Clarity on PLM

A quick peek into some Tech-Clarity research on … Innovating Through an Economic Downturn points out the importance of innovation so that smaller manufacturers can survive in the current, global economic crisis. The paper is intended to help companies develop an action plan that both recognizes the difficult reality that most manufacturers face today, and allows them to continue to invest in the future. This research complements earlier Tech-Clarity research focused on Engineering’s Role in Surviving a Down Economy, focusing on the implications for small to mid-size businesses (SMB).

The Research
The research includes interviews with three manufacturers, highlighting the challenges they faced during difficult economic times and the approaches they took to live to fight another day. The research points out that small to mid-size manufacturers have to make difficult trade-offs between product innovation and cost control, but that companies that continue to invest in innovation will fare better during the economic downturn and beyond.

The research identified three strategic approaches that companies have adopted during their downturns:

• Product (and Market) Innovation – Companies can’t afford to stop innovating. While some companies might be tempted to go into a pure sustaining engineering mode (putting the brakes on new product development), it is important for companies to continue to move key innovations forward to be prepared when market conditions improve.
• Reductive Innovation (innovation to reduce cost) - Small to mid-sized manufacturers are often caught in a pinch during economic downturns, having to offer price concessions to customers while simultaneously experiencing weaker product demand. This double-impact on their top lines means that they need to reduce cost in order to maintain profitability. Product innovation can be applied to cost reduction by reducing product or manufacturing costs. Many companies recognize that a down market is a good excuse to go back to correct over-designed or suboptimal designs that were acceptable during the good times.
• Process Innovation- Perhaps one of the major improvements can come from process innovation. Many innovative ideas are product lifecycle related and impact the efficiency of developing and managing products. By improving the efficiency of product innovation and product development, smaller manufacturers can afford to spend more of their limited resources on developing winning products.

These approaches were supported by product lifecycle management (PLM) solutions, which can support each of these three strategies. PLM, in fact, often helps companies achieve these three strategic objectives simultaneously – leading to improvements in both top-line revenue and bottom-line profitability.

My Thoughts
The three manufacturers interviewed helped crystallize a key fact – companies facing difficult times must act. By turning to innovation, these companies were able to survive their difficult times. In each case, the use of PLM technology helped to enable this innovation, providing the support required to continue to innovate despite limited resources. PLM helped them to put in place better processes that helped them survive the downturn, but also left them in a stronger competitive position during their recovery. PLM is unique among enterprise applications because of the dual role it can play in increasing revenue and decreasing cost – a compelling opportunity for SMBs in troubled times.

Implications for Manufacturers
The implications are clear. Small to mid-size manufacturers need to act despite difficult economic times. Now that the economy appears to have stabalized, it is time for companies to develop a PLM and innovation strategy to set themselves up for short-term and long-term success.

This research highlighted the experiences of three ENOVIA SmarTeam customers. Look for more information on the Enovia SmarTeam solution in an upcoming “One to One” post later this week.

So that was a quick peek into some recent research on innovating to combat difficult times, I hope you found it interesting. Does the research reflect reality? Do you see it differently? Let us know what it looks like from your perspective.

A quick peek into some research on … how the economy has impacted smaller companies in the engineering software market. This is a follow up to last my post on the impact of the economy on the engineering software market as a whole, with the detail I promised on smaller vendors. Last week I tipped my hand by saying that  smaller companies believe they will weather the storm, and some feel they will come out stronger on the other end. That generated some interesting discussion, so I thought I should hurry to post some detail, so here it is…

Research Background
My presentation at COFES indicated that the engineering software market is staying positive in challenging times. The research, conducted jointly by with Tech-Clarity, Cyon Research, and Design Insight, was presented at the annual “Congress for the Future of Engineering Software” and was the result of 1,000 survey responses. As I stated last week, the research was not intended to be an economic forecast, but instead an indication of the sentiment of the industry. The study was designed to guage respondents’ opinions about the market, and should be take as such.

Research Results – Smaller Vendors
The survey allowed respondents to classify themselves as customers (those that use engineering software), vendors, or channel (among others). Vendors were then broken down into the following two major categories:

• Broad Vendor – (broad suite) – a software company that offers a broad range of solutions
• Targeted Vendor – (targeted solutions) – a software company that offers one (or a few) best of breed tools

I was particularly interested in how the smaller vendors were weathering the financial storm. These smaller vendors play an important role in the PLM ecosystem, frequently pushing the boundaries of current functionally (I call these companies “innovators”) or serving a niche solution or population (I call these “specialty vendors”). These companies typically provide deeper capabilities for a specific industry, user population, or process that the larger vendors don’t support as well. These companies help to fill in the gaps for manufacturers while they wait for the larger vendors to address these needs (of which, some will probably remain unmet).

