Universally, every business has the same underlying purpose: to create value for customers, while capturing enough of the value created to sustain the business, grow it and maximise returns to shareholders. Business leaders usually focus on three levers in order to achieve this purpose:
- Increase revenue by acquiring new customers, growing within existing customers or introducing new products and services to the market.
- Reduce costs by streamlining business processes, improving operational efficiency, or introducing automation and digital transformation initiatives.
- Increase customer satisfaction by providing better products, services and support to current customers. While this is less direct than other levers, this lever has wide-reaching viral effects which increase customer retention, up-sell potential and net-promoter score (a measure of how much customers become advocates for a business in the wider market).
Electronics leaders are no different. An electronics engineering executive's core mission is to influence the three outlined business levers by building and maintaining electronics products. Like other functional leaders, electronics managers face numerous challenges, which they need to solve in order to increase revenue, reduce costs and increase customer satisfaction.
Over the last two years at Circuit Mind, we spoke with more than a hundred electronic executives / managers to understand the challenges they face in their quest to maximise value for their businesses using their electronic engineering resources. In no particular order, here are the top five most common issues they face:
1. Developing products on time and to budget
It's not surprising that "time to market" is one of the most critical concerns for electronic engineering leaders. However, during our conversations, we identified that depending on their business priorities, for different electronics leaders, the importance of developing on time and to budget stems from different reasons. Here is how an electronics manager might describe each of these separate objectives:
- "We need to develop our products faster so that we can get to market before our competition and capture market share before they have time to respond, thereby maximising our revenue." This article by Inertia Product Development discusses this objective in more detail.
- "My stakeholders (internal or external customers) now require us to develop products over shorter time scales. If we can't meet these time scales, we either don't win the project (and lose new revenue), upset our stakeholders (reducing customer satisfaction), or spend more money than we were expected to (run-up costs)."
- "If my team can complete projects faster, we can perform more new product development and old product updates with the current team, which will mean that we can increase our product revenues with the same cost base."
2. Capturing, understanding, and developing products to meet customer/stakeholder requirements
Let's face it: clear, concise communication amongst people is one of the hardest things to achieve consistently, both in business and in personal life. For electronics leaders, lack of communication between internal/external customers and their electronics teams is both widespread and costly. The reasons it is widespread are:
- Customers (internal/external) sometimes don't know exactly what they want.
- There is a technical knowledge barrier between electronics teams and customers, which means that they are usually speaking different languages during the requirement gathering stage.
- There are no standardised methods and tools for capturing, agreeing, and maintaining requirements from a customer. For instance, different teams might use Microsoft Excel, Word, IBM Rational Doors, Microsoft Visio etc. for capturing and managing requirements.
Lack of clear communication is not only frustrating, but it also translates directly to incurred costs:
- When an electronic team builds the wrong product for an external customer, they directly affect that customer's ability to make money. This is probably the most acute way to lower customer satisfaction. In this case, the business may lose a customer, or even worse, the customer might become an active critic of the business in the market.
- When a team builds the wrong product for an internal customer/stakeholder, the team might directly impair the business' ability to achieve revenue goals, when the product either does not hit the market at all or when the product hits the market, but does not achieve the needs of the end consumer.
- When a team needs to iterate on a product during development, due to constant requirement changes, the sequential and time-consuming nature of current electronics & hardware development processes means that the team will incur significant costs and delays when trying to modify designs, develop and test updated prototypes. This leads to increased costs and potential lost revenue (from getting to market slower).
3. Skills shortages - Hiring and retaining the right engineering talent to meet business goals
The world needs more electronics, yet is producing fewer electronics engineers. Trends in connected/smart devices, robotics, electric transportation, renewable energy and carbon capture (driven by the increased awareness of climate change) are driving the demand for new and updated electronics hardware.
On the other hand, the supply of skilled electronics engineers is shrinking globally, e.g. in Germany, the UK and the US. This widening gap in the demand and supply of engineers is placing pressure on electronics leaders as they struggle to fill electronics roles fast enough to meet their business goals. The four most cited contributing factors to this gap are:
- The increasing demand for more electronic devices.
- The ageing electronic engineering workforce: 60% of electronics engineers are over the age of 50.
- Fewer STEM students opting to create a career in electrical/electronics engineering due to alternative occupations like software engineering and machine learning engineering becoming more ubiquitous, financially rewarding, and appealing.
- The increasing bar for experienced electronic engineering recruits, as devices become more complex.
As it becomes harder to hire and retain electronic engineering talent, electronics leaders are starting to face delayed product launches (which affects revenues as discussed in ) and higher costs required to recruit, train and retain electronics engineering talent.
4. Developing products to meet more stringent requirements
As electronics systems become more advanced, customers and stakeholders expect engineering teams to develop systems which have higher performance, lower cost, better electromagnetic response, smaller sizes, and higher reliability, amongst other requirements. A few specific examples of increasingly complex requirement trends are:
- Connected device and consumer electronics manufacturers expect smaller sized printed circuit boards (PCBs), more powerful and longer range radio frequency connections, more processing power on the edge, and lower power consumption in order to extend battery life.
- Automotive Original Equipment Manufacturers (OEMs) are essentially converting cars into computers on wheels. They require higher processing power including with artificial intelligence capabilities, high-speed signals with dense connectivity on PCBs, while meeting electromagnetic compatibility requirements.
- Renewable energy manufacturers and Automotive OEMs require more sophisticated circuits to optimise battery power consumption and recharging.
The increasing complexity of electronics devices is leading to longer development times, which has a negative effect on revenue. It also causes a higher bar in the type of talent needed to be effective in product development which leads to higher operational costs as discussed in .
5. Increasing productivity of engineers
Resource productivity is the single most ubiquitous measure of performance across businesses that employ human labour. The reason is that productivity directly affects profit margins, the mechanism through which value is returned to shareholders. A simple way to measure electronic engineering productivity is by calculating the amount of lifetime revenue generated from all products developed in a year divided by the cost of the electronic engineering resources used on all the projects in that year. Productivity can be increased by:
- Increasing the number of products that a fixed number of engineers can develop or upgrade in a year (increasing the numerator of the equation). Doing this enables a business to increase revenue with the same cost base.
- Reducing the electronic engineering cost it takes to develop or upgrade the same number of products in a year (decreasing the denominator of the equation). Doing this enables a business to maintain revenues while decreasing the cost base.
6. Component shortages
Yes, we said five challenges, but we have six entries. This final entry is the most acute problem that electronics leaders face in 2021. However, it's also a challenge that has arisen due to a difficult to predict, black swan event: the COVID-19 pandemic. Therefore, if you're reading this article in 2030, this final entry may no longer be relevant.As we explain in this article about designing for availability, COVID-19, caused a disruption in semiconductor supply chains, which sent a ripple through the electronics industry.
Electronics/PCB design teams are struggling to procure the parts used in their designs and either need to pause product development, purchase parts at exorbitant prices, or redesign circuits. This has major effects for business leaders as they struggle to get existing and new products to market (losing revenue), incur increasing operational costs as engineers spend more time redesigning circuits and searching for available components, and reduce customer satisfaction as product production is mired in delays.
If this article does anything, we hope that it helps electronics engineering leaders understand that you are not alone: other leaders are facing the same problems that you are, and there are solutions: people solutions, process solutions, and technology solutions. At Circuit Mind, our aim is to provide the technology solutions that help electronics leaders and their teams to overcome these challenges. Let us know if we can help.