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The Principles of product development flow - a summary

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The principles of product development flow
“Second generation lean product management”
Author DonReinertsen
His latest award-winning book, The
Principles of Product Development Flow:
Second Generation Lean Product
Development, has been praised as, “…
quite simply the most advanced product
development book you can buy.”
Achieving Flow by emphasising
◉ Small batch transfers
◉ Rapid feedback
◉ Limited work in progress (WIP)
12 critical problems with current product development
◉ Failure to correctly quantify economics
◉ Blindness to queues
◉ Worship of Efficiency
◉ Hostility to Variability
◉ Worship of conformance
◉ Institutionalization of large batch sizes
◉ Underutilization of Cadence
◉ Managing timelines instead of queues
◉ Absence of WIP Constraints
◉ Inflexibility
◉ Noneconomic Flow Control
◉ Centralized Control
Economics
COD (life-cycle profit)
When you ask them how much
life-cycle profit will decrease due
to a week of delay, they don’t
know?
Cycle time and percent value added time are only proxy variables!
The unit of measure should be life-cycle profit impact, which is the ultimate measure
of product development success

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The Principles of product development flow - a summary

  • 1. The principles of product development flow “Second generation lean product management”
  • 2. Author DonReinertsen His latest award-winning book, The Principles of Product Development Flow: Second Generation Lean Product Development, has been praised as, “… quite simply the most advanced product development book you can buy.”
  • 3. Achieving Flow by emphasising ◉ Small batch transfers ◉ Rapid feedback ◉ Limited work in progress (WIP)
  • 4. 12 critical problems with current product development ◉ Failure to correctly quantify economics ◉ Blindness to queues ◉ Worship of Efficiency ◉ Hostility to Variability ◉ Worship of conformance ◉ Institutionalization of large batch sizes ◉ Underutilization of Cadence ◉ Managing timelines instead of queues ◉ Absence of WIP Constraints ◉ Inflexibility ◉ Noneconomic Flow Control ◉ Centralized Control
  • 6. When you ask them how much life-cycle profit will decrease due to a week of delay, they don’t know? Cycle time and percent value added time are only proxy variables! The unit of measure should be life-cycle profit impact, which is the ultimate measure of product development success
  • 7. Ask 10 people Ask them to independently estimate what it would cost the company, in pretax profit, if their project were 60 days late to the market. In the last 20 years the typical range of answers was 50 to 1.
  • 8. We need Cost of Delay to evaluate ◉ The Cost of queues ◉ The Value of excess capacity ◉ The benefit of smaller batch sizes and ◉ The value of variability reduction
  • 9. The value added by an activity is the difference in the price that an economically rational buyer would pay for a product before and after that activity is performed We can define waste as the failure to optimize our economics
  • 10. Money we’ve already spent is a “sunk cost” and should not enter into an economic choice.
  • 12. Few developers realize that queues are the single most cause of poor product development performance? Only 2 percent measure queues! How big are your queues? What is the cost of these queues? Only 15 percent know their cost of delay!! T
  • 13. Queues are leading indicators of future cycle time problems
  • 14. In product development, our greatest waste is not unproductive engineers, but work products sitting idle in process queues.
  • 15. Inventory in a product development process is not physical objects but information, it is virtually invisible
  • 16. Inventory is observable through its effects: increased cycle time, delayed feedback, constantly shifting priorities, and status reporting
  • 17. We need to make quick, forceful interventions when queues get large Set queue size maximums and frequently monitor queues
  • 18. Economic waste by queues ◉ Longer cycle time ◉ Increased Risk ◉ More variability ◉ More overhead ◉ Lower quality ◉ Less motivation Usually, delay cost raises linearly with queue size
  • 19. Example sources of queues ◉ Marketing ◉ Analysis ◉ Purchasing ◉ Testing ◉ Management reviews ◉ Specialists ◉ ...
  • 20. Queue size vs cycle time
  • 22. Most of the damage done by a queue is caused by high queue states
  • 23. High levels of capacity utilization are actually a primary cause of long cycle time
  • 24. Increasing capacity utilization increases queues exponentially. Increasing variability increases queues linearly.
  • 25. Queue size vs. capacity utilization
  • 28. CFD
  • 30. We cannot eliminate all variability without eliminating all value added! Minimizing the economic impact of variability is a profound different goal than minimizing variability!
  • 31. To manage product development effectively, we must recognize that valuable new information is constantly arriving throughout the development cycle! We must learn to make good economic choices using this emerging information!
  • 32. We must make resources, people and processes flexible to stay responsive in the presence of variability But instead we work with specialized resources loaded to high levels of utilization...
  • 33. Variability and rational risks Asymmetric payoffs ◉ The value of a success can be much higher than the cost of a failure
  • 35. Reducing batch size is usually the single most cost effective way to reduce queues
  • 36. Smaller batches have lower risk, are less expensive and produce faster results. They accelerate learning. 5-10 times improvements Start small and start quickly!
  • 37. Batch size reduction is one of the cheapest, simplest and most powerful ways to reduce variability and queues
  • 38. Reducing batch sizes ◉ Accelerates feedback ◉ Reduces risk (e.g. Internet and package sizes) ◉ Reduces variability in flow (otherwise causing periodic overloads) ◉ Reduces cycle time ◉ Reduces overhead ◉ Increases efficiency ◉ Increase motivation and urgency ◉ Large batches cause exponential cost and schedule growth ◉ Large batches lead to even larger batches ◉ The entire batch is limited by its worst element ◉ Small batches allows finer tuning of capacity utilization
  • 39. Reduce project scope Smaller scope leads to faster development, which shortens time-horizons. Reduced scope and shorter time-horizons combine to reduce risk. Lower risk means we don’t need high levels of management involved. This further reduces decision-making delays.
  • 40. Batch sizes and queues - cycle time Reduced cycle time without change to average arrival rate (demand) or average departure rate (capacity).
  • 41. Benefits of small batch (testing)
  • 42. We do not need the perfect answer for the batch size
  • 43. Managing batch sizes ◉ The most important batch is the transport batch (batch that changes the location) - allows overlapping activities and enables faster feedback ◉ Colocate teams to communicate in small batches ◉ Short run lengths reduce queues ◉ Good infrastructure enables small batches ◉ Sequence first that which adds value most cheaply ◉ Reduce batch size before you attack bottlenecks (as bottlenecks in product development are stochastic and physically mobile) ◉ Adjust batch size dynamically to respond to changing economics
  • 44. Sources of batches ◉ Project scope ◉ Project funding (expensive funding rounds increase batches) ◉ Project phases ◉ Up front heavy requirements definition ◉ Project planning (limit detailed planning to a short time horizon) ◉ Testing ◉ Capital spending ◉ Design reviews ◉ Market research ◉ Project post mortems
  • 46. Queue cost is affected by the sequence in wich we handle the jobs in the queue The goal is to reduce the economic cost of queues, not simply to reduce the size of queues.