TIM HW5

Product Design and Development, Fifth Edition, blends the perspectives of marketing, design, and manufacturing into a single approach to product development. As a result, the book provides students with an appreciation for the realities of industrial practice and for the complex and essential roles played by the various members of product development teams. For industrial practitioners, in particular, the book provides a set of product development methods that can be put into immediate practice on development projects.

In addition, an industrial example or case study illustrates every method in the book. A different product example is used in each chapter to add interest and to illustrate that the methods can be applied to a wide range of products, from industrial equipment to consumer goods.

Highlights of this edition include: New chapter, Opportunity Identification (Ch. 3), explains the process of finding new product opportunities and choosing the most promising ones for development.

New chapter, Design for Environment (Ch. 12), explains the importance of environmental sustainability and teaches a method to make better design decisions to reduce the environmental impact of products.

New example in Chapter 2 presents the product development process and organization at Tyco International replacing the AMF example in earlier editions.

Chapter 17, Product Development Economics, has been revised to include a graphical method to understand financial uncertainties in product development.

Updated examples and data, new insights from recent research and innovations in practice, and other revisions have been incorporated throughout the book.

To supplement the text, the authors have developed a website for instructors, students, and practitioners, www.ulrich-eppinger.net, which contains additional references, examples, and links to available resources related to the product development topics.

Fifth Edition

Product Design and Development

Fifth Edition

Product Design and Developm ent

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Product Design and Development

Fifth Edition

Karl T. Ulrich University of Pennsylvania

Steven D. Eppinger Massachusetts Institute of Technology

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PRODUCT DESIGN AND DEVELOPMENT, FIFTH EDITION

Published by McGraw-Hill, a business unit of The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, NY 10020. Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. Previous editions © 2008, 2004, a nd 2000. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of The McGraw-Hill Companies, Inc., including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning.

Some ancillaries, including electronic and print components, may not be available to customers outside the United States.

This book is printed on acid-free paper.

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ISBN 978-0-07-340477-6 MHID 0-07-340477-2

Vice President & Editor-in-Chief: Brent Gordon Vice President & Director of Specialized Publishing: Janice M. Roerig-Blong Editorial Director: Paul Ducham Managing Developmental Editor: Laura Hurst Spell Associate Marketing Manager: Jaime Halteman Project Manager: Erin Melloy Buyer: Laura Fuller Design Coordinator: Margarite Reynolds Cover Designer: Studio Montage, St. Louis, Missouri Media Project Manager: Balaji Sundararaman Compositor: Aptara®, Inc. Typeface: 10/12 Times Roman Printer: R. R. Donnelley

All credits appearing on page or at the end of the book are considered to be an extension of the copyright page.

Library of Congress Cataloging-in-Publication Data

Ulrich, Karl T. Product design and development / Karl T. Ulrich, Steven D. Eppinger.—5th ed. p. cm. Includes bibliographical references and index. ISBN 978-0-07-340477-6 (hardback) 1. Industrial management. 2. Production management. 3. Industrial engineering. 4. New products—Management. I. Eppinger, Steven D. II. Title. HD31.U47 2011 658.5�752—dc22 2011008557

www.mhhe.com

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To the professionals who shared their experiences with us and to the product development teams we hope will benefit from those experiences.

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About the Authors Karl T. Ulrich University of Pennsylvania is the CIBC Professor and Vice Dean of Innovation at the Wharton School at the Univer- sity of Pennsylvania and is also Professor of Mechanical Engineering. He received the S.B., S.M., and Sc.D. degrees in Mechanical Engineering from MIT. Professor Ulrich has led the development efforts for many products, including medical devices and sport- ing goods, and is the founder of several technology-based companies. As a result of this work, he has received more than 20 patents. His current research concerns technological innovation, product design, and environmental issues.

Steven D. Eppinger Massachusetts Institute of Technology is the General Motors LGO Professor of Management Science and Innovation at the Massachusetts Institute of Technology Sloan School of Management and is also Profes- sor of Engineering Systems at MIT. He received the S.B., S.M., and Sc.D. degrees in Mechanical Engineering from MIT and served as Deputy Dean of the MIT Sloan School for five years. He specializes in the management of complex product development pro- cesses and has worked extensively with the automobile, electronics, aerospace, medical devices, and capital equipment industries. His current research is aimed at the creation of improved product development practices and project management techniques.

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Preface This book contains material developed for use in the interdisciplinary courses on product development that we teach. Participants in these courses include graduate students in en- gineering, industrial design students, and MBA students. While we aimed the book at in- terdisciplinary graduate-level audiences such as this, many faculty teaching graduate and undergraduate courses in engineering design have also found the material useful. Product Design and Development is also for practicing professionals. Indeed, we could not avoid writing for a professional audience, because most of our students are themselves profes- sionals who have worked either in product development or in closely related functions.

This book blends the perspectives of marketing, design, and manufacturing into a single approach to product development. As a result, we provide students of all kinds with an appreciation for the realities of industrial practice and for the complex and essential roles played by the various members of product development teams. For industrial prac- titioners, in particular, we provide a set of product development methods that can be put into immediate practice on development projects.

A debate often heard in the academic community relates to whether design should be taught primarily by establishing a foundation of theory or by engaging students in loosely supervised practice. For the broader activity of product design and development, we reject both approaches when taken to their extremes. Theory without practice is ineffec- tive because there are many nuances, exceptions, and subtleties to be learned in practical settings and because some necessary tasks simply lack sufficient theoretical underpin- nings. Practice without guidance can too easily result in frustration and fails to exploit the knowledge that successful product development professionals and researchers have accumulated over time. Product development, in this respect, is like sailing: proficiency is gained through practice, but some theory of how sails work and some instruction in the mechanics (and even tricks) of operating the boat help tremendously.

We attempt to strike a balance between theory and practice through our emphasis on methods. The methods we present are typically step-by-step procedures for completing tasks, but rarely embody a clean and concise theory. In some cases, the methods are sup- ported in part by a long tradition of research and practice, as in the chapter on product development economics. In other cases, the methods are a distillation of relatively recent and ad hoc techniques, as in the chapter on design for environment. In all cases, the meth- ods provide a concrete approach to solving a product development problem. In our expe- rience, product development is best learned by applying structured methods to ongoing project work in either industrial or academic settings. Therefore, we intend this book to be used as a guide to completing development tasks either in the context of a course project or in industrial practice.

An industrial example or case study illustrates every method in the book. We chose to use different products as the examples for each chapter rather than carrying the same example through the entire book. We provide this variety because we think it makes the

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vi Preface

book more interesting and because we hope to illustrate that the methods can be applied to a wide range of products, from industrial equipment to consumer products.

We designed the book to be extremely modular—it consists of 18 independent chap- ters. Each chapter presents a development method for a specific portion of the product development process. The primary benefit of the modular approach is that each chapter can be used independently of the rest of the book. This way, faculty, students, and practi- tioners can easily access the material they find most useful.

This fifth edition of the book includes new chapters on opportunity identification and design for environment, as well as updated examples and data, new insights from recent research and innovations in practice, and revisions throughout the book.

To supplement this textbook, we have developed a Web site on the Internet. This is intended to be a resource for instructors, students, and practitioners. We will keep the site current with additional references, examples, and links to available resources related to the product development topics in each chapter. Please make use of this information via the Internet at www.ulrich-eppinger.net.

The application of structured methods to product development also facilitates the study and improvement of development processes. We hope, in fact, that readers will use the ideas in this book as seeds for the creation of their own development methods, uniquely suited to their personalities, talents, and company environments. We encourage readers to share their experiences with us and to provide suggestions for improving this material. Please write to us with your ideas and comments at [email protected] and [email protected].

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vii

Acknowledgments Hundreds of people contributed to this book in large and small ways. We are grateful to the many industrial practitioners who provided data, examples, and insights. We appreci- ate the assistance we have received from numerous academic colleagues, research assis- tants, and support staff, from our sponsors, and from the McGraw-Hill team. Indeed we could not have completed this project without the cooperation and collaboration of many professionals, colleagues, and friends. Thank you all.

Financial support for much of the development of this textbook came from the Alfred P. Sloan Foundation, from the MIT Leaders for Manufacturing Program, and from the MIT Center for Innovation in Product Development.

Many industrial practitioners helped us in gathering data and developing examples. We would particularly like to acknowledge the following: Richard Ahern, Liz Altman, Lindsay Anderson, Terri Anderson, Mario Belsanti, Mike Benjamin, Scott Beutler, Bill Burton, Michael Carter, Jim Caruso, Pat Casey, Scott Charon, Victor Cheung, Alan Cook, David Cutherell, Tim Davis, Tom Davis, John Elter, George Favaloro, Marc Filerman, David Fitzpatrick, Gregg Geiger, Anthony Giordano, David Gordon, Kamala Grasso, Matt Haggerty, Rick Harkey, Matthew Hern, Alan Huffenus, Art Janzen, Randy Jezowski, Carol Keller, Matt Kressy, Edward Kreuzer, David Lauzun, Peter Lawrence, Brian Lee, David Levy, Jonathan Li, Albert Lucchetti, Paul Martin, Doug Miller, Leo Montagna, Al Nagle, John Nicklaus, Hossain Nivi, Chris Norman, Paolo Pascarella, E. Timothy Pawl, Paul Piccolomini, Amy Potts, Earl Powell, Jason Ruble, Virginia Runkle, Nader Sabbaghian, Mark Schurman, Norm Seguin, David Shea, Wei-Ming Shen, Sonja Song, Leon Soren, Paul Staelin, Michael Stephens, Scott Stropkay, Larry Sullivan, Malcom Taylor, Brian Vogel, David Webb, Bob Weisshappel, Dan Williams, Gabe Wing, and Mark Winter.

We have received tremendous assistance from our colleagues who have offered fre- quent encouragement and support for our somewhat unusual approach to teaching and research, some of which is reflected in this book. We are especially indebted to the MIT Leaders for Manufacturing (LFM) Program and to the MIT Center for Innovation in Product Development (CIPD), two exemplary partnerships involving major manufactur- ing firms and MIT’s engineering and management schools. We have benefited from col- laboration with the faculty and staff associated with these programs, especially Gabriel Bitran, Kent Bowen, Don Clausing, Tom Eagar, Charlie Fine, Woodie Flowers, Steve Graves, John Hauser, Rebecca Henderson, Maurice Holmes, Tom Magnanti, Kevin Otto, Don Rosenfield, Warren Seering, Shoji Shiba, Anna Thornton, Jim Utterback, Eric von Hippel, Dave Wallace, and Dan Whitney. We have received financial support from LFM, CIPD, and the Gordon Book Fund. Most important, LFM and CIPD partner companies have provided us with unparalleled access to industrial projects and research problems in product development and manufacturing.

Several faculty members have helped us by reviewing chapters and providing feed- back from their in-class trials in teaching with this material. We are particularly grateful

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viii Acknowledgments

to these reviewers and “beta testers”: Alice Agogino, Don Brown, Steve Brown, Charles Burnette, Gary Cadenhead, Roger Calantone, Cho Lik Chan, Kim Clark, Morris Cohen, Denny Davis, Michael Duffey, William Durfee, Donald Elger, Josh Eliashberg, David Ellison, Woodie Flowers, Gary Gabriele, Paulo Gomes, Abbie Griffin, Marc Harrison, Rebecca Henderson, Tim Hight, Mike Houston, Marco Iansiti, Kos Ishii, R. T. Johnson, Kyoung-Yun “Joseph” Kim, Annette Köhler, Viswanathan Krishnan, Yuyi Lin, Richard Locke, Bill Lovejoy, Jeff Meldman, Farrokh Mistree, Wanda Orlikowski, Louis Padulo, Matthew Parkinson, Robert Pelke, Warren Seering, Paul Sheng, Robert Smith, Carl Sorensen, Mark Steiner, Cassandra Telenko, Christian Terwiesch, Chuck Turtle, Marcie Tyre, Dan Whitney, Kristin Wood, and Khim-Teck Yeo.

Several industrial practitioners and training experts have also assisted us by reviewing and commenting on draft chapters: Wesley Allen, Geoffrey Boothroyd, Gary Burchill, Clay Burns, Eugene Cafarelli, James Carter, Kimi Ceridon, David Cutherell, Gerard Furbershaw, Jack Harkins, Gerhard Jünemann, David Meeker, Ulrike Närger, B. Joseph Pine II, William Townsend, Brian Vogel, and John Wesner.

We also wish to acknowledge the more than 1,000 students in the classes in which we have tested these teaching materials. These students have been in several teaching programs at MIT, Helsinki University of Technology, Rhode Island School of Design, HEC Paris, STOA (Italy), University of Pennsylvania, and Nanyang Technological University (Singapore). Many students provided constructive comments for improving the structure and delivery of the material finally contained here. Also, our experiences in observing the students’ use of these methods in product development projects have greatly helped us refine the material.

Several MIT students served as research assistants to help investigate many of the development methods, examples, and data contained in the first edition of this book. These individuals are Michael Baeriswyl (Chapter 12), Paul Brody (Chapter 11), Tom Foody (Chapter 17), Amy Greenlief (Chapter 14), Christopher Hession (Chapter 4), Eric Howlett (Chapter 8), Tom Pimmler (Chapter 13 Appendices), Stephen Raab (Chapter 18), Harrison Roberts (Chapter 13 Appendices), Jonathan Sterrett (Chapter 5), and Gavin Zau (Chapter 7).

Other MIT students have also contributed by assisting with data collection and by of- fering comments and stimulating criticisms related to some of the chapters: Tom Abell, E. Yung Cha, Steve Daleiden, Russell Epstein, Matthew Fein, Brad Forry, Mike Frauens, Ben Goss, Daniel Hommes, Bill Liteplo, Habs Moy, Robert Northrop, Leslie Prince Rudolph, Vikas Sharma, and Ranjini Srikantiah. We also appreciate the assistance of the MIT Sloan support staff over several years: Stephen Arnold, Yubettys Baez, Cara Barber, Anna Piccolo, Kristin Rocheleau, and Kathy Sullivan.

The staff throughout the McGraw-Hill/Irwin organization has been superb. We are par- ticularly grateful for the support of our sponsoring editor Laura Hurst Spell. We also ap- preciate the efforts of developmental editor Robin Bonner, project manager Erin Melloy, copy editor Rich Wright, photographer Stuart Cohen, and designer Margarite Reynolds.

Finally, we thank our families for their love and support. Our parents provided much encouragement. Nancy, Julie, Lauren, Andrew, Jamie, and Nathan have shown endless patience over the years of this ongoing product development project.

Karl T. Ulrich

Steven D. Eppinger

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Brief Contents About the Authors iv Preface v Acknowledgments vii

1 Introduction 1

2 Development Processes and Organizations 11

3 Opportunity Identification 33

4 Product Planning 53

5 Identifying Customer Needs 73

6 Product Specifications 91

7 Concept Generation 117

8 Concept Selection 143

9 Concept Testing 165

10 Product Architecture 183

11 Industrial Design 207

12 Design for Environment 229

13 Design for Manufacturing 253

14 Prototyping 289

15 Robust Design 311

16 Patents and Intellectual Property 331

17 Product Development Economics 353

18 Managing Projects 379

Index 405

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Contents

About the Authors iv Preface v Acknowledgments vii

Chapter 1 Introduction 1

Characteristics of Successful Product Development 2 Who Designs and Develops Products? 3 Duration and Cost of Product Development 5 The Challenges of Product Development 6 Approach of This Book 6

Structured Methods 7 Industrial Examples 7 Organizational Realities 7 Roadmap of the Book 8

References and Bibliography 10 Exercises 10 Thought Question 10

Chapter 2 Development Processes and Organizations 11

The Product Development Process 12 Concept Development: The Front-End Process 16 Adapting the Generic Product Development Process 18

Technology-Push Products 18 Platform Products 20 Process-Intensive Products 20 Customized Products 20 High-Risk Products 21 Quick-Build Products 21 Complex Systems 21

Product Development Process Flows 22 The Tyco Product Development Process 23

Product Development Organizations 25 Organizations Are Formed by Establishing Links among Individuals 25 Organizational Links May Be Aligned with Functions, Projects, or Both 25 Choosing an Organizational Structure 28 Distributed Product Development Teams 28

The Tyco Product Development Organization 30 Summary 30 References and Bibliography 31 Exercises 32 Thought Questions 32

Chapter 3 Opportunity Identification 33

What Is an Opportunity? 34 Types of Opportunities 34

Tournament Structure of Opportunity Identification 36

Effective Opportunity Tournaments 37 Opportunity Identification Process 39 Step 1: Establish a Charter 39 Step 2: Generate and Sense Many Opportunities 40

Techniques for Generating Opportunities 40 Step 3: Screen Opportunities 46 Step 4: Develop Promising Opportunities 47 Step 5: Select Exceptional Opportunities 47 Step 6: Reflect on the Results and the Process 49 Summary 50 References and Bibliography 50 Exercises 51 Thought Questions 51

Chapter 4 Product Planning 53

The Product Planning Process 54 Four Types of Product Development Projects 55 The Process 56

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Establishing Target Specifications 94 Step 1: Prepare the List of Metrics 95 Step 2: Collect Competitive Benchmarking Information 99 Step 3: Set Ideal and Marginally Acceptable Target Values 99 Step 4: Reflect on the Results and the Process 103

Setting the Final Specifications 103 Step 1: Develop Technical Models of the Product 105 Step 2: Develop a Cost Model of the Product 106 Step 3: Refine the Specifications, Making Trade-Offs Where Necessary 108 Step 4: Flow Down the Specifications as Appropriate 109 Step 5: Reflect on the Results and the Process 111

Summary 111 References and Bibliography 112 Exercises 113 Thought Questions 113 Appendix Target Costing 114

Chapter 7 Concept Generation 117

The Activity of Concept Generation 118 Structured Approaches Reduce the Likelihood of Costly Problems 119 A Five-Step Method 119

Step 1: Clarify the Problem 120 Decompose a Complex Problem into Simpler Subproblems 121 Focus Initial Efforts on the Critical Subproblems 123

Step 2: Search Externally 124 Interview Lead Users 124 Consult Experts 125 Search Patents 125 Search Published Literature 126 Benchmark Related Products 127

Step 3: Search Internally 127 Both Individual and Group Sessions Can Be Useful 128 Hints for Generating Solution Concepts 129

Step 1: Identify Opportunities 57 Step 2: Evaluate and Prioritize Projects 57

Competitive Strategy 58 Market Segmentation 58 Technological Trajectories 59 Product Platform Planning 60 Evaluating Fundamentally New Product Opportunities 61 Balancing the Portfolio 63

Step 3: Allocate Resources and Plan Timing 64 Resource Allocation 64 Project Timing 66 The Product Plan 66

Step 4: Complete Pre-Project Planning 66 Mission Statements 67 Assumptions and Constraints 68 Staffing and Other Pre-Project Planning Activities 69

Step 5: Reflect on the Results and the Process 69 Summary 70 References and Bibliography 70 Exercises 72 Thought Questions 72

Chapter 5 Identifying Customer Needs 73

Step 1: Gather Raw Data from Customers 76 Choosing Customers 78 The Art of Eliciting Customer Needs Data 79 Documenting Interactions with Customers 80

Step 2: Interpret Raw Data in Terms of Customer Needs 81 Step 3: Organize the Needs into a Hierarchy 83 Step 4: Establish the Relative Importance of the Needs 86 Step 5: Reflect on the Results and the Process 87 Summary 88 References and Bibliography 88 Exercises 89 Thought Questions 90

Chapter 6 Product Specifications 91

What Are Specifications? 92 When Are Specifications Established? 93

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Chapter 9 Concept Testing 165

Step 1: Define the Purpose of the Concept Test 167 Step 2: Choose a Survey Population 167 Step 3: Choose a Survey Format 168 Step 4: Communicate the Concept 169

Matching the Survey Format with the Means of Communicating the Concept 173 Issues in Communicating the Concept 173

Step 5: Measure Customer Response 175 Step 6: Interpret the Results 175 Step 7: Reflect on the Results and the Process 178 Summary 179 References and Bibliography 179 Exercises 180 Thought Questions 180 Appendix Estimating Market Sizes 181

Chapter 10 Product Architecture 183

What Is Product Architecture? 184 Types of Modularity 186 When Is the Product Architecture Defined? 187

Implications of the Architecture 187 Product Change 187 Product Variety 188 Component Standardization 189 Product Performance 189 Manufacturability 190 Product Development Management 191

Establishing the Architecture 191 Step 1: Create a Schematic of the Product 192 Step 2: Cluster the Elements of the Schematic 193 Step 3: Create a Rough Geometric Layout 195 Step 4: Identify the Fundamental and Incidental Interactions 196

Delayed Differentiation 197 Platform Planning 200

Differentiation Plan 200 Commonality Plan 201 Managing the Trade-Off between Differentiation and Commonality 202

Step 4: Explore Systematically 130 Concept Classification Tree 132 Concept Combination Table 134 Managing the Exploration Process 137

Step 5: Reflect on the Solutions and the Process 139 Summary 140 References and Bibliography 141 Exercises 142 Thought Questions 142

Chapter 8 Concept Selection 143

Concept Selection Is an Integral Part of the Product Development Process 144 All Teams Use Some Method for Choosing a Concept 145 A Structured Method Offers Several Benefits 148 Overview of Methodology 149 Concept Screening 150

Step 1: Prepare the Selection Matrix 150 Step 2: Rate the Concepts 151 Step 3: Rank the Concepts 152 Step 4: Combine and Improve the Concepts 152 Step 5: Select One or More Concepts 152 Step 6: Reflect on the Results and the Process 153

Concept Scoring 154 Step 1: Prepare the Selection Matrix 154 Step 2: Rate the Concepts 155 Step 3: Rank the Concepts 156 Step 4: Combine and Improve the Concepts 156 Step 5: Select One or More Concepts 156 Step 6: Reflect on the Results and the Process 157

Caveats 157 Summary 159 References and Bibliography 159 Exercises 160 Thought Questions 161 Appendix A Concept-Screening Matrix Example 162 Appendix B Concept-Scoring Matrix Example 163

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Chapter 12 Design for Environment 229

What Is Design for Environment? 231 Two Life Cycles 232 Environmental Impacts 233 History of Design for Environment 234 Herman Miller’s Journey toward Design for Environment 234

The Design for Environment Process 235 Step 1: Set the DFE Agenda: Drivers, Goals, and Team 236

Identify the Internal and External Drivers of DFE 236 Set the DFE Goals 237 Set Up the DFE Team 237

Step 2: Identify Potential Environmental Impacts 239 Step 3: Select DFE Guidelines 240 Step 4: Apply the DFE Guidelines to the Initial Product Design 242 Step 5: Assess the Environmental Impacts 243

Compare the Environmental Impacts to DFE Goals 244 Step 6: Refine the Product Design to Reduce or Eliminate the Environmental Impacts 244 Step 7: Reflect on the DFE Process and Results 245 Summary 247 References and Bibliography 247 Exercises 248 Thought Questions 249 Appendix Design for Environment Guidelines 250

Chapter 13 Design for Manufacturing 253

Design for Manufacturing Defined 255 DFM Requires a Cross-Functional Team 255 DFM Is Performed throughout the Development Process 255 Overview of the DFM Process 256

Step 1: Estimate the Manufacturing Costs 256 Transportation Costs 259 Fixed Costs versus Variable Costs 259 The Bill of Materials 260 Estimating the Costs of Standard Components 261

Related System-Level Design Issues 202 Defining Secondary Systems 203 Establishing the Architecture of the Chunks 203 Creating Detached Interface Specifications 204

Summary 204 References and Bibliography 205 Exercises 206 Thought Questions 206

Chapter 11 Industrial Design 207

What Is Industrial Design? 209 Assessing the Need for Industrial Design 211

Expenditures for Industrial Design 211 How Important Is Industrial Design to a Product? 211 Ergonomic Needs 212 Aesthetic Needs 213

The Impact of Industrial Design 213 Is Industrial Design Worth the Investment? 213 How Does Industrial Design Establish a Corporate Identity? 216

The Industrial Design Process 217 1. Investigation of Customer Needs 217 2. Conceptualization 217 3. Preliminary Refinement 218 4. Further Refinement and Final Concept

Selection 218 5. Control Drawings or Models 220 6. Coordination with Engineering, Manufacturing,

and External Vendors 220 The Impact of Computer-Based Tools on the ID Process 220

Management of the Industrial Design Process 221 Timing of Industrial Design Involvement 222

Assessing the Quality of Industrial Design 224 1. Quality of the User Interface 224 2. Emotional Appeal 224 3. Ability to Maintain and Repair the Product 224 4. Appropriate Use of Resources 226 5. Product Differentiation 226

Summary 226 References and Bibliography 227 Exercises 228 Thought Questions 228

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xiv Contents

Principles of Prototyping 297 Analytical Prototypes Are Generally More Flexible Than Physical Prototypes 297 Physical Prototypes Are Required to Detect Unanticipated Phenomena 297 A Prototype May Reduce the Risk of Costly Iterations 298 A Prototype May Expedite Other Development Steps 300 A Prototype May Restructure Task Dependencies 301

Prototyping Technologies 301 3D CAD Modeling and Analysis 301 Free-Form Fabrication 302

Planning for Prototypes 303 Step 1: Define the Purpose of the Prototype 303 Step 2: Establish the Level of Approximation of the Prototype 304 Step 3: Outline an Experimental Plan 304 Step 4: Create a Schedule for Procurement, Construction, and Testing 304 Planning Milestone Prototypes 305

Summary 306 References and Bibliography 307 Exercises 308 Thought Questions 308

Chapter 15 Robust Design 311

What Is Robust Design? 312 Design of Experiments 314 The Robust Design Process 315

Step 1: Identify Control Factors, Noise Factors, and Performance Metrics 315 Step 2: Formulate an Objective Function 316 Step 3: Develop the Experimental Plan 317

Experimental Designs 317 Testing Noise Factors 319

Step 4: Run the Experiment 321 Step 5: Conduct the Analysis 321

Computing the Objective Function 321 Computing Factor Effects by Analysis of Means 322

Step 6: Select and Confirm Factor Setpoints 323 Step 7: Reflect and Repeat 323

Estimating the Costs of Custom Components 261 Estimating the Cost of Assembly 262 Estimating the Overhead Costs 263

Step 2: Reduce the Costs of Components 264 Understand the Process Constraints and Cost Drivers 264 Redesign Components to Eliminate Processing Steps 265 Choose the Appropriate Economic Scale for the Part Process 265 Standardize Components and Processes 266 Adhere to “Black Box” Component Procurement 267

Step 3: Reduce the Costs of Assembly 268 Keeping Score 268 Integrate Parts 268 Maximize Ease of Assembly 269 Consider Customer Assembly 270

Step 4: Reduce the Costs of Supporting Production 270

Minimize Systemic Complexity 271 Error Proofing 271

Step 5: Consider the Impact of DFM Decisions on Other Factors 272

The Impact of DFM on Development Time 272 The Impact of DFM on Development Cost 272 The Impact of DFM on Product Quality 273 The Impact of DFM on External Factors 273

Results 273 Summary 275 References and Bibliography 276 Exercises 277 Thought Questions 278 Appendix A Materials Costs 279 Appendix B Component Manufacturing Costs 280 Appendix C Assembly Costs 286 Appendix D Cost Structures 287

Chapter 14 Prototyping 289

Understanding Prototypes 291 Types of Prototypes 291 What Are Prototypes Used For? 294

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Contents xv

When Should Economic Analysis Be Performed? 355 Economic Analysis Process 356

Step 1: Build a Base-Case Financial Model 356 Estimate the Timing and Magnitude of Future Cash Inflows and Outflows 356 Compute the Net Present Value of the Cash Flows 358 The Base-Case Financial Model Can Support Go/No-Go Decisions and Major Investment Decisions 359

Step 2: Perform Sensitivity Analysis 359 Development Cost Example 360 Development Time Example 361

Step 3: Use Sensitivity Analysis to Understand Project Trade-Offs 363

Six Potential Interactions 364 Trade-Off Rules 365 Limitations of Quantitative Analysis 366

Step 4: Consider the Influence of the Qualitative Factors on Project Success 367

Projects Interact with the Firm, the Market, and the Macro Environment 367 Carrying Out Qualitative Analysis 369

Summary 370 References and Bibliography 371 Exercises 372 Thought Questions 372 Appendix A Time Value of Money and the Net Present Value Technique 373 Appendix B Modeling Uncertain Cash Flows Using Net Present Value Analysis 375

Chapter 18 Managing Projects 379

Understanding and Representing Tasks 380 Sequential, Parallel, and Coupled Tasks 380 The Design Structure Matrix 382 Gantt Charts 383 PERT Charts 384 The Critical Path 384

Baseline Project Planning 385 The Contract Book 385 Project Task List 385

Caveats 324 Summary 324 References and Bibliography 325 Exercises 326 Thought Questions 326 Appendix Orthogonal Arrays 327

Chapter 16 Patents and Intellectual Property 331

What Is Intellectual Property? 332 Overview of Patents 333 Utility Patents 334 Preparing a Disclosure 334

Step 1: Formulate a Strategy and Plan 336 Timing of Patent Applications 336 Type of Application 337 Scope of Application 338

Step 2: Study Prior Inventions 338 Step 3: Outline Claims 339 Step 4: Write the Description of the Invention 340

Figures 341 Writing the Detailed Description 341 Defensive Disclosure 342

Step 5: Refine Claims 343 Writing the Claims 343 Guidelines for Crafting Claims 346

Step 6: Pursue Application 346 Step 7: Reflect on the Results and the Process 348 Summary 348 References and Bibliography 349 Exercises 349 Thought Questions 349 Appendix A Trademarks 350 Appendix B Advice to Individual Inventors 350

Chapter 17 Product Development Economics 353

Elements of Economic Analysis 354 Quantitative Analysis 354 Qualitative Analysis 354

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xvi Contents

Team Staffing and Organization 387 Project Schedule 388 Project Budget 389 Project Risk Plan 389 Modifying the Baseline Plan 391

Accelerating Projects 391 Project Execution 394

Coordination Mechanisms 394 Assessing Project Status 396 Corrective Actions 396

Postmortem Project Evaluation 398 Summary 399 References and Bibliography 400 Exercises 402 Thought Questions 402 Appendix Design Structure Matrix Example 403

Index 405

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Introduction

1

Clockwise from top left: Photo by Stuart Cohen; Copyright 2002 Hewlett-Packard Company. Reproduced with permission; Courtesy of Boeing; Courtesy of Volkswagen of America; Courtesy of Rollerblade, Inc.

C H A P T E R O N E C H A P T E R O N E

EXHIBIT 1-1 Examples of engineered, discrete, physical products (clockwise from top left): Stanley Tools Jobmaster Screwdriver, Hewlett-Packard DeskJet Printer, Boeing 777 Airplane, Volkswagen New Beetle, and Rollerblade In-Line Skate.

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2 Chapter 1

The economic success of most firms depends on their ability to identify the needs of customers and to quickly create products that meet these needs and can be produced at low cost. Achieving these goals is not solely a marketing problem, nor is it solely a design problem or a manufacturing problem; it is a product development problem involving all of these functions. This book provides a collection of methods intended to enhance the abilities of cross-functional teams to work together to develop products.

A product is something sold by an enterprise to its customers. Product development is the set of activities beginning with the perception of a market opportunity and ending in the production, sale, and delivery of a product. Although much of the material in this book is useful in the development of any product, we explicitly focus on products that are engineered, discrete, and physical. Exhibit 1-1 displays several examples of products from this category. Because we focus on engineered products, the book applies better to the development of power tools and computer peripherals than to magazines or sweaters. Our focus on discrete goods makes the book less applicable to the development of prod- ucts such as gasoline, nylon, and paper. Because of the focus on physical products, we do not emphasize the specific issues involved in developing services or software. Even with these restrictions, the methods presented apply well to a broad range of products, includ- ing, for example, consumer electronics, sports equipment, scientific instruments, machine tools, and medical devices.

The goal of this book is to present in a clear and detailed way a set of product devel- opment methods aimed at bringing together the marketing, design, and manufacturing functions of the enterprise. In this introductory chapter we describe some aspects of the industrial practice of product development and provide a roadmap of the book.

Characteristics of Successful Product Development

From the perspective of the investors in a for-profit enterprise, successful product devel- opment results in products that can be produced and sold profitably, yet profitability is often difficult to assess quickly and directly. Five more specific dimensions, all of which ultimately relate to profit, are commonly used to assess the performance of a product de- velopment effort:

• Product quality: How good is the product resulting from the development effort? Does it satisfy customer needs? Is it robust and reliable? Product quality is ultimately reflected in market share and the price that customers are willing to pay.

• Product cost: What is the manufacturing cost of the product? This cost includes spend- ing on capital equipment and tooling as well as the incremental cost of producing each unit of the product. Product cost determines how much profit accrues to the firm for a particular sales volume and a particular sales price.

• Development time: How quickly did the team complete the product development ef- fort? Development time determines how responsive the firm can be to competitive forces and to technological developments, as well as how quickly the firm receives the economic returns from the team’s efforts.

• Development cost: How much did the firm have to spend to develop the product? De- velopment cost is usually a significant fraction of the investment required to achieve the profits.

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Introduction 3

• Development capability: Are the team and the firm better able to develop future prod- ucts as a result of their experience with a product development project? Development capability is an asset the firm can use to develop products more effectively and eco- nomically in the future.

High performance along these five dimensions should ultimately lead to economic success; however, other performance criteria are also important. These criteria arise from interests of other stakeholders in the enterprise, including the members of the develop- ment team, other employees, and the community in which the product is manufactured. Members of the development team may be interested in creating an inherently exciting product. Members of the community in which the product is manufactured may be con- cerned about the degree to which the product creates jobs. Both production workers and users of the product hold the development team accountable to high safety standards, whether or not these standards can be justified on the strict basis of profitability. Other individuals, who may have no direct connection to the firm or the product, may demand that the product make ecologically sound use of resources and create minimal dangerous waste products.

Who Designs and Develops Products?

Product development is an interdisciplinary activity requiring contributions from nearly all the functions of a firm; however, three functions are almost always central to a product development project:

• Marketing: The marketing function mediates the interactions between the firm and its customers. Marketing often facilitates the identification of product opportunities, the definition of market segments, and the identification of customer needs. Marketing also typically arranges for communication between the firm and its customers, sets target prices, and oversees the launch and promotion of the product.

• Design: The design function plays the lead role in defining the physical form of the product to best meet customer needs. In this context, the design function includes en- gineering design (mechanical, electrical, software, etc.) and industrial design (aesthet- ics, ergonomics, user interfaces).

• Manufacturing: The manufacturing function is primarily responsible for designing, operating, and/or coordinating the production system in order to produce the product. Broadly defined, the manufacturing function also often includes purchasing, distribution, and installation. This collection of activities is sometimes called the supply chain.

Different individuals within these functions often have specific disciplinary training in areas such as market research, mechanical engineering, electrical engineering, materi- als science, or manufacturing operations. Several other functions, including finance and sales, are frequently involved on a part-time basis in the development of a new product. Beyond these broad functional categories, the specific composition of a development team depends on the particular characteristics of the product.

