Andrews Cooper Product Development Strategy

Creating the Best Possible Product Development Strategy

Developing a new product is a major investment frequently made at a time when available funding is limited.

Selecting the best possible development strategy involves engineering and business trade-offs that can have significant impact on development costs, product costs, product features, and time to market. “Best” means that the plan achieves an optimal balance across all of the project’s key success criteria. “Possible” means that the plan fits within the hard project constraints like budget, scope, and time to market.

Most engineering organizations skip the critical step of aligning the development approach with the business situation. This article explains why this step is so important and how to do it well.

INTRODUCTION

Developing a new product is a major investment often made at a time when available funding is highly constrained. Every penny should be spent wisely.

Parkinson’s law reminds us that work expands to fill the time available. So as you approve the proposed engineering budget, you are pretty sure that it will not cost less, yet it could end up costing more.

  • You wonder if the initial estimates were less conservative, could the development project have cost less?
  • Did the engineering team make the right trade-offs for your business situation?
  • Are there opportunities to reduce development costs by leveraging existing solutions, or eliminating or delaying less-critical product features and functions?
  • Is there a better approach that tolerates more development cost and schedule risks, but also offers significant potential for lower costs and shorter time to market?

The missing link in most product engineering plans is alignment with the business priorities, concerns, constraints and areas of flexibility. Leveraging product strategy flexibility can reduce development costs and schedules. But in the typical situation, engineering doesn’t know enough about the business situation and product strategists don’t understand the engineering development trade-offs well enough.

This article is all about aligning the product development strategies with the business situation to create the best possible development approach. We start with the basic industry-standard phased product development model. Then we detail the trade-offs available and how they impact product development cost, schedule, scope and risk. Finally, we outline a process for business and engineering leaders to work together to achieve alignment.

Andrews-Cooper specializes in product development – both consumer products and medical devices. We work closely with our clients to determine how to adapt our product development approaches to meet their business needs and to deliver extraordinary value.

Phased Product Development

The Phased Iterative Product Development Model

This section describes the versatile product development model that can be adapted for a wide variety of products. This model has enjoyed widespread use across many industries for decades. It has been used to develop medical devices in compliance with ISO 13485 and FDA 21 CFR 820.30. And it has also been used to develop consumer products in compliance with ISO 9001 and with annual production exceeding millions of units. On the more modest scale, it has also been used to rapidly develop very simple, low-volume, low-cost products.

Iterative Phased Product Development Model

The focus of the Iterative Phased Product Development Model is risk management. During the early Product Definition phases, the team learns about how to best meet customer needs and reduce risks associated with both business ROI and technical feasibility.    During the Product Realization phases, risks are reduced in the engineering designs, and in the development cost and schedule. The Product Manufacturing phases focus on reducing risks associated with consistently producing high-quality products at the lowest costs.

Please refer to the Andrews-Cooper White Paper “Phased Iterative Product Development” for more information about this product development model.

Adapting the Phased Iterative Product Development Model

The Typical Product

It’s fair to say that there is no such thing as a typical consumer product or medical device. The spectrum can span from simple products like a can opener or syringe to products that include the added complexities or electronics and software. Electronics and software can provide functionality not possible otherwise. However, if they can be avoided, the product is going to cost a lot less to develop.

These more complex products can incorporate multiple custom circuit boards, custom injection-molded plastic parts and housings, and hundreds of thousands of lines of embedded firmware plus software that runs on mobile devices and the cloud. Medical device development further increases these development challenges with extensive regulatory requirements and required international standards.

Regardless of the product sophistication, the same basic phased iterative product development process can be used for all of these types of products. Typically, the number of builds per phase increases proportionally to the product’s engineering design complexity, quality requirements, and manufacturing volumes.

For example, a consumer product with modest complexity might involve one custom PCB inside a custom plastic housing, with a volume of 10,000 to 50,000 units for the first 12 months of production. Because this example would require expensive hard tooling, this type of product will probably utilize one EVT build and two DVT builds to minimize tooling risks. Products with much higher complexity or much larger production volumes, require more builds per phase to fully mitigate the engineering design and production risks.

