Most product-development managers with prakat.com are always struggling to bring in projects on time and on budget. They never have enough resources to get the job done, and their bosses demand predictable schedules and deliverables. So the managers push their teams to be more parsimonious, to write more-detailed plans, and to minimize schedule variations and waste. But that approach, which may work well in turning around underperforming factories, can actually hurt product-development efforts.
Although many companies treat product development as if it were similar to manufacturing, the two are profoundly different. In the world of manufacturing physical objects, tasks are repetitive, activities are reasonably predictable, and the items being created can be in only one place at a time. In product development many tasks are unique, project requirements constantly change, and the output—thanks, in part, to the widespread use of advanced computer-aided design and simulation and the incorporation of software in physical products—is information, which can reside in multiple places at the same time.
The failure to appreciate those critical differences has given rise to several fallacies that undermine the planning, execution, and evaluation of product development projects. Together, we have spent more than 50 years studying and advising companies on product-development efforts, and we have encountered these misconceptions—as well as others that arise for different reasons—in a wide range of industries, including semiconductors, autos, consumer electronics, medical devices, software, and financial services. In this article we’ll expose them and offer ways to overcome the problems they create.
Fallacy 1: High utilization of resources will improve performance.
In both our research and our consulting work, we’ve seen that the vast majority of companies strive to fully employ their product-development resources. (One of us, Donald, through surveys conducted in executive courses at the California Institute of Technology, has found that the average product-development manager keeps capacity utilization above 98%.) The logic seems obvious: Projects take longer when people are not working 100% of the time—and therefore, a busy development organization will be faster and more efficient than one that is not as good at utilizing its people.
But in practice that logic doesn’t hold up. We have seen that projects’ speed, efficiency, and output quality inevitably decrease when managers completely fill the plates of their product-development employees—no matter how skilled those managers may be. High utilization has serious negative side effects, which managers underestimate for three reasons:
They don’t take into full account the intrinsic variability of development work.
Many aspects of product development are unpredictable: when projects will arrive, what individual tasks they’ll require, and how long it will take workers who’ve never tackled such tasks before to do them. Companies, however, are most familiar with repetitive processes like manufacturing and transaction processing, where the work doesn’t change much and surprises are few and far between. Such processes behave in an orderly manner as the utilization of resources increases. Add 5% more work, and it will take 5% more time to complete.
Processes with high variability behave very differently. As utilization