This guide walks you through Lean product development and why it's the business opportunity of the century including:
What is Lean product development?
Lean is any process improvement that substantially improves the throughput of your system, sustainably.
So, it is with this definition in mind that we turn our focus to hardware development and find the ways to substantially improve throughput in these systems, sustainably.
Why is Lean product development the business opportunity of the century?
Because Lean product development is proven to increase speed to market, and speed to market is the biggest opportunity to increase profit.
Almost ten years ago, Stephen R. Covey said in his son's book, Stephen M.R. Covey's, The Speed of Trust, “My interactions with business leaders around the world have made it increasingly evident that ‘speed to market’ is now the ultimate competitive weapon.”
We also know from the Cost of Delay model that being late to market is usually the biggest cost (or lost profit opportunity) in a project.
The history of Lean
The origin of Lean is the Toyota Production System (TPS), which focuses on customer needs (customer value), pull (tasks) instead of push (tasks), and making work visible to the team with Oobeya rooms. The Toyota Product Development System (TPDS) also looks at mitigating risks and fast learning (knowledge capture, problem solving A3s, set-based development, etc.).
The result of TPS was better products, delivered more quickly and consistently.
Agile Software Development takes many of it's cues from Lean. For example, it focuses on customer needs and learning (iterative development), as well as visible work and pull (Scrum or Kanban boards).
The creators of the Agile Manifesto also place importance on improving requirements definition (user stories), inaccurate schedules (story points & burn-down), persistent resource overloads (sustainability), and multitasking (WIP constraints).
In addition to Agile, there are many offshoots or like-minded methodologies such as the Lean Startup movement, Critical Chain, and Product Development Flow. We know that not all Lean techniques are ‘smart’ in all systems. It’s clear that manufacturing systems are different from product development systems and that some Lean manufacturing techniques don't apply to product development.
Similarly, software development systems are different from hardware development systems, which are different from services oriented systems like health care, etc. These systems are different enough that good solutions in one can be detrimental in another, even if they share some things in common.
There is one common theme among these various schools – to improve the overall throughput of the system, sustainably, in ways other than just simply throwing m.ore money and resources into it
What is the goal of Lean product development?
First, it's important to understand the goal of product development is most often - profit. In order to achieve profit several conditions must exist.
- Profit is driven by sales volumes, Cost of Goods Sold (COGS), sales price and expenses.
- Sales volume and price are heavily driven by time-to-market (project duration) and the Cost of Delaying market launch (COD) is usually quite high. (Please see our blog series on Cost of Delay.)
- Sales volume, price, and COGS are also heavily driven by the level of innovation in our products. With innovation comes risk (uncertainty) and variability, and required learning. Innovation is often required to reduce COGS (e.g. new manufacturing processes) as well as increase sales volumes and price via new capabilities in our products.
- The rate of our learning heavily impacts the duration of our projects. This rate is impacted by many, many problems as we will discuss below and through the rest of this series.
- The earlier we can accurately predict when we will be ready for launch, the more profits we will realize by having ramped-up production, marketing, and sales capabilities.
To summarize, successful product development projects require the right innovative product, at the right price, delivered to market cost effectively, quickly, and predictably.
Which Lean product development process improvements have the greatest ROI?
So, which of the many schools of thought or potential process improvements deliver high ROIs in typical hardware development systems? Well, according to our analyses, in most companies, the big two process improvements with the highest ROI are Visual Work Management and Project Risk Management.
If you have the right tools for Visual Work Management and Project Risk Management, the ROIs in these areas are exceedingly high - easily over one hundred, and often over one thousand times the cost – when considering the Cost of Delay (lost profit due to being late to market). If you have the best VWM tools and methods available for your type of development system, you can solve a lot of these problems and go a lot faster with relatively little cost and effort. You can watch a demonstration of Playbook visual work management software to take a deeper dive into the benefits of the right visual management tool.
How to get started with Lean product development
I buy a lot of books—more than I have time to read. So if it’s a “good” book, I’ll actually finish it. If it’s a “really good” book it will have ideas in it that I’ll want to find later, so I’ll mark those pages with a piece of sticky note. Most of the really good books get just a few pages marked. However, Managing the Design Factory (MD), by Don Reinertsen, has forty-six notes in it…! There got to be so many pages marked that I started putting the stickies on the side of the page so I could tell the new ones from the old ones.
There is another that actually beats it in terms of density. Don Reinertsen’s third book is called The Principles of Product Development Flow: Second Generation Lean Product Development. Thankfully, you won't need to put sticky notes in it because he organized into eight sections with 175 numbered principles.
Key principles of Lean product development
It would be difficult to outline the forty-six (or 175!) good ideas here, but I’ll briefly summarize what every product developer should know.
Don Reinertsen points out that we’re in business to make a profit, so decisions made during the development process should be made by considering how they’ll impact profit. This can be done by creating an economic model that everyone on the team understands and buys into. For most companies, the biggest impact to profit is the cost of delay.
