What Are the Objectives of Aggregate Planning Harvard Business Review
The Idea in Brief
Could anything else go wrong with your visitor'due south product development efforts? You're running out of money. Products are late. Panicked squad leaders are cutting corners. Most alarming, people are squandering scarce resources on "the squeakiest wheels" rather than tackling strategically important products.
How to halt the chaos? Arroyo product development more than systematically—with an aggregate projection plan. No unmarried project can ascertain your business firm's hereafter; rather, the gear up of projects does. An aggregate project plan helps you manage your visitor's project mix and allocate deficient resources shrewdly. It categorizes projects based on their contribution to your firm's competitive strategy and the resources they eat. And information technology highlights gaps in your development pipeline.
After building an amass project programme, virtually companies eliminate the lion's share of their existing projects—freeing up resources for their nearly strategically valuable efforts.
The Idea in Practice
To build your aggregate project programme:
Classify existing projects according to five categories. Each category entails unlike degrees of production and manufacturing change. The greater the degree of change, the more resources the project consumes.
- needed incremental changes to existing products such equally cheaper, no-frills versions, new packaging, or more efficient manufacturing. Relatively few resources .
- needed major changes that create entirely new production categories and markets. Pregnant resources .
- plan key improvements in price, quality, and functioning over previous generations of products. Though these projects entail more all-encompassing changes than derivatives—and less than breakthroughs—they crave considerable upfront endeavor from numerous functions. Offering significant competitive leverage and the potential to increase market penetration, they should grade the cadre of your amass project .
Case:
Sony dominated the personal audio organization marketplace with 200+ Walkman models based on three platforms. The models offered something tailored to every niche, distribution channel, and competitor's product.
- products cosmos of new materials and technologies that eventually translate into commercial developments. These projects compete with commercial efforts for resources. However, a close relationship between R&D and commercial projects is essential for a counterbalanced project mix and polish conversion of ideas into .
- resources relationships formed with other companies to pursue whatever type of projection. Many companies fail to include them in their projection planning or to provide them with enough .
Judge the average fourth dimension and resources needed for each project type based on past experiences. For case, how many technology months does each project type typically require?
Place your existing resource capacity.
Determine the desired mix of projects. Include some from every category needed to support your overall corporate strategy, paying special attention to platforms. Case:
Scientific-instrument maker PreQuip strategically allocated l% of its resources to platform, 20% to derivative, and 10% each to R&D and partnership projects.
Guess the number of projects your existing resources tin can support. Allocate available resource according to your strategic product mix.
Decide which projects to pursue. Example:
PreQuip reduced its number of development projects from 30 to 11 (3 derivatives, i breakthrough, 3 platforms, 3 R&D, and i partnership). Fewer projects meant more than work got done; more than work meant more products. The company's commercial evolution productivity improved threefold.
The long-term competitiveness of any manufacturing visitor depends ultimately on the success of its production evolution capabilities. New product evolution holds hope for improving market position and fiscal operation, creating new manufacture standards and new niche markets, and even renewing the arrangement. Yet few development projects fully deliver on their early promises. The fact is, much can and does go incorrect during development. In some instances, poor leadership or the absence of essential skills is to blame. But often problems arise from the style companies approach the development procedure. They lack what we call an "amass project plan."
Consider the case of a big scientific instruments company we will telephone call PreQuip. In mid-1989, senior direction became alarmed most a rash of late production development projects. For some months, the development budget had been rising fifty-fifty equally the number of completed projects declined. And many of the projects in the development pipeline no longer seemed to reflect the needs of the market place. Management was especially troubled considering it had believed its annual business plan provided the guidance that the marketing and engineering science departments needed to generate and schedule projects.
To go to the root of the problem, the master executive first asked senior managers to compile a listing of all the current development projects. They discovered that 30 projects were under way—far more than anticipated, and, they suspected, far more than the organization could back up. Further assay revealed that the company had 2 to iii times more development piece of work than information technology was capable of completing over its 3-twelvemonth development planning horizon. (See the chart "PreQuip'due south Evolution Predicament: Overcommitted Resource.")