Few products are developed by a single individual. The collection of individuals de- veloping a product forms the project team. This team usually has a single team leader, who could be drawn from any of the functions of the firm. The team can be thought of as

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consisting of a core team and an extended team. In order to work together effectively, the core team usually remains small enough to meet in a conference room, while the ex- tended team may consist of dozens, hundreds, or even thousands of other members. (Even though the term team is inappropriate for a group of thousands, the word is often used in this context to emphasize that the group must work toward a common goal.) In most cases, a team within the firm will be supported by individuals or teams at partner compa- nies, suppliers, and consulting firms. Sometimes, as is the case for the development of a new airplane, the number of external team members may be even greater than that of the team within the company whose name will appear on the final product. The composition of a team for the development of an electromechanical product of modest complexity is shown in Exhibit 1-2.

Throughout this book we assume that the team is situated within a firm. In fact, a for-profit manufacturing company is the most common institutional setting for product development, but other settings are possible. Product development teams sometimes work within consulting firms, universities, government agencies, and nonprofit organizations.

Extended Team (Including Suppliers)

Core Team

Finance

Sales

Legal

Marketing Professional

Industrial Designer

Manufacturing Engineer

Mechanical Designer

Electronics Designer

Purchasing Specialist

TEAM LEADER

EXHIBIT 1-2 The composition of a product development team for an electromechanical product of modest complexity.

4 Chapter 1

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Duration and Cost of Product Development

Most people without experience in product development are astounded by how much time and money are required to develop a new product. The reality is that very few products can be developed in less than 1 year, many require 3 to 5 years, and some take as long as 10 years. Exhibit 1-1 shows five engineered, discrete products. Exhibit 1-3 is a table showing the approximate scale of the associated product development efforts along with some distinguishing characteristics of the products.

The cost of product development is roughly proportional to the number of people on the project team and to the duration of the project. In addition to expenses for develop- ment effort, a firm will almost always have to make some investment in the tooling and equipment required for production. This expense is often as large as the rest of the prod- uct development budget; however, it is sometimes useful to think of these expenditures as part of the fixed costs of production. For reference purposes, this production investment is listed in Exhibit 1-3 along with the development expenditures.

Introduction 5

Stanley Tools Rollerblade Hewlett-Packard Volkswagen Jobmaster In-Line DeskJet New Beetle Boeing 777 Screwdriver Skate Printer Automobile Airplane

Annual 100,000 100,000 4 million 100,000 50 production units/year units/year units/year units/year units/year volume

Sales lifetime 40 years 3 years 2 years 6 years 30 years

Sales price $5 $150 $130 $20,000 $260 million

Number of 3 parts 35 parts 200 parts 10,000 parts 130,000 parts unique parts (part numbers)

Development 1 year 2 years 1.5 years 3.5 years 4.5 years time

Internal 3 people 5 people 100 people 800 people 6,800 people development team (peak size)

External 3 people 10 people 75 people 800 people 10,000 people development team (peak size)

Development $150,000 $750,000 $50 million $400 million $3 billion cost

Production $150,000 $1 million $25 million $500 million $3 billion investment

EXHIBIT 1-3 Attributes of five products and their associated development efforts. All figures are approximate, based on publicly available information and company sources.

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The Challenges of Product Development

Developing great products is hard. Few companies are highly successful more than half the time. These odds present a significant challenge for a product development team. Some of the characteristics that make product development challenging are:

• Trade-offs: An airplane can be made lighter, but this action will probably increase manufacturing cost. One of the most difficult aspects of product development is recog- nizing, understanding, and managing such trade-offs in a way that maximizes the suc- cess of the product.

• Dynamics: Technologies improve, customer preferences evolve, competitors introduce new products, and the macroeconomic environment shifts. Decision making in an en- vironment of constant change is a formidable task.

• Details: The choice between using screws or snap-fits on the enclosure of a computer can have economic implications of millions of dollars. Developing a product of even modest complexity may require thousands of such decisions.

• Time pressure: Any one of these difficulties would be easily manageable by itself given plenty of time, but product development decisions must usually be made quickly and without complete information.

• Economics: Developing, producing, and marketing a new product requires a large in- vestment. To earn a reasonable return on this investment, the resulting product must be both appealing to customers and relatively inexpensive to produce.

For many people, product development is interesting precisely because it is challeng- ing. For others, several intrinsic attributes also contribute to its appeal:

• Creation: The product development process begins with an idea and ends with the production of a physical artifact. When viewed both in its entirety and at the level of individual activities, the product development process is intensely creative.

• Satisfaction of societal and individual needs: All products are aimed at satisfying needs of some kind. Individuals interested in developing new products can almost always find institutional settings in which they can develop products satisfying what they consider to be important needs.

• Team diversity: Successful development requires many different skills and talents. As a result, development teams involve people with a wide range of different training, ex- perience, perspectives, and personalities.

• Team spirit: Product development teams are often highly motivated, cooperative groups. The team members may be colocated so they can focus their collective energy on creating the product. This situation can result in lasting camaraderie among team members.

Approach of This Book

We focus on product development activities that benefit from the participation of all the core functions of the firm. For our purposes, we define the core functions as market- ing, design, and manufacturing. We expect that team members have competence in one or

6 Chapter 1

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more specific disciplines such as mechanical engineering, electrical engineering, indus- trial design, market research, or manufacturing operations. For this reason, we do not discuss, for example, how to perform a stress analysis or to create a conjoint survey. These are disciplinary skills we expect someone on the development team to possess. The integrative methods in this book are intended to facilitate problem solving and decision making among people with different disciplinary perspectives.

Structured Methods The book consists of methods for completing development activities. The methods are struc- tured, which means we generally provide a step-by-step approach and often provide templates for the key information systems used by the team. We believe structured methods are valu- able for three reasons: First, they make the decision process explicit, allowing everyone on the team to understand the decision rationale and reducing the possibility of moving forward with unsupported decisions. Second, by acting as “checklists” of the key steps in a develop- ment activity they ensure that important issues are not forgotten. Third, structured methods are largely self-documenting; in the process of executing the method, the team creates a record of the decision-making process for future reference and for educating newcomers.

Although the methods are structured, they are not intended to be applied blindly. The methods are a starting point for continuous improvement. Teams should adapt and modify the approaches to meet their own needs and to reflect the unique character of their institu- tional environment.

Industrial Examples Each remaining chapter is built around an example drawn from industrial practice. The major examples include the following: a wireless security system, a laser-based cat toy, a digital copier, a cordless screwdriver, a mountain bike suspension fork, a power nailer, a dose-metering syringe, an electric scooter, a computer printer, a mobile tele- phone, office seating products, an automobile engine, a mobile robot, a seat belt system, a coffee-cup insulator, a digital photo printer, and a microfilm cartridge. In most cases we use as examples the simplest products we have access to that illustrate the important aspects of the methods. When a screwdriver illustrates an idea as well as a jet engine, we use the screwdriver. However, every method in this book has been used successfully in industrial practice by hundreds of people on both large and small projects.

Although built around examples, the chapters are not intended to be historically accurate case studies. We use the examples as a way to illustrate development methods, and in doing so we recast some historical details in a way that improves the presentation of the material. We also disguise much of the quantitative information in the examples, especially financial data.

Organizational Realities We deliberately chose to present the methods with the assumption that the development team operates in an organizational environment conducive to success. In reality, some or- ganizations exhibit characteristics that lead to dysfunctional product development teams. These characteristics include:

• Lack of empowerment of the team: General managers or functional managers may engage in continual intervention in the details of a development project without a full understanding of the basis for the team’s decisions.

Introduction 7

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• Functional allegiances transcending project goals: Representatives of marketing, design, or manufacturing may influence decisions in order to increase the political standing of themselves or their functions without regard for the overall success of the product.

• Inadequate resources: A team may be unable to complete development tasks effec- tively because of a lack of staff, a mismatch of skills, or a lack of money, equipment, or tools.

• Lack of cross-functional representation on the project team: Key development deci- sions may be made without involvement of marketing, design, manufacturing, or other critical functions.

While most organizations exhibit one or more of these characteristics to some degree, the significant presence of these problems can be so stifling that sound development methods are rendered ineffective. While recognizing the importance of basic organiza- tional issues, we assume, for clarity of explanation, that the development team operates in an environment in which the most restrictive organizational barriers have been removed.

Roadmap of the Book We divide the product development process into six phases, as shown in Exhibit 1-4. (These phases are described in more detail in Chapter 2, Development Processes and Organizations.) This book describes the concept development phase in its entirety and the remaining phases less completely, because we do not provide methods for the more fo- cused development activities that occur later in the process. Each of the remaining chap- ters in this book can be read, understood, and applied independently.

• Chapter 2, Development Processes and Organizations, presents a generic product development process and shows how variants of this process are used in different in- dustrial situations. The chapter also discusses the way individuals are organized into groups in order to undertake product development projects.

• Chapter 3, Opportunity Identification, describes a process for creating, identifying, and screening ideas for new products.

• Chapter 4, Product Planning, presents a method for deciding which products to de- velop. The output of this method is a mission statement for a particular project.

• Chapters 5 through 9, Identifying Customer Needs, Product Specifications, Concept Generation, Concept Selection, and Concept Testing, present the key activities of the concept development phase. These methods guide a team from a mission statement through a selected product concept.

• Chapter 10, Product Architecture, discusses the implications of product architecture on product change, product variety, component standardization, product performance, manufacturing cost, and project management; it then presents a method for establish- ing the architecture of a product.

• Chapter 11, Industrial Design, discusses the role of the industrial designer and how human interaction issues, including aesthetics and ergonomics, are treated in product development.

• Chapter 12, Design for Environment, considers the environmental impacts associated with products and presents a method for reducing these impacts through better design decisions.

8 Chapter 1

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• Chapter 13, Design for Manufacturing, discusses techniques used to reduce manufac- turing cost. These techniques are primarily applied during the system-level and detail- design phases of the process.

• Chapter 14, Prototyping, presents a method to ensure that prototyping efforts, which occur throughout the process, are applied effectively.

• Chapter 15, Robust Design, explains methods for choosing values of design variables to ensure reliable and consistent performance.

• Chapter 16, Patents and Intellectual Property, presents an approach to creating a patent application and discusses the role of intellectual property in product development.

Introduction 9

Chapter 5: Identifying Customer Needs

Chapter 3: Opportunity Identification

Chapter 6: Product Specifications

Chapter 4: Product Planning

Chapter 2: Development Processes and Organizations

Chapter 7: Concept Generation

Chapter 8: Concept Selection

Chapter 9: Concept Testing

Chapter 10: Product Architecture

Chapter 11: Industrial Design

Chapter 12: Design for Environment

Chapter 14: Prototyping

Chapter 15: Robust Design

Chapter 16: Patents and Intellectual Property

Chapter 13: Design for Manufacturing

Many More-Focused Development Methods

Phase 0 Phase 1 Phase 2 Phase 4 Phase 5Phase 3 Planning Concept

Development System-Level

Design Detail Design

Testing and Refinement

Production Ramp-Up

Chapter 17: Product Development Economics

Chapter 18: Managing Projects

EXHIBIT 1-4 The product development process. The diagram shows where each of the integrative methods presented in the remaining chapters is most applicable.

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10 Chapter 1

• Chapter 17, Product Development Economics, describes a method for understanding the influence of internal and external factors on the economic value of a project.

• Chapter 18, Managing Projects, presents some fundamental concepts for understand- ing and representing interacting project tasks, along with a method for planning and executing a development project.

References and Bibliography A wide variety of resources for this chapter and for the rest of the book are available on the Internet. These resources include data, templates, links to suppliers, and lists of publications. Current resources may be accessed via www.ulrich-eppinger.net

Wheelwright and Clark devote much of their book to the very early stages of product development, which we cover in less detail.

Wheelwright, Stephen C., and Kim B. Clark, Revolutionizing Product Development: Quantum Leaps in Speed, Efficiency, and Quality, The Free Press, New York, 1992.

Katzenbach and Smith write about teams in general, but most of their insights apply to product development teams as well.

Katzenbach, Jon R., and Douglas K. Smith, The Wisdom of Teams: Creating the High-Performance Organization, Harvard Business School Press, Boston, 1993.

These three books provide rich narratives of development projects, including fascinating descriptions of the intertwined social and technical processes.

Kidder, Tracy, The Soul of a New Machine, Avon Books, New York, 1981.

Sabbagh, Karl, Twenty-First-Century Jet: The Making and Marketing of the Boeing 777, Scribner, New York, 1996.

Walton, Mary, Car: A Drama of the American Workplace, Norton, New York, 1997.

Exercises 1. Estimate what fraction of the price of a pocket calculator is required to cover the cost

of developing the product. To do this you might start by estimating the information needed to fill out Exhibit 1-3 for the pocket calculator.

2. Create a set of scatter charts by plotting each of the rows in Exhibit 1-3 against the development cost row. For each one, explain why there is or is not any correlation. (For example, you would first plot “annual production volume” versus “development cost” and explain why there seems to be no correlation. Then repeat for each of the remain- ing rows.)

Thought Question 1. Each of the chapters listed in Exhibit 1-4 presents a method for a portion of the prod-

uct development process. For each one, consider what types of skills and expertise might be required. Can you make an argument for staffing the development team from start to finish with individuals possessing all of these skills and areas of expertise?

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Development Processes and Organizations

11

Courtesy of Tyco International

C H A P T E R T W O

EXHIBIT 2-1 A wireless security alarm system control panel, one of Tyco’s products.

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12 Chapter 2

Tyco International is a leading manufacturer of sensors and controls, including home and industrial security systems. One of Tyco’s products is the wireless security alarm system control panel shown in Exhibit 2-1. Senior managers at Tyco wanted to establish a common product development process structure that would be appropriate for all of the many different operating divisions across the company. They also needed to create a product development organization that would allow Tyco to compete effectively in a va- riety of competitive business markets. Some of the questions Tyco faced were:

• What are the key product development activities that must be included in every project?

• What project milestones and review gates can be used to manage the overall develop- ment process by phases?

• Is there a standard development process that will work for every operating division?

• What role do experts from different functional areas play in the development process?

• Should the development organization be divided into groups corresponding to projects or to technical and business functions?

This chapter helps to answer these and related questions by presenting a generic de- velopment process and showing how this process can be adapted to meet the needs of particular industrial situations. We highlight the activities and contributions of different functions of the company during each phase of the development process. The chapter also explains what constitutes a product development organization and discusses why different types of organizations are appropriate for different settings.

The Product Development Process

A process is a sequence of steps that transforms a set of inputs into a set of outputs. Most people are familiar with the idea of physical processes, such as those used to bake a cake or to assemble an automobile. A product development process is the sequence of steps or activities that an enterprise employs to conceive, design, and commercialize a product. Many of these steps and activities are intellectual and organizational rather than physical. Some organizations define and follow a precise and detailed development process, while others may not even be able to describe their process. Furthermore, every organization employs a process at least slightly different from that of every other organization. In fact, the same enterprise may follow different processes for each of several different types of development projects.

A well-defined development process is useful for the following reasons:

• Quality assurance: A development process specifies the phases a development project will pass through and the checkpoints along the way. When these phases and check- points are chosen wisely, following the development process is one way of assuring the quality of the resulting product.

• Coordination: A clearly articulated development process acts as a master plan that defines the roles of each of the players on the development team. This plan informs the members of the team when their contributions will be needed and with whom they will need to exchange information and materials.

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Development Processes and Organizations 13

• Planning: A development process includes milestones corresponding to the comple- tion of each phase. The timing of these milestones anchors the schedule of the overall development project.

• Management: A development process is a benchmark for assessing the performance of an ongoing development effort. By comparing the actual events to the established process, a manager can identify possible problem areas.

• Improvement: The careful documentation and ongoing review of an organization’s de- velopment process and its results may help to identify opportunities for improvement.

The generic product development process consists of six phases, as illustrated in Exhibit 2-2. The process begins with a planning phase, which is the link to advanced research and technology development activities. The output of the planning phase is the project’s mission statement, which is the input required to begin the concept development phase and which serves as a guide to the development team. The conclusion of the prod- uct development process is the product launch, at which time the product becomes avail- able for purchase in the marketplace.

One way to think about the development process is as the initial creation of a wide set of alternative product concepts and then the subsequent narrowing of alternatives and in- creasing specification of the product until the product can be reliably and repeatably pro- duced by the production system. Note that most of the phases of development are defined in terms of the state of the product, although the production process and marketing plans, among other tangible outputs, are also evolving as development progresses.

Another way to think about the development process is as an information-processing system. The process begins with inputs such as the corporate objectives, strategic op- portunities, available technologies, product platforms, and production systems. Various activities process the development information, formulating specifications, concepts, and design details. The process concludes when all the information required to support pro- duction and sales has been created and communicated.

A third way to think about the development process is as a risk management system. In the early phases of product development, various risks are identified and prioritized. As the process progresses, risks are reduced as the key uncertainties are eliminated and the functions of the product are validated. When the process is completed, the team should have substantial confidence that the product will work correctly and be well received by the market.

Exhibit 2-2 also identifies the key activities and responsibilities of the different func- tions of the organization during each development phase. Because of their continuous involvement in the process, we choose to articulate the roles of marketing, design, and manufacturing. Representatives from other functions, such as research, finance, project management, field service, and sales, also play key roles at particular points in the process.

The six phases of the generic development process are:

0. Planning: The planning activity is often referred to as “phase zero” because it precedes the project approval and launch of the actual product development process. This phase begins with opportunity identification guided by corporate strategy and in- cludes assessment of technology developments and market objectives. The output of the planning phase is the project mission statement, which specifies the target market for the product, business goals, key assumptions, and constraints. Chapter 3, Opportunity

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EXHIBIT 2-2 The generic product development process. Six phases are shown, including some of the typical tasks and responsibilities of the key business functions for each phase.

Marketing • Articulate market

opportunity. • Define market

segments.

Design • Consider product

platform and architecture.

• Assess new technologies.

Manufacturing • Identify production

constraints. • Set supply chain

strategy.

Other Functions • Research:

Demonstrate available technologies.

• Finance: Provide planning goals.

• General Management: Allocate project resources.

• Collect customer needs.

• Identify lead users.

• Identify competitive products.

• Investigate feasibility of product concepts.

• Develop industrial design concepts.

• Build and test experimental prototypes.

• Estimate manufacturing cost.

• Assess production feasibility.

• Finance: Facilitate economic analysis.

• Legal: Investigate patent issues.

• Develop plan for product options and extended product family.

• Develop product architecture.

• Define major sub-systems and interfaces.

• Refine industrial design.

• Preliminary component engineering.

• Identify suppliers for key components.

• Perform make- buy analysis.

• Define final assembly scheme.

• Finance: Facilitate make- buy analysis.

• Service: Identify service issues.

• Develop marketing plan.

• Define part geometry.

• Choose materials.

• Assign tolerances.

• Complete industrial design control documentation.

• Define piece- part production processes.

• Design tooling. • Define quality

assurance processes.

• Begin procurement of long-lead tooling.

• Develop promotion and launch materials.

• Facilitate field testing.

• Test overall performance, reliability, and durability.

• Obtain regulatory approvals.

• Assess environmental impact.

• Implement design changes.

• Facilitate supplier ramp-up.

• Refine fabrication and assembly processes.

• Train workforce. • Refine quality

assurance processes.

• Sales: Develop sales plan.

• Place early production with key customers.

• Evaluate early production output.

• Begin full operation of production system.

• General Management: Conduct postproject review.

• •• • • •

Planning ConceptDevelopment System-Level

Design Detail Design

Testing and Refinement

Production Ramp-Up

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Identification, explains a process for gathering, evaluating, and choosing from a broad range of product opportunities. Chapter 4, Product Planning, presents a discussion of the subsequent product planning process.

1. Concept development: In the concept development phase, the needs of the target market are identified, alternative product concepts are generated and evaluated, and one or more concepts are selected for further development and testing. A concept is a descrip- tion of the form, function, and features of a product and is usually accompanied by a set of specifications, an analysis of competitive products, and an economic justification of the project. This book presents several detailed methods for the concept development phase (Chapters 5–9). We expand this phase into each of its constitutive activities in the next section.

2. System-level design: The system-level design phase includes the definition of the product architecture, decomposition of the product into subsystems and components, and preliminary design of key components. Initial plans for the production system and final assembly are usually defined during this phase as well. The output of this phase usually includes a geometric layout of the product, a functional specification of each of the prod- uct’s subsystems, and a preliminary process flow diagram for the final assembly process. Chapter 10, Product Architecture, discusses some of the important activities of system- level design.

3. Detail design: The detail design phase includes the complete specification of the geometry, materials, and tolerances of all of the unique parts in the product and the iden- tification of all of the standard parts to be purchased from suppliers. A process plan is established and tooling is designed for each part to be fabricated within the production system. The output of this phase is the control documentation for the product—the draw- ings or computer files describing the geometry of each part and its production tooling, the specifications of the purchased parts, and the process plans for the fabrication and assembly of the product. Three critical issues that are best considered throughout the product development process, but are finalized in the detail design phase, are: materials selection, production cost, and robust performance. These issues are discussed respec- tively in Chapter 12, Design for Environment, Chapter 13, Design for Manufacturing, and Chapter 15, Robust Design.

4. Testing and refinement: The testing and refinement phase involves the con- struction and evaluation of multiple preproduction versions of the product. Early (alpha) prototypes are usually built with production-intent parts—parts with the same geometry and material properties as intended for the production version of the prod- uct but not necessarily fabricated with the actual processes to be used in production. Alpha prototypes are tested to determine whether the product will work as designed and whether the product satisfies the key customer needs. Later (beta) prototypes are usually built with parts supplied by the intended production processes but may not be assembled using the intended final assembly process. Beta prototypes are extensively evaluated internally and are also typically tested by customers in their own use envi- ronment. The goal for the beta prototypes is usually to answer questions about perfor- mance and reliability in order to identify necessary engineering changes for the final product. Chapter 14, Prototyping, presents a thorough discussion of the nature and use of prototypes.

Development Processes and Organizations 15

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5. Production ramp-up: In the production ramp-up phase, the product is made using the intended production system. The purpose of the ramp-up is to train the workforce and to work out any remaining problems in the production processes. Products produced during production ramp-up are sometimes supplied to preferred customers and are care- fully evaluated to identify any remaining flaws. The transition from production ramp-up to ongoing production is usually gradual. At some point in this transition, the product is launched and becomes available for widespread distribution. A postlaunch project review may occur shortly after the launch. This review includes an assessment of the project from both commercial and technical perspectives and is intended to identify ways to im- prove the development process for future projects.

Concept Development: The Front-End Process

Because the concept development phase of the development process demands perhaps more coordination among functions than any other, many of the integrative development methods presented in this book are concentrated here. In this section we expand the con- cept development phase into what we call the front-end process. The front-end process generally contains many interrelated activities, ordered roughly as shown in Exhibit 2-3.

Rarely does the entire process proceed in purely sequential fashion, completing each activity before beginning the next. In practice, the front-end activities may be overlapped in time and iteration is often necessary. The dashed arrows in Exhibit 2-3 reflect the un- certain nature of progress in product development. At almost any stage, new information may become available or results learned that can cause the team to step back to repeat an earlier activity before proceeding. This repetition of nominally complete activities is known as development iteration.

The concept development process includes the following activities:

• Identifying customer needs: The goal of this activity is to understand customers’ needs and to effectively communicate them to the development team. The output of this step is a set of carefully constructed customer need statements, organized in a hi- erarchical list, with importance weightings for many or all of the needs. A method for this activity is presented in Chapter 5, Identifying Customer Needs.

• Establishing target specifications: Specifications provide a precise description of what a product has to do. They are the translation of the customer needs into technical terms. Targets for the specifications are set early in the process and represent the hopes

16 Chapter 2

Identify Customer

Needs

Establish Target

Specifications

Generate Product

Concepts

Select Product

Concept(s)

Test Product

Concept(s)

Set Final

Specifications

Plan Downstream Development

Development Plan

Mission Statement

Build and Test Models and Prototypes

Benchmark Competitive Products

Perform Economic Analysis

EXHIBIT 2-3 The many front-end activities comprising the concept development phase.

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of the development team. Later these specifications are refined to be consistent with the constraints imposed by the team’s choice of a product concept. The output of this stage is a list of target specifications. Each specification consists of a metric, and mar- ginal and ideal values for that metric. A method for the specification activity is given in Chapter 6, Product Specifications.

• Concept generation: The goal of concept generation is to thoroughly explore the space of product concepts that may address the customer needs. Concept generation includes a mix of external search, creative problem solving within the team, and systematic exploration of the various solution fragments the team generates. The result of this activity is usually a set of 10 to 20 concepts, each typically represented by a sketch and brief descriptive text. Chapter 7, Concept Generation, describes this activity in detail.

• Concept selection: Concept selection is the activity in which various product concepts are analyzed and sequentially eliminated to identify the most promising concept(s). The process usually requires several iterations and may initiate additional concept gen- eration and refinement. A method for this activity is described in Chapter 8, Concept Selection.

• Concept testing: One or more concepts are then tested to verify that the customer needs have been met, assess the market potential of the product, and identify any short- comings that must be remedied during further development. If the customer response is poor, the development project may be terminated or some earlier activities may be repeated as necessary. Chapter 9, Concept Testing, explains a method for this activity.

• Setting final specifications: The target specifications set earlier in the process are re- visited after a concept has been selected and tested. At this point, the team must commit to specific values of the metrics reflecting the constraints inherent in the product con- cept, limitations identified through technical modeling, and trade-offs between cost and performance. Chapter 6, Product Specifications, explains the details of this activity.

• Project planning: In this final activity of concept development, the team creates a detailed development schedule, devises a strategy to minimize development time, and identifies the resources required to complete the project. The major results of the front-end activities can be usefully captured in a contract book, which contains the mission statement, the customer needs, the details of the selected concept, the product specifications, the economic analysis of the product, the development schedule, the project staffing, and the budget. The contract book serves to document the agreement (contract) between the team and the senior management of the enterprise. A project planning method is presented in Chapter 18, Managing Projects.

• Economic analysis: The team, often with the support of a financial analyst, builds an economic model for the new product. This model is used to justify continuation of the overall development program and to resolve specific trade-offs between, for example, development costs and manufacturing costs. Economic analysis is shown as one of the ongoing activities in the concept development phase. An early economic analysis will almost always be performed before the project even begins, and this analysis is up- dated as more information becomes available. A method for this activity is presented in Chapter 17, Product Development Economics.

• Benchmarking of competitive products: An understanding of competitive products is critical to successful positioning of a new product and can provide a rich source of

Development Processes and Organizations 17

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ideas for the product and production process design. Competitive benchmarking is per- formed in support of many of the front-end activities. Various aspects of competitive benchmarking are presented in Chapters 5–9.

• Modeling and prototyping: Every stage of the concept development process involves various forms of models and prototypes. These may include, among others: early “proof- of-concept” models, which help the development team to demonstrate feasibility; “form- only” models, which can be shown to customers to evaluate ergonomics and style; spread- sheet models of technical trade-offs; and experimental test models, which can be used to set design parameters for robust performance. Methods for modeling, prototyping, and testing are discussed throughout the book, including in Chapters 5–7, 9, 11, 14, and 15.

Adapting the Generic Product Development Process

The development process described by Exhibits 2-2 and 2-3 is generic, and particular processes will differ in accordance with the unique context of the firm and the challenges of any specific project. The generic process is most like the process used in a market-pull situation: a firm begins product development with a market opportunity and then uses whatever available technologies are required to satisfy the market need (i.e., the mar- ket “pulls” the development decisions). In addition to the market-pull process outlined in Exhibits 2-2 and 2-3, several variants are common and correspond to the following: technology-push products, platform products, process-intensive products, customized products, high-risk products, quick-build products, and complex systems. Each of these situations is described below. The characteristics of these situations and the resulting de- viations from the generic process are summarized in Exhibit 2-4.

Technology-Push Products In developing technology-push products, the firm begins with a new proprietary technol- ogy and looks for an appropriate market in which to apply this technology (that is, the technology “pushes” development). Gore-Tex, an expanded Teflon sheet manufactured by W. L. Gore Associates, is a striking example of technology push. The company has devel- oped dozens of products incorporating Gore-Tex, including artificial veins for vascular surgery, insulation for high-performance electric cables, fabric for outerwear, dental floss, and liners for bagpipe bags.

Many successful technology-push products involve basic materials or basic process technologies. This may be because basic materials and processes are deployed in thou- sands of applications, and there is therefore a high likelihood that new and unusual char- acteristics of materials and processes can be matched with an appropriate application.

The generic product development process can be used with minor modifications for technology-push products. The technology-push process begins with the planning phase, in which the given technology is matched with a market opportunity. Once this matching has occurred, the remainder of the generic development process can be fol- lowed. The team includes an assumption in the mission statement that the particular technology will be embodied in the product concepts considered by the team. Although many extremely successful products have arisen from technology-push development, this approach can be perilous. The product is unlikely to succeed unless (1) the as- sumed technology offers a clear competitive advantage in meeting customer needs, and

18 Chapter 2

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Development Processes and Organizations 19

Process Type Description Distinct Features Examples

Generic (Market-Pull) Products

Technology-Push Products

Platform Products

Process-Intensive Products

Customized Products

High-Risk Products

Quick-Build Products

Complex Systems

The team begins with a market opportunity and selects appropriate technologies to meet customer needs.

The team begins with a new technology, then finds an appropriate market.

The team assumes that the new product will be built around an established technological subsystem.

Characteristics of the product are highly constrained by the production process.

New products are slight variations of existing configurations.

Technical or market uncertainties create high risks of failure.

Rapid modeling and prototyping enables many design-build-test cycles.

System must be decomposed into several subsystems and many components.

Process generally includes distinct planning, concept development, system- level design, detail design, testing and refinement, and production ramp-up phases.

Planning phase involves matching technology and market. Concept development assumes a given technology.

Concept development assumes a proven technology platform.

Either an existing production process must be specified from the start, or both product and process must be developed together from the start.

Similarity of projects allows for a streamlined and highly structured development process.

Risks are identified early and tracked throughout the process. Analysis and testing activities take place as early as possible.

Detail design and testing phases are repeated a number of times until the product is completed or time/budget runs out.

Subsystems and components are developed by many teams working in parallel, followed by system integration and validation.

Sporting goods, furniture, tools.

Gore-Tex rainwear, Tyvek envelopes.

Consumer electronics, computers, printers.

Snack foods, breakfast cereals, chemicals, semiconductors.

Motors, switches, batteries, containers.

Pharmaceuticals, space systems.

Software, cellular phones.

Airplanes, jet engines, automobiles.

EXHIBIT 2-4 Summary of variants of generic product development process.

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(2) suitable alternative technologies are unavailable or very difficult for competitors to utilize. Project risk can possibly be minimized by simultaneously considering the merit of a broader set of concepts that do not necessarily incorporate the new technology. In this way the team verifies that the product concept embodying the new technology is superior to the alternatives.

Platform Products A platform product is built around a preexisting technological subsystem (a technology platform). Examples of such platforms include the Intel chipset in a personal computer, the Apple iPhone operating system, and the blade design in a Gillette razor. Huge invest- ments are made in developing such platforms, and therefore every attempt is made to in- corporate them into several different products. In some sense, platform products are very similar to technology-push products in that the team begins the development effort with an assumption that the product concept will embody a particular technology. One differ- ence is that a technology platform has already demonstrated its usefulness in the market- place in meeting customer needs. The firm can in many cases assume that the technology will also be useful in related markets. Products built on technology platforms are much simpler to develop than if the technology were developed from scratch. For this reason, and because of the possible sharing of costs across several products, a firm may be able to offer a platform product in markets that could not justify the development of a unique technology.

Process-Intensive Products Examples of process-intensive products include semiconductors, foods, chemicals, and paper. For these products, the production process places strict constraints on the proper- ties of the product, so that the product design cannot be separated, even at the concept phase, from the production process design. In many cases, process-intensive products are produced in very high volumes and are bulk, as opposed to discrete, goods.

In some situations, a new product and new process are developed simultaneously. For example, creating a new shape of breakfast cereal or snack food will require both product and process development activities. In other cases, a specific existing process for making the product is chosen in advance, and the product design is constrained by the capabilities of this process. This might be true of a new paper product to be made in a particular paper mill or a new semiconductor device to be made in an existing wafer fabrication facility.

Customized Products Examples of customized products include switches, motors, batteries, and containers. Customized products are slight variations of standard configurations and are typically developed in response to a specific order by a customer. Development of customized products consists primarily of setting values of design variables such as physical dimen- sions and materials. Templates for specifying customized products may be provided with online design tools. When a customer orders a new product, the firm executes a struc- tured design and development process to create the product to meet the customer’s needs. Such firms typically have created a highly detailed development process involving a well- defined sequence of steps with a structured flow of information (analogous to a produc- tion process). For customized products, the generic process is augmented with a detailed

20 Chapter 2

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description of the specific information-processing activities required within each of the phases. Such development processes may consist of hundreds of carefully defined activi- ties and may be highly automated.

High-Risk Products The product development process addresses many types of risk. These include technical risk (Will the product function properly?), market risk (Will customers like what the team develops?), and budget and schedule risk (Can the team complete the project on time and within budget?). High-risk products are those that entail unusually large uncertainties re- lated to the technology or market so that there is substantial technical or market risk. The generic product development process is modified in high-risk situations by taking steps to address the largest risks in the early stages of product development. This usually requires completing some design and test activities earlier in the process. For example, when there is great uncertainty regarding customer acceptance of a new product, concept test- ing using renderings or user-interface prototypes may be done very early in the process in order to reduce the market uncertainty and risk. If there is high uncertainty related to technical performance of the product, it makes sense to build working models of the key features and to test these earlier in the process. Multiple solution paths may be explored in parallel to ensure that one of the solutions succeeds. Design reviews must assess levels of risk on a regular basis, with the expectation that risks are being reduced over time and not being postponed.

Quick-Build Products For the development of some products, such as software and many electronics products, building and testing prototype models is such a rapid process that the design-build-test cycle can be repeated many times. In fact, teams can take advantage of rapid iteration to achieve a more flexible and responsive product development process, sometimes called a spiral product development process. Following concept development in this process, the system-level design phase entails decomposition of the product into high-, medium-, and low-priority features. This is followed by several cycles of design, build, integrate, and test activities, beginning with the highest-priority items. This process takes advantage of the fast prototyping cycle by using the result of each cycle to learn how to modify the priorities for the next cycle. Customers may even be involved in the testing process after one or more cycles. When time or budget runs out, usually all of the high- and medium- priority features have been incorporated into the evolving product, and the low-priority features may be omitted until the next product generation.

Complex Systems Larger-scale products such as automobiles and airplanes are complex systems com- prising many interacting subsystems and components. When developing complex systems, modifications to the generic product development process address a number of system-level issues. The concept development phase considers the architecture of the entire system, and multiple architectures may be considered as competing concepts for the overall system. The system-level design phase becomes critical. During this phase, the system is decomposed into subsystems and these further into many compo- nents. Teams are assigned to develop each component. Additional teams are assigned

Development Processes and Organizations 21

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the special challenge of integrating components into the subsystems and these into the overall system.

