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Product Design & InnovationMedical Devices Summit – Colorado Springs 2012Nina KohnenDirector Operational Excellence,Design...
Agenda                  Importance of Achieving Success in Innovation                  & Product Leadership               ...
About Covidien                                     • Global manufacturer of medical devices and                           ...
Achieving Market Leadership                                            “Best Product”                             Innovati...
There is no Shortage of Advice on How to do it Right  Bring clarity and certainty      through analysis       Reduce compl...
What is Innovation?6 |   12/3/2012
This is one of very few 7 stars hotel in the worldIt was built in only 18 months...And opened its doors in 2003.....  8 | ...
9 |   12/3/2012
10 | 12/3/2012
What About These Innovations?• Apple vs. Rest• DVD vs. Streaming Video• Mobile Phones vs. Landlines• E-mail vs. Snail Mail...
My Take on Innovation      • Innovation is the Ability to Invent, Commercialize and Expand a         Product or Service Al...
Why is Innovation Important?     • Innovation is the Only Competitive Advantage a Company Really         Has. Quality Impr...
•OHLCCursor•Chart Scale•CHART SETTINGS       Values                                   NFLX•RESET                          ...
Impact on Investment Value     •        Innovation is Important to Financial Markets in Determining the              Value...
America’s Most Admired Companies                 Rank                         Company                     1               ...
Top 10 Most Innovative Companies          Rank 2012           Rank 2011             Company                 1             ...
How Difficult is Product Innovation?       •          Expected Failure Rate is 35% - 45% and Depends on the Industry1     ...
How Difficult is Product Innovation?    10,000                                                                            ...
Agenda                 Importance of Achieving Success in Innovation                 & Product Leadership                 ...
Key Components of Innovation / Product Leadership                                                                         ...
Success Through Innovation is Key    • About 50% of Executives Consider Innovation Very Critical1    • More than 54% Indic...
The Building Blocks For Innovative Organizations1         • Formally Integrate Innovation Into the Strategic Management   ...
Fail-Publicize Important Failures (Internally)                                                                       Forwa...
Covidien’s Strategic Initiatives •     Innovation •     Portfolio Management •     Operational Excellence •     Globalizat...
Key Components of Innovation / Product Leadership                                                                         ...
New Product Innovation Strategy •          Without a Sound Strategy, a New Product is Most Likely to Fail       –         ...
Key Questions to Ask for a Robust Innovation    Strategic Plan1    •         What Markets Do We/Can We Serve?    •        ...
Key Components of Innovation / Product Leadership                                                                         ...
Portfolio Management•         Portfolio Management– Focuses on:               −     New Opportunities, New Products, New V...
Portfolio Management Practices                                                                                            ...
Is This a Balanced Portfolio?                                                                                   High   Pot...
Balance of Products in the Portfolio – Product   Life Cycle                                            (3) Cash from      ...
Key Components of Innovation / Product Leadership                                                                         ...
Product Development Stage Process•          An Operational Map For Moving New Product Projects From Idea           to Laun...
Typical Stage Gate Process            The Five Stages of Product Development                                              ...
Common Errors & Pitfalls in a Gated Process•         Too Many Bad and in Trouble Projects are Sliding Through•         The...
Key Components of Innovation / Product Leadership                                                                         ...
Enablers - DFSS Tools      • Help Define Customer Requirements (CTQ’s)      • Result in Significant Improvement to Product...
DFSS Tools Used Early in The Process   Why Important?      Cost to Correct Quality and Reliability       Traditional Six S...
Application of Lean to Product DevelopmentApproach         Description                         FocusLean Product     Large...
Key Components of Innovation / Product Leadership                                                                         ...
…but there is clearly no standard for whichMost organizations are satisfied        innovation metrics are most effective.w...
Breakdown of Projects by Project Type (%) 45                                                  40      Best Performers     ...
Percentage of Revenue and Profits from New Products                                                                 42.4  ...
Success, Fail & Kill Rate of New Products                    79.5                                                         ...