PreQuip'due south Development Predicament: Overcommitted Resource
With such a strain on resources, delays were inevitable. When a project ran into trouble, engineers from other projects were reassigned or, more commonly, asked to add the crisis project to their already long listing of active projects. The more projects they added, the more their productivity dropped. The reshuffling acquired delays in other projects, and the effects cascaded. Furthermore, as deadlines slipped and development costs rose, project managers faced pressure to cut corners and compromise quality just to go on their projects moving forward.
The senior management team also discovered that the majority of PreQuip's development resource—primarily engineers and back up staff—was not focused on the projects nearly critical to the business. When questioned, project leaders admitted that the strategic objectives outlined in the annual concern plan had piffling bearing on project selection. Instead, they chose projects considering engineers found the technical problems challenging or because customers or the marketing section requested them. PreQuip had no formal process for choosing among development projects. As long as there was coin in the budget or the person making the request had sufficient clout, the head of the development department had no selection just to accept additional projection requests.
Many engineers were not just working on noncritical projects but besides spending every bit much as 50% of their time on nonproject-related work. They responded to requests from manufacturing for aid with problems on previous products, from field sales for assist with client problems, from quality balls for help with reliability problems, and from purchasing for aid with qualifying vendors. In improver to spending considerable time fixing problems on previously introduced products, engineers spent many hours in "information" and "update" meetings. In short, they spent too little fourth dimension developing the right new products, experimenting with new technologies, or addressing new markets.
PreQuip's story is hardly unique. Virtually organizations we are familiar with spend their time putting out fires and pursuing projects aimed at catching upward to their competitors. They have far too many projects going at once and all too often seriously overcommit their evolution resource. They spend as well much time dealing with short-term pressures and not enough time on the strategic mission of production evolution.
Indeed, in most organizations, management directs all its attending to individual projects—it micromanages project development. Merely no unmarried project defines a visitor'south future or its market growth over fourth dimension; the "set" of projects does. Companies need to devote more attention to managing the gear up and mix of projects. In particular, they should focus on how resource are allocated between projects. Direction must plan how the project set up evolves over time, which new projects get added when, and what role each project should play in the overall development attempt.
The aggregate project program addresses all of these issues. To create a programme, direction categorizes projects based on the amount of resource they swallow and on how they will contribute to the company'due south production line. Then, by mapping the project types, management can meet where gaps exist in the development strategy and brand more informed decisions virtually what types of projects to add and when to add together them. Sequencing projects advisedly, in turn, gives management greater control of resources allocation and utilization. The projection map also reveals where development capabilities demand to be potent. Over time, companies can focus on adding critical resources and on developing the skills of individual contributors, project leaders, and teams.
Finally, an aggregate program will enable management to improve the style it manages the development office. Only adding projects to the active list—a common practise at many companies—endangers the long-term health of the evolution process. Management needs to create a ready of projects that is consistent with the company'south development strategies rather than selecting individual projects from a long listing of advertizing hoc proposals. And management must become involved in the development process before projects go started, fifty-fifty before they are fully defined. It is non appropriate to give 1 department—say, engineering or marketing—sole responsibleness for initiating all projects because information technology is normally not in a position to determine every projection's strategic worth.
Nigh companies should offset reforming their development process by eliminating the lion's share of existing projects.
Indeed, most companies—including PreQuip—should start the reformation procedure by eliminating or postponing the lion's share of their existing projects, eventually supplanting them with a new set of projects that fits the business strategy and the capacity constraints. The aggregate projection plan provides a framework for addressing this difficult task.
How to Map Projects
The kickoff step in creating an amass project programme is to define and map the different types of development projects; defining projects by blazon provides useful information about how resource should be allocated. The 2 dimensions we accept found virtually useful for classifying are the degree of modify in the product and the caste of change in the manufacturing process. The greater the change forth either dimension, the more resources are needed.
Using this construct, nosotros accept divided projects into five types. The outset three—derivative, breakthrough, and platform—are commercial development projects. The remaining two categories are inquiry and development, which is the precursor to commercial development, and alliances and partnerships, which can be either commercial or basic research. (See the chart "Mapping the Five Types of Development Projects.")
