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As project managers, we spend a lot of effort worrying about the constraints of a project – the scope, schedule, and budget. A new product development (NPD) project must clearly define the scope of work by outlining the market, technology, and product category that will be addressed. Schedules are frequently set by trade-show dates or competitive actions. Budgets are estimated by a wide range of techniques as well.
New product budgets should follow a best practice of estimating based on similar projects through comparison with prior projects’ post-launch reviews.
- Post-Launch Reviews: Measuring Your NPD Process
- Project Post-Launch Reviews for Managing NPD
- Project Post-Launch Evaluations
Budgeting for a project may be top-down or bottom-up, and may utilize zero-based budgeting methodologies. Each offers advantages and disadvantages (see Budgeting for Innovation and The Budget: A Necessary Evil).
Budgeting NPD Resources
Much of the work done in North America and Western Europe is considered “knowledge work”. This means that about 80% of a project’s budget is due to the costs of human resources. Other project costs will be comprised of capital investments (such as equipment, hardware, or software) and direct project costs for the new product (such as consumer testing, focus groups, and detailed design).
Following the 80/20 rule, project managers should identify ways to decrease the majority of costs – in this case, human resource costs. Of course, reducing staff is the most obvious (and unfortunately, most common) way to lower project costs. However, eliminating staff can be counter-productive and may lead to a lower quality product being commercialized within a delayed time frame.
More Productive Resources
Imagine letting a key piece of factory machinery run even if there was no output. The machine consumes energy and raw materials. No one would advocate running equipment for no purpose whatsoever – it’s a waste of money and resources.
Furthermore, if plant equipment is running inefficiently, operational personnel and industrial engineers will implement projects to improve the machine’s capacity. Often a few percentage points in operating efficiency can translate to millions of dollars saved per year by a company.
Now, consider your human resources. Do they operate productively and efficiently? Are there opportunities to increase the productivity of your most expensive project resources? Can you increase worker productivity in new product development to realize a reduced project cost?
Reducing Meetings to Increase Productivity
While improving the productivity of a machine can save millions of dollars in equipment and operational expenses in a single year, you can also find substantial decreases in project costs by saving time on meetings. Wisely choosing attendees and minimizing meetings for decision-making purposes only can result in huge organizational savings. On the other hand, starting a meeting just five minutes late can add significant costs to a project.
Assume ten people attend a weekly NPD status meeting. The average salary of all employees, staff, and management involved in the project is $75,000 per year. For a one-year project, the cost of starting meetings late adds up to over 40 hours per year in wasted resources and over $1,500 in wasted project costs.
Worse yet, are all ten people necessary to reach the decision expected from the meeting? A recent study* shows that participant effectiveness declines in circumstances with over seven (7) people attending a meeting. In addition, about a quarter of attendees aren’t even paying attention – sending out at least three (3) emails for every 30 minutes of meeting time. One has to wonder how many of those emails are calling for more meetings?
Manage Human Resources in NPD
You can take action to increase the effectiveness of an NPD project simply by taking control of meetings.
- Enforce standardized meeting times,
- Set the default meeting length to 30 minutes (instead of 60 minutes),
- Start meetings on time,
- Choose participants wisely who will contribute to the decision, and
- Hold meetings only when a key decision is necessary.
Meetings should be reserved for decision-making purposes. There are many more cost-effective methods to provide one-way communications to inform and share information with team members, such as newsletters, email broadcasts, and memos.
To Learn More
If you liked this post, be sure to check out our monthly thought leadership papers where a variety of innovation topics are pursued in depth. If you’d like to learn more about managing NPD teams and projects, please contact Global NP Solutions at firstname.lastname@example.org or by phone at 281-280-8717 to enroll in one of our self-study or facilitated NPDP certification workshops.
* Harvard Business Review, May 2014, “Your Scarcest Resource.”
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