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Chain Reaction:Chain Reaction: Suppliers to Customers and Back
APQC Lessons Learned – Member Meeting 2010
Rachel Brill, Marisa Brown, and Erin WilliamsRachel Brill, Marisa Brown, and Erin Williams
Agendag Introductions
h l ll Rachel Brill Marisa Brown Erin Williams Erin Williams
Insights and Lessons Learned Innovation: Putting Ideas into Action – Rachel Brill Innovation: Putting Ideas into Action Rachel Brill New Product and Service Innovation: Improving Front‐
End Effectiveness – Marisa Brownl Improving Procure‐to‐Pay Processes ‐ From Suppliers
to Cash in the Bank: What Works? – Erin Williams
Discussion
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Discussion
Cross traditional boundaries to help innovation thriveinnovation thrive
Alignment from side‐to‐side enhances g e t o s de to s de e a cescollaboration and contribution
Cross‐functional teams: Must be productive Should meet on a regular basis
Membership may cross: Departments Disciplines Areas of interest Personality types
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Personality types
Mayo Clinic’s Innovation Personality Types
9 types you needThe Visionary The Generator The Iterator9 types you needon your team…
TheCustomer
Anthropologist The Tech Guru The Producer
y
The Communicator The Roadblock Remover The Futurecaster
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The Communicator The Roadblock Remover The Futurecaster
Distinguish among different types of innovationinnovation Different types of innovation
Incremental or core (“defend and extend”) Growth or emerging (adjacent) Disruptive breakthrough or radical Disruptive, breakthrough, or radical
Adopt a portfolio approach to: Risk Time horizons Processes Resources Vocabularies Management Measurement
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Measurement
Cast the net wide for ideas
Strategically select opportunity areas Strategically select opportunity areas through the eyes of your customers
Open innovation comes in two forms Open innovation comes in two forms
A purpose‐based view of innovation
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Through the eyes of your customerg y y
Keep a strategic focus on the customer’s Keep a strategic focus on the customer s constantly changing needs
Mayo Clinic focuses on health not Mayo Clinic focuses on health, not healthcare
K l k “ i ” Kennametal seeks “exciters”
IBM conducts First of a Kind (FOAK) projects with customers
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Open Innovationp
Gathering ideas from a wide range of Gathering ideas from a wide range of sources (IBM’s Jams)
Understanding the needs of a small set of Understanding the needs of a small set of key customers (Mayo Clinic’s partnerships)
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Purpose‐based viewp
Achieving innovation for both the good of Achieving innovation for both the good of the organization and to fulfill an overall corporate missioncorporate mission.
IBM:“Seeking innovation that matters globally and affects the greater good ”globally, and affects the greater good.
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IBM Looks Globallyy
Global Technology Outlook
Global Innovation Outlook
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New Product and Service Innovation:New Product and Service Innovation: Improving Front‐End Effectiveness
Marisa BrownMarisa Brown
A picture is worth a thousand words…p
When communicating with senior When communicating with senior leadership, conventional wisdom is that you get no longer than an “elevator speech” toget no longer than an elevator speech to make your point.
How can you condense something as multi How can you condense something as multi‐faceted as innovation into a small sound bite?bite?
Use pictures and images.
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New Product and Service Innovation: Improving Front End EffectivenessImproving Front‐End Effectiveness
Selected findings that show how some Selected findings that show how some innovative companies are using stories and images to communicate with seniorimages to communicate with senior leadership
Focus is on Shell GameChanger and Ethicon Focus is on Shell GameChanger and Ethicon Endo‐Surgery
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Shell GameChangerg
You have to be willing to play with an ou a e to be g to p ay t ainteresting idea for a little while before you can really judge it too harshly.
