The engineering industry has changed radically in the last 30 years, driven by evolving market forces, new technologies and innovation. At Parker, innovation has played, and continues to play, a big part in helping us meet our customers' needs in the best possible way. A few years ago we decided that we needed to change the way we approach new product development. We realised that our design effort could become overly focused on improvements, modifications or extensions of existing products, and while these are all important, they should take second place to customer focused innovation.
It's easy for any business to lose sight of the big picture. All too often the pressure to meet quarterly financial targets and short term goals prevents managers from having the time to stand back and think about how to improve the way their company works. Likewise, engineers can get caught up in the technical detail of a new product and forget why they started designing it in the first place.
To prevent this happening, we introduced our Winovation programme, which brings much more focus to breakthrough product development. The first change that Winovation brought about was the creation of a central online repository for all our engineering ideas and pre-release developments. This allows employees across our 125 divisions to share knowledge and see what others are working on. The results have been significant, with hybrid products being developed between, for instance, our Military Aircraft and Industrial divisions, and our Process Filter divisions and Aerospace group. Today, this allows us to meet our customers' needs far more efficiently.
Winovation also involved the establishment of a stage-gate process, whereby all new ideas have to pass though five formal stages before they are released. The purpose of this is to ensure that new products meet specific customer requirements, by making our engineers justify each of their projects with a proper business case to the management team. In this way our money and resources are more soundly invested in products that have major customer benefits and strong commercial potential.
The roll out of Winovation included an extensive training programme, which ensured every employee understood the need for the change and would therefore be instrumental in making it happen. Our engineers now spend considerably more time with our customers to understand their needs more accurately and make sure the solutions they develop are solving our customers' problems effectively.
Product prototypes are taken to customers after they sign a non-disclosure agreement, and those customers give us honest feedback as to whether we're on the right track or not. Working directly with our customers throughout the development process in this way also makes selling the final products much easier, as buyers have already been consulted on each stage of the design.
One good example of Winovation in action is the latest addition to our range of materials handling hoses, launched at the Hannover Fair earlier this year. CERGOM has been designed for transporting abrasive materials, such as cement powder, using compressed air or vacuum. Made by combining rubber hose with ceramic hexagonal plates, it provides tremendous wear advantages over steel pipes and has the added advantage of flexibility. This needs-focused approach benefits customers across a wide range of industries, delivering real value.
To put Winovation in some perspective, we still spend around 2% of sales revenue on R&D, but the value of our development portfolio is now five times what it was prior to implementing the strategy. With Winovation we can meet our customers' needs far more effectively and streamline our business. It's a win-win situation that will help both ourselves and our customers survive the current financial crisis and emerge stronger than ever.
Craig Maxwell is vice president of technology and innovation at Parker Hannifin