More on the design factory
Posted March 14, 2005 in miscReinertsen’s simple economic model is based on four drivers:
- Development expense
- Unit cost
- Product performance
- Schedule
From a life-cycle Profit and Loss statement you can work out the economic impact of failing to achieve the different drivers, i.e. is it worth delaying the project for a month to include this feature?
- More expensive means more complex than expected, which means higher support costs.
- Higher unit cost means…higher unit cost.
- Worse performance means lower unit volume or lower sales price.
- Schedule delay impact depends on the market type (monopoly, etc).
Another model he proposes is the “Application Economic Model” which tries to understand how product attributes affect customer economics. The outcome are rules like “if we increase the purchase price by x, but we manage to decrease downtime to y, it’s still worth it for the customer”.
His milestones look similar to this:
- Could start
- Really start
- Ship
- Break Even
- Total success
And his phases:
- Fuzzy Front End
- Development Cycle
- Time To Volume
On top of that:
- BET: From Start to Break even
- BEAR: From Ship to Break Even
From the development point of view he talks about the “Project Control Triangle” :
- Scope (Cost and Performance)
- Resources
- Schedule
Variablity means you can only choose which on will be variable.