Productivity in Product Development
The conundrum of measuring productivity in product development
This publication is broken up into three sections:
TL;DR - For those wanting a quick take
Summary - For those wanting a bit more context and high level points
Article - Main body of work containing fully detailed article and explanations that you might want to consume over several readings
TL;DR
Measuring productivity in product development is challenging due to unique factors like dealing with unknowns, managing risk, and complex metric design.
To create a comprehensive framework, consider integrating three key approaches: the Logic Model for structured planning, Donald G. Reinertsen's economic principles, and Mik Kersten's Flow Framework.
The Logic Model helps clarify program goals and outcomes, adaptable to a product development context.
Reinertsen's principles focus on economic optimization, including quantitative decision-making, reducing batch sizes, and exploiting variability.
Kersten's Flow Framework advocates a shift to a product-oriented mindset, emphasizing flow optimization, value stream mapping, and continuous adaptation in the face of digital disruption. Integrating these approaches provides a holistic approach to measuring and improving productivity in product development.
Summary
Measuring productivity in the realm of product development, which includes software and hardware, is a challenging task. This summary distills the key points from the provided article and outlines the complexities involved and the proposed approaches for a comprehensive framework.
Challenges in Measuring Productivity:
Unique Context: Product development differs significantly from manufacturing, as it involves ambiguous issues and requires solid problem definition before a solution can be found. Unlike manufacturing's focus on reproducing a recipe, product development seeks to develop those recipes that can be replicated at scale.
Risk Assessment: Product development faces risk heuristics related to desirability (value and usability) and feasibility (technical feasibility) and viability (business viability). These factors must be considered when evaluating potential solutions.
Metric Challenges: Designing metrics for evaluating productivity is challenging due to potential manipulation and the need for accurate attribution, especially as organizations grow and become more complex.
Building an Integrated Framework:
The article proposes three key approaches to building a robust theoretical foundation for measuring productivity in product development:
The Logic Model: This framework, popularized by the W.K. Kellogg Foundation, offers a structured approach for planning, implementing, and evaluating programs. It defines inputs, activities, outputs, outcomes, and goals, aiding organizations in aligning their efforts with desired outcomes and tracking progress.
Principles of Product Development Flow (Donald G. Reinertsen): Reinertsen's principles emphasize an economic view of product development, promoting quantitative decision-making, reducing batch sizes, exploiting variability, managing queues, and optimizing flow. These principles offer a comprehensive framework for achieving better economic outcomes in product development.
Flow Framework (Mik Kersten): Kersten's Flow Framework advocates a shift from project-based thinking to a product-oriented mindset. It emphasizes optimizing the flow of work, value stream mapping, key flow metrics (velocity, time, load, efficiency), and continuous learning and adaptation.
Integration for a Holistic Framework:
In the ever-evolving landscape of product development, the quest to measure productivity is an ongoing challenge. We explore the intricacies and complexities that define this domain, from managing ambiguity to navigating risk and designing meaningful metrics.
This article underscores the potential for integrating these three approaches into a holistic and fuller-featured framework for measuring productivity in product development. This integration allows organizations to gain a comprehensive understanding of their development processes, make data-driven decisions, optimize their workflows, and maximize overall value and profitability.
In our journey, we will go deep on the three key pillars that form the foundation for a comprehensive framework: the Logic Model, which offers structured planning; Donald G. Reinertsen's economic principles, which provide an economic lens; and Mik Kersten's Flow Framework, ushering in a product-centric mindset.
In conclusion, the challenges of measuring productivity in product development are met with a call for developing and refining a comprehensive framework.
Article
Product development productivity
Recently McKinsey and Company published an article on how to measure software developer productivity. The McK & Co. article has produced a furious response from developers working in the software industry to the extent that leading developers, Gergely Orosz (Part. 1 of 2) and Kent Beck (Part 2 of 2) have responded with a structured critique of McKinsey & Company’s proposals in the article.
There is value to you, the reader, going through the above articles to get a sense of the issues at stake. To get the most out of my article it may be worthwhile to be familiar with the above articles.
I would like the focus of my article to be on the considerations that would need to go into developing a holistic and fuller featured framework on how to frame productivity within a product development context.
In this article I will not be looking at specific software developer frameworks or metrics like DORA or SPACE metrics. Instead, I will focus on the challenges of measuring productivity in a product development context and what needs to be considered when thinking about how to measure product development productivity.
