Organizing for Innovation

Cool factor is high on the list when it comes to perception of innovation. Companies like Apple Computer get high marks for cool factor and have come to be perceived as the cradle of innovation within the computing industry.

Creative designers and engineers dream of developing the coolest new device or solving the most challenging problem in a novel way. Executives and shareholders have grand dreams as well but the realities of business require them to keep an eye on growth, profitability and the creation of corporate value.

In a survey of 125 global companies, Aberdeen found that 82 percent emphasize on growing product revenue and 93 percent on reducing cost. Manufacturers are faced with customers who want products that are innovative and rank high on the "cool factor" scale, but also have a shorter product lifecycle; and lower cost to produce. At the same time, globalization has meant competitors can come from anywhere in the world; and global sourcing means increased design and supply chain complexity. To cap it off, manufacturers are being asked to comply with varying regularity requirements at the countries they do business with.

The challenges to product innovation vary greatly by industry and geography (see Figure 1). Multiple factors are at play in the increased complexity and competition in product innovation. Unfortunately, there is no "one size fits all" solution. The innovation mandate is to produce more competitive products that better meet customer needs in a shorter period of time. And companies have to accomplish this while maintaining or even lowering product cost. The ability to adapt to these new market conditions effectively will determine the long-term winners and losers in manufacturing.

Cost pressure has intensified. Industry consolidation has resulted in a smaller number of larger, more powerful companies in many markets. These companies frequently dictate price reduction on their suppliers and supply chain.

Product lifecycles have shrunk. Knowledgeable customers are demanding innovation, and punishing commodity products with lower demand and profit margins. The result is that product profitability windows have shrunk.

Competition is tougher. Lower trade barriers and broader market reach due to advances in communications have opened up competition. Challenging market conditions have forced companies to improve in order to compete.

Markets and supply chains are globalizing. Many companies are competing in new markets and leveraging low-cost manufacturing from other countries. Companies operate in global manufacturing networks. We also see a shift to global design networks. Products must be designed with multiple markets in mind, complicating requirements and burdening designs with additional regulatory and commercial constraints.

Product complexity has increased. Products are becoming more complex to match customer needs more closely.

According to Jim Brown, Vice President and Service Director, Global Product Innovation and Engineering at Aberdeen "companies are succeeding in enhancing top-level business metrics by improving performance in product innovation, product development and engineering." Manufacturers surveyed reported double-digit improvements in product revenue (19 percent), decreased product costs (15 percent), and reduced product development cost (16 percent) by improving product innovation processes.

Today's leading enterprises are finding new ways to generate innovative product ideas, translate these concepts into compelling products quickly and efficiently, get these products to market quickly, and leverage these for optimal results.

Automating for Product Innovation Success

The increased globalization of markets and networked model of design and manufacturing resources demand strong communication and collaboration capabilities. Contributors in engineering and other disciplines will need tools to help them develop and test designs that were previously unachievable in practical terms with manual methods.

To improve product innovation, product development, and engineering processes, companies need enabling technologies such as product lifecycle management (PLM) solutions. PLM is a strategic business approach that applies a consistent set of business solutions in support of the collaborative creation, management, dissemination, and use of product definition information across the extended enterprise from product concept to end of life. It integrates people, processes, business systems, and information to create an environment in which companies can improve the efficiency of their product development programs.

Companies that have adopted PLM have realized savings in areas such as engineering, product development, time to market, and improved product quality.

CASE STUDY - Jinbei Automotive

Shengyang Brilliance Jinbei Automobile has grand ambitions – to become an internationally recognized automaker within five to ten years. Location in Shenyang, China, Jinbei manufactures light passenger vehicles. Originally designed for the domestic market, Jinbei has set its sight on the global market with expansions into new markets.

To achieve its goal, Jinbei management identified several areas for improvement. To bring new vehicles to market faster and reduce cost, Jinbei needed to streamline the research and development (R&D) process. Jinbei executives wanted better access to product knowledge to improve the quality of their strategic decisions for greater product innovation. Early in the process, the company discovered that it did not have a common platform for product information. Each vehicle model had a program that was independent of the others. Information re-use was non-existing. Lack of part sharing extended the development cycle and increased cost. The paper-based design review process and lack of a formal system for capturing knowledge further contributed to what was perceived as areas of inefficiencies.

Jinbei management realized it needed a PLM strategy to support its long-term development plan. "We needed a leading-edge information system that was not only powerful but also flexible enough to integrate with executive-level information, thereby helping us make better decisions in a highly competitive market environment," says He Tao, President of Shenyang Brilliance Jinbei Automobile.

After evaluating different solutions, Jinbei chose Teamcenter from UGS. Teamcenter offered a comprehensive system for product and process management by capturing, sharing and leveraging product knowledge. This allowed Jinbei to reduce repetitive work, enforce standard practices, and enhance efficiency. Teamcenter supports collaboration and teamwork by connecting people with processes. Its visualization capabilities made product information accessible electronically throughout Jinbei. And because digital product models are more easily understood than drawings, visualization helped leverage product information beyond the product development group.

Teamcenter gives Jinbei management immediate access to critical information such as digital product models (originally authored in Catia, then translated to CAD-neutral JT files in Teamcenter), all product-related documents, including bills of material, engineering change orders, cost data, and quality documents, and the status of workflows.

During the three-month pilot project, a centralized management of product information combined with ease of information access reduced basic design time by 20 percent. This led to a reduction in cost for the pilot project by 5 percent. Parts and information re-use increased by 7 percent, contributing to another 2 percent reduction in costs.

Based on the results of the pilot program, Jinbei expects Teamcenter to reduce R&D time by an average of 10 percent. Programs that involve less than the design of an entire vehicle will achieve even greater reduction in R&D process.

Jinbei's successful three-month pilot program convinced management to extend the benefits of Teamcenter companywide. Already the company plans to involve suppliers and partners in the electronic collaboration, capturing knowledge and creating a company-wide knowledge base by implementing additional Teamcenter functionalities.


By reaping the benefits of Teamcenter, Jinbei management believes they are on their way to achieving their goal of international recognition.

Call to Action

There are many options available to achieve innovation and improve product profitability within the enterprise.

Evaluate your product innovation goals in business terms not just operational metrics. Tie the value back to business as a whole.

Identify and implement operational improvements that yield tangible business results. Focus efforts on high-value initiatives that create a foundation for future improvements.

Manage for innovation success. Assign responsibility to a senior executive (with authority) for end-to-end innovation success, standardize processes, and measure performance frequently on a global basis.

Approach product innovation as a "team sport." Look for ways to share knowledge, information and workflow within and outside the enterprise, including with global design networks.

Intelligently implement PLM technologies to reach revenue growth and product cost reduction targets.

Don't try to implement PLM processes and technologies all at once. Pick and choose a path to the right value for your business, and then continue to build on that foundation.