The Impact of IT on Product Innovation
Peter Burrows
Sr. VP/ MIS and CIO
September 27, 2005
September 27, 2005
Boston College
1
Reebok Background
Multiple Brands
Variety of Product
Types
- Footwear, apparel,
fitness equipment,
licensed watches,
bottled water, etc
- Department stores
- Products may be
merchandised as
collections or
assortments requiring
coordinated delivery
- Company-owned stores
- Products may require
special fixtures or
collateral promotion
material like posters,
print ads, and store
signage
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Multiple Retail
Channels
2
- Sporting goods
- Specialty retailers
- Licensees
- Wholly-owned,
international
Subsidiaries and
distributors
- Sales in 140 countries
- Internet
Boston College
Reebok Financials
2004 Annual Sales = $4 billion
An improving financial performance for the last five years:
• Five consecutive years of earnings improvement.
• Compounded annual growth rate of 23.4%.
• Returned $226 million to shareholders in the form of dividends and
share repurchases
• We have generated $900 million of operating cash flow.
• Our share price increased more than 400% and during the past year it
outperformed the S&P 500 for the fifth consecutive year.
• Cash position at December 31, 2004, $565 million
• On August 3, 2005 Reebok agreed to be purchased by Adidas for $59 a
share – a 34% premium.
September 27, 2005
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Boston College
IT Governance
IT Investment Committee
Corporate Executive Management; establishes IT capital spending annually; meets once per year
IT Steering Committee
Brand Presidents and CFO’s/Shared Services, selects and monitors projects; meets monthly
Global Process Executives
Nominated owners of every key company process, referees changes to global process designs
Project Steering Committee
IT Project
Manager
F/T IT
Team Members
F/T Business
Team Members
September 27, 2005
Data
Conversion
Manager
4
Mandatory for any
project
Business Project
Executive
Project
Knowledge
Coordinator
Integration
Test
Manager
Change
Management
& Training
Boston College
Implementation Methodology
of all Major Systems Investments
Global
One-Time
Design
First
Usage
Risk
Aversion
G
First
1 Replication
T
• Any gaps to the G1T
• Pilot or parallel if
• Time boxed
model surfaced to
possible
• Involve appropriate
global process
• Select brand or
brands/countries
executives
location with best
• Highest voice to
• Only two outcomes:
skills/greatest
those that make
– Improve model
incentive to change
money
– Change practice
• Don’t try to reach
100% consensus if
process not needed
for first usage
September 27, 2005
5
G Second
1 Replication
T
• Gaps to G1T should
be smaller
• Project duration
should be faster
Boston College
Example 1:
Reebok Product Development
• Reebok introduces thousands of new products as seasons or collections every
year
• To ensure a steady supply of new products we are working on 5-7 active
seasons of products all at the same time
• The average footwear product takes 18 months to engineer, commercialize and
appear on retailer shelves, but quick to market products can move through the
same process in less than 90 days.
• Continuous improvement in materials present an ever increasing list of
construction choices that must be tested and approved before being included in
any product
• Despite the availability of digital product representations of products, our
industry requires physical product samples to test, approve and sell effectively
• We out source almost all manufacturing so we must work collaboratively with a
network of supply chain partners
September 27, 2005
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Boston College
Product Development Re-Engineering Challenges
• High volume process
• No exact-fit, off-the-shelf software that can scale to global requirements
• Geographically dispersed user base
• Large percentage of users not Reebok employees
• Desire to add more structure to current processes while reducing cycle times
• Footwear product development different than apparel and equipment
• No common workstation platforms due to nature of the work (PC’s, Mac’s,
Unix workstations)
• Employees want to work online/offline at the office and on the road
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Boston College
One Example: Pump 2.0
• Pump 2.0 introduced
in April of 2005
• The original pump
technology Reebok
introduced in the
1980's eventually
sold more than 20
million pairs
• Pump 2.0 needs no
laces and inflates by
itself
September 27, 2005
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Boston College
Pump 2.0 Facts and Figures
•
The inflatable bladder and smart valve took over four years to develop and perfect in
our Advanced Research department
•
50 additional parts beside the bladder make up this shoe
•
The parts are made from 25 different materials that had to be tested and approved by
labs located in China, Korea and Taiwan.
