Book Review: Lean Product and Process Development

    By: PDMA Headquarters on Oct 02, 2013

    Book Review: Lean Product and Process Development 

    By: Allen C. WardCambridge, MA : Lean Enterprise Institute , 2007 . 208+xvi pages 
    Review by: Donald Reinersten

    Book ReviewMany of us respect the work of Allen Ward. He provided critical leadership to the group of academics and consultants that has focused on Toyota's product development process. Without his influence, we would know dramatically less about how Toyota approaches product development. His final book, Lean Product and Process Development, was published posthumously, in March 2007. It was prepared by Durwood Sobek and John Shook from a 2001 book manuscript, and it represents the last major codification of Ward's thinking.

    In preparing this book, Sobek and Shook chose to preserve as much of the original manuscript as possible to capture both the intent and personality of the author. I mention this because, as an author, I am acutely aware of how much a book manuscript improves when the author is challenged during the editing process. Structure tightens, logic is clarified, and pivotal examples are added. Keep in mind as you read Ward's book that it did not benefit from this valuable iteration. Don't be put off the lack of an index and the meager table of contents. Instead, judge this book by the quality of its ideas, not its lack of superficial polish.

    The book is divided into three major sections. Part 1, 19 pages, focuses on the issues of value and performance. Part 2, 29 pages, focuses on recognizing waste in product development. Part 3, 145 pages, focuses on Ward's view of lean product development.

    Part 1 stresses the importance of looking at the full economic consequences of projects, including the useful knowledge they contribute to your company. To categorize learning Ward proposes a taxonomy of integration learning, innovation learning, and feasibility learning. He advocates spending a larger portion of development effort creating useful knowledge and a smaller portion creating products.

    Ward identifies six specific performance metrics and suggests combining all six into an overall metric called the learning-to-costs ratio. It is very likely he would have developed this idea further, because the book only recommends using this metric as a qualitative guide to see if you are moving in the right direction.

    Part 2 of the book discusses Ward's view of waste in product development. He categorizes waste into scatter, handoffs, and wishful thinking. He points out the disadvantage of excessive formal structure and stresses the importance of reducing barriers to communications, including the social barriers created by corporate “class systems.” He appears very aware of the power of status differences to distort communications. Of the three categories, he considers handoffs to be the most fundamental form of waste and states that this occurs when we separate knowledge, responsibility, action, and feedback.

    He also points out that conventional methods like PERT (Program Evaluation Review Technique) lead to unnecessary waiting and long cycle times: “It's hard to find a development upstream process that has to finish before a downstream process can start” (p. 49). Developers who favor the feeder buffers of the Theory of Constraints should consider this point carefully.

    Part 3, which represents two thirds of the text, is likely to be of greatest interest to most readers. Here Ward describes what he considers the five pillars of lean product development: (1) value focus; (2) entrepreneur system designers (ESDs); (3) set-based concurrent engineering (SBCE); (4) cadence, flow, and pull; and (5) teams of responsible experts.

    A value focus refers to the importance of creating consistently profitable value streams. This value stream includes both the profits created by the product and the useful knowledge created by the development organization.

    ESDs are typified by the chief engineers that hold the ultimate power over a new car program at Toyota. They combine the skills of an entrepreneur and those of a system designer. They are the authoritative proxy for the voice of the customer: “We asked a Toyota engineer how he knows what customers want: ‘The chief engineer tells me,’ he responded” (p. 98). When the chief engineer has an insightful view of the market, this approach leads to a highly coherent system design. However, we should recognize that it creates the risk that a single skilled engineer will assume that his or her preferences accurately predict those of all other customers.

    SBCE refers to the parallel development of multiple alternative solutions to reduce the chance that a single failed alternative will delay the project. This is suggested both as a method to control risk and as a means to build useful knowledge. SBCE involves more than parallel development; it emphasizes rapid attrition of weak solutions and the development of trade-off curves, knowledge bases that define the limits of the possible. Convergence on a solution is delayed until the solution is proven.

    Since Ward originally codified the concept of SBCE, one would expect him to have strong enthusiasm for this idea. It would be wise for the practitioner to recognize that SBCE buys the benefit of risk reduction for the cost of redundant development. This is an economic trade-off in which the total cost function is a U-curve. As a result, there is a quantifiable optimum number of concurrent programs. In some cases, this optimum is actually one. Ward suggests he was aware of this trade-off, since he makes the empirical suggestion that there should be sufficient parallel programs to drop the risk of failure to 5%.