Detail design of the components is a highly parallel process in which the many de- velopment teams work at once, usually separately. Managing the network of interactions across the components and subsystems is the task of systems engineering specialists of many kinds. The testing and refinement phase includes not only component and system integration, but also extensive testing and validation at all levels.

Product Development Process Flows

The product development process generally follows a structured flow of activity and information flow. This allows us to draw process flow diagrams illustrating the process, as shown in Exhibit 2-5. The generic process flow diagram (a) depicts the process used to develop market-pull, technology-push, platform, process-intensive, customized, and high-risk products. Each product development phase (or stage) is followed by a review (or gate) to confirm that the phase is completed and to determine whether the project proceeds. Quick-build products enable a spiral product development process (b) whereby detail design, prototyping, and test activities are repeated a number of times. The pro- cess flow diagram for development of complex systems (c) shows the decomposition into parallel stages of work on the many subsystems and components. Once the product

22 Chapter 2

Planning ConceptDevelopment

(a) Generic Product Development Process

Mission Approval

Concept Review

Preliminary Design Review

Critical Design Review

Production Approval

System-Level Design

Detail Design

Testing and Refinement

Production Ramp-Up

Planning ConceptDevelopment

(b) Spiral Product Development Process

Mission Approval

Concept Review

Cycle Plan Review

Cycle Review

System-Level Design Design Build

Many Iteration Cycles

Test ProductionRamp-Up

Planning ConceptDevelopment

(c) Complex System Development Process

Mission Approval

Concept Review

System Review

Production Approval

System-Level Design

Design Test Integrate and Test

Design Test

Design Test

Design Test

Validation and Ramp-Up

Project Review

Project Review

Project Review

EXHIBIT 2-5 Process flow diagrams for three product development processes.

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Development Processes and Organizations 23

development process has been established within an organization, a process flow diagram is used to explain the process to everyone on the team.

The Tyco Product Development Process

Tyco is primarily a market-pull enterprise. This means that Tyco generally drives its development projects based on a perceived market need and utilizes new or established technologies to meet that need. Its competitive advantage arises from highly effective marketing channels worldwide, strong brand recognition, a large installed base of equip- ment, and an ability to integrate new technologies into its product lines. For this reason, the technology-push process would not be appropriate. Most Tyco products are assembled from components fabricated with relatively conventional processes such as molding, machining, and electronics assembly. Products are generally customized for a particular customer in the final sales and installation processes, so the development process at Tyco is primarily aimed at creation of new models of products, rather than at the customization of existing models.

Tyco therefore established a common product development process similar to the generic phased process. The resulting Tyco Rally Point process flow is illustrated in Exhibit 2-6. Note that there are nine phases in the Rally Point process, with six of the phases (from concept definition to process verification) comprising the fundamental product development process activities. Each phase is followed by a critical review (called a Rally Point), which is required to gain approval to proceed to the next phase. The primary goal and key activities of each phase as well as the business function responsible for each activity are shown in Exhibit 2-7.

Although Tyco established Rally Point as its standard process, Tyco managers realized that this process would not be perfectly suitable for all Tyco development projects across all business units. Therefore one key activity in the concept definition phase is to select a Rally Point process variant if necessary. For example, some of Tyco’s new products are based on existing technology platforms. To develop such derivative products, the team assumes the use of the existing technology platform during concept development. Also, some products are designed for specific customers as private-label variants of standard Tyco products. In these cases, a streamlined process known as Rally Point EZ is used. Nevertheless, the standard Rally Point product development process is the baseline from which a particular project plan begins.

EXHIBIT 2-6 Tyco’s Rally Point product development process includes nine distinct phases and review gates.

Concept Definition

CONCEIVE

Feasibility and Planning

Preliminary Design

Final Design

Product Verification

Process Verification

Launch Post-Launch Assessment

RP 0 RP 1 RP 2 RP 3 RP 4 RP 5 RP 6 RP 7 RP 8

DESIGN OPTIMIZE VERIFY

Courtesy of Tyco International

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EXHIBIT 2-7 Key activities and the responsible functions comprising the Tyco Rally Point product development process. Courtesy of Tyco International

3. Preliminary Design

Create preliminary detailed design

Review concepts with customers

Conduct a preliminary design review

Build and test alpha prototypes

Assess product failure modes

Begin manufacturing process development

Conduct a preliminary manufacturing process review

Create a supplier participation matrix Assess suppliers for certification

Identify potential patents

Update RP1-2 deliverables

Prepare RP3 checklist & submit for approval

Rally Point Phase

Primary Goal

Marketing and Sales

Engineering

Quality Assurance

Manufacturing

Purchasing

Legal

Financial

Project Management

4. Final Design

Detail and optimize design

Freeze hardware and software design

Complete engineering documentation

Draft technical documentation Secure beta prototypes

Test beta prototypes for robustness

Finalize bill of materials (BOM)

Develop manufacturing control plans

Identify long lead- time items

Prepare patent applications

Update RP1-3 deliverables

Prepare RP4 checklist & submit for approval

5. Product Verification

Demonstrate product performance

Initialize field trials

Finalize design documentation

Complete beta prototype and field testing Apply for regulatory approvals

Complete quality assurance testing

Update manufacturing control plans

Assure trade compliance

Update RP1-4 deliverables

Prepare RP5 checklist & submit for approval

6. Process Verification

Demonstrate process performance

Complete field trials

Finalize training plans

Obtain regulatory approvals

Conduct process verification testing

Run manufacturing pilots

Finalize manufacturing control plans

Verify supply chain readiness

Update RP1-5 deliverables

Prepare RP6 checklist & submit for approval

0. Project Registration

Define project and business unit needs

Identify customers and market size

Describe competitive features and benefits Identify target cost and price

Identify project risks

Prepare preliminary business case

Identify project timing, resources, and capital Prepare RP0 checklist & submit for approval

1. Concept Definition

Develop project concept and charter

Capture voice of the customer

Analyze customer needs Document customer needs

Identify critical-to- quality specs

Develop and select concepts

Update project risks

Search patents

Refine business case

Assess team capabilities/skills

Identify development team members

Select a Rally Point process variant Prepare RP1 checklist & submit for approval

2. Feasibility and Planning

Create product description

Develop marketing and sales plans

Create phase-in and phase-out plans

Create functional specification and performance metrics Review concept selection

Define product architecture Assess technical failures modes

Create preliminary test plan

Identify trade compliance issues

Complete financial package

Plan integrated product development schedule

Assign a project manager

Update RP1 deliverables Prepare RP2 checklist & submit for approval

7. Launch

Launch product

Finalize pricing and sales forecasts

Complete sales and service training

Finalize product metrics

Finalize all deliverables

Finalize launch plans and documentation

Update RP1-6 deliverables Prepare RP7 checklist & submit for approval

8. Post-Launch Assessment

Identify lessons learned

Solicit customer feedback and satisfaction ratings Measure sales vs. forecast Complete phase-in and phase-out

Register obsolete and scrap products

Monitor return on investment

Document best practices

Prepare RP8 checklist & submit for approval

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Development Processes and Organizations 25

Product Development Organizations

In addition to crafting an effective development process, successful firms must organize their product development staff to implement the process in an effective manner. In this section, we describe several types of organizations used for product development and offer guidelines for choosing among these options.

Organizations Are Formed by Establishing Links among Individuals A product development organization is the scheme by which individual designers and developers are linked together into groups. The links among individuals may be formal or informal and include, among others, these types:

• Reporting relationships: Reporting relationships give rise to the classic notion of supervisor and subordinate. These are the formal links most frequently shown on an organization chart.

• Financial arrangements: Individuals are linked by being part of the same financial entity, such as a business unit or department within a firm.

• Physical layout: Links are created between individuals when they share the same of- fice, floor, building, or site. These links are often informal, arising from spontaneous encounters while at work.

Any particular individual may be linked in several different ways to other individuals. For example, an engineer may be linked by a reporting relationship to another engineer in a different building, while being linked by physical layout to a marketing person sitting in the next office. The strongest organizational links are typically those involving perfor- mance evaluation, budgets, and other resource allocations.

Organizational Links May Be Aligned with Functions, Projects, or Both Regardless of their organizational links, particular individuals can be classified in two different ways: according to their function and according to the projects they work on.

• A function (in organizational terms) is an area of responsibility usually involving specialized education, training, or experience. The classic functions in product devel- opment organizations are marketing, design, and manufacturing. Finer divisions than these are also possible and may include, for example, market research, market strategy, stress analysis, industrial design, human factors engineering, process development, and operations management.

• Regardless of their functions, individuals apply their expertise to specific projects. In product development, a project is the set of activities in the development process for a particular product and includes, for example, identifying customer needs and generat- ing product concepts.

Note that these two classifications must overlap: individuals from several different func- tions will work on the same project. Also, while most individuals are associated with only one function, they may contribute to more than one project. Two classic organizational

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structures arise from aligning the organizational links according to function or according to projects. In functional organizations, the organizational links are primarily among those who perform similar functions. In project organizations, the organizational links are primar- ily among those who work on the same project.

For example, a strict functional organization might include a group of marketing pro- fessionals, all sharing similar training and expertise. These people would all report to the same manager, who would evaluate them and set their salaries. The group would have its own budget and the people may sit in the same part of a building. This marketing group would be involved in many different projects, but there would be no strong organizational links to the other members of each project team. There would be similarly arranged groups corresponding to design and to manufacturing.

A strict project organization would be made up of groups of people from several dif- ferent functions, with each group focused on the development of a specific product (or product line). These groups would each report to an experienced project manager, who might be drawn from any of the functional areas. Performance evaluation would be handled by the project manager, and members of the team would typically be colocated as much as possible so that they all work in the same office or part of a building. New ventures, or “start-ups,” are among the most extreme examples of project organizations: every individual, regardless of function, is linked together by a single project—the growth of the new company and the creation of its product(s). In these settings, the president or CEO can be viewed as the project manager. Established firms will sometimes form an au- tonomous “tiger team” with dedicated resources for a single project when special focus is required to complete an important development project.

The matrix organization was conceived as a hybrid of functional and project organiza- tions. In the matrix organization, individuals are linked to others according to both the project they work on and their function. Typically each individual has two supervisors, one a project manager and one a functional manager. The practical reality is that either the project or the function tends to have stronger links. This is because, for example, both functional and project managers cannot independently assign their shared staff, they cannot independently evaluate and determine the salaries of their subordinates, and both functional and project organizations cannot easily be grouped together physically. As a result, either the functional or the project organization tends to dominate.

Two variants of the matrix organization are called the heavyweight project organization and lightweight project organization (Hayes et al., 1988). A heavyweight project organiza- tion contains strong project links. The heavyweight project manager has complete budget authority, is heavily involved in performance evaluation of the team members, and makes most of the major resource allocation decisions. Although each participant in a project also belongs to a functional organization, the functional managers have relatively little author- ity and control. A heavyweight project team in various industries may be called an inte- grated product team (IPT), a design-build team (DBT), or simply a product development team (PDT). Each of these terms emphasizes the cross-functional nature of these teams.

A lightweight project organization contains weaker project links and relatively stron- ger functional links. In this scheme, the project manager is more of a coordinator and administrator. The lightweight project manager updates schedules, arranges meetings, and facilitates coordination, but the manager has no real authority and control in the project organization. The functional managers are responsible for budgets, hiring and firing, and

26 Chapter 2

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performance evaluation. Exhibit 2-8 illustrates the pure functional and project organiza- tions, along with the heavyweight and lightweight variants of the matrix organization.

In this book we refer to the project team as the primary organizational unit. In this context, the team is the set of all people involved in the project, regardless of the organi- zational structure of the product development staff. In a functional organization, the team consists of individuals distributed throughout the functional groups without any organiza- tional linkages other than their common involvement in a project. In the other organiza- tions, the team corresponds to a formal organizational entity, the project group, and has a formally appointed manager. For this reason the notion of a team has much more meaning in matrix and project organizations than it does in functional organizations.

Development Processes and Organizations 27

General Manager

General Manager

Functional Managers

Project Managers

Functional Organization

General Manager

Functional Managers

Lightweight Project Matrix Organization Heavyweight Project Matrix Organization

Project Organization

General Manager

Heavyweight Project Managers

Lightweight Project Managers

Functional Managers

EXHIBIT 2-8 Various product development organizations. For simplicity, three functions and three projects are shown.

Adapted from Hayes et al., 1988

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28 Chapter 2

Choosing an Organizational Structure The most appropriate choice of organizational structure depends on which organizational performance factors are most critical to success. Functional organizations tend to breed specialization and deep expertise in the functional areas. Project organizations tend to enable rapid and effective coordination among diverse functions. Matrix organizations, being hybrids, have the potential to exhibit some of each of these characteristics. The fol- lowing questions help guide the choice of organizational structure:

• How important is cross-functional integration? Functional organizations may exhibit difficulty in coordinating project decisions that span the functional areas. Project or- ganizations tend to enable strong cross-functional integration because of the organiza- tional links of the team members across the functions.

• How critical is cutting-edge functional expertise to business success? When disci- plinary expertise must be developed and retained over several product generations, then some functional links are necessary. For example, in some aerospace companies, computational fluid dynamics is so critical that the fluid dynamicists are organized functionally to ensure the firm will have the best possible capability in this area.

• Can individuals from each function be fully utilized for most of the duration of a project? For example, a project may require only a portion of an industrial designer’s time for a fraction of the duration of a project. In order to use industrial design re- sources efficiently, the firm may choose to organize the industrial designers function- ally, so that several projects can draw on the industrial design resource in exactly the amount needed for a particular project.

• How important is product development speed? Project organizations tend to allow for conflicts to be resolved quickly and for individuals from different functions to coordinate their activities efficiently. Relatively little time is spent transferring infor- mation, assigning responsibilities, and coordinating tasks. For this reason, project or- ganizations are usually faster than functional organizations in developing innovative products. For example, consumer electronics manufacturers almost always organize their product development teams by project. This allows the teams to develop new products within the extremely short periods required by the fast-paced electronics market.

Dozens of other issues confound the choice between functional and project organiza- tions. Exhibit 2-9 summarizes some of the strengths and weaknesses of each organiza- tional type, examples of the types of firms pursuing each strategy, and the major issues associated with each approach.

Distributed Product Development Teams It is well established that a highly effective way to organize a product development team includes colocation of the team members at a single site. However, the use of modern communication technology and digital development processes allows even globally dis- tributed project teams to be effective. Reasons to utilize product development team mem- bers located at multiple sites may include the following:

• Access to information about regional markets.

• Availability of technical expertise.

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• Location of manufacturing facilities and suppliers.

• Cost saving through lower wages.

• Outsourcing to increase product development capacity.

Notwithstanding the importance of using the right team members regardless of loca- tion, firms implementing globally distributed product development have experienced many challenges due to the weaker ties between team members separated by great dis- tances. This may result in an increased number of design iterations and more difficult project coordination, particularly when such teams are newly formed. Fortunately, organi- zations having years of experience with global project teams report that distributed proj- ects do work more smoothly over time.

Development Processes and Organizations 29

EXHIBIT 2-9 Characteristics of different organizational structures.

Matrix Organization

Lightweight Heavyweight Functional Project Project Project Organization Organization Organization Organization

Strengths

Weaknesses

Typical Examples

Major Issues

Coordination and administration of projects is explicitly assigned to a single project manager. Maintains development of specialization and expertise.

Requires more managers and administrators than a non-matrix organization.

Derivative products in many automobile, electronics, and aerospace companies.

Provides integration and speed benefits of the project organization. Some of the specialization of a functional organization is retained.

Requires more managers and administrators than a non-matrix organization.

New technology or platform projects in automobile, electronics, and aerospace companies.

Resources can be optimally allocated within the project team. Technical and market trade-offs can be evaluated quickly.

Individuals may have difficulty maintaining cutting- edge functional capabilities.

Start-up companies. “Tiger teams” and “skunkworks” intended to achieve breakthroughs. Firms competing in highly dynamic markets.

How to maintain functional expertise over time. How to share learning from one project to another.

Fosters development of deep specialization and expertise.

Coordination across different functional groups can be slow and bureaucratic.

Customized products, where development involves slight variations to a standard design (e.g., motors, bearings, packaging).

How to integrate different functions (e.g., marketing and design) to achieve business goals.

How to balance functions and projects. How to simultaneously evaluate project and functional performance.

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The Tyco Product Development Organization

The primary functions involved in product development at Tyco are engineering, manu- facturing, marketing, sales, purchasing, quality assurance, finance, legal, and project management (as listed in Exhibit 2-7). Each of these functions has a manager who reports to the general manager of the division. However, product development projects are led by project managers, with the resources for each project drawn from the functional areas.

In terms of the variants described in Exhibits 2-8 and 2-9, product development at Tyco primarily takes place in projects strongly reflecting a traditional functional organiza- tion structure. Project leaders are given only indirect control of the functional resources assigned to their teams. As explained above, a functional structure generally sacrifices some project efficiency in favor of greater ongoing development of the functional skills. To address this concern, Tyco has created a highly effective project management function, with project leaders who know the Rally Point process and how to coordinate the activi- ties across the functions. This organizational choice has indeed led to very good product development performance for Tyco while maintaining very strong functional capabilities.

In recent years, Tyco has created new regional engineering centers at locations in high- growth markets such as China and India. Engineers at these centers are able to support product development projects across multiple Tyco business units around the world. This arrangement improves project performance by augmenting any project team with addi- tional technical resources on an as-needed basis, which is particularly helpful in the later stages of the Rally Point process.

Summary An enterprise must make two important decisions about the way it carries out product development. It must define both a product development process and a product develop- ment organization.

• A product development process is the sequence of steps an enterprise employs to con- ceive, design, and commercialize a product.

• A well-defined development process helps to ensure product quality, facilitate coordi- nation among team members, plan the development project, and continuously improve the process.

• The generic process presented in this chapter includes six phases: planning, concept development, system-level design, detail design, testing and refinement, and produc- tion ramp-up.

• The concept development phase requires tremendous integration across the differ- ent functions on the development team. This front-end process includes identifying customer needs, analyzing competitive products, establishing target specifications, generating product concepts, selecting one or more final concepts, setting final speci- fications, testing the concept(s), performing an economic analysis, and planning the remaining project activities. The results of the concept development phase are docu- mented in a contract book.

• The development process employed by a particular firm may differ somewhat from the generic process described here. The generic process is most appropriate for market-pull

30 Chapter 2

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products. Other types of products, which may require variants of the generic process, include technology-push products, platform products, process-intensive products, cus- tomized products, high-risk products, quick-build products, and complex systems.

• Regardless of the development process, tasks are completed by individuals residing in organizations. Organizations are defined by linking individuals through reporting rela- tionships, financial relationships, and/or physical layout.

• Functional organizations are those in which the organizational links correspond to the development functions. Project organizations are those in which the organizational links correspond to the development projects. Two types of hybrid, or matrix, organiza- tion are the heavyweight project organization and the lightweight project organization.

• The classic trade-off between functional organizations and project organizations is be- tween deep functional expertise and coordination efficiency.

• Globally distributed product development teams allow access to specialized resources, market information, and/or technical expertise. However, global teams experience higher project coordination costs.

References and Bibliography Many current resources are available on the Internet via www.ulrich-eppinger.net

Staged product development processes have been dominant in manufacturing firms for the past 30 years. Cooper describes the stage-gate process and many of its enabling practices.

Cooper, Robert G., Winning at New Products: Accelerating the Process from Idea to Launch, third edition, Perseus Books, Cambridge, MA, 2001.

The spiral product development process has evolved primarily within the software industry; however, many aspects of spiral development can be applied in manufacturing and other industries. McConnell describes spiral software development, along with several other processes used to develop software products.

McConnell, Steve, Rapid Development: Taming Wild Software Schedules, Microsoft Press, Redmond, WA, 1996.

The concept of heavyweight and lightweight project organizations is articulated by Hayes, Wheelwright, and Clark. Wheelwright and Clark also discuss product strategy, planning, and technology development activities, which generally precede the product development process.

Hayes, Robert H., Steven C. Wheelwright, and Kim B. Clark, Dynamic Manufacturing: Creating the Learning Organization, The Free Press, New York, 1988.

Wheelwright, Steven C., and Kim B. Clark, Revolutionizing Product Development: Quantum Leaps in Speed, Efficiency, and Quality, The Free Press, New York, 1992.

Andreasen and Hein provide some good ideas on how to integrate different functions in product development. They also show several conceptual models of product development organizations.

Andreasen, M. Myrup, and Lars Hein, Integrated Product Development, Springer- Verlag, New York, 1987.

Development Processes and Organizations 31

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Allen provides strong empirical evidence that physical layout can be used to create significant, although informal, organizational links. He also discusses the use of matrix organizations to mitigate the weaknesses of functional and project organizations.

Allen, Thomas J., Managing the Flow of Technology: Technology Transfer and the Dissemination of Technological Information within the R&D Organization, MIT Press, Cambridge, MA, 1977.

Galbraith’s seminal book on organizational design contains much useful information that can be applied to product development. His 1994 book is an update of his earlier writing.

Galbraith, Jay R., Designing Complex Organizations, Addison-Wesley, Reading, MA, 1973.

Galbraith, Jay R., Competing with Flexible Lateral Organizations, second edition, Addison-Wesley, Reading, MA, 1994.

Exercises 1. Diagram a process for planning and cooking a family dinner. Does your process re-

semble the generic product development process? Is cooking dinner analogous to a market-pull, technology-push, platform, process-intensive, customization, high-risk, quick-build, or complex system process?

2. Define a process for finding a job. For what types of endeavor does a well-defined process enhance performance?

3. What type of development process would you expect to find in an established com- pany successful at developing residential air-conditioning units? How about for a small company that is trying to break into the market for racing wheelchairs?

4. Sketch the organization (in some appropriate graphical representation) of a consulting firm that develops new products for clients on a project-by-project basis. Assume that the individuals in the firm represent all of the different functions required to develop a new product. Would this organization most likely be aligned with functions, be aligned by projects, or be a hybrid?

Thought Questions 1. What role does basic technological research play in the product development process?

How would you modify Exhibit 2-3 to better represent the research and technology de- velopment activities in product development?

2. Is there an analogy between a university and a product development organization? Is a university a functional or project organization?

3. What is the product development organization for students engaged in projects as part of a product development class?

4. Is it possible for some members of a product development organization to be orga- nized functionally, while others are organized by project? If so, which members of the team would be the most likely candidates for the functional organization?

32 Chapter 2

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Opportunity Identification1

33

C H A P T E R T H R E E

1 Many of the ideas in this chapter were developed in collaboration with Christian Terwiesch, and are described in more detail in the book Innovation Tournaments (Terwiesch and Ulrich, 2009).

EXHIBIT 3-1 The Bolt laser-based cat toy, the original product of the FroliCat brand.

Courtesy of Lucky Litter LLC and FroliCat

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34 Chapter 3

The pet products company FroliCat had introduced two successful laser-based cat toys, including the Bolt (Exhibit 3-1), a product that embodies a randomly moving laser beam to entertain cats. The company’s management team, hoping to build upon their initial success, sought additional opportunities to develop new cat toys. They were particularly interested in opportunities to extend their brand to other types of motion-based cat toys. FroliCat was a small company, and so an investment in developing a new product repre- sented substantial financial risk. As a result, the team hoped to identify opportunities that would be highly likely to result in profitable products.

FroliCat was based in Chicago, but because all of FroliCat’s products were produced by factories in China, and because it wished to adopt a more global market perspective, it engaged a Shanghai-based product development consulting firm, Asentio Design, to lead the opportunity identification effort.

This chapter provides a conceptual foundation for opportunity identification, and ar- ticulates a six-step process, which includes generating a large number of alternatives and filtering them to identify those that are exceptionally promising. We illustrate the oppor- tunity identification process using the FroliCat example.

What Is an Opportunity?

In the context of product development, an opportunity is an idea for a new product. An opportunity is a product description in embryonic form, a newly sensed need, a newly discovered technology, or a rough match between a need and a possible solution. At the earliest stage of development, uncertainty clouds the future, so an opportunity can be thought of as a hypothesis about how value might be created. For a consumer-products company like Procter & Gamble, an opportunity might be a new type of cleaner sug- gested by a customer. For a materials company like 3M, it might be a new polymer with unusual properties. Some opportunities ultimately become new products while others never warrant substantial further development.

An opportunity for a new product is usually articulated with less than one page of information, often including a descriptive title, a narrative explaining the idea, and some- times including a sketch of a possible product concept. Exhibit 3-2 shows the opportunity eventually pursued by FroliCat as it was first articulated following a brainstorming ses- sion by members of the team. The opportunity was for an interactive cat toy consisting of a swinging object hanging from the underside of a table, which would be moved around by a hand from above. This is an example of an opportunity that includes a possible solu- tion concept, which is typical for efforts focused on identifying opportunities for new products in a well-defined category like cat toys.

Types of Opportunities While there are many ways to categorize opportunities, two dimensions are particularly useful. They are (1) the extent to which the team is familiar with the solution likely to be employed, and (2) the extent to which the team is familiar with the need that the solution

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Opportunity Identification 35

addresses. For technology-based products, these dimensions can also be thought of as knowledge of the technology and knowledge of the market. These two dimensions are illustrated in Exhibit 3-3.

Because risk of failure increases as opportunities deviate from what the team already knows well, we can divide the opportunity landscape into categories based on the uncer- tainty “horizon” faced by the team. Horizon 1 opportunities are largely improvements, extensions, variants, and cost reductions of existing products for existing markets. They are relatively low-risk opportunities. Horizon 2 opportunities push out into less known territory in one or both of the dimensions of the market or the technology. Horizon 3 op- portunities represent attempts to exploit opportunities that in some way are new to the world, embodying the highest level of uncertainty.

Because of the need to launch a product within about a year, the FroliCat team explic- itly avoided Horizon 3 opportunities. The team wished to build on its initial success with the Bolt cat toy, and so focused on its existing customers and the existing needs it already addressed. It sought a next-generation solution for the existing need to entertain cats, and thus focused on Horizon 2 opportunities.

EXHIBIT 3-2 The “swinging ball” opportunity eventually pursued by the FroliCat team as first recorded in a sketch. This is an example of an opportunity that includes a potential solution concept.

Courtesy of Lucky Litter LLC and Future Life Labs

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36 Chapter 3

Tournament Structure of Opportunity Identification

Opportunities vary widely in value; however, that value is plagued by uncertainty. It is therefore very useful to identify a set of opportunities and then to select a subset for fur- ther development, with just a few coming to fruition. This process can be thought of as an innovation tournament, with only the best ideas prevailing. In most settings, dozens, hundreds, or even thousands of opportunities are considered for every one commercial success. A filtering process selects a subset for further development and, from those, picks one or more “champions” that will be launched as full product development efforts. Exhibit 3-4 illustrates this tournament structure.

The opportunity identification process embodied in an innovation tournament pre- cedes the product development process as shown in Exhibit 3-4. While both the opportu- nity identification process and the product development process consist of development steps and selection steps, the overarching goals of the two activities are quite different. In opportunity identification, the goal is to generate a large number of opportunities and ef- ficiently kill those that are not worthy of further investment. In the product development

Knowledge of Solution (e.g., method/process/technology)

K n

ow le

d ge

o f

N ee

d (

e. g

., u

se r/

m ar

ke t)

Existing solution that we currently use

Existing solution that we do not use

New solution

Existing need/market that

we currently serve

Existing need/market

that we do not

address

New need/market

Horizon 3 Opportunities

Horizon 1 Opportunities

Horizon 2 Opportunities

Improvements, extensions, variants, and cost reductions

Adjacent growth

Next generation products and services for core markets

Exploration into new markets

New-category products and service

Exploration with new solutions, approaches

EXHIBIT 3-3 Types of opportunities. Horizons 1, 2, and 3 represent increasing levels of risk, reflecting different types of uncertainty.

Source: Terwiesch and Ulrich (2009)

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Opportunity Identification 37

process, the goal is to take the opportunity articulated in the mission statement and do everything possible to assure it becomes the best product it can be.

Although opportunity identification and product development can be thought of as separate activities, there is clearly some overlap between them. For example, in a consumer product business like FroliCat, preliminary product concepts are almost always gener- ated and explored with prototypes during the opportunity identification process, before a formal product development process begins. However, these exploratory activities are typi- cally conducted for several alternative opportunities, with only the most promising pro- ceeding to more comprehensive product design and development. Exhibit 3-5 illustrates the opportunity identification tournament structure used by FroliCat, starting with 50 op- portunities and eventually resulting in one chosen to go into full product development.

Effective Opportunity Tournaments Given that great opportunities are rare, how can the opportunity identification process be managed to increase the number of excellent opportunities identified? There are three basic ways.

1. Generate a large number of opportunities. If you produce more opportunities, you’ll see more exceptional ones. The logic here is simple: on average, if you find one 7-foot (213 cm) tall person per 100,000 people, you’ll find two among 200,000. Creat- ing more opportunities (without sacrificing their average quality) is thus a key lever in finding the exceptional few.

Product Development Process

Opportunity Identification Process

System-Level Design

Production Ramp-Up

Testing & Refinement

Detail Design

Concept Development

EXHIBIT 3-4 The tournament structure of the opportunity identification process. The opportunity tournament feeds the product development process with exceptional opportunities.

Source: Terwiesch and Ulrich (2009)

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38 Chapter 3

50 Raw Opportunities 7 Opportunities with Representative Product Concepts

3 Opportunities with Exploratory Prototypes and Sample Packaging

1 Opportunity Articulated as a Mission Statement for Product Development Team

EXHIBIT 3-5 The overall tournament structure of the opportunity identification process for FroliCat. Fifty raw opportunities were eventually filtered and explored, resulting in a “swinging ball” opportunity that was developed into a product launched to the market.

Images courtesy of Lucky Litter LLC and Future Life Labs

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Opportunity Identification 39

2. Seek high quality of the opportunities generated. Adopting better methods for generating opportunities and mining better sources of opportunities can increase the average quality of the opportunities under consideration, which will also increase the quality of the best ideas resulting from the tournament.

3. Create high variance in the quality of opportunities. This is a direct, though not im- mediately obvious, implication of statistics. Holding the average quality and number of opportunities constant, you’ll generate more exceptional ones from a process that exhibits greater variability; that is, if it’s less consistent in the quality of its output. The quest for variability contradicts normal approaches to process improvement, but it’s ex- actly what you want in opportunity creation. Generating wacky ideas and wild notions increases the chance that at least one of the opportunities will be exceptionally good.

Opportunity Identification Process

We divide the opportunity identification process into six steps as follows:

1. Establish a charter.

2. Generate and sense many opportunities.

3. Screen opportunities.

4. Develop promising opportunities.

5. Select exceptional opportunities.

6. Reflect on the results and the process.

Each step is the focus of a section of this chapter.

Step 1: Establish a Charter

Organizations create new products to achieve goals such as growing revenues from exist- ing customers, filling a hole in a product line, or entering new market segments. Entre- preneurs starting new organizations also have goals like creating a new product related to an area of personal interest. The innovation charter articulates these goals and establishes the boundary conditions for an innovation effort. Charters are closely analogous to (al- though somewhat broader than) the mission statement for a new product. (See Chapter 4, Product Planning.)

For example, the charter for the FroliCat effort was:

Create a physical product in the cat toy category that we can launch to the market within about a year through our existing retail sales channel.

The main restrictions in this charter were the emphasis on physical goods instead of software or services, a focus on the cat toy category, a preference for opportunities that would not require enormous investments of calendar time, and a desire to take advantage of the company’s existing relationships with retailers.

The charter requires resolving a tension between leaving the innovation problem un- constrained, and specifying a direction that is likely to meet the goals of the team and organization. By specifying a narrow charter, the team avoids wasting effort generating

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40 Chapter 3

opportunities in areas that are unlikely to be pursued. On the other hand, sometimes decid- ing which opportunities are worthy of pursuit in advance and in the abstract is difficult.

Similar to the mission statement for a new product, we recommend that the innova- tion charter be broad, perhaps a bit broader than the team is comfortable with. Generating ideas is inexpensive, and sharpening the focus later is not difficult. The benefit of allow- ing a broad focus is that opportunities that may otherwise have never been considered will challenge the team’s assumptions about what kinds of opportunities it should pursue.

Step 2: Generate and Sense Many Opportunities

Based on a survey of companies across many industries, about half of innovation op- portunities are generated internally to an organization and about half are recognized from customers and other external sources (Terwiesch and Ulrich, 2009). The distribution of sources of opportunities is shown in Exhibit 3-6.

We therefore recommend that the team explicitly focus on both internal and external sources of opportunities. Typically, the team will want to identify dozens if not hundreds of raw opportunities. Fortunately, this daunting task is made much easier through the application of some structured techniques, which we outline here.

Techniques for Generating Opportunities For some creative people there is nothing more fun than coming up with new ideas. How- ever, we find that the majority of people have a hard time when asked simply to generate some promising opportunities. For them the problem of coming up with something new is simply too abstract, too unstructured, and has too many degrees of freedom. Following are seven basic techniques for stimulating the identification of opportunities. Most work well in both entrepreneurial and corporate settings.

46 %

23 %

11 %

2 %

4 %

3 %

5 %

2 %

4 %

Internally generated

Customer

Competitive product

Other partner company

Independent inventor

Distribution partner

Sales force

Supplier

University

10 20 30 40 50 60

EXHIBIT 3-6 The distribution of sources of opportunities in innovation.

Source: Terwiesch and Ulrich (2009).

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Opportunity Identification 41

Follow a Personal Passion

List your passions—endeavors that keep you awake with excitement—and then consider how emerging technologies, trends, and business models might influence them. Or iden- tify unmet needs that you have in connection with a personal interest. An avid bicyclist whom we know has been developing a nutrient delivery system for use with existing hydration backpacks (for example, CamelBak), which has applications for the military and for a wide variety of sports (Exhibit 3-7). He identified the opportunity while reflect- ing on his desire to adjust the amount of sugar and electrolytes in the beverages in his hydration pack.

Compile Bug Lists

Successful innovators are often chronically dissatisfied with the world around them. They notice unmet needs of users, including themselves. List (or photograph) every annoyance or frustration you encounter over a period of days or weeks and then pick the most univer- sal and vexing ones and dream up solutions. Any problem is an opportunity.

An annoyance that gives birth to the opportunity doesn’t have to be yours alone. In- stead, you might find it through customer complaints or market research. A powerful way to understand others’ annoyances is to immerse yourself in the world of people using your products or services.

Pull Opportunities from Capabilities

Theories of competitive advantage abound, but most spring from the idea that firms achieve above-average profits by exploiting unique resources. Resources, an umbrella

EXHIBIT 3-7 Nutrient delivery system worn during testing by the inventor, Matt Kressy (nutrient pouch, tubing, and valve on his right side).

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42 Chapter 3

term, includes capabilities, core competencies, and competitive advantage. To provide advantage, a resource must be:

• Valuable. To be valuable, a resource must either allow a firm to achieve greater per- formance than competitors or reduce a weakness relative to competitors.

• Rare. Given competition, a valuable resource must be rare.

• Inimitable. For value and rarity to persist, a resource must not be easily imitated.

• Nonsubstitutable. Even if valuable, rare, and inimitable, a resource providing advan- tage can’t be easily substituted.

