SCM, rethinking innovation beyond crisis and successes

Francesco Maria Barbini, Nicolò Cocchi, Paola Giuri June 19, 2023 7 min read

3M Coc

Reinventing itself twice in the space of six years to remain a world leader. The first time when emerging from a severe crisis in the industry, the second time, after the success of the first, to stay one step ahead of competitors. 

The History of SCM began in 1935, when Nicola Gemmani and Lanfranco Aureli – experts in foundries and machining – began a collaboration that in 1952 saw the birth of the first woodworking machine, designed by engineer Giuseppe Gemmani. In a short time, under the brand name “L’Invincibile” [the Invincible], SCM came up with a complete range of classic machines that enabled it to conquer all markets, achieving global leadership. It was among the first in its sector to adopt a production system based on standard components used for different models, laying the foundations for the concept of modular production. In the 1970s it began a process of internationalization and from the following decade carried out an aggressive expansion campaign through acquisitions, buying 18 companies in the sector and thus expanding its size and product range. Today, SCM is a group that has added to woodworking machines those for other materials and has a turnover of around 750 million euros, of which around 7% is dedicated to Research and Development, and almost 70% to exports. It employs 4 thousand employees mainly distributed in its three key production sites. 

To maintain its leadership, twice in a short period of time the company had to make choices that were not easy (illustrated in two case studies prepared at the Department of Management at the University of Bologna and the Bologna Business School), radically revising the way it does innovation and new product development. 

The economic crisis that followed the global financial crisis of 2008/2009 had caused a collapse of 60 percent of the target market, due to the contraction of the construction industry, and subsequently an initial stabilization of the woodworking machinery sector at lower levels. SCM responded with a new business plan, launched between 2009 and 2010, which led to a significant organizational change (from 18 semi-autonomous entities, the structure was redesigned to create 5 divisions): the group had traditionally operated in a highly decentralized and relatively informal manner in terms of innovation. Under the new plan, an approach to the new product development process called Product Lifecycle Management was also being adopted. 

While the plan had brought greater organizational efficiency, avoiding the duplication and even cannibalization of the traditional decentralized system, innovation in product development, however, remained unsatisfactory, so much so that the group’s top management had to rethink matters in less than two years. Development costs, one executive had observed in internal discussion, were considered a fixed cost, with no specific analysis to assess the economic return on projects. SCM was in danger of being squeezed, in a polarized market, between Western competitors focused on product innovation and Asian competitors capable of producing at lower costs and thus focusing on lower prices. Unable to compete on the latter front, SCM’s top management decided to address more decisively the former. Within the top management, a few voices initially supported the option of giving the newly implemented plan time, simply making a few corrections, but eventually the idea of solving the problem of developing new products through a completely different approach, that of the Stage Gate, prevailed. The Stage Gate model involves dividing the process of developing a new product into a set of stages (Stage) interspersed with control moments (Gate). For each stage, the model requires specifying the activities to be performed and the deliverables to be achieved, while at each gate management evaluates the deliverables based on internal project evaluation criteria, decides whether the project can move to the next stage, and defines the actions to be taken as a result of the decision. The progression of the project through the phases results in increased investment on the one hand and decreased uncertainty on the other. At SCM, the implementation of the 5-stage, 5-moment Stage Gate led to the active involvement, from the very beginning of the process, of all business functions that have a role in customer service, thus improving not only management awareness and internal discipline, but also the quality and speed of product development. 

The Stage Gate model brought good results, aligning the various units involved more closely and reducing the likelihood of “false” market launches, facilitating time-to-market estimation of new products, and finally achieving a link between innovation processes and the group’s economic performance. But six years after its implementation, despite the successes, they realized at SCM that the Stage Gate system needed to be rethought again, at least partially. On the one hand, there was a realization that for some simpler, low-risk projects, there was no need for a process that included all the stages and all the steps required by Stage Gate. On the other hand, in the era of Industry 4.0, SCM is required to produce digital, connected and integrated machines and technology solutions. At least for digital products it was necessary to move away from Stage Gate in favor of an Agile methodology, i.e., a methodology best suited for software development projects, which involves working in sprints and involving clients in all phases of projects to iteratively test the results of each sprint. 

Recognizing the need to change a system that had also worked well, SCM on the one hand introduced three versions of increasing complexity of Stage Gate, with decision making tied to which version to activate based on two variables: market and technological risks and development costs and expected revenues. On the other hand, SCM introduced the Agile process for the development of digital services. When the expected costs and revenues of a project are low, the Agile process is relied on purely, while if they are medium or high, gate-moments are introduced, in what may be defined a hybrid Agile/Stage Gate to assess its progress. 

SCM emerges in conclusion as a virtuous example of how the organization itself has been able to keep up with the times, structuring the new product development process in different ways and choosing the most suitable approach depending on the project to be developed. 

This article is based on
Nurturing innovation in product development: pursuing ambidexterity at SCM Group
Francesco Maria Barbini, Nicolò Cocchi, Paola Giuri