They can begin by looking to their internal design, brand management, and consumer-marketing teams as key sources of multi-lens talent, given the inherent focus of those teams on customers, end consumers, and innovation. Never miss an insight. Filter your search results by job function, title, or location. This requires that all market players set up complex engineering networks around the world with global and regional hubs and partnerships. For those who grew up with the notion that creative disruptive Horizon 3 products takes years are in for some unpleasant surprises. The average overrun is around 25 percent of the originally planned schedule. By Mike Gordon, Marek Kowski, and Sander Smits, Taking the measure of product development. Companies that measure their effort to identify and exploit external innovation are more likely to get better at it. Consumer-goods companies face a unique set of challenges. They want advanced autonomous-driving features, for example, and new personalization and infotainment options. For example, their products tend to require much quicker response to consumer trends and needs, and often require localization, which is unlike tech companies that have longer product lifespans and largely worldwide solutions. It also means greater use of more sophisticated microprocessors instead of embedded microcontrollers to boost performance, reduce power consumption, and centralize control. Next-generation electrical and electronics architectures will require significant upfront investments that will pay off only in the following generation. Our analysis suggests that this is a measure that deserves more attention, since it is strongly correlated with both short-term profit growth and long-term stability. It can be a complex challenge to refine a product concept and make the right adjustmentswhile balancing input from varying perspectiveswithout straying from the concepts core consumer-value proposition. The most intriguing result of our analysis is one that should give every R&D leader pause for thought. Product managers in the consumer-goods industry tend to fit a more traditional profile, with a focus on project management and tactical execution. We combine services and software to help companies unlock procurement value from spend insights. The McKinsey Growth Pyramid takes this one step further and posits that companies should further develop their growth strategies based on four choices; operational skills, privileged assets, growth opportunities and special relationships. And if it cant, the company can run what-if analyses to evaluate the impact of dropping certain features or simplifying performance requirements. 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 . McKinsey helps companies transform their product management capabilities by helping build the talent capabilities and putting in place the right product operating model and infrastructure, tailored for your product context. Immersive Ideation breaks the constraints of the physical world by using virtual-reality technology, backed by advanced analytics in fields such as procurement cost, customer insights, and pricing, to help teams visualize practical solutions to complex problems. They must balance new features and innovative technologies against cost, risk, and time to market. However, the trap of the Three Horizon model is not recognizing that today many disruptions can be rapidly implemented by repurposing existing Horizon 1 technologies into new business models and that speed of deployment is disruptive and asymmetric by itself. Per Year (Employer est. The COVID-19 pandemic has further complicated the development of consumer products. We also help companies develop and retain this crucialbut often overlookedtalent pool. True breakthrough innovation in product development has the potential to reshape categories, reinvigorate brands, and create deep consumer relationships. The offering is a powerful combination of Orpheus advanced platform technology with McKinseys industry experience and content-rich services in digital procurement. In practice, every company we surveyed was collecting data on budget adherence. Automotive manufacturers are moving away from a traditional product development steering approach focused on direct material cost optimization targeting the SOP. In this role, you will be a core member of the McKinsey consulting team with responsibilities that range from shaping product vision and strategic designs to managing and transforming agile product and . For companies, that means lower costs and lower risksa powerful combination of benefits to have in a highly competitive environment. $50K One consumer-goods maker sought to enter a new product segment while maintaining its unique brand position in the market. This employer has claimed their Employer Profile and is engaged in the Glassdoor community. Weekly progress reports enable managers to track progress between CX and R&D teams and their alignment on requirement changes. To facilitate the evolution of project managers to consumer-product managers, consumer-goods companies will need to do more than redefine the role. OEMs and suppliers create a network of cross-functional, empowered teams. Delays, and the extra resources needed to counter them, mean higher costs too. Consequently, such steering is currently not based on a TCO perspective and a holistic business case. Horizon 3 is the creation of new capabilities and new business to take advantage of or respond to disruptive opportunities or to counter disruption. For almost a decade, the McKinsey Product Development Fingerprint diagnostic has gathered data based on in-depth assessments of companies product-development practices and outcomes. Typically, this results in higher-level, more integrated