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Principles

In this section, we list the principles that we follow when developing products. We use these principles as a base to create all processes, tools, guidelines, and workflows of all departments—product, design, and engineering.

These principles are based on the book The Principles of Product Development Flow by Donald G. Reinertsen.

Table of Contents​

The Economic View​

Why do you want to change the product development process? The answer: to increase profits.

The economic view of product development allows you to make product development decisions based on economic choices. You don't chase the popular proxy variable of the moment. Instead, you transform all proxy variables to the same unit of measure, life-cycle profits, and make multivariable trade-offs to increase profits, which is the core of product development.

E1: The Principle of Quantified Overall Economics: Select Actions Based on Quantified Overall Economic Impact​

You should consider the economic impact of all possible decisions when you have to make a project decision. For example, choosing between releasing a project soon without many tests or testing more and releasing later should be an economic, not a philosophical choice.

E3: The Principle of Quantified Cost of Delay If You only Quantify One Thing, Quantify the Cost of Delay​

You don't have business trading money for cycle time if you don't know the economic value of cycle time. No single sensitivity is more eye-opening than the cost of delay (COD). The cost of queues, determined by COD, dominates the economics of Flow.

Managing Queues​

Q1: The Principle of Invisible Inventory: Product Development Inventory Is Physically and Financially Invisible​

Inventory in product development isn't physical objects but information. Then, it's virtually invisible, both physically and financially. Product development inventory's effects: increased cycle time, delayed feedback, constantly shifting priorities, and status reporting.

Q4: The Principle of High-Queues States: Most of the Damage Done by a Queue Is Caused by High-Queues States​

Queues spend more time in low-queue states, but high-queue states cause the most harm. When a queue is overloaded, it delays more tasks, increases cycle times, and leads to greater economic waste. Even though high-queue states are less frequent, they have a much bigger impact on overall performance and efficiency.

The State Probability of an M/M/1/∞M/M/1/\infty queue to have nn jobs in the system is:

State Probability=1−ρρn\text{State Probability} = \frac{1-\rho}{\rho^n}

For example, for a queue with at 75% utilization, the probabilities of having nn jobs in the system are:

Number of Jobs in the SystemProbability
025%
118.8%
214.1%
310.5%

This means that the probability of having two jobs are 75% of the probability of having one job in the system. However, delaying two units creates twice the economic waste (see The Hidden Costs of Queues in Product Development for more details) of delaying one unit.

Q8: The Principle of Linked Queues: Adjacent Queues See Arrival or Service Variability Depending on Loading​

In systems where one queue feeds into another, the output of one queue becomes the input for the next. The way each queue performs depends on how busy it is—its output may either mirror the rate at which tasks arrive or the speed at which they are completed.

In a process with several linked queues, one queue usually slows down the entire system (the bottleneck). To improve the flow and speed up the whole process, it's important to reduce delays and unpredictability at the bottleneck by managing how tasks arrive from the previous queue. By controlling what happens before the bottleneck, you can improve the flow through it and make the system more efficient.

Q16: The Intervention Principle: We Cannot Rely on Randomness to Correct a Random Queue​

When a queue builds up into a sustained high-load state, it won't easily or quickly revert to a low-load state on its own. Just like flipping 10 heads in a row doesn't increase the chance of flipping 10 tails to balance it out, randomness won't fix the problem.

You need to intervene quickly and decisively in such situations. Set limits on maximum queue size, and act before the system hits those limits. The more closely you monitor queues and intervene early, the less they will cost you in the long run.

Exploiting Variability​

V1: The Principle of Beneficial Variability: Variability can create economic value.​

Which choice is the best economic choice? Which option has the minimum uncertainty in its outcome?

ChoiceStakesPayoffProbabilityEMV
A$15,000$100,00050%$35,000
B$15,000$20,00090%$3,000
C$15,000$16,000100%$1,000

EMV = Expected Monetary Value

Choice A is the best economic choice and the most uncertain. Choice C has zero uncertainty, yet it isn't the best economic choice.

The economics of each discrete choice depends on two factors: the probability and the payoff function. We can't make good economic choices if we only pay attention to probabilities. So you need to pay attention to both probability and payoff functions.

V7: The Principle of Small Experiments: Many small experiments produce less variation than one big one.​

This principle emphasizes that breaking a large risk into many smaller, independent risks reduces the overall variation in outcomes. This idea stems from statistics, where repeated small trials (a binomial distribution) result in a smaller coefficient of variation compared to a single large trial. This is because, as the number of trials increases, the mean grows faster than the standard deviation, lowering the overall risk of failure.

