Measuring Value in Product Development

“What is value in product development?” is the key question of this paper. The answer is critical to the creation of lean in product development. By knowing how much value is added by product development (PD) activities, decisions can be more rationally made about how to allocate resources, such as time and money. In order to apply the principles of Lean Thinking and remove waste from the product development system, value must be precisely defined. Unfortunately, value is a complex entity that is composed of many dimensions and has thus far eluded definition on a local level. For this reason, research has been initiated on “Measuring Value in Product Development.” This paper serves as an introduction to this research. It presents the current understanding of value in PD, the critical questions involved, and a specific research design to guide the development of a methodology for measuring value. Work in PD value currently focuses on either high-level perspectives on value, or detailed looks at the attributes that value might have locally in the PD process. Models that attempt to capture value in PD are reviewed. These methods, however, do not capture the depth necessary to allow for application. A methodology is needed to evaluate activities on a local level to determine the amount of value they add and their sensitivity with respect to performance, cost, time, and risk. Two conceptual tools are proposed. The first is a conceptual framework for value creation in PD, referred to here as the Value Creation Model. The second tool is the Value-Activity Map, which shows the relationships between specific activities and value attributes. These maps will allow a better understanding of the development of value in PD, will facilitate comparison of value development between separate projects, and will provide the information necessary to adapt process analysis tools (such as DSM) to consider value. The key questions that this research entails are: · What are the primary attributes of lifecycle value within PD? · How can one model the creation of value in a specific PD process? · Can a useful methodology be developed to quantify value in PD processes? · What are the tools necessary for application? · What PD metrics will be integrated with the necessary tools? The research milestones are: · Collection of value attributes and activities (September, 200) · Development of methodology of value-activity association (October, 2000) · Testing and refinement of the methodology (January, 2001) · Tool Development (March, 2001) · Present findings at July INCOSE conference (April, 2001) · Deliver thesis that captures a formalized methodology for defining value in PD (including LEM data sheets) (June, 2001) The research design aims for the development of two primary deliverables: a methodology to guide the incorporation of value, and a product development tool that will allow direct application.

A Proposal for Enterprise Value Phase of the Lean Aerospace Initiative

The Massachusetts Institute of Technology (MIT) submits this proposal for the Enterprise Value Phase of the Lean Aerospace Initiative (LAI) in response to the October 9, 2002 Request for Proposal (RFP) F33615-02-2-5501 from the Air Force Research Laboratory (AFRL/MLKT), Wright-Patterson Air Force Base, Ohio. This proposal addresses the conduct of the LAI as set forth in the Enterprise Value Phase Concept of Operations (final draft dated 5 June 2002. The creation of this Enterprise Value Phase Concept of Operations (ConOps) was the result of extensive interaction among all stakeholders in the LAI consortium. The proposed products and research topics have been developed by the MIT LAI team based on this extended interaction with the Lean Aerospace Initiative consortium members during the concept of operations development. This proposal is in consonance with the Enterprise Value Phase vision, and mission as set forth in the concept of operations so as to meet stakeholder needs to achieve the goals and deliverables desired, prioritized to fit available funding.

An Assessment of the Degree of Implementation of the Lean Aerospace Initiative Principles and Practices within the US Aerospace and Defense Industry

This report is a formal documentation of the results of an assessment of the degree to which Lean Principles and Practices have been implemented in the US Aerospace and Defense Industry. An Industry Association team prepared it for the DCMA-DCAAIndustry Association “Crosstalk” Coalition in response to a “Crosstalk” meeting action request to the industry associations. The motivation of this request was provided by the many potential benefits to system product quality, affordability and industry responsiveness, which a high degree of industry Lean implementation can produce.

Applications of Lean Ideas to the Aerospace Industry

• Lean Aerospace Initiative origin and mission • Functional lean successes • Successes through interaction between functions • Success through enterprise integration and value creation • Total enterprise integration of all stakeholders • Enterprise transformation insights

Benefits of Implementing Lean Practices and the Impact of the Lean Aerospace Initiative in the Defense Aerospace Industry and Government Agencies

In the 1980’s, many United States industrial organizations started developing new production processes to improve quality, reduce cost, and better respond to customer needs and the pressures of global competition. This new paradigm was coined Lean Production (or simply “Lean”) in the book The Machine That Changed The World published in 1990 by researchers from MIT’s International Motor Vehicle Program. In 1993, a consortium of US defense aerospace firms and the USAF Aeronautical Systems Center, together with the AFRL Materials and Manufacturing Directorate, started the Lean Aircraft Initiative (LAI) at MIT. With expansion in 1998 to include government space products, the program was renamed the Lean Aerospace Initiative. LAI’s vision is to “Significantly reduce the cost and cycle time for military aerospace products throughout the entire value chain while continuing to improve product performance.” By late 1998, 23 industry and 13 government organizations with paying memberships, along with MIT and the UAW were participating in the LAI.

Lean Enterprise Self-Assessment Tool (LESAT)

-Status report on June Executive Board commitments -Enterprise-level LESAT Beta Version -Detailed-level LESAT Development Plan -Industry and government participation and support requirements -Resource Needs -Executive Board decision on proposed next steps

Lean Enterprise Transformation: Measuring and Accelerating the transition to lean.