Mapping the Five Types of Development Projects
Each of the five project types requires a unique combination of development resource and management styles. Understanding how the categories differ helps managers predict the distribution of resources accurately and allows for better planning and sequencing of projects over fourth dimension. Hither is a brief description of each category.
Derivative projects range from toll-reduced versions of existing products to add-ons or enhancements for an existing production process. For example, Kodak'south wide-bending, unmarried-use 35mm camera, the Stretch, was derived from the no-frills Fun Saver introduced in 1990. Designing the Stretch was primarily a matter of changing the lens.
Development piece of work on derivative projects typically falls into three categories: incremental product changes, say, new packaging or a new characteristic, with little or no manufacturing procedure modify; incremental process changes, like a lower cost manufacturing process, improved reliability, or a minor change in materials used, with little or no product modify; and incremental changes on both dimensions. Considering pattern changes are usually minor, incremental projects typically are more clearly bounded and crave substantially fewer development resources than the other categories. And because derivative projects are completed in a few months, ongoing management involvement is minimal.
Breakthrough projects are at the other end of the development spectrum because they involve significant changes to existing products and processes. Successful quantum projects establish core products and processes that differ fundamentally from previous generations. Like compact disks and fiber-optics cable, they create a whole new product category that can ascertain a new market place.
Considering breakthrough products oftentimes incorporate revolutionary new technologies or materials, they normally require revolutionary manufacturing processes. Direction should give development teams considerable latitude in designing new processes, rather than forcefulness them to piece of work with existing plant and equipment, operating techniques, or supplier networks.
Platform projects are in the middle of the development spectrum and are thus harder to define. They entail more product and/or process changes than derivatives do, merely they don't introduce the untried new technologies or materials that breakthrough products do. Honda's 1990 Accord line is an example of a new platform in the car manufacture: Honda introduced a number of manufacturing procedure and product changes but no fundamentally new technologies. In the computer marketplace, IBM'south PS/2 is a personal computer platform; in consumer products, Procter & Gamble'southward Liquid Tide is the platform for a whole line of Tide brand products.
Well-planned and well-executed platform products typically offer central improvements in cost, quality, and functioning over preceding generations. They innovate improvements beyond a range of operation dimensions—speed, functionality, size, weight. (Derivatives, on the other hand, usually introduce changes along only one or two dimensions.) Platforms likewise represent a significantly better system solution for the customer. Because of the extent of changes involved, successful platforms require considerable upfront planning and the involvement of not just technology only also marketing, manufacturing, and senior direction.
Companies target new platforms to meet the needs of a cadre group of customers but blueprint them for easy modification into derivatives through the addition, substitution, or removal of features. Well-designed platforms as well provide a smooth migration path between generations and then neither the customer nor the distribution aqueduct is disrupted.
Consider Intel's 80486 microprocessor, the fourth in a series. The 486 introduced a number of performance improvements; information technology targeted a core customer grouping—the loftier-end PC/workstation user—but variations addressed the needs of other users; and with software compatibility betwixt the 386 and the 486, the 486 provided an easy migration path for existing customers. Over the life of the 486 platform, Intel will introduce a host of derivative products, each offering some variation in speed, cost, and performance and each able to leverage the process and product innovations of the original platform.
Platforms offer considerable competitive leverage and the potential to increase market penetration, still many companies systematically under-invest in them. The reasons vary, simply the most common is that direction lacks an awareness of the strategic value of platforms and fails to create well-thought-out platform projects. To address the problem, companies should recognize explicitly the need for platforms and develop guidelines for making them a central office of the aggregate project plan.
Research and development is the creation of the know-how and know-why of new materials and technologies that eventually translate into commercial development. Even though R&D lies outside the boundaries of commercial evolution, we include it here for two reasons: it is the precursor to product and procedure development; and, in terms of future resource allocation, employees movement betwixt bones research and commercial development. Thus R&D projects compete with commercial evolution projects for resources. Considering R&D is a creative, high-risk process, companies accept different expectations nearly results and different strategies for funding and managing it than they do for commercial development. These differences tin indeed be cracking, but a shut relationship between R&D and commercial development is essential to ensure an appropriate balance and a smooth conversion of ideas into products.
