Do You have the Key Processes and Capabilities for Exceptional Innovation?

© Copyright Sopheon plc. Sopheon Confidential
Do You have the Key Processes
and Capabilities for Exceptional
Innovation?
President and CEO
Andy Michuda
Chief Innovation Officer Summit (CINO) 2014
London, UK

“house of knowledge”
Sophos : Eon
knowledge or
wisdom
house or
building
from the Greek…
2

Audience Participation…

• Too often, strategies are defined but not
translated into action
• Stuck in the three-ring binder on the shelf
• Quickly out-of-date due to constant market
changes
Corporate Strategic Plans
4
The Innovation/NPD Challenge

Execution Activities
5
• 70% of workforce doesn’t understand the strategy*
• 71% of workforce is not engaged**
• AOP is spreadsheet exercise, disconnected from strategy
*Forbes (2013)
**Gallup (2011)
Engineering
Supply
Chain Production
Sales &
MarketingFinance
• Each function has its own execution system
PLM ERP/MRP ERPSCM CRM

Engineering
Supply
Chain Production
Sales &
MarketingFinance
Corporate
Strategic Plans
?For steady, long-term growth and agility
companies must close this gap

Engineering
Supply
Chain Production
Sales &
MarketingFinance
Corporate
Strategic Plans
Enterprise
Innovation
Performance
To close the gap your company must take a
holistic review of:
• Organization
• Governance
• Processes
• Information

Engineering
Supply
Chain Production
Sales &
MarketingFinance
Corporate
Strategic Plans
Enterprise
Innovation
Performance
Sustainable,
Profitable
Revenue
Growth
Innovative
Products &
Initiatives

Sopheon Fills the Gap with Accolade for
Enterprise Innovation Management (EIM)
Innovation Planning
Strategic Alignment with Business Objectives
Market, Product & Technology Planning
Portfolio Management
Investment Funding Decisions and Optimization to Achieve Business Objectives
Resource Planning to Support Business and Portfolio Priorities
Idea & Concept Development
Produce High-Value, Winning Product Development Initiatives
Innovation Process Management
Manage Innovation Initiatives to get the Right New
Products/Services to Market Cost-Effectively and On Time

Technical Layer
• Product structure
• Project management
• Technical specs
• Engineering tools
• CAD/CAM
• PDM, parts, pieces
Enterprise Innovation Management Closes the Gap
Strategic Innovation Planning
Candidate Selection Line ExtensionsCapability & Function Development
Enabling Technology Development Invention Management
Business Layer
• Strategic planning
• Portfolio optimization
• Gate decision governance
• Ideas & candidate nomination
• Phase-out lifecycle planning
Transactional Layer
• Cost registration
• Financial transactions
• Supplier management
Portfolio or Master Planning

Innovation is Core to Business Performance
OperatingProfit
FY14 FY18
TARGET
$YM
CURRENT
$XMM New Product/
New Service
Initiatives
Marketing/
Brand/Promotion
Initiatives
M&A
Integration
Initiatives
Cost Reduction/
Margin Management
Initiatives
I.T.
Initiatives
Innovation includes and extends
beyond Product Innovation

In The Beginning ...
Typical Companies Best Practice Companies
Ideas In Ideas In
23%
12%
5%
2.5%
Percent of ideas that
make it to feasibility
Percent of ideas that
make it to development
46%
25%
20%
49%
Overall percent of resources
spent on project failures
Percent of revenue from
products introduced in
the past 5 years
Resource &
cost savings

The New Norm
“The only
uncertainty in life
is uncertainty.”
Anonymous

The New Norm
“It’s not the
strongest of the
species that
survives. It’s the
one that’s most
adaptable to
change.”
Charles Darwin
1809-1882

Global Themes Driving Strategy and Innovation

Your economic strategy connects the global theme with your company DNA
#1 Economic Vision

Define and scope the arenas where you want to win
#2 Segmentation
Pictured: crop science

Define and scope the arenas where you want to win
#2 Segmentation
mining
gas extraction
fertilizers
crop science
health foods
food
supplements
medicine

Apportion investments for a balanced innovation portfolio
#3 Balanced Investment Buckets
short term
long term
incremental breakthrough

