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Product and Service Leadership — 7 Characteristics of a Winning Product Strategy: Introducing SAP's Integrated Product Development Approach

by Thomas Ohnemus | SAPinsider

July 1, 2008

Concept. Design. Manufacturing. Launch. Sales. Service. The lifespan of a single product can be long and complex. Embracing an integrated product development approach — where the input of each stakeholder in the product development process is taken into account — is how your company will differentiate itself in the market today. Here, unravel the seven best practices illuminating the path to product differentiation.

Companies involved in the production and manufacturing of goods have always strived to refine and continually improve their product development processes. But consistently delivering market- leading products is no easy feat.

Product development — from conception through design and manufacturing to launch and after-sales service — is a complex, multistage process. And with increased globalization compelling companies to find new ways to differentiate themselves in the market, today's businesses must innovate their product processes to combat myriad challenges:

Rigid, slow processes. Many companies mistakenly employ a linear approach to the product development process, one that engages stakeholders and decision makers not from the start, but only when their particular piece of the process ramps up.

This strategy establishes a structured product development process that's mostly forward feeding and that only gets reevaluated when a problem is detected. Product optimization efforts start late and involve huge change efforts. The result of this suboptimal process is that products are often late to market and may lack the expected level of quality.

Incomplete, outdated information. Business and market realities often limit organizations' ability to achieve complete, accurate, and timely product knowledge, forcing them to make hasty business and design decisions based on incomplete information — and then to correct or adjust these decisions downstream from the design and engineering process, often at very high costs.

Narrow view of who owns the process. Product development and innovation traditionally begin in the technology area; the research and development (R&D) and engineering departments become the center of gravity when defining new products. This technology-centric view, which concentrates on early design and engineering activities, can delay the discovery of downstream setbacks that are later remedied at higher costs — or possibly even acknowledged as a deficiency that won't be corrected.

In addition, companies relying solely on technological superiority tend to underestimate the role of product strategy, which is often owned by the marketing organization. Marketing's role should be to ensure that the company's overall product portfolio is aligned with market needs and competitiveness. Conversely, companies should take marketing data — including market demand, product performance, customer satisfaction, and quality reports — into account when making product decisions.

Fragmented organizational structures. A broken product development process is often the result of a fragmented organizational structure or the rocky marriage of internal processes from various product companies. Across all industry sectors, companies have long and extensive histories of mergers and acquisitions that seldom include IT standardization and consolidation.

What's Needed? A Mindset Shift Toward Integrated Product Development

Overcoming these obstacles and integrating the needs of all involved functional teams and participating players in the product development process can be an uphill battle — one that often involves incompatible goals, conflicting designs, and competing solutions. Improving the reliability and durability of a product, for example, may require sourcing higher-cost components, which will increase the cost of manufacturing that product.

Top product development companies typically avoid these constraints by employing a collaborative decision making approach, which I will term integrated product development (see sidebar). They adjust and align customer and market requirements with design, sourcing, manufacturing, supply chain, service, and other business activities — if not all of them — to reach a globally optimized product design. These companies strive to strike the critical balance between reducing initial costs and improving quality.

So how can a company achieve integrated product development, this zen-like state of agile, collaborative product design that balances high quality and low costs?

Key Traits of a Top-Notch Product Development Organization

The most effective way a product company can achieve this agility is by coordinating all product development functions, then aggressively synthesizing the knowledge, experience, and best practices of the enterprise. Best-run product development teams consistently adhere to the following practices, employing technology to help them.

1. Sense, Understand, and React to Customer Needs and Market Trends

To truly understand customers' demands, companies need to establish strong customer relationships that include frequent communication with current and potential buyers and easy-to-use feedback mechanisms. Enhanced customer involvement greatly increases the probability of a product meeting users' needs and being successful in the market.

Methodologies such as business intelligence supported by SAP's integrated Business Suite together with Business Objects aid in providing market insights, analyzing customer needs, and translating those needs into specific product, process, and quality requirements. Once these requirements are defined, companies should tightly manage and track them and minimize any misjudgment that will delay development.

The most effective way a company can achieve product design that balances high quality and low costs is by coordinating all product development functions and agressively synthesizing knowledge and experience across the enterprise.

2. Align Development with Your Product and Service Portfolio Planning Strategy

Product management and marketing departments typically employ a portfolio planning process. They devote a lot of time and money to researching and planning the different product lines and models that will comprise their complete product and service portfolio. But there's often a disconnect between portfolio planning and product development.

