Tenet #7: Decentralize the decision-making
In this blog I would like to discuss the importance of decentralization in decision-making. I mean to illustrate the difference in effectiveness between managing decision-making from a central (usually high level) authority compared to empowering those people lower in the organizational structure (and typically closer to the daily status of specific issues) with the knowledge and authority to make these decisions for themselves. These differences will fall into the following categories:
- Project speed
- Decision correctness
- Leadership development
- Job satisfaction
I will mainly discuss how distributed decision-making impacts the first two points.
Tenet #6: Standardize the routine
Although innovation necessarily involves risk and variability, much of what is done in Product Development is predictable and routine, so where does standardization make sense in an NPD process?
There are two types of standardization that may be discussed with respect to the NPD system:
- Processes and Tools
Processes and Tools
Let’s start with the fact that NPD is not the same as manufacturing operations. Ideally in manufacturing, there is no need to change anything. From the beginning, products launched into manufacturing are perfect, low cost, high yield and exhibit high reliability. The suppliers will never stop supplying critical parts and there will never be a need for a redesign of the product. Of course, this ideal is seldom achieved, and it is less likely to be achieved the more cutting-edge your products.
Tenet #5: Sharpen your prioritization
I have worked with new product development leaders in the past who have said “We don’t prioritize projects in our active portfolio. All projects in the active funnel must be completed according to our agreements. That’s why they are approved to be in the active funnel; and it’s how we drive our teams to get the best performance.” This reasoning may appear to be sound, and perhaps in some industries and for some types of projects this mandate will work well; but in many industries and for many types of projects, the uncertainties in a project are just too high. Unless you have already driven your organization to a high level of conservatism in schedules (read “long schedules”) and have pushed risk-taking out of your process (read “little innovation in your products”), this type of directive will probably fail since few projects can account for the significant surprises that will impact scope, schedule or cost. In short, if you want fast projects and wish to maintain an innovative environment, this idea of no prioritization is a bad one.
Prioritization of projects is almost always necessary for the well-run product development organization wishing to emphasize fast throughput time and at the same time encourage high levels of innovation. This prioritization is essential to allow for well-reasoned decision making, agreed upon at the highest levels when leaders are faced with surprises.
Tenet #4: Reduce the portfolio
In most cases, the best way to improve the speed of product development is to reduce the number of projects in the active portfolio or project pipeline. Your choices of the number and type projects in the pipeline at any one time have significant consequences when it comes to the speed of your development systems. The balance chosen between “trying doing too much” and “doing too little” is an essential decision-point for the firm.
Throughput has been studied theoretically and experimentally in a diverse set of fields, from communication to traffic flow. Product development can be thought of as a chain of processes through which specific solution ideas, prototypes and documents, encompassing “products under development (PUDs)”, flow until they are deemed ready for production. Each PUD takes some capacity for its development, including engineering time, modeling and prototyping tool time, testing time and equipment, etc. It is self-evident that trying to develop too many products at the same time will slow everything down, but how can we find the optimum for a given capacity of development resources?
Many people talk about product innovation, but few develop a full understanding of what innovation really means or what it takes to build an innovation culture and new solution engine. There are four fundamentals that must be in place for a truly innovative company:
- A profound understanding of the customers to be served, and unmet or poorly-met needs of those customers,
- A process for creating compelling solution ideas to meet those needs,
- A process for prioritizing, selecting, and funding the most promising solution ideas, and
- A development capability that rapidly turns the selected ideas into competitive products or solutions.
Tenet #3: Focus on the risk
In this blog I will talk about risk, and how a focus on risk will drive a project faster and through reducing risk, be able to allow for greater innovation. By necessity, I will also talk about some of the methods of reducing risk. Aspects of this discussion apply also to the previous tenet, “Tenet #2: Think in sprints”.
There are two types of risk of which all participants on a project must be aware: Market risk and implementation risk.
- Market Risk: A market (or market segment) is the collection of customers to whom you are targeting the new offering. Market risk in summary is the risk associated with market acceptance of the new product. Your view of the risk may be seen in your uncertainty of the projected unit sales forecast or the price you will be able to charge.
Implementation Risk: This is the risk that your implementation of the project necessary for the product offering will not go according to plan. It includes technology risk, logistic risk and other areas potentially impacting the successful completion of the project.
All New Product Development (NPD) projects contain some level of both of these risks. And both must be actively managed for faster projects. Figure 3-1 shows six major ways to manage risk.
Tenet #2: Think in sprints
In my last blog, “Tenet #1: Align the organization”, I discussed the need to align the organization in two ways:
- Align with information to motivate for the needed change, and
- Align with structural changes, reporting, roles, responsibilities and metrics to make your pipeline faster.
Alignment of the organization in both information/motivation and structure is critical to moving faster. Don’t make the mistake of false economics that has hurt so many companies, that a lower cost product development engine with higher utilization of all resources is best for the company. In the end, this choice will slow you down, and slower projects will cost you far more in lifetime gross profit than a so-called efficient and highly utilized organization will save you in project cost.
Blog #1 of 10 – Introduction and Tenet #1
The business world is moving faster than ever, and every company is challenged to keep up with, or even surpass the competition in delivering great products . Market windows come and go more quickly. Technology inflection points arrive with ever increasing frequency, and provide opportunities to lose or gain significant market share. The total lifecycle of essentially every type of product is shrinking, with the end of life usually out of the hands of the provider, and driven by customer choices. No matter how fast you are now, no matter how many improvements in speed you have made, if you are to survive as a business you must continue to increase the speed of new product introductions. You must improve in identifying a need, innovating to produce the best solution to that need with a clear competitive contribution, and then delivering that solution to the market place.