% On Time & On Budget for New Products                    79.4                                    79 80                   ...
% New Product Projects Meeting Objectives                                                                   Top 20% of Bus...
Top 10 R&D Metrics Used Across Industries                                                                        % Compani...
Top 10 Innovators vs. Top 10 Spenders                                      80                                             ...
Top 10 R&D Spenders   Rank               Rank     Company             Spend        % of   2010               2009         ...
R&D Spending - Medical Device Companies                      16%                            11.8%   11.6%                 ...
Top 10 R&D Metrics Used By Industry                                                                           %C          ...
Key Components of Innovation / Product Leadership                                                                         ...
Best Practice for Best Practice Sharing • Establish a Process for Identifying Individual Best Practices   Throughout all A...
Must Do For Medical Device Product Development•         Get Clinical Data Pre-Launch Rather Than Post Launch•         Cons...
Summary - Achieving Success in Product    Design & Innovation - High Level•     Process Must be Led by Senior Management -...
“The world we have created today as a result of our thinking thus far has h problems which cannot b         bl       hi h ...
Product Design and Innovation - Nina Kohnen, Covidien
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Product Design and Innovation - Nina Kohnen, Covidien

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Nina Kohnen, Covidien - Speaker at the marcus evans Medical Device Manufacturing Summit Fall 2012, held in Colorado Springs, delivered her presentation entitled Product Design and Innovation

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Transcript of "Product Design and Innovation - Nina Kohnen, Covidien"

  1. 1. Product Design & InnovationMedical Devices Summit – Colorado Springs 2012Nina KohnenDirector Operational Excellence,Design Excellence
  2. 2. Agenda Importance of Achieving Success in Innovation & Product Leadership A Roadmap for Success2 | 12/3/2012
  3. 3. About Covidien • Global manufacturer of medical devices and pharmaceuticals • 43,000 employees with 51 manufacturing facilities located i 18 countries f iliti l t d in ti • 2012 Sales – $11.9 Billion Medical SuppliesNursing Care, SharpSafety, Medical Surgical, OEM Surgical 15% 17% 68% Medical Devices Endomechanical, Energy, Pharmaceuticals Soft Tissue Repair,Specialty Pharmaceuticals, Airway & Ventilation, Contrast Products, Oximetry & Monitoring, Radiopharmaceuticals, p Vascular Active Pharmaceutical Ingredients 3 | 12/3/2012
  4. 4. Achieving Market Leadership “Best Product” Innovation / Product Leadership Apple, Google, Intel, Nike, 3MWal-Mart, FedEx, Southwest, Dell Airborne Express, Home Depot, IBM Operational Excellence Customer IntimacyBest Total Cost, Ease of Use “Best Total Solution”Convenience,Convenience etcSource: The Discipline of Market Leaders- Michael Treacy 4 | 12/3/2012
  5. 5. There is no Shortage of Advice on How to do it Right Bring clarity and certainty through analysis Reduce complexity by focusing on process design Take larger strides to a e a ge st des speed up the pace of improvement Fix execution to accelerate improvement 5 | 12/3/2012
  6. 6. What is Innovation?6 | 12/3/2012
  7. 7. This is one of very few 7 stars hotel in the worldIt was built in only 18 months...And opened its doors in 2003..... 8 | 12/3/2012
