Project Management in the Fuzzy Front-End

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Project managers historically have difficulty participating during the innovation phase or Fuzzy Front-End of new products. Incomplete requirements, non-secured budgets, and unrealistic timelines are normal challenges the Project Manager must face once new product development begins. By becoming involved before the project starts, many of these issues can be minimized. In order to become engaged, the Project Manager must seek to understand the dynamics of the Fuzzy Front-End and then insert their value to the normal dominant functions of business and technology.

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Project Management in the Fuzzy Front-End

  1. 1. © 2003 SheepShank LLC Project Management in the Fuzzy Front-End of New Technology Product DevelopmentProject managers historically have difficulty participating during the innovation phase or FuzzyFront-End of new products. Incomplete requirements, non-secured budgets, and unrealistictimelines are normal challenges the Project Manager must face once new product developmentbegins. By becoming involved before the project starts, many of these issues can be minimized.In order to become engaged, the Project Manager must seek to understand the dynamics of theFuzzy Front-End and then insert their value to the normal dominant functions of business andtechnology.What is the Fuzzy-Front-End?Any new technology product lifecycle has many stages and tasks that vary greatly depending onthe type of product and the corporation developing and marketing the product. Most of thesedifferent lifecycles however, share three distinct phases controlled by four major milestones asshown in Figure 1. Figure 1 - Major Phases and Milestones of a New Product Life CycleThe first phase is defined from the time an idea is first conceived or need is determined until adecision is made to develop the product. This phase is referred to as the Fuzzy Front-End (FFE)and is the focus of this paper. The second phase or New Product Development portion of thelifecycle is the time after a decision is made (when the project starts) until the product is launchedinto the market. The final phase is Revenue Generation or is sometimes called thecommercialization phase. Revenue Generation is the time after new Product Introduction untilthe end of the lifecycle when a product is Manufacturing Discontinued.The end of the Fuzzy Front-End (FFE) phase is the Program Commitment milestone and is thedetermining factor in deciding to launch a product. Program Commitment decisions can either bemade as a controlled or uncontrolled set of events. Examples of uncontrolled scenarios are whencustomer promises (i.e. commitments) are made without corporate approval or when an R&Dskunkworks project is started also without official corporate authorization or budget. However, inthe controlled decision two criteria are normally used. The first is Return-On-Investment (ROI)and the second is risk associated with this investment. ROI can be simplified to the investment www.SheepShankLLC.com Page 1 info@SheepShankLLC.com
  2. 2. © 2003 SheepShank LLCduring Product Development versus the return produced during Revenue Generation. Risk canthen be defined as the projected versus actual time and cost accrued in Product Development, aswell as the projected versus actual gross profit during Revenue Generation. In Figure 2, thefuzzy curve (as presented by Jongbae Kim and David Wilemon in their research paper titled“Accelerating the Front End Phase in New Product Development) is key to understanding thejourney to Program Commitment. Once an idea is conceived, analysis and refinement work mustoccur in order to assure certainty (i.e. lower risk). As the fuzzy curve begins to flatten a ProgramCommitment decision is usually made. 2 Figure 2 - The Fuzzy Curve.In understanding the driving factors of a successful FFE, invention and innovation need to be fullydifferentiated. Invention alone is not innovation. Technologists are often focused on generatingIntellectual Property (IP) and in the process lose sight of the overall goal of innovation. Invention is something new and useful, not obvious to someone skilled in the art - common patent law “Technological Innovation involves a novel combination of art, science, or craft employed to create the goods or services used by society.” 1 - Innovation ExplosionInvention and innovation interact in the product lifecycle as shown in Figure 3. Innovation canalso be more commonly defined as generating economic importance to invention. By addingbusiness and market analysis to invention, innovation is born. www.SheepShankLLC.com Page 2 info@SheepShankLLC.com
