Melding apples and oranges
by Richard S. Moore
TO SUCCEED IN THE new Internet-driven economy, companies have to introduce first-to-market products one after another to grab market share and ensure increasing returns. But that isn't enough—companies also must introduce the right products at the right time. These escalating demands leave no room for wasted development efforts, mismanaged projects, or strategic blunders.
Today's competitive environment forces companies to manage business closely, and one of the major remaining opportunities for improvement is in the discipline of product development. Companies need tools to align development projects with business strategy to enhance competitive edge and maximize new opportunities.
The solution: Web-based software to integrate resource availability with process information taken from every phase of product development to provide a 360-degree view of projects, balanced against strategic objectives—helping companies to deliver the right products to the right markets faster, maximize market share, and enhance shareholder value.
Strategic Product Development: Taking It One Step Further
In recent decades, sophisticated systems for product design, manufacturing, accounting, sales, and supply chain management have profoundly affected the efficiency of manufacturing companies. Substantial IT investments in systems for computer aided engineering (CAE), enterprise resource planning (ERP), supply chain management (SCM), customer relationship management (CRM), and a host of other acronyms have become the norm. Many companies also embarked on retooling their product development processes, for the most part through manual and semimanual means, which fueled improvements in R&D effectiveness in the 1990s.
These improvements, though, began to plateau in the late 1990s. Process changes implemented through manual methods can go only so far. The acceleration in new product introductions has created the need for automated systems to manage the large volumes of data and huge numbers of variables associated with product development for companies to realize increased process benefits.
Richard Moore is president and CEO of Integrated Development Enterprise Inc. (IDe™), which he joined in 1998. He has 20 years of experience helping companies with their product development processes and currently sits on the board of MIT's Center for Innovation in Product Development.
Exhibit 1. The challenge in designing a system to integrate information flowing from many sources, and from both strategic (top-down) and tactical (bottom-up) levels, is in reconciling the disparate information (the apples and oranges) to provide insight to all participants, regardless of their roles.
Beyond effective implementation of a structured product development process, product companies must develop and execute effective product strategy. Strategic product management—deciding what products to invest in, analyzing and managing future resource needs, figuring out which products should be leveraged and which should be redirected—often determines the ultimate success or failure of a portfolio or product line.
Yet, successful strategies today are largely based on intuition and implemented in a seat-of-the-pants fashion. There are few tools that provide business insight into product creation and development, and little automation available to drive the process. Most current automation solutions are aimed at enhancing product design and manufacturing processes, not the development process as a whole.
How do companies make sure they're investing money wisely—on the right products and projects? How do they control the deployment of resources across projects? How do they minimize non-value-added activities? How do they maximize development investments?
Faced with these challenges, and the potential to improve R&D effectiveness, companies require a system that:
Integrates the best attributes of existing disparate project and resource tools to encompass the entire business-based management of the product development process into one comprehensive and consolidated Web-enabled solution
Provides the architecture for organizations to produce consistent and repeatable results in the complex and variable business environments that are typical of product development
Accommodates organizational structure, business practices, and product development methodology and terminology
Provides consistent, dynamic access to both high-level and detailed project information for effective project and resource planning
Identifies those products that will generate the highest revenues from development investments (portfolio management).
Managing R&D investments requires the integration of key development disciplines, including product planning, project management, resource allocation, and strategic portfolio management. Integration allows the high-level insight needed to keep products aligned with corporate business objectives. An effective product development management system must compile and analyze existing process and project information and provide the connective fiber that enables key participants—from process managers and functional managers to senior executives—to effectively perform their roles in managing the business of product development.
Apples and Oranges
Information needed to manage the business of product development flows in two directions: bottom-up from project trenches and top-down from executive management. A major challenge is reconciling top-down business strategies with bottom-up project details. From a systems-design point of view, this amounts to comparing apples and oranges, as shown in Exhibit 1.
Project and functional managers immersed in day-to-day activities must provide concise, critical pieces of project and resource information to decision-makers, who then make strategic choices about projects, products, and resources to be committed. Those choices are the actualization of business directives and strategies and provide top-down direction. The clear communication of individual project goals, within the context of strategic goals, back to those in project execution completes the process.
