From product first to better productsAlex Anderson. MSI. Oak Brook: Oct 2002.Vol.20, Iss. 10;  pg. 2A, 7 pgs

Subjects: Product development,  Product differentiation,  Strategic planning,  Product life cycle,  Production planningClassification Codes 5310   Production planning & control ,  2310   Planning ,  7500   Product planning & development,  9190   United States Locations: United States,  USAuthor(s): Alex AndersonDocument types: FeaturePublication title: MSI. Oak Brook: Oct 2002. Vol. 20, Iss. 10;  pg. 2A, 7 pgsSource type: PeriodicalISSN/ISBN: 15337758ProQuest document ID: 217938681Text Word Count 4343Document URL: http://proquest.umi.com/pqdweb?did=217938681&sid=1&Fmt=4&clientId=10342&RQT=309&VName=PQD

Abstract (Document Summary)It is obvious that good products are the essential starting point for any successful manufacturer. Product First is both a business strategy and a conceptual framework for making resource allocation and invest-ment decisions, based on the belief that companies exist to make great products. What is new is that an increasing number of companies are discussing what business initiatives and execution strategies result from a Product First strategy, and how different industries, based on their relative product lifecycle lengths, approach the discipline. When a manufacturer invests in systems that support product lifecycle management (PLM), the benefits include cost savings—for example, by eliminating duplicated efforts and automating manual tasks such as design changes. But unlike other technology solutions, product lifecycle management also is an opportunity for revenue gain, even in somewhat unexpected places.

Full Text (4343   words)Copyright Cahners Business Information, a division of Reed Elsevier, Inc. Oct 2002

Electronics, aerospace, and consumer goods industries gain from product lifecycle management; busi-ness initiatives and execution strategies aim at growth and profitability Brad MacLean, vice president of development and engineering with well-known office furniture maker Herman Miller, Zeeland, Mich., knows about Product First. "Innovative products can redefine an entire category," says MacLean. "Prior to the introduction of our Aeron chair, for example, it was unheard of to pay top dollar for an office chair-for everybody, not just ex-ecutives. That product redefined the market for well-made chairs and expanded it fivefold." It's obvious that good products are the essential starting point for any successful manufacturer. Product First is both a business strategy and a conceptual framework for making resource allocation and invest-ment decisions, based on the belief that companies exist to make great products. What's new is that an increasing number of companies are discussing what business initiatives and exe-cution strategies result from a Product First strategy, and how different industries, based on their relative product lifecycle lengths, approach the discipline. When a manufacturer invests in systems that support product lifecycle management (PLM), the benefits include cost savings-for example, by eliminating duplicated efforts and automating manual tasks such as design changes. But unlike other technology solutions, product lifecycle management also is an opportun-

Alex Anderson. MSI. Oak Brook: Oct 2002.Vol.20, Iss. 10;  pg. 2A, 7 pgs 1 of 11

ity for revenue gain, even in somewhat unexpected places. (For a definition of PLM, see the sidebar on page 3A.) "Major original equipment manufacturers' [OEMs] share of their product aftermarket often is only single or low double-- digit percentages," says Skip Shaw, managing partner of Accenture's Aerospace and De-fense practice. "Effective product lifecycle management can allow a higher capture rate for that part of the business-the product aftermarket-with the highest potential profit margin." Why hasn't recognition of the business value of a Product First strategy come sooner? It may be that too many companies in recent years have been distracted by mergers and acquisitions, schemes to reduce working capital, and attempts to fine-tune front-office, back-office, or distribution operations.

