Proactive Risk Management: Controlling Uncertainty in Product Development
A complete how-to guide for managing risk in product development and other projects. Covers both project risk management methodology and critical implementation details in real organizations. Risk management is a critical element in reducing time to market.
Proactive Risk Management: Controlling Uncertainty in Product Development, by Preston G. Smith and Guy M. Merritt, Productivity Press, 2002 (June), 246 pages.
(from the back cover)
Proactive Risk Management provides product development teams and managers with a step-by-step process for managing innovation risk in an effective cross-functional manner. In addition to providing a formula, this book illuminates the rationale of managing project risks allowing project and product development managers to successfully adapt the process to their organizations and projects.
Proactive Risk Management’s unique approach provides:
- A model of risk that is scalable to any size project or program and easily deployable as the risk management approach built into any product development or project management life cycle.
- Methods for identifying drivers (causes) of risks so you can manage root causes rather than the symptoms of risks.
- An appropriate quantification of the key factors of a risk that allows you to prioritize risks without introducing errors that render your numbers meaningless.
- A clear distinction between a risk and an issue and the different types of management they require.
- A vast array of supporting tools and strategies that support implementation of an effective project risk management program.
- Guidance on identifying and overcoming the organizational and cultural impediments that can block implementation of your risk management program.
Proactive Risk Management stands apart from much of the literature on project risk management in its practical, easy-to-use, fact-based approach to managing all of the risks associated with a project. The depth of actual how-to information and techniques provided here is not available anywhere else.
Witnessing teams develop new products, we have often been astonished to see “surprises” (that is, problems) pop up late in the project—which in fact should have come as no surprise at all. Indeed, in some cases, the very same problems had arisen before in other projects. In others, someone involved with the project suspected early on that a problem might occur, but no action was taken. (And such suspicions often remain entirely unspoken.) The developers fully intended to address a potential problem, but either a lack of time or a focus on other priorities prevented that from happening, and so that problem did not rise to a critical level of importance until it was too late.
Over the past decade, project management has become more sophisticated but no less amazing to observe. Most firms now use some variation of a stage gate product development process. Often built into this process is a step of identifying project risks and delivering a list of them at the initial gate. However, risk management usually ends with delivery of the list. Few development teams put much attention into managing risk, so they encounter needless surprises in schedule, product cost or features, project budget, team morale, or market acceptance. Even worse, the nature of these “surprises” is that they tend to come to a head late in the project, when it is difficult to do anything about them.
This regrettable situation need not exist. All pieces of the solution have been available in various places for some time. Yet, only in the last few years have a few companies assembled and integrated them into their development process in the way that they have done with, for example, stages and gates. Consequently, for most companies today, not only do surprises occur in a project, but similar surprises also tend to recur in project after project.
The prime purpose of this book is to enable product development teams to greatly enhance their management of project risks; that is, to identify these surprises early in the project and manage them throughout to diminish the disruption they cause. We lead you through a risk management process that has been used repeatedly and successfully at a few leading companies and suggest variations that you can make to adapt the process to your own needs.
On the surface, you may see nothing in our methodology that seems novel. Nothing critical in this book depends on advanced technology, recent research, or specialized software. However, there are some points crucial to success that we have seen in no other book. These include:
- a model of a specific risk that coalesces the team’s energy around vital elements of a risk and its drivers, thus enabling the team to identify, prioritize, and manage major risks effectively;
- guidance on identifying drivers of risks, so that you can manage the root causes of a risk rather than its symptoms;
- appropriate quantification of the key factors of a risk, so that you can prioritize risks effectively without introducing errors that render your numbers meaningless;
- a clear distinction between a risk and an issue, which requires a different type of management;
- a host of supporting tools and strategies that will enhance any implementation of project risk management; and
- emphasis on the organizational and cultural impediments that can undermine implementation of an effective risk management program, as well as means of overcoming them.
In preparing this book, we reviewed much of the literature on project risk management. We made two observations:
- The risk management process covered here fits closely with the approach to managing risk suggested by the Project Management Institute (PMI®), the U.S. Department of Defense, and several project management and software development books.
- The depth of actual how-to information provided here on the risk management process does not seem to be available elsewhere.
Our conclusion: although the management process covered here is tailored to commercial product development and has been tested most thoroughly on product development projects, the process is applicable to many other types of projects with some adaptation. Furthermore, this book may provide more specific guidance than is available elsewhere for managing other types of projects.
Following good product development practice, we involved customers (potential purchasers of the book) in developing this product. An international customer council of 46 individuals made important contributions by suggesting additions or changes to the book’s structure, completing 134 reviews of draft chapters among them, providing examples from their experience, and even selecting the book’s title. Their countless suggestions have improved this book greatly. We are most grateful for all of the help and encouragement we received.
