reinertsen lk france 2015 11 4-15
TRANSCRIPT
No part of this presentation may be reproducedwithout the written permission of the author.
An Introduction to
Second GenerationLean Product Development
Lean Kanban France 2015Paris, FranceNovember 4, 2015
Donald G. ReinertsenReinertsen & Associates
600 Via Monte D’OroRedondo Beach, CA 90277 U.S.A.
(310)-373-5332Internet: [email protected]
Twitter: @dreinertsenwww.ReinertsenAssociates.com
2Copyright 2015, Reinertsen & Associates
Seven Big Ideas of 2GLPD
1. Understand your economics.2. Manage your queues.3. Exploit variability.4. Enable smaller batches.5. Control WIP and start rates.6. Prioritize based on economics.7. Accelerate feedback.
3Copyright 2015, Reinertsen & Associates
1. Understand Your Economics
• In product development all difficult decisions involve multiple variables.
• Making decisions that affect multiple variables requires quantification.
• Doing such quantification, to a useful level of accuracy, is surprisingly easy.
4Copyright 2015, Reinertsen & Associates
Should we operate our testing process at 80 percent utilization with a 2 week queue, or at 90 percent utilization with a 4 week queue?
A Typical Question
5Copyright 2015, Reinertsen & Associates
Making Economic Decisions
Waste
Cycle Time
Variability
Efficiency
Unit Cost
Value-Added
Revenue
Life CycleProfits
Economic SpaceProxy Variable Space
Transformations
6Copyright 2015, Reinertsen & Associates
The Modeling ProcessCreate Baseline Model
Determine Total Profit Impact of Missing a MOP
Calculate Sensitivity Factors
ModelExpenseOverrun
ModelSchedule
Delay
ModelValue
Shortfall
ModelCost
Overrun
ModelRisk
Change
7Copyright 2015, Reinertsen & Associates
The Model OutputLife-Cycle Profit Impact
-$80,000
-$500,000
-$100,000-$150,000
-$40,000
1 PercentExpenseOverrun
1 PercentProduct Cost
Overrun1 Percent Value
Shortfall 1 Month Delay1 Percent
Increase in Risk
8Copyright 2015, Reinertsen & Associates
Range of Cost of Delay Estimates
Poor Intuition
Average Intuition
Best Case Intuition
Average Analysis
Quality Analysis
Any Analysis Beats Intuition
200:1
50:1
10:1
2:1
1.2:1
Source: Reinertsen & Associates Clients
9Copyright 2015, Reinertsen & Associates
Managing Weight vs. Product Cost
Engineer Supervisor ProgramManager
Boeing 777 Weight Reduction Decision Authority
$300
$2,500
$600
Dollars per Pound
10Copyright 2015, Reinertsen & Associates
2. Manage Your Queues
• Many product developers assume higher utilization leads to faster development.
• They neither measure nor manage the invisible queues in their process.
• Consequently, they underestimate the true cost of overloading their processes.
• Such overloads severely hurt all aspects of development performance.
Traffic at rush hour illustrates the classic characteristics of a queueing system.
Pho
to C
opyr
ight
200
0 C
omst
ock,
Inc.
12Copyright 2015, Reinertsen & Associates
The Effect of Capacity Utilization
Queue Size vs. Capacity Utilization
0
5
10
15
20
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%Capacity Utilization
Que
ue S
ize
Notes: Assumes M/M/1/ Queue, = Capacity Utilization
1
2
qL
13Copyright 2015, Reinertsen & Associates
Total Cost
Cost of Delay
Cost of Excess Capacity
Managing Queues
Excess Product Development Resource
Dollars
Minimize Total Cost to Maximize Profits
14Copyright 2015, Reinertsen & Associates
Longer Cycle Time
Lower Quality
More Variability
Increased Risk
More Overhead
Less Motivation
Queues Create...
Why Queues Matter
Managing Queues is the key to improving product development economics.
15Copyright 2015, Reinertsen & Associates
3. Exploit Variability
• In manufacturing it is always desirable to reduce variability.
• In product development eliminating variability eliminates innovation.
• We understand the specific conditions that make variability valuable and manage our process to create these conditions.
• We need development processes that function in the presence of variability.
16Copyright 2015, Reinertsen & Associates
Payoff vs. Price
Price
Payo
ff
Expected Price
Price
Prob
abilt
yAsymmetric Payoffs and Option Pricing
Strike Price
Expected Payoff
Price
Expe
cted
Pa
yoff Strike
Price
x
=
17Copyright 2015, Reinertsen & Associates
Higher Variability Raises This Payoff
Price
Expected Payoff
Payoff SD=15 Payoff SD=5
Option Price = 2, Strike Price = 50, Mean Price = 50, Standard Deviation = 5 and 15
Strike Price
18Copyright 2015, Reinertsen & Associates
Performance
Payoff
Target
Fast Feedback Enables Exploitation of Good Outcomes
Fast FeedbackReduces Loss
from Bad Outcomes
We Can Change Payoff Functions
Gain
Loss
19Copyright 2015, Reinertsen & Associates
Requirements Resources
Schedule
• Cost• Performance
Project Control Triangle
Variability Substitution
Possible Constraints1. Requirements and Resources2. Schedule and Resources3. Requirements and Schedule
Variability on one axis can be transformed into variability on another.
20Copyright 2015, Reinertsen & Associates
4. Enable Smaller Batches
• When work products are invisible, batch sizes are invisible.
• When batch sizes are invisible, product developers pay little attention to them.
• Many companies institutionalize large batch sizes.• Batch size reduction is attractive because it is fast,
easy, cheap, granular, leveraged, and reversible.• It is a great starting point for LPD.
