By C. Chadwick on Feb 11, 2013
Bertrand Godillot - Senior Director, Enterprise PLM Solutions EMEA
Hard Cost Benefits
How would you back up a recommendation to your board to implement a Product Lifecycle Management strategy? Soft benefits only go so far in convincing decision makers yet most executives shrink from providing hard cost benefits to them. Why?
In most cases they are doing this for the first time and are desperately looking for help! The problem begins when most solution providers position standardized spreadsheets as customer specific benefits calculators. While the usual suspect consulting firms sell their expertise, and six or so months later an RFI process is launched, few initiatives reach this stage with a realistic, approved business case.
The Cash Curve
Over the years, the "cash curve" has proven to be a successful framework. It helps drive business process discussions with representatives from sales and marketing, development, sourcing, quality, manufacturing engineering and operations. Similarly to some of the lean techniques, it helps visualizing dependencies between disciplines as well as some of the bottlenecks, issues, nightmares... In other words, areas of improvements -primarily from a process perspective, can be identified, shared and acknowledged across disciplines. This is clearly a major first step in the development of a proper business case.
Evaluating benefits is somewhat industry specific. A pharmaceutical or a medical device company is likely to be very sensitive to compliance and risk mitigation. Consumer packaged goods companies will be very focused on brand protection. Consumer electronics will pay a lot of attention to scrap, rework, and obsolete inventory. A common denominator for all seems to be the ideal balance between growth and margin.
Therefore, a PLM business case should always include three main sections:
• Increased Revenue
• Cost Reduction
• Industry Specific driver: Risk Mitigation, Brand Protection...
Unsurprisingly, there has been a lot of frustration on both sides in the past as very few executives would commit on the revenue dimension: in this just like in a number of other domains, compensation drives behaviour...
In future contributions, articles will drill down in each of the value area of the "cash curve" and share what should be considered as part of a Product Lifecycle Management business case. These will include pragmatic examples to make this as valuable as possible. Hopefully, this will help development and operations representatives in their business case development.