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5 Most Effective Skills Innovators Need

When I tell people that I work in innovation management, I am often asked what product I make.  Of course, with my hobbies, I make lots and lots of scrapbooks and greeting cards.  But, in my business serve my clients more than I create products.  I want to create knowledge and skills for individuals and businesses to take their innovation programs to the next level.  Innovation management is more about learning a continuous improvement process than it is about making “things”.

One of the most rewarding features of my job is to watch an individual or a company develop their own mastery of innovation.  There are five critical skills that innovation managers and new product development (NPD) practitioners need to be effective and to build sustaining innovation programs.

#1-Know the Fundamentals

In sports, music, or theater, participants practice drills on the fundamentals.  Quarterbacks catch the ball from the center and pass it, over and over again during the week and during the off-season.  Pianists play scales, repeatedly, to provide nimble fingers and practice for a concert in B-flat or F-major.  In theater, voice coaches train actors and actresses in delivery as they practice raising and lowering their pitch to build suspense for the performance.

NPD practitioners also need to practice the fundamentals.  Too often, we assume we know what customers want since we assume the project goal is to add features and functionality to the product.  Assumptions are performing, without the practice, and that can be a disaster!

Instead, innovation managers need to ensure that the NPD effort is based n fundamental customer needs.  NPD teams must understand the basic challenge or problem that a customer is trying to solve.  Those customer expectations are matched, one-to-one, with NPD project goals in successful innovation.

For example, a friend of mine had five dogs.  She would launder their blankets and bedding, then undergo a cleaning process for her washing machine.  A purely product-centric view of her challenge would be to make the bleach bottle easier to pour.  Yet, digging into the core need, new products have been released to clean and disinfect the washing machine by running a normal load.  Successful NPD teams focus on the core customer need and seek fundamental understanding.

#2 – Identify and Manage Barriers to Innovation

Innovation introduces change.  That’s why it is such a fun field in which to work.  Yet, change presents a tug-of-war for most people.  We are excited to try something new while at the same time, we are unsure if the risk is worth it.  Resistance to change is one barrier to innovation.

During conversations with existing and potential customer, innovation teams will identify any barriers or constraints to new product development.  I recommend creating a handful of personas, or generic customer profiles to help envision the barriers to innovation.  In this way, the NPD team can “query” the persona during product design and development to validate concepts, features, and functionalities.

For example, one persona may be a family with a lot of pets, like my friend.  Another persona may be a family with kids that play sports and have very dirty clothes needing daily laundering.  And yet another persona may be a single person living in an apartment who rarely needs to do laundry.  The NPD team uses these personas to understand resistance or constraints in the product design, since the challenges of each are unique.

#3 – Plan, Execute, and Be Flexible

There has been a ton of debate in recent years about the best project management methodology for innovation efforts.  Phased and gated processes rose in glory to be dissed by proponents of agile.  Many companies then jumped onto the agile bandwagon to find products still failing in the marketplace.

What’s most important in successful innovation is to plan your work (including customer observation, testing, and validation), execute to the plan, and be flexible (be agile) as needed.  NPD managers and CIOs (Chief Innovation Officers) should be trained as exceptional leaders first, and then, in the particular NPD processes for project management.

Successful leaders often have coaches or master mind groups to share ideas and to learn best practices.  Transformational leaders understand the importance of customer inputs and balance these needs with operational demands in manufacturing and distribution.  Innovation leaders are flexible and adapt to each situation to continuously develop team members and to improve the innovation management process itself.

#4 – Collaborate with Everybody

Another aspect of successful innovation is learning how to collaborate effectively.  Collaboration is not a one-way customer interview or survey, and it is not assigning and directing tasks to NPD team members.  Instead, collaboration builds on the skills and needs of everyone involved in the project, both internally and externally.

Employees working in NPD are often motivated by learning.  This desire to learn can be capitalized by linking NPD team members with target customers to develop a customer journey map and to gain specific market feedback.  Technical folks learn and develop collaboration skills working directly with customers.  Likewise, sales and marketing personnel grow in knowledge by collaborating with technical designers to groom features and attributes for a new product.

And, we don’t want to leave out the customer as a resource.  Customer collaboration means observing, questioning, and testing.  You may meet the customer in the environment where s/he is using the product or service, or you may invite the customer to your facility.  What’s crucial for innovation success is a long-term, interactive relationship with both external and internal customers.

#5 – Evaluate and Measure Success

In peer coaching, I am constantly reminded that success has not a singular definition.  One person views success as a launching a new business, while another views success as selling their enterprise.

Each innovation project has a set of measures that define success.  The metrics ought to be aligned with the organization’s mission, vision, and values.  And the success metrics must be agreed by the NPD team upfront.

For instance, one NPD project used sales volume and market penetration as measures of success.  Sales volume is a readily acquired number – how many units were sold?  Digging deeper you can also gain additional insight into the value of the new product by calculating the ratio of manufactured items and sales price (profit margin).

Market penetration gave the NPD team another measure of success with their target customers and a measure to compare against competition.  Market penetration provides the percentage of branded products sold versus the entire set of products and product solutions available.  “We sold 63% of single use washing machine packs; our nearest competitor controls 20% of the market.”

If innovation success metrics don’t align with the project plans and goals, it’s time to make a change, including further conversations and collaborations with customers.

Necessary Skills for Innovators

Improved speed-to-market and increased return on investment (ROI) depend on the successful initiation and execution of NPD projects.  Successful innovation managers practice, refine, and excel with all five key skills.  The first of these competencies is maintaining customer contact to gain insights regarding market challenges and problems.  This is a foundational innovation skill.

Next, innovators and NPD teams must identify constraints and barriers to developing products and services that delight the customers.  These barriers may be internal processes or a customer’s willingness to invest in a new product solution.  This leads to the innovation skill set of planning, implementing, and adapting.  No project management system is perfect and successful innovators are flexible in how a project meets its goals to deliver exceptional products to a target market.

Fourth, collaboration is a skill that successful NPD managers use in developing their teams, the new product, and customer relationships.  Collaboration requires an open line of communication, empathy, and favors doing something rather than talking about it.

And, finally, innovation success is measures to verify value delivery and to learn.  Metrics for each project are different, but are always objective, leading to more effective decisions.