ways of working in the collaboration between suppliers and OEMs. Learn how to build slide decks like McKinsey This enables the reuse of software and individual purchasing of hardware and software, as well as the integration of OEM-developed software modules. But to ensure that team members can make the leap from acting as project managers to product managers, companies will need to establish formal learning programs to complement on-the-job training. Predictive analytics have already have transformed the outcomes of some high-value projects (Exhibit 2). The OEM needs to ensure that all required information is shared with the suppliers, allowing them to significantly increase their customer centricity. Likewise, the approach applies iterative and incremental development processes to hardware and mechatronics development, synchronizing them with top-down planning. Mike Gordon is a senior expert in McKinseys New Jersey office, Marek Kowski is a knowledge specialist in the Wrocaw Knowledge Center, and Sander Smits is a partner in the Amsterdam office. The Key to Unlocking Growth Potential Product companies thrive or die based on their product strategy. The new players have no legacy systems to maintain, no cumbersome requirements and acquisition processes, and are single-mindedly focused on disrupting the incumbents. Learn how we work intensively with clients across all industries and topics to improve performance and produce results: rapid, significant, measurable improvements in productivity, cost, quality, sales, and other metrics. Process. If companies understand the complexity involved in a new project, they can estimate the effort and resources required to complete it (Exhibit 1). Copyright 2008-2023, Glassdoor, Inc. "Glassdoor" and logo are registered trademarks of Glassdoor, Inc. Likewise, proactive risk and error detection actions will improve overall productivity based on predictive maintenance and machine learning algorithms, as will intelligent talent and team management techniques such as capacity management and scheduling. Consumer beliefs and preferences will continue to evolve rapidly, forcing companies to redouble their efforts to embed the voice of the consumer throughout the product-development process. By maintaining a consumer-driven vision throughout the entire processfrom initial concept through transfer to manufacturingthe company was able to shorten the development timeline by 40 percent. OEMs must transition from working with several suppliers to creating alliances and partnerships centered on key technological control points, while tier-one suppliers must adapt to software sales and develop solutions in partnership with OEMs. Thats no longer true in the 21st century and leadership hasnt gotten the memo. 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. Built in a modular fashion, this program can be tailored to offer personalized learning journeys across different inflexion points in a product-oriented career. When embarking on efforts to design complex things, companies often have little idea how long a project will take, what it will cost, or what theyll finally be able to deliver to the end customer. The larger and more stable a companys profit growth over the analysis period, the higher this figure would be. Going forward, OEMs need to adopt data-enabled engineering and virtual-engineering capabilities to understand the value drivers of automotive customers in todays new ecosystem, which includes autonomous driving and data services. For our new analysis, we selected 42 companies from the Fingerprint database, choosing those with both a good dataset on the metrics in use, and publicly available data on financial performance over the ten-year period from 2007 to 2016. A fifth of those projects cost over 50 percent more than originally expected. McKinsey suggested that to remain competitive in the long run, a company allocate its research and development dollars and resources across all three horizons. The team then structures and breaks down the requirements along the reference system architecture. That raises a crucial question: how should they measure the performance of their product-development teams? These managers can speak the language of every function: they have the technical knowledge to engage in engineering problem solving, yet they think strategically enough to support the businesss goals. Only 15 percent of the companies in our sample did not make widespread use of this metric, but those companies had an average relative-profit growth 11.4 percentage points higher than the remaining 85 percent. In that time, weve interviewed hundreds of project stakeholders, including executive managers, technical leaders, and program and project managers. To estimate the correlation between each organizations KPIs and its overall financial performance, we created a new metric of our own, taking the companys profit growth for the year after its participation in the Fingerprint and subtracting the average profit growth for companies in its sector. 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. Doing that is harder than it sounds. The first was relative-profit growth, based on profit growth at the company in the year the data was collected, compared to the average for its sector. Unlock your team's curiosity and willingness to take smart risks. You will lead the execution of digital product development and transformation projects for leading industry players, mainly in Johannesburg. The transformation will need to happen along three dimensions: technology, commercial structure, and commercial change. McKinsey's Product Development service line is committed to helping clients develop products that fit market needs, produce attractive margins, provide platforms for add-on offerings, and enhance the reputation of brands for future business growth. 