Should a CIO Invest in Product Development?
By Kevin Prendeville, MD, Managing Consulting-NA Innovation & Product Development/PLM Practice Lead, Accenture
Why should a Chief Information Officer invest to improve product development?
The biggest reason for the relevance of this question today is the amount of money at stake – costs and revenues –that can be significantly impacted by information technology investments in this arena.
This holds true for a range of industries such as aerospace and defense, apparel, automotive, consumer electronics, consumer packaged goods, consumer durable goods, industrial products, oil and gas, semiconductors, and software.
In these industries plenty is already being invested in product development. In fact, according to Accenture research and analysis, businesses are spending more on product development than ever. For the 2,000 largest global public companies, research and development spending exceeds $680 billion. For some industries such as high tech and biotechnology, R&D spending can be 20 percent or more of overall revenues. The percentage of a company’s employees working in this area can reach 25 percent or more.
But while spending is robust, returns on those investments are not nearly as strong as they should be. To improve investment returns, companies need leverage IT to overcome three challenges:
• siloed groups and linear development processes spanning numerous point solutions;
• lack of access to, and governance of, development data
• Minimal integration spanning software and hardware development.
Overcoming silos and limited linear processes
Too many companies still use a linear, sequential product development process spanning numerous silos of systems, departments and data. This process inhibits internal and external information flow needed to optimize product development. Engineers often become disconnected from the new product introduction process. Product launch teams don’t hear about critical, last-minute design changes as often nor as soon as they should. Customer insights may be out of sync with functional and technical product requirements as well as test results. Products emerging from this fragmented system are unlikely to deliver on customer expectations.
Investing in Digital PLM
These challenges can be overcome through greater investment in Digital Product Lifecycle Management (Digital PLM), elevating product development processes to higher levels of efficiency, productivity, and intelligence. Compared with the linear model, Digital PLM enables direct and
Leading CIOs and product development groups understand that digital technologies– social media, mobile, analytics, bigdata, and cloud – can generate more rapid, scalable, intelligent and connected development by aligning all functions and constituents efficiently. Capitalizing on social networks, for example, companies can solicit their customers’ ideas and feedback about how to improve products.
In Accenture’s client engagements, we have learned that by using Digital PLM an industrial equipment manufacturer lowered inventory-carrying costs by some $200 million. And a global manufacturer of consumer packaged goods accelerated time to market by as much as 20 percent and improved R&D productivity above 30 percent.
Managing product development data
The second product development challenge is that everyone involved needs fast and easy access to the latest information. Picture this situation: An engineer has been assigned as project lead to design, engineer, source, and manufacture a smart device. This engineer wants to reduce part duplication, gain economies of scale, and accelerate the process across a product family.
To accomplish these goals, the engineer needs to search the corporation to find specific part attributes, understand their purposes, and use that knowledge to make informed decisions based on up-to-date insights. But that information is often cryptic, inaccessible, stale, scattered, and time-consuming to locate.
These professionals need a simple product development data hub providing access to required information and insights across disciplines. They need to confirm decisions that consider trade-offs among engineering, sourcing, quality, marketing, manufacturing, and operations.
Accenture and Microsoft have collaborated to meet these needs by developing a simplified, role-based data hub that spans and aggregates product data from numerous siloed sources and systems. When performing search-based tasks, information discovery, and research, the solution can increase an engineer’s productivity by up to 95 percent. It can also increase the number of users accessing real-time, pertinent product development related information by up to 40 percent.
The third challenge is supporting the development of products that contain software and hardware. Most companies still use separate and non-integrated processes for hardware and software components. But using separate PLM tools for hardware and ALM (Application Lifecycle Management) tools for software components can result in a non-integrated solution. This can add time, costs and risks through dependence on manual processes that span and reconcile the complete product’s data across both disciplines. These processes are difficult to track and cause errors that delay a product’s launch and impact product quality.
But this can be done more effectively. Supported by the Digital PLM underlying architecture, companies can implement Unified Application Lifecycle Management + Product Lifecycle Management (Unified ALM+PLM) into their development processes. Unified ALM+PLM combines strengths of ALM tools including managing requirements and features, as well as managing test cases, test results, defects and code. This architecture integrates them with the strengths of PLM tools that manage engineering changes, product configurations, parts compliance, design files, and bills of material.
This approach takes the best from existing software (ALM) and hardware (PLM) management and blends them into a single set of processes, one data model and synthesized tools. The goal is to maximize R&D efficiency and effectiveness. Unified ALM-PLM can improve time to market for new products, support better communications across the product team, and improve product development efficiency.
As CIOs examine their potential corporate investment portfolio, it is important that they recognize the positive impact they can have in the product development arena and the corresponding improvement on their company’s revenues and profits. While driving change and enabling product development processes can be complex, progressive concepts such as Digital PLM, role-based product data hubs, and Unified ALM+PLM have proven to be worth the investment.