How can companies compete in an environment of excess supply while preparing for a market upturn? This is a strategic question facing companies today, and effective product operations and engineering are fundamental to address the challenge.
We launch this blog with a strategic perspective: how can global engineering and product operations improve competitive advantage and ultimately shareholder value? Sustainable competitive advantage comes from operational effectiveness (doing what your competitors do, but better) or strategic positioning (delivering unique value to your customers by doing things differently than your competitors). Engineering and product operations drive both operational effectiveness and strategic positioning. These functional areas represent a significant portion of product cost, and they also are the linchpin for innovation and alignment to Voice of Customer.
Markets continue to exert extreme pricing pressure amidst the global economic slowdown. Executives now consider current conditions as a resetting of baseline expectations, not a temporary dip with an implied bounce back to former levels. Even with early signs of recovery, organizations need to take full advantage of both efficiency and effectiveness levers. The following product efficiency levers have demonstrated significant potential to reduce costs:
- Global sourcing: disaggregation and globalization of the product development lifecycle. High-value delivery (benefits – cost) is the real story, not simply low cost country sourcing. Proximity to local markets and understanding these markets are also important.
- Engineering program management: robust engineering foundation to facilitate global standardization, reuse and economy of scale.
- Testing: testing plans need to be integrated into a defined strategy to find defects early, incorporate learnings into institutional knowledge, and optimize asset costs across the organization.
- Sustainability: lower total cost is the practical driver for green product development, beyond regulatory requirements and corporate citizenship.
- Tools: integrate into engineering workflow and adopt standard tools where justified. These include product lifecycle management and engineering tools, and they must be integrated with the tools in other functional areas like ERP.
- Advanced Engineering: new processes and software-enabled design capabilities are enabling advancements in explicit knowledge representation and reasoning techniques. While also driving costs lower through virtualization, advanced engineering will increase differentiation and raise product form, fit and function to new levels.
- Innovation Management: match future customer demand with limited resources, developing the best ideas from any source – internal or external. Ideas must be generated, scored, and managed with a rigorous portfolio view.
- Customer Needs Management: identification, traceability, and management of customer needs and requirements through the stage gate process. Beyond aligning products with Voice of Customer, this also increases accountability for upstream personnel in marketing and product development.
- Portfolio management: manage ideas and projects effectively through the gating process. Processes and tools have evolved to allow more rigorous and accurate measurement at the individual product and portfolio level. In addition to improving portfolio yield as a sum of individual products, this also optimizes performance based on dependencies across products.
- Field performance management: use of data and field experience to improve product reliability and predict product performance. Closed-loop feedback into the engineering knowledge base is an important (though lagging) input and link to improving customer experience.
- Compliance: domestic and international trade compliance are differentiators in that they enable or restrict market reach. The cost to accommodate compliance requirements is also an efficiency dimension, placing an additional burden on companies that do not execute well in this area.