A highly-regarded VP of Research & Development recently told us that his best projects were those in which risks were actively managed throughout the product development process. He was referring to the various risks typically associated with market success, technological feasibility, environmental impacts, regulatory requirements, and supplier reliability. Since none of these sources of uncertainty can ever be eliminated entirely, they must be managed—the most logical process for which involves five key activities: Identification; Prioritization; Selection: Resolution; and Monitoring.
The identification of risks must take place at the very start of your new product development project. Your cross-functional project team needs to answer the question: “What are the areas of risk or uncertainty associated with this project?” Once identified, the risks should subject to prioritization, according to their potential impact and likelihood, followed by a selection of those with the most significant importance and priority.
Resolution of the selected areas of risk takes an approach that is highly dependent on the nature of the uncertainty. For a source of uncertainty like “market size,” resolution could involve some secondary research. Alternatively, if the uncertainty relates to the customer’s “willingness to buy,” resolution may include the production of prototypes, coupled with an active engagement with your end-user to establish their level of interest in your product concept. Uncertainty may also be associated with technological feasibility, whose resolution could include various methods of research (e.g., ethnography and customer visits) or experimentation (e.g., simulation and prototyping), depending on the maturity of the technology and your experience with it.
Finally, your progress in resolving the selected areas of risk must be subject to active and regular monitoring. This can be achieved in several different ways. For instance, you might find it most helpful to monitor directly following a project iteration, or perhaps during a daily/weekly meeting at your project board. Either way, to facilitate challenges to your assumptions, we recommend the involvement of contrarians—a role that we’ve found to work most productively when recruiting peers from outside of your project team. This is when your project team and management will be deciding whether to kill the project, put it hold, or proceed and prove out additional assumptions.
Based on numerous observations and our many years of experience, it has become evident that the product development processes in most companies do a rather poor job of identifying and mitigating risk. They may provide a checklist of criteria to watch out for, and employ standardized documentation that attempts to anticipate every eventuality. However, we found that these precautionary measures often fail to prevent the kinds of unpleasant surprises that result in cost overruns, missed launch dates, and sub-par performance in the marketplace.
In response to these and other shortcomings of traditional ‘phased and gated’ processes, we have developed an alternative approach: “Exploratory PD®” (ExPD). ExPD seeks to minimize risk by detecting and managing uncertainties—namely the unknowns, assumptions, or risks associated with a particular product. Through the resolution of uncertainties and reductions in risk, our approach is better suited for achieving the goals of increased commercial and technical success, and a shorter time-to-market, while making better use of resources available.
Drotar and Morrissey, the creators of ExPD, developed an accompanying software package called the Product Risk Framework™. They received an NSF STEM I-Corp sponsored by the University of Chicago, and the NSF research facilitated the identification of existing product risk solutions and minimum viable product (MVP) input that was instrumental in informing the design and development of the Product Risk Framework.