AME Author, KDR Associates, www.kdrassociates.com
(Transcript from “Lean Talks” at the AME Conference in Dallas October 28, 2016)
Having had product development responsibility for a lot of years in high tech and medical devices, including a startup, I am convinced that we as lean leaders need to put more urgency into improving our Product Development efforts.
Surveys have found that anywhere from 40 percent to 60 percent of new products launched turn out to be successful in the market. Other analysts have found about 90 percent of new products do not return their cost of capital spent to develop them. Contributing to these outcomes is the organization structures we use to manage our programs.
Currently, most Fortune 500 companies today have some sort of gate system for managing new product development. The gate system is designed for managing an orderly and sequential product development process with minimal risk and maximum compliance. One could argue that NPD is not sequential but iterative, but that is not the point.
The problem is that we have made the process more and more complex requiring more support systems to get the job done. Our transactional systems of managing work make it harder to keep up with rapidly changing business environments and technology developments. I suggest it hampers the success rate of our development efforts.
When we see projects succeed, and ask “Why?” most often we find it is not a super process. It’s because of cooperation. Thanks to cooperation, the whole is worth more than the sum of the parts. The miracle of cooperation is that it multiplies energy and intelligence in our efforts. With cooperation, we can do more with less even with broken processes.
We need to simplify our work structures and create environments that emphasize cooperation. Using a sports analogy, we might look at a basketball team. Players have specific positions on the team such as forward or center, etc. When the five players are on the court, they run plays in a fluid fashion adjusting on the fly as the other team does the same. All five players are focused on the goal to score points and win.
Let’s look at an example project from when I was at Graphic Controls.
Our company had a gate system of managing product development projects like most. Managing risk and costs were critical for us as we were in the medical device industry and a leverage buyout company with limited capital to spend.
The project manager presented the project with a development-to-launch cycle of two years. For us, this was a killer. Something different had to be done.
So we pulled together a cross-functional team representing the challenges appropriate to the project. The team had five disciplines; Design Engineering, Manufacturing Engineering, Regulatory/Quality, Marketing and Supply Chain. However, unlike the skunk works team, the members were not dedicated 100 percent to the project. We couldn’t afford to isolate them.
Knowing this, we asked the team to re-plan the project with a development-to-launch cycle of one year.
Rather than using the phase gate process to plan the project, the team developed a project plan around the project needs, the customer needs and our business needs. They approached the planning as a Kaizen Blitz and worked as a team to develop a plan to meet the one year challenge.
Once the team had a high level plan laid out, they then linked it to the phase gates. As a team they managed how the project was progressing and the work that needed to be done. Detailed work plans were not necessary nor did they need someone to tell them what to do.
Our company was not the first to market with this type of product. We had to navigate around IP and develop compelling value to entice customers to switch to our new product. In other words, the goal was to make a product the customers really wanted.
Normally, the marketing group would be responsible to define the customer requirements for a new product and then pass them along to engineering. After all, that is their role. In this case, time did not allow the chain of communication that happens in this manner.
The team worked together to observe and understand what the user was experiencing. Users were consulted frequently by the team throughout the project; alternate models were regularly created for discussion and feedback. For example, one of the key design concepts was to put the transducer in the tip of the catheter which required the tip to be larger than all of the competitors. We were surprised to learn that the users preferred the larger tip, as smaller tips currently on the market had some drawbacks.
The team viewed the project as a continuing dialogue with the customer to test ideas and gain knowledge. Other design features including how the product was packaged were reviewed with users along the way to solidify our design choices, manufacturing equipment and processes. The team spent a large fraction of their time gaining relevant knowledge rather than creating hardware or detail specifications which came more towards the end of the project.
The product required a clean production area and production line to be built. The team developed the manufacturing process concurrently with the product design including the supply chain. This team included the key suppliers in the dialog. Every step of the manufacturing process and material supply were designed and selected by the team.
Launch plans and specific target customers were identified and timed to allow Sales to introduce the product paced as the capacity of the manufacturing process developed.
This approach resulted in launching the product in 12 months instead of twenty four. In 24 months which was the time of the original scheduled launch, we had established a 25 percent market share.
Our learning here is that addressing the complicated and fast paced business world we work in is not helped with complicated processes but with simpler environments that create the critical mass of skills for people to take the risk to cooperate. Three meaningful steps you can take are:
- Simplify organization structures with cross-functional teams to create collaboration – not unlike what happens when we create a cell in manufacturing. Play a fluid fast paced game with purpose like basketball.
- Create a clear line of sight to target customers for everyone in the project team and enable them to connect with users. Use multiple designs to facilitate dialogue and learning to gain knowledge and reduce the probability of failure.
- Reduce the hand-off transactions by looking at new product development holistically as a process to create profitable operational value streams. Create your teams and plans accordingly.
In summary, we need to remove the interfaces and complicated coordination structures. As lean leaders and managers, we need to make it individually useful for people to cooperate. The survival of our organizations and even our companies, hinges on our ability to this.