Chapter 3 Product Planning Product Design and Development

Chapter 3: Product Planning Product Design and Development Fourth Edition by Karl T. Ulrich and Steven D. Eppinger

Session Outline • Product development opportunities Sourcing ideas on a regular basis • Market competition Planning products w. r. t competition • Technology The concept of technology S-curves • Portfolio planning The need for balanced portfolios; product-process change map & aggregate product planning • Mission statements For each project

Objectives & Strategy • Product development teams generally begin with a project mission statement. – This relates strongly to concepts of corporate strategy. • A cross-functional planning process develops the product development team's mission statement. • Note: The multiple-product, multiple-project context of product development in established firms. – The ability to choose the right set of development projects and to define the scope of these projects in such a way that they are complementary

Product Development Process Planning Concept Development System-Level Design Detail Design Testing and Refinement Production Ramp-Up Four Phases of Product Development The product planning phase precedes the product development process. (i. e. , before substantial resources are applied) It considers the portfolio of projects that an organization might pursue

Product Planning • Ensures product development projects support the broader business strategy of the company. Addresses: • What product development projects will be undertaken? • What mix of fundamentally new products, platforms and derivative products should be pursued? • How do the various projects relate to each other as a portfolio? • What will be the timing and sequence of projects?

Product Development Teams • Work on selected projects and start with a mission. The mission statement answers: • What market segments should be considered in designing the product and developing its features? • What new technologies (if any) should be incorporated into the new products? • What are the manufacturing and service goals and constraints? • What are the financial targets for the project? • What are the budget and the time frame for the project?

The Product Planning Process The product plan identifies the portfolio of products to be developed by the organization and the timing of their introduction to the market through proper allocation of resources. The planning process considers: • Product dev. Opportunities identified from various sources • Suggestions from marketing, research, customers, current product development teams • Benchmarking of competitors

Inefficiencies Some inefficiencies in organizations that do not engage in product planning: • Inadequate coverage of target markets with competitive products. • Poor timing of market introductions of products. • Mismatches between aggregate development capacity and the number of projects pursued. • Poor distribution of resources, with some projects overstaffed and others understaffed. • Initiation and subsequent cancellation of ill-conceived projects. • Frequent changes in the directions of the projects.

Xerox Lakes Project Example Xerox’s Competitive Strategy Exploit technological innovation in a rapidly changing market DIGITAL COPIER PLATFORM (AS OPPOSED TO EXISTING LIGHT LENS ) Xerox Document Centre 265

Concept of S-Curves TQ-1: How might a portfolio of development projects differ for product technologies at position A or B? Draw S-curves of your choice. What are the disruptive technologies here? What dimensions of performance are affected?

The Product Plan The product plans developed by keeping in mind: • Company’s goals • Capabilities • Constraints • Competitive environment The product plan is regularly updated to reflect changes in: • Competitive environment • Technology • Info on successes of existing products

Product Plan Exh 3 -2: The product plan identifies the portfolio of projects to be pursued by the development organization. This plan divides projects into four categories.

The Product Planning Process 1. Identify opportunities. 2. Evaluate and prioritize projects. 3. Allocate resources and plan timing. 4. Complete pre-project planning. 5. Reflect on the results and the processes. Note: Selecting a promising project is iterative in nature

Step 1: Identify opportunities Sources of product development opportunities: – – – – Marketing/Sales Research/Technology Development (Xerox PARC) PD Teams Manufacturing Customers Third party: Suppliers, Inventors, and business partners Other business groups (Xerox Supplies Division) Some proactive approaches: – – Document frustrations and complaints Study Competitors’ products (Competitive benchmarking) Track the status of emerging technologies More…see text

Xerox Some opportunity statements proposed at Xerox: • Create a document distribution system in which a networked printing, device resides on each office worker’s desk and automatically drives mail and other documents. • Create document delivery software that allows the digital delivery and storage of most intra-organizational documents via a worker’s personal computer. Opportunity statement: Lakes Project • Develop a new black & white (B&W), digital, networkable, document center platform for the office market, including scanning, storage, fax, distribution, and printing capabilities

