What Are The Metrics For PLM Innovation?

A couple of weeks ago I had healthy debates about PLM and Innovation with Jim Brown of TechClarity. If you haven’t had chance to be part of this discussion you can check out the following post – PLM vs. ERP: Don’t Manage Innovation. During the last couple of days, I had chance to have an additional discussion on the “innovation” topic with some of my readers off line and online, and I came to the conclusion that I need to refresh this topic. I want to take the notion of “management” and “innovation” as starting points. The combination of them together made me think about the fact I need to bring some metrics in this “innovation management” process. Since, if you don’t know how to measure it, you hardly be able to “manage it”.

PLM and Product Innovation
I think, that PLM-minded people think about the innovation in the context of product development. Since, the  goal of CAD/CAE/PDM/PLM and other system related to engineering is about how to create products, this is the only innovation that counted for product development. Obviously, other areas of business such as manufacturing planning, supply chain, business accounting also may contain innovative aspects, but they are not in the scope of PLM vision. So, I came to the conclusion that development of new, innovative products is the ultimate goal of PLM innovation.

Innovation and Golden Eggs
When I think about an innovation process, the best association I can bring is the idea of golden eggs. Each new idea or product can be actually considered as the potential golden egg. However, the biggest problem with golden eggs is that they can crack. To decrease the risk of having cracked egg, I can potentially think about having more than one egg in my innovation bag. So, when I think about innovation management, I’d like to think about how to turn my innovation process to goose that will lay down golden eggs. As soon as I can do that, I can manage this process to produce as many eggs as I can and choose the appropriated ones applying specific metrics.

PLM Innovation Metrics
When I think about potential measures of product innovation, I can come with set of criteria related to the different aspects of organization and product performance performances. I’d like to put below some of the ideas about possible metrics.

Organization Performance
– Revenues from new product
– Customer satisfactions from new product
– ROI from new product

Product Characteristics
– Cost
– Performance
– Usability
– Novelty

Innovation Process
– Number of new ideas in the pipeline
– Number of new ideas comes from outside of the organization
– Time from the idea to the realization
– % of the ideas materialized as a new product or new development.

I’m sure this is an incomplete list and may be different for the specific organization. However, I hope gives an idea about what can be considered as a metrics for PLM (product) innovation.

Just my thoughts… I’m very interested to know your opinion and get your feedback.
Best, Oleg

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  • Oleg,
    I think you also need to include (1) Number of Product Design Versions, (2) Number of ECR’s (Engineering Change Requests), and (3) Number of ECO’s (Engineering Change Orders).

    Product innovations are certainly good, but “innovative” products that the company cannot manufacture in an effective manner are not.

    And although revenue is certainly a very good measure of a product’s success, it doesn’t tell you how easy (or difficult) it was for the company to produce the product. History is full of reports of products that we so challenging for a company to produce that they were unable to continue producing them — even though they were successful in the marketplace.

    Therefore, the true “cost” of a product consists not only of the per-product manufacturing costs (material, labor, etc.), but should also include the number of times the design had to be redone (or revised) to address manufacturablity issues and the number of fixes that had to be addressed during the manufacturing process to ensure the desired quality of your product.

  • Thanks for your thoughts. I think “Re-usability” is the major factor in innovation, because mostly ideas which can reuse some/most of the the already developed components along with the new development will get accepted quickly.This will improve the “cost” & “Design time” factor also, as there will be less “revise” while designing & in overall development process. I think PLM solutions should have separate functionality to store the innovations ideas & have some kind of intelligent reports which will give rough idea about the component re-usability & so forth.
    I think so….Just my thoughts… !

  • Awadhesh Parihar

    Oleg
    First definition of product innovation, as distinct from ECR and ECO (may result in them), need to be understood.
    Typical organizations have seperate, R&D and Engineering departments. R&D for innovation and Engineering for enactment. PLM classically has enabled Engineering and rarely the R&D departments.

    So innovation or idea management, to be thought as a process, leading all the way down to product realization and commercialization, is a noble thought, but rarely established.

    Now, if I imagine an ideal scenario where innovation process looks as below
    (Ideas, Validation, Commercialization)->(Concept design, detailed design, development and launc)->(Support and reinvent)
    Then metrics could be distinct from if you just take the first block i.e. (Ideas, Validation, Commercialization)

    If its the first block definition of product innovation, metrics will just be
    Idea Throughput
    And % ideas commercialized

    Will request if Product innovation, in the context of PLM be adequately established, as a definable process.

