guiding principles for implementing lean product development

Tony OrzechowskiDirector, R&D Quality Engineering

Abbott Diagnostics

Guiding Principles for Implementing Lean Product Development


2 © 2008 Abbott

Conclusion: Our Deployment is based upon Several Key Guiding Principles that Help Assure Consistent Sustainable Results

1. Maintain Connection to Strategic Business Objectives

2. Establish and Maintain Project Portfolio Management(Manage Demand and Capacity – 10 Projects Half Done are Zero $’s)

3. Add Activation Energy to Help Drive Projects and Change(All good ideas evolve into hard work on someone’s part)

4. Manage Improvement Projects with Flexible Structure

5. Oversee Long-term Management of Competency Development for Key People

6. Develop, Assess and Validate Financial Impact

7. Ensure Clearly Defined Project Transfers back into the Design Factory*, and

8. Monitor Reproducibility of the Results over a 1 to 2 year period … Help adjust process when needed.

* Design Factory – Reinertsen – “Managing the Design Factory”


3 © 2008 Abbott

Guiding Principle #1. All Projects should be driven by a to fulfill the Strategic Business Objectives

• Being driven by the Strategic Business Objectives projects will maintain more consistent organization and leadership engagement

• The emphasis on how we prioritize (weight) our portfolio changes over the years may change, but in doing so we maintain consistency on what is most important

– Evolving Business Drivers emphasize focus on Quality, Timeliness, or Revenue / Cost

• Management oversight authorizes project selections and rebalancing in order to assure on-going alignment with evolving business objectives

• Measures of project success against projections are reported to validate the value being delivered by the overall program


4 © 2008 Abbott

Why Focus on Lean Product Development? Improved R&D speed drives higher revenues and margins resulting in Improved company Cash Flow

Improve the Fast Flexible Flow

of Key R&D Processes

Complication-Achieve this with the Same Internal R&D $

How will this be done ?

Increase Value to Abbott Shareholder(Increase Cash Flow / Margin Growth)

What is the required outcome for the company ?

Drive Growth by Accelerating Delivery

of New ProductsWhat is to be achieved ?

Increase Capacity of the R&D Process


5 © 2008 Abbott

Guiding Principle # 2. Controlling Project Demand and Queues through Project Portfolio Management is a Key to Successfully Completing Projects

Selecting and Authorizing the right projects, with the right resources, at the right time.

• All projects are traceable to Strategic Business Objectives

• Demand Management (managing management) – Maintain the discipline to start less and finish more

– Project prioritization based on Benefit / Effort / Risk assessment (scorecard is used to define weighted benefit based upon current strategic business objectives)

– Non-discretionary projects (… and we all have these …) are accounted for

– Ability to Start Less to maintain a Fast Flexible Continuous Improvement Process is Vital … learning how to say NO or Not Now, but Later (postponement).

“Stop Starting Stuff … Start Finishing Stuff !” – Reinertsen 2006


6 © 2008 Abbott


• Resource Management

– Managing Capacity (Utilization of Key Skilled Resources),

– Managing Long-term Competencies Flexibility to flow competent resources to project bottlenecks

• Portfolio Diversification (Gaming Strategy - How to place your bets)

– Managing the % Layout of “Game Changers” (monster projects with massive payback) vs. sure-thing quick-wins with small incremental paybacks

Idea GenerationDeveloping a project pipeline – Both Top-Down and Bottom-up


7 © 2008 Abbott


Project Portfolio Management Plot - PICK ChartPrioritization (Benefit - Effort - Risk)

50

49

47

46

45

44

4140

5 4-1

1-4

2 3

32

34

*35

36

39

*42

43

7-4

8-5

9

10

11-4

*12

13*16

14

17-18

18-1720

21

24

25

26*27

28

29

30

31

33

-

1.0

2.0

3.0

4.0

5.0

- 1.0 2.0 3.0 4.0 5.0Effort

Be

ne

fit

Implement Zone

Kill Zone Possible Zone (Quick Wins)

