npd presentation file risk management
TRANSCRIPT
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Project Risk Management in New Product Development
Amirhosein EmamiFateme Askarzadeh
Abazar Farahani Mahsa karimpour
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NPD starts with market opportunities and technical possibilities.
Uncertain information
Precise information
Introduction
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Financial RisksInterest Rates FOREXCredit
RegulationsCultureBoard Composition
Operational Risks
ContractsNatural Events
SuppliesEnvironment
Hazard Risks
Strategic RisksCompetition
Customer ChangesIndustry Changes
Customer Demand
M & A Integration
Recruitment
Supply Chain
Liquidity & Cash Flow
Products & Services
Public Access
Employees
Properties
R & DIntellectual Capital
Accounting Controls Information System
Internally Driven
External
ly
Driven
Externally Driven
Some risks can have both external and internal drivers. Hence, those risks overlap in two areas.
To combat these risks, Risk Management has become a core business process.
Risk Types
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RISK MANAGEMENT PROCESS
The Organization's Strategic Objectives
Risk Assessment
Risk ReportingThreats and Opportunities
Decision
Risk Treatment
Residual Risk Reporting
Monitoring
DataAnalysis
BusinessResearch
Risk Analysis
Risk Identification
Risk Description
Risk Estimation
Risk Evaluation
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Risk Management in New Product Development
Why research and analysis before new
product development
New product development is linked with very limited historical or preliminary data. Hence, risky
Risk can be in form of market, technical, or organizational issues. Risk analysis solves the problem through flexible modeling, primary and secondary research.
A good strategy is a must for evaluating and dealing with the associated and unavoidable risks.
Research conducted to understand customer needs and develop a new product is different from research required to launch a new product.
Product development research is focused on needs of customers while launch research focuses on understanding the motivation and attitudes of early adopters. Successful targeting of early adopters builds the fountain for new product success.
New product have a very high failure rates.Products fail, not because of technical shortcomings, but due to absence of market.Over 60% of new product fail before entering the market, and out of the remaining 40% that do see the ray of light, 40% fail to yield profit and are withdrawn from the market. Timely and reliable knowledge about customer preferences is most important. Such data is obtained from business research.
RISK MANAGEMENT PERTAINING TO THE BUSINESS ENVIRONMENT
Environment
External Internal
Socio-Economic
RegulationsTechnologyCompetition Structure Processes Culture
Constituents of the Business Environment
•Companies operate in a dynamic business environment which forces them to adopt risk management measures.
•The business environment is both external and internal to a company and an adverse change in any of the above mentioned constituents can increase the risk levels for the company.
NPD RISKS:
Market related risks
Completion risks
Institutional risks
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CONCEPTS OF UNCERTAINTY
Risk Definition
The possibility of several possible outcomes for a situation, each with a probability of occurrence.
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Novel Venture
Possible outcomes are knownProbabilities are unknown
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New Technology or New Market
Unknown Unknowns
APPROACHES TO BUFFERS
Project buffers:
Schedule buffersBudget contingenciesSpecification compromises
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Schedule buffers
Critical Chain Project Management (CCPM)
CCPM helps to overcome following phenomenon:
- Parkinson’s Law: Work expands to fill the available time. - Student Syndrome: People start to work in full fledge only when deadline is near. - Murphy's Law: What can go wrong will go wrong. - Bad Multi Tasking: Bad multitasking can delay start of the successor tasks.
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Schedule buffers
Critical path (no slack)
SCHEDULE BUFFERS
The effectiveness of the schedule buffer is realizing that it is not mainly a calculation
device, but a tool to change attitudes.
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Buffer for errors in cost estimates
Budget reserve: 5 to 10% of the estimated cost (20% in early phases)
Budget contingencies
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Used as an alternative to schedule buffers and shorten the durations: Working overtime Adding additional or using more experienced staff Outsourcing activities Upgrading equipment
Budget contingencies
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Specification Compromises
Microsoft focused on the most important features and entered PC
software mass market.
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Approaches to Project Risk Management
PRM: formal process to manage identifiable risk factors
It consists of 4 phases:
Risk identificationRisk assessment and prioritizationRisk response planningDocumentation and learning
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Project Risk Management
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Risk identificationRisk Checklist
RISK ASSESSMENT & PRIORITIZATION
Risk status =
(event amount at stake) × (event probability)
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RISK RESPONSE PLANNING
Identified Risk
Partially under the control of the team
Uncontrollable (No influence)
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RISK PREVENTION
Risk avoidance- Use novel technologies
Risk mitigation- Market risks
Risk transfer- Insurance
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UNCONTROLABLE RISKS
Contingency planning:
In project schedule and budget
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Decision Trees
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Increasing Project FlexibilityDiscovery Driven PlanningInformation Gap Decision Theory
Approaches to Unforeseeable Uncertainty
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Increasing Project Flexibility
Overlapping the development phase and the implementation phase
Quick feedbacks about customer requirements
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Increasing Project Flexibility
DISCOVERY DRIVEN PLANNING
Uncover unknown unknowns with 4 analyses:
1. Reverse income statement
2. Pro forma operations specification
3. Assumptions checklist
4. Milestone planning
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INFORMATION GAP DECISION THEORY
Severe uncertainty
Maximize the robustness or immunity to failure
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The project goal and path are unknown
Unknown unknowns affecting the project goal
No project plan
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The team knows little about the project outcomes
The project goal and path are unknown
Trial-and-error learning Selectionism
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Cost Comparison of Trial and Error and Selectionism
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Benefit Comparison of Trial and Error and Selectionism
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