MIT professor Dr. Charlie Fine, author of the book Clock Speed: Winning Industry Control in the Age of Temporary Advantage, is familiar with the problems companies have had with installing "solve-world-- hunger" enterprise systems that were overly rigid, locking the company into business processes that weren't always the best fit. "It's like pouring concrete over your business processes," says Fine. "If you're in a rapidly changing envir-onment, that's deep trouble. The faster the pace of the underlying businesses, the more flexible the sys -tems need to be." Product First recognizes that customers know companies by their products, not by their Wall Street strategies. In addition, 13213 buyers are loyal to those vendors whose products and services are of con-sistently high quality. "Product development is partly art and partly science," says MacLean. "It's also really hard-so we try to be very strategic about our product development efforts and our investments." MacLean says Herman Miller has a corporate culture that is hugely supportive of product development and innovation. "A passion for great products is wired into our DNA. People come to work every day thinking about products that really wow the marketplace and create new value for customers."

Introduction of the Aeron chair from Herman Miller, Zeeland, Mich., changed markets for office furniture. Herman Miller attributes its suc-cess to a culture that supports product innovation, and to a technology in-frastructure that supports that culture.

MacLean also stresses the collaborative nature of Herman Miller's relationships with prominent indus-trial designers and resellers, helping it to gain keen insight into what customers want and how they want it. Increasing the collaborative nature of these relationships is a big reason Herman Miller invested in Windchill, a product lifecycle management solution from Needham, Mass.-based PTC. To further the discussion about what follows from Product First, FTC is introducing a Product First roadmap (see sidebar, page 4A) that associates the defining goals of a manufacturer with the initiatives and execution strategies that allow attainment of those goals.

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For any manufacturer, two overriding business goals stand out: growth and profitability. Successful com-panies pursue both goals simultaneously. However, in recent years, experts say the stress has been too strongly in the direction of profitability, to the detriment of growth potential. For example, many manufacturers made investments in enterprise systems-solutions whose primary value is to cut costs through inventory reduction and increased capacity utilization. Laudable goals, no doubt, but at the end of the day having little to do with a strategy bent on growth through product excel -lence. With its Product First roadmap, PTC furnishes manufacturers with a starting point for connecting goals of profit and growth with high-level business initiatives and execution strategies that are clearly articulated and attainable. The framework is modular and flexible, enabling companies to create a roadmap uniquely suited to their particular goals. In addition, PTC recently hosted a series of industry roundtables that focused on how companies in differ-ent industries approach Product First and product lifecycle management. Many of the points raised in these forums resonate with the goals, initiatives, and strategies identified in the Product First roadmap. Short lifecycle: electronics Malcolm Smith is vice president of design and engineering with Flextronics, the electronics manufacturing services provider with $13.1 billion in annual revenues and 70,000 employees worldwide. As an electron-ics manufacturing services provider-more commonly referred to as a contract manufacturer-Singapore-based Flextronics delivers "operational services to technology companies," and has design, engineering, manufacturing, and logistics operations in 28 countries. It's easy for Flextronics to see the connection between revenue generation and customer collaboration. Flextronics functions as a virtual extension of its customers' businesses, which demand that the company be flexible in terms of stipulating data formats, transport mechanisms, and other technology standards.

Electronics manufacturing services provider Flextronics says one im-portant factor in its success as the maker of Microsoft's X-Box is its ability to work as a virtual extension of its customers' businesses.

"We have to be very flexible to link up with our customers' IT systems, their tool sets," says Smith. "I think our involvement in the manufacture of the Microsoft X-Box is a great example. We got to market on-time and met the customer's expectations, and the ability to work concurrently on design and manufacturing-with the customer and with the supply chain-was key here. So for us there can really be no distinction between internal and external." Nor-for product lifecycle management to work effectively-can there be any artificial distinctions between internal department functions. "As we get our arms around product development in this day and age, we realize we can't just do it within engineering," says Carl BannaT of Lockheed Martin. "It has to be opera-tions, manufacturing, finance, and others as well. Everybody has to be part of that process. It's allowed us to increase our design iterations. In the past we might only get one or two turns. Now it's three, four, or even five turns." Bannar is vice president, technical operations, Lockheed Martin Naval Electronics & Surveillance Sys-tems-Surface Systems-one of the largest systems integrators within the Lockheed Martin Corp. Lock-heed Martin worked with PTC to connect its globally dispersed partners and share product information throughout the supply chain. Where do I go now, you ask Roadmap gives direction to those looking to grow their business through a Product First orientation

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TC, a thought leader in understanding what it takes to create value through a Product First strategy, is in -troducing a Product First roadmap that associates the goals and values that define a Product First strategy with the business initiatives and execution strategies that follow from those values.

