Supply & Demand Chain Executive - Special Edition - December 2015

SPECIAL EDITION: MANAGING KNOWLEDGE DECEMBER 2015

GLOBAL SOLUTIONS FOR SUPPLY CHAIN ROI

UNLEASHING TECHNICAL TALENT: The Key to Engineering Excellence Global R&D and engineering leaders are combining complex technical content with advanced research capabilities and sophisticated analytics PAGE 7

BUILDING THE KNOWLEDGE-BASED ENTERPRISE

PAGE 05

INDUSTRY SPOTLIGHTS Energy: pg 11 / Automotive: pg 13 Aerospace: pg 15 / Technology: pg 17

SDCEXEC.COM | Exclusive online features and solutions for successful supply chain operations. | Fresh new content daily.

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CONTENTS SPECIAL EDITION | December 2015

BUILDING THE KNOWLEDGEBASED ENTERPRISE

04} EXECUTIVE MEMO Confront the Knowledge Quandary Today to Win in the Market Tomorrow

IHS’s Sheri Rhodine talks about how leveraging technology can lead to business success. As vice president in the product design business at IHS, she has her finger on the pulse of the global business world and understands the trials and tribulations that companies face on the information front. In this Q&A with Supply & Demand Chain Executive, Sheri discusses the current corporate agenda, the challenges firms will be facing in 2016 and how knowledge-driven companies can overcome these issues.

Knowledge may be power, but could too much knowledge lead to powerlessness?

By Barry Hochfelder

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11} INDUSTRY SPOTLIGHT: ENERGY Leveraging Knowledge & Technology to Overcome Top Energy Challenges

17} I NDUSTRY SPOTLIGHT: TECHNOLOGY Seeing the IP Trees and the Forest

How the energy industry can achieve continuous improvement goals while maximizing operational efficiencies and excellence

By Matt Coates

Three intellectual property strategies that will help determine a company’s growth and market valuation potential for years to come

By Matt Coates, Ian Mitchell and Michelle Lynch

13} INDUSTRY SPOTLIGHT: AUTOMOTIVE Modernizing Quality & Risk Management Practices

Automotive manufacturers are leveraging human capital, natural language processing and enterprise knowledge management tools in new ways

By Vasanth Krishnaswami

21} K NOWLEDGE MANAGEMENT The Clear Path to Effective Knowledge Management

How organizations can overcome the top obstacles that are standing in the way of effective knowledge management and achieve both top- and bottom-line benefits in the process.

By Kevin Alexander

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COVER

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15} INDUSTRY SPOTLIGHT: AEROSPACE Tapping the Unstructured Data in Airplane Acceptance Testing

UNLEASHING TECHNICAL TALENT:

By going beyond metadata and leveraging their unstructured data, airplane manufacturers can get earlier revenue recognition while saving time and enhancing quality

By Bao Bui

THE KEY TO ENGINEERING EXCELLENCE Global R&D and engineering leaders are generating greater revenues, profits and competitive advantage with knowledge frameworks that combine complex technical content with advanced research capabilities and sophisticated analytics.

By Rory King and Robert Dennis

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SPECIAL EDITION | DECEMBER 2015 ®

EXECUTIVE MEMO Global Solutions for Supply Chain ROI

By Barry Hochfelder, Editor bhochfelder@ACBusinessMedia.com

www.SDCExec.com Published by AC Business Media Inc.

Confront the Knowledge Quandary Today to

WIN IN THE MARKET TOMORROW

KNOWLEDGE MAY BE POWER, BUT COULD TOO MUCH KNOWLEDGE LEAD TO POWERLESSNESS?

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onsider that a theme running through this special edition is that we are all the victims of our own success in accumulating vast stores of information, scattered through different systems in different formats and with different means of access.

As an observer of the engineering and knowledge management fields, Sheri Rhodine, points out in the Q&A (Page 5), technical professionals are “drowning in information,” and the problem is getting worse as systems and data expand exponentially within and outside our companies. We’re paralyzed by the sheer volume of information.

The potential impact of this paralysis on profitability and brand reputation is significant, including procurement costs, lost engineering and research productivity, and problems that don’t get solved before products go to market. The latter possibility creates tremendous risks—no CEO wants to wind up in the news due to a critical product failure that could lead to ruinous financial liability or worse.

The good news is, companies are overcoming the barriers to success created by the data deluge, at least regarding the kinds of information required by engineers, scientists and related professionals. As explained in “Unleashing Technical Talent” (Page 7), a set of best practice strategies for technical knowledge management is emerging. It’s based on the experience of industry leaders, but applicable to an array of companies looking to arm their 4

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knowledge-driven professionals with tools to help them make faster and better decisions.

Diverse companies across sectors are successfully applying these strategies today to manage their knowledge challenges, as you will read in articles describing initiatives in the energy sector (“Leveraging Knowledge ...,” Page 11), automotive (“Modernizing Quality ...,” Page 13) and aerospace (“Tapping the Unstructured Data ...,” Page 15). These case studies demonstrate that bringing together an enterprise’s most talented— and highly paid—technical professionals with the right set of tools and processes can empower these innovators to spend more time on their core competencies, rather than performing non-value-adding information searches.

A word of caution is warranted for companies looking to improve technical knowledge management. The article, “The Clear Path to Effective Knowledge Management” (Page 21), points out that if engineers and researchers spend inordinate amounts of time tagging content and ensuring that documents get filed correctly, they end up working for the system instead of the system working for them. Companies need to ensure solutions enable staff rather than create additional tasks or complexities that take them away from their core competencies.

Knowledge is power, but only for those effectively mining true nuggets of knowledge inside and outside the enterprise. Put the right tools into the hands of your innovators and open up infinite possibility for progress—and profit. SDCE

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SUPPLY & DEMAND CHAIN EXECUTIVE | SPECIAL EDITION | December 2015

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EXECUTIVE Q&A

BUILDING THE KNOWLEDGEBASED ENTERPRISE As a vice president in the product design business at IHS, Sheri Rhodine has her finger on the pulse of the global business world, and understands the trials and tribulations that companies face on the information front. Here, Sheri discusses the current corporate agenda, the challenges firms will be facing in 2016, and how knowledge-driven companies can overcome these issues by leveraging modern technology, advanced research and problem-solving tools.