Alliances and partnerships, which also lie outside the boundaries of the evolution map, can be formed to pursue whatever blazon of project—R&D, breakthrough, platform, or derivative. As such, the corporeality and type of evolution resources and direction attention needed for projects in this category can vary widely.
Even though partnerships are an integral role of the project development process, many companies neglect to include them in their project planning. They oftentimes separate the management of partnerships from the rest of the evolution organization and fail to provide them with enough development resources. Even when the partner company takes full responsibility for a projection, the acquiring company must devote in-business firm resources to monitor the projection, capture the new cognition being created, and ready for the manufacturing and sales of the new production.
All five development categories are vital for creating a evolution organization that is responsive to the market. Each type of project plays a different role; each requires dissimilar levels and mixes of resources; and each generates very unlike results. Relying on only ane or two categories for the bulk of the development work invariably leads to suboptimal use of resources, an unbalanced product offering, and eventually, a less than competitive market position.
PreQuip'south Project Map
Using these five project types, PreQuip set about changing its project mix as the starting time step toward reforming the product development process. It started past matching its existing project list to the five categories. PreQuip's product line consisted of four kinds of analytic instruments—mass spectrometers, gas and liquid chromatographs, and data handling and processing equipment—that identified and isolated chemical compounds, gases, and liquids. Its customers included scientific laboratories, chemic companies, and oil refineries—users that needed to measure and test accurately the purity of raw materials, intermediate by-products, and finished products.
PreQuip's management asked some very basic questions in its attempt to delineate the categories. What exactly was a breakthrough production? Would a three-dimensional graphics display constitute a quantum? How was a platform defined? Was a full-featured mass spectrometer considered a platform? How almost a derivative? Was a mass spectrometer with additional software a derivative?
None of these questions was easy to reply. But after much analysis and contend, the management team agreed on the major characteristics for each project blazon and assigned most of PreQuip'south 30 projects to 1 of the five categories. The map revealed simply how uneven the distribution of projects had go—for example, less than xx% of the company's projects were classified equally platforms. (See the chart "Before: PreQuip's Development Procedure Was Chaotic….")
Before: PreQuip'due south Development Process Was Chaotic….
Management and then turned its attention to those development projects that did not fit into any category. Some projects required substantial resources but did not represent breakthroughs. Others were more complicated than derivative projects but did not fall into PreQuip'south definition of platforms. While frustrating, these dilemmas opened managers' eyes to the fact that some projects fabricated piddling strategic sense. Why spend huge amounts of money developing products that at best would produce simply incremental sales? The realization triggered a reexamination of PreQuip'due south customer needs in all product categories.
Consider mass spectrometers, instruments that identify the chemic composition of a compound. PreQuip was a top-of-the-line producer of mass spectrometers, offering a whole series of high-functioning equipment with all the latest features just at a meaning cost premium. While this strategy had worked in the past, it no longer made sense in a maturing marketplace; the evolution of mass spectrometer technology was predictable and well defined, and many competitors were able to offer the same capabilities, often at lower prices.
Increasingly, customers were putting greater emphasis on cost in the purchasing conclusion. Some customers also wanted mass spectrometers that were easier to use and modular and so they could be integrated into their ain systems. Others demanded units with casings that could withstand harsh industrial environments. All the same others required faster operating speeds, additional information storage, or cocky-diagnostic capabilities.
Taking all these client requirements into account, PreQuip used the projection map to rethink its mass spectrometer line. Information technology envisaged a single platform complemented with a series of derivative products, each with a different set of options and each serving a different customer niche. Past combining some new product blueprint ideas—modularity and simplicity—with some features that were currently under evolution, PreQuip created the concept of the C-101 platform, a low-priced, full general-purpose mass spectrometer. In part because of its modularity, the product was designed to exist simpler and cheaper to manufacture, which also helped to improve its overall quality and reliability. Past adding software and a few new features, PreQuip could easily create derivatives, all of which could exist assembled and tested on a single product line. In i case, a variant of the C-101 was planned for the high-end laboratory market. Past strengthening the casing and eliminating some features, PreQuip also created a production for the industrial market.
