Launch Higher Value Products Faster
Executive Summary
Launching higher value products faster requires a great dynamic process and growth-minded teams with people who learn, think, and continually develop knowledge. Too often, organizations adopt from others without critical thinking. A prime example is Stage-Gate™ or Phase-Gate. While it’s a structured framework, in the absence of key knowledge or purposeful thought on new product design and launch, it can be detrimental to a company’s growth.
In fact, organizations have used Stage-Gate for years to launch products taking twice the time they needed because of not questioning the process they were working within. When they got really serious though, many times from external competitive pressures, they figured out ways to cut the cycle-time in half or even better.
Can you begin to fathom the opportunity losses that have compounded over the inefficient years? People tend to operate in the status quo instead of working on alleviating their system’s constraint at any given time. Often, people in the function are blamed. However, it is executive leadership who squarely owns this problem. Executives are responsible for running a growth leadership organization, which requires continual learning and development. Instead, they are running an operationally managed organization. Each modus operandi presents a stark contrast in culture from the other.
Introduction
Has the business community lost its marbles? In 2007, when Tim Ferriss published the 4-Hour Workweek, it was on the New York Times Best Sellers List for four years. The message from this book is the antithesis of what we ought to be striving for. It encourages people to start new businesses during working hours while the company pays you. How ethical is this? Yet, Tim made fortunes on the speaking tour as scores of leaders invited him to spew his unethical message, laced with tips on his new “lifestyle design.”
What does this have to do with launching higher value products faster? Tim Ferriss’ message is “direct others to do while doing the minimum.” Who’s doing critical thinking for improvement and growth of the business here? Launching higher value products faster takes real brain power and hard work by engaged knowledge teams.
In 2011 when Eric Ries published The Lean Startup, corporate America flocked to this next “shiny object.” The reality is that startups as a group are the worst investment asset class. Yes, there are the few great successes that everyone talks about, but the dark underbelly of losses runs deep. Why would a going concern want to adopt startup practices when they have tried and true innovation practices at their disposal?
One such susceptible company was General Electric. It invested millions of dollars in launching Lean Startup programs throughout, only to find that it was just another fad. The reality is that the Lean Startup Build, Measure, Learn principle is a diluted version of the Plan, Do, Study, Act (PDSA) model created by Walter Shewhart in 1939 and popularized by Dr. Edwards Deming. Even the PDSA model is an incomplete and mis-sequenced rendition of a closed-loop feedback control system. Why would Fortune 500 companies spend millions of dollars on a simple but flawed method that’s been available for free for 70 years?
Who should we learn from to understand how to launch higher value products faster?
Curtis Carlson
One source I would recommend would be Curtis Carlson’s work outlined in his book with William Wilmot, Innovation: The Five Disciplines for Creating What Customers Want. Here, the authors outline a simple sequence: need, approach, benefit per cost, and competition (NABC). They cite many examples from their experience at Stanford Research Institute International (SRI) to support their simple model for framing the front-end of new project selection and value proposition design.
NEED: “What is the market or customer need?” As we know, there are many methods that may be leveraged to increase understanding of customer value, such as jobs-to-be-done, ethnography, contextual interviewing, data mining, house of quality, and many more.
APPROACH: “What is your approach to addressing this need?” There are many methods one can invoke to elicit more interesting approach concepts. For example, invoking aspects of the Theory of Inventive Problem Solving (TRIZ) in the early design phase can produce approaches otherwise unimaginable.
BENEFITS: “What are the benefits per costs of your approach?” Carlson introduces an interesting approach through the Value Factor Analysis (VFA) method that Len Polizzotto created at SRI. 
The writers offer extensive detail on how to use Polizzotto’s VFA cycle in the appendix to their book. The model can be leveraged for product or process design.
COMPETITION: “How do those benefits per costs compare with the competition?” Competition can be added to the VFA model for comparison purposes.
The Five Disciplines for Creating What Customers Want outlines the five disciplines to launch higher value products faster. They are:
- Important Needs
- Value Creation
- Innovation Champions
- Innovation Teams
- Organizational Alignment
Carlson makes a key point that it is the creation of a robust System for developing new products that makes the difference between high sustainable compounding growth from new products versus duds.
For more information on not only creating such a system but automating it, visit our website.
What would Dr. W. Edwards Deming advise?
Let’s take an excerpt from Dr. Deming’s book, The New Economics for Industry, Government, Education on New Product Development.
Planning for a new engine
Engineers were at work on plans for a new engine. They had worked on most of the pieces of the development, but had not put the pieces in sequence. For example, they were training 100 skilled workers for machining, inspection, assembly. A flow diagram put the pieces in sequence, and showed relationships between them. Figure 14 shows the flow diagram that we arrived at just as I drew it on plastic on the overhead projector. Results of the last stage may indicate reconsideration of the stage of actual drawings. With the flow diagram in view, everyone may understand the relationships between stages.
To shorten the time of development
There is much talk about need to speed up development of a new product. The reasons given flirt around the alleged need to put a product into the hands of customers while they still have the same preferences as they say that they have today. The effort is noble but for the wrong reason. The customer will name a preference today, buy something else tomorrow. The drive for reduction in time for development of a new product, or of a method to produce cheaper and faster an existing product, is important mainly for reduction of cost.
The usual method is to rush through the development, only to find at the end that the pieces do not fit together, or that new and brilliant ideas for design have meanwhile emerged. The whole play then starts afresh with Stage 1. Time is lost; costs go up; the end product falls short of expectations. One reason to shorten the development of a method by which to make something is to move into an existing market for a product or service that is already well established, or will be. Speed in development of the process captures profit at the point where profit is easiest to capture. This track may be far more profitable than development of a new product or service. Examples: the video recorder, FAX, the CD player. Americans invented the video recorder and FAX, the Dutch invented the CD player, but all three have become Japanese products.
