Want More New Products? Reduce Capacity Utilization

Congratulations. You’ve managed to keep your product development engine running. Good work.  But now the hard part. Marketing and sales know new products are a key to profitability, and so does the CEO. So they’ve all asked for more new products, and now you have more active product development projects in the pipeline. The product development folks will do whatever they can to crank out the products. But can they get it done?

When does the product pipeline become too much for your product development engine to handle? We all know you can’t keep adding more new product development projects without adding capacity or improving productivity. Sure you can ask your product development engine to do more (and more), and it will try; but at some point it will run out of gas. So, ask yourself: Has your product development engine run out of gas? How can you tell? If it hasn’t, do you know how many miles are left in the tank?

If you don’t measure it you can’t improve it, that’s what the black belts say. But what to measure? What are the right metrics to tell you if your product development engine is out of gas? One of the best books on the subject is Managing the Design Factory, by Don Reinertsen. The rest of the post is strongly shaped by Don’s book, if not taken directly from it. Remember, genius steals.

The best metrics are simple, relevant to the objective, and are leading indicators. Simple so they’re easy to interpret; relevant so they move you toward the objective, in this case launching more new products; and are leading indicators, in that they are predictors of outcomes, so you can take action before catastrophic outcomes occur.  Here are three good ones.

Metric 1 – Turnover. When people leave the projects, development capacity is reduced and trouble will follow. Simply put, there are fewer people to do the work, but the project timelines are not pushed out. The new products will hit the market much later than usual.

Metric 2 – Staffing Level Relative to Project Plan. When project plans are created, the number of people needed to execute the project is defined. Read the project plan and write down that number, then compare it to the actual number of people working on the project. As the ratio drops, so will the number of new products launched.

Metric 3 – Queue Size. When you’re waiting in a line of cars at the drive through that’s a queue. The number of cars in the line is the queue size. The queue size (number of cars) is a great predictor of waiting time – long lines predict long wait times. You don’t even have to get in line to know the wait will be long. Best of all it’s easy to see the number of cars in the queue, so it’s easy to predict wait time by looking at queue size. In product development, queues are not lines of cars, but rather piles of stacked up tasks waiting for resources. Big piles mean long waits which will result in fewer product launches. Are there more cars lined up in your product development drive through?

Metric 1 and 2 are straightforward, but Metric 3 – Queue Size – is not. Big queues are a result of taking on too many product development projects resulting in an over-full pipeline. Capacity utilization soars and so does the waiting. It’s backwards: the desire to launch more products increases wait times resulting in fewer products launched, not more. So, decrease capacity utilization and the queues shrink. How to do that? Increase capacity.

Here’s a short list of actions to increase product development capacity.

  1. Improve your engineering tools. As engineering productivity increases the same number of engineers can put out more design work – more capacity.
  2. Increase support resources. Most often it’s the shared resources of the support teams that cause the waiting. Increase support resources so your engineers don’t wait – more capacity.
  3. Reduce non-value added activity. Overlap tasks and streamline your product development process. Less waste frees up capacity.
  4. Invest in training. Better trained engineers do work faster and better (less re-work). Both free up capacity.
  5. Cross train. The added flexibility from cross training allows the engineers to move to the work. More effective use of resources increases capacity.

Increasing capacity is easy to talk about, but difficult to do. All options require investment which, as we know, is difficult to come by. However, new products are a key to profitability. Do the math – compare the cost of the investment and the value of the new products, and hopefully you’ll budget for some investment to increase your product development capacity.

One Response to “Want More New Products? Reduce Capacity Utilization”

  • Mike, fantastic job simplifying Don’s writings into a one pager that’s easy to understand. I’ve been reading Don’s books, but man, wish I had the Cliff Notes like your post here.

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Mike Shipulski Mike Shipulski
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