“Guide” very well received by systems engineering community

My Guide to Lean Enablers for Managing Engineering Programs was presented last week at the 2012 Annual INCOSE Symposium. It is a pleasure to report that it was very well received by the community. INCOSE President John Thomas hailed it as a “strong leadership piece” in his welcoming speech at the Joint Leadership Meeting. Gary Roedler, Chair of INCOSE’s Corporate Advisory Board, referred to it as an excellent result of the INCOSE-PMI-MIT collaboration and something that INCOSE should be doing more of. I was obviously very pleased by these kind and encouraging words. And after Terence Cooke-Davies held up and praised the Guide during his keynote speech, the remaining hardcopies provided by PMI were gone in a few minutes.

For everyone who was not able to score a hardcopy, there are still plenty of copies available for download.

I am also pleased to report that I was elected during the symposium as one of the co-chairs of INCOSE’s Lean Systems Engineering Working Group.

Guide to Lean Enablers for Managing Engineering Programs

Download the "Guide"

The “Guide to Lean Enablers for Managing Engineering Programs” has been officially published today by PMI, INCOSE and MIT’s Lean Advancement Initiative. It can be downloaded here (7.9MB) from MIT’s online library.

The publication is also announced by a joint press releases from LAIPMI, and INCOSE.

For more information and to join the mailing list of the Joint INCOSE-PMI-MIT Lean in Program Management Community of Practice, please visit http://www.lean-program-management.org.

Edited by Dr. Josef Oehmen, the “Guide” summarizes the findings of the Joint MIT‐PMI‐INCOSE Lean in Program Management Community of Practice that are based on a 1‐year project executed during 2011 and 2012. The community was made up of selected subject matter experts from industry, government, and academia. The findings reported in this guide are based on known best practices from the literature, program experience of the subject matter experts, and input from an extensive community of professionals.

The findings of the Joint Community of Practice were extensively validated through community and practitioner feedback, multiple workshops at INCOSE and PMI conferences, LAI‐hosted web‐based meetings, and surveys of the extended professional community. The survey results clearly show that programs that use the Lean Enablers show a significantly stronger performance in all dimensions—from cost, to schedule and quality, as well as stakeholder satisfaction.

The core of this document contains (1) the 10 themes for major engineering program management challenges, and (2) the 43 Lean Enablers with 286 subenablers to overcome these challenges, better integrate program management and systems engineering, and lead engineering programs to excellence.

The main engineering program management challenges that were identified and addressed By Lean Enablers in this guide are: 1. Firefighting—Reactive program execution; 2. Unstable, unclear, and incomplete requirements; 3. Insufficient alignment and coordination of the extended enterprise; 4. Processes are locally optimized and not integrated for the entire enterprise; 5. Unclear roles, responsibilities, and accountability; 6. Mismanagement of program culture, team competency, and knowledge; 7. Insufficient program planning; 8. Improper metrics, metric systems, and KPIs; 9. Lack of proactive program risk management; and 10. Poor program acquisition and contracting practices

The 43 Lean Enablers (LE) and 286 subenablers for Managing Engineering Programs—actionable best practices— are summarized in six categories that represent the six Lean Principles (LP): LE 1.x: Respect the people in your program (LP6); LE 2.x: Capture the value defined by the key customer stakeholders (LP1); LE 3.x: Map the value stream and eliminate waste (LP2); LE 4.x: Flow the work through planned and streamlined processes (LP3); LE 5.x: Let customer stakeholders pull value (LP4); and LE 6.x: Pursue perfection in all processes.

In the news, again

PMI’s magazine PM Network is running a featured article in its current issue on the collaboration between MIT, PMI and INCOSE that I started last year. It talks about the collaboration, as well as about our “Year 1” deliverable, the Guide to Lean Enablers for Managing Engineering Programs. The guide will be available shortly. You can find additional information on the PMI website dedicated to the collaboration, or on the website of the joint community of practice.

In the news

I visited CEAGA last week, an automotive cluster in Galicia, Spain, and member of the LAI industry consortium. The local industry is strong in Lean production, but wants to move beyond that into Lean product development to increase their global competitiveness. I gave several presentations and a workshop that were covered in the economics’ section of Faro de Vigo.

Appointment as Visiting Professor at the Technical University of Munich

I am honored to have been appointed as the “TÜV Süd Foundation Visiting Professor” for 2012 at the Technical University of Munich (TUM). According to the TU Munich, the title is awarded “to an outstanding scientist or engineer” each year. I will be working closely with the Institute for Advanced Studies at TUM, as well as the Chair for Product Development the Department for Mechanical Engineering, and plan on spending three month in Munich later this year. The focus of my work will be on risk management in the product development process.

Guide to Lean Enablers for Managing Engineering Programs

About a year ago, I started the joint MIT-PMI-INCOSE Working Group on Lean in Program Management that I have been running since. The 1-year deliverable of our group, the Guide to Lean Enablers for Managing Engineering Programs, is on track and scheduled to be published end of May. Version 1.0 has been submitted for copy-editing. The official “launch” will be at the PMI EMEA Congress, May 6-9, in Marseille, France. It will simultaneously be published as an “INCOSE Technical Data” document. The review process to publish it as an “INCOSE Technical Product” in the summer at the INCOSE Symposium in Rome is currently under way.

