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Pipeline Physics

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Pipeline Physics produces profit
Gary Summers, PhD 1700 University Blvd, #936
President, Pipeline Physics LLC Round Rock, TX 78665-8016
gary.summers@PipelinePhysics.com 503-332-4095

Fuzzy Front-End Analysis

The equation for filling product development with high-value projects is:

Good Choices + Good Choosing = Profitable Projects

You can evaluate the fuzzy front-end of your company's product development by answering two questions:

Data analysis techniques can answer these questions.

Some concepts help to illustrate the results of the analysis. Define a high-value project as one that produces outstanding results after launch. Suppose 35% of your company's product development projects produce high value. How did this result arise?

One possibility is that 20% of your project proposals had high value, and by careful evaluation and selection, you boosted the percentage to 35%. The fraction of proposals for high-value projects is called the base rate, and the increase from project selection is called the boost. Answering the above questions requires estimating the base rate (quality of choices) and the boost (quality of choosing).

The base rate arises from ideation. To get a higher base rate, you need more high-value ideas and fewer average ones. The boost results from project evaluation and selection. To suggest the impact of selection, Figure 1 presents the rankings of proposals, where yellow represents high-value projects, and black represents average projects.

Perfect, realistic and random ranking of projects

Figure 1: A ranking of projects within a category, such as radical or incremental innovation. Yellow represents high-value projects, while black represents average projects (or worse). In this example, 50% of projects offer high value. The rankings on the left, middle, and right represent perfect, realistic, and random rankings.

Figure 2 integrates all the concepts. Consider the red curve. If all proposals become product development projects (no selection), 20% of development projects offer high value. This percentage is the base rate. If you select only a percentage of the projects (funding top-down), throughput falls, but the faction of development projects with high values increases. Unfortunately, the boost is small because project evaluations are poor. The green curve shows the impact of better project evaluations. Being selective gives a greater boost. The blue curve shows the impact of better evaluations (bigger boost) and better ideas (higher base rate). Notice two qualities: