Real Metrics to Drive Product Development: Using Real Earned Value to Manage Risk and Create Value (EX)
Traditional management approaches, typically applicable for repeatable, stable, and high-volume processes, backfire when applied to product development, which is non-linear, and based on processes involving collaborative control rather than on discrete transactions. A systems-modeling approach is better suited to non-deterministic processes, where clusters of activities are modeled at higher levels of abstraction. Less is known about how to evaluate the effectiveness of collaborative control-based business processes guiding product development. A general approach is to apply options methods from the financial markets to compute the Real Program Value (RPV), the true investment value of a development program. Real Earned Value (REV) provides a consistent evaluation method that focuses the team on the real value of product development efforts relative to current market conditions. It provides an objective methodology to build consensus and confidence. Note that the approach is not based directly on detail, but builds the level of confidence of the team by concentrating on the most relevant metrics – estimates of the cost-to-complete and of critical risks.
Keywords: Product development metrics, non-linear processes, collaborative control, systems modeling, risk assessment, control-points, iterative checkpoints, Real Program Value, RPV, Real Earned Value, REV, IBM Rational Unified Process, RUP