Value engineering has been one of the trump cards of businesses worldwide in improving their bottom line. For years, businesses relied on improving their sales metrics to reign in profits. However, over the past couple of decades, they have realized that profitability requires not just better sales, but a highly streamlined cost advantage in operations. This is where value engineering comes into the picture. Value engineering refers to the methodology of optimizing operational processes and engineering workflows to lower the cost of products. Rather than having your sales strategies compensate for production costs, value engineering dwells on leveraging as many levers as possible to keep cost increases under check and contribute to profitability. Before we go deeper into the characteristics of value engineering, it is important to understand the state of affairs in the enterprise world today.
We have seen how the COVID-19 pandemic created one of the biggest disruptions to normal life in the history of modern society. While the world is slowly limping back to normalcy, some of the habits and traits that became popular during the pandemic are likely to stay. Amongst them, the biggest trend that is sure to cement its presence in the post-pandemic world is the incredible growth of the digital economy worldwide. From retail to finance, entertainment, education, and utilities, the years 2020 and 2021 witnessed a steady migration of traditional business models into a digital-first mode of operations. Digital transformation has amassed followers from nearly every business sector and the pace at which businesses adopted the same has accelerated rapidly from years to just a matter of days or weeks.
While most businesses are still figuring out a successful roadmap to win customer loyalty in the digital era, the market is in no way patiently waiting for them to evolve at a slow pace. Customer demands are diversifying by the minute and new entrants in the startup space are leapfrogging established names in the industry by leveraging advanced technology to fill in the gaps of experience and market analysis. In addition to turning in profits, businesses need to constantly innovate with speed to stay relevant in the market. Only when a business offers its customers market-linked offerings corresponding to the latest trends, would customers develop a loyal relationship that can be nurtured for repeat business!
Staying in sync with what the market demands requires businesses to quickly adapt to dynamic customer behavior. For this, they need innovative offerings that must be quickly launched to their potential customers and win their attention. However, with budgets tightening and competition growing by leaps and bounds, there is a high demand from key stakeholders to conserve cash. So how can enterprises balance the need to conserve cash but encourage innovation at speed? This brings us back to our initial discussion – value engineering. Value engineering focuses on discovering the core functions of a product (in this case a digital product or service) and prioritizing its worth and determining the most optimal resource allocation to facilitate the service in providing intended results at the lowest possible cost.
How can enterprises foster innovation and speed with value engineering?
Optimize resource utilization
The principles of value engineering can be applied to streamline processes and workflows that development teams have to endure while building an enterprise’s digital ecosystem. By focusing on automation at scale and breaking down processes into simpler ones, staff can be encouraged to work smarter on lower workloads than in the past. This helps reduce costs and the reduction can be pooled for contributing toward digital innovation.
Improve Research & Development (R&D)
Value engineering enables constant feedback integration into R&D practices which ultimately helps enterprises benchmark the right budgetary allocation for every project type. This prevents wastage of financial and human resources in any project, which ultimately results in freeing more budgets for innovation and speed enhancement initiatives.
One of the ways in which value engineering achieves cost optimization is via improving the quality of digital offerings. When digital components exhibit higher standards of quality, they will seldom need reworks or re-engineering efforts in the future to cope with market dynamics. This brings in a huge cost advantage besides freeing up critical human resources to focus more on creating value-added services for customers rather than worrying about operational or maintenance costs.
Not only does value engineering contribute to enhancing the scope of innovation, but also it can be the very lever to kick in innovation within the existing business model. In the quest to lower costs, enterprises can leverage value engineering to experiment and discover better ways of doing business at lower and more efficient costs. These findings can themselves prove to be breakthrough discoveries or best practices that can be reciprocated in other projects to deliver better value for the organization.
Value engineering brings in quite a good scope for enterprises to improve their focus on innovation and time to market. In the age of digital disruption, value engineering can help enterprises quickly realize their full potential by ensuring the flow of critical capital into innovation exercises when compared to the cash-starved scenario in traditional business models.
About the author:
Anurag Sinha is Co-Founder & Managing Director, Wissen Technology (Wissen.com).