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February 20-21, 2007 / St. Pete’s Beach, FL
Pushing the Envelope – Driving Innovation in a Mature Market
Dr. John Irven,
Director of Technology, Packaged Gases, Air Products
Visiting Professor , Queen Mary, University of London
First International Stage-Gate Leadership SummitFebruary 20-21, 2007 / St. Pete’s Beach, FL
Slide 2© 2005© 2007 Air Products
A ~$9bn industrial gases & special chemicals company
Diversified markets & geographiesin 30 countries, 50% outside USA
Number # 1 in ElectronicsHeliumHydrogen
First International Stage-Gate Leadership SummitFebruary 20-21, 2007 / St. Pete’s Beach, FL
Slide 3© 2005© 2007 Air Products
Air Products - some examples of our businesses
Cryogenic Air Separation Cryogenic liquid, space
Cylinder packaged gases
Helium MRI scanning
Electronics, analyticalHydrogen fuelling
First International Stage-Gate Leadership SummitFebruary 20-21, 2007 / St. Pete’s Beach, FL
Slide 4© 2005© 2007 Air Products
Air Products Global businessPG ~$1.0bn within a $30bn Industrial Gases market
Cylinders and packages to users in many industries
Regional & Technology Centres
Countries where we operate or partner
First International Stage-Gate Leadership SummitFebruary 20-21, 2007 / St. Pete’s Beach, FL
Slide 5© 2005© 2007 Air Products
Old Business model - Strategy
• No real opportunity for change• Supply chain dominated• Operations & distribution focused• Target cost reduction in filling &
distribution• Low profit expectations
New Business Model - Strategy
• If we don’t change we die• Refocus on high value ‘retail end’• Use new agent distribution model• Cost reduce, but drive profit growth
by differentiated offerings• High profit expectations
BulkGases
CylinderFill
DirectDistribution
RetailDistribution
CustomerOn-siteProduction
x % 2x % >4x %x %Best
PerformerOROI
1.5x %
Old model New agent modelGases Supply chain
100,000s customers, transaction intensive commodity business
‘Lead don’t follow’
First International Stage-Gate Leadership SummitFebruary 20-21, 2007 / St. Pete’s Beach, FL
Slide 6© 2005© 2007 Air Products
BUT - Size of innovation challenge in mature, commodity, conservative industryno new products in decades !
KEY FEATURES :•Cylinder•Cylinder Valve & Cap•Compressed Gas
The only change had been the colour of the paint…...
1900 20002000
KEY FEATURES :•Cylinder•Cylinder Valve & Cap•Compressed Gas
First International Stage-Gate Leadership SummitFebruary 20-21, 2007 / St. Pete’s Beach, FL
Slide 7© 2005© 2007 Air Products
Changing the paradigmBIP® - a purifier inside the cylinder
BUT – DESPITE great response from Customers– ‘NIH’ attitude was preventing take–up
WHY?– we had an un-integrated innovation approach
NEW APPROACH– developed & applied
RESULT – our first success
– UK Queen’s Award for Innovation – BIP commercialised in > 20 countries,
becoming global analytical standard
ExternalPurifierHIGH VALUE
Analyser
BIP in CylinderHIGH VALUE
ImprovedPurityQualityReliabilityReduced ‘hassle’
CylinderLOW VALUE
First International Stage-Gate Leadership SummitFebruary 20-21, 2007 / St. Pete’s Beach, FL
Slide 8© 2005© 2007 Air Products
Regional & Technology Centres
Countries where we operate or partner
Effect of globalisation on BIPEuropeUK, IrelandFrance, GermanyBelgium, NetherlandsLuxembourg, SpainPortugal, ItalySwitzerlandScandinaviaAmericasUSA (Airgas)Canada, MexicoPuerto Rico, BrazilAsiaSingapore, MalaysiaIndiaAfrica/M.EastS.AfricaDubai
First International Stage-Gate Leadership SummitFebruary 20-21, 2007 / St. Pete’s Beach, FL
Slide 9© 2005© 2007 Air Products
So what were the key strategic initiatives ?
1. Embed technology in business & strategy, linked to defined market segmentation
2. Demand differentiated offerings, ‘lead not follow’3. An integrated process and cross functional approach4. Drive VOC at all stages of development5. Manage the Gate 4 and launch aggressively6. Use tools & metrics to support the culture change
Best practices have fed into our corporate wide “Innovate” process
First International Stage-Gate Leadership SummitFebruary 20-21, 2007 / St. Pete’s Beach, FL
Slide 10© 2005© 2007 Air Products
Strategic initiative # 1Embed technology in business strategy
• Integrate technology into the business programs and strategy
• Link to market segmentation & selection
• To ‘Lead not follow’the market
First International Stage-Gate Leadership SummitFebruary 20-21, 2007 / St. Pete’s Beach, FL
Slide 11© 2005© 2007 Air Products
Strategic initiative # 2Demand differentiated offerings
50 ℓ200 bar
Customer
‘Conventional wisdom’- value 2 + 2 = 4
Reduced size/weight
Incorporate functionality & safety to capture value, and meet ‘VOC’ needs for light, easy to use packages
New opportunity- value 2 + 2 = 5 !
