Research Rap: What Gives Chief Engineers Sleepless Nights?

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.