In order to simplify the concepts and break the system into manageable parts, we have defined seven key elements/principles to lean product development. The seven elements are by no means all-encompassing, but we have found that organizations that focus on getting good at these go a long way in improvement and create a solid foundation for other aspects, like supplier involvement.
Here are the seven key elements:
+1. Match Throughput to Business Need
A business should have objectives for revenue and profit growth that must align with the capability of the product development system necessary to deliver both the Revenue and Profit objectives. For an existing business, there will be a natural decay of sales for products in the market. There are factors that can mitigate the sales decay, such as sales incentives, expanded geography and market reach, etc. However in essence, doing nothing to existing products will lead to sales decay. The fiscal difference between the Sales Decay curve and the Revenue / Profit curve must be filled with new products and services. Filling this gap is the responsibility of the organization’s Product Development system and must be designed to produce the throughput in terms of projects necessary just like manufacturing capacity is planned and managed.
In this context, Product Development refers to the organization’s strategy for the business, the portfolio plan encompassing the product plan, technology roadmaps, engineering, product design, project management, sales, marketing, and any development aspects necessary to launch and bring a product to market. We can look to Little’s law, which identifies the product development throughput necessary to match product development with the business needs.
Little’s Law: WIP=TH x CT
Where WIP is the Work in Process, TH is the Throughput, and CT is the Cycle Time.
Thus the throughput (TH) which the product development system must deliver is the cumulative of the number and type of projects needed to close the gap between the sales decay and the revenue / profit objectives. Effective management of the product plan (WIP) and the time-to-market (CT) dictate the throughput a development system will produce and in turn the revenue and profit of the business.
1. Manufacture customers
An intimate understanding of customers’ needs, desires, and preferences is necessary to guide product development plans and the introduction of new products that create demand. Companies must build a deep intimate, hands-on, active understanding of real customers, not simply rely on indirect market studies.
2. Bins, cadence, pull, and flow
Ideas “swirl” in front of a firewall that paces and only allows the best ideas to become development projects. Upon passing through the firewall, those projects are structured into categories called “bins,” which standardize similar types of projects in terms of resources, scope, and schedule. This concept is the foundation of a repeatable innovation process that leads to the consistent and continual release of new products at a rate and by type necessary to support the business and drive profitable sales growth.
3. Set-based concurrent development
Contrary to linear, point-based phase and gate development processes, a set-based approach establishes multiple design parameters and explores many attributes simultaneously, focusing on closing knowledge gaps more effectively in the development process. Rhythmic “integration events” are the decision-making mechanisms that aligns and drives the development portfolio.
4. Reusable/visible knowledge
Compiling information into reusable/visible knowledge (e.g., limit curves, trade-off curves, casual diagrams) allows organizations to see their knowledge gaps and proactively address them. They create an effective means for teams to repeatedly leverage existing knowledge, more efficiently explore design limits, and more rapidly create the best solutions for a specific design space.
5. Visual management
Product development is fraught with hidden work and unknown issues. Visual management provides the mechanism to see the work and see the issues, leveraging predefined help chains to ensure effective progress.
6. Entrepreneurial system designer (ESD or Chief Engineer)
A single entity (not necessarily a single person) — the Chief Engineer — is responsible for the success of a product, from making the business case through design and to production. While wielding little to no authority over any business function with which he or she interacts, the ESD, nonetheless, unites the organization around creating value for the customer. The ESD embodies a passion to develop products through intimate knowledge of customer needs, deep technical capabilities, and a drive to deliver business results.
7. Teams of responsible experts
Individuals with personal mastery in their area of expertise collaborate on a shared vision with defined objectives, creating and sharing knowledge. The team’s cross-functional dialogue results in a level of collective thinking not attainable by individuals alone. Team members embrace “dynamic subordination” as their form of leadership. Dynamic subordination allows for fluid leadership that is determined by current conditions and needs rather than titles or positions.