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. The projects planners arrived at this estimate on the basis that 90 percent of the new design would be carried over from its predecessor. The company then sought to develop a bold new look that would serve as a statement upon entering the new product category. We strive to provide individuals with disabilities equal access to our website. To benchmark R&D performance, they should compare their performance against peers on dimensions such as R&D intensity, new-product costs, time to market, and R&D offshore ratios. Product development and innovation in the consumer-goods industry has never been easy. Likewise, the line organization reflects competencies and module ownership to optimally support the delivery organization and safeguard component and system communality. But for practical reasons, the only useful factors are ones easily measured, consistently gathered, and known early enough to drive budget and planning decisions. The specially appointed product manager led the creation of a new portfolio vision to differentiate the companys products from the sea of sameness that pervaded the marketplace. Enabling future customer experiences and accelerating product development. Automotive OEMs and suppliers need to adapt quickly to maintain their R&D competitiveness in areas including time to market, cost, quality, and new-feature rollouts. 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. Exhibit 1. One global consumer-goods company had lost its position as a market leader because of a lack of innovation, a recently failed launch of a critical product, and decreasing margins in an increasingly competitive market. The product manager has emerged as a crucial force to steer this process and balance these lenses. Overview Overview 9.2k Reviews 257 Jobs 16k Salaries 4.7k Interviews 2.6k Benefits 88 Photos. Other new regulations related to cybersecurity, systems to manage software updates, and the use of Society of Automotive Engineers (SAE) Level 3 autonomous-driving capabilities could also make future vehicle performance parameters more complex. AirBnB, Uber, Lyft, Craigslist, SpaceX, and Tesla are examples of Horizon 3 disruptions using existing technologies and deployed in extremely short periods of time. The core of the steering approach should be the total product business case based on the TCO, including any costs that arise during the initial product development phase (for example, R&D costs, capital expenditures, and product and factory or production costs). McKinsey Three Horizons: this article explains the Mckinsey Three Horizons of Growth model in a practical way. The team also collaborated with end consumers, sales reps, distributors, purchasing managers, consultants, and internal stakeholders to pinpoint market trends and consumer needs. With warning of such resource bottlenecks, it can take appropriate actionadjusting the schedules to separate the peaks in demand, bringing in contractors, or outsourcing part of the work. The three horizons are no longer bounded by time. Leaders estimate the renewed focus on the consumer will result in a 15 to 25 percent price premium and incremental market share of more than 20 percent by year two. 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. Traditional tech product managers focused primarily on execution and were evaluated by the on-time delivery of engineering projects. The consumer-goods industry can learn from the evolution of product management in the technology industry and empower product managers to play this critical role. The predictive analytics models showed that with the companys current resources and project plan, it was going to miss its delivery schedule by 50 weeks. This architecture consists of a big-data stack in the backend, broad OTA capabilities, and a protected mode in the vehicle stack for in-vehicle simulations. Freeing teams from strict budgetary limits may lead to product designs that perform better in the market. Through our work with technology companies, we have identified several principles and approaches for running a successful learning program. Our dataset comprises 42 companies, for which detailed data on product-development metrics and financial performance was available. This finding should not be interpreted as a suggestion that companies stop tracking their R&D project budgets, but it may have important implications for the way budgets are used. In the second step, players need to prioritize their efforts and set up a transformation office to drive change. Cleansheet analyzes a products underlying cost structure to help organizations establish cost transparency, set target costs, and capture savings. Large organizations are executing and protecting the legacy. In particular, we wanted to identify the approaches used by companies that achieve consistent high performance. Today, however, tech and digital product managers are increasingly the mini-CEO of the product. Last, companies will have to rethink innovation and collaboration in remote-working team structures. It's All About Customer Value If you beat competitors at the customer value game, your products will win. 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 two aspects to Product Portfolio management (each with different stakeholders): . Moving from a conventional car to an automotive ecosystema kind of smartphone on wheelsrequires changes to the vehicles electronics and software architecture. 