APQC, ASME, and the Open Standards Benchmarking Collaborative

1. APQC, ASME, and the Open Standards Benchmarking Collaborative Presented by Cathy Hill, APQC ASME Industry Advisory Board Meeting April 18, 2007

2. To work with organizations worldwide to improve productivity and quality by: Discovering effective methods of improvement Broadly disseminate findings Connect individuals and the knowledge they need to improve APQC’s Mission

3. Who is APQC? • Member-based non-profit research and education organization • Long history in Research & Development (R&D) and Innovation • Membership of more than 500 organizations globally • Conducted more than 6,000 benchmarking studies • Directed more than 250 consortium and best practice studies • Strong adherence to Code of Conduct that ensures that all data shared with APQC will be kept confidential • APQC conducts three types of research • Custom - for unique or confidential needs • Consortium - multi-company best practice collaboration around common set of issues or processes • OSBC - global metric research and benchmarking based on Open Standards

4. Open StandardBenchmarking CollaborativeSM • The OSBC is a global initiative to develop a common, standard framework for process definitions, measures, and benchmarks that are available to participating organizations worldwide to improve performance. • The goal is to accelerate innovation and improvement within organizations. • Hundreds of global firms are participating. • Governance includes an Advisory Council of 14 global organizations. • APQC serves as steward of the Open Standards. • APQC members serve as voice of the customer to validate process, measurement and benchmarking requirements.

5. OSBC Research Database • Over 1,000 individual metrics and performance drivers covering approximately 65 processes and functions • Data collected from Fortune 1000 companies across a variety of industries and geographies • To date, over 3,500 surveys have been collected across the various process areas and industries • Metrics are validated, normalized, and aggregated before reporting • Database is refreshed continuously • 40% Americas, 40% EMEA, 20% Asia Pac • Participants received customized performance level report • Compare across multiple dimensions • Industry peers, geographic, relevant size, etc.

6. Innovation “Pains” • Organizations are facing pressure to grow from shareholders, and other internal and external sources. • The “street” wants to see payback on R&D investments within a year – can anything survive the pressure? • In today's corporate world of ever increasing expectations, a successful innovation strategy is critical to remaining competitive and attractive to investors. • But how do you measure innovation? • Considering that innovation encompasses products and services, operations, business models, and key enablers, no one measure is sufficient to give an organization an assessment of its innovation performance.

7. Innovation Research Background • The research initiative builds upon prior research conducted by APQC and IBM. Several of these recent research projects include: • 2006 Innovation Metrics Survey - joint research by IBM and APQC • 120+ responses • Geographically dispersed organizations • Diverse sectors represented • Participants were asked to evaluate the effectiveness of each metric in measuring innovation • IBM’s CEO Survey • APQC’s “Innovation: Putting Ideas into Action” consortium benchmarking study (2006) • APQC’s “Successfully Embedding Innovation: Strategies and Tactics” consortium benchmarking study (2007)

8. Objectives of the Innovation Survey • Examine how organizations are measuring innovation • Provide participating organizations with their relative performance using an inclusive definition of innovation: • Product and service innovation, • operational innovation, • business model innovation, and • enablers of innovation.

9. Types of Research Questions Innovation Capacity, Processes, and Spending Outcomes Measures • Revenue • Cost of continuing operations • Cost of goods sold • Time-to-market • Time-to-profitability/ payback 28 questions 16 questions

10. Innovation - Where we are to date • Total number of surveys received: 60 • Next Deadline: May 31, 2007 • Early-stage findings and observations: • Please see sample report section “Innovation Analysis and Findings” • The following slides provide a few illustrations of these early stage findings and observations

11. Among responding organizations, external collaboration appears to be highest in R&D function, followed by IT, Marketing, and Sales

12. Idea Generation – Almost 2/3 of ideas come from inside the organization

13. External Sources for Ideas – Customers lead the list

14. Most respondents use cross-functional teams consistently

15. The majority of innovation spending is on enhancements and extensions; however, “white space” spending is not insignificant

16. Respondents reporting more revenue from new products/services tended to report more employees tasked with innovation goals

17. Observations: • The higher the percentage of staff tasked with achieving at least one innovation goal… • The higher the percentage of revenue from new products for the current reporting period • The greater the extent to which operations for the business entity collaborate externally • The greater extent to which the business entity has the ability to provide resources to an accepted new idea • Higher revenue growth respondents: • tended to have significantly shorter times to market and • reported being more able to readily make resources available to newly accepted ideas.

18. How can you participate in the Innovation OSBC Research? • Access the survey directly from the ASME landing page: http://www.apqc.org/asme • Participants input their data at no charge and in return receive a comparative report showing how their organization compares to top performers • All data will be kept fully confidential per APQC’s Benchmarking Code of Conduct • This powerful diagnostic tool will enable your organization to see how your innovation capabilities stack up.

19. The ASME Audience receives: • Access to the OSBC Innovation data collection tool • Each survey participant will receive a complimentary detailed report which includes comparative data on relevant measures. Including: • Peer group comparisons • against all participants • by industry • by geographic region • by company size • Gap analysis • Best practices associated with top performance • Key success factors that top performers use when managing people, process, and technology

20. ASME Receives • Additionally APQC will provide customized reporting for ASME to share with your broader audience possibly comparing ASME to the OSBC database or other useful peer group comparisons. • APQC and ASME would work together to identify the target population that would most benefit, develop effective messaging, communication approaches and reporting needs.

21. How End User Clients Use the OSBC APQC recently conducted phone interviews from a representative list of OSBC survey participants to learn how the end users apply the OSBC findings. Here are a few of the most popular responses: • For annual budgeting and planning purposes- to set goals for cost reduction or staffing levels • To target their top priority improvement projects:  via six sigma or other methodologies • For internal benchmarking across their sites – all sites complete the surveys and then use the data to identify best practices internally and externally. • To identify the enablers of best practice and top performance (for their process improvement and transformation projects) • For detailed process and metric analysis when they are in the middle of a restructuring, a merger or an outsourcing evaluation. • To provide data for the DMAIC process in Six Sigma • To set a baseline for an ERP or other technology implementation. Then they will benchmark again after the implementation to see the impact.

22. Other APQC/ASME Partnering ideas: • Use key findings to create Innovation workshops for the ASME audience • Work with APQC, IBM, Innosight, and ASME to create Innovation standards • Identify other OSBC surveys to market within the ASME audience