Step 2: Evaluate and Prioritize Projects Competitive strategies – – Technology leadership Cost leadership Customer focus Imitative Market Segmentation Technology Trajectories Product Platform Planning Evaluating Fundamentally New Product Opportunities Balancing the portfolio

Competitive Strategies • Technology leadership Basic R & D • Cost leadership Superior manufacturing methods; Design for manufacturing to reduce costs • Customer focus Rapid development of derivatives through carefully designed product platforms • Imitative Fast development process NOTE XEROX: Paradigm shift in business practice to participate in digital revolution of office aligned with the growth of the Internet…. from “print & then distribute” to “distribute & then print”

Market Segmentation: Market Segment Map Exh 3. 4: Product segment map showing Xerox B&W digital products and the competition in three markets (Segmentation based on number of users sharing office equipment). Key performance dimensions pages per minute & networking capability

Technology Trajectories Exh 3. 5: This technology S-curve illustrates that Xerox believed digital copier technologies were just emerging and will improve product performance in coming years. Xerox believed that it could develop a full-featured digital copier in the near future with performance exceeding that of light-lens copiers. Q: How near or far is the ultimate performance limit?

Product Platform Planning: Platforms vs. Derivatives Platform Set of assets shared across a set of products (e. g. components & sub assys) Derivatives For different segments Exh 3. 6: A platform development project creates the architecture of a family of products. Derivative products may be included in the initial platform development effort (Platform A) or derivative products may follow thereafter (Platform B)

Product Platform Planning: Technology Roadmap Exh 3. 7: This technology roadmap shows the life cycles of several digital photocopying technologies & identifies which technologies would be used in each product. For Lakes platform Higher speeds and color capabilities required of its derivatives. Note: decisions about product platforms are closely related to the technology development efforts of the firm

Evaluating Fundamentally New Product Opportunities Some criteria for evaluating fundamentally new product opportunities: – – – – – Market size (units/year * average price) Market growth rate (percent per year) Competitive intensity (#competitors & their strengths) Depth of the firm’s existing knowledge of the markets Depth of the firm’s existing knowledge of technology Fit with the firm’s other products Fit with the firm’s capabilities Potential for patents or other barriers to competition Existence of a product champion within the firm

Balancing the portfolio • Exh 3. 8: The product-process change matrix – The extent to which the project involves changes in the product line and/or the production processes – Helps identify projects breakthrough opportunities as well as incremental improvements • Firms typically benefit from a diverse set of projects • Firm’s choice of competitive strategy influences product development portfolio: (FIRM STRATEGY) (PORTFOLIO) – LOW COST STRATEGY MORE OF PRODUCTION PROCESS IMPROVEMENT PROJECTS – HIGH PRODUCT VARIETY DERIVATIVE PRODUCTS UPON EXISTING PLATFORMS – TECHNOLOGICAL SUPERIORITY TECH DEV. & BREAKTHROUGH PROJECTS

Product-Process Change Matrix Extent of Production Process Changes Extent of Product Changes Research and Technology Development New Core Product Next Generation Product Addition to Product Family Minor Product Enhancement No Product Change New Core Process Next Generation Process Single Department Upgrade Tuning and Incremental Changes No Process Change Breakthrough Development Projects Platform Development Projects Lakes Project Derivative Product Development Current Product/Process Support

Step 3: Allocate Resources & Plan Timing Resource Allocation – Careful use of the limited development resources – Avoid starting too many projects. May result in: • Skilled engineers and managers stretching their capabilities • Affects productivity, time-to-market, quality, and profitability – Aggregate Product Planning (Exh 3. 9): • makes efficient use of resources within budgeted resources Project Timing – – Timing of product introductions Technology readiness Market readiness Competition The Product Plan (Exhibit: 3. 2) – Set of projects approved by the planning process and sequenced in time. – Mix of: Fundamentally new product, platform and derivative projects. – Updated periodically as a part of the strategic planning activity.

Aggregate Resource Planning

Exh 3. 9: Aggregate Resource Planning

Product Plan The Product Plan (Exhibit: 3. 2) • Set of projects approved by the planning process and sequenced in time. • Mix of: Fundamentally new product, platform and derivative projects. • Updated periodically as a part of the strategic planning activity. Exh 3 -2: The product plan identifies the portfolio of projects to be pursued by the development organization. This plan divides projects into four categories.

