The business of managing new product development projects requires optimization of the balance between:
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?
| Benefit | Cost |
| 1% extra revenue $100 m x 1% = $1 m At 16% profit margin$1 m x 16% = $160,000 | 2 months’ delay at $470,000 per month |
| Benefit = $160,000 | Cost = $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:
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- 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
LEARN HOW TO APPLY THIS TO YOUR ORGANISATION
Prodex Systems on a periodic basis offers both public masterclasses and in-house workshops with Don Reinertsen (the pioneer of this material). For more information on these workshops visit our Masterclasses page or contact us directly.