•
15 different manufacturers supplied these materials from five different countries
•
Special tooling had to be created for manufacturing to support RF welding dies,
cutting dies, midsole molds, outsole molds, flow molds, hot press molds and injection
molds
•
Physical samples of this shoe had to manufactured for initial product review,
prototype, confirmation meetings, retail and consumer feedback meetings, photoshoots, bulk sales samples for distribution to more than 30 countries,
3 rounds of
fit and wear testing and final manufacturing confirmation
•
Hundreds of product wear testers had to be identified, provided product and then
surveyed for results
September 27, 2005
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Boston College
Product Development Technology
THE PAST
Current Environment
Materials Group
Marketing
Factories
Materials group
Development
•
•
•
•
•
•
•
Sales
Product
Information
Costing
Costing
Sales
Islands of Information
Redundant views of information
Technology makes factory participation
difficult
Manual hand offs between groups
Data integrity issues
No visibility or control over process
Increasing pace of market changes
leading to employee stress
September 27, 2005
Factories
10
Marketing
Development
• Increased investments in automating
the product development process
• Single database for all product
information
• Only one version of the truth
• Internet based to allow factory
participation
• Workflow agents for electronic handoffs
Boston College
Key Attributes of Current Environment
• Single product vault for all product information regardless of where the
products are designed or what technologies are used to create them
• Ability to view and comment on aspects of a product digitally, without
the need to have specialized software that might have been used to
create digital view
• Every electronic device used in product development is connected to
the network to support 100 % flow of information
• Individual products can be grouped into categories, lines and seasons
so the timelines can be managed as a collection that must be
delivered to the market together
September 27, 2005
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Boston College
Key Attributes of Current Environment
• Electronic workflow to move all products through specific process
gates defined for each product type
• Web browser user interface
• Digital product images are used in all reports and management dash
boards
• Collaboration with supply chain partners for 7/24 hour global
engineering
• Management alerts on products not hitting timelines or margin
expectations
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Boston College
Product Development Technology Portfolio
Product
Development
Tools
MAC-based
Design Tools
2D & 3D
CAD/CAM
Tools
PC-based
Design Tools
September 27, 2005
Tooling
Design
Software
Pattern
Engineering
Software
13
Digital
Cameras
Electronic
Last
Design
Software
Wear
Testing
Software
Material
Testing
Technologies
QA
Analysis
Tools
Color
Matching
Lab Dip
Software
Boston College
Product Development Technology Portfolio
Databases
and
Transaction
Systems
Product
Development
Tools
Quality
Analysis
Database
MAC-based
Design Tools
ERP for
Supply Chain
Management
2D & 3D
CAD/CAM
Tools
PC-based
Design Tools
September 27, 2005
Product Vault
“Single Vision
of the Truth”
Tooling
Design
Software
Pattern
Engineering
Software
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Digital
Cameras
Digital
Asset
Library
Electronic
Last
Design
Software
Approval
Materials
Database
Fit and
Wear Test
Databases
Wear
Testing
Software
Material
Testing
Technologies
QA
Analysis
Tools
Color
Matching
Lab Dip
Software
Boston College
Product Development Technology Portfolio
Communication
and
Collaboration
Tools
Databases
and
Transaction
Systems
Product
Development
Tools
Secure
E-Mail
Quality
Analysis
Database
MAC-based
Design Tools
Supplier
Portal/E-Hub
ERP for
Supply Chain
Management
September 27, 2005
Product Vault
“Single Vision
of the Truth”
2D & 3D
CAD/CAM
Tools
PC-based
Design Tools
Web
Conferencing
Secure File
Transfer
Servers
Tooling
Design
Software
Pattern
Engineering
Software
15
Digital
Cameras
Remote
Visualization
Tools
Video
Conferencing
Digital
Asset
Library
Electronic
Last
Design
Software
Approval
Materials
Database
Fit and