Learn More

There are two ways to learn more about leadership skills for innovation.  First, New Product Development Professional (NPDP) certification addresses best practices in innovation from devising a business strategy to idea generation and to market research for product concept testing.  Second, CIOs, NPD leaders, and R&D managers who are committed to taking their innovation program to the next level must participate in the Innovation Master Mind (IMM).  IMM is a 6-month peer coaching group that allows you to extend your NPD knowledge beyond NPDP certification and to collaborate with other CIOs and innovation managers.  You will realize improved efficiency and growth from our Life Design Master Mind (LDMM), IMM, or through NPDP certification which entails a deep dive into strategy and NPD processes, including design thinking.  Feel free to contact me at info@simple-pdh.com or 281-280-8717.  At Simple-PDH.com where we want to help you gain and maintain your professional certifications.  You can study, learn, and earn – it’s simple!

 

Study. Learn. Earn. Simple.

© Simple-PDH.com

A division of Global NP Solutions, LLC  

Three Reasons You Need Design Thinking

Today’s world is hyper-competitive.  There are fewer jobs, more talent, and higher needs.  Companies compete with products in their own industries, yet new categories offer novel solutions to existing customers.  Schools and churches even limit the number of kids they can accept into various sports and extra-curricular programs.  To the jaded observer, it seems that only the very, very best survive.

But, is it a matter of being the “best” or really a matter of being the “best prepared”?  Companies and individuals that know themselves well – and understand customers and stakeholders even better – are the true, profitable survivors.  A competition isn’t won by having more skills or more product features.  The competition is won by sticking to a core set of principles, doing the basics well, and by understanding the rules of the game.

So, how do you accomplish the simple elegance of talent, skill, and competency to serve customers and stakeholders?  Let’s look to Design Thinking for three ways to inspire positive change and to beat the competition.

#1 – Customer Empathy

Design thinking is defined as “a collaborative and creative problem-solving approach that integrates customer and user empathy throughout the development process.”  Empathy is the key word in this definition.  Recall that empathy is different than sympathy or acknowledgement.  Empathy is putting yourself into someone else’s shoes to understand how they see the situation and how they feel about it.

In new product development (NPD), we use empathy to identify customer needs.  New product development and innovation are not limited to the technical feature set and marketing campaign.  Instead empathy helps the NDP team observe a customer’s decisions and interactions with a product or service from the point of research through the transaction and to after-sales support.  If any point of the customer’s journey is difficult or challenging, the NPD team recognizes an opportunity for improvement.

In our own lives, we use empathy to understand our constraints and biases.  Often, we end up with tunnel vision and assume a problem can only be solved in one way.  Empathy allows us to view our own decisions and challenges from another person’s perspective.

#2 – Creative Curiosity

Design thinking doesn’t assume that there is one right answer.  In fact, we don’t use design thinking to identify a single answer.  Instead, we use the design thinking tools to generate lots of potential solutions to any question.

In design thinking, we demand curiosity.  Not an idle curiosity, like “Is it going to rain today?”  We demand a deep, core curiosity of how to do tasks better and how to improve the live of others.  Curiosity in NPD includes understanding all of a customer’s problems and learning new technologies.  In Life Design, we seek to find our energies and passions.

One way to regrow your curiosity is to disconnect from the grid for a few hours each week.  Take a hike in the woods or a long bike ride.  Play an old-fashioned board game with your friends and family.  Go to the symphony.

The idea is to let your mind wander and enjoy fresh air and renewed relationships.  On an outdoor trek, you might wonder about the shape of the trees, the colors of the flowers, or the destination of the birds flying across the sky.  Downtime encourages our brains to seek new meaning through curiosity of how the world works.

#3 – Try New Things

In NPD, we often use prototypes to test customer reactions.  With design thinking, you will try new stuff with earlier prototypes.  Instead of testing a new product with a fully designed marketing campaign, test the form and function of a product improvement.  Early prototype testing is inexpensive and can frame the context for a better designed product that will truly delight the customer.  Not to mention, the customer interactions and feedback throughout the NPD process will lead to more competitive product and services.

In your own life, it is important to try new things, but within the boundaries of acceptable risk and expense.  A participant in one of my PMP training classes told me that his wife decided she wanted to do triathlons.  She wanted a new bicycle for her first event.  He suggested she participate in a race first, with her current bike, to see if she liked it.  She didn’t.  And they saved the money for a new bicycle.  However, she also discovered from the experience that she really enjoyed the running leg of the triathlon.  So, the two of them began running together in all distance races (5K, 10K, half- and full-marathons).

Trying new things should not mean abandoning all that we’ve done until now.  Instead, we can prototype parts and pieces to identify the best features and attributes to add, eliminate, or modify.  Especially in innovation, we want to manage new features while understanding customer needs to use and interact with the product or service.

Design Thinking to Embrace Change

Because the world is competitive, we cannot rest on our laurels and hope that things will turn out okay.  We must embrace change and identify opportunities to enhance our competitiveness.  Winning business or winning happiness requires a different approach as our world becomes higher speed and more technologically integrated.  Design thinking tools allow us to refocus on the person with empathy and to generate creative solutions to even the most challenging problems.

In NPD and in life, we use design thin king tools to (1) empathize with the customer and stakeholders throughout the development process and user experience, (2) to generate curiosity about how a product or service can be used and what new combinations of features and attributes will satisfy a customer’s needs, and (3) to establish frequent and candid feedback from customers on prototypes including form and function.  Design thinking allows us to create connections with the people we serve and through empathetic relationships, we often benefit more than those we serve.

To Learn More

Join us in an introductory Life Design Master Mind group in Houston where we start with how you spend your time today.  Over the next 6 months, we will use design thinking tools to take a deep dive into professional and personal motivation to frame and test what next steps you can take to live a joy-filled life.  Check out our on-line tutorial on Design Thinking, too.  Feel free to contact me at info@simple-pdh.com or 281-280-8717.  At Simple-PDH.com where we want to help you gain and maintain your professional certifications.  You can study, learn, and earn – it’s simple!

Speaking on Design Thinking

  • 7 September 2018 at Texas Association of Change Management Professionals Conference

 

Study. Learn. Earn. Simple.

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A division of Global NP Solutions, LLC  

Leading an Agile Team

While less than 20 years old, the agile philosophy has immensely impacted how we do projects, interact on teams, and manage resources. First applied to software and IT projects, the agile theory emphasizes people over processes, and experimentation over documentation. Today, we apply the flexibility of agile management to tangible product development as well as computer-based projects.

One of the greatest challenges for an organization that transitions from a traditional project management approach is the role of managers. In a waterfall methodology, the PM directs tasks and activities of the project by assigning work to individual team member. S/he monitors task completion as well as the overall project budget and schedule. The project manager’s role is to keep things on track and to implement corrective actions if there is a deviation from the plan.

