Engineering Velocity: How to Make it to Market without Cost Creep

The Double Challenge of Engineering Execs: Keep Velocity Up But Keep Costs Down

In today’s competitive market, if companies can’t get their products shipped on time, they stand to lose tremendously, not only in profit, but also with market share and future competitive advantage. At the same time, holding to aggressive launch schedules also has consequences with unforeseen cost run-ups that eat away at margins and are harder to shave off later. How can executives keep engineering velocity high while preventing costly errors? We’re learning the answer today from Hank Marcy, a seasoned executive from the competitive world of consumer appliances. This conversation in our Exec Talk series is hosted by Chris Jeznach, the Senior Director of Product Marketing at aPriori, and touch-point for the Executive Advisory Board. Here’s that conversation between Chris Jeznach and Hank Marcy.

Chris Jeznach: Today we’re going to focus on engineering velocity, with Hank Marcy who has been on our Executive Advisory Board for, what, a couple of years now?

Hank Marcy: Two years.

Chris Jeznach: Hank Marcy previously led a very successful engineering career as an engineering executive in various industries.

Hank Marcy: Yes, I worked at a corporate research and development center at the beginning of my career. Then from aerospace and defense, I went to home appliances and spent pretty much the rest of my career in the home appliance and related spaces. At Whirlpool Corporation it was working on major appliances, at Bissell Corporation working on floor care appliances, and finally at Johnson Controls-Hitachi working on air conditioning systems, both residential and commercial.

Engineering velocity has been a topic at all three of those hardcore product development locations, and I have used aPriori since the early 2000s to help with this. We used aPriori at Whirlpool to understand product costs, at Bissell to work with our contract manufacturers, and then at Johnson Controls-Hitachi to understand our commodity purchasing efficiency.

How this Executive Used aPriori

1. Understand product costs
2. Improve collaboration with contract manufacturers
3. Increase efficiency in commodity purchasing

Definition of Engineering Velocity

Chris Jeznach: The term engineering velocity, how would you define it? When I think about engineering velocity, it’s about the speed of developing new products, bringing them to market, but also the incremental add-ons for existing products where maybe there’s an improvement plan or something going on there. How would you define the term engineering velocity?

Hank Marcy: I think engineering velocity is always wanting to go faster with better quality, and with more innovation. It includes the idea of cost, time and quality.

There are a variety of different kind of dimensions to how can you go fast, and how can you do things right the first time. And I think there’re whole variety of tools and processes around understanding variation, doing designs of experiments, and working with your supply base collaboratively to increase your speed.

I think engineering ends up being kind of a discipline of “and.” You need to do a lot of “and.” You need to have the best cost and the very best quality and to be on time.

How Does Design Velocity Vary by Industry?

Chris Jeznach: How did you see the development cycle changing throughout your career? Did it get lower and lower each year and did it vary by industry?

Hank Marcy: It varied by industry. In my aerospace and defense days, it was about pushing a technical envelope, and so time was a little bit less of a driver. Fast forward to the home appliance industry where you’re typically working through large retailers. You’re setting up products on their floor, you’re in their catalogs, you’re online and so your offerings need to be timely and they need to be innovative. Everything has to come together in those products for those retailers. And so being on time and meshing with their schedule for how they’re going to refresh their floors, refresh their catalogs is a necessity. Being late, honestly, in those environments really just isn’t an option because everyone’s depending on you. A lot of downstream work is depending on you being on time. Of course the business is expecting you to be at cost and you’re also expected to be producing product that people want. So it’s a complicated equation that you’re constantly working to balance and to deliver against.

What Causes Delay in Engineering Velocity?

Chris Jeznach: When you look at the reasons why a project slipped or that a timeline slipped, is there anything that comes to mind in terms of common themes there? And what are some things that you put in place to try to get it back on course?

Hank Marcy: I think if you’re trying to invent something new inside of a time bound project, that’s very often a cause for delay, and I think there’s a number of ways you can mitigate that. One is by having an upfront R&D organization that brings a new technology to a given readiness level so that it can go into the product. Another one is having an A&B approach. I know I want to do A, A is my plan of record, that’s what I want to do, but if A doesn’t work out because it’s counting on some invention, well then I have a fallback position solution B that I can go to market with and not jeopardize the timing. Other instances are where we think we’re gonna get the cost of a component or a sub-assembly down to a given level, and we don’t. And generally these are not small numbers. It’s where the margin just isn’t gonna be right in the marketplace and we can’t change the price. When those things pop up, it’s a problem. Having an understanding of your cost as you’re going into a project is huge.

So while I would typically focus on the larger projects, the major projects where we’re making big investments and new tooling, there’s 10 of those and there’s 100 of the refreshes where you’re making things new and different and vibrant for customers for the next launch. So being on top of all of that is important. It comes back to: do you know that your technical solution are going to work? Are you going to be at the right cost? And knowing that, not at the end, but really all the way through with tightening boundaries as you go, is how to prevent delays and stay on track.

Chris Jeznach: Were there cases where you might choose to go to market, knowing you’re above what your cost was, but knowing you could maybe fix this later on?

Hank Marcy: Yes. Being on time really mattered. And so yes, we might have a project that was over cost, but launch anyways because missing the deadline would mean not being on the floor and not having sales. So in that situation, launching it above cost and then working through ways to bring costs down without having to relaunch, that was a viable strategy. Other times, we would work to get to cost, maybe when we had a bit more control and we were further out. But cost was never an afterthought. It was always front and center from the beginning of a project through to the end. I always had the annual goals around hitting cost targets and taking costs out.

How to Keep Costs in Focus in Design Engineering

Chris Jeznach: How did you make sure culturally within your design engineering group that they were designing for cost? Because a lot of times we do hear that cost actually might be an afterthought. Maybe cost is seen as Sourcing’s problem or another group’s problem. What are some things that you saw that worked well to get engineers to think about designing for cost?

Hank Marcy: One way to drive an understanding of cost much earlier in the process is to do a lot of competitive teardowns and cost modeling. So for example, in the home appliance industry, we at Whirlpool had a group in Shenzhen, China, about 50 engineers who tore down roughly between 75 and 100 products a year. They were trained in Design for Assembly, Design for Manufacturing, and Design for Cost, and they used tools like aPriori’s to model costs. The reason to do it in central groups was so that you wouldn’t have the engineers in India fighting the engineers in North America over cost or procurement. You wanted one central place where everyone gets our cost information. And so now, if I was an engineer working on a project, I know what my costs are in my factories and I know what my competitors’ costs are.

And so the way to make costs come earlier is to put it in front of people much earlier. That paid benefits throughout, and it upped our annual cost takeout relative to a baseline from 2% to 3% to 5% to 6%. So it’s real money.

Chris Jeznach: As we wrap up, what would be your suggestions on what people should be doing now?

Hank Marcy: Knowing your costs and simulating to know that your solutions are going to work — those will change the game for you.