How can having too many ideas be bad for your new product development success; it sounds counterintuitive doesn’t it? Well, the problem isn’t actually the number of ideas generated. The problem is allowing too many of them into the new product development process simultaneously. Previously, I’ve written about how multi-tasking hurts individual productivity. But it applies at the portfolio level too. Too many projects creates unnecessary delays in cash flow and actually increases your risk. I’ll also share an approach that you can use to manage your pipeline.
Let’s start with an example:
- You have 2 new product ideas
- Both can generate $1 million a year in cash flow
- They have an equal probability of success
- Each idea will require the efforts of 10 people for six months (60 work months)
- You have 10 people available to work on these projects
How should You prioritize our resources for these projects? Frequently we compromise and put five people on each of them. Let’s compare two scenarios to see why there’s a better way.
Scenario 1 – You compromise and split the effort so that you can do both at the same timely. For now, we’ll ignore any shared resource constraints that might actually overlap and result in the two projects taking longer. With five people working on each idea, both programs are completed and ready for market launch at the end of 12 months.
Scenario 2 – Alternatively, in a focused, sequential approach, you put all 10 available people on Project A and launch in six months. It’s possible that you could finish even sooner since individual productivity increases when you eliminate multi-tasking; we’ll ignore that for the time being. After finishing Project A at the end of the first six months, the team then moves over and spends the next six months on Project B. It’s ready for market launch at the end of the twelfth month.
So what’s the difference? It still takes twelve months to finish the two projects.
The important difference is that in a focused approach, one product launches six months earlier and generates an extra $500,000 during that period. That’s half the time it would have taken in Scenario 1, without any delay on the second project. On average, our two projects get to market in nine months. That’s a 25% improvement in time to market with no additional resources or costs and an increase in cash flow. However, most companies try to run far more than two projects at the same time. Make this same comparison with 5 projects and you are close in on a 50% reduction in time to market (18 months vs. 30 months) not to mention the boost in early cash flow. One industrial products client that tried this approach moved from 25 projects down to five projects. As a result, they reduced project cycle time from 36 months down to less than a year: more than a 65% reduction in time to launch with no additional resources. And they more than doubled their new product growth rate.
One of the biggest concerns I hear when discussing this approach with management teams is risk management. “We can’t put all of our eggs in one basket.” In fact, a more sequential, focused approach reduces risk. Getting some projects done sooner reduces the market risk of competitors getting to market first. Additionally, delaying the commitment point on the next opportunity adds flexibility. In our example, if the market for Project B were to erode before you finished Project A, you could move to Project C. In this case, the sequential approach saves us from working on a troubled project by allowing us to reprioritize based on the latest and best information.
Simple Bottom Line
Letting too many good ideas into your new product process at the same time has just the opposite effect that you would hope. It slows time-to-market and increases new product risk. Instead, focusing your resources on fewer projects sequentially, rather than more projects simultaneously, results in earlier cash flow by completing most of the projects earlier and none later. Additionally, it increases flexibility and reduces risk since you can delay making resource commitments for any projects that haven’t started.
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