Shipulski On Design

Companies that are good at planning their projects create roadmaps spanning about three years, where individual projects are sequenced to create a coordinated set of projects that fit with each other.  The roadmap helps everyone know what’s important and helps the resources flow to those most important projects.

Through the planning process, the collection of potential projects is assessed and the best ones are elevated to the product roadmap.  And by best, I mean the projects that will generate the most incremental profit.  The projects on the roadmap generate the profits that underpin the company’s financial plan and the company is fanatically committed to the financial plan. The importance of these projects cannot be overstated.  And what that means is once a project makes it to the roadmap, there’s only one way to get it off the roadmap, and that’s to complete it successfully.

For the next three years, everyone knows what they’ll work on.  And they also know what they won’t work on.

The best companies want to be efficient so they staff their projects in a way that results in high utilization.  The most common way to do this is to load up the roadmap with too many projects and staff the projects with too few people.  The result is a significant fraction of people’s time (sometimes more than 100%) is pre-allocated to the projects on the roadmap.  The efficiency metrics look good and it may actually result in many successful launches.  But the downside of ultra-high utilization of resources is often forgotten.

When all your people are booked for the next three years on high-value projects, they cannot respond to new opportunities as they arise.  When someone comes back from a customer visit and says, “There’s an exciting new opportunity to grow the business significantly!” the best response is “We can’t do that because all our people are committed to the three-year plan.”.  The worst response is “Let’s put together a team to create a project plan and do the project.”.  With the first response, the project doesn’t get done and zero resources are wasted trying to figure out how to do the project without the needed resources.  With the second response, the project doesn’t get done but only after significant resources are wasted trying to figure out how to do the project without the needed resources.

Starting new projects is difficult because everyone is over-booked and over-committed on projects that the company thinks will generate significant (and predictable) profits.  What this means is to start a new project in this high-utilization environment, the new project must displace a project on the three-year plan.  And remember, the projects that must be displaced are the projects the company has chosen to generate the company’s future profits.  So, to become an active project (and make it to the three-year plan) the candidate project must be shown to create more profits, use fewer resources and launch sooner than the projects already on the three-year plan.  And this is taller than a tall order.

So, is there a solution?  Not really, because the only possible solution is to reduce resource utilization to create unallocated resources that can respond to emergent opportunities when they arise.  And that’s not possible because good companies have a deep and unskillful attachment efficiency.

Image credit — Bernard Spragg NZ

There are natural limits to the amount of work that any one person or group can do.  And once that limit is reached, saying yes to more work does not increase the amount of work that gets done.  Sure, you kick the can down the road when you say yes to work that you know you can’t get done, but that’s not helpful.  Expectations are set inappropriately which secures future disappointment and more importantly binds or blocks other resources. When preparatory work is done for something that was never going to happen, that prep work is pure waste.  And when resources are allocated to a future project that was never going to happen, the results are misalignment, mistiming, and replanning, and opportunity cost carries the day.

But how to know if you the team has what it takes to get the work done?  The answer is a capacity model.  There are many types of capacity models, but they all require a list of the available resources (people, tools, machines), the list of work to be done (projects), and the amount of time (in hours, weeks, months) each project requires for each resource.  The best place to start is to create a simple spreadsheet where the leftmost column lists the names of the people and the resources (e.g., labs, machines, computers, tools).  Across the top row of the spreadsheet enter the names of the projects.  For the first project, go down the list of people and resources,  and for each person/resource required for the project, type an X in the column.  Repeat the process for the remainder of the projects.

While this spreadsheet is not a formal capacity model, as it does not capture the number of hours each project requires from the resources, it’s plenty good enough to help you understand if you have a problem.  If a person has only one X in their row, only one project requires their time and they can work full-time on that project for the whole year.  If another person has sixteen Xs in their row, that’s a big problem. If a machine has no Xs in its row, no projects require that machine, and its capacity can be allocated to other projects across the company. And if a machine has twenty Xs in its row, that’s a big problem.

This simple spreadsheet gives a one-page, visual description of the team’s capacity.  Held at arm’s length, the patterns made by the Xs tell the whole story.

