Clarity on PLM

I had the chance to talk with … PTC and their customers at last week’s PTCuser user conference. PTC has been busy, making a number of significant announcements. I will clearly not do justice to such a big event in one short blog, but I hope to hit the highlights for you and share my thoughts on the implications.

Note: Just to be clear, this is the last PTCuser because the conference is changing and will be renamed PlanetPTC.

What I Learned

PTC is still serious about mechanical CAD. They believe that there is still innovation happening in that space, and that it will be an interesting market in the future. Good news for mechanical engineers and those that are fans of PTC CAD solutions including Pro/Engineer and CoCreate. They announced Project Lightening which is a multi-year strategy to reinvent mechanical CAD, but promised deliverables in the near term. Not much information here yet, but from conversations with PTC product managers this is a big focus area. Expect some significant focus on making MCAD much easier to use.

PTC is pushing the PLM boundaries. PTC furthered InSight product analytics by announcing product cost analytics and expanded Arbortext into service documentation and instructions. By going into areas like product analytics (particularly in areas like cost), PTC continues to push the envelope. PTC has a broad vision for PLM, and has already stretched the scope of PLM to include product documentation and engineering calculations in the past, and they don’t appear to be done yet.

PTC is making good on their Social Product Development initiative. The new SocialLink product is a great example of this. They added a new product, but also demonstrated how these new social computing capabilities will work across the entire PTC product portfolio. That is the right way to do it (in my opinion). The capabilities are generalized and part of the infrastructure (in large part thanks to Microsoft), but the application of the capabilities is happening in the solutions themselves. This allows product managers from each product line to decide how their users can benefit. Expect more here over time.

PTC has refocused on a Small to Midsize Business (SMB) PDM system – ProductPoint is no longer trying to be both a simpler PDM offering for the SMB and PTC’s answer to Social Product Development. With the introduction of SocialLink and other social computing capabilities, ProductPoint is now free to be a SharePoint-based PDM system. Good news for the SMB who doesn’t need (or can’t attain) a full PLM system.

PTC enters PPM market – PTC is launching a product portfolio management solution based on Microsoft technology. The early indications are that PTC’s solution is more focused on project roll ups and programs than decision support in product portfolios and R&D investment. Stay tuned for more on this in the future as I learn more.

PlanetPTC replaces PTCuser – PTC users have asked PTC to take a broader role and responsibility in the user event. PlanetPTC also includes a community site and virtual events like webcasts, showing that PTC really believes in the power of social media.

So that’s what I hear from PTC, I am sure I missed something. I hope you found it useful. What do you think? What else should I have asked them? What else would you like them to do?

What I learned this week … is that product cost is not getting the attention it deserves in PLM. I was presenting on the future of PLM in a PLM-focused event last week in Helsinki. My topic was the future of PLM, and I based my discussion on the four dimensions of PLM expansion (recently updated past post). I got a great question from one of the participants. He wanted to know “why I hadn’t included cost in the future of PLM?“ My response? Good question!

Product Cost in PLM

Product Cost Management (PCM) in PLM is something that I used to bring up on a regular basis. Design for cost is an important initiatives. Particularly as companies are trying to remain lean in uncertain economic times, controlling cost is critical. Even in good times, designing products with optimal cost structures is hugely important to driving high profit margins. So why has this dropped off of my radar? Is the problem being addressed? Is the problem solved? No.

The problem still lingers, but I haven’t seen as many companies willing to try to address it. Perhaps this complicates the roles of ERP and PLM, and companies don’t want to deal with a hard decision on which system supports which part of the process. ERP and PLM both have the potential to help, and should be a part of the solution. But neither ERP nor PLM are ready to take on the PCM challenge fully.

• ERP
  • Has historic costs
  • Understands multi-currency, locations, volumes, other sourcing factors
  • Generally handles cost for the execution of procurement and manufacturing
• PLM
  • Has new parts
  • Understands product content early when costs are locked into designs
  • Generally handles product development decisions in the innovation lifecycle

So each system has some thing to offer. So why instead of addressing this properly with the right combination of ERP and PLM, do companies continue to use masses of disconnected spreadsheets to solve the problem? At least I can hope that they are managing the spreadsheets in PLM so it is readily available and can be reused. But that is only a partial solution. We need a better answer.

