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Value Creation in the Product Development Process by James P. Chase Bachelor of Science, Aerospace Engineering and Mechanics

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Value Creation in the Product Development Process by James P. Chase Bachelor of Science, Aerospace Engineering and Mechanics Value Creation in the Product Development Process by James P. Chase Bachelor of Science, Aerospace Engineering and Mechanics University of Minnesota, 1999 Bachelor of Arts, English Language and Literature University of Minnesota, 1999 Submitted to the Department of Aeronautics and Astronautics in Partial Fulfillment of the Requirements for the Degree of Master of Science in Aeronautics and Astronautics at the Massachusetts Institute of Technology December 2001 ©2001 Massachusetts Institute of Technology All rights reserved Signature of Author .......................................................................................................................................................... Department of Aeronautics and Astronautics December 21, 2001 Certified by....................................................................................................................................................................... Edward M. Greitzer Associate Department Head, Department of Aeronautics and Astronautics Thesis Supervisor Certified by....................................................................................................................................................................... Hugh L. McManus Principal Research Engineer, Lean Aerospace Initiative Thesis Supervisor Certified by....................................................................................................................................................................... John J. Deyst, Jr. Professor, Department of Aeronautics and Astronautics Thesis Supervisor Accepted by ...................................................................................................................................................................... Wallace E. Vander Velde Professor of Aeronautics and Astronautics Chair, Committee on Graduate Students Written in the shadow of the September 11th terrorist attacks, this thesis is dedicated to the victims in the hope that the knowledge herein will contribute, in its fashion, to lasting peace and security. 2 Value Creation in the Product Development Process by James P. Chase Submitted to the Department of Aeronautics and Astronautics on December 21, 2001 in Partial Fulfillment of the Requirements for the Degree of Master of Science in Aeronautics and Astronautics ABSTRACT A framework for value creation in the product development process is proposed as an aid for visualizing and understanding value in complex processes and thus guiding resource allocation, process measurement, and process improvement. The framework is based on information received from a variety of industry site visits and stresses process value. It defines process value in product development as the approach of the enterprise in creating a desired product for the customer, continuing profit for the shareholder, and lifetime satisfaction for the employee. The four principal elements of the framework include tasks, resources, environment, and management. These elements are further divided into several levels of value attributes, affording a constructive view of value creation. Several sets of data provide observations on portions of the framework. An analysis of industry work breakdown structures revealed (i) tasks contribute markedly different types of value among programs, implying that no single definition of "the product development process" exists at a detailed level, (ii) lower level tasks contain more enabling activities, supporting the notion that improvement efforts should focus at a detailed level of the process, and (iii) programs transitioning to lean include more tasks emphasizing cost/schedule, advocating that companies should recognize cost/schedule more explicitly. A survey showed that engineers spend over 70% of their time on communication-related activities, suggesting that achieving effective communication should be a priority of process improvement efforts. Finally, programs using earned value management had greater consistency and fewer delayed tasks than programs which tracked task completion dates only. Thesis Supervisors: Edward M. Greitzer H.N. Slater Professor Department of Aeronautics and Astronautics Hugh L. McManus Principal Research Engineer Lean Aerospace Initiative John J. Deyst, Jr. Professor Department of Aeronautics and Astronautics 3 I expect to pass through life but once, if therefore there be any kindness I can show, or any good thing I can do to any fellow being, let me do it now, and not defer or neglect it, as I shall not pass this way again. – William Penn 4 ACKNOWLEDGEMENTS As suggested later in the thesis, graduate research is similar to the product development process. The core areas of tasks, resources, environment, and management were as critical in my research as they are in the product development process. This analogy helps to recognize the importance of others in the success of research. Resources, environment, and management are linked with faculty advisors, industry members, colleagues, friends, family and faith. Thus, the successful completion of this work is a testament to the many hours that others have contributed. I am grateful for these contributions and consider myself fortunate for having the opportunity to work with those listed here. I am especially thankful to my three advisors (Ed Greitzer, Hugh McManus, and John Deyst), Earll Murman, Simon Walter-Hansen, and the Lean Aerospace Initiative. Ed instilled a level of rigorousness that will follow me well beyond this research. Hugh provided considerable insight from his knowledge of lean practices. John is responsible for the consistent theme of risk reduction that pervades the thesis. Earll went well beyond his available time to provide advice on the research process. Simon donated many hours (and then some) to help with the online surveys. And, the Lean Aerospace Initiative (LAI) provided my research funding. LAI Faculty and Staff I would like to thank the many members of LAI who provided intellectual guidance. Kirk Bozdogan and Deborah Nightingale inspired the work on communication. Al Haggerty and Joyce Warmkessel offered insight on the management sections. Eric Rebentisch provided initial help on the research framework. Tom Shields “located” funding for my academic pilot study. And, Frances Meale and Robin Palazzolo’s weekly assistance was invaluable. Industry Members The participation of industry was an essential component of the research. Many industry members gave their time through interviews, surveys, and discussions. In particular, I am indebted to Adi Choudri, Ed Harmon, and Ed Peterson for their continued support and advice. Others also provided considerable time, including Jim Ayers, Bill Carrier, Sarah Hotaling, Mukesh Luhar, Russell Parker, George Reynolds, Kevin Smith, Kerry Sugimoto, Robert Tock, and Jeff Wessels. Finally, former colleagues, Josh Bernstein and Tyson Browning, successfully bridged the gap between industry and academia in their support of the research. Fellow Graduate Students My LAI colleagues were a source of inspiration and support. For example, I will never be able to appropriately reference the ideas contributed by Rob Dare, Rich Millard, and Alexis Stanke. I am also thankful to the members of my pilot study, including Sandra Kassin-Deardorff, Jacob Markish, Michelle McVey, Rhonda Salzman, Carissa Tudryn, and Mandy Vaughn. In sum, each of these colleagues, and now friends, contributed to a positive and memorable experience. Friends, Family, and Faith The expertise from LAI and industry means little, however, without a solid foundation of friends, family, and faith. In addition to those referenced above, I would like to give special thanks to 5 David Nistler for his review of several thesis chapters, Monica Herlofsky for her ideas on the communication survey, and Breanna Ahmad for the continued, yet always unexpected, deliveries of “high-calorie cuisine.” My parents (Claire and Pat) and sister (Jeanne) have contributed continual patience, guidance, help, and understanding. They have proven to be constant role models that I continue to look up to. Finally, God is ever present and ultimately my guide for past, present, and future work. 6 TABLE OF CONTENTS CHAPTER 1: INTRODUCTION AND EXECUTIVE SUMMARY.................................................................13 1.1 MOTIVATION AND PROBLEM STATEMENT..................................................................................................13 1.2 KEY QUESTIONS.........................................................................................................................................14 1.3 RESEARCH OVERVIEW ...............................................................................................................................14 1.4 SUMMARY OF THESIS CONTRIBUTIONS ......................................................................................................15 CHAPTER 2: THE LEAN PHILOSOPHY .........................................................................................................17 2.1 ORIGINS OF LEAN.......................................................................................................................................17 2.2 LEAN PRINCIPLES.......................................................................................................................................18 2.2.1 Specify Value....................................................................................................................................18 2.2.2 Identify the Value Stream.................................................................................................................20
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