Major Cost and Schedule Drivers

The major product development cost and schedule drivers are as follows:

  • Tooling for injection molded plastics: can cost $100k or more for hard tooling with typical turn-around of 6 to 8 weeks. It is important to get the tooling right the first time. Small changes can be made fairly easily, but a complete redesign doubles one of the tallest poles in the project. Soft tooling is a lot less expensive and can be used where only 1,000 or fewer units must be built.
  • Custom components: the typical make vs. buy trade-off is that the custom part will lower COGS and perform better, but their development costs more and takes longer.
  • Design-build-verify cycles: a cycle during EVT, DVT and PVT can cost $50k or more and require two to three months duration. One cycle per phase reduces development cost and schedule but increases development risks if issues are found. In some situations, partial cycles can be used as risk contingencies – in other words instead of a completely new build, new parts can be retrofitted into the existing build.
  • Standards compliance testing – independent test labs can charge $100k or more for compliance testing for safety standards, EMC, a CE mark, and wireless standards and FCC regulations. It is prudent to perform selected screening tests with prototype units for higher risk elements to avoid needing two complete compliance test runs.

Alignment Levers

The tables below summarize the typical levers for aligning the development approach with the business situation. Some of these levers might not apply to a specific product, but others (not listed here) might.

Product Design Refinement Iteration Levers
Number and types of product concept models Fast convergence saves time and money, but inadequate conceptualization risks building the wrong product.
Number and areas of technical feasibility investigations Each investigation takes time & money, but can reduce risks of unrealizable product concepts.
Number of EVT Builds Each build takes time & money, but EVT builds are faster and cost less than DVT builds.  In some cases, the number of DVT builds can be reduced by adding an EVT build.
Number of DVT Builds Each build takes time & money, but DVT builds are faster and cost less than PVT builds.  In some cases, PVT can be eliminated by PV combining with the last DVT build.
Number of PVT Builds Usually one build is sufficient, but production shutdowns can significantly reduce revenues and profits permanently impacting ROI.
Product Development Trade-off Levers
Make vs. Buy Development cost & time can be reduced, but COGS might increase and performance could decrease.
COGS vs. Development Cost/Time Heroic measures to reduce COGS will increase development cost & time.
Product-specific trade-offs that impact Development Cost/Time Each product has areas of dominant complexity where trade-offs can impact development cost & time.
Soft tooling vs. hard tooling Tooling is a major expense, soft tooling costs much less but limits the production quantities.
Time-to-market vs. Development Cost Time to market can sometimes be shortened by adding resources and overlapping long lead time tasks, but these steps can increase development costs and risks.
Low Project Risk vs. Opportunity to Save Cost/Time There are always a lot of unknowns when development project estimates are created.  A conservative bid has higher cost & duration because the risk reserves are built in.  Tolerating some risk can lead to lower development cost & time, but with some chance that cost & time could increase.
Must vs. Nice-to-have Features Some product features are essential for market success, but development costs & time and COGS can be reduced by eliminating or delaying non-essential features.
Initial vs. Follow-on Features
Manual vs. Automated Production With higher volume production, COGS can be reduced significantly with automated assembly and test.   Development costs increase, but ROI can be very favorable if funding is available.

How to Collaboratively Adjust the Levers

Project management wisdom says that you can’t optimize everything simultaneously. The triple constraint of cost, time and scope reminds us that you can optimize any two, but not all three simultaneously. Project optimization requires that we expand on the notions of cost, time and scope – breaking them into their constituent parts relevant to the project. But we are still avoiding any attempt to optimize them all. The basic approach for adjusting all the levers simultaneously is to find the best combination of trade-offs. In other words, as we move a lever, we might find that it helps some important aspects but hurts others. The best lever position is determined in combination with all the other levers.

Sound like a complicated process?

Actually it is done almost every day during the development of the product. It is the same process used, implicitly or explicitly, for numerous product design decisions from selecting the best among several product concept models, designing the system architecture, and designing the details of the electronics, mechanics and software.

The starting point is for business and engineering leaders to work together to identify and prioritize the key success criteria for the project. These criteria typically include project attributes such as development cost and time to market and a variety of product attributes like accuracy, size and COGS.