TALK TO US ABOUT THE CORPORATE AGENDA TODAY—WHAT KEEPS PEOPLE UP AT NIGHT?

These are the key issues that are keeping people up at night.

PRODUCT RELEVANCE, GEOGRAPHIC EXPANSION AND THE CHANGING REGULATORY ENVIRONMENT ARE THE TOP CONCERNS. WHAT IMPACT ARE THESE ISSUES HAVING ON ORGANIZATIONS?

The majority of CEOs are optimistic about the economy and also bullish on their own businesses’ prospects over the coming three years, according to KPMG’s annual CEO study. They envision the potential for efficient growth, and the opportunity to leverage new technologies to enhance customer relationships and streamline operations, according to KPMG. On the flip side, 72 percent are concerned about the relevance of their companies’ products/services over the next three years, 90 percent are concerned about competitors taking their business and 59 percent are concerned about new entrants disrupting their business models.

These CEOs worry most about product relevance, expanding geographically and understanding the regulatory environment. They know that innovation, market knowledge and technical know-how are all critical to their survival. In fact, 72 percent of the 300 information technology (IT) and business leaders KPMG surveyed said that innovation is very important to their company’s success right now.

Companies know that they need to overcome these issues in order to grow and thrive, but right now, most of them struggle with the pace and complexity of engineering and other knowledge work within the technical enterprise.

With an eye on driving profitable growth, competitive advantage and risk mitigation, knowledge workers face enormous pressure to deliver against corporate objectives such as growth, profitability and risk management.

For example, engineers, scientists, researchers and other technical professionals handle a huge volume of data sources, information and systems on a daily basis. They are drowning in information. With data growing at a rate of 40 percent annually, 66 percent of decision-makers now have less time to make the best possible choices for their companies. Capsized

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IHS’s Sheri Rhodine talks about how leveraging technology can lead to business success

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EXECUTIVE Q&A

by information, knowledge workers are unable to assess future technology and intellectual property (IP) needs, leverage existing IP, commercialize new ideas, and/or analyze regulatory, technological, customer trends quickly enough to capitalize on market opportunity or competitive advantage.

ARE COMPANIES SUCCEEDING? Yes and no. Despite investing a significant amount of money in technical content, IT systems and technical talent, many companies overlook the fact that their technical enterprises are being bogged down by information. As a result, companies pay the ultimate price by having their technical workforces diverted from their core competencies and, effectively, potentially losing hundreds of thousands (or in some cases, millions) of dollars a year in the process.

On the other hand, the organizations that understand their operational dependencies on human capital (talent, knowledge, etc.) are succeeding because they see

Successful companies recognize this dependency and work hard to equip themselves with information.

WHAT ARE THE OBSTACLES TO BECOMING A KNOWLEDGE-DRIVEN ORGANIZATION? Information is expensive. Companies generally pay 10 to 40 percent more than they should on total direct costs to acquire basic technical content (standards, patents, journals, etc.).

Then they spend another 10 to 40 percent more than they should on indirect costs related to the same data.

Complicating the situation further is the fact that most organizations have decentralized and uncoordinated purchases of hundreds, thousands and potentially millions of documents (i.e., standards, codes, specifications, regulatory content, patents, etc.).

Risk is another stumbling block.

Culpable for the use of unapproved content, performing redundant engineering tasks, failing to spot preventable failures, and using data

... the organizations that understand their operational dependencies on human capital (talent, knowledge, etc.) are succeeding because they see things differently. things differently. For example, they understand that success falls on the technical enterprise, and that the technical enterprise depends on talent and knowledge. They also understand that their knowledge workers—those engaged in the acquisition, analysis and manipulation of data vs. the production of goods or services—are a critical component of organizational success. Knowledge, in turn, depends on reliable information as a feedstock.

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to design proprietary products and processes that the organization is responsible for, the technical organization is a virtual blind spot when it comes to accountability.

Vulnerable to potential risks—and not always aware of this vulnerability— knowledge workers must spot potential product failures (and, hopefully, address them) before the issues become true liabilities for their companies. Instead, these knowledge workers, who were

hired, trained, and employed for their knowledge and experience, are buried in data, documents and systems that divert them from the very value-added tasks that drive corporate performance.

HOW ARE THE WINNERS BREAKING DOWN THESE OBSTACLES? Knowledge-driven companies are consolidating content for the technical enterprise, applying today’s modern technology, and leveraging advanced research and problem-solving tools.

In return, these knowledge-driven enterprises are spending 30 percent less time researching, 15 times faster when it comes to leveraging information and 30 percent more likely to find what they’re looking for when they need it. Finally, three times as many organizations that met their financial objectives did so using knowledge discovery tools and analytics. Those that outperform their peers have two times greater shareholder returns, four times greater return on revenues and three-and-a-half times greater return on assets.

WHAT ELSE DO OUR READERS NEED TO KNOW? We live in the Information Age. As companies begin to think differently about their dependency on information, they can begin to envision the content, analytics and technology that will eradicate information overload, and restore organizational focus on creative and innovative practices. They can use the information or be left behind. Leading organizations understand the need to leverage their dependencies on information, rather than ignoring them and hoping for the best. SDCE

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KNOWLEDGE MANAGEMENT

By Rory King and Robert Dennis

UNLEASHING TECHNICAL TALENT:

The Key to Engineering Excellence

Global R&D and engineering leaders are generating greater revenues, profits and competitive advantage with knowledge frameworks that combine complex technical content with advanced research capabilities and sophisticated analytics THE KNOWLEDGE-DRIVEN ENTERPRISE IMPERATIVE

patents, product information, chemical and material properties data, and regulatory information. If that weren’t enough, decision-making incorporates an equally overwhelming number of internal data sources, such as product lifecycle data, technical drawings, quality data, internal specifications or standards, or corporate project documentation, to name a few.