Mapping out the new mass spectrometer line and the three other product lines was not painless. It took a number of months and involved a reconceptualization of the product lines, close direction, and considerable client involvement. To provide additional focus, PreQuip separated the technology resource into 3 categories: basic R&D projects; existing products and customers, now a part of the manufacturing organisation; and commercial production development.
To determine the number of breakthrough, platform, derivative, and partnered projects that could be sustained at whatever time, the company first estimated the boilerplate number of technology months for each type of projection based on past feel. It and so allocated available engineering resources according to its desired mix of projects; nigh fifty% to platform projects, 20% to derivative projects, and 10% each to breakthrough projects and partnerships. PreQuip and so selected specific projects, confident that information technology would non overallocate its resources.
When the grit had settled, PreQuip had reduced the number of development projects from 30 to 11.
In the end, PreQuip canceled more than ii-thirds of its development projects, including some high-profile pet projects of senior managers. When the dust had settled in mid-1990, PreQuip had just eleven projects: three platforms, one breakthrough, 3 derivatives, one partnership, and three projects in bones R&D. (Encounter the nautical chart "…Subsequently: PreQuip's Development Process Was Manageable.")
…After: PreQuip'due south Development Process Was Manageable
The changes led to some impressive gains: between 1989 and 1991, PreQuip'southward commercial development productivity improved by a factor of three. Fewer projects meant more than actual piece of work got washed, and more than piece of work meant more products. To avert over-committing resources and to better productivity further, the company built a "capacity absorber" into its plan. It assigned merely 75 total-fourth dimension-equivalent engineers out of a possible lxxx to the 8 commercial evolution projects. By leaving a small pct of development capacity uncommitted, PreQuip was better prepared to take advantage of unexpected opportunities and to deal with crises when they arose.
Focus on the Platform
PreQuip's development map served as a ground for reallocating resources and for rethinking the mix of projects. Just every bit of import, however, PreQuip no longer thought almost projects in isolation; breakthrough projects shaped the new platforms, which defined the derivatives. In all four product lines, platforms played a particularly important part in the development strategy. This was not surprising considering the maturity of PreQuip's industry. For many companies, the more mature the industry, the more important it is to focus on platform projects.
Consider the typical industry life cycle. In the early stages of growth, innovative, dynamic companies gain market position with products that have dramatically superior functioning forth 1 or two dimensions. Whether they know it or not, these companies employ a breakthrough-platform strategy. Merely as the manufacture develops and the opportunity for breakthrough products decreases—frequently because the technology is shared more broadly—competitors effort to satisfy increasingly sophisticated customers by rapidly making incremental improvements to existing products. Consciously or not, they adopt a strategy based on derivative projects. Equally happened with PreQuip, this arroyo ultimately leads to a proliferation of product lines and overcommitment of development resources. The solution lies in developing a few well-designed platform products, on each of which a generation of products can be congenital.
In the hospital bed industry, for example, companies that blueprint, manufacture, sell, and service electric beds have faced a mature marketplace for years. They are constantly under force per unit area to assistance their customers constrain majuscule expenditures and operating costs. Technologies are stable and many blueprint changes are minor. Each generation of product typically lasts 8 to 12 years, and companies spend most of their time and energy developing derivative products. As a issue, companies discover themselves with big and unwieldy product lines.
In the 1980s, Hill-Rom, a leading electric-bed manufacturer, sought a new product strategy to help contain costs and maintain market share. Like other bed makers, its product evolution procedure was reactive and mired in as well many depression-payoff derivative projects. The company would design whatever the customer—a unmarried infirmary or nursing home—wanted, even if it meant pregnant commitments of evolution resources.
The new strategy involved a dramatic shift toward leveraging evolution and manufacturing resources. Hill-Rom decided to focus on hospitals and largely withdraw from the nursing home segment, as well every bit limit the product line by developing two new platform products—the Centra and the Century. The Centra was a loftier-priced product with built-in electronic controls, including communications capabilities. The Century was a simpler, less complex blueprint with fewer features. The products built off each platform shared common parts and manufacturing processes and provided the customer with a number of add-on options. By focusing evolution efforts on two platforms, Colina-Rom was able to introduce new technologies and new product features into the marketplace faster and more systematically, directly affecting patient recovery and hospital staff productivity. This strategy led to a less cluttered evolution cycle as well as lower unit price, higher product quality, and more satisfied customers.