  8. 8. 9 | 12/3/2012
  9. 9. 10 | 12/3/2012
  10. 10. What About These Innovations?• Apple vs. Rest• DVD vs. Streaming Video• Mobile Phones vs. Landlines• E-mail vs. Snail Mail• Paper Maps vs. GPS11 | 12/3/2012
  11. 11. My Take on Innovation • Innovation is the Ability to Invent, Commercialize and Expand a Product or Service Along a Customer’s Dimension of Value. Customer s – Invention Requires a System to Generate, Prioritize & Process Ideas – Commercialization Requires a Robust Product Development Process to Launch Ideas – Expansion Requires a System to Fully Manage & Exploit Post Launch Utilization of the New Products or Services12 | 12/3/2012
  12. 12. Why is Innovation Important? • Innovation is the Only Competitive Advantage a Company Really Has. Quality Improvements & Price Reductions Can be Q y p Replicated. • A Company Should Proactively Make its Own Products Obsolete Before Competitors Do. – Creative Destruction – Planned Obsolescence13 | 12/3/2012
  13. 13. •OHLCCursor•Chart Scale•CHART SETTINGS Values NFLX•RESET Netflix Blockbuster 14 | 12/3/2012
  14. 14. Impact on Investment Value • Innovation is Important to Financial Markets in Determining the Value of a Company over the Long Term • About 91% of Executives Surveyed Consider Increasing the Companys Capacity for Innovation was Critical to Creating Future Competitive Advantage and Earning Profits1 • Fortune Magazine: “Secrets of America’s Most Admired Corporations”- New Ideas and New Products are the Key2 p y1 A study by Bain & Co. published in Harvard Business Review (Oct 2002) Co (Oct.2 B. O’Reilly, “Secrets of America’s Most Admired Corporations: New Ideas, New Products.” Fortune 15 | 12/3/2012
  15. 15. America’s Most Admired Companies Rank Company 1 Apple 2 Google 3 Amazon.com 4 Coca Cola Coca-Cola 5 IBM 6 FedEx 7 Berkshire Hathaway 8 Starbucks 9 Procter & Gamble 10 Southwest Airlines Most Admired Linked to Most Innovative! Source: Fortune, March 201216 | 12/3/2012
  16. 16. Top 10 Most Innovative Companies Rank 2012 Rank 2011 Company 1 1 Apple 2 2 Google 3 3 3M 4 7 Samsung 5 4 General Electric 6 5 Microsoft 7 9 Toyota 8 8 Procter & Gamble 9 6 IBM 10 n/a Amazon Most Admired Linked to Most Innovative! Source: Booz & Company Inc17 | 12/3/2012
  17. 17. How Difficult is Product Innovation? • Expected Failure Rate is 35% - 45% and Depends on the Industry1 • An Estimated 46% of all Resources Allocated to Product Development are Spent on Cancelled or Failed Products1 • 56% of Products Meet Their Market Objective and About 50% Launch on Time2 • The Consumer Electronics Show (CES) is the Biggest Stage of the Technology Industry – Most of the Products Showcased This Year Will Not See Commercialization!! Boosting a Steady Stream of Successful New Products is Not an Easy Task.1 Robert G. Cooper: Product Leadership 2nd edition.2 Behnam Tabrizi and Rick Walleigh “Defining Next-Generation Products” Harvard Business Review. 18 | 12/3/2012
  18. 18. How Difficult is Product Innovation? 10,000 “If we knew what we were doing, 3000 Raw Ideas (Unwritten) it wouldn’t be called research wouldn t research, 1000 would it?” — Albert EinsteinNumber of Ideas 300 Ideas Submitted I 100 125 Small Projects 9 Early Stage Development 10 0 4 Major Development 1.5 Launches 1 1 Success 1 2 3 4 5 6 7 Stage of New Product Development Process Source: G. Stevens and J. Burley, “3000 Raw Ideas = 1 Commercial Success!” Research•Technology Management, 40(3): 16-27, May-June, 1997. 19 | 12/3/2012
  19. 19. Agenda Importance of Achieving Success in Innovation & Product Leadership A Roadmap for Success20 | 12/3/2012
