept BOMs and Designs
Fuzzy-Front-End of New Product Development
Align Customer Needs / Product Features Requirements Management
Filter Ideas Idea Management

8

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Hitachi Consulting
Do you need PPM? A diagnostic

Characteristics to look for: Product delivery deadlines missed Unable to prioritize the most important projects No visibility to evolving program risks Skilled R&D resources working excessive overtime Marketing promoting unavailable products Lost major customer due to poor resource planning

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Hitachi Consulting
AMR Research Hierarchy of Product Metrics What it tells you

Strategic Benefit
New Product Forecast Accuracy Innovation Innovation Benefits Investment
Predictable returns to shareholders
Time-to-Value
Time to Value Time to Time to Market Breakeven Design & Launch
Capability to respond to market opportunity
Operational Excellence
Product Planned vs. % Customer Actual Design Pipeline Needs Met Manage Budget / Sched. Post Launch New Product Detail Planned vs. Actual Mfg/Cycle Time
Part & Process Reuse
First Pass Yield
Stability of processes driving value
Engineering First Year Changes Field Returns
Cost Detail
Source: AMR Research 2006
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Hitachi Consulting
Basic best practices in setting up measures

Define who is reading the measures
What action will be taken Roles and accountability
Identify many but reduce to a critical few metrics

Key outputs and causal factors Process execution vs. management measures
Automate data collection and reporting

Imbed the collection into the system Report only what matters to avoid overload
Corrective action and next steps

Take action on the measures Asses if the right metrics are in place

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Hitachi Consulting
Benefits realized - Cases

Cell phones -2X increase in products launched TTM reduced 50% Food products - 25% value increase on 40% fewer projects Specialty materials - 40% increase new product revenue Specialty Chem - 20-30% margin imprv. & 15% pipeline productivity
Process Benefits (risk reduction)

Med. Device - Monitor metrics to determine cause & effect in NPD A&D - Manage globally distributed Integrated Product Teams Tier 1 Auto APQP process for supplier qualification on NPD

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Hitachi Consulting
Summary
Product launch success is an executive concern Balance return on R&D with product innovation Identify and monitor top reasons for product launch failure Product Portfolio Management is within a PLM strategy Define PPM stakeholders and process before technology Manufacturers are seeing benefits today

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Hitachi Consulting
Thank You!
Michael Burkett Vice President mburkett@amrresearch.com

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Hitachi Consulting
Maximizing Your Product Portfolio

Presented by: Keith Williams, Senior Manager - Hitachi Consulting Mike Burkett, Vice President AMR Research
Hitachi Consulting
Product Introduction and Product Management success continues to decline
Portfolio Management Issues Definition of Portfolio Management Strategic and Tactical Steps for Improvement Tools for Improving Portfolio Management
* Worst Case is a 40% drop in success..
* Average success rate is 50%
Source: Data from AMR Research and others

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Hitachi Consulting
Symptoms of a poorly tuned portfolio

Products are released into the market and do not meet the business objectives
Research and Development budgets are repeatedly exceeded Product ideas get killed very late in the development process Cost overruns on new product development projects Product ideas that should have been developed never see the light of day Lack of balance in the portfolio: Not enough ideas in the pipeline Stale products in the market place Lack of available resources for the products that could have the most potential impact

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Hitachi Consulting
Product Portfolio Management - Challenges and Common Mistakes

Strategy
Lack of clear product strategy for new, existing, and retiring products Product strategy is not aligned with the business objectives Strategy is not communicated and followed Mix Mix of products do not support business and product strategy Reluctance to kill projects Reluctance to sun-set projects (no clear end of life strategy) Volume Not enough volume of ideas in the pipeline Release to market based only on speed and not proper planning Release too many or too few new products into the market place

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Hitachi Consulting
Product Portfolio Management - Challenges and Common Mistakes

Definition of Portfolio Management Portfolio Management Issues Strategic and Tactical Steps for Improvement Tools for Improving Portfolio Management
Execution Lack of a decision based stage gate process to manage the portfolio Lack of clear decision points in the process Lack of integrated communication between functions in the process Quality Ramp to volume and design for manufacturability not managed or considered Speed to market as the key driver Lack of integration and check points in the process Communication Collaboration Lack of communication protocols between functions in the process Information is in silos and not available for key resources Communication is ad-hoc and not structured

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Hitachi Consulting
PPM Objectives for a success future


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Hitachi Consulting
Introduction of Product Portfolio Management as a critical component of Product Lifecycle Management

True Product Portfolio Management is a often overlooked yet extremely critical component of Product Lifecycle Management
Product Portfolio Product Portfolio Management Management
Innovation/Ideation Innovation/Ideation
Product Portfolio Product Portfolio Management Management
Project Portfolio Project Portfolio Management Management
Product Development Product Development
Project Execution Project Execution and and Management Management
1 The Development of New Product Ideas

Product Lifecycle Management
2 The Management of New Product Ideas and Existing Products 3 The Process and Project Management for the Release of New Products 4 The Translation of Product Ideas into a Saleable Product 5 The Care, Feeding, and Ultimately Retirement of Existing Products

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Hitachi Consulting
Simple Formula for Improving Product Portfolio Management Performance

