Value Creation in the! Product Development Process ! January 31, 2002!
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LAI Product Development Workshop Value Creation in the! Product Development Process! January 31, 2002! Presented By! Jim Chase! S.M. in Aero/Astro, MIT! ! ! Advisors! Professor John Deyst! Professor Edward Greitzer! Dr. Hugh McManus! Research sponsored by the Lean Aerospace Initiative, MIT! Lean! Aerospace! Initiative! Research Objective LAI Value Creation Model! Value! Identification! Value! Proposition! Value! Delivery! Source: LAI, 2001! To define and analyze value delivery in the product development (PD) process! 2 - PD Jim Chase - 013102 © 2001 Massachusetts Institute of Technology! Introduction! Lean! Aerospace! Initiative! Motivation • To improve the PD process, one must understand and quantify value creation ! • Value is difficult to define! • Models can handle complex PD processes, but do not consider value! • Methodology for assessing value creation offers potential to guide PD process enhancement! 3 - PD Jim Chase - 013102 © 2001 Massachusetts Institute of Technology! Introduction! Lean! Aerospace! Initiative! • Part I: !Background! • Part II: !Framework! • Part III: !Data Collection! • Part IV: !Results! 4 - PD Jim Chase - 013102 © 2001 Massachusetts Institute of Technology! Outline Lean! Aerospace! Initiative! Process Value Product-Centered! Process-Centered! Value is a measurement of the usefulness, importance, availability, and cost of the product. (Slack, 1998)! 1961! Miles, Kaufman, Shillito & DeMarle, Womack & Jones, Slack! Value is anything that directly contributes to the form, fit, or function of the build-to package. (LAI, 1998)! 1998! McManus, Browning, Deyst! 2001! The definition of value in product development has evolved from being product-centered to process-centered.! 5 - PD Jim Chase - 013102 © 2001 Massachusetts Institute of Technology! Background! Lean! Aerospace! Initiative! Outline Framework! • Part I: !Background! • Part II: !Framework! • Part III: !Data Collection! • Part IV: !Results! Literature review and early site visits! 6 - PD Jim Chase - 013102 © 2001 Massachusetts Institute of Technology! PD Framework for Value Creation Lean! Aerospace! Initiative! Process Value! Resources! Task 1! Schedule! Info.! Resources! Risk! Task 2! Info.! Resources! Cost! Performance! Risk! Product Value! Task n! Info.! Risk! Product! 7 - PD Jim Chase - 013102 © 2001 Massachusetts Institute of Technology! $$! Framework! Extended Framework for Value Creation Lean! Aerospace! Initiative! ! Tasks! ! Customer! Value! ! Intermediary! Value! ! Shareholder! Value! ! ! Resources! Environment! ! Time! Allocation! ! Knowledge! ! ! Communication! Effectiveness! People! ! ! Team! Organization! Tools! ! Management! ! Schedule! ! Cost! ! Performance! ! Employee! Value! Create! Facilitate! Deliver! Value is the contribution of tasks, resources, environment, and management to the PD process.! 8 - PD Jim Chase - 013102 © 2001 Massachusetts Institute of Technology! Framework! Lean! Aerospace! Initiative! Task Value Perspective! Attribute: Task contributes to…! Enterprise Value! V1. Functional performance of end product! Customer! V2. Definition of processes to deliver product! V3. Reduction of risks and uncertainties! V4. Form of final output! Intermediary! V5. Facilitating communication! V6. Enabling other tasks! Shareholder! Employee! Government, supplier, end-user, etc.! V7. Cost and/or schedule emphasis! V8. Learning or resource improvement! V9. Employee job satisfaction! V10. Other! Tasks are the principal building blocks of value.! 9 - PD Jim Chase - 013102 © 2001 Massachusetts Institute of Technology! Framework! Lean! Aerospace! Initiative! Resource Value Resource Attributes! People! Diversity! Empowerment! Mentorship! Leadership! Tools! Knowledge! Proficiency! Knowledge application! Information gathering! Resource value is the integration of people and tools to create organizational knowledge.! 