Can you imagine an organization that had no interest in improving its factory output, upgrading its IT, or in optimizing its financial investments? Can you imagine a company that had used the same processes for manufacturing or the same financial investment strategies that it used 10 years ago? Can you imagine a successful company that used the same IT infrastructure it had five or ten years ago? Management would never tolerate such inaction in its other operations, but it consistently short-changes one of the most important processes in the enterprise: the ability to deliver a stream of exciting new products that delight customers. Organizations are failing to take a stake in improving product development productivity, a core process that is the engine of top-line growth.
The problem is that improving manufacturing output and financial investments seems to be straightforward, with proven Best Practices and clear metrics and goals. The same is true for product development but companies are either unaware of the Best Practices for driving engineering productivity or they fail to invest sufficiently in learning and implementing them. The result is a collection of varied and inefficient practices and methods that show just how unproductive a company can become over time.
We observe a surprising reluctance among engineering managers to invest in basic infrastructure that would drive improvements in product development productivity. Our experience shows that most organizations spend approximately 1% of their R&D budgets on improving engineering productivity. These investments include training, tools for estimating budgets, competitive benchmarking, etc.
This level of investment is simply inadequate to support the hardware, software and people-ware necessary to continuously improve product development throughput. A small increase to 2% of the R&D budget, as a steady-state investment over time, can yield a 20% improvement in product development productivity.
Companies low-ball these crucial investments because they are an easy expense to defer. They tend to neglect these investments until symptoms appear, such as projects that are chronically late and over budget. They then throw money at problem projects – when it is already too late.
It is also easy to spend unwisely which makes management teams wary. Investments in the wrong types of resources can lead to flagging productivity. For instance, some companies have invested in product lifecycle tools that have automated the process to such a degree that they have diminished the role of human judgment, with costly results. Doing nothing, and relying on existing capacity and methods, sometimes seems to be a better course.
The risk of poor investments does not justify delaying them. It means that a company must be sure that it invests in tools that are compatible with its technology and infrastructure and that are easy to use. This reduces the slope of the learning curve and guards against the growth of wasteful bureaucracy.
When engineers think of improving their productivity eyes might glaze over. They think it must include unnecessary training programs and needless off-sites or yet more bureaucracy. What it really requires is investment in the tools and information technologies that help product developers do their jobs better. It also means staying current with industry best practices and a posture of continuous iteration and innovation.
Managerial communication is a frequently missed leverage point for improving product development productivity, as we have mentioned elsewhere. In one company we observed how a senior manager asked what he thought was an innocent question that caused the team to spiral out of control. The team attempted to redesign the product and the result was an avoidable, three-month slip in the schedule.
Diagnosing and then reducing the bottlenecks in communication between management and the team, and empowering teams as much as possible, is a low cost/high impact way to boost productivity.
If your company is ready to invest in engineering productivity and reap the benefits in terms of the timely, on-budget delivery of the right product to market, then these are the most important steps to take:
- Set specific goals, such as predictability or on-budget delivery
- Allocate the funds accordingly, especially in process redesign and training for the team and management, and in the tools that support these investments
- Focus training on effective team leadership, include training for Senior Management on how to empower teams to do the job with as little interference as possible
- Tie training on all levels to very specific goals and challenges – make the training situation-specific
Investing in engineering productivity is a long-term proposition. The returns are down the road, but they have a long tail. The alternative is to continue running your product development shop at the same level of productivity that your process yielded five or ten years ago. A small increase in investment will help your company achieve a step-change in productivity with a long-term return in consistently better products, delivered on time and on budget.