by Michelle Boucher, Aberdeen Group

Working smarter with analytics in product development

Mar 07, 2011
IT Strategy

As the economy teeters on the brink of recovery, companies are looking for profitable growth from new products, yet they must accomplish this with fewer resources. This means they must find ways to work smarter.

They need to define the best ways to manage new product development and what data management and engineers need access to in order to balance development schedules with factors such as product cost, compliance, and performance.

Aberdeen’s November 2010, Using Product Analytics to Keep Engineering on Schedule and on Budget study investigated these issues.

What Are the Biggest Hurdles for Making the Right Decisions? A variety of factors that impact time, cost, quality, performance, and compliance must be considered when making decisions about new products. In order to understand the impact of their decisions, engineers and management must have access to the right information. What is hardest about collecting this information?

Figure 1displays these top challenges.

Figure 1: Top Challenges for Decision Making in Product Development Source: Aberdeen Group, November 2010

What is interesting is that this mostly boils down to one thing: time. Engineers are so busy, stopping to provide status updates is just a distraction.

In addition, it takes too long to obtain needed information from individuals. Survey respondents report spending 18 per cent of their time just preparing updates.

This is further aggravated by the manual processes used to collect this information. Then, it is too detailed or technical to be easily digested by an executive level person. They just do not have time to fully absorb it to put in context the of business goals.

Clearly there is a need to streamline information gathering.

What’s striking is that nearly a quarter of the respondents do not even have a way to collect needed information. This puts companies at a disadvantage because they have no way of understanding the impact of their product decisions on company profitability.

Just to provide some context of how quickly lack of visibility drives up cost, respondents report:

Engineering Change Orders (ECOs) cost 75 per cent more after release to manufacturing than they do if implemented before release to manufacturing. Each new part number added an average of $4,405 (£2,709)to the enterprise costs.

Visibility to make better decisions to avoid late ECOs will save significant cost. In addition, just five new part numbers adds over $20,000 (£12,2990) to the cost of the product. The ability to make better decisions about part reuse has a tremendous impact on the overall profitability of a product.

Identifying Success To understand successful approaches to make better decision during product development, Aberdeen benchmarked the performance of study participants and categorized them as either Best-in-Class (top 20 per cent of performers), Industry Average (mid 50 per cent), or Laggard (bottom 30 per cent). The performance of each of these tiers is displayed in Table 1.

Table 1: Top Performers Earn Best-in-Class Status

Source: Aberdeen Group, November 2010

Best-in-Class Strategies

Given the performance benefits enjoyed by the Best-in-Class, they are clearly doing a better job of balancing time, quality, and cost pressures. The top strategies implemented by the Best-in-Class are shown in Figure 2.

Figure 2: Best-in-Class Strategies to Improve Decision Making

Source: Aberdeen Group, November 2010

The strategies followed by the Best-in-Class get the right information to the right people at the right time. This empowers both engineering and management.

To meet customer expectations for lower priced products, the Best-in-Class are 60 per cent more likely than their competitors to provide engineering with visibility into cost drivers. Four out of ten respondents report that products costing more than budgeted is a top issue having a negative impact on product success.

With this insight, engineers make informed design decisions to keep product cost down. However, the Best-in-Class do not stop there. They also make sure cross-functional stakeholders have visibility to cost drivers to support an enterprise wide approach for keeping costs in check.

The Best-in-Class address time to market pressures by tracking schedule and performance across the entire product portfolio. Consequently, they can recognize bottlenecks and take corrective action when needed. With this insight, they can easily shift resources as needed to ensure priority projects stay on schedule.

To meet demands for higher quality and reliability, the Best-in-Class are 32 per cent more likely than competitors to provide engineering with visibility to field failures. They can then learn from previous mistakes in the future.

Finally, the Best-in-Class ensure management has access to critical information so that they can better manage their teams. To ensure conflicting criteria such as time, cost, quality, and performance are properly balanced, the Best-in-Class are 25 per cent more likely than their competitors to provide management with visibility into key trade-off decisions.

They are also 48 per cent more likely than their competitors to make sure that management has visibility into critical metrics.

Recommendations By following the practices of the Best-in-Class, other companies can make better decisions to boost profitability. As seen from the strategies executed by the Best-in-Class, better decision making comes with better visibility and transparency to critical product development information. Click here for the full Aberdeen study.

Michelle Boucher is a Research Analyst in the Product Innovation and Engineering practice

Pic: FostersDGcc2.0