  20. 20. Key Components of Innovation / Product Leadership Metrics Balanced Scorecard Customers, Market Environment & Senior Mgt Team ology Strategy Performance Goals ENABLERS orporate Strategy DFSS & Lean PD TOOLS ment Portfolio Innovation & Techno Outputs Managem Stage 5 Stage 4 Stage 2 Stage 1 ORGANIZATION Stage 3 & PEOPLE ∑Co TECHNOLOGY Gaps Between Actual & Desired Goals Lean/Sigma Design Product Development Process Desired Goals Best Practice Sharing 21 | 12/3/2012
  21. 21. Success Through Innovation is Key • About 50% of Executives Consider Innovation Very Critical1 • More than 54% Indicated Increased Investment in the Last Two Years1 • Ab t 90% of Executives Consider O About fE ti C id Organic G i Growth Th th Through h Innovation Essential to Success2 • About 70% of Senior Executives Say That Innovation in One of the Top Three Drivers of Growth for Their Company in the Next 3-5 Years3 Innovate or Die!1 Cheskin and Fitch: Worldwide, 20032 The Boston Consulting Group, innovation 20053 The McKinsey Quarterly September 2007 22 | 12/3/2012
  22. 22. The Building Blocks For Innovative Organizations1 • Formally Integrate Innovation Into the Strategic Management Agenda of Senior Leaders • Create the Conditions That Allow Dynamic Innovation Networks to Emerge and Flourish • T k Explicit St Take E li it Steps to Foster an Innovation Culture Based on Trust t F t I ti C lt B d T t Among Employees – People Understand That Their Ideas are Valued p – Trust That its Safe to Express Those Ideas – Create High Risk – High Reward Environment – Publicize Important Failures Innovation is an Important Driver for Growth1 Leadership & Innovation, The McKinsey Quarterly Jan. 2009 23 | 12/3/2012
  23. 23. Fail-Publicize Important Failures (Internally) Forward Culture Don’t Punish D ’t P i h Discuss Failure Publish Failures Appropriate Failure To promote appropriate risk taking, 3M reinforces its culture of risk Approximately 90 grants of $50K Former Lockheed Martin CEO, taking by sharing stories of are given to 3M employees each Dan Haughton, gathered the past failures and second year to pioneer new product company’s manufacturing chances. ventures. The product champion p p executives to discuss his own recruits his / her own team to develop failures, including the admission One example is Francis Okie’s and launch the product. that the failure to purchase the 1922 attempt to replace razor Douglas Aircraft company was a blades with a new sandpaper If the venture does not succeed team product. The product failed as a costly mistake. shaving tool but was ultimately the tool, members are guaranteed their g basis for a successful line of fine- previous jobs. There is no grained, waterproof sandpaper punishment for a product failing in the products. market. Post-It Post It notes were developed by accident. Intolerance for failure likely would have killed the concept.pSource: Corporate Executive Board, Tuck Business School Center for Global Leadership, 3M Company Website 24 | 12/3/2012
  24. 24. Covidien’s Strategic Initiatives • Innovation • Portfolio Management • Operational Excellence • Globalization • Talent management Innovation is a Key Component of Covidien’s Strategy25 | 12/3/2012
  25. 25. Key Components of Innovation / Product Leadership Metrics Balanced Scorecard Customers, Market Environment & Senior Mgt Team ology Strategy Performance Goals ENABLERS orporate Strategy DFSS & Lean PD TOOLS ment Portfolio Innovation & Techno Outputs Managem Stage 5 Stage 4 Stage 2 Stage 1 ORGANIZATION Stage 3 & PEOPLE ∑Co TECHNOLOGY Gaps Between Actual & Desired Goals Lean/Sigma Design Product Development Process Desired Goals Best Practice Sharing 26 | 12/3/2012