For example, dividing a single high-risk bet (e.g., a 50% chance of losing $15,000) into multiple smaller bets significantly decreases the chance of total loss. Similarly, in product development, launching several smaller innovations rather than one blockbuster product reduces the risk of complete failure, offering more consistent and stable outcomes.

Reducing Batch Size​

B17: The Proximity Principle: Proximity enables small batch sizes​

Proximity reduces the cost of transporting or communicating in small batches, making processes faster and more efficient. In manufacturing, close distances enable one-piece flow and greater flexibility, while in product development, colocated teams benefit from real-time, face-to-face communication. This eliminates delays inherent to asynchronous communication, unlocking the full advantages of small batch sizes and enhancing responsiveness to emerging needs.

Controlling Flow Under Uncertainty​

F19: The Round-Robin Principle: When Task Duration Is Unknown, Share Time Among Tasks​

When scheduling a task with an unknown duration, you can't predict how long it will occupy a resource. Worse, the task could take an infinite amount of time.

The round-robin scheduling method from operating system design addresses this by allocating a fixed time slice (quantum) to each task. After the quantum ends, the task returns to the queue, and the next task starts. This ensures shorter tasks are completed sooner, even if their duration is unknown.

The key decision is setting the quantum size. If too large, the system behaves like FIFO; if too small, frequent context switching increases overhead. A useful heuristic is setting the quantum so that 80% of tasks are completed within a single time slice.

F28: The Principle of Preplanned Flexibility: For Fast Responses, Preplan and Invest in Flexibility​

Flexibility comes from early decisions and careful planning. By preparing in advance, teams can respond quickly to changes.

For instance, if maintaining schedules is crucial, pre-identify nonessential requirements, classifying them as mandatory, important, or optional. This way, optional features are loosely coupled with the core architecture, making it easier to drop them if needed.

Similarly, if you anticipate needing to reallocate resources quickly, invest in keeping backup resources informed and ready. This reduces their response time and ensures they can become productive on short notice.

Using Fast Feedback​

FF1: The Principle of Maximum Economic Influence: Focus control on project and process parameters with the highest economic influence​

Control measures that have the greatest impact on economic success. Use an economic framework to identify these parameters. For example, if a 10% increase in project expenses reduces profits by 1%, but a 10% increase in unit cost reduces profits by 50%, prioritize controlling unit cost over project expenses.

FF2: The Principle of Efficient Control: Control parameters that are both influential and efficient​

A parameter's strong economic influence does not guarantee efficient control. For instance, average sales price significantly impacts life cycle economics but is difficult to control directly. On the other hand, unit cost has a similar influence and is more manageable.

To identify effective control variables, find the intersection of economic influence and control efficiency. Conduct sensitivity analysis to determine which proxy variables have economic impact, then rank these variables based on their control efficiency to identify the most effective ones.

FF3: The Principle of Leading Indicators: Select control variables that predict future system behavior​

Leading indicators are valuable for efficient control because they enable early interventions, which are economically beneficial. As development progresses, intervention costs rise exponentially, while the value of acting early increases significantly. These combined effects make early interventions highly efficient.

For instance, a manager focused on monitoring task start times instead of completion times. He observed a strong correlation: when the right person started a task on time, it usually finished on schedule. Conversely, tasks that started late or with incorrect resources often finished late. By using start times as a leading indicator, he could intervene early—adjusting resources or priorities—before delays became costly.

However, these conditions—predictive leading indicators and the potential for impactful early interventions—may not always be present. When absent, the benefits of using leading indicators can diminish or even become counterproductive.

FF5: The Moving Target Principle: Know when to pursue a dynamic goal​

Many companies create harmful control systems by failing to distinguish between static and dynamic goals. They assume that following the plan is always correct and any deviation is negative. In stable environments, like manufacturing, this can be true, where frameworks like Six Sigma prevent deviations to optimize efficiency.

However, in product development, goals constantly shift as better information emerges. Stable goals require preventing deviations and avoiding risk, while dynamic goals demand quick adjustments and reduced inertia to close the gap between the current state and the desired outcome.

Recognizing when your goals are dynamic or stable is crucial, especially in the highly variable world of product development. For example, in developing a new software feature, user feedback may shift priorities, requiring the team to pivot and adjust the goal to meet evolving customer needs.

FF7: The Queue Reduction Principle of Feedback: Fast feedback enables smaller queues​

Fast feedback loops not only provide insights more quickly but also reduce the need for work-in-progress (WIP) in a system. By rapidly addressing variability, these loops allow processes to operate with smaller buffers, minimizing delays caused by excessive WIP. Smaller WIP, in turn, reduces overall system delays, enabling even faster feedback. This creates a positive feedback cycle: faster feedback reduces WIP, which lowers delays, further accelerating feedback and improving system efficiency. This principle highlights the compounding benefits of designing systems with rapid feedback mechanisms.

