Operational Excellence - Paper

IntrODUCtIOn new product and service innovation is concerned with putting new ideas into practice by embedding them in services and products. innovation is the act of introducing new ideas, design is about making those ideas practical. this is why the activity of product and service innovation and the activity of design are so closely linked. Both are important because products and services are often the first thing that customers see of a company. so they should have an impact. and although operations managers may not always have full responsibility for service and product innovation, they always have some kind of responsibility, if only to provide the information and advice upon which successful product or service development depends. But increasingly operations mangers are expected to take a greater and more active part in product and service innovation. unless a service, however well conceived, can be implemented, and unless a product, however well designed, can be produced to a high standard, they can never bring their full benefits. Figure 4.1 shows where this chapter fits into the overall operations model.

product and service innovation 4

Direct

Operations performance

The structure

and scope of operations

Operations strategy

Operations management

Product and service innovation

Topic covered in this chapter

Operations management

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Design Develop

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Figure 4.1 this chapter examines product and service innovation

❯ What is product and service innovation?

❯ What is the strategic role of product and service innovation?

❯ What are the stages of product and service innovation?

❯ What are the benefits of interactive product and service innovation?

Key questions

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110 PART ONE DIRECTING THE OPERATION

WHAT IS PRODUCT AND SERVICE INNOVATION?

There are a number of terms that we will use in this chapter that have similar meanings, and are defined by different authorities in different ways, or overlap to some extent, and yet are related to each other. For example, what is ‘innovation’? Is it the same as ‘creativity’? How does ‘design’ relate to both terms? So a sensible first step might be to establish how we will be using these terms.

Innovation, design and creativity Given that this chapter is about product and service innovation, we will start with what exactly we mean by ‘innovation’. In fact there are many definitions. The term is notoriously ambiguous and lacks either a single definition or measure. It is ‘ a new method, idea, product, etc. ’ ( Oxford English Dictionary ), ‘ change that creates a new dimension of performance ’ (Peter Drucker, a well-known management writer), ‘ the act of introducing something new ’ ( American Heritage Dictionary ), ‘ a new idea, method or device ’ (Webster Online Dictionary), ‘ new knowledge incor- porated in products, processes and services ’. 1 What runs through all these definitions is the idea of novelty and change. Innovation is simply about doing something new. But it is worth noting that the idea of innovation is both broader and more complete than that of ‘invention’. An ‘invention’ is also something that is novel or unique (usually applied to a device or method), but it does not necessarily imply that the novel device or method has the potential to be practical, economic or capable of being developed commercially. Innovation goes further than ‘invention’. It implies not just the novel idea, but also the process of transforming the idea into something that provides a return for an organization’s customers, owners, or both. The study of innovation, what influ- ences it, and how to manage it, is a huge subject and beyond the scope of this book. However, there is one particular attribute that is central to innovation – creativity. ‘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. It is seen as essential not just in product and ser- vice innovation, but also in the design and management of operations processes more generally.

Partly because of the fast-changing nature of many industries, a lack of creativity (and consequently of innovation) is seen as a major risk.

So, if creativity is an essential ingredient of innovation, and innova- tion implies making novel ideas into practical, commercial form, what is the process that transforms innovative ideas into something more concrete? It is ‘design’. Innovation creates the novel idea; design makes

it work in practice. Design is to ‘ conceive the looks, arrangement, and workings of something. A design must deliver a solution that will work in practice. ’ Design is also an activity that can be approached at different levels of detail. One may envisage the general shape and intention of something before getting down to defining its details (we will observe this later in this chapter when we examine the process of product and service design, and when we look at process design in Chapter 6 ). Figure 4.2 illustrates the relationship between creativity, innovation and design as we use the terms here. These concepts are intimately related, which is why we treat them in the same chapter. First we will look at some of the basic ideas that help to understand innovation.

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Is an essential ingredient of…

That defines the characteristics of…

That is transformed into a practical proposition by…

The use of imagination or original ideas

Doing something

new

Defining the looks, arrangement and

workings of something

The nature and characteristics of the

organization’s o�erings

Creativity Innovation Design Products and services

Figure 4.2 The relationship between creativity, innovation, and design

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CHAPTER 4 PRODUCT AND SERVICE INNOVATION 111

OPERATIONS IN PRACTICE

When Apple introduced the original iPhone, the world of smartphones was changed for ever. It was arguably one of the most influential products ever to be launched in the consumer technology market and set the bench- mark for the (many) smartphones that came after it. It sold millions worldwide and helped to make Apple into the world’s most valuable company. Yet how Apple and its visionary then leader, Steve Jobs, managed the inno- vation process remained something of a secret for years after the product’s launch. Originally visualized as a tab- let computer, work on the iPhone was initiated partly because of the success of the firm’s earlier product, the iPod music player. It was the profound effect that the iPod had on the music industry that encouraged Apple to consider what other markets it could challenge. Yet, it was a technological breakthrough, the multi-touch dis- play , which allowed the company to change course. As Steve Jobs said later, ‘ I had this idea about having a glass display, a multi-touch display you could type on. I asked our people about it. And six months later they came back with this amazing display. [When] we got inertial scroll- ing working and some other things, I thought, “my God, we can build a phone with this” and we put the tablet aside, and we went to work on the phone. ’ But making the multi-touch display a working proposition was challeng- ing for Apple’s engineering team. The team had to create an entirely new way in which users could interact with their phones. There were many novel unsolved prob- lems to overcome. Every single part of the design had to be rethought to adapt to touch. For example, engi- neers had to make scrolling work on the iPhone not only when a user’s finger moved up and down, but also when a user’s thumb moved in an arc across the screen. And there were many other obstacles to overcome, some which seemed almost insurmountable. Sir Jonathan Ive, Senior Vice-President of Design at Apple, has admitted that issues with the touchscreen were so difficult that it brought the project to the brink of being aborted. ‘ There were multiple times when we nearly shelved it because there were fundamental problems that we couldn't solve ’, said Sir Jonathan. ‘ I would put the phone to my ear and my ear dialled a number. The challenge is that you have to then detect all sorts of ear shapes, chin shapes, skin col- our and hairdos. We had to develop technology, basically a number of sensors, to inform the phone that “this is now going up to an ear, please deactivate the touchscreen”. ’

Security during development was obsessively tight. For example, the senior Apple executive in charge of developing what would later become known as the iOS operating system was told that he could choose anyone

he wanted from within Apple to join the embryonic iPhone team, but he was not allowed to hire anybody from outside the company. He could not even convey to potential team members exactly what they would be working on, just that it was a new and exciting project and that they would have to ‘ work hard, give up nights, and work weekends for years ’. When the development team formed, it was located on a separate and secured floor on Apple’s campus. The development area was ‘locked down’ with extensive use of badge readers and cameras. Team members might have to show their badges five or six times to gain access. Within Apple, the code name for the iPhone project was ‘Project Purple’ with the devel- opment area itself called the ‘purple dorm’ because the team worked continuously and so closely together that it felt ‘like a college dorm’. It smelled like pizza.

