White Paper. White Paper 10 Proven Practices for Successful PLM Evaluations. 1: Involve Experienced, Independent PLM Experts

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1 White Paper 10 Proven Practices for Successful PLM Evaluations Finding and selecting the product lifecycle management (PLM) solution that can best meet your organization s immediate and long- term needs is a complex and demanding task. If you select the right software and implementation partner, your organization will have short time- to- value as well as all the benefits PLM can provide for many years to come. But going about the evaluation in an improper way and making the wrong selection often result in budget overruns, implementation delays, user dissatisfaction and rejection, and maybe even the need to go through a similar evaluation process again after only a few years to add functionality that is missing or replace the entire system. 1. Involve experienced, independent PLM experts 2. Learn from the experience of others 3. Secure management sponsorship and support 4. Get the best people 5. Transform existing practices and processes 6. Develop a long- term PLM strategy 7. Define your PLM requirements before speaking with software vendors 8. Determine the value of PLM before setting a budget 9. Test before you buy 10. Inform often and involve everyone So, what can you do to ensure your organization finds and selects the right system among the dozens of systems available today? Since making a wrong decision can be costly and have a long lasting negative effect on your company, it is worthwhile to take a methodical approach and use proven practices that have worked for other companies and have reliably led to the selection of the right PLM solution. To identify what works and what doesn t, we talked with various organizations that have evaluated and implemented PLM. We analyzed over a dozen companies in the automotive supplier, aerospace and defense, consumer goods, life science, machinery equipment and high- tech and electronics industries to find out what made their PLM evaluation projects successful, why they had difficulties, or why they failed. Based on these companies and our own experience, we identified 10 best practices for evaluating PLM that will help you in the selection of the best PLM solution for your organization and lay the groundwork for a successful subsequent implementation. 1: Involve Experienced, Independent PLM Experts For most companies PLM is not a core competency and, consequently, they often do not possess the necessary knowledge, information, and experience to ensure a proper evaluation and selection of the right technology and implementation partner. Yet many companies rely only on their own staff to find the appropriate system, quite often with a futile outcome. Page 1

2 Lack of unbiased information, knowledge and experience is often the reason why an inappropriate PLM system is selected. Independent PLM experts can contribute significantly in finding the right system. The most common factor among companies that successfully selected and implemented PLM is that they all involved an experienced partner or consultant with extensive PLM knowledge and integration expertise very early in the evaluation process. Such a partner has done it many times before and will therefore save you time and money, help to avoid common pitfalls, ask the right questions, and provide guidance throughout the entire selection process. An additional benefit is when the same partner is not only able to help during the evaluation, but can later also assist in the implementation and operation of the system. Another very important factor during the selection process is to seek a partner or system integrator who is vendor and technology independent and not to rely too much on software vendors for help. The latter often try to influence or change the requirements so that their product best meets the criteria, a problem one company representative described as follows: Relying on a software vendor to help with the evaluation is like trusting a fox to guard the henhouse. A neutral partner will ensure that your PLM solution is selected based on your company s business needs and not based on the possibly limited functionality of a particular system. It is better to pay for good information than for a bad (or inappro- priate) system. 2: Learn from the Experience of Others Early in the evaluation process it is imperative to learn as much as possible about PLM by reading related literature, attending PLM seminars, talking with consultants, and visiting companies that have gone through a selection process. This will enable you to assess the information given by outside sources and to make good decisions throughout the selection process. The PLM Technology Guide is an excellent source of independent and objective information specifically about PLM ( Important in this early phase is to acquire knowledge as much as possible from neutral sources, such as industry analysts, consultants, and other companies already using PLM, but resist the temptation to contact system vendors. Although the latter is a convenient source of an abundance of free information, the knowledge you build is biased and can early on lead you in the wrong direction. One of the best ways to learn about PLM is to talk to companies using it, and one of the best ways to find such companies is to ask your PLM Page 2

