Jim Brown

Research Rap: What Gives Chief Engineers Sleepless Nights?
July 9, 2008

I have posted on the executive view for product innovation numerous times. Execs are seeking profitable growth through product innovation. With apologies, that probably sounds obvious and could be a candidate for the pointy-haired boss in Dilbert as a self-evident (and useless) mission statement. You can see the engineers roll their eyes and ask "duh, but how?" So the question is, where the rubber hits the road in Engineering, what is engineering leadership concerned about? Let's take a quick peek into some research on ... the engineer's view from some new Aberdeen research on The Engineering Executives Strategic Agenda.

The Executive View
With apologies, one last time (for now). Execs are looking to grow the top line through product innovation. As obvious as it sounds, it is a change from past strategies. We finished up a decade or more of cost cutting and growth through mergers and acquisitions. While neither of those tactics go away, companies are looking for new ways to grow organically - new products and new markets - and innovation is the key.

Back in the Engineering Suite - From Strategy to Tactics
Don't get me wrong, Engineering is a part of the exec team and likely compensated in line with shareholders (stock or options) to some extent. But the view from Engineering needs to turn from strategy into real tactics to get the job done. Platitudes are not enough here.

So what are the biggest challenges that Engineering execs face? The study indicates (those reporting pressures in the top 5):

• Shrinking Development Schedules    60%
• Rising Raw Material Costs               33%
• Shrinking Development Budgets       32%
• Decreasing Product Price-Points      28%
  
  Source: Aberdeen Group June, 2008

Aligning Exec and Engineering Agendas?
How do the two agendas align? I believe that alignment comes through tangible measures that Engineering can touch and feel (and most importantly, control). Consider the product profitability equation (simplified) as: 

Revenue - Cost = Profit

To Engineering that is most easily measured as: 

Faster Development at Lower Product Cost and Lower Development Cost = Profit

Given the highest emphasis and concern on shrinking development schedules, it is clear that top line growth (through speed) is the way that Engineering most feels the pressure for "profitable growth." But cost is not far behind, as with the execs, because the second and fourth pressures (material costs and product price points) can also be viewed in the profitability equation, with the combined challenge that price points are coming down while material costs are going up. Talk about getting squeezed from both sides! It's amazing with that "perfect storm" that speed still shows up so much higher than the cost. But cost cutting will not lead to top line growth, and the execs know that top line growth drives share prices. 

So that was a quick peek into some recent research on what gives Engineering execs sleepless nights. I hope you found it interesting. Next week I'll include a bit more from Aberdeen on exactly what those execs are doing about it from the same study.

Does the research reflect reality? Do you see it differently? Let me know what it looks like from your perspective.

Posted by Jim Brown on July 9, 2008 | Comments (0)