This paper is designed to help CEOs, CFOs, and senior Engineering executives understand how and where to leverage the growing phenomenon known as Global Product Development as a means to gain a dramatic increase in productivity within their product development operation.
P T C . c o m
Gaining Competitive Advantage Through Global
Product Development
A PTC White Paper
AbstractBecause products ultimately define a manufacturing company's success, product development is by definition a mission critical process. It is also avery expensive process-in most manufacturing sectors, companies reinvest between 3% and 8% of their total revenues back into product development each year. This large investment is primarily spent on human resources, ranging from those in the marketing department who anticipatecustomer needs, to those in R&D who conceptualize, test, and refine new product ideas, to those in various organizations who document and preparethe information that will be used in the manufacturing and subsequent operation of the product in the field. Across this spectrum of employees, therange of value-add varies dramatically. It is typical to have a handful of truly critical members who embody the company's knowledge of the market and its product lines, and then a tremendous supporting cast who help to see those ideas get fully developed and realized.Companies who manage to develop higher levels of productivity in product development compared to their peers enjoy a well-documented competitive advantage in the marketplace. Because productivity is ultimately defined as the amount of output per unit of input, companies whocan find a means to develop great products while containing product development costs enjoy a distinct advantage in terms of market share andprofitability. Within their product development process, few companies effectively balance their inputs and outputs today. By concentrating bothhigher value-add and lower value-add resources in a single high-cost region, most companies simply overpay for their respective level of output.Other companies may spend less across the board by mandate, but in so doing they compromise on value-add and therefore achieve correspondinglylower returns as well. Fortunately, for most companies, there is not just an opportunity but actually an entitlement to improved productivity. Just as levels of value-addvary significantly across activities, so too do costs vary dramatically from region to region. By simply rearranging product development activities andpersonnel in a globally distributed fashion that better aligns cost structures with levels of value-add, companies can immediately increase productdevelopment productivity by 10%, enjoying a cost savings equal to 0.5% of total company revenues.This paper is designed to help CEOs, CFOs, and senior Engineering executives understand how and where to leverage the growing phenomenonknown as Global Product Development as a means to gain a dramatic increase in productivity within their product development operation. For companies pursuing growth opportunities, this productivity increase can materialize into increased capacity and capability within a constant coststructure. For companies pursuing increased profitability levels, the same productivity increase can be monetized as reduced costs and improvedprofits within a constant capacity. Either way, the benefit to a company and its shareholders is significant.P T C . c o m
White Paper Global Product Development Page 2 of 13
Abstract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
What Is Global Product Development? . . . . . . . 3
Domino Theory . . . . . . . . . . . . . . . . . . . . . . . 3
The Basics of Global Product Development. . . . 3
Offshoring Versus Outsourcing. . . . . . . . . . . . . . 4
Global Development Maturity Model . . . . . . . . . . 4
Value Proposition. . . . . . . . . . . . . . . . . . . . . . 5
Financial Benefits. . . . . . . . . . . . . . . . . . . . . . 5
Operational Benefits . . . . . . . . . . . . . . . . . . . . 5
Global Product Development - Is It Real?. . . . . 6
Manufacturing Leaders Deploy Global Product Development. . . . . . . . . . . . . . . . . . . . 6
Global Product Development at PTC . . . . . . . . . . . 6
Operational Considerations. . . . . . . . . . . . . . . 7
What To Offshore? . . . . . . . . . . . . . . . . . . . . . 7
Where to Offshore?. . . . . . . . . . . . . . . . . . . . . 8
How to Offshore? . . . . . . . . . . . . . . . . . . . . . . 9
The Outsourcing Option . . . . . . . . . . . . . . . . . 10
Risks and Challenges. . . . . . . . . . . . . . . ... [download for more]