Challenges

ERP and PLM both bring value as seen above, but both fall short. Here are some of the issues:

• New purchased parts - ERP is not involved in the early parts of design, and doesn’t help with estimating costs of new parts. PLM (for the most part) doesn’t have a rich enough model for sourcing. I have seen “cost” as a single field too many times, without any concept that the cost will change based on volumes, locations, currencies, etc.
• Newly engineered parts – For brand new parts, there is not historic data to work from. Costs need to be developed based on product characteristics like materials and manufacturing complexity. Comparisons can help, but ERP typically doesn’t know enough to determine which parts are similar in their construction

Who will step up?

Are vendors ready for this? Agile has had a cost model for some time. Siemens partnered with ATK. Dassault Systemes invested in this area. PTC just announced that their InSight product analytics product will address cost. So there is hope. There are also specialty vendors like Akoya and aPriori that help engineers estimate cost based on product attributes. Why haven’t SAP PLM and Oracle (with Agile and ERP) done something about it?

More importantly, are manufacturers ready? Adidas CIO mentioned Design for Cost at a PLM user conference (PTCuser) yesterday. But I don’t hear it often enough. I haven’t seen the momentum that something as important to profitability as cost deserves.

Implications for Manufacturers

If manufacturers aren’t willing to integrate cost into their design processes (and PLM), they will be stuck with spreadsheets. And actually, the question was broader. The question also addressed other financials in addition to cost. For example, is PLM addressing product pricing? Product forecasting? While I think that it makes sense for PLM to address this, I have seen little activity in this area to this point. What a shame. What a great opportunity for someone to step up.

So that is my rant for today, I hope you found it interesting. Why did this fall off of my radar? Did it fall off of yours? Have you done something to address this? If you did let us know about it!

A quick peek into some research on … on social computing for product development. Why does Facebook miss the mark? Can it be fixed? I have been talking for some time about the potential value of social computing in PLM and have mentioned before why Facebook will fail. I am preparing for a presentation next week, and decided to pull my thoughts together. So here they are, I look forward to your feedback.

The Research Findings

There are two parts to the findings. The first is a list of concerns that I have heard, here is a short list:

• What relevance do status comments and photos have to do with serious engineering?
• How will we protect intellectual property?
• What does Facebook know about business processes or how to manage them?
• What does Facebook know about engineering data? CAD files? Projects? Engineering in general?
• Why would I trust my business performance to a technology platform like Facebook that doesn’t appear stable or perform well (sorry Facebook, that is just my practical experience not a sound technical analysis)?
• How do I have time to pay attention to this in addition to everything I already do?
• How do we address security concerns?

OK, part two. Can it be fixed? Yes, but I doubt they will do it. There are two reasons:

• They are not focused on this and don’t have domain expertise
• They don’t have the ability to connect to the underlying context, the product data

But let’s not throw the baby out with the bath water. Let’s see what Facebook can teach us about PLM. Here are my thoughts (and if you happen to be in Helsinki next week stop by to see this live):

Implications for Manufacturers

Don’t look to tools like Facebook to help you with social computing in PLM. But don’t discount the concepts. Learn from them. They are compelling. And manufacturers are getting started. In fact, I look forward to sharing research that I am doing with Kalypso that gives some great insight on what companies have been doing.

So that was a quick peek into some recent research on Facebook failing in PLM, I hope you found it interesting. Yes, I know they didn’t design to tool for product development, so I am really not picking on them. Does the research reflect your experiences? Do you see it differently? Let us know what it looks like from your perspective.

Please feel free to review more free research and white papers about PLM and other enterprise software for manufacturers from Tech-Clarity.

What I learned this week … came from PLM Processes: Flowchart vs. Rule-based? from Oleg in PLM Twine. He discusses rule-based business processes for PLM, which immediately set off red flags in my head based on past experience. Oleg made me think about two different experiences I have in the same context, and it made me shudder. Why? I have seen rules go wrong too many times. And I have seen workflow processes go wrong just a many times.

Workflow Warnings

As Oleg knows, I am bit of a process weenie. Years at Andersen Consulting (the part that is now Accenture) will do that to you. I am 100% in favor of defining processes as a part of implementing business change and supporting technology. But here are some tidbits that I think are worth sharing:

• Define All Processes - Technology implementations should be process driven. Unless you define how the technology helps the business, you won’t get the most out of it.  
• Automate Some of Them - Not all processes should be workflows. While workflow is a great tool to automate and enforce processes, don’t overdo it. I have seen people implement workflow for workflow’s sake. It should be used as needed to improve efficiency and process adoption, but don’t workflow everything.
• Don’t Sweat the Exceptions – There are times where humans need to step in to make decisions and alter workflows. Don’t try to handle every exception condition. If you can identify them and send an alert, great. But most importantly make sure you have flexibility to alter a workflow based on business needs. This is where I see rules-based processes go wrong. Companies try to make rules cover too much, get too complex, and end up being hard to maintain, outdated, and eventually ignored.