With the importance of speed in mind, we need to understand what slows down projects. There are many causes, but a common one is that work sits idle for long periods of time (in a queue) before it’s worked on. These queues are caused by common practices that create large batch transfers of work that create large wait times. But they can be managed by reducing batch sizes. Closely related is the fact that high capacity loading has a serious impact on cycle times. But it can be managed with WIP constraints.
The R&D factory isn’t creating a product, it’s creating knowledge, which comes from information that is understood. So we need to optimize the rate at which we’re creating economically useful information. And we do that by studying information theory and systems theory.
One of the challenges that R&D has that manufacturing doesn’t is that most of the work is invisible, which makes it difficult to see the queues. And queues are leading indicators of system slowdowns so it’s important that we monitor them. Again, investing in the right visual work management tool is key here.
Finally, decentralization is a key principle for managing and optimizing complex systems.
PLAYBOOK's principles of Lean product development
If you combine the key points from Agile and TOC, and the key points from Don Reinertsen’s books, you can see why we have selected these as
driving principles of Playbook and how they benefit Lean hardware development teams.
These principles give us the first level benefits of visibility, communication, fast feedback, no multitasking, and early warning of delays…
And all of those combine to give every team member clear and correct priorities each day…
Which means that projects are consistently completed 30-50% faster!
4 ways to ensure your Lean product development initiative won't fail
The first attempt to implement Lean product development is critical. If you don’t get it right, there will be more resistance on the next attempt. Getting a successful pilot isn’t rocket science, but there are a few things you must know in order to prevent failure.
In this post I will outline the most common pitfalls impacting Lean Pilots and how to avoid them.
The phases of change
To get started, let’s review the solution steps in the phases of change diagram.
It should be clear that you need to have a successful pilot that yields measurable business results in order to prove its effectiveness and continue with the next initiative. But what the diagram doesn’t show is what’s necessary within the pilot to create those results.
Fortunately, there’s a model that makes this process easier to understand. It comes from the Kirkpatrick model for evaluating training effectiveness and is outlined in the image below.
If you view it backwards (from right to left), it shows that in order to get results, you need to change behavior. And in order to change behavior, people to learn something. And finally, in order to learn something, people need to have a good reaction to the training.
This should sound logical, but there’s a hidden stumbling block.
Just because someone learns something,
doesn’t mean they will change their behavior!
Think about that. Have you ever seen people go to training and come back excited, but a few weeks later, there’s no evidence of any change?
It’s actually quite common. There’s a reason most training doesn’t work, but it’s not because it was “bad training."
So how do we get people to actually change their behavior?
There’s a good solution for this that we learned from a book written by Charles Fred called, Breakaway: Deliver value to your customers—fast!
In it Mr. Fred describes the four phases of learning:
- Introduction – when you first hear about the topic
- Assimilation – attend the class and learn more about the topic
- Translation – learn how to apply it to your specific job
- Accumulation of Experience – do the new thing until it becomes habit
Most companies stop with step two—they send someone to a general class. Some training programs go to step three and teach the students how to apply the knowledge at work.
But very few companies go to step four and actually coach, or otherwise enable, the students in the new behavior until they have reached proficiency.
That’s too bad because Charles Fred makes it clear:
There is a minimum threshold of experience necessary
for new behaviors to become habit!
How much “experience” does it take?
The amount of practice it takes for new experiences to become habit depends on a lot of things:
- How different is the new behavior from the old one?
- How difficult is it to perform?
- How quickly and clearly does the person perceive the benefit?
- Are there other controls in place?
Basically, the higher the “benefit to cost ratio,” the quicker people will adopt new behaviors. But people still have to get to a certain amount of time to practice the new behavior before you can expect it to stick.
So how can you ensure your Lean product development initiative is a success?
Let’s review the solution phases laid out on the phases of change diagram again.
In order to ensure success on your first initiative, you must follow four key steps:
- Do something that will give you measurable business results. You’ll need those metrics to get approval for the next initiative.
- Pick a solution that can be piloted quickly and with a small team. Solutions that involve a lot of people, or take a long time to get results, often fail due to lack of inertia even though they might be good solutions. (A good idea at the wrong time is still a bad idea.)
- Recognize that the goal of training is to create behavioral change.
- Be sure to facilitate enough coaching and practice so that the new behaviors are thoroughly adopted as habit.
If you do those things right the first time, you will have broken the cultural barrier and set your company on the path for continuous improvement!
Get Lean product development training
Interested in Learning more about lean product development?
We have a series of webinars dedicated to Lean product development training.
What is Lean product development software?
Lean product development project management software incorporates the principles of Lean so that you can focus on the important stuff - managing your Hardware development project. For example, PLAYBOOK supports distributed planning, a daily view of project status as well as a Long term planning view. It also automatically updates priority tasks for each team member as project changes are made, across the organization. So, everyone can ensure they are working on the right work, at the right time to keep the project moving forward.
Lean product development software has been known to speed up project delivery by up to 85%! In short, Lean project management software:
- Creates flow for fast product development teams.
- Collaboration becomes barrier free.
- Teams hold themselves accountable.
- And innovation becomes predictable!