The Engineering Efficiency Crisis
How antiquated new product introduction (NPI) workflows put a $1 trillion market at risk
Introduction
The COVID-19 pandemic was a wakeup call in electronics manufacturing. Starting with global travel bans, which compounded existing vulnerabilities driven by US-China tariff changes, electronics manufacturing teams saw decades of carefully cost-optimized supply chains quickly unravel. Early 2021 continued this trend of disruption with the global semiconductor shortage impacting everything from automotive to consumer electronics, and erratic demand throwing capacity planning into a tailspin.
But these challenges didn’t start with COVID-19, and they won’t disappear simply because the pandemic has passed. In fact, data shows that new product introduction programs have been slowing for years, with few companies addressing the root cause of the slowdown – crippling engineering inefficiency and sluggish innovation.
While many suggest that increasing supply chain volatility and global travel disruptions are to blame for program slowdowns and cancellations, this survey of 100 electronics brands focused on new product introduction (NPI) programs found that NPI programs have been sluggish for years, and that electronics businesses need to address how they empower their product engineering and operations teams to be agile if they want to continue to accelerate both product complexity and time-to-market.
In recent decades, product engineering has become an exercise in fire fighting. Teams that focus on optimization and intentionally design processes to support agile decision-making and distributed collaborators are well positioned to confront the biggest risks to NPI programs through the 2020’s.
A $1 Trillion market opportunity, gated by slow or no process innovation
The global consumer electronics market today is estimated at ~US$800 billion, with projected growth to nearly US$1 trillion by 2027.
Continued growth in consumer electronics relies on rapid product innovation to meet customer demand and expectations and keep up with the emergence of new consumer markets in APAC. With the expansion of connectivity, electronics are increasingly being incorporated into more product sectors: connected home devices, apparel, expanded wearables form factors, personal transportation and electric vehicles, and more. Components are becoming smaller and more complex, and reliability must extend across a much broader set of use cases.
At the same time, maintaining a competitive market position depends increasingly on further accelerated new product introduction (NPI) schedules that take more complex designs to maturity at a faster pace each cycle. This means NPI teams – comprised of engineering, operations, and quality professionals – are putting increasing pressure on the core tools and workflows they use to bring ambitious products to market quickly.
Unfortunately, results show that without significant innovation in how these companies bring products to market, their share of the $1 trillion market is on the line.
NPI leaders view hitting schedules as their #1 success metric
Leaders of new product introduction (NPI) programs must juggle competing priorities with an eye on protecting the most business-critical outcomes. These priorities evolve over time as the market changes and key drivers of competitiveness oscillate between speed-to-market and fundamental engineering innovation.
77% of leaders in 2021 view launching on time and meeting program deadlines as their most important goals, followed by hitting BOM cost targets (53%) and meeting product feature goals (53%).
However, this survey found that 43% of programs in the past five years were delayed from their initial ship date.
This means that even before COVID-19 disrupted NPI processes, many teams had a poor track record of meeting their most important performance metric – meeting ship dates.
We also learned that when programs ship late, delays are frequently measured in weeks or months, not days.
Access to engineering capacity is as much a threat as supply chain disruption and travel restrictions to NPI delivery
Engineering bandwidth is tied with supply chain disruption and lack of factory travel as one of the top three factors threatening on-time product releases. While the placement of supply chain disruption at the top of the list should come as no surprise as the volatility of 2020 continues into 2021, engineering bandwidth and headcount concerns did not start with the pandemic, and will continue to put schedules at risk into 2022.
At the same time, NPI teams are not growing to meet the expanded demands put on them. 72% of engineering teams stayed the same size or shrank in the past 12 months. This means that despite more complexity, shorter timelines, and higher expectations – NPI leaders are expected to do more with the same human resources, or – in 23% of cases, smaller teams than before.
It’s interesting to note that despite the many program cancellations or postponements in 2020, only 22.7% of teams actually shrank, indicating that companies continue to try to work through their engineering obstacles even in the wake of progarm cancellations.
76% of engineering time is spent on tasks that are easily automatable or could be expedited with better data
This research identified engineering time as a premium resource for consumer electronics teams, which are already struggling to tread water. Yet, while leaders cited developing their engineering talent as a priority, they reported that 57.3% of engineering hours are spent on easily automatable tasks like data gathering, asynchronous communication, and status reporting.
A further 19.4% is spent on experiments run to diagnose problems reactively and retroactively, because inadequate up-front data collection means engineers rely on time-consuming methods like teardowns and various configuration tests to find the root cause of issues.
