Bring ideas to reality through structured tools | In the June issue, we had an article titled, “Bringing ideas to life” where we had discussed about the ‘ITM – Idea to Market’ process in detail and elaborated about various phases and milestones which need to be traversed in order to convert a nascent idea into a successful product delivered to the customer. Along with that, product idea management too is very important not only for a new start up but also for an organisation that is already active. Innovative ideas help create a better product portfolio. Ideas in line with an organisation’s strategic intent helps in increasing its top and bottom line and market share whereas ideas not in line but still useful can lead to diversification of the business into other areas.
If an organisation does not receive continuous supplement of ideas, it is bound to become stale and will not survive for long. While there may be multiple sources of ideas and many ways of collecting and collating it, what is most important is to handle the ideas properly. Analysing each and every idea carefully using a uniform approach and finally objectively evaluating them to rank and prioritise it will successfully convert an idea into a cognisable and a profitable product for the organisation.
For converting an idea into a feasible product, lot of information needs to be collected during the idea management process. Only technical feasibility of the idea is not sufficient and a successful product needs to consider many other parameters too. Some of the parameters which need consideration are: Newness of the product to the market, the geography for which the product has been planned, any special regulatory, approbation needs, market size and the future potential, consumer profile and targeted customer segment, current and emerging technology trends, competition scenario and major threats, strategic pricing, technical competency available and time to market.
All the parameters indicated above may play a role in the success of the product in the market. The above factors may not be totally comprehensive and depending on the product portfolio and the external environment, one needs to add more parameters so as to take full view of the product idea from a complete feasibility perspective. Portfolio management is another tool for analysing and rating ideas and managing a portfolio of products.
Portfolio management is a dynamic decision making process where all the new ideas, projects are reviewed periodically as a total portfolio, prioritised; go/kill decisions are made; resources are allocated/reallocated for a new product strategy. The concept deals with future events and opportunities, multiple projects at different stages of completion and allocation of resources across projects.
The main objective of portfolio management is:
- Selection, funneling of right ideas and doing the right products/projects
- Effective investment of organisation funds in its R&D and new product resources
- Reviewing the entire mix of ideas, projects and new products or technology investment that the business plans to make Once all the ideas are received, it is important to screen them suitably to arrive at a few really feasible ones and they can be rated using a well defined rating mechanism. In portfolio management, there are different methods which are available for the project selection based on an idea and each one can have its own usage. For example,
- Value maximisation: The goal is to allocate the resources to maximise the value of portfolio – long term profitability, ROI, likelihood of success.
- Methods: Net Present Value (NPV), Expected Commercial Value (ECV), PI, Scoring model (includes many criteria like strategic alignment, product advantage, market potential, tech feasibility etc.)
There are traditional financial tools like forecasted NPV, EVA or payback period based on which the project can be selected. However, for an innovative new product where the unknowns are more, taking a decision based on such parameters is not advisable.
New financial tools like the ECV is calculated as shown below:-
ECV = [(pv * Pcs-C)*Pts]-D
Where, PV is the Net present value
C = Product Launch Cost
D = Product Development Cost
Pcs = Probability of commercial success
Pts = Probability of technical success
As this method is financial and statistical in nature, again the probability can be grossly misjudged and can lead to a wrong interpretation. Another method is of “Productivity Index” where the expected output is compared with the input in terms of resources required to complete the projects in a given timeframe.
For new products, scorecards are emerging as a reliable method of rating the feasibility of projects because it takes into account all the parameters required for the success of the project.
Effective criteria used for predictions include:
- i) Alignment of the product idea with respect to the strategic intent of the organisation
- ii) Uniqueness of the product or its USP with respect to competition
iii) Market related advantage factors in terms of volume, growth potential, branding, technological superiority etc.
- iv) Exploitation of core competencies available within the organisation
- v) Technical feasibility and gap analysis with respect to the present situation
- vi) Risks, mitigation plans and rewards in terms of potential gains
Let us take an example of a newly formed company which has the strategic intent of making automotive components and subsystems for all types of passenger cars and has a vision to become one of the top three players in the next 10 years. The vision aims to address certain issues of a vehicle occupant while driving like providing systems that: aid in imparting information, entertain and enhance safety.
The company through its mission statement communicates that it is going to realise the vision by focussing on a portfolio of products which can be fitted into the vehicle by the OEM as a standard fitment. At the same time, it will also work on products which can be fitted in the vehicle as an aftermarket product. The company also states that its products will meet the highest quality and reliability requirements and provide full value to the customer for the price offered.
Based on the above strategic directions, a product idea workshop is conducted and around 20 ideas are collected and considered after initial screening. These ideas are then grouped under certain subgroups which are as shown under:
1) Safety enhancement products:
- Rain sensors for wipers
- Tyre pressure monitoring device
- Collision warning
2) Advanced safety systems
- Anti lock braking systems
- Adaptive cruise control
3) Instrument clusters
- Basic convention speed and odo gauges
- Combined analogue and digital gauges
- Advanced digital clusters
- TFT based information clusters
4) Vehicle telematics products
- Basic telematics device for fleet tracking
- Telematics device with vehicle diagnostics
- Advanced telematics for BPO’s, shuttles etc.
5) Vehicle entertainment products
- Basic audio device with new ergonomics
- Advanced entertainment system with interactive features
6) Engine management systems electronics
7) Power-train management system electronics
8) Comfort electronics products
- Reverse park assist
- Cornering assist
- Automatic climate control
9) Other electronics for two wheelers – ignition systems, regulation systems, etc.
All the above ideas were put on a score card and the objective rating was taken on all the six criteria mentioned above. Post the rating, the score cards looked like what is shown in the table. Tools of portfolio management other than scoring cards have found their usage for various applications and conditions and are summarised as below :
q Balanced portfolio: The goal is to achieve a desired balance of projects in terms of number of parameters like:-
u Long term vs short term — Methods: Risk vs reward bubble dia
u High risk vs low risk — Tech feasibilty vs market
u Across markets, technologies
q Building strategy into the portfolio: The focus here is to allocate the resources for products/projects in alignment and consistent with business strategy. Two approaches are used:
u Bottoms up – use scoring models and top-down or strategic
buckets – vision, business strategy, general plan
q The right number of projects: The aim is to plan and balance the number of projects with the resources available.
u Methods: resource demand vs capacity chart.
Hence, it is very clear that while collection of ideas is critical it is more important to collate the ideas and conclude it for product realisation. This can happen through a set of systematic tools as explained above.
K Umesh
Vice President, Plant, Operations, Business
Excellence, Car Programs, IT, Validation,
Materials, Mahindra Reva Electric Vehicles