Product Development Performance Metrics

On our Japan Kaikaku Experience trip in August, we visited Omron, a manufacturer of sensors and factory automation products. They have been implementing TPS step by step and they are very Lean in the factory. They have relocated their Product Development team to the same campus as their production team and they have taken a Value Stream Organization approach they call Work Shop Management.
They are in Phase III of their Lean transformation, nearly 7 years into the process of applying the Toyota Production System model. As part of this they are taking kaizen beyond the factory (Phase I) and factory indirect (Phase II – purchasing, production engineering) and into the Product Development process itself.
There are many notable aspects of kaizen at Omron. One thing that was particularly eye-opening was their response to the question of “How do you measure productivity of your engineers in Product Development?” At Omron, the performance of Product Development engineers is measured by the sales of the new product over their lifespan.
The significance of this is that it places the responsibility for launching a top selling product not on sales or marketing, but also on the Product Development team. This requires the people coming up with new ideas to truly understand what their customers needs are, and how their factory automation products will be used and need to be improved. In addition, if the products are long-lived and difficult to imitate, this means Product Development did their job well.
This type of Lean Product Development requires a higher degree of customer intimacy as well as a cross-functional coordination with sales, marketing, R&D, engineering, and production. The fact that Product Development and Production are co-located, as well as the fact that Omron factories use their own factory automation devices (they can hear their own internal Voice of Customer) makes this easier. Pretty impressive, nonetheless.