Challenge Zone

Project Portfolio Management Plot - PICK ChartPrioritization (Benefit - Effort - Risk)

50

49

47

46

45

44

4140

5 4-1

1-4

2 3

32

34

*35

36

39

*42

43

7-4

8-5

9

10

11-4

*12

13*16

14

17-18

18-1720

21

24

25

26*27

28

29

30

31

33

-

1.0

2.0

3.0

4.0

5.0

- 1.0 2.0 3.0 4.0 5.0Effort

Be

ne

fit

Implement Zone

Kill Zone Possible Zone (Quick Wins)

Challenge Zone

Benefit• Revenue Growth• Cost Reduction

(including Cost of Delay)• Strategic Fit• Quality / Customer Satisfaction• Compliance

Effort• Length of Project• Resource Impact• Costs (One-Time and On-going)

Risk• Project• Technical• Organizational / Cultural

Possible (Quick Wins)Implement (Clear Value)

Challenge

Kill (Low Value)


8 © 2008 Abbott

Clear ConsistentDefinitions ofBenefit, Effort and Risk for Fast Accurate Project Selection and Authorization

Business Impact: For each category below, indicate the relative benefit that the project will have by clicking on corresponding box and use "Fill Color" to mark the box. Benefits guidelines are annualized.

Criteria Wgt. Description N/A

Revenue GrowthRevenue growth (based on % increase in revenue)

$0

Cost Reduction

Reduction of product and/or operating costs without eroding quality, functionality and/or service (based on % improvement in EBITDA)

$0

Strategic FitThe extent to which a project supports the strategic goals. ( how many goals, how strongly)

Does not directly support any

current site goal.

Customer Satisfaction

The extent to which a project will increase customer satisfaction (i.e. increase the likelihood of retention of incremental purchases).

Customer does not "see" this

issue.

Compliance Improvement

Improves compiance with prescribed laws, regulations, policies and procedures.

Does not impact compliance or

quality of product.

0%

Project Effort:

Criteria Wgt. Description No Effort

Length of ProjectThe duration of the project overall (i.e. the amount of time a Black Belt is dedicated to the problem)

< 1 day

Number of FTENumber of experienced headcount required to implement the project (excluding contract HC- see One Time Costs).

< 0.1

One-Time CostsAny incremental expense (capital outlay, contract HC or any other expenses incurred) required to implement the project.

< $10,000

0%

Risk of Project: For each category below, indicate the relative risk of the project by clicking on the corresponding box and use "Fill Color" to mark the box.

Criteria Wgt. Description N/A

Project RisksProbability of not succeeding due to issues with respect to schedule, budget, union / contractual / regulatory barriers, etc.

Do Not Use

Technical Risks

Probability of not succeeding due to customer requirements, difficulty collecting data, difficulty in identifying or developing the solution.

Do Not Use

Cultural / Change Risks

Probability of not succeeding due to issues with respect to the sustainability and acceptability of the project. This includes the risk due to lack of sponsorship and cultural / change resistance.

Do Not Use

> 4 mos

0.1 - < 1.0

High Effort

Some customers may defect if this is not addressed OR only poor customers will

defect. Levels of improvement are moderate.

Project will help to prevent Field Actions / complaints or to a compliance related

gap.

>$100,000

$100,000 - $1,000,000

Medium Benefit High Benefit

$25,000 - $100,000

Significant risks identified, barrier resolution difficult,

project not well-understood -OR- Re-design required

Low Risk Medium Risk

Project is well-understood with no significant barriers

identified

Med Risk - project has some risk attached to it, barriers identified have

possible resolutions, and/or some gaps in understanding of project

High Risk




identified



Low Benefit

$10,000 - $100,000

Project may help to prevent Field Actions /

complaints or to a compliance related gap.

