Project Management in the Fuzzy Front End

Revision as of 13:56, 14 September 2016

In many organizations the pressure on the Product Development Process (PDP) has increased through the demand of greater product varieties and shorter lifecycles. Organizations aim for a structured way of speeding up the Product Development Process while not loosing effective scoping in the identification of market needs. Often they have succeeded using the Stage Gate Process - or a customized version of it. ^[1] Yet the application of the Stage Gate Process has shown that it enabled only a certain type of innovation to be handled with higher efficiency - incremental Innovations. ^[2] Radical Innovations demand a different and however still largely unpracticed handling in the initial stages. What is more, even though the execution of an incremental innovation in organizations has increased in efficiency the search and selection of the ideas in the "Fuzzy Front End" of the Product Development Process resembles great complications to the project management. This comes with no surprise since the "Fuzzy Front End" is typically characterized through a high degree of uncertainty and equivocality. ^[3] To answer these difficulties transferring knowledge from the Risk Management tools for decision making under uncertainty or forecasting can be applied to ease the Project Management in the Fuzzy Front End.

The "Fuzzy Front End"

Definition

Figure 1: Process Model of Innovation and the Fuzzry Front End ^[4]

The Management of Innovation can be divided roughly into 4 stages:

1. Search - Finding opportunities for innovations
2. Select - Selecting the ideas to pursuit
3. Implement - Development of the product and launching it on the market
4. Capture - Capturing value from the innovation

On one hand most of the parameters for the later success or failure are set in the first two stages. On the other hand project managers are reluctant to make fast decisions because these stages are characterized with the highest risk and uncertainty levels of the whole process of innovation. The Search phase involves detecting signals in the environment like e.g. technological opportunities or changing requirements in the market. Here opportunities can be easily overseen. The Select phase the inputs from the Search phase are distilled and very few converted into an innovation concepts. Based on these concepts the whole organizational mechanism can now implement the innovation and capture value. ^[5] Hence in Innovation Management the Fuzzy Front End is considered the period between when an opportunity for a new product is first considered until the concept if the innovation enters the formal product development process.^[3]

The Fuzzy Front End of incremental and radical Innovations

The Fuzzy Front End is an assortment of factors to control with difficulty, which create high uncertainty and risks for decision makers such as the project manager in charge: complex information processing, conflicting organizational pressures, market uncertainties, technology uncertainties, equivocality or reciprocal interdependencies to name a few. But it seems to get even more complicated: the Fuzzy Front End process seems not only to differ between firms but also between individual projects within the firms regarding e.g. individual activities, their sequencing, the overall duration and their degree of overlap. ^[3]

Innovation Managers distinguish between radical and incremental innovations. In general incremental innovations are characterized by minor changes in existing products which cumulatively improve its performance. They often take place in the context of facelifts of products or the concept of continuous improvement. The scope is to improve quality and/or the productivity of the product. However the underlying ideas in incremental innovations are not new but result often from the typical "learning curve" effect. Nevertheless most of the innovations take place in the incremental fashion and a successful project management can result in a stable ROI.^[6]

As incremental innovations are many times a result of the continuous improvement within total quality management or the daily and planned facelifts of already launched products. Since they are often a product of the overall strategic planning process a high degree of certainty characterizes the Fuzzy Front End: an earlier version of the product is already on the market and risks like the technical feasibility or hence market adaption are not as high as with breakthrough innovations. Therefore a "gentle" screening of the overall strategic fit, the market attractiveness and the technical feasibility is sufficient to reach a level of certainty which is acceptable for the further execution. In terms of the project management, since the uncertainty is not as high as in breakthrough innovations, technical staff or employees from the marketing are gatekeepers for the project - not the senior management. At the same time most of the resources needed for the project can be assigned from the very beginning after the market and technical assessment. Most often it is also possible to forecast quite precisely the financial benefits of the product and the decision for the product is a result of it. The financial attractiveness routes in an already accepted earlier version of the product on the market. Sometimes incremental innovations arise not from the strategic planning process but e.g. from other creativity workshops or engaged employees. These unplanned ideas often need to "fight" more for their resources and for strategic acceptance. Sometimes companies create internal "seed-funding" for these ideas. When they are not provided with sufficient resources market acceptance and technical feasibility is often harder to predict and the management of the project in the Fuzzy Front End is characterized by more uncertainty. ^[7]

Radical Innovations, also breakthrough innovations or discontinuous innovation, completely change the nature of the product and bring hence a very high degree of novelty. These innovations often change the rules of their industry through opening up new opportunities but also challenging the existing players to reframe their operations. ^[6][8] But irrespective of the radical innovations the tendency of higher complexity and uncertainty in the innovation process is increasing. This emerges due to business, technological or regulatory changes, increasing need for speeding up the development

Challenges of Project Management

Based on the description of the Fuzzy Front End it is easy to comprehend the difficulties of organizational project management. Generally flexible project management skills are needed with a profound insight of the individual success factors of the firm and ability to adapt to changing conditions. For each project three types of constraints need to be discussed: should the idea screening be "gentle" or "harsh"? How formal should the Search and Select process be? How much uncertainty can be dealt with?

In the Searching phase the screening for opportunities in as many different ways as possible is key to success. However the organization should get rid of the bad ideas as quickly as possible in order to save costs of failed development. On the other hand a quick and "harsh" rejection can also sort out good ideas. Sometimes a "gentle" treatment of ideas is of advantage because they flourish through informal discussions in the company and then gain momentum. The next individual balance to be found regards freedom and formality. On one hand a high degree of formality can reduce risks create transparency and predictability. On the other hand a too high degree of formality can decrease innovation and flexibility. The project management needs to find an individual balance suitable for the project in all three constraints. Since the Fuzzy Front End differs to a very high degree between industries, companies and projects it is key success factor that the project manager is aware of the type of development project. The two types to be distinguished are incremental and radical innovations. Based on the type he can create the frame regarding the aforementioned constraints. ^[3]

Once the frame is set for the project, projectcontent-specific challenges need to be clarified. In general it can be said: the higher the amount of planning is in the beginning of the project, the higher the success. But planning refers not only to the time-scheduling, the detailed definition of work-packages to be done and the assignment of resources to the project. In this case planning also refers to the extinction of uncertainties. During the Fuzzy Front End thee major uncertainties arise: acceptance of the project within the organization, market uncertainties and technological uncertainties.

Relevance of Project Management

Project management is a management task divided into project definition, project implementation and project completion. The aim is that projects are properly planned and controlled so that the risks are limited, seized opportunities and project goals high, on time and be accomplished within budget. It is defined as a set of management tasks, organization, techniques and materials for the development of a project. ^[9] In terms of product development the project management structure is strongly correlated with the success of the developed products. Contrary to the project management the purely functional structure has shown the lowest success rate. However managing a product development project needs to fulfill all the demands regarding quality, costs and time as any other project. ^[10] Typical for product development projects is that in the very initial stages the resource commitment is still low, while there is a very high degree of uncertainties. Throughout the project the uncertaities decrease but the resource commitment increases strongly. In many cases high resource commitment can create a "lock-in" effect and leads organizations into pursuing projects which will fail in the end hoping, since they have invested heavily already, for a high return on invest. (technology, market, internal etc.). ^[1] To avoid costly "lock-in" effects project management is highly relevant not only for the successful execution of the goal set within the quality, costs and time aimed for, but also regarding the correct setting of the goal. In terms of the project management in the field of product development this means to choose the "right" ideas to implement and launch as innovations on the market.

Project Management of Innovations in the Fuzzy Front End

The Stage Gate Process

Since the innovation process of incremental innovations is relatively predictable many organizations succeeded in structuring the project execution. The most typical way to orchestrate the innovation process is through the Stage Gate Process - or an individualized version of it. It resembles a structured process with milestones - the "Gates" - which force the team to make stop/go decisions at each of them. Along with the "go" decisions comes an increased resource commitment. The further the project develops, and the higher the resource commitment gets, the more seniority will have the staff to make the stop/go decisions.

Figure 2: The Stage Gate Process of Cooper ^[11]

The original Stage Gate Process was developed by Cooper in 1993 and included the following five stages:

1. Preliminary investigation - a fast examination and scoping of the project
2. Detailed investigation - detained analysis which results in a business case, a project definition and project plan
3. Development - design and development of the actual product
4. Testing and Validation - trials on the marketplace and laboratory to test the market and technical feasibility to reach a product validation
5. Full Production and Market Launch - commercialization, full production, marketing and sales

It can be noted that Cooper sees the idea generation as the pre-phase of the Stage-Gate-Model. ^[12] Nowadays many companies have changed the nature of their innovation process from a linear process to a model of feedback systems between the individual stages - creating "learning loops" and adjustments. ^[13]

With respect to the Fuzzy Front End the first two Stages - Preliminary Investigation and Detailed investigation - are of interest since they set the scope for the following development project. BLA BLA

Naturally the project effectiveness increases with the reduction of technical and market uncertainties supported by internal planning and adjusting of the innovation concept.

Reduction of market and technology uncertainties

Delphi-Method

Customer Market surveys, Internal Analysis (e.g. Brainstorming), Scenario Development based on computer simulations and external assessment like the Delphi Method are only a few examples of how organizations try to gain insight into potential markets and henceforth reducing market uncertainties. However each of the methods has its restrictions. Sometimes a consumer does not know what he wants exactly since he only speaks and desires what is known to him. Hence it is difficult to gain valuable insight from customer surveys about potential innovations which deviate from known solutions. A similar effect can be observed by the internal analysis or the computer based scenario development. Creativity and knowledge about markets and their needs are limited within the organizations and therefore employees see the problem through the internal "lens". To find unusual solutions organizations have started to search outside of the company-boundaries through e.g. the application of the Delphi method.

HOW DOES IT WORK?

Although the Delphi-Method has shown to be very useful a project manager can not rely alone on this tool. It should be used in an individual composition together with other tools to gain a holistic insight into the market and the current technological possibilities. Furthermore since it is a tool that relies strongly on human capabilities the outcome of the Delphi-Scession depends a lot on the experts invited and the moderator being able to extract their knowledge from them. In poor cases key customer needs can be missed because the experts invited do not have the necessary insights into the customer, the group collaboration suppresses opinions of members or the moderator is not able to see the value in the contributed suggestions of the members and hence the idea is dismissed.

