Product Development / Innovation Management

1. Product Development /Innovation Management Maturity Example

2. Content PD Maturity • Definitions • Business Benefits • Description • Enablers • High-level Process Flow • Principles of the SC Maturity Capability Model • Key Indicators of Mature PD Organizations • Relevant Maturity Levels of the PD Process • PD Assessment Methodology • Business Benefits of PD Assessments

3. Definition Process Maturity postulates that: • Organizations of higher maturity are more productive and that • Processes, in order to mature and improve, have to go through Evolutionary Phases defined as Ad-hoc, Defined, Managed, Leveraged, and Optimized

4. Components of Process Maturity • Leadership - that actively supports & believes in the process value proposition and participates in the process. • Strategy – that aligns with the process (customer focused) values between company, customers, and suppliers. • Structure – informal and formal cross functional (horizontal) team based organization structures with broad process ownership with authority (and investments) clearly assigned. • Process – the process is defined, documented and understood by a majority of the company (not just the people directly involved). People speak in the process “language”. • People – that are skilled, trained and capable with multi-dimensional jobs and authority. Also a “learning” and continuous improvement philosophy. • Systems – that enable information sharing and collaboration between business functions and units, organization and suppliers; organization and customer

5. Maturity Relationships Inter- company High High SCM Maturity Accuracy / Control Stability Predictability / Certainty Efficiency Effectiveness Capability Business Performance Esprit d’ Corps SCM Focus SCM Maturity Inter-functional Internal - within functions Low Low

6. Maturity Relationships Source: Dorfman, M. and Thayer, R.H. (1997). The Capability Maturity Model for Software. Software Engineering, pp.427-438.

7. * Total SCM Cost BM % of Revenue Optimized Leveaged 338 3.1 % Managed 227 8.7 % Defined 12.0 % 112 Ad Hoc * Total SCM Cost BM Reference - Supply chain World Presentation, April 23, 2002. The Performance Management Group

8. The Evolution of SCM Maturity Concept McCormack Research Handfield Research 1990 – University of Pittsburgh issues Capability and Maturity Model (CMM) for Software Development Process 1997-1998 – Interviewed SC managers to build best practice list. 1992-1999 - Mich State University – Global Electronic Benchmarking Network (>1000 global company strategies assessed) 1998-2001 – Conducted survey research with Supply Chain Council companies both in US and Europe. 1995 - NSF Study on Supplier Integration (>25 site visits in US, Japan, Europe + survey of 110 companies) 1997 – CAPS World Class Supply Mgmt Study (>50 site visits in US, Japan, Europe, Korea + survey of 220 companies) 1999-2000 – Developed and published SCM Process Maturity Model assessment concept 1999 – Harper Master’s Thesis on EPC Strategic Alliances (interviewed > 25 EPC’s, suppliers, and energy companies) 2000-2003 – Developed and published Extended SCM Maturity Model concept 2000 – 2003 Developed case based “SCM practice Maturity Model” and deployed assessment. 2003 – McCormack and Handfield Maturity models merge Ongoing Research – Supply Chain Resource Consortium – over 200 faculty/student research projects with 20 partner companies completed. Continued refinement through model use.

9. Competition is based upon multi-firm networks. Collaboration between legal entities is routine to the point where advanced process practices that allow transfer of responsibility without legal ownership are in place. Trust and mutual dependency are the glue holding the extended network together. A horizontal, customer-focused, collaborative culture is firmly in place. Optimized The company, its vendors and suppliers, take cooperation to the process level. Organizational structures and jobs are based on process, and traditional functions, as they relate to the supply chain, begin to disappear altogether. Process measures and management systems are deeply imbedded in the organization. Advanced process management practices take shape. Leveraged The breakthrough level. Managers employ process management with strategic intent. Broad process jobs and structures are put in place outside of traditional functions. Cooperation between intra-company functions, vendors and customers takes the form of teams that share common process measures and goals. Managed Basic processes are defined and documented. Changes to these processes must now go through a formal procedure. Jobs and organizational structures include a process aspect, but remain basically traditional. Representatives from functions meet regularly to coordinate with each other concerning process activities, but only as representatives of their traditional functions. Process Maturity Defined Processes are unstructured and ill-defined. Process measures are not in place and the jobs and organizational structures are based upon the traditional functions, not horizontal processes. Individual heroics and “working around the system” are what makes things happen. Ad Hoc The Process Maturity Model: Best Processes, Practices, & Enablers

10. Definition The Product Development process: • plans • resources • directs • evaluates • selects • implements • and monitors new product developments, revisions to existing products and benefits of both.

