Turn innovation frustration to joy with value engineering!

Industrial digitalisation, coupled with the ever-changing requirements of ever more demanding customers, is changing the nature of product innovation. To develop differentiated, intelligent, valuable products that meet new customer needs, product teams are having to adopt new ways of thinking and working.

It’s important to ensure, however, that you don’t let the huge potential of new ideas blind you to which ideas are actually most valuable. This blog post aims to explore one way that companies can go about achieving this. 

Does this sound familiar? Enthusiasm abounds as development work starts on a new product innovation. The project has the goal of, say, adding extra functionality and simultaneously reducing manufacturing costs by at least 30 percent. As development proceeds, it slowly dawns on the project team that this ambitious goal can’t be met. The project has failed at the implementation stage.

This gulf between intent and actual implementation, the challenge of transforming an idea into an innovative, saleable product, is what we call the ‘innovation orchestration gap’. This blog explores some of the reasons why companies fail to achieve the goals they set themselves. We will look at specific approaches which can help you overcome the various obstacles on the road to successful product innovation.

Value engineering – clear focus on costs leads to successful innovation

A key component of value engineering is a constant, unbroken focus on costs. Before getting started on actual product innovation, i.e. implementing your idea, you therefore need to ask yourself one simple question: Who can add value and what can they do to add value? Successful product innovation can only happen if you define clear responsibilities for costs and ensure that all departments involved in the project are fully on board.

Every team member needs to be constantly thinking about costs. Value engineering is innovation at the intersection between technology and costs. Sometimes this necessitates a significant change in corporate mindset. The new culture needs to become part of the company’s DNA, so that all staff embrace and employ it. You can read more about how to go about realising this kind of cultural change and the obstacles you’re likely to encounter along the way in our blog post “Product Innovation means Business Transformation”.

Your teams and how they work together play an important role in successful value engineering and by extension in successful product innovation. When assembling a development team, there are a number of pitfalls to be negotiated:

• Core team and managers: Our experience has led us to recommend having a small, potent core team consisting of a project manager and one team member from each of the product management, research & development, purchasing and production departments. This should be coupled with managers who are not afraid to take decisions. Shying away from taking key decisions is one of the biggest cost drivers during a development project and is a major risk factor in any innovation project. Other specialists should be drafted into the team as needed.
   
• Vision: Many projects fail not so much because of a lack of motivation on the part of team members, but because of discord within the team, different ways of working or different ideas for how the project objective should be achieved. You should therefore ensure that your team members have a shared vision of the project objective and how it can be achieved.

Value engineering – step by step to successful product innovation

For many companies, successfully putting value engineering into practice is a big challenge. It’s not uncommon for it to be a big enough challenge that it fails to happen. So we offer the following, somewhat cheesy-sounding recommendation: Make the steps smaller.

As the figure shows, sometimes it pays to start small, define your milestones, celebrate your successes and then move on to the next step. If your staff can see that the innovative products they helped create are selling well and are well received, they will also recognise that their own work is a success and in turn recognise the value of value engineering for the business and your customers. They will be quicker to embrace the new way of working and be better motivated to incrementally drive the transformation process forward.

In the course of achieving, or having achieved the defined milestones, many companies are unfortunately still far too focused on bureaucracy – on ensuring that all the right boxes have been ticked and all the right forms have been signed. Ditch the bureaucracy! Bureaucracy and paperwork don’t make your products more reliable or cheaper.

The key point when developing and monetising innovative products quickly is to get actual people invested in the project, not just their signatures. Getting these people actively involved in reviews, for example, facilitates the identification of key sticking points. This helps avoid unnecessary additional development cycles. As a result, the product hits the shelves sooner and you keep your costs firmly under control.

Another issue is that many businesses are still compulsively focused on greenfield projects. In most cases, the next product generation is characterised by very specific innovations which deliver value for the customer, with the remainder of the product or service generally based on an existing product. Don’t forget to look in the rearview mirror!

• What has stood the test of time?
• Where is there still room to reduce costs?

This gives you a solid foundation to build on, enabling you to focus on genuine innovation.

And in any innovation project, it’s essential to keep the focus on cost vs. benefit. Ensure that the benefit-cost ratio of your project is clear right from the outset and keep checking that this ratio has not changed over the course of the project. Start by analysing the current situation, then use this analysis to determine the potential offered by your innovation and analyse potential profitability. Then it’s just a question of ‘go’ or ‘no go’. Only take on projects that look like they will work – have the courage to discard projects if your analysis suggests they are unlikely to succeed.

Value engineering helps you focus on those innovation projects with genuine potential and to discard those projects that are likely to be a waste of resources with little prospect of success. The result is that you gain a better understanding of the needs of your customers, you can make informed decisions to successfully create innovative products and services, you enhance the innovation capacity of the business as a whole, and you permanently bridge the innovation orchestration gap. In short, turn innovation frustration to joy!

To learn more about the innovation orchestration gap, see our blog posts “The digitalization obstacles hurting innovation outcomes” and “Discover the three dimensions to successful industrial innovation”.