Question

Imagine a market research project (say a manufacturing company intends to know customer response about a new product to be launched). Create the WBSs up to first level of breakdown. Work out sequence of activities and estimate time duration of each activity. Based upon your estimation, prepare schedule of the project by CPM Method as well as PERT method.

Answer 1

New product development is one of the most important value-creating processes in every industry. New products create interest, excitement and new business opportunities by providing customers with better, more convenient or lower priced ways to fulfil their needs. Many believe that distributors and suppliers working together as allies can both reduce the costs of product development and introduction and, more importantly, develop more and better products than those that are being produced today. If the world was stable, there would be no need to change business operation and methods, or to understand what has changed and what works well. However, firms operate in dynamic environments, not stable ones. In response, management processes must also change over time so that firms can remain effective and profitable through this changing situation. Some of the changes in business with the potential to impact   the   ways   in   which   new   product development is practiced and managed include:

1. Increased levels of competition;

2. Rapidly   changing   market   environments;  

3. Higher rates of technical obsolescence;

4. Shorter product life cycles.

A primary impact of these environmental changes is   to implement changes which help speed products through development, and improve process efficiency and overall new product development effectiveness. The Model of the Product Development and Management Association (PDMA) wants to create   and   disseminate   knowledge   about managing   and   improving   new   product development. Best research practices wish to:

- determine the current status of product development practices and performance;

- understand how product development has changed from five years ago;

- determine whether differences exist in new product development practice or performance across industry segments;

- investigate process and product development tools which differentiate the success on product development

Project Management on New Product

Work Breakdown Structure (WBS)

New product processes essentially turns an opportunity (a real start) into a profit flow (a real finish). It begins with something that is not a product (the opportunity) and ends up with another thing that is not a product (the profit). The basics stages are:   

Phase    1:    Opportunity    Identification: Marketing    planning;    Corporate    planningOpportunity analysis   

Phase 2: Concept generation: Idea screening;Concept statement        

Phase 3: Concept/project evaluation: Concept testing; Concept screening; Protocol concept

Phase 4: Development: Allocate resources; Prototype   concept;Batch   concept;   Process concept;   Piloting   concept;   Comprehensive business analysis   

Phases 5: Launch/Commercialization: Test the market; Evaluate the market;Make a public announcement; Assess concept success

WBS is a tree structure that captures all project activities in an organized manner. Large, complex organized and understood projects are divided into pieces of increasingly smaller size until they become a collection of "work packages" which may include a set number of tasks

Critical Path Method (CPM)

It is an algorithm for planning, managing and analyzing the timing of a project. The step-by-step CPM system helps to identify critical and non-critical tasks from projects' start to completion and prevents temporary risks

Step 1: Specify Each Activity
Using the work breakdown structure, you need to identify each activity (or task) involved in the project. This activity specification list should only include higher-level activities. When detailed activities are used, the critical path analysis may become too complex to manage and maintain.
A work breakdown structure breaks down projects into manageable sections.

The first step is to identify the main deliverables of a project. Then you can start breaking down the high-level activities into smaller chunks of work.

Step 2: Establish Dependencies

Some activities will depend on the completion of others. Listing the immediate predecessors of each activity will help you identify the correct order. To correctly identify activities and their precedence, ask yourself these three questions for each activity on your list from step one:

    Which task should take place before this task happens?
    Which tasks should be finished at the same time as this task?
    Which tasks should happen right after this task?

Step 3: Draw the Network Diagram

Once you have identified the activities and their dependencies, you can draw the critical path analysis chart (CPA), known as the network diagram. The network diagram is a visual representation of the order of your activities based on dependencies.

This critical path diagram used to be drawn by-hand, but there are now software programs that can create this diagram for you.

Step 4: Estimate Activity Completion Time

Using past experience or the knowledge of an experienced team member, you must now estimate the time required to complete each activity. If you are managing a smaller project, you will most likely estimate time in days. If you are working with a complex project, you may have to measure time in weeks.

If you don’t feel comfortable using your best-guess estimates, you can use the 3-point estimation method, which is designed to put more weight on the most realistic timeframe.