Wear Test
Databases
Wear
Testing
Software
Material
Testing
Technologies
QA
Analysis
Tools
Color
Matching
Lab Dip
Software
Boston College
Product Development Technology Portfolio
Presentation
Tools and
Analysis
Communication
and
Collaboration
Tools
Databases
and
Transaction
Systems
Product
Development
Tools
Decision
Support
Information
Warehouse
Secure
E-Mail
Quality
Analysis
Database
MAC-based
Design Tools
Supplier
Portal/E-Hub
Executive
Dashboards
Secure File
Transfer
Servers
Web
Conferencing
ERP for
Supply Chain
Management
Product Vault
“Single Vision
of the Truth”
2D & 3D
CAD/CAM
Tools
PC-based
Design Tools
September 27, 2005
Line
Planning
tools
Product
Viewer
Tooling
Design
Software
Pattern
Engineering
Software
16
Digital
Cameras
Marketing
and Sales
Presentation
Tools
Custom
Product
catalogs
Remote
Visualization
Tools
Video
Conferencing
Digital
Asset
Library
Electronic
Last
Design
Software
Approval
Materials
Database
Fit and
Wear Test
Databases
Wear
Testing
Software
Material
Testing
Technologies
QA
Analysis
Tools
Color
Matching
Lab Dip
Software
Boston College
Results So Far
 In the sixth inning of a nine inning
game
 15 Complete Seasons in footwear
and apparel now managed
 Over 45,000 electronic files are
stored in the product vault
 24 reports and 35 line plan views
are utilized daily by 64 different
user profiles/roles
 8 footwear and 9
apparel milestones
are tracked as
workflow gates
September 27, 2005
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Boston College
Example 2: Supplier E-Hub - What is it ?
Web enabled application that can be used to extend
internal ERP and PLM systems to factories,
transportation providers and other supply chain
partners.
Can facilitate:
– Distribute PO’s electronically
– Publish ticketing and labelling requirements
– Track work in process
– Obtain shipping services
– Creation of advanced shipping notices
– Exchange shipping documents
September 27, 2005
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Boston College
Logistics Facts
40 Main Footwear Factories in 8 Countries
600 Apparel Factories in 29 Countries
450 Raw Material Suppliers
27 Freight Forwarders
 Transportation modes include Ship, Truck, Rail and Air
34 Custom Brokers
Over 5,000 purchase orders placed each month
September 27, 2005
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Boston College
Past Supply Chain Challenges
Purchase Order Management



Lack of complete purchase order visibility to trading partners
(sales offices, factory, raw materials supplier, ticketing,
consolidator, transportation, Distribution Center) to manage
supply chain lead time & inventory
Difficult to extend internal systems to link different supply chain
parties.
Difficult to accurately implement customer specific services
(e.g. ASN, pre-ticketing, labeling, mark-for-store)
Transportation Logistics Management



Different carriers, different way to trace & track
Non completeness of consignment check point
Manual processes for smaller carriers, air and exceptions

Last minute inventory management difficult
September 27, 2005
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Boston College
the Old Way
Country
Liaison
Offices
Customs
Factories
Raw
Material &
&
Component
Suppliers
Reebok
HQ
Transportation
Providers
Drop
ship
customers
Reebok
Trading
Hong
Kong
Label
Providers
Banks
Communication Methods: Fax, Mail, Couriers, site visits, EDI, proprietary file transfers
September 27, 2005
21
Boston College
the New Way
Business-to-Business data sharing /Vendor Neutral E-Hub/ Hosted
Environment (ASP model)
Country/
Liaison
Offices
Factories
Raw
material &
Component
supplies
Employees
Custom-built
e-HUB with LINE,
a division of container
port operator,
Hutchinson- Whompoa
in Hong Kong
Reebok HQ
Drop
ship
customers
Reebok
Trading
Hong
Kong
Banks
Label
Providers
Customs
Transportation
Providers
Workflow, message alerts, backoffice integration with reporting capabilities
September 27, 2005
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Boston College
Results So Far
• Increased operational efficiency through electronic
transmission of order information directly into the factory
systems
 Improved data accuracy
 Reduced administration cost through data inheritance
• Some factories now using same solution for raw material
suppliers.
