Operations Strategy 8 - Product Service Development Strategy

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Contents

Introduction

A reminder - There is a difference between the design of the products and the design of the processs that create them but especially in services there is a large degree of overlap betwen them

The design activity can be judged on QFDCS and time-to-market that can be affected by

  • overlapping development phases
  • catching problems early
  • project based structures
  • and can extend outside the organizations boundaries
  • the design process involves progressively filtering out potential designs, reducing uncertainty until the final design is reached.


The development of new and innovative products and services is clearly of tremendous importance to most organizations. Without a stream of appropriate innovation a company leaves itself vulnerable to having to react to however its competitors decide to innovate. Many authorities would say that new product and service development is one of the three major processes that any organization must master in order to succeed (the other two of course being operations and marketing). It is because the topic is so important that it is included within the broad treatment of operations strategy; it is not that new product and service development is a subset of operations strategy, rather it is that no operations strategy could regard itself as complete without an understanding of how it interrelates with new product and service development strategy. The way to treat the subject is to look at it through an operations strategy "lens" and explain it in terms of one of the models we introduced earlier - the operations strategy matrix. Most of chapter 12 is devoted to developing that particular perspective. However, prior to that it discusses the relationship between new product and service development and process development



Key points

While the development of new product and service ideas has always been a significant activity in most companies, it is getting more important and because product and service development is itself a process, it can be analyzed using operations strategy models.

Following on from the point above, the chapter uses a similar calibration of the degree of product or service change to that which was used when describing process change. Although this calibrated scale, which again moves from "modification, through extension and development to pioneer" is described as a four-stage process; it is, of course, a continuum.

Product and service development and process development should be considered together. The box that describes the development of the ballpoint pen illustrates the obvious but important point that attempting extensive product or service change at the same time as extensive process change increases the degree of difficulty.

The Funnel of Development

The idea of the funnel of development is straightforward. The mouth of the funnel needs to be wide enough to capture enough knowledge and ideas to stimulate embryonic product and service developments. This may be done through systematic searching of research publications, examination of competitors’ activities, rigorous and systematic focus-group activity with customers, regular meetings with suppliers, and so on. The task then is to put organisational mechanisms in place which progressively narrow the funnel down, such that ideas which are not capable of being developed further are dropped and do not take up more of the organisation’s time and effort. Funnel of Development

What degree of product service design is required?

  • Modification -
  • Extension
  • Development
  • Pioneer - Disruptive ie Dyson

What degree of process design is required to complement product service design?

This can be a one on one on a straight line but also think of Volvo or Mini

  • Degree of product design was small but process design was pioneer
  • Degree of product design change was pioneer but process change was minor


Modular design and mass customization

Don't ignore modular design and mass customization. Both are significant developments, both are interrelated, and both have done much to overcome the trade-off between cost and variety in new product and service design. For example, think of the way ordinary domestic paint is now sold. Whereas some years ago a paint company would develop a range of colors, manufacture those in its factory and distribute them as separate products to the retail stores, much paint is now sold "made to order" in the store itself. The customer simply chooses a color from an incredibly wide range of alternatives and the paint is mixed there and then. This is only possible because each color is comprised of a defined set of "modules" of component colors. This "recipe-based" approach allows a degree of mass customization because a relatively small number of "modules" or colors can be mixed together in a far wider variety of ways.

The Quality, Function Development Matrix (QFD)

The what v the hows customer requirements v design characteristics The hows v the hows (the triangle hat on top of the box) The trade off between the various design characteristics

A series of QFD matrices can be created next one coild design characteristics v component charactersistis then process characteristics then Individual activities

You can also use the Operation Strategy matrix to show the trade off between QSFCD (Quality, Speed, Flexibilty, Dependability, Cost) and the Operations Strategy decision areas: Supply, Development, Capacity and Process Technology

Operations Strategy Matrix

Theory considerations

The Quality function deployment matrix 

The what v the hows customer requirements v design characteristics The hows v the hows The trade off between the various design characteristics


A series of QFD matrices can be created next one could design characteristics v component charactersistics then process characteristics then Individual activities

You can also use the Operation Strategy matrix to show the trade off between QSFCD and the decision areas supply, development, capacity and Process Technology


New Product and Service Development

Its important to know what the capabiltities and constraints are before starting design process.

It should go through the following steps: concept generation concept screening preliminary design design evaluation and improvement Prototyping and final design Development of the operations processes

The various stages of new product and service development

Here it is important to remember that, although many organizations have a model that looks like the stages described in the chapter, it is really a huge simplification of reality. Stages will merge with each other and the process will often cycle backwards and forwards. So, don't think of this as a prescriptive set of steps but rather a description of the activities that, in some order, generally take place during the new product and service development process.

Remember the funnel concept is subject to high degree of chaos and may ahve bulges where things are replanned and new options are considered late in the development process

Hayes and Wheelwright show in their digram on p 5 lesson 8 that the ability to influence outcome is greater during the knowledge acquistion and basic design but management activity increases during manufacturing and product launch

Think about the overall design process as progressively filtering out potential designs and thus reducing uncertainty, until the final design is reached

A Market Perspective

The design activity is itself a process that can be judged in the same way as any other operations process, that is in terms of quality, speed, dependability, flexibility and cost of the designs or development ideas that are produced.

All the five generic performance objectives are important, but in recent years there has been an increased emphasis on the speed of new product and service development. This speed issue is often referred to time-to-market That is, the time between the original concept and the product or service starting to earn revenue in the marketplace. It is an important performance measure and in most industries is getting shorter. Several determinants of fast time-to-market performance can be identified. But the main ones are generally held to be;

  • simultaneous overlapping of development phases (sometimes called simultaneous or concurrent engineering);
  • the early resolution of design conflict;
  • project-based organization structures.

The financial consequences of fast time-to-market are best illustrated by the figure shows that a delay in launching a product or service usually means a far longer delay in the financial payback from that product or service.

An operations resource perspective

The four general categories of operations strategy decisions (capacity, supply networks, process technology and development and organization) are all relevant ( in managing the new product and service development process at a strategic level.

Capacity is particularly interesting. The issue here being that, unlike the day-to-day production of products and services, demand for new designs is not always smooth. This "lumpiness" in demand can lead some companies to be reluctant to invest in development capacity - often a mistake.

The idea of a product and service development network (a similar idea to a supply network) is a useful way of thinking about whether any organization should develop products and services themselves or subcontract the activity. Occasionally organizations do subcontract all their new products and service development activity (book publishers an obvious example!) but generally it is a question of how much development activity to subcontract, if any at all

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