  3. 3. © 2003 SheepShank LLC Figure 3 - Invention and Innovation in the Product Lifecycle.Adding Project Management to the Fuzzy Front-EndNormally, the focus in FFE activities deals with the business development and technical feasibilityof the proposed new product. Marketing is most concerned with gaining market share, andproducing revenue as a function of the feature set. Technologists usually focus on optimizing thefeatures and minimizing the risk associated with the commercialization of the technology. Whileboth of these activities are important, the actual development time and cost can weigh heavilyinto the overall profit equation. Often, the project planning phase (using the Project Manager) isdone as a final exercise either directly before or after the Program Commitment milestone. Thislogic is flawed because the New Product Development phase is de-emphasized leading to apotentially devastating outcome on new products with long Development or short RevenueGeneration phases. The Project Manager has the best visibility into the resources, milestonesplanning, and historical development data to plan, predict, and estimate the Product Developmentphase. If the Project Manager is included as an iterative part of the FFE, the importance of form,fit, function and technology at Product Introduction, can be properly evaluated against thedevelopment cost and schedule for the overall product lifecycle.The skills needed to define the successful Project Manager differ significantly from those of theTechnologist or Marketer. Technologists are idea oriented and apt to applying concepts in a veryconstrained manner to build confidence. Marketers naturally think in broad terms when doingbusiness development and are less likely to focus on the details. They thrive on ambiguity andadversity. The Project Manager has the ability to build the bridges between these two disciplines. 3Deborah Bigelow, from her white paper , titled “What Makes A Good Project Manager?” finds thefollowing attributes as common in successful Project Managers: - Love of their work … and embracing the challenges - Clear vision … and communicating this vision - Strong team building skills… and setting positive tones - Structure and alignment… creating the environment and direction - Strong interpersonal skills… listening to and leading their teams - Discipline… completing each phase of the project properly - Communication skills… knowing when and to whom to communicateFew Marketers or Technologists exhibit these traits at the same skill level as the ProjectManager. These same traits can be most effective in taking an idea and generating thedeliverables for Program Commitment. By assuming the role of facilitator during the FFE, theProject Manager can transform chaos to order by the time of Program Commitment. Throughdriving towards Program Commitment and defining the tasks required to produce thedeliverables, the fuzzy curve of Figure 2 becomes steeper. After all, the Project Manager has the www.SheepShankLLC.com Page 3 info@SheepShankLLC.com
  4. 4. © 2003 SheepShank LLCmost to gain by having this order before the project starts. However, attacking this chaos withpredefined processes and algorithms is not effective for true ideation and innovation. Somechaos must exist that enables innovators to think freely without boundaries. The goal toimplementing an effective FFE methodology is to transform this chaotic, creative, and energeticphase into a path using the company’ vision and product strategies to meet the deliverables sneeded for the decision at Program Commitment, as shown in Figure 4. Figure 4 - An Effective Approach to the Fuzzy Front-End.A typical solution is to build Subject Matter Experts (SMEs) in each discipline. (I.E. They all havevery specific skills rooted in their job function.) This approach limits the ability of what the teamcan accomplish. Whether a player in the FFE is the Project Manager, Marketer, or Technologist;trades of their profession should be treated as skills. This means that a combined understandingof ROI and risk needs to permeate across all members of the team. To achieve this, the teamfunctions as a single unit stepping out of their own specific titles. If they remain locked into theirdefined responsibilities as SMEs, the synergy across all disciplines will fail, thus stifling trueinnovation.An Analytical Approach to ChaosIf the only common criteria for the Program Commitment decision are ROI and risk, how can theProject Manager tame the chaos of innovation to the order required for a decision to start theproject? To do this the Marketer must be willing to move out of the realm of broad and fuzzy.Likewise the technologist must seek to expand their thinking, building an area of commonality thatboth disciplines can communicate towards innovation. One method is to lock down the smallestset of analytical constraints that must be shared between business, technology and managementinto a function of ROI for the new product. Typically this can be narrowed to six major variablesas follows: www.SheepShankLLC.com Page 4 info@SheepShankLLC.com