For companies that must react to abiding changes in fashion and consumer tastes, a different relationship betwixt platform and derivative projects makes sense. For example, Sony has pioneered its "hyper-variety" strategy in developing the Walkman: it directs the bulk of its Walkman development efforts at creating derivatives, enhancements, hybrids, and line extensions that offer something tailored to every niche, distribution aqueduct, and competitor'south production. Every bit a event, in 1990, Sony dominated the personal audio organization market with over 200 models based on just iii platforms.
Sony pioneered the "hyper-diverseness" strategy—its 200 Walkman models are based on only 3 platforms.
Platforms are disquisitional to any product evolution endeavour, only at that place is no one ideal mix of projects that fits all companies. Every company must pursue the projects that match its opportunities, business organization strategy, and available resource. Of form, the mix evolves over time as projects motion out of development into product, as concern strategies change, as new markets sally, and as resources are enhanced. Direction needs to revisit the project mix on a regular ground—in some cases every six months, in others, every year or and then.
Steady Stream Sequencing: PreQuip Plans Future Development
Periodically evaluating the product mix keeps development activities on the right rail. Companies must make up one's mind how to sequence projects over time, how the set of projects should evolve with the business organisation strategy, and how to build development capabilities through such projects. The decisions about changing the mix are neither piece of cake nor straightforward. Without an aggregate projection programme, most companies cannot fifty-fifty begin to formulate a strategy for making those decisions.
PreQuip was no different. Earlier adopting an aggregate project plan, the company had no concept of project mix and no understanding of sequencing. Whenever someone with dominance had an idea worth pursuing, the development section added the projection to its active list. With the evolution of a project plan, PreQuip adult an initial mix and elevated the sequencing decision to a strategic responsibleness of senior management. Management scheduled projects at evenly spaced intervals to ensure a "steady stream" of development projects. (Run into the chart "PreQuip's Project Sequence.")
PreQuip's Projection Sequence
A representative example of PreQuip'due south new strategy for sequencing projects is its new mass spectrometer, or C series. Introduced into the evolution cycle in late 1989, the C-101 was the first platform conceived as a system built around the new modular design. Aimed at the middle to upper end of the market, it was a versatile, modular unit for the laboratory that incorporated many of the existing electro-mechanical features into the new software. The C-101 was scheduled to enter manufacturing prototyping in the third quarter of 1990.
PreQuip positioned the C-1/X, the offset derivative of the C-101, for the industrial market place. It had a rugged casing designed for extreme environments and fewer software features than the C-101. Information technology entered the development procedure about the time the C-101 moved into manufacturing prototyping and was staffed initially with two designers whose activities on the C-101 were drawing to a close.
Very like to the C-1/X was the C-1/Z, a unit designed for the European market; the C-i/10 squad was expanded to work on both the C-1/Ten and the C-1/Z. The C-one/Z had some unique software and a different brandish and packaging but the aforementioned modular blueprint. PreQuip'southward marketing department scheduled the C-101 to be introduced about half dozen months before the C-one/X and the C-1/Z, thus permitting the company to reach a number of markets quickly with new products.
To leverage accumulated knowledge and feel, senior management assigned the squad that worked on the C-1/Ten and the C-1/Z to the C-201 project, the next-generation spectrometer scheduled to supervene upon the C-101. It too was of a modular design but with more reckoner power and greater software functionality. The C-201 also incorporated a number of manufacturing process improvements gleaned from manufacturing the C-101.
To provide a smooth market transition from the C-101 to the C-201, direction assigned the remainder of the C-101 squad to develop the C-101X, a follow-on derivative projection. The C-101X was positioned as an improvement over the C-101 to attract customers who were in the market place for a low-cease mass spectrometer but were unwilling to settle for the aging technology of the C-101. Just as important, the project was an ideal way to gather market data that could exist used to develop the C-201.