  • David, You mentioned interesting point – how to measure product development process. In my view, it is a little different than “product innovation” and more “process innovation”. However, it is another confirmation that it is very hard to limit “innovation” to the particular scope of activities. Best, Oleg

  • Chandrajit, Thanks for commenting! I agree re-usability is an important factor that can improve product. However, the question is what belongs to scope of “product innovation” and what is out. Again, again, again…this is a confirmation about impossible limitation of innovation in the organization. It is everywhere!. Best, Oleg

  • Awadhesh, The question of separation between “innovation” and “R&D” is not simple. The most of R&D will tell you they are very innovative, and you cannot take it from them. So, it is not an always fit schema you figured out. However, to measure “innovation” by a number of “released innovative ideas” is a right one in my view. Best, Oleg

  • Steve Kumar

    I was excited when I read this subject. I was looking for someone to bring this subject up and discuss it little bit.

    From PLM stand point, the promise of PLM or the value prop of the PLM has been

    Faster Time to Marker
    New product development and introduction
    Decreased product cost
    Improved product quality
    Increased product revenue

    While your blog discusses the topic of how to measure the Metrics of PLM innovation, the big question in mind is what is PLM doing to facilitate the Innovation within PLM effectively and efficiently?

    The Innovation part obviously falls into the category of the New Product Development & Introduction. If you kept doing the same old ECR/ECOs and tying up your process together, you are only improving your business process to affect faster time to market, reduce waste etc. I don’t see what part of this constitutes the innovation?

    To me, innovation is the conglomerate of ideas, thoughts that is a result from the outside the box thinking. Something that has the Next Gen thinking in it. If I made cars and wrote up ECO/ECRs to rev it up, it doesn’t mean innovation. It is done to fix issues and address defects and improve the overall product.

    The difficulty is in this day & age there is no good PLM system that can manage the innovation concepts, even today the enterprises look up for CAD system as a tool to drive the innovation process. This is a difficult time consuming process.

    There is a desperate need to make the PLM to simplify the process and allow seamless innovations. Until this happens the metrics to measure PLM innovations will be an elusive goal.

  • VS Srividhya

    Innovation from the Intellectual assets managed by PLM could be measured in terms:
    Market outcome(profits/revenue/sales)
    Effort metrics(patents/ publications/citations/ peer review)
    Potential metrics (impact on existing products)

  • Steve, Thanks for your comments and insight! I agree with you – innovation comes a lot from NPDI process and idea management process. However, I think, people involved into this processes are considering PLM as somewhat complicated and fully dedicated to design and engineering. This is something that vendors can change in my view. One of the possibilities is to think about ideas related to social software and what is considered as Enterprise 2.0. What is your opinion on that? Best, Oleg

  • VS Srividhya, Thanks for your comments! It is interesting what you are saying on “a potential impact on existing products”. I believe, that in many cases innovation and new products can cannibalize existing ones. The question what do you suggest to measure? How many existing products were killed by new innovations? This can be an interesting measure. Best, Oleg

  • VS Srividhya

    Yes, both internal and external (from competitors)products that would be impacted by innovation.

  • Srividhya, competitor’s product will be impacted. However, what you need to measure is cannibalizing rate for your products. It means you need to shift your revenue streams from old product to new products. This is very important metric, in my view. Thanks for your comments! Best, Oleg

  • Oleg,

    Regarding the Social software / Ent 2.0, this is all good stuff, but I just can’t see it delivering what customers want from innovation within PLM stand point. I think this is one area which probably is going to require a paradigm shift with the PLM. Perhaps the next gen PLM is going to be focusing on this a whole lot than it is today.

    The other aspect that makes the innovation facet of PLM more difficult is that the industry verticals have different requirements based on their specific industry.

    For eg: Consider Hi-tech / Hand held electronic devices industry etc, these days the life span of these products are quite less. There is a constant churn and a huge challenge to get innovative products out to the market in extremely aggressive timelines. So anything that PLM can do to provide innovation, make the product better than the competitor products without comprimising on the quality, all within that small window of opportunity is going to be extremely challenging and complicated.

  • Steve, Thanks for your insight on social/ent 2.0. I see a potential here. However, because of huge hype created now around “a social” topic, some rational thinking requires to analyze all positive and negative impacts. Your example with different industries is a very good one. I’d expect the next wave of PLM providers focuses on the specific industries / niches. Since the devil in details, it takes time to create a really good solution. Just my thoughts… Best, Oleg

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