The aesthetics of the iPhone were treated as being just as important as the iPhone technology. This was the responsibility of Apple’s secretive industrial design group. Apple designer Christopher Stringer said that their objective was to create a ‘ new, original, and beau- tiful object [that was] so wonderful that you couldn't imagine how you'd follow it ’ . The design group, Stringer explained, was composed of 16 ‘maniacal’ individuals who shared one singular purpose – to ‘ imagine prod- ucts that don't exist and guide them to life ’. Team mem- bers worked closely together, often gathering around a ‘kitchen table’ where they exchanged ideas, often in a ‘brutally honest’ way. To the designers, even the tiniest

How the iPhone disrupted the smartphone market 2

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The innovation S-curve When new ideas are introduced in services, products or processes, they rarely have an impact that increases uniformly over time. Usually performance follows an S-shaped progression. So, in the early stages of the introduction of new ideas, although (often large) amounts of resources, time and effort are needed to introduce the idea, relatively small performance improvements are experienced. However, with time, as experience and knowledge about the new idea grow, performance increases. But as the idea becomes established, extending its performance further becomes increasingly difficult, see Figure 4.3 (a). But when one idea reaches its mature, ‘levelling-off’ period, it is vulnerable to a further new idea being intro- duced which, in turn, moves through its own S-shaped progression. This is how innovation works, the limits of one idea being reached which prompts a newer, better idea, with each new S-curve requiring some degree of redesign, see Figure 4.3 (b).

Incremental or radical innovation An obvious difference between how the pattern of new ideas emerges in different operations or industries is the rate and scale of innovation. Some industries, such as telecommunica- tions, enjoy frequent and often significant innovations. Others, such as house building, do have innovations, but they are usually less dramatic. So some innovation is radical, result- ing in discontinuous, ‘breakthrough’ change, while other innovations are more incremental leading to smaller, continuous changes. Radical innovation often includes large technolog- ical advancements which may require completely new knowledge and/or resources making existing services and products obsolete and therefore non-competitive. Incremental innova- tion, by contrast, is more likely to involve relatively modest technological changes, built upon existing knowledge and/or resources so existing products and services are not fundamentally

of details were important. They often would create up to 50 designs of a single component before moving on to computer-aided design modelling and the creation of physical mock-ups.

The fact that the Apple designers overcame several technology and production bugs during its development is partly a testament to the design team’s belief, both in their technological skills and in their understanding of what people will buy. Yet Apple avoids conducting

market research when designing its products, a policy introduced by Steve Jobs, its late chief executive. ‘ We absolutely don't do focus groups ’, said Ive. ‘ That’s designers and leaders abdicating responsibility. That’s them looking for an insurance policy, so if something goes wrong, they can say, well this focus group says that only 30 per cent of people are offended by this and, look, 40 per cent think it’s OK. What a focus group does is that it will guarantee mediocrity. ’

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Slow introduction Obstacles to

further development

overcome

Idea approaches its natural limits

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Progressive introduction

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(a) The basic S-shaped improvement in performance (b) Innovation following multiple S-shaped curves

Figure 4.3 The S-shaped curve of innovation

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CHAPTER 4 PRODUCT AND SERVICE INNOVATION 113

changed. This is why established companies may favour incremental innovation because they have the experience of building up a significant pool of knowledge (on which incremental innovation is based). In addition, established companies are more likely to have a mindset that emphasizes continuity, perhaps not even recognizing potential innovative opportunities (see the ‘Operations in practice’ case on Kodak). New entrants to markets, however, have no established position to lose, nor do they have a vast pool of experience. They may be more likely to try for more radical innovation.

The Henderson–Clark model Although distinguishing between incremental and radical innovation is useful, it does not fully make clear why some companies succeed or fail at innovation. Two researchers, Henderson and Clark,3 looked at the question of why some established companies sometimes fail to exploit seemingly obvious incremental innovations. They answered this question by dividing the technological knowledge required to develop new products and services into ‘knowledge of the components of knowledge’ and ‘knowledge of how the components of knowledge link together’. They called this latter knowledge ‘architectural knowledge’. Figure 4.4 shows what has become known as the Henderson–Clark model. It refines the simpler idea of the split between incremental and radical innovation. In this model incremental innovation is built upon existing component and architectural knowledge, whereas radical innovation changes both component and architectural knowledge. Modular innovation is built on exist- ing architectural knowledge, but requires new knowledge for one or more components. By contrast, architectural innovation will have a great impact upon the linkage of components (or the architecture), but the knowledge of single components is unchanged.

So, for example, in healthcare services, simple (but useful and possibly novel at the time) innovations in a primary-care (general practitioner) doctors’ clinic, such as online appoint- ment websites, would be classed as incremental innovation because neither any elements nor the relationship between them are changed. If the practice invests in a new diagnostic heart scanner, that element of their diagnosis task has been changed and will probably need new knowledge, but the overall architecture of the service has not been changed. This innovation

High impact on architectural knowledge

Low impact on architectural knowledge

High impact on component knowledge

Low impact on component knowledge

Radical innovation

Architectural innovation

Modular innovation

Incremental innovation

New scanner Walk-in service

Primary healthcare example

Direct call-up service Telemedicine

Figure 4.4 The Henderson–Clark model

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would be classed as ‘modular’. An example of architectural innovation would be the practice providing ‘walk-in’ facilities in the local city cen- tre. It would provide more or less the same service as the regular sur- gery (no new components), but the relationship between the service and patients has changed. Finally, if the practice adopted some of the ‘telemedicine’ technology that monitors patient signs and can react to significant changes in patient condition, then this would be radi- cal innovation. The components are novel (monitors) as is the overall architecture of the service (distance diagnosis).

WHAT IS THE STRATEGIC ROLE OF PRODUCT AND SERVICE INNOVATION?

Innovation is a risky business. Not every idea is transformed, or is capable of being incorpo- rated into the design of a successful product or service. Sometimes this is because an inno- vative idea is just too challenging, at least with realistically available technology, or under prevailing market conditions. Sometimes the development cost is out of the reach of the busi- ness that had the original idea. Ideas may be abundant, but resources are limited. Yet despite the obstacles to successful innovation, almost all firms strive to be innovative. The reason is that there is overwhelming evidence that innovation can generate significant payback for the organizations that manage the incorporation of innovative ideas in the design of their prod- ucts and services. What matters is the ability to identify the innovations and manage their transformation into effective designs so that they can sustain competitive advantage and/or generate social payback.

Design makes innovative ideas useful It is worth repeating why design is so important. Good design takes innovative ideas and makes them practical. Good design also communicates the purpose of the product or ser- vice to its market, and brings financial rewards to the business. Product and service design, therefore, can be seen as starting and ending with the customer. So the design activity has one overriding objective: to provide products, services and processes which will satisfy the operation’s customers. Product designers try to achieve aesthetically pleasing designs which meet or exceed customers’ expectations. They also try to design a product which performs well and is reliable during its lifetime. Further, they should design the product so that it can be manufactured easily and quickly. Similarly, service designers try to put together a service which meets, or even exceeds, customer expectations. Yet at the same time the service must be within the capabilities of the operation and be delivered at reasonable cost.