Instead, development must be laser focused on those projects with the highest revenue potential. Companies must integrate product development and R&D with the business plans and develop a longer-term perspective on research and process technology investments that align with the overall business strategy. In turn, it also falls on the business to:

  • Synchronize product portfolio plans with R&D and development personnel

  • Focus on promising fewer development projects at any point in time to use resources more efficiently and shorten development time

  • Develop a greater awareness of affordability and lifecycle costs

  • Involve development team members in the plans and proposals for new products or programs to obtain their input and commitment

To ensure that continuous product and service innovation processes are aligned with integrated product development, planning becomes critical. SAP offers a full suite of tools, including SAP Resource and Portfolio Management (SAP RPM) and cProjects, to forecast product and lifecycle costs and proactively factor these cost projections into decisions.

3. Promote Design Collaboration with Partners and Customers

The best product and service ideas often evolve when a wider net of partners and customers co-innovate them. To that end, co-location improves communication and coordination among team members, and empowered, self-directed teams have greater ownership and are more committed to development objectives, improving the chance of a successful product design that's on schedule and budget.

To optimize the efficiency of the development process, companies need to integrate authoring tools. For example:

  • Integrated computer-aided engineering (CAE) and computer-aided design (CAD) tools that work with a common digital product model can facilitate the timely capture, analysis, and refinement of product and process design data

  • Integrated computer-aided manufacturing (CAM) tools facilitate process design and definition with fewer errors, greater accuracy, and reduced production lead time

  • Computer-aided software engineering (CASE) tools support a standard development methodology and level of software reusability through object-oriented design

To connect all of these tools, SAP Product Lifecycle Management (SAP PLM) provides an open interface and a single repository for managing all kinds of product data, thereby minimizing handling, redundancy, and errors as various functions use the data. What's more, electronic design frameworks and standards such as the Standard for the Exchange of Product Model Data (STEP) facilitate the downstream interpretation, analysis, and use of this product data. These tools, when applied intelligently and cost effectively, can streamline the product development process.

4. Design for Manufacturing, Sales, and Support While Incorporating Compliance into the Product from the Start

To optimize a product's performance, availability, and cost, companies must design it with manufacturing, sales, service, and compliance in mind. In other words, companies need to design products in a way that makes them relatively easy to manufacture, in a way that meets customer needs (and therefore makes them easy to sell), and in a way that's simple to maintain from a service standpoint — with parts that are easy to track should a product break, for instance.

Perhaps most importantly, it's critical for companies to design compliance with industry standards and regulations into a product. Toy manufacturers, for example, must innovate safety requirements into their toys from the beginning — not in the production phase, when it's too late.

To accomplish this proactive product planning, companies must integrate design and business rule checking into their design processes — and then automate those processes to ensure they're executed properly. SAP PLM can help you manage all of these pieces.

5. Stimulate Your Supplier Network; Involve Suppliers and Subcontractors Early

Suppliers know their product technology, product application, and process constraints best. Companies that can take advantage of this expertise during the product development phase can reduce costs, ensure compliance, and minimize time-to-profit for new products.

Accordingly, best-run companies extend the sourcing window to reduce costs and get the best suppliers on board early (in parallel to product development), avoiding potential product launch delays caused by out-of-stock parts, for example. Companies can incentivize early supplier involvement and reduce their supplier base to focus on developing long-term relationships.

SAP Supplier Relationship Management (SAP SRM) integrates with our PLM tools to facilitate this. SAP PLM provides an open, flexible collaboration platform to efficiently share product and supplier data while also ensuring intellectual property (IP) protection.

6. Simulate and Optimize in a Digital, Virtual Way

Product companies have a big opportunity to optimize and reduce costs by using virtual product testing and simulation, avoiding the cost and time required to develop physical prototypes.

Electronic mockups and analysis and simulation tools — such as finite element analysis (FEA), circuit simulation, thermal analysis, numerically controlled (NC) verification, and software simulation — can be used to develop and refine both product and process design inexpensively. These tools should be used early in the development process to develop a more mature design and reduce the number of time-consuming design, build, and test iterations for mock-ups and developmental prototypes.

SAP Business Suite delivers the underlying functionality you need to execute and optimize your product development processes.

7. Manage Product Data Holistically with Lifecycle Configuration Management

Huge amounts of data are associated with a product throughout its life cycle: Marketing and R&D produce requirements data when innovating and planning the product, engineers create design structure data, manufacturing produces detailed specifications for sourcing and assembling the product, the sales team creates data to market and deliver the product, and then the service team creates data to properly support and maintain the product once its out in the market. Yet, in the end, all of this data represents the very same product.

Though many companies still manage all of this data in silos, it's critical for best-run companies to take a holistic product data management approach. You must be able to manage this information in an integrated way so that, for example, you can track and pinpoint a particular manufacturing process should a product malfunction once it's out in the market. This is essential for compliance purposes.

Embedded within the SAP Business Suite is the concept of lifecycle configuration management where all product data, no matter where it's being used, is linked. Only SAP's integrated, holistic suite can truly deliver this synergized product data.

