Do values matter to New Product Development? I suspect most people would answer yes to the question, but not agree on what those values are. Let's work by analogy and see if we can sniff them out. An example from manufacturing will be used to tease out the four values of Efficiency, Effectiveness, Design, and Optimization. These will then be applied to product development, context will be discussed, and some observations will be given.
I spend a lot of time in semiconductor manufacturing environments, in particular final electrical test. Test floors in Asia are usually organized as a grid of work stations with operators managing multiple workstations. Each work station has a robot called a "handler" and a "tester". The handler moves product and the tester finds manufacturing defects.
The first picture is the input device. The second picture shows the robotic mechanism that moves devices between operations, such as rotate, test, mark, inspect, etc. Devices then exit the machine and are placed into reels if they are good devices, and a trash bucket if they are bad devices.
The market for semiconductors is very competitive and the equipment is very expensive. No one survives for long unless this process is very efficient. Units per hour is universally monitored and managed. Small improvements in throughput directly hit the bottom line. The core value is Efficiency.
However, end users of the devices care about quality. Devices must meet specifications. As always, the world is gray, and their are tradeoffs between test time and test quality. A more expensive tester can improve quality and throughput, but raise the capital cost. Averaging a measurement can reduce variations and reduce the probability of test escapes, but increase test time. When the goal is quality, the core value is Effectiveness.
Somewhere in the manufacturing organization someone worries about test strategy, capital allocation, market strategy, and competitive positioning. Decisions regarding purchase of buildings and equipment operate on a different time scale than everyday improvements. This core value is Design.
The last value is more holistic and organic. A well functioning manufacturing organization will maximize value and minimize cost, but you will find many localized sub-optimum processes. Someone at the top has the responsibility to ensure that all functions work as a whole to reach a global maximum. We can call this core value Optimization.
Values vs Behaviors
The reason I like to call these values rather than perspectives or behaviors is because people get attached to them. If you have effectiveness tendencies, how do you feel when you can't get something done because someone with an efficiency bug won't work around the process? And if you have spent your entire career improving efficiency, how do you feel when the someone wants to trash your beloved process when changing the organizational design or get something done a different way? These emotional attachments make them values, and they can be very persistent, even to the detriment of the organization.
New Product Development Example
How do these values relate to New Product Development? Let's change perspectives and consider the companies that develop the robotics and test equipment, and consider their development process.
Capital equipment is very complex and the design process is expensive. A typical system has mechanics, software, firmware, and electronics. With long development cycles, the risk of delivering a product that does not sell is large.
First, consider the software. Suppose the team uses an agile process. Sprints are by design a process of translating requirements into deployable code. Well designed sprints are very efficient. Roles, process, and tools are well defined. At the end of each sprint there may a postmortem where improvements to the process are discussed. At this level there is not a lot of work on effectiveness, because it is all about execution efficiency. (Agile guys and gals: please don't beat me up over the simplification, I know it is not as simple as this.)
The sprints are consuming a backlog of requirements, typically managed by a project owner or product manager. The product manager is responsible for delivering maximum value to a market or customer. There is some negotiation with the scrum master over the backlog, effectively managing the tension between delivering value value, vs. managing execution. This is all about effectiveness, and managing the relationship between efficiency and effectiveness.
When it comes to mechanics and electronics, things work a bit different. The cost of iteration is too high to run an agile team, so much more upfront requirements effort is required. This changes the dynamics for the product manager, who must spend more time in the field understanding the market and context the equipment will be used in. The product manager must generate an effective product definition, then hand it off to an efficient development team.
Both values of efficiency and effectiveness are in play, but there emphasis and time relationships have changed due to the nature of the product. Agile processes can relax the up front need for effectiveness a bit and depend on feedback coupled with efficiency. A staged process with high iteration costs can relax efficiency a bit and depend on a very effective front end that gets the requirements right the first time. (If you are in a fast moving market for hardware based products, start thinking platforms as a way to deal with the mismatch between the need for speed and need for upfront definition.)
Design plays a larger role in developing capital equipment. The hugh capital risk puts pressure on strategic thinking, because a bad bet can result in company failure. Design of the organization may be customized on a product by product basis. Optimization will play a smaller role, due to the small number of products in development. With less routine and data, optimization is difficult.
Dynamic Nature of Values
The four values of Efficiency, Effectiveness, Design, and Optimization are universal. However, their emphasis and interrelationships are context dependent. In addition to context dependency, individuals have biases and tend to favor one above all the others. Group bias is self reinforcing, working against the need to change when the context changes.
My goal here is to create a language for discussion of values in the context of product development. The values are Efficiency, Effectiveness, Design, and Optimization. I propose using the language as follows:
- Look at your current situation and categorize behavior according to the four values. Ask where these values are found in your new product development, who holds, their relative strength, and how they relate to each other.
- Look at your market and assess how well the current values address this market in terms of product development. Do they create value for the market or hinder creation of value.
- Decide what shifts in values must take place to improve value creation.
My experiences seem to indicate that effectiveness in product development is harder to come by than efficiency. Efficiency is much easier to measure, and personal risk is much lower. If one is measured by conformance to to process, a product can fail in the market while one receives high marks. Such risk avoidance happens in other areas of product development. In "Leading Product Development" Wheelwright and Clark give the following reasons why senior leaders tend to get involved in new product development when things go wrong, rather than up front:
- Low risk/high return when they arrive late in the game.
- It's urgent and visible when it is in trouble.
- Firefighting skills are rewarded.
- It's exciting to put out fires.
- It is easy to be wrong at the beginning, but at the end if one fails to fix it, it is not your fault.
- A lot of knowledge is required be involved at the beginning.
- At the front end problems are not well defined, and tools/roles are not clear.
- Lack of metrics/long feedback paths means less feedback.
- Absence of urgency.
I think that effectiveness inherently involves risk, because it requires judgement. In a risk adverse environment, this skews the values toward efficiency. If senior managers are subject to this bias, I imagine everyone else is too. Yet, what I think works best is focus on effectiveness on the front end of product development, efficiency on the back end, and a well managed boundary between them.
This implies companies must deal with risk adverse attitudes that block effective behavior.
Four values that are important for product development are Efficiency, Effectiveness, Design, and Optimization. Emphasis on and relations between these values are Context Dependent. People and groups have Preferences and Tendencies that need to be managed. The Front End of product development tends to require Effectiveness and the back end tends to require Efficiency. Risk Aversion tends to Skew values towards Efficiency.
The core categories of Efficiency, Effectiveness, Design, and Optimization are inspired by Adizes. Please see his books if you want to dig deeper into his framework. Note that he uses different words and has different nuances than I do. I don't make any claims of representing his work, I just want to give credit to his work because it led to my categorization.