Academic journal article The McKinsey Quarterly

"Heroic' Engineering Takes More Than Heroes

Academic journal article The McKinsey Quarterly

"Heroic' Engineering Takes More Than Heroes

Article excerpt

For many companies, engineering represents an untapped opportunity to cut excess costs, improve market position, and bolster competitiveness. Getting it right can take as much as 60 percent out of the cost gap between a company and its competitor. It can also trim back the resources needed for a new product development cycle by up to 40 percent. When companies do focus attention on engineering, however, the usually rely on high-visibility pilot programs, run by equally visible "heroic" leaders, which produce occasional breakthroughs or localized pockets of excellence but often to tackle the underlying causes of ineffective performance. What's missing is the determination to build a consistently high level of engineering effectiveness -- heroic performance -- throughout the entire organization.

IN THE MID-1980s, Ford scored a product development coup with "Team Taurus" under the strong program guidance of its project leaders. More recently Ford introduced the Explorer, another clear winner. These programs were introduced to market before and after two other programs that industry observers would say were less successful -- the 1989 T-Bird/Cougar (MN12) and the 1991 Escort (CT20). These programs followed many of the same steps as the Taurus and Explorer teams, but without the same dramatically successful results.

Ford's case is not unusual. These successes depended largely on the board experience and forceful personalities of its program leaders. Forceful leadership can produce successful pilot programs, but repeated success in product development has to come from a more institutionalized process.

Such success matters. Most companies recognize the critical importance of sustained high levels of performance in product development, but many are good at only parts of it: R&D, production, or rolling out a product to customers. Where they usually fall short is in engineering. Yet there is convincing evidence that effective engineering -- design and specification of a product so it has high functionality, fits well with production processes, better addresses customer requirements, and reduces development time -- is the strongest lever a company can use to achieve quality, responsiveness, and low cost.

A recent analysis of product cost for an equipment supplier, for example, showed that engineering was responsible for about 60 percent of the cost gap between the company and its best competitor; manufacturing and material together accounted for only one-third. Similarly, in our work with an automotive company, we found that engineering was responsible for two-thirds of the root causes of customer dissatisfaction. In both cases, no matter how hard manufacturing tried to close performance gaps, real improvements could not happen unless engineering tried as well.

Equally important, truly effective engineering can also be a powerful offensive weapon to raise the competitive "ante." In appliances, automobiles, automotive components, office electronics, and aerospace manufacturing, for example, we have seen companies reduce the resource requirements for a new-product development cycle by 20 to 40 percent. They can then divert these freed-up resources to new genres of products where incremental margins offer benefits many times greater than the development savings. As the proven revenue, market share, and margin advantages of faster speed-to-market make clear, the product development process has, for many companies, become a key factor for success.

We believe most companies pursuing effective engineering have realized that there are four key steps they need to take (see the insert "Laying the groundwork"): * Appoint strong program managers. * Designate a significant product development program as a

pilot. * Front-load programs. * Emphasize a team approach.

The speed with which a transition to a more effective engineering organization can occur depends, in turn, on a company's ability to transfer knowledge and new practices internally. …

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