—Russell Conser, Manager, GameChanger, Shell International Exploration & Production
GameChanger is a front end–focused team, GameChanger is a front end focused team, modeled after Silicon Valley venture capital firms, within R&D in E&P technology
A sheltered testing zone, GameChanger fosters radical new ideas by providing resources to d t i if id h it
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determine if an idea has merit
GameChanger Visualsg
GameChanger team creates and uses GameChanger team creates and uses numerous visual diagrams and icons to: Reinforce the importance of the process Reinforce the importance of the process
Clarify the process for both internal and external participantsexternal participants
GameChanger focuses on: Si l hi l t i l Simple, graphical materials
Use of analogies
B d di ib i ki “l f f i d ”
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Broad distribution – making “lots of friends”
Communicate the Front‐end Process
How it works…Funnel That Feeds the FunnelBroaden & accelerate inflow by…
Venture
ns
C R&DG Ch
License
Academics
Core R&D Program
GameChanger
DeploymentShell Staf f
Entrepreneurs
Sto
S top
Bound Scope
…“Bringing Silicon Valley Inside”
Stop Bound Scope
Open SourcesFlexible ProcessSimple Criteria
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Simple Criteria
Collaboration is Key When Seeking Ideasy g
The GameChanger team wants to be the The GameChanger team wants to be the first place people with creative ideas within the oil and gas space come tothe oil and gas space come to.
It accepts ideas from anyone at anytime: E l Employees
Innovators outside of Shell
Collaboration, not outsourcing, is the source of value in new ideas and idea
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management
How it Works…Open Sourcesp•Any idea•Anyone•Any idea•Anyone
The most energizing environmentthat attracts
the world’s most creative peoplel bl
More options f r str t ic
•Anyone•Anywhere•Any time
Academics, Entrepreneurs The most energizing environment
that attractsthe world’s most creative people
l blMore options f r str t ic
•Anyone•Anywhere•Any time
Academics, Entrepreneurs
with their most valuable ideas for solutions to
Shell EP’s most important problemsand enables them to become real
for strategic thinking
All Shell Staff
with their most valuable ideas for solutions to
Shell EP’s most important problemsand enables them to become real
for strategic thinking
All Shell Staff
R&D TeamsR&D Teams
It’s like a river system draining an entire continent of ideas instead of just one mountain range
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Ethicon Endo‐Surgeryg y
A Johnson & Johnson company in the medical Jo so & Jo so co pa y t e ed cadevices and diagnostics sector Disposable devices for open and minimally‐
invasive surgery
Established in 19926 000 E l W ld id 6,000 Employees Worldwide
~$4B in Annual Sales
Regional Sales 45% US 55% International Regional Sales 45% US, 55% International Vision: Transforming Patient Care Through
Innovation
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Innovation
Management Commitment g
Outside Learning Outside Learning Clayton Christensen
Successful start ups Successful start‐ups
Management Primer on I tiInnovation
Patterns and Guidelines for Senior Executives
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The Classic “9 Dot” Problem
Connect the dots with no more than
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4 lines without lifting your pencil
This section borrowed from Shell GameChanger and stimulated by similar slides of Michael Hawley at MIT Emerging Technologies Conference, Sept 2004.
The Classic “9 Dot” ProblemThe “Standard” Solution
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This section borrowed from Shell GameChanger and stimulated by similar slides of Michael Hawley at MIT Emerging Technologies Conference, Sept 2004.
The Classic “9 Dot” ProblemThe “Wide Dot” Solution
Note: Only 3 lines!
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This section borrowed from Shell GameChanger and stimulated by similar slides of Michael Hawley at MIT Emerging Technologies Conference, Sept 2004.
The Classic “9 Dot” ProblemThe “Big Dull Pencil” Solution
Note: Only 1 line!
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This section borrowed from Shell GameChanger and stimulated by similar slides of Michael Hawley at MIT Emerging Technologies Conference, Sept 2004.
The Classic “9 Dot” ProblemThe “Tube and Loop” Solution
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This section borrowed from Shell GameChanger and stimulated by similar slides of Michael Hawley at MIT Emerging Technologies Conference, Sept 2004.
