{"id":8975,"date":"2020-01-04T21:19:34","date_gmt":"2020-01-04T11:19:34","guid":{"rendered":"http:\/\/prodex.com.au\/?p=8975"},"modified":"2020-09-20T19:41:52","modified_gmt":"2020-09-20T09:41:52","slug":"development-trade-off-model","status":"publish","type":"post","link":"https:\/\/prodex.com.au\/ms\/development-trade-off-model\/","title":{"rendered":"Development Trade-Off Model"},"content":{"rendered":"

The business of managing new product development projects requires optimization of the balance between:<\/p>\n

1. Development Speed<\/strong>
\nReducing time to market to achieve the earliest possible launch date and generating earlier sales and potentially increasing market share.<\/p>\n

2. Product Cost<\/strong>
\nMinimising the cost per unit over its lifecycle including maintenance and warranty costs.<\/p>\n

3. Product Performance<\/strong>
\nAdding features or increasing development time can enhance product performance but at a cost.<\/p>\n

4. Development Program Expense<\/strong>
\nFaster development may result in earlier sales but can have a corresponding increase in development program expense. Product developers, project managers and executives responsible for optimizing the business outcomes from new product development need new tools and new rules to manage this complexity. The development trade off model developed by Don Reinertsen and Preston Smith provides a useful framework for optimizing business decisions in new product development.<\/p>\n

Development Trade-off Model<\/strong><\/p>\n

\"\"<\/p>\n

Source: Developing Products in Half-the-Time \u2013 Smith & Reinertsen<\/p>\n

Example: The trade-off of product performance verses development speed.<\/b><\/p>\n

The question: <\/strong>Should we add the feature to the product?<\/p>\n

 <\/p>\n\n\n\n\n\n
Benefit<\/b><\/td>\nCost<\/b><\/td>\n<\/tr>\n
1% extra revenue $100 m x 1% = $1 m At 16% profit margin$1 m x 16% = $160,000<\/td>\n2 months\u2019 delay at $470,000 per month<\/td>\n<\/tr>\n
Benefit = $160,000<\/b><\/td>\nCost = $940,000<\/b><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Cost outweighs benefit. Don\u2019t add the feature.<\/strong><\/p>\n

Source: Developing Products in Half-the-Time \u2013 Smith & Reinertsen<\/p>\n

 <\/p>\n

MANAGE NEW PRODUCT DEVELOPMENT \u2013 WRAP IT IN NUMBERS!<\/h4>\n

Wrapping the trade-off alternatives in numbers provides the business information required to make more complex decisions and optimize the business performance of new product development projects.
\nOther topics included in this workshop series are:<\/p>\n