New Product Development

Ganesh N Prabhu
 06.
Product Architecture, Design for
Manufacturing and Prototyping
 Modular Product Architecture
• Modular architecture is the structure found in
desktop computers – every part is a module.
1. Allows for standard components, upgrades,
add-ons, replacements, reuse and flexibility.
2. Enables customizing products for each user.
3. Allows for providing greater product variety.
4. Allows for isolation of all wear and tear parts.
• Modular optimizes flexibility over performance
– not technical performance but form factor.
 Integral Product Architecture
• Integral architecture is like in laptops/tablets.
1. Optimizes desired performance (form factor)
over flexibility and the ability to upgrade.
2. Minimizes form, size and volume of product.
3. Uses multiple functionality from single part.
4. Allows limited pre-designed product variety.
5. Limits post purchase change, repair, upgrades
6. Limits the use of standard components.
• Gives high quality (robust) but lowers flexibility.
Six Types of Modularity
 Six Types of Modularity
1. Component Sharing – using an identical
component (e.g. chips) across multiple products.
2. Component Swapping – using the same socket
(e.g. electric socket) across multiple products.
3. Cut to Fit – use of a base material to lengthen
sections (e.g. fitted electric wiring covers).
4. Mix modularity – mixing materials (e.g. paints).
5. Bus modularity – use same base (e.g. electronic
circuit board) for fixing multiple components.
6. Sectional – this is found in toy construction kits.
 Design for Manufacturing
How to design products to enable their easy and
low cost manufacture? Some techniques are:
• Minimize the number of parts in the product
• Use common parts across many products.
• Eliminating fasteners in products to cuts time.
• Eliminate using jigs and fixtures in assembling.
• Eliminate adjustments made during assembly.
• Eliminate error by design – by colour coding.
 Design for Manufacturing
• Consider customer assembly where possible.
• Minimize system complexity for assembly.
• Isolate parts that require frequent replacement.
• Choose modular architecture in all the parts
that require repair, upgrade and replacements.
• Choose integral architecture to reduce cost and
improve on desired performance parameters.
• Swatch provides an example of how it is done
 Swatch Case
• Swatch was a response to the Japanese quartz.
• The first to use integral architecture in watches.
• Drastic parts reduction gave it higher reliability.
• Lower costs with use of new rugged materials.
• Lower costs by using fully automated assembly.
• Watch was sealed – it cannot be repaired at all.
• Used modular dials to provide higher variety.
• Sold watches at lower prices – good value buy.
• Swiss still strong on costly mechanical watches.
 Shimano Case
• Bicycle components was a fragmented industry.
• Shimano introduced “click-shift” gear changing.
• Shimano then integrated the click-shift system
into an optimized set with rail, crank and brake.
• User needs on gears were more homogeneous.
• Users accepted the option of an optimized set.
• Brand recognition (handle branded) with higher
quality made Shimano the dominant gear design.
• By 1997 Shimano had 86-98% market share in
gears-by integrating a more fragmented industry.
 Prototypes
• Prototypes are product approximations used in
testing, learning, communication & integration.
• Use of prototypes reduces time, cost and risk.
• Prototypes are also used as funding milestones
in product development as interim successes.
• Analytical prototypes (computer models) are
flexible and enable non-destructive testing.
• Physical prototypes help detect unanticipated
issues that are not found in computer models.
 Use of Prototypes
1. In breakthrough products, to show feasibility.
2. In derivative products, for problem detection.
3. In platform products, to plan product releases.
• Multiple prototypes are typically used in more
complex product development projects.
• Prototyping plans are used to time and combine
the learnings from different types of prototypes.
• Appropriate use of prototype cycles is essential.
 Prototypes
• Prototypes should be spaced out adequately to
enable in-depth learning from each prototype.
• Learnings from each prototype cycle is used in
building the next prototype with lesser flaws.
• Prototypes can also face evaluation by target
users who point flaws that the team is blind to.
• Prototyping strategy is finding the fit between
the product development process adopted by
the company and the prototyping method used.
 Prototyping Strategy
• Example – a prototype strategy issue is - Make
prototypes internally or by the usual vendors?
• Making the prototype in-house allows for
greater secrecy on the new product – often the
workers in the prototype shop are highly skilled
• However the prototype is not easily transferred
to production done by lesser skilled workers.
• Making the prototype through vendors allows
for earlier detection of production problems.
 07.
Organizing for
Product Development
 Organizing for Product Development
Key questions that are used to decide on a new
product development organization structure:
1. Which department has to take a lead role?
Depends on emphasis and degree of change.