In three-point estimation, you must come up with three time estimates for every task, based on prior experience or best guesses. The estimation method is presented in formulas in order to calculate the time duration more accurately.

a = the best-case estimate
m = the most likely estimate
b = the worst-case estimate

These three values identify what happens in an optimal state, what is the most likely, and what happens in the worst case scenario.

Once you’ve identified these values, you can use them in two different formulas. The first is used to find the Weighted Average, which puts more weight on the “Most Likely” value. The formula is as below. E stands for Estimate, and the 4 and 6 represent the standard method to place more weight on the most realistic value.

E = (a + 4m + b) / 6

The second way of using these values is known as Triangular Distribution. The main difference is that this method doesn’t put more weight on the “Most Likely” value. The formula is as below. E stands for Estimate, and the 3 represents the standard method.

E = (a + m + b)/3

Step 5: Identify the Critical Path (Fig2)

There are two ways you can now identify the critical path. You can eyeball your network diagram and simply identify the longest path throughout the network -- the longest sequence of activities on the path. Be sure to look for the longest path in terms of longest duration in days, not the path with the most boxes or nodes.

You can also identify critical activities with the Forward Pass/Backward Pass technique, identifying the earliest start and finish times, and the latest start and finish times for each activity.

If you have multiple critical paths, you will run into network sensitivity. A project schedule is considered sensitive if the critical path is likely to change once the project begins. The more critical paths in a project, the higher the probability of a change in schedule.

Step 6: Update the Critical Path Diagram to Show Progress
As the project progresses, you will learn the actual activity completion times. The network diagram can then be updated to include this information (rather than continuing to use estimations).

By updating the network diagram as new information emerges, you may recalculate a different critical path. You will also have a more realistic view of the project completion due date and will be able to tell if you are on track or falling behind.

PERT Estimation Technique

PERT (Program Evaluation Review Technique) is an estimation technique which was first developed and applied by United States Defence establishment for their Ballistic Missile development program. It was one of their most ambitious programs. Completion of this in time, ahead of the other nations was critical for them. Such missile development program was filled with huge amount of uncertainty, as it required large number supplier agencies working on new technology development. This method of estimation which helped them build-in all the uncertainties in their estimates and helped them to complete this program ahead of their expected schedule.

PERT uses a three point estimation approach for a task. Any task filled with uncertainties can have a wide range of estimate in which the task actually will get completed. Uncertainties include both favourable conditions (opportunities) as well as unfavourable conditions (threats).

PERT includes statistical analysis.

The 3 points of estimates are as below:

    Optimistic estimate – Estimate when all favourable things will happen (all opportunities happen and no threats take place)
    Pessimistic estimate – Estimate when all unfavourable conditions happen (all threats happen and no opportunities take place)
    Most Likely estimate – Estimate when both favourable and unfavourable conditions will happen

For example, if we think about a task which involves travelling in a crowded city from a specific location in the city to the airport. Actual time taken will depend upon the traffic condition on the road.

This may take optimistically 30 minutes, pessimistically 90 minutes and most likely 60 minutes. So the range in which the travel time will fall is 30 minutes to 90 minutes.

An average expected estimate is calculated by taking a weighted average of these 3 points of estimates using below formula:

    E (Mean PERT Average) = (O+4ML+P)/6   (by giving more weightage to most likely estimate)
    Standard Deviation (SD) = (P-O)/6

Actual time taken to travel will be anything within this range with the most likely duration as 60 minutes. PERT allows applying statistical concepts to study the probabilities of completing the tasks in a particular estimate range.

Assuming that the mean is exactly in the middle, and assuming the actual estimates will follow a normal distribution within the extreme range of optimistic and pessimistic estimates, we can predict the following probabilities of completing the task in certain range of time as below:

    Mean +/- 1 Standard Deviation range – Probability is 68.4%
    Mean +/- 2 Standard Deviation range – Probability is 95.5%
    Mean +/- 3 Standard Deviation range – Probability is 99.7%

PERT estimation technique will be a practical approach for estimating when the tasks on hand are filled with uncertainties, where the tasks may take up different estimates depending upon certain conditions. Actual estimate is dependent on certain variables. PERT allows preparing a more practical estimate by factoring the 3 point estimates into one as explained above.