Thus, the data that technical professionals access, review and disseminate on a daily basis bogs them down and wastes their time.

Moreover, all this data resides in disparate systems, with different log-in credentials and in different formats, with differing search capabilities, making it nearly impossible to cross-reference information across industries and organizations to enable competitive intelligence or innovation.

The resulting business impact is significant. Companies invest millions of dollars in engineering tools, yet one-

Engineers need access to many different types of information and data sources to be effective and productive.

The Information Age put many of these sources at our fingertips, but at the same time, it made finding the most relevant and useful content extremely difficult. Global pace, complexity and competition are accelerating, while skilled professionals are also subject to the rising volume, velocity and variety of Big Data that are changing the world as we know it.

In fact, the typical company needs to access an average of 13 unique data sources in order to empower their most critical line-of-business decision-makers[1]. For engineering, this number is even higher. Technical professionals require 15 or more external data sources[2] ranging from standards, codes, specifications, journals and scientific literature to

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third of total research and development (R&D) spend is wasted, diminishing the anticipated return on investment.

Studies show that engineers and analysts spend 80 percent of their time gathering information before they begin to analyze it[3]. Thus, they are diverted from value-added competencies to spend unproductive time searching for information. Case in point: A full 30 percent of total R&D spend is wasted duplicating research and work previously performed[4].

BREAKTHROUGH PRACTICES EXPLOITED BY LEADERS Engineering at today’s accelerated pace demands faster and smarter decision-making among skilled technical professionals. They must be able to more quickly find the answers they’re seeking in order to solve problems, innovate, improve product quality and generate demand more rapidly than ever before.

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KNOWLEDGE MANAGEMENT

Here are four strategies that industry leaders are leveraging to drive superior corporate performance and identify game-changing opportunities that were not previously possible. ❯❯ TAKING BIG DATA HEAD ON. Data is growing 40 percent each year, while 66 percent of decisionmakers have less time to make decisions[5]. The sooner organizations come to grips with the fact that their technical talent is waging a losing war against information, the better. Leaders are formalizing company-wide processes for innovation and problem-solving. To do so, they are putting in place a knowledge framework that integrates comprehensive technical content with advanced research capabilities and analytics.

This unifies salient technical information and complex data sources within a common, enterprise-wide approach to knowledge management. It 8

equips global talent with access to the right information based upon disciplines, geographies and industries germane to the company. This makes immediately available the collective might of cross-industry references, expert-vetted sources and multilingual data coming from millions of industry standards, tens of millions of patents and over a hundred million other essential content sources, such as reference books, material properties, journals, patents and research papers available to today’s engineer.

It associates these with other data sources such as product and supplier data. And finally, internal data sources, such as corporate standards databases, intranets, email, enterprise resource planning (ERP), product lifecycle management (PLM) or other technical content, are harmonized with external content

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KNOWLEDGE MANAGEMENT

WHAT CEOS ARE CONCERNED ABOUT to close the loop and enable true knowledge management.

Armed with the right data and better tools, engineers are more productive and can focus on core, value-adding competencies— applying information rather than searching for it. Not only does the organization see higher engineering morale, but spirits are also lifted all the way to the board room as competitiveness, margins and market share rise.

The fact is that knowledge-based organizations have two times greater shareholder returns, four times greater return on revenues and three-and-a-half times greater return on assets than peers.[6] ❯❯ UNLOCKING PATENT INTELLIGENCE. Seventy percent of companies admit to investing in research that led to (or was leading to) a previously patented solution[7].

This speaks to the opportunity to eliminate wasteful investment, and unproductive use of valuable, highly technical and tenured R&D talent. Why? Patents represent more than 80 percent of all technical and scientific information because, in most cases, when someone makes a discovery that’s relevant and useful in science, he or she patents it. By incorporating domestic and worldwide patents into their knowledge framework and workflows, engineers can get up to speed quickly on specific innovations to determine their relevancy with respect to current and proposed projects. The rich technical and scientific information inherent within patents can reverse the overpowering tide

of information aggregation, search and analysis that lead to wasted R&D spending. It can be a watershed moment for problem-solving and decisionmaking by shifting the balance of power from aggregating and synthesizing vast amounts of data to producing a greater number of informed outcomes. This can have a profound effect on R&D utilization, productivity and throughput. It separates those organizations that generate greater revenues and profits from companies that continue to divert talent and technology investments to non-revenue-generating activities. ❯❯ REVVING UP SEMANTIC ENGINES. Semantic search is a method of searching that improves search accuracy by understanding searcher intent and the contextual meaning of terms.

When enterprise knowledge has a semantic engine under the hood, it unlocks extremely useful and relevant information.

Searching for information suddenly moves from search results consisting of words, documents and hyperlinks to business results enabled from rich, contextual groupings of information related to a query. Categorizations such as cause and effect, advantage and disadvantage, methods, applications and so on become apparent. This is particularly valuable when the use of unstructured data is the norm.

Search for rechargeable battery in Google, for example, and you get pages of hyperlinks and sentence highlights from unverified sources, mixed with

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72% 90% 59%

COMPANIES’ PRODUCTS/ SERVICES RELEVANCE IN 3 YEARS

COMPETITORS TAKING THEIR BUSINESS

NEW ENTRANTS DISRUPTING THEIR BUSINESS MODEL paid advertisements. A semantic engine underlying enterprise knowledge bases, on the other hand, categorizes results from trusted sources into buckets like lithium ion, nickel metal hydride and nickel cadmium. It also helps engineers identify and solve problems like, “Why do batteries overheat?” Through a single search, users can review all of the problem spots related to battery overheating (short circuits, overcurrents, rapid charge rates, etc.), solve their problems and move on to the next important task. It’s no surprise then that best-in-class companies that outperform their peers are 15 times faster leveraging data sources and have information available when it’s needed 30 percent more of the time than laggards.[8] Those that run on semantic engines accelerate their enterprise toward best in class. ❯❯ HARNESSING INNOVATION TREND ANALYSIS. Seventy-two percent of CEOs are concerned about the relevance of their companies’

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KNOWLEDGE MANAGEMENT

PACE, COMPETITION AND DISRUPTIVE MARKET PRESSURES DEMAND THAT TECHNOLOGY MAPPING, PROBLEM-SOLVING AND TECHNOLOGY TRENDING ANALYTICS BE ENHANCED FOR A COMPANY TO STAY RELEVANT.