In addition to this top-down/bottom-up flow of information, product development information percolates through all links in the development chain, not only management and project teams but also consultants, customers, suppliers, development partners, and many others. A change in one phase of a project affects all other links in the development chain.
All development organizations generate data, but it is often fragmented and hidden. By integrating project data with strategic goals throughout the development chain, companies can leverage their knowledge to gain competitive advantage.
Roadblocks to Adoption
Why hasn't enterprise automation been applied to the management of R&D investments? Several factors come into play, and they all relate to increasing orders of magnitude.
Crushing Data Volumes. To manage project spending rationally in a typical product development environment, a company must collect an overwhelming volume of data.
In a conservative example, a company has 40 active projects and 40 planned projects. Each project might have 15 critical pieces of data (such as start date, end date, manufacturing risk, projected first-year revenue, and so forth) needed to track that project within a portfolio. Add a time dimension of 30 months per project, across which data can change. Then add 10 more critical data points to track skill-based resource needs, milestones, and deliverables for each project. So the company must track 80 x 15 x 30 x 10, or 360,000 pieces of data, in a highly variable environment, to manage its R&D investment. What's more, the integrity of the data is crucial—if information is incorrect or outdated, the collection effort is wasted.
Exhibit 2. Development chain management applies the power of information technology to managing the business aspects of new product development. Exemplified by the Integration Triangle™, an effective application will incorporate information from all three key elements of the product development chain: portfolio management, resource allocation, and project planning and management. The integration should occur in the context of the process already standardized at the adopting company.
Traditional desktop solutions cannot deal with this quantity of data. It takes a more sophisticated database solution to aggregate and summarize this data into a form managers can use to make good decisions. And the database solution must cultivate an efficient development climate without the corporate angst usually associated with implementation of (and struggle to derive ROI from) mainframe enterprisewide applications like ERP and CRM.
Highly Variable Processes. Product development, as a creative process, is a highly variable, highly uncertain process. The best-laid plans are seldom executed precisely. Data associated with product development can change daily as project teams encounter hurdles and revise estimates.
A project management system focusing on critical path methodology and detailed timesheet reporting, for example, might be well suited to construction projects, where most tasks are well understood and easily estimated. But even a well-structured product development process hinges on professionals meeting goals by applying problem-solving skills in novel ways. Two engineers can manage their time in different ways and still produce deliverables to specification and on schedule. So an IT solution for product development must embody a very specialized understanding of project management.
Vanishing Timelines. Organizations are under relentless pressure to achieve more in less time. As a result, the product development environment is constantly in flux. Any automation for product development business management must leverage development information to allow critical decisions in real time, using live data. Dynamic data access implies state-of-the-art Internet and database technologies, which require a formidable infrastructure. For many organizations that infrastructure is new and just beginning to be utilized for critical business disciplines.
Increasing Process Complexity. Demanding quality issues, stringent regulatory restrictions, aggressive market requirements, and emerging technologies all complicate the product development process. Companies recognize the importance of capturing lessons learned in development and leveraging that knowledge, but how in fact do they parlay the knowledge to maximize R&D throughput? The challenge is to automate process structure and repeatability within an increasingly complex environment.
Globally Distributed Development. Today's product development environment is distributed across time zones, companies and business units, departments and projects, vendors and suppliers. Successful product development automation must manage the interdependencies across this entire network of development resources, projects, products, and processes, enabling an organization to leverage development information to make critical decisions in real time.
Even with the abundance of communication and collaboration tools (e-mail, project data management, the Internet), companies continue to develop near-duplicate products or perform redundant work. There is still a crucial ingredient missing that prevents effective communication throughout the increasingly distributed development environment.
Breaking Down the Barriers Through Enabling Technologies
The key to the adoption of an enterprise solution lies in the ability to identify the critical data to be integrated, automate the consistent reporting of that information and aggregate it across every project, product, and portfolio. Successfully doing so requires some crucial enabling technologies:
Dynamic data reconciliation and aggregation
Realistic resource evaluation
Integration with detailed project data
Dynamic Data Reconciliation and Aggregation. Enabling technology that effectively reconciles top-down plans with bottom-up development activities allows companies to compare apples and oranges. Standard project profiles to ensure consistent business measurement across the portfolio (Exhibit 2) provide for this type of reconciliation. Profiles include key strategic metrics that managers use to evaluate and compare development projects. A project profile might include information about the technology platform, target markets, comparisons with competitive products, anticipated sales volume, or planned development costs.