In sharp contrast, an agile project leader is a servant leader. In this role, the project leader helps to smooth the pathway for the project team by removing roadblocks and streamlining paperwork and systems as needed. The agile project leader’s role is to engage, empower, and encourage.

Engage

In traditional projects, the project manager is a manager by definition. S/he has authority and influence. Accomplishing the written project goals is the primary objective of the project manager. Success is measured by achieving the project scope on-time and on-budget.

As the agile philosophy emphasizes people and interactions over plans and contracts, an agile project leader will focus on building relationships. Engaging the project team and the customer are within the roles and responsibility of an agile team leader.

Notice, too, that we don’t say “agile project manager;” instead we use the term “agile team leader”. This is quite intentional as a manager expects to have the organization line up behind his/her decisions and act on these. In contrast, the agile team leader engages the team in decision-making processes.

Peculiar to new product development (NPD), agile team leaders facilitate customer engagement. Products are designed, developed, and tested to meet customer needs. Engaging customers to gain insights and preferences throughout the life cycle of the NPD project is critical to success in commercializing goods and services.

Empower

It is probably apparent in the agile philosophy that the project leader serves to empower the team. Because relationships are placed higher than documentation, systems, and plans, the servant leader works to establish team autonomy. Agile NPD teams, like traditional project teams, are made up of cross-functional representatives. What’s different, however, is that the agile NPD team members are empowered to act autonomously in their creative design. The goal is to create a product desired by customers – not to match a complicated scope of work etched in stone.

Agile NPD teams are also empowered to meet with potential customers directly to test concepts, feature ideas, and prototypes. This feedback is incredibly valuable to the development of a new product and will help the team with speed-to-market. Ultimately, these relationships serve not only to empower external interactions but also help to bond the agile NPD team to a common mission.

Encourage

A final role of the agile project leader is to encourage the team. Of course, any good leader demonstrates empathy and encouragement, but it is a special characteristic of successful agile NPD team leaders.

Any NPD project faces failures and setbacks. It’s a matter of course in our chosen field. We find that the technology didn’t work as we had hoped, the market size is dwindling, or the customers didn’t like that feature after all. This is discouraging to NPD project team members who have worked hard and long hours to meet the challenge. It is normal to feel a bit depressed about these results.

An effective project leader recognizes the highs and lows in NPD project work and encourages the team. One form of encouragement is simply a reminder of the overall mission of the team. Most products and services are designed to improve customers’ lives and this focus can re-energize the team to establish new energy to accomplish goals. A benefit of the agile methodology is the frequent feedback from potential customers which is motivating in and of itself.

Traits of an Agile Leader

Agile leaders for NDP project teams are successful when they engage, empower, and encourage the team. Engaging with the team and with customers helps to provide focus on the best design. Teams accomplish goals and achieve better results when they are empowered to act autonomously and to build strong customer relationships. Finally, team leaders are effective when they encourage and reward team members as the team experiments with various ideas, concepts, and behaviors.

In our on-line tutorial on Design Thinking and in our Agile NPD course, we discuss failing fast and failing often to drive learning. However, we must first categorize the type of failure to benefit from lessons learned. Not all failures offer a growth opportunity, but we must be open and honest when we do encounter such circumstances. Join us for the Agile NPD course or check out our self-study and other NPDP Workshops. Feel free to contact me at info@simple-pdh.com or 281-280-8717. At Simple-PDH.com where we want to help you gain and maintain your professional certifications. You can study, learn, and earn – it’s simple!

 

Reading Recommendation

We discuss different customer insight methodologies in NPDP Certification Prep: A 24-Hour Study Guide, and you can find additional references at https://globalnpsolutions.com/services/npd-resources/.   Some other books you might enjoy:

 

Study. Learn. Earn. Simple.

© Simple-PDH.com

A division of Global NP Solutions, LLC  

Scrum in New Product Development

One of the hottest topics in project management and product development today is Agile.  Agile is a set of values that generate several different project management frameworks to increase productivity, customer satisfaction, and team morale.  While agile methodologies are widespread in software and IT, they are only recently being adapted to the development of physical products.

The Agile Manifesto

The core values of the agile philosophy are reflected in The Agile Manifesto.  This proclamation was produced by a group of software developers in 2001 in an attempt to improve speed-to-market and accuracy of product delivery.

The Agile Manifesto compares a preferred way of doing things in a project to the traditional way.  So, while conventional project management tools, techniques, and procedures are not rejected outright, the agile philosophy recognizes a better and more efficient way to accomplish project tasks.  These are shown on the left-hand side of the comparison statements, while conventional policies are shown the right-hand side.

  • Individuals and interactions over processes and tools
  • Working products over comprehensive documentation
  • Customer collaboration over contract negotiation
  • Responding to change instead of following a plan

Scrum

While there are literally dozens of implementations of the agile philosophy, the most commonly adopted framework for physical product development is Scrum.  Scrum is an adaptative, flexible approach to projects that allows for iterative development and improves communication across a team and with the customer.  Elements of Scrum fall into three categories:  artifacts, tools, and roles.

Artifacts

A key artifact or process in Scrum is the idea of time-boxing.  This produces a rhythm and cadence in the work and, for product development, helps to minimize risk.  Several events are time-boxed or limited.  The first is the sprint.

A sprint typically lasts two to four weeks and is a period of intense work for the product development team.  Only a few, priority tasks are completed in each sprint so that the team maintains focus.  For example, a sprint may be designed to gain customer insights through market research by conducting customer focus groups or testing a particular concept in a real environment.  Sprint tasks re prioritized to bring the highest value to the project as early as possible.  Thus, by keying in on a few, critical items early in the project, a new product can be designed with appropriate features that customers want and need.

A disadvantage of the sprint in physical product design is in the definition of “done”.  Whereas a software project can deliver completed lines of code at the end of a sprint, physical product development sprints may deliver test results or qualitative market research.  It may be useful to view the sprint as a learning period.

Other artifacts in Scrum include the daily stand-up meeting and retrospectives.  I’d like to refer you to other posts and papers for more information on these artifacts.

Tools

As indicated, the new product development (NPD) team works on gaining customer feedback or delivering a working feature during each sprint.  A crucial decision-making tool for Scrum is the product backlog.  This is loosely like a list of project requirements in a traditional phased and gated product development process.

The product backlog is developed at the beginning of a project and is constantly reviewed and updated (“groomed”) during the project life cycle.  Product features and attributes, along with the most critical customer experiments are listed in rank order.  Items from the product backlog are worked during any given sprint.  The NPD team commits to only work on a product backlog item during a sprint which can be completed in the timeframe (e.g. 2 to 4 weeks).  In this way, the highest business value items are worked first.