FF8: The Fast-Learning Principle: Use fast feedback to make learning faster and more efficient​

Fast feedback is essential for accelerating learning and making it more precise. It achieves this by shortening the time between cause and effect, reducing noise, and improving clarity in the results. Investing in environments that enhance feedback, like Team New Zealand's (they designed the yacht that won the America's Cup) use of two boats for direct comparison, allows for more cycles of testing and better insights in each iteration. This approach demonstrates that faster feedback not only provides quicker answers but also leads to more efficient and reliable learning processes.

FF10: The First Agility Principle: We don't need long planning horizons when we have a short turning radius​

In product development, agility is the ability to quickly shift focus or direction without needing to plan too far ahead. A smaller, more focused project is much easier to adapt than a large, rigid one. Just like turning a small object is easier than moving a massive one, agile teams can change direction quickly when they have fewer moving parts.

To maintain this agility, it's important to have enough resources ready to make these changes as soon as needed. Organizations operating at full capacity often struggle because they can't reallocate resources quickly enough. This delays response times and makes it harder to shift direction.

When teams are set up to pivot quickly—by working on manageable projects and keeping resources flexible—they can move faster and more confidently, even in uncertain environments. This short "turning radius" means you don't need to plan everything in detail far into the future, because you can make quick adjustments as new information emerges. This approach reduces the complexity of managing changes and allows teams to operate at a higher speed without losing control.

FF19: The Principle of Colocation: Colocation improves almost all aspects of communication​

Colocation accelerates feedback by fostering real-time, face-to-face communication, which is more efficient and includes both verbal and nonverbal cues (the principle B17: The Proximity Principle discussed the value of physical proximity). It reduces communication costs, enabling frequent, small-batch interactions and immediate issue resolution. Beyond speed, colocation strengthens team cohesion through informal, non-task-related interactions, helping team members see each other as complex individuals and reducing negative biases. This leads to more cohesive and effective teams. Despite its proven benefits, colocation remains underutilized, but it is one of the simplest and most impactful ways to boost team performance and development speed.

Achieving Decentralized Control​

D1: The Second Perishability Principle: Decentralize Control for Problems and Opportunities that Age Poorly​

Certain problems and opportunities are highly perishable, requiring swift action—like putting out a fire before it spreads. On the other hand, some issues, like a bad stock investment, have self-limiting impacts.

To handle problems that worsen over time or seize fleeting opportunities, decentralize control. This means empowering individuals with the authority and resources to act quickly. Centralized planning can set tasks, but decentralized control ensures flexibility, enabling immediate responses to minor issues without delays.

D2: The Scale Principle: Centralize Control for Problems that Are Infrequent, Large, or Have Significant Economies of Scale​

Some problems require large-scale responses—big fires need fire trucks, not garden hoses. Centralized control is ideal for infrequent but significant demands, especially when economies of scale are at play. In contrast, frequent, small, and low-variability issues are better handled by decentralized resources (D1: The Second Perishability Principle).

Centralizing resources can delay response due to their size and complexity, so prioritizing these resources is crucial to ensure timely action. In product development, instead of placing an expert on every project, centralizing their expertise can be more efficient.

D3. The Principle of Layered Control: Adapt Control Based on Emerging Information​

When it's unclear whether to centralize or decentralize control, two approaches can help: triage and escalation.

Triage, as used in hospitals, prioritizes resources by addressing solvable, potentially critical issues and avoiding those that are unsolvable or less urgent. This method is effective when enough information is available at the outset to make informed decisions.

Alternatively, when it's uncertain which task will take the most time, a round-robin scheduling approach discussed in F19: The Round-Robin Principle ensures fair resource distribution. Each task is given a time slice, and unfinished tasks return to the queue, preventing long tasks from blocking shorter ones.

In systems with layered priorities, escalation ensures low-priority tasks don't get neglected. Problems are escalated after waiting too long, striking a balance between keeping important issues from being overlooked and avoiding overloading centralized resources.

D4. The Opportunistic Principle: Adjust the Plan for Unplanned Obstacles and Opportunities​

In line with Principle FF5: The Moving Target Principle: Know When to Pursue a Dynamic Goal, static goals call for conformance, but dynamic goals require continuous adaptation. Plans should not enforce rigid conformance; instead, they should be used to maintain alignment and synchronize complex activities, such as coordinating multiple tasks for a product launch.

