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Avoiding Product
Development Risk is Very Risky!
Does your
organization know how to manage NPD risk? |
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Product development, at its core, is risk management. Lets face it, many products fail. And many projects are delayed as teams take "corrective" actions to match product attributes with market needs. Yet, it is my belief, no more than one quarter of all product development managers and their teams truly
understand the risk their projects confront. I say this based on nearly twenty years of experience dealing with NPD teams and using quantitative techniques to review their projects. I do not mean to suggest that these individuals are not bright, hardworking, or dedicated. I am simply suggesting that most teams and projects managers are
not aware of the risks
associated with their projects. Teams will execute against what knowledge they have. A detailed understanding of risk, unfortunately, is not often within this knowledge.
Good project management needs to understand risk-benefit tradeoffs for both individual projects and portfolios of projects. The challenge is to do this in the unbelievable clutter of facts, insights, assumptions, uncertainties, politics, market dynamics, organizational culture, and individual personalities. Teams face the task of sorting through what's important and what's not, in judging uncertainties and possibilities, and in determining which actions are doable and which are problematic. Obviously assessing product development risk is not a trivial task. Some might argue that it is too complicated and not worth the effort. But smart
NPD risk assessment can be
easy to conduct and is very much worth the effort. |
10 Fundamental Rules of NPD Risk Management |
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1 |
Risk is a given |
All product development projects have risk. Without risk, there is likely to be no reward, and avoiding risk is a surefire way to avoid reward. Good project management recognizes that product development has risk. It is a given.
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2 |
Risk is measurable and manageable |
Tools and methods can help measure risk. But it takes people… their insights and actions… to manage and mitigate risk. Adept project managers assess project risk and then address the most critical areas of risk.
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3 |
Risk can be hidden |
Assumptions underlying new product development projects often obscure risk. Smart managers have a clear understanding of project assumptions and their rationale. Candid dialogue by team members to test all assumptions is essential to good project management.
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4 |
Risk management requires a collective understanding |
Open communication about project risk is the foundation of NPD risk management. Communication across functions, and up and down a hierarchy, enables a common understanding of risks, project opportunities, and the path forward for all involved.
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5 |
Disciplined execution enables risk mitigation |
Sharp project descriptions, objectives, and value propositions --- coupled with good processes --- help greatly to mitigate risk and speed rewards. These elements of new product development project management help direct and accelerate collective actions.
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6 |
Focused diversity is highly desirable |
Portfolios of projects deliver rewards more consistently. Smart product development portfolios will amplify rewards. The gains from good portfolio management can greatly offset the weaknesses and uncertainties of a few individual projects.
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7 |
Systemic risk
is significant |
Organizations, their strategies, and their decisions contribute both positively and negatively to the risk of individual NPD projects. Insightful top management will address common risks that cut across a portfolio of projects. Intelligent actions directed across a portfolio will have a multiplier effect in realizing gains.
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8 |
Experience enables economic Risk Management |
Experience and knowledge in NPD risk management improves project and portfolio returns by speeding good insights and driving appropriate actions. Smart NPD management recognizes and exploits the economic value of experience and knowledge in NPD risk management.
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9 |
Too little risk, just like too much risk, requires correction |
Portfolios with either too much risk or too little risk can induce corrective actions. Good product development management will choose responses to risk based on the situation, not just pushing the same approach harder. Simply adding and subtracting project, while easy to do, it not always the best action. Good analysis of risk is requisite to the best corrective actions.
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Risk mitigation is best
addressed at project starts |
Almost all teams eventually build a common understanding of the specific risks underlying a project. Good project management should seek to gain this understanding very early in the project's life. Waiting too late in the development cycle simply increases the cost of corrective actions and delays commercial benefits. Good NPD management deliberately assesses risk very early in the life of projects.