Integra weldingIntegration
Integra medicalParty Perfect Helium balloons
First International Stage-Gate Leadership SummitFebruary 20-21, 2007 / St. Pete’s Beach, FL
Slide 12© 2005© 2007 Air Products
Strategic initiative # 3An integrated process & cross functional approach
• Cross-functional and cross-regional participation in strategy, planning and prioritisation in a steering team– Technology/ R&D– Marketing– Operations, Engineering, Supply chain
• Use staged development pipeline, with gatekeepers from key functions
• Rank & select ideas by financial impact & risk analysis
• All aimed at avoiding the ‘NIH’ issue
R&D Group + Dev Group + Commercial Group
Ideas Development Introduction
0 Gates 4
First International Stage-Gate Leadership SummitFebruary 20-21, 2007 / St. Pete’s Beach, FL
Slide 13© 2005© 2007 Air Products
• Stage-Gated process with VOC at all stages• Understand customer and market need, recognising
‘unmet’ or unstated needs with a truly innovative offering
Ideas
Com
mer
cial
isat
ion
0 1 2 3 4Gates
Con
cept
Feas
ibili
ty
Prot
otyp
e
Dev
elop
men
t
‘Voice of customer’VOC at all stages
$
Strategic initiative # 4Drive VOC at all stages
‘Voice
s to ch
oices’
& market
research
Value stre
am maps
Focus groups
Customer/
OEM trials
Field tr
ial pilo
ts
Customer
satisfacti
on
surveys
First International Stage-Gate Leadership SummitFebruary 20-21, 2007 / St. Pete’s Beach, FL
Slide 14© 2005© 2007 Air Products
Gate 4
Strategic initiative # 5Manage the Gate 4 & launch aggressively
• Gate 4 determines move into commercialisation• Tied to mandatory Business & Launch plans• Targets baked into our
– Plan & commitment process, regional marketing & sales budgets– individual and team appraisals for accountability– “Innovate” make-good tracking
• Driven and supported by senior business executive & team• Linked to market-communications & branding strategies
Development Launch & commercialisation
BusinessPlan
First International Stage-Gate Leadership SummitFebruary 20-21, 2007 / St. Pete’s Beach, FL
Slide 15© 2005© 2007 Air Products
Strategic initiative # 5Manage the Gate 4 – understand/optimise the process
• Heading to the Gate 4 decision, & post Gate 4 ‘Launch’• An Environment of :
• Intense Communication & change• Commitment !• Hand-Over and Changing RACI
• ‘How to’– optimise effective transfer to the market– industrialise the product
• So that the offering becomes part of our ‘standard’ portfolio in a sustainable way as soon as possible
First International Stage-Gate Leadership SummitFebruary 20-21, 2007 / St. Pete’s Beach, FL
Slide 16© 2005© 2007 Air Products
Ideas Development Introduction
0 4
R&D Group Dev GroupCommercial
Group
Strategic initiative # 5Manage the Gate 4 – understand/optimise the process
•• CI role mappingCI role mapping
Concept/ Feasibility/ Prototype/ Development
Gates
Development proven with field trials
Standard activity
Launch/commercialisation
First International Stage-Gate Leadership SummitFebruary 20-21, 2007 / St. Pete’s Beach, FL
Slide 17© 2005© 2007 Air Products
Ideas Development Introduction
0 4
R&D Group Dev GroupCommercial
Group
Strategic initiative # 5Manage the Gate 4 – understand/optimise the process
•• CI role mappingCI role mapping•• TransitionTransition from ‘end developmentend development’ to ‘routineroutine’
Concept/ Feasibility/ Prototype/ Development
Development proven with field trials
Standard activity
Launch/commercialisation
Gates
Launch plan
First International Stage-Gate Leadership SummitFebruary 20-21, 2007 / St. Pete’s Beach, FL
Slide 18© 2005© 2007 Air Products
Ideas Development Introduction
0 4
R&D Group Dev GroupCommercial
Group
Strategic initiative # 5Manage the Gate 4 – understand/optimise the process
•• CI role mappingCI role mapping•• TransitionTransition from ‘end developmentend development’ to ‘routineroutine’
Concept/ Feasibility/ Prototype/ Development
Development proven with field trials
Standard activity
Launch/commercialisation
Gates
TransitionTransition
Launch plan
First International Stage-Gate Leadership SummitFebruary 20-21, 2007 / St. Pete’s Beach, FL
Slide 19© 2005© 2007 Air Products
Strategic initiative # 5Manage the Gate 4 – understand/optimise the process
• Marketing & Sales– The (Central) Launch Manager Role– Linking Strategic & Tactical marketing to Sales
• Engineering & Operations– Use ‘Pilot Field trials’ pre-Gate 4– Management Of Change (MOC) Best Practice
• Procurement & Supply Chain– Supplier/partner engagement – ‘open innovation’
• Knowledge management – Training & skills development– Build Manuals, Procedures & documentation
First International Stage-Gate Leadership SummitFebruary 20-21, 2007 / St. Pete’s Beach, FL
Slide 20© 2005© 2007 Air Products
Strategic initiative # 6 Tools & metrics – Air Products & PG
• ‘Make-good’ predicted v actual• Number of new offerings
through Gate 4 over time• Predicted impact of offerings in
pipeline• # ideas in each stage• Times in each stages
– Development cycle time– Product life cycles
• Customer loyalty
Air Products Corporate Portfolio
0
20
40
60
80
100
120
1999
2000
2001
2002
2003
2004
2005
Year
Impa
ct b
enef
it (n
orm
alis
ed)
0
5
10
15
20
25
30
35
Num
ber g
ate
4 pa
PredictedActualGate 4s p.a.