✽ ✽ ✽ Operations principle Operations principle Operations principle Operations principle Operations principle Operations principle

Critical commentary

Remember that not all new services and products are created in response to a clear and articulated customer need. While this is usually the case, especially for products and services that are similar to (but presumably better than) their predecessors, more radical innovations are often brought about by the innovation itself creating demand. Customers do not usually know that they need something radical. For example, in the late 1970s people were not asking for microprocessors – they did not even know what they were. They were improvised by an engineer in the USA for a Japanese customer who made calculators. Only later did they become the enabling technology for the PC and after that the innumerable devices that now dominate our lives.

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CHAPTER 4 PRODUCT AND SERVICE INNOVATION 115

Design pays for itself 4 There is an increasingly common acceptance that design can add very significant value to all types of organization. A growing number of books, articles, reports and blogs have looked at companies and the benefits that they have gained by taking the design process seriously. This interest in design is partly because of the success of companies like Apple (see the ‘Operations in practice’ case earlier in this chapter), which are regarded as excellent at design. Numerous authors have confirmed the impact of design on performance. One report from the Design Council in the UK has shown that, on average, for every £1 businesses invest in design, they gain over £4 net operating profit, over £20 net turnover and over £5 net exports. 5

Design can add value to any organization. In particular, good design practice can:

● drive and operationalize innovation, increasing market share and opening up new markets; ● differentiate products and services, making them more attractive to customers, while

increasing consistency in the company’s range, and helping to ensure successful product launches;

● strengthen branding, so that products and services embody a company’s values; ● reduce the overall costs associated with innovation, through more efficient use of

resources, reduced project failure rate and faster time to market.

All of these benefits are strategic in that they very significantly affect the future of a busi- ness. As one company boss said, ‘ design is everything, because without it we have no business… There is intense competition, and anybody can design a decent product. They can't all design out- standing products. So, design is the differentiator .’

OPERATIONS IN PRACTICE

The once mighty Eastman Kodak Company dominated the pho- tographic and film markets for decades. But no longer: 30 years ago it employed over 140,000 people and made substantial profits; by 2010 it had shrunk to around 19,000, with regular quar- terly losses. This dramatic fall from grace is usually put down to the company ’s failure to see the approach of digital photography or fully appreciate how it would totally undermine Kodak’s traditional products. Yet, ironically, Kodak was more than ahead of its com- petitors than most people outside the company realized. It actually invented the digital camera. Sadly, though, it lacked the foresight to make the most of it. For years the company had, as one insider put it, ‘ too much technology in its labs rather than in the market ’.

It was back in 1975 when a newly hired scientist at Kodak, Steve Sasson, was given the task of research- ing how to build a camera using a comparatively new type of electronic sensor – the charged-coupled device (CCD). He found little previous research so he used the lens from a Kodak motion-picture camera, an ana-

logue-to-digital converter, some CCD chips and some digital cir- cuitry that he made himself. By December 1975 he had an oper- ational prototype. Yet the advance was largely, although not com- pletely, ignored inside the com- pany. ‘ Some people talked about reasons it would never happen, while others looked at it and real- ized it was important ’, he says. He

also decided not to use the word ‘digital’ to describe his trial product. ‘ I proposed it as filmless photography, an electronic stills camera. Calling it “digital” would not have been an advantage. Back then “digital” was not a good term. It meant new, esoteric technology. ’ Some resistance came from genuine, if mistaken, technical reservations. But others feared the magnitude of the changes that digital photography could bring. Objections ‘ were com- ing from the gut: a realization that [digital] would change everything – and threaten the company’s entire film-based business model ’ . Some see Kodak’s reluctance to aban- don its traditional product range as understandable. It was making vast profits and as late as 1999 it was making over $3 billion from film sales. Todd Gustavson, Curator

The sad tale of Kodak and its digital camera 6

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The design activity is itself a process Producing design innovations for products and services is itself a process that conforms to the input–transformation–output model described in Chapter 1 . Although organizations will have their own particular ways of managing innovation and design, the design process itself is essen-

tially very similar across a whole range of industries. It therefore has to be designed and managed like any other process. Broadly, the better the design process is managed, the better the products and service offering. Figure 4.5 illustrates the design activity as an input–transformation– output diagram. The transformed resource inputs will consist mainly of information in the form of market forecasts, market preferences, techni- cal data, potential design ideas, and so on. It is these ideas and informa-

tion that will be transformed in the design process into the final design. Transforming resource inputs includes the operations and design managers who manage the process, together with specialist technical staff with the specific knowledge necessary to solve design problems. They also may include suppliers, other collaborators, and even especially interested customer groups (sometimes called ‘lead users’) who are brought in to provide their expertise. Transforming resources may also include computer-aided design (CAD) equipment and software.

Design process objectives The performance of the design process can be assessed in much the same way as we would consider the products and services that result from it, namely in terms of quality, speed, dependability, flexibility and cost. Here we also include ‘sustainability’ as a design objective. It is, of course, included as part of the ‘triple bottom line’ objectives, as explained in Chapter 2 , but because product and service design has

such an influence on sustainability, we include it alongside our normal operational-level objectives. These performance objectives have just as much relevance for innovation as they do for the ongoing delivery of offerings once they are introduced to the market.

of Technology at the George Eastman House Museum, says that ‘ Kodak was almost recession-proof until the rise of digital. A film-coating machine was like a device

that printed money. ’ So Kodak’s first digital camera, the Quicktake, was licensed to and sold by Apple in 1994.

In 2012 Kodak filed for bankruptcy protection.

OutputsInputs

Transformed resources, e.g. • Technical information • Market information • Time information • Design ideas

Transforming resources, e.g. • Test and design equipment • Design and technical sta� • Lead user (customer) feedback • Supplier advice • Collaborators

Designs produced to appropriate standards of… • Quality • Speed • Dependability • Flexibility • Cost • Sustainability

The product/service design innovation

process

Figure 4.5 The design activity is itself a process

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What does quality mean for the design process? Design quality is not always easy to define precisely, especially if customers are relatively sat- isfied with existing product and service offerings. Many software companies talk about the ‘I don't know what I want, but I'll know when I see it’ syndrome, meaning that only when customers use the software are they in a position to articulate what they do or do not require. Nevertheless, it is possible to distinguish high- and low-quality designs (although this is easier to do in hindsight) by judging them in terms of their ability to meet market requirements. In doing this, the distinction between the specification quality and the conformance quality of designs is important. No business would want a design process that was indifferent to ‘errors’ in its designs, yet some are more tolerant than others. For example, in pharmaceutical devel- opment the potential for harm is particularly high because drugs directly affect our health. This is why the authorities insist on such a prolonged and thorough ‘design’ process (more usually called ‘development’ in that industry). Although withdrawing a drug from the market is unusual, it does occasionally occur. Far more frequent are the ‘product recalls’ that are rela- tively common in, for example, the automotive industry. Many of these are design related and the result of ‘conformance’ failures in the design process. The ‘specification’ quality of design is different. It means the degree of functionality, or experience, or aesthetics, or whatever the product or service is primarily competing on. Some businesses require product or service designs that are relatively basic (although free from errors), while others require designs that are clearly special in terms of the customer response they hope to elicit.

