Overcommitting and Underutilizing Resources is Risky Business

Bringing innovative products, methods, and ideas to market requires companies to apply resources to their most promising concepts and that can be expensive, requiring lots of talent, if they want to be fast and first to market. The problem is that most companies overcommit their limited resources by approving more ideas than they execute. They do it because they lack a clear view into their resource capacity.

When companies blindly commit resources to products and projects without knowing resource availability, it’s like writing a check without having the funds to cover it. While it may seem that taking on every new product idea will result in some winners, the unintended consequence is that products don’t make it to market on time and checks bounce. Resources get stretched thin and cycle times elongate to the detriment of the business. The downstream impacts of missing the market directly affect the bottom line: reduced margins, missed business opportunities, quality problems, low employee retention, and loss of revenue.

Solving the resource capacity problem

Top performers are significantly (39%) less likely to overcommit resources than their lower maturity counterparts.

Overcommitting and underutilizing resources has become business as usual for many companies – a risky business at that. But it does not have to be that way. Top performing companies are solving the resource capacity problem and, in the process have positioned their companies for accelerated innovation and competitive differentiation. The 2014 Resource Management and Capacity Planning Benchmark Study engaged 110 product development leaders across the globe with responsibility for their company’s people resources. The breakthrough finding from the study is that companies that have focused on maturing in terms of people, processes and tools in the interrelated areas of resource management and capacity planning are resolving the perennial overcommitment problem. In fact, the top performers are significantly (39%) less likely to overcommit resources than their lower maturity counterparts. They’ve also alleviated or addressed a host of other overcommitment-related pain points. How have they done it?

Four differentiators of the top performers

Top performing companies do four things differently than their lower maturity counterparts. And your company can implement these same best practices to improve maturity and reap the measurable benefits.

1) Have a holistic view into both pipeline demand and resource capacity

Top performers are 58% more likely to have a holistic view into both demand and capacity during pipeline planning and for resource management. This panoramic view allows them to effectively plan resource capacity against products and accurately forecast product revenue. Visibility into resources or projects alone without this comprehensive, centralized view can result in committing to theoretical roadmap returns and a lack of confidence that products can be delivered on time.

As one benchmark study participant stated: “This is the first time our COO actually cut projects due to early visibility on capacity issues. Two years ago we knew we had too much work and not enough resources and spreadsheets were always out of date. Now we can pull together a holistic view of allocated, over-allocated across all of our resources. Quantitative numbers are hard to argue and we’re using the data to make decisions.” – Manager of Quality Assurance and Product Delivery, national health insurer

To improve estimates, companies need to consider implementing time capture into a centralized system.

2) Improve estimating and conduct what-if scenarios

Mature companies are 56% less likely to see estimating as a pain point than lower maturity companies and 71% said their estimates are accurate (as opposed to only 43% of lower maturity). Accurate estimates allow products teams to properly resource projects in the first place; when combined with a holistic view into available capacity, they enable a more precise product development engine that results in cycle time compression. To improve estimates, companies need to consider implementing time capture into a centralized system such as a product portfolio management software application, so that historical and actual data can be used to refine estimates for future projects based on similar characteristics.

Mature companies are also 20% more likely to conduct what-if scenarios, putting them in position to be agile in dynamic and competitive markets when resource allocations need to change to speed a particular product to market.

3) Obtain access to real-time data

Mature companies are 42% more likely to have access to real-time data and reporting on resources. More than half of lower maturity companies don’t have real-time access, leading to regular “fire drills” to scavenge for data across silos when it’s time to make staffing and hiring decisions. This slows innovation and puts companies into the difficult position of having to make undesirable trade-offs and tough executive choices about how best to utilize scarce resources. A common reason for lack of access to real time data is that lower maturity companies with complex product portfolios are relying on spreadsheets and basic project tools instead of software purposely built for capacity planning and resource management.

“For our company, access to real-time data allows for effective resource planning, and concurrent resource allocation. We gain cycle time compression because we can ensure that marketing, engineering and manufacturing resources are aligned to bring products to market faster.”– VP R&D, industrial manufacturer

Mature companies have identified capacity planning as crucial to their success.

4) Conduct monthly or continuous capacity planning

Leveraging their access to real-time data, mature companies have identified capacity planning as crucial to their success. No longer an annual event or even quarterly, their capacity planning happens on a monthly or continuous basis.

Product Development-Capacity Planning maturity Level

Will your company continue to write bad checks?

Overcommitting resources slows the pace of innovation. Companies that master capacity planning and effectively balance capacity throughout the product lifecycle by making more successful tradeoffs than their competitors are in a position to win in their product categories. Top performers told our research team that they plan to continue to invest in people, processes and software tools for capacity planning and resource management so that they can maximize the potential of their resources on the most important innovation pursuits in their companies.

What to do next to gain a first-mover competitive advantage

  • Take a maturity assessment on resource management and capacity planning and benchmark your organization. Get everyone involved from executives to product development managers. (Note that the research revealed that executives tend to rate the company at a higher level of maturity than middle managers do; make sure everyone gets realistic with an honest assessment.)
  • Connect the dots for executives about the business risks of overcommitting and underutilizing resources and why capacity planning is important for innovation. Read the full report with more details.
  • Evaluate the team’s access to real-time data and whether there is a holistic view into both demand and capacity.
  • Don’t leave the management of your most important asset – your people resources – to spreadsheet silos. Get the right software for the job.

By Maureen R Carlson

About the author

Maureen Carlson has more than 20 years of technology marketing and research experience working with companies to identify emerging markets, understand market needs, and introduce new products to market. She is the author of six benchmark studies sponsored by Planview on the topics of resource management, capacity planning, product portfolio management and innovation. Maureen is a partner at Appleseed Partners and the chief researcher on the 2014 State of Resource Management and Capacity Planning Benchmark study.

Photo : A Male Hand Filling Out by Shutterstock.com

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