For any manufacturer, two overriding business goals stand out: growth and profitability. And while every company pursues both these goals simultaneously, some say that in recent years the stress has been too strongly toward profitability. The danger is that the pursuit of short-term goals will deliver only limited re-turns. On the other hand, a Product First orientation is the best-reasoned approach to pursuing growth. But the question naturally arises as to what values, business initiatives, and execution strategies follow from that commitment to Product First, or-as the lieutenant once said to the captain-where do I go now? This is the question that PTC has answered with its Product First roadmap, which associates value oppor-tunities for growth and profitability with the execution strategies that follow from them (see figure, this page). At the same time, it identifies seven summary business initiatives that follow from Product First (see figure, page 5A). For example, a given manufacturer, convinced that in pursuit of growth it must place great value in its ability to grow market share, would first look to initiatives in the area of product development cycle-time reduction, quality improvement, and product standardization. One of the keys to this accomplishment was the ability to share high-quality CAD models, adds Bannar. In fact, all design at Lockheed NE&SS is tied to solid models, a change that led to new internal processes

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and new ways of working with suppliers. At the end of the day, though, says Banner, "We're able to go to suppliers and, with their models, they're able to turn a part around in two weeks-something that used to take three months. Use of a complex model, along with the co-development, allows us to get it right the first time. It allows us to get in earlier and be more integrated." Michael Grandinetti, senior vice president of product mar keting at PTC, sums up some of the chief chal -lenges facing short product lifecycle and electronics firms: "These companies must carefully manage their complex content by applying unique requirements around systems engineering, to integrate mechanical, electronic, and software design. It's not realistic to expect your ERP system to handle that. Nor is it real-istic to expect that an ERP system is going to provide a great platform for doing collaborative, real-time design with suppliers."

Medium cycle: consumer products The second panel-for medium lifecycle products, including consumer products-touched on some key Product First value opportunities leading to revenue growth (see diagram on page 4A). These value op-portunities include protection of product position, market share growth, design for ongoing revenue streams, and developing and defining new market streams. While, clearly, these values resonated well with the panel, any discussion of revenue growth potential seemed to have its cost-savings aspect as well.

Top 7 summary business initiatives - As identified in PTC customer interviewsHerman Miller, for example, furnished its dealers with PTC Windchill DynamicDesignLink in 2001, al-

lowing them to create and visualize custom designs on-the-fly. The innovation that followed had a signific-ant impact on brand perception. "Every time we produce something innovative," says MacLean, "we reinforce that brand name, and that's important. It has a lot of value and is a major asset for us in the marketplace. But we've also learned that great products yield great margins, because when people crave a specific product, we have an opportun-ity to leverage that into higher margins. Finally, it puts you ahead of the game, so the competition is fol-lowing and you're leading." The close relationships Herman Miller engendered with its resellers through the use of product lifecycle management provide cost-savings opportunities as well. "By working with the resellers," says MacLean, "we learn how people deploy our furniture, and that helps us rejuvenate our product lines. But we can also look at our manufacturing and supply chain processes. Costs you thought were frozen may not be. The more times you're able to reengineer your supply chain based on collaborative processes, the more chances you have to drive both market share growth and profitability."

