MANGING RISK IN PRODUCT DEVELOPMENT

1. Introduction:i. Risk

The chance or probability of losing is a commonly used metric to measure risk. Risk may be considered as an outcome that is not desirable or negative.ii. Managing risks effectively is important in product development.iii. Development Cycle time and Riskiv. Minimizing risks is a very important trait of entrepreneurs.v. Successful product development teams define risks and confine them

2. KINDS OF RISKS

i. Technical Riskii. Market Risk

iii. Financial Risk

3. Technical Risk

Could be due to any one or all of the following

• Technology failing to perform as expected

• Product cost getting higher than expected

• Unanticipated side effects

4. Market Risk

Inadequate market research

Poorly written product specifications

Unclear customer desires and expectations

Emerging /Competing products

5. Financial Risk

• Not Enough development funds

• Revenue not as projected

• Profit margins not as projected

• ROR not as anticipated

6. TECHNIQUES FOR CONTROLLING RISK

• Keep it simple. Software programs are not panacea for handling risks.

• Use standard and proven parts. • Do your homework.• Have a technology development plan.• Be proactive rather being reactive.• Have a better risk-control system by having high risk - areas highly

visible.• Do not shoot the messenger.• Work on resolving both market and technical risks concurrently but

independently.• Do a feasibility study for developing contingency plans.• Develop a physical model if at all feasible.

Continued

6. TECHNIQUES FOR CONTROLLING RISKS- (contd.)

• Make use of rapid prototyping technology to the fullest extend.• Three-dimensional models help to get quality feed back from

customers.• Build more than one model if there are two ideas.• Test from the lowest level like the component level.

7. RISK ASSESSMENT AND RISK PRIORITY NUMBER(RPN)

• Risk Assessment is concerned with identifying potential risks in a product development project and developing contingency plans to mitigate risks.

• Recognizing potential risks and developing fall back plans is definitely a very smart business.

• Risk Priority Number is a metric used to assess the risk of a failure mode.

RPN = S. O. D

where S- Severity rating (1-10)

O- Occurrence rating (1-10 )

D – Detection rating(1-10)

The lower the RPN, the smaller is the risk.

8. RISK ANALYSIS• Eliminate or reduce risks as far as possible (inherently safe design and

construction). • Protect products, operators and end-users against risks resulting from the

influence of environmental conditions that are reasonably foreseeable.• When possible, integrate protective measures into the design to mitigate

unavoidable risks. • Inform users of any risks due to any shortcomings of the protective

measures. • Clearly define the product's intended use in the product's labeling, manuals

and other instructions. • Document the process of determining what risks were considered to be

"reasonably foreseeable." • Seek assistance from a third-party test laboratory with expertise in risk

analysis, if needed. • Use technical consensus standards - not those developed by a non-

recognized agency - to verify that the identified risks have been minimized

during the design phase, if possible.

2. The Effect of Risk in Introducing New Products