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Issue Date: April 2005

Realising the value in PLM?

April 2005

The Product First Roadmap from PTC provides a business framework that will help you implement PLM and ensure that your product development strategy is aligned to your capabilities.

Manufacturing companies are always struggling when it comes to making better products faster. They sometimes struggle with the concept of product lifestyle management - and how to implement it. If you are aiming to improve your company's product development - the foundation of any manufacturing company - there are probably a lot of questions you are going to be pondering, such as:
* Whether PLM is right for your company.

* Wondering what PLM is.

* Trying to build a return-on-investment business case for PLM.
If you are in this position, there is a logical framework out there to guide your PLM strategy - and that is the Product First Roadmap from Nasdaq-listed product development company, PTC. Product First is a philosophy built on the idea that great products make great companies. After all, it is the product that defines a manufacturing company in the eyes of a customer. It is the product that creates enthusiasm and loyalty in the marketplace.
Where is the value in PLM?
But before we take the covers off PTC's Product First Roadmap, let us first look at the inherent value of PLM: Over the next five years, global manufacturing is expected to invest upwards of R150 billion rand in product development solutions. Why? Because, after making massive investments in infrastructure and the physical supply chain with mixed results, leading manufacturing companies are now re-discovering 'what matters most' for business success in the 21st century, the product. Within this new global economy, product development processes have been elevated as a leading competitive weapon. To achieve a competitive advantage through superior product development, leading manufacturers are seeking to optimise their product development processes in an increasingly complex and distributed value chain.
The rise of PLM
This recognition has given rise to a new category of software solutions known as product lifecycle management (PLM). Leading industry analyst firms including AMR Research, Gartner, and Forrester Research have identified PLM as the necessary enterprise infrastructure to successfully address these issues and improve the effectiveness of the product development process. PLM describes a comprehensive framework of technology and services that permit manufacturing companies, their partners and customers to collaboratively conceptualise, design, build, and manage products throughout their entire lifecycle. PLM has emerged as the primary means by which manufacturing companies can achieve improvements in their product development processes.
The need to manage digital product data throughout the value chain is a reality that is here to stay, and it certainly complicates matters regarding how to most efficiently collaborate and share information in a timely, secure, and structured manner during the product development process.
Enter PLM, which defines the requirements and capabilities that allow manufacturers to manage information and facilitate communication and collaboration across the entire product lifecycle from product concept and planning to final retirement of the product and every lifecycle contained therein. PLM systems provide a single system-of-record for the complete digital product so that different constituents have access to up-to-date information at every stage in a product's life.
Product development is neither sequential nor enterprise-centric. Since the decisions made by various departments are interdependent, it is critical that various constituents communicate effectively and work in parallel. Furthermore, participants in product development are in most cases not limited to internal organisations; Yankee Group notes, "The monolithic manufacturing establishment, with the ability to conceive, design, engineer, manufacture, and distribute products, is a thing of the past." Today, companies are becoming increasingly specialised; creating narrowly focused yet highly effective entities that work together in value chains to create the final product. In many industries, suppliers contribute more than 70% of the final product design, and in some cases the perceived 'manufacturer' is essentially just a systems integrator. In effect, while companies continue to own the complete digital product, contributions are likely to originate from external suppliers, manufacturing partners, and even customers. The ability of a company's digital product value chain to effectively work together to produce great products is becoming the key measure of competitive advantage.
However, PLM system deployments, like all IT system deployments, present inherent challenges to the organisation. Large IT projects are often characterised by excessive expenditures due to drawn-out software implementations, difficult and unpredictable system integration, and slow to non-existent user adoption. According to Forrester Research, only 29% of Enterprise IT projects came in on time and on budget in the past 10 years. Thus, it is critical for a manufacturer deploying PLM to take into account the inherent risks and complexities of system-wide software deployments. A true PLM solution will deliver an holistic, proven system that optimises product development process throughput while minimising implementation and adoption risks and total cost of ownership. As documented by Giga in a study entitled "Total economic impact of collaborative product development," the benefits of using an enterprise PLM solution can be:
* Reduce product development lifecycle time by 40%. Accelerates information sharing between design engineers with robust collaboration spaces aggregating required information, project timelines and activity assignments.
* Reduce number of process errors by 50%. Ensures that participants are using the most up-to-date and accurate product data.
* Reduce product development travel expenses by 65%. Powers collaboration spaces that aggregate all required information and include discussion forums and meeting spaces to conduct design reviews and other virtual meetings.
* Reduce engineering change order processing time by 85%. Delivers automated, standards-based engineering change processes (spanning request, analysis, and notification) containing supporting data, assignments and activity tracking for monitoring.
* Reduce time to market by 40%. Bridges the communication and exchange of product data between design and manufacturing to meet time-to-market requirements.
This is all good and well, however, realising these benefits is another task all together. It is fine to adopt a strategy of implementing PLM technology and hence providing new capabilities to the organisation, however, without linking these capabilities to the companies overall business strategy few, if any, of these benefits will be realised.
That is how we get to the Product First Roadmap.
Today, many manufacturers are struggling to link strategy with operations, and, as a result, great plans often remain just that - plans - and not great products. Yet a few standout companies find a way to cross this divide and create robust and regular pipelines of successful products. By studying the traits of these winners, PTC - represented in sub-Saharan Africa by productONE - has created the Product First Roadmap.
Product First, as said earlier, is a philosophy built on the idea that great products make great companies. It places product at the centre of a business strategy, creating an adaptable framework for leveraging other business imperatives, such as building customer relationships, optimising supply chains, and efficiently allocating resources. When the mission of building and sustaining great products is at the core of everything a company does, significant value will be created.
But creating that value is challenging. Some estimates indicate that nearly half of product development resources are spent on products that fail. For those manufacturers who are committed to putting product first, PTC has created a tool to help them lay their plans and plot a course. That tool is the Product First Roadmap.
Why a roadmap?
The Product First Roadmap is designed to make the philosophy of Product First actionable: it is one thing to say that a company should place products at the centre of everything it does, but it is another to actually make that vision a reality.
The Product First Roadmap is a flexible tool and does not prescribe just a single course of action. Instead, it is designed to help customers create their own plan for getting to Product First.
Where did the Roadmap come from?
Using the language of our manufacturing customers, PTC built a comprehensive framework that links engineers - the company's traditional customer base - to senior executives. Likewise, the Product First Roadmap demonstrates to senior executives that their corporate strategy can be directly influenced by improvements that are made in product development. By identifying and highlighting the concerns felt at multiple levels within the customer's organisations, PTC is able to speak directly, not only to its software users, but also to the senior managers who drive broad product development issues.
Nearly 20 years in the product development business enabled PTC to develop a comprehensive list of customer initiatives. From that base, the company then launched an exhaustive review of external product development resources, including product development thought leaders in both academia (Harvard and MIT) and business, interviews with over 900 manufacturing companies, reviews of published media articles, and more.
The results were used to organise the Product First Roadmap around core customer needs so that it would resonate quickly. The Product First Roadmap now aggregates a variety of different issues and conveys them back to customers with a simplicity and clarity that did not previously exist in the industry.
The framework
The fundamental premise of the Product First Roadmap is that value (eg, total enterprise value, equity plus debt, market capitalisation, stock price etc) is driven by earnings, which are mostly directly influenced by growth and profitability.
To understand how product development can influence both growth and profitability, PTC articulated the following framework which is comprised of four primary components:
* Strategy - Product development strategy capitalises on opportunities to enhance business value by driving growth and/or profitability.
* Initiatives - Business initiatives are the 'actions' required to achieve your strategies, and they often necessitate a change in people, process, and/or technology.
* Operations - Your business initiatives will, no doubt, impact specific operations within your product development process, such as digital model definition, digital product data management, project management and execution, and change management.
* Capabilities - Lastly, a company must implement the necessary capabilities to provide a solid foundation for the entire framework. Capabilities include: capturing all forms of product-related intellectual property in digital formats, establishing a single source of product data, and conducting virtual design reviews.
For more information contact Dayne Turbitt, productONE, 012 673 9300.

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