This material comes directly from the experience of project teams in applying this process and techniques. We have learned from them, for which we are thankful. We intend to keep expanding our knowledge of this vital field, so we are interested in hearing how this book works for you, what it lacks, and how you enhance these techniques. We look forward to hearing from you.
PMI David I. Cleland Project Management Literature Award for 2003 The Project Management Institute annually honors the best piece of project management literature published during the previous calendar year and seeks to distinguish the author for a significant contribution and for advancing the state of the art in project management knowledge, practices, procedures, concepts, or other advanced techniques (see the award). PMI has over 200,000 members in approximately 125 countries and is the world’s leading professional association of project managers.
Executive Book Summaries This organization reviews all business books published and selects the thirty best ones each year to summarize for busy executives whose reading time is limited.Proactive Risk Management was as one of the best 30 business books in 2002 (see the certificate). The summary is available from Executive Book Summaries in print, electronic and audio formats.
“This is the most useful, approachable guide on Risk Management that I have seen in my 5 years of providing advanced project management training. It was instrumental in delivering Risk Management training that ‘stuck’ with students.”
Jim Sloane, PMP, CM, Project Management Explorations
“The authors present an easy-to-understand model and an easy-to-implement set of steps to successful risk management. This book should be required reading for project and product managers. I believe you can read it one day, implement it the next, and begin seeing results immediately. The model and approach presented here navigates the knife-edge between the obvious babbling and the philosophical musing that seems to dominate the risk management literature.”
Patrick Neal, Ph.D. PMP, Manager, Project Management Network, Agilent Technologies
“In our fast-paced environment, there is ever-increasing pressure to bring successful new products and services to market faster than before. This means that risk management is strategically important to the success of your project or venture. Proactive Risk Management provides proven techniques for assessing and avoiding risks before they hinder the results of your project. This excellent manual will be my standard reference on the subject from now on.”
Dr. Peter Maddern, Product Development Manager, Kimberly-Clark Europe
“Successfully managing complex product development projects — and keeping effected customers, stakeholders and team members connected — requires clear communication. In my experience as a leader of projects and project managers – in Defense, Aerospace, Commercial Consumer Electronics, and Medical Devices/Bio Pharmaceuticals – the most effective basis for that communication is risk identification and management. Proactive Risk Managementprovides an extremely practical guide to the tools, techniques, and strategies that best enable that risk-based communication. It is clear that identifying and accepting the “right” risks within a project can be a powerful competitive edge. Keep a copy of this book on your desk and in the hands of your teams – I will.”
Mike Shires, Vice President, Global Program Management,Baxter Healthcare
“This book clearly communicates the challenges of risk management in product development and provides simple, proven methods for addressing them. The authors’ experience with managing risk in product development is clearly evidenced in their practical treatment of the subject. They take a holistic view of product development and illuminate the cross-functional nature of risk in product development. They then offer a straightforward procedure for managing risk and suggestions for implementing techniques in the real world.”
Kent Harmon, Director, Product Development Improvement, HPA Division, Texas Instruments
“You can read Proactive Risk Management, begin implementing strategies, and start seeing immediate results. For survival in these uncertain times, Smith and Merritt offer the straightforward procedures applicable to any product development project.”
Ruth Carter, Director of Program Management, InFocus Corporation
“Proactive Risk Management provides the right amount of depth and breadth in its discussion of ways to model, predict, measure, and control risks that arise in projects. It is written in a style that is easy to read and understand; a style that makes you eager to apply the knowledge to your own projects. I am sure that I will go back to it repeatedly for insights and tactics.”
Dr. J.M. Radovich, Director, Research & Development Fenwal Division, Baxter
By Gregg Tong in Consulting to Management, December 2003, pp. 51-52. Download a PDF file (2 pp., 56KB).
By Mark R. Durrenberger in the Journal of Product Innovation Management, November 2002, pp. 463-464.
In OEM Design, January 2003. Download a PDF file (2 pp., 23KB).
By Adam Hansen in Visions, January 2003.
Customer reviews posted at Amazon.com.
- Title: Proactive Risk Management: Controlling Uncertainty in Product Development
- Authors: Preston G. Smith and Guy M. Merritt
- Published by Productivity Press, now CRC Press, a division of Taylor & Francis, New York, 2002 (June); download their book flyer (2 pp., 122 KB)
- 246 pages, 7×10-inch (18×25 cm) format (most books are 6×9 inches) paperback; includes a reference guide (card) attached to the back cover
- US$35.00 list price
- International Standard Book Number (ISBN): 1-56327-265-2
Where to Get It
- Your public, company, or university library
- Your local book dealer (if they do not have it in stock, they can order it using the ISBN)
- Productivity Press:
- Telephone: (800) 394-6868; +1 (203) 225-0451 from outside the United States
- An online book service, such as Amazon.com, which is offers good service and price, especially on orders from outside of the United States.
Please note that New Product Dynamics does not sell books, but please contact us if you have difficulty obtaining the book from the sources above.