2. How much inter-departmental integration is
required? Higher in more complex projects.
3. Is there a need for good communication and
high levels of collaboration across the firm?
Yes in more complex long gestation projects.
 Organizing for Product Development
• Co-locating people of different specializations.
• Moving people across departments over time.
• Joint decisions across departments on gates.
• Informal meetings and gathering places for
exchange and validation of new product ideas.
• Incentives and rewards across departments for
support on unusual tasks involved in projects.
• Project or team structures that are known to
be more effective for specific NPD projects
 Functional NPD Structure
In this structure the new product moves from one
functional department to the next one till its done.
Eg. Foundry making casting items in a new design.
Product moves - blueprint dept. to casting dept.
• Suitable for customized development projects.
• Good for functional specialization projects.
• Usually suffers in coordination and time taken.
• No one may take full ownership of any project.
 Project NPD Structure.
In this mode the entire team focuses exclusively
on the new product activity till it is launched.
Eg. Startup entering a market with a new product.
• Suitable for breakthrough projects/start-ups.
• OK for low functional specialization projects.
• Shortens time taken and enables coordination.
• Dedicated team’s expertise is not available to
other projects elsewhere in their company.
 Matrix NPD Organization Structure
Matrix structures involves dual reporting –
(a) to a functional manager on regular tasks (that
are typically not new product related) and
(b) to project managers on all new product tasks.
Suitable for complex and long gestation projects.
Eg. Automobile and aerospace new products. The
new product projects may stretch over several years
and experts like industrial designers are available
for multiple new product projects in matrix mode.
 Matrix NPD Organization Structure
Two versions of matrix NPD structures exist:
1. Heavyweight Project Organization
Higher discretionary power for project managers.
Project manager is powered over functional heads.

2. Lightweight Project Organization

Primarily a coordination role for project managers.
Project manager less powerful than functional head.
 Matching Structures to Project Types
• Use suitable team structures for projects types.
1. Radical/breakthrough project – the project
NPD organization structure is more suitable.
2. Deep technical expertise – functional structure
3. System solution/new platform project – the
heavyweight matrix structure is more suitable.
4. Derivation/enhancement project – lightweight
matrix structure is more suitable.
 Matching Structures to Project Types
• Better if team is led by functional area that has
large or critical role in product improvement.
• Eg. R&D leads for technology dominant and
Design leads for ergonomics and aesthetics.
• Though matching is desirable, firms tend to
have a dominant NPD organization structure.
• Firms often do not switch to a better option.
• Difficult to move from a functional structure.
 Integrity: Consistency in Differentiation
• Organizing for achieving product integrity is key
to successful new product differentiation.
• Product Integrity is the total balance of product
features that creates an instant appeal – a feel of
fit! – “its just right!” or “they got it right!”
• Product integrity is consistency of all aspects of
the firm’s relationship with its target customers.
• Integrity is more subtle – it is harmony of the
product or service with users and their lifestyle.
 Integrity: Consistency in Differentiation
• Integrity is broader than just the functionality
and performance of the product or service.
• Organizations that create products with integrity
have a seamless pattern of organizing – efforts
are coherent with the organizational strategy.
• Such organizations have clarity on what to do
and what not to do across all its hierarchy levels.
• They also have clarity on the basis of choice of
new products and new customers they target.
 Consistency and Fit: Product Integrity
• Both internal and external integrity are important
• Internal integrity: this is the consistency between
function and structure of the product or service;
all the parts fit smoothly, the components and
the layout match – all parts work well together.
• External integrity: this is the fit between product
performance and user expectations – objectives
of users, their values, their lifestyle and so on.
 Product Integrity and Leadership
• Effective leadership has key role in developing
and achieving high levels of product integrity.
• Effective leaders help their development team
to focus on meeting and sometimes exceeding
the target user expectations for new products.
• Heavyweight project managers on major long-
gestation projects act as a catalyzing force for
achieving product integrity in new products.
 Product Integrity and Leadership
• Project leaders help create powerful product
concepts – the “soul” of the product and infuse
it into all the fine details of the development.
• Product concepts effectively communicated
help the project to draw more effectively on
both internal and external resource persons.
• Effective leaders also seem to know instinctively
when they “got it right” and they do not usually
tinker with their so called “right” product.
 08.
Developing Services and
Product-Service Systems
 Developing Pure Services
• Pure services are usually harder to develop
and sell due to their inherent intangibility.
