One of management’s primary purposes is to take limited resources and invest in projects that will provide the company with the greatest return. During boom years, when resources are not as restricted, customers are more willing to share the burden of product development, as the demand for new or custom products exceeds the service companies’ ability to supply them. These conditions often compel companies to take on more projects than they can reasonably handle, which makes it difficult to effectively direct resources toward the best new-product opportunities.

A global economic recession that tightened resources and slowed demand provided an opportunity for companies to re-think their product portfolios and their new product development processes. Recognizing this opportunity, Baker Hughes recently set out to meet the challenges of the market downturn through three initiatives: standardizing requirements, implementing a cross-functional process, and project rationalization. These initiatives were designed to ensure the company was directing its finite capital and personnel at the projects that would make the largest impact.

Standardization
Baker Hughes’ product development and management (PDM) process was first implemented 10 years ago. It is based on an industry-standard stage-and-gate system. In such a system, a new product progresses through stages of work activities separated by a series of reviews. In these reviews, project teams present the progress of their project, and management decides to either move it to the next stage or take other actions.

Over time, as the organization changed, so too did adherence to the process, the metrics used to make decisions, and management expectations for projects. The purpose of following a development process is that projects can follow similar steps and provide similar documentation so they can be measured easily against one another. If adherence drops off, the ability to prioritize and compare projects becomes virtually impossible.

Baker Hughes, PDM process, projects

Baker Hughes’ PDM process streamlines decision-making and allows those involved in marketing to direct the biggest volume of resources to the most promising projects.

To reverse deteriorating adherence, the PDM process was renewed through standardization. Across the entire organization, project teams were given specific guidelines governing what was expected of them when reporting on their development’s progress. As a result, when management is making an investment decision, they can quickly and easily compare the project in question to others in the portfolio. This ensures that the company’s resources are directed towards the projects with the highest potential.

In addition to standardizing the project teams’ work, emphasis was placed on standardizing the decisions that management can make regarding a project. These decisions were limited to five possibilities:

1. Approve: The project is attractive. Resources are available to continue;

2. Terminate: The project is stopped. No more investment is made;

3. Hold: The project is attractive. Resources are not currently available;

4. Return: Management needs more information to make a decision; and

5. Refer: The project is referred a group that is best aligned with the application.

The most important change deals with approval decision.

In the past, if a project was attractive, it was approved to move forward, often without considering the resources involved. This created the problem of having too many projects in the pipeline, and it slowed the progress of innovation. This problem has been solved by providing management with more information about the resources required to complete a project when making an approval decision.

Cross-functional approach
Many companies that sell technology to other companies tend to place a heavy emphasis on engineering during the new product development process. Marketing or operations provide an idea for development and then wait — along with supply chain — until the design is complete and tested before they start to plan for market introduction. This linear approach to product development leads to long development times, poor market introductions, and products that do not meet customers’ needs.

To widen the view from just technology, Baker Hughes defined and implemented a product launch process. This clearly documented process requires that planning for market introduction be done alongside engineering of the product. This planning includes:

• Targeting markets so that customers are targeted for the product and their needs are identified. The question at this stage is, “How will the product differentiate itself?”

• Defining the supply chain so the customer’s delivery requirements can be identified. The question here is, “What steps need to be taken to meet these needs?”

• Organizing an internal launch, which means identifying internally those who need to be introduced to the product. The primary question at this stage is, “What training will be required and who will conduct it?”

• Preparing for an external launch, which requires determining how customers will be targeted. The critical question at this stage is, “What marketing tools are needed to achieve the product goals?”

Not only does this planning process give project teams expectations for progress during each stage of development, but it also provides guidance to managers who are making decisions regarding the future of the development.

Now management must verify the product functionally meets the customer’s needs, marketing is prepared to communicate the product to its customers, and the supply chain has the capacity to meet the market’s delivery requirements.

This expanded view of product development allows management to direct resources toward projects that are focused on meeting the customer’s every need — not just the performance of the tool — in order to provide the best return on investment.

While standardizing the documentation and outlining a new launch process is a step in the right direction, the organization must agree with the changes in order for the initiatives to be a success. To communicate the changes and how it will benefit the company and its employees, Baker Hughes conducted two-day product launch working sessions for all engineering, marketing, and supply chain personnel. In these working sessions, the new standardized development and launch process was presented, and open feedback was invited. In this manner, two-way communication could take place, a component that was paramount to the acceptance of and adherence to the process by all stakeholders.

Project rationalization
After putting the project teams back on track with the right process and re-educating everyone regarding expectations, it was important to carry out an in-depth review of the current project portfolio. The goal of this rationalization effort was to prioritize all projects in progress and to make sure projects at the top of the list were adequately resourced. At this stage, the most unattractive and resource-constrained projects were eliminated.

Within a large organization, this is no easy task. When all of the marketing managers feel that their projects are the most important, hard decisions have to be made.

To begin with, all marketing managers were asked to rank their projects from most to least important. Labeling all their projects “most” important was not an option. Once the individual prioritizations were complete, management then ranked all of the projects for the entire organization. After further review, about 10% of the projects were eliminated, and the resulting resources were dedicated to the most attractive opportunities.

Results
Through the steps Baker Hughes took to renew adherence to the development process and rationalize the launch process, the company is now able to place greater focus on the most important products through resource reallocation, which provides the maximum return on the investment.

Baker Hughes has reduced confusion through standardization and consistent communication, which has streamlined development efforts. And, most importantly, the company has changed the mindset of its development teams from providing a technological solution to providing a complete solution.

Not only have these initiatives helped to alleviate short-term resource problems, they also have positioned the company to take full advantage of the next upturn in industry activity.