Nearly everyone is familiar with the metaphor of “running on all cylinders,” understanding it to refer to the idea of peak performance optimization — something that all companies strive to attain. But when applied to new product development (NPD), this metaphor can be dangerously misleading. Why? Because running your NPD on all cylinders (aiming for peak resource utilization) can generate the opposite effect.
At Pivot International, we are a global single-source NPD and DFM leader with a proven track record of helping hundreds of clients deliver successful innovations to market. By integrating product design, development, manufacturing, and supply chain management, we optimize each aspect of the broader process to drive peak performance while helping you avoid the dangers of peak resource utilization.
Four Reasons Why It Can Be So Easy to Confuse PPO with PRU
Running your NPD on all cylinders is one of the fastest ways to jeopardize your project, organizational health, and bottom line. Research shows that many NPD managers aim for resource utilization above 98%. This highlights a common confusion that occurs when peak performance optimization is confused with peak resource utilization. In this next section, we’ll examine why it can be so easy to confuse the two, along with how to get clarity for moving forward successfully.
1. Companies Are Conditioned to Fear Redundancies
For decades now, companies have been conditioned to pursue maximum efficiency at the expense of resilience. Of course, no company sets out to make this devil’s bargain. It’s simply a natural consequence of indiscriminate adoption of lean practices designed to eliminate redundancies. But the single-minded pursuit of wringing every last drop of productivity and profit from as few resources as possible exposes companies to considerable risk. This holds for every activity a business undertakes, including NPD, making the quest to reconcile resilience with efficiency a critical task.
2. NPD Processes are Highly Variable and Nonlinear
Deliberately conserving resources allocated expressly for NPD can seem counterintuitive. After all, if your company isn’t investing 100% of such resources into this activity, don’t you run the risk of being slower, less efficient, less productive, and more likely to be left behind by competitors who are “operating on all cylinders?”
The resounding and decidedly counterintuitive answer to this question is no. The reason is that NPD processes (in contrast to manufacturing processes) are highly variable and nonlinear rather than predictably rote and repetitive. This means that even slight increases in resource utilization can generate dramatic delays. For example, increasing resource expenditures by a mere 2% may result in a 50% reduction in overall speed, efficiency, and output. This illustrates why project leads with complexity management experience can be so valuable and why it’s imperative to adjust your management control systems to ensure you’re not overcommitting your resources.
3. Queue Costs are Often Underestimated
Peak resource utilization stands a strong chance of creating project queues, therefore extending project duration and time-to-market. But queues come with other costly hazards. They prevent timely feedback needed for informing the broader process. They also prevent companies from making the rapid pivots required for responding in real-time to changing conditions.
To strike a balance between queue costs and the cost of underutilized capacity, you’ll need to get crystal clear on your project priorities and know when and where to apply the brakes. Keep in mind you can significantly shorten or eliminate queues and unlock vital feedback by adding resources to areas of NPD where utilization rates exceed 70%.
4. Significant Portions of NPD Can Be Relatively Invisible
The manufacturing stage of NPD is highly tangible and therefore easily visible and trackable. Conversely, NPD activities like product requirement metrics, use case and design documentation, CAD instructions, and so forth are highly intangible and therefore relatively invisible and challenging to track. Adding to the challenge of visibility, R&D inventory must be maintained at zero value, and excessive inventory is rarely reflected in financial statements.
The lesson here is that it’s easy to overestimate your resource capacity. When companies confuse PPO with PRU, they set themselves up for a shortfall, making it crucial to track and factor tangible and intangible variables into your resource utilization budget.
Moving Forward Successfully
Running your NPD on all cylinders is one of the fastest ways to jeopardize your NPD, organizational health, and bottom line, but clarifying the confusion between PPO and PRU can help you move forward successfully.
If you’re gearing up to develop a new product, we can help! With nearly fifty years of experience, DFM expertise that spans fourteen industries, 320,000 square feet of global manufacturing capability, and an internationally award-winning product portfolio, we will help you make your product vision a successful market reality! Contact us today to learn how a partnership with Pivot can fuel your growth!