Investing in PLM - Path to Competitive Success

By: David Weisberg, Chief Industry Strategist, Cyon Research

Recent financial reports indicate that most technical software companies are struggling to increase their sales of design and product information management software as users keep a tight lid on budgets. Saving money by reducing technology investments may well turn out to be false economy. One of the first business principles I learned many years ago was that you have to spend money to make money. Unless a business invests in the tools that make it more efficient, sooner or later competitors who do make these investments will end up with advantages that make life untenable for those who are mired in the past. If this is true, then why do so many manufacturing firms have such a difficult time committing adequate funding to support the implementation of advanced design and information management technology?

Twenty years ago computer-aided design and drafting systems cost over $100,000 per seat. Today, not even considering the effect of inflation, contemporary systems cost less than a fifth as much and provide far greater performance and functionality. Yet, whenever I am around users, I often hear complaints that top management will not fund new hardware or the latest software. Likewise, the development of project or organization-specific applications can greatly improve the overall productivity of these systems if the budget were only made available to pay for that development.

When I first began writing about this subject in the mid-1980s, there might have been some justification for foot dragging by top management. Computer-Aided Design technology was still relatively new and it was often difficult to fully take advantage of those systems. Many management-level people had little hands-on experience with computer systems - they perceived them to be tools just for specialists. Now, nearly everyone uses a computer as an everyday tool both at the office and at home. One would expect that today's computer-knowledgeable executives would open the corporate checkbook and provide the company's technical staff with all the latest technology. Unfortunately, in far too many situations that simply is not happening.

I believe that there are two reasons for this lack of funding. On one hand, we are only now beginning to fully appreciate the full spectrum of benefits that can be derived from using Product Lifecycle Management software. (In this article PLM refers to the entire category of design creation and product information management software.) Second, even when these benefits are recognized, many top managers have a hard time figuring out how to take advantage of them. There seems to be an attitude within far too many companies that new technology investments have to produce an immediate return. What many executives don't seem to understand is that the investment in computer hardware and software programs is only the tip of the iceberg. Far more important are the steps a company takes to reorganize its business practices around these tools and the time it takes for these new processes to become ingrained within the organization.

The positive impact on personal productivity is usually fairly easy to identify and quantify. For many years, this is how investments in design technology were justified. Far more important is the impact advanced design and information management tools can have on the overall effectiveness and competitive positioning of the user organization. Sometimes this latter category of benefits is not entirely obvious.

We currently appear to be coming out of a fairly serious economic downturn. Manufacturing companies are starting to show improved earnings after several years of lower results and even losses in many cases. If you dig into these numbers, an interesting trend shows up. Much of the improved financial results has come from reducing costs rather than increasing revenues. Companies have reduced personnel, made supply chain operations more efficient and are doing a better job in dealing with customers on issues such as warranty support. Much of this has been a result of earlier investments made in software tools such as Customer Relationship Management (CRM), Supply Chain Management (SCM), and Enterprise Resource Planning (ERP). All of these software packages have two things in common - the deal with products after the design has been completed and they are focused on business issues that non-technical executive management can identify with. PLM is different and it is not getting the executive attention it deserves.

On the surface, most executives probably believe that they understand the economics of using PLM technology for creating new and revised product designs. I am not sure, however, that they fully understand the importance of data reusability, information sharing, increased design accuracy, computer resource sharing and overall job satisfaction. As an example, what are the real financial benefits for a global design organization that is able to have employees in multiple offices work on the same project with minimal travel and no relocation involved?

The fundamental reason companies need to invest in the latest PLM technology, however, boils down to one word - COMPETITION. The manufacturing world today is more competitive than it ever has been in history and it will only become more so in the future. A major reason behind increased competition, whether on a local or global basis, is improved communications. From the buyer's point of view, it is much easier today to find components that are available outside of one's normal supplier environment than it was just a few years ago. In the past, if you were a brake shoe manufacturer in Detroit, you just worried about other Michigan brake shoe manufacturers competing with you for OEM business. Today's competitor, however, may be in Mexico, Thailand or Spain. Fail to deliver quality products in a timely manner and your OEM customer can use a vast array of communications tools to quickly find and deal with this dispersed network of potential competitors.

Likewise, the OEMs face increasing aggressive competition on a global basis. Case in point - the May 5, 2003 issue of Business Week had an article titled "The Sun is Setting on 'Truckish' Sport-Utes" which discussed the fact that the worldwide volume of SUVs built on a truck chassis has been flat for the past several year while the volume built on a car chassis has been skyrocketing. Obviously, if an automotive manufacturer wants to remain competitive in this market segment, it needs to react quickly with its own new designs, and it needs to do so in an competitive environment where the time to design new vehicles has gone from 50 or 60 months a decade ago to less than 24 months in many cases today.

This increased level of competition means that manufacturers of every stripe have to become more efficient. For a long time, we called this "re-engineering." Today, the lean organization is a way of life. Some of the steps firms are taking include:

• Inventory levels of finished goods and work in progress have been reduced to the bare minimum.
• Both manufacturing and product design are increasingly being outsourced to specialists.
• Product development cycles are being slashed.
• Flexible factories enable manufacturers to switch the products being produced far quicker than ever before.
• Customized products have become prevalent in many industries and will become more so in the future.
• Styling has become a key design element even with industrial equipment.
• The previously mentioned ERP, SCM and CRM systems have taken over much of the data processing needs of manufacturers, enabling them to respond faster to changing market needs.
• Companies are implementing, either individually or collaboratively, Internet-based communications, procurement, sales and information exchange capabilities.

