Fifth Annual Conference

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"An excellent mix between academic theory and industry experience. Every session generated one or two ideas to try and bring back to my organization"
Nick Cassella
Group Marketing Manager
Thomas & Betts

"The conference topics were right on target for me. They addressed the critical business problems that I am facing."
Brian Montgomery
Sr. Project Manager
Lexis-Nexis

Conference Presentations

Robert G. Cooper, Product Development Institute Inc, Penn State University (ISBM) and McMaster University, Canada, author of 5 books on new product management (including Portfolio Management for New Products)

Portfolio management is about picking the winners – which new product projects to invest in, and, it’s about resource allocation to get the right balance and numbers of projects, given squeezed resources.

In his talk, Dr. Cooper focuses on the solutions and best practices in dealing with the major problems faced in effective portfolio management, identified in his recent benchmarking studies. The first is picking the right projects to maximize the value of your portfolio. His research reveals that traditional financial tools do a poor job here – there are better methods. Balancing the portfolio – achieving the right mix of projects between long term and short term, high risk and low risk – is the next area where Cooper offers solutions. Not only is the mix of projects wrong in most companies, but most have far too many projects in their new product pipeline. And so, resource balancing – getting the right numbers of projects — is the next topic. Finally, Cooper offers methods such as Strategic Buckets to bring your project portfolio into alignment with your business’s innovation strategy. His talk concludes with a look at two fundamentally different approaches to portfolio management — one is likely right for you.

Takeaways:

• Maximize portfolio value by: allocating resources and selecting the right balance and number of projects
• Metrics to measure high and low risk
• Implementing Strategic Buckets to align your project portfolio with corporate innovation strategy
• Two schools of thought for effective portfolio management

In the early 1990s, Technology VPs of many private companies came under increasing pressure to justify the contribution of R&D to the financial success of their companies. Several turned to the Industrial Research Institute to develop metrics that would allow them to respond to this concern. Most initial efforts were targeted at determining the financial benefits obtained or anticipated from technology investment. However, these benefits are only obtained when R&D is aligned with the organization’s vision, strategy, culture and organizational structure so tools have been developed to measure the alignment. Carefully selected metrics can enhance the effectiveness of technology’s voice in the development of vision and strategy. To be successful, R&D metrics must be meaningful, credible, and uncomplicated and enjoy the support of managers with program and budget authority. Metrics can also be used at the operational level to track several dimensions of R&D effects and as a diagnostic tool to prescribe improvement actions. This talk will:

• Provide an overview of the methodology developed by the Industrial Research Institute to enable organizations to select a set of metrics that can enable them to measure and improve their effectiveness
• Illustrate the strengths and weaknesses of several potential metrics
• Describe the depth of metrics that measure alignment
• Describe the system of innovation metrics used at Eastman Chemical Company and the lessons learned from use of these metrics

• Metrics to justify contribution of R&D to company financial success
• Benefits of aligning R&D with corporate strategy & the tools used to measure it

Gerald M. Katz, Executive Vice President, Applied Marketing Science

In a recent working paper called "Metrics Thermostat", Professor John R. Hauser of the MIT Sloan School of Management examined one firm’s use of some of the most commonly accepted metrics in use today (e.g. Platform Re-Use, Time-To-Market, and Customer Satisfaction) and their impact on ultimate profitability. Metrics ’97 alumnus Gerry Katz, an associate of Hauser’s, will present key highlights from this important paper and their (unexpected) implications.

Using the concept of "adaptive control" (of which a thermostat is perhaps the simplest example), Hauser first develops a theoretical model of this relationship. Then, using real data from several dozen new product development initiatives in one major division, he evaluates their utility in contributing to the firm’s profitability. Surprisingly, this analysis showed that, at least for this firm, a blind adherence to certain metrics can sometimes lead to counter-productive results.

Takeaways:

• The theory of "adaptive control"
• A model for evaluating the effectiveness of various metrics
• A surprising outcome in one well-known and highly regarded firm

Download a copy of MIT Professor John Hauser's paper: "Metrics Thermostat" or read an article about it from PDBPR.

Luncheon Breakout Sessions

• A proven process that truly maximizes profit contribution of the total project portfolio.
• How data visualization notches-up the ability to quickly evaluate and communicate complex portfolio scenarios.
• How to ensure that the project portfolio really links to the business strategy!

2. The Competitive Benefits of Continuous Benchmarking

Peter Tarbox, Senior Global Account Manager, Performance Measurement Group, LLC

Setting Product Development performance targets is vital to the success of an organization, and many companies find benchmarking to be an effective tool for setting these targets. However, companies who view benchmarking as a discrete event do not get the maximum return on their effort. In contrast to this, continuous benchmarking allows for a much higher return on effort and investment.

This breakout session will illustrate how continuous benchmarking allows organizations to gauge the impact of their Product Development processes on their competitive position and enables critical adjustments to those processes over time. Other benefits of continuous benchmarking will also be discussed, including an increased ability to focus on the metrics that will provide the greatest impact, measurement of process improvement efforts, and greater understanding of Product Development trends.

