They must balance new features and innovative technologies against cost, risk, and time to market. Successful product development requires teams to engage with experts across disciplines while aligning four critical development lensesbusiness, design, consumer, and technical (Exhibit 1). They must consider how well they are meeting the needs of customers with varying requirements. In the second step, players need to prioritize their efforts and set up a transformation office to drive change. Thats no longer true in the 21st century and leadership hasnt gotten the memo. Doing that is harder than it sounds. Bringing automotive-product development into the 21st century is a difficult but necessary step if OEMs and suppliers want to remain competitive in the face of new architecture and software-centered challenges ahead. For example, NASA and. Companies that measure their effort to identify and exploit external innovation are more likely to get better at it. Agile methodologies in hardware development and concept sprints have recently gained momentum as effective tools for steering the innovation process because they promote an iterative, build-to-learn mentality. 1
The three horizons are no longer bounded by time. In part, that's because R&D activities require companies to juggle so many dimensions. Over the long term, two customer-related metrics were associated with profit-growth stability: customer satisfaction with price for value and product performance against its specification. Smartphones on wheels: New rules for automotive-product development, This article is a collaborative effort by. This approach requires a top-down definition of general requirements with a strong focus on customer expectations and experience. In the 21st century the attackers have the advantage, as the incumbents are burdened with legacy. Process. 34+ Free McKinsey Presentations & Slide Decks [Download] 1. We correlated the use of selected metrics with two measures of financial performance. Beyond product-related improvements, this transformation should propel productivity and efficiency advances due to predictive maintenance or defect detection enhancements. OEMs and suppliers create a network of cross-functional, empowered teams. We guide the creation of a streamlined next-generation operating model, characterized by digital user journeys. In fact, its the speed of deployment of Horizon 3 products, strategies, and capabilities that are a devastating upset to the status quo. The product manager needs to be at the center of the development ecosystem, empowered to make decisions and resolve differences throughout the process with the support of senior leadership. For example, companies that measure suppliers innovation performance show an average short-term profit growth thats 15.4 percentage points higher than the rest (Exhibit 3). In an effort to reverse course, the company appointed a team member to maintain organizational focus and promote a culture of consumer centricity. Furthermore, future revenues and costs are planned, targeted, and tracked in the same way as development efforts and product costs that happen before the SOP due to a lack of experience with update and release cycles for software, for example, and the underlying life cycle revenues and costs. We helped a high-tech company elevate the skills and impact of its 300-person product organization through a three-month capability building program that encompassed learning forums, online modules, Process breakdowns. The goal of agile product development is to create rapid decision and learning cycles, which requires organizations to put supporting processes in place and align them throughout the entire organization. Recognizing that dramatic action was needed to get back on track, the company embarked on a six-week sprint led by a specially appointed product leader. It was more of a behavioral interview. The product manager is well positioned to guide this process as a scrum master would, leading frequent iteration and collaboration across company stakeholders. Regional regulations and the cybersecurity ecosystem will in part enable this change. Next-generation electrical and electronics architectures will require significant upfront investments that will pay off only in the following generation. procurement functions leverage the power of analytics. Thus, they systematically underestimate the effort and cost required today versus future revenues or costs over the vehicles life cycle. Led teams of up to eight consultants in growth strategy, marketing & sales, and technical product .
