Company Level: The Value Chain and NPD

Dr.-Ing. Amalia Suzianti, ST, M.Sc.

suzianti@ie.ui.ac.id
amalia.suzianti@alumni.tu-berlin.de

Agenda

What is Industrial Value in A Company Level

The Source of Value

The Value Chain

Definitions of NPD Process

Models of NPD

Industrial Value: Company Level View

Today, the industrial system is complex with a large number of actors

on a global stage. Those actors interact with each other in complex,
interlinked value chains, exchanging data, goods (raw materials,
components and products), services and money.
Capturing value from a company level view is not just about capturing
the implicit value in making and selling products, it is about capturing
value throughout the lifecycle of those products or services, benefiting
many companies and requiring many different kinds of skills throughout
the value chain.
It comprises the context, resources, activities, processes, actors, and
interdependencies that support the creation and delivery of products
and services such as the innovation and product development
processes, R&D activities, production and service lifecycles, and supply
chain alliances and relationships.

What are the source of value in industrial

systems?

Financial performance , skills, reputation, capabilities, social value and

environmental quality.

Intellectual property in both design and manufacturing know-how.

Best-practices industrial systems organization

The Value Chain

A broader and formal understanding of value systems:

Encourage critical review of the value of key skills, assets, and activities
Highlight the collaborative and competitive impacts of partnerships
Identify strategic and social as well as financial value as a basis for growth.
From an industrial perspective, value creation and capture can be considered at
several levels operations, systems, and networks.

The Value Chain

Definitions of NPD Process

New Product Development (NPD) processes are the procedures

and methods that companies use to design new products and
bring them to the market.
It covers the conceptual and operational model of product
development from idea generation to launch and beyond and it
is used as a blue print for managing the new product generation
process
Several Models of NPD: Departmental-Stage Model, General
Staged NPD, Stage-Gate Model, Spiral Model, Network Model.

The NPD Models (Trott, 2012)

Departmental-Stage Model:
Over The Wall Model

Mike Smiths secret weapon: the salutary

tale of How not to design a swing, or the
perils of poor coordination

Source: C. Lorenz (1990) The Design Dimension, Basil Blackwell, Oxford.

An Activity Stage Model

General Staged NPD Process

These processes methodically follow a series of steps, are characterised by few iterations and rigid
reviews, and tend to freeze design specifications early. Frozen specifications help companies by providing
stability, creating sharp product definitions, avoiding scope creep, and reducing the need for midstream
corrections. Staged processes perform especially well when product cycles have stable product
definitions, have high quality standards, and use well-understood technologies, as is often the case for
product updates

General Staged NPD Process: Limitations

 The most important limitations of staged processes are their
rigidity and long lead times
 Staged processes are sometimes too inflexible for companies in
dynamic markets that require short development times or changes
during development.
 Staged processes can expose companies to market risk,
especially if early specifications or assumptions are poor and
staged processes sometimes have difficulty handling parallel tasks
within stages. As a result, the length of each stage may be
constrained by the slowest activity within the stage, thus
lengthening the development process and delaying new designs

The Stage-Gate Model

One of the most famous systematic product innovation

processes is the Stage-Gate Plan.
The Stage-Gate breaks the innovation process into a
predetermined set of stages, each stages consisting of a set of
prescribed, cross-functional and parallel activities.The entrance
to each stage is a gate. These gates control the process and
serve as the quality control and go/kill checkpoints. These stage
and gate format leads to the name Stage-Gate process (see
Cooper, 2001a, 129).

The Stage-Gate Model

From Discovery to Launch: Stages

The key stages consist of following processes:

Discovery : pre-work designed to discover and uncover opportunities and generate ideas
Scooping : a quick, preliminary investigation of the project (inclusive technical benefits and market prospects)
Building the Business Case: a much more detailed investigation involving primary research, both market and
technical, leading to a business case, including product and project definition, project justification and a
project plan. It is the critical homework stages, the one that decides if the projects should be broken or continued.
Development : the actual detailed design and development of the new product and the design of the operations
or production process
Testing and Validation : tests or trials in the marketplace, lab and plant to verify and validate the proposed
new product and its marketing and production / operations
Launch: commercialisation, beginning of full operations or production, marketing and selling.

The Stage-Gate Model

From Discovery to Launch: Gates
The typical Gates in Stage-Gate process consists of:
Idea Screen: The point where the project is born. It is a gentle screen and amounts to subjecting the project to
a handful of key must meet and should meet criteria which often deal with strategic alignment,
project feasibility, magnitude of opportunity and market attractiveness, product advantage, ability to leverage
the firms resources and fit with company policies.
Second Screen: This is essentially a repeat of Gate 1; the project is re-evaluated based on the information
obtained in stage 1. Here additional should-meet criteria may be considered, dealing with sales force and
customer reaction to the proposed product and potential legal, technical and regulatory killer variables,
all the result of new date gathered during stage 1.
Go to development: This is the final gate prior to the Development Stage, the decision point at which the project
can be killed or can be continued. Gate 3 also yields a sign off of the product and project definition and
commit of the financial expenses.
Go to Testing: This post-development review is a check on the progress and the continued attractiveness of the
product and project. This gate also revisits the economic question through a revised financial analysis based
on new and more accurate data. The validation plans for the next stage are approved for immediate
implementation and the detailed marketing and operations plans are reviewed for probable future execution.
Go to Launch: The final gate opens the door to full commercialisation, market launch and full production or
operations start-up. It is the final point at which the project can still be killed. Criteria for passing the gate focus
largely on expected financial return and appropriateness of the launch and operations start-up plans.

The Network Model of NPD

The Spiral Product Development Process

The Spiral PDP Characteristics

 The spiral PDP repeats regular steps, including concept development,
system level design, detailed design, and integration and testing.
 The process is flexible; the actual number and span of loops can vary.
The spiral process requires managers to evaluate risk early in the project,
which is useful because major costs have yet to be incurred
 The spiral process also has several disadvantages. First, its complexity
requires significant management attention. Second, the lack of rigid
specifications can potentially lead to delays in developing complex
subsystems .Finally, a simple spiral process with minimal uncertainty and
only one loop would closely resemble a staged process; thus, the spiral
process may be overkill for ordinary projects that could use a simpler
staged process

NPD Process Comparison

Best Practices of NPD Processes

SiemensWestinghouse Power Generation, which used a strict stage
gate process to design turbomachinery.
Aviation Technology Systems, which used a spiral process to design air
traffic control software.
United Technologies Corporation, which used variants of stage gate
processes to design helicopters and jet engines.
Xerox, Inc., which used a stage gate process with a nested spiral process
to develop copier and printing machines.
Integrated Development Enterprises (IDe), which used an evolutionary
delivery process to design development change management software.
ITT Industries, which used a staged process with progressive freezes of
functional specifications to design military radios and satellites.
Microsoft, which used a spiral process in designing operating and
application software.

Key Factors for Designing NPD Process

Companies face unique sets of individual development risks and
integration abilities that should be the basis for PDP design.
PDPs are composed of design iterations and reviews. We should consider
how best to use iteration and review cycles in customised PDP designs.
Design iterations can be employed to address various risks. The specific
risks addressed depend upon what activities are involved in the iterations
and upon the timing of the iterations. For example, market risks can be
managed by iterations that allow market feedback during the design
process.
Design reviews may also help in managing risks, both in conjunction with
and independently of iterations. The types of risks managed depend on
the characteristics of the design reviews.

NPD Process Design Method