3. Unbalance Your Scorecard: A Common Sense Approach for Simplifying the Web of Product Development Metrics

Dr. Ajai Kapoor, co-founder and VP Product Management, Speed to Market

One appraoch is to develop sophisticated mathematical models with appropriate weights to reflect criticality - sounds nice but doesn't work in reality. The answer lies not in compromising one for the other, but to deliver all through a single, actionable metric.

Jonathan Propp, Manager, Strategic Decisions, Sun Microsystems

Two years ago, Sun Microsystems began collecting a comprehensive set of metrics on product development projects. We knew that, for people to track metrics seriously, we needed an easy to use, web-based application that would allow different views of the data for executive management, program managers, and teams.

This presentation will cover the selection, implementation, and use of a web-based portal for managing product life cycle information. It will address some of the issues of vendor selection in an emerging market, infrastructure and resources, and implementation in a decentralized organization.

Takeaways:

• Learn how to implement a central repository for product life cycle projects
• Criteria for data selection

Robert Stasey, Director of Quality, Analog Devices

Fourteen years ago, ADI set in motion a series of improvement strategies that culminated in the creation of the Scorecard that became one of industry’s most useful business tools linking strategy and action. Targeting sales growth beyond 20% in 1998 required new metrics to determine required R&D performance and to measure results of improvement strategies displaced in time.

This presentation by Mr. Stasey, ADI’s Product Development Metric Steward, will include measures for projects, pipeline management, R&D practices and overall R&D effectiveness. Mr. Stasey will describe how a benchmarking assessment and improvement strategies reshaped ADI’s product development metrics. The importance of the new metrics is underscored by the aggressive targets - 25% sales growth, 25% operating profit and 25% ROA - goals that exceed the performance of ADI’s top competitors. ADI has captured the attention of customers, competitors and now Wall Street, as evidenced by a three-fold rise in the stock price since last year.

Takeaways:

• Measures for projects, pipeline management, R&D practices and overall R&D effectiveness
• How to use metrics to meet aggressive targets

Michelle Roloff, Service Director, Performance Measurement Group, LLC

Over the last few years, the majority of companies have made significant progress in improving product development. Having achieved improvements in the management of individual projects, companies are turning to portfolio & pipeline management practices for further gains. We will discuss new metrics that are being adopted to assess the performance of the overall development pipeline, show how these can be used to predict future implications, and the impact to higher level financial performance.

Takeaways:

• Review of key metrics for measuring pipeline & portfolio performance
• Current performance levels in the telecommunications and electronic equipment and other industries
• Methods for assessing portfolio & pipeline management practices

Bradford L. Goldense, President, Goldense Group, Inc.

The 2000 Product Development Metrics Survey builds on the 1998 survey jointly conducted by Management Roundtable and GGI which focused on the systems, measures, and reward systems being used to manage tactical product development activities such as projects and products. The 2000 survey will focuses on processes, activities, decision points, and information being used to manage strategic product development activities.

The 2000 Survey covers four major areas of concern to top management and top functional management: R&D linkages to company business strategy, R&D portfolio management and selection, R&D capacity management, and product life-cycle management. The results of this survey target issues of concern to corporate officers, top functional managers in Marketing, Engineering, and Manufacturing, and all professionals that manage within R&D environments at levels across projects and products.

09-05 Deadline has past to participate in GGI's industry metrics survey, but you can still get a copy of the survey here [Download Survey] GGIMetrics-Survey.pdf - 40kb

Click here for Preliminary Survey Results - 10-12-00

Goal: Management wants a 30% improvement in cost, quality, and schedule for transitioning new products into production.

Action Plan: A Transition-to-Production (TTP) management team was created, which in turn created quarterly TTP meetings comprised of managers and supervisors from 3 production sites and one design site scattered throughout the US. The initial meetings were spent with "team building" activities and developing sub-teams with each team assigned an improvement area. Sub-Team Improvement areas included production planning, technical data transfer, processing design changes, and implementing a "Natural Work Team" concept for vehicle assembly. Each team was requested to develop their own improvement project plans and metrics and then provide status briefings at the quarterly meetings.

Issues: After several quarterly meetings, TTP Management is uncertain whether each team is contributing towards the 30/30/30 improvement goals, some design programs are not participating, and some specific improvement targets set by management are not being met.

Solution: The TTP Management Team began an initiative to better align sub-team actions and objectives with management goals.

Takeaways:

• Using metrics to set goals and align the organization
• Overview of typical conflicts, lessons learned
• Bridging the gaps between project and corporate level metrics
• Metrics to address collocation issues with different business units

Professor John B. Gallagher, Assistant Professor of Management, Maryville College

What are Shareholder Value Metrics (SVMs)? How are they developed, used, and implemented?

Who is really using them, and how are they really being used? Presentation includes the actual research findings regarding use patterns.

Why should SVM’s have any affect on investment in R&D (brief theoretical exploration), and what does the research show? Profiles of research participant companies will be provided: how large they are (sales), how research intensive, the industries they represent, their profitability profiles. It will also include an explanation (brief) of the research methodology, and then an exposition of the research findings and their implications. Firms who use SVM’s do appear to invest incrementally more in R&D.

