Chapter 5

Product and
Service
Design

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 directing designing managing

Business Capacity
Strategy & Designing Planning &
Customer Supplier Management
Orientation Relationships

Supply
Chain & Supply
Operations Product & Relationship
Strategy Service Design Management

Inventory
Planning &
Innovation Process Design
Management

Lean Operations
& Just in Time
(JIT)

Project
Management

improving

Future Directions
Performance Quality
in Operations
Management Management
Management

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 Learning Outcomes

• Explain the new product development process

• Discuss the role of platform strategies in
managing product variety
• Assess how products can be mass-customized
• Identify key issues related to the organization of
services
• Identify key operational activities related to the
management of product innovation and service
designs

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 Introduction

• Topics covered in the chapter

– New product development process
– Product platforms
– Modularization
– Organizing product designs for manufacturing
– Mass customization
– Service design and development
– Customers’ input in service development
process

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 Relationship Between R&D and NPD

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 Management Challenges of R&D

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 Dropout Rates for R&D Projects

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 New Product Development Process

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 Customer Roles in NPD

• Table 5.2

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 STOP AND THINK

• Why do good designs sometimes become

bad products?

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 VW Inter-Firm Product Platform Development

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 Advantages of Platform Strategy

• reduced development and manufacturing costs

• reduced incremental costs of addressing the specific needs
of a market segment
• reduced fixed costs of developing individual product variants
• reduced development time
• reduced systemic complexity
• improved ability to upgrade products
• lowered investment risks
• greater degree of component and subsystems reuse
• increased responsiveness of partners and suppliers
• higher product variety offered to customers
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 Key Decisions on Platform Configuration

• how to make sure that the platform is

compatible with complementary products
• how to create technology competences
that prevent imitation
• how to share components and designs
effectively
• how to maintain platform leadership, that
is, how to maintain its market leadership in
its core technical area
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 Modularization Levels in Automobiles

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 Modular Design of a Trailer

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 Integral Design of a Trailer

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 Tradeoffs Between Modular and Integral
Designs

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 STOP AND THINK

• What kinds of challenge might a firm face

when changing its NPD strategy from
integral product design to modular product
design, or vice versa?

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 Product Structure of a Swivel Chair

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 Decisions Related to the DFM Method

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 Success Factors for Mass Customization

1. Customer demand for variety and

customization
2. Appropriate market conditions
3. Value chain readiness
4. Technology availability
5. Customizable products
6. Shared knowledge

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 Methods for Achieving Mass Customization

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 Four Approaches to Customization

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 STOP AND THINK

• Consumers might be pleased to know that

there is a wide range of product variety to
choose from when purchasing a product,
but what kinds of problems they may face
when there are too many options?
• What kinds of problems does it present for
the producers and retailers?

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 Evolution of Product-Service Systems

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 THE KEY POINT IS…

... the design of products and that of

services have to be interlinked.

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 Elements of Service Delivery Systems

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 THE KEY POINT IS …

… service systems can also be decomposed

into simpler pieces (modules).

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 Degree of Customer Contact

Percentage of time the customer is in the system

Degree of customer contact 
Total service time

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 Major Design Considerations in High- and Low-
Contact Systems

• Facility location • Worker skills

• Facility layout
• Product design
• Process design
• Scheduling
• Production planning
• Quality control
• Time standards
• Wage payment
• Capacity planning
• Forecasting

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 Activities in Processing a Retail Loan

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 Service Process Matrix

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 Challenges for Service Managers

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 STOP AND THINK

• Recall an experience you had when you

were dissatisfied with a service.
• What caused it, and who was to blame?

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 Spectrum of Virtual Service Strategies

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 New Service Development Cycle

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 Levels of Service Innovation

• Radical Innovations • Incremental innovations

– Major innovation – Service line extensions
– Start-up business – Service improvements
– New services for the – Style changes
market currently
served

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 Decomposition of a Sea Cruise Services

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 STOP AND THINK

• Are there major differences between

innovation in services and innovation in
products?

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 Customers’ Input in the NSD Processes

• Strategic planning
• Idea generation
• Idea screening
• Business analysis
• Formation of cross-functional team
• Service design and process system design
• Personnel training
• Service testing and pilot run
• Test marketing
• Commercialization

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 Summary

• Understanding the new product

development (NPD) process provides the
foundation for the development of
innovative products and services
• How a platform is configured, in terms of
the technology composition and
organization, is dependent on product
architecture design strategies (which can
range from modular to integral)
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 Summary (continued)

• One purpose for devising modular designs

is to create flexibility and changeability of
product configurations
• Development of services is equally crucial
for the survival and competitiveness of the
firms
• The design and development of new
services go through several stages similar
to those used in designing products
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 Key Theories

• Platform design – the creation of a

foundation design that can be used in a
number of products, and upon which the
reminder of the design can be based.
• Modularization – an approach to
organizing complex products and
processes efficiently

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 Key Theories

• Mass customization – a strategy that

emphasizes the need to provide
outstanding service to customers in
providing products that meet their needs at
a low cost
• Service process matrix – a framework
that provides a classification of service
industry firms based on the characteristics
of a firm’s service processes
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