Phase 2: Business Case Building — Setting the Criteria for Success

Pat Klingberg Idea-to-Launch, Machine Design

In There’s a Good Idea in There Somewhere! we explored the concept of idea discovery and generation as the first phase of the idea-to-launch (I2L) process for developing custom equipment that reduces or eliminates ‘blind waste’ in manufacturing.

In this installment, we’ll discuss the second phase — building a business case — of the multi-phase I2L process in more detail; exploring user’s needs and wants, design criteria decisions, concept testing, and planning the action steps in the development phase.

The Second Phase is the Most Critical

You’ve generated a list of ideas to “fix” the waste in your process. By the end of this phase, that list more than likely will be whittled down even further.

Remember, from the Booz, Allen & Hamilton study discussed in the previous article, less than 1/3 of the new product ideas made it into development. Why? The case for any or all of the ideas may not match the end user’s and business’ needs and wants.

Therefore, your team must thoroughly vet each idea.

“People don’t know what they want until you show it to them.”Steve Jobs

The very best companies are successful because they take every opportunity to obtain the “voice of the customer” from the study of the needs and wants, and to design (a) concept(s) based on those needs and wants, test those concepts with the end users, and then iterate all the way through to the installation.

What does this really mean?

It means that this phase is part research and part development.

This is because, as Steve Jobs said in many interviews, “People don’t know what they want until you show it to them.”1 In other words, ask many questions, build a concept, test the concept, and then revise. No matter what process methodology is employed (Stage-Gate, Agile, Waterfall, etc.) this rotating development process provides the best chance at finding the “right” solution.

You have all of these ideas.  Where do you start?

Building a Business Case

In a landmark study into the New Product Development process, Robert G. Cooper proposed that building a business case is the last of the upfront phases before serious development work begins.2 Each business case should define and justify the end product, and the provide an action plan through the development phase.

To truly evaluate each idea from Phase 1 give them the same course of actions. By doing so, many of the ideas will be rejected before the end of this process.

Each business case should include the following.


Phase 2 Gate

What happens if more than one idea reaches the end of this phase to be evaluated?

This is where the gate evaluators’ work really begins. This group has a tough decision to make — which project or projects are worthy enough to invest more time and money. Not only do the evaluators have to make a decision about the projects, but they also have to select the method of evaluation.

You may already have a decision tree for making other decisions within your business. You may even have a methodology that you use for new product development. Great! You are ahead of most.

If you don’t, here are some ideas that will help you design an evaluation process.

Keep in mind, you must consider the purposes and requirements of the gate before developing the process. There are four primary purposes of a gate:

  • Make a Go/Kill decision

    This seems obvious, but the toughest decision management needs to make is on those ideas or projects that are not winners. Too many ideas make it to the final phases without being evaluated fully.

  • Prioritization decision

    You may develop many ideas to solve a perceived problem, but some of these ideas may affect the company more than others do. Not all these ideas-turned-projects deserve the resource time or money, so they may be put into a master schedule to attack when prudent.

  • Act as quality control

    These evaluation points serve as the company’s opportunity to make sure the project is executed on time, on budget and with top quality.

  • Forward projection

    This is often as difficult as which project to move forward. This has to answer what is the path forward.

Beyond these four purposes, there are certain requirements that the team must bear in mind during these evaluations.

You have to remember that each decision is a tentative commitment to move forward in a systematic process. The project team has to perform and the ‘Go’ decision could be revoked at any time in the future.

The procedure used to evaluate the project must be robust enough to ‘Kill’ the projects that are not working early enough in the project’s life, but not too difficult that shutdown those that may be worthwhile, but are lacking direction or resources.

The decisions made during these evaluations are often made with uncertain information and incomplete financial data during the beginning phases. As the project proceeds the amount of valuable information increases so the evaluations become more thorough.

The criteria used to make the Go/Kill decision should align with the company’s objectives with respect to the individual projects. Not all of these may be quantifiable. They may not even be consistent from one to the other. Just know that with each decision point the information presented is more complete and that more and more stringent criteria will be used.

The method used to evaluate multiple projects must be realistic as well as easy to use. If the assumptions are simplified too much the information becomes invalid. For instance, it’s often assumed that resources can be shifted from one project to another without a loss in quality. Another assumption that must be tempered is the probability of project success. Too high and resources can be applied to projects when they are not warranted.

If the method is too difficult or intricate, the people doing the evaluation may not spend the appropriate time. The method must be easy to gather data and easily interpret the results.

For this type of project evaluation during the second phase there are two approaches that may be employed — benefit measurement and economics. Since economic data most likely will be imperfect at this stage, the benefit measurement approach concentrates on the characteristics of the project and compares them to the company’s objectives.