Scout, maintain a global ecosystem, and establish an IP strategy
#4 Research Strategy

Future portfolio mix of enabling technologies, platforms,
processes, and …
#5 Technology Strategy

Product portfolio planning and management – idea to obsolescence
#6 Product Line Strategy
Candidate Development Active Phase –Out Obsolete
NPD 4201
Volume

Globalized, interdepartmental, open teams across entire value chain
#7 Multi-Functional Development Processes

PlanningRealization
Product Portfolio Plan Alignment
Technology
Development
Phase-out
Projects
Research
Projects
Regional Sales Plans
Strategic Business Targets
New Product
Development
Market Segmentation Plan
Project Portfolio Plan
Enhancement
Releases
Market
Introduction
Segments : products : projects : technologies
#8 Integrated Portfolio Management

8 Principles of Innovation Management for
Transformation

Top Innovation Performers Achieve Measurable Benefits
There Will Be Winners & Losers
Months to Break Even
Share of Total Sales from
New Products / Services
Share of Total Earning from
New Products / Services
30%
13%
19%
Source: Getting a Better Return on Your Innovation Investment, Arthur D. Little, 2012
15
29
35
22
16
16
0 5 10 15 20 25 30 35 40
Others Top Innovation Performers

Alignment Matters
Companies achieving high alignment between innovation strategy,
business strategy & culture enjoy superior financial performance
33% higher
enterprise value
growth
17% higher
profit growth
Source: The Culture of Innovation, Booz & Co., March 2012
Business
Strategy
Innovation
Strategy
Culture

Innovation Maturity
%ofNPDRevenue
Innovation Competency
 Process
inconsistencies
 High risk, few
decision points
 Established decision
processes
 Priorities defined &
understood
 Resource allocation
managed
 Business & Strategy
Alignment
 Metrics measured
 Priorities proactively
managed
 Transparency
 Increased reuse &
reduction of data
duplication
 Integration
improves speed-to-
value
 “Go/no go” decision
making based on
real-time data
 Enhanced
collaboration for
strengthened
efficiency/speed
Elementary Effective Advanced World Class
Friction
Unstructured
Structured
“Gated”
Governance
Knowledge-Centric
“Smart”

Sustainable, Profitable
Revenue from New Products
via increased throughput, value, and success rate
Localized
One Function, One BU
Cross-Unit
Several Functions, Several BU’s
Critical Mass
Most Functions, Most BU’s
Enterprise
All Functions, All BU’s
No Adoption
No BU’s
Your Expert Guides on the
Innovation Management Journey
AdoptionCapability
Strategy
Ideation
Execution
Informal Introductory Intermediate Advanced World Class
•Unstructured •Roadmap Workshops •Roadmapping Process •Integrated Processes
•Composite Roadmaps
•Portfolio Prioritization
•Portfolio Reviews
•Basic Resource Planning
•Dynamic “Living” Process
•Real-time Scenario Analysis
•True Culture of Innovation
•Knowledge Transparency
•Unstructured •Standard Idea Forms •Idea Campaigns
•Unstructured •Basic SG Process •Routine Gate Meetings
Innovation Capability

Sustainable, Profitable
Revenue from New Products
…via increased throughput, value, and success rate
Localized
One Function, One BU
Cross-Unit
Several Functions, Several BU’s
Critical Mass
Most Functions, Most BU’s
Enterprise
All Functions, All BU’s
No Adoption
No BU’s
Your Expert Guides on the
Innovation Management Journey
AdoptionCapability
Starting
Point
Legend
Current
State
C
F
Q
B
M
I
D
Strategy
Ideation
Execution
Informal Introductory Intermediate Advanced World Class
•Unstructured •Roadmap Workshops •Roadmapping Process •Integrated Processes
•Composite Roadmaps
•Portfolio Prioritization
•Portfolio Reviews
•Basic Resource Planning
•Dynamic “Living” Process
•Real-time Scenario Analysis
•True Culture of Innovation
•Knowledge Transparency
•Unstructured •Standard Idea Forms •Idea Campaigns
•Unstructured •Basic SG Process •Routine Gate Meetings
Innovation Capability

