Innovation and the art of Product Lifecycle Management

Dear Readers,

Earlier this year I was asked to write an article for Oracle on Innovation in relation to Product Lifecycle Management.  That article has now been published and so I thought I'd take the opportunity to share the original with you.  Of course this doesn't have all the nice graphics and pics of the finished article but it does have the unedited content.  I hope you enjoy it.

With the advent of the digital revolution has come a dramatic change in the way many businesses seek to source, fund and manage innovation.   Rather than simply relying on their own innovation processes or those of their traditional supply chain partners, many businesses are now aspiring to partner with entrepreneurial digital start ups (either directly or through technology ‘incubators’) in a concerted attempt to access digital expertise.  

Digital expertise is required to create, enhance and develop product sets and challenge business models.  In many cases these new partnerships are being championed by the Chief Marketing Officer who has lost a measure of faith in the ability of their own product development teams to create customer centric, digitally accessible products at speed. If proof were needed of this major shift one only needs to look at the exponential rise in the number of technology incubators offering to act as brokers between big business and entrepreneurial technology start ups. 

This is a big challenge for PLM and its associated tools, which, if we are being honest, have not always done the best job of supporting businesses in the effective management of the innovation processes at the very front end of the product development lifecycle. Too often the inception of product ideas is not linked to the product lifecycle. Instead inception is within the domain of an isolated team using stand-alone, hard-to-use and opaque systems. As a result the Chief Marketing Officer (CMO) often feels entirely justified in looking outside their own organization to plug into new sources of innovation.  What the CMOs need are tools that can provide them with a sufficient level of clarity on the quality and costs associated with the innovation process and more importantly on the visibility of the product innovation pipeline - including inception.

Therefore, PLM methods and tools currently face a double challenge, firstly to simply get better at managing the existing innovation process and the existing sources of innovation and secondly to adapt themselves to managing and extracting data from the newly emerging innovation ecosystems.

If PLM methods and tools cannot adapt to these changes then we are in danger of seeing a growing disconnect between the existing, data rich, PLM tools and the new product pipeline.   This will only add fuel to the fire of the power struggle between the Chief Marketing Officers driving the demand for new innovative digitally accessible products, the Chief Information Officers providing the infrastructure to support the product lifecycles and the Heads of Manufacturing and Supply Chain who are tasked with delivering the products at an optimum cost point and the CFO who is responsible for providing the investment funds.  Multiple and conflicting sources of data will continue to be developed with each senior executive not trusting the data provided by the others.

To bridge this growing schism requires work, but it is far from an impossible task. In fact the solutions seem to sit within the history of PLM itself and its approach to the supply chain.   We know the ability to deliver effective product lifecycle management blossomed when the full product supply chain and the external suppliers’ systems were bought within the scope of PLM thinking and methods; when their data was captured, their processes were improved and the interfaces between the suppliers’ business and the product development businesses were enhanced. What is now clear is that we need to treat the innovation eco-system, at the very front end of the PLM process, with the same type of diligent approach if we are to continue to see a steady increase in the benefits that accrue from effective PLM.

At the heart of the new thinking and tooling required is the recognition of a number of truths:

• That the sources of Innovation (in house R&D, supplier’s R&D, and digital incubators) can be effectively monitored, tracked and managed.
• That the process of Innovation can be effectively monitored, tracked and managed, it really is not a mystical process reliant upon some maverick genius. Innovation is a key business process and should be treated as such.
• That effectively managing the Innovation process is a key driver of competitive advantage.
• That managing the Innovation process requires effective collaboration between marketing, IT, manufacturing, supply chain management and finance.
• That there is a pressing need to access and utilize effective PLM tools that supply useful data and management information on the costs and quality of the innovation pipeline.

 Once we have taken onboard these truths we should be looking to create intelligent PLM tooling that delivers the following:

• Visibility of the innovation pipeline from all the sources of Innovation, including the emerging innovation ecosystems.
• An understanding of the real “cost of deployment” for products developed on standalone external systems, especially where the product is utilizing new technology or technology platforms.
• A rich source of data and the associated analytical tools that can spot and analyse trends in the innovation pipeline in e.g.:

1. Innovative Business model and operating model trends
2. Innovative Material and technology performance trends
3. Innovative Product distribution trends
4. Innovative Ecosystem trends
5. Innovative Service management trends

 Tools that are capable of delivering these outputs will ensure that a business investing in a PLM tool is investing in a tool that is capable of supplying the crucial strategic data required for managing the investment portfolio.

