PRODUCT AND SERVICE

DEVELOPMENT AND ORGANIZATION

GROUP-3
 Innovation, Design and Creativity

Innovation according to Oxford Dictionary is “ a new method, idea, product etc”

According to Peter Ducker Innovation is “change that creates a new dimension of performance”

Creativity is the ability to move beyond conventional ideas, rules or assumptions, in order to generate significant new ideas.

It is a vital ingredient in innovation

Design transforms innovative ideas into something more concrete

It is to “conceive the looks, arrangement, and workings of something and can be approached at different levels of detail
 The Innovation S-Shaped Curve

 When new ideas are introduced in Products,

Services or Processes they rarely have an impact
that increases uniformly over time. Usually,
performance follows a S-shaped curve

 In the early stages of a new ideas introduction

large amount of resources, time and effort are
needed, relatively small performance
improvements are experienced

 However with time as experience and knowledge

about the new idea grows performance increases

 As the idea becomes established, extending its

performance further becomes difficult
 The Henderson-Clark Model

 Incremental innovation is built upon existing

component and architectural knowledge

 Radical innovation changes both component and

architectural knowledge

 Modular innovation is built on existing

architectural knowledge, but requires new
knowledge for one or more components

 Architectural innovation will have a great impact

upon the linkage of the components but the
knowledge of the single components is unchanged
Strategic Importance of Product and Service Development
In many markets there are a number of competitors bunched together in
terms of their product and service performance

 Even small advantages in product and service specifications can have a

significant impact on competitiveness

 This has made customers both more sophisticated in exercising their choice
and often more demanding in terms of wanting products and services that fit
their specific needs

 Markets are becoming more fragmented. Unless companies choose to follow

relatively narrow niche markets, they are faced with developing products and
services capable of being adapted in different ways to different markets

 Product and service life cycles have become shorter

The Degree of Product Change
 The Degree of Product Change
Table 8.1 describes four levels of change, ‘modification
’, ‘extension’, ‘development’ and ‘pioneer’, in terms of
the products or services’ external and internal characte
ristics
Relatively small ‘modification’ changes are likely to be
relatively frequent and probably will be made using
routine procedures
It is important to recognize the nature of the product and
service development process is likely to be different
depending on the degree of product/service change
Connectivity is the degree to which changes in one part of
a product or service impact on other parts
Product and Process change should be considered together
We can put together the degree of process change scale from the
previous chapter with the scale indicating the degree of
product/service change

Advanced
. or ‘blue sky’ research and development lies beyond both
of these scales, but it is from this direction that most radical
innovation emerges

The dotted lines indicate the degree of difficulty encountered in the

development process

Product/service change is easier when the underly-ing processes that

produce them are not being changed at the same time, and vice
versa

Figure also shows three service/process developments at a bank.

Making changes to the services offered in a bank branch involves
relatively minor ‘product’ and process changes compared with the
redesign of both product and process involved in a major new call
centre. This, in turn, is less than the development of a totally new
internet banking service.
Managing the Overlap between Product and Process Development

There are probably two reasons for this:

.
 First, there is a growing recognition that the design of product
has a major effect on the cost of making them. Many decisions ta
ken during the development of products, such as the choice of m
aterial, or the way components are fastened together, will all defi
ne much of the cost of making the product

 Second, the way overlap is managed between product and pro

cess development has a significant effect on the effectiveness an
d efficiency of the development process itself. This is particularly
true for the time between the initial product or service concept an
d its eventual delivery into the market, and the overall cost of the
total development effort
 Modular Design and Mass Customization
 Strategy for organizing complex product
(and services) and processes efficiently
 A modular system is composed of units
(or modules) that are designed independe
ntly but still function as an integrated
whole
 Rather than designing a product and ser
vice as a totally integrated and indivisible
whole, the design is divided into modules
that can be put together in various ways
 Putting different modules together will
result in products or services with different
functionality
Modularity  Ability to provide customers with high levels of
variety and customization through flexible and re
sponsive processes and flexible product and serv
ice designs
 The vision of mass customization is to reduce
radically the effect of the assumed trade-off betw
een variety and cost
 Markets are becoming increasingly fragmented
, while as far as operations resources are concer
ned, new forms of organization and technology a
re allowing greater degrees of flexibility and resp
onsiveness
 The major management task is to understand
implications of market and operations developme
Mass
nts and harness them
Customization
 Product and Service Development as a Process
There are two views of how to
characterize product and service develo
pment
01
 A creative process where a
technical understanding of the
mechanisms involved in the
service or product is brought to
gether with ingenuity and flair
 Typically this view of product
and service development sees
the activity as a collection of,
sometimes interdependent, pro
jects
 The raw material of this kno
wledge is a substance that is d
ifficult to define and even more
difficult to identify
 Product and service develop
ment, there-fore, must focus
on its outcome
02
 Great ideas for produ
cts and services emerg
e. from a process that m
akes them great
Therefore, of course,
one should examine the
process of product and
service development
The normal generic pe
rformance objectives th
at apply to any operatio
ns process – quality,
speed, dependability,
flexibility and cost –
all have relevance to pr
oduct and service devel
opment
 Operations Strategy Analysis for
Product and Service Development