To take this spreadsheet to the next level, the Xs can be replaced with numbers that represent the number of weeks each project requires from the people and resources.  Sit down with each person and for each X in their row, ask them how many weeks each project will consume.  For example, if they are supposed to support three projects, X1 is replaced with 15 (weeks), X2 is replaced with 5, and X3 is replaced with 5 for a total of 25 weeks (15 + 5 + 5).  This means the person’s capacity is about 50% consumed (25 weeks / 50 weeks per year) by the three projects.  For each resource, ask the resource owner how much time each project requires from the resource.  For a machine that is needed for ten projects where each project requires twenty weeks, the machine does not have enough capacity to support the projects.  The calculation says the project load requires 200 machine-weeks (10*20 = 200 weeks) and four machines (200 machine-weeks / 50 weeks per year = 4 machines) are required.

Creating a spreadsheet that lists all the projects is helpful in its own right.  And you’ll probably learn that there are far more projects than anyone realizes.  (Helpful hint: make sure you ask three times if all the projects are listed on the spreadsheet.)  And asking people how much time is required for each project is respectful of their knowledge and skillful because they know best how long the work will take. They’ll feel good about all that.  And quantifying the number of weeks (or hours) each project requires elevates the discussion from argument to analysis.

With this simple capacity model, the team can communicate clearly which projects can be supported and which cannot.  And, where there’s a shortfall, the team can make a list of the additional resources that would be needed to support the full project load.

Fight the natural urge to overcomplicate the first version of the capacity model.  Start with a simple project-people/resource spreadsheet and use the Xs.  And use the conversations to figure out how to improve it for next time.

Defend – Protect your success in its current state.  In short, do what you did last time and do no harm.

Extend – Modify and adapt your success. In short, sell similar offerings to similar customers.

Transcend – Obsolete your best work before someone else does.

All three elements can be important to a company’s success and longevity, but it’s more important that the company’s resource allocation aligns with its priorities.  But how to tell if the company’s resource allocation matches its priorities?  Well, even though I was the one that asked it, I think that’s the wrong question because how a company allocates its resources DEFINES its priorities.  Though we don’t usually think of it that way, I think it’s a good way to think about it.  It’s a straightforward thing.  If it’s a priority, allocate the resources. If it’s not a priority, don’t allocate the resources. But there’s confusion when a company declares its priorities but those words contradict how resources are allocated.  Here are two rules to help navigate the confusion:

Rule 1. When there is a difference between how people spend their time and what the company says is a priority, company priorities are defined by how people spend their time.

Rule 2. When there is a difference between how the company spends its money (projects, investments, equipment, other) and what the company says is a priority, company priorities are defined by how the money is spent.

We’re all pretty clear on what the company says are the priorities, but how do you tell if the words are aligned with the actual priorities?  Well, measure how the resources are allocated – measure how you spend your time.

Open your calendar and move forward in time by one month and you will see a collection of standing meetings.  These are the meetings that are on the schedule and are the meetings that WILL happen.  Sure, there will be other meetings that come up, but the standing meetings, the regularly recurring meetings, are a good indicator of how you’ll spend your time.  For each meeting in week five, determine if the meeting is a defend, extend, or transcend meeting.  If the meeting agenda defines work that protects things as they are, that’s a Defend meeting.  If the meeting agenda defines work that modifies or adapts success, that’s an Extend meeting.  If the agenda defines work that obsoletes what’s been successful, that is a Transend meeting.  Categorize the meetings of week five and tally the hours.  Then, repeat for weeks six through eight.  You now have a good measure of your resource allocation and the company’s priorities.

If all the meetings are Defend meetings, the company’s priority is to defend what’s been successful.  This indicates the company’s priorities have a short-term bias.  If this is the case, I hope you have an unfair monopoly.  If not, you might consider adding some medium-term work to adapt and extend your success. If half the meetings are Defend meetings and the other half are Extend meetings, that’s a better balance between short-term and medium-term priorities.  But I hope there are no startups in your space because, without some Transcend work, one of them might soon eat your lunch.  If almost half are Defend, another almost half is Extend, and some are Transcend congratulations.  You have a reasonable balance of short and medium priorities and a splash of long-term priorities.  I’m not sure the balance is exactly right, but it’s at least a great start.

A similar characterization/quantification can be done for how the company spends its money.

Take a look at the open job requisitions on the company website.  Do those positions do work that defends, extends, or transcends?  Count them.  What does the data say?

Review and tally last year’s capital equipment purchases.  Did they defend, extend, or transcend? Do the same for this year’s capital budget.  How do you feel about all that?

Count the people who do projects to keep the production line running (defend), count the people who do new product development projects with the same DVP as last time (defend), who do new product development projects that adapt the DVP (extend) and who do technology development that builds on the DVP (extend) or decimates your best product (transcend).  What does the tally say?

