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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

2©2010 APQC. ALL RIGHTS RESERVED. 2

Discussion

Innovation: Putting Ideas into Action

Rachel BrillRachel Brill

The Idea of the The Idea of the “New CrossFunctional”


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


Personality types

IBM’s Approachpp


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


The Communicator The Roadblock Remover The Futurecaster

Flexibility


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


Measurement

IBM’s Emerging Business Opportunities Program


Cast the Net Wide


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


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


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)


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.


Mayo Clinic’s Annual Symposiumy y p


IBM Looks Globallyy

Global Technology Outlook

Global Innovation Outlook


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.


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


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


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 ”


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


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


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


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


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


Different Kinds of Innovation


It’s About Ships and Castles


Freedom to Explorep


Picking the Right Peopleg g p


Key Points for Management y g


To the Future…


Show, Don’t Just Tell

Think “outside the box”


The Classic “9 Dot” Problem

Connect the dots with no more than


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



The Classic “9 Dot” ProblemThe “Wide Dot” Solution

Note: Only 3 lines!



The Classic “9 Dot” ProblemThe “Big Dull Pencil” Solution

Note: Only 1 line!



The Classic “9 Dot” ProblemThe “Tube and Loop” Solution



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


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


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


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


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


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.


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


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!)


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]


713‐685‐4757

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