What does speed mean for the design process? The speed of design matters more to some industries than others. For example, design inno- vation in construction and aerospace happens at a much slower pace than in clothing or microelectronics. However, rapid design innovation or ‘time-based competition’ has become the norm for an increasing number of industries. Sometimes this is the result of fast- changing consumer fashion. Sometimes a rapidly changing technology base forces it. Telecoms, for example, are updated frequently because their underlying technology is constantly improv- ing. Yet, no matter what the motivation, fast design brings a number of advantages:

● Early market launch – an ability to innovate speedily is that product and service offerings can be introduced to the market earlier and thus earn revenue for longer, and may com- mand price premiums.

● Starting design late – alternatively, starting the design process later may have advantages, especially where either the nature of customer demand or the availability of technology is uncertain and dynamic, so fast design allows design decisions to be made closer to the time when product and service offerings are introduced to the market.

● Frequent market stimulation – rapid innovations allow frequent new or updated offerings to be introduced into the market.

What does dependability mean for the design process? Rapid design processes that cannot be relied on to deliver dependably are, in reality, not fast at all. Design schedule slippage can extend design times, but, worse, a lack of dependability adds to the uncertainty surrounding the innovation process. Conversely, processes that are dependable minimize design uncertainty. Unexpected technical difficulties, such as suppliers who themselves do not deliver solutions on time, customers or markets that change during the innovation process itself, and so on, all contribute to an uncertain and ambiguous design environment. Professional project management (see Chapter 19) of the innovation process can help to reduce uncertainty and prevent (or give early warning of) missed deadlines, pro- cess bottlenecks and resource shortages. However, external disturbances to the innovation process will remain. These may be minimized through close liaison with suppliers as well as market or environmental monitoring. Nevertheless, unexpected disruptions will always occur and the more innovative the design, the more likely they are to occur. This is why flexibility

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within the innovation process is one of the most important ways in which dependable deliv- ery of new product and service offerings can be ensured.

What does flexibility mean for the design process? Flexibility in the innovation process is the ability to cope with external or internal change. The most common reason for external change is because markets, or specific customers, change their requirements. Although flexibility may not be needed in relatively predictable markets, it is clearly valuable in more fast-moving and volatile markets, where one’s own cus- tomers and markets change, or where the designs of competitors’ offerings dictate a matching or leapfrogging move. Internal changes include the emergence of superior technical solu- tions. In addition, the increasing complexity and interconnectedness of product and service components in an offering may require flexibility. A bank, for example, may bundle together a number of separate services for one particular segment of its market. Privileged account hold- ers may obtain special deposit rates, premium credit cards, insurance offers, travel facilities, and so on, together in the same package. Changing one aspect of this package may require changes to be made in other elements. So extending the credit card benefits to include extra travel insurance may also mean the redesign of the separate insurance element of the pack- age. One way of measuring innovation flexibility is to compare the cost of modifying a design in response to such changes against the consequences to profitability if no changes are made. The lower the cost of modifying an offering in response to a given change, the higher is the level of flexibility.

What does cost mean for the design process? The cost of innovation is usually analysed in a similar way to the ongoing cost of delivering offerings to customers. These cost factors are split up into three categories: the cost of buying the inputs to the process, the cost of providing the labour in the process, and the other general overhead costs of running the process. In most in-house innovation processes the latter two costs outweigh the former.

One way of thinking about the effect of the other innovation performance objectives on cost is shown in Figure 4.6. Whether caused by quality errors, an intrinsically slow innovation process, a lack of project dependability, or delays caused through inflexibility, the end result is that the design is late. Delayed completion of the design results in both more expenditure on the design and delayed (and probably reduced) revenue. The combination of these effects usually means that the financial break-even point for a new offering is delayed far more than the original delay in its launch.

What does sustainability mean for the design process? The sustainability of a design innovation is the extent to which it benefits the ‘triple bot- tom line’ – people, planet and profit. When organizations carry out their design innova- tion activities, they should consider their objectives in relation to this triple bottom line. The design innovation process is particularly important in ultimately impacting the ethical, environmental and economic well-being of stakeholders. And incorporating sustainability criteria in the design process is increasingly common. Sometimes this is because of exter- nal pressures, such as new legislation, sometimes because of changing customer attitudes. For example, some innovation activity is particularly focused on the ethical dimension of sustainability. Banks have moved to offer customers ethical investments that seek to maxi- mize social benefit as well as financial returns. Such investments tend to avoid businesses involved in weaponry, gambling, alcohol and tobacco, for example, and favour those pro- moting worker education, environmental stewardship and consumer protection. Other examples of ethically focused innovations include the development of ‘fair-trade’ products. Similarly, garment manufacturers may establish ethical trading initiatives with suppliers; supermarkets may ensure animal welfare for meat and dairy products; online companies may institute customer complaint charters.

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Design innovation may also focus on the environmental dimension of sustainability. Critically examining the components of products towards a change of materials in the design could significantly reduce the environmental burden. Examples include the use of organic cotton or bamboo in clothing; wood or paper from managed forests used in garden furniture, stationery and flooring; recycled materials for carrier bags; and natural dyes in clothing, curtains and upholstery. Other innovations may be more focused on the use stage of an offering. The MacBook Air, for example, introduced an advanced power management system that reduced its power requirements. In the detergent industry, Unilever and Proctor & Gamble have developed products that allow clothes to be washed at much lower temperatures. Architecture firms are increasingly designing houses that can operate with minimal energy or use sustainable sources of energy such as solar pan- els. Some innovations focus on making product components within an offering easier to recycle or remanufacture once they have reached the end of their life. For example, some food packaging has been designed to break down easily when disposed of, allowing its conversion into high-quality compost. Mobile phones are often designed to be taken apart at the end of their life, so valuable raw materials can be reused. In the automotive indus- try, over 75 per cent of materials are recycled.

WHAT ARE THE STAGES OF PRODUCT AND SERVICE INNOVATION?

Fully specified designs rarely spring, fully formed, from a designer’s imagination. The design activity will generally pass through several key stages. These form the sequence shown in Figure 4.7 , although in practice designers will often recycle or backtrack through the stages. Nor is this sequence of stages descriptive of the stages used by all

Delay in time to market

Cash

Delay in financial

break-even

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Cash flow

Delayed sales revenue

Delayed cash flow

Development costs

Development costs of delayed project

Time

Figure 4.6 Delay in time to market of new innovations not only reduces and delays revenues, but also increases the costs of development. The combination of both of these effects usually delays the financial break-even point far more than the delay in the launch

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companies, yet most will use some stage model similar to this one. It moves from the concept generation stage to a screening stage, a preliminary design stage that produces a design to be evaluated and prototyped before reaching the final design.

Concept generation This is where innovative ideas become the inspiration for new service or product concepts. And innovation can come from many different sources:

● Ideas from customers – Marketing, the function generally responsible for identifying new service or product opportunities, may use market research tools for gathering data from customers in a structured way to test out ideas or check services or products against prede- termined criteria.