11. Definition Product Development Maturity postulates that: • Organizations of higher PD maturity are more productive and that • PD processes, in order to mature and improve, have to go through Evolutionary Phases defined as Ad-hoc, Defined, Managed, Leveraged, and Optimized

12. Benefits of PD Maturity • Integrates customer needs and market opportunities with company (including suppliers) resources and capabilities. • Manages the product portfolio and road map for a company. • Manages process activities to meet business objectives. • Engages talent and skills of suppliers (and suppliers’ suppliers) personnel in achieving company’s business goals • Delivers maximum value to company through efficient, timely (predictable), visible process outcomes.

13. Product Development Description • A process that plans, resources, directs, evaluates, selects, implements, and monitors new product developments, revisions to existing products and benefits of both. • Integrates and involves suppliers and customers into the process • Manages product risks and integration. • Operates across the entire lifecycle of the product.

14. Key Indicators of PD Maturity • Foundation: (Defined) • Basic PD processes, programs, structures, jobs and systems for the organization are defined and documented, however, are not duplicated in supplier’s organization. • Company and supplier PD managers are identified and documented. • Basic: (Managed) • PD participates early in Business Strategy processes. • PD process cross functional teams, measures and product road maps are in place. • PD performance review is on a regular and formal basis with action and follow up management, including suppliers and customers. • Systems support basic knowledge management and process flow. • Advanced: (Leveraged) • PD processes are well defined, implemented, and duplicated in most product categories. • Open information and knowledge sharing about relevant criteria, such as performance and capabilities, facilitates cross-enterprise decision-making. • Cross-functional and cross company PD teams review optimal rationalization measures for alignment with product strategy and business (Market) strategic plans. • Key suppliers begin to duplicate PD process in own organization.

15. Ad Hoc:Maturity Level 1 (General) • Level 1: Ad Hoc. The PD process and its practices are unstructured and ill defined. Process measures are not in place. Jobs and organizational structures are not based upon horizontal processes. Process performance is unpredictable. Targets, if defined, are often missed. PD process costs are high. Customer satisfaction is low. Functional cooperation is also low. • Processes are undefined, undocumented and not understood. • Process owners are not identified. • Basic process measures are unidentified. • Process teams do not exist. Individuals reside totally within functions. • All investments are allocated by functions or business units.

16. Product Development (PD) : Ad Hoc Maturity Level 1 (Detail) • PD is a very manual, unpredictable, time consuming process that is largely • undefined and left up to individual methods and preferences. • No forecasting or planning takes place for the process or outcomes. • Suppliers are not involved in anything but “providing information” and responding to requests. Communication to suppliers is one-way in the form of a request. • Product knowledge is fragmented and contained within individuals. An informal network of expertise is almost invisible. • PD performance is unpredictable and not evaluated through any formal process. • Information flows are unreliable. Information on the process and products is difficult to find and often resides within individual computers.

17. Product Development (PD) : Maturity Level 1 Ad Hoc Customer Start Product Testing Product Management 0010.1 Recognition of Need 0010.2 Investigation of Need 0010.5b Product Prep (market test) 0010.6 Roll Out 0010.7 Sustain And Manage 0010.8 Continuous Improvement Marketing 0010.5a Product Prep (prototype) 0010.3a Product Development 0010.4a Product Design 0010.8 Continuous Improvement PD Dept. 0010.5c Product Prep (prod. test) 0010.5 Product Production Operations Feedback / Improvements Suppliers Business Leadership 0010.3b Product Review -1 0010.4b Product Review -2 0010.5d Product Review -3 0010.5d Product Review -4 Kill Product IT Systems IT System IT System IT System End

18. Defined: Maturity Level 2 (General) • Level 2: Defined.Basic SCM processes are defined and documented. Jobs • and organizational basically remain traditional. Process performance is more • predictable. Targets are defined but still missed more often than not. Overcoming • the functional silos takes considerable effort due to boundary concerns • and competing goals. SCM costs remain high. Customer satisfaction has improved, • but is still low. To move to the next level the following must be in place: • Processes are defined, documented and understood. • Process owners are clearly identified. • Basic process measures are identified and in use. • Process teams are defined but still secondary to functions. • Some investments are allocated by process not functions or business units.

