Transcript The SearchSAP.com Conference Europe

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Using PLM Software to Boost
Invention-to-Innovation
Margins
Navi Radjou
Vice President
Forrester Research
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Theme
Firms need a new
approach to
convert inventions
into profitable
innovations
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Firms’ Challenge: How To Convert…
Eureka!
Eureka!
Wow!
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Forrester defines innovation as occurring
► When inventions intersect a
business process and change
the way something is done,
experienced or created
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Agenda
 Why innovation matters?
 What’s wrong with today’s innovation
model?
 How can Innovation Networks fix it?
 How can Product Lifecycle Management
(PLM) help firms accelerate their inventionto-innovation cycles?
 Q&A
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Why Innovation Matters?
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CXOs Believe In Economic Recovery
Base: 7,300 global senior execs; Source: McKinsey & Company
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CEOs’ Confidence in Revenue Growth is
Growing
Source: PwC’s 7th Annual Global CEO Survey, 2004
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Responsiveness + Innovation = Key to
Sustain Customer Loyalty and Growth
Source: CEO Challenge 2004, The Conference Board
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CEOs’ Preoccupation No. 1: (Organic) Innovation
Base: 650 global companies; Source: Deloitte Research
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Firms Strive To Become More Innovative
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Innovate or Die!
Customers
 Atkins dieters
Competition
 Drug = 3 month
market exclusivity
 Baby boomers
Compliance
 FDA
 Sarbanes-Oxley
 Generics
 Wal-Mart
 Emerging markets
 India and China
 China’s dietary
standards
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India & China Move Center Stage in
Pharma Innovation
R&D spending as % of sales
6.1
Dr. Reddy's
7.6
2002
2003
3.1
Ranbaxy
6.9
0
2
4
6
Source: Financial Times, August 18, 2004
8
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India and China Will Climb up the
Innovation Ladder
“We aim to have 40%
of our revenues from
innovative products
by 2012.”
Dr. Brian Tempest
CEO, Ranbaxy
Source: Financial Times, August 18, 2004
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Size Doesn’t Matter…
 Western drug makers spend 15% revenues
on R&D
 Indian companies spend 5% revenues on
R&D
 Entire revenue of Indian drugs industry = $7
billion (less than Pfizer’s R&D budget)
BUT…
 Drug development in US = $800 million
 Drug development in India = $50 million
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…. If you Know How to Collaborate, you Win
(WHO you know is more critical than WHAT you
know)
 Developed by Tata Consultancy Services
(TCS) in...
 Collaboration with 18 public-sector R&D
bodies
 Cost = a fraction of that charged by US
vendors
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What’s Wrong With
Today’s Innovation Model?
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Bearish Supply is no Match to Bullish
Innovation Demand
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Firms are no Longer Pumping Billions of
Dollars into R&D
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Firms’ Innovation Engine is Stuck in
Low Gear
Innovation
1.
2.
3.
4.
5.
6.
One-way customer relations
Ivory-towered R&D labs
Organizational silos
Risk-averse top management
Unskilled partners
Limited local talent
Market irrelevant inventions
Slow rate of invention
No collaborative idea generation
Eschews radical innovation
Fail to keep pace with innovation
Slow the innovation cycles
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CIOs Have Relinquished “Innovation Catalyst”
Role
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Short-Sighted Public Policies Drain U.S.
Talent Pool
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How Can Innovation
Networks Fix it?
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Firms Need a New Market Structure That
Can Re-establish Balance in Innovation
Supply/Demand
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Innovation Networks:
Firms seamlessly weave
internally and externally
available invention and
innovation services to
optimize the profitability of
their products, services and
business models
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Best-known Innovation Network:
Hollywood
Writers
Actors
Studios/
Producers
Directors
Film
Musicians
Talent agents
Technicians
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Innovation Networks Consist of Four Types of
Organizational Models
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Procter & Gamble Plays Multiple IN Roles
’
Interaction patterns within P&G’s Innovation
Network
P&G
2
4
3
Collaboration
Scenario
Inventor
Transformer Financier
Broker
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P&G Kicked its Innovation Engine into
Full Gear
Innovation
1.
2.
3.
4.
5.
6.
One-way customer relations
Ivory-towered R&D labs
Organizational silos
Risk-averse top management
Unskilled partners
Limited local talent
Market irrelevant inventions
Slow rate of invention
No collaborative idea generation
Eschews radical innovation
Fail to keep pace with innovation
Slow the innovation cycles
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Innovation Networks Swell the
Supply Base for Talent and Ideas
1. Contract research labs
2. Academia
3. Military
4. Competitors
5. Customers
6. Free agents
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Industries Most Impacted by Innovation
Networks
 Electronics
 Software
 Financial services
 Pharmaceuticals
 Medical device
 Consumer goods
 Chemicals
 Aerospace and defense
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How can Product Lifecycle
Management (PLM) help
firms accelerate their
invention-to-innovation
cycles?
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Firms Rate Their Innovation Performance
as So-so
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Firms Need a New Strategy
Strategy
Business goals
and objectives
Networked
Innovation
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Networked Innovation:
The networking of internally
and externally available
invention and innovation
services to develop and
market customer-valued
products and services
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Firms Need New Processes
Strategy
Business goals
and objectives
Process
Procedures and
business rules
Networked
innovation
processes
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Process Requirement No. 1:
Customer Engagement
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Process Requirement No. 2:
Source and Market Anywhere
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Process Requirement No. 3:
Responsiveness
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Firms Must Deploy “Networked Innovation”
Processes
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Networked Innovation in Action:
IBM
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Firms Need New Governance Structure
Strategy
Business goals
and objectives
Process
Procedures and
business rules
People
Organizational
structure, skills
and incentives
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Firms Lack Formal Governance that Could
Foster Disruptive Innovations
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The Rise of CIOs:
Chief Innovation Officers
 Cargill
 PepsiCo
 Coca-Cola
 Wrigley
 Humana
Dr. Carol Pletcher
Cargill Innovation Officer
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Firms Must Retool Innovation Metrics and
Incentives
1. From supply push to demand pull
2. From patent hoarding to uninhibited IP
licensing
3. From not-invented-here to best-fromanywhere
4. From process-efficiency to market
responsiveness
5. From technology prowess to customer
value creation
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Firms Need New Technology
Strategy
Business goals
and objectives
Process
Procedures and
business rules
People
Organizational
structure, skills
and incentives
Technology
Applications and
infrastructure
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Networked Innovation in Action: P&G
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Innovation is Key to Success of Firms… and
Countries
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“Innovating for Growth” – Theme of Forrester
Forum
Innovating for growth —
• Accelerate your
invention-to-innovation cycle.
• Discover how to tap into
new technologies, processes,
and governance models
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Thank you
Navi Radjou
617-613-6119
[email protected]
www.forrester.com
Entire contents © 2004 Forrester
Research, Inc. All rights reserved.
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Related Research
June 17, 2004, Forrester Big Idea
“Innovation Networks”
June 24, 2004, Best Practices “Networked
Innovation Drives Manufacturers’ Profit”
June 30, 2004, Trends “Firms Confront
Growing Innovation Demand”
January 6, 2004, Brief “Technology
Innovation: Q1 2004”
August 18, 2003, Brief “CIO’s: Break The “IT
Isn’t Innovative” Stereotype”