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 . Very generic interview. Successful product development requires teams to engage with experts across disciplines while aligning four critical development lensesbusiness, design, consumer, and technical (Exhibit 1). More than 40 percent of consumers also say they will use connectivity services more in the future, and about the same number are willing to pay for connected services. 1 Indeed, the average relative-profit growth of the companies that did use this metric was 12.9 percentage points higher than those that did not (Exhibit 2). Brand managers often act as product owners, but rarely play the central integration role that we believe is crucial to propelling innovation. Typically, little data consistency exists across systems, and stakeholders base their planning and steering on different versions of data. Todays market research shows customers want more than a traditional car ownership experience. Such learning programs must be tailored to meet the specific needs of the individual organization. Build product management talent through four levers: a well-articulated leadership development model, tailored learning journeys, ongoing development enablers and strategic recruiting. For example, Google buying Android. Healthier teams may be better-equipped to regroup and produce good results, project after project, year after year. Please try again later. We have a proven methodology focused on creating value. Subscribed to {PRACTICE_NAME} email alerts. Commercial change. $50K McKinsey & Company Procurement Interview Questions | Glassdoor A modern product manager fills both organic and inorganic gaps between team functions, providing connective tissue and promoting a much higher level of collaboration and alignment. McKinsey Three Horizons: this article explains the Mckinsey Three Horizons of Growth model in a practical way. OEMs focus on material cost optimization to reduce product costs and improve product profit. The goal of agile product development is to create rapid decision and learning cycles, which requires organizations to put supporting processes in place and align them throughout the entire organization. When first articulated by Baghai, Coley, and White in 2000, inThe Alchemy of Growth, the Three Horizons model was a breakthrough. It's All About Customer Value If you beat competitors at the customer value game, your products will win. OEM can typically use commercial databases to support their benchmarking efforts on material costs and capital expenditures; for R&D hardware and software costs, third-party providers can help. These models can even identify the productivity impact of changes to working methods. As an example, at one company, a project to create a derivative of a newly released product was originally expected to take just 300 person-weeks of effort. The product manager needs to be at the center of the development ecosystem, empowered to make decisions and resolve differences throughout the process with the support of senior leadership. 34+ Free McKinsey Presentations & Slide Decks [Download] Built in a modular fashion, this program can be tailored to offer personalized learning journeys across different inflexion points in a product-oriented career. In our work with consumer-goods companies, we have identified a critical need for a product manager to connect these many stakeholderssomeone who is ultimately accountable for delivering consumer and business outcomes. Anna Herlt is a partner in McKinseys Munich office, where Martin Kellner and Paul Jana are associate partners, and Sebastian Kchler is a partner; and Henrik Rochlitz is an associate partner in the Berlin office. Our work in product development includes developing, defining, and implementing strategies that . For example, cost and margins can overshadow other development considerations and appear inherently at odds with the design and consumer departments, which seek to create differentiation and delight end users. The modern product-manager role is rooted in the voice of the consumer and elevates that perspective throughout the process to ensure that product development is guided by these insights. Moving from a conventional car to an automotive ecosystema kind of smartphone on wheelsrequires changes to the vehicles electronics and software architecture. If you would like information about this content we will be happy to work with you. The Product Strategy Playbook from McKinsey Alum - Free PPT Templates If companies understand the complexity involved in a new project, they can estimate the effort and resources required to complete it (Exhibit 1). S2P enables clients to realize the full potential of procurement savings in profit and loss by linking category-sourcing strategies to procurement operationsputting the optimal processes, organization, and digital procurement tools in place that enable simple, efficient, and compliant third-party spend. Breakthrough innovation in product development is often not a straightforward process: it requires a company to continually pivot and iterate to identify and pursue the biggest opportunities and the right scope. By designing agile processes that incorporate source to pay, we help to reduce leakage and to sustain performance to meet future needs. By themselves, metrics arent a solution to product-development challenges, but the key performance indicators (KPIs) companies use do show where management is focusing its attention. And their estimates automatically incorporate the effects of the everyday delays and disruptions that development teams must face. R&D projects are inherently unpredictable. 2 There are three keys to making agile product development work: structure, process, and people. 