● Listening to customers – Ideas may come from customers on a day-to-day basis; from complaints, or from everyday transactions. Although some organizations may not see gathering this information as important (and may not even have mechanisms in place to facilitate it), it is an important potential source of ideas.

● Ideas from competitor activity – Most organizations follow the activities of their compet- itors. A new idea from a competitor may be worth imitating or, better still, improved upon. Taking apart a competitor’s product or service to explore potential new ideas is called ‘reverse engineering’. Some aspects of services may be difficult to reverse-engineer (espe- cially ‘back-office’ services) as they are less transparent to competitors.

● Ideas from staff – The contact staff in a service organization or the salesperson in a product-oriented organization could meet customers every day. These staff may have good ideas about what customers like and do not like. They may have gathered suggestions from customers or have ideas of their own. One well-known example – which may be urban myth – is that an employee at Swan Vestas, the matchmaker, suggested having one instead of two sandpaper strips on the matchbox. It saved a fortune!

● Ideas from research and development – Many organizations have a formal research and development (R&D) function. As its name implies, its role is twofold. Research devel- ops new knowledge and ideas in order to solve a particular problem or to grasp an oppor- tunity. Development utilizes and operationalizes the ideas that come from research. And although ‘development’ may not sound as exciting as ‘research’, it often requires as much creativity and even more persistence. One product has commemorated the persistence of its development engineers in its company name. Back in 1953 the Rocket Chemical Company set out to create a rust-prevention solvent and degreaser to be used in the aero- space industry. It took them 40 attempts to get the water-displacing formula worked out. So that is what they called the product. WD-40 literally stands for Water Displacement, 40th attempt.

Open sourcing – using a ‘development community’7

Not all ‘products’ or services are created by professional, employed designers for com- mercial purposes. Many of the software applications that we all use, for example, are developed by an open community, including the people who use the products. If you use Google, the Internet search facility, or use Wikipedia, the online encyclopaedia, or shop at

Concept generation

Concept screening

Preliminary design

Evaluation and

improvement

Prototyping and final design

Figure 4.7 The stages of product/service design innovation

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Amazon, you are using open-source software. The basic concept of open-source software is extremely simple. Large communities of people around the world, who have the abil- ity to write software code, come together and produce a software product. The finished product is not only available to be used by anyone or any organization for free, but also regularly updated to ensure it keeps pace with the necessary improvements. The produc- tion of open-source software is very well organized and, like its commercial equivalent, is continuously supported and maintained. However, unlike its commercial equivalent, it is absolutely free to use. Over the last few years the growth of open source has been phenomenal, with many organizations transitioning over to using this stable, robust and secure software. With the maturity that open-source software now has to offer, organ- izations have seen the true benefits of using free software to drive down costs and to establish themselves on a secure and stable platform. Open source has been the biggest change in software development for decades and is setting new open standards in the way software is used. The open nature of this type of development also encourages com- patibility between products. BMW, for example, was reported to be developing an open- source platform for vehicle electronics. Using an open-source approach, rather than using proprietary software, BMW can allow providers of ‘infotainment’ services to develop com- patible, plug-and-play applications.

Crowdsourcing8

Closely related to the open sourcing idea is that of ‘crowdsourcing’. Crowdsourcing is the process of getting work or funding, or ideas (usually online), from a crowd of people. Although in essence it is not a totally new idea, it has become a valuable source of ideas largely through the use of the Internet and social networking. For example, Procter & Gamble, the consumer products company, asked amateur scientists to explore ideas for a detergent dye whose colour changes when enough has been added to dishwater. Other uses of the idea involve government agencies asking citizens to prioritize spending (or cutting spending) projects.

Parallel-path approach Because the likelihood of successful innovation coming from a single source of ideas is highly uncertain, it has been argued that firms could improve the odds of innovation success by using what is sometimes termed a ‘parallel-path strategy’. This simply means utilizing a vari- ety of different sources and approaches to generating ideas.

Traditionally, it was assumed that there was a trade-off between the depth and breadth of the usefulness of the ideas that can come from various sources. One could pursue a few sources of ideas in depth or a wide range of sources in a relatively shallow manner. In addition, the marginal cost of exploring a new source may increase as the number of sources examined increases. So, the breadth of knowledge sources also may be subject to diminishing marginal returns. However, more recent research9 suggests that firms also may improve their odds of successful innovation by accessing a large number of knowl- edge sources.

Ideas management Obtaining new product or service ideas (or indeed any innovative ideas) from employ- ees was traditionally done through the use of paper-based ‘suggestion schemes’ where employees placed their ideas in a ‘suggestion box’. Such schemes were often only partly effective, yielding few, low-quality ideas. Unless the running of the scheme was well resourced it could be difficult to guarantee that all ideas were evaluated consistently and quickly. Also, the scheme could lose credibility unless employees could track their ideas to confirm that they ‘didn't just disappear’. However, the advent of ‘idea management’ soft- ware tools has overcome some of these difficulties. Ideas management systems are a type of enterprise software (often web-based) that can help operations to collect ideas from

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employees, assess them and, if appropriate, implement them quickly and efficiently. Such systems can track ideas all the way though from inception to implementation, making it much easier to understand important performance measures such as where ideas are being generated, how many ideas submitted are actually implemented, the estimated cost savings from submitted ideas and any new revenues generated by implemented ideas. Often ideas management systems are used to focus ideas on specific organizational tar- gets and objectives, which it is claimed improved both the quality and quantity of ideas, when compared with ‘open’ suggestion schemes.

Concept screening Not all concepts which are generated will necessarily be capable of further development into products and services. Designers need to be selective as to which concepts they progress to the next design stage. The purpose of the concept-screening stage is to evaluate concepts by assessing the worth or value of design options. This involves assessing each concept or option against a number of design criteria. While the criteria used in any particular design exercise will depend on the nature and circumstances of the exercise, it is useful to think in terms of three broad categories of design criteria:

● The feasibility of the design option – can we do it? ● Do we have the skills (quality of resources)? ● Do we have the organizational capacity (quantity of resources)? ● Do we have the financial resources to cope with this option?

OPERATIONS IN PRACTICE

It sounds like a joke, but it is a genuine product innovation motivated by a market need. It is green, square and comes originally from Japan. It is a square watermelon! Why square? Because Japanese grocery stores are not large and space cannot be wasted. Similarly a round water- melon does not fit into a refrigerator very conveniently. There is also the problem of trying to cut the fruit when it keeps rolling around. So an innovative farmer from Japan’s south-western island of Shikoku solved the problem with the idea of making a cube-shaped watermelon which could easily be packed and stored. But there is no genetic modification or clever science involved in growing water- melons. It simply involves placing the young fruit into wooden boxes with clear sides. During its growth, the fruit naturally swells to fill the surrounding shape. Now the idea has spread from Japan. ‘ Melons are among the most delicious and refreshing fruit around but some people find them a problem to store in their fridge or to cut because they roll around ’, said Damien Sutherland, the exotic fruit buyer from Tesco, the UK supermarket. ‘ We've seen sam- ples of these watermelons and they literally stop you in their tracks because they are so eye-catching. These square mel- ons will make it easier than ever to eat because they can be served in long strips rather than in the crescent shape .’ But

Square watermelons! 10

not everyone liked the idea. Comments on news websites included: ‘ where will engineering every day things for our own unreasonable convenience stop? I prefer melons to be the shape of melons! ’; ‘ they are probably working on straight bananas next! ’; and ‘ I would like to buy square sausages then they would be easier to turn over in the frying pan. Round sausages are hard to keep cooked all over .’

