MP3 Audio Version AvailableI recently received a question from a reader, named Eric, asking about the right balance between so-called incremental product development and breakthrough projects. That’s also a question I get all the time in my coaching work. Since striking the right balance is critical to speed-to-market in execution, I thought it was time for an article on the subject.
Obviously the answer to Eric’s question depends on a lot of different factors. But it is primarily a question of strategy and secondarily one of execution. The role of strategy is to guide how you focus your resources in order to achieve your top-level growth goals. So to get the right balance, you first have to look at your business and ask where your leverage is in terms of new product development.
New product resource usage can be classified lots of different ways, so it’s useful to go just a little deeper than incremental vs. breakthrough. Here’s one way I find helpful:
- Platform Development – New product lines offering significantly different benefits and maybe even using different technology than you already offer.
- Line Extension – New products extending your existing platform into new market segments or adding features and benefits for the existing segments. Line extensions can be critical to realizing all the value created by your platform developments.
- Cost Reduction – Projects to lower the cost to produce your product through some combination of design, material, and process work. Some cost reduction projects will be invisible to the end user. Others are borderline line extension projects and may actually be marketed as lower cost versions of your main products.
- Tactical Customization – Tweaking existing products for specific customers or market segments.
- Line maintenance – support required in manufacturing to maintain quality and supply.
Each type will be required at a different level depending on your company’s specific situation and the strategy you have chosen to address it.
For example, if your main product line is in a dying market, you will probably be focusing heavily on cost reduction and capacity rationalization to maintain margins against eroding volumes. At the same time, some portion of your resources should also be directed towards new platforms for adjacent markets where there is still growth potential.
However, after successfully launching a new platform, your efforts may be more focused on-line extension and tactical customization work required to extend the platform into under-served markets and customers in order to realize full value.
Cost saving and line maintenance will likely be part of the mix at any time as you ramp up volumes in the early stages and defend your cost position as time goes on.
So the answer to Eric’s question is that it’s all a matter of balance and the only right balance is the one that best addresses your current strategic position.
Of course, there’s also the matter of execution, without which no strategy can ever succeed. And there are two basic approaches to managing – either integrated or separated resource pools.
With either approach, new projects are pulled out of the backlog and moved into execution only after another project is finished. This pull approach limits work in process (WIP) and dramatically improves both speed and predictability—keep an eye out for an upcoming article using the dice game to show why this is so important.
With an integrated resource pool, you use the same talent pool regardless of project type. To achieve balance you set the cadence for project starts. For example, let’s say that you have decided that 1/3 of your resources will go to platform projects, 1/3 to line extensions and 1/3 to cost reduction and line maintenance. Further, let’s say that platform projects are 3 times as long as line extensions and 9 times as long as cost reduction and line maintenance. So the required cadence to achieve the desired 1/3-1/3-1/3 balance is:
- Platform
- Cost Reduction or Line Maintenance
- Cost Reduction or Line Maintenance
- Cost Reduction or Line Maintenance
- Line Extension
- Cost Reduction or Line Maintenance
- Cost Reduction or Line Maintenance
- Cost Reduction or Line Maintenance
- Line Extension
- Cost Reduction or Line Maintenance
- Cost Reduction or Line Maintenance
- Cost Reduction or Line Maintenance
- Line Extension
- Platform
- And so on
The cadence is a guideline, not a hard and fast rule, so it can flex with priorities. But deviate too often and it will be tough to maintain the desired balance.
However, I usually prefer to use separated resource pools for longer term and fast turn work. Following from the example above, you would use two-thirds of the resources as a pool for platform and line extension work and the remaining third for line maintenance and cost reduction work. Each pool would have its own backlog from which to pull the next project.
The downside of the separated approach is that you give up some flexibility. But in my experience, it is well worth it for the improved focus in execution. Additionally, you’ll often find that your engineers and scientists are better suited to working in one pool vs. another. I’ve had chemists who were only so-so on bigger development projects but performed like superstars in fast turnaround project work and vice-versa.
So Eric – thanks for your question. Balancing sustaining and breakthrough development is a matter of strategy and achieving the right resource allocation for your situation. But as with any strategy, execution is critical, so you also need to decide whether you will manage using a separated or an integrated resource pool and what your WIP limit should be for maximum speed and productivity.