    Cadence, flow, and pull refer to the repetitive rhythm of the development process; the division of work into bite-sized, easily handled chunks; and the use of customer pull to drive the process. Ward shows how these ideas apply in product development. He points out that working supervisors can be pulled to quickly correct temporary bottlenecks.

    Finally, the idea of teams of responsible experts refers to replacing bureaucracy with strong, expert, mission-focused, value-creating leadership. Ward stresses the importance of creating an organization with internal discipline rather than the discipline imposed by external structures and centralized control. He believes that this can be done by using people with deep technical expertise and giving them the opportunity to take action. His experience as an Army officer gave him the ideal background to recognize the great importance of subordinate initiative. This is a refreshing challenge to the general trend toward centralized bureaucratic control.

    There are several ideas in this book that deserve more extensive examination. As you would expect, the book has a strong pro-Toyota bias. This will please most readers, since few of them have ever bothered to study Toyota's financial performance. They are unlikely to be aware that Toyota's average return on assets from 1997 to 2006 was only 3.9% (Standard & Poor's, 2006). Toyota is unquestionably a superb source of management ideas, but its financial performance only rises above average when it is compared with General Motors, Ford, and Chrysler.

    The book praises the fact that Toyota's engineers report that they spend 80% of their time creating value. This could easily be interpreted to support the dangerous misconception that engineering resources should be operated at high- capacity utilization. It is unlikely that Ward would advocate this since one of the great insights of the Toyota Production System is that high- capacity utilization undermines flow.

    The book also reinforces the popular idea that consistency of performance is a key measure of success. Ward emphasizes, “Good development systems consistently create profitable value streams” (p. 9). Readers would do well to think more deeply about this issue. While consistency of performance creates enormous value in manufacturing, the same is not always true in product development. Product development has highly asymmetric payoff functions, because the cost of a failed idea is much lower than the payoff of successful one. In the presence of such asymmetries, high variability can actually produce better economic returns than low variability. (Such asymmetric payoffs also occur in the Black-Scholes options pricing model, which is why options increase in value when volatility rises.)

    Overall, this book provides 200 pages of very worthwhile reading, particularly for those who have an interest in how Toyota approaches product development. It undoubtedly provides the best perspective on SBCE, from the man who originally described this practice. Allen Ward brings a great wealth of knowledge, experience, and insight to his observations. Sobek and Shook have done us a service by creating this book.

    . Without his influence, we would know dramatically less about how Toyota approaches product development. His final book, Lean Product and Process Development, was published posthumously, in March 2007. It was prepared by Durwood Sobek and John Shook from a 2001 book manuscript, and it represents the last major codification of Ward's thinking.

    In preparing this book, Sobek and Shook chose to preserve as much of the original manuscript as possible to capture both the intent and personality of the author. I mention this because, as an author, I am acutely aware of how much a book manuscript improves when the author is challenged during the editing process. Structure tightens, logic is clarified, and pivotal examples are added. Keep in mind as you read Ward's book that it did not benefit from this valuable iteration. Don't be put off the lack of an index and the meager table of contents. Instead, judge this book by the quality of its ideas, not its lack of superficial polish.

    The book is divided into three major sections. Part 1, 19 pages, focuses on the issues of value and performance. Part 2, 29 pages, focuses on recognizing waste in product development. Part 3, 145 pages, focuses on Ward's view of lean product development.

    Part 1 stresses the importance of looking at the full economic consequences of projects, including the useful knowledge they contribute to your company. To categorize learning Ward proposes a taxonomy of integration learning, innovation learning, and feasibility learning. He advocates spending a larger portion of development effort creating useful knowledge and a smaller portion creating products.

    Ward identifies six specific performance metrics and suggests combining all six into an overall metric called the learning-to-costs ratio. It is very likely he would have developed this idea further, because the book only recommends using this metric as a qualitative guide to see if you are moving in the right direction.

    Part 2 of the book discusses Ward's view of waste in product development. He categorizes waste into scatter, handoffs, and wishful thinking. He points out the disadvantage of excessive formal structure and stresses the importance of reducing barriers to communications, including the social barriers created by corporate “class systems.” He appears very aware of the power of status differences to distort communications. Of the three categories, he considers handoffs to be the most fundamental form of waste and states that this occurs when we separate knowledge, responsibility, action, and feedback.

    He also points out that conventional methods like PERT (Program Evaluation Review Technique) lead to unnecessary waiting and long cycle times: “It's hard to find a development upstream process that has to finish before a downstream process can start” (p. 49). Developers who favor the feeder buffers of the Theory of Constraints should consider this point carefully.