This perspective, abbreviated as VRIN, can be used to define targets by first articu- lating an inventory of resources and then using the inventory as a lens for opportunity generation.

Apple Computer’s VRIN resources, for example, might include excellence in industrial design, a leading brand, and a loyal customer base. Each of these resources can guide the opportunity creation process by reformulating them as a challenge. For example: In what other product categories might Apple’s design excellence create advantage? For which product or service categories could the Apple brand be deployed to advantage? What other products or services could Apple provide to its customer base?

Study Customers

Opportunities can be identified by studying customers in a selected market segment. These studies (also called user anthropology or consumer ethnography) provide a deeper understanding of the true customer needs than you can obtain through surveys.

Consider the bicycle industry. Shimano, a maker of bike components like pedals and brakes, recently commissioned a user-anthropology study to understand why more people in the United States don’t ride bikes. The traditional approach to this problem would have been to create a survey or a set of focus groups, asking customers how often they ride and what at- tributes of a bike they value the most. Most likely, most Americans would say that they ride regularly (which for some might mean once a year) and that they want light bikes with many gears. Those, after all, are the product attributes emphasized in nearly every bike shop.

Unfortunately, what people say to researchers and what they really do can differ sub- stantially. By spending many hours observing potential cyclists, including time on and off bicycles, Shimano’s researchers found that many consumers want bikes that are techni- cally simple, easy to ride, and easy to get on and off—all attributes that aren’t emphasized in the current competition among bicycle manufacturers, who tend to emphasize the needs of biking enthusiasts.

User anthropology thus helped Shimano to identify a set of latent needs. (See Chap- ter 5, Identifying Customer Needs, for a description of latent needs.) When a latent need is articulated, it becomes a target for the opportunity creation process. Once they identi- fied the factors that keep many potential customers in their automobiles as opposed to on their bikes, they had the opportunity to redefine the product category.

In the case of Shimano, these efforts led to the creation of bikes targeted specifically at the leisure rider, that is, people who might rent a bike during their annual family trip to the beach but otherwise weren’t riding regularly. Shimano developed a line of com- ponents under the brand Coasting, and manufacturers then incorporated them into their bikes. One example is the Trek Lime, shown in Exhibit 3-8.

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Opportunity Identification 43

Consider Implications of Trends

Changes in technology, demography, or social norms often create innovation opportuni- ties. Ubiquitous mobile telephone service, for example, enables a wide variety of infor- mation delivery services. An increasing Spanish-speaking population in the United States, for example, enables new sorts of Spanish-language media. Growing environmental awareness creates a market for green products and services. Once again, the means of exploration is easy: list social, environmental, technological, or economic trends and then imagine innovation opportunities made possible by each one.

Imitate, but Better

When another firm innovates successfully, it in effect publishes the location of a gold mine. You can exploit this information by either considering alternative solutions that could address the same need or alternative needs that could be addressed with the same solution. Exhibit 3-9 shows examples of the imitate-but-better approach. Here are some sources of opportunities for imitation:

• Media and marketing activities of other firms. Scan the media and monitor the activi- ties of other firms by attending trade shows and following patent filings, for example. Articulate the need and solution associated with any innovation that you identify. Generate alternative approaches to meeting the need or alternative needs that can be addressed with the new approach.

• De-commoditize a commodity. Often, price competition characterizes a product cate- gory, and the offerings themselves are little more than commodities. Recall coffee before Starbucks or breath mints before Altoids. A situation like this creates an opportunity for innovation. To pursue this kind of innovation, list all of the inexpensive, undifferentiated products or services in a category and then consider the possibility of deluxe versions.

EXHIBIT 3-8 The Trek Lime bicycle incorporating the Shimano Coasting component group.

Courtesy of Trek

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© Stockbyte/PunchStock

SMC Photos

© Ingram Publishing/Alamy

The McGraw-Hill Companies, Inc./Jill Braaten, photographer

EXHIBIT 3-9 Examples of the imitate-but-better approach: SpinBrush, Starbucks, Altoids.

Existing Product “Imitate-but-Better” Product

SMC Photos SMC Photos

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Opportunity Identification 45

• Drive an innovation “down market.” Four entrepreneurs with a history in the toy and candy businesses invented the Crest SpinBrush in 1998. They believed that their com- petitive advantage was in creating small, cheap, battery-powered devices, as they had done with the Spin Pop, a lollipop spun by a little motor. They were struck by the array of electric toothbrushes, many selling for about $100, yet none having much more complexity than their spinning lollipops. They decided to “create an electric tooth- brush that can sell for six dollars.” Their SpinBrush became the best selling toothbrush of any type. To follow their example, list the premium products or services in a cate- gory and then imagine much cheaper versions that provide many of the same benefits.

• Import geographically isolated innovations. Innovations are often geographically isolated, particularly if introduced by smaller firms. Translating the innovation from one geographic region to another can be a source of innovation. The Red Bull energy drink started as a product for Thai truck drivers. Starbucks founder Howard Schultz created the chain after visiting Milan and becoming infatuated with its café culture and espresso-based drinks.

Mine Your Sources

Recall that about half of product opportunities arise from sources inside an organization and about half come from outside sources. As a result, you benefit from cultivating exter- nal sources of ideas. Those sources include the following:

• Lead users. Firms have ample incentive to innovate. Innovation, after all, can result in new sources of cash. But lead users and independent inventors may have even greater incentives. Lead users are people or firms that have advanced needs that may not be met by existing products or services. Lead users must either tolerate their unmet needs or innovate themselves to address them. Many devices and procedures in health care were invented by clinicians. For example, consider Dr. Lillian Aronson, a veterinarian at the University of Pennsylvania who performs feline liver transplants. Her procedure is rela- tively new, the market is small, and few existing surgical tools fit the task. Dr. Aronson thus has to choose between ill-suited instruments and inventing her own. If she invents a useful device, she creates an opportunity for further innovation by an established firm.

• Representation in social networks. Another way to increase the keenness of your sens- ing is to ensure that you are plugged into the appropriate social networks. Social institutions of all kinds facilitate communication among innovators. Some of these institutions may not be related to professional life. Cricket and softball leagues in Silicon Valley are widely known to be hotbeds of entrepreneurial activity and have played a key role in facilitating the exchange of ideas leading to opportunities for new products. Online social networking communities and discussion forums also may foster communication among innovators.

• Universities and government laboratories. Students, research staff, and professors continually pursue novel solutions to vexing challenges. In many cases, the solutions identified in universities and government laboratories can be commercialized by third parties, including existing companies and start-ups. Research universities and government laboratories have technology transfer organizations to facilitate this process.

• Online idea submission. Opportunities may be collected from customers and non- customers through Web sites. For example, the computer company Dell runs a Web site IdeaStorm for soliciting innovation opportunities from customers.

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46 Chapter 3

Step 3: Screen Opportunities

The goal of screening is simply to eliminate opportunities that are highly unlikely to result in the creation of value and to focus attention on the opportunities worthy of further inves- tigation. The aim is not to pick the single best opportunity. Given many opportunities to be screened, the process must be relatively efficient, even at the expense of perfect accuracy.

For this step, a very effective screening criterion is the holistic judgment by a group of individuals of whether or not the opportunity is worthy of a few days or weeks of addi- tional investigation. Separate application of multiple screening criteria (e.g., market need, technological feasibility, alignment with strategy) tends to bog down the process in un- necessary discussion. Recall that in most settings you will have dozens or even hundreds of raw opportunities to consider.

Two methods are effective approaches to screening: Web-based surveys and work- shops with “multivoting.” Both methods rely on the independent judgments of a group of people. Typically this group comprises members of your organization, but could be an extended entrepreneurial team, or even friends and family members with relevant exper- tise. Of course, the group performing the evaluation must have relevant expertise, even if that expertise varies in type and depth.

A Web-based interface can ensure that the participants don’t know the author of each idea, so they will base their votes on the quality of the opportunity, not their opinion of its originator. Many free Web-based survey tools are available, or you can use one of the Web- based tools designed specifically for the purpose of evaluating innovation opportunities. A Web-based screening survey can be as simple as a listing of opportunities with short descrip- tions for which you ask respondents simply to indicate a yes–no vote on whether or not the opportunity deserves further investment. Alternatively, you can use a 1–10 scale, which may be useful if you have a relatively small group of people voting. In our experience, you need at least six independent judgments, and preferably more than 10, to make reliable decisions.

You can also use an in-person workshop to evaluate opportunities. In a format we have used frequently, each participant presents one or more opportunities to the group. These presentations can be supported by a single slide, page, or flip-chart sheet. We strongly recommend that these presentations be limited to about one minute and that each pre- senter adhere to the same time limit and format. Summaries of each opportunity may be distributed in advance of the workshop.

Following the presentations, you ask a group of raters to multivote on the opportuni- ties. With multivoting, you display opportunities on pages or flip-chart sheets posted on the walls of the room where you’re conducting your workshop. Raters are given “dots” (or other types of stickers) to register their votes. They simply apply their stickers to the opportunities they favor. (Another way that multivoting may be applied in the product development pro- cess is for choosing the most promising concepts. See Chapter 8, Concept Selection.)

We recommend that you number the opportunities and ask voters to write the number of the opportunity they will vote for on each of their stickers. They do this quietly as a group before actually applying the stickers to the sheets. Then, everyone places their stickers simultaneously. By this method, you avoid influencing the voting decisions with information about how others have voted.

Workshops work well for reviewing up to about 50 opportunities. For more than 50, we suggest first doing a round of Web-based screening.

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Opportunity Identification 47

Regardless of which voting method you choose, we suggest that you consider advanc- ing not only the ideas receiving the most votes, but also those with only a few very enthu- siastic supporters. Strong opinions often point to exceptional ideas. Remember that your goal is to efficiently eliminate opportunities that are not worthy of further investment, but to avoid killing a potentially great idea.

The FroliCat team had developed 50 raw opportunities as the result of the efforts of six individuals working independently and in brainstorming sessions. The team members identified seven opportunities they felt were worthy of further development, by aggregat- ing the individual judgments of the team members, including both product designers at Asentio and marketing managers at FroliCat.

Step 4: Develop Promising Opportunities

Rarely does it make sense to bet on a single opportunity. Too much uncertainty clouds the prospects for success. After screening opportunities, the team should invest modest levels of resources in developing a few of them. At a minimum, an opportunity passing the ini- tial screen warrants an Internet search for existing solutions and an informal discussion with a few potential customers.

Some additional tasks that are often worth completing include: customer interviews, testing of existing products, concept generation, quick prototypes, and estimates of mar- ket sizes and growth rates. You might invest a few days to a few weeks in each of several promising opportunities.

In developing promising opportunities, the goal is to resolve the greatest uncertainty surrounding each one at the lowest cost in time and money. One way to structure this step is to list the major uncertainties regarding the success of each opportunity, the tasks you could take to resolve the uncertainties, and the approximate cost of each task. Then, perform the tasks that resolve the most uncertainty at the lowest cost. For example, an opportunity based on a clever concept might not be very valuable if a patent is unlikely. A cursory patent search takes just a couple of hours, and so that is a task that should be completed early in the process of developing the opportunity.

The FroliCat team explored the seven opportunities shown in Exhibit 3-5 and selected three opportunities for further development. The subsequent development tasks were to build functional prototypes and test them with cats and cat owners, to create packaging concepts and test their appeal with consumers, and to complete financial analysis based on likely manufacturing costs and price points.

Step 5: Select Exceptional Opportunities

Once a handful of opportunities have been developed with modest investment of re- sources, enough uncertainty should be resolved in order to pick the exceptional few op- portunities that warrant a significant investment in product development.

Chapter 8, Concept Selection, describes how to choose a design concept by compar- ing alternatives against selection criteria. The same basic method can be used to select product opportunities. One specific approach used within established companies is the Real-Win-Worth-it (RWW) method, developed originally by 3M (Day, 2007). The name,

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48 Chapter 3

Real-Win-Worth-it, summarizes the three questions an organization should attempt to an- swer when screening opportunities:

• Is the opportunity real? Is there a real market that you can serve with the product? Criteria here include market size, potential pricing, availability of technology, and the likelihood the product can be delivered in the required volume at the required cost.

• Can you win with this opportunity? Can you establish a sustainable competitive ad- vantage? Can you patent or brand the idea? Are you more capable of executing it than competitors? For example, do you have superior engineering talent in this field?

• Is the opportunity worth it financially? Do you have the resources needed (financial and developmental) and are you confident that the investment will be rewarded with appropriate returns?

Exhibit 3-10 shows the RWW criteria applied to the “swinging-ball” opportunity for FroliCat. An analysis like this one, done for each opportunity, allows the team to nar- row the opportunities to the exceptional few. For FroliCat, the swinging-ball concept was highly appealing to potential purchasers, was engaging for cats, offered the prospect of a good patent, and could be developed and launched with modest investment. These factors distinguished the opportunity from the others.

Real-Win-Worth-it (RWW) Framework—“Swing Ball Cat Toy” Example

1. Is there a real market and a real product? Is there a need? (What is the need? How is the need presently satisfied?) Yes Can the customer buy? (size of the market, customer decision-making process) Yes Will the customer buy? (perceived risks and benefits, expectations on price and availability) Yes Is there a viable concept for a product already? How likely are we to be able to develop a viable concept? Yes Is the product acceptable within the social, legal, and environmental norms? Yes Is the product feasible? Can it be made? Is the technology available? Does it satisfy the needs? Yes Will our product satisfy the market? Is there a relative advantage to other products? Yes Can it be produced at low cost? Yes Are the risks perceived by the customer acceptable? What are the barriers to adoption? Yes

Answer YES 2. Can we win? Can our product or service be competitive? Can we succeed as a company? Do we have a competitive advantage? Is it sustainable? (performance, patents, barriers to entry,

substitution, price) Yes Is the timing right? Yes Does it fit our brand? Yes Will we beat our competition? (How much will they improve? price trajectories, entrants) Yes Do we have superior resources? (engineering, finance, marketing, production; fit with core competencies) No Do we have the management that can win? (experience? fit with culture? commitment to this opportunity?) Yes Do we know the market as well as or better than our competitors? (customer behavior? channels?) Yes

Answer YES 3. Is it worth doing? Is the return adequate and the risk acceptable? Will it make money? Yes Do we have the resources and the cash to do this? Yes Are the risks acceptable to us? (What could go wrong? technical risk vs. market risk) Yes Does it fit our strategy? (fit with our growth expectation, impact on brand, embedded options) Yes

Answer YES

EXHIBIT 3-10 The Real-Win-Worth-it criteria applied to the swinging ball opportunity. The checklist is available from the book Web site.

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Opportunity Identification 49

This same selection method can be applied using other criteria. An entrepreneur starting a new business will use different criteria from those of an established company. For example, in addition to or instead of the Real-Win-Worth-it criteria, an entrepreneur might select opportunities based on the amount of capital required, the time required to get to market, or the passion and excitement invoked by the opportunity.

Step 6: Reflect on the Results and the Process

The FroliCat team pursued the swing-ball opportunity and developed a product for sale (Exhibit 3-11), which was named the Sway. The Sway was launched through major retailers such as Amazon. The team anxiously awaited the market response, which would be a key indicator of the success of their opportunity identification process. However, market success is not the only success criterion for the process. Some questions to consider in reflecting on the opportunity identification results and process are:

• How many of the opportunities identified came from internal sources versus external sources?

• Did we consider dozens or hundreds of opportunities?

• Was the innovation charter too narrowly focused?

• Were our filtering criteria biased, or largely based on the best possible estimates of eventual product success?

• Are the resulting opportunities exciting to the team?

EXHIBIT 3-11 The Sway cat-toy product that resulted from the swinging-ball opportunity.

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50 Chapter 3

Summary This chapter articulates a conceptual framework for opportunity identification as a tour- nament in which a large number of raw opportunities are generated and then filtered and explored in order to narrow those opportunities to an exceptional few.

The opportunity identification process includes six steps:

1. Establish a charter.

2. Generate and sense many opportunities.

3. Screen opportunities.

4. Develop promising opportunities.

5. Select exceptional opportunities.

6. Reflect on the results and the process.

The performance of the opportunity identification process depends on considering a large number of opportunities from a variety of sources, applying idea generation pro- cesses that result in good opportunities, and in considering opportunities of widely vary- ing quality. By systematically filtering and developing a large set of raw opportunities to identify an exceptional few for further development, the resources of the organization are put to their best use.

References and Bibliography Many current resources, including the Real-Win-Worth-it spreadsheet, and Web-based software for evaluating opportunities, are available on the Internet via www.ulrich-eppinger.net

For more information about opportunity identification, see these books. Kim, W. Chan, and Renee Mauborgne, Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant, Harvard Business Press, Boston, 2005.

Nalebuff, Barry, and Ian Ayres, Why Not? How to Use Everyday Ingenuity to Solve Problems Big and Small, Harvard Business Press, Boston, 2003.

Terwiesch, Christian, and Karl T. Ulrich, Innovation Tournaments: Creating and Identifying Exceptional Opportunities, Harvard Business Press, Boston, 2009.

VanGundy discusses the merits of various screening methods. VanGundy, Arthur B., Techniques of Structured Problem Solving, second edition, Van Nostrand Reinhold, New York, 1988.

The Real-Win-Worth-it method is described in greater detail in this article by Day. Day, George S., “Is it Real? Can We Win? Is it Worth Doing?: Managing Risk and Reward in an Innovation Portfolio,” Harvard Business Review, December 2007.

The following studies provide some of the theoretical and experimental evidence for the principles underlying the opportunity identification process.

Girotra, Karan, Christian Terwiesch, and Karl Ulrich, “Idea Generation and the Quality of the Best Idea,” Management Science, Vol. 56, No. 4, 2010, pp. 591–604.

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Opportunity Identification 51

Kornish, Laura J., and Karl T. Ulrich, “Opportunity Spaces in Innovation: Empirical Analysis of Large Samples of Ideas, Management Science, Vol. 57, No. 1, January 2011, pp. 107–128.”

Exercises 1. Visit a local specialty retail store (e.g., sporting goods, cooking products, electronics)

and identify a generic product or commodity that might be “de-commoditized” and differentiated through innovation.

2. Generate 10 opportunities for innovation based on an area of your own personal passion.

3. Identify the VRIN resources for a product-based company you admire. What new product opportunities might be enabled by these resources?

Thought Questions 1. What are the advantages and disadvantages of anonymous voting in screening

opportunities?

2. Would consumers make good raters in an opportunity screening process?

3. Can you really answer the question of whether an opportunity is real (as in the Real- Win-Worth-it criteria) before developing a product concept?

4. Could a great opportunity identification process result in a product that fails in the market?

5. How do the risks differ between two types of Horizon 2 opportunities, one addressing a current market need and the other using a current solution?

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Product Planning

53

C H A P T E R F O U R

Courtesy of Xerox

EXHIBIT 4-1 The Lakes project developed a new copier platform, including this new product, the Xerox Document Centre 265.

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54 Chapter 4

Xerox Corporation is a global enterprise offering a wide array of document-related products, services, and business solutions. Its mission is to be the leader in the global document market, providing document solutions that enhance business productivity. A key element of Xerox’s competitive strategy is to exploit technological innovation in a rapidly changing market. Pursuing this strategy requires the ability to choose the right set of development projects and to define the scope of these projects in such a way that the projects are complementary. Exhibit 4-1 is a photo of the Xerox Document Centre 265, a product resulting from a Xerox project code-named Lakes.

The product planning process takes place before a product development project is formally approved, before substantial resources are applied, and before the larger devel- opment team is formed. Product planning is an activity that considers the portfolio of projects that an organization might pursue and determines what subset of these projects will be pursued over what time period. The product planning activity ensures that product development projects support the broader business strategy of the company and addresses these questions:

• What product development projects will be undertaken?

• What mix of fundamentally new products, platforms, and derivative products should be pursued?

• How do the various projects relate to each other as a portfolio?

• What will be the timing and sequence of the projects?

Each of the selected projects is then completed by a product development team. The team needs to know its mission before beginning development. The answers to these criti- cal questions are included in a mission statement for the team:

• What market segments should be considered in designing the product and developing its features?

• What new technologies (if any) should be incorporated into the new product?

• What are the manufacturing and service goals and constraints?

• What are the financial targets for the project?

• What are the budget and time frame for the project?

This chapter explains how an organization can maximize the effectiveness of its prod- uct development efforts by first considering the set of potential projects it might pursue, deciding which projects are most desirable, and then launching each project with a fo- cused mission. We present a five-step planning process beginning with the identification of opportunities and resulting in a mission statement for the project team.

The Product Planning Process

The product plan identifies the portfolio of products to be developed by the organization and the timing of their introduction to the market. The planning process considers prod- uct development opportunities identified by many sources, including suggestions from marketing, research, customers, current product development teams, and benchmarking of competitors. From among these opportunities, a portfolio of projects is chosen, timing of

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Product Planning 55

projects is outlined, and resources are allocated. Exhibit 4-2 is an example of a product plan listing products to be developed and indicating the time frame for each.

The product plan is regularly updated to reflect changes in the competitive environ- ment, changes in technology, and information on the success of existing products. Product plans are developed with the company’s goals, capabilities, constraints, and competitive environment in mind. Product planning decisions generally involve the senior manage- ment of the organization and may take place only annually or a few times each year. Some organizations have a director of planning who manages this process.

Organizations that do not carefully plan the portfolio of development projects to pur- sue are often plagued with inefficiencies such as:

• Inadequate coverage of target markets with competitive products.

• Poor timing of market introductions of products.

• Mismatches between aggregate development capacity and the number of projects pursued.

• Poor distribution of resources, with some projects overstaffed and others understaffed.

• Initiation and subsequent cancellation of ill-conceived projects.

• Frequent changes in the directions of projects.

Four Types of Product Development Projects Product development projects can be classified as four types:

• New product platforms: This type of project involves a major development effort to create a new family of products based on a new, common platform. The new product family would address familiar markets and product categories. The Xerox Lakes proj- ect, aimed at the development of a new, digital copier platform, is an example of this type of project.

New Platforms

Derivatives

Improvements

Fundamentally New

H-Net

L-Net

595 392 3936010

Astro

Lakes Project

Product Release

LegendHodaka

1996 1997 1998 1999 2000

EXHIBIT 4-2 The product plan identifies the portfolio of projects to be pursued by the development organization. This plan divides projects into four categories: new platforms, derivatives of existing platforms, product improvements, and fundamentally new products.

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• Derivatives of existing product platforms: These projects extend an existing product platform to better address familiar markets with one or more new products. To develop a new copier based on an existing light-lens (not digital) product platform would be an example of this type of project.

• Incremental improvements to existing products: These projects may only involve add- ing or modifying some features of existing products in order to keep the product line current and competitive. A slight change to remedy minor flaws in an existing copier product would be an example of this type of project.

• Fundamentally new products: These projects involve radically different product or production technologies and may help to address new and unfamiliar markets. Such projects inherently involve more risk; however, the long-term success of the enterprise may depend on what is learned through these important projects. The first digital copier Xerox developed is an example of this type of project.

The Process Exhibit 4-3 illustrates the steps in the product planning process. First, multiple opportuni- ties are prioritized and a set of promising projects is selected. Resources are allocated to these projects and they are scheduled. These planning activities focus on a portfolio of opportunities and potential projects and are sometimes referred to as portfolio manage- ment, aggregate product planning, product line planning, or product management. Once projects have been selected and resources allocated, a mission statement is developed for each project. The formulation of a product plan and the development of a mission state- ment therefore precede the actual product development process.

Although we show the planning process as essentially linear, the activities of selecting promising projects and allocating resources are inherently iterative. The realities of schedules and budgets often force a reassessment of priorities and further refinement and culling of potential projects. The product plan is therefore reevaluated frequently and should be modified based on the latest information from develop- ment teams, research laboratories, production, marketing, and service organizations. People involved later in the process are often the f irst to realize that something about the overall plan or a proj ect’s mission is inconsistent, infeasible, or out of date. The ability to adjust the product plan over time is vital to the long-term success of the enterprise.

56 Chapter 4

Multiple Projects

Mission Statements

Product Plan

Complete Pre-Project Planning

Allocate Resources and

Plan Timing

Evaluate and Prioritize Projects

Identify Opportunities

Portfolio of Projects

Product Development

Process

EXHIBIT 4-3 The product planning process. These activities address a portfolio of product development projects, resulting in a product plan and, for each selected project, a mission statement.

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To develop a product plan and project mission statements, we suggest a five-step process:

1. Identify opportunities.

2. Evaluate and prioritize projects.

3. Allocate resources and plan timing.

4. Complete pre-project planning.

5. Reflect on the results and the process.

Step 1: Identify Opportunities

The planning process begins with the identification of product development opportu- nities. Such opportunities may involve any of the four types of projects defined above. This step can be thought of as the opportunity funnel because it brings together inputs from across the enterprise. Opportunities may be collected passively, but we also recommend that the firm explicitly attempt to generate opportunities. Chapter 3, Op- portunity Identification, provides a process for generating, recognizing, and evaluating opportunities.

When employed actively, the opportunity funnel collects ideas continuously, and new product opportunities may arise at any time. As a way of tracking, sorting, and refining these opportunities, we recommend that each promising opportunity be de- scribed in a short, coherent statement and that this information be collected in a da- tabase. Several Web-based idea management systems are available for gathering and storing information on opportunities, although a simple list in a spreadsheet may be sufficient.

At Xerox, many opportunities had been gathered and discussed. Some were simple en- hancements to existing products, and others were proposals for products based on entirely new technologies. Following are some examples of opportunity statements similar to those proposed at Xerox:

• Create a document distribution system in which a networked printing device resides on each office worker’s desk and automatically delivers mail and other documents.

• Create document delivery software that allows the digital delivery and storage of most intraorganizational documents via a worker’s personal computer.

This opportunity statement eventually became the Lakes project:

• Develop a new black and white (B&W), digital, networkable, document center plat- form for the office market, including scanning, storage, fax, distribution, and printing capabilities.

Step 2: Evaluate and Prioritize Projects

If managed actively, the opportunity funnel can collect hundreds or even thousands of opportunities during a year. Some of these opportunities do not make sense in the context of the firm’s other activities, and in most cases, there are simply too many opportunities for the firm to pursue at once. The second step in the product planning

Product Planning 57

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process is therefore to select the most promising projects to pursue. Four basic perspectives are useful in evaluating and prioritizing opportunities for new products in existing product categories: competitive strategy, market segmentation, technological trajectories, and product platforms. After discussing these four perspectives, we then discuss evaluating opportunities for fundamentally new products, and how to balance the portfolio of projects.

Competitive Strategy An organization’s competitive strategy defines a basic approach to markets and products with respect to competitors. The choice of which opportunities to pursue can be guided by this strategy. Most firms devote much discussion at senior management levels to their strategic competencies and the ways in which they aim to compete. Several strategies are possible, such as:

• Technology leadership: To implement this strategy, the firm places great emphasis on basic research and development of new technologies and on the deployment of these technologies through product development.

• Cost leadership: This strategy requires the firm to compete on production efficiency, either through economies of scale, use of superior manufacturing methods, low-cost labor, or better management of the production system. Design for manufacturing methods (see Chapter 11) are therefore emphasized in the product (and process) devel- opment activities under this strategy.

• Customer focus: To follow this strategy, the firm works closely with new and existing customers to assess their changing needs and preferences. Carefully designed product platforms facilitate the rapid development of derivative products with new features or functions of interest to customers. This strategy may result in a broad product line featuring high product variety in order to address the needs of heterogeneous customer segments.

• Imitative: This strategy involves closely following trends in the market, allowing com- petitors to explore which new products are successful for each segment. When viable opportunities have been identified, the firm quickly launches new products to imitate the successful competitors. A fast development process is essential to effectively im- plement this strategy.

At Xerox, strategic discussions centered around how the company would participate in the digital revolution of the office associated with growth of the Internet. Xerox believed that the Internet would enable a paradigm shift in business practices from one of “print and then distribute” to one of “distribute and then print.” The Lakes project would need to support this corporate vision.

Market Segmentation Customers can be usefully thought of as belonging to distinct market segments. Dividing a market into segments allows the firm to consider the actions of com- petitors and the strength of the firm’s existing products with respect to each well- defined group of customers. By mapping competitors’ products and the firm’s own

58 Chapter 4

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products onto segments, the firm can assess which product opportunities best address weaknesses in its own product line and which exploit weaknesses in the offerings of competitors. Exhibit 4-4 shows a product segment map of this type for some Xerox products in which markets are segmented according to the number of users sharing office equipment.

Technological Trajectories In technology-intensive businesses, a key product planning decision is when to adopt a new basic technology in a product line. For example, in the document business, the key technological issue at the turn of the century was the shift to digital image processing and printing. The product planning decision was when to develop digital products, as opposed to developing another product based on light-lens technology. Technology S-curves are a conceptual tool to help think about such decisions.

The technology S-curve displays the performance of the products in a product cat- egory over time, usually with respect to a single performance variable such as resolution, speed, or reliability. The S-curve illustrates a basic but important concept: Technologies evolve from initial emergence when performance is relatively low, through rapid growth in performance based on experience, and finally approach maturity where some natural

Product Planning 59

1997 1998 1999 2000 Year of Release

Department

Workgroup

Personal

M ar

ke t

S eg

m en

ts

Legend

Xerox product

30 ppm $10k

25 ppm $9k

40 ppm network

$20k

40 ppm $16k

55 ppm $20k

65 ppm $23k

30 ppm $10k

20 ppm $8k

competitor product

40 ppm $20k

25 ppm $10k

20 ppm $7k

potential competitor

35 ppm $15k

65 ppm network

$31k

60 ppm network

$35kLakes Project Lakes

Extensions

Hodaka Project

EXHIBIT 4-4 Product segment map showing Xerox B&W digital products and the competition in three market segments: personal, workgroup, and department machines. Key performance dimensions (pages per minute, networking capability) and price points are listed for each product in the map, along with the time of its market introduction.

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technological limit is reached and the technology may become obsolete. The S-shaped trajectory captures this general dynamic, as shown in Exhibit 4-5. The horizontal axis may be cumulative research and development effort or time; the vertical axis may be a performance/cost ratio or any important performance dimension. While S-curves char- acterize technological change remarkably well in a wide variety of industries, it is often difficult to predict the future trajectory of the performance curve (how near or far is the ultimate performance limit).

Product Platform Planning The product platform is the set of assets shared across a set of products. Components and subassemblies are often the most important of these assets. An effective platform can allow a variety of derivative products to be created more rapidly and easily, with each product providing the features and functions desired by a particular market segment. See Chapter 10, Product Architecture, for more discussion of the underlying architecture en- abling the product platform and for a platform planning method.

Since platform development projects can take from 2 to 10 times as much time and money as derivative product development projects, a firm cannot afford to make every project a new platform. Exhibit 4-6 illustrates the leverage of an effective product plat- form. The critical strategic decision at this stage is whether a project will develop a de- rivative product from an existing platform or develop an entirely new platform. Decisions

60 Chapter 4

EXHIBIT 4-5 This technology S-curve illustrates that Xerox believed digital copier technologies were just emerging and would improve product performance in the coming years. Xerox believed that it could develop a full-featured digital copier in the near future with performance exceeding that of light-lens copiers.

Light-Lens Technology

C o

p ie

r P

ro d

u ct

P er

fo rm

an ce

Today Time

Digital Technology

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about product platforms are very closely related to the technology development efforts of the firm and to decisions about which technologies to employ in new products.

One technique for coordinating technology development with product planning is the technology roadmap. A technology roadmap is a way to represent the expected avail- ability and future use of various technologies relevant to the product being considered. This method has been used by Motorola, Philips, Xerox, and other leaders in fast-moving high-technology industries. The method is particularly useful for planning products in which the critical functional elements are well known in advance.

To create a technology roadmap, multiple generations of technologies are labeled and arranged along a time line, as shown in Exhibit 4-7. The technology roadmap can be aug- mented with the timing of projects and projects that would utilize these technological de- velopments. (This is sometimes then called a product-technology roadmap.) The result is a diagram showing a product’s key functional elements and the sequence of technologies expected to implement these elements over a given period of time. Technology roadmap- ping can serve as a planning tool to create a joint strategy between technology develop- ment and product development.

Evaluating Fundamentally New Product Opportunities In addition to new versions of products in existing product categories, the firm faces many opportunities in either new markets or fundamentally new technologies. While investing scarce resources in the development of products using new technologies or for new markets is quite risky, some such investments are necessary to periodically

Product Planning 61

ProjectPlatform A Platform B

Product Release

Legend

Research and Technology

Development

Platform Product

Development

Derivative Product

Development

Time

EXHIBIT 4-6 A platform development project creates the architecture of a family of products. Derivative products may be included in the initial platform development effort (Platform A) or derivative products may follow thereafter (Platform B).

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rejuvenate the product portfolio (Christensen, 1997). Some criteria for evaluating fun- damentally new product opportunities include:

• Market size (units/year × average price). • Market growth rate (percent per year).

• Competitive intensity (number of competitors and their strengths).

• Depth of the firm’s existing knowledge of the market.

• Depth of the firm’s existing knowledge of the technology.

• Fit with the firm’s other products.

• Fit with the firm’s capabilities.

62 Chapter 4

Time

Photo- receptor

Scanner Layout

Diagnostics

Image Processing

User Interface

Output Modes

Toner Type

Cylindrical Drum

3-Pitch Belt Photoreceptor

n-Pitch Belt Photoreceptor

2D CCD Array w/Optical Reduc.

Full-Width, Linear Array without Optical Reduction

On-Board Diagnostics

Remote-Dialup Diagnostics

Remote Repair

Keypad Touch Screen Touch Screen, Remote PC

High Temperature

Low Melting Point

Monochrome: Paper, Fax, Scan, Local Network, Internet

Color: Paper, Fax, Scan, Local Network, Internet

Low Melting Point, Low Emission

Functional Elements Technologies

600 dpi 600/1200 dpi 1200 dpi 1800 dpi Automatic Image Quality

Document Centre

220, 230

Hodaka Project

Document Centre

240, 255, 265

Lakes Project

Document Centre 2XX

Lakes Extensions

Document Centre 3XX

Next Platform

EXHIBIT 4-7 This technology roadmap shows the life cycles of several digital photocopying technologies and identifies which technologies would be used in each product. For the Lakes platform, Xerox selected technologies for critical functions that could be extended to the higher speeds and color capability required of its derivative products.

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• Potential for patents, trade secrets, or other barriers to competition.

• Existence of a product champion within the firm.

While these criteria are particularly useful in evaluating fundamentally new product opportunities, they also apply generally to evaluating any product opportunity. These criteria can be used in a simple screening matrix to evaluate the overall attractiveness and types of risk for any given opportunity. Chapter 3, Opportunity Identification, includes the Real-Win- Worth-it analysis for opportunities, an example of criteria-based evaluation. Chapter 8, Con- cept Selection, describes screening matrices for selecting product concepts, but this method is directly applicable to selecting product opportunities as well.