3 If management is not behind the PLM initiative, no one is and it will fail. partner or consultant. They will be able to introduce you to companies that can share their experiences and lessons learned both good and bad which is precisely what you need to make good decisions, reduce the risk, and avoid making mistakes along the way. 3: Secure Management Sponsorship and Support PLM can affect almost every part of an organization. As a result, investments in software and services as well as internal efforts to evaluate, implement, deploy, and maintain such solutions are usually significant. To ensure that the necessary resources are available throughout the project it is critically important to secure the support and sponsorship of executive management before starting. Just having the support is not enough though. It is as important for management to openly express their backing and to let the entire organization know that this project is critical and requires the attention and support of all employees, whether directly involved or not. Assign those people to the PLM project that the business absolutely does not want to give up. The importance of this point cannot be stressed enough. As indicated above, PLM projects are usually resource intensive, and only management can make sure that the project receives the attention and priority it needs to be successful. Not having strong management support and not explicitly informing the organization about management s view of the importance of the project are, in our experience, among the most important reasons why PLM projects fail. 4: Get the Best People Cisco s CIO said about his company s approach to evaluating and implementing an important business system: Our orientation in pulling people out of their jobs [to work on this project] was that if it was easy we were pulling the wrong people. We pulled people out that the business absolutely did not want to give up. The same approach should be taken when evaluating and implementing PLM. Organizations commonly use a PLM system much longer than it takes to evaluate and implement it. Any upfront investments, be it for external expertise or internal resources, are usually recovered within only a short Page 3

4 Automating a bad process with PLM technology simply results in doing something bad faster. The biggest business improvements can be achieved when PLM technology is utilized to integrate optimized process chains. period of time if the upfront work is done proficiently by people who really understand the business and PLM. Involving only the best people from all affected areas of the organization in the PLM project team is a good assurance for success. Mistakes, oversights, and omissions on the other hand whether committed knowingly or not often result in very costly consequences and corrective actions at some point in the future. 5: Transform Existing Practices and Processes Evaluating and implementing a PLM system without simultaneously optimizing related practices and processes is like buying a Ferrari to drive it on gravel roads. In both cases the technology cannot be utilized to its fullest potential. One of the most beneficial aspects of PLM is its ability to integrate data and processes, as illustrated in figure 1. Figure 1: Integration of functionally divided operations (according to A.W. Scheer, Ph.D.) Traditionally, companies have divided their operations in various sub- processes or activities that are each carried out independently by separate departments. Each sub- process is preceded by a lead- in period, in which task owners prepare the required activity and gather necessary data and information for its execution. Between sub- processes data often has to be transferred from one database and format to another because departments store their data in separate databases and Page 4

5 distinct formats. Studies have shown that lead- in periods and data transfer activities can cause up to 70% of the entire work effort. Although a PLM system cannot entirely eliminate these non- value- add lead- in and data transfer activities, reductions of as much as 90% and resulting overall process efficiency improvements of over 60% have been achieved through enterprise- wide data and process integration. The first step in utilizing the full potential and achieving all the benefits of PLM is to conduct a detailed process and technology analysis with the objective of identifying existing process discontinuities, redundancies, non- value added activities, and isolated data repositories. The next step is to define optimized processes on the phase and step levels, taking into consideration and fully utilizing the capabilities of available PLM technologies. The latter aspect is an important reason why the process reengineering activities and the evaluation of a PLM system should be done in a coordinated effort and with participation of experts who have a deep understanding of both process improvements as well as existing PLM technologies. 6: Develop a Long- Term PLM Strategy A PLM strategy provides the foundation for an enterprise- wide integrated and cost- effective PLM solution and assures that all potential benefits of PLM can be achieved. People and organizations don t plan to fail, but they fail to plan. The objective of developing a PLM strategy is to provide a decision framework for the long- term implementation, deployment, and use of PLM within the extended enterprise. The strategy should address which parts of the organization will be using PLM, what needs it ought to address initially and in the long- term, and how the system will fit into the organization s application framework, i.e. what will be done in PLM versus other applications, which existing systems PLM will replace, which it will complement, and whether integrations to other systems, such as ERP or CRM, are desired or required. Developing a long- term PLM strategy for the entire organization is an important prerequisite for defining appropriate application requirements and selecting the right system. A too- narrow focus on only a few functional areas and short- term needs can result in the selection of a system that Page 5