    Part 3, which represents two thirds of the text, is likely to be of greatest interest to most readers. Here Ward describes what he considers the five pillars of lean product development: (1) value focus; (2) entrepreneur system designers (ESDs); (3) set-based concurrent engineering (SBCE); (4) cadence, flow, and pull; and (5) teams of responsible experts.

    A value focus refers to the importance of creating consistently profitable value streams. This value stream includes both the profits created by the product and the useful knowledge created by the development organization.

    ESDs are typified by the chief engineers that hold the ultimate power over a new car program at Toyota. They combine the skills of an entrepreneur and those of a system designer. They are the authoritative proxy for the voice of the customer: “We asked a Toyota engineer how he knows what customers want: ‘The chief engineer tells me,’ he responded” (p. 98). When the chief engineer has an insightful view of the market, this approach leads to a highly coherent system design. However, we should recognize that it creates the risk that a single skilled engineer will assume that his or her preferences accurately predict those of all other customers.

    SBCE refers to the parallel development of multiple alternative solutions to reduce the chance that a single failed alternative will delay the project. This is suggested both as a method to control risk and as a means to build useful knowledge. SBCE involves more than parallel development; it emphasizes rapid attrition of weak solutions and the development of trade-off curves, knowledge bases that define the limits of the possible. Convergence on a solution is delayed until the solution is proven.

    Since Ward originally codified the concept of SBCE, one would expect him to have strong enthusiasm for this idea. It would be wise for the practitioner to recognize that SBCE buys the benefit of risk reduction for the cost of redundant development. This is an economic trade-off in which the total cost function is a U-curve. As a result, there is a quantifiable optimum number of concurrent programs. In some cases, this optimum is actually one. Ward suggests he was aware of this trade-off, since he makes the empirical suggestion that there should be sufficient parallel programs to drop the risk of failure to 5%.

    Cadence, flow, and pull refer to the repetitive rhythm of the development process; the division of work into bite-sized, easily handled chunks; and the use of customer pull to drive the process. Ward shows how these ideas apply in product development. He points out that working supervisors can be pulled to quickly correct temporary bottlenecks.

    Finally, the idea of teams of responsible experts refers to replacing bureaucracy with strong, expert, mission-focused, value-creating leadership. Ward stresses the importance of creating an organization with internal discipline rather than the discipline imposed by external structures and centralized control. He believes that this can be done by using people with deep technical expertise and giving them the opportunity to take action. His experience as an Army officer gave him the ideal background to recognize the great importance of subordinate initiative. This is a refreshing challenge to the general trend toward centralized bureaucratic control.

    There are several ideas in this book that deserve more extensive examination. As you would expect, the book has a strong pro-Toyota bias. This will please most readers, since few of them have ever bothered to study Toyota's financial performance. They are unlikely to be aware that Toyota's average return on assets from 1997 to 2006 was only 3.9% (Standard & Poor's, 2006). Toyota is unquestionably a superb source of management ideas, but its financial performance only rises above average when it is compared with General Motors, Ford, and Chrysler.

    The book praises the fact that Toyota's engineers report that they spend 80% of their time creating value. This could easily be interpreted to support the dangerous misconception that engineering resources should be operated at high- capacity utilization. It is unlikely that Ward would advocate this since one of the great insights of the Toyota Production System is that high- capacity utilization undermines flow.

    The book also reinforces the popular idea that consistency of performance is a key measure of success. Ward emphasizes, “Good development systems consistently create profitable value streams” (p. 9). Readers would do well to think more deeply about this issue. While consistency of performance creates enormous value in manufacturing, the same is not always true in product development. Product development has highly asymmetric payoff functions, because the cost of a failed idea is much lower than the payoff of successful one. In the presence of such asymmetries, high variability can actually produce better economic returns than low variability. (Such asymmetric payoffs also occur in the Black-Scholes options pricing model, which is why options increase in value when volatility rises.)

    Overall, this book provides 200 pages of very worthwhile reading, particularly for those who have an interest in how Toyota approaches product development. It undoubtedly provides the best perspective on SBCE, from the man who originally described this practice. Allen Ward brings a great wealth of knowledge, experience, and insight to his observations. Sobek and Shook have done us a service by creating this book.

    Released: October 2, 2013, 2:25 pm | Updated: November 20, 2013, 12:29 pm
    Keywords: PDMA Blog


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