Why R&D needs to reinvent itself? If you don't, you won't survive over the long term...

Over the past decades, you most probably have been able to realize that market places became increasingly dynamic and competitive, while customer expectations have been changing heavily over time - and one thing is clear, the changes are happening quicker and impacting more than ever before.

Looking into R&D / PLM, there was as well a significant change happening. In the very beginning, R&D/PLM was rather focussed on managing CAD documents, but as well the relevant meta/master data about the design/engineering BoM. Considering the early stages of product development and the relatively standardized product portfolios back that time, the overall approach was rather simple, as it was rather concentrated on document lifecycle management and making these information ready for operations/manufacturing. With the increasing market dynamics, growing customer expectations and globalization of markets, PLM vendors started coming up with more holistic and integrated approaches. That's where basically the entire product lifecycle management process started evolving by not only "managing documents" but really adding business value, respective functionality to master the challenges - from product structure management, bill of materials towards really adding a horizontal process integration layer towards manufacturing with the key aim of getting one single source of truth from a PLM perspective.

That's why you have been able to realize that the entire PLM market evolved significantly, attracting many vendors with different visions supporting world class companies on that journey. Often if you look into many large enterprises which have been growing through many M&As, you will be able to realize there might be per division different CAD systems, PDM solutions etc. - which definitely is the result of a larger consolidation wave (M&As etc.). And often these developments still continue. Consequently, this leads to the fact that you have different approaches on product development together with different terminologies etc. In general not bad, but it puts a tremendous complexity to manage different product terminologies, structures and even bring the different terminologies to one harmonized layer in order to ensure a proper product structure management, and generate value in terms of efficiency. But is that wrong? No, definitely not - people need the freedom to work with what they like to.

Now, let's close the history, and look into the future. What trends do we see in general impacting the product lifecycle management process?

Let me summarize at least based on many market interactions and trends within the overall supply chain affecting PLM some important points:

• PLM will need to transform itself into a much more horizontally integrated and collaborative concept, not starting with idea management and ending at the design BoM or final recipe. But for example downstream ensure a proper and efficient handover to manufacturing, or even distribution-related preparation activities towards packaging etc.
• Collaboration in PLM will not only be important from an internal aspect, but as well the collaboration on requirements with externals like suppliers on requirements, artwork etc. will gain on importance, since markets are moving that fast, that building up core competences everywhere is not meanful at all, but rather leveraging the own strengths while building up trustful relationships with externals and setting up guided processes/agreements between each other, supported by a digital platform
• Smart "things", connected products will require internal know how not only towards designing and manufacturing products, but complete concepts incl. software components within the bill of materials and respective control for version management across different types of generations, models etc. Now, we are entering the big data topic, because data produced needs to be analyzed in that way, that it creates either internal value towards aligning the supply chains / replenishment / service better, R&D feedbacks to improve product development or external by allowing f.e. automated replenishment scenarios, subscription models etc. That's a big thing and a strategic decision of merging transactional with more service oriented business models.
• In increasingly dynamic markets where M&A is on the "standard agenda", you definitely need concepts which can deal with the variabilities towards authoring systems, because in most cases it does not really make sense to force people using something which is not made for them. That's why building up a more flexible layer between your CAD/authoring tools and your backend ERP is key for a harmonized data management layer which feeds the entire processes within your system of record (procurement, material management, inventory, quality management etc.)
• Live R&D horizontally embedded within your value chain becomes key since processes become more and more connected - not only towards product development and direct horizontal layers within the process steps, but as well supporting functions like procurement, quality management, health and safety etc. Why is that important? Let's take a simple example, if for example certain materials / ingredients will be forbidden in certain markets, the substance management team immediately needs to update their business as it might be possible, that product development would need to re-configure or re-structure the bill of materials. However, if this happens in too many different and disparate systems, people might even not know or only in difficult ways get the feedbacks to launch their activities. This is definitely inefficient.
• Early product costing becomes very key - before launching any product, not only from a bill of material costing perspective it will be important to know about the cost. But more important the entire routing resp. supply chain behind, is a much bigger cost driver and needs to be put into the "costing picture" to allow creating a product based on targeted costs or bring products due to strategic reasons to the market and meanwhile work on reducing costs at the right place. Country regulations in many industries like medical devices are becoming more dynamic and it might be the case that certain materials would not be allowed and figuring out whether alternatives are being produced internally or externally are then key questions (make or buy)
• What will become even more key considering the market dynamics, the high shareholder expectations and limited resources are tightly integrated project portfolio management concepts which cascade corporate targets into portfolios and executable projects, mapping targeted costs vs. actual cost, but as well enabling a global resource overview which finally helps to focus on the right things.