19. Product Development (PD) : DefinedMaturity Level 2 (Detail) PD is defined but still unpredictable with >50% of the products not in PD process and largely uncontrolled. Basic PD forecasting and planning takes place but by the PD people without customer or supplier input. 40% accuracy is typical. Some key suppliers are involved in process or product improvement. Others are asked for input on occasion. Product knowledge is still fragmented and contained within individuals but a formal network of expertise is defined (list of experience and competencies). PD communication procedures are defined (quarterly meetings, identified points of contact, frequency, etc.) PD performance is defined but measures are unreliable. Quarterly reviews are done but include only key (strategic) suppliers only. Information flows are manual. Information on portions of the PD process resides in disconnected repositories (often a file cabinet).

20. Product Development (PD) : Maturity Level 2 Defined Start Customer Product Testing Product Management 0010.1 Recognition of Need 0010.2 Investigation of Need 0010.5b Product Prep (market test) 0010.6 Roll Out 0010.7 Sustain And Manage 0010.8 Continuous Improvement Marketing 0010.5a Product Prep (prototype) 0010.3a Product Development 0010.4a Product Design 0010.8 Continuous Improvement PD Dept. R&D 0010.5c Product Prep (prod. test) 0010.5 Product Production Operations Feedback / Improvements Suppliers Business Leadership 0010.3b Product Review -1 0010.4b Product Review -2 0010.5d Product Review -3 0010.5d Product Review -4 Kill Product IT Systems IT System File Cabinet File Cabinet File Cabinet IT System IT System End

21. Maturity Level 3 (General) • Level 3: Linked (Managed)This represents the breakthrough level. Managers employ • SCM with strategic intent and results. Broad SCM jobs and structures are put in place outside • and on top of traditional functions. Cooperation between intra-company functions, vendors and • customers takes the form of teams that share common SCM measures and goals that reach • horizontally across the supply chain. Process performance becomes more predictable and • targets are often achieved. Continuous improvement efforts take shape focused on root • cause elimination and performance improvements. SCM costs begin decreasing and feelings • of esprit de corps take the place of frustration. Customers are included in process improvement • efforts and customer satisfaction begins to show marked improvement. To move to the next level • the following must be in place: • Process measure are clearly related to job responsibilities. • Process performance goals are defined and progress is tracked. • Process performance is predictable (variability reduced). • Process measures are clearly linked to strategy • The performance management process is documented (written description, flow chart) and • understood by the organization. • A formal process performance review process takes place on a regular basis. • The owner of the performance management process is clearly identified. • Process teams are clearly identified and are equal to functional groups. • Suppliers’ performance is measured (with feedback and improvement actions). • Suppliers are informal members of process teams and asked for input. • IT systems support the gathering and reporting of process performance.

22. Product Development (PD) : Managed - Maturity Level 3 (Detail) Organizational focus is on stabilization of processes related to PD. KPIs support improvement of the overall PD process The majority of Suppliers are involved in process or product improvement. Suppliers are often involved in annual planning and budgeting discussions. However, Suppliers don’t interact with each other. Knowledge development and sharing is limited within Informal relationships. Typically, Customers are more involved in identifying and validating needs, and in product testing than Suppliers. All relevant functions involve External Thought Leaders to a higher extend. Approvals are very time consuming requiring many resources in preparation of meetings. Identification and Investigation of Needs is mainly driven by Marketing. CRM processes and systems support identification of product improvement opportunities and other needs. Continuous Improvement processes are mainly focused on improving production processes such as resolving quality issues but less on improving overall PD process Knowledge Management and Sharing is encouraged however, occurs only within the same product categories. SRM performance is predictable with >80% of the suppliers in an SRM process. Relationship forecasting and planning takes place by the SRM people in collaboration with the customer and supplier. 80% accuracy is typical. Joint communication processes are in place and institutionalized. Formal relationship structures are in place on both sides (Executive Sponsor, Relationship Manager, teams, etc.) Supplier performance is defined and measures are aligned with strategy. Relationship performance reviews are a continuous process. Information flows are connected. Information on the relationship is easily available on line.