In physical product development, it is of high value to determine the business case for a new product as well as to test a minimally viable product (MVP).  Market studies and technical experiments are often conducted int eh early sprints to determine customer need and product feasibility.  Such knowledge-building activities are designed to eliminate uncertainty in the product development effort.

Scrum Roles

Three important roles in a Scrum project are the team, the Scrum Master, and the product owner.  A cross-functional, co-located team does the work of the project during the time-boxed sprints.  Close collaboration among team members is often cited as a reason for improved productivity in an agile project versus traditional staged and gated processes.

The Scrum Master is a bit like a project leader yet works in a service role more than a directional one.  The team largely decides how to accomplish tasks during any given sprint while the Scrum Master interfaces with the customer, and removes roadblocks and obstacles facing the team in their daily work.

The product owner is a unique role in Scrum and a role that is frequently overlooked in practice of traditional NPD and project management processes.  Product owners create the prioritized product backlog, making the decisions of which features are most important – and valuable – to the business and to the customer.  It is the product owner who approves features and applications at the end of each sprint.  NPD projects benefit from creating personas for the product owner to assume in this role.

Agile for NPD

While initially designed for software development, agile methodologies are gaining traction in NPD for physical, tangible product development.  Often, the agile processes, like those in Scrum, are overlaid on a traditional NPD process.  Learning cycles are especially important in the market and technology development of a new product.

Please contact me if you’d like a free pdf copy of the Scrum Body of Knowledge (SBOK).  To learn more about applying agile to new product development management, check out self-study and other NPDP Workshops.  Feel free to contact me at info@simple-pdh.com or 281-280-8717.  At Simple-PDH.com where we want to help you gain and maintain your professional certifications.  You can study, learn, and earn – it’s simple!

 

Reading Recommendation

Stories of entrepreneurial success, like Airbnb, using agile techniques for new business are artfully included in The Creator’s Code and Barking Up the Wrong Tree (affiliate links).  I also dedicate an entire chapter to traditional NPD processes in NPDP Certification Prep:  A 24-Hour Study Guide, and you can find additional references at https://globalnpsolutions.com/services/npd-resources/.   Some more great references on agile and Scrum are:

 

Study. Learn. Earn. Simple.

© Simple-PDH.com

A division of Global NP Solutions, LLC  

Organizational Culture vs. Team Climate

Brian is a smart guy.  He works in a product development group as a technical expert.  With over 20 years of experience, Brian also has worked in operations and in customer-facing roles, such as sales and marketing.  He is passionate about the product and wants to make is successful both to satisfy customer needs and to help the company make money.  He takes pride in his contributions to the product.

Samantha is Brian’s direct supervisor. She believes in team empowerment.  She trusts her team members to make the right decisions based on appropriate data and she gives them the responsibility to plan and execute project work.  Samantha has created a good working culture, right?

Wrong!  Samantha’s team is working within a climate that is conducive to innovation.  Culture is reflected less by behaviors and more by unspoken norms.  Let’s take a look at the differences between organizational culture and team climate.

Organizational Culture

Culture is defined as a “set of shared beliefs, values, assumptions, and expectations.”  An organization’s culture reflects its values and can be observed in the customs, norms, and rites of the group.  The fact that Brian wears a tie to work every day and never questions the unwritten dress code is an element of organizational culture.  A tie is an indication of a more formal environment, ad the policies and procedures at the company are also quite formal and detailed.

Newcomers to an organization are quick to sense both the culture ad the climate.  The culture, however, is underlying the surface and is often difficult for employees to articulate.  Culture can be inferred in how work gets accomplished.  Brian, for instance, must complete several forms to submit an idea for prototype investigation, and then the forms must be approved by both Samantha and Samantha’s boss, Bill.  He also must track a specific budget for the project and report project status weekly on a prescribed template.

Ricardo used to work with Brian and Samantha.  But, he liked to wear jeans to work and preferred trying things out to see if there was a potential in a solution before delving deeper into the problem.  Ricardo hated bureaucracy and felt like filling out forms was a waste of time that he could otherwise dedicate to testing features and functions for the new product.  He like to talk to customers to understand their real need for the product.  Ricardo’s personality did not match the company culture and he eventually found a job at another company with a different set of values and norms, and where he could maximize his talents in technical product development.

Team Climate

Samantha works hard to ensure her team members all get a chance to contribute.  She was sorry to see Ricardo go but understood his personal and professional growth needs.  Samantha communicates with her team regularly, either in person or by phone for the team members that are in different geographical locations.  She is quick to publicly name someone who has made a significant contribution to the project and she uses the word “Thanks” a lot.

Because many of her teammates are part of dual-career families, Samantha is understanding about time off for school events.  Honestly, she doesn’t care if someone works 8 to 5 or 5 to 8 as long as they get their work done and they are actively involved in accomplishing the team goals to deliver the best new product possible.

Samantha has created a certain climate for her team.  Climate is defined as “a set of properties of a work environment, perceived directly or indirectly by employees, that has a significant impact on employee behavior.”  Team climate includes elements of leadership, communication, trust, responsibility, recognition, and employee participation.

Truth be told, Brian doesn’t like wearing a tie, but he loves his work and he finds great opportunities to pursue his technical passions working for someone like Samantha.  Daisy is co-worker of Brian’s.  She has just transferred to the new product development (NPD) group from operations.  She understands that forms and procedures are often required for audit tracking and to file patents on new inventions.  While she’d prefer to be building a new prototype, Daisy acknowledges that the corporate culture and government regulations require forms and templates.  She is really excited about working for Samantha in an open climate with a chance to have greater responsibility in product design.  She wants to be recognized for her direct contributions to the team.

Culture vs. Climate

Most of us mistake team climate for organizational culture.  As leaders, we strive to make changes in our style and in the work environment to positively influence employee behaviors.  Leadership, responsibility, and trust are visible at the surface.  Employees can quickly point out the positive and negative elements of their working environment – elements of the team climate.

Culture is not as readily identified because it is a set of organizational values, often rooted in long corporate histories, that lie under the surface of the working environment.  Organizational culture defines how work gets done and is passed on informally through legends and stories.  Corporate “heroes” are emulated as new employees adopt customs, patterns, and values of the organization.  The culture drives the underlying work processes, relationships, and leadership styles of executive management.

Our confusion between culture and climate arises because, as leaders, we have the levers at our control to quickly change team climate.  A new leader can bring fresh perspectives to a team.  Yet, a new leader cannot fundamentally or rapidly change the intrinsic values and norms of a company.  Even when the senior leadership undergoes a full-scale transformation (such as in an acquisition or buy-out), the corporate culture is slow to change – maybe even taking years to do so.  Habits and customs of employees are the deeply ingrained fundamentals that determine the culture.