Balancing the Portfolio There are many methods to help managers manage an organization’s portfolio of develop- ment projects. Several of these methods involve mapping the portfolio along useful dimen- sions so that managers may consider the strategic implications of their planning decisions. Cooper et al. (2001) describe numerous mapping approaches involving dimensions such as technical risk, financial return, market attractiveness, and the like. One particularly useful mapping, suggested by Wheelwright and Clark (1992), plots the portfolio of projects along two specific dimensions: the extent to which the project involves a change in the product line and the extent to which the project involves a change in production processes. Exhibit 4-8

Product Planning 63

EXHIBIT 4-8 Product-process change matrix. The size of the circles indicates the relative cost of the development projects.

New Core

Process

Next Generation

Process

Single Department

Upgrade

Tuning and Incremental

Changes

No Process Change

Extent of Production Process Changes

Current Product/Process

Support

Derivative Product

Development

Platform Development

Projects

Breakthrough Development

Projects

Lakes Project

New Core

Product

Next Generation

Product

Addition to Product

Family

Minor Product

Enhancement

No Product Change

E xt

en t

o f

P ro

d u

ct C

h an

ge s

Research and Technology

Development

Adapted from Wheelright and Clark, 1992

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illustrates this mapping, called a product-process change matrix. This perspective can be use- ful to illuminate imbalances in the portfolio of projects under consideration and in assessing the consistency between a portfolio of projects and the competitive strategy. For example, a firm may discover that it has identified essentially no breakthrough opportunities or that it has no projects aimed at incremental improvements to existing products.

There are no general procedures for deciding exactly what the portfolio should look like. However, the firm’s choice of competitive strategy should affect the shape of the product development portfolio. For example, a firm pursuing a low-cost strategy would expect the portfolio to contain more production process improvement projects. Firms fol- lowing a strategy requiring high product variety would need to develop many derivative products based upon existing platforms. Firms implementing a strategy based on technolog- ical superiority may need to have a portfolio including more technology development and breakthrough projects in anticipation that not all of these risky projects will result in mar- ketable new products. Note that planning research and technology development activities is closely coupled to, but generally outside the purview of, the product planning process.

Step 3: Allocate Resources and Plan Timing

It is likely that the firm cannot afford to invest in every product development opportunity in its desired balanced portfolio of projects. As timing and resource allocation are determined for the most promising projects, too many projects will invariably compete for too few resources. As a result, the attempt to assign resources and plan timing almost always results in a return to the prior evaluation and prioritization step to prune the set of projects to be pursued.

Resource Allocation Many organizations take on too many projects without regard for the limited availabil- ity of development resources. As a result, skilled engineers and managers are assigned to more and more projects, productivity drops off dramatically, projects take longer to complete, products become late to the market, and profits are lower. Aggregate planning helps an organization make efficient use of its resources by pursuing only those projects that can reasonably be completed with the budgeted resources.

The Lakes project was only one of many projects proposed at Xerox. However, since Lakes involved the development of an entirely new platform, this project was substantially larger than the other projects being considered at the time. Any feasible portfolio of projects would be dominated by the resource demands of the Lakes platform development effort. In fact, for the managers at Xerox to find the resources necessary to execute Lakes, many other projects had to be eliminated or postponed until engineers were finished working on Lakes.

Estimating the resources required for each of the projects in the plan by month, quarter, or year forces the organization to face the realities of finite resources. In most cases, the primary resource to be managed is the effort of the development staff, usually expressed in person-hours or person-months. Other critical resources may also require careful planning, such as model shop facilities, rapid prototyping equipment, pilot production lines, testing facilities, and so on. Estimates of required resources in each period can be compared with available resources to compute an overall capacity utilization ratio (demand/capacity) as well as utilizations by resource types, as shown in Exhibit 4-9. Where utilization exceeds 100 percent, there are not sufficient resources to execute all of

64 Chapter 4

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P roduct P

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EXHIBIT 4-9 Aggregate resource planning can be achieved using a simple spreadsheet method based on estimates of resource demands over time. This example spreadsheet uses units of person-years, although smaller time units (quarters or months) are commonly used in practice. The associated chart highlights where capacity is insufficient to handle all of the projects.

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66 Chapter 4

the projects in the plan on schedule. In fact, to allow for contingencies and to enable re- sponsiveness, planned capacity utilization may be below 100 percent.

In the aggregate planning process, an organization may find that it is in danger of over- committing resources (often by as much as 100 percent or more, according to Wheelwright and Clark, 1992). Therefore the organization must decide in the planning stage which projects are most important to the success of the firm, and pursue those with adequate re- sources. Other projects may need to be eliminated from the plan or shifted in time.

Project Timing Determining the timing and sequence of projects, sometimes called pipeline management, must consider a number of factors, including:

• Timing of product introductions: Generally the sooner a product is brought to market the better. However, launching a product before it is of adequate quality can damage the reputation of the firm.

• Technology readiness: The robustness of the underlying technologies plays a critical role in the planning process. A proven, robust technology can be integrated into prod- ucts much more quickly and reliably.

• Market readiness: The sequence of product introductions determines whether early adopters buy the low-end product and may trade up or whether they buy the high-end product offered at a high initial price. Releasing improvements too quickly can frus- trate customers who want to keep up; on the other hand, releasing new products too slowly risks lagging behind competitors.

• Competition: The anticipated release of competing products may accelerate the timing of development projects.

The Product Plan The set of projects approved by the planning process, sequenced in time, becomes the product plan, as shown earlier in Exhibit 4-2. The plan may include a mix of fundamen- tally new products, platform projects, and derivative projects of varying size. Product plans are updated on a periodic basis, perhaps quarterly or annually, as part of the firm’s strategic planning activity.

Step 4: Complete Pre-Project Planning

Once the project has been approved, but before substantial resources are applied, a pre-project planning activity takes place. This activity involves a small, cross-functional team of people, often known as the core team. The Lakes core team consisted of approximately 30 people rep- resenting a wide range of technical expertise, marketing, manufacturing, and service functions.

At this point, the earlier opportunity statement may be rewritten as a product vision statement. The Lakes concept team began with the following product vision statement:

Develop a networked, mid-range, digital platform for imaging, marking, and finishing.

The objective defined by a product vision statement may be very general. It may not say which specific new technologies should be used, nor does it necessarily specify the goals and constraints of functions such as production and service operations. In order

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to provide clear guidance for the product development organization, generally the team formulates a more detailed definition of the target market and of the assumptions under which the development team will operate. These decisions are captured in a mission state- ment, a summary of which is illustrated in Exhibit 4-10.

Mission Statements The mission statement may include some or all of the following information:

• Brief (one-sentence) description of the product: This description identifies the basic function of the product but avoids implying a specific product concept. It may, in fact, be the product vision statement.

• Benefit proposition: This element of the mission statement articulates the critical few reasons a customer would buy the product. To some extent this is a hypothesis, which will be validated during the concept development process.

• Key business goals: In addition to the project goals that support the corporate strategy, these goals generally include goals for time, cost, and quality (e.g., timing of the product introduction, desired financial performance, market share targets).

Product Planning 67

EXHIBIT 4-10 Mission statement for the Lakes project. This document summarizes the direction to be followed by the product development team. Many more details are appended to this mission statement, including the environmental goals, service objectives, and specific technologies identified for use in the Lakes platform.

Mission Statement: Multifunctional Office Document Machine

Product Description • Networkable, digital machine with copy, print, fax, and scan functions

Benefit Proposition • Multiple document processing functions in one machine

• Connected to office computer network

Key Business Goals • Support Xerox strategy of leadership in digital office equipment

• Serve as platform for all future B&W digital products and solutions

• Capture 50% of digital product sales in primary market • Environmentally friendly • First product introduction 4th Q 1997

Primary Market • Office departments, mid-volume (40–65 ppm, above 42,000 avg. copies/mo.)

Secondary Markets • Quick-print market • Small “satellite” operations

Assumptions and Constraints • New product platform • Digital imaging technology • Compatible with CentreWare software • Input devices manufactured in Canada • Output devices manufactured in Brazil • Image processing engine manufactured in both the

United States and Europe

Stakeholders • Purchasers and users • Manufacturing operations • Service operations • Distributors and resellers

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• Target market(s) for the product: There may be several target markets for the product. This part of the mission statement identifies the primary market as well as any second- ary markets that should be considered in the development effort.

• Assumptions and constraints that guide the development effort: Assumptions must be made carefully; although they restrict the range of possible product concepts, they help to maintain a manageable project scope. Information may be attached to the mission statement to document decisions about assumptions and constraints.

• Stakeholders: One way to ensure that many of the subtle development issues are ad- dressed is to explicitly list all of the product’s stakeholders, that is, all of the groups of people who are affected by the product’s success or failure. The stakeholder list be- gins with the end user (the ultimate external customer) and the external customer who makes the buying decision about the product. Stakeholders also include the customers of the product who reside within the firm, such as the sales force, the service organi- zation, and the production departments. The list of stakeholders serves as a reminder for the team to consider the needs of everyone who will be influenced by the product.

Assumptions and Constraints In creating the mission statement, the team considers the strategies of several functional areas within the firm. Of the many possible functional strategies to consider, the manu- facturing, service, and environmental strategies had the largest influence on the Lakes project. In fact, these strategies guided the core technical developments of the product.

One could reasonably ask why manufacturing, service, and environmental strategies (for example) should be part of the mission statement for a new product. An alternative view is that decisions about these issues should arise from the customer needs for the new product and should not be determined in advance. First, for extremely complex projects, like Lakes, the design of the manufacturing system is a project of similar magnitude to the design of the product itself. As a result, the manufacturing facilities involved in the product need to be identified very early in the process. Second, some product require- ments may not be derived strictly from customer needs. For example, most customers will not directly express a need for low environmental impact. However, Xerox chose to adopt a corporate policy of environmentally responsible design. In such cases, the mission state- ment should reflect such corporate objectives and constraints.

Following are some of the issues that Xerox considered in establishing assumptions and constraints for the Lakes project.

• Manufacturing: Even at this very preliminary stage, it is important to consider the capabilities, capacities, and constraints of the manufacturing operations. A broad array of questions may be relevant, including: Which internal production facilities might be used to manufacture and assemble the product? What key suppliers should be involved in the development, and when? Are the existing production systems ca- pable of producing the new technologies that have been identified for the product? For Lakes, Xerox assumed that input devices would be manufactured at production sites in Canada, output devices in Brazil, and the digital image processing engine in both the United States and Europe.

• Service: In a business where customer service and service revenue are critical to the success of the firm, it is necessary to also state strategic goals for levels of service

68 Chapter 4

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quality. Efforts to improve service include a strategic commitment to designing prod- ucts that contain few parts, which can be serviced quickly. For Lakes, serviceability goals included reducing both the number of field-replaceable modules required to fully service the machine and the time to install them by an order of magnitude.

• Environment: Many corporations today are developing new products with environmen- tal sustainability in mind. The Lakes concept team adopted Xerox’s first “zero to land- fill” policy, an aggressive goal even for a leader in environmental design practices such as Xerox. The stated goal was that no components from a Lakes product should ever go to a landfill. All components would be either remanufacturable or recyclable, or both. No parts should be disposed of by customers. The Lakes environmental design strategy also included an energy efficiency goal to be the “most efficient machine in its class.”

Staffing and Other Pre-Project Planning Activities The pre-project planning activity also generally addresses project staffing and leadership. This may involve getting key members of the development staff to “sign up” for a new project, that is, to agree to commit to leading the development of the product or of a critical element of the product. Budgets are also generally established during pre-project planning.

For fundamentally new products, budgets and staffing plans will be for the concept de- velopment phase of development only. This is because the details of the project are highly uncertain until the basic concept for the new product has been established. More detailed planning will occur when and if the concept is developed further.

Step 5: Reflect on the Results and the Process

In this final step of the planning and strategy process, the team should ask several questions to assess the quality of both the process and the results. Some suggested questions are:

• Is the opportunity funnel collecting an exciting and diverse set of product opportunities?

• Does the product plan support the competitive strategy of the firm?

• Does the product plan address the most important current opportunities facing the firm?

• Are the total resources allocated to product development sufficient to pursue the firm’s competitive strategy?

• Have creative ways of leveraging finite resources been considered, such as the use of product platforms, joint ventures, and partnerships with suppliers?

• Does the core team accept the challenges of the resulting mission statement?

• Are the elements of the mission statement consistent?

• Are the assumptions listed in the mission statement really necessary or is the project overconstrained? Will the development team have the freedom to develop the best pos- sible product?

• How can the product planning process be improved?

Because the mission statement is the handoff to the development team, a “reality check” must be performed before proceeding with the development process. This early stage is the time to remedy known flaws, lest they become more severe and expensive as the development process progresses.

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70 Chapter 4

This chapter explains the product planning method as a stepwise process, largely for simplicity of the presentation. However, reflection and criticism of consistency and fit should be an ongoing process. Steps in the process can and should be executed simultane- ously to make sure that the many plans and decisions are consistent with one another and with the goals, capabilities, and constraints of the firm.

Summary • Product planning is a periodic process that considers the portfolio of product develop-

ment projects to be executed.

• Product planning involves a five-step process:

1. Identify opportunities.

2. Evaluate and prioritize projects.

3. Allocate resources and plan timing.

4. Complete pre-project planning.

5. Reflect on the results and the process.

• The opportunity funnel collects possibilities for new product platforms, enhancements, and fundamentally new products from several sources within and outside the firm.

• Potential product development projects are evaluated based on the organization’s com- petitive strategy, technological trajectories, and product platform plans.

• A balanced portfolio of development projects may include investments in breakthrough products, new platforms, derivatives, and current product support.

• Aggregate planning ensures that selected projects have adequate resources for success- ful completion.

• A mission statement for each product development project documents the product description, benefit proposition, business goals, target markets, critical assumptions, and the product’s stakeholders.

References and Bibliography Many current resources are available on the Internet via www.ulrich-eppinger.net

There are many excellent books on competitive strategy. These selections include discussions related to product planning.

Day, George S., Market Driven Strategy: Processes for Creating Value, The Free Press, New York, 1990.

Moore, Geoffrey A., Crossing the Chasm: Marketing and Selling Technology Products to Mainstream Customers, Harper Business, New York, 1991.

Porter, Michael E., Competitive Advantage: Creating and Sustaining Superior Performance, The Free Press, New York, 1985.

Treacy, Michael, and Fred Wiersema, The Discipline of Market Leaders, Addison- Wesley, Reading, MA, 1995.

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Product Planning 71

Wheelwright and Clark discuss several of the dimensions of product planning presented here, including aggregate planning and some mapping methods.

Wheelwright, Steven C., and Kim B. Clark, “Creating Plans to Focus Product Development,” Harvard Business Review, March–April 1992, pp. 70–82.

Cooper, Edgett, and Kleinschmidt describe a wide range of product portfolio management methods, including financial analysis, scoring techniques, and visual mapping methods.

Cooper, Robert G., Scott J. Edgett, and Elko J. Kleinschmidt, Portfolio Management for New Products, second edition, Basic Books, New York, 2001.

Fine relates product planning and competitive strategy to the decisions of supply-chain design and strategic partnerships with suppliers.

Fine, Charles H., Clockspeed: Winning Control in the Age of Temporary Advantage, Perseus Books, Reading, MA, 1998.

McGrath emphasizes planning of product platforms and strategy for technology-based products.

McGrath, Michael E., Product Strategy for High-Technology Companies, McGraw- Hill, New York, 1995.

Reinertsen focuses particular attention on the issue of excess utilization of aggregate development capacity.

Reinertsen, Donald G., Managing the Design Factory: The Product Developer’s Toolkit, The Free Press, New York, 1997.

Marketing texts include a more detailed treatment of market strategy, market analysis, and product planning.

Crawford, C. Merle, and Anthony Di Benedetto, New Products Management, ninth edition, McGraw-Hill, New York, 2008.

Urban, Glen L., and John R. Hauser, Design and Marketing of New Products, second edition, Prentice Hall, Englewood Cliffs, NJ, 1993.

Foster developed the S-curve concept and provides many interesting examples from a diverse set of industries.

Foster, Richard N., Innovation: The Attacker’s Advantage, Summit Books, New York, 1986.

Burgelman and Maidique provide a very good discussion of technology S-curves and stress that these life-cycle curves are not predetermined; rather, they can be influenced by technical development efforts.

Burgelman, Robert A., Modesto A. Maidique, and Steven C. Wheelwright, Strategic Management of Technology and Innovation, third edition, Irwin Professional Publishing, Homewood, IL, 2001.

Several authors present a more thorough discussion of product platform planning in various industries.

Meyer, Marc H., and Alvin P. Lehnerd, The Power of Product Platforms, The Free Press, New York, 1997.

Sanderson, Susan W., and Mustafa Uzumeri, Managing Product Families, Irwin, Chicago, 1997.

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Managers at Motorola and Philips describe their use of several technology roadmapping methods for integrating the planning of technology development and product development.

Groenveld, Pieter, “Roadmapping Integrates Business and Technology,” Research- Technology Management, Vol. 40, No. 5, Sep./Oct. 1997, pp. 48–55.

Willyard, Charles H., and Cheryl W. McClees, “Motorola’s Technology Roadmap Process,” Research Management, Vol. 30, No. 5, Sep./Oct. 1987, pp. 13–19.

Christensen provides evidence that firms must invest in fundamentally new products, technologies, and markets in order to remain at the leading edge of their industries.

Christensen, Clayton M., The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail, Harvard Business School Press, Boston, 1997.

Exercises 1. Conduct a search using the Internet or published corporate annual reports to identify the

corporate strategy of a company in which you might be interested in investing. Learn about the firm’s product lines and its newest products. How do these products support the corporate strategy? What types of projects would you expect to see in the product plan?

2. Create a product-technology roadmap illustrating the availability of technologies for a class of products you understand well, such as personal computers.

Thought Questions 1. How might a portfolio of development projects differ if the firm believes a particular prod-

uct technology is currently at position A or B on the technology S-curve shown below?

2. How might Xerox be able to address the shortage of mechanical design engineers iden- tified by the aggregate project planning analysis shown in Exhibit 4-9? List five ways Xerox could increase the capacity and five ways to reduce the demand for mechanical design engineers.

72 Chapter 4

Time

Technical Performance

A

B

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Identifying Customer Needs

73

Photo by Stuart Cohen

C H A P T E R F I V E

EXHIBIT 5-1 Existing products used to drive screws: manual screwdrivers, cordless screwdriver, screw gun, cordless drill with driver bit.

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74 Chapter 5

A successful hand tool manufacturer was exploring the growing market for handheld power tools. After performing initial research, the firm decided to enter the market with a cordless screwdriver. Exhibit 5-1 shows several existing products used to drive screws. After some initial concept work, the manufacturer’s development team fabricated and field-tested several prototypes. The results were discouraging. Although some of the products were liked better than others, each one had some feature that customers objected to in one way or another. The results were quite mystifying since the company had been successful in related consumer products for years. After much discussion, the team de- cided that its process for identifying customer needs was inadequate.

This chapter presents a method for comprehensively identifying a set of customer needs. The goals of the method are to:

• Ensure that the product is focused on customer needs.

• Identify latent or hidden needs as well as explicit needs.

• Provide a fact base for justifying the product specifications.

• Create an archival record of the needs activity of the development process.

• Ensure that no critical customer need is missed or forgotten.

• Develop a common understanding of customer needs among members of the develop- ment team.

The philosophy behind the method is to create a high-quality information channel that runs directly between customers in the target market and the developers of the product. This philosophy is built on the premise that those who directly control the details of the product, including the engineers and industrial designers, must interact with customers and experience the use environment of the product. Without this direct experience, techni- cal trade-offs are not likely to be made correctly, innovative solutions to customer needs may never be discovered, and the development team may never develop a deep commit- ment to meeting customer needs.

The process of identifying customer needs is an integral part of the larger product de- velopment process and is most closely related to concept generation, concept selection, competitive benchmarking, and the establishment of product specifications. The customer- needs activity is shown in Exhibit 5-2 in relation to these other front-end product develop- ment activities, which collectively can be thought of as the concept development phase.

The concept development process illustrated in Exhibit 5-2 implies a distinction be- tween customer needs and product specifications. This distinction is subtle but important.

Identify Customer

Needs

Establish Target

Specifications

Generate Product

Concepts

Select Product

Concept(s)

Test Product

Concept(s)

Set Final

Specifications

Plan Downstream Development

Development Plan

Mission Statement

Build and Test Models and Prototypes

Benchmark Competitive Products

Perform Economic Analysis

EXHIBIT 5-2 The customer-needs activity in relation to other concept development activities.

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Identifying Customer Needs 75

Needs are largely independent of any particular product we might develop; they are not specific to the concept we eventually choose to pursue. A team should be able to identify customer needs without knowing if or how it will eventually address those needs. On the other hand, specifications do depend on the concept we select. The specifications for the product we finally choose to develop will depend on what is technically and economically feasible and on what our competitors offer in the marketplace, as well as on customer needs. (See Chapter 6, Product Specifications, for a more detailed discussion of this distinction.) Also note that we choose to use the word need to label any attribute of a po- tential product that is desired by the customer; we do not distinguish here between a want and a need. Other terms used in industrial practice to refer to customer needs include cus- tomer attributes and customer requirements.

Identifying customer needs is itself a process, for which we present a five-step method. We believe that a little structure goes a long way in facilitating effective product develop- ment practices, and we hope and expect that this method will be viewed by those who employ it not as a rigid process but rather as a starting point for continuous improvement and refinement. The five steps are:

1. Gather raw data from customers.

2. Interpret the raw data in terms of customer needs.

3. Organize the needs into a hierarchy of primary, secondary, and (if necessary) tertiary needs.

4. Establish the relative importance of the needs.

5. Reflect on the results and the process.

We treat each of the five steps in turn and illustrate the key points with the cordless screwdriver example. We chose the screwdriver because it is simple enough that the method is not hidden by the complexity of the example. However, note that the same method, with minor adaptation, has been successfully applied to hundreds of products ranging from kitchen utensils costing less than $10 to machine tools costing hundreds of thousands of dollars.

Before beginning the development project, the firm typically specifies a particular market opportunity and lays out the broad constraints and objectives for the project. This information is frequently formalized as a mission statement (also sometimes called a charter or a design brief ). The mission statement specifies which direction to go in but generally does not specify a precise destination or a particular way to proceed. The mis- sion statement is the result of the product planning activities described in Chapter 4, Prod- uct Planning. The mission statement for the cordless screwdriver is shown in Exhibit 5-3.

The cordless screwdriver category of products is already relatively well developed. Such products are particularly well suited to a structured process for gathering customer needs. One could reasonably ask whether a structured method is effective for completely new categories of products with which customers have no experience. Satisfying needs is just as important in revolutionary products as in incremental products. A necessary condi- tion for product success is that a product offer perceived benefits to the customer. Products offer benefits when they satisfy needs. This is true whether the product is an incremen- tal variation on an existing product or whether it is a completely new product based on a revolutionary invention. Developing an entirely new category of product is a risky undertaking, and to some extent the only real indication of whether customer needs have

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been identified correctly is whether customers like the team’s first prototypes. Nevertheless, in our opinion, a structured method for gathering data from customers remains useful and can lower the inherent risk in developing a radically new product. Whether or not custom- ers are able to fully articulate their latent needs, interaction with customers in the target market will help the development team build a personal understanding of the user’s envi- ronment and point of view. This information is always useful, even if it does not result in the identification of every need the new product will address.

Step 1: Gather Raw Data from Customers Consistent with our basic philosophy of creating a high-quality information channel di- rectly from the customer, gathering data involves contact with customers and experience with the use environment of the product. Three methods are commonly used:

1. Interviews: One or more development team members discusses needs with a single customer. Interviews are usually conducted in the customer’s environment and typically last one to two hours.

2. Focus groups: A moderator facilitates a two-hour discussion with a group of 8 to 12 customers. Focus groups are typically conducted in a special room equipped with a two-way mirror allowing several members of the development team to observe the group. In most cases, the moderator is a professional market researcher, but a member of the development team sometimes moderates. The proceedings are usually video recorded. Par- ticipants are usually paid a modest fee ($50 to $100 each) for their attendance. The total cost of a focus group, including rental of the room, participant fees, video recording, and refreshments, is about $5,000. In most U.S. cities, firms that recruit participants, moder- ate focus groups, and/or rent facilities are listed in directories under “Market Research.”

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EXHIBIT 5-3 Mission statement for the cordless screwdriver.

Mission Statement: Screwdriver Project

Product Description • A handheld, power-assisted device for installing threaded fasteners

Benefit Proposition • Drives screws more quickly and with less effort than by hand

Key Business Goals • Product introduced in fourth quarter of 2010 • 50% gross margin • 10% share of cordless screwdriver market by 2012

Primary Market • Do-it-yourself consumer

Secondary Markets • Casual consumer • Light-duty professional

Assumptions • Handheld • Power-assisted • Nickel-metal-hydride rechargeable battery technology

Stakeholders • User • Retailer • Sales force • Service center • Production • Legal department

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3. Observing the product in use: Watching customers use an existing product or perform a task for which a new product is intended can reveal important details about customer needs. For example, a customer painting a house may use a screwdriver to open paint cans in addition to driving screws. Observation may be completely passive, without any direct interaction with the customer, or may involve working side by side with a customer, allowing members of the development team to develop firsthand experience using the product. Ideally, team members observe the product in the actual use environment. Procter & Gamble, for example, observes thousands of customers every year in their homes or workplaces to better understand their needs. For some products, such as do-it-yourself tools, actually using the products is simple and natural; for others, such as surgical instruments, the team may have to use the products on surrogate tasks (e.g., cutting fruit instead of human tissue when developing a new scalpel).

Some practitioners also rely on written surveys for gathering raw data. While a Web- based survey is quite useful later in the process, we cannot recommend this approach for initial efforts to identify customer needs; text-based surveys simply do not provide enough information about the use environment of the product, and they are generally in- effective in revealing unanticipated needs.

Research by Griffin and Hauser shows that one 2-hour focus group reveals about the same number of needs as two 1-hour interviews (Griffin and Hauser, 1993). (See Ex- hibit 5-4.) Because interviews are usually less costly (per hour) than focus groups and because an interview often allows the product development team to experience the use environment of the product, we recommend that interviews be the primary data collec- tion method. Interviews may be supplemented with one or two focus groups as a way to allow top management to observe a group of customers or as a mechanism for sharing a common customer experience (via video) with the members of a larger team. Some practitioners believe that for certain products and customer groups, the interactions among the participants of focus groups can elicit more varied needs than are revealed through interviews, although this belief is not strongly supported by research findings.

Identifying Customer Needs 77

EXHIBIT 5-4 Comparison of the percentages of customer needs that are revealed for focus groups and interviews as a function of the number of sessions. Note that a focus group lasts two hours, while an interview lasts one hour.

Source: Griffin and Hauser, 1993

Pe rc

en t

o f

N ee

d s

Id en

ti fi

ed

40

60

80

100

20

0 1 2 3 4 5 6 7 8 9 10

Number of Interviews or Groups

One-on-One Interview (1 hour)

Focus Group (2 hours)

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Choosing Customers Griffin and Hauser also addressed the question of how many customers to interview in order to reveal most of the customer needs. In one study, they estimated that 90 percent of the customer needs for picnic coolers were revealed after 30 interviews. In another study, they estimated that 98 percent of the customer needs for a piece of office equipment were revealed after 25 hours of data collection in both focus groups and interviews. As a practi- cal guideline for most products, conducting fewer than 10 interviews is probably inadequate and 50 interviews are probably too many. However, interviews can be conducted sequentially and the process can be terminated when no new needs are revealed by additional interviews. These guidelines apply to cases in which the development team is addressing a single market segment. If the team wishes to gather customer needs from multiple distinct segments, then the team may need to conduct 10 or more interviews in each segment. Concept development teams consisting of more than 10 people usually collect data from plenty of customers sim- ply by involving much of the team in the process. For example, if a 10-person team is divided into five pairs and each pair conducts 6 interviews, the team conducts 30 interviews in total.

Needs can be identified more efficiently by interviewing lead users and/or extreme users. According to von Hippel, lead users are customers who experience needs months or years ahead of the majority of the market and stand to benefit substantially from prod- uct innovations (von Hippel, 1988). These customers are particularly useful sources of data for two reasons: (1) they are often able to articulate their emerging needs, because they have had to struggle with the inadequacies of existing products, and (2) they may have already invented solutions to meet their needs. By focusing a portion of the data col- lection efforts on lead users, the team may be able to identify needs that, although explicit for lead users, are still latent for the majority of the market. Developing products to meet these latent needs allows a firm to anticipate trends and to leapfrog competitive products.

Extreme users are those who use the product in unusual ways or who have special needs. For example, extreme users of the screwdriver might be people who have limited vision or dexterity or those who use the tool professionally every day. Extreme users can help the team identify needs that may be felt less acutely by the mainstream market, but are nevertheless important opportunities for competitive advantage. For example, entre- preneur Sam Farber created the original Good Grips vegetable peeler in response to the needs of his wife who suffered from arthritis. Her extreme needs proved to be a reflection of the latent need for more ergonomic kitchen tools among mainstream users.

The choice of which customers to interview is complicated when several different groups of people can be considered “the customer.” For many products, one person (the buyer) makes the buying decision and another person (the user) actually uses the product. A good approach is to gather data from the end user of the product in all situations, and in cases where other types of customers and stakeholders are clearly important, to gather data from these people as well.

A customer selection matrix is useful for planning exploration of both market and cus- tomer variety. Burchill suggests that market segments be listed on the left side of the ma- trix while the different types of customers are listed across the top (Burchill et al., 1997), as shown in Exhibit 5-5. The number of intended customer contacts is entered in each cell to indicate the depth of coverage.

For industrial and commercial products, actually locating customers is usually a mat- ter of making telephone calls or sending e-mail. In developing such products within an

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existing firm, a field sales force can often provide names of customers, although the team must be careful about biasing the selection of customers toward those with allegiances to a particular manufacturer. The Web or a telephone directory can be used to identify names of some types of customers for some classes of products (e.g., building contractors or insurance agents). For products that are integral to a customer’s job, getting someone to agree to an interview is usually simple; these customers are eager to discuss their needs. For consumer products, customers can also be located by making telephone calls or e-mail inquiries. However, arranging a set of interviews for consumer products generally re- quires more inquiries than for industrial or commercial products because the benefit of participating in an interview is less direct for these customers.

The Art of Eliciting Customer Needs Data

The techniques we present here are aimed primarily at interviewing end users, but these methods do apply to all of the three data-gathering modes and to all types of stakeholders. The basic approach is to be receptive to information provided by customers and to avoid confrontations or defensive posturing. Gathering needs data is very different from a sales call: the goal is to elicit an honest expression of needs, not to convince a customer of what he or she needs. In most cases customer interactions will be verbal; interviewers ask questions and the customer responds. A prepared interview guide is valuable for structuring this dialogue. Some helpful questions and prompts for use after the interviewers introduce themselves and explain the purpose of the interview are:

• When and why do you use this type of product?

• Walk us through a typical session using the product.

• What do you like about the existing products?

• What do you dislike about the existing products?

• What issues do you consider when purchasing the product?

• What improvements would you make to the product?

Here are some general hints for effective interaction with customers:

• Go with the flow. If the customer is providing useful information, do not worry about conforming to the interview guide. The goal is to gather important data on customer needs, not to complete the interview guide in the allotted time.

Identifying Customer Needs 79

EXHIBIT 5-5 Customer selection matrix for the cordless screwdriver project.

Retailer or Service Lead Users Users Sales Outlet Centers

Homeowner 0 5(occasional use)

Handy person 3 10

2

3(frequent use)

Professional 3 2 2(heavy-duty use)

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• Use visual stimuli and props. Bring a collection of existing and competitors’ products, or even products that are tangentially related to the product under development. At the end of a session, the interviewers might even show some preliminary product concepts to get customers’ early reactions to various approaches.

• Suppress preconceived hypotheses about the product technology. Frequently custom- ers will make assumptions about the product concept they expect would meet their needs. In these situations, the interviewers should avoid biasing the discussion with as- sumptions about how the product will eventually be designed or produced. When cus- tomers mention specific technologies or product features, the interviewer should probe for the underlying need the customer believes the suggested solution would satisfy.

• Have the customer demonstrate the product and/or typical tasks related to the prod- uct. If the interview is conducted in the use environment, a demonstration is usually convenient and invariably reveals new information.

• Be alert for surprises and the expression of latent needs. If a customer mentions something surprising, pursue the lead with follow-up questions. Frequently, an unex- pected line of questioning will reveal latent needs—important dimensions of the cus- tomers’ needs that are neither fulfilled nor commonly articulated and understood.

• Watch for nonverbal information. The process described in the chapter is aimed at developing better physical products. Unfortunately, words are not always the best way to communicate needs related to the physical world. This is particularly true of needs involving the human dimensions of the product, such as comfort, image, or style. The development team must be constantly aware of the nonverbal messages provided by customers. What are their facial expressions? How do they hold competitors’ products?

Note that many of our suggested questions and guidelines assume that the customer has some familiarity with products similar to the new product under development. This is al- most always true. For example, even before the first cordless screwdriver became available, people installed fasteners. Developing an understanding of customer needs as they relate to the general fastening task would still have been beneficial in developing the first cordless tool. Similarly, understanding the needs of customers using other types of cordless appli- ances, such as electric razors, would also have been useful. We can think of no product so revolutionary that there would be no analogous products or tasks from which the develop- ment team could learn. However, in gathering needs relating to truly revolutionary products with which customers have no experience, the interview questions should be focused on the task or situation in which the new product will be applied, rather than on the product itself.

Documenting Interactions with Customers Four methods are commonly used for documenting interactions with customers:

1. Audio recording: Making an audio recording of the interview is very easy. Unfor- tunately, transcribing the recording into text is very time consuming, and hiring someone to do it can be expensive. Also, audio recording has the disadvantage of being intimidat- ing to some customers.

2. Notes: Handwritten notes are the most common method of documenting an inter- view. Designating one person as the primary notetaker allows the other person to concen- trate on effective questioning. The notetaker should strive to capture some of the wording

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of every customer statement verbatim. These notes, if transcribed immediately after the interview, can be used to create a description of the interview that is very close to an ac- tual transcript. This debriefing immediately after the interview also facilitates sharing of insights between the interviewers.

3. Video recording: Video recording is almost always used to document a focus group session. It is also very useful for documenting observations of the customer in the use en- vironment and/or using existing products. The video recording is useful for bringing new team members “up to speed” and is also useful as raw material for presentations to upper management. Multiple viewings of video recordings of customers in action often facili- tate the identification of latent customer needs. Video recording is also useful for captur- ing many aspects of the end user’s environment.

4. Still photography: Taking photographs provides many of the benefits of video re- cording, but is usually less intrusive and therefore easier to do while observing customers in the field. Additional advantages of still photography are ease of display of the photos, excellent image quality, and readily available equipment. The primary disadvantage is the relative inability to record dynamic information.

