Fourth week of the course on Operations Management Master's program Quality and Operations Management has focused on product development. This is according to me perhaps the most interesting part of the master's program, perhaps because I have a history of having developed EverTee, eternity tee for golf verdict . During the week we had a guest lecture by the SCA, has been at Volvo 3P and solved a Harvard Business Review case studies on product development (Le Petit Chef).

Dilemmas in product

Product development, or at least strategy and portfolio theory in product development, has a lot to make tradeoffs. Organizations are constantly faced with product development dilemmas. Typical examples of dilemmas in product development are:

• What projects to be developed - in a mature organization, it is often the case that the number of projects exceeds the number of available resources. Many organizations make the mistake of having too many projects in the portfolio at the same time, leading to missed deadlines. Another mistake is to allow each engineer to be on too many projects. Classic in product development, Wheel Wight & Clark (1992), shows that the optimal number of projects for an engineer to attend at the same time is two. Then the engineer switch between projects when any of the projects are stationary. At the same time not too much of the time spent on meetings and non-value-added time.
  

  Resource utilization in the number of parallel project

• If the product is manufactured internally or externally
• When a product shall be released from R & D? Sent -> competitors get ahead; early -> for bad product.

Time, frequency, focus and strategy for where and how they must be manufactured (sourcing) is usually mentioned as four key dimensions of product strategy. With a focus means that the product mix should not be so broad that products kannibaliserar on each other.

Product Portfolio Management - product portfolio management

Scientists today agree that portfolio management can not only be made after a financial perspective. Several studies have shown that this leads to ineffective results. Many companies are now estimates of such repayment or present value of their projects and then take the decision after the project has the best numbers. Financial estimates are of course always speculation as they rely on a number of uncertain assumptions.

A far better approach to portfolio management, ie to select their projects in the portfolio, is to use several different methods for assessing the projects. Cooper, Edgett and Kleinschmidt (1999) have proposed that the portfolio should be selected along any project that best fits with its strategy, has a good balance and is financially viable.

Strategy for portfolio management

Strategy for the product portfolio

Volvo AB has a three-pronged strategy that has chosen to focus on safety, quality and environment. If their product portfolio to be good from a strategic perspective, so all the elements of the strategy is reflected in the projects in the portfolio. If Volvo says that the three perspectives of safety, quality and environment equal weight is 1/3 of the projects consist of improvements in each area. As it stands today, most of Volvo's portfolio in environmental research thus is their main policy dimension.

The balance of the product portfolio

In some dimensions are important to product portfolio is in balance. Such a dimension such as time to market. In contrast to profitability perspective, where you want to select the projects with the highest profitability, wish it when it comes time to market, selecting projects as widely as possible. It should be a balance between long and short term projects.

Another dimension where there should be a balance is in the type of project portfolio contains. The portfolio include a balance of small improvement projects, new platform projects, breakthrough projects (in areas where the company has not previously served), and pure research (where the exact use of the developed technology is unclear). However, it should also be a balance between projects that develop products and projects that develop processes for manufacturing products. Product and process development are equally important!

Financial viability of the product portfolio

Financial viability is conveniently measured by return on investment, ROI = profit / investment, as in the case of product development can be translated to:

ROI = net present value of the investment / cost of engineering hours [%]

Credit models are common to determine the product portfolio

It is common points models are used for weighting the different dimensions to each other. It is important that the process is as objective as possible so that scores are not adjusted retrospectively to change PORTFOLIO composition. Score weighting to be determined along the three dimensions and then stand firm.

References

Clark. K. B & Wheelwright. S. C. (1992). Revolutionizing Product Development - Quantum Leaps in Speed, Efficiency, and Quality. New York: The Free Press

Cooper. RG, Edgett. SJ & Kleinschmidt EJ (1999) New Product Portfolio Management: Practices and Performance. J Prod Innov Manag 1999; 16:333-351