Lesson 4

Product and Service Design

Learning Objectives
To identify or define:
o
o
o
o
o

Product Strategy Options

Generation of New Product Opportunities
Types of New Products
Different Product Development Stages
QFD or House of Quality

To explain issues in Product Development and

Service Design
To develop own product or service design.

Product and Service

Design Decision
The good or service the organization provides society
Top organizations typically focus on core products
Customers buy satisfaction, not just a physical good or
particular service
Fundamental to an organization's strategy with
implications throughout the operations function
The objective of the product decision is to develop and
implement a product strategy that meets the demands
of the marketplace with a competitive advantage.

Activities in Product and

Service Design
1. Translate customer wants and needs into product
and service requirements
2. Refine existing products and services
3. Develop new products and/or services
4. Formulate quality goals
5. Formulate cost targets
6. Construct and test prototypes
7. Document specifications.

Reasons for Product and Service

Design or Redesign

Economic changes
Social and demographic changes
Political, liability, or legal changes
Competitive changes
Cost or availability changes
Technological changes

Product Strategy Options

Differentiation
Low cost
Rapid Response

Sources of Ideas for Product and

Service Designs
Internal
o Employees
o Marketing department
o R&D department

External
o Customers (QFD)
o Competitors
o Suppliers

What is a New Product?

Consumers perspective
o Product that is new to the marketplace. Such
can vary from simple modifications of existing
product to a major innovation

Companys perspective
o Products that are new to the firm but
not necessarily new to the market

Types of New Products

The Discontinuous Innovation

The Category Extension
The Line Extension
The Product Improvement
Repositioned Products
Lower Priced Product

 The Discontinuous Innovation

This is the "new to the world" product that is based
on, generally, a major new technology.
Example: automobile, the personal computer

 The Category Extension

A product that is new to the firm but not
necessarily new to the marketplace
Example: disposable lighters or disposable
razors by Bic

 The Line Extension

Similar to a category extension with the exception
that the new product occurs in the same
product category as existing products
manufactured and marketed by the firm

 The Product Improvement

These are simply "new and improved" versions of
existing products that amount to reformulations,
modifications, or enhancements made to these
products.
Example: new and improved
laundry detergents

 Repositioned Products
Those that have undergone a change in image,
but the physical product it self may not have
changed

 Lower Priced Product

These products generally offer fewer features, are
of somewhat reduced quality, or function
somewhat differently than their higher priced
counterparts. These products are designed to
appeal to more price sensitive segments.

The Discontinuous Innovation

The Category Extension
The Product Improvement

The Line Extension

Repositioned Products
Lower Priced Product

The Discontinuous Innovation

The Category Extension
The Product Improvement

The Line Extension

Repositioned Products
Lower Priced Product

The Discontinuous Innovation

The Category Extension
The Product Improvement

The Line Extension

Repositioned Products
Lower Priced Product

Why Do New Products Fail?

Inadequate Product Superiority or Uniqueness

Inadequate or Inferior Planning
Poor Execution
Technical Problems
Poor Timing

Product Design Issues

Design for Mass
Customization

Reliability

Robust Design

Standardization

Product Life
Cycles

ISSUES

Environmentally
Friendly Design

Product Life Cycles

May be any length from a few hours to decades

The operations function must be able to introduce

new products successfully

Product Life Cycles

Introduction
Fine tuning may warrant unusual
expenses for
Research
Product development
Process modification and enhancement
Supplier development

Product Life Cycles

Growth
Product design begins to stabilize
Effective forecasting of capacity
becomes necessary
Adding or enhancing capacity may be
necessary

Product Life Cycles

Maturity
Competitors now established
High volume, innovative production
may be needed
Improved cost control, reduction in
options, paring down of product line

Product Life Cycles

Decline
Unless product makes a special
contribution to the organization, must
plan to terminate offering

Standardization
Standardization: refers to the extent to which there is
absence of variety in a product, service, or process

The Key Trade-off

Volume

Efficiency

Variety
Flexibility

Advantages of Standardization
Fewer parts to deal with in inventory & manufacturing

Reduced training costs and time

More routine purchasing, handling, and inspection
procedures

Orders fill-able from inventory

Opportunities for long production runs and
automation

Need for fewer parts justifies increased expenditures

on perfecting designs and improving quality control
procedures.

Disadvantages of Standardization
Designs may be frozen with too many imperfections
remaining.
High cost of design changes increases resistance to
improvements.
Decreased variety results in less consumer appeal.

Mass Customization
A strategy of producing standardized goods or
services, but incorporating some degree of
customization
Implications
o Product implications
o Process implications

> > modular design

> > delayed differentiation

Reliability
Reliability
o The ability of a product, part, or system to
perform its intended function under a prescribed
set of conditions

Failure
o Situation in which a product, part, or system does
not perform as intended

Normal operating conditions

o The set of conditions under which an items
reliability is specified

Improving Reliability
Component design
Production/assembly techniques
Testing

Redundancy/backup
Preventive maintenance procedures
User education
System design

Robust Design
Robust Design: Design that results in products or
services that can function over a broad range of
conditions
Insensitive to environmental factors either in
manufacturing or in use.