2. In a time of rapid innovation, we help clients leverage the broader supply ecosystem to drive process and product development. Design the right organization, processes, tools and data infrastructure to get the best out of your product managers. This role combines the orchestration of an agile scrum master, the insights of a data scientist, and the consumer centricity of a design lead. This requires that OEMs and suppliers shift their current development processes toward a cyclical, more integrated pattern and establish R&D steering approaches that connect software and hardware development along the entire life cycle of the vehicle. Insufficient focus on the voice of the consumer. Before development starts, the team examines CX insights and conducts mid- to long-term planning as it collects business and industry trends and user feedback. Know Your Worth. A modern product manager acts as a catalyst and objective arbiter of competing interests and perspectives in the product-development process to facilitate both designing the right thing and designing the thing right.1McKinsey proprietary market research; S&P Capital IQ, spglobal.com. This approach features a harmonized systems landscape and a single end-to-end data backbone along the entire process of product development and life cycle management that connects all relevant steering KPIs. Traditionally, OEMs incorporated engineering capabilities based on the collective experience of their engineers and experts with only limited data on customer behavior and product performance in the field. This dynamic will place more importance on roles and skill sets that involve orchestrating and integrating product-development processes. 1 If you would like information about this content we will be happy to work with you. Technology has made that assumption incorrect: Today innovations like Uber and Airbnb can be rolled out extremely quickly. Please try again later. Over the next 18 months, the team redefined the companys product lines to better reflect consumer preferences and strengthen the value proposition for each product. In another example, a company had a tight deadline to complete a new release for a big customer, with competitors vying for the work. This benchmark reveals areas of strength and opportunities to build capabilities for individual product managers and organizational changes to enable their development. And even today, some Horizon 3 disruptions do take long periods of development. We based the work on ten years of data collected through the McKinsey Product Development Fingerprint, a proprietary product-development diagnostic tool. Something went wrong. To understand how quickly Horizon 3 products can come to market, consider some examples. In this way, modern product managers are similar to data and analytics talentwithout the proper commitment and support from across the company, they wont be effective. Companies should focus their efforts on several areas. This misalignment can result in products that miss the mark holistically. The Three Horizons allowed senior management to visualize what an ambidextrous organization would look like the idea that companies and government agencies need to execute existing business models while simultaneously creating new capabilities and helped to prioritize innovation products and programs. Thats important, because widespread knowledge of a metric indicates that the company is using that indicator actively as part of its performance management processes. executive coaching and on-the-job learning. There are three keys to making agile product development work: structure, process, and people. A global team of analysts from five Sourcing Centers, located in best-cost sourcing hot spot locations, help provide our clients implementation-level support in global sourcing diagnostics; country and category prioritization; supplier identification and evaluation; supplier bidding, negotiation and selection; and global sourcing organization design. The CX team discusses the feasibility of CX elements with R&D, creates product and requirement documents, and participates in all aspects of development. Last, it is important to evaluate these programs by tracking KPIs that measure both participation and effectiveness. An empowered product manager enables an organization to amplify its innovation efforts. 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. Critically, top management must actively drive this change. Get a free, personalized salary estimate based on today's job market. Our approach, which combines customer, technology, operations, and market insights, along with our partnership with, Our innovative methodology to optimize products shifts the focus from design-to-cost to, By delivering a holistic transformation of engineering departments, we ensure organizations remain agile, effective, and ready to deal with a rapidly evolving marketincluding supporting our clients in identifying forward-looking insights through leading, We leverage proven methodologies to optimize direct and indirect spend categories. This in turn will allow them to provide agile teams with high-level inputs and boundary conditions. We strive to provide individuals with disabilities equal access to our website. KEY NOT FOUND: ei.filter.lock-cta.message. Smartphones on wheels: New rules for automotive-product development, This article is a collaborative effort by. When we looked at profit-growth stability, however, a different picture emerged. ), Get started with your Free Employer Profile, The Ultimate Job Interview Preparation Guide. That doesnt mean abandoning budgeting altogether, although that approach has worked well for some. Based on these inputs, agile teams can create detailed requirements before developing and testing the components. After reading it, . 1. As partners and suppliers play an ever more important role in product-development and innovation activities, a systematic approach to developing these relationships provides benefits in both the short and long-term.