  5. 5. © 2003 SheepShank LLC Return-On-Investment (ROI) = f x1,6 x1 = Market Demand x2 = Product Price x3 = Product Introduction x4 = Product Cost x5 = Non-Recurring Costs x6 = Program CommitmentMarket Demand is the revenue generating capability of the new product. This is most closelylinked to the feature set and is very time dependent due to new technology developments andcompetition within the market. This variable is extremely subjective and will initiate most of thedebates. Product Price or pricing strategy is usually a method to control market share. However,in a highly competitive market the competitor pricing mostly sets product price. ProductIntroduction is the date when the product is available to the customer. This can be generalavailability for a me-too product or beta release for an entirely new product concept requiringcustomer acceptance. Figure 5 shows a product revenue function using Market Demand,Product Price, and Product Introduction. Note the Manufacturing Discontinued date does notchange with a fixed feature set. Figure 5 - The Business EquationProduct Cost or cost-of-goods is the dollar amount to be spent by the company to produce eachproduct shipped. Non-Recurring Costs are normally development costs and one timemanufacturing start-up costs. And finally, Program Commitment is the project start date andgates all of the variables. Figure 6 shows how a Development is normally optimized for lowestNon-Recurring Costs, but can sacrifice Product Costs and Product Introduction on a projectoverrun. www.SheepShankLLC.com Page 5 info@SheepShankLLC.com
  6. 6. © 2003 SheepShank LLC Figure 6 - The Project Management EquationBy understanding how the graphs of Figure 4 and Figure 5 come together for ROI is key to thedecision process in the FFE. This is not an easy task and will potentially require a differentapproach for each type of product.Just as important as ROI is risk. Instead of brainstorming what could go wrong to generate risk, amuch more effective method is to analyze the risk outcomes. This is accomplished by pushingthe variables in the ROI function outside the normal range and recalculating ROI. An examplewould be to drop the Market Demand by 50% and delaying the Product Introduction by sixmonths. In addition to risk, the value of improving dates like Program Commitment can beanalyzed as shown in Figure 7. Figure 7 - How the Fuzzy Front-End changes ROI. www.SheepShankLLC.com Page 6 info@SheepShankLLC.com
  7. 7. © 2003 SheepShank LLCSummaryTo be effective in the FFE, the Project Manager must use their project management skills to bringnew concepts from the chaos of ideation to the order associated with Program Commitment. Nolonger can the Project Manager act as an observer that is waiting for the hand-off to start theproject. By becoming this active participant in the Fuzzy Front-End, the Project Manager will onlystrengthen their position at the time of Program Commitment. The Project Manager must comeout of the comfort zone into the phase of “ What Ifs” where ambiguity and adversity are key tosuccess. The Project Manager should seek to solve and adapt concepts and not be seen astrying to minimize their own future risks. By having a positive attitude with an approach of liftingup ideas instead of shooting them down, the Project Manager is usually accepted as a key playerin this process. As the order comes from chaos, risk can be attacked and minimized in anefficient manner. By continuing to build commonality of business, technology, and projectmanagement as shown in Figure 6, companies can put the most value into their innovations.These innovations can also be greatly accelerated by using iteration of ideation, assessment, andpresentation to transform the initial idea into a positive outcome and meet the deliverables forProgram Commitment with a smooth hand-off to the Project Manager.About the AuthorAs a Senior Partner with SheepShank LLC, Greg Evans is focused on efficient pre-projectplanning and iterative innovation for new product development. His expertise spans twenty plusyears in commercializing emerging technologies into viable products, including jointdevelopments with Samsung, 3Com, Cadence, Philips, ADI, Aware, Amp, and Lucent. Gregreceived his BSEE from North Carolina State University in 1981 and most recently was Directorof US R&D for Inovia Telecoms, maintaining responsibility for their Centennial Campus Lab. Asone of the founding members of BroadBand Technologies, Greg spent nine years managing thedevelopment of leading edge technologies into mass-deployable products. Prior to BroadbandTechnologies, Greg worked for ITT and Siecor as a development engineer and project manager.About the CompanySheepShank LLC focuses on delivering effective innovation solutions for the Front End of theProduct Development Cycle by aligning Business, Development and Project Management usingIdeation, Assessment, and Presentation. The company forms partnerships with clients to assesstheir needs, create a customized solution, and facilitate the implementation of a methodology thatco-exists within the company’ existing infrastructure. sReferences1. Quinn, Baruch, & Zien; Innovation Explosion (New York: Free Press, 1997).2. Kim & Wilemon “Accelerating the Front End Phase in New Product Development” Research Paper3. Bigelow “What Makes A Good Project Manager?” PM Network, April 2000, Vol.14, Number 4 www.SheepShankLLC.com Page 7 info@SheepShankLLC.com

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