SVM’s impact on the R&D Portfolio. The preliminary research findings that SVM use may affect the incremental investment in basic and applied research relative to product development or process improvement.

Other important SVM issues. This will include a discussion of how SVM use may affect the functional relationship between R&D and the rest of the company, and how SVM use may affect the overall market value of the company.

Takeaways:

• SVM implementation strategies
• Profiles of companies using SVMs
• SVM use and its link to increased R&D investment
• Using SVMs to increase company market value

Luncheon Breakout Sessions

1. Gaining Alignment and Buy-in

Wayne Mackey and David Whitmore

In this breakout session David Whitmore of United Defense and Wayne Mackey of Product Development Consulting will provide details of a case study in gaining buy-in and alignment to a new set of metrics. This session will expand on David Whitmore's general session talk earlier that morning and allow interactive discussion on how United Defense's experience could apply to your company. Wayne Mackey will provide input on the process United Defense used and additional examples using the same process from the telecom, medical devices, consumer durables and service industries.

2. Innovation Metrics

One of the main uses of the Industrial Research Institute’s Technology Value Program (TVP) is in the selection and definition of metrics that can be used to measure and improve the effectiveness of innovation. These metrics are targeted at particular issues (for example measurement of technology’s contribution to shareholder value or measurement of alignment with the business, etc.). Metrics can also be selected based on the needs of the management likely to use them (for example CEO, CTO, lab head, business unit manager). Building on the previous day's talk, the group will be given a practical example of an industrial R&D issue. Participants will then use the TVP to find metrics that will help resolve the issue. Thus, this session will give the participants an opportunity to see how the TVP can be used to aid their effectiveness.

3. Selecting the Right Value Metrics for Your Company

This breakout session will provide a framework to assist your organization in developing a workable approach to the Shareholder Value Metric (SVM) implementation and explore the significant differences between various metrics. The differences between the most prominent SVM’s, such as EVA^TM or CFROI, concern trade-offs between technical accuracy and ease of use; these trade-offs are heavily influenced by the unique nature of each organization and the sophistication of SVM’s. Companies planning to implement an SVM, or expand an existing system, must consider a number of issues including: specific time horizons associated with internal investment, growth rates, and innovation capacity as wells as certain work force demographics, and the relative sophistication of existing IT systems.

4. Trading Off Cost, Speed, and Other Business Objectives

Preston Smith

The metrics for a specific development project usually involve balancing speed, cost, and product performance. However, rare is the team that has adequate guidance for making such trade-offs. Management often says simply that they expect faster, better, and cheaper. In effect, this leaves each team member to choose the balance that she or he prefers.

This breakout session will address not only how an optimal balance might be determined for the project, but more importantly, how the team can coalesce behind a single set of tradeoff rules that keep everyone pulling in the same direction. How can unified trade-off rules become standard operating policy for your company?

Roger Lundberg, Director of Vehicle Engineering Operations, DaimlerChrysler

Chrysler’s 75-year history is filled with dramatic events: stunning success and sensational failures, brilliant engineering and inept styling at times. During the decade of the 90’s, Chrysler’s sales grew by 50%, and profits soared from near zero, to over $5B last year. Reinventing its culture and organizational structure, Chrysler implemented Product Development Platform Teams and traded in its internally developed CAD system for an open CAD system (CATIA) in strategic alliance with Dassault Systemes. With the creation of its extended enterprise, everything changed: the organization, the processes, the systems and the product. Chrysler had changed from a financially controlled company to a product and process driven company by discarding traditional cost control mechanisms and focusing on product and process.

From 1993 – when Chrysler launched the first products of its platform teams –through 1999, Chrysler made more profit than its entire history. Chrysler improved quality by a factor of 5, received numerous awards for innovative products and concepts, achieved a 50% cut in product development lead time, and doubled its product development throughput using four key product development metrics: quality, speed, cost and innovation.

This talk will feature the complete story of the evolution of Chrysler’s ground-breaking Platform Teams, its product development process called the Chrysler Development System, its Development Factory, and the metrics used in the product development process to achieve these results.

Takeaways:

• Four key product development metrics
• Learn how to make the transition from a financially controlled company to a product and process driven company

Paul R. Bunch, Ph.D., Sr. Decision Scientist and Deepa Gangwani, Decision Scientist, Eli Lilly & Company

The ability to bring novel pharmaceutical agents to market at reasonable cost is challenging. The staged development process is marked by high attrition of candidate molecules, long cycle times, and intense resource requirements. To meet corporate strategic objectives, the R&D organization must be able to set and measure key performance targets. Furthermore, it is essential to be able to estimate the resources necessary to execute R&D plans.

We present models of our R&D process that are used to set targets for R&D performance as well as models that are used to predict the expected performance of the projects currently in our R&D portfolio. We will discuss the development and delivery of the models as web-based applications. Several case studies will be covered which describe how the models have been used to aid in strategic decisions.

Takeaways:

• How to set and measure key performance targets for R&D
• Using models to predict expected performance of current projects in your R&D portfolio
• How to develop models as web-based applications
• Using models to determine
  corporate strategy