Exploring Mergers & Acquisitions:
A Strategy for Long-term Success
Over the years, industry has struggled to develop a process that will eliminate the unpredictable nature of product development projects. Methods such as: Stage Gate, Agile, Six Sigma, etc. have provided much needed structure, but have still failed to deal adequately with the resource challenges. In most cases, it’s not a lack of knowledge of the processes or even the implementation of processes that keeps organizations from achieving predictable performance; rather, it’s commonly a limitation of the discipline and culture set by management. This article illustrates some of the common tendencies and suggests some solutions and traits that can produce results from the many good processes available.
The basic path of product development is very consistent regardless of the process employed.
Most processes for product development focus on the execution of these tasks and the decisions related to whether to move to the next step. However, few if any deal effectively with ways to manage the frequent pull of multiple priorities on the same resources. This is most commonly an issue due to the struggle between managing near-term priorities of new product development and the immediate priorities of sustaining engineering and end-of-life issues on electronic components. Once resources get tossed back and forth due to the opposing pull of these priorities, all the best processes have only a minor effect on the outcome.
Most organizations recognize three distinct product development activities; while they may have different names, they are characterized by:
Research or Advanced Development: This is core research into new areas or experimentation with new materials or processes. While an important activity, it tends to have a long term financial impact.
New Product Development (NPD): This includes the core new product development activity. This activity has a relatively near term financial impact for the organization.
Sustaining, Installed Base or Life-cycle Engineering: This activity is generally highly urgent as the products are in production and changes can be required due to safety issues, regulatory compliance, component end of life and cost reductions. Clearly, these activities can have an immediate financial impact on the organization.
Typical Resource Allocation
Large companies often have the ability to create completely separate organizations for the three activities. However, most small-to-mid-sized organizations and divisions of large organizations have only one engineering pool from which to accomplish three very different activities. In our view, this can be a major contributor to dissatisfaction with product development efficiency.
The chart below illustrates that the sustaining engineering activities, while strategically less significant, have the greatest economic urgency. Conversely, advanced development is highly strategic to an organization but has less economic urgency. This dynamic tends to pull research resources and projects into product development (commercialization) before they are ready while at the same time product development resources are being pulled into sustaining engineering projects for urgent needs.
At Syncroness, we found that new product development activities can miss schedules and budgets for many reasons; however, we can virtually guarantee failure if either technology is introduced with research remaining and/or if critical resources are pulled off a project for even short periods of time.
Both pulling resources from a product development project for short periods and introducing immature technology have a compounding negative impact. When introducing immature technology, schedule delays are virtually guaranteed but the disruption goes beyond the specific feature affected and pollutes the entire project. Resource utilization gets out of synch, interdependencies and critical path analysis becomes increasingly complex; even to the point that the project schedule is completely unpredictable. The same can be true for pulling resources for sustaining efforts. In addition to the labor hours lost, reduced efficiency occurs due to starting and stopping. Often, morale is negatively impacted but the biggest impact is caused by the excuses it gives the team for missing budgets. We have found that the missed budgets exceed the length of the disruption by a factor of 1.1 to 1.5, depending on the length of the disruption.
So, what should R&D leaders do?
• Create a system to accurately track project performance with a
good time tracking system. This will allow you to quantify the impact of
disruptions. Don’t fall into the trap of assuming that overtime has no cost
for salaried employees—there is always a cost.
Ensure that research activities are complete before implementing them
in a product development program. Research, by its nature, cannot
be completed on a schedule.
Assess the real cost of disrupting a product development activity
so that good decisions for alternatives can be made. Too many times,
poor decisions are made only because we are not realistic about the
costs of each path.
Once you have established a solid framework for capturing the real cost, informed decisions can be made. This doesn’t mean that you will never pull resources for a high priority task; instead you will know the cost up front. In some cases, you may find it is more cost-effective to train someone else (this is often true) with only limited review and oversight from the key individual. Consider establishing a team specifically designed for handling sustaining engineering tasks. If this is not practical due to the small size of your team, consider partnering with an outside firm to provide this as a service.
Above all, don’t underestimate the importance of resource management and all your other processes and efforts will be much more effective.