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● The acceptability of the design option – do we want to do it? ● Does the option satisfy the performance criteria which the design is trying to achieve?

(These will differ for different designs.) ● Will our customers want it? ● Does the option give a satisfactory financial return?

● The vulnerability of each design option – do we want to take the risk? That is: ● Do we understand the full consequences of adopting the option? ● Being pessimistic, what could go wrong if we adopt the option?

What would be the consequences of everything going wrong? (This is called the ‘downside risk’ of an option.)

The design ‘funnel’ Applying these evaluation criteria progressively reduces the number of options which will be available further along in the design activity. For example, deciding to make the outside casing of a camera case from aluminium rather than plastic limits later decisions, such as the overall size and shape of the case. This means that the uncertainty surrounding the design reduces as the number of alternative designs being considered decreases. Figure 4.8 shows what is sometimes called ‘the design funnel’, depicting the progressive reduction of design options from many to one. But reducing design uncertainty also impacts the cost of chang- ing one’s mind on some detail of the design. In most stages of design the cost of changing a decision is bound to incur some sort of rethinking and recalculation of costs. Early on in the design activity, before too many fundamental decisions have been made, the costs of change are relatively low. However, as the design progresses the interrelated and cumulative deci- sions already made become increasingly expensive to change.

Preliminary design Having generated an acceptable, feasible and viable product or service concept the next stage is to create a preliminary design. The objective of this stage is to have a first attempt at specify- ing the individual components or elements of the products and services, and the relationship between them, which will constitute the final offering.

✽ ✽ ✽ Operations principle Operations principle Operations principle

Figure 4.8 The design funnel – progressively reducing the number of possibilities until the final design is reached

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124 PART ONE DIRECTING THE OPERATION

Specifying the components of the design The first task in this stage of design is to define exactly what will go into the product or service. This will require the collection of information about such things as the constituent component parts which make up the product or service package and the component (or product) structure, the order in which the component parts of the package have to be put together. For example, the components for a remote ‘presentation’ mouse may include the presentation mouse itself, a receiver unit and packaging. All these three items are made up of components, which are, in turn, made up of other components, and so on. A ‘component structure’ is the diagram that shows how these components all fit together to make the final product ( see Fig. 4.9 ).

Reducing design complexity Simplicity is usually seen as a virtue among designers of products and services. The most elegant design solutions are often the simplest. However, when an operation produces a variety of products or services (as most do) the range of products and services consid- ered as a whole can become complex, which, in turn, increases costs. Designers adopt a number of approaches to reducing the inherent complexity in the design of their prod-

ucts or service range. Here we describe three common approaches to complexity reduction: standardization, commonality and modularization.

Standardization Operations sometimes attempt to overcome the cost penalties of high variety by standardizing their products, services or processes. This allows them to restrict variety to that which has real value for

the end customer. Often it is the operation’s outputs which are standardized. Examples of this are fast food restaurants, discount supermarkets or telephone-based insurance companies. Perhaps the most common example of standardization is the clothes which most us of buy. Although everybody’s body shape is different, garment manufacturers produce clothes in only a limited number of sizes. The range of sizes is chosen to give a reasonable fit for most body shapes. To suit all their potential customers and/or to ensure a perfect fit, garment manufacturers would have to provide an unfeasibly large range of sizes. Alternatively, they would need to provide a customized service. Both solutions

Critical commentary

Not everyone agrees with the concept of the design funnel. For some it is just too neat and ordered an idea to reflect accurately the creativity, arguments and chaos that sometimes characterize the design activity. First, they argue, managers do not start out with an infinite number of options. No one could process that amount of information – and, anyway, designers often have some set solutions in mind, looking for an opportunity to be used. Second, the number of options being considered often increases as time goes by. This may actually be a good thing, especially if the activity was unimaginatively specified in the first place. Third, the real process of design often involves cycling back, often many times, as potential design solutions raise fresh questions or become dead ends. In summary, the idea of the design funnel does not describe what actually happens in the design activity. Neither does it necessarily even describe what should happen.

✽ ✽ ✽ Operations principle Operations principle Operations principle Operations principle Operations principle Operations principle

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CHAPTER 4 PRODUCT AND SERVICE INNOVATION 125

would have a significant impact on cost. This control of variety is an important issue with most companies. A danger facing established operations is that they allow variety to grow excessively. They are then faced with the task of variety reduction, often by assessing the real profit or contribution of each service or product. Many organizations have signif- icantly improved their profitability by careful variety reduction. In order to overcome loss of business, customers may be offered alternative products or services which provide similar value.

Commonality Using common elements within a product or service product can also simplify design com- plexity. Using the same components across a range of automobiles is a common practice. Likewise, standardizing the format of information inputs to a process can be achieved by using appropriately designed forms or screen formats. The more different product and services can be based on common components, the less complex it is to produce them. For example, the European aircraft maker, Airbus, has designed its aircraft with a high degree of commonality. This meant that 10 aircraft models ranging from the 100-seat A318 through to the world’s largest aircraft, the A380 with over 500 seats, feature vir- tually identical flight decks, common systems and similar handling characteristics. In some cases, such as the entire A320 family, the aircraft even share the same ‘pilot-type rating’, which enables pilots with a single licence to fly any of them. The advantages of commonality for the airline operators include a much shorter training time for pilots and engineers when they move from one aircraft to another. This offers pilots the possibility of flying a wide range of routes from short haul to ultra-long haul and leads to greater efficiencies because common maintenance procedures can be designed with maintenance teams capable of servicing any aircraft in the same family. Also, when up to 90 per cent of all parts are common within a range of aircraft, there is a reduced need to carry a wide range of spare parts.

Level 3

Level 4

Level 2

Level 1

Remote presentation mouse

Receiver unit Packing

R/C unit

USB connector LeafletOuter

LogoMoulding Control unitMoulding

TransmitterButton

Upper cover Main

assembly

Presentation mouse

Level 0

Figure 4.9 The component structure of a remote mouse

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126 PART ONE DIRECTING THE OPERATION

Modularization The use of modular design principles involves designing standardized ‘sub-components’ of a product or service which can be put together in different ways. It is possible to create wide choice through the fully interchangeable assembly of various combinations of a smaller number of standard sub-assemblies; computers are designed in this way, for example. These standardized modules, or sub-assemblies, can be produced in higher volume, thereby reduc- ing their cost. Similarly, the package holiday industry can assemble holidays to meet a specific customer requirement, from pre-designed and purchased air travel, accommodation, insur- ance, and so on. In education also there is an increasing use of modular courses which allow ‘customers’ choice but permit each module to have economical volumes of students.

