Today, businesses operate in markets that are increasingly complex. Consumer preferences are dynamic and traditional business models are frequently challenged by disruptors. Internally, technologies, such as artificial intelligence (AI), present promising opportunities to transform every corner of the business, from sales and marketing to human resources.
Faced with this changing landscape, many corporations are turning toward CEOs with engineering backgrounds. Despite accounting for less than 6% of undergraduate degrees, engineers lead many of the world's largest companies. Examples include Jeff Bezos (Amazon), Ginni Rometty (IBM), Ryan Lance (ConocoPhillips) and Darren Woods (ExxonMobil). In fact, a Harvard Business Review study shows that more of the world's best-performing CEOs have engineering degrees than MBAs.
I know firsthand how a technical background can prepare you for a career in business. After earning two engineering degrees, I started my career as a computer engineer before taking on leadership roles in product management and corporate development. Over the years, I've held executive roles at some of the fastest-growing enterprise software companies and presently serve on the board of a major university's engineering department.
Throughout my career, I've leaned on a number of fundamental engineering concepts to solve complex business problems and drive successful outcomes. I strongly believe that any leader should apply these five core engineering principles to improve their business performance.
1. Think in systems.
When designing or analyzing complex systems, engineers take a holistic approach to understand inputs, outputs and interrelated components to drive performance and find efficiencies. When they're confronted with an event or a trend, engineers look below the surface to uncover the dynamics producing those results.
Modern business leaders increasingly recognize that companies and markets are interconnected systems. Manipulating one input can lead to unintended consequences if the system is not well understood. To counteract this, teams should develop and maintain shared models of how internal and external systems operate. When done right, companies can unlock leverage points and positive feedback loops that turn small changes into large results.
2. Know and monitor leading indicators.
Well-engineered systems have gauges to help the operator anticipate performance. Unfortunately, many managers fail to have this level of visibility across their business operations. Corporate key performance indicators (KPIs) are lagging indicators — metrics that describe what happened but don't help predict what will happen.
To use a sales example, revenue is a lagging indicator; it tells you what happened. Famed Intel CEO Andy Grove, an engineer, developed a management system known as OKRs (objectives and key results). The core of the OKR approach is to determine quantifiable ways to measure progress toward the ultimate goal. Alphabet CEO Larry Page, an engineer, and other leading CEOs credit OKRs with helping them build high-performing companies.
During your next strategic planning meeting, spend time breaking each of your corporate goals into quantifiable milestones. This will remove subjectivity and provide you with a set of leading indicators to monitor throughout the year. Returning to the sales example, an organization can set OKRs around the number of product evaluations, average opportunity size and conversion rates. In fact, each of these metrics can be further broken down to form another level of indicators.
3. Capitalize on failure.
When failure inevitably occurs, engineers have been trained to dig deep and understand why it happened. In fact, one "why" is often not enough, and methodologies, including "The Five Whys Technique," have been created to guide engineers in performing root cause analysis.
When a new marketing campaign fails to generate the expected demand or a new feature has limited traction, these present opportunities to better understand the market. Perhaps there's a hidden trend or force that you'll notice before your competitors do. When faced with failures, modern business leaders should seek to understand the "whys."
While many companies have adopted a "fail fast" mantra, learning from those failures must be a team priority. I've been fortunate to work in organizations where continuous improvement was part of the culture. One technique I've found helpful is conducting retrospective meetings focused on learning, not blaming.
4. Embrace an iterative mindset.
When you are building physical systems, you usually only get one chance to get it right. There are few do-overs. As a result, engineers have historically made a significant investment in upfront design, sometimes suffering from "analysis paralysis."
Fortunately, over the last few decades, software engineering has transformed the way many engineers think. Supported by process frameworks such as the Agile methodology, engineers have taken to incrementally launching products and solutions.
In the early days of the consumer electronics company Sonos, their team had a saying: "if there's one thing that absolutely has to work in version 1 of the software it's the ability to upgrade to version 1.1." Business leaders can use this approach, where possible, to validate their ideas in the real world. The next time you are launching a new strategic initiative, think in iterations. Companies built to learn and adapt outperform traditional firms.
5. Don't let assumptions masquerade as facts.
Good engineers intuitively separate what they think is true (assumptions) from what they know is true (facts). They understand the need to challenge and ruthlessly validate assumptions. While you will never have perfect knowledge, the key is to write down your assumptions and work aggressively to validate the most critical ones. Leading management consultancies actively promote a similar approach known as hypothesis-driven problem-solving. Fortunately, engineers already think in these terms.
Whether it is entering a new market, releasing a new product feature or establishing a new partnership, business leaders can lean on this fundamental skill to drive better decision-making and solution design. Jeff Bezos asserts that great leaders "audit frequently, and are skeptical when metrics and anecdotes differ." Every business can benefit from proactively reviewing their assumptions and acknowledging when they are relying on intuition versus data.
Take action.
As businesses work to navigate shifting markets and capitalize on technical innovation, they search for sources of competitive advantage. By applying these principles, companies can change the way they approach their biggest challenges, driving new innovation and accelerating growth.