Improving Procure to Pay ProcessesImproving Procure‐to‐Pay Processes From Suppliers to Cash in the Bank: What Works?
Erin WilliamsErin Williams
Characteristics of high‐performing procure to pay processesprocure‐to‐pay processes
Measure Measure
Centralize
li Manage suppliers
Automate
Secure stakeholder commitment
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Measure: 46% of FTEs are allocated to ordering materials or servicesordering materials or services
Procurement FTEResourceAllocation
17.2%13.7%
Procurement FTE Resource Allocation
Develop sourcing strategiesp g g
Select suppliers and develop/maintain contracts
O d t i l / i23.4%
45.7%
Order materials/services
Appraise and develop suppliers
N = 159
Only 54 % of procurement FTEs are dedicated to the other three, i
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more strategic processes
Automated practices enable FTEs to be allocated to more strategic processesallocated to more strategic processes
Procurement FTEAllocation
16.9%17.7%Appraise and develop
suppliers
Procurement FTE Allocation
23.6%
41.3%
28.9%
30.5%
Select suppliers and develop/maintain contracts
Order materials/services
18.3%
23.6%
22.9%Develop sourcing strategies
develop/maintain contracts
0.0% 10.0% 20.0% 30.0% 40.0% 50.0%
Have initiated e‐Procurement/e‐SourcingHave not initiated e‐Procurement/e‐Sourcing N = 26
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Centralized organizations have lower procurement costsprocurement costs
Organizational structure and procurement costs
$
$13.57
$12.00
$14.00
$16.00
cycle per
$4 09
$9.49
$5.90$6.00
$8.00
$10.00
ocurement
revenue
$1.11
$4.09
$2.41
$ 00
$2.00
$4.00
$
ost of the pr
$1000
$.00
25th Percentile Median 75th Percentile
Total co
Centralized Decentralized N = 84
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Rein in the cowboys (and girls)…y ( g )
Maverick spend and procurement costs
$213
$200
$250
cle pe
r ands)p p
$79
$112
$149
$102$130
$100
$150
curemen
t cyc
FTE (in
thou
sa
$
$50
t of th
e proc
men
t cycle F
25th Percentile Median 75th Percentile
Total cost
procure
Less than 1% 16% or more N = 33Maverick Spend
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In their words…
If you are still working in a paper system, by default you will never be best practice.
—Kate Vitasek, Managing Partner, Supply Chain Visions
Th i b [ f li ] h h There is no number [of suppliers] that we have ever tried to drive to. All you need is one good supplier: one growth supplier for every commodity you buy.
—Rod Anderson, Director of Strategic Sourcing, Cessna
Many companies have failed by just addressing Many companies have failed by just addressing procurement or just addressing accounts payable. It is important to tackle it at a higher level holistically from procurement to payment.
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from procurement to payment.—Mark DiGiovanni, Director, Caturano and Company
Resources in APQC’s Knowledge BaseQ g
Innovation: Putting Ideas into Action 2009 Innovation: Putting Ideas into Action 2009 (Best Practices Report)
Innovation: Putting Ideas into Action (Best Innovation: Putting Ideas into Action (Best Practices Report)
N P d d S i I i New Product and Service Innovation: Improving Front‐End Effectiveness (Best P i R )Practices Report)
Improving Procure‐to‐Pay Processes ‐ From
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Suppliers to Cash in the Bank: What Works?
What’s next?
Current collaborative benchmarking study New Product Development: Embracing an Adaptable
Process Ongoing Open Standards Benchmarking
Supply Chain: Supply chain planning Procurement
f Manufacturing Logistics
Product Development I ti Innovation
Upcoming 2011 collaborative benchmarking studies Supplier Relationship Management (survey coming soon!)
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Embedding Knowledge Management in the Flow of Innovation (to be refined – we’d like your input)
For more information
Rachel Brill Rachel Brill [email protected]
713 685 7270 713‐685‐7270
Marisa Brown [email protected]
713‐685‐4655
Erin Williams [email protected]
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713‐685‐4757