Brian, Samantha, Ricardo, and Daisy are all fictional characters.  Yet, each of us can recognize a bit of ourselves and a bit of our fellow team members in their stories and behaviors.  Our job as product development and engineering leaders is to manage the team climate for productivity and efficiency within the bounds and values of the greater organizational culture.

To learn more about teams and organizational structures to successfully launch new products, please join us in a self-study or other NPDP Workshop.  Feel free to contact me at info@simple-pdh.com or 281-280-8717.  At Simple-PDH.com where we want to help you gain and maintain your professional certifications.  You can study, learn, and earn – it’s simple!

 

Reading Recommendation

A classic book on organizational structure is Structure in Fives:  Designing Effective Organizations by Henry Mintzberg (affiliate link).  I have a chapter on NPD teams in NPDP Certification Prep:  A 24-Hour Study Guide and additional references at https://globalnpsolutions.com/services/npd-resources/.

 

Study. Learn. Earn. Simple.

© Simple-PDH.com

A division of Global NP Solutions, LLC  

Decision-Making for New Product Projects

All of us make dozens, perhaps hundreds of decisions, every day.  Should I get skim milk or whole milk in my latte?  Should I wear the red shirt of the blue one?  What is for dinner – hamburgers or tacos?  Or something entirely different?  In addition to these daily, personal choices, we also participate in making important business decisions regarding products, services, and programs.

Yet, what is the basis for our decisions and can we improve our capability to make better choices?  Making better organizational decisions can lead to increased productivity, higher revenues, and competitive advantages.  Decisions are influenced by our emotions (even when we think they are not), biases, and the way alternatives are presented.  We’ll take a look at these three elements of decision-making here.

Emotional Decisions

Emotion and social dimensions play a large role in making decisions and can even cause us to make a poor decision.  A recent article in the Houston Chronicle (2/15/17) indicated that as many as 8% of women refuse chemotherapy treatment for breast cancer because of the side effect of hair loss.  This decision is made on an emotional basis to avoid the social stigma – “She has no hair; therefore, she has cancer.”

Better decisions are those in which we can move beyond emotions to data and logic.  A traditional quiz to measure your own dimension of emotional vs. logical decision-making involves simple arithmetic.  A bat and a ball cost $1.10.  The bat costs $1.00 more than the ball.  How much is the ball?

If you answered $0.10, you probably used an intuitive decision-making process.  Yet, if you engage a logical evaluation framework, you will find (by simple math) that the ball costs $0.05.

Project, product, and engineering managers need to drive their teams toward more logical decisions over purely emotional ones.  Having a “gut feel” that a new product feature should be added is far less objective that is a market test validating the customer value proposition.  Using data and information to make investment decisions will lead to better outcomes for projects.

Decision Bias

We are all familiar with the status quo.  We keep on doing things because we’ve always done it that way.  Without any pressure to change things, we’ll just stick with the same old way.  This is known as a “stability bias”.  Paired with “sunk cost bias,” decision-makers can be on a dangerous path toward poor evaluation of whether a project deserves future investment.

The sunk cost fallacy is especially relevant for project leaders.  Knowing that a past investment has been made, we optimistically assume we can recover those costs if we just work harder.  After all, an effective project manager or senior engineering manager should be able to speed up the team’s work, right?  Wrong.  A past action does not predict the accuracy of a future action.  And, in some cases, it is better to cut your losses rather than continue to throw good money after bad.

Again, moving to a careful, data-driven, logical decision framework can help to eliminate effects of bias.  Successful product development teams compare anticipated revenues against go-forward costs to make a development decision.  Project managers cannot magically make up a 2-month schedule delay on a 12-month project.  Moving beyond intuitive decision-making rooted in emotions and bias improves project outcomes.  An honest evaluation of whether the project is still profitable if delivered in 14 months instead of 12 will lead to increased motivation and a better result.

Using PPM to Decrease Bias

One way to decrease bias in decision-making is to consider all the available alternatives at once.  In this way, each choice is compared against the other options in a fair and unbiased manner.  Decision scorecards are especially valuable in focusing a team on key variables and away from emotional judgements.

Product portfolio management (PPM) utilizes decision scorecards to evaluate which new product development (NPD) projects should advance and which should be put on hold.  The advantage of this decision-making framework over individual project assessments is that it forces strategic alignment and dialogue among key stakeholders and decision-makers.  Every firm has a set of strategic objectives that are supported by NPD efforts.  If, for example, a strategic goal is to increase category sales by 15%, the decision scorecard in PPM will include a factor for increased category sales.  If the firm is trying to expand its geographical reach, the scorecard will include geographical reach as an evaluation item.  Finally, if a company is very risk averse, a PPM scorecard will include an item for probability of success.

Moreover, because a cross-functional team is responsible for conducting PPM, an honest conversation is had about strategy and implementation.  Strategic objectives do need revising occasionally and the PPM evaluation can indicate if the firm is on track (or not) to meet those strategic goals.  The conversation determining which projects to advance is actually far more valuable than even the results of the PPM analysis.  This open dialogue ensures strategic alignment among top executives and project staff.

Improving Project Decisions

All of us participate in business decisions regarding which products and projects to advance within our organizations.  We can improve our capability in making these decisions by removing emotional elements, like bias and lack of motivation, and moving toward logical evaluation of alternatives.  Decision scorecards are one way to visualize decision data to improve the outcome of a choice.

In particular, PPM scorecards are effective in NPD.  PPM drives strategic alignment of projects as well as decision-makers.  Additionally, PPM opens up a rick dialogue within product development teams to energize the effective implementation of the innovation strategy.  If you’d like to learn more about customer relationships and marketing for new product development, please join use one in a self-study or other NPDP Workshop.  Feel free to contact me at info@simple-pdh.com or 281-280-8717.  At Simple-PDH.com where we want to help you gain and maintain your professional certifications.  You can study, learn, and earn – it’s simple!

 

Reading Recommendation

A detailed book on creating a business case for R&D projects is The Valuation of Technology by F. Peter Boer (affiliate link).  I have a chapter on PPM in NPDP Certification Prep:  A 24-Hour Study Guide and additional references at https://globalnpsolutions.com/services/npd-resources/.

 

Study. Learn. Earn. Simple.

© Simple-PDH.com

A division of Global NP Solutions, LLC  

Learning from Bad News

I had to give someone bad news and I hated doing it.