First International Stage-Gate Leadership SummitFebruary 20-21, 2007 / St. Pete’s Beach, FL
Slide 21© 2005© 2007 Air Products
Forecast Impact of Completed Gate 4 Projects (2000-2005)
-5.0
0.0
5.0
10.0
15.0
20.0
0 20 40 60 80 100 120 140 160
Project Number
Impa
ct (M
M$)
Strategic initiative # 6 Tools & metrics – AP corporate metrics
0 5 10 15 20 25 30 35Number of Projects
Cum
ulat
ive
Impa
ct o
f pro
ject
s
02
03
04
01
05
Predicted impact in pipeline
First International Stage-Gate Leadership SummitFebruary 20-21, 2007 / St. Pete’s Beach, FL
Slide 22© 2005© 2007 Air Products
New Revenue
0
20
40
60
80
100
120
140
160
FY01FY03FY05
FY07 P
&C
Year
Nor
mal
ised
bas
is
SRLD
Experis
Home Medical
Medical
Licensing
Oxy DA
Acetylene (DMF)Carbon Black
Linx Gases/Inframix
Party Perfect
Heligas / Ballonium
BIP
Maxx
Integra Welding
Strategic initiative # 6 Tools & metrics – Packaged Gases ‘make good’
Differentiated offerings grow > 25% pa CAGR even in flat mature markets
Growth in Market, AP PG Sales & Differentiated Offerings
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
2002
2003
2004
2005
2006
2007
Year
Perc
ent
Market growth%
AP PG SalesGrowth %
Differentiatedofferings CAGR%
First International Stage-Gate Leadership SummitFebruary 20-21, 2007 / St. Pete’s Beach, FL
Slide 23© 2005© 2007 Air Products
38
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
GI Non Premium Maxx Heligas BIP
At RiskIndifferentFavourablesecure
Customer loyalty measure
Categoryof risk
Commodity
Strategic initiative # 6 Tools & metrics – Packaged Gases
• Support culture change, with metrics showing progress
• Demonstrate price premiums over standard offerings at much higher profit/OROI
• Measure and demonstrate the benefit in customer loyalty surveys (part of VOC)
First International Stage-Gate Leadership SummitFebruary 20-21, 2007 / St. Pete’s Beach, FL
Slide 24© 2005© 2007 Air Products
Key learningsBusiness & Technology together
Strategic initiatives
1. Embed technology in business & strategy, linked to defined market segmentation
2. Demand differentiated offerings, ‘lead not follow’3. An integrated process and cross functional approach4. Drive VOC at all stages of development5. Manage the Gate 4 and launch aggressively6. Use tools & metrics to support the culture change
First International Stage-Gate Leadership SummitFebruary 20-21, 2007 / St. Pete’s Beach, FL
Slide 25© 2005© 2007 Air Products
The future-what’s next ?