10 - PD Jim Chase - 013102 © 2001 Massachusetts Institute of Technology! Framework! Lean! Aerospace! Initiative! Environmental Value Environment Attributes! Knowledge application! Time Allocation! Information gathering! Other activities! Technical work! Communication Effectiveness! Process related work! Team building! Team Organization! Geographic location! Office layout! Environmental value promotes value-added activities and effective communication.! 11 - PD Jim Chase - 013102 © 2001 Massachusetts Institute of Technology! Framework! Lean! Aerospace! Initiative! Management Value Goal! Cost, Schedule, and Performance ! (Browning, 1998; Deyst, 2001)! Cost! Success! Desired value! Reserve! Estimate & uncertainty! Perform.! Schedule! Failure! Probability! Management Attributes! Desired value! Reserve! Estimate & uncertainty! Desired value! Reserve! Estimate & uncertainty! Management value is the effective management of cost, schedule, and performance.! 12 - PD Jim Chase - 013102 © 2001 Massachusetts Institute of Technology! Framework! Lean! Aerospace! Initiative! • Part I: !Background! • Part II: !Framework! • Part III: !Data Collection! • Part IV: !Results! 13 - PD Jim Chase - 013102 © 2001 Massachusetts Institute of Technology! Outline Tasks Resources Environment Management Customer Value People Time Allocation Cost Risk Intermediary Value Tools Communication Effectiveness Schedule Risk Shareholder Value Knowledge Team Organization Performance Risk Employee Value Lean! Aerospace! Initiative! Data Collection ! ! Tasks! ! ! Customer! 1, 2 ! Value! People! ! ! Intermediary! 1, 2 ! Value! Tools! ! ! Shareholder! 1, 2 ! Value! ! Employee! Value! ! Resources! 2! Knowledge! 1 2 3 4 ! Environment! Management! ! 3! Time! Allocation! 4! ! 3! Communication! 4! Effectiveness! ! 5! Team! Organization! ! Cost! ! Schedule! 6! ! Performance! ! !15 work breakdown structures analyzed (1600+ tasks)! !110 surveys of academic research tasks! !80 industry interviews of PD resources! !59 surveys on time allocation and communication! 5 !3 brief case studies on the environments of successful teams! 6 !4 teams (235 tasks) analyzed by schedule completion! 14 - PD Jim Chase - 013102 © 2001 Massachusetts Institute of Technology! Data Collection! Summary of Industry Programs Visited Lean! Aerospace! Initiative! Organizations! Method of Data Collection! # of Programs! 1! 2! 3! 4! 5! 6! A! Commercial! 5! √! √! √! B! Commercial! 8! √! √! √! C! Commercial! 3! √! √! √! D! Commercial! 1! √! √! E! Government! 2! √! √! F! Government! 2! √! √! G Commercial! 1! √! √! I! 6! MIT! 15 - PD Jim Chase - 013102 © 2001 Massachusetts Institute of Technology! √! √! √! √! √! √! √! Data Collection! Lean! Aerospace! Initiative! Outline • Part I: !Background! • Part II: !Framework! • Part III: !Methodology! • Part IV: !Results! 16 - PD Jim Chase - 013102 © 2001 Massachusetts Institute of Technology! Tasks Resources Environment Management Customer Value People Time Allocation Cost Risk Intermediary Value Tools Communication Effectiveness Schedule Risk Shareholder Value Knowledge Team Organization Performance Risk Employee Value Lean! Aerospace! Initiative! Industry Tasks (1 of 2) Work Breakdown Structures Task contributes to…! V1. Functional performance of end product! Customer Value! V2. Definition of processes to deliver product! V3. Reduction of risks and uncertainties! 14 WBS’s (1600 tasks) evaluated for value(s) V4. Form of final output! Intermediary Value! contributed to program! V5. Facilitating communication! V6. Enabling other tasks! V7. Cost and/or schedule emphasis! Shareholder Value! Employee Value! Other Value! 