Use Case Example: Integrated Product Development in Action

You may be thinking: These guidelines sound great — but how can my company employ them? What does integrated product development really look like, and how does SAP technology support the process?

Perhaps the best way to understand this seamless intertwining of business processes and the technology that supports them is by examining a use case. Throughout the example, SAP Business Suite delivers the underlying functionality you need to execute and optimize your product development processes (see sidebar). Note that this example incorporates many of the touch points shown in Figure 2.

Figure 2
Integrated product development aligns people, processes, and intelligence, achieving faster time to profit; the process steps outlined in red indicate areas touched by this article's demo example
  1. While reviewing his high-tech company's product portfolio through a product-specific report called the Product Portfolio Dashboard, the product manager discovers and identifies an underperforming product with decreasing margins: a stereo system. Accordingly, he plans to exchange a problematic CD-ROM drive within the stereo with one from a new supplier. This step involves SAP Resource and Portfolio Management, Business Objects, and information insights from SAP CRM, SAP ERP, and SAP PLM.

  2. Upon request from the product manager, the procurement head retrieves the CD-ROM supplier specs from SAP SRM, identifying three potential new suppliers. The procurement head passes these supplier names to the CAD engineer, who's tasked to ensure the potential new CD-ROM drive will work properly. This stage uses SAP SRM and SAP PLM functionality.

  3. Through an engineering change process, the CAD engineer receives the task, checks the CD-ROM drive in the CAD system (verifying that a neutral viewing format is available), grants access for three potential suppliers for the CD-ROM drive, and passes the Web links back to procurement. SAP PLM with integrations to authoring systems are in use during this step.

  4. Procurement then initiates strategic sourcing. The purchaser invites the three potential candidates to bid for the job, sending them a link to the product model. SAP SRM is the supporting technology for this step.

  5. The potential suppliers review the requirements and open the product model to compare it with their own portfolio. Here SAP PLM and direct collaboration capabilities are employed.

  6. Comparing different bids and checking for product compliance, the purchaser selects the supplier with the best offering and price. This step involves SAP SRM.

  7. With the bid accepted, the design engineer analyzes how the CD-ROM drive can be assembled. He executes several installation tests via 3D model checks, model conflicts and assembly simulation, and weight and stability calculations. This stage involves SAP PLM with viewing integration and interfaces to simulation tools.

  8. At a stage-gate meeting, the product manager verifies that all deliverables for the product revision are available and releases the new design for manufacturing and service. Here SAP RPM or workflow capabilities are involved.

  9. The planning engineer updates the manufacturing bill of materials (BOM) by integrating the engineering, thus updating the routings for the manufacturing planning. SAP PLM, SAP ERP, and manufacturing functionalites are used here.

  10. Once again, the product manager verifies that all deliverables for the release of the product revision to manufacturing are available. Required technologies for this step include SAP RPM or workflow capabilities.

  11. The machine operator is informed that a new CD-ROM drive will be used. He receives an instructional video that unveils how to assemble the new drive within the stereo. SAP ERP and manufacturing technologies are necessary for this step.

  12. The customer service manual is automatically updated, integrating a 3D product view that provides the latest product and service information. This final step employs SAP ERP and SAP Service Management technologies.

By employing an integrated product development approach supported by SAP Business Suite technology, companies can implement automation and consistency across what used to be a slow, disconnected, error-prone process.

Integrated Product Development Shortens Development Times, Reduces Costs, and Improves Quality

Overcoming the obstacles to new product development means executing product development processes in alignment with both the company's existing product portfolio and long-term product business strategy. And we know it's not easy.

Best-in-class companies — ones that embrace the seven characteristics I've outlined here — develop products using a structured, integrated product development approach. This approach applies an integrated view to manage the product portfolio composition, the refresh rate of current product lines, and the introduction of new products.

With the aid of portfolio management and analytical tools, among other offerings in the SAP Business Suite, companies can determine optimal design, go-to-market, and sales operations strategies to overcome the potential cannibalization of other products. Integrated product development enables companies to develop innovative products faster, more efficiently, and with higher quality.

Additional Resources

  • The Product Lifecycle Management 2009 conference in Orlando, March 2-4, 2009, for guidance on shortening product development cycles, improving design, and ensuring compliance (

Thomas Ohnemus ( is the Senior Director of Solution Marketing for SAP Product Lifecycle Management (SAP PLM) and new product development and introduction (NPDI). He is responsible for SAP PLM and NPDI marketing strategy, market analyses, and analyst relations. He is a PLM expert with more than 19 years of experience. Before joining SAP, he was head of key account management at a leading PLM vendor. Thomas has spent most of his career in the PLM software area, working primarily in implementation consulting, product management, and marketing. He holds a master's degree in engineering.


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