Review this year’s training budget.  What are the relative fractions of extend, defend, and transcend?  Do you feel good about that?

There is no best ratio for defend, extend, and transcend.  What’s important, I think, is to be objective and clear about how the resources are allocated and to be open and honest about how all that aligns (or not) with the stated priorities.  And most important of all is what you do when there’s a mismatch between resource allocation and the stated priorities.

Image credit — Tommy Wong

It’s difficult to describe what an innovative company looks like, and there’s no singular recipe or direction that is right for all companies.  Here are some From: To: pairings that I hope will help you in your migration toward innovation.  You’re heading in the right direction as your company generates Tos and fewer Froms.

From:  No one is asking for that technology.

To:       What does this new technology stand for?

From:  How will the company benefit?

To:       How will the customer benefit?

From:  What’s the smallest improvement that will make a difference?

To:       How can we make the most significant difference?

From:  When will you be done?

To:       What will you learn?

From:  This might not work.

To:       How might this work?

From:  Start, Start, Continue.

To:       Stop, Start, Continue.

From: We’ve tried that before and it didn’t work.

To:      What’s changed since last time?

From:  What does perfect look like?

To:       How is the work done today and which elements can we improve?

From:  Defend and Defend the core.

To:       Extend and Defend the core.

From:  Define the idealized future state.

To:       Start with the work.

From:  That won’t work!

To:       Hey, watch this!

It’s easy to say yes to a project, and it’s difficult to say no.

When I say no to a great project, it preserves the opportunity to say yes to a magical one.

When in doubt, I say no to a project.

When I say no to a project, people notice.

When I say no to a project, I can give you a good reason.  And that reason shapes the selection of the next candidate projects.

When I say no to a project, but I can’t give you a good reason, I’m not doing my job.

When I say no to a project, it’s usually because there’s nothing in it for the customer.

When a project solves a problem for the company, it brings no top-line growth.  Just say no.

If the company benefits from the project, that benefit comes at the expense of the customer. Just say no.

If the customer doesn’t benefit, I say no to the project.

When I say no to a project, people know it’s because I care about the customer.

If there’s disagreement around how the customer will benefit, it’s because the customer benefit is insignificant. I say no and choose a project where the customer benefit is massive.

If you want to judge me, judge me on the projects I say no to.

If you want to help someone grow, use the work.  Put them on mission-critical work that gives them the opportunity to demonstrate next-level skills.  And the work must fit the person – it can’t be too difficult or too easy.  It must be just right.   And don’t create new work. Instead, for the company’s most important projects, identify the critical path work that is vital to the projects’ success and assign them to the work.

Rule 1: A personal development plan must be made from real work.

People don’t develop skills when they talk about the work, they develop skills when they do the work.  But if the work isn’t new, they don’t develop new skills.  And if the work is too difficult, they don’t develop new skills.  The role of the leader is to define work that stretches the individual without pulling them apart.  To do this, the leader must select the work appropriately and pay attention as the work proceeds.  When the going gets rough, the leader shows them how it’s done and then lets them do the work in a supervised way.  The leader does it right when it can be done independently after the work is done with supervision.

Rule 2: A personal development plan is only as good as the leader’s involvement.

There’s great pressure to create personal development plans for everyone.  It’s a good idea in principle, but in practice, it’s not effective.  Good personal development plans are resource intensive.  Even before the work starts, the planning and coordination require significant resources.  And once the plan is up and running, the company’s best talent is applied to the best (and most important) work and the best leaders must stay close to the work for the duration.  The level of commitment is significant to design and manage a good personal development plan and this limits the number of development plans that can be done well.

Rule 3: Fewer personal development plans create more personal development.

Just before it’s possible, it’s impossible.

An instant before you know how to do it, you don’t.

After searching for the answer for a year, you may find it in the next instant.

If you stop searching, that’s the only way to guarantee you won’t find it.

When people say it won’t work, their opinion is valid only if nothing has changed since the last time, including the people and their approach.

If you know it won’t work, change the approach, the specification, or the scope.

If you think it won’t work, that’s another way of saying “it might work “.

If you think it might work, that’s another way of saying “it might not work”.

When there’s a difference of opinion, that’s objective evidence the work is new.

If everyone sees it the same way, you’re not trying hard enough.

When you can’t predict the project’s completion date, that’s objective evidence that the work is new.

If you know when the project will be done, the novelty has been wrestled out of the project or there was none at the start.