23. WS Draft Product Development (PD) : Maturity Level 3 Managed External Thought Leaders 0010.2 Investigation of Need 0010.1 Recognition of Need Product Testing Product Management 0010.2 Investigation of Need 0010.1 Recognition of Need Customer 0010.5b Product Prep (market test) 0010.6 Roll Out 0010.7 Sustain And Manage 0010.8 Continuous Improvement 0010.2 a Investigation of Need 0010.1 a Recognition of Need 0010.3a Product Development Marketing 0010.5a Product Prep (prototype) 0010.8 Continuous Improvement PD Dept. / R&D 0010.1 Recognition of Need 0010.2 Investigation of Need 0010.3a Product Development 0010.4a Product Design 0010.2 Investigation of Need 0010.5c Product Prep (prod. test) 0010.5 Product Production 0010.1 Recognition of Need 0010.3a Product Development Operations Feedback / Improvements 0010.1 Recognition of Need 0010.2 Investigation of Need 0010.3a Product Development Suppliers Yes 0010.3b Product Review -1 Business Leadership 0010.1 Recognition of Need 0010.2 Investigation of Need 0010.4b Product Review -2 0010.5d Product Review -3 0010.5d Product Review -4 No Kill Product IT Systems IT System IT System IT System End IT System IT System IT System

24. Maturity Level 4 (General) • Level 4: Integrated (Leveraged). The company, its vendors and suppliers, take cooperation to • the process level. Organizational structures and jobs are based on SCM procedures, and traditional • functions, as they relate to the supply chain, begin to disappear altogether. SCM measures and • management systems are deeply imbedded in the organization. Advanced SCM practices, such • as collaborative forecasting and planning with customers and suppliers, take shape. Process • performance becomes very predictable and targets are reliably achieved. Process improvement • goals are set by the teams and achieved with confidence. SCM costs are dramatically reduced • and customer satisfaction and esprit de corps become a competitive advantage. To move to the • next level the following must be in place: • Supplier performance measures and goals are clearly identified and integrated into the • performance measurement system. • A cross functional and cross company performance management team is identified and operating. • Responsibility for process measures and goals are team based (including suppliers) • People in different functions and companies cooperate to improve process performance. • Customer driven performance measures are identified and dominate the performance • management system. • Suppliers routinely collaborate with the process teams to improve performance. • Customers are asked to be involved with improving process performance. • Suppliers regularly self report performance. • Process goals are routinely met or exceeded. • IT systems connect with suppliers and customers systems for data gathering and reporting.

25. Product Development (PD) : Leveraged - Maturity Level 4 (Detail) Organizational focus on PD is twofold. First, on vertical integration of PD participants and further process improvements. Second, on expanding development and distribution of knowledge throughout other parts of the organization. KPIs support development of the Learning Organization. Very high level of alignment between participants of the PD process exists. Suppliers interact with each other exchanging best practices and identifying improvement opportunities outside of their business area to the benefit of the PD Organization. External Thought Leaders are fully integrated into the PD process interacting with other Thought Leaders and Suppliers on their own behalf to the benefit of the PD Organization. Business Leadership is a fully integrated member of the PD process. Approval times are reduced to a minimum. Executive Support exists throughout the entire PD process. The majority of Suppliers is fully integrated into the PD process identifying and validating needs and testing products to the same extend as Customers. In addition, Suppliers are fully integrated into early stages of product development and product design, reducing product realization time further and increasing level of quality. Systems and access to systems is almost optimized. Relevant data is correct and can be accessed by a defined group of PD participants. Identification and Investigation of Needs is driven by various parts of the organization such as Marketing, PD, Operations, Suppliers, and External Thought Leaders . Systems facilitate the identification and investigation of needs. Ideas and concepts that have not been realized will automatically be tested for relevance. The PD process is considered a continuous improvement process, involving process and production improvements. Advanced process improvement methods such as Six Sigma are applied to optimize production throughout entire organization.