• Neutral & common platform compared to having different
system for each shipper/carrier
• Purchase order history and version control logs benefit
factories
• Dashboard design with “To Do List”, “Overdue Tasks” and
“Alerts” for each user level
• Ability to print / re-print purchase orders on demand
• Numerous pre-delivered reports to manage PO activity
September 27, 2005
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Boston College
Example 3: Digital Asset Management
WHAT IS IT?
BENEFITS
– A central repository for all
digital assets capable of
handling all of Reebok image
types (video, products,
lifestyle)
- Cost reduction
– Ability to push digital assets to
a channel partners
– A work flow system that
enables a stream-lined
process for creating and
approving digital assets
September 27, 2005
- Improved brand image
- Enable better
communication with
distribution partners and
customers requiring digital
images
- Allows the use of digital
images in all executive dash
boards
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Boston College
The Past . . .
Product
Development
Centers
E-Mail
Manually Archive
to CD
US
strain on network
and mail servers
Librarian
Manually resize all images low, med, hi versions
Print
Catalogs
Users requesting images
September 27, 2005
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Boston College
Reebok’s New DAMS Process Diagram
Lifestyle
Marketing Materials
Catalog Stage
Prototypes
Line Confirmations
Product Development Centers
Librarian
FTP to Partners
Hot Folder
Product
Images
Footwear and Apparel
Line Planning System
Deployment Agent
Push of Assets
Product Data
Access
System
Manual
Process
Reebok Websites
Internal
Folder Locations
Global Users
September 27, 2005
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Boston College
Results So Far
Central Repository for all of Reebok’s digital assets.
 Reduction / elimination of redundant photo shoots
 Better control of copyrighted assets - automated expiration of assets
 Access to the correct and most current version of assets
Store only the core asset; Render to needed format
and resolution “on-the-fly”.
Self-service model for image requests 



Reduction of CD creation costs
Reduction of Shipping Costs
Reduction of Product Catalog Printing Costs
Instant fulfillment – reduced time-to-market
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Boston College
Results So Far (cont.)
Reduced network traffic:
 Automated upload of product assets via FTP and not E-mail
 View thumbnail and only download high resolution if desired
 Use of shortcut links in emails to reference images, instead of attaching image
file
Improved worker efficiency by providing a one stop
location for product images and product data.
 Product data from Reebok’s Line Planning System automatically mated with
appropriate asset
 Built in search tools
Better control of access to assets through user groups
and permissions.
Browser based application accessible from any public
Internet connection and does not require any client install.
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Boston College
Central Repository for Reebok’s Assets
September 27, 2005
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Boston College
Advice when using technology to improve product
development:
 Obtain executive leadership at the highest possible level
 Balance top-down objectives for change with ample benefits for the
people who work in the process
 Avoid long-duration, big-bang implementations
 Try to deliver some benefits every 3-6 months
 Initial focus on low hanging fruit to gather support and momentum
 If possible, defer most complex technology challenges until team has
mastered the technology and gained confidence
 Retire Legacy modules along the way to increase compliance to new
processes/simplify maintenance
 Do not accept software that is NOT a good fit
 Influence suppliers if you can/custom build if you cannot
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Boston College
Advice when using technology to improve product
development (continued):
 Fund full-time, business team members in project cost
 Pay close attention to systems technical architecture so it can
scale and handle performance and allow secure collaboration
outside of the firewall
 Adjust project calendar to recognize and accommodate seasonal
product development calendars
 Use the project as an opportunity to clean up data
 Adhere in strong project methodology and focus attention on
issues and off plan items.
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Boston College