CONSULTING  |  TRAINING  |  SOFTWARE

May 5, 2019
Optimise business decisions with the development trade off model…
Gerard Ryan

Are you struggling to prioritize which projects should be killed? which would benefit from extra resources? or those that should be started?

The business of managing new product development projects requires optimization of the balance between 4 key factors:

1. Development Speed
Reducing time to market to achieve the earliest possible launch date and generating earlier sales and potentially increasing market share.

2. Product Cost
Minimising the cost per unit over its lifecycle including maintenance and warranty costs.

3. Product Performance
Adding features or increasing development time can enhance product performance but at a cost.

4. Development Program Expense
Faster 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.

Development Trade-off Model

Source: Developing Products in Half-the-Time – Smith & Reinertsen

Example: The trade-off of product performance verses development speed.

The question: Should we add the feature to the product?

BenefitCost
1% extra revenue $100 m x 1% = $1 m At 16% profit margin$1 m x 16% = $160,0002 months’ delay at $470,000 per month
Benefit = $160,000Cost = $940,000

Cost outweighs benefit. Don’t add the feature.

Source: Developing Products in Half-the-Time – Smith & Reinertsen

Manage New Product Development – Wrap it in numbers!

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.
Other topics included in this workshop series are:

  • Structured, systematic processes with clearly defined project acceptance and kill criteria
  • Quantifying the value of cycle time vs. other project objectives
  • Developing decision rules to guide complex tradeoff decisions
  • Compressing the Fuzzy Front End
  • Controlling the overall scope of projects
  • Developing solid specifications quickly
  • Using product architecture to influence the schedule
  • Staffing and organizing product development teams
  • Designing management control systems for rapid development projects
  • Choosing metrics for managing rapid development projects
  • Avoiding bottlenecks and queues
  • Techniques to reduce program risk on high speed projects
  • Achieving early manufacturing involvement

Want to know more about the development trade off model?

Download our Prodex Articles

Want to discuss your Innovation Portfolio Strategy and identify the holes?

Contact Prodex Systems Senior Innovation Consultant and Managing Director, Gerard Ryan gerard@prodex.com.au

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