[3] The Opportunity

Experience demonstrates that the rate, at which projects are completed today by product development organizations, is no more than 50% of what that rate could be. Evidence that supports this hypothesis is provided by Figure 1, below, which presents the performance data supplied by Confluence, a software development company located in Pittsburgh.

The vertical axis of the figure below denotes project duration, measured in business days. The horizontal axis of the figure shows simply the calendar for the years 2000 through 2003. Confluence reports that during the year 2000 and during most of 2001, before that company’s implementation of the Theory of Constraints Multi-Project Management Method, the average duration of the company’s projects was 140 business days. After the company’s implementation of the Theory of Constraints Multi-Project Management Method, the average duration of the company’s projects was reduced to 43 days. This indicates a tremendous increase in the project throughput provided by the company’s resources. The nature and scope of the company’s projects did not change throughout this period. In addition, Confluence maintained a constant workforce throughout the entire period indicated in Figure 1. Indeed, today Kirk Botula, the company’s Chief Operating Officer, reports that during the implementation period his company actually lost a few of its developers.




Confluence is but one of a number of organizations that report noteworthy gains in speed within their product development operations or similar multi-project operations (such as IT), as a result of streamlining the logistics (flow of work) during project execution. These organizations include Lucent Technologies Optical Cable Systems[i], Hampton Conservatories Ltd[ii], LSI Logic’s Design Technology Development Group[iii], Pharmacia Drug Development and Clinical Trials Division[iv], Seagate Technologies – Hard Disk Drives Division[v], and the United States Air Force[vi].

The reports from Confluence and the numerous others suggest a significant opportunity for greatly increasing the speed of project execution, for the programs funded by the government. It is my hypothesis that these successes can be duplicated within the defense sector, provided the right changes are made first by the related government organizations and subsequently by the contractor organizations. Therefore, it remains for us to determine how the specific steps, with which Confluence changed its management methods and operations, can be duplicated in the defense sector.

Acting on the advice of the Product Development Institute, the leadership team of Confluence took the following actions:

1) The leadership team created (and uses to this day) a process with which all projects were prioritized and sequenced.

2) The leadership team required the use of an effective project planning process (Robust Project Planning) with which the logistics of individual projects could be optimized up front.

3) The leadership team eliminated the earlier measurements of individual performance and project -schedule performance, replacing these instead with real-time estimates of the risk that the company’s projects might overrun their commitment dates. This was a more advanced version of the practice known as buffer management.

Any one of these steps, by itself, might have provided some minor improvement. It is my opinion that the revolutionary performance increase demonstrated by Confluence is attributable largely to an interaction among all three steps. To be sure, the full implementation involved a number of additional changes at all levels of the organization. But these three steps were the senior management actions that caused the day-to-day decisions and behaviors of middle managers and of resources to change and consequently to improve significantly the schedule performance of all projects.

This brings us to the question at hand. While all the other minor changes undertaken by the personnel of Confluence can be implemented readily by the corresponding personnel of any defense contractor, can these three enabling steps, which were undertaken by the leadership team of Confluence, also be applied to the product development operations of defense contractors? At first, the answer would appear to be “yes.” However, there exist two significant obstacles to achieving this objective. These obstacles are the subject of the next article.

Footnotes:

[i] William Baron, Management Roundtable, Executive Summit with Dr. E. M. Goldratt, April, 2000. Baron’s business developed new leading edge optical cables for telecom industry. For Premise Cable products - 100% of projects completed on-time (Compared to 40% before); 8 projects completed before 50/50 points and New Product Introduction (NPI) lead times reduced 50%. For outside cables - NPI lead times reduced 50% and tripled development capacity (16 projects vs. 5 before, with no staff increase).
[ii] Michael Dinham, TOC Reference Bank (toc-goldratt.com), 2002. Hampton Conservatories Ltd. designs, manufactures and installs high end custom hard wood conservatories for the commercial and domestic markets. Long lead times and poor due date performance were blocking the company’s growth. Improved the due date performance from 60% to 90% while reducing overall project lead times by over 50%. Throughput increased nearly 100%, while projects in progress dropped from 10 to 3. Project completion dates are now highly predictable and quality is also improved significantly.

[iii] Management Round Table Symposium hosted by IBM Global Services, March 2002. LSI Logic’s Design Technology Development Group has a few hundred engineers, producing technologies for designing chips. These technologies have to be available on promised dates so that the company can meet customer requirements. Over 90% of projects in the library development group now finish within 2 weeks of planned dates. Throughput has also increased by more than 10%, despite reduction in total number of resources due to reorganization.

[iv] Management Round Table Symposium hosted by IBM Global Services, March 2002. Pharmacia implemented the Critical Chain method within the clinical supplies area, a small but vital link in the drug development process. In a very short time, lead time was reduced over 60%, due-date delivery improved to over 90% and throughput increased. Package rate was increased from 20 per month to 50 per month (a throughput increase of over150%).

[v] TOC World Conference, 2000. Seagate Technologies – Hard Disk Drives Division, with the guidance of the team from AGI, the Core Team working on the Cheetah X-15 disk drive project beat their target date by nearly five weeks! Five weeks in their industry is extremely valuable. A 1997 internal case study done at Seagate showed that when the company lagged its competition by just one quarter, Seagate missed $500 million in incremental revenue opportunity and about $200 million in gross margin. The Cheetah X-15 was the first 15,000 rpm disk drive to ever hit the market. All of Seagate’s competitors dropped out due to technological challenges or being late to market.

[vi] Bob Casey, David K. Christ, Jim Pitstick, TOC World Conference 2001. “Scrap and rework on the F-22 fighter program has been remarkably lower than any previous fighter program. The F-22 is meeting and exceeding its testing and affordability goals.” These results were presented by Bob Casey (F-22 Weapons System Integration and Test, Lockheed Martin Aero), David K. Christ (F-22 Manufacturing Plans, The Boeing Company), and Jim Pitstick (Industrial Engineer, F-22 Special Program Office) at TOC World® 2001.