The future value of a company is directly dependent on the successful launch of new, innovative products and services. According to a survey of CEOs by Accenture [Good Ideas are not enough, 2005], two-thirds of executives believe that innovation is vital to the future of their company.

However the same survey found that only one in eight executives feels that their company excels at implementing innovative ideas. Further research from AMR Research found more than two-thirds of companies admit that their new product development (NPD) processes are not under control.

According to the Product Development and Management Association (PDMA) historically the systems that have been deployed in these areas have been applications that, at best, support single sub-processes. While this has been an improvement over paper-based systems, it has resulted only in local optimization. At the same time it has also created additional problems as a result of duplicate systems, incompatible data, unavailable information and lost data. In addition, the resulting drag on efficiency and productivity is compounded by work-arounds, making it difficult to re-establish the disciplines required for people to rely on a formal system.

Clearly there is room for improvement.

Recent research from AberdeenGroup provides us with some clues as to where to look for needed improvements. AberdeenGroup’s Product Innovation Agenda benchmark revealed that companies that are best-in-class in new product development and introduction tend to share the following characteristics:

• Innovation strategy is centrally controlled or coordinated.
• A senior manager is directly responsible for overseeing the full process of identifying innovation opportunities, engineering them, and bringing products to market.
• Measurement of innovation performance is frequent, and has visibility at the enterprise level.
• Product development across all lifecycles is enabled by the implementation of PLM-related technologies.

AberdeenGroup found that best in class companies are four times more likely to have PLM-related technology than their peers. In addition, companies that are better able to meet their new product development targets are three to four times more likely to have centralized data and product knowledge than the industry norm. They are also four times more likely to achieve margin premiums of 75% or higher from new products.

Leading manufacturers are reaping gains by pursuing business capabilities that improve team performance in new product development and coordinating those efforts around customer needs. Fundamental areas that need to be addressed if manufacturers want to create an environment that fosters sustainable, measurable innovation in new product development:

• Strategic Portfolio Management: Capture the voice of the market and align it with the needs of the company. Prioritize the right investments and outline key requirements to direct research and development.
• Program Execution Management: Control and manage projects to manage program and development team complexities, and put in place performance measurements and milestones to keep projects on track. Establish consistent and repeatable product development stage-gate and change-management processes across development organizations.
• Product Development: Develop systems and technologies that embed market and customer requirements directly into product architectures. Align product concepts to strategic requirements that can be simulated and validated as a basis for detailed development.
• Manufacturing Planning and Validation: Synchronize product manufacturing and sourcing processes with the rest of product development to ensure flawless product launches and smooth ramp-up. Validate manufacturing processes and line designs to ensure quality and compliance.

The opportunity is great. Manufacturers can realize significant benefits, both above and below the line. The findings of AberdeenGroup are corroborated by the U.S. National Institute of Standards & Technology, which outlines the productivity gains, alone:

• 30 to 70 percent less development time
• 65 to 90 percent fewer engineering changes
• 20 to 90 percent less time to market
• 200 to 600 percent higher quality
• 20 to 110 percent higher white collar productivity

For new product development initiatives, PLM provides an opportunity to link key business efforts, such as strategic portfolio management and program execution, to operational execution in product development and manufacture in a way that brings together development, marketing, procurement, sales – and all members of the product lifecycle team who can collaborate for greater innovation and efficiency.