An expensive lesson: Not measuring project risk upfront

An expensive lesson: Not measuring project risk upfront

Topics: Product Development Process | Risk

Our firm was brought into a company that encountered product development process issues. Some of the symptoms included missing delivery dates, missing organic growth revenue goals and just general dissatisfaction with the overall process from the perspective of executive management and the project team members.

One of the many gate meetings we attended illustrates the potential inefficiencies of the phased and gated approach. The project in this case involved the upgrade of a product that incorporated breakthrough technology, and which served an existing and attractive market with a known need. The biggest unknown was the technology, which did not exist at the time, while information around the existing market and competition was found to be available and well-defined.

Over the previous two years, the marketing department had executed an extremely expensive global VOC study to gather customer reaction to the breakthrough technology. The VOC study indicated that the end-users basically didn’t believe that the technology proposed could actually work. Meanwhile, the R&D department had been unable to get the chosen technology to work. A solution was still not in sight, and the project was due for the business case gate.

In preparation for the gate meeting, the project team stopped their project work and spent a considerable amount of time documenting a business case that included manufacturing, product management, marketing, engineering, R&D, regulatory, finance, legal, sales, and supply chain assessments. The current decision placed before the gatekeepers was whether or not to proceed with the project.

The lack of proof of technical feasibility, end-user lack of believability and a high level of project risks should probably have informed the gatekeepers to kill the project earlier. However, even on their own, the VOC studies represented a significant sunk cost, so the pressure to continue the search for technical feasibility was very strong. The gatekeepers decided to continue the project despite the enormous technology risks and ongoing project costs.

We later discovered that the company had given up on developing this new technology, deciding instead to pursue a simple revision to the existing product. Had their development process detected and resolved big risks early on, they would have focused their resources on proving out technical feasibility and understanding the lack of believability with the end-user on a smaller scale (biggest unknowns), before making big investments of money and project team time in elaborate VOC global studies and unnecessary process documentation. The traditional phased and gated approach demonstrates the tremendous amount of time and money that can be wasted when you don’t take a focused approach in uncovering the riskiest project unknowns upfront.

Part of our In the trenches of new product development series

Photo by mnchick23

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For more information, contact:

Mary Drotar, Partner

Strategy 2 Market, Inc.


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