[1] M anufacturing and Business Analytics, Aberdeen Group, 2013 [2] External Data Sources Analysis, IHS Engineering, 2014 [3] McKinsey Quarterly , McKinsey & Company, 2012 [4] WIPO-IFIA International Symposium on Inventors and Information Technology, 1998 [5] M anufacturing and Business Analytics, Aberdeen Group, 2013 [6] Creating Opportunities from Challenges, Raytheon Company, 2011 [7] Acquisition, Utilisation and the Impact of Patent and Market Information on Innovation Activities, National Board of Patents and Registration (PRH) and VTT, 2009 [8] M anufacturing and Business Analytics, Aberdeen Group, 2013 [9] Setting the course for growth: CEO Perspectives, KPMG, 2014

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products/services in three years, while 90 percent are concerned about competitors taking their business, and 59 percent are concerned about new entrants disrupting their business model[9].

If this doesn’t speak to the stiff headwinds of pace, complexity and competition confronting engineering today, what does?

Innovation trend analysis is a new technique organizations are exploiting for rapidly honing in on market strategies, investment decisions or opportunity for their intellectual property. But it’s not always immediately obvious how to do this. Patent intelligence is performed when analytical capabilities applied to global and domestic patent information allows a company to rapidly perform innovation trend analysis by visualizing patent activity over time. It also allows professionals to drill into salient information for relevant underlying patents in order to support decisionmaking. One such use is identifying a specific innovation’s place on the technology S-curve.

S-curve analysis can yield insights ranging from lucrative early-stage opportunities to take products to market to mid-stage opportunities to leverage existing technology into a growth market to late-stage situations that may present opportunities to monetize intellectual via players in a mature market’s ecosystem.

An engineer who is designing electric vehicles, for example, may want to know where rechargeable batteries stand on the S-curve. Additionally, he

or she may want to know whom the top five players are in that space and what patent class codes those individuals filed for. Highly skilled technical professionals need an efficient way to access and track that type of patent activity without having to spend hours poring over their computers trying to find that data. Patent intelligence via innovation trend analysis fills this void nicely, allowing organizations to expand profits from existing intellectual property, or to better identify and capitalize on new breakthroughs.

TOWARD ENGINEERING EXCELLENCE To solve problems faster, deliver more innovative products and realize better project outcomes, today’s engineers need a knowledge framework that enables quicker, smarter decisionmaking, and shifts the organization toward a more productive and valueadded use of talent. Pace, competition and disruptive market pressures demand that technology mapping, problem-solving and technology trending analytics be enhanced for a company to stay relevant.

With an enterprise knowledge framework that combines trusted internal and external content sources with patent intelligence, semantic engines and innovation trend analytics, organizations can achieve best-in-class performance. Leading knowledge management practices transform vast amounts of data into big insights yielding new opportunities to buoy the company’s competitive position, and improve returns on human capital and R&D investments. SDCE

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INDUSTRY SPOTLIGHT: ENERGY

By Matt Coates

Leveraging Knowledge & Technology to OVERCOME TOP ENERGY CHALLENGES

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oday’s energy producers face a number of key challenges in their quest to achieve continuous improvement and operational efficiency goals. The need to lower costs and optimize processes is at an all-time high; the majority of senior engineers are set to retire over the next 10 years; and there is an ongoing need for better collaboration and cooperation amongst key industry players. Combined, these three forces are challenging energy companies to accelerate engineering excellence initiatives in order to maximize profitability by increasing revenue and lowering operating expenses. This is critical to drive greater operational efficiency and foster continuous improvement within a dynamic and uncertain economic environment.

processes. In essence, energy-related projects of enormous scale are generally difficult for organizations to wrap their minds around even when the business climate is favorable—let alone when it is challenging and unpredictable. This translates into a significant issue for producers, particularly when it comes to optimizing processes to extract at certain price points.

The Big Crew Change—in which the majority of senior engineers will retire—will take place over the next three to 10 years and leave behind a large experiential void for new engineers to fill. The fact that so many experts are leaving the industry creates a great deal of pressure on up-andcoming engineers who must be able to harness the tribal knowledge of their predecessors. This isn’t an easy task, but it’s one that must be taken seriously and approached diligently to avoid a massive brain drain over the coming decade. Consider that a production engineering workforce handles the daily management of all oil and gas production operations. Their availability, skill and experience directly

THE BIG THREE ENERGY CHALLENGES The simple reduction in the price of oil over the last few months is pushing energy organizations to focus on reducing costs and optimizing

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Effectively addressing cost constraints, the Big Crew Change and a new need for industry collaboration can help the energy industry achieve continuous improvement goals, while maximizing operational efficiencies and supporting operational excellence

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INDUSTRY SPOTLIGHT: ENERGY

The circa 1980s cloak-and-dagger/ industrial espionage days must be left in the past, replaced by greater levels of cooperation and a willingness to tackle industry, technical, human resource, economic and related challenges for the greater good.

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correlate with corporate revenues and operating expenses, as well as personal safety and environmental performance.

Finally, the oil and gas industry needs to focus on collaboration and cooperation to operate more efficiently in today’s volatile business environment—both individually as companies and as an industry as a whole. But garnering the level of input and cooperation needed to create a valuable consortium amongst competitors isn’t always easy. To achieve this goal, energy companies need a mindset shift from guarding the information to sharing it with other companies. The circa 1980s cloak-and-dagger/industrial espionage days must be left in the past, replaced by greater levels of cooperation and a willingness to tackle industry, technical, human resource, economic and related challenges for the greater good.