The reason for my approach from my perspective is that software development falls into the the wider domain of product development which can encompass both hardware and software development. Similar challenges are faced by both product developers as well as software developers.
Why is measuring productivity in product developement so challenging
Without having a sound theoretical framework on the why, what and how we develop products it becomes really difficult to evaluate the success or failure of a product development team and their process.
Defining Productivity in Product Development - Compared to measuring productivity in a manufacturing context, product development teams are still in their infancy in terms of adopting and applying some important concepts. For example, what does being lean in a product development context mean, how do you meaningfully reduce waste or variance in a research and development context?
Product Development and dealing with Unknowns - Product development generally deals with highly ambiguous issues that require a solid problem definition before a solution can be produced. In manufacturing you are focused on reproducing a recipe with minimal variance whereas with the ‘fuzzy front-end of product development’ aka product design or research and development you are focused on developing the recipes that can be reproduced repeatably at scale later on.
Product Development Risk Heuristics - There are some heuristics you can use to decide if something is a ‘solution’. These heuristics need to pass through a few filters that will vary in importance across industries, maturity of a product line, service offering or concept:
How desirable is the solution, which can be further decomposed as per Marty Cagan and Co. into?
Value risk - This refers to the risk that the product or feature might not be something that customers or users will value or want, even if it's built and delivered perfectly. Essentially, will the customer buy it? Or, in the case of a free product, will they choose to use it?
Usability risk - This risk pertains to the possibility that users might find the product too difficult or not intuitive to use. Even if the product provides value, if users can't figure out how to access that value due to poor usability, it will fail.
How feasible is the solution?
Technical feasibility - This is about the technical challenges. Can we build what we are considering? Do we have the right technology, tools, skills, and capacity to make it happen?
How viable is the solution?
Business model and/or financially viability - This considers whether the proposed product or feature aligns with the business model or the business's objectives. It asks if the business can sustainably support the product, monetize it, or achieve desired strategic goals with it.
Metric Design - The challenge with metrics design is how they can be manipulated especially when they are used for evaluating performance and deciding on who gets promoted or exited and how performance incentives are allocated?
Metric Attribution - When an organization is young and small it is clear to see the impact an individual or team has on an organisation’s performance. As an organisation grows and has more business functions with increasing levels and hierarchies unless thoughtful consideration is paid to organizational design and aligning individuals, teams, and functions to Value Steams, trying to understand performance becomes really challenging and instead devolves into an optics game.
Conceptual Background to build an integrated framework
There are three approaches that I consider relevant in building a sound theoretical footing.
I will be referring to and integrating work from the Kellog Foundation (The Logic Model), Donald G. Reinertsen (Principles of Product Development Flow) and Mik Kersten (From Project to Product) respectively.
Logic Model – It is important to begin with the Logic Model as the foundational framework. The Logic Model provides the structure for planning, implementing, and evaluating programs. It defines inputs, activities, outputs, outcomes, and goals. See my previous article here on how the Logic Model can be used to frame Data & Analytics effort.
The Logic Model framework, popularized by the W.K. Kellogg Foundation, is a structured approach used for planning, implementing, and evaluating programs or interventions. It provides a visual representation of the logical relationships between program components, activities, outputs, outcomes, and goals. The framework helps organizations clarify their program's goals, activities, and expected outcomes, making it easier to measure the program's effectiveness and impact.
The Logic Model typically consists of the following components:
Inputs: Resources such as funding, staff, equipment, and materials that are dedicated to a program.
Activities: Specific actions or interventions carried out using the inputs. These activities are the steps taken to achieve the program's objectives.
Outputs: Direct and tangible results of the activities. Outputs represent the products or services that are produced because of the program's efforts.
Outcomes: The changes or benefits that result from the outputs and activities. Outcomes are categorized into short-term, intermediate, and long-term outcomes, reflecting the different levels of impact over time. You can think of leading indicators and lagging indicators as fitting into the Outcome bucket.
Goals/Objectives: The overarching aims or purposes of the program. Goals are usually broad and aspirational statements that the program seeks to achieve.
The Logic Model framework helps organizations align their efforts with their desired outcomes, track progress, and make informed decisions about program improvements. It also serves as a communication tool, allowing stakeholders to visualise a program's theory of change and expected impact.
