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Archive for November, 2016

Product development – are you good enough?

Wednesday, November 23rd, 2016

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The challenges of managing R&D

Product development is a critical function for product-based businesses. The ability to develop new products with features and functionality that are valued by customers and users, to bring them to market quickly, cost effectively and at acceptable quality and then to support and enhance them during their lifetime has always been a complex undertaking.

Today’s additional requirements to serve a global market, to exploit new technologies to meet ever higher customer expectations, to consider the opportunities for complementary digital services and to compete against new low cost, but increasingly high value, rivals from China and other emerging economies simply add to the challenge.

To achieve business goals for profit and growth from new and existing products, there are major responsibilities placed on the Research & Development (R&D) function and its management team. The R&D function has two fundamental goals:

  • To develop, bring to market and support new value propositions
  • To do this in an effective and efficient way

In delivering new value propositions to the market, R&D management needs to be able to link research and technology possibilities with customer needs. It needs to have deep insight into the wants and needs of the users of its products and technologies. It needs to understand the unmet needs of users who are not yet its customers and where future growth can come from. It needs to be able to innovate to formulate technologies and product concepts that best meet these unmet needs, select the most promising and bring them to market.

 Effective and Efficient R&D

Being effective is a key requirement for R&D – to focus on the ‘right’ technologies, to select the ‘right’ product concepts and to get the ‘right’ balance between investment in new products with support and enhancements to existing products. But in addition, R&D efficiency is a key requirement. In developing new products there are critical resources which have to be efficiently used if the business is to realise the promise of its R&D potential:

  • Time – particularly time to market
  • People – particularly key research and development skills
  • Intellectual Property (IP) – how to exploit and protect it
  • Knowledge of the requirements of Customers and Users
  • Relationships with suppliers of technologies, components and services
  • Competitive analysis – of existing, as well as emerging and potential, rivals
  • The capabilities of internal functions – such as Marketing, Sales and Manufacturing – that provide the key resources across the value chain

Measuring R&D performance

To consider how well an R&D function is meeting these goals, there are some key outcomes that can be reviewed:

Is R&D creating value propositions that the market wants? 

A key measure here is the % of revenue from products launched in the last three years. If the % of revenue contributed by new products is low, then this indicates that the new product portfolio is not meeting user requirements in ways that are superior to the firm’s existing products – or rival products. This metric can be complemented by surveys among existing customers and also non-customers. In-depth understanding of user requirements (including unmet needs) and application knowledge are critical here. In meeting user needs, there is a balance to be struck between developing a new product and enhancing an existing one – or by providing a service-based solution. Increasingly digital services are playing a key role in meeting customer requirements. R&D operations now need to consider how to create ‘platforms’ that bring together hardware, software and service elements to meet user requirements in effective and reconfigurable ways that enable fast time to market.

Does R&D bring new products to market quickly? 

Key measures here are: How does the firm’s time to market compare to rivals? Has time to market reduced over the past 5 years? A fast time to market enables a company to met emerging customer needs before rivals – and thus achieve a higher profitability whilst there is less competition. A focus on getting a ‘core product’ to market fast – and then follow with enhancements is an effective approach. Lessons can be learned here from the ‘Lean Startup’ movement regarding the use of the ‘Minimum Viable Product’ (MVP) approach. With the increased in servitization, user needs may be met by a software/digital service solution that is ‘wrapped around’ an existing product platform. Service-based solutions can be brought to market much faster than product-based ones. R&D Management need to decide how this service element is provided – internally or through partners.

Is R&D on-time to market? 

Predictability is important – to fit with customer needs but also to align with the plans of internal support functions such as Manufacturing and Sales. Is R&D meeting defined project timescales? Failure to do so results in internal costs to replan and realign internal resources – with likely impacts on other products – and also can result in customer opportunities being missed.

 Is R&D delivering quality products?

How well are new products meetings their target performance? What is the level of their reliability, measured by field failures and returns? Trading quality for a fast time to market is a short-term solution. New technologies will have inherent risks which need to be identified and addressed – through rigorous trial and testing – prior to their use in new products.

Are products being developed by R&D within budget?

This is key to R&D delivering across its portfolio of planned and existing products. If new products overrun their development budget, the shortfall is typically met by reducing the planned budgets on other products or projects. R&D management need to consider how to get the best ‘bang for the buck’ from their budget – which requires a strategic view of their product portfolio and key decisions to be made on ‘make v buy’ policy, in-house development v external, new product v enhanced existing product and product v service solution.

Assessing your R&D operation

An effective way to ensure that your R&D operation is ‘fit for purpose’ is to assess it against best practices and also to determine how well defined practices are deployed in daily work (e.g. is FMEA applied effectively, is application expertise embedded in concept development,  are design reviews regularly held?).

An outside view can be powerful in such assessments – bringing an independent eye and experience from other businesses and sectors. Codexx has performed a number of assessments of R&D operations in Western and Eastern Europe, China and the USA, making use of our licensed PROBE benchmarking solution for R&D and our F4i (‘Foundations for innovation’) assessment for innovation practices.

