The Benefits and Risks of Global Product Development
A few weeks ago, AMR published a thought-provoking piece by Jeffrey Hojlo, Michael Burkett, and Nigel Montgomery titled Driving Global Product Development Excellence: A Guide To Balancing Benefits and Risks in their free research section. (It will likely be locked to members only by the time this post goes up, so I will try to capture the most significant highlights.) In the article, the authors note that although it's no surprise that the offshoring of Global Product Development (GPD) has become a $13B market, it is surprising that companies that consider New Product Development and Launch (NPDL) core to their businesses still outsource in developing regions despite the inherent risks, which include security, supplier qualification, low compliance standards, product quality, slow time to market, geopolitical unrest, and lack of regulation.
In a recent AMR survey, they found that 30% of organizations are outsourcing some aspect of their New Product Development and Launch (NPDL) processes, 40% plan to outsource some aspect of their NPDL processes over the next 12-24 months, and another 27% have captive development centers in place. The primary reason given is the shortage of affordable engineering talent in developed markets and, thus, despite the risks, the business demands it.
Most of these companies still keep the actual product design process within the four walls of the corporation, but are increasingly looking to outside partners and captive development centers to help with the front end (ideation) and back end (product launch). This can be good news for vendors in developing economies with the skill sets to assist in these processes.
The research brief points out that many of the risks - including product quality, supplier qualification, security, brand equity, slow time to market, disparate data, the right people, compliance, and geopolitical - can be mitigated, or at least managed, by way of appropriate strategies. To this end, it recommends starting with the following six strategies:
- Product Road-Mapping and Portfolio Management
- Iterative Product Development and Validation
- Product Architecture and System Design across the Value Chain
- Knowledge Management on the Front End of Innovation;
Content Management, Product Data Management, and Search
- Intellectual Property (IP) Security & Management, Authentication, and Authorization
- Talent Management
And I would add the following:
- The right Product Lifecycle Management - Sourcing Platform
Since the goal is to lower costs while lowering risks and increasing quality and value. The right, integrated, platform will go a long way towards helping you implement the strategies above.
The brief concludes with an overview of the GPD opportunity, based on three technology gaps in GPD environments cited by end-users in the AMR study:
- Concept Testing
- Design Engineering and Prototyping
- Needs Assessment / Idea Generation
It goes on to note that these are all areas that require robust decision support and notes some typical questions in a GPD scenario that developers and managers need to answer:
- What are the risks I need to be aware of?
- Open innovation: how open should I be with offshore partners?
- Will my ideas resonate with my target audience in this particular market?
- What are the operational cost tradeoffs to expanding the design performance or increasing the number of SKUs when offering additional product features?
- How do the results of alpha-beta tests or recent market data affect a new product launch?
- Do I have the right people working on the right projects?
- How do local regulations and requirements affect the materials I need to source and the proof of compliance I need to provide to local officials?
- What learning experience from past experimentation or failures (such as product or supplier quality issues) can be reused in future product development efforts?
It then concludes with some wrap-up recommendations for vendors of NPD(L) and Product Lifecycle Management (PLM) solutions and technologies.
- Expand Your Services Practice
There is a huge need for business process engineering, risk mitigation consulting, and training in developing countries.
- Enable Postponement Strategies
Extend postponement strategies from simply delaying the final assembly from sourced components to include sales configuration and design for supply.
- PLM and Sourcing Unite
One of the major risks with global sourcing is the variability due to inconsistent lead times and product quality. Tight integration between PLM technologies for Product Development and Sourcing technologies will help minimize the variability.
- Don't Forget About the People Component of GPD
People Management is not a strong focus of PLM vendors. But why not incorporate more in-depth skill requirement, training, and talent management functionality in PLM technology for quick decision making on the right resources for a project?
- Extend PLM to be a Risk Decision Support Platform
There's currently no platform to manage the various types of risk in GPD.