How to Measure the Value of PLM Solutions

My first post on ensuring value for PLM solutions focused on what to measure, and presented the first three steps to ensure business value:

  1. Defining a Total Value Model
  2. Developing a Program Value Scorecard with measurable Key Performance Indicators (KPIs)
  3. Creating program scorecards for each individual project or program phase

In this post, I’ll explain the final two steps of the overall approach to ensuring value throughout the life of a long-term PLM initiative:

Step 4: Continuously Measure Value during the Execution and After Each Rollout

Assuming the scorecard you’ve created contains sufficiently detailed measures, the next step is for the project team to define how to gather the data. Ideally, the data can be easily extracted from different systems such as PLM or ERP using standard reporting functionalities so they can be used to drive decisions throughout the project and in the overall PLM program.

Next the team should create a baseline of current business metrics. If legacy systems are to be replaced as part of the project, someone will likely need to extract the relevant data from them. However, if legacy data are migrated to the new PLM system, the team could create the baseline in the new solution as soon it is up and running. Remember: if PLM processes undergo major changes in the project, make sure that data in the baseline are comparable with data from the new solution.

Finally, make sure to continue measurement long after the initial rollout of the new system. Process improvement with the new system should begin quickly, but it often takes time to realize the more full value projected in the various measures defined in the scorecard.

Many companies struggle to gather the data during the project and after rollout. During the project, the priority is on project issues rather than on gathering data. After the rollout, your team will focus on using the new solution and moving on to other projects.

The key to successful measurement is program governance. Program sponsors and managers need to use the scorecard at every meeting and program review, and make sure that all major decisions are made in the context of target value and measures.

Step 5: Refine the Value Model before Each New Project or Phase

It is natural that PLM program managers adjust their plans during program execution in response to new business requirements, acquisitions, new findings, organizational changes, and so on. From a value perspective, it is critical that program leadership consider the cost-benefit tradeoffs of any significant potential change. How would the proposed change affect the Total Value Model? How would we update the Program Value Scorecard? What are the appropriate KPIs?

Updating the Value Model can be a useful exercise, but changes to the most important strategic or process value objectives should only be made after careful consideration and review with key stakeholders. For example, if increasing product development efficiency is a strategic objective, program changes may affect how long it takes to achieve specific improvements, such as reduction in design rework, but the overall objective most likely remains a key driver for the program.

In sum, taking a disciplined approach to defining what to measure and how to measure value throughout the life of a program can provide great benefits to program sponsors and managers. By following the five steps outlined above and in my earlier post, companies will:

  • Establish a consistent Value Model that integrates long-term Strategic Value, mid-term Process Value and short-term Infrastructure and Tactical Value
  • Ensure that program decision making is guided by the overall targeted and agreed value (and not by the specific needs of some departments only)
  • Maintain a set of consistent scorecards that grows as the scope of the PLM program grows
  • Support clear and concrete measurement of the success of the program and its contribution to improved business performance

This entry was posted in Best Practices, Product Lifecycle Management and tagged . Bookmark the permalink.

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