We also worked with the Universities of Exeter and Aalborg between 2010-13 to study the ‘journey’ of new products from concept to market, covering 43 UK and Danish technology-based businesses, using a best practice model of the innovation journey. We have subsequently used this model to help companies assess their product development practices and performance.

 

The core of this article is an excerpt from the forthcoming book ‘Sowing the seeds of business transformation’ by Alastair Ross, to be published in 2017.

 

Legal tech frenzy – lessons from industry

Friday, November 18th, 2016

http://www.dreamstime.com/royalty-free-stock-images-man-working-modern-technology-image22891879The legal geek moves centre stage
There has been an explosion of interest in information technology in the legal sector of late – particularly technology at the leading edge such as Artificial Intelligence (AI). This interest was crystallised in the recent and well publicised ‘Legal Geek’ conference in London when a number of major law firms mingled with ‘LawTech’ companies and startups to discuss how new information technologies and new thinking could be used to transform ways of providing legal services. As well as AI and technologies such as blockchain the conference looked at ‘softer’ elements such as innovation and cultural change.

New thinking

This is a significant development in a business sector that has long been conservative and behind other sectors in its application of new business thinking and technology. It comes as many firms law struggle to maintain their levels of profitability in market conditions that have been challenging since the 2008 financial crash. The combination of price-focused clients, globalisation, the internet (and market deregulation in the UK) has driven law firms to seek to innovate in the services they provide and the ways they work.

Law firms typically have applied IT for legal research, case and document management and for the management of support activities such as time recording, billing and finance. This new wave of IT brings internet-based technologies and – what typically makes the press – Artificial Intelligence (AI) systems. The application of these new technologies promises to revolutionalise the way law is provided – for the benefit of law firms who can work more efficiently and effectively – and for the benefit of clients who will receive ‘more for less’. The implementation of these technologies will – over time – help in digitizing key elements of legal services – making law more affordable and accessible to the large unmet market of small businesses and individuals.

Deja vu? Lessons from industry

Having worked for the last decade in helping major UK law firms transform their services through re-engineering and innovation – and also one who has consulted to multiple business sectors for twenty-five years – I am feeling a sense of deja vu.

In the 1990s, the industrial sector was in the midst of an ERP frenzy – implementing new Enterprise Resource Planning systems such as SAP and Oracle to transform the efficiency of their business operations. In the late 1990s and into the 2000s, the next wave of technology looked outwards into SCM (Supply Chain Management) and CRM (Customer Relationship Management) – to better link business with their suppliers and customers. In both these ‘tech frenzies’, many companies suffered from implementation programmes that significantly overran their budget and plan and failed to achieve their business goals.

The root cause of many of these problems was the lack of an holistic and integrated approach to implementing these technologies as business transformation programmes, not simply as technology projects. The lessons learned were that there were key success factors for IT exploitation, particularly:

1. A vision & strategy are required for effective communication within the business, getting buy-in from key stakeholders and coordinating the resources and activities.

2. To get the best out of the IT, business processes need to be re-engineered first (to avoid the all-too-common ‘pig in lipstick’ outcome).

3. Effective programme management is required for effective coordination of IT, process and people work-streams.

4. Change management is fundamental to effectively deploying the new technology and working methods into daily business.

Are law firms grasping for a silver bullet?

New technology can often be an attractive ‘silver bullet’ for management teams faced with major business challenges. It appears as a nice ‘clean’ solution to a firm’s problems – as compared to complex messy process and organisational-based improvements. For this reason many businesses have wasted money and sub-optimised the impact of their technology investments by not ‘preparing the ground first’ with re-engineering and restructuring work.

We should also be clear that those law firms currently looking to apply new IT such as AI systems, are typically larger firms – the ‘Top 50’ in the UK – not the other 10,433 firms*. These are the wealthier and more sophisticated firms.

However in my re-engineering work with these larger firms in the last decade, it is clear that their services and processes have much opportunity for improvement. Re-engineering projects have typically yielded 25-50% cost reduction – whilst improving service quality – without the application of any new technology.

These services simply were not designed or operated in a systematic and efficient way. Automating them without re-engineering them first would significantly reduce the benefits from IT investment. Indeed for smaller firms lacking the capital or the resources for major IT investment, internal re-engineering work would be a better approach  for now – then later exploit the use of these new technologies when prices have reduced and functionality improved.

Structured evaluation and execution

So law firms should look outside their sector and seek to learn from others’ experience on how best to truly transform their businesses by exploiting new technologies and thinking. They should strategically evaluate – and incubate – these new technologies to determine how they can be used to re-fashion their value proposition and their business model. They should prepare the way by first systemising their services and processes. And they should manage the implementation of these new technologies as an holistic programme.

 

For more information on law firm innovation, see ‘Innovating professional services – transforming value and efficiency’ by Alastair Ross, published in May 2015 by Gower.

* There are 10,483 law firms registered in England and Wales in September 2016 according to the Solicitors Regulation Authority.

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