PreQuip practical this same strategy across the other three product categories. Every other year information technology planned a new platform, followed by two or three derivatives spaced at appropriate intervals. Typically, when a team finished work on a platform, management assigned part of the squad to derivative projects and part to other projects. A year or so afterwards, a new squad would course to work on the adjacent platform, with some members having worked on the preceding generation and others not. This steady stream sequencing strategy worked to meliorate the company's overall market position while encouraging knowledge transfer and more rapid, systematic resource development.
An Alternative: Secondary Wave Planning
While the steady stream approach served PreQuip well, companies in different industries might consider alternative strategies. For instance, a "secondary wave" strategy may exist more appropriate for companies that, similar Hill-Rom, have multiple product lines, each with their own base platforms merely with more time between succeeding generations of a particular platform.
The strategy works like this. A evolution team begins work on a next-generation platform. One time the visitor completes that project, the key people from the squad start work on another platform for a dissimilar production family. Management leaves the recently introduced platform on the market for a couple of years with few derivatives introduced. As that platform begins to historic period and competitors' newer platforms challenge it, the company refocuses development resource on a set of derivatives in order to strengthen and extend the viability of the production line'due south existing platform. The wave of derivative projects extends the platform life and upgrades product offerings, but it as well provides experience and feedback to the people working on the product line and prepares them for the next-generation platform evolution. They receive feedback from the market on the previous platform, information on competitors' platform offerings, and information on emerging market needs. Key people then bring that information together to define the side by side platform and the cycle begins again, built around a team, many of whose members have simply completed the wave of derivative products.
A variation on the secondary wave strategy, one used with considerable success by Kodak, involves compressing the time betwixt market introduction of major platforms. Rather than going off to work on some other product family's platform following one platform'due south introduction, the majority of the development team goes to work immediately on a set of derivative products. This requires a more compressed and careful assessment of the market place's response to the only-introduced platform and much shorter feedback loops regarding competitors' products. If washed right, yet, companies tin build momentum and capture significant incremental market place share. In one case the flurry of derivative products has passed, the squad goes to work on the next-generation platform project for the same product family.
Before 1987, Kodak conducted a serial of advanced development projects to explore alternative single-employ 35mm cameras—a roll of film packaged in an inexpensive camera. Once used, the motion picture is processed and the photographic camera discarded or recycled. During 1987, a grouping of Kodak evolution engineers worked on the offset platform projection which resulted in the market introduction and volume product of the Fling 35mm camera in January 1988. (The product was later renamed the Fun Saver.) As the platform neared completion, management reassigned the front-finish development staff to 2 derivative projects: the Stretch, a panoramic, double-wide image version of the Fling, and the Weekend, a waterproof version.
Past the finish of 1988, Kodak had introduced both derivative cameras and was shipping them in volume. True to the definition of a derivative, both the Stretch and the Weekend took far fewer development resource and far less time than the Fling. They besides required less new tooling and process engineering since they leveraged the existing automation and manufacturing procedure. The development team and so went to piece of work on the next-generation platform production—a Fun Saver with a built-in flash.
No matter which strategy a visitor uses to plan its platform-derivative mix—steady stream or secondary moving ridge—information technology must accept well-defined platforms. The almost advanced companies further amend their competitive position by speeding up the rate at which they innovate new platforms. Indeed, in a number of industries we've studied, the companies that introduced new platforms at the fastest charge per unit were ordinarily able to capture the greatest market place share over fourth dimension.
In the auto industry, for case, dissimilar companies follow quite different sequencing schedules, with markedly unlike results. According to information collected in the late 1980s, European car companies inverse the platform for a given product, on average, every 12 years, U.Southward. companies every 8 years, and Japanese companies every 4 years. A number of factors explain the differences in platform evolution cycles—historical and cultural differences, longer development lead times, and differences in development productivity.1
In both Europe and the United States, the applied science hours and tooling costs of new products were much higher than in Japan. This translated into lower development costs for Japanese auto makers, which allowed faster payback and shorter economic lives for all models. As a consequence, the Japanese could profitably conduct more projects and make more frequent and more extensive changes than both their European and U.S. competitors and thus were amend positioned to satisfy customers' needs and capture market share.