6 may do one thing well but does not provide a solution for another in industry terms often referred to as a point solution. Choosing such a point solution can be beneficial if it is done intentionally, but unfortunate if done by mistake. The latter usually means that the company has to find and implement one or more additional systems that address the needs not covered by the first system and, in addition, often develop costly integrations between the different systems. A PLM strategy also allows to prioritize the implementation of different functionalities in phases and to determine the areas of the organization in which to deploy first. But most importantly, it helps to avoid the creation of an application patchwork with point solutions over time and, instead, ensures that a comprehensive and integrated solution is selected that will meet the long- term needs of the entire organization, even though various elements of the selected system are implemented and deployed in different phases over a longer period of time. 7: Define Your PLM Requirements Before Speaking With Software Vendors PLM can only afford your organization a compe- titive advantage if the solution addresses your specific situation and needs and is designed according to your requirements. When evaluating PLM systems, many companies start gathering information by reading product brochures, studying vendors websites, attending trade shows, and inviting system vendors for initial sales meetings or even product demonstrations. These activities are often done without having established a clear understanding of the needs of the entire organization and the ensuing company- specific requirements for PLM. In this situation, software vendors often offer their help by suggesting certain functionalities a PLM system should provide. This, unfortunately, serves almost exclusively the vendors interests. The reason is that software vendors have one major objective: To sell their software. To do this, vendors often try to influence the requirements in favor of their application a common tactic in the sales process. Vendors attempt to do this either by providing a list of requirements that are tailored to their system or by demonstrating the strengths of their system early in the process. If a vendor can introduce functional requirements that only his product can meet, his chances of selling his software increase dramatically. Page 6

7 A good starting point for defining requirements for your future PLM system is to use so- called requirements or RFP templates that can be bought on the Internet. An excellent template is available for download on the PLM Technology Guide at Such a template can save weeks or even months of work and help to avoid costly mistakes by employing an industry standard approach in defining application requirements. It is important though to understand that the template should generally not be used as is. Since they provide a list of standard requirements, these templates may not include or reflect requirements that are specific to your company. It is important therefore that the requirements template provides the possibility to add company specific or custom requirements to the list of available standard requirements. The best approach is to define a list of detailed application requirements that is based partially on standard requirements and takes into consideration your organization s specific situation and needs. Input for your requirements should come from the process and technology analysis, the optimized processes, your PLM strategy, and from independent PLM experts that have no bias towards a specific solution. 8: Determine the Value of PLM before Setting a Budget It is important to use appropriate assumptions and a proven metho- dology for determining the expected ROI of your PLM solution In a recent survey conducted by a PLM industry analyst 68% of respondents indicated that their investment in PLM either did not produce the expected return on investment or ROI (30%), they weren t sure whether they achieved the expected ROI (22%), or they did not have metrics, i.e. were not able to calculate or did not know the ROI (16%). The conclusion of this survey result is that apparently more than two thirds of the companies that have made investments in PLM have done so either by using wrong assumptions or without determining its real value prior to making a purchase. How is this possible? Many companies attempt to rationalize an investment in PLM often only after a project budget is established, and frequently they turn to software vendors for help with the justification. This approach is problematic insofar as vendors have an inherent interest in a positive result, for any negative outcome will preclude them from selling their software. This often encourages parties involved in the Page 7

8 justification to modify assumptions in order to inflate the value of the desired improvements or potential savings and thereby artificially increase the projected return of investment. Organizations should therefore first determine the value of the improvements that can be achieved with PLM, independent of any vendor or system. This information can then be used to set the budget for the solution, under consideration of a desired or required return on investment or net present value (NPV) of the improvement. If the cost of the proposed PLM solution is within the budget, i.e. less than the value of the improvement, the organization will achieve the desired ROI or NPV and an investment will make sense. If the cost exceeds the budget or does not provide a sufficient ROI or NPV, either the scope has to be changed or the project abandoned. This budget or cost limit can also become an openly stated requirement that potential vendors will have to meet in order to be further considered. Using proper assumptions and a systematic, proven method to determine the ROI of an investment in PLM ensures that you will not spend too much money on something you do not really need and that you are among the 32% of companies that achieve the expected results from their investments in PLM. 9: Test Before You Buy Do not buy software before you have tested its ability to meet all your requirements. Investments and expenditures in PLM can quickly exceed $100,000 or more for all necessary software, maintenance, implementation and support services, training, and hardware, even for smaller deployments. A major part of this is software and first year maintenance, which usually represent between 40% - 50% of the overall costs. Considering this, it makes sense to buy the software only when you know that it can do what you need and what the vendor promises. The best way to verify this is by conducting a test or pilot project with the selected PLM system. Generally this is a project of about three to four months duration in which the preferred PLM system is tested against two or three of your company s critical use cases or scenarios. Depending on the situation this can be done either with test data in a non- productive environment often also called conference room pilot or with a limited set of data in a production pilot for a real, but non- critical project. Page 8