OEMs have an opportunity to redefine their performance regarding R&D hardware and software costs. In our analysis, we considered a company to be using a metric if the metric was cited by at least one-third of participants in the diagnostic interview phase. When they reevaluated the plan using analytic models, they found that the project would actually take three or four times as much effort. Structure. Heres whats changed: In the past we assigned relative delivery time to each of the Horizons. For example, Google buying Android. Its paired with algorithms based on machine learning to intelligently collect data at scale and identify interesting situations to propel the development of Level 4 and Level 5 autonomous-driving features or optimize driver-assistance features. We'll email you when new articles are published on this topic. Combine the existing strengths of a company or agency and its business model by acquiring external innovators who can operate at the speed of the disruptors. Product development is inherently risky and unpredictable: no plan survives contact with the enemy. The delivery organization links closely to systems engineering, reflecting the system architecture featured along the different system levels. Product Management | Technology, Media & Telecommunications | McKinsey In our analysis, we considered a company to be using a metric if it was cited by more than one-third of staff interviewed. Done right, product development will change the ways automotive companies conceive of, plan, engineer, and monetize new products, thus expanding their go-to-market strategy, business case, and revenue streams. In software engineering, for example, those models would need to understand the complexity of the system requirements, the architectures, the testing, and the potential required interactions with hardware. Join our McKinsey experts as they delve into the cost savings, sustainability, and commercial advantages of reducing the size of product packaging, and discuss innovative solutions such as nesting products and honeycomb packing formats to reduce stock outs and improve . To seize this opportunity, OEMs need to switch from purchasing ECUs with embedded software to a more centralized electrical and electronics architecture and hardwaresoftware separation (Exhibit 2). It was not that tough. Designs and leads major operational transformations for basic materials clients; brings extensive expertise in procurement. Senior leaders should champion innovation in product development, but they shouldnt control the process. A company can model the resource requirements of multiple projects scheduled to run concurrently, for example, to see if there are any points where those projects will demand more staff than it has available for a specific role. Unlock your team's curiosity and willingness to take smart risks. This connective tissue is particularly vital for companies seeking to revitalize their product portfolios: low-performing products often indicate a lack of coordination across functions. Your product development process needs a strategic integrator | McKinsey We also help companies develop and retain this crucialbut often overlookedtalent pool. We have a proven methodology focused on creating value. In your case, you will have to work on Product Development and Procurement projects primarily, so you will build an expertise on those topics for the beginning. Remember that use of a metric by a company indicates that it was cited by more than a third of respondents from that organization. There are three keys to making agile product development work: structure, process, and people. McKinsey Study Supports Balanced Product Portfolio. To investigate this issue, we conducted a new analysis to compare companies use of different product-development KPIs and their overall financial performance. Based on reverse engineering, product innovation design and 3D-printing technology, a technical route for the rapid design and development of helmet products has been constructed, and optimize the . This makes intuitive sense, as understanding your customers real requirements, delivering on your promises, and offering strong value for money are good ways to build reputation and customer loyalty. After SOP, the team drives CX upgrade opportunities and product life cycle management. McKinsey suggested that to remain competitive in the long run, a company allocate its research and development dollars and resources across all three horizons. Roni Luo - Senior Engagement Manager - McKinsey & Company - LinkedIn That led us to wonder about the relationships between what companies track in product development and how they perform. The best new product development process includes portfolio management as a way to select new projects. We help strengthen leadership, transform processes, and build capabilities. This research is at an early stage. Over the long term, however, companies should also measure the things that build customer loyalty, such as satisfaction with a products performance, price, and specifications. Such direct sales will give the automaker full control over the customer experience, whereas a traditional overreliance on franchised dealers could lead to inconsistent customer handling. In the 20th century McKinsey created a model called the Three Horizons to explain how businesses must invest in current products, incremental innovations, and breakthrough innovations. Indeed, the average relative-profit growth of the companies that did use this metric was 12.9 percentage points higher than those that did not (Exhibit 2). In our experience, the primary skills of a modern product manager are often dispersed across a number of talented individuals. They play a variety of roles, using a broad base of knowledge to make trade-offs, and convene cross-functional teams to align diverse functions. By interacting with all partners in the product-development process, the product manager helps to spur collaboration and knowledge sharing. expansion of the product range), fit in perfectly with Horizon 1. Where in the past automakers had to contend with patchy customer relationship management (CRM) data and limited sales lead analytics, this new approach provides full access and the full use of customer data through advanced analytics. This emphasis on building brand equity marked a critical juncture in reinvigorating the companys approach to product development. Without clarity on business objectives and consumer needs, the product-development process can be arbitrarily influenced by biased perspectives on how to create or improve a product. Taking the measure of product development | McKinsey DOWNLOADS Article (PDF-424KB) For something so fundamentally important to a company's success, product development is notoriously tricky to manage. The systems landscape and data backbone must feature a common product structure that enables end-to-end steering from a systems perspective for team leads and department leads, all managed by the R&D controlling staff. The shift toward electrification due to market and regulatory forces has resulted in new requirements across all main vehicle domains, including new electric powertrains; thermal management and heating, ventilation, and air conditioning (HVAC) systems; and new infotainment services keyed to finding charging stations. Direct customer interactions or feedback remain rare and limit the voice of the customer in important product decisions. product management leadership development model. That raises a crucial question: how should they measure the performance of their product-development teams? Traditional product-focused R&D and product development processes typically remain in their lanes and have few structured interactions with other functions such as marketing and sales. Steering toward the right ambition level. The product development team should derive targets by benchmarking development projectsand the benchmarks should reflect the true project intent. Introducing the next generation of automotive electrical and electronics architecture requires a comprehensive business case that looks beyond the vehicle start of production (SOP) and initial bill of materials.
