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issue: February 2004 APPLIANCE Magazine

APPLIANCE EngineerĀ® - The Open Door
Ten Lessons for Controlling Product-Development Costs

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by Philip Bourgeois, founder and CEO, Studio Red

Any engineer who has completed a product-development program during his or her career understands the difficulty of meeting cost estimates.

About the Author
Philip Bourgeois is the founder and CEO of Studio Red, a 20-year-old product-development consultancy firm based in Silicon Valley, CA, U.S.

Even with years of experience, it is challenging to navigate through all the unexpected minefields that occur, or better yet, to have contingency plans to account for the unforeseen problems that arise.

However, there are 10 methods that may help an engineer reduce development costs. The following methodologies define how to keep costs under control, while creating a manageable product-development program.

1. Plan your program well. Spend time on this. A detailed and thorough program will deliver many times over later in the process. Elements of this program plan include resource planning, scheduling, milestone dates, meeting internal and external commitments, contingency plans, and budgeting for both internal and external resources.

2. Develop a good product specification and manage to it. A product specification includes items such as product function, components, pricing, user demographics, production volumes, operating life, competitors, assembly, testing, quality assurance, distribution, maintenance, product updates, competitive market landscape, cost targets, unit pricing, and test requirement procedures.

3. Define stakeholders and an approval procedure. The product development process includes many disciplines and skills. The most successful include experienced persons from every discipline needed in the product-development process. Each should be able to influence the product's final design direction. The main concern should be that although these people have the ability to influence a decision - they should not stall or compromise some critical objective in the final result.

4. Understand and agree with a consultant's/partner's deliverables. Deliverables are the most tangible result of a consulting or partner firm's activity. In the industrial design portion, it may be possible to live with a hand rendering instead of a 3-D computer-rendered, photographically realistic model. But there are other questions that must be asked and answered. Is a concept model needed for a press event or a working model for customer evaluations? Who will own the Intellectual Property (IP) when completed?

5. Associate the development schedule with key dates in the product rollout. Align milestones and deliverables to those key dates that are important in the product development cycle. This means the consultant/partner involved with the product will need to be apprised of and also adhere to these dates.

6. Identify as many partners early on and ensure they are integrated into the team and process. Taking all the vendors' issues into account is a management challenge, but it can make a huge difference in the final development cost.

7. Get close to the manufacturing/integration partner and plan for optimization. Many times the people chartered with the development of a product are not worried enough about production issues and, subsequently, cost of the product. Even when the product development team wants to do it right, if the best information becomes available too late, it might not be possible to deliver a best-of-breed solution.

8. Assign an experienced program manager to manage and audit the process and partners. To be best matched to the problem, he or she should be versed in programs of similar complexity. These experiences lead to an understanding of the critical minefields that may show up during any of the myriad project decisions and compromises.

9. Make changes carefully, but quickly and proceed with a sense of urgency when committed. While some changes are innocuous and have little impact, others have catastrophic consequences to the schedule or budget.

10. If the decision to make changes to a product spec come down, it is paramount to get everyone to move forward with a sense of urgency. It will be difficult to make up the lost time, but if all partners sign up and move quickly, the financial and schedule losses will be minimized. However, there will never be a way to make up for lost time-to-market (TTM). This factor is a huge hidden opportunity cost that is above and beyond money.

In the end, when development costs exceed the budget, management will notice, it could even cause the project to be cancelled. Although product development is a very complex process and difficult to estimate, these techniques should provide the best chance to minimize the risks to the product-development program budget. The main factor is picking the resources and partners with the right experience. When done well, money, partnerships, friendships, time, and stress will be saved. Most importantly, product-development costs will be controlled.


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