The combination of workflow and rules can be very powerful, but can also lead to a resource sinkhole of if not approached cautiously. This is true for the process / rule authors and those that execute them alike.

Implications for Manufacturers

Define your processes. Use workflow where it makes sense. Keep it simple. Don’t try to do too much. Don’t forget that in many scenarios people make better decisions in context than any pre-determined set of rules can handle – don’t tie their hands. If you have standard operating procedures that you need to follow, you may need to document process exceptions. But don’t entirely lock them down in the system. Exceptions will happen, and if the system doesn’t accommodate the real world it will just happen outside of the system in an unmanaged way.

So those are my quick reactions to Oleg’s post, I hope you found it interesting. His post is worth reading if you haven’t already. But I get scared when I see the opportunity for things to go astray. And workflow and rules are a great candidate for bad things to happen. And this is from a self-admitted process weenie!

What I learned this week … came from a great post on Hypertextual titled Positioning with other IT systems: the liquid nature of Enterprise 2.0. I really enjoyed reading the post, and some of the underlying information linked to it including How Enterprise 2.0 fosters Knowledge Capture. There are some very powerful thoughts here. I think the post does a fantastic job of discussing the value that social computing has to offer PLM (and other applications such as ERP, SCM, and CRM). I see things slightly differently regarding social computing and PLM, but I believe it is in a complementary not a conflicting way. I will respond to the post directly, but I felt I had more to say than I could fit into a comment so decided to share here.

Enterprise Applications Roles

To summarize a few key background points from the post (please read the post, it is worth your time and I will not do it full justice here):

• Referencing Michael Grieves’ book Product Lifecycle Management, Driving the Next Generation of Lean Thinking, the author (Cecil Dijoux) points out that the interconnecting nature of ERP, PLM, SCM, and CRM in relation to domain knowledge and business activities. The model here shows ERP overlapping in certain activities and domains. I couldn’t agree more.
• Later he states that ERP, PLM, SCM, and CRM systems “have very clear boundaries and a strict scope of responsibilities.” That is a good model to work from, although I believe that there are overlapping “grey areas” where roles need to be defined on a company basis. See The Evolving Roles of ERP and PLM in Manufacturing for more of my thoughts there, including how PLM develops plans for manufacturing and quality that are executed in ERP. Oleg has also been posting some very interesting points on ERP and PLM in PLM Twine.

Social Software and Enterprise Applications

More importantly, the Cecil goes further to point out two areas where traditional enterprise applications fall short, and social computing software (what he refers to as ”Emergent Social Software Platforms” or “ESSP”) “fill the gap”: 

• Tacit Knowledge – This is information that is corporate knowledge, and frequently poorly captured. I love the way Cecil describes the issue; “Some studies show that between 25 and 50% of the communication between knowledge workers remains tacit and uncaptured. The question is how can we be productive and comfortable with our daily work if about half of the raw material we’re working with is wandering around ?.“ Knowledge management is a tremendous issue in product innovation, product development, and engineering. In the underlying post on Enterprise 2.0, Cecil says “It is easier and less intimidating for knowledge workers to capture knowledge on collaborative platforms (wiki, blogs, forums etc …)  then on word documents and then knowledge management systems.“
• Communities – Product development is about people, or as I have been known to say “product innovation is a team sport.” Again, I love what Cecil has to say. “ESSP make it easy to build communities which, in the enterprise context, are built around common areas of knowledge, business expertise, and professional know-how. These communities juxtapose different types of experts (technical, marketing, sale, integration) on a specific domain. This allows to build multi-dimensional expertise in very confined and otherwise unreachable locations in the company activity and knowledge map.”