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Laura McCann, founder and president of Zweave, a technology-based services provider for the global fashion, apparel, and soft goods industries, reveals just how short "medium" lifecycles can be when she addressed the changing landscape of the fashion industry and how manufacturers were meeting the glob-alization challenge. Zweave customers-- fashion designers, retailers, and manufacturers-use Windchill ProjectLink to collaborate with business partners in pre-production activities. "People don't yet think of the fashion industry in terms of 'engineering,' even though it's very much like other kinds of manufacturing. In fact, the product development cycle in the fashion industry actually is ten times faster than other industries. "We're working with retailers and manufacturers at what we call the fashion stage-whether it's for home furnishings, accessories, cookware, or apparel-helping them understand how collaborative product life-cycle management deals with the complexity of their operations. The supply chain today is global. The question is: How can a company design and deliver a new product in less than thirty days, which is be-coming an imperative for many of these companies." At the same time, says McCann, the same vertical retailer has outsourced to Asian partners a lot of the responsibility for product development and supply chain. These companies are struggling with balancing in-house expertise and outsourcing. "Some companies, such as Target, have revamped their whole product image and their ability to get the right products to market," continues McCann. "They collaborate with great designers that give them great product, and they source it very quickly. Other companies have been able to increase product introduc-tions from once a month to twice a month, sometimes by aligning with a manufacturing partner. They col -laborate on everything from raw material to design, approval, and change management. Companies driv-ing product innovation are beating the companies that have been more focused on operational efficiency. It's a new game."

Thomas Cook, CXO, PLM solutions, Sun Microsystems, offers the unique insight of a technology in-frastructure provider, indicating that many of Sun's own customers use PTC solutions for product lifecycle management. Says Cook, "Architecture is everything. In a typical PLM deployment you see a phased approach. It's sel-dom just dropped in at the enterprise level. So scalability is a key factor. You also need software that maps to the distributed architecture of the hardware for best efficiency. Most PLM applications are de-veloped with Sun's J2EE architecture and are implemented in the SunOne environsent." Cook points out that Sun, PTC, and Accenture have worked together to address these architecture is-sues. "We believe that you shouldn't need to rip out your existing legacy applications, but rather extend their availability and usefulness. One way to do this is to use standard technologies to put wrappers around these applications that make the data available to a wider audience through a simple browser-based in-terface." Long lifecycle: aerospace & defense The long lifecycle panel focused on value opportunities related to an improved ability to fulfill demand, with execution strategies that included increasing manufacturing and supplier flexibility and improvement of product performance, as well as business initiatives aimed at improved information exchange, predict-ability, and product cost reduction.

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Structural changes in the aerospace & defense in-dustry have led to increased needs for being able to accomplish product development, manufactur-ing, and supply chain management across enter-prise boundaries.

Dr. Fine began with a stark view of the challenge the aerospace & defense industry faces. "How many op-portunities does a major aerospace and defense contractor get to introduce new products? The industry thinks in terms of decades. The impact of a new product on your brand name is enormous, because you don't get a second chance." Another key factor in aerospace Et defense, says Accenture's Shaw, is the structural changes that have taken place in the industry in recent years. "Look at the impact that consolidation and rationalization have had on the defense industry. Each company did product development in its own way, with its own toolkit and processes. What we're doing now is finding efficient ways to work across business units, even within a given enterprise." Exostar is an electronic business service provider within the $400-billion aerospace & defense industry. It connects manufacturers, suppliers, and customers in a secure, virtual marketplace for sourcing, com-merce, and collaboration. Exostar uses PTC Windchill ProjectLink to streamline the supplier network in the aerospace industry. Jim Mandracchia, Exostar chief strategist and senior VP of business development, says, "The single biggest thing we had to overcome in bringing this system to the industry was guaranteeing security. We had to reassure chief security officers, by means of a very rigorous process, that there would be no com-promise of their digital assets. We have the needed high levels of security in this application." Mandracchia says there are several other things that distinguish PLM from other types of information technology projects. "There's clearly a customer mandate to do it [PLM], and the focus is primarily on the revenue growth opportunity. Although the diagnostics we've developed over numerous implementations include cost savings as well."