Ethics and Environmentally

Friendly Design
It is possible to enhance productivity,
drive down costs, and preserve
resources
Effective at any stage of the product life cycle

Design
Production
Destruction

The Ethical Approach

View product design from a
systems perspective
Inputs, processes, outputs

Costs to the firm/costs to society

Consider the entire life cycle of

the product

Goals for Ethical and

Environmentally Friendly Design

1. Develop safe and more environmentally sound

products

2. Minimize waste of raw materials and energy

3. Reduce environmental liabilities
4. Increase cost-effectiveness of complying with
environmental regulations
5. Be recognized as a good corporate citizen

Guidelines for Environmentally

Friendly Designs
1.
2.
3.
4.
5.
6.

Make products recyclable

Use recycled materials
Use less harmful ingredients
Use lighter components
Use less energy
Use less material

Research & Development (R&D)

Organized efforts to increase scientific knowledge or
product innovation & may involve:
Basic Research advances knowledge about a
subject without near-term expectations of
commercial applications.
Applied Research achieves commercial
applications.
Development converts results of applied research
into commercial applications.

New Product Development

(NPD) Process
The method by which new products evolve from
conceptualization through engineering to
manufacturing and marketing.
1

Idea Generation

Concept Development

Quality Function Deployment

Early Design Collaboration

Design for Manufacturability

IDEA
GENERATI
ON

Concept
Development

Quality Function
Deployment

Early Design
Collaboration

Design for
Manufacturability

This is the initial stage where a business sources for

ideas regarding a new product. Some of the
sources for new product ideas include the business
customers, competitors, newspapers, journals,
employees and suppliers.
Methods: a) Market pull
b) Technology push

Idea Generation

CONCEPT
DEVELOPME
NT

Quality Function
Deployment

Early Design
Collaboration

Design for
Manufacturability

This includes an initial design of the product along

with a detailed analysis of the market and the
customers requirements

Idea
Generation

Concept
Development

QUALITY
FUNCTION
DEPLOYMEN
T

Early Design
Collaboration

Design for
Manufacturability

The process for translating customer requirements into a

products design

1.
2.
3.
4.
5.

Market research
Defining customer attributes
Weighing of customer attributes based on relative
importance to customer
Comparing and rating of companys products
with those of its competitors
Building models of the new product, small-scale
testing of the various elements and components
of the new product, conducting detailed
investment and financial analyses over the
products anticipated life cycle

House of quality
part of the quality
function deployment
process that uses
customer feedback for
product design criteria

EARLY

Idea Generation

Concept
Development

Quality Function
Deployment

DESIGN
COLLABORATI
ON

Design for
Manufacturability

Internal creating cross-functional teams with

representatives from marketing, R&D, and
manufacturing
External suppliers and customers
o Significant impact of supplier involvement:
1. Brings new perspective to the development process
2. Reduces late engineering changes
3. Helps determine the most effective process for making the
final product

Idea Generation

Concept
Development

Quality Function
Deployment

Early Design
Collaboration

DESIGN FOR
MANUFACTURABILITY

Translating a functional product design into a

manufacturable product using various methods
and alternative materials
o Products specifications output from the design activity that
states all criteria for building a product
o Concurrent engineering

Categories of New Services

(according to degree of innovation)
Types of Incremental and Radical Services
Incremental Services

Radical Services

Service line Extensions

Major Innovations

Service Improvements

Start-up services

Style changes

New services for current markets

Incremental Services
Service Line Extensions
o are new services that augment current services
E.g. new items on a restaurant menu, new airline routes, and new
courses at a college or university

Service Improvements
o Are services with new features
E.g. E-ticketing for railroads and airlines

Style Changes
o most common form of new service
o Modestly affect customer perceptions, emotions, and attitudes,
changing only the appearance of the service
E.g. restaurant renovation or painting an airplane with new logo

Radical Services
Major Innovations
o Includes new services for markets that are not fully defined
o Often driven by information and computer-based technologies
E.g. Internet banking

Start-up Services
o Provide new services to established markets already served by
existing services
E.g. smart card for retail transactions

New Services for Current Markets

o Are new service offerings provided to existing customers of an
organization
E.g. bank kiosk in a supermarket

Categories of New Services

Degree of content change

(according to degree of content change and delivery change)

High
Breadth of offerings

Revolutionary

Window dressing

Channel development

Low
Low

High
Degree of delivery change

Window Dressing Services

Encompasses services that do not differ significantly
from the countrys current offerings and are
delivered in a similar fashion
o E.g. new items on restaurant menus, new destinations for airlines

Breadth-of-Offering Services
Represents a significant change in the content of
the service, but it is delivered in much the same
manner as existing services
o E.g. Marriott beginning with a single hotel
concept catering to a particular market but
now has a variety of products such as Fairfield
Inns, Residence Inns, Marriott Courtyards, and
Marriot suites

Revolutionary Services
Are new services that provide both very new
content and a very new method of delivery
Typically take much longer to bring to the market
and require significantly more of the firms resources
than other categories
o E.g. FedEx creating and overnight delivery service using airplanes rather
than ground transportation

Channel Development Services

Services that is the same as that currently offered by
the firm, but through another, perhaps entirely new
channel
o E.g. automated teller machine (ATM)

New Service Development

(NSD) Process
The method by which new services evolve from
conceptualization through to marketing and
delivery to the customer

Design

Analysis

Development

Full launch

Design

Analysis

Development

Consists of the formulation of the objectives and

strategy of the new service, followed by concept
development and testing of the concept

Considers the financial implications of the new service

and examines the relevant supply chain issues
Service design is completed and tested, all the processes
that ensure service delivery are fully designed and tested,
personnel are trained, and a pilot run of the service is
conducted

Release of the new service to the marketplace

Full Launch