I can’t agree more with what Cecil says about how social computing helps capture tacit knowledge and develop communities. I went back to check, I said almost the exact same things in Going Social with Product Development, although in a different way. What I said is that there are three areas where social computing will help PLM specifically:

• Enhance product development team execution and collaboration
• More naturally capture and share product knowledge and expertise
• Enable the discovery of new IP and product value

I think the alignment with the second point and Cecil’s point on tacit knowledge is clear. My thoughts on communities are represented in both improving collaboration within existing teams, but also discovering new product value through “social discovery.” Please see more detail in the report Tech-Clarity Insight: Going Social with Product Development: Improving Product Development Performance with Social Computing.

My Complementary View

So where do I see things differently? Cecil talks about social computing filling gaps in the enterprise system landscape. In his words, “This provides a liquid nature to ESSPs that helps them to seep in and fill up any gaps left by other systems.” I see this very differently. Maybe it is my old scars from the days when enterprise workflow was going to do the same thing. Instead, I see social computing as a new part of the infrastructure that helps connect and extend applications like PLM into a community. The social software is important, but the product lifecycle management domain expertise is crucial.

What is the key difference in views? Integration. I believe that social software is a part of the answer. But social computing needs to be addressed in the context of PLM. See How Will PLM Get Social? for more of my insight. How will PLM capture knowledge and make it useful unless it is tied back to the underlying product record? It will help, but it will miss the mark. To me, the value in social computing is not as a gap filler. Yes, it fills the gaps of capturing tacit knowledge and developing communities. But instead I see it is a new way to connect and extend PLM to capture and discover knowledge in the context of the product. It is also a way to improve collaboration in the product development community. Perhaps Cecil will agree, we may just be looking at different aspects of the same topic.

Implications for Manufacturers

If you have read this far, you clearly have an interest in the intersection of social computing and PLM. I have only one piece of advise. Keep learning. This is going to have a big impact on how companies innovate and bring products to market, and the manufacturers that are experimenting with social computing techniques in PLM and developing corporate understanding will have a big advantage in the future. We don’t know what that future will look like, but I can tell you it will be different and you don’t want to be caught left behind. On this point, I believe Cecil would probably echo my thoughts. And if you haven’t read his posts yet, go back and learn from them. There is a lot you can take away from his posts.

So that is what I learned from Cecil on Hypertextual (Merci Cecil!) along with some of my perspective. I hope you found it interesting. Let us know what you think.

What I learned this week … came from a blog post  in the PTC Social Product Development blog. The post, How will PLM get Social, was written by … me. OK, perhaps this is cheating a bit, but PTC asked me to write a guest blog post and I liked it so I decided to share it here as well. The question I think this posts answers is “if social computing in PLM is going to provide value, how will the PLM industry get there?”

The Potetential of PLM and Social Computing

I have posted a number of time (see Going Social with Product Development as an example) that I believe there is significant business value to be gained from the intersection of social computing in PLM. Why? Because product development is inherently a team activity. Getting a product right requires contributions and feedback from people from all corporate walks of life. The most brilliant technical product that doesn’t fit a market need is wasted technical beauty. The fantastic market breakthrough that can’t be manufactured effectively is at best a squandered market, and at worst an opening for a competitor to introduce the leading product in a market that you created. The blockbuster product that can’t be introduced into new geographies is a lost opportunity. OK, ok, you get the picture and I know I am preaching to the choir. There is gold in the hills of social computing in PLM, even if it’s just inside the enterprise. And if the opportunity for innovation internally is high, extending outside is potentially greater.

So if we agree, the question becomes “how do we get there as an industry?” Here are my thoughts:

Figuring it Out

I believe that manufacturers need to experiment and learn to see what works. This is an area for process innovation, not an area where standard best practices apply. This is uncharted territory, and requires exploration. Multiple pilot projects, sharing ideas with other companies, and a willingness to fail are important factors to success. It will take a while to get this right, but those that get there first will not only have the advantage of their success. They will also have the advantage of the knowledge and experience they develop through the process.

Building It Out

Most of the early efforts will require custom work. As of today, there are no standard, off-the-shelf applications that provide everything a company needs on a “plug and play” basis. There are lots of components available, but they need to be assembled and integrated to meet needs as they are defined. Without proven best practices, it is hard to expect a standard solution! Having said that, some PLM vendors are helping blaze the trail. They are investing in helping manufacturers “figure it out” based on their own understanding of product development and building social capabilities directly into their products. (Note that by the fact that PTC asked me to contribute to their blog on this topic, you can safely assume that they are taking social computing in PLM seriously.) These built-in enablers are a big boost to manufacturers in helping enable their programs as they learn and experiment to determine where the specific business value is for their particular company.