Not all product attributes need to be considered – only those that have a significant impact on the development approaches. These success criteria are used to evaluate the alternative development approaches using a decision tool such as a Pugh Matrix.

The table below shows an example of prioritized success criteria for a prototypical product development project.

Success Criteria Priority Target
Development cost 1
Product Cost (COGS) 1
Time to market 2 12 months
Product Attribute 1 (accuracy) 2 ± 2%
Product Attribute 2 (weight) 3
Product Attribute 3 (battery life) 4 > 1 week
Tolerance for development cost risks 5
Tolerance for schedule risks 6
Tolerance for product feature reduction 7 Low

There are several notable items shown above:

  • The success criteria include typical project attributes such as development cost and time to market.
  • The success criteria also include several product attributes including accuracy and COGS. Product attributes are used only if they impact the development approach – for example they might dictate whether a custom sensor must be developed instead of using an off-the-shelf part that might be less accurate and cost more but would reduce the development costs and schedule.
  • The success criteria also include three attributes that are measures of business’s ability to tolerate risk. These are key to tailoring the development approach because there are always many unknowns at the time the project plans and estimates must be formulated. A very low risk tolerance leads to higher costs and longer schedules. However, some tolerance for risk, opens up opportunities to significantly reduce costs and schedule.
  • Note that the prioritization did not force a strict ordering. Some effort should be made to spread the priorities, but in the end sometimes two attributes are equally important. The prioritization is used to weight the relative importance of each of the success criteria.
  • Note that a target value is identified for each success criteria. The target can be used to rank various alternatives as better, worse or equivalent.

A Trade-Off Analysis Example

The table below shows an example of how a trade-off analysis can be performed to evaluate and select between two different development approaches for a product. The alternatives are evaluated using a Pugh Matrix where the key attributes of the product development are prioritized and then scored for each alternative considered.

Approach 1: has 1 build for EVT, 1 build for DVT and 1 build for PVT. There is some development cost and schedule risk that another DVT build will be needed. A full custom sensor is used to achieve high accuracy, even though it increases development costs and schedule.

Approach 2: is a more conservative approach: has 1 build for EVT, 2 builds for DVT and 1 build for PVT.  An off-the-shelf sensor is used to reduce development costs and schedule even though its accuracy is not as good.

The scoring uses a simple three-point scale: worse (-1), equivalent (0) or better (+1).

Approach 1 Approach 2
Weight Target Description Score Description Score
Development cost 7 1 build each: EVT, DVT & PVT 1 1 build for EVT & PVT, 2 builds for DVT -1
Product Cost (COGS) 7 Full custom parts 1 Selected buy vs build -1
Time to market 6 12 months Minimum number of builds 0 One extra build planned -1
Product Attribute 1 (accuracy) 6 ± 2% Custom sensor 1 Off the shelf sensor 0
Product Attribute 2 (weight) 5 2 AA cells -1 2 AAA cells 1
Product Attribute 3 (battery life) 4 > 1 week 1 0
Tolerance for development cost risks 3 risk of 2nd DVT build adding $60k -1 low risk 0
Tolerance for schedule risks 2 risk of 2nd DVT build adding 3 months -1 low risk 0
Tolerance for product feature reduction 1 Low low risk 0 low risk 0
Total (Weight X Score) 14 -15

Approach 1 scores better overall than Approach 2. The product produced by Approach 1 is arguably better with a custom sensor and longer battery life, although it is a little heavier. Approach 2 has higher development costs but lower development risks because an additional build cycle is in the plan. Due to the higher risks in Approach 1, it could end up costing the same as Approach 2 (if the second DVT build is needed), but it could also end up costing considerably less.

Conclusions

The industry-standard phased product development approach can be adapted for better alignment with a specific business situation. The alignment process requires good collaboration between business and engineering leaders to understand each others’ perspective and concerns and make decisions that optimize the potential for success.

Our example shows the use of a formal decision matrix to evaluate the alignment of alternative approaches. The merits and demerits of each alternative are assessed with respect to success criteria identified and prioritized using the collaborative process.

This overall approach of identifying and prioritizing the success criteria and scoring project approach trade-offs will lead to the best possible development strategy for each business situation, including yours.

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