The final result of the data-gathering phase of the process is a set of raw data, usually in the form of customer statements but frequently supplemented by video recordings or photographs. A data template implemented in a spreadsheet is useful for organizing these raw data. Exhibit 5-6 is an example of a portion of such a template. We recommend that the template be filled in as soon as possible after the interaction with the customer and edited by the other develop- ment team members present during the interaction. The first column in the main body of the template indicates the question or prompt that elicited the customer data. The second column is a list of verbatim statements the customer made or an observation of a customer action (from a video recording or from direct observation). The third column contains the customer needs implied by the raw data. Some emphasis should be placed on investigating clues that may identify potential latent needs. Such clues may be in the form of humorous remarks, less serious suggestions, frustrations, nonverbal information, or observations and descriptions of the use environment. The symbol (!) is used in Exhibit 5-6 to flag potential latent needs. Tech- niques for interpreting the raw data in terms of customer needs are given in the next section.

The final task in step 1 is to write thank-you notes to the customers involved in the process. Invariably, the team will need to solicit further customer information, so develop- ing and maintaining a good rapport with a set of users is important.

Step 2: Interpret Raw Data in Terms of Customer Needs

Customer needs are expressed as written statements and are the result of interpreting the need underlying the raw data gathered from the customers. Each statement or observation (as listed in the second column of the data template) may be translated into any number of customer needs. Griffin and Hauser found that multiple analysts may translate the same interview notes into different needs, so it is useful to have more than one team member conducting the translation process. Below we provide five guidelines for writing need statements. The first two guidelines are fundamental and are critical to effective translation; the remaining three guidelines ensure consistency of phrasing and style across all team members. Exhibit 5-7 provides examples to illustrate each guideline.

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• Express the need in terms of what the product has to do, not in terms of how it might do it. Customers often express their preferences by describing a solution concept or an implementation approach; however, the need statement should be expressed in terms independent of a particular technological solution.

• Express the need as specifically as the raw data. Needs can be expressed at many dif- ferent levels of detail. To avoid loss of information, express the need at the same level of detail as the raw data.

• Use positive, not negative, phrasing. Subsequent translation of a need into a product specification is easier if the need is expressed as a positive statement. This is not a rigid guideline, because sometimes positive phrasing is difficult and awkward. For example, one of the need statements in Exhibit 5-6 is “the screwdriver does not strip screw heads.” This need is more naturally expressed in a negative form.

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EXHIBIT 5-6 Customer data template filled in with sample customer statements and interpreted needs. SD is an abbreviation for screwdriver. (Note that this template represents a partial list from a single interview. A typical interview session may elicit more than 50 customer statements and interpreted needs.)

Customer: Bill Esposito Address: 100 Memorial Drive

Cambridge, MA 02139 Telephone: 617-864-1274 Willing to do follow-up? Yes

Question/Prompt Customer Statement Interpreted Need

Typical uses I need to drive screws fast, faster than The SD drives screws faster than by hand. by hand.

I sometimes do duct work; use sheet The SD drives sheet metal screws into metal screws. metal duct work.

A lot of electrical; switch covers, outlets, The SD can be used for screws on fans, kitchen appliances. electrical devices.

Likes—current tool I like the pistol grip; it feels the best. The SD is comfortable to grip.

I like the magnetized tip. The SD tip retains the screw before it is driven.

Dislikes—current tool I don’t like it when the tip slips off The SD tip remains aligned with the the screw. screw head without slipping.

I would like to be able to lock it so I can The user can apply torque manually to use it with a dead battery. the SD to drive a screw. (!)

Can’t drive screws into hard wood. The SD can drive screws into hard wood.

Sometimes I strip tough screws. The SD does not strip screw heads.

Suggested improvements An attachment to allow me to reach down The SD can access screws at the end of skinny holes. deep, narrow holes.

A point so I can scrape paint off of screws. The SD allows the user to work with screws that have been painted over.

Would be nice if it could punch a The SD can be used to create a pilot pilot hole. hole. (!)

Interviewer(s): Jonathan and Lisa Date: 19 December 2010

Currently uses: Craftsman Model A3 Type of user: Building maintenance

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• Express the need as an attribute of the product. Wording needs as statements about the product ensures consistency and facilitates subsequent translation into product specifications. Not all needs can be cleanly expressed as attributes of the product, however, and in most of these cases the needs can be expressed as attributes of the user of the product (e.g., “the user can apply torque manually to the screwdriver to drive a screw”).

• Avoid the words must and should. The words must and should imply a level of im- portance for the need. Rather than casually assigning a binary importance rating (must versus should) to the needs at this point, we recommend deferring the assessment of the importance of each need until step 4.

The list of customer needs is the superset of all the needs elicited from all the inter- viewed customers in the target market. Some needs may not be technologically realizable. The constraints of technical and economic feasibility are incorporated into the process of establishing product specifications in subsequent development steps. (See Chapter 6, Product Specifications.) In some cases customers will have expressed conflicting needs. At this point in the process the team does not attempt to resolve such conflicts, but simply documents both needs. Deciding how to address conflicting needs is one of the challenges of the subsequent concept development activities.

Step 3: Organize the Needs into a Hierarchy

The result of steps 1 and 2 should be a list of 50 to 300 need statements. Such a large number of detailed needs is awkward to work with and difficult to summarize for use in subsequent development activities. The goal of step 3 is to organize these needs into a hi- erarchical list. The list will typically consist of a set of primary needs, each one of which

Identifying Customer Needs 83

Customer Need Statement— Need Statement— Guideline Statement Right Wrong

“What” not “how”

Specificity

Positive not negative

An attribute of the product

Avoid “must” and “should”

“Why don’t you put protective shields around the battery contacts?” “I drop my screwdriver all the time.”

“It doesn’t matter if it’s raining; I still need to work outside on Saturdays.” “I’d like to charge my battery from my cigarette lighter.”

“I hate it when I don’t know how much juice is left in the batteries of my cordless tools.”

The screwdriver battery is protected from accidental shorting. The screwdriver operates normally after repeated dropping. The screwdriver operates normally in the rain.

The screwdriver battery can be charged from an automobile cigarette lighter. The screwdriver provides an indication of the energy level of the battery.

The screwdriver battery contacts are covered by a plastic sliding door. The screwdriver is rugged.

The screwdriver is not disabled by the rain.

An automobile cigarette lighter adapter can charge the screwdriver battery. The screwdriver should provide an indication of the energy level of the battery.

EXHIBIT 5-7 Examples illustrating the guidelines for writing need statements.

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will be further characterized by a set of secondary needs. In cases of very complex prod- ucts, the secondary needs may be broken down into tertiary needs as well. The primary needs are the most general needs, while the secondary and tertiary needs express needs in more detail. Exhibit 5-8 shows the resulting hierarchical list of needs for the screwdriver example. For the screwdriver, there are 15 primary needs and 49 secondary needs. Note that two of the primary needs have no associated secondary needs.

The procedure for organizing the needs into a hierarchical list is intuitive, and many teams can successfully complete the task without detailed instructions. For completeness, we provide a step-by-step procedure here. This activity is best performed on a wall or a large table by a small group of team members.

1. Print or write each need statement on a separate card or self-stick note. A print macro can be easily written to print the need statements directly from the data template. A nice feature of this approach is that the need can be printed in a large font in the center of the card and then the original customer statement and other relevant information can be printed in a small font at the bottom of the card for easy reference. Four cards can be cut from a standard printed sheet.

2. Eliminate redundant statements. Those cards expressing redundant need state- ments can be stapled together and treated as a single card. Be careful to consolidate only those statements that are identical in meaning.

3. Group the cards according to the similarity of the needs they express. At this point, the team should attempt to create groups of roughly three to seven cards that express similar needs. The logic by which groups are created deserves special attention. Novice develop- ment teams often create groups according to a technological perspective, clustering needs relating to, for example, materials, packaging, or power. Or they create groups according to assumed physical components such as enclosure, bits, switch, and battery. Both of these ap- proaches are dangerous. Recall that the goal of the process is to create a description of the needs of the customer. For this reason, the groupings should be consistent with the way cus- tomers think about their needs and not with the way the development team thinks about the product. The groups should correspond to needs customers would view as similar. In fact, some practitioners use a process in which customers actually organize the need statements.

4. For each group, choose a label. The label is itself a statement of need that general- izes all of the needs in the group. It can be selected from one of the needs in the group, or the team can write a new need statement.

5. Consider creating supergroups consisting of two to five groups. If there are fewer than 20 groups, then a two-level hierarchy is probably sufficient to organize the data. In this case, the group labels are primary needs and the group members are secondary needs. However, if there are more than 20 groups, the team may consider creating supergroups, and therefore a third level in the hierarchy. The process of creating supergroups is identi- cal to the process of creating groups. As with the previous step, cluster groups according to similarity of the need they express and then create or select a supergroup label. These supergroup labels become the primary needs, the group labels become the secondary needs, and the members of the groups become tertiary needs.

6. Review and edit the organized needs statements. There is no single correct ar- rangement of needs in a hierarchy. At this point, the team may wish to consider alternative groupings or labels and may engage another group to suggest alternative arrangements.

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Identifying Customer Needs 85

EXHIBIT 5-8 Hierarchical list of primary and secondary customer needs for the cordless screwdriver. Importance ratings for the secondary needs are indicated by the number of *’s, with *** denoting critically important needs. Latent needs are denoted by !.

The SD provides plenty of power to drive screws.

* The SD maintains power for several hours of heavy use.

** The SD can drive screws into hardwood. The SD drives sheet metal screws into metal

ductwork. *** The SD drives screws faster than by hand.

The SD makes it easy to start a screw. * The SD retains the screw before it is driven. *! The SD can be used to create a pilot hole.

The SD works with a variety of screws. ** The SD can turn Phillips, Torx, socket, and hex

head screws. ** The SD can turn many sizes of screws.

The SD can access most screws. The SD can be maneuvered in tight areas. ** The SD can access screws at the end of deep,

narrow holes.

The SD turns screws that are in poor condition. The SD can be used to remove grease and dirt

from screws. The SD allows the user to work with painted screws.

The SD feels good in the user’s hand. *** The SD is comfortable when the user pushes on it. *** The SD is comfortable when the user resists twisting. * The SD is balanced in the user’s hand. ! The SD is equally easy to use in right or left hands. The SD weight is just right. The SD is warm to touch in cold weather. The SD remains comfortable when left in the sun.

The SD is easy to control while turning screws. *** The user can easily push on the SD. *** The user can easily resist the SD twisting. The SD can be locked “on.” **! The SD speed can be controlled by the user while

turning a screw. * The SD remains aligned with the screw head

without slipping. ** The user can easily see where the screw is. * The SD does not strip screw heads. * The SD is easily reversible.

The SD is easy to set up and use. * The SD is easy to turn on. * The SD prevents inadvertent switching off. * The user can set the maximum torque of the SD. *! The SD provides ready access to bits or accessories. * The SD can be attached to the user for temporary

storage.

The SD power is convenient. * The SD is easy to recharge. The SD can be used while recharging. *** The SD recharges quickly. The SD batteries are ready to use when new. **! The user can apply torque manually to the SD to

drive a screw.

The SD lasts a long time. ** The SD tip survives heavy use. The SD can be hammered. * The SD can be dropped from a ladder without

damage.

The SD is easy to store. * The SD fits in a toolbox easily. ** The SD can be charged while in storage. The SD resists corrosion when left outside or in

damp places. *! The SD maintains its charge after long periods

of storage. The SD maintains its charge when wet.

The SD prevents damage to the work. * The SD prevents damage to the screw head. The SD prevents scratching of finished surfaces.

The SD has a pleasant sound when in use.

The SD looks like a professional quality tool.

The SD is safe. The SD can be used on electrical devices. *** The SD does not cut the user’s hands.

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The process is more complicated when the team attempts to reflect the needs of two or more distinct market segments. There are at least two approaches that can be taken to address this challenge. First, the team can label each need with the segment (and pos- sibly the name) of the customer from whom the need was elicited. This way, differences in needs across segments can be observed directly. One practical visual technique for this labeling is to use different colors of paper for the cards on which the needs statements are written, with each color corresponding to a different market segment. The other approach to multiple market segments is to perform the clustering process separately for each market segment. Using this approach, the team can observe differences both in the needs themselves and in the ways in which these needs are best organized. We recommend that the team adopt this parallel, independent approach when the segments are very different in their needs and when there is some doubt about the ability of the team to address the different segments with the same product.

Step 4: Establish the Relative Importance of the Needs The hierarchical list alone does not provide any information on the relative importance that customers place on different needs. Yet the development team will have to make trade-offs and allocate resources in designing the product. A sense of the relative importance of the various needs is essential to making these trade-offs correctly. Step 4 in the needs process establishes the relative importance of the customer needs identified in steps 1 through 3. The outcome of this step is a numerical importance weighting for a subset of the needs. There are two basic approaches to the task: (1) relying on the consensus of the team mem- bers based on their experience with customers, or (2) basing the importance assessment on further customer surveys. The obvious trade-off between the two approaches is cost and speed versus accuracy: the team can make an educated assessment of the relative impor- tance of the needs in one meeting, while a customer survey generally takes a minimum of two weeks. In most cases we believe the customer survey is important and worth the time required to complete it. Other development tasks, such as concept generation and analysis of competitive products, can begin before the relative importance surveys are complete.

The team should at this point have developed a rapport with a group of customers. These same customers can be surveyed to rate the relative importance of the needs that have been identified. The survey can be done in person, by telephone, via the Internet, or by mail. Few customers will respond to a survey asking them to evaluate the importance of 100 needs, so typically the team will work with only a subset of the needs. A practical limit on how many needs can be addressed in a customer survey is about 50. This limit is not too severe, however, because many of the needs are either obviously important (e.g., the screwdriver fits in a toolbox easily) or are easy to implement (e.g., the screwdriver prevents inadvertent switching off). The team can therefore limit the scope of the survey by querying customers only about needs that are likely to give rise to difficult technical trade-offs or costly features in the product design. Such needs would include the need to vary speed, the need to drive screws into hardwood, and the need to have the screwdriver emit a pleasant sound. Alterna- tively the team could develop a set of surveys to ask a variety of customers each about dif- ferent subsets of the needs list. There are many survey designs for establishing the relative importance of customer needs. One good design is illustrated by the portion of the cordless screwdriver survey shown in Exhibit 5-9. In addition to asking for importance ratings, this

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survey asks the respondent to explicitly identify the needs that are unique or unexpected. This information can be used to help the team identify latent needs.

The survey responses for each need statement can be characterized in a variety of ways: by the mean, by the standard deviation, or by the number of responses in each category. The responses can then be used to assign an importance weighting to the need statements. The same scale of 1 to 5 can be used to summarize the importance data. The needs in Exhibit 5-8 are rated according to the survey data, with the importance ratings denoted by the number of *’s next to each need statement and the latent needs denoted by !. Note that no critical needs are also latent needs. This is because if a need were critical, customers would not be surprised or excited by it; they would expect it to be met.

Step 5: Reflect on the Results and the Process

The final step in the method is to reflect on the results and the process. While the process of identifying customer needs can be usefully structured, it is not an exact science. The team must challenge its results to verify that they are consistent with the knowledge and intuition the team has developed through many hours of interaction with customers. Some questions to ask include:

• Have we interacted with all of the important types of customers in our target market?

• Are we able to see beyond needs related only to existing products in order to capture the latent needs of our target customers?

• Are there areas of inquiry we should pursue in follow-up interviews or surveys?

• Which of the customers we spoke to would be good participants in our ongoing devel- opment efforts?

Identifying Customer Needs 87

Cordless Screwdriver Survey

For each of the following cordless screwdriver features, please indicate on a scale of 1 to 5 how important the feature is to you. Please use the following scale:

1. Feature is undesirable. I would not consider a product with this feature. 2. Feature is not important, but I would not mind having it. 3. Feature would be nice to have, but is not necessary. 4. Feature is highly desirable, but I would consider a product without it. 5. Feature is critical. I would not consider a product without this feature.

Also indicate by checking the box to the right if you feel that the feature is unique, exciting, and/or unexpected.

Importance of feature Check box if feature is unique, on scale of 1 to 5 exciting, and/or unexpected.

______ The screwdriver maintains power for several hours of heavy use. ❏ ______ The screwdriver can drive screws into hardwood. ❏ ______ The screwdriver speed can be controlled by the user while turning a screw. ❏ ______ The screwdriver has a pleasant sound when in use. ❏

And so forth.

EXHIBIT 5-9 Example importance survey (partial).

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• What do we know now that we didn’t know when we started? Are we surprised by any of the needs?

• Did we involve everyone within our own organization who needs to deeply understand customer needs?

• How might we improve the process in future efforts?

Summary Identifying customer needs is an integral part of the concept development phase of the product development process. The resulting customer needs are used to guide the team in establishing product specifications, generating product concepts, and selecting a product concept for further development.

• The process of identifying customer needs includes five steps:

1. Gather raw data from customers.

2. Interpret the raw data in terms of customer needs.

3. Organize the needs into a hierarchy.

4. Establish the relative importance of the needs.

5. Reflect on the results and the process.

• Creating a high-quality information channel from customers to the product developers ensures that those who directly control the details of the product, including the product designers, fully understand the needs of the customer.

• Lead users are a good source of customer needs because they experience new needs months or years ahead of most customers and because they stand to benefit substan- tially from new product innovations. Furthermore, they are frequently able to articulate their needs more clearly than typical customers. Extreme users have special needs which may reflect latent needs among mainstream users.

• Latent needs may be even more important than explicit needs in determining customer satisfaction. Latent needs are those that many customers recognize as important in a final product but do not or cannot articulate in advance.

• Customer needs should be expressed in terms of what the product has to do, not in terms of how the product might be implemented. Adherence to this principle leaves the development team with maximum flexibility to generate and select product concepts.

• The key benefits of the method are: ensuring that the product is focused on customer needs and that no critical customer need is forgotten; developing a clear understanding among members of the development team of the needs of the customers in the target market; developing a fact base to be used in generating concepts, selecting a product concept, and establishing product specifications; and creating an archival record of the needs phase of the development process.

References and Bibliography Many current resources are available on the Internet via www.ulrich-eppinger.net

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Concept engineering is a method developed by Burchill at MIT in collaboration with the Center for Quality of Management. This chapter benefits from our observations of the development and application of concept engineering. For a complete and detailed description of concept engineering, see:

Burchill, Gary, et al., Concept Engineering, Center for Quality of Management, Cambridge, MA, Document No. ML0080, 1997.

The research by Griffin and Hauser validates different methods for extracting needs from interview data. Their study of the fraction of needs identified as a function of the number of customers interviewed is particularly interesting.

Griffin, Abbie, and John R. Hauser, “The Voice of the Customer,” Marketing Science, Vol. 12, No. 1, Winter 1993, pp. 1–27.

Kinnear and Taylor thoroughly discuss data collection methods and survey design. Kinnear, Thomas C., and James R. Taylor, Marketing Research: An Applied Approach, fifth edition, McGraw-Hill, New York, 1995.

Norman has written extensively on user needs, especially as related to the cognitive challenges of using products.

Norman, Donald A., The Design of Everyday Things, Doubleday, New York, 1990.

Payne’s book is a detailed and interesting discussion of how to pose questions in surveys. Payne, Stanley L., The Art of Asking Questions, Princeton University Press, Princeton, NJ, 1980.

Total quality management (TQM) provides a valuable perspective on how identifying customer needs fits into an overall effort to improve the quality of goods and services.

Shiba, Shoji, Alan Graham, and David Walden, A New American TQM: Four Practical Revolutions in Management, Productivity Press, Cambridge, MA, and The Center for Quality of Management, Cambridge, MA, 1993.

Urban and Hauser provide a thorough discussion of how to create hierarchies of needs (along with many other topics).

Urban, Glen L., and John R. Hauser, Design and Marketing of New Products, second edition, Prentice Hall, Englewood Cliffs, NJ, 1993.

Von Hippel describes many years of research on the role of lead users in innovation. He provides useful guidelines for identifying lead users.

von Hippel, Eric, The Sources of Innovation, Oxford University Press, New York, 1988.

Exercises 1. Translate the following customer statements about a student book bag into proper

needs statements:

a. “See how the leather on the bottom of the bag is all scratched; it’s ugly.” b. “When I’m standing in line at the cashier trying to find my checkbook while bal-

ancing my bag on my knee, I feel like a stork.” c. “This bag is my life; if I lose it I’m in big trouble.”

Identifying Customer Needs 89

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d. “There’s nothing worse than a banana that’s been squished by the edge of a textbook.” e. “I never use both straps on my knapsack; I just sling it over one shoulder.”

2. Observe someone performing an everyday task. (Ideally, you should choose a task for which you can observe different users performing the task repeatedly.) Identify frustrations and difficulties encountered by these people. Identify the latent customer needs.

3. Choose a product that continually annoys you. Identify the needs the developers of this product missed. Why do you think these needs were not met? Do you think the devel- opers deliberately ignored these needs?

Thought Questions 1. One of the reasons the method is effective is that it involves the entire development

team. Unfortunately, the method can become unwieldy with a team of more than 10 people. How might you modify the method to maximize involvement yet maintain a focused and decisive effort given a large development team?

2. Can the process of identifying customer needs lead to the creation of innovative prod- uct concepts? In what ways? Could a structured process of identifying customer needs lead to a fundamentally new product concept like the Post-it Note?

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Product Specifications

91

C H A P T E R S I X

Courtesy of Specialized Bicycle Components

EXHIBIT 6-1 One of Specialized’s existing mountain bikes with a suspension fork.

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92 Chapter 6

Specialized Bicycle Components was interested in developing a new front suspension fork for the mountain bike market. Although the firm was already selling suspension forks on its bicycles (Exhibit 6-1), it was interested in exploring designs that would pro- vide higher value for the recreational cyclist.

The development team had spent a great deal of time identifying customer needs. In addition to logging many hours of riding on suspended bikes themselves, the members of the team had interviewed lead users at mountain bike races and recreational cyclists on local trails, and they also had spent time working with dealers in their stores. As a re- sult of this process they had assembled a list of customer needs. They now faced several challenges:

• How could the relatively subjective customer needs be translated into precise targets for the remaining development effort?

• How could the team and its senior management agree on what would constitute suc- cess or failure of the resulting product design?

• How could the team develop confidence that its intended product would garner a sub- stantial share of the suspension fork market?

• How could the team resolve the inevitable trade-offs among product characteristics like cost and weight?

This chapter presents a method for establishing product specifications. We assume that the customer needs are already documented as described in Chapter 5, Identifying Cus- tomer Needs. The method employs several simple information systems, all of which can be constructed using conventional spreadsheet software.

What Are Specifications?

Customer needs are generally expressed in the “language of the customer.” The primary customer needs for the suspension fork are listed in Exhibit 6-2. Customer needs such as “the suspension is easy to install” or “the suspension enables high-speed descents on bumpy trails” are typical in terms of the subjective quality of the expressions. However, while such expressions are helpful in developing a clear sense of the issues of interest to customers, they provide little specific guidance about how to design and engineer the product. They simply leave too much margin for subjective interpretation. For this reason, development teams usually establish a set of specifications, which spell out in precise, measurable detail what the product has to do. Product specifications do not tell the team how to address the customer needs, but they do represent an unambiguous agreement on what the team will attempt to achieve in order to satisfy the customer needs. For example, in contrast to the customer need that “the suspension is easy to install,” the corresponding specification might be that “the average time to assemble the fork to the frame is less than 75 seconds.”

We intend the term product specifications to mean the precise description of what the product has to do. Some firms use the terms “product requirements” or “engineering characteristics” in this way. Other firms use “specifications” or “technical specifications” to refer to key design variables of the product such as the oil viscosity or spring constant of the suspension system. These are just differences in terminology. For clarity, let us be

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Product Specifications 93

precise about a few definitions. A specification (singular) consists of a metric and a value. For example, “average time to assemble” is a metric, while “less than 75 seconds” is the value of this metric. Note that the value may take on several forms, including a particular number, a range, or an inequality. Values are always labeled with the appropriate units (e.g., seconds, kilograms, joules). Together, the metric and value form a specification. The product specifications (plural) are simply the set of the individual specifications.

When Are Specifications Established?

In an ideal world, the team would establish the product specifications once early in the development process and then proceed to design and engineer the product to exactly meet those specifications. For some products, such as soap or soup, this approach works quite well; the technologists on the team can reliably concoct a formulation that satis- fies almost any reasonable specifications. However, for technology-intensive products this is rarely possible. For such products, specifications are established at least twice. Immediately after identifying the customer needs, the team sets target specifications. These specifications represent the hopes and aspirations of the team, but they are estab- lished before the team knows what constraints the product technology will place on what

EXHIBIT 6-2 Customer needs for the suspension fork and their relative importance (shown in a convenient spreadsheet format).

No. Need Imp.

1 The suspension reduces vibration to the hands. 3

2 The suspension allows easy traversal of slow, difficult terrain. 2

3 The suspension enables high-speed descents on bumpy trails. 5

4 The suspension allows sensitivity adjustment. 3

5 The suspension preserves the steering characteristics of the bike. 4

6 The suspension remains rigid during hard cornering. 4

7 The suspension is lightweight. 4

8 The suspension provides stiff mounting points for the brakes. 2

9 The suspension fits a wide variety of bikes, wheels, and tires. 5

10 The suspension is easy to install. 1

11 The suspension works with fenders. 1

12 The suspension instills pride. 5

13 The suspension is affordable for an amateur enthusiast. 5

14 The suspension is not contaminated by water. 5

15 The suspension is not contaminated by grunge. 5

16 The suspension can be easily accessed for maintenance. 3

17 The suspension allows easy replacement of worn parts. 1

18 The suspension can be maintained with readily available tools. 3

19 The suspension lasts a long time. 5

20 The suspension is safe in a crash. 5

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can be achieved. The team’s efforts may fail to meet some of these specifications and may exceed others, depending on the product concept the team eventually selects. For this reason, the target specifications must be refined after a product concept has been se- lected. The team revisits the specifications while assessing the actual technological con- straints and the expected production costs. To set the final specifications, the team must frequently make hard trade-offs among different desirable characteristics of the product. For simplicity, we present a two-stage process for establishing specifications, but we note that in some organizations specifications are revisited many times throughout the development process.

The two stages in which specifications are established are shown as part of the concept development process in Exhibit 6-3. Note that the final specifications are one of the key elements of the development plan, which is usually documented in the project’s contract book. The contract book (described in Chapter 18, Managing Projects) specifies what the team agrees to achieve, the project schedule, the required resources, and the economic implications for the business. The list of product specifications is also one of the key information systems used by the team throughout the development process.

This chapter presents two methods: the first is for establishing the target specifications and the second is for setting the final specifications after the product concept has been selected.

Establishing Target Specifications

As Exhibit 6-3 illustrates, the target specifications are established after the customer needs have been identified but before product concepts have been generated and the most promising one(s) selected. An arbitrary setting of the specifications may not be techni- cally feasible. For example, in designing a suspension fork, the team cannot assume in ad- vance that it will be able to achieve simultaneously a mass of 1 kilogram, a manufacturing cost of $30, and the best descent time on the test track, as these are three quite aggressive specifications. Actually meeting the specifications established at this point is contingent upon the details of the product concept the team eventually selects. For this reason, such preliminary specifications are labeled “target specifications.” They are the goals of the development team, describing a product that the team believes would succeed in the mar- ketplace. Later these specifications will be refined based on the limitations of the product concept actually selected.

94 Chapter 6

Identify Customer

Needs

Establish Target

Specifications

Generate Product

Concepts

Select Product

Concept(s)

Test Product

Concept(s)

Set Final

Specifications

Plan Downstream Development

Development Plan

Mission Statement

Build and Test Models and Prototypes

Benchmark Competitive Products

Perform Economic Analysis

EXHIBIT 6-3 The concept development process. The target specifications are set early in the process, but setting the final specifications must wait until after the product concept has been selected.

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The process of establishing the target specifications contains four steps:

1. Prepare the list of metrics.

2. Collect competitive benchmarking information.

3. Set ideal and marginally acceptable target values.

4. Reflect on the results and the process.

Step 1: Prepare the List of Metrics The most useful metrics are those that reflect as directly as possible the degree to which the product satisfies the customer needs. The relationship between needs and metrics is central to the entire concept of specifications. The working assumption is that a translation from cus- tomer needs to a set of precise, measurable specifications is possible and that meeting specifi- cations will therefore lead to satisfaction of the associated customer needs.

A list of metrics is shown in Exhibit 6-4. A good way to generate the list of metrics is to contemplate each need in turn and to consider what precise, measurable characteristic of the product will reflect the degree to which the product satisfies that need. In the ideal case, there is one and only one metric for each need. In practice, this is frequently not possible.

For example, consider the need that the suspension be “easy to install.” The team may conclude that this need is largely captured by measuring the time required for assembly of the fork to the frame. However, note the possible subtleties in this translation. Is assembly time really identical to ease of installation? The installation could be extremely fast but require an awkward and painful set of finger actions, which ultimately may lead to worker injury or dealer frustration. Because of the imprecise nature of the translation process, those establishing the specifications should have been directly involved in identifying the customer needs. In this way the team can rely on its understanding of the meaning of each need statement derived from firsthand interactions with customers.

The need for the fork to reduce vibration to the user’s hands may be even more difficult to translate into a single metric, because there are many different conditions under which vibration can be transmitted, including small bumps on level roads and big bumps on rough trails. The team may conclude that several metrics are required to capture this need, including, for example, the metrics “attenuation from dropout to handlebar at 10 Hz” and “maximum value from the Monster.” (The “Monster” is a suspension test developed by Mountain Bike magazine.)

A simple needs-metrics matrix represents the relationship between needs and metrics. An example needs-metrics matrix is shown in Exhibit 6-5. The rows of the matrix cor- respond to the customer needs, and the columns of the matrix correspond to the metrics. A mark in a cell of the matrix means that the need and the metric associated with the cell are related; performance relative to the metric will influence the degree to which the product satisfies the customer need. This matrix is a key element of the House of Quality, a graphical technique used in Quality Function Deployment, or QFD (Hauser and Claus- ing, 1988). In many cases, we find the information in the needs-metrics matrix is just as easily communicated by listing the numbers of the needs related to each metric alongside the list of metrics (the second column in Exhibit 6-4). There are some cases, however, in which the mapping from needs to metrics is complex, and the matrix can be quite useful for representing this mapping.

Product Specifications 95

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A few guidelines should be considered when constructing the list of metrics:

• Metrics should be complete. Ideally each customer need would correspond to a single metric, and the value of that metric would correlate perfectly with satisfaction of that need. In practice, several metrics may be necessary to completely reflect a single customer need.

• Metrics should be dependent, not independent, variables. This guideline is a variant of the what-not-how principle introduced in Chapter 5. As do customer needs, specif ications also indicate what the product must do, but not how the

96 Chapter 6

EXHIBIT 6-4 List of metrics for the suspension. The relative importance of each metric and the units for the metric are also shown. “Subj.” is an abbreviation indicating that a metric is subjective.

Metric No. Need Nos. Metric Imp. Units

1 1, 3 Attenuation from dropout to handlebar at 10 Hz 3 dB

2 2, 6 Spring preload 3 N

3 1, 3 Maximum value from the Monster 5 g

4 1, 3 Minimum descent time on test track 5 s

5 4 Damping coefficient adjustment range 3 N-s/m

6 5 Maximum travel (26-in. wheel) 3 mm

7 5 Rake offset 3 mm

8 6 Lateral stiffness at the tip 3 kN/m

9 7 Total mass 4 kg

10 8 Lateral stiffness at brake pivots 2 kN/m

11 9 Headset sizes 5 in.

12 9 Steertube length 5 mm

13 9 Wheel sizes 5 List

14 9 Maximum tire width 5 in.

15 10 Time to assemble to frame 1 s

16 11 Fender compatibility 1 List

17 12 Instills pride 5 Subj.

18 13 Unit manufacturing cost 5 US$

19 14 Time in spray chamber without water entry 5 s

20 15 Cycles in mud chamber without contamination 5 k-cycles

21 16, 17 Time to disassemble/assemble for maintenance 3 s

22 17, 18 Special tools required for maintenance 3 List

23 19 UV test duration to degrade rubber parts 5 hr

24 19 Monster cycles to failure 5 Cycles

25 20 Japan Industrial Standards test 5 Binary

26 20 Bending strength (frontal loading) 5 kN

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specifications will be achieved. Designers use many types of variables in product development; some are dependent, such as the mass of the fork, and some are inde- pendent, such as the material used for the fork. In other words, designers cannot control mass directly because it arises from other independent decisions the design- ers will make, such as dimensions and materials choices. Metrics specify the over- all performance of a product and should therefore be the dependent variables (i.e., the performance measures or output variables) in the design problem. By using dependent variables for the specifications, designers are left with the freedom to achieve the specifications using the best approach possible.

Product Specifications 97

EXHIBIT 6-5 The needs-metrics matrix.

Need 1 Reduces vibration to the hands • • • 2 Allows easy traversal of slow, difficult terrain • 3 Enables high-speed descents on bumpy trails • • • 4 Allows sensitivity adjustment • 5 Preserves the steering characteristics of the bike • • 6 Remains rigid during hard cornering • • 7 Is lightweight • 8 Provides stiff mounting points for the brakes • 9 Fits a wide variety of bikes, wheels, and tires • • • • 10 Is easy to install • 11 Works with fenders • 12 Instills pride • 13 Is affordable for an amateur enthusiast • 14 Is not contaminated by water • 15 Is not contaminated by grunge • 16 Can be easily accessed for maintenance • 17 Allows easy replacement of worn parts • • 18 Can be maintained with readily available tools • 19 Lasts a long time • • 20 Is safe in a crash • •

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• Metrics should be practical. It does not serve the team to devise a metric for a bicycle suspension that can only be measured by a scientific laboratory at a cost of $100,000. Ideally, metrics will be directly observable or analyzable properties of the product that can be easily evaluated by the team.

• Some needs cannot easily be translated into quantifiable metrics. The need that the suspension instills pride may be quite critical to success in the fashion-conscious mountain bike market, but how can pride be quantified? In these cases, the team sim- ply repeats the need statement as a specification and notes that the metric is subjective and would be evaluated by a panel of customers. (We indicate this by entering “Subj.” in the units column.)

• The metrics should include the popular criteria for comparison in the marketplace. Many customers in various markets buy products based on independently published evaluations. Such evaluations are found, for example, in Popular Science, Consumer Reports, on various Internet sites, or, in our case, in Bicycling and Mountain Bike magazines. If the team knows that its product will be evaluated by the trade media and knows what the evaluation criteria will be, then it should include metrics cor- responding to these criteria. Mountain Bike magazine uses a test machine called the Monster, which measures the vertical acceleration (in g’s) of the handlebars as a bicycle equipped with the fork runs over a block 50 millimeters tall. For this reason, the team included “maximum value from the Monster” as a metric. If the team cannot find a relationship between the criteria used by the media and the customer needs it has identified, then it should ensure that a need has not been overlooked and/or should work with the media to revise the criteria. In a few cases, the team may conclude that high performance in the media evaluations is in itself a customer need and choose to include a metric used by the media that has little intrinsic technical merit.

In addition to denoting the needs related to each metric, Exhibit 6-4 contains the units of measurement and an importance rating for each metric. The units of measurement are most commonly conventional engineering units such as kilograms and seconds. However, some metrics will not lend themselves to numerical values. The need that the suspension “works with fenders” is best translated into a specification listing the models of fenders with which the fork is compatible. In this case, the value of the metric is actually a list of fenders rather than a number. For the metric involving the standard safety test, the value is pass/fail. (We indicate these two cases by entering “List” and “Binary” in the units column.)