• Idea collection from wider sources • Better assessment/prioritisation tools
– Different ‘incremental’ v ‘step out’– DDP, ‘MacMillan’ & risk analysis
• Improved idea selection – related to strategic marketing and
segment analysis• Forward-looking metrics• Reduce cycle time through
– Improved project management– CI & lean techniques
Tech
nica
l Unc
erta
inty
Market Uncertainty
IncrementalExpansions
PlatformLaunches
ScopingOptions
SteppingStones
ScoutingOptions
Tech
nica
l Unc
erta
inty
Market Uncertainty
IncrementalExpansions
PlatformLaunches
ScopingOptions
SteppingStones
ScoutingOptions
Tech
nica
l Unc
erta
inty
Market Uncertainty
IncrementalExpansions
PlatformLaunches
ScopingOptions
SteppingStones
ScoutingOptions
MacMillan matrix
First International Stage-Gate Leadership SummitFebruary 20-21, 2007 / St. Pete’s Beach, FL
Slide 26© 2005© 2007 Air Products
7
BIP
Heligas
“Maxx”Welding Gases
Medical
Integra
OxyWalker
PartyPerfect Linx
Gases
Best gas supplier awardExternally recognised© 2007
Silver awardUK Chartered
Institute of Marketing
Silver awardUK Chartered
Institute of Marketing
2006
Winners of Dow-Corning Chemical Industry Innovation award, Queens Award for Innovation
February 20-21, 2007 / St. Pete’s Beach, FL
Key take awaysBelieve in your product and approach - if you don’t the market won’t !Recognise and nurture innovation – it’s quite hard to do !Thank you
First International Stage-Gate Leadership SummitFebruary 20-21, 2007 / St. Pete’s Beach, FL
Slide 28© 2005© 2007 Air Products
Bibliography
‘Stage-Gate systems: a new tool for managing new products’ Robert G Cooper, Business Horizons, May-June 1990 pp 44-56
‘Voices into choices’ C.Brodie, G.Burchill, Center for Quality management, Cambridge Mass, Joiner Associates 1997
‘The entrepreneurial mindset’ R.G.McGrath, I MacMillan, Harvard Business School Press Publishing Corp, 2000
‘Open Innovation’ H. Chesbrough , Business & Economics 2003
‘The Lean design solution’ B.Hulthwaite, The Lean design solution, 2004
‘Lean, rapid & profitable:new product development’ Robert G Cooper, Cambridge Mass, Perseus Books 2005
‘Market busters’ R.G.McGrath, I MacMillan, Harvard Business School Press Publishing Corp, 2005
First International Stage-Gate Leadership SummitFebruary 20-21, 2007 / St. Pete’s Beach, FL
Slide 29© 2005© 2007 Air Products
Biographical sketch
Professor John Irven MA, PhD, CSci, CChem, FRSCJohn Irven is Director of Technology for Air Products, Packaged Gases Group, where he is responsible for the global R&D and innovation of new products, processes and applications in industrial gases technology. A particular area of focus is on gases for welding and fabrication processes, as well as applications across Electronics, Specialty and Helium gases businesses.Before joining Air Products, John read Natural Sciences at St. John’s College Cambridge, worked for the Plessey Company on Electronic materials and semiconductor processing, and Standard Telecommunication Laboratories on optical fibre technology, in which his PhD is based.He is a chartered scientist, chartered chemist, and Fellow of the Royal Society of Chemistry, and is visiting Professor in Chemistry at Queen Mary University of London. He chairs the TWI (Welding Institute) Cambridge Research Board activities on welding and fabrication, and is member of EPSRC, and RSC solid state committees.New products developed by John’s team have received a number of external recognitions, including a UK Queen’s Award for Enterprise, Innovation 2004, the inaugural ECN Dow Corning Chemical Industry new product innovation award 2004, and endorsements from the UK Chartered Institute of Marketing and TUV Germany.He has over 60 published papers, 25 patents, and has presented a number of invited talks at scientific meetings, as well as on the topic of Innovation.
February 20-21, 2007 / St. Pete’s Beach, FL
Back-up slides
First International Stage-Gate Leadership SummitFebruary 20-21, 2007 / St. Pete’s Beach, FL
Slide 31© 2005© 2007 Air Products
Strategic initiative 6 Tools & metrics – Packaged Gases Product lifecycle studies
Revenue & profit
-20
0
20
40
60
80
100
1 3 5 7 9 11 13 15
year
$
Rev
Profit
Introduce Grow Mature Harvest RetireDevelop
ImprovedNew
Improved
Integra-Maxx revenue
0
5
10
15
20
25
30
35
40
FY00
FY01
FY02
FY03
FY04
FY05
FY06
$mm pa
Improved
Improved
New
New
First International Stage-Gate Leadership SummitFebruary 20-21, 2007 / St. Pete’s Beach, FL
Slide 32© 2005© 2007 Air Products
Key lessons learned
• Ensure ongoing integrated cross functional support to avoid the ‘black hole’ syndrome at ‘hand-overs’
Ideas Development Introduction
0 4
R&D Group Dev GroupCommercial
Group
Non-aligned, non-integrated processes
Integrated OLM, P&C & Strat Plan processR&D Group + Dev Group + Commercial Group
Ideas Development Introduction
FINISH
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