• Clients of services are usually skeptical and
unsure about good end results for them.
• Productizing a pure service - making it more
like a product can make it easier to purchase.
• Productized services are more tangible to the
user – it also makes them easier to budget.
• Lowers risks of cost overrun or poor results.
 Productizing Pure Services
• Productizing pure services allows sellers to
reduce their costs by templating their service.
• How can you productize a pure service?
1. Give the service a descriptive name, define its
scope, fix its time frame and fix a price tag.
2. Offer customized service packages that may
specifically suit many different user groups.
3. Create interlinked service modules that can be
purchased by users with no prior commitment.
 Product-Service Systems
• Product-Service Systems lie in the spectrum
between pure products and pure services.
• Product-Service Systems are a marketable
combination of products and services that
serves users better than each can serve alone.
• Product commoditization can be reduced by
adding services that differentiate the product.
• Product combined with value added services
can give higher profits than products alone.
 Product-Service Systems
• Product-Service Systems can reduce resource
needs and may also reduce resource wastage.
• A PSS business model shows how organizations
create, deliver and also capture value of a PSS.
• A PSS business create value in four ways (Ostaeyen, 2014)
1. Cost reductions in the utilization of assets.
2. Increased value of the P-S combination.
3. Expansion of customer base by inclusion.
4. Changes to the competitive environment.
Three Types of Product-Service Systems
1. Product Oriented PSS – in this very common
system, users are the owners but the seller firm
maintains the product as required on demand.
• It includes financing schemes to buy product,
maintenance contracts, advice and consultancy
on efficient use of product, supply of required
consumables and buy back offer at end of life.
• Eg. Selling dish washers, water purifiers, air-
purifiers – periodic supplies and maintenance.
 Types of Product-Service Systems
2. Use Oriented PSS – in this system the firm is
the owner and sells or hires out only functions of
the product through sharing, pooling or leasing
along with maintaining the product over life cycle.
3. Result Oriented PSS – in this case, the users
pay only for results – the product is replaced by
service. It includes modes like outsourced activity,
paying per output unit and paying for result.
• Business models change on moving to 2 or 3.
 Examples of Use Oriented PSS
In these examples the firm owns the product and
hires out its functionality as and when required.
(a) Tent service – rented tents for outdoor events.
(b) Bicycle sharing – borrow whenever you need.
(c) Tool libraries – pool & borrow when needed.
(d) Maternity clothes library – donated clothes.
Use can be in a self-service mode or in a delivered
service mode. It saves customers the investments
made in less frequently used products (eg. Tools).
 Examples of Result Oriented PSS
In these examples the product has been replaced
by a service such that there is no ownership for
user and also no hiring of the product by the user.
(a) Phone voicemail replaces answering machines.
(b)Peerflix – exchange of DVDs – ask for a DVD
you want to see and send one you already seen.
(c) Cat cafés (Japan) – enjoy being in the company
of cats in a café if you cannot own a pet cat.
Users avoid owning products and pay for service.
 Platform Thinking for Developing Services
• Product platforms are service subsystems that
can be leveraged to offer high service variety.
• Platforms have common architecture spanning
multiple services that are implemented with
common subsystems and subsystem interfaces.
• Robust product platforms can be extended to
address markets with new business models.
• Platforms hold important capabilities and key
insights and shape the organization structure.
SuperSeva: Platform Thinking for Services
• SuperSeva is a leading concierge service in
Bangalore with 87+ services and low prices.
• They ask for desk space at the office entrance
at all the major Bangalore IT firm offices.
• For each major service, they use a detailed and
error-proof requirement data collection form.
• They use a robustly refined process for each
activity module (say proof of service done).
• Multiple services use the same robust modules.
SuperSeva: Platform Thinking for Services
• Multiple services use the same service tracking.
• This reduces the cost they incur per service.
• Modules have processes that are robust and
offer high quality built by failure based learning
• Well defined modules ensure that adding new
services require minimal new process changes.
• They offer 11 popular services for free while
the other 76 services have service fees of only
about 50 cents/service – a bargain value price!
SuperSeva: Platform Thinking for Services
• Free services are all online bill payments with
them getting cash in advance and some float.
• New competitors cannot offer 87+ services at
the start and all fail in bids against SuperSeva.
• New competitors cannot offer the low rates
that SuperSeva offers as setup costs are high.
• Competitor cannot refine their service quality
at short notice and are unable to imitate them.
• SuperSeva is effectively a monopoly in its space