GETTING PAST THE OBSTACLES TO SUCCESS To overcome the cost reduction, crew change and collaboration challenges they are facing in today’s market, some energy producers are coming together to collaborate in new ways. In Canada, for example, a consortium of oil and gas players came together as a single cooperating force to more efficiently scout certain territories, optimize operational costs and extract at certain price points.

The same efforts are helping these producers address the Big Crew Change. By harnessing knowledge that one organization gathered, for example, and sharing it amongst a consortium of key industry players, the looming brain drain can be more effectively assessed and addressed.

Technology is a great facilitator that can help producers tackle the

larger issues standing before them while, at the same time, enhancing their own organizations’ operational efficiency, continuous improvement, benchmarking and standardization processes. When assessing how to shore up the world’s failing pipeline infrastructures, for instance, companies can go beyond the “just weld some plates to the outside of the pipeline” mentality, and reshape their thinking to a more optimized and effective solution.

And, rather than using a conventional thick copper wire to move electricity to that welding torch, organizations can start to think differently about the role that lasers, optical fiber and other modern technology can play in the process. This type of thinking breathes life into organizations, and allows them to more efficiently and effectively solve problems.

Equipped with the ability to harness information and talent through an enterprise-wide approach to knowledge management and discovery, energy companies can drive operational efficiencies and enable continuous improvement. This foundation shifts the firms’ knowledge work and technical capability to more productive practices that support higher levels of organizational learning, reliability and performance.

By thinking more critically, brainstorming more effectively and collaborating more practically, firms’ workers are able to create more meaningful solutions to some of energy’s top challenges. Not only can this reduce costs and optimize processes efficiently to navigate through an uncertain economic environment, but it also aligns them in support of operational excellence, which is welcome news to executives, the board and investors. SDCE

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INDUSTRY SPOTLIGHT: AUTOMOTIVE

By Vasanth Krishnaswami

MODERNIZING QUALITY & RISK MANAGEMENT PRACTICES

in the Automotive Industry Automotive manufacturers are leveraging human capital, natural language processing and enterprise knowledge management tools in new ways to address heightened contemporary concerns about product quality, risk and recalls.

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uality management, risk management, and failure modes and effects analysis (FMEA) are standard operational processes that product development organizations rely on to ensure that high-quality standards are attained while minimizing risk factors. A step-by-step approach for identifying as comprehensive a set as possible of failures or risks in a product, process or service, FMEA focuses on anticipating and taking actions to eliminate or reduce failures, starting with the highest priority issues.

Most organizations incorporate quality and risk processes into their routine product development activities, and as such, are fairly effective at implementing and using them.

However, there remains significant room for improvement. For example, many firms address quality and risk management on a one-off basis (i.e., a process that’s performed afresh for each development effort, without systematic capture and carryover of learning from previous efforts). This

practice is prevalent because it is often surprisingly difficult, even in the current digital Information Age, to locate and reuse knowledge regarding previous product lines from organizations’ data repositories.

The challenges associated with quality and risk management don’t end there. Increasingly, products are integrations of complex subsystems, and while engineering teams have significant expertise within each of those individual subsystems, integration results in complex interactions that can produce unanticipated risks. To minimize the risks of such interactions, organizations need both a formal way of identifying as many of these unanticipated risks as possible ahead of product launch and a way of continuing to track performance to allow quick reaction to any issues should they arise.

THE HIGH COST OF IGNORING QUALITY AND RISK MANAGEMENT There are a few good reasons that now is the right time to address the

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INDUSTRY SPOTLIGHT: AUTOMOTIVE

A January 2015 Pulse of Engineering survey, conducted by IHS, among more than 2,000 global technical professionals found that

57% 52% 44%

OF ENGINEERS ARE REQUIRED TO DO MORE WITH LESS SAID PACE IS INCREASING

SAID PRESSURE TO MEET DEADLINES & COST-CUTTING ARE THREATENING PRODUCT QUALITY

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need for improved quality and risk management. First, there are both benefits to a proactive approach and potential risks to reacting after a problem occurs. When working with complex systems, it’s generally better to address problems before they arise—particularly when they involve regulatory compliance or safety issues.

Having to deal with these issues in the field, or even after integration into final designs, can multiply initial development costs many, many times over. In some cases, such as those that involve significant danger to human safety or large-scale environmental damage, the costs can be effectively unbounded, thus threatening the survival of the business itself.

By dealing with quality and risk issues upfront, companies can not only avoid significant future costs, but they can also parlay their experiences into a highly effective development process that results in more reliable and higher quality products and services. And, they should do so quickly. A January 2015 Pulse of Engineering survey, conducted by IHS, among more than 2,000 global technical professionals found that 57 percent of engineers are required to do more with less, 52 percent said pace is increasing, and 44 percent said that pressure to meet deadlines and cost-cutting are threatening product quality.

The good news is that, over the last few years, there have been tremendous and rapid advances in information technology—including the ability to handle large quantities of data, rapidly monitor information and perform natural language processing (whereby unstructured data can be turned into really meaningful information). Today, companies have the ability to actually solve problems using solid tools and

platforms that can be implemented at a cost that would be only a fraction of what would have been needed even just a few years ago.

LEVERAGING KNOWLEDGE ACROSS THE ENTERPRISE Enterprise knowledge can effectively help auto and other manufacturers improve product quality and reduce risk. The first step in dealing with these risks is to deploy an effective set of knowledge management tools.

But that is just a starting point because simply deploying tools is not sufficient for solving the overarching issue of ineffective quality and risk management. The most effective organizations establish strong processes in which the tools themselves serve as one part of a larger whole. These processes include regular risk reviews, knowledge capture, and the publication of that knowledge in a manner that can then be retrieved from the knowledge repository and used in the creation of the next generation of products.

