Michael Burkett, VP Research at Gartner conducted a compelling Webinar last week titled, “New Supply Chain Strategies to Maximize Product Value and Growth.” The key message of Burkett’s presentation is that product value is maximized when the supply chain is considered and integrated throughout the product’s lifecycle.
New products fail 50% of the time. Why? Contributing factors include product cost issues, inventory shortages and poor commercialization process, to name a few. Profitable innovation is key to bringing new products to market. With failure rates so high, it’s important to understand that product success is a cross functional process. Demand, Product and Supply must intersect in order to ensure product success. The first step is to bring cross functional teams together, define success and make adjustments to the new product launch process as needed to meet goals.
Gartner has recognized many companies in their annual Supply Chain Top 25 for achieving operational and innovative excellence. These companies exercise discipline and place value on five characteristics as the assess the introduction of a new product and manage it through its lifecycle; Active Governance, Integrated Teams, Product Developed for Total Customer Experience, Learning Organization, Technology.
Several companies that Gartner recognizes for having a good balance of understanding produce and operational excellence include Apple, Proctor & Gamble, Inditex (Zara) and Honda.
- Apple achieves elegant and simplistic design because it not only ensures a product that will appeal to the market for its innovation, but design has a key impact on the manufacturing and supply chain process. By integrating these two components into the design of new products Apple has enjoyed continued Success. CEO Steve Jobs was a key driver in sustaining these principals and before his death he was extremely involved in the product lifecycle.
- P&G is another example of a company that really understands the importance of creating synergies between produce and operational processes. P&G’s Open Innovation process capitalizes on their partner network (supply chain partners, universities, etc) to find innovative ideas and leverages these relationships to commercialize new products. By involving their partners during innovation and operational processes from the beginning of a new products’ life, they ensure will meet market demands and have the support network in place to achieve a successful introduction and lifecycle.
- Inditex the company that owns Zara retail stores is also on Gartner’s list. Burkett notes that they deliver on their value proposition by creating affordable fashions throughout the year. In order to ensure they can fulfill this they standardize on some materials so that designers can develop new fashions off common choices.
- Honda is a brand that reaches innovative and operational excellence through the model of supplier collaboration. They incent and involve suppliers to innovate and reward the ones that do. They also employ discipline and governance in creating Centers of Excellence around standard, non-distinguishing parts like the powertrain. This allows them to focus innovation on more distinguishing features that the market demands such as styling. This really resonated with me because the “center of excellence” principle could be easily applied to so many different areas of a company’s supply chain or indirect spend in terms of procurement. For products/services that have a clear, stable purpose, defined requirements and are not subject to obsolescence as applied to your company’s goals there is no reason why “mini centers of excellence” cannot be created around the buying and maintaining of any category. One example that springs to mind would be services such as paper products or janitorial services/supplies, even telephony/Internet services to a certain extent could be managed with a similar practice.
Stay tuned for Part 2, which will discusss more examples the importance of realizing value across a products’ lifecycle, supply chain and demand from the beginning of its life.