Case Study: Growth Through Innovation
Parker Hannifin
Challenges Results Testimonial
• 128 global divisions - no
common innovation process
• No easy way to gather cross-
functional input or give
executives visibility to status of
key projects
• Large number of duplicate
projects in the pipeline, diluting
the value of product portfolios
• Goal to derive 5% annual
increase from organic growth
• Enterprise Innovation
Management implemented by
divisions with minimal assistance
to 6,000 people across 250
locations
• Value of portfolio increased by
500% in 3 years
• Improved value analysis led to
elimination of half the projects in
the pipeline
• Common process and centralized
data enabled greater focus on
new product winners
• Exceeded organic growth goal
by 60%
“The value of Parker’s
product portfolio has
increased by more than 500%
... We view [the system] as
being critical to helping create
sustainable competitive
advantage for our company.”
Craig Maxwell
VP, Technology & Innovation

Some Key Results
Within 2 years of starting implementation:
• Reduced active projects from 2,400+ to 1,316
• Increased product portfolio value (based on NPV) by 20%
• Significant cost savings
In subsequent 3 years increased product portfolio value
by 500%
Enabled investment in new growth initiatives such as
• Exoskeleton suits in defense and medicine
• Eco-friendly garbage trucks powered 100% by hydraulics
• And more ...

Strategies for Growth
12% annual total sales growth
• 8% organic
• 4% value added acquisitions
Organic growth strategy
• Emerging markets
• Expanded distribution
• Innovation
• Systems solutions

Insights and Knowledge Reuse
Key Questions for Innovation &
NPD Initiatives:
• Have we tried or done this before?
• Do we have existing product or technology for this initiative?
• Who are the experts on staff for this?
• Do we have research related to this?
• Have other divisions or locations worked on something like this?
?

Parker uses Roadmapping for Solutions Transformation to
Build Systems Capabilities
Total Machine
Systems
Sub-Systems
Components
Energy Aerospace Industrial
Manifolds Power Units Door Control Systems

More New to Market & New to World Products
Significant Growth of Parker Higher-Margin Sales

Sustainable Growth

1. Enterprise Innovation requires cross-functional ownership
2. Create innovation KPI’s for both input and output (risk, strategy, financial)
3. Only track the data necessary for decision making
4. Define your global and local variability to max adoption
5. Data integrity is required for “speed to act”
6. Agility and Governance is a balancing act
7. Tie leadership compensation directly to innovation performance
Key Learnings

Innovation Trends To Watch

Corporate
Strategic
Planning
Long Range/
Strategic Plans
Annual
Operating
Planning
Corporate & Business
Unit AOP/Objectives
Targets &
Strategies
Candidate
Investments
Targets &
Strategies
Candidate
Investments
Targets &
Strategies
Candidate
Investments
Targets &
Strategies
Candidate
Investments
Monthly Gate Meetings
Weekly Functional Review Meetings
Trend #1
The “New Norm” – AOP goes Agile

Trend #2
Digital Tools are Influencing the Innovation Lifecycle
Companies that use digital
enablers to support the
innovation lifecycle are
77% more likely to report
that they outperform
competitors
Source: Navigating the Digital Future, Booz & Co, 2013

Smart Value Add
(teach the user something they didn’t know)
A single Innovation repository of content and context to proactively help the user
Over the last 90 days,
cycle times have
increased 15 days
Your volume forecasts in
business category X are
always 15% too high
You’re spending 20% of
your investment for
minimal return
Your NPV drops by 30% on
average between design and
development
Requires Continuous Quality Data
Data must be gathered through the regular day-to-day activities,
not just to “get ready”
Trend #3
Insights Become a Part of Company Culture

Trend #4
A Bright Future for CINOs

1. Conduct your own maturity model
assessment
2. Read the "The Interconnected
Enterprise: Closing the Strategy-
Execution Gap" featuring research by
Gartner — http://budurl.com/97er
3. Learn more about how Sopheon
helps companies improve their
Enterprise Innovation Performance
— www.sopheon.com
Next Steps for Your Innovation Journey

Thank you for your attention
Any questions?

Do You have the Key Processes and Capabilities for Exceptional Innovation?

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