The Principles of Product Development Flow

1. Economic Framework: The Foundation of Product Development Success

If you only quantify one thing, quantify the cost of delay.

Quantify economics. Product development's primary goal is to make good economic choices. Many organizations focus on proxy variables like cycle time or efficiency without understanding their true economic impact. This leads to suboptimal decisions and missed opportunities.

Cost of delay (COD) is crucial. Understanding the economic cost of delaying a project is fundamental. It allows teams to evaluate trade-offs between time, resources, and features. COD helps prioritize work, justify investments in process improvements, and make informed decisions about resource allocation.

Use economic decision rules. By establishing clear economic decision rules, organizations can empower teams to make fast, decentralized decisions that align with overall business objectives. For example, on the Boeing 777 project, engineers were authorized to increase unit cost by up to $300 to save a pound of weight, enabling thousands of system-level optimum trade-offs without constant managerial oversight.

2. Queues: The Hidden Culprit of Inefficiency

Queues are the root cause of the majority of economic waste in product development.

Queues are invisible but costly. Unlike in manufacturing, product development queues are often invisible, consisting of information rather than physical objects. This makes them easy to overlook, but their impact is significant, increasing cycle time, risk, variability, and cost while reducing quality and motivation.

Understand queueing theory. Key principles include:

• Capacity utilization increases queues exponentially
• Variability increases queues linearly
• Most damage is done by high-queue states

Manage queues actively. Strategies include:

• Control queue size rather than capacity utilization
• Use WIP constraints to limit maximum queue size
• Implement fast feedback loops to quickly address emerging queues
• Apply queueing discipline to prioritize high-value work

3. Variability: A Double-Edged Sword in Product Development

We cannot add value without adding variability, but we can add variability without adding value.

Embrace beneficial variability. Unlike in manufacturing, some variability in product development can create economic value. This occurs when the positive outcomes of variability (e.g., breakthrough innovations) outweigh the negative outcomes.

Understand economic payoff functions. The impact of variability depends on how it's transformed by economic payoff functions. Asymmetric payoff functions can make increased variability beneficial.

Manage variability strategically. Approaches include:

• Variability pooling: Combine uncorrelated random tasks to reduce overall variation
• Short-term forecasting: Reduce uncertainty by shortening planning horizons
• Small experiments: Break large risks into series of smaller risks
• Consequence reduction: Focus on reducing the cost of variability rather than just its amount

4. Batch Size Reduction: Accelerating Feedback and Learning

Don't test the water with both feet.

Small batches yield fast feedback. Reducing batch size accelerates feedback, enabling quicker learning and adaptation. This is particularly crucial in product development, where fast feedback can truncate unproductive paths quickly and reduce the cost of failure.

Benefits of small batches:

• Reduced cycle time
• Decreased variability in flow
• Accelerated feedback
• Lower risk
• Reduced overhead
• Improved efficiency
• Increased motivation and urgency

Implement small batches strategically. Focus on reducing transaction costs to enable smaller batches. Look for opportunities in areas like testing, prototyping, and review processes. Remember that the most important batch to reduce is often the transport batch – the amount of work transferred between processes.

5. WIP Constraints: Controlling Flow and Cycle Time

It is easier to start work than it is to finish it. It is easier to grow WIP than it is to reduce it.

WIP constraints control cycle time. By limiting the amount of work in process, organizations can directly control cycle time and improve flow. This is based on Little's Law: Cycle Time = WIP / Throughput.

Implement WIP constraints effectively:

• Use local constraints for unpredictable, moving bottlenecks
• Apply global constraints for stable, predictable bottlenecks
• Adjust WIP constraints dynamically as capacity changes
• Combine WIP constraints with flexible resources for best results

React to WIP excursions. When WIP reaches its upper limit, consider:

• Blocking new demand
• Shedding low-value projects or features
• Pulling additional resources to emerging queues
• Using cross-trained resources from adjacent processes

6. Cadence and Synchronization: Orchestrating Smooth Development

Use a regular cadence to limit the accumulation of variance.

Cadence creates predictability. A regular rhythm in development activities helps limit the accumulation of variability, makes waiting times more predictable, and enables smaller batch sizes by reducing coordination overhead.

Synchronization reduces queues. By aligning the timing and batch size of adjacent processes, organizations can dramatically reduce queues without changing capacity utilization or batch size.

Implement cadence and synchronization:

• Schedule frequent, predictable meetings
• Use synchronized events for cross-functional trade-offs
• Nest cadences as harmonic multiples (e.g., daily, weekly, monthly)
• Provide sufficient capacity margin to enable cadence and synchronization

7. Fast Feedback: The Key to Adaptive Control

A little rudder early is better than a lot of rudder late.

Fast feedback enables adaptation. In product development, where goals are often dynamic and payoff functions asymmetric, fast feedback is crucial for making good economic choices based on emerging information.

Design effective feedback systems:

• Focus on parameters with high economic influence and efficient control
• Use leading indicators to enable early interventions
• Set balanced tripwires based on economic impact
• Design multiple, layered control loops for different time horizons

Accelerate feedback:

• Reduce batch sizes
• Implement frequent, cadenced review cycles
• Colocate teams for face-to-face communication
• Use visual management tools to make work and progress visible

8. Decentralized Control: Balancing Autonomy and Alignment

There is more value created with overall alignment than local excellence.

Decentralize for speed and adaptability. In uncertain environments, decentralized control allows for faster response to emerging problems and opportunities. However, this must be balanced with the need for overall alignment.

Maintain alignment in decentralized systems:

• Use clear mission statements focused on intent and purpose
• Establish roles and boundaries
• Designate a main effort and subordinate other activities
• Enable peer-level coordination
• Use simple, modular plans with preplanned branches and sequels
• Distribute reserves at multiple organizational levels

Enable effective decentralization:

• Disseminate key information widely
• Accelerate decision-making speed
• Measure and incentivize response time for critical support functions
• Consider using internal markets to balance supply and demand
• Cultivate initiative and trust throughout the organization

Last updated: October 3, 2024