On average, teams report that only 23.3% of engineering time is actually spent directly on creative design or engineering tasks.
20,000
new consumer electronics products are introduced each year
Direct Cost of Engineering Inefficiency
Approximately 20,000 new consumer electronics products are introduced each year. In this survey, teams reported an average of 10 engineers working on each program, though in many of the Fortune 500 electronics brands this number is an order of magnitude greater.
The reported inefficiencies amount to $26.2 billion in annual waste for consumer electronics companies in headcount cost alone. This does not account for the cost of additional experiments, other staff, as well as the massive impact of shipping delays.
Considering that engineering efficiency is a major driver of the ability of companies to release new products quickly at attractive consumer prices, this inefficiency represents a potential ~$250 billion revenue loss annually, driven by the inability to ship more innovative products quickly.
Constant fire fighting leads to engineer burnout
The revenue and personnel cost is only one element of inefficiency. Engineering turnover is another factor that impacts companies. As institutional knowledge leaves, teams become less efficient and generational learnings are lost.
The revenue and personnel cost is only one element of inefficiency. Engineering turnover is another factor that impacts companies. As institutional knowledge leaves, teams become less efficient and generational learnings are lost.
This means that mission-critical schedules are dependent on a company’s most exhausted and overworked employees, contributing to the high incidence of delays seen across consumer electronics.
NPI engineers are frogs in slowly boiling water
The decades-long trend toward faster delivery and increasing complexity, without process innovation, means that many experienced engineers today do not remember a time in their professional lives when NPI programs did not consist largely of fire fighting and frequent schedule misses. It’s becoming clearer that change must come from leaders within the discipline realizing that current practices are unsustainable and schedule slippage or program cancellation due to intractable manufacturability issues will become more common over time – not less.
Team empowerment is a priority, but adoption of tools and process are lagging
55% of NPI teams cite limited engineering time as a primary obstacle for NPI, followed by product complexity (52%) and partial or incomplete data (40%), yet few feel that their engineers are properly equipped to make real-time decisions. Only 58% of engineers report that they have the resources they need to be successful.
The gap comes down to lack of data and tools. Only 54% of manufacturers believe they have the appropriate visibility into defects and issues occuring during development and production to make the best real-time decisions. And only 47% of teams believe they have the data needed to understand risks in their programs and allocate resources to meet goals.
That said, most engineers are still working out of spreadsheets, relying on manual processes to analyze what data they have.
Only 23% of respondents reported that their company uses a line or build analytics tool, only 22% use a BI tool, and only 11% are using AI for defect detection. Further, only 42.2% of new product introduction teams even have access to their data in the cloud, a minimum bar for being able to operate quickly as a remote or distributed team.
Software-first companies pose an increasing market threat in consumer electronics
It’s no coincidence that software companies have established a beachhead in consumer electronics hardware in the last five years, with Google, Facebook, and Amazon developing hardware product lines that build on and extend the power of their existing software services and challenge longstanding hardware incumbents on their own turf.
Increasingly the most successful new physical products are coming from companies with strong software development DNA, where leadership is accustomed to agile product development methodologies and facilitating rapid product iteration using a robust data and automation infrastructure.
In software, these tools include building data systems that are cloud-native through services such as AWS and Snowflake, analytics infrastructure like Segment, dashboarding and business intelligence tools like Tableau, and performance monitoring like DataDog.
Leadership that expects the same degree of iterability, remote monitoring, and data-driven practices in their physical product programs as they do their digital ones are quickly proving that this methodology has the potential to deliver massive innovation and acceleration just as new consumer markets come online.
Conclusion
Consumer electronics NPI is an accelerating practice driven by market demand, compressed timelines, and dramatically increasing engineering complexity. Leaders are responsible for hitting timelines at cost, but are concerned that continued disruption to decades-old processes is a major threat to their ability to meet or exceed goals going forward. In fact, many engineers entering management today have never known builds that weren’t plagued by constant delays and fire-fighting, and consequently don’t have a complete understanding of how things are changing.
This survey revealed a broad concern that engineers and their supporting teams may not be able to keep pace with the innovation speed that the market demands. Even so, leaders know that in many cases their companies are lagging in their ability to employ new tools to improve the efficiency of core issue discovery, investigation, and resolution processes during NPI.
Though cloud-based data systems, AI-powered defect detection, and build analytics tools have existed for half a decade, many teams are still trying to meet a higher performance bar with the same methods, resulting in nearly half of all programs failing to meet their most important goal – shipping on time. To learn how Instrumental can help with your next NPI program, get a personalized demo today.