  26. 26. New Product Innovation Strategy • Without a Sound Strategy, a New Product is Most Likely to Fail – Successful Companies Implement a Company-Specific Approach Driven by p p p y p pp y Business Objectives and Strategies with a Well-Defined Product Innovation Strategy at its Core1 • Innovation Strategy is a Component of the Overall Business Strategy2 – Includes Defined Goals that Tie to the Overall Company Strategy – Includes Deployment Decisions – Includes Attack and Entry Points to Markets – Forms the Basis for Project Selection and Portfolio Management j g – Well Communicated1 Booz-Allen& Hamilton, New product management2 Product Leadership, Robert Cooper 2nd ed. 2002 27 | 12/3/2012
  27. 27. Key Questions to Ask for a Robust Innovation Strategic Plan1 • What Markets Do We/Can We Serve? • In What Segments Do We & Our Competitors Actively Participate? • How Large is the Business Opportunity? • What are the Key Value Propositions? • What Will We Establish as the Major Differentiators? • What are the Platforms to Address the Targeted Customer and Markets? • What are the Resources Required to Deliver Against the Product and Technology Strategic Plans? • What is the Expected Business Outcome? • How Will this Strategy Integrate with the Corporate Strategy?1 Maurice F. Holmes and R.B. Campbell Jr. 28 | 12/3/2012
  28. 28. Key Components of Innovation / Product Leadership Metrics Balanced Scorecard Customers, Market Environment & Senior Mgt Team ology Strategy Performance Goals ENABLERS orporate Strategy DFSS & Lean PD TOOLS ment Portfolio Innovation & Techno Outputs Managem Stage 5 Stage 4 Stage 2 Stage 1 ORGANIZATION Stage 3 & PEOPLE ∑Co TECHNOLOGY Gaps Between Actual & Desired Goals Lean/Sigma Design Product Development Process Desired Goals Best Practice Sharing 29 | 12/3/2012
  29. 29. Portfolio Management• Portfolio Management– Focuses on: − New Opportunities, New Products, New Ventures − All Products a Company has in Development or Available for Customer at any Time• The Goals are: − Maximize Value * Net Present Value (NPV) * Expected Commercial Value (ECV) * Internal Rate of Return (IRR) − Balanced Portfolio (Short vs. Long Term, Breakthrough vs. Line Extension, etc.) − Strategic Alignment 30 | 12/3/2012
  30. 30. Portfolio Management Practices Worst Performers 4 Formal Portf. Mgnt. Process in Place 31 Best Performers 46 Alignment with Bus. Strategy 66 4 Good Balance Projects/Resources 38 12 Good Project Prioritization 41 8Resource Breakdown Reflects Strategy 66 19 31 Excellent Balance of Projects 1 38 Portfolio Contains High Value Projects P tf li C t i Hi h V l P j t 0 10 20 30 40 50 60 70 Source: Product Development Institute 2010. % 31 | 12/3/2012
  31. 31. Is This a Balanced Portfolio? High Potential Stars cess (Pearls) hnical Succ Bread & Butter Probabili of Tech $14 M 12 10 8 6 4 2 0 Reward (NPV) ity White Elephants Long Shots Low (Oysters) Risk Reward Bubble DiagramSource: Robert G. Cooper: Winning at Circle Size = Resources (annual)New Products, 3rd edition. 32 | 12/3/2012
  32. 32. Balance of Products in the Portfolio – Product Life Cycle (3) Cash from (2)Cash from ‘C’‘B’ used to support ‘D’ supports growth of DSales (1) through used to ‘C’ ‘A’ is at maturity The possibly growth and product stage – extension finance cash cow. stage and to portfolio – four ( ) (1) ( ) (2) ( ) (3) Generates . launch ‘D’. the for strategy Din funds products the development of portfolio ‘A’ now possiblyaa ‘D’ “B” Now possibly dog? Dog? D B A C Time 33 | 12/3/2012
