PRODUCT AND SERVICE DEVELOPMENT DEFINITIONS AND KEY MEASURE

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1 PRODUCT AND SERVICE DEVELOPMENT DEFINITIONS AND KEY MEASURE Version THE FRAMEWORK FOR PROCESS IMPROVEMENT Experience shows that benchmarking s potential to drive dramatic improvement lies squarely in making out-of-the-box comparisons and searching for insights not typically found within intra-industry paradigms. To enable this type of benefi cial benchmarking, the APQC Process Classifi cation Framework SM (PCF) serves as a high-level, industry-neutral enterprise model that allows organizations to see their activities from a crossindustry process viewpoint. The PCF enables organizations to understand their inner workings from a horizontal process perspective, rather than a vertical functional viewpoint. The PCF does not list all processes within a specifi c organization, and every process listed in the framework is not present in every organization. Originally created in 1992 by APQC and a group of members, the framework has experienced more than twenty years of creative use by thousands of organizations worldwide. The PCF is supported by APQC s Open Standards Benchmarking research. It is continuously enhanced as APQC s Open Standards Benchmarking team further develops defi nitions, processes, and measures. Please visit APQC s web site periodically for updates. The PCF is available for organizations of all industries and sizes at no charge by visiting Develop and Manage Products and Services 1.0 Develop Vision and Strategy OPERATING PROCESSES >>> 2.0 Develop and Manage Products and Services >>> 3.0 Market and Sell Products and Services >>> 4.0 Deliver Products and Services >>> MANAGEMENT AND SUPPORT SERVICES 6.0 Develop and Manage Human Capital 7.0 Manage Information Technology 8.0 Manage Financial Resources 9.0 Acquire, Construct, and Manage Assets 10.0 Manage Enterprise Risk, Compliance, and Resiliency 5.0 Manage Customer Service 11.0 Manage External Relationships HISTORY The Process Classifi cation Framework was originally envisioned as a taxonomy of business processes. The initial design involved more than 80 organizations from the United States and worldwide. Since its inception, the PCF has been updated several times to refl ect changes in the way organizations do business Develop and Manage Business Capabilities In response to feedback from users of the PCF, APQC regularly engages practitioners, consultants, and academics to develop defi nitions based on real-world experience with the processes. That collaborative effort resulted in this document: a listing of processes with defi nitions and selected key performance indicators from APQC s Open Standards Benchmarking repository. The defi nitions contained in this document are to be considered in conjunction with the PCF. The content in this document will be updated according to research performed by APQC and subsequent updates to the PCF. This document was created using PCF version Version October 2012

2 2.0 Develop and Manage Products and Services Defi nitions and Key Measures TABLE OF CONTENTS 2.1 Manage product and service portfolio 3 Key Performance Indicators Evaluate performance of existing products/ services against market opportunities Defi ne product/service development requirements Perform discovery research Confi rm alignment of product/service concepts with business strategy Manage product and service life cycle Manage product and service master data Develop products and services 5 Key Performance Indicators Design, build, and evaluate products and services Test market for new or revised products and services Prepare for production 6 RIGHTS AND PERMISSIONS 2012 APQC. ALL RIGHTS RESERVED. APQC encourages the wide distribution, discussion, and use of the PCF and PCF defi nition documents for classifying and defi ning processes. APQC grants permission for use and adaptation of the PCF for internal use. For external use, APQC grants permission for publication, distribution, and use, provided that proper copyright acknowledgment is made to APQC. No modifi cations to the look or content should be made in external venues. ABOUT APQC APQC is a member-based nonprofi t and one of the world s leading proponents of knowledge management, benchmarking, and best practices business research. Working with more than 750 organizations worldwide in all industries, APQC provides organizations with the information they need to work smarter, faster, and with confi dence. Visit www. apqc.org or call and learn how to Make Best Practices Your Practices SM. Please use the following text when reusing the PCF in external print or electronic content. The PCF was developed by APQC and member companies as an open standard to facilitate improvement through process management and benchmarking regardless of industry, size, or geography. The PCF organizes operating and management processes into a number of enterprise-level categories, including categories, process groups, and over 1,000 processes and associated activities. The PCF and its associated measures and benchmarking surveys are available for download and completion at no charge at org. 2 Permission granted to photocopy for personal use APQC. ALL RIGHTS RESERVED.

3 2.1 Manage product and service portfolio (10061) This process group encompasses all processes associated with product and service portfolio management, including the analysis of the current portfolio compared to market opportunities and the defi nition of requirements for new/evolved products and services using that analysis. This group also includes activities related to the alignment of new additions to the portfolio with corporate business strategy as well as the management of the product or service lifecycle. Preliminary research and development falls in this group, under Perform discovery research. Key Performance Indicators: Total cost to generate new product/service ideas per $1,000 revenue Total R&D cost per business entity employee for the current reporting period Evaluate performance of existing products/services against market opportunities (10063) The Evaluate performance of existing products/services against market opportunities process is used to identify gaps between existing product/service capabilities or performance levels and the current market demand, available technologies, and customer requirements. This process culminates in the decision of whether or not to proceed with investments in the development of new deliverables. Input gathered from customers through exercises such as focus groups assess marketplace need. In addition, input can be gathered from internal or third-party service organizations to support the product/service evaluation. Although the marketplace may look for new technologies or techniques to enhance existing products and services, customers may not be willing to pay more for them. Accordingly, remember that perfection can be the enemy of good enough. Find out exactly what customers are willing to pay for, and ensure that efforts do not exceed the parameters of the development business case. This is especially important with global products for which cost and availability issues may be more apparent Defi ne product/service development requirements (10064) Define product/service development requirements encompasses the identifi cation of new products/services or potential improvements to current products/services. This process entails collaboration with members of the supply chain to ensure the feasibility of what is being defi ned in the requirements. For example, a product with manufacturing requirements that supply chain cannot currently fulfill requires a corporate decision to either upgrade manufacturing capabilities or abandon the new product. Depending on the nature of the fi nal product or service, product/service development requirements are often defi ned as a set of abilities, such as availability or reliability, that infl uence product development decisions. Version October

