Performance Management Measurement Model for

Proceeding of Industrial Engineering and Service Science , 2013

Performance Management Measurement Model for Agro industrial Product Innovation and Commercialization Elfira Febriani1, Taufik Djatna2 1,2

Department of Agro industrial Technology, Faculty of Agricultural Technology, Bogor Agricultural University Darmaga, Bogor, West Java 1 Email : [email protected] 2 Email : [email protected]

ABSTRACT Commercialization processes an invention into an innovation it arises from an idea or a need to the unmet market. Some actors involves in this process such as R&D, marketing, product developer and customers play their own roles, rules, mission, opportunities, and others to form a business process in developing innovation and commercialization, where the performance is critical to measure. The business processes described the flow of activities in the process of development innovation and commercialization. These measurements are to ensure each actor focuses for the development of the invention into an innovation. This paper showed how to analyze mechanism of the innovation and product commercialization and measured performance management for development innovation and commercialize. Balanced scorecard is deployed to design the performance evaluation within its four perspectives of customer, innovative and learning, internal business process and financial perspective. In order to enhance method for measuring performance management, classification and prediction approaches are used. Keywords: performance management, innovation, commercialization

1.

Introduction

Commercialization process of the invention become an innovation arises from an idea or a need unmet market. Invention is an idea from an inventor to solve a specific problem in the field of technology that could be improvement and development of products or processes [1]. The emergence of the idea of an inventor can be derived from the development of research or unmet market needs. The idea appears to be re-examined to see or find some researches that support the library. Then researchers dug further information in support to research and and causing environmental pollution. Therefore we need a biodegradable packaging, which is able to be recycled naturally by microbes in the soil. Biodegradable plastics are plastics that can be degraded naturally and usually made from organic material, such as starches. Biodegradable packaging product has short life cycle. This is caused the products have to be more attractive to consumers, in order to compete with other similar products, and excite new markets. However, commercialization of biodegradable packaging product design is still difficult to do. This happens because the shape of the packaging is still away from consumer expectations. It can be commercialized if interaction among actors involved to achieve a goal (commercialization) can work well. For example before develop the product, R&D should shared a information about new product to marketing so that marketing can start searching market for the product. After they found it, product manufacture can start produce a new product. Interaction between stakeholders has their roles, rules, mission, opportunities, and others to form a business process in developing innovation and commercialization. The business processes will describe the flow of activities in the process of development innovation and commercialization. According to Wasson [2] the system design established from the rules, mission, SOP, the role of each stakeholder involved and it has been represented in the business process that are built. Analysis of the business process is needed to determine the appropriate sequencing of each actor in the development of innovation and commercialization. Business process contains a set of activities that relate to each other to produce an output that supports the strategic goals and objectives of the organization. A business process is built specifically to define the activities that are on it. Each process sometimes involves a lot of steps that have one or more Copyright © 2013 IESS.

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Performance Management Measurement Model For Agroindustrial Producrt Innovation And Commercialization targets. These stages are descriptive of the activity that must be done to achieve the goals that have been defined. This business process model is first step to develop digital business ecosystem (DBE) as for this research. Performance of every stakeholder in the development of innovation and commercialization will be measured so that each actor can focus for develop invention into an innovation. Performance measurement is conducted to evaluate the performance of each actor such as R & D to see the number of inventions generated, the number of inventions commercialized and so on. Performance measurement is the process of measuring the effectiveness and efficiency of an activity [3]. Evaluating performance is involved requires to focus on continuous improve their performance. Their performance is measured to evaluate their performance by looking at the number of inventions generated, the number of inventions commercialized and others so that actors can continue to develop their invention and compete with others. The result of evaluation should yield important information that is useful, such as feedback to the formulation or implementation strategies [4]. That information is used to improve performance each stakeholder to have more effective performance. Effective performance improvement plan includes three main processes, they are measurement or initial performance status assessment, performance improvement plan based on the strategy and tactics and measurement of performance status after repair. A good performance assessment system should provide forecasting function. In this paper, Balanced scorecard has been used to design the performance evaluation. The Balanced scorecard is a card that is used to record the results of the performance of one's final score [5]. Balance scorecard can also be used to plan the score to be realized by personnel in the future. Through balanced scorecard, score personnel to be realized in the future compared with actual performance results. Results of this comparison are used to evaluate the performance of the personnel concerned. Balanced words are intended to demonstrate that the performance is measured in a balanced personnel from the two aspects of financial and non-financial, short-term and long-term, internal and external. Balanced scorecard has four perspectives: finance, customer, internal business, and learning and growth perspective. Based on the problem above, the aims of this paper are to analyze mechanism of the innovation and product commercialization. The result of analysis mechanism is business process model which contain information to develop performance management measurement for innovation and commercialization.

2.

Methodology

2.1. Framework When measuring performance, for the first we should know a business process model that happened. Business process model can be established by looking at the interaction between stakeholders, roles, rules, vision and mission to achieve a goal. The business process model will consist of processes and sub-processes for every stakeholder and the roles, rules and so on. Business process models that form can be used to formulate KPIs with BSC perspectives. In addition to preparing KPI also specified target of achievement. From KPI then Key Performance Questions (KPQ) for each stakeholder can be formed. KPQ that has been fully can be processed using data mining techniques, they are feature selection and decision tree. From calculations with these techniques it will get the value of performance measurement.