For an organization’s quality and risk management approach to be most effective and efficient, the system must leverage the best capabilities of both software tools and human engineers. Software tools are very good at sorting through large amounts of information and rapidly identifying trends, while human beings are excellent at the creative process of brainstorming multiple solutions and selecting among them to meet complex functional, consumer and compliance requirements. Truly effective organizations make use of the best of both worlds in solving their problems, and developing systems that take both quality and risk into consideration on all projects. SDCE

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INDUSTRY SPOTLIGHT: AEROSPACE

By Bao Bui

Tapping the Unstructured Data in AIRPLANE ACCEPTANCE TESTING

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uilding airplanes is a complex task that includes a wide variety of materials, jobs, tasks and responsibilities. An airplane manufacturer’s job isn’t done when the final product rolls out of the hangar either. Before the airplane can even be delivered to the customer, it has to be thoroughly tested both on the ground and in flight by the manufacturer. All of the avionics, engines, and hydraulic and critical systems must be operating like clockwork—or it’s back to the drawing board for more fixes and tweaks (then, more testing).

In most cases, there is going to be something that doesn’t operate properly. It’s just the law of averages when you’re talking about an aircraft that’s made up of over 2 million parts.

Every aircraft is also assembled with

different configurations—a fact that virtually ensures that the product does not always work the first time.

That’s why airplane acceptance testing exists in the first place; it gives aircraft manufacturers the opportunity to go through and remove all of the discrepancies in order to be able to deliver a perfect final product.

During the final airplane acceptance testing process, manufacturers collect tons of data. Every time a discrepancy surfaces, the issue is included in an incident report for the particular aircraft. Then, once the test flights and other exercises are completed, companies aggregate all of the collected data and review it thoroughly to figure out what is and isn’t working.

The reports, which can include many different sections and subsections, must then be filed away for future use. This

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By going beyond metadata and leveraging their unstructured data, airplane manufacturers can get earlier revenue recognition while saving time and enhancing quality

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helps manufacturers pinpoint recurring problems, for example, and come up with global solutions to those issues.

In most cases, aircraft manufacturers use metadata to achieve this goal.

To capture this data, the inspector conducting the test writes down all of the findings and creates an incident report that’s then tagged with various metadata. The issue is tagged under a serial number, and the inspector’s name, the data and the specific problem are notated.

Also within the metadata are codes for specific parts, such as landing gear, the engine and so forth. That entire set of information then goes into one or more systems for later use. And while this system can be effective for logging, storing and retrieving structured data (serial number, code number and/ or tags), there is also a lot of valuable knowledge that lies in the related unstructured data. The general notes that an inspector writes down, or his or her opinion on the possible solutions to the issue, aren’t always easy to locate and retrieve, but they are valuable.

The good news is that there is a way to make an organization’s unstructured data easier to find, thereby shortening the amount of time needed to perform aircraft acceptance testing. This is particularly important for manufacturers that don’t get to recognize revenue until they actually deliver the aircraft—an activity that can’t take place until all of the testing is completed to satisfaction.

When the latter occurs at a faster rate, manufacturers gain the value of earlier revenue recognition. In addition, the time it takes to test, troubleshoot and engineer can eat up critical resources and lead to higher costs.

Finally, with the right tools, notes, and incident reports at their fingertips, 16

Aerospace Giant Leverages Collective Knowledge and Creativity to Power Innovation One global aerospace company addressed its technical knowledge management challenges by implementing an enterprise software platform fusing ideation and problem-solving methodologies with access to corporate and external knowledge. The software automates and facilitates knowledge capture and reuse, enabling engineers and scientists to stimulate creative idea generation to drive breakthrough problem-solving.

With the platform in place, the aerospace company’s scientists are empowered to leverage and build on the experience of their historic space exploration programs, which includes hundreds of thousands of documents, such as materials, engine performance data and ground support equipment inventory.

What’s more, the company’s scientists are able to collaboratively define problem and opportunity areas in a common language, and use a structured process for inventive problem-solving and concept generation—critical in aerospace platforms and systems that often comprise interacting subsystems that independently and collectively must satisfy a complex set of performance requirements.

To date, the company used the software in dozens of workshops, generating ideas and solutions for numerous products and projects, including two high-profile rocket engine initiatives. These engines are complex systems comprised of several major components, each of which is made up of countless sub-components. Using its new platform, the manufacturer’s scientists and product teams generated more ideas and translated these ideas into products.

In addition to fueling the product pipeline with competitively differentiated products, the platform delivered significant cost savings to the company. Within one year of implementing its knowledge management program, with the new software as the backbone, the company reported an impressive 10-fold return on investment through cost-savings efforts. The program continues to pay back huge dividends while the manufacturer regularly benchmarks and refocuses its knowledge management program to ensure its future success.

FINALLY, WITH THE RIGHT TOOLS, NOTES AND INCIDENT REPORTS AT THEIR FINGERTIPS, COMPANIES CAN FIX PROBLEMS SOONER AND BETTER, THUS IMPROVING QUALITY. companies can fix problems sooner and better, thus improving quality.

And that’s certainly quite a trio of benefits. SDCE

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INDUSTRY SPOTLIGHT: TECHNOLOGY

By Matt Coates, Ian Mitchell, Michelle Lynch

SEEING THE IP TREES & THE FOREST There are three intellectual property strategies that can help determine a company’s growth and market valuation potential for years to come

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rom the embryonic to the iconic, companies and whole industries are defined by the intellectual property (IP) they own. A startup with one key patent can grow exponentially while mega-companies dominating whole patent classification codes can be displaced and, if they don’t adapt, rendered obsolete.

Investors value the strength of a company’s IP portfolio, and its ability to defend and grow it, but it can be a risky business. There is a large and growing global legal industry— both internal legal departments and independent law firms—that’s purpose is to engage in the defense and dismemberment of IP. Knowing when to lawyer up or move on is rarely an easy decision, and even a legal victory is no guarantee of a successful strategy.