Lockheed Martin Aeronautics builds military airplanes used around the world. The Joint Strike Fighter (JSF) is a multirole fighter aircraft designed for the U.S. Air Force, Navy, and Marine Corps., as well as the U.K. Royal Air Force and Royal Navy. PTC Windchill furnishes enterprisewide access and collabora-tion among all the JSF entities. John Burden is systems development and demonstration planning manager, Lockheed Martin Aero-nautics, JSF program. "We're moving into a realm where the customer wants unprecedented visibility into what we're doing to manage these programs," says Burden. "At the very highest level of customer re-quirements, the United States government has a six-page document called the 'statement of the objective' that clearly specified real-time, on-line access to all of our management information systems. So it wasn't something

Concluding remarks So at the end of the day, is Product First more about revenue generation or cost savings? Most panel members answered "revenue generation," but still they couldn't help but mention the potential for cost savings, leading one to believe that the right answer is-it's both, or even better yet, a balance between the two.

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Kevin O'Marah, a vice president and research fellow with Boston-based AMR Research, says manufac-turers are assembling "enterprise systems" based around product development, rather than around down-stream applications such as enterprise resources planning. "A Product First strategy lets you drive revenue growth by renewing what's compelling about your offering to the market, and increase shareholder value by letting you re-write your supply chain and look at costs you thought were frozen," he says. PTC's Grandinetti agrees that there is efficacy in both approaches, "but what you really need is a balance between operational efficiency and investing in the product development process to ensure future growth."

How do leading manufacturers drive value? By putting the product at the center of their businesses.

What's striking to Mike Wetzer, a partner in Accenture's Communications and High Tech group, is that "companies have done many of the easy things in terms of transac-tional efficiency. They're now turning to the complexities of the product development process. The key to success in this area is taking ownership and making sure everyone is involved."

Define your terms You'll hear about PLM, if you haven't already Product lifecycle management (PLM) is an information technology-based discipline, in-troduced as a concept by Boston-based AMR Research, that encompasses the technolo-gies, tools, and software applications that allow manufacturers to put their products first. PLM denotes the sharing and control of product-related data, as part of product devel-opment efforts and in support of supply chain operations. Today's corporations have fa-cilities worldwide, and the role of suppliers in product development is increasing. Inter-net and other new technologies, applied to product development, automate its collabor-ative aspects, which even within a given facility can prove tedious and time-consuming. Further, securing accurate product data for supply chain processes-such as mainten-ance, repair and overhaul (MRO), and field service-is increasingly difficult, given the complexity following from widely recognized trends toward mass customization.

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Thus, by means of concurrent engineering, companies simultaneously and interactively design the product, its manufacturing process, and the supply chain that supports it. By overlapping these formerly disparate functions, a dynamic collaboration takes place amongst them, essentially forming a single large product team. According to AM R, spending on PLM solutions increased 35 percent in 2001, and the potential margin impact on U.S. manufacturing is as high as $106 billion. PLM can have a significant beneficial impact in engineering change cycle time, design reuse, and engineering productivity. Studies have shown that electronic-based collabor-ation can reduce product costs by 20 percent, travel expenses by 80 percent, and significantly re-duce costs associated with product change management. Moreover, an explosion of new products that have minimal lifecycles, as well as increas-ing complexity in supply chain management, are driving the need for PLM. The benefits of the dissemination of product data throughout the supply chain is obvious if one thinks of the importance companies like GE have placed on sales to after-product markets and how important the availability of material resource optimization data is to these initiatives. It's key to note, too, the importance of product data in the sales cycle, where so often the configuration of custom products is dependent on in-tensive collaboration between the sales force and design engineering. In fact, some manufacturers, convinced that a Product First strategy gives them their best opportunity for market share growth, already are using the management concepts, IT infrastructure elements, and product technologies associated with product lifecycle management to pursue the initiatives identified in the roadmap. One such company is contract manufacturer Flextronics. Malcolm Smith, vice president of design & engineering, recently said, "We really look at it as the cost of doing busi -ness. We want to be in this game, and we have to have sophisticated systems to be able to play because they allow us to do things that other -wise couldn't be done, given that we have facilities, suppliers, and customers all over the world. It's a service business and customer satisfaction is what's most important to us." Flextronics, and others, recognize that 1) the benefits of product lifecycle management support the value of market share growth, and 2) PTC has the domain expertise, in -dustry knowledge, and product technologies to make improved product lifecycle man-agement possible. Says PTC's Dan Hirsh, a company vice president, "Manufacturers are beginning to un-derstand that a focus on product is the single best way to grow their companies. What they're asking PTC now is how do they get started with Product First in a systematic way. In our work across all major manufacturing industries, we've learned in detail what our customers need to do, and the Product First roadmap is a framework to develop the right course of action to help our customers move forward as quickly and effectively as possible." A comprehensive product portfolio From Product First to create, collaborate, and control As manufacturers become increasingly committed to Product First, they look to partner with business application providers that understand the challenges they face. An applic-

