High-Level Requirements and Life Cycle Costs management for development of complex products

Motivation:

Let's say, you've led the development of a complex product and, once it's delivered to your customers, it is plagued with high maintenance costs, for several reasons (e.g. issues with pricing, durability, reliability, and so on). Bad reputation is spreading across the market. Orders and revenue are at risk, so you think: what should I have done to prevent this? What will I do in my next product development?

It is widely accepted that Life Cycle Costs (LCC) are key for product competitiveness in terms of operating costs and overall business performance. However, LCC management in product development is often neglected due its multifaceted nature and inherent complexity.

This article is about how to set high-level requirements for Life Cycle Costs (LCC) management during development of complex products. 

Context: 

5 weeks ago, I started a series of posts at LinkedIn with provocative questions and some knowledge sharing on "LCC management during development of complex products". I have accumulated experience and expertise in the subject over 17+ years working for top Aviation & Aerospace OEMs. This article is a summary of the first 4 posts of the series.

Scope:

Let me clarify. When I say "LCC", I broadly mean all spending aspects in real-life operation of a complex product. Let's take a commercial aircraft as an example: it includes Direct Maintenance Costs, Indirect Operating Costs, Reliability, Availability, Maintainability, Spare Parts Investment, Maintenance Services etc., and other operating costs that can be affected in trade studies and decision-making, such as Fuel Consumption, Residual Values, Production Costs etc.

The Multidisciplinarity of LCC Management

LCC management in product development is often neglected due its multifaceted nature: LCC not only depends on technical features of the product, but is also affected by commercial conditions and contracts. Moreover, it is key for other business fronts, such as after-sales services. Therefore, proper LCC management in development of complex products is a multidisciplinary work that demands systemic planning and actions along the WBS branches of your project. See Figure 1.

(Figure 1)

High-Level Requirements and LCC Management

LCC management must start with the right set of requirements. A senior engineer told me once that "gasoline makes a car move, and requirements do the same with Engineering work".

As a reference, PMBOK (from Project Management Institute) suggests several tools and techniques that can support us in the definition of a requirements document. Personally, I think that not all of them are applicable to LCC scope, and analytical methods (e.g. cost modeling) are essential for such task.

Information collection for the creation of a recommended list of LCC-related requirements varies from industry to industry. Is there anything missing in Figure 2? Feel free to add your comment.

(Figure 2)

When we set a list of requirements, there must be a hierarchy in terms of relevance and scope. High Level Requirements (HLR) are the top, broader ones that match what the customer needs in general. LCC-related HLRs are not independent from other HLRs, as they also are fundamental to customer satisfaction and business success.

Product Strategy and LCC-related HLRs

Contents of LCC-related HLRs will vary according to the type of product and industry. Anyway, there are key aspects to be checked during HLR definition. I listed some of them in Figure 3. Generally speaking, it's about how competitive you need to be in terms of LCC for your product to be successful. Product positioning tools have to address LCC as a main KPI for the success of your product. Additionally, your LCC-related HLRs will need to be deployed / broken down into lower-level requirements soon.

(Figure 3)

Of course, there is more work before and around it: Market Research and Analysis, Product Strategy, Preliminary Design and so on. Anyway, setting HLRs is the kind of work that is done hand-in-hand with Sales and Marketing teams.

Figure 4 has a few more insights and checkpoints on how Product Positioning and Strategy interact with LCC-related High Level Requirements (HLR).

(Figure 4)

Although you must keep customers in mind all the time, you also need to understand/address, in terms of LCC, at least:

• Who are your competitors, and how well they perform;
• How is customers' perception about you, competitors, suppliers, service providers, new entrants and parallel businesses (i.e. potential competitors);
• What are the acceptable/desired/latent business practices and LCC levels in the industry. New technologies and solutions deserve special attention, as they tend to change the level-playing field.

Is there anything missing? Can you share any lesson learned in your past projects?

We know that LCC management in development of complex products is not supposed to stop at the issuance of HLRs. Soon I will publish another article following this one. Stay tuned!