In parallel, companies face the challenge of developing and evolving

their IP portfolios, that is, creating an environment or framework in which investment consistently produces value for stakeholders in the form of new products or processes. As with any strategic asset, managing and protecting IP is core to revenue growth and company valuation.

Understanding the evolution of IP and its trajectory can produce insight into how and when it can be leveraged to create new market opportunities— whether in an already crowded landscape or an as-yet-to-be-defined new product category.

A visual analogy for understanding this evolution is to consider the global patent collection as an IP forest. Each tree represents a unique product category based on a patent classification code, such as the

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As a seedling becomes a sapling, new patent leaves are introduced to absorb new market light.

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international patent classification (IPC) code. For example, the code H04Q 7/00 is “selecting arrangements to which subscribers are connected via radio links or inductive links.” This product category saw an explosion of activity due to the growth of cellular communications. Individual product category trees, such as H04Q 7/00, sprout from foundational seedling patents that grow with the addition of new patent leaves. These new leaves may be derivatives of the original patent or come from other disciplines.

The sprout grows into the marketdriven sunlight—that is, market demand for products utilizing the IP. As a seedling becomes a sapling, new patent leaves are introduced to absorb new market light. As the tree thrives, it matures and the proliferation of leaves produces branches that support growth to new market light. Over time, the lower branches receive less light, becoming backward citations. They are the necessary building blocks that ensure the growth of other branches, which are now pursuant of the strongest market light and defining the latest iteration of product innovation.

Mature trees produce seeds that themselves grow into new trees.

Sometimes these sprouts fall adjacent to the parent tree and sometimes they plant their roots in a distant part of the IP forest. Using the tree analogy, there are three main trajectories for IP development that companies can pursue: ❯❯ ADD A NEW LEAF ON THE SAME BRANCH of the tree by filing patents immediately adjacent to one another, which result in incremental product improvements. ❯❯ ADD A NEW LEAF ON A DIFFERENT BRANCH of the tree by filing

patents that spawn new, but related products, which threaten exposure to the market light for other patent branches. ❯❯ PLANT A SEEDLING ELSEWHERE in the forest by filing patents that could eclipse current technology.

Three strategies that follow from these three trajectories can determine a company’s growth and market valuation potential for years to come. To balance the risk, many companies pursue a combination of the three strategies.

STRATEGY 1:

NEW LEAF, SAME BRANCH OR INWARD INNOVATION Filing adjacent patents is an inwardlooking IP strategy intended to defend, protect and incrementally grow market share for existing products.

For instance, Apple’s introduction of iPhones with colored casings enticed a subset of customers to upgrade.

In truth, defending and protecting market space is largely a litigation strategy rather than an innovation strategy. Indeed, the majority of IP litigation that companies engage in is infringement defense from patents that occupy the same classification code. Companies defend (or attack) their space on the branch where they currently have the most market light.

In many respects, litigation is the default IP strategy, as it is familiar ground. Companies know their products, competitors and markets.

Still, the strategy is generally short term, protectionist, and can be more time-consuming than finding new branches on the tree or planting seedlings that grow into new trees.

It can also be expensive. Consider the smartphone patent wars between many of the major manufacturers that

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INDUSTRY SPOTLIGHT: TECHNOLOGY

continue to rage today over devices that since faded from shelves and out of pockets. Millions of dollars were spent on litigation with little, if anything, to show for it. Bottom line: The new-leaf, same-branch strategy is market topiary designed to keep the light on what may eventually be a fading leaf on an inner branch. Ultimately, the tree grows from somewhere else and the market doesn’t care about the millions spent on litigation.

commoditization trap. First-movers harmonize their research and development (R&D) spending to find the path outward into new light-filled areas, while fast followers track them to ensure they are the next leaf growing in the new space. The alternative—or complementary—strategy for the market leader is to stay and fight to protect its market position on the branch. This is the inward-looking new-leaf, same-branch strategy.

Consistently finding and timing the path outward is not easy. For those that do it well—Procter & Gamble and Qualcomm, to name a few—it becomes part of their corporate culture. This includes incentives to file ideas; fast communication paths to legal departments; public recognition of employees for inventiveness; recruitment strategies that include criteria for developing patent portfolios; and providing employees with time to pursue valueadded activities outside day-to-day responsibilities.

STRATEGY 2:

NEW LEAF, DIFFERENT BRANCH OR OUTWARD INNOVATION If the first strategy is about defending old markets, this strategy is about growing outward into new market light to stay ahead of the competition. There are various ways companies can do this, but the most common is to grow or switch to a new branch: for example, the introduction of IP to wirelessly charge mobile phones that can be traced back to a U.S. patent granted to Nikola Tesla in 1900.

From observation, only a small percentage of companies are effective at consistently evolving IP into new markets ahead of the competition. The rest are fast followers that enter the market and file incremental patents, prompting the early movers to move on again before the market becomes commoditized. Of course, timing the next move is critical. Understanding where the market is on the lifecycle maturation curve—the S-curve—can be helpful, as it often corresponds to the density of patent filings: That is, the more patent applications, the more mature the market (see Figure 1).

Companies know this and develop IP strategies to stay ahead of the

STRATEGY 3:

PLANT A NEW TREE OR FORWARD INNOVATION The list of innovative companies developing IP that launches a new product classification is the shortest of the three. Edison, Ford, Toyota

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Figure 1: Understanding where the market is on the S-curve can be helpful, as it often corresponds to the density of patent filings.

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... Be ruthlessly objective when analyzing technology options, the dynamics of the market and a thousand other factors that often are ignored.

This article is excerpted from the original article that appeared in the Q1 2015 IHS Quarterly. The full text—including case studies—can be found at on ihs.com/PatentTrees.

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and Apple are iconic examples. While Apple did not invent the smartphone, its IP refined and defined it. Likewise, Toyota built on earlier battery technology to plant the electric vehicle (EV) powertrain seedling in the 1990s.

The first leaf was the hybrid Prius, which hit the Japanese market in 1997.