 If the PLM industry does not respond to the challenges provided by the developments in Innovation then PLM tools will still provide a valuable source of intelligence on the manufacturing process but will not continue their impressive progress towards holding centre stage in the Boardroom as a rich source of data, trusted by all members of the senior executive team, upon which key strategic business decisions can be based.

Compliance Breaches will continue until the UK’s Financial Institutions finally put delivering positive customer outcomes as their primary objective

Last month’s FOREX ruling in the UK and US against a cadre of the best known names in banking saw the issuance of some of the largest fines to date yet for regulatory breaches in the Financial Services sector.  

Whilst the wanton act of corruption is, in itself, deeply disturbing, what makes it particularly shocking is that it was happening at a time when many of the senior executives in the banking sector were opining that the industry, whilst not yet being perfect, had significantly cleaned up its act and was now once again trustworthy.   It hadn’t and it wasn’t. 

So were the apologist executives actively lying about the state of their industry or were they just as in the dark as the rest of us as to the shady goings on within their institutions.   Outside of a court of law I guess we will never know the answer, however, I would not be surprised to find that a number of them were even more surprised and disappointed by the actions of the FOREX traders than the general public.   Why?   Because I think a number of them genuinely believed they had done all that was necessary to protect their Bank from serious compliance breaches.   However, based on the evidence and supporting anecdotes all they had done was to ensure that the compliance boxes were ticked.  What they had struggled to deal with, in any meaningful way, was the same pernicious culture of “bankers self interests” that had underpinned the 2008 crash.

Strangely, contrary to public opinion most Banks believe themselves to be over run by compliance and risk staff – the people whose job it is to spot and stop errant behaviours.  Bankers are forever being asked to complete mandatory compliance training, complete risk assessments and participate in internal audit activities. So how on earth, at some of the most “protected” banks, (i.e. those with the largest risk and compliance departments) can such a massive set of non-compliant behaviours not get picked up and stopped at a much earlier stage?   How is it possible, given the compliant exhortations and sentiments of the Chief Executives, that FOREX traders still think it is OK to form a cartel and fix the exchange rates to the detriment of their customers?   

The answer is relatively simple to articulate and elusively challenging to enact.   Culture change.

The FCA are now very fond of reminding their regulated firms and those applying for regulation, that complying with regulation, both the spirit and the letter of it, maintaining a “culture of compliance” and delivering fair customer outcomes (and nothing less) is what they are expecting.

However, from my most recent experiences of working within major financial institutions it still appears to me as though the Banks are missing the point on what the FCA is actually looking for.

As part of a recent assignment I had to complete a series of mandatory training modules on compliance and risk in order to be able to work within a particular bank.  I believe that the total time required for me to complete the training was approximately 6 hours.  The modules covered the banks approach to risk, compliance, fraud, bribery anti-money laundering etc, etc and were very comprehensive.  Surely the bank could do no more in preparing me to work in a compliant way?  Well yes and no. 

What struck me as odd as I worked my way through the well prepared materials was the focus of the training.   Almost all the modules concentrated on informing me of the actions that I needed to take to protect the bank from financial and reputational risk – not a bad thing in itself – but what almost all the training modules failed to do was emphasise the need to do the right thing for the customer and to drive positive customer outcomes.   In essence, there was still a faint whiff of the old masters of the universe thinking in the materials. Banking is for bankers.

In my opinion, if the banking industry is truly going to adopt a culture of compliance then they will have to navigate away from the bank and bankers being the primus inter pares to the customer and the customer’s outcomes taking that position.  Until that place is reached there will continue to be a regular (all be it somewhat reduced) flow of breaches and scandals that will have the Chief Executives of banks wringing their hands and scratching their heads.

So how do they get there?  Unsurprisingly there are a myriad of actions required over an extended period of time.  However, here are a few that appear obvious to me.

1.   Ensure the voice of the customer is prominent in all compliance training

2.     Review technology, products, processes and policies from an end to end viewpoint to ensure that they are actually delivering positive customer outcomes

3.     Invest in a targeted culture change programme to increase the focus on the customer

4.     Spend more time listening to the voice of the customer at senior manager level

      There are a course a million others but that’s for another blog.  Do get in touch if there’s anything you’d like to agree or disagree with in the blog or whether you recognise the issues in your Bank and would value some advice and support.