During a recent Sopheon Webinar broadcast, Mark Thut, a Director in PRTM's Innovation Practice for Sopheon, shared best practices and real-life case studies of some of today's most innovative companies and how they're successfully applying Lean practices to product development. Attendees learned how they could reduce cycle-time, increase throughput, and increase the value of their product portfolio to gain competitive advantage in today's marketplace.

A number of questions submitted during the live Q&A were left unaddressed.  Mark's responses to some of the most frequently-asked questions are listed below.

How do you measure R&D effectivness?

The R&D Effectiveness Index is essentially the profits generated by new products divided by the R&D investment required to create those new products.  A ratio less than 1.0 indicates that a company is not getting sufficient return for its R&D investment. 

How do lean product development processes differ from open innovation (e.g., an unconstrained environment to a highly constrained, defined environment)?

Lean PD is best suited for organizations that focus on a fairly well defined set of products, such as automobiles, electronics, software, medical devices, consumer products, and so forth.  In these situations, a company benefits by becoming the fastest and most cost-effective innovator of products within their category(ies).  Lean PD is not well suited for creating whole new categories of products, such as the invention of the internet, the invention of polymerase chain reaction for mapping genes, or the invention of snowboards.  Conversely, Open Innovation is a great way to stimulate, nurture, and commercialize all new products.

Is Lean PD mainly for incremental development vs. green field development? 

Lean PD works well for the most common range of new product development projects:  platform, major and minor.  Since these three common types of product development projects often flow through the same development organization, a single development management system is needed to make sure they all can be managed successfully, within the context of the limited and shared resources.  All new revolutionary products and categories like automotive fuel cells or satellite radio or video on demand are not well suited for Lean PD.  The general premise of Lean is to bring consistency and regularity to a process.  Inventing a new product or category is not yet a process, since it is the first of its kind.

Please explain the Portfolio Multiplier benefit in more detail.

The "Portfolio Multiplier" benefit is another way of counting the value of Lean PD.  Since Lean PD focuses on reducing waste, the straightforward measures of results include reductions in lead-time, error rates, and resource hours.  Theoretically, a company can capture these benefits by reducing its development workforce.  But the vast majority of companies are far more interested in increasing the capacity, throughput, and value delivery of their development organizations, not cutting staff.  The "Portfolio Multiplier benefit" is how we calculate the boost in capacity, throughput, and value from Lean PD.

Can you give an example of how to make information flow and be more visible in a product development environment? 

Yes, there are three primary strategies to bring visibility to product development workflow.  The first strategy is to define and standardize key deliverables required throughout the development process, such as Market Requirements Document, Product Requirements Document, System Architecture Document, Design Specifications, Test Plans, Prototypes, etc.  Careful definition and standardization of discrete development work products throughout the development cycle are the physical things that can tracked as they move from group to group.  The second strategy is to measure and track workflow at the workgroup level - throughput, cycle-time, quality, productivity, etc.  Since these groups are the building blocks of most the development work that gets done, it is important to measure and prominently display performance metrics so that everyone upstream and downstream can see how work is flowing through the groups.  The third strategy is to measure and track projects at the project and portfolio levels.  The objective here is to bring visibility to each project and the full set of projects flowing through the entire development factory.  These metrics and scorecards are important because this is the level where global bottlenecks can occur.

Do you find a different degree of complexity when developing products vs. services? Do the metrics change considerably?

Each business model has its own complexities that need to be considered.  However, we believe that the questions asked by senior management when making a decision are fairly standard across every company.  Is it real? Is it worth it? Can we "win?"  Accolade's ease of configuration allows the client to use the metrics that matter most to them when answering these questions. For example, companies typically use net present value or a derivative thereof.  If the margins or costs associated with a project or group of projects doesn't change substantially, senior executives may only look at top-line sales.  Another possible consideration would be the amount of risk associated with the likelihood of technical and/or commercial success of a proposed product or products.  Once you get beyond such top-line measurements, the key performance indicators do vary from business to business, and even within businesses of the same type, to reflect a company's unique strategy and business goals.  Bottom line, both product companies AND service companies can benefit immensely by better managing their innovation processes.

How do top-performing companies measure the effectiveness of their innovation and lean product development efforts?

Top-performing companies measure their innovation and lead PD efforts in three ways:  they track performance metrics at each level of the development organization (workgroup, project, portfolio), they use a balanced set of development metrics across the 6 key facets of development performance (speed, cost, quality, productivity, innovativeness and value) and they periodically benchmark their performance against internal standards and external standards.

Do you have any good sources for Lean Product Development?

There are several books on Lean Product Development, but in my opinion, none of them really address the topic in a full and detailed manner.  Instead, I suggest that product development professionals go back to reviewing the first principles ofLean Management. There are several excellent text books available on this topic.  In addition, a good book that brings Lean Management to life in the product development arena is Jeffrey Likers book, The Toyota Way.

PRTM also has detailed development benchmarks for the electronics industry and the medical device and diagnostic industry.  These benchmarks are available to companies who participate in our lean product development study.  If you are interested in learning more about these benchmarks, please visit http://www.pmgbenchmarking.com or call Ed Black at 781-434-1470.