The Long-Term Goal: Edifice Critical Capabilities
Maybe the greatest value of an aggregate projection programme over the long-term is its power to shape and build development capabilities, both private and organizational. It provides a vehicle for training development engineers, marketers, and manufacturing people in the different skill sets needed past the company. For instance, some less experienced engineers initially may be better suited to work on derivative projects, while others might have technical skills more suited for breakthrough projects. The aggregate project programme lets companies play to employees' strengths and broaden their careers and abilities over time.
Thinking well-nigh skill development in terms of the aggregate projection plan is most important for developing competent team leaders. Take, for example, an engineer with five years of experience moving to get a project leader. Management might assign her to lead a derivative project first. It is an ideal training footing because derivative projects are the best divers, the least complex, and usually the shortest in duration of all project types. Afterwards the projection is completed successfully, she might become promoted to lead a larger derivative project and and then a platform projection. And if she distinguishes herself there and has the other required skills, she might be given the opportunity to work on a breakthrough project.
In add-on to creating a formal career path within the sphere of evolution activities, companies should also focus on moving key engineers and other development participants between advanced research and commercial development. This is necessary to keep the transfer of engineering fresh and creative and to reward engineers who keep their R&D efforts focused on commercial developments.
Honda is one company that delineates conspicuously betwixt advanced research and product development—the 2 kinds of projects are managed and organized differently and are approached with very different expectations. Development engineers tend to have broader skills, while researchers' are usually more specialized. Even so, Honda encourages its engineers to motility from one type of projection to another if they demonstrate an idea that management believes may upshot in a commercially viable innovation. For case, Honda's new lean-burning engine, introduced in the 1992 Civic, began as an avant-garde inquiry project headed past Hideyo Miyano. As the project moved from research to commercial development, Miyano moved likewise, playing the function of project champion throughout the entire development process.
Besides improving people's skills, the aggregate project plan can be used to identify weaknesses in capabilities, improve development processes, and incorporate new tools and techniques into the development environs. The project program helps identify where companies demand to brand changes and how those changes are connected to product and procedure evolution.
Equally PreQuip developed an aggregate project plan, for example, it identified a number of gaps in its capabilities. In the case of the mass spectrometer, the need for more than software functionality meant PreQuip had to develop an expertise in software development. And with an accent on price, modularity, and reliability, PreQuip also had to focus on improving its industrial pattern skills.
As part of its strategy to improve design skills, the visitor introduced a new computer-aided blueprint system into its engineering science department, using the aggregate project plan every bit its guide. Management knew that one of the platform projection teams was particularly adept with computer applications, so it chose that project as the pilot for the new CAD system. Over the life of the project, the team's proficiency with the new organisation grew. When the projection ended, management dispersed team members to other projects and then they could train other engineers in using the new CAD system.
As PreQuip discovered, developing an amass projection plan involves a relatively simple and straight-forward procedure. But carrying it out—moving from a poorly managed collection of advertisement hoc projects to a robust prepare that matches and reinforces the business strategy—requires hard choices and discipline.
At all the companies we accept studied, the difficulty of those choices makes imperative strong leadership and early on involvement from senior management. Without management'southward active participation and management, organizations discover it adjacent to impossible to kill or postpone projects and to resist the curt-term pressures that bulldoze them to spend most of their time and resource fighting fires.
Getting to an aggregate projection programme is non easy, but working through the process is a crucial function of creating a sustainable development strategy. Indeed, while the specific plan is extremely of import, the planning procedure itself is even more than and then. The plan volition change as events unfold and managers make adjustments. Only choosing the mix, determining the number of projects the resources can support, defining the sequence, and picking the right projects raise crucial questions about how production and process development ought to be linked to the visitor'south competitive opportunities. Creating an amass project program gives direction and clarity to the overall evolution try and helps lay the foundation for outstanding functioning.
i. Based on research by Kim B. Clark and Takahiro Fujimoto. Run into their article, "The Ability of Production Integrity," HBR Nov–December 1990, p. 107.
A version of this article appeared in the March–April 1992 event of Harvard Business Review.
Source: https://hbr.org/1992/03/creating-project-plans-to-focus-product-development
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