Flow-based Product Development
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Transcript of Flow-based Product Development
Product Development vs. Manufacturing
Mfg
• Predicatable and repetitive tasks
• Homogeneous Delay Costs
• Homogeneous Task Durations
• FIFO Sequences work well
PD
• Highly variable tasks
• Very different delay costs
• Very different task durations
• FIFO Sequences hardly ever work well
Eight Themes of Flow-Based Product Development• 1. Economics as a Measure of
Project Health
• 2. Manage by Queues, not Capacity
• 3. Variability Always Subtracts Value in Manufacturing, Not Always in Product Development
• 4. Minimize Batch Sizes
• 5. WIP Constraints
• 6. Cadence, Synchronization, and Flow Control
• 7. Fast Feedback
• 8. Decentralized Control
1. Measuring Projects by Profitability
• Hard to measure impact of project decisions on profitability• Proxy variables used instead• Drunk and the Lamppost
Problem
• Hard is not impossible• Understand interaction of 5
key variables through sensitivity analysis
• Focus on quantifying the cost of delay
2. Managing Queues, not Capacity
• Work spends more time in queues than in process
• Managing queues therefore has greater effect on cycle time than maximizing capacity utilization
• In fact, utilization and queue length contra-vary
The Effect of Queues
• Multiple effects of queues on value
• Even queues off the critical path matter
• N.B.: Each “specialist” role on the IT project implies a queue for their services
3. Variability Can Produce Value
• In manufacturing, variability creates waste, harms value
• Manufacturing value lies in minimum variability
• In product development, no variability = no value
• Need to take risks
• But variability is not necessarily a source of value
• Need to understand the economic payoffs for variabilities
Example: Taking Rational Risks
Choice Stakes Payoff ProbabilityExpected
Value
A $15,000 $100,000 50% $35,000
B $15,000 $20,000 90% $3,000
C $15,000 $16,000 100% $1,000
• Choice C has the least risk, but the lowest expected value
• Expected value depends on payoff as well as probability
• Lesson? Variability is not always a source of loss
…So There Is an Optimum Amount of Risk/Variability in IT ProjectsEven If We Don’t Always Know Exactly How Much It Is
4. Reduced Batch Size
• Single most effective way to reduce queue sizes
• Reduces variability in flow
• Numerous virtues to smaller batch sizes
Some Batch Size Issues on IT Projects
• Project Scope
• Project funding: tranche-ing
• Project phases as hard gates: waterfall
• Requirements definition up front
• Project Planning
• Testing
• Design Reviews
• Manufacturing Release
5. WIP Constraints
• Managing by WIP constraints reduces batch sizes, queues
• WIP constraints save more than they cost
• Cost of delay swamps other costs
6. Cadence, Synchronization, and Flow Control• Flow Control: beware
“Congestion Collapse”• Make congestion visible
• Control occupancy
• Use pricing
• Cadence: • Regular time intervals
smooths flow
• Synchronization:• Proper synchronization
requires extra capacity
7. Fast Feedback
• Extremely important for product development
• Feedback influences product development choices
• Small batch sizes favor faster feedback
8. Decentralized Control
• Logical response to unpredictable situations where response time is important
• Military as a model: • Decentralized
control
• Alignment