<$100,000

2 - 4 mos1 day - 2 mos

1.0 - 3.0


identified





> 3.0

$100,000 - $500,000 >$500,000

Low Effort

For each category below, indicate the relative effort required to meet the project’s requirements by clicking on the corresponding box and use "Fill Color" to mark the box.

Medium Effort

Project is directly related to prevention of Field Action / high

level of complaints or is to a significant compliance related

gap.

Customers occassionally see this

issue, but do not change their buying behavior

because of it

Customers will defect if this is not addressed AND these are "key" customers (large and/or

profitable).

Supports multiple goals, and/or will have a significant impact on

1 or more.

>$1,000,000

<$25,000

Supports just 1 goalSupports multiple goals, or will have a

significant impact on 1.


9 © 2008 Abbott

Guiding Principle # 3. Adding Activation Energy Helps to Drive Successful Projects and Change

Activation Energy – Experienced Resources

• 1-2% - Full-time dedicated catalysts with capacity to drive projects

• Used to establish and drive momentum “over the top of the hill”

Organization• Collocate and embed organization

• Manage group through measures / rewards on strategic outcomes:

– avoid identifying too strongly with their own work group rather than with the company as a whole.

– avoid looking inwards at what they do and how it is measured / rewarded and look more at the strategic level outcomes.

Example: Some teams can focus too heavily upon cycle-time reductions as an end outcome rather than improvement to product launch times (lead times). - Ask the question … “Do our products launch sooner now or do we launch more products with the same resources.”


10 © 2008 Abbott

Guiding Principle # 4. Keep Project Structures as Simple and Flexible as Possible

Key Themes for a Lean Product Development Project

1. Understand the Project Economics

2. Focus on the Queues

3. Create Flexibility

4. Drive Behavior of Fast Learning

5. Utilize Real-time Planning

6. Understand the Value Stream

Always keep it as Simple as Possible – Find the Queues !


11 © 2008 Abbott

One Project’s Example: How was a Lean R&D Process achieved …

Category Actual ImprovementsImproved CapacityBetter Tools, Increased Support of Key Resources and Reduction of non-value added activity

• Better Tools - New Data Management System

• ELN Reduction(Precision: From: 300 To: 2)

• Testing Error Reduction

• Protocol Simplification and Robustness

• Capacity Level Loading thru VSM

Demand ManagementStop Starting Stuff, Start Finishing Stuff

• Small batches with WIP-Caps

• Pull-System

Fast Learning and Feedback

• Daily Stand-up meetings

• Visual Mgmt Board

• Co-location of functional groups

FlexibilityReduce the Impact of Variation

• Cross-training

• Protocols now allow for extra reps

Standardization Reduce Sources of Variation

• Further Standardization of Statistical Outputs

• ELN Standardization

Employee Ownership • Clear process ownership of individual protocols

• Clear expectations of functional groups


12 © 2008 Abbott

When Structure is needed … There is a Basic Process to Reduce Lead Time

ConstrainedResources and Time

these causes ?

Identify Solutions and Establish

Magnitude of Benefit

How will we prevent

Key Solutions - Trace Map of Potential Solutions to Causes

Balance Benefit against Effort to

Prioritize and Select Key Solutions

Where is our biggest bang for our dollar ?

Benefit / Effort Matrix - Prioritization and Selection of Key Improvements

Identify Key Areas of Lost Time

What and Where is the Lost Time ?

Key Areas of Lost Time - Map the Process - Find the Biggest Queues

Lost Time ?Brainstorm Causes and

Key DriversWhat causes this

Key Causes - Trace Map of Causes to Process WasteIdentify


13 © 2008 Abbott

Guiding Principle # 5. Overseeing Long-term Management of Competency of Key Resources is a key to Building Flexibility to Meet Future Business Needs

Competency Management

• Growth Plans are integrated with Business Objectives based upon Current-state and Projected Future-state capacity requirements

• Skillset cross-training / redundancy built-upon to maintain flexibility

Example:

• The types and quantity of skillsets necessary to meet business needs are listed and defined.