Adaptive plans allow teams to seize opportunities, adding significant value in product development. For instance, if a feature turns out to be far more costly and less valuable to customers than expected, a flexible process will recognize this and adjust. Similarly, if an easier-to-implement feature is discovered to provide greater customer value, adaptive plans make it simple to pivot, something much harder in rigid, conformance-focused processes.

D5. The Principle of Virtual Centralization: Quickly Reorganize Decentralized Resources to Create Centralized Power​

It's often inefficient to keep centralized resources idle for rare large demands. Instead, these resources can be used for routine tasks and mobilized when needed to tackle big problems, allowing organizations to benefit from both centralized and decentralized resources, as discussed in F28: The Principle of Preplanned Flexibility: For Fast Responses, Preplan and Invest in Flexibility.

For example, cities can train civilians in firefighting and collaborate with nearby fire departments for mutual aid, providing centralized response capacity without maintaining a large permanent fire department.

In product development, some companies use "tiger teams"—highly skilled, experienced employees who handle critical crises but perform their regular duties during normal times. This strategy enables the company to mobilize expert resources quickly in emergencies.

D7: The Principle of Alignment: More Value Is Created with Overall Alignment than Local Excellence​

While one barbarian might defeat a Roman soldier, 1,000 Roman soldiers would always overcome 1,000 barbarians due to superior coordination and alignment of their forces.

In war, the principle of mass refers to concentrating effort and resources on a decisive point to achieve maximum impact. Economy of force means allocating minimal resources to secondary tasks, ensuring most resources are focused on the main objective. Together, these principles demonstrate the power of alignment.

In product development, small gains across many features don't impress, but a significant advantage in a key area can sway customer preference. Aligning resources to focus on a single area can create a competitive advantage, even if it means sacrificing excellence in other areas.

D8: The Principle of Mission: Specify the End State, Its Purpose, and the Minimal Possible Constraints​

In maneuver warfare, missions align teams through mission orders, which focus on the operation's intent—its end state—rather than prescribing specific actions. They communicate the "why," not the "what" or "how."

When the intent is clear, those executing the mission can adapt to obstacles or opportunities, choosing the best course of action. A well-crafted mission statement is a powerful tool for maintaining coordination, with the "why" being its most crucial element.

For example, in product development, rather than prescribing detailed features, a mission might be "create a seamless user experience that reduces churn by 20%." The team is free to explore the best solutions to achieve this goal, whether through UX improvements, better onboarding, or new product features. The key is the clear end state (reduce churn) and its purpose (improve retention), with minimal constraints on how to achieve it.

D9. The Principle of Boundaries: Establish Clear Roles and Boundaries​

In decentralized control, clearly defined roles and boundaries are crucial to avoid confusion. Too much overlap leads to inefficiency, while gaps leave tasks undone. In product development, unclear roles increase the need for communication and meetings. For instance, without clear roles, many people may need to approve simple decisions, slowing progress. Well-defined roles streamline teamwork. Additionally, it's important to identify and address gaps between roles to ensure all tasks are covered.

D10. The Main Effort Principle: Designate a Main Effort and Subordinate Other Activities​

In product development, it's essential to focus on the few key features that drive success. While customers may request hundreds of features, only a handful—typically four to six—truly influence their decision. These are the “main effort” of the project, where the team should concentrate the most resources. Other features should take a back seat, allowing the team to excel in the areas that really matter. By prioritizing these core features, you maximize the impact and effectiveness of the product, much like focusing on a key point in a mission.

D11. The Principle of Dynamic Alignment: The Main Effort May Shift Quickly when Conditions Change​

In product development, priorities can change as new information arises. Initially, one feature or aspect of the project may be the main focus, with all resources aligned to support it. However, as the project progresses, new insights may reveal better opportunities or shifts in market needs. When this happens, it's essential to be flexible and quickly redirect focus to areas that offer the greatest value. Adapting swiftly ensures that resources are always aligned with the most impactful objectives, optimizing the project's success.

D12. The Second Agility Principle: Develop the Ability to Quickly Shift Focus​

It's not enough to decide to change direction quickly—you must be able to execute that change rapidly. In product development, you can pivot faster by:

  • Having a small, skilled team instead of a large, slower one.
  • Focusing on a streamlined feature set rather than managing unnecessary features.
  • Maintaining some reserve capacity, as overworked teams struggle to adapt quickly.

Additionally, designing flexible product architecture helps absorb changes. For example, segregating uncertainty into specific parts of the design allows for adjustments without affecting the entire system. This enables swift changes without disrupting overall progress.

This ties directly into Principle FF10: The First Agility Principle, which emphasizes that you don't need long-term planning when you can quickly adjust course. A short "turning radius" allows teams to adapt to changing conditions and maintain control, even at high speeds.