You see, I usually ride my bike to the gym.  It’s a short distance and gets me warmed up before a workout.  It also saves gas, and therefore, saves money.  When I got to the gym one recent evening, I saw a cable and padlock lying on the ground at the bike rack.  There aren’t many of us who ride to the gym, and I thought I recognized the lock and bright blue cable.  Unfortunately, it had been cut and there was no bicycle nearby.  I took the damaged cable and lock to the front desk.

When I got into the gym, I looked around for the one guy who I know rides his bike a lot.  Mike’s bike isn’t fancy or expensive – just a common hybrid, but he has told me that he enjoys riding his bike more than anything – even running!  I see him riding all over our part of town since on non-workout days, Mike will ride for over two hours.

So, I found Mike in the free weight area and asked if he’d ridden his bike to the gym that day.  “Yes,” he replied.  And then, I had to tell him that his bike was gone, and the cable and lock were cut.  He didn’t get as I would have been, and he left the gym before I could chat with him again.  From experience, I do know that the local police and most insurance plans are of no help at all when you have a bicycle stolen.

Bad News

Bad news comes in a lot of categories.  Mike lost money, transportation, and joy.  We often com across bad news in our jobs as product, project, and engineering managers, too.  Projects have bad news when they are behind schedule and over budget.  New product development (NPD) efforts result in bad news when the technology doesn’t work as envisioned or the market interest is lacking.  Engineering managers deliver bad news when employee promotions are not forthcoming or when a company is forced to downsize because of a poor economy.  Worse yet, instead of a being mere acquaintances, as managers we are usually deeply vested in the lives of our staff and the viability of the project.

Product, project, and engineering bad news also costs us money, time, and joy, just as Mike’s stolen bike has cost him.  However, we can learn from the mistakes and errors in a project to improve our circumstances next time.  This is the heart of a learning organization and learning is the key to a lean business model leading to successful project execution and product development.

Learning from Bad News

First, I learned from Mike’s stolen bike incident and reflected on how I could improve the safety of parking my bike at the gym.  I use a “Krypton” lock with an excessively thick cable, unlike his smaller and thinner cable.  I hope my bike will be safe with this lock.  Second, I park my bike closest to the main traffic lane.  Mike typically parked his bike closest to the gym’s secondary exit where less people walk or drive by.  Although, my bike is more likely to get bumped by a careless driver or inconsiderate pedestrian, it is more visible.  I’m willing to take that risk.

We should also apply reflection and learning to the bad news we get from projects.  Learning from the past to prevent future errors is a foundational principle of a lean organization.  “Lean” means to reduce waste and scrap, and to apply continuous learning in seeking continuous improvement.

On a project that fails to meet its objectives, we typically ask the following questions.

  • What went right?
  • What went wrong?
  • What can be improved next time?

These questions form the basis of a lessons learned review.  However, most product, project, and engineering managers are using only a backward look in such a review.  Real value, especially the ability to learn, comes from applying a continuous improvement mindset throughout the project – and especially when bad news hits.

Characteristics of a Learning Organization

A learning organization is not ashamed of failure.  Instead, the team focuses heavily on the last question of how to improve.  Learning organizations take the time to review best practices as well as the things that have gone awry.  And a learning organization has no fear.

Most of us have been conditioned over a lifetime of formal education and complying with the norms and laws of society to fear being called out as wrong or different.  We have been taught that there is one right answer on every test.  While exams do have right and wrong answers, product development projects have a lot of different options available to accomplish the goals and objectives of the business.  With hindsight, one choice might have been better than another, but there aren’t wrong answers in life!

A learning organization also accepts that there is no one right answer and feels free to investigate and explore multiple alternatives.  Trade-offs are evaluated to determine which option might be best for the customer, market, and firm at that particular point in time.  Freedom to make choices and to evaluate alternatives is a hallmark of a learning organization.

Learning from Bad News

I’m going to be a little more diligent at the gym when parking and locking my bike at the rack.  I am really sorry that Mike had his bike stolen.  I want to learn from his experience because I don’t want to suffer the same fate.

As a product, project, and engineering manager, I’m going to learn from the experiences of past successes and failures.  Bad news isn’t just a set of dismal facts, but an opportunity to improve.  We can dap the lessons learned to enhance team member relationships, to improve process flows, and to encourage additional ideas and feedback from the customer.  Bad news is only bad if you don’t learn from it!

To learn how to become a lean learning organization as project, product, or engineering managers, please join us in an NPDP Workshop.  Feel free to contact me at info@simple-pdh.com or 281-280-8717.  At Simple-PDH.com where we want to help you gain and maintain your professional certifications.  You can study, learn, and earn – it’s simple!

 

Study. Learn. Earn. Simple.

© Simple-PDH.com

A division of Global NP Solutions, LLC

The Curse of Knowledge

I was recently teaching a Project Management Professional (PMP®) prep course to a group of 15 experienced project and program managers.  The gray hairs in the room attested to the years of experience, and all of the participants actively described their current project work and challenges.  Several of the attendees were employed by a government agency working on capital construction projects – roads, bridges, and drainage.

Not surprisingly, the government agency had a lot of strict and rigid policies and procedures in place to manage projects.  Contractors were granted procurement agreements when they had the lowest bid, regardless of past experience.  Bidding and acquisition followed specific procedural steps with no allowances for deviations.  In no circumstance was budget allowed to overrun, yet cost estimates could be padded beyond a normally-acceptable allowance for private industry.

During the PMP prep class, one individual (let’s call him Spencer), struggled to align practices from the Project Management Institute (PMI®) with the policies and procedures he was used to in his job.  Change orders were a particular stumbling block since the government agency required full accountability of any change before it was approved.  A general industry practice is to estimate the overall impact scope, schedule, and budget for the change, and to work out the details later if the change is approved.

Spencer’s problem was the curse of knowledge.  His experience in one job had taught him that there was one right way to do the job.  Of course, his knowledge had served him well in his job and resulted in success in that job.

The Basis of Cognitive Bias

Spencer had learned to follow the rules.  He had made sense of complex projects according to one set of policies and procedures.  Following these practices to the letter meant he could successfully execute a project in that environment.  He simply could not conceive of an alternate way to do things.

All human beings are bombarded with data and information daily – even more so today with social media and technology available to us 24/7.  We are exposed to risks and we must make trade-off decisions to balance time, money, and relationships in a constant rhythm.  To survive the onslaught of information, we necessarily filter this vast amount of information through our history of past experiences to make the best choice.

For example, we know that if there is a car accident on our primary route to work, a secondary road will be a good alternative.  Because we are familiar with the roads, we can easily estimate the trade-off in terms of the delay in time to reach our workplace.  Our history leads us to an effective decision in the present.