There are surely even more trends, but in my opinion some of the key ones. As you might have realized, the key aspects are horizontal/vertical integration, internal/external collaboration, business agility and seamless information flows. PLM will not have the typical boundaries anymore and upstream start earlier in the process with collaboration and downstream go up to the customer in certain cases, where intelligent devices might be feeding the R&D process in real time (e.g. through error messages etc.).

But why am I writing this article and what is the role of SAP here?

Well, as most of you know, SAP is one of the companies which put "run live" businesses first across the entire value chain, from finance, to procurement, to supply chain, to many other areas. It is our DNA. Therefore in whatever we do, we follow the principle of making businesses run live and run better.

In the area of PLM, SAP is very strongly positioned to allow freedom within the company no matter what CAD authoring system leverage while through the tight integration within the value chain enabling businesses run live. On top, SAP is heavily investing into the entire area of external collaboration with Intelligent Product Design, a cloud-based, flexible solution enabling structured exchanges on requirements. But what is even better now, with many digital transformation projects from ERP to S/4HANA, these applications will be sitting directly on your backend system enabling real-time processing, live information and even smoother handover of information as we're now sitting on the materials, on the quality management aspects, on purchasing, on SD etc. The below picture illustrates the embedded solutions which can be leveraged to enable live R&D.

Let's put the entire concept into an E2E value chain in the following to illustrate the entire business process framework and as you can imagine any deviations move with the "bullwhip effect" across the entire organization causing additional cost, inefficiency and lack of visibility in case there is no "digital embedded core" is there. However, as mentioned, SAP has invested a significant amount of time to bring all the solution areas which have significant impact by being on the digital core into it to really enable your business run live.

Without going into solution details, I'd like to sum up a bit SAPs positioning here:

• SAP allows freedom towards any authoring system by leveraging SAP Engineering Control Center which can connect to various CAD solutions (NX, Solidworks etc.) respecting the fact that companies might change over time, divisions might be added but you still want to keep track on product structure management, document management, versioning etc. in a more harmonized way
• SAP PLM for Discrete and Process Industry offering a massive set of capabilities to drive product development with close connection to the downstream processes into manufacturing resp. product handovers etc.
• Idea and Concept development together with project portfolio management build up the early stages of SAPs PLM strategy as well enabling open innovation, leading to "efficient innovations" guiding through stage gates, business cases, corporate portfolios, projects while always keeping an eye on the cost and the subsequent processes.
• For the external collaboration SAP has significantly invested into Intelligent Product Design which enables the exchanges on standardized processes with various business partners. A short insight is given with the following video:

A very powerful and value-generating use case and great video here. But as well in other areas like early product costing SAP is leveraging latest technological possibilities like ML to get recommendations based on patterns, which you can see in the next video.

To summarize, i hope you as well see why R&D today has so many possibilities to re-invent itself, gain a stronger internal position by adding value up- and downstream within the value chain and therefore realize much quicker time to market, higher output quality and by leveraging even new technologies, boundaries for R&D might "break" and go beyond corporate borders to keep pace with the market changes.

SAP definitely is best positioned to support you in this area, enabling flexibility, allowing freedom and integrating into the corporate value chains (directly!). For more information get in touch with your SAP contact person or feel free to reach out to me.