2.2. Business Process Model The Business Process Model and Notation (BPMN) is a standard maintained by the Object Management Group (OMG) and is aimed at business analysts and technical developers [6]. BPMN provides a graphical notation that is widely used for process modeling; however, the specification is comprehensive and partially conflicting. The notations that used in BPMN is start event, task, intermediate message, end event, gateways, and other notations, each of which has its own function. In BPMN, a “Business Process” involves capturing an ordered sequence of business activities and supporting information. Modeling a business process involves how a business process pursues its overarching objectives; the objectives themselves are important but at this point are not captured in the notation. With BPMN, only processes are modeled. The Business Process Modeling for innovation and commercialization is based on the Sybase Power Designer 16.0 which is also support for process models level to examine interaction in each stakeholder.

2.3. Performance Measurement Steps in designing performance measurement of development innovation and commercialization are: A. Identification KPIs KPI defined as a measure to determine the level of achievement of each objective [8]. Results of variable selection checklist suggested Balanced scorecard performance and the identification of the four balanced scorecard perspectives,

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Performance Management Measurement Model For Agroindustrial Producrt Innovation And Commercialization compiled several items performance parameters (Performance Indicators) and conducted in accordance with the classification of the basic framework of the balanced scorecard. The parameters that have been determined then formulated in the questionnaire that each parameter will be given its own value in accordance with their importance. These values will be analyzed and performed calculations. B. Calculating KPI values The results of the KPI will be calculated with data mining techniques. Data mining techniques can be used feature selection and classification.  Feature Selection Feature selection is a method that specifically gives ranking on every existing feature and over ride features that do not meet certain standards. Ranking selection independently determine the level of ranking between one feature with another feature. Features that have high rankings will be used and the low will be excluded. Ranking selection typically use some way of adding value to each feature instance ranking regression, correlation, mutual information and others.  Decision Tree Decision Tree is a classification method each node of the tree represents the attributes that have been tested, each branch is a division of the test, and leaf nodes represents a particular class group. Top-level node of a Decision Tree is a root node (root) is usually a most attributes have the greatest influence on a particular class. In general, perform Decision Tree search strategy is top-down for the solution. In the process of classifying unknown data, attribute values will be tested by tracing the path from the root node (the root) to the end node (leaf) and then to predict the class owned by a certain new data.[9]

3. Results Interaction in each stakeholder in the development innovation and commercialization of product can be seen in the business processes that occur. Business processes describe the relationship and activities flow when each stakeholder develops an idea to commercialization of the product. In BPMN, interaction each stakeholders can be seen with the flow of information between them. Stakeholders in BPMN depicted in a swim lane. Swim lane described as a rectangular box, which contains a process flow for each stakeholder. Figure 1 describes the BPMN business process with R&D flow and customer flow. Process and sub process flows for each stakeholder can be known in Figure 1. R&D got an idea to create new product or unmet market needs. R&D do research to produce an information or knowledge which then shared to product developer to develop products and then can be commercialized and also marketing did their jobs with searching target market. Product that has been produced will be commercialized and consumers will give their comments for marketing. This will be repeated continuously. During this process, performance measurement can be conducted. From BPMN, it can be seen how the role, mission, and objectives of each stakeholder so that the drafting of KPIs can be done. KPI based methods BSC consists of four perspectives: customer, internal business process, innovation and learning, and financial perspective. The balanced scorecard for development innovation and commercialization can be seen in Table 1. Those objects chosen from Jyoti [10] paper about R&D Balanced Scorecard.

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Performance Management Measurement Model For Agroindustrial Producrt Innovation And Commercialization

Figure 1. BPMN design for development innovation and commercialization

Table 1. The structure of Balanced Scorecard perspectives and KPI

Perspective

Objectives Improve cost effectiveness Influence product‟s sales

KPIs Financial position in terms of profit Return on Investment (ROI)

Maximize shareholders wealth

Business created from the output

Minimize cost of capital

Royalties, fees obtained licensing of patents

Financial from

Improve returns

Customer

Match the needs of the customers Create the demand for a new product/process

Matching the product to the demands of the market Number of customer for product

Provide value to the customer Improve product quality and features

New customers formed Local customers customer

international

Level of customer satisfaction Customer relationship Market share Customer feedback Customer loyalty

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Internal business processes

Persist in project‟s schedule and shorten lead times Improve cost effectiveness in a product Efficient in resource utilization Innovate Improve product‟s competitiveness Increase knowledge and learning

Innovation and learning Improve manufacturing process

Work accomplishment in terms of phase Number of projects completed Target met in terms of quality, cost, time Progress in work flow New product created Number of invention created Confidence of customers Adoption of new technologies Number of product commercialized Number of patents filed Number of patents granted

The results from KPI weren‟t weight but percentage of the level of achievement (min to max) of each indicators. For example in financial perspective, there are ROI indicators, so the value is 23% because the target of min ROI is 20% and max 50%. The data used consists of data testing and data learning. After got KPIs value then this data can be divided to data learning and data testing. Data learning used to make rules data testing to test rules that has been done. The flows of data processing is used to get information is called knowledge flow and can be seen in figure 2. Knowledge flow in figure 2 used orange.

Figure 2. A construct of knowledge flow measuring performance management The techniques for measuring KPI values are feature selection for pre processing data and decision tree for classification. Feature selection, also known as variable selection, attribute selection or variable subset selection, is the process of selecting a subset of relevant features for use in model construction. Features that have high rankings will be used and the low will be excluded. Table 2 is shown the results of feature selection that will be use in decision tree. Table 2. Top 5-feature selection for performance measurement Variable/attribute Ranking New technology development 1 Customer satisfaction 2 Number of patents filed 3 Number of invention conducted 4 New customers formed 5

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Decision tree is a flowchart-like tree structure, where each internal node (non leaf node) denotes a test on an attribute, each branch represents an outcome of the test and each leaf node (or terminal node) holds a class label. The top most nodes in tree are the root node. [5]. decision tree is shown in Figure 2. This tree means IF A >70.500 AND H >85.500 AND G >76.500 AND I >10.500 AND I