As a sneak preview, here is a copy of the table of contents.

Check here for the latest information on the publication of the Guide.

DAU 2012 Research Competition Winner

My student Major Sean Dorey (USAF), colleague Ricardo Valerdi and I were just announced as the winners of the 2012 Research Competition of the Defense Acquisition University for  research Sean conducted last year under my supervision at LAI.

The award-winning paper that Sean co-authored with me and Ricardo Valerdi is titled “Enhancing cost realism through risk-driven contracting: Designing incentives fees based on probabilistic cost estimates”. You can download it here.

The research tackles one of the most persistent problems in managing large-scale engineering programs: How do you design monetary incentive structures that drive the right contractor behavior, without exposing them to unacceptable risk?

Simply speaking, the government has two main options: “Cost plus” contracts are pay-as-you-go contracts, where contractors bill engineering hours to the government. The government thus assumes all risks, mostly cost overrun risks, and the contractor is not necessarily incentivized for maximum efficiency and effectiveness. On the other extreme, in “fixed price contracts”, a specific deliverable is defined and a fixed amount of money paid. Now the contractor assumes all risks.

Both contract types are not ideal, as you want to create strong performance incentives, without exposing contractors to undue risks outside of their control. Excessive use of cost-plus contracts leads to large cost overruns, whereas excessive use of fixed price contracts would lead to an extreme risk aversion that would stifle innovation.

Sean’s approach takes two probability distributions as starting points for designing contracts that create the right mix of incentives and risk-balancing: a cost-probability distribution for the planned engineering program, as well as a fair profit probability distribution.

Developing cost probability distributions is a mature field that, with sufficient care, yields high quality results today.

Deriving fair profit probability distributions is even easier –  look for example at rates of return of comparable companies and industries on the Dow Jones.

Sean’s contracting method now links the cost probability distribution to the profit probability distribution by an incentive fee curve: An incentive fee is designed that links each cost probability with its corresponding profit probability. If the 80th percentile cost for example is $100 million, and the 80th percentile profit (from high to low margin) is 1%, the incentive fee (or profit) for reaching $100 million cost is $1 million. If the contractor reaches the hypothetical 50th percentile cost of $90 million, and the 50th percentile profit is 6%, the incentive fee for achieving this level of performance would $5.4 million.

This method resolves several challenges:

  • It eliminates the “risk of wishful thinking” during contracting, where contractors might be inclined to low-ball cost estimates to win contracts, and make up the difference with change orders.
  • As these estimates would form the basis for the incentive fee and already include (some) risk of changing requirements, the higher the estimate, the more favorable the contract, but the less likely the chance to win it – a balancing feedback loop that creates an incentive to be as accurate as possible in the cost estimate.

Congratulations to Sean for a job well done!

INCOSE Award

I received the 2011 INCOSE Working Group Award for the collaborative work between LAI, PMI and INCOSE that I organized and lead during the past year.

The “Lean in Program Management Community of Practice” has been hard at work to develop concrete recommendations on how to improve the management of large-scale engineering programs. It draws on three major knowledge areas: lean management, program management and systems engineering. We are currently writing up our final report, which will be circulated for peer review within the next weeks. Read more about the group on our website.

The award was presented during the Opening Plenary at the 2012 INCOSE International Workshop on Saturday, January 21, in Jacksonville, Florida.

Whitepaper on Program Management released

I just finished up a Whitepaper on Program Management that summarizes 15 years of research at MIT’s Lean Advancement Initiative.

It focuses primarily on large-scale engineering programs, but provides some level of guidance for other types of programs as well (e.g. business change or public service programs). The focus is on the early life cycle aspects, up to the start of production.

The whitepaper consists of an introductory and overview section that discusses several program management approaches, and then continues to summarize the result of about 120 research papers in four major areas:

  1. Program execution and enterprise management
  2. Planning, bidding and contracting
  3. Technology Development and Integration
  4. Product Development and Systems Engineering

Please have a look, and get back to me with your feedback!

Journal Paper of the Year Award

My paper on some of my earlier work on Supplier Codes of Conduct has received the 2010 Best Paper Award by the journal that it published, Product Planning & Control (PPC, Taylor & Francis).

Thanks to the award, the paper is now freely available on the publisher’s website (click here). The paper also is one of the top 5 most read at PPC.

In his announcement of the award,  editor Stephen Childe writes:

“Each year I invite nominations from the members ofthe editorial board for good papers that reflect the interests of PPC in terms of addressing the real current needs of industry and developing applicable useful new knowledge based on research in real companies. […]

The paper selected this year draws our attention to the wider responsibilities of operations managers in dealing with the ethical side of supply chain relationships.

The Best Paper Award for Volume 21, 2010, goes to ‘Supplier code of conduct – state-of-the-art and customisation in the electronics industry’ by Josef Oehmen, Mikko De Nardo, Paul Schönsleben and Roman Boutellier (No. 7, pp 664–679). This paper looks at the details of the ‘codes of conduct’ used to guide and manage relationships with suppliers in a sample of companies in the electronics industry. The researchers go on to develop a way to customise a supplier code of conduct, using an Action Research approach in a company.

The paper reminds us of the need to manage to the strategic and relationship issues that go with operations management, apart from the quantifiable stocks and flows of everyday production.”

Thank you, PPC!