Institutionalizing It

As the manufacturing industry becomes more experienced, best practices will emerge. At that point, PLM vendors will have a business process “template” to build from in the same way they had when building applications for configuration management or concurrent design. At this point, the infrastructure vendors (such as Microsoft) will have many of the core capabilities available in their technology stack. Those common components can then be assembled, tailored, and integrated into existing PLM business processes to create socially-enabled PLM. The key in institutionalizing these capabilities is to combine the generic social capabilities with the knowledge of product development, and then integrate the general capabilities into solutions that handle the specific needs of engineers and product developers (such as protecting intellectual property, linking to product configurations, etc.)

Implications for Manufacturers

So what does this mean to today’s manufacturer? First, get started. It’s challenging to start on a journey when you don’t know the final destination. That is something that is being discovered along the way, and you can change course as you go. Start with small investments and short programs that contribute to corporate learning. Second, partner with your PLM vendor. Share your emerging best practices with them so they can help drive their product strategy. Some are investing today, others will follow suit. Be a part of the build-out. Finally, take advantage of the institutionalized, standard solutions as they become available. Share in the investment that your PLM vendor has made and implement best practices. But don’t wait for them to emerge, help create them. One company’s best practice isn’t always as advantageous to another. Focus today’s efforts on unique value that helps your company achieve its business strategy.

So those are my thoughts from the PTC blog reconstructed here, I hope you found it interesting. There is more that could be said, but I will leave it at that for now and I look forward to your feedback. I also invite you to read more of my thoughts on social computing in PLM on the ClarityonPLM blog by clicking the “social computing” tag in the tag link.

What I learned this week … was a retrospective look at an article analyzing how industry-specific PLM application are. The review was in response to a comment on my post In Search of a Common PLM Definition. I had a little bit of fun with the review, and I thought I would share it here. In fairness to Oleg, I decided to use my “mythbusting” technique that I used on him earlier in the year in Mythbusing ERP-PLM Integration.

Responses and Reactions

Need to Document and Prioritize PLM Requirements (Confirmed) - I start by saying companies should document and prioritize requirements. I believe that holds as true today as ever. And I think that you might agree, so let’s confirm that as a statement that holds up today.

Inegrating PLM to Manufacturing (Plausible) - I use “technology transfer” as an example of a very industry-specific part of PLM. For those that aren’t as familiar with the term, it is effectively translating the product as defined in engineering / R&D (and PLM) into a product that can be produced, up to and including instructions for automated plant equipment. This is an area that really hasn’t come to be in most PLM solutions. The example holds trues as industry specific, but despite efforts in Digital Manufacturing (DM) and Manufacturing Process Management (MPM) - most manufacturers are still not yet integrating PLM to plant solutions like Manufacturing Execution Systems (MES) or Manufacturing Operations Management (MOM). The opportunity is still compelling, but I thought we would be further ahead. Hats off to my old friends at Sequencia for being ahead of the curve.

Product Portfolio Management in PLM (Confirmed) - I use Product Portfolio Management as an example for a general solution. I think this one still stands true, and is a hot topic in product innovation and product development today.

My Bio (BUSTED, big time) - Most importantly, what was I thinking with that bio picture? I think I thought it made me look like a serious analyst. Instead, I just look like I have a stomach ache (and seriously need a haircut). Yikes. Busted. Definately.

So that is a brief look at some old research with the benefits of hindsight, I hope you found it interesting. Who knew? I didn’t, if you did let us know about it. I look forward to additional commentary (although not on the picture, the glasses, or the haircut please).

NOTE: I use the “mythbusting” concept out of pure admiration and respect for such a brilliant concept, that helps kids (and adults) learn about how cool engineering can be while entertaining them.

What I learned this week … was that we could use a good, common PLM definition and scope, but we will not get one. The discussion (a lot of discussion in multiple forums, actually) came from my post SAP, Too Much or Too Little Credit for PLM Efforts and another called Who Will Disrupt Entrenched PLM Vendors? Chris Williams pointed out on a LinkedIn thread that he felt maybe the confusion was due to a lack of understanding of what PLM really is, and asked for a common definition. My response? Not so much.