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. A multifunctional team undertook a series of workshops to brainstorm, align, and tactically plan key design choices across its product portfolio. The company then applied its new vision and strategy to the redesign of its highest-volume product. Source2Pay (S2P) Access more than 40 courses trusted by Fortune 500 companies. The use of this type of metric was strongly associated with both relative-profit growth and profit-growth stability. Instead, OEMs need to become more customer centered across the entire product development process, even to the point of launching a dedicated customer experience (CX) unit. Likewise, the approach applies iterative and incremental development processes to hardware and mechatronics development, synchronizing them with top-down planning. That raises a crucial question: how should they measure the performance of their product-development teams? Enter the modern product manager. Once the company understood the work involved, it changed its plans, keeping the team that developed the original product together to work on the derivative, and ultimately delivering it on time. That doesnt mean abandoning budgeting altogether, although that approach has worked well for some. Elements of these include the data backbone; the backend or big-data stack; in-vehicle architecture; technology such as machine learning algorithms and simulation techniques; and governance, including data governance, legal framework, and consent management processes. By taking a balanced view of the critical development lenses throughout, companies will be poised to achieve the elusive breakthrough innovation that both resonates with markets and supports key business objectives. Companies can use waterfall practices to define the overall vehicle and domain architecture. Ironically, rapid Horizon 3 disruption is most often used not by the market leaders but by the challengers and new entrants (startups, ISIS, China, Russia, etc.). Beyond product-related improvements, this transformation should propel productivity and efficiency advances due to predictive maintenance or defect detection enhancements. Unlock your team's curiosity and willingness to take smart risks. Done right, product development will change the ways automotive companies conceive of, plan, engineer, and monetize new products, thus expanding their go-to-market strategy, business case, and revenue streams. Designs and leads major operational transformations for basic materials clients; brings extensive expertise in procurement. The most intriguing result of our analysis is one that should give every R&D leader pause for thought. The team should set targets for all core steering dimensions, especially material costs, R&D costs, and capital expenditures, centered on benchmark-based target costing. Instead, companies are now exploring a holistic product development approach that optimizes the total cost of ownership (TCO) or the product business case over the entire vehicle life cycle, including sustainability-related costs. 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. It was more of a behavioral interview. Thats no longer true in the 21st century and leadership hasnt gotten the memo. We strive to provide individuals with disabilities equal access to our website. Orpheus elevates the focus of spend analytics to guide procurement strategy development and execution. Yet too many companies are not getting the results they want from their investments: only 6 percent of CEOs indicate they are satisfied with their companys innovation efforts.2McKinsey proprietary market research; S&P Capital IQ, spglobal.com. The team concentrated on three priorities to build momentum: use a design-to-value approach to improve the margins of two key products by 20 percent, use this margin creation to self-fund an innovation engine, and develop a growth strategy to take advantage of white space in the market. In particular, we wanted to identify the approaches used by companies that achieve consistent high performance. Stages of the Product Development Cycle In just six months, the company was able to create a new-to-category product with a new design languagea process that often takes more than a year. Weekly progress reports enable managers to track progress between CX and R&D teams and their alignment on requirement changes. OEMs must transform their approach to product development steering to focus on cost and revenue optimization over the entire vehicle life cycle as shown in Exhibit 3. However, in the 21st century the Three Horizons model has a fatal flaw that risks making companies lag behind competitors or even putting them out of business. Automotive manufacturers and suppliers often combine overarching, classic engineering methods with agile development. 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. Other important key performance indicators and business case dimensions include R&D costs, capital expenditures, variants-based complexity costs (for example, testing and validation and integration of life cycle maintenance), and sustainability costs (including CO2 penalties). 