However, in projects and in innovation, cognitive bias can lead us to uninteresting, trivial tweaks of technology.  Our new products and services are “lukewarm”, and sales have only marginal improvements.  The Apple iPhone’s latest version advertises “brighter colors”.  I have to wonder if the average consumer can discern these subtle intensity changes for brighter colors and if that alone will motivate him to spend $1,000 on a new smartphone.

Reframing the Problem

One of the key principles in Design Thinking is to reframe the problem.  This technique is also helpful for project, quality, and risk managers.  Looking at a problem from a new perspective can help us generate new insights to a better solution.  Even more important is to view the problem from the customer’s perspective.

Andy Zynga shares a story (“The Innovator Who Knew Too Much,” HBR.org, 29 May 2013) in which an organization sought a new vaccine for AIDS.  Scientists experience in working on solutions for the dreaded disease did not submit any proposals.  Yet, when the organization reframed the problem as a need to stabilize proteins, they received dozens of high-quality proposals.  Protein stabilization is a step toward a vaccine, but cognitive bias prevented the scientists from viewing their work from that perspective.

Tools for Overcoming Bias

The first tool to overcome cognitive bias is observation.  All too often, R&D scientists, engineers, and project managers sit in offices working on so-called innovations in isolation.  Get out there!  Talk to potential customers and end-users.  Learn what their problems are and seek to understand issues from their point of view.

A second useful tool to generate alternative perspectives is the SCAMPER heuristic.  The acronym SCAMPER encourages us to view a product or solution with a different perspective:  Substitute, Combine, Adapt, Modify, Put to another use, Eliminate, and Reverse.

Finally, we can use standard project management techniques such as interviews and focus groups to gain insights to the problems our customers face.  What these tools have in common is that they are qualitative market research techniques.  While data is important, we also have to understand the emotional impacts of trade-off decisions and of how our customers interact with our products and services.

The Curse of Knowledge

I finally convinced Spencer that his experience was very valuable for the government agency and for us to learn from him.  But, for four hours, while he sat for the PMP exam, he needed to visualize the ideal world that PMI envisions for successful project management.  Spencer suffered from the curse of knowledge, assuming that the right answer in one situation translate to the right answer in another circumstance.  While following our internal compass usually results in a predictable outcome, project, product, and engineering managers need to overcome such cognitive biases in order to generate truly innovative solutions.  We do this by viewing a problem from new perspectives and especially through the eyes of our customers.

To learn more about problem-solving for project, product, or engineering managers, please join us in an NPDP Workshop.  Feel free to contact me at info@simple-pdh.com or 281-280-8717.  At Simple-PDH.com where we want to help you gain and maintain your professional certifications.  You can study, learn, and earn – it’s simple!

 

Study. Learn. Earn. Simple.

© Simple-PDH.com

A division of Global NP Solutions, LLC

Three Elements of Service Design

Product, project, and engineering development today are more than just designing features and functions.  Customers across the global spectrum expect fantastic service to be fully satisfied with a product purchase.  Moreover, in many instances, in product, project, and engineering management, our only product is a service.

Superior service doesn’t happen by accident.  Organizations need to consider a service design strategy and train employees on acceptable behaviors to deliver consistent customer service experiences.  WE can borrow the ideas from “Woo, Wow, and Win” by Thomas Stewart and Patricia O’Connell to name three important elements of exceptional service design:

  1. Every customer is not right,
  2. Customer service should be consistent, and
  3. You’re never done.

Every Customer is Not Right

We’ve all heard the old adage that “the customer is always right.”  Innovation for service must recognize the fallacy of this statement.  First, we know that we do not design products and services for all customers.  We develop new products and undertake engineering projects for a specific target audience.  Not all customers are right for every organization and certainly customers are not always right.

The latter point is especially relevant as a firm scales its product and service offering from niche, early adopters to a majority market.  Features and functionalities desired by an early user can be more complex and less refined than those necessary to be successful in a mass market.  Firms need to utilize feedback from early adopters to initially develop a new product, yet the design must be streamlined for cost-effective manufacturing as the product transitions to the mainstream.  The initial customers might be “right” to want you to add advanced technology to their product, but they may no longer be the “right” customers.

Customer Service Should Be Consistent

Consider the last time you stayed at a really nice, luxury hotel.  The lobby shines and the staff are formally dressed, offering polite comments as you check in and transfer your luggage to your suite.  The room itself may be quite plush with thick carpet and fluffy pillows. Bath products include aromatherapy scents to relax and calm you after a long day.

Yet, you’d also like to get an ice-cold soda so you consult the (faux?) leather-bound guide book on the desk.  Ugh!  The ice machine is on another floor, all the way down the hall.  The soda and candy machines are on another, different floor and the room is barren, noisy, and dirty.  Your shoes stick to the floor where someone has obviously spilled something and the trash can is overflowing.  The ambiance is ruined.

Organizations need to provide a reliable, consistent customer service experience.  One way to ensure that service delivery is predictable is to use the service yourself.  Managers should go shopping at their retail outlets to understand and empathize with an ordinary customer.  The service experience should be consistent through all levels of the company.

Employees across the board should be trained to understand the service experience and the overall standards expected in the business.  Nothing should be outside of anyone’s job.  Front desk clerks should tour the hotel to check for consistent “messaging”.  If trash left in the hotel lobby is unacceptable, a dirty snack and ice room or guest laundry room is also unacceptable.  Each employee must also be empowered to make decisions (within the bounds of a set of standards and guidelines) that ensure a consistent, reliable, and satisfying customer experience for all.

You’re Never Done

One of my favorite philosophies of quality management is “kaizen,” or the idea that you must continuously strive to improve.  This is more than true in customer service design!  Especially in a world of social media, customer service matters.

A company that can provide consistent and reliable customer service will excel ahead of its competitors.  But the race never ends.  Consumers expect more and your competitors will add features and services to try to gain market share.

Companies must continually benchmark against their top industry competitors to maintain exceptional service standards.  The best firms will also benchmark and study top firms in other industries to learn what works best.  For years, REI (a sporting goods cooperative) has taken returns with no questions asked.  Zappos, a relatively new online shoe retailer, learned from this policy and offers shoe returns with no questions asked.

You’re never done and translating a customer experience success from one industry to another can keep your firm ahead of the competition.

Service Design Principles

Product, project, and engineering managers today are faced with satisfying a more selective and differentiating group of customers than ever.  Features and technology functions will only get you so far.  Service can make the difference to fully satisfy customer expectations and to lead the competition.  Exceptional service is built on choosing the right customers, delivering consistent and reliable service, and recognizing that you’re never done.