26. WS Draft Product Development (PD) : Maturity Level 4 Leveraged Product Realization External Thought Leaders 0010.2 Investigation of Need 0010.3a Product Development 0010.1 Recognition of Need Product Management & Continuous Improvement 0010.2 Investigation of Need 0010.3a Product Development 0010.1 Recognition of Need Customer 0010.6 Roll Out 0010.7 Sustain And Manage 0010.2 Investigation of Need 0010.1 Recognition of Need 0010.3a Product Development Marketing PD Dept. / R&D 0010.1 Recognition of Need 0010.2 Investigation of Need 0010.3a Product Development 0010.2 Investigation of Need 0010.5 Product Production 0010.1 Recognition of Need 0010.3a Product Development Operations 0010.5 Product Production 0010.1 Recognition of Need 0010.2 Investigation of Need 0010.3a Product Development Suppliers Yes 0010.5d Product Review 0010.3a Product Development 0010.1 Recognition of Need 0010.2 Investigation of Need Business Leadership No IT Systems IT System IT System IT System IT System

27. Product Development (PD) : Optimized - Maturity Level 5 (Detail) The PD process is optimized and operationalized. A consistent and expanding team of PD experts and Innovation Managers exists. KPIs are defined to support further development and distribution of knowledge throughout the entire Network of the Learning Organization. Cross-functional and cross-business and industry learning is operationalized throughout the entire Network on a process and systems level. People and processes drive the development and distribution of knowledge. Shared IT Systems support learning and knowledge sharing. People subscribe to pre-defined knowledge areas. Relevant information is either automatically send to subscribers or can be researched in databases (pull approach). In addition, a function exists identifying, filtering and distributing relevant information to the right areas using the best media available (push approach). A Network Relationship Manager exists facilitating and managing relationships and providing guidance for further developments and in case Mediation is required. Business Leadership and Executive Support is provided through the Network Relationship Manager. Very high level of independence and alignment between participants of the PD process exists. Suppliers interact with each other exchanging best practices and identifying improvement opportunities outside of their business area to the benefit of the Network. External Thought Leaders are fully integrated into the PD process interacting with other Thought Leaders, Operations, and Suppliers on their own behalf to the benefit of the Network. Network Effects are the norm and not the exception.

28. WS Draft Product Development (PD) : Maturity Level 5 Optimized Network Relationship Manager 0010.5 Provide Stewardship; Facilitate & Manage Relationships Concept Realization & Management PD &Innovation Management Team (including customers) 0010.7 Sustain & Manage 0010.3a Product Development 0010.2 Investigation of Need 0010.1 Recognition of Need 0010.6 Roll Out 0010.5 Product Production IT Systems Shared IT System

29. PD Maturity Assessment Methodology Interviews

30. PD Maturity Improvement Implementation Methodology Analyze Design Implement Monitor & Sustain • Reassess processes and Best-practices • Measure KPIs and define steps for further improvements • Capture lessons learned • Deploy Q&D methodology across organization & network • Support Organization in development, design and implementation of agreed upon improvement plan • Manage Improvement Initiative • If IT changes required, manage IT project at organization and in case required, at Suppliers • Facilitate between Organization and Suppliers • In cooperation with Organization define framework to assess current processes and best-practices • In cooperation with Organization and Participants of Assessment develop improvement plan, including KPIs

31. Business Benefits of PD Assessments • Detailed and focused outline for improvement initiative • Documented Strengths & Weaknesses • Buy-in from participating organization(s) • Detailed understanding of expected ROI • A benchmark to measure future improvement.

32. Business Benefits of PD Assessments Detailed and focused outline for improvement initiative

33. Business Benefits of PD Implementation • Defined and documented Organizational Strengths & Weaknesses • Defined and agreed upon Transformation Plan, including defined and agreed upon KPIs • At Organization & Supplier Site, Management of Improvement Projects • Operational process improvements • IT systems improvement and implementation • Facilitation & Change Management between Organization and Supplier • Reassessment of As-Is Situation after project closure • Definition of further improvement opportunities