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 #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.
While studying physics as an undergraduate in San Diego, I had the great pleasure of working as an intern for 4 years, nearly full time for the Naval Ocean System Center (NOSC, now called SPAWAR: Space and Naval Warfare Systems Command). This was a research lab staffed mainly by civilians, and run by Navy top brass. The projects on which I worked cannot be fully discussed even today. I had a Secret Clearance and worked in one of those vaults like you see in the movies. It was a concrete building with no windows (at least in the lab areas). The only entry was a large bank-like vault door with a grim security guard closely scrutinizing each person as they approached.
So-called “Waterfall” or “Phase-Gate” product development methodologies often give management the illusion that they are under control of the project, while they are actually just meddling and slowing it down. Each formal gate meeting or project review is an opportunity for every manager to put the project team under scrutiny about what they have accomplished and whether they should continue with the next phase. I have been on both sides of the PC projector for many of these reviews, so I know what I am talking about.
When a gate checkpoint meeting or formal review is approaching, the project slows down. The project manager and key technical contributors view the meeting as an opportunity to show their value or possibly to slip up, which may affect not only their project, but quite possibly their personal ranking and stature. Therefore they spend a lot of time and emotional energy on perfecting slideware – deciding what to emphasize or perhaps what to obfuscate about the progress of the project. These meetings drive other suboptimal behavior as well; for example, in order to show a “quick win” at a review, the team may take on a quick, low-risk piece of the development instead of concentrating their talents on retiring the higher-risk elements as early as possible. These deferred high-risk elements can cause major project problems and delays later.
I have seen such a situation, when a newly-hired manufacturing expert applied lean principles directly according to the theoretical ideals, to a high-tech, high-mix, low-volume operation. The result was a near shut-down of the manufacturing operation for three months while “save-the-company” modifications to processes and tools were made. Thankfully, when the dust settled we had a balance of lean and other manufacturing philosophies that was more appropriate to the business. The same could happen to a product development processes if care is not taken. These roll-outs need to be done carefully, with skill, respecting the past, the company culture, the needs of the customers, and the market and industry, balancing various philosophies to create the best optimization for your business.