Product development covers all activities from program initiation and concept development through the start of production or service delivery. There are many process models for product development, among them the classic waterfall, the spiral, the Systems V model, Lean and Agile. In the U.S. automotive industry, the product development process is defined, or at least constrained, by the Advanced Product Quality Planning (APQP) manual from the Automotive Industry Action Group, or AIAG. The standard in academia seems to be laid out in Ulrich and Eppinger’s Product Design and Development (U&E).Most of these have some common features. Many start with defining the business goals and authorizing the project. The rest start with the next step: identifying customer needs. They also end somewhere between the hand-off to manufacturing and post-manufacturing support.

We can see that product development is a process that starts with the customer and ends with the customer. The output of product development is customer fulfillment; not merely an engineering design. The input is customer needs; not a product specification. Product development is not simply an engineering activity; it’s blend of business and engineering activities, the goal of which is to maximize company profit through customer fulfillment. Product development is a customer-focused process, and it looks something like this rather cycle:

From a customer’s perspective, though, this process looks much simpler:

One of the primary problems with product development is this delay. For you, the developer, all of the technical and market risk are wrapped up in this delay, and the market risk is the more troublesome of the two risks. Market risk is the risk that the customer will change their mind, developing a new set of priorities, or that a competitor will enter the market with a similar product before you do.

One of the key mitigation strategies for product development is the reduction of this delay. Design and manage your product development processes to bring the customer closer to their fulfillment.

To achieve this in a consistent and effective manner, you have to understand the economics of your development projects and the market. Every decision in product development is a trade off, and these trade-offs need to be focused on the goal: increasing profit through by increasing the gap between value and costs. For instance, you will be faced with a choice: spending more time in requirements gathering and analysis vs. decreasing the delay in delivering product to the customer. Just how you balance this depends on the cost of a performance shortfall (technical risk) vs. the cost of delay. With highly risk-averse customers, the cost of a performance shortfall is much greater than the cost of delay, which is probably why aerospace projects are notorious for falling behind schedule yet often held up as the gold standard for safety and technical performance. In contrast, consumer electronics tend to have very short time-to-market, but notoriously poor reliability; the customers value immediate fulfillment over technical performance.

It is important, too, to recognize that these kinds of trade-offs are not made just once; they are made on a daily basis. The upper management of the development organization needs to understand these economics so that they can design the product portfolio and product development strategy (e.g. selecting between more modular designs, shifting technology development off the critical path of customer deliverables, vs. more integrated designs that are more tailored to fit the customer needs). The program managers and design responsible engineers need this knowledge, too, in order to intelligently design and manage the product.

Your product development processes, then, must be designed to provide rapid feedback to project managers and engineers relative to these trade-offs between risks, and to assist them in making consistent decisions. The natural result of this line of reasoning is the development of decision tools, standard cost models and standard measurements focused on technical performance risk, project expenses, product costs and delays.