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. In another example, a company had a tight deadline to complete a new release for a big customer, with competitors vying for the work. The Product Management Academy leverages a field-and-forum approach and adult learning techniques to build skills for product managers from diverse backgrounds. Im a big fan of McKinseys Three Horizons Model of innovation. For full details of our data set, and how we analyzed it, see sidebar, Linking product-development metrics to financial performance.. McKinsey Study Supports Balanced Product Portfolio. The goal is to design a modular product architecture to ensure that different teams can develop modules independently from each other in an agile way. This success will shift the business model away from one-time sales and toward vehicle life cycle revenue streams and new forms of monetization, such as pay-per-use or subscription-based models. Companies that measure their effort to identify and exploit external innovation are more likely to get better at it. If you would like information about this content we will be happy to work with you. This employer has claimed their Employer Profile and is engaged in the Glassdoor community. I interviewed at McKinsey & Company (Miramar, FL) in Jun 2016. Strategies such as market penetration (e.g. McKinsey research has found that more than 40 percent of companies arent talking with end users during product development. And they must understand how new products will fit into their existing portfolio, and how they stack up against competitor offerings. That led us to wonder about the relationships between what companies track in product development and how they perform. Back to Software Product Management & Development, [email protected]. Furthermore, the centers of gravity in global and regional markets continue to shift toward Asia, requiring local strategies to provide incentives for OEMs and suppliers to maintain local footprints and keep data in the region. The difference arose because while the amount of truly new work was small, it was widely distributed and affected nearly every part of the architecture. Rewiring car electronics and software architecture for the Roaring 2020s, McKinsey, August 4, 2021. Over the long term, two customer-related metrics were associated with profit-growth stability: customer satisfaction with price for value and product performance against its specification. In other words, they take into account not only the complexity of the project (both the functional and implementation aspects) but also the complexity of the team environment. Managers and engineering teams are often surprised by the combined impact of all the features and performance targets and the cost of integration into a finished product. Doing that is harder than it sounds. expansion of the product range), fit in perfectly with Horizon 1. Get a free, personalized salary estimate based on today's job market. Jeremy Hope and Robin Frasier, Who needs budgets? Harvard Business Review, February 2003, hbr.org. We also help companies develop and retain this crucialbut often overlookedtalent pool. The ability to relate credibly to all stakeholders, especially when passions are high, is extremely valuable. You will lead the execution of digital product development and transformation projects for leading industry players, mainly in Johannesburg. In this approach, the OEMs CX team is involved in the entire R&D process, from the initiation of the project to SOP and life cycle management. Arjun Balaji is a partner in McKinseys Bengaluru office, Raghavan Janardhanan is a partner in the Chennai office, Shannon Johnston is a specialist in the Toronto office, and Noshir Kaka is a senior partner in the Mumbai office. Consequently, such steering is currently not based on a TCO perspective and a holistic business case. Larger development teams are less productive than small ones, for example, as they must expend more effort on internal coordination and communication. This misalignment can result in products that miss the mark holistically. This makes intuitive sense, as understanding your customers real requirements, delivering on your promises, and offering strong value for money are good ways to build reputation and customer loyalty. 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. We have a proven methodology focused on creating value. Combine the existing strengths of a company or agency and its business model by acquiring external innovators who can operate at the speed of the disruptors. Jobs | Careers | McKinsey & Company The larger and more stable a companys profit growth over the analysis period, the higher this figure would be. Your product development process needs a strategic integrator | McKinsey A critical element of product development is instilling consumer centricity in the end-to-end process. The risk here is that copying innovation without understanding the customer problem can result in solutions that miss the target. The first step should be a thorough and rapid assessment through benchmarking, diagnosing, and pursuing development. 1. Companies must nurture a culture that emphasizes and supports the following ways of working: A key challenge for organizations is to identify the right talent. Automakers should also increase their engineering efficiency and use their limited R&D resources most efficiently. Technology will see a consolidation toward domain-centered archetypes (fourth-generation architectures) and zone- or vehicle-centered archetypes (fifth-generation architectures). 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. In our work on strategic product efforts for consumer-goods companies in recent years, we have found that specially appointed product leaders made a significant impact. Something went wrong. And even today, some Horizon 3 disruptions do take long periods of development. 1 One element of the diagnostic involves structured interviews with staff from all parts of the R&D function, who are asked about the metrics their organization uses to monitor product-development activities. Horizon 3 is the creation of new capabilities and new business to take advantage of or respond to disruptive opportunities or to counter disruption. Automotive OEMs are undergoing an essential transformation from experience-based engineering toward data-driven, virtual engineering. While an effective product manager can have a tremendous impact on innovation efforts, companies must also invest in creating an environment where these professionals can thrive. The second root cause is overestimating the productivity of the development team. The process took 1 day. 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.