So what is happening to these vendors? The chart above shows that 75% felt that these companies would struggle, but survive. Given how drastic and unpredictable this economic downturn has been, I find that a surprising level of confidence. Still, 32% of respondents believed that smaller companies would go out of business, and 28% believed they would get acquired. Note that while this was supposed to be the “most likely” outcome, respondents could pick multiple outcomes. I believe this data is showing that respondents believe that some smaller companies will survive, and others will be acquired or go out of business. This is not an “either-or” situation, the scenario will be unique for each of the smaller vendors.These results are far away from the “doom and gloom” that are prevalent in some other industries.

My favorite view into this subject can be seen in the table below. When you analyze the opinions of what will happen to the smaller vendors based on who is commenting, you find a few interesting things:

• Targeted vendors don’t think they are going away
• Bigger vendors think they will be acquired (by them, I assume?)
• Bigger vendors are the most pessimistic about specialists, but interestingly the customers disagree

So the view from the smaller vendors’ perspective is not as bleak as some might thing. On the other hand, few believe it’s “business as usual.” These are tough times, and there have already been corporate casualties.

My Thoughts
What does all this mean? My opinion is that the engineering software market – as a whole – will struggle but survive.The smaller vendors, who are more nimble but also more vulnerable, believe they will stand the test of time. This is good for all of us, as they typically push the limits of the current solutions and help bring more innovation to the software market.

Implications for Manufacturers
For manufacturers, you should make sure to know how healthy your vendor is, but don’t panic. I don’t believe that a “rip and replace” strategy to save on software and maintenance costs will be easy to justify as a short-term reaction. Stick with your strategy, but update it based on the economic realities. If you are in the position to take advantage of it, this might even be a pretty good time to look for some deals from your vendors.

So that was a quick peek into some recent research on the impact of the economy on smaller vendors, I hope you found it interesting. Does the research reflect reality? Do you see it differently? Let us know what it looks like from your perspective.

A quick peek into some research on … social computing in PLM that I am currently working on. I had the opportunity to lead a discussion at COFES (Congress for the Future of Engineering Software) this morning on the use of social networking in design and engineering. I am just starting my research project for a paper, so the timing was very good to start the discussion. I will share my key takeaways from the conversation with you now, and of course post a link to the paper when it is ready.

The Research
Instead of going into detail on what I am looking into, I will point to a number of my recent blog posts on the topic. They should give you a good idea about my views on the topic:

How Does Social Computing in PLM Help Collaboration?
Why Social Networking in PLM is More than Just Collaboration
What I Learned: Why Social Networking in PLM is a (Really) Bad Idea 
(hint) You might want to read the last one and not just take the title for face value.

My Takeaways from Today
The primary surprise take away from my session was the level of interest in the topic. Manufacturers, vendors, consultants, and other analysts all attended and contributed to the discussion. I believe we are early in the maturity curve in our use of these technologies, and that the high level of interest shows that people are getting a glimpse that something very important is happening here. They are starting to see what I have believed for some time – that the use of these technologies is coming and that it is inevitable. Our youngest participant said what I think we all know, “this is just how we communicate these days.” Using these tools is as common to those his age as using the telephone was to me (land line, living through the “new technology” of push buttons vs. rotary dialing in my case).

The interest came from believers and from those that don’t see it, or perhaps don’t want it. It was great to hear both sides. It is clear that there are concerns about security, and that there are (legitimate) concerns that these technologies will just add more information and communication to an already cluttered landscape. Those that had been using the technology longest, though, believed that the use of the technology would settle in to a workable level over time, and that the solutions would find their place along with other forms of communication technology.

What does this mean? When there is a packed room full of a combination of supporters, detractors, and those that just want to be educated – that is the smoke that says there is a fire burning. There is something new happening that is exciting and promising. It will mean change. Some will embrace it and others will fight it. Some might want to adopt it while the corporate antibodies try to fight it. There is still a lot to learn as we find out where this will provide value and how, but the interest level is very high.

Implications for Manufacturers
I will keep this brief, because there are other sessions I want to attend to learn from others in the great network of individuals that are physically here at COFES:

• Social computing in PLM is a real and compelling
• The intersection of social computing and engineering is happening – although slowly
• There is a lot of potential value
• There are a lot of potential barriers
• Social computing is not just for the younger generation (although they are more likely to just expect it)
• As an industry, we are very early in the maturity of our vision to use these technologies, we have a lot of experimentation left before there is an accepted “best practice” approach

My favorite takeaway comes in the form of a quote from one of the participants. He correctly pointed out that “the network that you build is an asset.” I couldn’t agree more.

So that was a quick peek into some of my current research on social computing in PLM, I hope you found it interesting. Does the research reflect reality? Do you see it differently? Let us know what it looks like from your perspective.