You can learn more about service design and strategy in an NPDP workshop where we discuss specific marketing tools and techniques for new product development.  Contact me at info@Simple-PDH.com or 281-280-8717 to enroll in a free NPDP overview course or any of our newly scheduled PMP, Scrum, or NPDP workshops in Houston as well as our online PDH courses.  At Simple-PDH.com where we want to help you gain and maintain your professional certifications.  You can study, learn, and earn – it’s simple!

 

Study. Learn. Earn. Simple.

© Simple-PDH.com

A division of Global NP Solutions, LLC

Project Management Contract Types

Project managers play an integral role in selecting third party vendors to perform work on projects.  It is no realistic, in most cases, to complete projects with only internal resources.  Additional skills can be accessed via outsourcing and often provide specialty services that are unavailable otherwise.

While procurement, purchasing, and legal departments normally take the lead in contract negotiations, project managers need to also take an active role in procuring third party materials and services.  After all, the project manager will be integrating the work of the vendor or supplier with all other aspects of the project.  This includes understanding the scope, schedule, cost, quality, and risk of the third party work.

Contracts

Contracts are used in projects to outline the legal responsibilities of the seller and the buyer.  The seller may be also identified as the vendor, supplier, or third party.  The buyer may be identified also as the customer, client, or sponsor.

A contract is a legally binding agreement in which the seller agrees to provide labor, equipment, materials, or other services in exchange for some form of payment.  The buyer agrees to pay the seller for the work provided; usually, the payment is made in monetary terms (e.g. $10,000 or 10,000 €).  However, in some cases, exchange of valuable goods may be made in lieu of money.  For instance, the right to license a process or access to patent-protected technology may be considered a valuable exchange by the buyer and seller in a contract.

It is important to keep in mind that a contract is a legally binding agreement.  Normally, the terms and conditions will state the jurisdiction of law under which the contract will be executed.  This may be stated as “according to the laws of the State of Texas” or in discussing mediation if the parties later disagreed upon the service rendered or payment received.  Thus, third party agreements should not be treated casually.

The Basic Contracts

Project, product, and engineering managers should be familiar with the three most common types of contracts.  While there are variations on these types of contracts that add risk or may reduce cost, most project managers can participate in a technical negotiation with a clear understanding of these basics.

Fixed Price Contract

The firm fixed price contract is used when the buyer can explicitly describe the materials, equipment, or services to be acquired.  The buyer agrees to a specific price (“fixed”) and the seller agrees to provide the goods and/or services.

A fixed price contract is of little risk to the buyer because there is no room for variation in the price of the goods or service being procured.  Of course, project, product, and engineering managers will prefer this type of contract since it allows a firm budget estimate.  However, the project manager must be extremely clear in describing the full scope of work in the contract as the seller will be constrained to provide exactly what is stated in the contract.

In a fixed price contract, the seller is at a greater degree of risk than the buyer.  Many factors can impact the completion of the work as specified that may add cost to the project work.  For instance, an unexpected period of high inflation or a labor shortage that drives up wages can impact the cost of the work that the seller provides.  Furthermore, if the seller underestimates the scope of work, they are still legally obligated to provide the agreed-upon work product, even at a financial loss.

Both the buyer and seller will be particularly attentive to changes in a fixed price contract.  The seller will view the contract as a minimum standard.  Anything that the buyer requests that is not explicitly called for in the contract may be considered a change.  Change orders are often expensive and can introduce schedule delays as well.  Again, it is important for the buyer to be familiar with the work and to provide a detailed scope statement to avoid eth potential of costly changes later.

Cost Reimbursable Contracts

Cost reimbursable contracts typically involve more risk for the buyer than the seller.  In this type of agreement, the seller is reimbursed for all actual costs as they are incurred.  Usually, the seller will invoice the customer on a regular basis, say weekly or monthly.

A buyer has more risk with a cost reimbursable contract than in a fixed price contract because the total cost of the work is not predetermined.  Sellers may incur more overhead costs using this type of contract since they will spend more time justifying expenses to the customer.  Buyers normally protect against financial risk by requiring specific documentation for costs incurred and/or by including a price cap within the contract terms and conditions.

A cost reimbursable contract is useful in situations where the end result in unknown.  This might be the case for a research study or if the scope of work is unclear.  For example, a home remodel project may involve uncertainties regarding the condition of subfloors, piping, and supports.  In other situations, the end product may be ill-defined due to the nature of the work, such as in new product development where customer inputs will guide decisions throughout the project life cycle.

Evaluation of fixed price contracts is easy.  Normally, a buyer will choose the lowest bid.  Cost reimbursable contracts must be evaluated based upon estimated total costs as well as other factors.  These can include approach to the work, experience, past performance on similar projects, and/or technical and management capability.  A vendor-customer relationship built on trust will enhance the execution of a cost reimbursable contract.

Time and Materials Contract

Finally, a time and materials contract is a hybrid between a fixed price and cost reimbursable contract.  Materials, equipment, and supplies are provided at a fixed (known) price while labor is reimbursed as necessary to complete the project work.  An example of a project in which a time and materials contract might be used is in venture software installation.  The cost of the software licenses is fixed (e.g. $300 per user) but operating system upgrades, testing, and data transfers are variable.  Like a cost reimbursable contract, buyers often include a price cap for a time and materials contract.

Procurement Contracts

Project managers should be involved when contracts are negotiated for third party work.  Technical specification and requirements are the responsibility of the project manager during negotiations.  Moreover, the project manager has a vested interest in the delivery schedule and cost of outsourced project work because it must be integrated with all other project activities.  Third parties also introduce special concerns regarding risk, quality, and communication – areas which are key responsibilities for a product, project, or engineering manager.

Project procurement is one of ten (10) knowledge areas covered on the Project Management Professional (PMP™) exam.  If you are planning on becoming certified, you will want to consider a PMP review course and/or practice tests.  Candidates who prepare with a PMP training course are more likely to pass the exam on the first try.  Join us for online study sessions – contact me at info@Simple-PDH.com or 281-280-8717 for more information on our next available study session.

Contract management is a key responsibility for product, project, and engineering managers.  Be on the lookout for a special PDH course on contract management where you can refresh your skills, learn new tools, and earn professional development hours (PDH).  At Simple-PDH.com where we want to help you gain and maintain your professional certifications.  You can study, learn, and earn – it’s simple!

 

Study. Learn. Earn. Simple.

© Simple-PDH.com

A division of Global NP Solutions, LLC