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ations provider like Needham, Mass.-based PTC, whose entire raison d'etre is informa-tion technologies that support product development, is just such a partner. PTC, as developer of a suite of technology solutions for all phases of product develop-ment and product lifecycle management (PLI), has a clear stake in the Product First movement-- both as a business strategy and as a conceptual framework for thinking about investment, resource allocation, and other related issues. "Product First compan-ies recognize that they exist to make great products, and ve help companies focus squarely on what matters most in that regard," says Jim Heppelmann, executive vice president, software products, and CTO. PTC has a comprehensive Product First strategy that encompasses everything from product planning and design to support and service. The underpinnings of PTC's strategy are three fundamental concepts: enable companies to create the product digit-ally, collaborate with participants throughout the value chain, and control the product de-velopment and lifecycle processes. Where true value is captured, says Heppelmann, is within the digital version of the product, created using computer-aided design and visualization tools. This digital model provides a faithful representation of the product capable of being shared with non-engin-eers over the Internet. This digital representation becomes the basis for a "digital product value chain" in which a multitude of suppliers work with internal departments to create, analyze, and drive alignment of product development and product lifecycle man-agement. When completed and agreed to, the digital representation is "released" to the production process, and feeds the traditional "physical" value chain where the "actual" instances of the product are created. PTC's solution for getting the most out of this digital product value chain brings together its Pro/ENGINEER product design and development product suite with Windchill-its ro-bust, Web-based suite of collaborative software solutions for extended and collaborative product development. This solution provides a secure environment for product lifecycle management that allows enterprises to integrate business processes and product data with dispersed divisions, partners, and customers. The PTC product family includes the following software solutions for product lifecycle management: Pro/ENGINEER Wildfire-A new version of PTC's industry-leading product design and development software unlocks the power of the Internet to improve the design process, and connect to other users, in-cluding Windchill solutions. Windchill ProjectLink-Enables project collaboration and drives innovation by providing all the tools necessary to pull together organizationally and globally dispersed product development teams in project-managed virtual workspaces. Windchill PartsLink-Delivers a digital parts catalog that facilitates strategic sourcing dur-ing the product development process and gives suppliers a more dynamic, interactive B213 selling environment. Windchill DynamicDesignLink-Automates design and engineering processes for manu-facturers focused on design-toorder products, lowering costs, and providing a platform for building strong customer relationships. Windchill PDMLink-Offers unmatched capabilities for capturing product information throughout the product lifecycle, and manages important release, change, and configur-

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ation management processes. It is a quick-start, out-of-the-box product data manage-ment solution for discrete manufacturing companies of all sizes. Windchill Supply Link -Provides manufacturing outsourcing partners with a secure, Web-based collaboration workspace, Now manufacturers can enable structured sup-plier collaboration among virtual teams during the product development process -dra-matically speeding a product's time-to-production. The benefits of Product First, expressed through a commitment to product leadership, are revenue growth and improved profitability. The use of information technology to sup-port best practices in the digital product value chain is a key enabler. "Product First companies," says Heppelmann, "believe they will win-and win again-by creating super-ior products. Because, in the end, companies are defined first and foremost by the products they make." For more information please contact: PTC 140 Kendrick St. Needham, MA 02494 USA 781-370-5000 www.ptc.com

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