Step 4: Complete Pre-Project Planning Product Vision Statement Develop a networked, mid-range digital platform for imaging, marking, and finishing Mission Statements – – – Brief (one sentence) description of the product Key business goals Target market(s) for the product Assumptions and constraints that guide the development effort Stakeholders Assumptions and constraints – Manufacturing – Service – Environment Staffing and other pre-project planning activities

Lakes Project Mission Statement Product Description · Networkable, digital machine with copy, print, fax, and scan functions Key Business Goals · Support Xerox strategy of leadership in digital office equipment · Serve as platform for all future B&W digital products and solutions · Capture 50% of digital product sales in primary market · Environmentally friendly · First product introduction 4 th. Q 1997 Primary Market · Office departments, mid-volume (40 -65 ppm, above 42, 000 avg. copies/mo. ) Secondary Markets · Quick-print market · Small ‘satellite’ operations Assumptions and Constraints · New product platform · Digital imaging technology · Compatible with Centre. Ware software · Input devices manufactured in Canada · Output devices manufactured in Brazil · Image processing engine manufactured in both USA and Europe Stakeholders · Purchasers and Users · Manufacturing Operations · Service Operations · Distributors and Resellers

Lakes Project Mission Statement Product Description · Networkable, digital machine with copy, print, fax, and scan functions Key Business Goals · Support Xerox strategy of leadership in digital office equipment · Serve as platform for all future B&W digital products and solutions · Capture 50% of digital product sales in primary market · Environmentally friendly · First product introduction 4 th. Q 1997 Primary Market · Office departments, mid-volume (40 -65 ppm, above 42, 000 avg. copies/mo. ) Secondary Markets · Quick-print market · Small ‘satellite’ operations Assumptions and Constraints · New product platform · Digital imaging technology · Compatible with Centre. Ware software · Input devices manufactured in Canada · Output devices manufactured in Brazil · Image processing engine manufactured in both USA and Europe Stakeholders · Purchasers and Users · Manufacturing Operations · Service Operations · Distributors and Resellers

Assumptions & Constraints Some may ask: • Why manufacturing, Service and Environmental strategies should be part of the mission statement for a new product? Some may even hold: • Decisions about these issues should arise from customer needs for new products and should not be determined in advance. Why then do we have Xerox mentioning these in the project mission statement?

Assumptions & Constraints (contd. . ) • For complex projects (as in this Xerox example), the design of the manufacturing systems are equally complex. – Thus manufacturing facilities involved in the product need to be identified very early in the process. • Some product requirements cannot be derived strictly from customer needs. – Environmentally responsible design (as a Corporate Responsibility of Xerox Mission statements must reflect such corporate objectives and constraints.

Assumptions & Constraints (contd. . ) For Lakes Project of Xerox Manufacturing • Capabilities, capacities, and constraints of existing manufacturing processes – Which internal production facility to be used? – What key suppliers to be involved and when? – For Xerox: Input devises at Canada, Output devices in Brazil etc. Service • Note: Customer service and service revenue important in this business • Strategic goals for improving service quality – Designing components requiring few parts – Designing for ease of serviceability (quick service) Environment • Design for environment – Developing new products with environmental sustainability – Xerox’s “Zero to landfill” policy with an energy efficiency goal “most efficient machine in its class” – Remanufacture or recycle [no part should be disposed by the customer to end up in a landfill]

Step 5: Reflect on the Results & the Process Some suggested questions: • Is the opportunity funnel collecting an exciting and diverse set of product opportunities? • Does the product plan support the competitive strategy of the firm? • Does the product plan address the most important current opportunities facing the firm? • Are the resources allocated product development adequate to pursue the firm’s competitive strategy? • Have creative ways of leveraging finite resources been considered…? • Does the core team accept the challenges of the resulting mission statement • Are the elements of the mission statement consistent? • Are assumptions listed in the mission statement really necessary or is the project over-constrained? Will the development team have the freedom to develop the best possible design? • How can the product planning process be improved?