  33. 33. Key Components of Innovation / Product Leadership Metrics Balanced Scorecard Customers, Market Environment & Senior Mgt Team ology Strategy Performance Goals ENABLERS orporate Strategy DFSS & Lean PD TOOLS ment Portfolio Innovation & Techno Outputs Managem Stage 5 Stage 4 Stage 2 Stage 1 ORGANIZATION Stage 3 & PEOPLE ∑Co TECHNOLOGY Gaps Between Actual & Desired Goals Lean/Sigma Design Product Development Process Desired Goals Best Practice Sharing 34 | 12/3/2012
  34. 34. Product Development Stage Process• An Operational Map For Moving New Product Projects From Idea to Launch• It is Like a Playbook in a Football Game − It Maps Out What Needs to be Done, Play by Play Huddle by Done Play, Huddle and How to Do it in Order to Win The Game• Each Stage Has Clearly Defined Deliverables g y• Each Stage is Cross Functional − No Department Owns Any One Stage 35 | 12/3/2012
  35. 35. Typical Stage Gate Process The Five Stages of Product Development Ve Feasibility of Concept F erification & Valida Commer Idea Ge Devel n y rcializatio lopment eneration n on Stage g Stage Stage Stage ation Stage g Post Launch 1 2 3 4 5 SurveillanceSuccessful New Product Launches Go Through the Process36 | 12/3/2012
  36. 36. Common Errors & Pitfalls in a Gated Process• Too Many Bad and in Trouble Projects are Sliding Through• The Stages Have No Teeth: Once Approved, Projects Never Get Approved Killed• Resource are Either Not Committed as Projects Move From Stage to Stage or Committed t T M St C itt d to Too Many P j t at a Ti Projects t Time• Executive Pet Projects Get Special Treatment and Bypass the Stages• Deliverables Overkill• Process is Too Rigid and Not Scalable Gated Process is Not a Magic Bullet: It is Only One Piece of the Puzzle g y 37 | 12/3/2012
  37. 37. Key Components of Innovation / Product Leadership Metrics Balanced Scorecard Customers, Market Environment & Senior Mgt Team ology Strategy Performance Goals ENABLERS orporate Strategy DFSS & Lean PD TOOLS ment Portfolio Innovation & Techno Outputs Managem Stage 5 Stage 4 Stage 2 Stage 1 ORGANIZATION Stage 3 & PEOPLE ∑Co TECHNOLOGY Gaps Between Actual & Desired Goals Lean/Sigma Design Product Development Process Desired Goals Best Practice Sharing 38 | 12/3/2012
  38. 38. Enablers - DFSS Tools • Help Define Customer Requirements (CTQ’s) • Result in Significant Improvement to Product Quality & Reliability Levels • C t ib t to Revenue Growth, Customer Delight, M k t Contributes t R G th C t D li ht Market Share, Volume, Price • Warranty Cost Reductions y • Customer Satisfaction / Targets Met • Focus the product development teams on what is important Design for Six Sigma as an Enabler39 | 12/3/2012
  39. 39. DFSS Tools Used Early in The Process Why Important? Cost to Correct Quality and Reliability Traditional Six Sigma & Lean Efforts are Focused Here $ DFSS Efforts are Focused Here t Post Launch Research Design Development Launch Performance Defects are: Difficult to See/Predict Easy to Fix Easy to See Costly to Fix Best $ Opportunities Realized Through Product Design40 | 12/3/2012
  40. 40. Application of Lean to Product DevelopmentApproach Description FocusLean Product Largely based on the adaptation Time to market, marketDevelopment of process, organization, and development costs,System tools used in Toyota Product capacity, quality, Development System (TPDS) to continuous develop products better, faster, improvement and cheaperLean Business Application of Lean Principles to Time to market,Process minimize waste in Business development costs, Processes capacityLean Design Elimination of waste from the Product cost, quality, product design to reduce customer value manufacturing costs41 | 12/3/2012