The economics method relies heavily on the economic data. The group would have to assess the reliability of the gathered data and weigh this pro-forma output against the company’s needs.

Now that you have selected a couple of outstanding possible solutions to eliminate the ‘blind waste,’ it’s time to roll up your sleeves and get to work. This next phase, which we’ll discuss in the next installment, is all about the design-build-test-iterate spiral.

OK, you’ve selected a couple of outstanding possible solutions to reduce or eliminate the ‘blind waste,’ what’s next?

It’s time to roll up your sleeves and get to work by entering the design-build-test-iterate spiral. The development phase is up next for discussion.

Each selected idea is further scrutinized by building a business case. This is what will be discussed in the next article.

  • Product Definition

    You may have a brief definition of the end product from developing the ideas in Phase 1.  However, in this phase, the product definition is more precise. It defines the following.

    • Exactly who the intended users are.
    • The benefits delivered by the custom machine.
    • List of features, attributes and requirements prioritized — or order of ‘must haves’ (needs) and ‘would like to haves’ (wants).

    Successful companies include not just the people that directly interact with the custom machine, but the entire supporting cast like the maintenance department and the area supervisor. They realize developing the best possible product requires meeting every user’s wants and needs.To ask the right questions of the right people, the group must understand:

    • How the company defines value?
    • How it defines what a benefit is?
    • What features and attributes will translate into values and benefits?

    Typically, value is derived from the benefits, and the benefits are from the features and physical attributes of the machine.If your group doesn’t know exactly how the company defines value, the following questions will help spark a discussion.

    • Does the company value time to market?
    • Does the company value effective use of worker’s time?
    • Does the company value short-term or long-term revenue impacts?

    Answering the following questions should determine the benefits that may provide the value the company wants.

    • Will this new machine reduce the total production time of the items being produced?
    • Will it increase the total available time for production?
    • Will it reduce maintenance time?

    Even though the product definition part of this phase is incredibly important, there are a number of shortcomings in many companies. Most companies don’t have a future plan for the custom machine or for the manufacturing department in general. Without an understanding of the impact to other areas or departments, there could be widespread issues that will need to be solved. Machine requirements are often developed without true user input. A manager may know what the company needs, but forgets that the operator needs to be able to operate the machine or even maintain it. Stakeholders may not understand the impact of design creep once a decision is made. Even having a lack of formal requirements for passing through this phase to development can have negative impact to the process. You want to leave this phase with a complete understanding of the requirements to be successful.

    Successful companies utilize the following tips and hints to overcome these shortcomings.

    1. Create an outline of the required key design decisions.
    2. Develop a written, structured questionnaire to provide completeness, consistency and a method of recording the answers. NOTE: Response bias may interfere with developing a well-written questionnaire.
    3. Test the questionnaire by answering the questions via a thought experiment. After answering the questions, ask yourself; can design decisions be made from these answers? If not, revise the questionnaire.
    4. All stakeholders must be present during the interview process, and be encouraged to be open and honest.
    5. While this custom machine is for a specific plant area, it can equally affect the upstream and downstream customers as much as its user(s). Therefore, it is essential to interview those upstream and downstream customers as well.

    Upon completion, you may have a good understanding of what the machine must do — and what the user(s) want from it. To gain a thorough understanding, use the answers from the questionnaire and develop a refined machine concept. Present this concept to the same group as before in order to gauge interest in the solution, and ask why the level is high or low. Ask questions to solicit what parts of the concept do they like the most and the least. Be prepared to discuss alternative concepts in order to compare their likes and dislikes to the alternatives as well as what they are currently using for a solution.

  • Justification

    The second part of this phase is all about answering the question “why.” Why should the company invest in this custom machine? Will it meet the needs of the company from a financial and risk standpoint?

    Financial data like cost of ownership, overhead costs, etc. may most likely be in error so don’t just use financial data to justify the machine. Make sure that it’s a strategic fit for the company.

    Does it provide a competitive advantage to the end customer?

    Does it allow for any synergies within the company?

  • Project Plan

    The third and final component of the business case lays out the action plan for the remaining phases of the project.

    This plan is usually in the form of a timeline or a critical path plan through to installation of the custom machine. It must include the resources — money, people, and equipment — needed to complete the project.

    Given uncertainties of future needs or events, a launch date is specified as well as the details of the development phase. Details such as activities, events, milestones, time line and resources needed for the phase. From that point forward, however, the plans from development to installation are often tentative.

1Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011. 567.
2Cooper, Robert G. Winning at New Products Accelerating the Process from Idea to Launch. 2nd ed. Cambridge, Mass.: Perseus Pub., 2001. 138.


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