Quality Function Deployment

After the market has been investigated and the needs identified as well as the technology for the development generally clear it is the task of the project team, guided by the project manager, to assure that they are translated into a tangible product (or intangible service). First the gathered information needs to be translated into functions and integrated into the product concept. Then the identified functions need to be matched with technical specifications i.e. a certain tangible feature of the product. Literature finds multiple ways to realize this step however in practice organizations which apply the concept of Quality Function Deployment reach high success rates with their products.

In this method it has shown to be highly successful to include as many knowledge fields related to the product during the QFD-sessions as possible. Especially the collaboration between the technical staff and the marketing employees succeeds in translating the customer needs into technical specifications best.

Risk Assessment

Limitations of the Project Management in the Fuzzy Front End

Project Management in the Fuzzy Front End is characterized with a lot of uncertainties. As mentioned above the market and technology represent the key risks, but also the internal acceptance within the organization can suppress great innovations. Literature shows multiple tools to cope with different situations but all "one-fits-all"-approaches to the project management in the Fuzzy Front End result in practice in a "one-fits-none" solution. Fuzzy Front Ends are as diverse as the projects they concern. Even though parallels could be found in the technological and market aspect e.g. in the development of cell-phones for Apple or Samsung, the project manager has to deal with the human factor in his team just as well. All tools mentioned can only be as good as the humans applying them and Delphi, QFD and Risk Assessment have to be seen in the greater context of a variety of tools applied in the Fuzzy Front End. This may represent hi greatest limitation of all tool together.

Additionally it is important that the tools should not be seen to deliver static results. The linear Stage-Gate-Process prevents that later insights of e.g. customer, market, technology, resources... can affect the initial stages. The therefore developed process with feedback systems is recommendable. Hence if e.g. the risk assessment shows that certain technological features create a risk to high for the company maybe the product concept has to be adapted. It is key for the project manager to be flexible.

Recent research to enable the company to more flexibility is connected with the product development method SCRUM. This method bases on short iterations and the achievement of fast, still imperfect products, which can then be tested with users right away. ^[14] Further research and investigation could be connected to the project management with the SCRUM method and how it could take the fuzziness out of the Fuzzy Front End. human factor, organizational factor, commitment factor

References

1. ↑ ^{1.0 1.1} Tidd, J. & Bessant, J. (2013). Managing Innovation - Integrating Technological, Market and Organizational Change, John Wiley & Sons Ltd, 5th Edition, p.405-412, UK, ISBN 978118360637
2. ↑ Herstatt, C., Verworn, B. (2001). The "Fuzzy Front End" of Innovations, Technical University of Hamburg, Retrieved 12.09.2016, Available Online
3. ↑ ^{3.0 3.1 3.2 3.3} Florén, H. & Frishammar, J. (2012). From Preliminary Ideas to Corroborated Product Definitions: Managing the front-end of new product development, California Management Review, 54 (4), p.20-43
4. ↑ Wikipedia. Fuzzy Front End. Retrieved 11.09.2016
5. ↑ Tidd, J. & Bessant, J. (2013). Managing Innovation - Integrating Technological, Market and Organizational Change, John Wiley & Sons Ltd, 5th Edition, p.88-96, UK, ISBN 978118360637
6. ↑ ^{6.0 6.1} Dogson, M., Gann, D., Salter, A. (2008). Management of Technological Innovation, Oxford University Press, p.54-60, UK, ISBN: 9780199208524
7. ↑ Koen, P.A. (2004). The Fuzzy Front End for Incremental, Platform and Breakthrough Products and Services, PDMA Handbook, 2nd Edition, Retrieved 11.09.2016, Available Online
8. ↑ Tidd, J. & Bessant, J. (2013). Managing Innovation - Integrating Technological, Market and Organizational Change, John Wiley & Sons Ltd, 5th Edition, p.23-35, UK, ISBN 978118360637
9. ↑ Gabler Wirtschaftslexikon. Projektmanagement, Retrieved 11.09.2016, Available Online
10. ↑ Tidd, J. & Bessant, J. (2013). Managing Innovation - Integrating Technological, Market and Organizational Change, John Wiley & Sons Ltd, 5th Edition, p.405-412, UK, ISBN 978118360637
11. ↑ Wikipedia. Stage Gate Process.,Retrieved 12.09.2016 Available Online
12. ↑ Dogson, M., Gann, D., Salter, A. (2008). Management of Technological Innovation, Oxford University Press, p.220-223, UK, ISBN: 9780199208524
13. ↑ Dogson, M., Gann, D., Salter, A. (2008). Management of Technological Innovation, Oxford University Press, p.60-65, UK, ISBN: 9780199208524
14. ↑ Cooper, R.G., Sommer, A.F. (2016). The Agile-Stage Gate Hybrid Model: a Promising New Approach and a new Research Opportunity, Journal of Product Innovation Management, Vol. 33, Issue 5.Retrieved 14.09.2016, Available Online