A Not-so-Common Defintion

Chris asked the million dollar question. But PLM is not one thing. While ERP has matured to a more common footprint across the vendors, the scope of PLM from each of the vendors differs. I define PLM as “processes and software used to improve product innovation, product development, and engineering performance.” That is (by definition, not by fault) very broad. There is no one “PLM” definition. The vision of the vendors shows consoliation over time, but today they are very different. Siemens includes MRO (maintenance, repair and overhaul) for A&D. Dassault Systemes has spent much more effort in “lifelike simulation.” PTC includes development of product documentation. Then, there are the applications that don’t come as a part of the suite, which makes each implementation different. Aras includes APQP and quality. They are all different.

Implications for Manufacturers

The lack of a common definition is also why putting in PLM without a strategy is a quagmire waiting to happen. But a common defintion won’t help. While there are standard processes in PLM, they are not as common as in ERP. There are examples of common processes, such as Stage-Gate processes for new product development (NPD) or CMII for change management. But product innovation and product development are not as standardized processes as accounting, as an example. It is not the lack of common PLM system definition at the root of this, it is the lack of common PLM processes. And as much as companies like Invention Machine are putting process orientation into innovation, it will still not be as standardized as ERP functions like human resource management.

So, manufacturers really need to think about what problems they want to solve before implementing PLM. You can’t just install the software and expect any benefits (beyond maybe simple data management). This is what I call the PLM Program, a strategy and vision for PLM that you accomplish in small, incremental steps.

So those are my thoughts on a common PLM defintion, don’t hold your breath waiting for it. I hope you found it interesting. Do you have a better one? I didn’t, if you do let us know about it.

That, by the way, is one of the reasons it is very hard for ERP to simply build another module and call it PLM. That is why SAP has a long program to develop PLM (which will be yet another variation on the PLM theme, different from the others).

What I learned this week … came from some discussions with Chris Williams yesterday about my blog post SAP – Too Much, or Too Little Credit for PLM? in combination with a conversation over breakfast with Oleg, author of PLMTwine. In both conversations I kept hearing about who is going to disrupt the big PLM vendors (Dassault Systemes, PTC, Siemens PLM). Maybe I am just a small thinker, but there seems to be a lot more talk about disruption than actual disrupting going on. Time to share my thoughts, with the expectation that I might be eating my own words on this very blog over the next couple of years.

Disrupting Giants

Maybe it is my jaded view, but I don’t see technology being the disruptor to PLM. I have drawn as many “waves of technology” charts as the next guy, and discussed how difficult it is for vendors to move from one technology to the next big wave. But two things have happened:

• Enterprise software companies have managed to gain significant scale
• Vendors have gotten smarter at riding waves of technology

Already I am sure there are people disagreeing. Let me share my experience.

The Technology Wave Argument

Let’s start with the technology waves. Who will out-technology the big vendors. Will it be a SaaS play like Arena Solutions? Will it be open source like Aras? Or a brand new technology, like Chris William’s Vuuch? Or a more generalized infrastructure technology like Microsoft SharePoint? Or the king of disruption (they are disrupting everybody, I think I heard the words “disruption” and “Google“ at breakfast with Oleg more times than I orderd another cup of coffee (that is saying a lot).

OK, let me share some history that I lived through (maybe you have too). In the ERP world, many players have come and gone. Some have crashed and burned due to their own mismanagement, some have become obsolete in technology and withered away, and others tried and failed trying to migrate to new technology. So why doesn’t this happen to the current largest enterprise software vendor, SAP? Long ago, SAP burst onto the scense with Client-Server architecture with R/3. But truth be told, that transition was a slow and deliberate one. Since that time they have moved their technology along several times. Each time slowly, methodically, and never scrapping the old solution and going for broke on the new one. Countless others tried to grab the brass ring and jump to a new architecture, and drove their companies into the ground.

So while some get frustrated by slow evolution of architecture by big PLM vendors, I say they are being prudent. They are moving deliberately. Some say that will be their downfall. I say slow evolution is the best practice they learned from SAP’s success in ERP. I have heard the “we are going to make SAP (or Oracle, or whatever) obsolete pitch hundreds of times. Some from really great ideas and technologies. But where are they now? Part of the answer lies in the next section.

