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(originally published by Booz & Company)


Next-Generation Product Development

2. Just-in-time information and resources. These are bedrocks of traditional lean systems. In product development projects, just-in-time elements take a slightly different cast but ultimately achieve the same ends as they do in manufacturing. For example, several aerospace and industrial companies have begun to form “expert cells” of engineers who can do specialized design and development analytic work on an on-demand or just-in-time basis. Demand/pull lean planning techniques are used to ensure that work packages for development teams from these cells are accomplished on schedule, in turn allowing the core project teams to focus on risk mitigation and customer preferences. Implementation requires development of simple workload forecasts and demand-planning tools that match project demand with available functional skills. This helps companies avoid starving critical projects of necessary resources and unnecessarily deploying resources on less critical tasks.

3. Lean supplier integration. Just as suppliers are intimately involved in the early stages, these partners also collaborate in the detailed development and prelaunch phases. The goal is to identify the most critical product and process features, as well as risk mitigation parameters, while ensuring that supplier partners can meet these benchmarks at a high level of quality. If these so-called critical-to-quality parameters are identified early enough in the process — in the agile stage, for example — they can be moved down the supply chain to avoid costly quality problems and delays in the lean phases. Creating critical-to-quality task teams made up of core development groups and leading suppliers that apply state-of-the-art Six Sigma tools is one way to start developing this capability.

4. Responsive change-control system. Applying the third-generation approach not only dramatically reduces the number of changes that occur during the development life cycle, but also ensures that product alterations do not greatly slow down the overall process. This is accomplished by having a highly responsive change-control approach in place, backed by the appropriate internal systems and technology. That’s a far cry from the norm in many companies, in which change management depends on outdated processes and systems and features ineffective queues for sign-off and approval — a flurry of red tape that erodes speed-to-market. By applying lean analysis and principles, some industrial companies have seen dramatic results: reductions of as much as 75 percent in the time they take to process and approve changes. Change management bottlenecks are eliminated, and time-to-launch targets are maintained. Companies can start by determining how much time elapses between change initiation and change implementation; if it’s a month or more, they have an opportunity to cut it down.

Order Out of Chaos

Companies that implement the next-generation product development model enjoy significant returns, well beyond what they could expect with either the gated or the lean approach. However, it’s not an easy process. It requires significant behavioral change for most companies, which alone makes rapid transformation unlikely. Success with the agile front-end approach is dependent on a highly collaborative organizational culture, reflecting the idea that most disruptive innovations come from outside the organization. To embed this culture and outpace competitors, companies must continuously scout, filter, and channel global sources of technology, capabilities, and solutions as well as recommendations from suppliers. Perhaps most important, companies need to understand that delivery of differentiated products requires a deep well of sophisticated customer knowledge. Product teams must spend substantial time in the field, observing customers using their products in real-life situations.

Many companies lack the skills, structures, metrics, and incentives to isolate market opportunities before they become obvious or to incubate and validate them before turning those opportunities over to a product development organization that can bring them to market effectively. To overcome these organizational weaknesses, executives must address decision rights and information flows with the goal of developing faster decision-making capabilities and mobilizing quickly to take advantage of new first-to-market opportunities. High-level metrics — for example, return on innovation investment, which measures the overall health of the product portfolio and pipeline — as well as project-level yardsticks that assess yield, value, and speed across the development life cycle should be adopted. Such carefully chosen metrics can improve transparency and accountability, enabling more educated decision making and trade-offs in the up-front agile iteration cycles.

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