I am writing this week’s post on my way to a customer to finalize an implementation and in parallel describing the Return On Investment of this project. But before that, I would like to have a short note about my previous post ‘Free PLM software does not help companies“.
The reason I wrote this post was because I wanted to assure that companies do not believe that ROI for implementing PLM is based on the software costs. PLM implementations are a combination of software, business skills and the company culture. Specially in the current economical situation, I wanted to make clear that these factors are not overlooked. Also I did not want to say Open Source PLM is bad, I made my points on the messaging, however in functionality and usage I do not see a big difference between other types of PLM systems. I got some interesting comments on this post and I advise all of you, who have read the post to go through the comments to get a broader perspective. Once I have had some more opportunity to investigate this area deeper, I will come with a more in-depth post on this topic.
To PLM or Not To PLM
But now back to: To PLM or Not To PLM, where I wrote in a first post on this topic that before judging the costs and ROI of PLM, we should start analyzing our current processes and situation and use this as a baseline to guesstimate the PLM benefits.
The first PLM phase to analyze is the concept phase, where new ideas are picked up (or not). Actually this is the phase where we define the future of the company. The economical recession in a way forces companies to rethink their strategy and fortunately all of the competition is in a similar position. downturn means less activities, the company might be in the position to allocate time to address these analysis for PLM ROI. Instead of making people redundant, use these people to work on a new and optimized product strategy.
Existential questions to ask yourself as a company
The basic questions to ask about the concept phase:
- Do we know where our products are currently in their lifecycle ?
Measure: quantity, sales trends, margin
Analyze: is our portfolio healthy ? - How do customer rate our products ?
Measure: market share, market awareness, customer satisfaction, quality, field issues
Analyze: will customers keep on buying from us ? - Where are we different from the competition ?
Measure: where do we win/ where do we loose and compare per quarter ?
Analyze: how can we improve the success ratio ? - In case of bidding
Measure: how many bids do we handle per quarter and with which effort
Analyze: What is the win percentage and how to influence this ? - Who are our customers ?
Measure: does the 80-20 rule apply – does 80 % of the revenue come from 20 % of the customers ?
Analyze: What is the trend specially in relation to the current market situation - Where does innovation come from ?
Measure: the amount of new ideas, the source (people, customers) and the ones that reach it to the portfolio
Analyze: Do we have a guarantee for innovation ?
Additional questions to be asked due to current financial and global situation: 
- How do we strive for climate neutral products – sustainable development ?
Measure: the amount of energy used to build the products but also to recycle and what remains
Analyze: How can we change our products and production process ? - How do we capture our company’s IP due to the aging workforce in most of the countries
Measure: How many people with the specific knowledge will retire in 5 – 10 years ?
Analyze: Where and how can I assure this knowledge remains in the company ?
For many of the above questions you might say that you know how to conduct your business as you are doing most of these activities and even more. However the question you should ask yourself also is: How long does it take to answer these questions and to react on these trends ?
Because all the above topics are positively influenced by PLM – here it the PLM ROI !
Project and Portfolio Management, company wide workflow process allow the company to measure, to run analysis and to have information within hours (or worse case in days), where in a company where every department and discipline has their own environment, the effort to collect this information becomes huge and not natural. And as it will take a lot of time to collect the information, people tend to react on their guts or intuition, which might be wrong if you are among the wrong people or if the world changes in a way never seen before.
Additional capturing product and process knowledge allows companies to contain their IP. And just to make this point clear: Product knowledge is not only CAD and Bills of Materials. It is all collected information: issues during design, during production, coming from field services, best practices used and more. The challenge anyway for every PLM system is to provide an environment, user-friendly enough for all users, to start managing their total product IP in a single environment.
Conclusion
PLM as a total approach brings a lot of value and control in the concept phase, the phase where the company’s future is merely defined. And it is obvious that the future should be green and sustainable. Use the current downturn to shape the future – the questions in this post and your analysis should be the base.
Jos Voskuil's Weblog 
5 comments
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February 27, 2009 at 1:55 pm
olegshilovitsky
Jos, i think during economical downturn companies will look for small steps and productivity improvements. How do you see PLM approach can help? I’m afraid, total approach, conceptually is something that may disturb people in current economical situation. What is your view on this?