4 ( 2.1 Manage product and service portfolio continued ) Perform discovery research (10065) The Perform discovery research process encompasses tasks and decisions associated with early-stage research and development when product/service assumptions are greater than knowledge. Based on the gap between current product/ service characteristics and new/changing requirements (from the marketplace, customers, or other business forces), organizations use this process to identify and develop new technologies in support of a new product. This process also includes an assessment of how feasible it is to incorporate those new or potential technologies into products and services. It guides the funding and documentation of preliminary research and development projects and ensures that any fi ndings (related to feasibility of technology or other recommendations) translate into stage-gate processes that drive overall product/service development. Consider the ramifi cations of being too bleeding-edge (as opposed to being on the leading or cutting edge) with new products. Key stakeholders in the marketplace may not be ready to adopt the latest and greatest technologies, increasing the risk that the product or service will not succeed or be adopted Confi rm alignment of product/service concepts with business strategy (10066) The Confirm alignment of product/service concepts with business strategy process is a reality check prior to significant investment by the organization. It ensures that the new product/service concepts are in line with overall business strategy. This process involves planning and developing cost and quality targets for the new products/services. It can also involve the prioritization and timing of development activities if there are a number of concepts vying for funding or other scarce resources. Regardless of the number of product/service concepts, this process includes planning for product/service offering modifications. This process is most useful when the business strategy is current. If the strategy is outdated, this process may trigger a review of the corporate business direction and drivers Manage product and service life cycle (10067) The Manage product and service life cycle process includes the introduction of new products/services to the market and the retirement of outdated products/services. This process also encompasses the identification and refinement of performance indicators. Introduction of the new product/service may be timed to coincide with key marketing opportunities. Products and services should be retired when their marketplace or cost effectiveness begins to decline below a predetermined threshold. Once a product or service has reached marketplace maturity, its performance indicators should be continuously refined Manage product and service master data (14192) The Manage product and service master data process consists of activities related to the creation and storage of information related to both new and current products and services. This information may include design specifications, part descriptions, material data sheets, product history, and any documents associated with the product or service development process. Internal stakeholders may need access to product and service master data. Consider creating a central repository that is accessible by multiple groups across the enterprise. 4 Permission granted to photocopy for personal use APQC. ALL RIGHTS RESERVED.

5 2.2 Develop products and services (10062) This process group relates to the design, development, and in-service confi guration control of products and services. It encompasses traditional design, build, and evaluation processes; confi guration and change management; manufacturing and production process planning; and fi nal product validation and verifi cation. This process is where most of the product or service risk is identifi ed, controlled, and mitigated. Key Performance Indicators: Average time-to-market in days for new product/service development projects Average time-to-profi tability in months for: existing product/service improvement projects new product/service development projects Number of FTEs who develop and manage products and services per $1 billion revenue Percentage of existing product/service improvement projects launched: on budget on time Percentage of new product/service development projects launched: on budget on time Total cost per $1,000 revenue to: develop and manage products and services support product manufacturing or service delivery design and develop products/services test market products/services Design, build, and evaluate products and services (10080) The Design, build, and evaluate product and services process describes the core engineering design and development of any new product/service or existing product/service upgrade. The process includes planning the development of the product/ service and assigning resources to deliver the plan. Building on the research and development efforts carried out earlier in the development lifecycle, the process activities define a high-level business case and technical assessment. Product/service design specifications are developed and documented as part of this process, and both mandatory and elective external reviews are conducted with regard to legal, regulatory, and standards concerns. Additional activities that occur during this process include the building of prototypes, elimination of quality and reliability problems, conduct of in-house product/service testing and evaluation of feasibility, identification of design/development performance indicators, and collaboration on product/ service design with suppliers and contract manufacturers Test market for new or revised products and services (10081) Test market for new or revised products and services is a more detailed iteration of the marketplace analysis that took place earlier in the product development lifecycle. It involves preparing a detailed market study, conducting customer tests and interviews, finalizing product/service characteristics and business cases, finalizing technical requirements, and identifying requirements for changes to the manufacturing and delivery processes that support market delivery. To prepare a detailed market study that accounts for any changes in the global environment, consider conducting a series of interviews, workshops, and focus groups with potential and existing customers. Version October

6 ( 2.2 Develop products and services continued ) Prepare for production (10082) In the Prepare for production process, the organization develops and tests a prototype production and/or service delivery process to ensure optimal production time and alignment with cost targets. This process also ensures that the production/ assembly/manufacturing lines are suitably equipped to meet the demands of the new product. If they are not, new material and equipment can be designed and obtained. With the prototype process successfully tested and production or assembly rates realized, the full-scale production process or methodology can be installed and validated. The Prepare for production process is often a key target for Lean initiatives to ensure operational and cost efficiency. 123 North Post Oak Lane, Third Floor Houston, Texas phone fax pcf_feedback@apqc.org 6 Permission granted to photocopy for personal use APQC. ALL RIGHTS RESERVED.