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 Effective Engineering e-Newsletter – 11/07/2002

This is the first in a series of bi-weekly e-Newsletters from Effective Engineering Consulting Services (www.effectiveeng.com).  If you would like to receive Effective Engineering e-Newsletters as they are published, please send an email to e-newsletter@effectiveeng.com, and we will add you to our distribution list.

eN-021107:

Ineffective Engineering Costs You Time, Money, and Customers!
  By Tom Dennis – President, Effective Engineering [ tdennis@effectiveeng.com ]

In today’s fast-paced and cost-control driven business environment, Wall Street, investors, and customers place strict financial and timing demands on companies.  They demand to know what company plans are and when they expect to deliver on those plans.  Wall Street rewards companies who deliver on their commitments, and severely punishes companies who miss them.

For small private companies, delivery on commitments can be even more critical.  Meet your commitments, and the company can survive, and hopefully grow and prosper.  Miss your commitments, and the company may need to shutter the doors and lay everyone off.

The primary role of a product development engineering organization in meeting company commitments is delivering high-quality products on an agreed upon schedule and within budget.  The consequences of timely product delivery and solid product quality are more critical than ever.  Effective engineering enables engineering organizations to meet their commitments.  Ineffective engineering leads to missed delivery commitments, and failure to deliver costs companies time, money, and  customers – most companies can’t afford the loss of any of these three.

The discussion here will concentrate on the business impact of missing engineering commitments.  [Subsequent e-newsletters will go into more detail].  A look at the graph at www.effectiveeng.com/the_problem.htm (also shown here) summarizes the overall business impact of engineering missing its commitments. 

When a project is late, it obviously causes the corresponding product to be late coming to market, embarrassing management who made availability commitments, upsetting customers who were depending on this delivery to meet their plans and commitments, and upsetting financial analysts who made projections of company performance based on this commitment.  But beyond the obvious time delay, late delivery also directly impacts a company's top line
(revenues) and bottom line (profits), in three ways:
► If a product is late, the revenue that would have been made from the time a product should have been delivered is lost forever - it can never be recovered, and thus directly impacts a company's top line, and consequently its bottom line.
► Further, since late delivery impacts customer' plans and commitments, they will make other arrangements and some ongoing sales will be further lost forever, again impacting both the top and bottom lines.
► Finally, because engineering resources will need to continue to be used from the time the project should have been completed until it is actually completed, development expenses will significantly increase, directly impacting the company's bottom line.

When product quality is poor, it has similar but somewhat different impacts:
► During product development, poor quality results in late delivery and added product costs due to the time it takes to find and fix the problems that are found.  This increases development and production costs as described above, directly impacting the company's bottom line.
► Once the product reaches the field, poor quality leaves a very bad impression with customers.  Some will refuse to accept the product, reducing sales and impacting both the top and bottom lines.

► Other customers may be dependent on the product and still buy.  They will undoubtedly have problems that will require significant ongoing customer support and sustaining engineering efforts well above that which would be required if the product quality was good.  This will therefore increase engineering and support expenses, directly impacting the company’s bottom line.

A common response when a project gets in trouble is to  throw more people at it.  This may help, but often is exactly the wrong thing to do, as new people must now be  brought up to speed, taking away time from those already involved in the project.  The consequence is often even more delay.  Even without the delay, adding more people to a project than were planned increases development expenses, directly impacting the bottom line.

All of these – late delivery, poor quality, and added people – are the result of ineffective engineering.  As has been made clear here, ineffective engineering costs companies time, money and , and customers!  The effects are severe, both qualitatively (in terms of company confidence, reputation, and survival), and quantitatively (in terms of revenues and net income).  The stakes could not be higher.  Ineffective engineering cannot be tolerated!


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