17 - PD Jim Chase - 013102 © 2001 Massachusetts Institute of Technology! V8. Learning or resource improvement! V9. Employee job satisfaction! V10. Other! Results! Lean! Aerospace! Initiative! Industry Tasks (2 of 2) Analysis of WBS’s • 86% of tasks in high-level (program) WBS’s address customer value! • At lower level (process WBS), more tasks are enabling or supplemental! • Correlation of WBS breakdown with observed lean awareness shows more emphasis on communication and cost/schedule tasks! 18 - PD Jim Chase - 013102 © 2001 Massachusetts Institute of Technology! Lean! Aerospace! Initiative! Environment Time Allocation 20 14 12 10 8 6 4 2 19 - PD Jim Chase - 013102 © 2001 Massachusetts Institute of Technology! W ng er th eb re si ow g in ad Re er th O Br Li m Co m PD value than improving tasks.! tu te ic un ee M Thus, improving communication effectiveness may provide more ra at Em io ai s l n 0 ti This result suggests at least a 3:1 ratio of communication versus isolated work! Managers (n = 23) 16 ng • 26% on “other”! Engineers (n = 23) 18 Time Allocation (hrs/wk) Engineering Time! • 33% on meetings! • 14% on email! • 9% on web! • 5% reading lit.! O ! Engineers: 45 hrs/wk! Managers: 50 hrs/wk! Results! Lean! Aerospace! Initiative! Management (1 of 3) In-Process Task Completion Estimated vs. Actual Completion (Gantt chart approach)! Progress in PD is difficult to estimate accurately.! 20 - PD Jim Chase - 013102 © 2001 Massachusetts Institute of Technology! Results! Lean! Aerospace! Initiative! Management (2 of 3) PD versus Manufacturing Comparison of Product Development to Manufacturing! R2 = 0.004! R2 = 1.00! Toyota, adapted from Spear & Bowen (1999)! 21 - PD Jim Chase - 013102 © 2001 Massachusetts Institute of Technology! Results! Lean! Aerospace! Initiative! Management (3 of 3) Task Completion Histogram of Product Development Task Completion! Early! On Time! Late! Data! Gantt Chart! 7%! 20%! 73%! 2 prgms, 106 tasks! EVMS! 15%! 49%! 37%! 2 prgms, 129 tasks! 22 - PD Jim Chase - 013102 © 2001 Massachusetts Institute of Technology! Results! Lean! Aerospace! Initiative! Outline • Part I: !Background! • Part II: !Framework! • Part III: !Methodology! • Part IV: !Results! Tasks Resources Environment Management Customer Value People Time Allocation Cost Risk Intermediary Value Tools Communication Effectiveness Schedule Risk Shareholder Value Knowledge Team Organization Performance Risk Employee Value Summary of Results! 23 - PD Jim Chase - 013102 © 2001 Massachusetts Institute of Technology! Lean! Aerospace! Initiative! Summary • PD value has shifted from product-centered to process-centered! • PD value may be decomposed into tasks, resources, environment, and management! • WBS Analysis! ! ! ! ! ! ! Variety of WBS’s suggests that there is no ! !single solution for defining value in PD ! ! Programs with lean awareness incorporate !more enabling tasks than traditional programs! • Comm. Survey! ! ! ! ! Time allocation data suggests that there is at !least a 3:1 ratio of communication versus ! !isolated work! • Task ! Completion-! ! ! !! Progress in PD is difficult to estimate accurately An EVMS approach contributes to more effective schedule mgmt. than solely using a Gantt chart 24 - PD Jim Chase - 013102 © 2001 Massachusetts Institute of Technology! Lean! Aerospace! Initiative! Value Creation in the Product ! Development Process! Presented By! Jim Chase! S.M. in Aero/Astro, MIT! ! ! Advisors! Professor John Deyst! Professor Edward Greitzer! Dr. Hugh McManus! Questions? Tasks Resources Environment Management Customer Value People Time Allocation Cost Risk Intermediary Value Tools Communication Effectiveness Schedule Risk Shareholder Value Knowledge Team Organization Performance Risk Employee Value Thesis located at LAI website: http://lean.mit.edu/Publications/ pub_db/files_public/TH_Chase.pdf! 25 - PD Jim Chase - 013102 © 2001 Massachusetts Institute of Technology!
