An Adaptive Approach to Product Development: Exploratory PD (ExPD)

By Mary Drotar and Kathy Morrissey, co-founders of Strategy 2 Market, Inc.

Over the years we have found that the traditional phased-and-gated product development process does not work for many companies. So, we began a long, challenging, but ultimately successful project to understand what’s not working and how to fix it. The root cause for many of the problems is uncertainty. The result is a new way of thinking and acting, which we call Exploratory PD.

In this article we share our learnings and the system. It’s at a high-level because a complete explanation would take a book (which we are working on). Our hope is that these ideas for improving product development will help companies achieve success in today’s complex and challenging world.

The challenge of product development

The most fundamental challenge in product development is uncertainty — including the risk it creates and the potential for loss.

As developers, we try to read the market correctly. But even if we are right today, how can we know whether the market will remain stable while we’re developing the product? During that time, the competition could render our product obsolete. The technology might not work the way we predict. Or our product could be adversely affected by future regulatory changes.

Changes in factors beyond our control tend to happen too quickly and unexpectedly for our product development systems to cope. This paper discusses the state of product development (PD) processes and offers “Exploratory PD® ” (ExPD) as an alternative approach that is better suited to today’s environment.

Product development is not a closed system. It is affected by external and internal forces requiring the system to be adaptable.

An adaptive versus structured (phased-and-gated) approach

ExPD is an adaptive approach that explicitly identifies and drives down the risk that can result in product failure. By organizing activities focused on resolving the most important risks, it readily adapts to the nuances of each project as it evolves over time, while eliminating unnecessary activities and paperwork. This translates into speed.

Phased-and-gated processes seek to control risk and ensure that the appropriate work gets done through a structured sequence of prescribed activities, deliverables, and decisions. They also attempt to minimize risk through significant up-front planning by setting a clear scope, objectives, budget, and timeline.

The highly-defined and structured nature of the phased-and-gated approach has 6 major drawbacks:

1. The structure encourages practitioners to fill out documentation with little thought about what they are doing and why.
2. A standardized process does not anticipate the unique nuances of projects and will miss potential risks.
3. There are typically different process paths depending on product type: full process for new products, light process for revisions and research process for unproven technology. Managing and integrating multiple processes has proven to be very difficult for our clients.
4. The sheer comprehensiveness of the activities and documentation can lull managers into a false sense of security that all bases are covered.
5. Managing according to a prescribed set of activities is problematic when it can’t adjust appropriately to surprises like a major change in the market or technology.
6. Creates multiple batches that slows down the overall project. Two major sources of batches include phase activities with documentation, and gates.

In spite of its shortcomings, the phased-and-gated approach remains appropriate for companies that are in a stable environment and need structure and guidance. We are very familiar with this methodology, and we have more than 25 years of experience consulting and training with companies on how to use it. In fact, our familiarity with the phased-and-gated process is what has enabled us to see how product development can be done differently. The result is ExPD.

Traditional product development is to a road atlas …

Early definition is like using a road atlas to plan and manage a trip. The route is predetermined, and travelers have little ability to modify the route if they encounter road construction or traffic along the way. Delays become a surprise and are difficult to deal with.

. . . as ExPD is to waze®

ExPD is an adaptive approach and operates like waze®. waze is an app that plans a driver’s route based on experience and current conditions.Throughout the trip, it continuously monitors road conditions ahead, using real-time feedback. It can evaluate alternative routes and make a recommendation when it identifies a better route. The process is adaptive and learns how to deal with surprises quickly and easily. Most importantly, users end up taking the quickest route to their final destination.

High-level overview of Exploratory PD® (ExPD) and its key features

The phased-and-gated process is a case of the tail wagging the dog. The rigid structure of the process drives the project.

In contrast, ExPD is a case of the dog wagging its tail. It is an adaptive approach that identifies and drives down risk. By iteratively resolving the most important risks, the process easily adapts to the needs of the project.

Segment 1: Strategy

In the Strategy segment, a guide to product development is created. To facilitate this, ExPD uses a framework called the s2m Strategic Framework™, which comprises three pillars: Enterprise, Business Unit, and Product Development (PD). The three pillars are integrated with the execution elements of Pipeline, Process, and Portfolio — together, P3 (Figure 2).

In Figure 2, the Enterprise Pillar includes strategies developed at the enterprise/corporate level. It also includes mission, vision, and values. Enterprise strategies are typically determined by executive management and the board of directors, and are executed across the whole organization.

The Business Unit Pillar includes the business strategy, business model, and innovation strategy. These are typically developed at the business unit level and must be consistent with the enterprise strategy.

The PD Pillar incorporates the market, product, technology/IP, and platform strategies, along with the corresponding road maps. These are typically written by product management, marketing, and engineering, and they support the business unit strategies.

In our experience, companies have struggled with the implementation of their strategies when there is no clear linkage between strategy and execution. The most effective approach we have seen includes linkages between strategies and P3, i.e., the design and implementation of the idea pipeline, product development process, and portfolio management system.

