Volume 1 | Issue 2 | October 2005 | Management Roundtable Website

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Issue Two Contents:

2-1 Scoring R&D Success: Metrics of Champions

2-2 Speed-Based R&D at Dow Chemical
[read article]

2-3 Process Initiatives Drive Market Accepted New Products
[read article]

Issue 1
Issue 3

As reported in our first issue of Measuring and Delivering R&D Value, Management Roundtable launched the Product Development and R&D Metrics MVP Awards to recognize outstanding individuals and their accomplishments. The inaugural winners have achieved impressive gains, both for their organizations and the field of product development.

Since metrics are clearly tied to their results, we decided to ask the MVPs what they measure. All acknowledged they have many metrics in their portfolio, but several stand out.

At Dow Chemical, it’s return on research.  At Textron Fastening Systems, two are primarily tracked and monitored: new product sales growth and margin growth. For Boeing Commercial Airplanes, the “readiness” of the R&D activities process are measured through R&D gate reviews/criteria led by product development, with cross-functional involvement.

Return on Research

Using a “three-bucket” approach, Kurt W. Swogger, vice president of Plastics R&D for The Dow Chemical Company, calculates a return on research. In the first bucket is technical service: what you have to do, and if not done the business will collapse. The point here is to put minimal resources into the job, he relates. In the second, “count EBIT (Earnings Before Interest and Taxes) for the tasks done with current customers, products and processes,” he explains. “If you do a process improvement, count the dollars you made,” he says. “If you sell more product to a customer, or sell a higher value product, you can count the dollars.” The third bucket is for new products and services. “We look at the future value, even though it hasn’t yet been launched, and use net present value, usually ten years,” he explains. “With that input, and using some six sigma tools, we have a methodology to count and determine how much value we bring. It turns out that mathematically it’s not that difficult to calculate a return on research.”

New Product Sales Growth and Margin Growth

At Textron Fastening Systems, new product sales growth measures the total sales contribution of products introduced over the last five years. Currently it is at 19%, and MVP winner K.L. Seshu Seshasai, executive vice president, says the goal is to bring it up to 30% within the next three years while maintaining the current engineering headcount and budget. Meanwhile, margin growth continues to grow at five percentage points per year over the previous year.

Measuring R&D Readiness

Finally, the importance of cross-functional organizational involvement cannot be overlooked. Product Development Chief, Duane Oda notes that the “readiness” of the R&D activities process at Boeing Commercial Airplanes are measured through R&D gate reviews/criteria led by product development, with cross-functional involvement by organizations such as marketing/sales, product strategy, product development, technology development, finance, engineering, manufacturing and competitive analysis/intelligence.

In fact, the strategic road-mapping and portfolio management processes he champions helps to define and strengthen the links among marketing, product development, technology development, finance and others—essentially the value stream—to develop the right products at the right time in the right marketplace. “We all now have a better understanding of the role each of us plays in producing a successful product in the world marketplace,” Oda maintains.

More details on the approaches used by Swogger and Seshasai follow; next issue will examine the approaches used by John Cordes of National Semiconductor and Duane Oda of Boeing Commercial Airplanes.

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For news releases and additional information, visit the MVP Awards Press Center.

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