OPERATIONS IN PRACTICE

In 1907 a janitor called Murray Spangler put together a pillowcase, a fan, an old biscuit tin, and a broom han- dle. It was a great innovation – the world’s first vacuum cleaner – but not one that he ever capitalized on. One year later he had sold his patented idea to William Hoover whose company went on to dominate the vac- uum cleaner market for decades, especially in its US homeland. Yet when Hoover’s market share dropped significantly, it was because a futuristic looking and com- paratively expensive rival product, the Dyson vacuum cleaner, had jumped from nothing to a position where it dominated the market. The product may have been new, but the company was not. The Dyson product dates back to 1978 when James (now Sir James) Dyson noticed how the air filter in the spray-finishing room of a com- pany where he had been working was constantly clog- ging with power particles ( just like a vacuum cleaner bag clogs with dust). So he designed and built an industrial cyclone tower, which removed the powder particles by exerting centrifugal forces. The question intriguing him was: ‘ Could the same principle work in a domestic vacuum cleaner? ’ Five years and five thousand prototypes later he had a working design, since praised for its ‘uniqueness and functionality ’. However, existing vacuum cleaner manufacturers were not as impressed – two rejected the design outright. So Dyson started making his new design himself. Within a few years Dyson cleaners were, in the UK, outselling the rivals who had once rejected them. The aesthetics and functionality of the design help to keep sales growing in spite of a higher retail price. To Dyson, good ‘ is about looking at everyday things with new eyes and working out how they can be made bet- ter. It’s about challenging existing technology. ’ Then the Dyson engineers took the technology one stage further and developed core separator technology to capture even more microscopic dirt. Dirt now goes through three stages of separation. First, dirt is drawn into a pow- erful outer cyclone. Centrifugal forces fling larger debris

such as pet hair and dust particles into the clear bin at 500 g (the maximum g -force the human body can take is 8 g ). Second, a further cyclonic stage, the core separa- tor, removes dust particles as small as 0.5 microns from the airflow – particles so small you could fit 200 of them on this full stop. Finally, a cluster of smaller, even faster cyclones generates centrifugal forces of up to 150,000 g , extracting particles as small as mould and bacteria.

Other innovations followed. The Dyson Airblade is an electric hand dryer that dries hands quicker (around 10 seconds) and uses less electricity than conventional hand

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Design evaluation and improvement The purpose of this stage in the design innovation activity is to take the preliminary design and subject it to a series of evaluations to see if it can be improved before the service or prod- uct is tested in the market. There are a number of techniques that can be employed at this stage to evaluate and improve the preliminary design. Perhaps the best known is quality func- tion deployment (QFD).

Quality function deployment The key purpose of QFD is to try to ensure that the eventual innovation actually meets the needs of its customers. It is a technique that was developed in Japan at Mitsubishi’s Kobe shipyard and used extensively by Toyota, the motor vehicle manufacturer, and its suppliers. It is also known as the ‘house of quality’ (because of its shape) and the ‘voice of the customer’ (because of its purpose). The technique tries to capture what the customer needs and how it might be achieved. Figure 4.10 shows a simple QFD matrix used in the design of a promo- tional USB data storage pen. The QFD matrix is a formal articulation of how the company sees the relationship between the requirements of the customer (the whats ) and the design characteristics of the new product (the hows ):

● The whats , or ‘customer requirements’, are the list of competitive factors which customers find significant. Their relative importance is scored, in this case on a 10-point scale, with price scoring the highest.

● The competitive scores indicate the relative performance of the product, in this case on a 1 to 5 scale. Also indicated are the performances of two competitor products.

● The hows , or ‘design characteristics’ of the product, are the various ‘dimensions’ of the design, which will operationalize customer requirements within the product or service.

● The central matrix (sometimes called the relationship matrix) represents a view of the inter- relationship between the whats and the hows . This is often based on value judgements made by the design team. The symbols indicate the strength of the relationship. All the relation- ships are studied, but in many cases, where the cell of the matrix is blank, there is none.

● The bottom box of the matrix is a technical assessment of the product. This contains the absolute importance of each design characteristic.

● The triangular ‘roof’ of the ‘house’ captures any information the team has about the corre- lations (positive or negative) between the various design characteristics

Prototyping and final design At around this stage in the design activity it is necessary to turn the improved design into a prototype so that it can be tested. It may be too risky to launch a product or service before testing it out, so it is usually more appropriate to create a ‘prototype’ (in the case of a product) or ‘trial’ (in the case of a service). Product prototypes include everything from clay models to computer simulations. Service trials may also include computer simulations but also the actual implementation of the service on a pilot basis. Many retailing organizations pilot new products and services in a small number of stores in order to test customers’ reaction to them.

dryers. Then came the Dyson Air Multiplier™: fans and fan heaters that work very differently to conventional fans and electric heaters. They do not have fast- spinning blades that chop the air and cause uncomfortable buf- feting. Instead, they use Air Multiplier™ technology to draw in air and amplify it up to 18 times, producing an uninterrupted stream of smooth air. Sir James, who remains chief engineer and sole shareholder in Dyson,

said the heater was part of the company’s effort to turn itself into a ‘ broad-line technology company ’ rather than being seen as only an appliance maker. ‘ I would not limit the company to particular areas of technology or markets. We are developing a range of technologies to improve both industrial and consumer products so that the people using them get a better experience than with the compa- rable items that currently exist. ’

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Virtual reality-based simulations allow businesses to test new products and services as well as visualize and plan the processes that will produce them. Individual component parts can be positioned together virtually and tested for fit or interference. Even virtual workers can be introduced into the prototyping system to check for ease of assembly or operation.

Computer-aided design (CAD) CAD systems provide the computer-aided ability to create and modify product drawings. These systems allow conventionally used shapes such as points, lines, arcs, circles and text to be added to a computer-based representation of the product. Once incorporated into the design, these entities can be copied, moved about, rotated through angles, magnified or deleted. The designs thus created can be saved in the memory of the system and retrieved for later use. This enables a library of standardized drawings of parts and components to be built up. The most obvious advantage of CAD systems is that their ability to store and retrieve design data quickly, as well as their ability to manipulate design details, can considerably increase the productivity of the design activity. In addition to this, however, because changes can be made rapidly to designs, CAD systems can considerably enhance the flexibility of the design activity, enabling modifications to be made much more rapidly. Further, the use of standardized libraries of shapes and entities can reduce the possibility of errors in the design.

Alpha and beta testing A distinction that originated in the software development industry, but has spread into other areas, is that between the alpha and beta testing of a product or service. Most software prod- ucts include both alpha and beta test phases, both of which are intended to uncover ‘bugs’

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Figure 4.10 QFD matrix for a promotional USB data storage stick

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CHAPTER 4 PRODUCT AND SERVICE INNOVATION 129

(errors) in the product. Not surprisingly alpha testing comes before beta testing. Alpha testing is essentially an internal process where the developers or manufacturers (or sometimes an outside agency that they have commissioned) examine the product for errors. Generally, it is also a private process, not open to the market or potential customers. Although it is intended to look for errors that otherwise would emerge when the product is in use, it is in effect per- formed in a virtual or simulated environment, rather than in ‘the real world’. After alpha test- ing, the product is released for beta testing. Beta testing is when the product is released for testing by selected customers. It is an external ‘pilot test’ that takes place in the ‘real world’ (or near real world, because it is still a relatively small, and short, sample) before commercial production. By the time a product gets to the beta stage most of the worst defects should have been removed, but the product may still have some minor problems that may only become evident with user participation. This is why beta testing is almost always performed at the user’s premises without any of the development team present. Beta testing is also sometimes called ‘field testing’, pre-release testing, customer validation, customer acceptance testing, or user acceptance testing.