The s2m Strategic Framework should be an adaptive, ongoing, collaborative effort. The approach isn’t necessarily top-down, it is bidirectional and iterative. Senior managers are ultimately responsible for setting the direction through the enterprise and business unit strategies. As the product development strategies are developed and executed, they can provide feedback and lead to changes in strategy at the business unit and enterprise levels.

Similarly, as market intelligence-gathering activities proceed, including the identification of opportunities and threats, the various elements of the strategic framework need to be evaluated and modified. In a fast-changing, uncertain environment, the organization should be ready with a rapid-response process, whereas a slow-moving or more certain environment would call for reviews on a less frequent basis (e.g., biannually).

The s2m Strategic Framework addresses the fundamental principles that product development contends with: doing the right projects and optimizing resource usage. The framework brings clarity to the product development system. The product developer gains a stronger sense of purpose and confidence in reaching decisions rapidly and without extensive debate and politicking. Since there is more certainty around commercial and technical feasibility, projects on the road maps should move quickly through the process. (We have a whitepaper on the Strategic Framework if you are interested in more detail.)

Segment 2: Ideas & Select

The Ideas & Select segment comprises two sets of activities (Figure 3). Those depicted on the left side of Figure 3 correspond to the generation and collection of ideas. Some product ideas will emerge from the road maps; others will be serendipitous. Located on the right side is the “Select Ideas” activity, which involves evaluating and selecting the best ideas, which then feed into the Prioritization Valve (PV1) for prioritization.

Ideas

Some new product ideas are identified and vetted through the strategic planning process and are included in the product road maps. Other ideas are serendipitous, meaning they are unplanned and can come from a variety of sources.

Serendipitous ideas should be encouraged from both internal and external sources. Internal sources might include ongoing programs for gathering market and competitor intelligence, as well as programs that encourage suggestions from employees. External sources of ideas would include programs seeking input from customers, suppliers, and inventors.

All these ideas need to be collected and organized in a database. This is important, because it provides a way to keep track of all ideas previously considered or judged. This will also help you avoid losing ideas and important intellectual property that have been squirreled away on someone else’s hard drive, or, worse still, in the head of someone who has left the company.

Select

The “Select Ideas” process requires that a committee (typically a senior-level, cross-functional team) will review all incoming ideas, whether generated serendipitously or from the road map, to determine which ideas will move forward. There are three possible review outcomes (Figure 4). The YELLOW “yield” sign denotes an idea that has been placed on hold. The RED “stop” sign shows that the idea has been killed. The curved BLUE arrow indicates the project moving forward to PV1, prioritization for the Explore & Create Segment.

The road map only includes ideas that have already been vetted and found to align with the strategy and that meet the approval of senior management. Ideas that do not appear on the road map must be vetted according to those same criteria. Often, the committee will have insufficient information to perform a proper evaluation, but it can still apply appropriate filters to screen out the most obvious “misfit” ideas.

When the committee believes an idea has promise and is willing to allocate time and resources (e.g., people, money, and lab space), it can feed the idea through the Prioritization Valve (PV1), and onward into the Explore & Create Segment for further analysis (Figure 4).

The Prioritization Valve provides two benefits:

1. Timelier resourcing. Projects are simultaneously prioritized and resourced during the ExPD committee meeting, rather than waiting for resource allocation at the quarterly portfolio meeting. This avoids the common difficulties companies experience when attempting to actively manage projects at the process level while those same projects are resourced on an intermittent basis at the portfolio level.
2. Match between number of projects and available resources. Among their prioritization criteria, the committee must consider which of the resources needed to do the work are actually available. If the available resources are inadequate, the committee must place the project on hold. The function of the PV is to control the number of projects in the system and prevent excessive pressure on resources. The ideas are maintained in a prioritized queue, each waiting its turn to be resourced and advanced into the third segment, Explore & Create.

Segment 3: Explore & Create

In the Explore & Create segment (Figure 5), we have three major components starting with 1) Investigate, which includes identification, evaluation and prioritization of assumptions for each project. 2) All projects from Investigate go to PV2 for prioritization and allocation of resources. This is the gateway to 3) the Resolve Loop where the project undergoes resolution of the biggest uncertainties and leads to the development of the product.

Investigate

The Investigate component works to determine the kinds of situations or outcomes that would kill the project, and to identify where a potentially high level of risk will need to be managed. Risk arises from incomplete or missing information and unpredictable future events, both of which affect decision making and may lead to unexpected results.

We recommend that the project team rephrase the risks and uncertainties in terms of assumptions. Rephrasing the risks helps the team develop hypotheses it can test. (See “The Multiple Personalities of Risk” on our corporate blog www.strategy2market.com/risk-terminology.)

The Investigate component involves two major steps:

1. Identification of assumptions, and
2. Evaluation and prioritization of assumptions. The project team starts by identifying assumptions and any deal breakers or showstoppers. A deal breaker is an assumption that, if proven false, will result in killing the project or putting it on hold.

