Leonel Leal on How Engineers Should Frame a Business Case for Innovation

Leonel Leal, a senior director focused on driving innovation, is still an engineer at heart. He knows firsthand how difficult it can be for teams to break from their silos and patterns to make changes that impact the overall business. But Leonel, who led Product Innovation and Advanced Manufacturing at Amazon, Whirlpool, and Faraday Future also understands how organizations run on the macro level. Having witnessed operations from both the bottom-up and the top-down, Leonel has unique insights into how engineers can make the business case for investing in innovation – from individual solutions to enterprise-wide implementation.

Leonel Leal at a Faraday Future product launch.

Justifying Investment in Manufacturing Innovation

When innovators and visionaries see opportunities for innovation and optimization in their organization, getting buy-in and funding to try those ideas can be an uphill battle. Even when that investment takes the form of a tool that seems rudimentary to some — like a precision microscope for taking measurements of parts — it can look like a ludicrous investment in another organization. My experience is that unless you get “lucky”, every investment requires rigorous ROI backing, which can be difficult to determine before you’ve even gotten to try the tool or technology out in the first place.

Calculating ROI is only half the battle, the other half is the conversation about it. Leonel suggests reframing the conversation away from the cost of investment and towards the costs of failing to innovate. “What are the manufacturing losses that occur during the product's lifetime until the next iteration comes around?” These can include delays in shipment, the cost of rework, and the reputational damage of escapes. “Depending on the product cycle, this could be millions of units over 5 or 10 years.” By focusing on the ultimate consequences (and costs) of not implementing an innovation, visionaries can make a stronger case.   

If an engineer or leader finds that they’re directed to look outside their direct budget to solve the issue, this reframe provides important guidance. Leonel advises focusing on the cost center where the investment may significantly impact the bottom line — that precision microscope might result in a faster repair process that reduces shipping delays — if they can’t get the funding from their own organization.

Data Traceability is the Foundation of Manufacturing Innovation

Leonel advocates for what he calls The Enablement Layer — an end-to-end traceability system that captures data and verifies critical parameters. Traceability technology is one of those investments that can be really tricky to predict the ROI on in advance — but Leonel was able to pilot it on one section of a line. He collected automated data about the true cycle time on that line. In the data, he discovered a number of micro-stoppages that weren’t previously understood or measured. Those micro-stoppages added up to 30-40% more losses than they believed they had on that line. When you don’t have traceability, you can’t uncover waste, so as Leonel says, “The cost of traceability is the lack of knowledge.”

Leonel’s Enablement Layer concept is about creating a baseline. Innovators can use their baseline of data and performance to improve their understanding of their system and identify improvement opportunities. A baseline is also important for measuring your progress with innovation. When you focus on each metric, like micro-stoppages, scrap, quality, energy consumption, and your factory’s footprint, Leonel insists, you can unlock innovation.

What’s the ROI of a Solved Problem?

How does a visionary make the case for an investment where ROIs can’t be easily calculated? It isn’t easy, precisely because it doesn’t boil down to a “spend X to save Y” equation. Instead, Leonel recommends tying the conversation to a long-term business goal.

The first step is to look at where the business has the largest waste – that’s where to focus. As I like to say when advising customers on piloting Instrumental, “Put it where it hurts.” Leaders can use a crisis to unlock funding to stop the bleeding, allowing them to generate ROI immediately.

The second step is to keep moving. Teams that implement a fix and stop there eventually run out of justification for continued investment (it’s hard to calculate ROI on a problem that’s been solved). “When you say you want digital transformation and visibility end-to-end”, Leonel said, “they’ll ask for the ROI of that. You’ll need to explain that it starts with delivering products the first time, releasing engineering the first time, and getting suppliers aligned in quality.” A technology like traceability empowers companies to capture all the losses that led to that first stop-the-bleed issue and create long-term value.

It’s Better to Fix Issues in Design, Not Process

The factory floor is a reactive place, Machines go down. Yields drop. A business’s top priority is always making sure there’s output. Innovation, however, is proactive. That contradiction is often why businesses fail to invest in innovation when there are more immediate, pressing needs that need to be addressed.

As a leader in innovation, Leonel believes that the industry needs to shift to a more proactive model. “We specialize and silo away design teams so they can focus on getting the product done,” Leonel says. But that means that the design teams can’t address the issues that occur in the factory. Design teams need to develop with their next downstream customer in mind – a view other operational executives also share. Leonel’s perfect solution would be to pull the people who own the manufacturing processes into working with the product development team so they can solve design issues collaboratively. These multi-specialty teams could develop designs that proactively eliminate downstream issues from the outset.

“No one is great at this,” Leonel concedes. “Unless you’re a small team, I don’t know that anyone understands the details of what’s going on with a product in every step of its development.” But that doesn’t mean there aren’t opportunities to innovate. With traceability and the data, visionaries can find processes to improve. They just need to remember to make the case for the big picture.