  41. 41. Key Components of Innovation / Product Leadership Metrics Balanced Scorecard Customers, Market Environment & Senior Mgt Team ology Strategy Performance Goals ENABLERS orporate Strategy DFSS & Lean PD TOOLS ment Portfolio Innovation & Techno Outputs Managem Stage 5 Stage 4 Stage 2 Stage 1 ORGANIZATION Stage 3 & PEOPLE ∑Co TECHNOLOGY Gaps Between Actual & Desired Goals Lean/Sigma Design Product Development Process Desired Goals Best Practice Sharing 42 | 12/3/2012
  42. 42. …but there is clearly no standard for whichMost organizations are satisfied innovation metrics are most effective.with their innovation metrics… % of respondents who use more than 3 innovation metrics, n=633 % of respondents who use more than 3 innovation metrics, n=633 Approximately 75% of Companies Studied Use Innovation Metrics in Some Form, with an Average of Eight Metrics Used Form Used.Source: McKinsey Quarterly 43 | 12/3/2012
  43. 43. Breakdown of Projects by Project Type (%) 45 40 Best Performers 40 40 Worst Performers 35 28 27 30 25 25% 19 20 12 15 10 6 5 0 Packg Changes Incremental Major Product New to the Improvement Revisions Business/WorldSource: Robert G. Cooper: Product Leadership 2nd edition. 44 | 12/3/2012
  44. 44. Percentage of Revenue and Profits from New Products 42.4 45 Revenue 38 Profits 40 35 27.5 28.4 30 25% 20 15 9 9.1 91 10 5 0 Ave. Business Top 20% of Bottom 20% of Businesses BusinessesSource: Robert G. Cooper: Product Leadership 2nd edition. 45 | 12/3/2012
  45. 45. Success, Fail & Kill Rate of New Products 79.5 Top 20% of Businesse 80 Bottom 20% of Businesses 70 60 50 37.6%40 28.4 25.7 30 20 8.1 4.3 10 0 Success Failure Late KillSource: Robert G. Cooper: Product Leadership 2nd edition. 46 | 12/3/2012
  46. 46. % On Time & On Budget for New Products 79.4 79 80 Top 20% of Businesse 70 Bottom 20% of Businesses 60 44.3 44 3 50% 40 30 20.5 17.2 15.5 20 10 0 On Time On Budget Slip rateSource: Robert G. Cooper: Product Leadership 2nd edition. 47 | 12/3/2012
  47. 47. % New Product Projects Meeting Objectives Top 20% of Businesse 100 Bottom 20% of Businesses 90 77.1 74.5 74 5 73.4 73 4 80 70 60% 50 29.3 40 26.9 29.6 30 20 10 0 Meeting Profit Meeting Sales Meeting Market Share Objectives j Objectives j Objectives jSource: Robert G. Cooper: Product Leadership 2nd edition. 48 | 12/3/2012
  48. 48. Top 10 R&D Metrics Used Across Industries % Companied Metric Using Metric1. R&D Spending as a % of Sales 77%2. Total Patents Filed/Pending/Awarded/Rejected 61%3. Total Current R&D Headcount 59% • Many Companies Invest Only in R&D Resources. Product Development is4. Cu e Current-Year % Sa es Due to New Products Released in Past X Years ea Sales ue o e oduc s e eased as ea s 56% not Just R&D tJ t5. Number of New Products Released 53%6. • Number Invest in Other Support Functions (QA, Manufacturing, Procurement, Must of Products/Projects in Active Development 47%7.7 Engineering, etc) % Resources/investments Dedicated to New Product Development 41%8. • Number of Products in Defined/Planning/Estimation Stages A Study by Booz Allen showed no Correlation Between: 35%9. − R&D to Sales Ratio, Projects Payback Average Project ROI or AverageR&D to Sales Growth, R&D to Gross, Net Profits 31%10.10 Percentage Increase/Decrease in R&D Headcount 31% • However, most Innovative Companies outperformed their peers with respect to revenue growth, EBITA as a percentage of revenue, and market cap growth Source: industryweek May 2008 49 | 12/3/2012
  49. 49. Top 10 Innovators vs. Top 10 Spenders 80 Top Innovators 80 6 67 p p Top Spenders 70 56 54 60 50 42%40 35 30 20 10 0 Revenue Growth EBIT as % of Market Cap Growth Revenue 5-yr CAGR 5-yr Ave 5-yr CAGRSource: Booz Allen. 50 | 12/3/2012