Since then, Toyota filed thousands of patents to protect and grow the EV powertrain tree just as other automakers entered the market with their own hybrid EVs. Today, the tree has many branches, including the plugin hybrid EV, mild hybrids, full hybrids and hydrogen fuel cell EVs. Combined, these EVs accounted for nearly 3 percent of vehicle sales worldwide in 2014, according to IHS. Of course, planting a new tree does not guarantee success. Consider, for example, a display manufacturer that recognized user frustration from relying on touch as the interface for mobile devices. The company launched an R&D effort to develop fingerprintless coatings that could be fused to the glass or added as an aftermarket add-on. However, a disruptive technology that makes touching the screen altogether unnecessary emerged shortly after and the company’s ability to capitalize on its investment is now uncertain.

IT ALL COMES DOWN TO CRITICAL THINKING It is often the case that an incoming technology resolves a constraint that the adopting market did not.

The constraint may be one of manufacturing or material properties or something else. It can often be recognized as addressing not the wants the consumer articulated, but the needs they couldn’t. Of course, hindsight is 20/20 so, looking back, the answer

always seems obvious. But why is it not obvious when companies are peering forward? This is the question every executive asks. The decisions made at this level have direct shareholder impact, with percentage points of market share and valuation gained and lost not just on the decision, but on the long-term course for the company set from that point onward.

It could be said that top-tier global companies are better at making these decisions. Indeed, they execute decisions sufficiently fast to stay on the part of the tree that receives the most market light or plant seeds in the most fertile parts of the forest. But where does this insight come from given that the majority of information is widely available? Indeed, the same advisors and consultants are offering their services to a wide array of companies.

In nearly all cases, the first step— the most important step—is to think critically. This requires companies to be ruthlessly objective when analyzing technology options, the dynamics of the market and a thousand other factors that often are ignored. The best decisions for forward growth are based on addressing the questions about the unknowns, not the knowns.

They deliberately force conventional thinking to be unconventional and, more often than not, aim to disrupt and compete with their own technologies, not just those of their competitors.

By setting a critical-thinking framework with which to drive innovation, companies can embrace the cultural process and grow more efficiently; build sustainable, defensible and diverse IP; and ultimately create the most value, whether embryonic or iconic. SDCE

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KNOWLEDGE MANAGEMENT

By Kevin Alexander

The Clear Path to

EFFECTIVE KNOWLEDGE MANAGEMENT

How organizations can overcome the top obstacles that are standing in the way of effective knowledge management and achieve both topand bottom-line benefits in the process

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rganizations typically struggle to manage and leverage their internal knowledge for four different reasons. The key issues that challenge them are: ❯❯ THE WORKFORCE IS AGING. Most companies don’t do a very good job of extracting the tribal wisdom that’s stored in the heads of their veteran employees. To compound that problem, older workers typically aren’t adept at socializing their personal expertise in the same way that perhaps a younger worker might be. ❯❯ GLOBALIZATION IS A CONTINUED STRUGGLE. This issue is perhaps a bit cliché these days, but globalization remains a struggle for many organizations. Different companies have workers in

different geographies that speak different languages.

The cultural norms may not extend to fostering knowledge management. ❯❯ FIRMS ARE STILL USING LEGACY SYSTEMS. Many companies are using outdated legacy systems that simply don’t foster knowledge management. These systems were not developed in order to foster knowledge management and they really tend to fall down when folks try to extend them to a knowledge management environment. ❯❯ ORGANIZATIONAL DEPARTMENTS REMAIN LARGELY SILOED. Information typically is very siloed in most companies. Often, certain departments may have their own servers and then other

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departments may have their server located elsewhere. These servers don’t talk to one another and don’t coordinate with one another, so they don’t foster knowledge management.

In assessing the impact of knowledge management on corporate top and bottom lines, one needs only look to history for the answers. There’s plenty of anecdotal evidence that can be reviewed and factored into the problem. In the 1990s, for example, computer-aided design (CAD) was all the rage. And while CAD was great at helping individual end users model their designs, it wasn’t good at telling the next person why those designs were modeled in that fashion or what the thought process was. CAD didn’t capture that level of information.

In the 2000s, there was a big focus on product lifecycle management (PLM) software. This software is great at helping companies consolidate and secure documents, but it serves as an input system. It’s all about command and control. What we really need is an output system that enables easily accessible information.

These days, companies are dealing with terabytes and petabytes of information, and the search and retrieval paradigm tends to really just start to break down once you get to that scale. Companies want (and need) to be relieved of that burden.

Also popular in the 2000s and even now are enterprise resource planning (ERP) software systems that most of us think of as a necessary evil (myself included). Although some companies attempt to do very limited knowledge management with their ERPs, at this point, most firms realize that these 22

systems do a poor job of managing knowledge.

So, as you can see, CAD, PLM and ERP all solve the wrong problems, and wind up negatively impacting both top and bottom lines. Workers spend their time fighting the nuances and quirks of the systems, for example, instead of putting their time and energy into innovation.

OVERCOMING KNOWLEDGE MANAGEMENT ISSUES There are several ways to overcome the challenges associated with knowledge management, but most of them require a mindset shift on the organization’s part.

Historically, knowledge management was all about search and retrieval. In that paradigm, the onus is really on the end user to know a lot of information ahead of time. He or she needs to know the answers to questions like: What type of document am I looking for? Where is it located? Do I have access? Was it tagged with the proper metadata fields so that I can search for that information?

This type of system really only works when there’s a very small corpus of information. These days, companies are dealing with terabytes and petabytes of information, and the search and retrieval paradigm tends to really just start to break down once you get to that scale. Companies want (and need) to be relieved of that burden. They don’t want to have to think about where a document is located, whether it was tagged properly and if users have access to it.

To innovate and achieve engineering excellence, companies must be aware that there are research and discovery platforms available that allow their users to simply ask questions and get answers in return. It’s as simple as that. SDCE

SUPPLY & DEMAND CHAIN EXECUTIVE | SPECIAL EDITION | December 2015

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