PowerPoint presentation that showcases: • Research Objectives • Strategic Value of the Lean Enterprise • Multi-Stakeholder Value Optimization • Lean Enterprise Self-Assessment Tool (LESAT) • Leading and Lagging Indicators of Lean Enterprise Transformation • Empirical Results in the Aerospace Industry • Accelerating the Lean Transformation - Linking LESAT to Strategic Objectives • Summary and Questions

Lean Transition of Emerging Industrial Capability

This volume of the final report documents the technical work performed from December 1998 through December 2002 under Cooperative Agreement F33615-97-2-5153 executed between the U.S. Air Force, Air Force Research Laboratory, Materials and Manufacturing Directorate, Manufacturing Technology Division (AFRL/MLM) and the McDonnell Douglas Corporation, a wholly-owned subsidiary of The Boeing Company. The work was accomplished by The Boeing Company, Phantom Works, Huntington Beach, St. Louis, and Seattle; Ford Motor Company; Integral Inc.; Sloan School of Management in the Massachusetts Institute of Technology; Pratt & Whitney; and Central State University in Xenia, Ohio and in association with Raytheon Corporation. The LeanTEC program manager for AFRL is John Crabill of AFRL / MLMP and The Boeing Company program manager is Ed Shroyer of Boeing Phantom Works in Huntington Beach, CA. Financial performance under this contract is documented in the Financial Volume of the final report.

Strategies for Lean Product Development

The essence of lean is very simple, but from a research and implementation point of view overwhelming. Lean is the search for perfection through the elimination of waste and the insertion of practices that contribute to reduction in cost and schedule while improving performance of products. This concept of lean has wide applicability to a large range of processes, people and organizations, from concept design to the factory floor, from the laborer to the upper management, from the customer to the developer. Progress has been made in implementing and raising the awareness of lean practices at the factory floor. However, the level of implementation and education in other areas, like product development, is very low.

The Wrong Kind of Lean: Over-Commitment and Under-Represented Skills on Technology Teams

This paper reports on results from five companies in the aerospace and automotive industries to show that over-commitment of technical professionals and under-representation of key skills on technology development and transition teams seriously impairs team performance. The research finds that 40 percent of the projects studied were inadequately staffed, resulting in weaker team communications and alignment. Most importantly, the weak staffing on these teams is found to be associated with a doubling of project failure rate to reach full production. Those weakly staffed teams that did successfully insert technology into production systems were also much more likely than other teams to have development delays and late engineering changes. The conclusion suggests that the expense of project failure, delay and late engineering changes in these companies must greatly out-weigh the savings gained from reduced staffing costs, and that this problem is likely going to be found in other technology-intensive firms intent on seeing project budgets as a cost to be minimized rather than an investment to be maximized.

Applying the Lessons of “Lean Now” to Transform the US Aerospace Enterprise

Lean is common sense and good business sense. As organizations grow and become more successful, they begin to lose insight into the basic truths of what made them successful. Organizations have to deal with more and more issues that may not have anything to do with directly providing products or services to their customers. Lean is a holistic management approach that brings the focus of the organization back to providing value to the customer. In August 2002, Mrs. Darleen Druyun, the Principal Deputy to the Assistant Secretary of the Air Force for Acquisition and government co-chairperson of the Lean Aerospace Initiative (LAI), decided it was time for Air Force acquisitions to embrace the concepts of lean. At her request, the LAI Executive Board developed a concept and methodology to employ lean into the Air Force’s acquisition culture and processes. This was the birth of the “Lean Now” initiative. An enterprise-wide approach was used, involving Air Force System Program Offices (SPOs), aerospace industry, and several Department of Defense agencies. The aim of Lean Now was to focus on the process interfaces between these “enterprise” stakeholders to eliminate barriers that impede progress. Any best practices developed would be institutionalized throughout the Air Force and the Department of Defense (DoD). The industry members of LAI agreed to help accelerate the government-industry transformation by donating lean Subject Matter Experts (SMEs) to mentor, train, and facilitate the lean events of each enterprise. Currently, the industry SMEs and the Massachusetts Institute of Technology are working together to help the Air Force develop its own lean infrastructure of training courses and Air Force lean SMEs. The first Lean Now programs were the F/A-22, Global Hawk, and F-16. Each program focused on specific acquisition processes. The F/A-22 focused on the Test and Evaluation process; the Global Hawk focused on Evolutionary Acquisitions; and the F-16 focused on improving the Contract Closeout process. Through lean, each enterprise made many significant improvements. The F/A-22 was able to reduce its Operational Flight Plan (OFP) Preparation and Load process time of 2 to 3 months down to 7 hours. The Global Hawk developed a new production plan that increases the annual production of its Integrated Sensor Suite from 3 per year to 6 per year. The F-16 enterprise generated and is working 12 initiatives that could result in a contract closeout cycle time reduction of 3 to 7 years. Each enterprise continues to generate more lean initiatives that focus on other areas and processes within their respective enterprises.

Lean Transition of Emerging Industrial Capability (LeanTEC)

Lean Transition of Emerging Industrial Capability (LeanTEC) program was a cooperative agreement between the Boeing Company and AFRL conducted from January 1998 to January 2002. The results of this program are documented in the Manual for Effective Technology Transition Processes included as an attachment to this report. This manual provides processes, procedures, and tools for greatly improving technology transition in the aerospace industry. Methodology for the implementation of these improvements is given along with methods for customizing the various processes, procedures, and tools for a given company or business unit. The indicated methodology was tested by the LeanTEC team and results are documented in the report.