This article was originally published in our PLM Report 2023 – the definitive instalment in fashion’s longest-running dedicated PLM market analysis. To read other opinion pieces, exclusive editorials, and detailed profiles and interviews with key vendors, download the full PLM Report 2023 completely free of charge and ungated.
Key Takeaways:
- More than 80% of executives expect to adopt Digital Transformation as a management tool. And PLM is poised to play a more far-reaching role than ever before, compelling companies to tap into their PLM system’s full potential – whether by capturing more information, increasing efficiency, enhancing collaboration or maximizing utilization.
- Companies must work with solution providers and implementation partners to shift from a more transaction-oriented approach to a long-term outcome-oriented approach.
- To be outcome-oriented means to plan beyond system go-live and expand the PLM implementation roadmap to include performance indicators.
- Companies must understand, monitor, and track their PLM usage or adoption rate to maximize the long-term benefit they gain from implementing PLM.
More than 80% of surveyed executives expect to adopt Digital Transformation as a management tool, according to Bain & Company’s study “Management Tools & Trends 2023”. As a critical enabler of Digital Transformation in the Retail, Footwear and Apparel industry, PLM is poised to play a more far-reaching role than ever before, compelling companies to tap into their PLM system’s full potential – whether by capturing more information, increasing efficiency, enhancing collaboration or maximizing utilization.
As the true potential of PLM becomes apparent, companies must rethink, redesign and reconfigure their approach to PLM. Specifically, companies must work with solution providers and implementation partners to shift from a more transaction-oriented approach to a long-term outcome- oriented approach.
What does it mean to employ an outcome-oriented approach?
To be outcome-oriented means to plan beyond system go- live and expand the PLM implementation roadmap to include performance indicators.
At a high level, PLM implementation success is often evaluated by key performance indicators (KPIs) that may be qualitative or quantitative in nature. Examples include improvements across business productivity, error rate, collaboration, or efficiency. While these metrics certainly provide proof of performance, substantial data gathering over an extended time period is required to analyze data with an acceptable level of confidence.
However, there is another key performance indicator that can signal implementation outcome early on: the level of PLM usage or adoption rate.
What is PLM usage or adoption rate?
Typically, PLM adoption rate of an organization is defined as the percentage of total license purchasers that become active PLM users. It differs from the general definition of technology adoption rate as the organizational version considers usage relative to number of licenses purchased rather than overall usage increase. However, this formula can be misleading as it only indicates how many users adopt PLM and not how well they use it.
For instance, 100% of license purchasers could be actively utilizing only 10% of the system’s capabilities. Judging from the definition above, PLM usage appears to be maximized.
However, considering this value along with the level of system usage reveals that the company is far from utilizing PLM to its fullest.
To avoid the fallacy of over-simplification, Ptex Solutions embraces a more inclusive approach to PLM adoption rate. Among additional factors, the company’s proprietary methodology expands adoption rate definition to include usage of system capabilities adopted at go-live versus new capabilities added and adopted post-implementation.
Since level of PLM usage varies by industry segment (retail, footwear, apparel, manufacturing, etc.), product type, company size, structure, as well as several other factors, the company emphasizes the need to review adoption data in the right context.
Understanding, monitoring and tracking this rate can enable companies to maximize the long-term benefit they gain from implementing PLM.
Why do adoption rates matter?
When a PLM solution’s adoption rate declines, it is a strong signal of a potential performance drop ahead.
Case in point: A leading retailer who adopted PLM in the early 2000s should have theoretically achieved a head-start vis-à- vis the industry in terms of realizing efficiency and financial gains from the system. Instead, the company saw significantly reduced system usage due to employee turnover accompanied by loss of knowledge transfer. As a system that was intended to be largely automated became increasingly manual, decline in usage was followed by a decline in system effectiveness and user satisfaction levels. Fast forward to 2022, the company’s PLM system functioned more as a document management system and was only used because it was mandatory due to integration with their ERP system. Ultimately, the company ended up replacing their system as it became a hindrance to productivity.
Had the company sought guidance from a PLM implementation partner or advisor as soon as they noticed a trend toward declining usage, the story might have followed a different trajectory. This is not to say that PLM systems should not be upgraded to the latest version, they certainly should, but PLM ROI can be maximized only when the maximum number of users operate the system to its full capacity.
