Systems Thinking – Investment in Product Development

I love basketball. In fact, my three sons all play. Two of my son’s teams have/had completely different cultures. One son’s team looked to win the game, but spend the minimum amount of energy they need to win. The other son’s team goes all out the whole game, fully investing in the game, in an attempt to win.

Product development is an investment. Although it is often managed and viewed as a something that needs expense management. In product development we have the classic tradeoffs. Phillips Corporation has a very nice way of prioritizing these tradeoffs. They call it QTF$. Quality — It’s the first tradeoff, but it’s not really a tradeoff. You have a quality threshold your product needs to meet, and there’s no negotiation about that. The other three, TF$, stand for Time, Functionality, and Cost. Time is the second most important of the tradeoffs. If your product is delivered on time, it positively impacts your entire customer base. If you withhold some Functionality to get the product out on time, it will negatively impact some small section of your market that relies on that functionality. If Costs are overrun; if the cost of the project or the build cost of the project itself fail to hit the target and go over, that effects you internally and doesn’t affect your customer base. So Phillips, from the standpoint of serving the customer, ranked order of the tradeoffs as QTF$.

Time is king and yet we get hung up on costs. We bring our classic business short-term focus to the system, product development, that’s concerned about growing our future. If you’re familiar with the work of product development guru Don Reinertsen, then you’re probably familiar with his theory of the cost of delay. On-time is the greatest lever for optimizing the return of investment in product development. Expense management in projects should be about measuring costs, not about squeezing them.

We recognize the investment nature of product development in our portfolio management where we require predictive ROIs. But how many of your companies follow through and actually check your investment by measuring the S-curve for your return. Very few, at least in my experience, because we are bound by linear process thinking, which ends as the project ends, as opposed to closed-loop systems thinking, which goes back and checks the results of our actions.

So of my two boys…the one who played on the team with a culture to conserve energy, they had a player who now plays in the NBA. None-the-less they lost as many games as they won. The team that goes all-out, they don’t have any NBA caliber players on that team. In fact, the best player on that team will play in Division 2 college ball next year, and yet that team wins five times as many games as they lose and they’re currently ranked #7 in the state.

When you make an investment, fully commit to the investment. The investment in product development is most carefully managed, and gives it’s greatest return, when you focus not on costs and expense, but rather on time.

Contact us to learn more about how Systems Thinking and the application of our Product Development Operating System can help your organization become more efficient, productive, innovative, and competitive.

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