Deal breaker example:

A company normally used a vinyl chloride plasticizer to obtain the flexibility and durability required for its product. The project team was aware of an impending European ban of the most common vinyl chloride plasticizers — including the one used by the company. If the team could not find a suitable replacement material, the project would have to be killed. In this case, the deal breaker assumption was that the company could find a material other than the banned plasticizers that would provide the same product properties. (The company did find one, by the way.)

We have built a tool called the Business Fit Framework that helps identify assumptions, and we’ll describe that in another article.

After the cross-functional team has identified the assumptions, the team then evaluates and prioritizes the assumptions in the Assumptions Tracker™. This tool is used by the team during the project to help evaluate, prioritize, and track the riskiest project assumptions.

In the same way as in Ideas & Select (Figure 3), the committee must evaluate all ideas before they enter the prioritization valve, PV2. Some ideas are selected to proceed through the process, and others are killed or put on hold. The purpose of PV2 is the same as PV1, but the extent of resources committed is much greater. PV2 is the gateway to entering the Resolve Loop, where the new product undergoes resolution of uncertainties and includes the actual development of the product.

At PV2, it is especially critical that resource availability be assessed before the committee authorizes a project to proceed in the product development process.

As stated previously, the committee is responsible for providing the project team with the necessary resources, budget, timeline, and tools to achieve the agreed upon Resolve Loop goals and objectives. At the same time, the project team must commit to achieving certain milestones in developing the product and resolving risk.

This commitment is expressed in the Pledge, a written agreement between the committee and project team. The Pledge authorizes the team to make more decentralized decisions without constantly checking back with the committee (following a practice called management by exception). The result of decentralized decision making is improved speed and quality of decisions.

Cross-functional teams are imperative for identifying, evaluating, and prioritizing risk. The most effective teams include disciplines such as engineering, marketing, operations, supply chain, service, and regulatory. They should include members at different levels of the organization: project team members and senior management, as well as a senior fellow (e.g., a chief engineer with extensive experience) to play the role of a contrarian.

Resolve Loop

The last part of the Explore & Create segment consists of a series of Resolve Loops (Figure 6). Inputs to the Resolve Loop include the inventory of prioritized assumptions, a plan for resolution, and the Pledge of resources, budget, time, and objectives.

Each Resolve Loop addresses an assumption. A project team can resolve several assumptions at the same time in parallel. Generally, the riskier the project, the greater the number of assumptions to be addressed.

Within each project, the team maintains an inventory of assumptions and works through the biggest uncertainties first. During the Resolve Loop, the team is not only driving down commercial and technical risks, but also driving down uncertainties around operational risks like manufacturability.

Cross-discipline integration throughout ExPD is required. This includes resolving any uncertainties of other departments, such as distribution, sales, downstream marketing, customer service, regulatory, legal, and finance. Over time, some risks will drop off because they’re no longer relevant; others will need to be continually monitored, and new ones are added as they arise.

A Resolve Loop has four major steps:

1. In Design, the project team finalizes the plan for resolving each prioritized assumption. The plan can consist of secondary research, primary research, an experiment, prototypes for end-user feedback, or a mitigation plan that allows the company to reduce or eliminate the risk as quickly and inexpensively as possible.
2. Next is to Build the test — that is, the company creates the test environment to address the plan from Design. Options for Build include the creation of models, prototypes, or surveys to test assumptions.
3. In Execute, the company tests as defined in Design, using the items created in Build.
4. Finally, in Learn, the project team analyzes the findings and their impact on the assumptions. The team determines whether it has learned enough and sufficiently resolved the risk. It might be necessary to iterate again or to introduce another assumption that needs to be resolved.

The length of a loop varies based on the complexity of the assumption. Typically, we like to run these Resolve Loops in a short sprint, similar to agile techniques.

While resolving risk, the project team needs to make progress in developing the product. The backbone of the process is what we call the Concept Maturity Model™. This model ensures that the product is designed, tested, and launched. It helps the team stay on track and works with the Pledge to identify objectives and milestones all the way through to Launch. We will describe the Concept Maturity Model in another article.

In summary, what’s in it for you?

1. Speed
2. Adaptability
3. Strategic alignment
4. Risk reduction
5. Products that begin with the customer
6. Real-time project prioritization and resource optimization
7. Learning fast from key uncertainties and killing projects quickly
8. Decreased bureaucracy and paperwork
9. Better decision making through team empowerment

The overall benefit of using ExPD is speed and adaptability to the complex and ever-changing environment of product development. We understand that product developers not only have to react quickly to external forces, but also must adapt to a complex internal environment.

Learn more

We invite you to visit our website devoted to ExPD at exploratorypd.com

1. Download a whitepaper about ExPD that includes 3 case studies not included here
2. Follow our ExPD blog where we will release more information about ExPD and useful tools. We welcome your thoughts and comments.
3. Find updates about the availability of our forthcoming book.

Contact information:

Mary Drotar - mdrotar@strategy2market.com — Mary Drotar

Kathy Morrissey — kmorrissey@strategy2market.com — kathy morrissey

www.exploratorypd.com © 2016 Strategy2Market®, Inc.