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Two Contents:
2-1
Scoring R&D Success:
Metrics of Champions
[read article]
2-2
Speed-Based R&D at Dow Chemical
[read article]
2-3
Process Initiatives Drive
New Product Market Acceptance
Issue 1
Issue 3
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2-3
Process Initiatives Drive
New Product Market Acceptance
K.L. Seshu Seshasai joined Textron
Fastening Systems as
executive vice president, technology almost four years ago, and
immediately instituted a series of major initiatives that improved the
Textron (Inc) subsidiary’s ability to drive for market accepted new
products.
His process initiatives effectively helped change the company’s culture
to one that focused on and supported the innovation and new product
development central to the business, along with the introduction of new
metrics that tracked performance. As he emphasizes, “Implementing these
processes and following them by tracking the metrics that are the key
drivers for fostering continued growth.”
Seshasai has developed a project ranking methodology which uses a single
number, profits-to-investment ratio, which helps to rank projects and
distribute resources without conflict between teams.
“This helps to drive project values year over year, and it provides a
single page review of all current projects, hedge projects, active
funnel projects to be resourced, and funnel and ideas list for future
all ranked and organized for our cross-functional leadership review
monthly,” he explains. “By transforming it into a mathematical number,
emotion is removed from the decision-making process.”
Meaningful new metrics are also in place. He introduced metrics for
individual performance, team performance, projects’ profits contribution
to the bottom line, continual margin growth, intellectual property
growth, and more. The two he considers as key relate to financial
performance: 1) new product sales growth and 2) margin growth.
He notes that margin growth has been moving up about five percentage
points each year over the past couple of years. “What it means is this
year’s products have more intellectual property content,” he explains.
“There’s more proprietary technology and no commodity products. This
means we’ve created a value-add for the customer.”
New product sales growth is another key driver, and measures the total
sales contribution of products introduced over the last five years. With
the new product development processes installed, Textron Fastening
Systems’ new product sales growth has advanced over the past three years
from seven percent, to 9.5%, then 14%, and currently stands at 19%. The
engineering headcount and budgets have not grown significantly during
this period.
The company’s goal for new product sales growth is to take it up to 30%
in the next couple of years. “That’s our long-term target, and we plan
to maintain it at that level because when you go beyond that you’re then
replacing your current products too soon, even before you’ve recovered
all of the investment cost,” Seshasai explains.
Each of the company’s operating regions (Americas, Asia, Europe) hold
weekly Product Review Board meetings during which each of the product
programs are reviewed. There is also a product review board, a
cross-functional group composed of executives from technology, sales,
marketing, operations and finance. Led by Seshasai, the group meets
monthly and is also attended by team leaders who present their project’s
status. The new product development process includes a seven phase gate
methodology with detailed task lists, project plan templates,
cross-functional sign-off sheets and also countermeasures and
contingency processes.
During the meeting team leaders must show the execution of their project
using the right process. “There is no option to following the process
for any project—it’s mandated,” he says. “The five of us on the board
all must sign off on each of the projects, each of the phase gates.”
Also, the only way a project can get capital approval is when it is in
the right phase gate and signed off by the cross-functional board.
During the product review board meeting all projects are reviewed and
ranked by a methodology which uses a single number,
profits-to-investment ratio, to help rank projects and distribute
resources without conflict between teams. “This helps to drive project
values year over years, and it provides a single page review of all
current projects, hedge projects, active funnel projects to be
resourced, and funnel and ideas list for future all ranked and organized
for cross-functional leadership review monthly,” Seshasai explains.
Complementing the new product development process, utilization of
Seshasai’s metrics methodology, is spreading throughout the other
Textron business units (Bell Helicopter, Cessna Aircraft, Fluid and
Power and other Industrial businesses). Seshasai introduced his
methodology to Textron’s Engineering and Technology Council – composed
of the engineering leaders from the various business units – which is in
the process of rolling it out within the respective business units. “Our
products may be different, but the process, the core content is the
same. The Product Review Board is applicable to anyone because the
process is common. Everything is converted to numbers for
decision-making,” Seshasai observes
He concludes: “Without a strong metrics discipline, you don’t know where
you are, you can’t set any targets, and you don’t realize the extent of
the improvement you are making. Having a metrics culture is critical for
any Technology function.”
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