  50. 50. Top 10 R&D Spenders Rank Rank Company Spend % of 2010 2009 $Billion Sales 1 1 Roche Holdings $9.65 21.1% 2 5 Pfizer $9.41 13.9% 3 6 Novartis $9.07 17.9% 4 2 Microsoft Mi ft $8.71 $8 71 14.0% 14 0% 5 14 Merck $8.59 18.7% 6 4 y Toyota $8.55 3.9% 7 10 Samsung $7.87 5.9% 8 3 Nokia $7.78 13.8% 9 11 General M t G l Motors $6.96 $6 96 5.1% 5 1% 10 7 J&J $6.84 11.1% It is not How Much you Spend, It is How you Spend it!Source: Booz Allen 2011 51 | 12/3/2012
  51. 51. R&D Spending - Medical Device Companies 16% 11.8% 11.6% 12% 10.6% 9.3% 9 3% 9.2% 9 2% % of Total Sales 7.8% 8% 7.2% 6.8% 6.1% 4.8% 4% 0% • Data for GE, Siemens and Phillips are for their healthcare business only • J&J and Abbott numbers include the pharma spend52 | June 6, 2012
  52. 52. Top 10 R&D Metrics Used By Industry %C Companied i d Metric Using Metric1. R&D Spending as a % of Sales 77%2. Total Patents Filed/Pending/Awarded/Rejected 61%3. Total Current R&D Headcount 59%4. Current-Year % Sales Due to New Products Released in Past X Years 56%5. Number of New Products Released 53%6. Number of Products/Projects in Active Development 47%7. % Resources/investments Dedicated to New Product Development p 41%8. Number of Products in Defined/Planning/Estimation Stages 35%9. Average Project ROI or Average Projects Payback 31%10. Percentage Increase/Decrease in R&D Headcount 31% “If you are Not Keeping Score, you are Just Practicing” Vince Lombardi Source: industryweek May 2008 53 | 12/3/2012
  53. 53. Key Components of Innovation / Product Leadership Metrics Balanced Scorecard Customers, Market Environment & Senior Mgt Team ology Strategy Performance Goals ENABLERS orporate Strategy DFSS & Lean PD TOOLS ment Portfolio Innovation & Techno Outputs Managem Stage 5 Stage 4 Stage 2 Stage 1 ORGANIZATION Stage 3 & PEOPLE ∑Co TECHNOLOGY Gaps Between Actual & Desired Goals Lean/Sigma Design Product Development Process Desired Goals Best Practice Sharing 54 | 12/3/2012
  54. 54. Best Practice for Best Practice Sharing • Establish a Process for Identifying Individual Best Practices Throughout all Appropriate Areas of the Organization • Create a Forum or Channel for Sharing Best Practices Formally. Link it to Strategy • Create a dedicated process/System with Clear Responsibilities p • Review Effectiveness of the Process and Improve 55 | 12/3/2012
  55. 55. Must Do For Medical Device Product Development• Get Clinical Data Pre-Launch Rather Than Post Launch• Consider Global Product registration Requirements Early in the g q y Process• Integrate Package Design, Development and Validation into Product Development Process• Consider Sterilization Method Early in the Process• Reimbursement Considerations - second largest barrier to market entrance• Direct Input from Healthcare Professionals• Pricing Considerations early in the Process 56 | 12/3/2012
  56. 56. Summary - Achieving Success in Product Design & Innovation - High Level• Process Must be Led by Senior Management - Walk the Talk• New P d t I N Product Innovation and T h l ti d Technology St t i Linked t Strategies Li k d to Corporate Strategy• Portfolio Management – Alignment of Resources, Projects, Right Markets etc.• Multi Stage Product Development Process to Ensure: – DFSS & Lean PD Tool Usage – Regular Project Progress Reviews – Robust & Reliable Product Designs• Use a Balanced Score Card to Track Metrics and Provide a Closed Loop System with Periodic System Assessments• Share Best Practices 57 | 12/3/2012
  57. 57. “The world we have created today as a result of our thinking thus far has h problems which cannot b bl hi h t be solved by thinking the way we thought when we created them.” Albert Einstein Thank you y 58 | 12/3/2012
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