When you don’t start with the most challenging element of the project, you cause your company to spend a lot of money on a potentially nonviable project.

Until the novel elements of a project are demonstrated, there is no real progress.

“Jumping Backwards – Cape Verde, Sal Rei” by Espen Faugstad is licensed under CC BY 2.0.

Health matters. What did you do this year to take care of your physical health? What did you do this year to take care of your mental health? Next year what can you stop doing to make it easier to take care of your physical and mental health? Without your health, what do you have?

Family matters. What did you do this year to connect more deeply with your family? And how do you feel about that?  Next year what can you change to make it easier to deepen your relationships with a couple of family members?  If you’re going to forgive anyone next year, why not forgive a family member? Without family, what do you have?

Friends matter. What did you do this year to reconnect with old friends? What did you do this year to help turn a good friendship into a great one? What did you do this year to make new friends? Next year what will make it easier to reestablish old friendships, deepen the good ones, and create new ones?  Without friends, what do you have?

Fun matters. What did you do this year to have fun for fun’s sake? Why is it so difficult to have fun? Next year what can you change to make it easier for you to have more fun?  Without fun, what do you have?

“Friendship” by *~Dawn~* is licensed under CC BY 2.0.

X: We need to decrease the time to market for our new products.

Me: So, you want to decrease the time it takes to go from an idea to a commercialized product?

X: Yes.

Me: Okay.  That’s pretty easy.  Here’s my idea.  Put some new stickers on the old product and relaunch it.  If we change the stickers every month, we can relaunch the product every month.  That will reduce the time to market to one month.  The metrics will go through the roof and you’ll get promoted.

X: That won’t work.  The customers will see right through that and we won’t sell more products and we won’t make more money.

Me: You never said anything about making more money.  You said you wanted to reduce the time to market.

X: We want to make more money by reducing time to market.

Me: Hmm.  So, you think reducing time to market is the best way to make more money?

X: Yes. Everyone knows that.

Me: Everyone?  That’s a lot of people.

X: Are you going to help us make more money by reducing time to market?

Me: I won’t help you with both.  If you had to choose between making more money and reducing time to market, which would you choose?

X: Making money, of course.

Me: Well, then why did you start this whole thing by asking me for help improving time to market?

X: I thought it was the best way to make more money.

Me: Can we agree that if we focus on making more money, we have a good chance of making more money?

X: Yes.

Me:  Okay.  Good.  Do you agree we make more money when more customers buy more products from us?

X: Everyone knows that.

Me:  Maybe not everyone, but let’s not split hairs because we’re on a roll here.  Do you agree we make more money when customers pay more for our products?

X: Of course.

Me: There you have it.  All we have to do is get more customers to buy more products and pay a higher price.

X: And you think that will work better than reducing time to market?

Me: Yes.

X: And you know how to do it?

Me: Sure do.  We create new products that solve our customers’ most important problems.

X: That’s totally different than reducing time to market.

Me: Thankfully, yes.  And far more profitable.

X: Will that also reduce the time to market?

Me: I thought you said you’d choose to make more money over reducing time to market. Why do you ask?

X: Well, my bonus is contingent on reducing time to market.

Me: Listen, if the previous new product development projects took two years, and you reduce the time to market to one and half years, there’s no way for you to decrease time to market by the end of the year to meet your year-end metrics and get your bonus.

X: So, the metrics for my bonus are wrong?

Me: Right.

X: What should I do?

Me: Let’s work together to launch products that solve important customer problems.

X:  And what about my bonus?

Me: Let’s not worry about the bonus.  Let’s worry about solving important customer problems, and the bonuses will take care of themselves.

Image credit — Quinn Dombrowski

X: Me: format stolen from @swardley.  Thank you, Simon.

X: Of the pool of candidate new product development projects, which project should we do first?

Me: Let’s do the one that makes us the most money.

X: Which project will make the most money?

Me: The one where the most customers buy the new product, pay a reasonable price, and feel good doing it.

X: And which one is that?

Me: The one that solves the most significant problem.

X: Oh, I know our company’s most significant problem.  Let’s solve that one.

Me: No. Customers don’t care about our problems, they only care about their problems.

X: So, you’re saying we should solve the customers’ problem?

Me: Yes.

X: Are you sure?

Me: Yes.

X: We haven’t done that in the past. Why should we do it now?

Me: Have your previous projects generated revenue that met your expectations?

X: No, they’ve delivered less than we hoped.