For example, another early adopter who implemented PDM in their company more than 25 years ago is on its third generational upgrade. The company began its journey with PDM, then moved to on-premise PLM and is now in the process of implementing MT Cloud PLM. Every 7-8 years, the company upgrades its system to keep pace with the latest technology trends as well as changing business dynamics. Since employee turnover is a natural part of business, scheduling timely upgrades and periodic training sessions with implementation partners ensures that benefits derived from PLM continue to increase over time.
As a side benefit, adoption rate can also be a PLM implementation partner selection criterion. To find the right implementation partner, ask how they plan to continually engage with your company beyond system go-live. The ideal partner will present a roadmap that incorporates processes designed to maintain or improve PLM adoption rate.
What is considered a good adoption rate?
To be relevant, target adoption rate must be reset every year to realign with organizational goals for the year ahead. While companies aim to achieve and maintain a 100% adoption rate, it is not a realistic expectation as the number will fluctuate due to an ever-changing environment.
A more effective tactic to determine a good adoption rate level is benchmarking. One of the most powerful and underutilized management tools, benchmarking, enables companies to compare performance vis-à-vis others and identify potential performance gaps. Adding context around adoption data not only helps answer the adoption rate benchmark question, but also helps decode the best practices that drive them.
Benchmarking is hardly a new concept in the retail, footwear, apparel and manufacturing companies. In their book “Benchmarking for Best Practices: Winning Through Innovative Adaptation”, authors Christopher E. Bogan and Michael J. English narrate: “In the 1800s, British textile mills were absolutely the best in the world. In contrast, American mills were still in their infancy when it came to producing all types of textiles. Francis Lowell, a New England industrialist, set out to change this situation by upgrading business technology in the United States. Lowell travelled to England, where he studied the manufacturing techniques and industrial design of the best British mill factories. He saw that the British plants had much more sophisticated equipment, but the British plant layouts did not effectively utilise labor. In short, there was room for improvement.
In 1815, Francis Lowell built a factory that employed much of the technology
in the British plants but was designed to be much less labor-intensive than the British facilities. It was a splendid example of innovative adaptation.
In 1820, this textile mill center became known as Lowell, Massachusetts. By 1840, just two decades later, Lowell had grown to become the second largest city in America and the largest manufacturing complex in the country. This dynamic growth was largely fueled by “one man’s vision and his ability to creatively adapt practices observed in the world’s best mills.”
How can retail, footwear and apparel companies benchmark their adoption rate?
Data harvested from benchmarking initiatives may be qualitative such as the example above or quantitative depending on whether the focus is on capturing performance, process or strategy benchmarks.
Companies can conduct internal or external benchmarking exercises to find relevant, meaningful and actionable information:
- Internal benchmarking: refers to benchmarking within an organization. This exercise could be conducted across brands or departments to identify the most effective users of PLM.
- External benchmarking: refers to benchmarking vis- à-vis a select class of companies from within or outside the industry.
Whether benchmarking internally or externally, identifying and analyzing those users or companies that are ahead of the industry on the PLM learning curve can provide invaluable insights for harnessing the power of PLM as well as avoiding potential pitfalls. While there are numerous ways to cut, slice and dice benchmarking data to cull meaningful insights, even simply monitoring high-level usage stats on an on-going basis enables companies ensure PLM users continue to optimize system benefit.
For example, every year, the company highlighted in the earlier example will be working with Ptex to conduct a PLM audit by performing an internal benchmarking exercise. This exercise will culminate in the creation of an annual PLM adoption plan that will help the company identify new avenues to use their system.
Beyond adoption rate, insights gleaned from internal or external benchmarking can be instrumental for corporate goal setting, strategic decision-making or capability-building.
In conclusion
From an on-premise technology solution used to streamline product design and development processes, PLM has evolved into a multi-tenant cloud-based tool with the power to significantly influence organizational Digital Transformation. However, PLM can only do so if it is adopted and leveraged to its full potential across the organization.
At the end of the day, it is not just about how well a PLM solution is designed and developed, but also about how well it is implemented. Using a comprehensively defined PLM adoption rate as a critical performance indicator and benchmarking it against best-in-class users or organizations enables businesses to build an outcome-driven PLM approach that is informed, forward-looking, responsive, and adaptable.