Regards,Oleg
Oleg – I agree the total approach might disturb people once you talk about implementing PLM. Here I agree with you, and in this crisis even more, small steps are brining the company in a lower risk situation and probably a better estimate of the ROI in a short time. In this post and the upcoming posts I want to assist companies with the right questions to ask at each PLM lifecycle step. Because also the small steps need to go in the right direction. For that reason this most might create the impression of the total approach, however I believe especially in the concept phase where a company decides on its portfolio, these questions are unavoidable. Knowing were to go (and to be profitible / innovative / different/etc) – and then decide and execute step by step where ROI is visible
Does this make things clearer ?
Best regards
Jos
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March 2, 2009 at 6:45 pm
Tom Gill
Hi Jos,
I think you questions are the right ones, and much of the data exists within the enterprise. The problem is finding it and assembling it quickly and reliably. Hopefully as applications become based on SOA’s or at least SOA enabled, it will get easier to answer these questions.
The other issue I have run across in trying to execute projects, is the quality of the information, in various databases, a few examples include; How consistent are naming conventions across systems. Customer Name is the first one, is it GM, G.M. Gen Motors, General Motors, Opel….. The other item is quantities, is it dollars or euros, kilos, grams or pounds.
One of the big struggles in justifying PLM is quantifying the soft costs. You mention the value of capturing IP from retiring employees. Do you have a method for doing this you can share?
Best Regards
Tom
Tom hi, I agree the dream is to have access to all data through the enterprise where SOA at this moment is the preferred approach. In parallel the issue you raised is also important: what is the quality of data (and the meaning) taht you might access from various locations and systems.
Therefore I believe that if you implement a PLM system, one of your goals should be managing data in a way you can understand its context – as PLM system is not a bin, where everyone drops their data. And here you also touch one of the weak points of many current PLM systems, the implementation has not been focused on reuse or interpretation of data
The same topic is valid for capturing IP from retiring employees. This is one of the cornerstones of knowledge management – a discipline close related to PLM, where various concepts exists. It could be solved addressed by tagging, by question & answer databases, by a knowledge department and more. For sure employees are not motivated to share their knowledge when they feel insecure about their position, so sharing and publishing knowledge should be rewarded as at the end it brings benefit for a company. Why not reward people for a knowledge topic they publish internally … and more ???
I will stop here and put it on my list of topic to write
Thanks
Jos
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March 3, 2009 at 12:47 am
Tom Gill
I think the issue of data quality is a tough one to address. The easiest way to keep it clean is to have someone responsible for maintaining it. Everyone that wants a change must go through that person. Users hate this because it is slow. In my implementation we tried to keep “really important” fields under central control, and allow freeform data on less important fields. We also instructed users to review what had been previously entered in the freeform fields and to reuse what was possible. A “suggest” feature like google and yahoo use would help a lot.
Best Regards
Tom
Agree – there is always the balance between too much mandatory information and not enough information. Having someone responsible for it, might be a good solution although measuring or proving this person’s ROI might be a subjective case
Best regards
Jos
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March 13, 2009 at 4:59 pm
Martin
Jos,
I would definitely agree with your comments.
Do you know companies who are “doing the right thing” and have measured the PLM ROI in the right way ?
probably – as always in this line of business – non-disclosure agreements etc – prevent you sharing any information in this respect from companies you know. At least this is what I hear from my old customers. Do you think there is any chance, means that we can all learn from good real-life case-studies and benchmarks of different companies deploying PLM ?
Do you know what PLM costs companies ? I have some data based on total costs / user / year – but again difficult to share. Would appreciate any ideas to make progress in this area.
all the best
Martin
Martin hi, I agree with your observations. I worked with some well organized companies. They could tell after the PLM/PDM project what kind of measurable benefits they experienced, but none of these companies measured the whole picture.
Both from the costs side (hidden internal costs made by employees) or hidden benefits (we had no clue before). Now I try to discuss / define with companies I am working with the impact of the project phase we are doing and from there justify the ROI for this phase – Each phase should have a target ROI.
I worked in the past (and will do it again I suppose) with spreadsheets trying to estimate benefits. Benefits in efficiency are measurable, benefits in innovation are hard to capture – what was the impact of PLM on a new concept ?
Looking forward to brainstorm together on some details – let me know when you are around/available – perhaps we should arrange it as an open discussion with other colleagues ?
Best regards
Jos
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March 15, 2009 at 5:52 pm
To PLM or Not to PLM - measuring the planning phase « Jos Voskuil’s Weblog
[…] concrete figures. One of the main challenges is also “What to measure”. As I added to Martin’s comment on my previous post, we can measure comparable activities, like how much time and people are […]
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