OPERATIONS IN PRACTICE

Design innovation is not just confined to the initial conception of a product; it also applies to the end of its life. This idea is often called ‘designing for the circu- lar economy’. The ‘circular economy’ is proposed as an alternative to the traditional linear economy (or make– use–dispose as it is termed). The idea is to keep products in use for as long as possible, extract the maximum value from them while in use, and then recover and regener- ate products and materials at the end of their service life. But the circular economy is much more than a concern for recycling as opposed to disposal. The circular econ- omy examines what can be done right along the supply and use chain so that as few resources as possible are used, then (and this is the important bit) recover and regenerate products at the end of their conventional life. This means designing products for longevity, reparability, ease of dismantling and recycling.

Typical of the companies that have either adopted this idea, or been set up specially to promote it, is Newlife Paints, based on the south coast of England. It ‘remanufactures’ waste water-based paint back into a premium-grade emulsion. All products in the com- pany’s paint range guarantee a minimum 50 per cent recycled content, made up from waste paint diverted from landfill or incineration. The idea for the company began to take root in the mind of an industrial chemist, Keith Harrison. His garage was becoming a little unruly, after many years of do-it-yourself projects. Encouraged by his wife to clear out the mess, he realized that the stacked-up tins of paint represented a shocking waste. It was then that his search began for a sensible and envi- ronmentally responsible solution to waste paint. ‘ I kept

thinking I could do something with it, the paint had an intrinsic value. It would have been a huge waste just to throw it away ’, said the former industrial chemist. Keith thought somebody must be recycling it, but no one was, and he set about finding a way to reprocess waste paint back to a superior-grade emulsion. After two years of research, he successfully developed his technology, which involves removing leftover paint from tins that have been diverted from landfill, and blending and fil- tering them to produce colour-matched new paints. The company has also launched a premium brand, aimed at affluent customers with a green conscience, called Reborn Paints, the development of which was partly funded by Akzo Nobel, maker of Dulux Paints. Although Keith started small (in his garage) he now licenses his technology to companies such as the giant waste com- pany Veolia. ‘ By licensing we can have more impact and spread internationally ’, he says. He also points out that manufacturers could plan more imaginatively for the

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130 PART ONE DIRECTING THE OPERATION

WHAT ARE THE BENEFITS OF INTERACTIVE PRODUCT AND SERVICE INNOVATION?

Treating each stage of design innovation as totally separate and sequential activities (as we have just done) is a little misleading. As we said earlier, it is common for companies to cycle back through stages, sometimes several times. Also it is increasingly common to break down the once ridged boundaries between each stage in the design innovation process. This applies especially to the boundary between the design of the product or service and the design of the process that will produce it.

It is generally considered a mistake to separate product and service design from process design. Operations managers should have some involvement from the initial evaluation of the concept right through to the production of the product or service and its introduction to the market. Merging the stages of the design innovation process is sometimes called ‘interactive design’. The main benefit of merging stages is seen to be a reduction in the elapsed time for the whole design innovation activity, from concept through to market introduction. This is often called the time to market (TTM). The argument in favour of reducing time to market is that doing so gives increased competitive advantage. For example, if it takes a company five years to develop a product from concept to market, with a given set of resources, it can intro- duce a new product only once every five years. If its rival can develop products in three years, it can introduce its new product, together with its (presumably) improved performance, once every three years. This means that the rival company does not have to make such radical improvements in performance each time it introduces a new product, because it is introduc- ing its new products more frequently. In other words, shorter TTM means that companies get more opportunities to improve the performance of their services or products.

Three factors in particular have been suggested which can significantly reduce time to market for a service or product:

● Simultaneous development of the various stages in the overall process. ● An early resolution of design conflict and uncertainty. ● An organizational structure which reflects the development project.

Simultaneous development We described the design innovation process as essentially a set of individual, predetermined stages, each with a clear starting and an ending point. The implicit assumption is that one stage is completed before the next one commences. Indeed, this step-by-step, or sequential, approach has traditionally been the typical form of product/service development. It has some advantages. The process is easy to manage and control because each stage is clearly defined. In addition, each stage is completed before the next stage is begun, so each stage can focus its skills and expertise on a limited set of tasks. However, the main problem of the sequential approach is that it is both time consuming and costly. When each stage is separate, with a clearly defined set of tasks, any difficulties encountered during the design at one stage might necessitate the design being halted while responsibility moves back to the previous stage. This sequential approach is shown in Figure 4.11 (a).

Yet often there is really little need to wait until the absolute finalization of one stage before starting the next. For example, perhaps while generating the concept, the evaluation activity

afterlife of their products. For example, simply adding more symbols to packs to assist sorting waste paints into types would help. ‘ At the moment we're fighting fires,

because the paints we pull out of the waste stream today were manufactured five or so years ago, when the circular economy was barely on the horizon ’, he says.

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CHAPTER 4 PRODUCT AND SERVICE INNOVATION 131

of screening and selection could be started. It is likely that some con- cepts could be judged as ‘non-starters’ relatively early on in the pro- cess of idea generation. Similarly, during the screening stage, it is likely that some aspects of the design will become obvious before the phase is finally complete. Therefore, the preliminary work on these parts of the design could be commenced at that point. This principle can be taken right through all the stages, one stage commencing before the previous one has finished, so there is simultaneous or concurrent work on the stages ( see Fig. 4.11 (b)). (Note that simultaneous development is often called simultaneous (or concurrent) engineering in manufacturing operations.)

First stage in the innovation activity

Second stage in the innovation activity

Third stage in the innovation activity

(b) Simultaneous arrangement of the stages in the innovation activity

(a) Sequential arrangement of the stages in the innovation activity

etc.

etc.

= Communication between stages

First stage in the innovation activity

Second stage in the innovation activity

Third stage in the innovation activity

Figure 4.11 (a) Sequential arrangement of the stages in the design activity; (b) simultaneous arrangement of the stages in the design activity

✽ ✽ ✽ Operations principle Operations principle Operations principle

OPERATIONS IN PRACTICE

Most companies are obsessed with reducing the time to market (TTM) of their design process. Short TTM means lower development costs and more opportunities to hit the market with new designs. Some automobile com- panies have reduced the design time for their products to less than three years, while a new smartphone (a far

more dynamic market) can be developed in as little as six months. So why does IKEA, the most successful homeware retailer ever, take five years to design its kitchens? Because, with the huge volumes that IKEA sells, development costs are small compared with the savings that can result from product designs that bring down the final price in its stores.

IKEA’s slow development process 13

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