Analyze Your Surroundings 1 2 Define Your Identity 3 Rally Around Your Identity
Step 1 Analyze Your Surroundings Analyze where your winning and where your losing in your market Analyze your skills but be weary to only focus on your perceived core-competencies Step 2 Define your Product Identity Define how you want to attack the market Define your product identityInnovator or Executor Step 3 Rally Around Your Focus Align your business and product strategy to your focus Align your resources to your focus Align your processes and technologies to enable you to execute ruthlessly

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Hitachi Consulting
Step 1 Analyze your Surroundings

Analyze your business strategy
Analyze and understand your Business Strategy Analyze how your current Product Identity and Portfolio support the business strategy Define the gaps Analyze the trends in the market place What direction is the market moving What are the requirements in the market Analyze the balance in your existing portfolio Analyze the competition Analyze and understand where they're focused Analyze and understand why you beat them and why they beat you Analyze where theyre going next Analyze why you fail Analyze why products youve released into the market have failed and learn from them Analyze if your still making mistakes

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Hitachi Consulting
Step 2 Define Your Product Direction and Identity

Understand from your analysis who you are today
From your analysis map where your focus is today Determine if your focus supports your goals Define who you will be tomorrow Define how you want to attack the market (Innovator or Executor) Define where youll focus your strategy, resources, processes, and technologies to support for direction and identity Articulate your vision Document the clear definition of your vision Clearly and frequently communicate your vision Define the success factors Define what success means Define a series of metrics that indicate success

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Hitachi Consulting
Common Product Portfolio Management Metrics

Common Product Portfolio Management Metrics
TTM Time to Market TTP Time to Profit Slip Rate Target Unit Costs, Price, and Profit Accuracy Volume Accuracy Specification Changes First Pass Success Training Level and Channel Effectiveness Budget Accuracy Etc

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Hitachi Consulting
Step 3 Rally Around Your Identity

Assure adequate resources to achieve your vision
Provide the appropriate resources to assure success:
Human Capital, Facilities, Partners, R&D and Product Management Budgets, etc.
Define, develop and deploy processes that support the vision Define, develop, and deploy cross functional collaborate stage gate processes Define, develop, and deploy enabling technologies that support the vision Deploy technologies that help with all aspects of your new vision:
Ideation and Idea Capture. Portfolio Management and Analysis, Product

Execution. Etc. Execute relentlessly Adhere to the visionexecutecommunicatemeasure

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Hitachi Consulting
Enabling Technologies
PLM> Innovation Management
PLM > Product Portfolio Management
PLM > Project Portfolio Management
PLM > Product Development and Execution

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Hitachi Consulting
Product Portfolio Management Improvement Case Studies

Companies like Apple use true Innovation as a mechanism for capturing market share
Companies like Dell use execution and operational excellence as a portfolio tool for capturing marketing share Companies Toyota are gaining market share by using quality and the voice of the customer to gain market share Others are using true disynchronous innovation and portfolio management as a way to capture market share ESPN Phone Apple iTunes

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Hitachi Consulting
Your Questions Our Answers
Hitachi Consultings Product Lifecycle Management Competency:

Keith Williams at krwilliams@hitachiconstulting.com
AMR Expert Analysis:

Mike Burkett at mburkett@amrreasrch.com

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Product Portfolio Management:: Hitachi Consulting

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Hitachi Consulting

Product Portfolio Management:

Inspiring Your Next Success!

Inspiring Your Next Success!

Product launch success is a CEOs concern

Motorola Speed getting cell-phones to market

Inspiring Your Next Success!

Balancing act of profitable growth

Shareholder Value ROI

Profit Growth Risk Rapid sales increase

Source: AMR Research, 2005

Top reasons why product launches fail

32% 31% 30% 30%

Source: AMR Research, 2006

Inspiring Your Next Success!

Inspiring Your Next Success!

PLM: The Applications

Product Lifecycle Management CEO Facing

Direct Materials Sourcing

Customer Needs Management

Requirements Management Preference Analytics ETO/BTO/DTO

Collaborative Product Design

Product Structure (BOM) Document Management Engineering Change Mgt

Product Data Management

Product Data Publishing Service Parts Records Configuration Management

Product Information Repository

Fuzzy-front-end through product launch

Program / Product Portfolio Management Project Dashboard & Portfolio Analytics

Internal / Technology Driven Input

Platform Roadmap Concept BOMs and Designs

Fuzzy-Front-End of New Product Development

Align Customer Needs / Product Features Requirements Management

Filter Ideas Idea Management

Source: AMR Research, 2006

Inspiring Your Next Success!

Do you need PPM? A diagnostic

Inspiring Your Next Success!

AMR Research Hierarchy of Product Metrics What it tells you

Predictable returns to shareholders

Time to Value Time to Time to Market Breakeven Design & Launch

Capability to respond to market opportunity

Part & Process Reuse

First Pass Yield

Stability of processes driving value

Engineering First Year Changes Field Returns

Inspiring Your Next Success!

Basic best practices in setting up measures

Identify many but reduce to a critical few metrics

Automate data collection and reporting

Corrective action and next steps

Inspiring Your Next Success!

Benefits realized - Cases

Process Benefits (risk reduction)

Inspiring Your Next Success!

Inspiring Your Next Success!

Michael Burkett Vice President mburkett@amrresearch.com

Inspiring Your Next Success!

Maximizing Your Product Portfolio

Inspiring Your Next Success!

Product Introduction and Product Management success continues to decline

* Worst Case is a 40% drop in success..

* Average success rate is 50%