The importance rating of a metric is derived from the importance ratings of the needs it reflects. For cases in which a metric maps directly to a single need, the importance rating of the need becomes the importance rating of the metric. For cases in which a metric is related to more than one need, the importance of the metric is de- termined by considering the importances of the needs to which it relates and the nature of these relationships. We believe that there are enough subtleties in this process that importance weightings can best be determined through discussion among the team members, rather than through a formal algorithm. When there are relatively few speci- fications and establishing the relative importance of these specifications is critically important, conjoint analysis may be useful. Conjoint analysis is described briefly later in this chapter and publications explaining the technique are referenced at the end of the chapter.

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Step 2: Collect Competitive Benchmarking Information Unless the team expects to enjoy a total monopoly, the relationship of the new product to competitive products is paramount in determining commercial success. While the team will have entered the product development process with some idea of how it wishes to compete in the marketplace, the target specifications are the language the team uses to discuss and agree on the detailed positioning of its product relative to existing products, both its own and competitors’. Information on competing products must be gathered to support these positioning decisions.

An example of a competitive benchmarking chart is shown in Exhibit 6-6. The columns of the chart correspond to the competitive products and the rows are the metrics established in step 1. Note that the competitive benchmarking chart can be constructed as a simple appendage to the spreadsheet containing the list of metrics. (This information is one of the “rooms” in the House of Quality, described by Hauser and Clausing.)

The benchmarking chart is conceptually very simple. For each competitive product, the values of the metrics are simply entered down a column. Gathering these data can be very time consuming, involving (at the least) purchasing, testing, disassembling, and estimat- ing the production costs of the most important competitive products. However, this invest- ment of time is essential, as no product development team can expect to succeed without having this type of information. A word of warning: Sometimes the data contained in competitors’ catalogs and supporting literature are not accurate. Where possible, values of the key metrics should be verified by independent testing or observation.

An alternative competitive benchmarking chart can be constructed with rows corre- sponding to the customer needs and columns corresponding to the competitive products (see Exhibit 6-7). This chart is used to compare customers’ perceptions of the relative de- gree to which the products satisfy their needs. Constructing this chart requires collecting customer perception data, which can also be very expensive and time consuming. Some techniques for measuring customers’ perceptions of satisfaction of needs are contained in a book by Urban and Hauser (1993). Both charts can be useful and any discrepancies between the two are instructive. At a minimum, a chart showing the competitive values of the metrics (Exhibit 6-6) should be created.

Step 3: Set Ideal and Marginally Acceptable Target Values In this step, the team synthesizes the available information in order to actually set the target values for the metrics. Two types of target value are useful: an ideal value and a marginally acceptable value. The ideal value is the best result the team could hope for. The marginally acceptable value is the value of the metric that would just barely make the product commercially viable. Both of these targets are useful in guiding the subsequent stages of concept generation and concept selection, and for refining the specifications after the product concept has been selected.

There are five ways to express the values of the metrics:

• At least X: These specifications establish targets for the lower bound on a metric, but higher is still better. For example, the value of the brake mounting stiffness is specified to be at least 325 kilonewtons/meter.

• At most X: These specifications establish targets for the upper bound on a metric, with smaller values being better. For example, the value for the mass of the suspension fork is set to be at most 1.4 kilograms.

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• Between X and Y: These specifications establish both upper and lower bounds for the value of a metric. For example, the value for the spring preload is set to be between 480 and 800 newtons. Any more and the suspension is harsh; any less and the suspension is too bouncy.

• Exactly X: These specifications establish a target of a particular value of a metric, with any deviation degrading performance. For example, the ideal value for the rake offset metric is set to 38 millimeters. This type of specification is to be avoided if possible because such specifications substantially constrain the design. Often, upon reconsid- eration, the team realizes that what initially appears as an “exactly X” specification can be expressed as a “between X and Y” specification.

• A set of discrete values: Some metrics will have values corresponding to several discrete choices. For example, the headset diameters are 1.000, 1.125, or 1.250 inches. (Industry practice is to use English units for these and several other critical bicycle dimensions.)

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Rox Rox Gunhill Metric Need ST Maniray Tahx Tahx Tonka Head No. Nos. Metric Imp. Units Tritrack 2 Quadra Ti 21 Pro Shox

1 1, 3 Attenuation from dropout to handlebar at 10 Hz 3 dB 8 15 10 15 9 13

2 2, 6 Spring preload 3 N 550 760 500 710 480 680

3 1, 3 Maximum value from the Monster 5 g 3.6 3.2 3.7 3.3 3.7 3.4

4 1, 3 Minimum descent time on test track 5 s 13 11.3 12.6 11.2 13.2 11

5 4 Damping coefficient adjustment range 3 N-s/m 0 0 0 200 0 0

6 5 Maximum travel (26-in. wheel) 3 mm 28 48 43 46 33 38

7 5 Rake offset 3 mm 41.5 39 38 38 43.2 39

8 6 Lateral stiffness at the tip 3 kN/m 59 110 85 85 65 130

9 7 Total mass 4 kg 1.409 1.385 1.409 1.364 1.222 1.100

10 8 Lateral stiffness at brake pivots 2 kN/m 295 550 425 425 325 650

1.000 1.000 1.000 1.125 1.000 1.125 1.000 11 9 Headset sizes 5 in. 1.125 1.250 1.125 1.250 1.125 NA

150 150 180 140 150 170 150 210 165 170 190 190 230 190 190 210 210 12 9 Steertube length 5 mm 255 215 210 230 220 NA

26 in. 13 9 Wheel sizes 5 List 26 in. 26 in. 26 in. 700C 26 in. 26 in.

EXHIBIT 6-6 Competitive benchmarking chart based on metrics.

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The desirable range of values for one metric may depend on another. In other words, we may wish to express a target as, for example, “the fork tip lateral stiffness is no more than 20 percent of the lateral stiffness at the brake pivots.” In applications where the team feels this level of complexity is warranted, such targets can easily be included, although we recommend that this level of complexity not be introduced until the final phase of the specifications process.

Using these five different types of expressions for values of the metrics, the team sets the target specifications. The team simply proceeds down the list of metrics and assigns both the marginally acceptable and ideal target values for each metric. These decisions are facilitated by the metric-based competitive benchmarking chart shown in Exhibit 6-6. To set the target values, the team has many considerations, including the capability of com- peting products available at the time, competitors’ future product capabilities (if these are predictable), and the product’s mission statement and target market segment. Exhibit 6-8 shows the targets assigned for the suspension fork.

EXHIBIT 6-6 Continued

EXHIBIT 5-6 Continued

Rox Rox Gunhill Metric Need ST Maniray Tahx Tahx Tonka Head No. Nos. Metric Imp. Units Tritrack 2 Quadra Ti 21 Pro Shox

14 9 Maximum tire width 5 in. 1.5 1.75 1.5 1.75 1.5 1.5

15 10 Time to assemble to frame 1 s 35 35 45 45 35 85

16 11 Fender compatibility 1 List Zefal None None None None All

17 12 Instills pride 5 Subj. 1 4 3 5 3 5

18 13 Unit manufacturing cost 5 US$ 65 105 85 115 80 100

19 14 Time in spray chamber without water entry 5 s 1300 2900 >3600 >3600 2300 >3600

20 15 Cycles in mud chamber without contamination 5 k-cycles 15 19 15 25 18 35

21 16, 17 Time to disassemble/ assemble for maintenance 3 s 160 245 215 245 200 425

22 17, 18 Special tools 3 List Hex Hex Hex Hex Long Hex, required for hex pin maintenance wrench

23 19 UV test duration to degrade rubber parts 5 hr 400+ 250 400+ 400+ 400+ 250

24 19 Monster cycles to failure 5 Cycles 500k+ 500k+ 500k+ 480k 500k+ 330k

25 20 Japan Industrial Standards test 5 Binary Pass Pass Pass Pass Pass Pass

26 20 Bending strength (frontal loading) 5 kN 5.5 8.9 7.5 7.5 6.2 10.2

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EXHIBIT 5-7

ST Maniray Rox Tahx Rox Tahx Tonka Gunhill No. Need Imp. Tritrack 2 Quadra Ti 21 Pro Head Shox

1 Reduces vibration to the hands 3 • •••• •• ••••• •• •••

2 Allows easy traversal of slow, difficult terrain 2 •• •••• ••• ••••• ••• •••••

3 Enables high-speed descents on bumpy trails 5 • ••••• •• ••••• •• •••

4 Allows sensitivity adjustment 3 • •••• •• ••••• •• •••

5 Preserves the steering characteristics of the bike 4 •••• •• • •• ••••• •••••

6 Remains rigid during hard cornering 4 • ••• • ••••• • •••••

7 Is lightweight 4 • ••• • ••• •••• •••••

8 Provides stiff mounting points for the brakes 2 • •••• ••• ••• ••••• ••

9 Fits a wide variety of bikes, wheels, and tires 5 •••• ••••• ••• ••••• ••• •

10 Is easy to install 1 •••• ••••• •••• •••• ••••• •

11 Works with fenders 1 ••• • • • • •••••

12 Instills pride 5 • •••• ••• ••••• ••• •••••

13 Is affordable for an amateur enthusiast 5 ••••• • ••• • ••• ••

14 Is not contaminated by water 5 • ••• •••• •••• •• •••••

15 Is not contaminated by grunge 5 • ••• • •••• •• •••••

16 Can be easily accessed for maintenance 3 •••• ••••• •••• •••• ••••• •

17 Allows easy replacement of worn parts 1 •••• ••••• •••• •••• ••••• •

18 Can be maintained with readily available tools 3 ••••• ••••• ••••• ••••• •• •

19 Lasts a long time 5 ••••• ••••• ••••• ••• ••••• •

20 Is safe in a crash 5 ••••• ••••• ••••• ••••• ••••• •••••

EXHIBIT 6-7 Competitive benchmarking chart based on perceived satisfaction of needs. (Scoring more “dots” corresponds to greater perceived satisfaction of the need.)

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Because most of the values are expressed in terms of bounds (upper or lower or both), the team is establishing the boundaries of the competitively viable product space. The team hopes that the product will meet some of the ideal targets but is confident that a product can be commercially viable even if it exhibits one or more marginally acceptable characteristics. Note that these specifications are preliminary because until a product con- cept is chosen and some of the design details are worked out, many of the exact trade-offs are uncertain.

Step 4: Reflect on the Results and the Process The team may require some iteration to agree on the targets. Reflection after each iteration helps to ensure that the results are consistent with the goals of the project. Questions to consider include:

• Are members of the team “gaming”? For example, is the key marketing representative insisting that an aggressive value is required for a particular metric in the hopes that by setting a high goal, the team will actually achieve more than if his or her true, and more lenient, beliefs were expressed?

• Should the team consider offering multiple products or at least multiple options for the product in order to best match the particular needs of more than one market segment, or will one “average” product suffice?

• Are any specifications missing? Do the specifications reflect the characteristics that will dictate commercial success?

Once the targets have been set, the team can proceed to generate solution concepts. The target specifications then can be used to help the team select a concept and will help the team know when a concept is commercially viable. (See Chapter 7, Concept Generation, and Chapter 8, Concept Selection.)

Setting the Final Specifications

As the team finalizes the choice of a concept and prepares for subsequent design and development, the specifications are revisited. Specifications that originally were only targets expressed as broad ranges of values are now refined and made more precise.

Finalizing the specifications is difficult because of trade-offs—inverse relationships between two specifications that are inherent in the selected product concept. Trade-offs frequently occur between different technical performance metrics and almost always occur between technical performance metrics and cost. For example, one trade-off is between brake mounting stiffness and mass of the fork. Because of the basic mechanics of the fork structure, these specifications are inversely related, assuming other factors are held con- stant. Another trade-off is between cost and mass. For a given concept, the team may be able to reduce the mass of the fork by making some parts out of titanium instead of steel. Unfortunately, decreasing the mass in this way will most likely increase the manufactur- ing cost of the product. The difficult part of refining the specifications is choosing how such trade-offs will be resolved.

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Metric Need Marginal Ideal No. Nos. Metric Imp. Units Value Value

1 1, 3 Attenuation from dropout to handlebar at 10 Hz 3 dB >10 >15

2 2, 6 Spring preload 3 N 480–800 650–700

3 1, 3 Maximum value from the Monster 5 g <3.5 <3.2

4 1, 3 Minimum descent time on test track 5 s <13.0 <11.0

5 4 Damping coefficient adjustment range 3 N-s/m 0 >200

6 5 Maximum travel (26-in. wheel) 3 mm 33–50 45

7 5 Rake offset 3 mm 37–45 38

8 6 Lateral stiffness at the tip 3 kN/m >65 >130

9 7 Total mass 4 kg <1.4 <1.1

10 8 Lateral stiffness at brake pivots 2 kN/m >325 >650

1.000 1.000 1.125 11 9 Headset sizes 5 in. 1.125 1.250

150 150 170 170 190 190 210 12 9 Steertube length 5 mm 210 230

26 in. 13 9 Wheel sizes 5 List 26 in. 700C

14 9 Maximum tire width 5 in. >1.5 >1.75

15 10 Time to assemble to frame 1 s <60 <35

16 11 Fender compatibility 1 List None All

17 12 Instills pride 5 Subj. >3 >5

18 13 Unit manufacturing cost 5 US$ <85 <65

19 14 Time in spray chamber without water 5 s >2300 >3600 entry

20 15 Cycles in mud chamber without 5 k-cycles >15 >35 contamination

21 16, 17 Time to disassemble/assemble 3 s <300 <160 for maintenance

22 17, 18 Special tools required for maintenance 3 List Hex Hex

23 19 UV test duration to degrade rubber parts 5 hr >250 >450

24 19 Monster cycles to failure 5 Cycles >300k >500k

25 20 Japan Industrial Standards test 5 Binary Pass Pass

26 20 Bending strength (frontal loading) 5 kN >7.0 >10.0

EXHIBIT 6-8 The target specifications. Like the other information systems, this one is easily encoded with a spreadsheet as a simple extension to the list of specifications.

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Here, we propose a five-step process:

1. Develop technical models of the product.

2. Develop a cost model of the product.

3. Refine the specifications, making trade-offs where necessary.

4. Flow down the specifications as appropriate.

5. Reflect on the results and the process.

Step 1: Develop Technical Models of the Product A technical model of the product is a tool for predicting the values of the metrics for a particular set of design decisions. We intend the term models to refer to both analytical and physical approximations of the product. (See Chapter 14, Prototyping, for further dis- cussion of such models.)

At this point, the team had chosen an oil-damped coil spring concept for the suspen- sion fork. The design decisions facing the team included details such as the materials for the structural components, the orifice diameter and oil viscosity for the damper, and the spring constant. Three models linking such design decisions to the performance metrics are shown in conceptual form in Exhibit 6-9. Such models can be used to predict the product’s performance along a number of dimensions. The inputs to these models are the independent design variables associated with the product concept, such as oil viscosity, orifice diameter, spring constant, and geometry. The outputs of the model are the values of the metrics, such as attenuation, stiffness, and fatigue life.

Ideally, the team will be able to accurately model the product analytically, perhaps by implementing the model equations in a spreadsheet or computer simulation. Such a model allows the team to predict rapidly what type of performance can be expected from a particular choice of design variables, without costly physical experimentation. In most cases, such analytical models will be available for only a small subset of the metrics. For example, the team was able to model attenuation analytically, based on the engineers’ knowledge of dynamic systems.

Several independent models, each corresponding to a subset of the metrics, may be more manageable than one large integrated model. For example, the team developed a separate analytical model for the brake mounting stiffness that was completely independent of the dynamic model used to predict vibration attenuation. In some cases, no analytical models will be available at all. For example, the team was not able to model analytically the fatigue performance of the suspension, so physical models were built and tested. It is generally necessary to actually build a variety of different physical mock-ups or prototypes in order to explore the implications of several combinations of design variables. To reduce the number of models that must be constructed, it is useful to employ design-of-experiments (DOE) techniques, which can minimize the number of experiments required to explore the design space. (See Chapter 15, Robust Design, for a summary of DOE methods.)

Armed with these technical models, the team can predict whether any particular set of specifications (such as the ideal target values) is technically feasible by exploring different combinations of design variables. This type of modeling and analysis prevents the team from setting a combination of specifications that cannot be achieved using the available latitude in the product concept.

Product Specifications 105

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Note that a technical model is almost always unique to a particular product concept. One of the models illustrated in Exhibit 6-9 is for an oil-damped suspension system; the model would be substantially different if the team had selected a concept employing a rubber suspension element. Thus, the modeling step can only be performed after the concept has been chosen.

Step 2: Develop a Cost Model of the Product The goal of this step of the process is to make sure that the product can be produced at the target cost. The target cost is the manufacturing cost at which the company and its distribution partners can make adequate profits while still offering the product to the end customer at a competitive price. The appendix to this chapter provides an explanation of target costing. It is at this point that the team attempts to discover, for example, how much it will have to sacrifice in manufacturing cost to save 50 grams of mass.

For most products, the first estimates of manufacturing costs are completed by draft- ing a bill of materials (a list of all the parts) and estimating a purchase price or fabrication cost for each part. At this point in the development process the team does not generally know all of the components that will be in the product, but the team nevertheless makes an attempt to list the components it expects will be required. While early estimates gen- erally focus on the cost of components, the team will usually make a rough estimate of assembly and other manufacturing costs (e.g., overhead) at this point as well. Efforts to develop these early cost estimates involve soliciting cost estimates from vendors and estimating the production costs of the components the firm will make itself. This process

106 Chapter 6

Fatigue Model of Suspension Durability

(Physical)

Static Model of Brake Mounting Stiffness

(Analytical)

Dynamic Model of Suspension Performance

(Analytical)

Metrics (Model Outputs)

Design Variables (Model Inputs)

Attenuation at 10 Hz

Estimated Monster g's

Lateral Stiffness

Cycles to Failure

Suspended Mass

Unsprung Mass

Orifice Diameter

Spring Constant

Oil Viscosity

Support Geometry

Material Properties

Tube Geometry

Mounting Points

Fork Geometry

Material Properties

Fastening Methods

Suspension Geometry

EXHIBIT 6-9 Models used to assess technical feasibility. Technical models may be analytical or physical approximations of the product concept.

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is often facilitated by a purchasing expert and a production engineer. A bill-of-materials cost model is shown in Exhibit 6-10 for the suspension fork. (See Chapter 13, Design for Manufacturing, for more details on estimating manufacturing cost.)

A useful way to record cost information is to list figures for the high and low es- timates of each item. This helps the team to understand the range of uncertainty in the estimates. The bill of materials is typically used iteratively: the team performs a “what-if ” cost analysis for a set of design decisions and then revises these decisions based on what it learns. The bill of materials is itself a kind of performance model, but instead of predicting the value of a technical performance metric, it predicts cost performance. The bill of materials remains useful throughout the development process and is updated regularly (as frequently as once each week) to reflect the current status of the estimated manufacturing cost.

At this point in the development process, teams developing complex products contain- ing hundreds or thousands of parts will not generally be able to include every part in the bill of materials. Instead, the team will list the major components and subsystems and place bounds on their costs based on past experience or on the judgment of suppliers.

Product Specifications 107

EXHIBIT 6-10 A bill of materials with cost estimates. This simple cost model allows early cost estimates to facilitate realistic trade-offs in the product specifications.

Qty/ High Low High Total Low Total Component Fork ($ ea.) ($ ea.) ($/fork) ($/fork)

Steertube 1 2.50 2.00 2.50 2.00 Crown 1 4.00 3.00 4.00 3.00 Boot 2 1.00 0.75 2.00 1.50 Lower tube 2 3.00 2.00 6.00 4.00 Lower tube top cover 2 2.00 1.50 4.00 3.00

Main lip seal 2 1.50 1.40 3.00 2.80 Slide bushing 4 0.20 0.18 0.80 0.72 Slide bushing spacer 2 0.50 0.40 1.00 0.80 Lower tube plug 2 0.50 0.35 1.00 0.70 Upper tube 2 5.50 4.00 11.00 8.00

Upper tube top cap 2 3.00 2.50 6.00 5.00 Upper tube adjustment knob 2 2.00 1.75 4.00 3.50 Adjustment shaft 2 4.00 3.00 8.00 6.00 Spring 2 3.00 2.50 6.00 5.00 Upper tube orifice cap 1 3.00 2.25 3.00 2.25

Orifice springs 4 0.50 0.40 2.00 1.60 Brake studs 2 0.40 0.35 0.80 0.70 Brake brace bolt 2 0.25 0.20 0.50 0.40 Brake brace 1 5.00 3.50 5.00 3.50 Oil (liters) 0.1 2.50 2.00 0.25 0.20

Misc. snap rings, o-rings 10 0.15 0.10 1.50 1.00 Decals 4 0.25 0.15 1.00 0.60

Assembly at $20/hr 30 min 20 min 10.00 6.67 Overhead at 25% of direct cost 20.84 15.74

Total $104.19 $78.68

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108 Chapter 6

Step 3: Refine the Specifications, Making Trade-Offs Where Necessary Once the team has constructed technical performance models where possible and constructed a preliminary cost model, these tools can be used to develop final specifica- tions. Finalizing specifications can be accomplished in a group session in which feasible combinations of values are determined through the use of the technical models and then the cost implications are explored. In an iterative fashion, the team converges on the specifications that will most favorably position the product relative to the competition, will best satisfy the customer needs, and will ensure adequate profits.

One important tool for supporting this decision-making process is the competitive map. An example competitive map is shown in Exhibit 6-11. This map is simply a scatter plot of the competitive products along two dimensions selected from the set of metrics and is sometimes called a trade-off map. The map displayed in Exhibit 6-11 shows estimated manufacturing cost versus score on the Monster test. The regions defined by the marginal and ideal values of the specifications are shown on the map. This map is particularly useful in showing that all of the high-performance suspensions (low Monster scores) have high estimated manufacturing costs. Armed with technical performance models and a cost model, the team can assess whether or not it will be able to “beat the trade-off ” exhibited in the competitive map.

Marginal Values

Ideal Values

Rox Tahx Ti 21

Maniray 2

Gunhill Head Shox

Rox Tahx Quadra

Tonka Pro

ST Tritrack Trade-Off Curve for Concept A

Trade-Off Curve for Concept B

4.03.83.63.43.23.0 50

60

70

80

90

100

110

120

E st

im at

ed M

an u

fa ct

u ri

n g

C o

st , $

Score on Monster (g's)

EXHIBIT 6-11 A competitive map showing estimated manufacturing cost versus score on the Monster test. Trade-off curves for two suspension concepts are also drawn on this map.

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These maps can be constructed directly from the data contained in the competitive benchmarking chart using the plotting feature of the spreadsheet software. Generally the team will prepare three or four such maps corresponding to a handful of critical metrics. Additional maps may be created as needed to support subsequent decision making.

The competitive map is used to position the new product relative to the competition. Trade-off curves, showing performance of the product concept for a range of design variables, can be drawn directly on the competitive map, as shown in Exhibit 6-11. Using the technical and cost models of the product and the competitive maps, the team can refine the specifications in order to both satisfy the inherent constraints of the prod- uct concept and make the trade-offs in a way that will provide a performance advantage relative to the competitive products. The final specifications for the suspension fork are shown in Exhibit 6-12.

For relatively mature product categories in which competition is based on performance relative to a handful of well-understood performance metrics, conjoint analysis may be useful in refining product specifications. Conjoint analysis uses customer survey data to construct a model of customer preference. Essentially each respondent in a sample of potential customers is repeatedly asked to evaluate hypothetical products characterized by a set of attributes. These attributes must generally be metrics that are easily understood by customers (e.g., fuel economy and price for automobiles). Subjective attributes (e.g., styl- ing) can be represented graphically. The hypothetical products are constructed using the statistical techniques of experimental design. Using customer responses, conjoint analysis infers the relative importance of each attribute to the customer. These data can then be used to predict which product a customer would choose when offered a hypothetical set of alternatives. By using these predictions for all of the customers in a sample, the market share of each product in the set of alternatives can be forecast. Using this approach, the specification values that maximize market share can be estimated. The details of conjoint analysis are fairly straightforward, but beyond the scope of this chapter. Relevant refer- ences are listed at the end of the chapter.

Step 4: Flow Down the Specifications as Appropriate This chapter focuses on the specifications for a relatively simple component designed by a single, relatively small development team. Establishing specifications takes on additional importance and is substantially more challenging when developing a highly complex product consisting of multiple subsystems designed by multiple development teams. In such a context, specifications are used to define the development objectives of each of the subsystems as well as for the product as a whole. The challenge in this case is to flow down the overall specifications to specifications for each subsystem. For example, the overall specifications for an automobile contain metrics like fuel economy, 0–100 kilometer/ hour acceleration time, and turning radius. However, specifications must also be cre- ated for the several dozen major subsystems that make up the automobile, including the body, engine, transmission, braking system, and suspension. The specifications for the engine include metrics like peak power, peak torque, and fuel consumption at peak efficiency. One challenge in the flow-down process is to ensure that the subsystem specifications in fact reflect the overall product specifications—that if specifications for the subsystems are achieved, the overall product specifications will be achieved. A second challenge is to ensure that certain specifications for different subsystems are equally

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difficult to meet. That is, for example, that the mass specification for the engine is not inordinately more difficult to meet than is the mass specification for the body. Otherwise, the cost of the product will likely be higher than necessary.

Some overall component specifications can be established through budget allocations. For example, specifications for manufacturing cost, mass, and power consumption can be allocated to subsystems with the confidence that the overall cost, mass, and power con- sumption of the product will simply be the sum of these quantities for each subsystem.

110 Chapter 6

EXHIBIT 6-12 The final specifications.

No. Metric Unit Value

1 Attenuation from dropout to handlebar at 10 Hz dB> 12

2 Spring preload N 600–650

3 Maximum value from the Monster g <3.4

4 Minimum descent time on test track s <11.5

5 Damping coefficient adjustment range N-s/m >100

6 Maximum travel (26-in. wheel) mm 43

7 Rake offset mm 38

8 Lateral stiffness at the tip kN/m >75

9 Total mass kg <1.4

10 Lateral stiffness at brake pivots kN/m >425

1.000 11 Headset sizes in. 1.125

150 170 190 210 12 Steertube length mm 230

13 Wheel sizes List 26 in.

14 Maximum tire width in. >1.75

15 Time to assemble to frame s <45

16 Fender compatibility List Zefal

17 Instills pride Subj. >4

18 Unit manufacturing cost US$ <80

19 Time in spray chamber without water entry s >3600

20 Cycles in mud chamber without contamination k-cycles >25

21 Time to disassemble/assemble for maintenance s <200

22 Special tools required for maintenance List Hex

23 UV test duration to degrade rubber parts hr >450

24 Monster cycles to failure Cycles >500k

25 Japan Industrial Standards test Binary Pass

26 Bending strength (frontal loading) kN >10.0

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To some extent, geometric volume can be allocated this way as well. Other component specifications must be established through a more complex understanding of how subsys- tem performance relates to overall product performance. For example, fuel efficiency is a relatively complex function of vehicle mass, rolling resistance, aerodynamic drag coef- ficient, frontal area, and engine efficiency. Establishing specifications for the body, tires, and engine requires a model of how these variables relate to overall fuel efficiency.

A comprehensive treatment of flowing down specifications for complex products is beyond the scope of this chapter, and in fact is a major focus of the field of systems engi- neering. We refer the reader to several useful books on this subject in the reference list.

Step 5: Reflect on the Results and the Process As always, the final step in the method is to reflect on the outcome and the process. Some questions the team may want to consider are:

• Is the product a winner? The product concept should allow the team to actually set the specifications so that the product will meet the customer needs and excel competi- tively. If not, then the team should return to the concept generation and selection phase or abandon the project.

• How much uncertainty is there in the technical and cost models? If competitive suc- cess is dictated by metrics around which much uncertainty remains, the team may wish to refine the technical or cost models in order to increase confidence in meeting the specifications.

• Is the concept chosen by the team best suited to the target market, or could it be best applied in another market (say, the low end or high end instead of the middle)? The selected concept may actually be too good. If the team has generated a concept that is dramatically superior to the competitive products, it may wish to consider employing the concept in a more demanding, and potentially more profitable, market segment.

• Should the firm initiate a formal effort to develop better technical models of some aspect of the product’s performance for future use? Sometimes the team will discover that it does not really understand the underlying product technology well enough to create useful performance models. In such circumstances, an engineering effort to develop better understanding and models may be useful in subsequent development projects.

Summary Customer needs are generally expressed in the “language of the customer.” In order to provide specific guidance about how to design and engineer a product, development teams establish a set of specifications, which spell out in precise, measurable detail what the product has to do to be commercially successful. The specifications must reflect the customer needs, differentiate the product from the competitive products, and be techni- cally and economically realizable.

• Specifications are typically established at least twice. Immediately after identifying the customer needs, the team sets target specifications. After concept selection and testing, the team develops final specifications.

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• Target specifications represent the hopes and aspirations of the team, but they are es- tablished before the team knows the constraints the product technology will place on what can be achieved. The team’s efforts may fail to meet some of these specifications and may exceed others, depending on the details of the product concept the team even- tually selects.

• The process of establishing the target specifications entails four steps:

1. Prepare the list of metrics.

2. Collect competitive benchmarking information.

3. Set ideal and marginally acceptable target values.

4. Reflect on the results and the process.

• Final specifications are developed by assessing the actual technological constraints and the expected production costs using analytical and physical models. During this refine- ment phase the team must make difficult trade-offs among various desirable character- istics of the product.

• The five-step process for refining the specifications is:

1. Develop technical models of the product.

2. Develop a cost model of the product.

3. Refine the specifications, making trade-offs where necessary.

4. Flow down the specifications as appropriate.

5. Reflect on the results and the process.

• The specifications process is facilitated by several simple information systems that can easily be created using conventional spreadsheet software. Tools such as the list of metrics, the needs-metrics matrix, the competitive benchmarking charts, and the com- petitive maps all support the team’s decision making by providing the team with a way to represent and discuss the specifications.

• Because of the need to utilize the best possible knowledge of the market, the custom- ers, the core product technology, and the cost implications of design alternatives, the specifications process requires active participation from team members representing the marketing, design, and manufacturing functions of the enterprise.

References and Bibliography Many current resources are available on the Internet via www.ulrich-eppinger.net

The process of translating customer needs into a set of specifications is also accomplished by the Quality Function Deployment (QFD) method. The key ideas behind QFD and the House of Quality are clearly presented by Hauser and Clausing in a popular article.

Hauser, John, and Don Clausing, “The House of Quality,” Harvard Business Review, Vol. 66, No. 3, May–June 1988, pp. 63–73.

Urban and Hauser present several techniques for selecting combinations of product attributes in order to maximize customer satisfaction. Some of these techniques can serve as powerful analytical support for the general method described in this chapter.

112 Chapter 6

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Urban, Glen, and John Hauser, Design and Marketing of New Products, second edition, Prentice Hall, Englewood Cliffs, NJ, 1993.

Ramaswamy and Ulrich treat the use of engineering models in setting specifications in detail. They also identify some of the weaknesses in the conventional House of Quality method.

Ramaswamy, Rajan, and Karl Ulrich, “Augmenting the House of Quality with Engineering Models,” Research in Engineering Design, Vol. 5, 1994, pp. 70–79.

Most marketing research textbooks discuss conjoint analysis. Here are two references. Aaker, David A., V. Kumar, and George S. Day, Marketing Research, sixth edition, John Wiley & Sons, New York, 1997.

Conjoint Analysis: A Guide for Designing and Interpreting Conjoint Studies, American Marketing Association, June 1992.

Systems engineering and the flow down of specifications are treated comprehensively in the following books.

Hatley, Derek J., and Imtiaz A. Pirbhai, Strategies for Real-Time System Specification, Dorset House, New York, 1998.

Rechtin, Eberhardt, and Mark W. Maier, The Art of Systems Architecting, second edition, CRC Press, Boca Raton, FL, 2000.

More detail on the use of target costing is available in this article by Cooper and Slagmulder. Cooper, Robin, and Regine Slagmulder, “Develop Profitable New Products with Target Costing,” Sloan Management Review, Vol. 40, No. 4, Summer 1999, pp. 23–33.

Exercises 1. List a set of metrics corresponding to the need that a pen write smoothly.

2. Devise a metric and a corresponding test for the need that a roofing material last many years.

3. Some of the same metrics seem to be involved in trade-offs for many different prod- ucts. What are some examples of such metrics?

Thought Questions 1. How might you establish precise and measurable specifications for intangible needs

such as “the front suspension looks great”?

2. Why are some customer needs difficult to map to a single metric?

3. How might you explain a situation in which customers’ perceptions of the competitive products (as in Exhibit 6-7) are not consistent with the values of the metrics for those same products (as in Exhibit 6-6)?

4. Can poor performance relative to one specification always be compensated for by high performance on other specifications? If so, how can there ever really be a “marginally acceptable” value for a metric?

5. Why should independent design variables not be used as metrics?

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114 Chapter 6

Appendix

Target Costing Target costing is a simple idea: set the value of the manufacturing cost specification based on the price the company hopes the end user will pay for the product and on the profit margins that are required for each stage in the distribution channel. For example, assume Specialized wishes to sell its suspension fork to its customers through bicycle shops. If the price it expected the customer to pay was $250 and if bicycle shops normally expect a gross profit margin of 45 percent on components, then Specialized would have to sell its fork to bicycle shops for (1 � 0.45) ¥ 250 = $137.50. If Specialized wishes to earn a gross margin of at least 40 percent on its components, then its unit manufacturing cost must be less than (1 � 0.40) ¥ 137.50 = $82.50.

Target costing is the reverse of the cost-plus approach to pricing. The cost-plus ap- proach begins with what the firm expects its manufacturing costs to be and then sets its prices by adding its expected profit margin to the cost. This approach ignores the realities of competitive markets, in which prices are driven by market and customer factors. Target costing is a mechanism for ensuring that specifications are set in a way that allows the product to be competitively priced in the marketplace.

Some products are sold directly by a manufacturer to end users of the product. Fre- quently, products are distributed through one or more intermediate stages, such as dis- tributors and retailers. Exhibit 6-13 provides some approximate values of gross profit margins for different product categories.

Let M be the gross profit margin of a stage in the distribution channel.

M P C

P = −( )

where P is the price this stage charges its customers and C is the cost this stage pays for the product it sells. (Note that mark-up is similar to margin, but is defined slightly differently as P/C – 1, so that a margin of 50 percent is equivalent to a mark-up of 100 percent.)

Target cost, C, is given by the following expression:

C P Mi i

n

= − = Π 1 1( )

where P is the price paid by the end user, n is the number of stages in the distribution channel, and Mi is the margin of the ith stage.

EXAMPLE Assume the end user price, P, equals $250.

If the product is sold directly to the end user by the manufacturer, and the desired gross profit margin of the manufacturer, Mm, equals 0.40, then the target cost is

C = P(1 – Mm) = $250 (1 – 0.40) = $150

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Product Specifications 115

EXHIBIT 6-13 Approximate margins for manufacturers, wholesalers, distributors, sales representatives, and retailers. Note that these values are quite approximate. Actual margins depend on many idiosyncratic factors, including competitive intensity, the volume of units sold, and the level of customer support required. Sales representatives are paid by commission and are not strictly part of the distribution channel. However, the team may wish to account for commissions in its analysis of target cost.