Batch Size Queues Cycle Time
X 0.5 X 0.5 X 0.5
21Copyright 2015, Reinertsen & Associates
Small BatchesLarge Batch
Unreviewed Drawings
Drawing Review Process
200
20
10 Weeks 1 Week
22Copyright 2015, Reinertsen & Associates
Small BatchesLarge Batch
Unreviewed Drawings
Drawing Arrival Rate
200
20
10 Weeks 1 Week
Who’s First?Who’s Last?
23Copyright 2015, Reinertsen & Associates
Cheaper Correction
Cheaper Debug
Lower Cost Changes
Better Economics
Fewer Status Reports
Faster Cycle Time
Early Feedback
Faster Learning
Less Requirements Change
Less Debug Complexity
More Efficient Debug
Cheaper Testing
Less Non-Value-Added
Better Code
Fewer Open Bugs
More Uptime
Higher Validity
Smaller Changes
Benefits of Small Batch Testing
24Copyright 2015, Reinertsen & Associates
Setting Batch Size
Economic Batch Size
0
5
10
15
20
25
1 2 3 4 5 6 7 8 9 10
Items per Batch
Cost
Transaction Cost Holding Cost Total Cost
25Copyright 2015, Reinertsen & Associates
Typical Batch Size Problems• Megaprojects• Project funding• Project phases• Requirements
definition• Project planning• Testing
• Capital spending Drawing release
• Design reviews• Manufacturing release • Market research• Prototyping• Post Mortems
Batch sizes are often too large when we incorrectly assume large batches create economies of scale.
Large batches are like rabbits in Australia, only worse.
26Copyright 2015, Reinertsen & Associates
5. Control WIP and Start Rates
• Many developers incorrectly assume that the sooner they start work, the sooner they will finish it.
• They are constantly tempted to start too much work.
• This dilutes resources and causes long transit times through their processes.
• A long transit time hurts efficiency, quality, and responsiveness.
27Copyright 2015, Reinertsen & Associates
Little’s Formula
• By constraining WIP in development processes we can control cycle time.
• This approach, which is known as Lean Kanban, is currently growing rapidly in software development.
Rate Departure Average
Queuein Customers ofNumber Average
Queuein Time Wait Average
q
q
L
W
LW
28Copyright 2015, Reinertsen & Associates
1234
12
34
COD Savings of Project 1 and 2 Late Start Advantages for Project 3 and 4
Control Number of Active Projects
Många barn och lite mat ger tunna smörgåsar.
29Copyright 2015, Reinertsen & Associates
Avoiding Long Planning Horizons
Datum
Search Area
D = Vt
D = Vt
A =V2 t2
Planning Horizon
Error
30Copyright 2015, Reinertsen & Associates
Visual WIP Control Boards
ReadyQueue Coding
Readyto Test Testing
TestComplete
A D
E
C
B
WIP Constraint = 10 unitsWIP constraints can be local, regional, or global.
31Copyright 2015, Reinertsen & Associates
6. Sequence Work Correctly
• The sequence in which work is processed is called the queueing discipline.
• By changing the queueing discipline we can reduce the cost of a queue without decreasing the size of the queue.
• Since manufacturing has homogeneous flows it always uses FIFO.
• For the non-homogeneous flows of product development other approaches have better economics.
32Copyright 2015, Reinertsen & Associates
The TPS Emergency Room
• We desire to rigorously imitate the practices of Toyota.
• All arriving patients will be processed on a FIFO basis.
• We will set strict limits on WIP.
33Copyright 2015, Reinertsen & Associates
Cost of
Delay
Time
2
Cost of
Delay
Delay Cost
First-In First-Out
Last-In First-Out
Project DurationCost of Delay
1 3 32 3 33 3 3
Use FIFO for Homogeneous Flow
1
3
23
1
34Copyright 2015, Reinertsen & Associates
Cost of
Delay
Time
Cost of
Delay
Delay Cost
High Weight First
Low Weight First
12
3
Project DurationCost of Delay
Weight = COD/
Duration1 1 10 102 3 3 13 10 1 0.1
1
23
Weighted Shortest Job First (WSJF)
160 796 Percent Reduction!
35Copyright 2015, Reinertsen & Associates
7. Create Faster Feedback
• When queues and batch sizes are large feedback is slow.
• Slow feedback hurts quality, efficiency, and cycle time.
• Feedback speed has enormous economic leverage in product development, but it is rarely explicitly managed.
36Copyright 2015, Reinertsen & Associates
The Front-Loaded Lottery• A lottery ticket pays $3000 to the winning
three digit number. • You can pick the numbers in two ways:
• Pay $3 to select all three digits at once.• Pay $1 for the first digit, find out if it is
correct, then choose if you wish to pay $1 for the second digit, and then choose if you wish to pay $1 for the third digit.
37Copyright 2015, Reinertsen & Associates
100%Probability
of Occurrence
Value of Feedback
Cumulative Investment
100%
10%
Savings= $0.90
$1 $2
10%
0 $3
Savings= $0.99
1%
Spend $1.00
38Copyright 2015, Reinertsen & Associates
1. Understand your economics.2. Make your queues visible and control them.3. Create a process to exploit variability.4. Enable smaller batches. 5. Control cycle time by controlling WIP.6. Sequence work based on economics.7. Accelerate feedback with smaller batches.
Seven Big Ideas of 2GLPD
39Copyright 2015, Reinertsen & Associates
1991 / 1997 1997 2009
Going Further
Print OnlyPrint + Kindle
Print Only