Use Flexibility to Control Risk

(I’m saying that traditional phase-gate processes don’t eliminate waste in turbulent markets; they actually increase risk.  Do you agree? Disagree?  Post a comment and join the discussion!)

The surprising thing is that, in turbulent markets, “best practice” phase-gate development processes actually increase risk and waste: External factors force change on your project before you can complete it, and frozen plans increase the cost of change.

The challenge and the solution:  Your challenge as a product developer is that your biggest opportunities lie in these turbulent markets.  If you can control risk and the waste that goes with it, you can beat your competitors to these choice opportunities.

The solution is to change your dogmas about controlling waste with phase-gate processes.  Preston G. Smith has pioneered new thinking about product development methods for fast changing markets.

Flexible Product Development (FPD), sometimes called “agile hardware development,” translates proven agile software principles for developing products outside of the software domain.  Instead of freezing requirements and plans based on assumptions and preliminary information, you keep key design options open and structure the project to reduce the cost of mid-project changes.

Why is FPD important?  In turbulent markets, frozen plans don’t eliminate uncertainty, they just paper it over.  When customers’ needs change, the frozen requirements are embedded so thoroughly into your design that it is very expensive to make changes.  Paradoxically, by trying to eliminate changes, you actually exacerbate risk by increasing the cost of change.

FPD provides fresh thinking about risk and change in turbulent markets. Surprisingly, the key to reducing risk and waste is to keep design options open as long as you can so that you have the latitude to respond quickly to market changes.

But open design options needn’t create excessive cost.   FPD also includes tools to mitigate project disruption by anticipating change and accelerating learning to close options in a timely way.

Is FPD right for you?  Costly mid-project changes can be caused either by market turbulence or by poor planning.  What makes it tricky to tell the difference is that in companies with a deeply ingrained phase-gate mentality, all mid-project changes are attributed to poor planning or sloppy execution.

Instead, explore the cause of the change.  Did a customer change his mind after your project started?  Were changes driven by customers learning more about their application while you were developing the solution?  Was the change forced by your competitor offering a new solution?  Any of these situations indicates that you’d benefit from a more flexible approach.

Another key symptom of the need for flexibility is hard to see because project post-mortems will never spot it.  This is the risk of sticking to a plan that should have been changed.  When the market target moves but developers fail to adapt, developers get kudos for meeting the plan but the product doesn’t meet its profit goals.

FPD resources:  If you think you might need more development flexibility to meet the challenges of turbulent markets, here are some resources to look into.

I have a brief explanation of FPD on the Silver Streak Partners web site at is a website devoted to FPD that I maintain after inheriting it from Preston.

And of course, Preston’s book, Flexible Product Development, is available on Amazon.

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