The moral of the story is clear. He that can make a product cheaper can take it away from the inventor. The course for America that was right in 1960—development of new products—may not now be right.[1]
The secret for reduction in time of development is to put more effort into the early stages, and to study the interaction between stages. Each stage should have the benefit of more effort than the next stage.
We content ourselves here to adopt a constant ratio of cost from one stage to the next. Specifically, let the cost of any stage be 1 − x times the cost of the preceding stage. Then if K be the cost of the opening stage (the 0-th stage, concepts and proposals), then the cost of the n-th stage would be
The total cost through the n-th stage would be
We note that the series in the brackets is merely 1/x expanded in powers of 1 − x. This is easily seen by writing x = 1 − (1 − x). This series will converge if 0 < x ≤ 1, which satisfies our requirements. Further,
Figure 15 Graphical display of the decrease in cost and effort, stage by stage, highest at the 0-th stage—ideas, concepts, imagination. The sequence is drawn as a geometric series, the cost of any stage being only 1 − x times the cost of the preceding stage.
For a numerical illustration, not as a recommendation, we set x = 0.2. Then the cost of 8 stages beyond the 0-th stage will be
The average cost per stage of all 9 stages (counting the 0-th stage) would be 0.481 times the cost of the 0-th stage.
The cost of the 8-th stage beyond the 0-th stage would be only 0.168 K, or about 116th the cost of the 0-th stage.
The 0-th stage is the foundation for the whole project. The 0-th stage is the place for ideas and brainstorming, to avoid so far as possible changes in direction and backtracking in later stages. Changes in direction cost more and more with each stage.
It is impossible to eliminate backtracking entirely, but under the scheme proposed here, backtracking will be reduced and will be more effective, the whole development speedier, with reduction of total cost. The job of the program manager is to manage all the interfaces, to manage the system as a whole, not to optimize any stage.
Each stage may have a leader, but everyone involved might well work in all stages. A marketing man might well be a member of the team, especially at the 0-th stage.
Suppliers and toolmakers should be chosen at the 0-th stage, and made members of the team. They will be ready and waiting with supplies and tools when development of the product reaches the last stage. They will contribute to every stage, including the 0-th stage.
The manager of the whole vehicle must be a member of the team for development of an engine.
It will be necessary for top management to block the privilege of anybody in top management or in any other level to come along at the end of the line with a bright idea. A bright idea belongs in the 0-th stage, not in the last stage.
The system of development must be managed. It will not manage itself.
Example
As I understand it, the manager of Ford’s maker of transmissions at Batavia increased effort and cost on the initial stage, with the aim to improve the uniformity of castings before work was done on them. Results: this increase of effort at the start cut the cost of transmissions to half, and improved greatly the quality of the end product.
A word on current accounting practice in development
Costs associated with capital equipment for a new product or process will also follow a geometric decay, 1 − x in successive stages, even though traditional accounting practice will show the expense to be in the future. Current accounting practice reinforces the incorrect perception that decisions made during development are independent of future costs. One should remember that future costs include capital expenditures plus maintenance, operations, and losses suffered by customers.
Deming, W. Edwards. The New Economics for Industry, Government, Education, third edition (p. 92-96). MIT Press. Kindle Edition.
[1] Taken from Harper’s Magazine, March 1992, p. 16, which in turn is taken from Lester C. Thurow, Head to Head, The Coming Economic Battles Between japan, Europe, and America (William Morrow, 1992).
Perspective
A few years ago, I attended an innovation conference in New York City. One of the presenters asked a group of over 100 strategy and innovation senior executives from Fortune 1000 companies, “if you are familiar with Stage-Gate™, raise your hand.” 96% of the attendees raised their hands. When the presenter asked how many use Stage-Gate™, 85% raised their hands. Finally, the presenter asked, “for those who are using Stage-Gate™, raise your hand if you are satisfied with how it’s working for you,” 30% raised their hands.
Two thirds of these Fortune 1000 executive leaders were not satisfied with the processes they owned, yet they continued to follow the Stage-Gate cookie-cutter approach without critical understanding of how to improve their NPD system or working with their teams to do so.
Conclusion
In order to launch higher value products faster, it’s as straightforward as changing from an operating culture to a knowledge growth culture, so the organization builds the capability and capacity of changing customer value, process, or a combination of the two. This requires a leadership shift. Should companies have ingrained cultures where knowledge building is part of their DNA? Of course they should, and the great companies do. But most don’t. This is a travesty because the loss to shareholders and frankly, to society, is immense.
By focusing on knowledge growth that is directly tied to the purpose of the business, executive leaders will get highly engaged and empowered people. Ingraining knowledge-building as a transformation objective, and executing on it, separates growth leadership companies from operationally managed companies. This is the key difference to growth acceleration, because the difference causes an increase in the slope of the growth curve and it compounds year after year after year.
In the Lean community, a question is often asked—is Lean about a way of thinking or a set of methods and tools? It’s clearly about a way of thinking with the support of methods, tools, and automation. The same holds for launching higher value products faster.
About Pivotal Innovation
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[1] Taken from Harper’s Magazine, March 1992, p. 16, which in turn is taken from Lester C. Thurow, Head to Head, The Coming Economic Battles Between japan, Europe, and America (William Morrow, 1992).
[1] Taken from Harper’s Magazine, March 1992, p. 16, which in turn is taken from Lester C. Thurow, Head to Head, The Coming Economic Battles Between japan, Europe, and America (William Morrow, 1992).