• We then assess our current state of competency against these future needs, identify gaps, and begin making investments for reducing these gaps in competency / capacity.


14 © 2008 Abbott

Lean Product Development PrinciplesKey Drivers of Fast Flow

Basic Queuing Theory: Little’s Law* applies to any process

Lean is a set of tools to reduce the “Number of Things in Process” without reducing the completion rate

* First proven by Dr. John D.C. Little, MIT, 1961

How to Control the Number of Things in Process?

How to Control the Number of Things in Process?

IncreaseCapacityIncreaseCapacity

Manage DemandManage Demand

Reduce VariabilityReduce

VariabilityUse Control

SystemsUse Control

Systems

>90% of Opportunity

is here.


15 © 2008 Abbott

Lean Product Development PrinciplesKey Drivers of Fast Flow are Capacity and Demand

Plan Utilization of Key Resources < 70%

Do Work into Small Iterative Batch Size

Eliminate Non-value Added Activities

Maximize Reuse

Level Loading Capacity

Cross-training

Co-location

Task Simplification and Standardization

Identify Alternative Pathways for Work to get done

Control Queue Size (WIP-Caps)

New Work Enters at the Pace that Old Work Leaves the Process

Release Work in Small Batches

Fast Flexible

Flow

Capac ity

Demand

(Rate and Amount of Work)

Example: We do not cross-train to create more efficient resources,

we do it to deal with bottlenecks. A small change in capacity can

have a large change in cycle time.


16 © 2008 Abbott

Guiding Principle # 6. Developing, Assessing and Validating Financial Impact isn’t Easy, but it is Essential for Sustaining Leadership Engagement

• By establishing the financial impact of these improvement activities we are better able to sustain leadership engagement and drive change

• Key Steps include:

– Understand the economics of the development project (e.g. Optimizing the Cost of Capacity versus the Cost of Delay)

– Establish a process, with the Finance organization, to Quantify and Certify these results

– Integrate this process with the Portfolio Management Process


17 © 2008 Abbott

Guiding Principle # 7. Ensuring clearly defined Project Transfers back into the Design Factory is Essential for Long-term Sustainability of Improvements

• Poor project transfer (by the project lead or the process owner) is the primary risk factor to sustaining long-term improvements

• To prevent this key risk factor, we currently:1. Establish a formal transfer of improvements from “project” status to on-going

R&D operations (the Design Factory)

2. Core team assesses risks associated with sustaining improvements once activation energy and project focus is removed

3. Agree to control plans as part of project transfer aimed at mitigating these risks

4. Process Owner personally accepts transfer and responsibility to sustain improvements


18 © 2008 Abbott

Guiding Principle # 8. Continuing to Monitor Reproducibility is an Important Action to Maintaining or Improving Sustainability

• Continue to Monitor Reproducibility of the Results over a 1 to 2 year period …

• Be prepared to help adjust process performance when needed


19 © 2008 Abbott

Conclusion: Our Deployment is based upon Several Key Guiding Principles that Help Assure Consistent Sustainable Results

1. Maintain Connection to Strategic Business Objectives

2. Establish and Maintain Project Portfolio Management(Manage Demand and Capacity – 10 Projects Half Done are Zero $’s)

3. Add Activation Energy to Help Drive Projects and Change(All good ideas evolve into hard work on someone’s part)

4. Manage Improvement Projects with Flexible Structure

5. Oversee Long-term Management of Competency Development for Key People

6. Develop, Assess and Validate Financial Impact

7. Ensure Clearly Defined Project Transfers back into the Design Factory*, and

8. Monitor Reproducibility of the Results over a 1 to 2 year period … Help adjust process when needed.

* Design Factory – Reinertsen – “Managing the Design Factory”

guiding principles for implementing lean product development

Education