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Each of three methods can be used in new product development risk assessment (See Side Box). The quickest --- and in my opinion, the best --- is the comparative model approach. Teams simply need to fill in the appropriate surveys. An administrator uses the team's input to generate reports comparing the project to a larger number of previously executed product development projects. These reports, quite revealing by themselves, also provide the basis for the team dialogue needed to tag underlying issues. Fast iterations of the survey and comparison drive a common understanding of key issues and potential actions. Many organizations have implemented this approach
with our tool NPD RiskAssessor. |
NPD
RiskAssessorTM
The Adept Group has driven the use of comparative models in product and portfolio risk assessment. The algorithm, upon which the software is based, is very powerful. It is a mathematical representation of
critical factors influencing the likelihood of success or failure of new product development projects. Through NPD
RiskAssessor, the algorithm reveals the degree of influence on success from each factor. This in turn enables a team to spot what issues are affecting their project negatively and to rank-order these issues. This also enables the team to address the negative influences with specific actions, and thereby mitigate specific risks.
NPD RiskAssessor is simple in
use, but highly effective in results.
Over the years, The Adept Group has made many advances in terms of the algorithm, the software, and its use/methodology within the organization.
NPD RiskAssessor comes in three forms:
- Online surveys with analysis and report documents delivered via the internet;
- In person, on-site, team process facilitation;
and
- Site and enterprise licenses along with facilitator training.
If improving new product development effectiveness is important in your organization, strongly consider learning more about NPD RiskAssessor. Project teams know that they need to avoid failure. The key is to enable the team to see where the risk is coming from. There are different approaches for doing so. The easiest and most direct way, though, is through an algorithmic model. Whether in-person or online,
NPD RiskAssessor will move teams toward faster success.
To learn more simply contact us directly or go
to: NPD RiskAssessor
Please request a demo.
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Three
Approaches to Product Development Risk Assessment
1. Nominal Group Processes
This is a method conducted during a group meeting, in which individuals carry out dialogue, giving rapid feedback until a general consensus or agreement is reach. Faith is the collective understanding and insights of the group. Dominance of individuals is "normalized" through quick, facilitated feedback.
2. Probabilistic Models
This is a mathematical technique often referred to as "Monte Carlo simulation". Here team members develop consensus of the 'profile of outcome' of all contributing elements to a project. For example, a bell-shape curve leaning to the left may be agreed upon as the profile of outcome for sales or revenue. All factors are profiled in this way and then the model 'simulates' the likely outcome, which in turn reflects the aggregate risk of the project.
3. Comparative Models
This is another mathematical approach to risk assessment. This technique compares a project to a large history of previous launched project. It does this much like a bank does when an individual seeks a loan. In the loan process, the bank collects information about the loan applicant: income, credit rating, asset value, education, etc. It simply plugs these values into an algorithm that compares the loan application to precious loans to see the likelihood of success… what the back really wants to know. |
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Best Regards,
Paul O'Connor
The
Adept Group Limited, Inc.
Tel: 904-273-5319
www.adept-plm.com
Focused on Productivity in New
Product Development
Brief Bio on Paul O'Connor:
Paul O'Connor is an expert in the fields of New Product Development
Productivity. He has conducted assignments, implementation initiatives
and benchmarking activities with such firms as Akzo-Nobel, SBC,
Hercules, Shell Chemical, Procter & Gamble, Black & Decker,
L & F Products, DuPont, Polaroid, Kraft, Raychem, Bausch &
Lomb, Exxon, Nabisco, Ameritech, Corning, Dow, Eastman Chemical,
Pitney Bowes, Lucent Technologies, S.C. Johnson, Eaton, US West,
Calgon Carbon, Milliken, Reynolds Metals, Kodak, Mead Paper, AT&T,
Shuford Mills, General Electric, McNeil Labs, Blue Cross Blue Shield,
Uniroyal Chemical, DuPont-Dow Elastomers, Sprint, UPS, Ashland,
Johnson & Johnson, AlliedSignal, Praxair, Senco and Stanley
Tools.
Mr. O'Connor is Managing Director and principal shareholder of The
Adept Group. Paul is also Past-President of the Product Development
and Management Association, and teaches Portfolio Management for
PDMA and the Institute for International Research. More
RiskAssessorTM
is a trademark of The Adept Group Limmited, Inc.
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