9 Software vendors are generally willing to provide the necessary software licenses for the duration of the pilot on a trial basis for free. It is however common and fair to pay the implementation partner for the services that are necessary to install and configure the pilot, for the training of the pilot users, and for the required hardware. If done correctly there is not much extra cost for such a pilot as virtually all the work performed and hardware purchased can later be leveraged or used for the production environment. The potential downside of a pilot is the additional three or four months it takes to conduct it properly. The upside on the other hand can be significant: Having the confirmation that the software can really meet your company s requirements and knowing how the implementation partner performs before large amounts of money are committed to either party. 10: Inform Often and Involve Everyone As a general rule, it is better to inform too much than not enough. One reason why PLM projects fail is user dissatisfaction or even rejection. To avoid this, it is important to inform everyone early and regularly. Evaluating PLM is not only about selecting new technology, it also means preparing the organization and the employees for change. And change is best managed by involving people as much as possible in the process and by providing honest information about the predicted benefits, effects, and consequences. Of course it may not be possible to involve the entire organization in the system evaluation. However, it can be very beneficial to ask all affected employees what they expect of the new system, to consider their input as much as possible, and to continually inform them about the project status and the reasons why management and the selection team are making certain decisions. It will help to increase the acceptance and maybe even generate a certain anticipation of the new PLM system, and as a result, contribute to a successful outcome of the project. Page 9

10 About the Author Andreas Lindenthal is the founder and principal of PLMadvisors. He brings over 25 years of professional, international experience in innovation, new product development and PLM to his clients. He serves clients in the aerospace & defense, automotive, consumer goods, high tech & electronics, medical device and machinery & plant equipment industries. Andreas has successfully assisted over 50 small and large companies in the automotive, aerospace, consumer goods, high- tech/electronics, machinery equipment, and medical device industries in the development of strategies, optimization of business processes and the implementation of new technologies to enable their growth strategies and drive innovation, increase productivity, shorten time- to- market, reduce costs, ensure compliance, and improve product quality. Andreas is a former partner of Kalypso and co- founder and president of Metafore, both consulting firms focused on innovation, new product development and PLM. He also served as an executive of UGS Corp. (today Siemens PLM Software), a leading provider of product lifecycle management software, both in Switzerland and the United States. Prior to UGS he worked as head of product development at Sulzer AG, a Swiss technology corporation, where he was responsible for new product development (NPDI). In this role he also led the evaluation, implementation, and operation of an enterprise- wide PLM system with the objective of lowering time- to- market and cost of goods sold for new products. From Sulzer he received the Innovation Award for his pioneering ideas and work in establishing and sustaining a corporate culture of innovation and productivity. Andreas holds an MBA degree from the Graziadio School of Business and Management at Pepperdine University in Malibu, California and a bachelor degree in Mechanical Engineering with emphasis in Computer Integrated Manufacturing (CIM) from the Zurich University of Applied Sciences in Switzerland. Contact Andreas Lindenthal at andreas.lindenthal@plmadvisors.com or at PLM. About PLMadvisors We help our clients to drive innovation, accelerate revenues, increase productivity, reduce costs, improve quality, shorten time- to- market and ensure compliance through the resourceful utilization of best- in- class innovation, new product development and product lifecycle management practices, processes and technologies. For more information call us at PLM, send an e- mail to info@plmadvisors.com, or go to our website at Copyright 2013 PLM Advisors, LLC. All rights reserved. Page 10