 The generic performance objectives of
quality, speed, dependability, flexibility and
cost can be used to describe the impact of
new or modified products and services in t
he marketplace
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 In order to achieve competitive ‘producti

on’ of product and service designs, the res
ources and processes that are used to de
velop them will themselves need organizin
g along the lines of any other operation

 The company’s design capacity will hav

e to be matched to the demand placed on
it over time, relationships with an external
supply network for design and developme
nt knowledge will have to be established,
process
Stages of Development
Stages of Development 01 Ideas for new product or service concepts may be generated from sources outside the organization,
such as expressed customers’ needs or competitor activity, or from sources within the organization

02 The purpose of the concept-screening stage is to take the flow of concepts emerging from the
development process and evaluate them

03 This stage represents the beginning of detailed work on the product or service design. It includes
defining what will go into the product or service such as Bill of Materials

04 Costing the proposed product/service, identifying areas of cost improvement, technical ch

aracteristics of product and services to increase overall value

The next stage in the design activity is to turn the improved design into a prototype so that it can
05 be tested. This may be to learn more about the nature of the proposed product or service, but oft
en it is also to reduce the risk inherent in going straight to market

06 If the development process is intended to design products and services that will fulfill a market need, then
process decisions can take place only after some product or service characteristics have been decided.
Flexibility of Product and Service Development
 It means the ability of the development process to cope with external or internal
changes.

 Example:
1. External Changes- Change in requirements by customers, the market in
general, development in competitors product or service etc.
2. Internal Changes- May include emergence of superior materials or
technical solutions.

 Measurement:
Comparing the cost of modifying a product or service in response to the
changes against the cost when no changes are made. The higher the cost of
modifying the lower the development flexibility.

 Why development flexibility is important?

1. Firstly the pace and magnitude of environmental change, it is clearly
valuable in fast moving and volatile environments.
2. Increasing complexity and interconnectedness of products and services.

 Example: A bank may bundle together a no. of separate services for a

particular segment of the market. So changing one aspect of the bundle may
require changes to be made in the other elements.
Cost of Product and Service Development

 Analyzed in similar ways to the cost of producing ongoing goods and services.

 Three categories of cost factors:

1. Cost of buying the inputs to the process
2. Cost of providing the labour in the process
3. Overhead cost for running the process.

 For daily production it is important to consider the following cost drivers:

1. Quality
2. Speed
3. Dependability
4. Flexibility

 With the above mentioned factors not in line , the end result is that development
is late. Delayed completion of the development results in both more expenditure
and delayed revenue.
Product and Service Development Networks

 Focus around the exchange of product and service development knowledge and
integration of suppliers into the innovation process.

 Two decisions determine the effectiveness of such networks:

1. The extent of vertical integration i.e. how much development to do in house
and how much to subcontract.
2. How to manage the relationship between the players.

 In-house and subcontracted development- A firm may retain all the necessary
design capacities in-house, while it outsources all the development work.

 Involving suppliers in development

 Involving customers in development

 Organization of Product and Service Development
 Criteria to assess the effectiveness of different organizational forms:
1. Specialization- It encourages the depth of knowledge and technical
understanding that is required in a concentrated form during the developmen
t process.
2. Integration- Coordinating the efforts of developers in different parts of a
project and integrating their technical solutions.

 Project Based Organizational Structure:

1. Functional Organization- The project is divided into segments and
assigned to relevant functional areas.
2. Functional Matrix- A person is designated to oversee the project across
different functional areas.
3. Balanced Matrix- A person is assigned to oversee the project and interact
on an equal basis with functional managers.
4. Project Matrix- A manager is assigned to oversee the project and is
responsible for the completion of the project.
5. Project Team- A manager is given the responsibility for a project team
composed of a core group of personnel from several functional areas assign
ed in a full time basis.
THANK YOU !!