The Benefit of Scale

The key question in disrupting giants is what can you do that they can’t respond to? What can you where they can’t buy or build their way to the next generation? Particularly when most vendors are several steps ahead of the majority of their customers? Current vendors need to show a vision and a path, but revolution is pretty scary to most of the manufacturs they count as customers. As Oleg points out, and here I agree, one thing they can’t compete with is “free.” But I do not forsee the day that there will be an effort of the scale it takes to develop a full, integrated, PLM system. That is not just technology – it is data model and process as well. Let’s face it, this stuff is complex. But here is the thing. If one of these technologies gets hot, won’t the vendors with scale just acquire it? We are not talking about a solution with the broad interest and potential of word processing (Google Docs) or a brand new idea like social networking (Facebook, etc.). Who except a major enterprise player would invest in disrupting the PLM market? Who would find that investment appealing?

So is it SAP PLM? Or Oracle with their Agile solutions? They have the scale, do they have the will? Is PLM an interesting enough market that they will invest enough to compete with best-of-breed? Realizing, of course, that they have the advantage of their installed base in hand? Perhaps? But I don’t see this happening overnight. I believe the big ERP vendors will get to a level where they can compete, but the big PLM vendors have enough scale to stay ahead. SAP and Oracle will be players in the market, but I don’t think they will own it.

Bottom Line

Will their be acquisitions? Mergers? Sure. The names may change (I didn’t expect UGS to become Siemens PLM), but the assets (software and customer base) are large enough to live in. In my opinion. Unless they fall to their own mistakes, I don’t see a sudden displacement coming. I hope that I am not eating these words at some point, but if I should I will. But that is the way I see it.

Implications for Manufacturers

Buy the solution that works for you. Invest in it. Markets move slowly and software takes a long time to go away. Focus on the solution that meets your business needs, and that you feel you can grow with. Buy a solution that will fit the direction of your PLM vision. Keep an eye on new technologies and see where you can apply them. But I wouldn’t lose too much sleep about disruption right about now.

So have I just grown closed minded? Have I always been a small thinker and I just didn’t know it? Or am I making some sense? I hope you found it interesting. Let me know what it looks like from your vantage point.

What I learned this week … came from a conversation with Jeremy Johnson from IHS. Jeremy opened my eyes to a new way to make manufacturing more sustainable and ecologically friendly. I have written in the past about how companies are making their products compliant in Product Compliance – Hidden Tax on Innovation and  Making Product Compliance Sustainable. One way this is different is because it is not about the products, but the plant. But here’s the catch that makes this the most interesting to me. While product compliance helps to protect top-line revenue and market access across the globe, it is an activity that costs manufacturers money. As Jeremy explained, getting in control of the chemicals in the plant helps reduce environmental impact and increase employee health and safety - and also helps reduce cost at the same time. Now that sounds like something most executives would sign up for, regardless of whether their “green” philosophy focuses more attention on a greener planet or a greener wallet.

NOTE: Graphic from IHS White Paper, “IHS Chemical Inventory Greening”

Chemicals for MRO (Maintenance, Repair, and Overhaul)
Manufacturers use a lot of chemicals. Most plants are filled with greases, solvents, and cleaners to name a few. These “indirect” materials frequently fall under lower levels of purchasing rigor, and companies tend to have a large number of similar products. This duplication offers a pretty straight-forward inventory reuse/consolidation opportunity. By gaining visibility and control over what chemicals a company uses (particularly if they are running multiple plants), companies can reduce procurement and handling costs. Simply consolidating from twenty hand cleaning products to a few could offer savings through bulk procurement contracts, reduction of duplicate inventory, and reducing other inventory handling costs including disposal.

Beyond cost savings, IHS acquired technology from a company called Dolphin Software. The Dolphin solution goes beyond part reduction to address employee health and safety and toxicity concerns. By using publicly available data, they pull together a “hazard profile” that indicates whether products contain known dangerous or environmentally unfriendly ingredients. When looking for opportunities to eliminate items, the decision can be made on cost, sustainability, and safety perspectives. By reviewing objective rankings of hazards in combination with spend, manufacturers can “green” up their operations while saving money.

Implications for Manufacturers

The opportunity for manufacturers is clear. Save money, and help save the planet. Most manufacturers I speak with would love to be more eco-friendly, but find themselves as cross purposes with making a profit. This initiative helps them operate in a more sustainable way without a big price tag. In fact, it comes with money back! Of course Jeremy points out that chemicals can’t be rationalized blindly, they have to meet the operational needs they are currently being purchased for. The approach is sound, and IHS has a number of case studies they shared with me that back up the approach.

So companies can go green without having to sacrifice profits, I hope you found it interesting. It’s a pretty compelling opportunity. Who knew? I didn’t, if you did let us know about it.