Me: Well, that’s because there’s no place for hope in this game.

X: What do you mean?

Me: You can’t hope they’ll buy it.  You need to know the customers’ problems and solve them.

X: Are you always like this?

Me: Only when it comes to customers and their problems.

image credit: Kyle Pearce

I hear it’s a good idea to move manufacturing work back to the US.

Before getting into what it would take to move manufacturing work back to the US, I think it’s important to understand why manufacturing companies moved their work out of the US.  Simply put, companies moved their work out of the US because their accounting systems told them they would make more money if they made their products in countries with lower labor costs. And now that labor costs have increased in these no longer “low-cost countries”, those same accounting systems think there’s more money to be made by bringing manufacturing back to the US.

At a low level of abstraction, manufacturing, as a word, is about making discrete parts like gears, fenders, and tires using machines like gear shapers, stamping machines, and injection molding machines.  The cost of manufacturing the parts is defined by the cost of the raw material, the cost of the machines, the cost of energy to power the machines, the cost of the factory, and the cost of the people to run the machines. And then there’s assembly, which, as a word, is about putting those discrete parts together to make a higher-level product.  Where manufacturing makes the gears, fenders, and tires, assembly puts them together to make a car.  And the cost of assembly is defined by the cost of the factory, the cost of fixtures, and the cost of the people to assemble the parts into the product.  And the cost of the finished product is the sum of the cost of making the parts (manufacturing) and the cost of putting them together (assembly).

It seems pretty straightforward to make more money by moving the manufacturing of discrete parts back to the US.  All that has to happen is to find some empty factory space, buy new machines, land them in the factory, hire the people to run the machines, train them, source the raw material, hire the manufacturing experts to reinvent/automate the manufacturing process to reduce cycle time and reduce labor time and then give them six months to a year to do that deep manufacturing work.  That’s quite a list because there’s little factory space available that’s ready to receive machines, the machines cost money, there are few people available to do manufacturing work, the cost to train them is high (and it takes time and there are no trained trainers).  But the real hurdles are the deep work required to reinvent/automate the process and the lack of manufacturing experts to do that work.  The question you should ask is – Why does the manufacturing process have to be reinvented/automated?

There’s a dirty little secret baked into the accounting systems’ calculations.  The cost accounting says there can be no increased profit without reducing the time to make the parts and reducing the labor needed to make them.  If the work is moved from country A to country B and the costs (cycle time, labor hours, labor rate) remain constant, the profit remains constant.  Simply moving from country A to country B does nothing.  Without the deep manufacturing work, profits don’t increase.  And if your country doesn’t have the people with the right expertise, that deep manufacturing work cannot happen.

And the picture is similar for moving assembly work back to the US.  All that has to happen is to find empty factory space, hire and train people to do the assembly work, reroute the supply chains to the new factory, redesign the product so it can be assembled with an automated assembly line, hire/train the people to redesign the product so it can be assembled in an automated way, design the new automated assembly process, build it, test it, hire/train the automated assembly experts to do that work, hire the people to support and run the automated assembly line, and pay for the multi-million-dollar automated assembly line.  And the problems are similar.  There’s not a lot of world-class factory space, there are few people available to run the automated assembly line, and the cost of the automated assembly line is significant.  But the real problems are the lack of experts to redesign the product for automated assembly and the lack of expertise to design, build, and validate the assembly line.  And here are the questions you should ask – Why do we need to automate the assembly process and why does the product have to be redesigned to do that?

It’s that dirty little secret rearing its ugly head again.  The cost accounting says there can be no increased profit without reducing the labor to assemble the parts.  make them.  If the work is moved from country A to country B and the assembly costs (labor hours, labor rate) remain constant, the profit remains constant.  Simply moving from country A to country B does nothing.  Without deep design work (design for automated assembly) and ultra-deep automated assembly work, profits don’t increase.  And if your country doesn’t have the people with the right expertise, that deep design and automated assembly work cannot happen.

If your company doesn’t have the time, money, and capability to reinvent/automate manufacturing processes, it’s a bad idea to move manufacturing work back to the US.  It simply won’t work.  Instead, find experts who can help you develop/secure the capability to reinvent/automate manufacturing processes to reduce the cost of manufacturing.

If your company doesn’t have the time, money, and capability to design products for automated assembly and to design, build, and validated automated assembly systems, it’s a bad idea to move assembly work back to the US. It, too, simply won’t work.  Instead, partner with experts who know how to do that work so you can reduce the cost of assembly.