I'm not sure if this is the cause of the confusion, but "production" in the IT Development Cycle is actually quite a late phase, it doesn't mean "starting the whole thing".
It means that they've started coding, producing assets, developing the locations, stuff like that, not as prototypes, but with the expectation that what they produce will be in the final game.
It can also mean that they've (tentatively) finished design, depending on the specific lifecycle methodology they use. Some methodologies are very iterative, so they move back and forth a lot between design and production, others pretty much freeze design when they move into the production phase.
Either way, going into the production phases means the big ramp-up of people, that there'll definitely be an internal clock running on when it should be finished (as payroll costs will have shot up), and that they'll have a fairly clear idea of what the game will be, although there'll probably still be a lot of changes as they try stuff out and find it doesn't quite work/fit.