The same technology enables the aggregation of project data from individual project activities, tasks, and steps into a portfolio view, greatly simplifying portfolio and resource analyses. Project data, by nature, is fragmented and constantly in flux. The ability to roll up the information dynamically and interactively is essential.
Realistic Resource Evaluation. Why do companies seldom have enough folks doing the right things and too many doing (apparently) the wrong things? Largely, this is due to project managers inflating time and resource estimates, assuming they'll get only a portion of what they ask for.
Project managers must be able to trust an IT-enabled resource management system to provide adequate resources to meet realistic project estimates. The first step is to create a central repository for resource commitments that clearly defines available resources, organized by skills, and the projects to which they are committed. The repository need not detail what each employee is doing day to day but should define individual responsibilities and when the commitment is to end.
The system must reconcile bottom-up resource requests from project teams with top-down allocations by functional managers. To allocate resources intelligently, functional managers must be able to visualize future needs based on project plans and portfolio strategies. And project managers must be advised of deficits between their requests and allocations so that they can adjust their plans. The system must be intelligent enough to distinguish resources based on skill types, handle both named and unnamed resources, and map accurately to the company's organizational and geographic structure.
Project Data Integration. For many companies, day-to-day project planning data is locked up in desktop project management applications like Microsoft Project or in scattered individual spreadsheets. What is needed is an integrated project management system flexible enough to accommodate the needs of a wide array of project types, while at the same time providing central collection and rollup of data from the detail level to the portfolio level.
Process Mapping. Today's successful product developers employ a structured development process comprising a series of logical phases or stages and a review process to determine go or no-go decisions. Centralized collection and rollup of project data provides crucial input for decision-making, but encouraging far-flung teams to use a consistent process is a challenge. Project teams evolve their own variants of the process, often innovating improvements, making the resulting pockets of information difficult to aggregate and use for comparing projects.
An IT-based development chain management system must foster consistency, while still allowing companies to use their own structured product development processes. It also must accommodate a wide variety of projects and the diverse working styles of teams. And it must be able to incorporate process improvements as teams gain experience.
Project plans built from centralized, modular project templates encourage continuous improvement because the modules in the templates are updated based on real-world experience. And a system that allows project managers flexibility in choosing their planning techniques, while ensuring consistent reporting of data, improves the reliability of gathered information.
Web-Powered Computing. The World Wide Web has created the infrastructure and ability to access data in ways unimaginable a decade ago, creating a new competitive environment yet to be exploited. How do companies improve product development using the Web? The only practical, cost-effective way to link the diverse chain of people and organizations involved in product development today is with the Internet. And the only way to provide global access to real-time information is on the Web. Therefore, any automation applied to managing product development must be 100 percent Web-enabled.
PRODUCT DEVELOPMENT DRIVES the growth of manufacturing companies. The National Science Foundation estimates that U.S. product manufacturers spend over $170 billion a year in industrial research and development [“R&D as a Percentage of GDP Continues Upward Climb,” National Science Foundation, 4 October 1999]. These same companies typically spend 6 to 10 percent of annual revenues, perhaps $40 million per company, on R&D [source: Pittiglio Rabin Todd & McGrath]. Companies that effectively maximize return on that investment through strategic product development via a Web-enabled approach improve both market share and value to investors.
As solutions emerge, the most successful companies will employ those that effectively integrate information from the key activity areas of the development chain: portfolio management, resource management, and project management. In addition, the best solutions will be those that allow companies to reconcile and align top-down business strategy with bottom-up project details, across multiple development portfolios, and which can do so within the context of the product development processes already in place. Such an approach allows corporations to more fully exploit market windows, reduce wasted effort, and gain competitive advantage by improving throughput, profitability, and investment performance of research and development efforts. ■
Reader Service Number 030
September 2000 PM Network