Interview with Wayne Mackey

Product development expert and bestselling author, Wayne Mackey, thinks that while most companies have their hearts in the right place when it comes to R&D metrics, the way in which they are typically implemented and used range from marginally useful to potentially hazardous.

“10 or 15 years ago,” said Mackey, “people really started to take measurement seriously, and though I’m not sure we’ve gone backwards, we haven’t gone very far forward. [People] spend a lot of time and money collecting information, but even the people doing the work know there’s not a lot of value in it. None of the concepts behind performance measurement are wrong, but we’ve lost our way on the basics of what we’re measuring and why.”

For example, Mackey offers the metric that a majority of companies use to determine their company’s innovation activity: “% of sales from new products.” When companies started to measure this, many managers learned to game the system by changing the definition of what constituted a “new” product. The result was product portfolios that looked innovative according to the metric, but in reality were losing ground to truly innovative competitors. Such measures can do a lot of damage to your bottom line and even prevent growth, a complete opposite of the metric’s intention.

In a recent interview, Mackey discusses new metrics that companies are having greater success with, including “information turns” and “design for gross margin.” He will be leading educational sessions on these emerging trends as chair of Management Roundtable’s upcoming 13th Annual Conference on Product Development and R&D Metrics this October. This is the industry’s longest running event where executives and managers will meet to discuss the performance measures that are guiding them in the current economy, where the value of innovation seems in flux.

Ahead of the conference, Mackey has the following advice for executives responsible for putting performance measures in place in their R&D organization:

Define the improvement goal. Tie it to a customer. Vision, mission, and strategy are important, says Mackey, but if you want to know what your improvement goal should be, ask your customer. He identifies five key questions to ask yourself to know if you have a well-defined, appropriate goal:

• Is it what you want at the end?
• Is it specific?
• Is it quantitative?
• Is it realistic?
• Is it customer-driven?

Sound simple? Remember, it doesn’t have to be difficult. But how do you know if a goal is realistic, for example? Says Mackey, “See whether your competitors are doing it.”

Measure what gets you to the goal. Make sure the things you measure are causal to the goal. Ask yourself four questions of a proposed metric:

• Is it likely to cause the goal to happen?
• Is it not the same as a failed past approach?
  Mackey reminds us that doing again what didn’t work in the past and expecting a different result is the definition of insanity.
• Is the list of causal actions prioritized from 3 to 5? Notes Mackey, “You hear a lot of numbers thrown out as to how many is the right number: the key is how many you can concentrate on because a metric that isn’t attended to is a waste of everyone’s time.”
• Are the causal actions correct and adequate?

Tier the “whats” to the level you affect. “A metric that isn’t at the appropriate level is designed for frustration. If you make someone responsible for a metric, especially in an improvement project, it’s key that they can affect the outcome.”

Key questions:

• Are the names and organizations assigned who will do the actions?
• Do they control the process?
• Are the responsibilities horizontal and framed?

“Because of the dynamics of vertical delegation and decision-making, this only tends to work in real-world organizations if responsibilities are largely horizontal. To understand framing a metric, think of the dashboard of a 747: the pilot isn’t expected to simultaneously focus on all of the things there, but each thing is clearly framed, and the pilot knows what to look at and when.”

• Do the lower-tier goals lead directly to upper-tier actions?
• Are sufficient tiers established to manage the project? “Not too many, not too few—stop formal metrics when you find yourself counting paper clips and can no longer describe the goal as strategic.”

Test the “whats” for time. All actions should be timed to manage the improvement process, says Mackey. Key questions:

• Does a proposed action precede the goal? If it doesn’t, it might make a worthwhile result metric, but it’s not a good predictive metric.
• Is it objective?
• Are you sure it’s not really a level of effort in disguise? Don’t mistake a large expenditure of effort, with the right expenditure of effort.
• Are you sure it won’t cause inappropriate behavior?

Advises Mackey, “Don’t set up metrics that you know are easy to achieve or that will create sub-optimization in your organization. If you pit individuals or groups against each other, you may get them all working hard, but you’ll sub-optimize your overall organization.”

ABOUT WAYNE MACKEY

WAYNE MACKEY, Principal, Product Development Consulting, Inc., is an internationally acknowledged expert in metrics and his expertise is grounded in over twenty years of hands-on leadership of large engineering, manufacturing, and procurement organizations. His management consulting is focused on product / service development, and he is especially effective in collaborative design, metrics, portfolio management and business strategy implementation. He is co-author of the best selling book Value Innovation Portfolio Management: Achieving Double-Digit Growth Through Customer Value, and co-author of the PDMA Toolbook for Product Development 3. He holds a Bachelor of Science in electrical engineering and economics from Carnegie-Mellon University and a Master of Science in engineering, from Loyola Marymount University.

 

Portions of this article excerpted from the
Product Development Metrics Handbook