As an aside Josh Seiden and Jeff Gotthelf mention the Logic Model in in their book called Lean UX. This model has already been leveraged by some in a product development context to an extent.
Two modern product development frameworks
Principles of Product Development Flow
Donald G. Reinertsen's principles from his book " The Principles of Product Development Flow: Second Generation Lean Product Development” emphasises the economic aspects and value-driven decision-making of product development. He recognises that optimizing flow in product development requires aligning activities with business value, customer value, minimizing waste and taking advantage of variability. See my previous article here on how taking advantage of bounded variability within a product development context can create business value.
"The Principles of Product Development Flow" by Donald G. Reinertsen emphasizes a more flexible, data-driven approach to product development that aims to increase efficiency and decrease waste.
Here are the key themes based on Reinertsen's work
Quantitative decision-making: Reinertsen argues that the traditional qualitative approach of first-generation Lean doesn't provide a sufficient framework for managing the complex trade-offs in product development. Instead, he promotes quantitative decision-making and the use of economic models to anchor rigorous decision-making.
Batch size reduction: Reinertsen identifies large batch sizes as a significant source of waste and inefficiency in product development. He recommends reducing batch sizes to improve flow and reduce queues.
Exploiting variability: Unlike traditional Lean approaches that aim to eliminate variability in a manufacturing context, Reinertsen suggests that variability can be exploited to improve performance in product development. He argues that variability can create opportunities for innovation and advantage.
Understanding and managing queues: Reinertsen discusses the economic cost of queues in product development and provides strategies for managing and reducing them.
Fast feedback: The book emphasizes the importance of fast and reliable feedback to prevent problems from being propagated down the line, which increases the cost and time required to fix them.
Decentralised control: Reinertsen suggests that centralized decision-making is often too slow and rigid for the fast-paced and unpredictable environment of product development. He proposes a decentralized model where decisions are made by the people who are closest to the work.
Synchronization and flow control: Reinertsen offers techniques for synchronization and flow control to create a smooth and efficient product development process.
The use of WIP (Work in Progress) constraints: Reinertsen explains how limiting WIP can help balance the capacity and demand of a system, thus improving the flow.
These themes are built on principles derived from a wide range of disciplines, including lean manufacturing, queuing theory, economics, and computer science. Reinertsen's work stands as a seminal guide to advanced product development flow concepts.
Each of the above themes covered by Reinertsen could be a post in and of themselves. I want to zero in on Donald G. Reinertsen's comprehensive economic view of the product development process. This perspective is central to making decisions that yield the best economic outcomes rather than just following traditional best practices.
Deeper dive into the five key economic objectives from his framework
Cycle Time (Duration):
Definition: Cycle time refers to the time it takes for a product to move from the initial concept or design phase through to completion.
Significance: Shorter cycle times can lead to faster time-to-market, which can offer competitive advantages, especially in industries where technology or consumer preferences evolve rapidly. Reducing cycle time can allow for quicker feedback loops and iterative improvements.
Economic Impact: A reduced cycle time can lead to earlier revenue realization, can reduce the costs associated with prolonged development periods and reduce working capital requirements.
Product Cost:
Definition: This relates to the cost of producing the actual product, encompassing materials, labor, overheads, and any associated costs required to bring the product to market.
Significance: Managing and optimizing product costs is vital to ensure that the product can be competitively priced and still yield the desired profit margins.
Economic Impact: Products that are expensive to produce might need to be priced higher in the market, which can affect demand and overall profitability. Conversely, products that manage to maintain high-quality standards while reducing production costs can achieve better profit margins.
Product Value:
Definition: This pertains to the perceived value of the product in the eyes of customers. It includes functional benefits, emotional connections, brand associations, and more.
Significance: High product value can justify premium pricing, enhance brand reputation, and foster customer loyalty.
Economic Impact: A product that offers significant value can command better market share, higher pricing, and increased revenues. Conversely, products perceived as low-value might struggle in the market, regardless of their production costs.
Development Expense:
Definition: Development expense encompasses the costs associated with the research, design, testing, and refinement phases of product development.
Significance: While investing in development is crucial, it's equally essential to manage and optimize these expenses to ensure they don't outweigh the potential profits once the product is in the market.
Economic Impact: High development expenses can extend the time it takes to achieve a return on investment. Being economically efficient in the development phase can lead to better overall profitability for the product.