We strive to provide individuals with disabilities equal access to our website. While the majority of the companies in our sample monitor customers satisfaction with product performance, only 44 percent of them measure customers satisfaction with the price they paid for the value they received. We are continuously seeking the best talent at all levels and for all types of roles, and are particularly keen to talk to experienced professionals looking for their next challenge. Companies must nurture a culture that emphasizes and supports the following ways of working: A key challenge for organizations is to identify the right talent. This approach features strengthened end-to-end responsibilities through clearly defined system-engineering roles and aligns the organizational structure with the system architecture to integrate the functional, logical, and physical architectures. More than three-quarters of companies in our sample made widespread use of product volume, revenue, unit cost, and time-to-market KPIs. In addition, product managers learn most effectively through activities that are grounded in their day-to-day work, rather than through generic product-management trainings. Skinny design: Smaller is better - McKinsey Talks Operations Stages of the Product Development Cycle Story points, by their nature, are qualitative and team specific, making estimation difficult when multiple teams are working on the same release. But for practical reasons, the only useful factors are ones easily measured, consistently gathered, and known early enough to drive budget and planning decisions. By their very nature, FPs focus only on function and not the actual effort drivers associated with implementation and validation, thereby leading to inaccuracies of greater than 60 percent in more than 50 percent of projects that use FP-based estimates. Filter your search results by job function, title, or location. Procurement Interview. R&D projects are inherently unpredictable. It provides standardized processes for the product development process. The new service will enable spend transparency, spend and cost analytics, and value-capture management. Consumer-goods companies face a unique set of challenges. (PDF) New Product Development Process Models - ResearchGate This new approach to product development isnt just a fadits the future. That was the case for one former leader in the consumer-goods space that had lost 50 percent of its market share over the course of a decade-long slide. Our hypothesis here is that freeing R&D teams from excessive pressure to ensure budget compliance enables them to be more flexible, effective, and innovative. It can then assess the risk of the current plan or create a more realistic staffing plan along with a good budget estimate and an achievable schedule. We take a blended approach to learning, combining assessments with online courses, classroom training, coaching, and group work to create targeted learning journeys for different cohorts. A critical element of product development is instilling consumer centricity in the end-to-end process. When different stakeholders engage in a myopic, sequential way, using only their own lensesfor example, when engineering comes first, followed by design and then manufacturingthe numerous handoffs create gaps in knowledge. These rapid Horizon 3 deliverables emphasize disruption, asymmetry and most importantly speed, over any other characteristic. Automotive manufacturers are moving away from a traditional product development steering approach focused on direct material cost optimization targeting the SOP. And competing priorities can cause organizations to lose sight of the initial product and business goals.
Healthier teams may be better-equipped to regroup and produce good results, project after project, year after year. In particular, we wanted to identify the approaches used by companies that achieve consistent high performance. McKinseys Product Academy offers actionable content from leading-edge practitioners for anyone interested in learning more about product. This requires the introduction of a holistic systems-engineering approach combined with an agile organization and agile ways of working. Top-down micromanaging can prematurely squash promising ideas, devalue necessary iteration, and demotivate otherwise highly engaged team members. For incumbents, there are four ways to counter rapid disruption: The Three Horizons model is still very useful as a shorthand for prioritizing innovation initiatives. Furthermore, the centers of gravity in global and regional markets continue to shift toward Asia, requiring local strategies to provide incentives for OEMs and suppliers to maintain local footprints and keep data in the region. The use of this type of metric was strongly associated with both relative-profit growth and profit-growth stability. Furthermore, the strong focus on material costs can lead to a high number of variants in the product portfolio configuration. Only 39 percent of the companies in our sample take a systematic approach to measuring project-team morale. Exhibit 1. Breakthrough innovation in product development is often not a straightforward process: it requires a company to continually pivot and iterate to identify and pursue the biggest opportunities and the right scope. Companies should focus their efforts on several areas. OEM can typically use commercial databases to support their benchmarking efforts on material costs and capital expenditures; for R&D hardware and software costs, third-party providers can help. The OEM needs to ensure that all required information is shared with the suppliers, allowing them to significantly increase their customer centricity. Learn from top product professionals and thought leaders in a cohort-based learning program and get recognized with a graduation badge. When first articulated by Baghai, Coley, and White in 2000, inThe Alchemy of Growth, the Three Horizons model was a breakthrough. Predictive analytics have already have transformed the outcomes of some high-value projects (Exhibit 2). Im a big fan of McKinseys Three Horizons Model of innovation. In another example, a company had a tight deadline to complete a new release for a big customer, with competitors vying for the work. For product-development leaders, our analysis offers some important insights.