Divide And Conquer

Dec. 21, 2004
Lubrizol uses software tools to support strategic investment of R&D resources.

With hundreds of research projects active at any one time, Lubrizol Corp. needed a consistent way to prioritize its mix of projects. The Wickliffe, Ohio, company met that challenge by applying decision-support software tools to guide project and portfolio evaluation, and to provide a way to capture and communicate changes in light of new information. "One of the keys to an effective R&D program is to cut out the dogs early and fund the winners more completely," says Steve DiBiase, vice president, R&D, of the nearly $2 billion provider of specialty chemicals for fuels and lubricants, as well as systems for the transportation industry. "Information technology allows our people to think more clearly, more deeply, and more quickly so we can assess the data we have to make these decisions more intelligently." The research portfolio was divided into three categories: offensive/ growth, defensive/protecting existing business, and new capability/competency development. To evaluate the potential value of individual projects and their fit in the overall portfolio, Lubrizol developed separate business models for each category, with criteria and weightings based on their strategic objectives. AliahThink decision support software from Aliah Inc., Pittsburgh, was selected to support development of the models. "AliahThink is a 'group think' tool that allows us to extract the knowledge and experience from people's minds and assemble that in a form from which we can make decisions," says DiBiase. The software takes a real-life view of decision making. By constantly prompting comparisons of one criterion against another, the tool allows a business model to be constructed that contains both qualitative and quantitative inputs, ranked and weighted. "The tool allows hard inputs like financials to be combined with softer inputs like fit with business strategy, competitive intensity, competencies, and ability to take advantage of distribution channels," says Walter Copan, manager, research administration, at Lubrizol. "We've adapted the tools for our own business process and culture, and the priorities of our business decisions." The software "makes decision making much more consistent, with specific definition of inputs and traceability of decisions and results," says Copan. AliahThink also allows for reranking of projects and business opportunities as the overall attractiveness of a business scenario changes or as new candidates are proposed for the portfolio. An R&D portfolio mix of offensive, defensive, and competency projects can be continuously balanced in a changing marketplace. "The intention is to have a tool for functional and business managers to give them the best opportunity for optimizing where we put our money and our people," continues Copan. Actual commercialization of ideas spawned in research and modification of products for individual customers is powered by a stage/gate system called the product approval process. This process is supported by a workflow soft-ware tool, ActionWorks Metro from Action Technologies, Alameda, Calif. The tool manages all workflow of the stage/gate system across Lubrizol labs in the U.S., the UK, and Japan, as well as other service/testing providers worldwide. As projects move through their phases, the AliahThink-based business models can be applied at gate reviews to evaluate attractiveness of the projects compared with others in the portfolio or awaiting approval. For management purposes, the workflow tool generates reports in terms of timing, strategic category, net present value, project stage, and other criteria, across the portfolio of projects. Lubrizol anticipates that organizational learning will be one significant benefit of having captured so much information with the business-model and stage-gate-workflow tools. The company intends "to improve how we make decisions by capturing the inputs and outputs of each of the project decisions, and to determine if there are certain trajectories that successful projects go through based on our analysis of criteria throughout the project life cycle," says Copan.

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