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|If innovation is the key to growth, jobs and shareholder value, why do so many companies manage their product launch processes so badly? AMR Research shows that fragmented ownership, budgets and objectives perpetuate costly, error-prone Product Lifecycle Management (PLM) systems.
According to Kevin O'Marah, an AMR Research Analyst, existing systems and processes that support innovation need an overhaul. Despite its cherished position as the driver of so much new value, innovation is still managed with fragmented, disconnected and expensive tools. As a result, the average time-to-market for a new product is close to two years, while failure rates for new product launches run around 75 percent. Too much money and time is spent with too little control of product innovation.
In a recent cover story about outsourcing, Time Magazine asserted, "The move to outsourcing forces a company to use its resources where they count most, like product development." This sentiment may be widely shared, but many companies are finding that the information systems and business processes they rely on for product development are in poor shape.
A recent AMR Research field survey of product development and engineering professionals across 40 US manufacturers shows a disturbing lack of control over the New Product Development and Launch (NPDL) process, including the following:
- Less than 60 percent claim to have financial control (the ability to stay within budgets and assess resource requests systematically) over the NPDL process.
- 45 percent claim strategic control (the ability to hit market-timing windows, market share and margin goals).
- Less than one-third believe that they have strategic and financial control.
- 80 percent claim to have formal NPDL processes, but only 50 percent maintain formal metrics.
- Only 10 percent put overall NPDL process ownership at the senior vice president level or above; 45 percent place NPDL process ownership below the vice president level.
- NPDL process owners control 'none' of the budget for product development in 25 percent of cases and for product launch in 45% of cases.
Kevin O'Marah notes that it is no wonder that the most frequently cited barriers to success are communication and resource availability? The data shows why executing a perfect product launch is still so difficult for so many companies. For organizations it also highlights how expensive people like scientists, engineers, and marketers are being used to create new profit centers with innovative products.
In a world of shortening product lifecycles and quick-response global supply chains, many businesses are finding that the current approach to new product development is taking way too long. AMR Research's benchmark data on overall time-to-market finds a median of 24 months for industries as diverse as Consumer Products (27.5 months), Tier Auto Suppliers (35 months), Industrial Electronic Equipment (19 months) and Semiconductors (23.2 months). This is a long time between seeing an opportunity and seizing it, no matter what the market.
Early AMR Research field research suggests that best practice process benchmarking could improve new product launch cycle times by between 30 percent to 90 percent. Better PLM systems allow the creative minds of engineering, marketing, and manufacturing to get three times as many new product launches per year for the same 10 percent to 20 percent of revenue currently spent on NPDL.
Poor control over NPDL is one symptom of a bad PLM system strategy. Like any persistent health problem, bad PLM will eventually kill any company as competitors grab new business opportunities more quickly and efficiently. AMR Research recommends the following:
- Elevate ownership of the new product development and launch process. It is at least as important as sales, manufacturing or purchasing.
- Audit the readiness of PLM systems to support faster and cheaper NPDL. Most organizations are behind the curve; some will never catch up.
- Start measuring NPDL. Benchmarking is the first step toward getting better, and improvements of 30 percent are certainly achievable.