The bottom line is that the entire business process is moving at warp speed. If a company slows down, even momentarily, it risks falling behind competitors and playing catch-up for an extended period of time. From a product design point of view, aggressive use of the latest PLM technology can have a positive impact on a company's competitive position. The key point is that it takes time to integrate these tools into an organization's business processes. But it will never happen if the company doesn't start.

Implementing a Multi-Project Environment in Your Organization
Shelley Gaddie, President, Project Corps

Redefining Traditional Project Management

The demands of business today require that even the largest companies are nimble and responsive to their customers and the changing economy. This often requires launching high-impact initiatives to support major change efforts. As a project manager, how do you deliver your project effectively in an environment of major change with limited resources? Traditional project management is incomplete in addressing these challenges, missing the multi-project perspective on how to resolve conflicts, balance requirements, prioritize resources, and maintain alignment with the driving strategy. The solution to creating a reliable connection between a company's business strategy and projects is to redefine your processes and tools into the broader perspective of a multi-project environment. (figure 1, below).

Figure 1 - Redefining Traditional Project Management
Single-Project Perspective		Multi-Project Environment
Specific project-oriented		Strategic and operating initiatives-oriented
Get each project delivered on time and within budget		Integrate multiple projects to be done most efficiently
For construction, aerospace and defense industries		Applicable to functional, operational-type organizations
Functional Managers and Project Managers		All managers are Project Managers
A professional discipline		A management discipline and a business culture
Scheduling system and software		A communications and visibility system and integrated database

• The Project Corps EPM Vision

Shifting your organization to a multi-project environment is very much a foundation for the larger shift to Enterprise Program Management, or EPM. Therefore, it is useful to look at the EPM framework and definition. EPM gives you the complete framework and systematic approach for staying connected to your company's business strategy, remaining responsive to business needs, and prioritizing your resources for maximum effectiveness. EPM expands your focus from pursuing results on a project-by-project basis, to a seamless enterprise-wide view of all the work you need to accomplish. It ensures that your efforts are always directed towards what's most important to the organization. The EPM framework and definition is a useful starting reference point as you begin the shift to a multi-project environment.

Figure 2 - Project Corps Enterprise Program Management Structure

• Process for Implementing a Multi-Project Environment

There are 11 key steps for creating a multi-project environment. These 11 steps mirror the top-down process for implementing EPM. Moving to a multi-project environment requires stepping outside the traditional boundaries of a project manager. The skills of persuading and motivating people, which are important to managing a project, become even more critical. Shifting to a multi-project environment requires communicating broadly and often to win the support of your management and other project managers.

1.  Identify Top Level Owner(s) of Multi-Project Environment
The first step is to understand what projects should be included in the multi-project environment, and then determine what executive or senior manager has ultimate responsibility for those projects. The communication you provide throughout the following steps should be tailored to the concerns of the top-level owner, as well as their vision for the organization.

2.  Assess Environment's Capabilities and Challenges
Look for the strengths, weaknesses, and challenges in your organization's ability to manage cross-project dependencies and impacts. Summarize and package your findings in a report for the top-level owner.

3.  Communicate and Influence EPM Thinking
Use knowledge gained from the assessment to create a vision for your multi-project environment. Share this vision with other project managers, and directly address how the multi-project vision will solve their challenges.

4.  Identify and Communicate Interproject Relationships
Work with other project managers to fully understand dependencies and impacts between your projects. Build a notional Gantt chart view of your findings. The Gantt view of the multi-project environment becomes another communication tool for you to obtain understanding and buy-in.

5.  Determine Detailed Requirements of Multi-project Environment
Identify and prioritize the requirements for managing the interproject relationships you uncovered in step 4. Identify and prioritize the requirements in terms of making best use of your current project management capabilities.

6.  Design Multi-project Environment Model
Redefine your current project management capabilities to meet the requirements of the multi-project environment. This includes redefining roles, responsibilities, and reporting relationships from a project-specific perspective to a multi-project perspective.

7.  Build the Multiproject Environment System, Processes, and Tools
Configure your project management systems around the newly defined multi-project processes and business rules.

8.  Steward Pilot Program Using New System
This is your opportunity to demonstrate the capabilities of the multi-project environment. Use the processes and tools to manage interproject dependencies, manage shared resources, and provide centralized reporting visibility, and communication. Collect successes and lessons learned throughout the pilot.

Figure 3 - Piloting the Multi-Project Environment

9.  Validate the Multi-Project Environment Model.
Validate the multi-project environment model by evaluating the ability of the pilot to solve originally stated challenges.

10.  Communicate Success of Pilot Program
All your efforts in steps 1 through 9 have culminated in a powerful story to tell. Package all of the knowledge you have gained from this process into a communication package to share with a broader audience in your organization. You will use this information to obtain buy-in and understanding among other project managers and management.

11.  Implement New Model to Broader Audience
Prioritize the remaining projects in your organization for implementation into the multi-project model. Repeat steps 1 through 9, on these prioritized projects, leveraging all of the knowledge and information you gained for your effort so far.

• Next Steps in the Multi-project Environment

Establishing a multi-project environment sets the foundation for your organization to engage in the more complete shift to EPM. Moving to a multi-project environment give you the ability to drive change in your organization, rather than simply be affected by it. As a project manager, you are expected to deliver your project on time, within budget, even when other projects impact your work or compete for your resources. Operating with a multi-project environment gives you the tools to manage those impacts and deliver not only your project more effectively, but other projects as well.