Risk:
Definition: Risk in product development refers to the potential for undesired outcomes, which might include product failures, market rejection, or unforeseen development challenges.
Significance: Managing and mitigating risks is crucial to ensure that the product development process is smooth, and the end product meets market and organizational expectations.
Economic Impact: High risks that materialize can lead to significant financial losses, brand reputation damage, and lost opportunities. Proactively managing risks can prevent costly mistakes and enhance the predictability of economic returns.
In summary, Reinertsen's economic framework underscores the importance of viewing product development through an economic lens. By understanding and optimizing these five key economic objectives, organizations can make decisions that maximize the overall value and profitability of their product development efforts.
From Project to Product
Mik Kersten's book "Project to Product: How to Survive and Thrive in the Age of Digital Disruption with the Flow Framework" introduces the Flow Framework as a novel approach to understanding and managing software and hardware delivery in the face of digital disruption. The key themes of the book can be summarized as follows:
Shift from Projects to Products: The book emphasizes the need to shift from traditional project-based approaches to a product-oriented mindset. Instead of focusing on completing projects, organizations should align their efforts towards continuously delivering value through products.
Flow Efficiency: The Flow Framework places a strong emphasis on optimizing the flow of work throughout the software and hardware delivery process. This involves identifying and eliminating bottlenecks, reducing delays, and ensuring a smooth progression of work from concept to customer.
Value Stream Mapping: Kersten uses the concept of Value Stream Mapping, which involves visualizing the end-to-end process of delivering software or hardware. By mapping out each step and identifying areas of waste or inefficiency, organizations can streamline their processes and improve overall delivery speed and quality.
Four Key Flow Metrics: The book introduces four essential flow metrics that organizations should measure and manage: flow velocity, flow time, flow load, and flow efficiency. These metrics help organizations gain insights into their delivery process and make informed decisions to enhance efficiency and effectiveness.
Value Stream Networks: Kersten discusses the idea of Value Stream Networks, which involve understanding the interconnectedness of various teams, tools, and processes that contribute to software and hardware delivery. By optimizing the entire network, organizations can achieve higher levels of efficiency and innovation.
Continuous Learning and Improvement: The book underscores the importance of continuous learning and improvement within the software and hardware delivery process. Organizations are encouraged to embrace a culture of experimentation, feedback, and adaptation to stay competitive in the rapidly changing business landscape.
Alignment with Business Goals: The Flow Framework aims to align software and hardware delivery efforts with the overarching business goals of an organization. By focusing on delivering value to customers and the market, teams can ensure that their work directly contributes to business success.
Transformation and Adaptation: In the age of digital disruption, organizations must be willing to transform and adapt. The book provides insights into how companies can navigate the challenges posed by technological advancements, market shifts, and changing customer demands.
Overall, "Project to Product" introduces the Flow Framework as a comprehensive approach for organizations to thrive in the era of digital disruption. By shifting from project-based thinking to a product-centric approach and optimizing the flow of work, organizations can enhance their software and hardware delivery processes, deliver greater value to customers, and remain competitive in a rapidly changing business landscape.
With this background you are now in a better position to see how the above approaches can be integrated in the next article.
Conclusion
In the ever-evolving landscape of product development, the quest to measure productivity is an ongoing challenge. We've explored the intricacies and complexities that define this domain, from managing ambiguity to navigating risk and designing meaningful metrics.
In our journey, we've unearthed three key pillars that form the foundation for a comprehensive framework: the Logic Model, which offers structured planning; Donald G. Reinertsen's economic principles, which provide an economic lens; and Mik Kersten's Flow Framework, ushering in a product-centric mindset.
But this is just the beginning. In our next article, we will embark on a deeper exploration. We will unveil the art of weaving these three pillars into a cohesive, integrated framework that can transform the way you measure productivity in product development. Specifically, we'll dive into the intricacies of melding the economic framework from Reinertsen's principles with the Flow Framework, forging a dynamic synergy that can revolutionize your approach to product development.
Prepare to delve into the practicalities that will empower your organization to thrive in the age of digital disruption. Stay tuned for our next article, where we'll unlock the secrets to creating an integrated framework that propels your product development efforts to new heights of productivity and success.
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Some Resources
Gergely Orosz (Part. 1 of 2) structured critique of McKinsey & Company’s proposals
Kent Beck (Part 2 of 2) structured critique of McKinsey & Company’s proposals