10 20 30 40 50 60 70 80 Percent

Price 2 Cost Price

Gross Margin

Manufacturers

Automobiles

Computers

Appliances

Consumer electronics

Sporting goods

Industrial equipment

Medical devices

Toys

Branded packaged goods

Consumer software

Retailers

Automobile dealers

Electronics

Mass merchandisers

Department stores

Specialty retailers

Mail order

Independent Sales Representatives

Sporting goods

Industrial products

Toys

Gifts and novelties

Wholesalers/Distributors

Computers

Branded packaged goods

Industrial products—materials, supplies

Industrial products—equipment

Medical devices

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If the product is sold through a retailer, and the desired gross profit margin for the re- tailer, Mr, equals 0.45, then

C = P(1 – Mm)(1 – Mr) = $250 (1 – 0.40)(1 – 0.45) = $82.50

If the product is sold through a distributor and a retailer, and the desired gross profit margin for the distributor, Md, equals 0.20, then

C = P(1 – Mm)(1 – Md)(1 – Mr) = $250 (1 – 0.40)(1 – 0.20)(1 – 0.45) = $66.00

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Concept Generation

117

C H A P T E R S E V E N

Courtesy of The Stanley Works

EXHIBIT 7-1 A cordless electric roofing nailer.

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118 Chapter 7

The president of Stanley-Bostitch commissioned a team to develop a new handheld nailer for the roofing market. The product that eventually resulted from the effort is shown in Exhibit 7-1. The mission of the team was to consider broadly alternative product concepts, assuming only that the tool would employ conventional nails as the basic fasten- ing technology. After identifying a set of customer needs and establishing target product specifications, the team faced the following questions:

• What existing solution concepts, if any, could be successfully adapted for this application?

• What new concepts might satisfy the established needs and specifications?

• What methods can be used to facilitate the concept generation process?

The Activity of Concept Generation

A product concept is an approximate description of the technology, working principles, and form of the product. It is a concise description of how the product will satisfy the customer needs. A concept is usually expressed as a sketch or as a rough three-dimensional model and is often accompanied by a brief textual description. The degree to which a product satisfies customers and can be successfully commercialized depends to a large measure on the quality of the underlying concept. A good concept is sometimes poorly implemented in subsequent development phases, but a poor concept can rarely be manipulated to achieve commercial success. Fortunately, concept generation is relatively inexpensive and can be done relatively quickly in comparison to the rest of the development process. For example, concept generation had typically consumed less than 5 percent of the budget and 15 per- cent of the development time in previous nailer development efforts. Because the concept generation activity is not costly, there is no excuse for a lack of diligence and care in ex- ecuting a sound concept generation method.

The concept generation process begins with a set of customer needs and target speci- fications and results in a set of product concepts from which the team will make a final selection. The relation of concept generation to the other concept development activities is shown in Exhibit 7-2. In most cases, an effective development team will generate hun- dreds of concepts, of which 5 to 20 will merit serious consideration during the concept selection activity.

Identify Customer

Needs

Establish Target

Specifications

Generate Product

Concepts

Select Product

Concept(s)

Test Product

Concept(s)

Set Final

Specifications

Plan Downstream Development

Development Plan

Mission Statement

Build and Test Models and Prototypes

Benchmark Competitive Products

Perform Economic Analysis

EXHIBIT 7-2 Concept generation is an integral part of the concept development phase.

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Concept Generation 119

Good concept generation leaves the team with confidence that the full space of alter- natives has been explored. Thorough exploration of alternatives early in the development process greatly reduces the likelihood that the team will stumble upon a superior concept late in the development process or that a competitor will introduce a product with dra- matically better performance than the product under development.

Structured Approaches Reduce the Likelihood of Costly Problems Common dysfunctions exhibited by development teams during concept generation include:

• Consideration of only one or two alternatives, often proposed by the most assertive members of the team.

• Failure to consider carefully the usefulness of concepts employed by other firms in re- lated and unrelated products.

• Involvement of only one or two people in the process, resulting in lack of confidence and commitment by the rest of the team.

• Ineffective integration of promising partial solutions.

• Failure to consider entire categories of solutions.

A structured approach to concept generation reduces the incidence of these problems by encouraging the gathering of information from many disparate information sources, by guiding the team in the thorough exploration of alternatives, and by providing a mecha- nism for integrating partial solutions. A structured method also provides a step-by-step procedure for those members of the team who may be less experienced in design-intensive activities, allowing them to participate actively in the process.

A Five-Step Method This chapter presents a five-step concept generation method. The method, outlined in Exhibit 7-3, breaks a complex problem into simpler subproblems. Solution concepts are then identified for the subproblems by external and internal search procedures. Classifi- cation trees and concept combination tables are then used to systematically explore the space of solution concepts and to integrate the subproblem solutions into a total solution. Finally, the team takes a step back to reflect on the validity and applicability of the results, as well as on the process used.

This chapter will follow the recommended method and will describe each of the five steps in detail. Although we present the method in a linear sequence, concept generation is almost always iterative. Like our other development methods, these steps are intended to be a baseline from which product development teams can develop and refine their own unique problem-solving style.

Our presentation of the method is focused primarily on the overall concept for a new product; however, the method can and should be used at several different points in the development process. The process is useful not only for overall product concepts but also for concepts for subsystems and specific components as well. Also note that while the ex- ample in this chapter involves a relatively technical product, the same basic approach can be applied to nearly any product.

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Step 1: Clarify the Problem

Clarifying the problem consists of developing a general understanding and then breaking the problem down into subproblems if necessary.

The mission statement for the project, the customer needs list, and the preliminary product specification are the ideal inputs to the concept generation process, although often these pieces of information are still being refined as the concept generation phase

120 Chapter 7

EXHIBIT 7-3 The five- step concept generation method.

1. Clarify the problem.

• Understanding • Problem decomposition • Focus on critical subproblems

2. Search externally.

• Lead users • Experts • Patents • Literature • Benchmarking

3. Search internally.

• Individual • Group

4. Explore systematically.

• Classification tree • Combination table

5. Reflect on the solutions and the process.

• Constructive feedback

New Concepts

Integrated Solutions

Existing Concepts

Subproblems

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begins. Ideally the team has been involved both in the identification of the customer needs and in the setting of the target product specifications. Those members of the team who were not involved in these preceding steps should become familiar with the processes used and their results before concept generation activities begin. (See Chapter 5, Identify- ing Customer Needs, and Chapter 6, Product Specifications.)

As stated before, the challenge was to “design a better handheld roofing nailer.” The scope of the design problem could have been defined more generally (e.g., “fasten roof- ing materials”) or more specifically (e.g., “improve the speed of the existing pneumatic tool concept”). Some of the assumptions in the team’s mission statement were:

• The nailer will use nails (as opposed to adhesives, screws, etc.).

• The nailer will be compatible with nail magazines on existing tools.

• The nailer will nail through roofing shingles into wood.

• The nailer will be handheld.

Based on the assumptions, the team had identified the customer needs for a handheld nailer. These included:

• The nailer inserts nails in rapid succession.

• The nailer is lightweight.

• The nailer has no noticeable nailing delay after tripping the tool.

The team gathered supplemental information to clarify and quantify the needs, such as the approximate energy and speed of the nailing. These basic needs were subsequently translated into target product specifications. The target specifications included the following:

• Nail lengths from 25 millimeters to 38 millimeters.

• Maximum nailing energy of 40 joules per nail.

• Nailing forces of up to 2,000 newtons.

• Peak nailing rate of one nail per second.

• Average nailing rate of 12 nails per minute.

• Tool mass less than 4 kilograms.

• Maximum trigger delay of 0.25 second.

Decompose a Complex Problem into Simpler Subproblems Many design challenges are too complex to solve as a single problem and can be use- fully divided into several simpler subproblems. For example, the design of a complex product like a document copier can be thought of as a collection of more focused design problems, including, for example, the design of a document handler, the design of a paper feeder, the design of a printing device, and the design of an image capture device. In some cases, however, the design problem cannot readily be divided into subproblems. For example, the problem of designing a paper clip may be hard to divide into subproblems. As a general rule, we feel that teams should attempt to decompose design problems, but should be aware that such a decomposition may not be very useful for products with ex- tremely simple functions.

Dividing a problem into simpler subproblems is called problem decomposition. There are many schemes by which a problem can be decomposed. Here we demonstrate a func- tional decomposition and also list several other approaches that are frequently useful.

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The first step in decomposing a problem functionally is to represent it as a single black box operating on material, energy, and signal flows, as shown in Exhibit 7-4(a). Thin solid lines denote the transfer and conversion of energy, thick solid lines signify the move- ment of material within the system, and dashed lines represent the flows of control and feedback signals within the system. This black box represents the overall function of the product.

The next step in functional decomposition is to divide the single black box into subfunctions to create a more specific description of what the elements of the product might do in order to implement the overall function of the product. Each subfunction can generally be further divided into even simpler subfunctions. The division process is repeated until the team members agree that each subfunction is simple enough to work with. A good rule of thumb is to create between 3 and 10 subfunctions in the diagram. The end result, shown in Exhibit 7-4(b), is a function diagram containing subfunctions connected by energy, material, and signal flows.

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Store or accept

external energy

Store nails

Sense trip

Convert energy to

translational energy

Isolate nail

Driven Nail

Apply translational

energy to nail

Trigger tool

Energy

Nails

"Trip" of Tool

Input Output

Energy (?)

Material (nails)

Signal (tool "trip")

Energy (?)

Material (driven nail)

Signal (?)

Handheld Nailer

(a)

(b)

EXHIBIT 7-4 Function diagram of a handheld nailer arising from a functional decomposition: (a) overall “black box”; (b) refinement showing subfunctions.

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Note that at this stage the goal is to describe the functional elements of the product without implying a specific technological working principle for the product concept. For example, Exhibit 7-4(b) includes the subfunction “isolate nail.” This subfunction is ex- pressed in such a way that it does not imply any particular physical solution concept, such as indexing the coil of nails into a slot or breaking a nail sideways off of the stick. The team should consider each subfunction in turn and ask whether it is expressed in a way that does not imply a particular physical solution principle.

There is no single correct way of creating a function diagram and no single correct functional decomposition of a product. A helpful way to create the diagram is to quickly create several drafts and then work to refine them into a single diagram that the team is comfortable with. Some useful techniques for getting started are:

• Create a function diagram of an existing product.

• Create a function diagram based on an arbitrary product concept already generated by the team or based on a known subfunction technology. Be sure to generalize the dia- gram to the appropriate level of abstraction.

• Follow one of the flows (e.g., material) and determine what operations are required. The details of the other flows can be derived by thinking about their connections to the initial flow.

Note that the function diagram is typically not unique. In particular, subfunctions can often be ordered in different ways to produce different function diagrams. Also note that in some applications the material, energy, and signal flows are difficult to identify. In these cases, a simple list of the subfunctions of the product, without connections between them, is often sufficient.

Functional decomposition is most applicable to technical products, but it can also be applied to simple and apparently nontechnical products. For example, an ice cream scoop has material flow of ice cream being separated, formed, transported, and deposited. These subfunctions could form the basis of a problem decomposition.

Functional decomposition is only one of several possible ways to divide a problem into simpler subproblems. Two other approaches are:

• Decomposition by sequence of user actions: For example, the nailer problem might be broken down into three user actions: moving the tool to the gross nailing position, positioning the tool precisely, and triggering the tool. This approach is often useful for products with very simple technical functions involving a lot of user interaction.

• Decomposition by key customer needs: For the nailer, this decomposition might include the following subproblems: fires nails in rapid succession, is lightweight, and has a large nail capacity. This approach is often useful for products in which form, and not working principles or technology, is the primary problem. Examples of such products include toothbrushes (assuming the basic brush concept is retained) and storage containers.

Focus Initial Efforts on the Critical Subproblems The goal of all of these decomposition techniques is to divide a complex problem into simpler problems such that these simpler problems can be tackled in a focused way. Once problem decomposition is complete, the team chooses the subproblems that are most criti- cal to the success of the product and that are most likely to benefit from novel or creative

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solutions. This approach involves a conscious decision to defer the solution of some of the subproblems. For example, the nailer team chose to focus on the subproblems of storing/ accepting energy, converting the energy to translational energy, and applying the trans- lational energy to the nail. The team felt confident that the nail handling and triggering issues could be solved after the energy storage and conversion issues were addressed. The team also deferred most of the user interaction issues of the tool. The team believed that the choice of a basic working principle for the tool would so constrain the eventual form of the tool that they had to begin with the core technology and then proceed to consider how to embody that technology in an attractive and user-friendly form. Teams can usually agree after a few minutes of discussion on which subproblems should be addressed first and which should be deferred for later consideration.

Step 2: Search Externally

External search is aimed at finding existing solutions to both the overall problem and the subproblems identified during the problem clarification step. While external search is listed as the second step in the concept generation method, this sequential labeling is deceptive; external search occurs continually throughout the development process. Implementing an existing solution is usually quicker and cheaper than developing a new solution. Liberal use of existing solutions allows the team to focus its creative energy on the critical subproblems for which there are no satisfactory prior solutions. Furthermore, a conventional solution to one subproblem can frequently be combined with a novel so- lution to another subproblem to yield a superior overall design. For this reason external search includes detailed evaluation not only of directly competitive products but also of technologies used in products with related subfunctions.

The external search for solutions is essentially an information-gathering process. Available time and resources can be optimized by using an expand-and-focus strategy: first expand the scope of the search by broadly gathering information that might be re- lated to the problem and then focus the scope of the search by exploring the promising directions in more detail. Too much of either approach will make the external search inefficient.

There are at least five good ways to gather information from external sources: lead user interviews, expert consultation, patent searches, literature searches, and competitive benchmarking.

Interview Lead Users While identifying customer needs, the team may have sought out or encountered lead users. Lead users are those users of a product who experience needs months or years be- fore the majority of the market and stand to benefit substantially from a product innova- tion (von Hippel, 1988). Frequently these lead users will have already invented solutions to meet their needs. This is particularly true among highly technical user communities, such as those in the medical or scientific fields. Lead users may be sought out in the mar- ket for which the team is developing the new product, or they may be found in markets for products implementing some of the subfunctions of the product.

In the handheld nailer case, the nailer team consulted with the building contractors from the PBS television series This Old House in order to solicit new concepts. These lead users, who are exposed to tools from many manufacturers, made many interesting

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observations about the weaknesses in existing tools, but in this case did not provide many new product concepts.

Consult Experts Experts with knowledge of one or more of the subproblems not only can provide solu- tion concepts directly but also can redirect the search in a more fruitful area. Experts may include professionals at firms manufacturing related products, professional consultants, university faculty, and technical representatives of suppliers. These people can be found by calling universities, by calling companies, and by looking up authors of articles. While finding experts can be hard work, it is almost always less time consuming than re-creating existing knowledge.

Most experts are willing to talk on the telephone or meet in person for an hour or so without charge. In general, consultants will expect to be paid for time they spend on a problem beyond an initial meeting or telephone conversation. Suppliers are usually will- ing to provide several days of effort without direct compensation if they anticipate that someone will use their product as a component in a design. Of course, experts at directly competing firms are in most cases unwilling to provide proprietary information about their product designs. A good habit to develop is to always ask people consulted to sug- gest others who should be contacted. The best information often comes from pursuing these “second generation” leads.

The nailer design team consulted dozens of experts, including a rocket fuel specialist, electric motor researchers at MIT, and engineers from a vendor of gas springs. Most of this consultation was done on the telephone, although the engineers from the spring ven- dor made two trips to visit the team, at their company’s expense.

Search Patents Patents are a rich and readily available source of technical information containing detailed drawings and explanations of how many products work. The main disadvantage of pat- ent searches is that concepts found in recent patents are protected (generally for 20 years from the date of the patent application), so there may be a royalty involved in using them. However, patents are also useful to see what concepts are already protected and must be avoided or licensed. Concepts contained in foreign patents without global coverage and in expired patents can be used without payment of royalties. See Chapter 16, Patents and In- tellectual Property, for an explanation of patent rights and how to understand patent claims.

The formal indexing scheme for patents is difficult for novices to navigate. Fortu- nately, several databases contain the actual text of all patents. These text databases can be searched electronically by key words. Key word searches can be conducted efficiently with only modest practice and are remarkably effective in finding patents relevant to a particular product. Copies of U.S. patents including illustrations can be obtained for a nominal fee from the U.S. Patent and Trademark Office and from several suppliers. (See the Web site www.ulrich-eppinger.net for a current list of online patent databases and sup- pliers of patent documents.)

A U.S. patent search in the area of nailers revealed several interesting concepts. One of the patents described a motor-driven double-flywheel nailer. One of the illustrations from this patent is shown in Exhibit 7-5. The design in this patent uses the accumulation of rotational kinetic energy in a flywheel, which is then suddenly converted into translational energy by a friction clutch. The energy is then delivered to the nail with a single impact of a drive pin.

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Search Published Literature Published literature includes journals; conference proceedings; trade magazines; govern- ment reports; market, consumer, and product information; and new product announce- ments. Literature searches are therefore very fertile sources of existing solutions.

Electronic searches are frequently the most efficient way to gather information from published literature. Searching the Internet is often a good first step, although the quality of the results can be hard to assess. More structured databases are available from online sources. Many databases store only abstracts of articles and not the full text and diagrams. A follow-up search for an actual article is often needed for complete information. The two main difficulties in conducting good database searches are determining the key words and limiting the scope of the search. There is a trade-off between the need to use more key words for complete coverage and the need to restrict the number of matches to a manage- able number.

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EXHIBIT 7-5 Concept from motor-driven double-flywheel nailer patent (U.S. Patent 4,042,036). The accompanying text describing the patent is nine pages long.

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Handbooks cataloging technical information can also be very useful references for ex- ternal search. Examples of such engineering references are Marks’ Standard Handbook of Mechanical Engineering, Perry’s Chemical Engineers’ Handbook, and Mechanisms and Mechanical Devices Sourcebook.

The nailer team found several useful articles related to the subproblems, including ar- ticles on energy storage describing flywheel and battery technologies. In a handbook they found an impact tool mechanism that provided a useful energy conversion concept.

Benchmark Related Products In the context of concept generation, benchmarking is the study of existing products with functionality similar to that of the product under development or to the subproblems on which the team is focused. Benchmarking can reveal existing concepts that have been implemented to solve a particular problem, as well as information on the strengths and weaknesses of the competition.

At this point the team will likely already be familiar with the competitive and closely related products. Products in other markets, but with related functionality, are more dif- ficult to find. One of the most useful sources of this information is the Thomas Register, a directory of manufacturers of industrial products organized by product type. Often the hardest part of using the Thomas Register is finding out what related products are actu- ally called and how they are cataloged. The Thomas Register database can be accessed via the Internet.

For the nailer, the closely related products included a single-shot gunpowder-actuated tool for nailing into concrete, an electrical solenoid-actuated tacker, a pneumatic nailer for factory use, and a palm-held multiblow pneumatic nailer. The products with related func- tionality (in this case, energy storage and conversion) included air bags and the sodium azide propellant used as an energy source, chemical hand warmers for skiing, air rifles powered by carbon dioxide cartridges, and portable computers and their battery packs. The team obtained and disassembled most of these related products in order to discover the general concepts on which they were based, as well as other, more detailed informa- tion, including, for example, the names of the suppliers of specific components.

External search is an important method of gathering solution concepts. Skill in con- ducting external searches is therefore a valuable personal and organizational asset. This ability can be developed through careful observation of the world in order to develop a mental database of technologies and through the development of a network of profes- sional contacts. Even with the aid of personal knowledge and contacts, external search remains “detective work” and is completed most effectively by those who are persistent and resourceful in pursuing leads and opportunities.

Step 3: Search Internally

Internal search is the use of personal and team knowledge and creativity to generate solution concepts. Often called brainstorming, this type of search is internal in that all of the ideas to emerge from this step are created from knowledge already in the posses- sion of the team. This activity may be the most open-ended and creative of any task in product development. We find it useful to think of internal search as a process of re- trieving a potentially useful piece of information from one’s memory and then adapting

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that information to the problem at hand. This process can be carried out by individuals working in isolation or by a group of people working together.

Four guidelines are useful for improving both individual and group internal search:

1. Suspend judgment. In most aspects of daily life, success depends on an ability to quickly evaluate a set of alternatives and take action. For example, none of us would be very productive if deciding what to wear in the morning or what to eat for breakfast in- volved an extensive period of generating alternatives before making a judgment. Because most decisions in our day-to-day lives have implications of only a few minutes or hours, we are accustomed to making decisions quickly and moving on. Concept generation for product development is fundamentally different. We have to live with the consequences of product concept decisions for years. As a result, suspending evaluation for the days or weeks required to generate a large set of alternatives is critical to success. The imperative to suspend judgment is frequently translated into the rule that during group concept gen- eration sessions no criticism of concepts is allowed. A better approach is for individuals perceiving weaknesses in concepts to channel any judgmental tendencies into suggestions for improvements or alternative concepts.

2. Generate a lot of ideas. Most experts believe that the more ideas a team generates, the more likely the team is to explore fully the solution space. Striving for quantity lowers the expectations of quality for any particular idea and therefore may encourage people to share ideas they may otherwise view as not worth mentioning. Further, each idea acts as a stimulus for other ideas, so a large number of ideas has the potential to stimulate even more ideas.

3. Welcome ideas that may seem infeasible. Ideas which initially appear infeasible can often be improved, “debugged,” or “repaired” by other members of the team. The more infeasible an idea, the more it stretches the boundaries of the solution space and en- courages the team to think of the limits of possibility. Therefore, infeasible ideas are quite valuable and their expression should be encouraged.

4. Use graphical and physical media. Reasoning about physical and geometric in- formation with words is difficult. Text and verbal language are inherently inefficient vehicles for describing physical entities. Whether working as a group or as an individual, abundant sketching surfaces should be available. Foam, clay, cardboard, and other three- dimensional media may also be appropriate aids for problems requiring a deep under- standing of form and spatial relationships.

Both Individual and Group Sessions Can Be Useful Formal studies of group and individual problem solving suggest that a set of people work- ing alone for a period of time will generate more and better concepts than the same peo- ple working together for the same time period (McGrath, 1984). This finding is contrary to the actual practices of the many firms that perform most of their concept generation activities in group sessions. Our observations confirm the formal studies, and we believe that team members should spend at least some of their concept generation time working alone. We also believe that group sessions are critical for building consensus, communi- cating information, and refining concepts. In an ideal setting, each individual on the team would spend several hours working alone and then the group would get together to dis- cuss and improve the concepts generated by individuals.

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However, we also know that there is a practical reason for holding group concept gen- eration sessions: it is one way to guarantee that the individuals in the group will devote a certain amount of time to the task. Especially in very intense and demanding work envi- ronments, without scheduling a meeting, few people will allocate several hours for con- centrated individual effort on generating new concepts. The phone rings, people interrupt, urgent problems and e-mails demand attention. In certain environments, scheduled group sessions may be the only way to guarantee that enough attention is paid to the concept generation activity.

The nailer team used both individual effort and group sessions for internal search. For example, during one particular week each member was assigned one or two subproblems and was expected to develop at least 10 solution concepts. This divided the concept gen- eration work among all members. The group then met to discuss and expand on the indi- vidually generated concepts. The more promising concepts were investigated further.

Hints for Generating Solution Concepts Experienced individuals and teams can usually just sit down and begin generating good concepts for a subproblem. Often these people have developed a set of techniques they use to stimulate their thinking, and these techniques have become a natural part of their problem-solving process. Novice product development professionals may be aided by a set of hints that stimulate new ideas or encourage relationships among ideas. VanGundy (1988), von Oech (1998), and McKim (1980) give dozens of helpful suggestions. Here are some hints we have found to be helpful:

• Make analogies. Experienced designers always ask themselves what other devices solve a related problem. Frequently they will ask themselves if there is a natural or biological analogy to the problem. They will think about whether their problem exists at a much larger or smaller dimensional scale than that which they are considering. They will ask what devices do something similar in an unrelated area of application. The nailer team, when posing these questions, realized that construction pile drivers are similar to nailers in some respects. In following up on this idea, they developed the concept of a multiblow tool.

• Wish and wonder. Beginning a thought or comment with “I wish we could . . .” or “I wonder what would happen if . . .” helps to stimulate oneself or the group to consider new possibilities. These questions cause reflection on the boundaries of the problem. For example, a member of the nailer team, when confronted with the required length of a rail gun (an electromagnetic device for accelerating a projectile) for driving a nail, said, “I wish the tool could be 1 meter long.” Discussion of this comment led to the idea that perhaps a long tool could be used like a cane for nailing decking, allowing users to remain on their feet.

• Use related stimuli. Most individuals can think of a new idea when presented with a new stimulus. Related stimuli are those stimuli generated in the context of the problem at hand. For example, one way to use related stimuli is for each individual in a group session to generate a list of ideas (working alone) and then pass the list to his or her neighbor. Upon reflection on someone else’s ideas, most people are able to generate new ideas. Other related stimuli include customer needs statements and photographs of the use environment of the product.

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• Use unrelated stimuli. Occasionally, random or unrelated stimuli can be effective in encouraging new ideas. An example of such a technique is to choose, at random, one of a collection of photographs of objects, and then to think of some way that the ran- domly generated object might relate to the problem at hand. In a variant of this idea, individuals can be sent out on the streets with a digital camera to capture random images for subsequent use in stimulating new ideas. (This may also serve as a good change of pace for a tired group.)

• Set quantitative goals. Generating new ideas can be exhausting. Near the end of a ses- sion, individuals and groups may find quantitative goals useful as a motivating force. The nailer team frequently issued individual concept generation assignments with quantitative targets of 10 to 20 concepts.

• Use the gallery method. The gallery method is a way to display a large number of con- cepts simultaneously for discussion. Sketches, usually one concept to a sheet, are taped or pinned to the walls of the meeting room. Team members circulate and look at each concept. The creator of the concept may offer explanation, and the group subsequently makes suggestions for improving the concept or spontaneously generates related con- cepts. This method is a good way to merge individual and group efforts.

In the 1990s, a Russian problem-solving methodology called TRIZ (a Russian acro- nym for theory of inventive problem solving) began to be disseminated in Europe and in the United States. The methodology is primarily useful in identifying physical work- ing principles to solve technical problems. The key idea underlying TRIZ is to identify a contradiction that is implicit in a problem. For example, a contradiction in the nailer problem might be that increasing power (a desirable characteristic) would also tend to increase weight (an undesirable characteristic). One of the TRIZ tools is a matrix of 39 by 39 characteristics with each cell corresponding to a particular conflict between two characteristics. In each cell of the matrix, up to four physical principles are suggested as ways of resolving the corresponding conflict. There are 40 basic principles, including, for example, the periodic action principle (i.e., replace a continuous action with a periodic action, like an impulse). Using TRIZ, the nailer team might have arrived at the concept of using repeated smaller impacts to drive the nail. The idea of identifying a conflict in the design problem and then thinking about ways to resolve the conflict appears to be a very useful problem-solving heuristic. This approach can be useful in generating concepts even without adopting the entire TRIZ methodology.

Exhibit 7-6 shows some of the solutions the nailer team generated for the subproblems of (1) storing or accepting energy and (2) delivering translational energy to a nail.

Step 4: Explore Systematically

As a result of the external and internal search activities, the team will have collected tens or hundreds of concept fragments—solutions to the subproblems. Systematic exploration is aimed at navigating the space of possibilities by organizing and synthesizing these so- lution fragments. The nailer team focused on the energy storage, conversion, and delivery subproblems and had generated dozens of concept fragments for each subproblem. One approach to organizing and synthesizing these fragments would be to consider all of the

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possible combinations of the fragments associated with each subproblem; however, a little arithmetic reveals the impossibility of this approach. Given the three subproblems on which the team focused and an average of 15 fragments for each subproblem, the team would have to consider 3,375 combinations of fragments (15 × 15 × 15). This would be a daunting task for even the most enthusiastic team. Furthermore, the team would quickly discover that many of the combinations do not even make sense. Fortunately, there are two specific tools for managing this complexity and organizing the thinking of the team: the concept classification tree and the concept combination table. The classification tree helps the team divide the possible solutions into independent categories. The combination table guides the team in selectively considering combinations of fragments.

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EXHIBIT 7-6 Some of the solutions to the subproblems of (1) storing or accepting energy and (2) delivering translational energy to a nail.

Solutions to Subproblem Solutions to Subproblem of Applying Translational of Storing or Accepting Energy Energy to Nail

• Self-regulating chemical reaction emitting high-pressure gas

• Carbide (as for lanterns)

• Combusting sawdust from job site

• Gun powder

• Sodium azide (air bag explosive)

• Fuel-air combustion (butane, propane, acetylene, etc.)

• Compressed air (in tank or from compressor)

• Carbon dioxide in tank

• Electric wall outlet and cord

• High-pressure oil line (hydraulics)

• Flywheel with charging (spin-up)

• Battery pack on tool, belt, or floor

• Fuel cell

• Human power: arms or legs

• Methane from decomposing organic materials

• “Burning” like that of chemical hand warmers

• Nuclear reactions

• Cold fusion

• Solar electric cells

• Solar-steam conversion

• Steam supply line

• Wind

• Geothermal

Single impact

Multiple impacts (tens or hundreds)

Multiple impacts (hundreds or thousands)

Push

Twist-push

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Concept Classification Tree The concept classification tree is used to divide the entire space of possible solutions into several distinct classes that will facilitate comparison and pruning. An example of a tree for the nailer example is shown in Exhibit 7-7. The branches of this tree correspond to different energy sources.

The classification tree provides at least four important benefits:

1. Pruning of less promising branches: If by studying the classification tree the team is able to identify a solution approach that does not appear to have much merit, then this approach can be pruned and the team can focus its attention on the more promising branches of the tree. Pruning a branch of the tree requires some evaluation and judgment and should therefore be done carefully, but the reality of product development is that there are limited resources and that focusing the available resources on the most promising di- rections is an important success factor. For the nailer team, the nuclear energy source was pruned from consideration. Although the team had identified some very intriguing nuclear devices for use in powering artificial hearts, they felt that these devices would not be economically practical for at least a decade and would probably be hampered by regu- latory requirements indefinitely.

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EXHIBIT 7-7 A classification tree for the nailer energy source concept fragments.

Chemical

Pneumatic

Hydraulic

Electrical

Nuclear

Fuel-Air Systems

Explosive Systems

Wall Outlet

Battery

Fuel Cell

Store or Accept Energy

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2. Identification of independent approaches to the problem: Each branch of the tree can be considered a different approach to solving the overall problem. Some of these ap- proaches may be almost completely independent of each other. In these cases, the team can cleanly divide its efforts among two or more individuals or task forces. When two approaches both look promising, this division of effort can reduce the complexity of the concept generation activities. It also may engender some healthy competition among the approaches under consideration. The nailer team found that both the chemical/explosive branch and the electrical branch appeared quite promising. They assigned these two ap- proaches to two different subteams and pursued them independently for several weeks.

3. Exposure of inappropriate emphasis on certain branches: Once the tree is con- structed, the team is able to reflect quickly on whether the effort applied to each branch has been appropriately allocated. The nailer team recognized that they had applied very little effort to thinking about hydraulic energy sources and conversion technologies. This recognition guided them to focus on this branch of the tree for a few days.

4. Refinement of the problem decomposition for a particular branch: Sometimes a problem decomposition can be usefully tailored to a particular approach to the problem. Consider the branch of the tree corresponding to the electrical energy source. Based on additional investigation of the nailing process, the team determined that the instantaneous power delivered during the nailing process was about 10,000 watts for a few milliseconds and so exceeds the power that is available from a wall outlet, a battery, or a fuel cell (of reasonable size, cost, and mass). They concluded, therefore, that energy must be accu- mulated over a substantial period of the nailing cycle (say 100 milliseconds) and then suddenly released to supply the required instantaneous power to drive the nail. This quick analysis led the team to add a subfunction (“accumulate translational energy”) to their function diagram (see Exhibit 7-8). They chose to add the subfunction after the conver- sion of electrical energy to mechanical energy, but briefly considered the possibility of accumulating the energy in the electrical domain with a capacitor. This kind of refine- ment of the function diagram is quite common as the team makes more assumptions about the approach and as more information is gathered.

The classification tree in Exhibit 7-7 shows the alternative solutions to the energy source subproblem. However, there are other possible trees. The team might have chosen to use a tree classifying the alternative solutions to the energy delivery subproblem, show- ing branches for single impact, multiple impacts, or pushing. Trees can be constructed with branches corresponding to the solution fragments of any of the subproblems, but certain classifications are more useful. In general, a subproblem whose solution highly constrains the possible solutions to the remaining subproblems is a good candidate for a classifica- tion tree. For example, the choice of energy source (electrical, nuclear, pneumatic, etc.) constrains whether a motor or a piston-cylinder can be used to convert the energy to translational energy. In contrast, the choice of energy delivery mechanism (single impact,

Concept Generation 133

EXHIBIT 7-8 A new problem decomposition assuming an electrical energy source and the accumulation of energy in the mechanical domain.

Convert Energy to

Translational Energy

Accumulate Translational

Energy

Electrical Energy

Energy Applied to Nail

Apply Translational

Energy to Nail

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multiple impacts, etc.) does not greatly constrain the solutions to the other subproblems. Reflection on which subproblem is likely to most highly constrain the solutions to the remaining subproblems will usually lead to one or two clear ways to construct the clas- sification tree.

Concept Combination Table The concept combination table provides a way to consider combinations of solution fragments systematically. Exhibit 7-9 shows an example of a combination table that the nailer team used to consider the combinations of fragments for the electrical branch of the classification tree. The columns in the table correspond to the subproblems identi- fied in Exhibit 7-8. The entries in each column correspond to the solution fragments for each of these subproblems derived from external and internal search. For example, the subproblem of converting electrical energy to translational energy is the heading for the first column. The entries in this column are a rotary motor with a transmission, a linear motor, a solenoid, and a rail gun.

Potential solutions to the overall problem are formed by combining one fragment from each column. For the nailer example, there are 24 possible combinations (4 × 2 × 3). Choosing a combination of fragments does not lead spontaneously to a solution to the overall problem. The combination of fragments must usually be developed and refined before an integrated solution emerges. This development may not even be possible or may lead to more than one solution, but at a minimum it involves additional creative thought. In some ways, the combination table is simply a way to make forced associations among fragments in order to stimulate further creative thinking; in no way does the mere act of selecting a combination yield a complete solution.

134 Chapter 7

Rotary motor with transmission

Linear motor

Spring

Moving mass

Solenoid

Single impact

Multiple impacts

Push nail

Rail gun

Accumulate Energy

Convert Electrical Energy to Translational Energy

Apply Translational

Energy to Nail

EXHIBIT 7-9 Concept combination table for the handheld nailer.

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Exhibit 7-10 shows a sketch of a concept arising from the combination of the frag- ments “solenoid,” “spring,” and “multiple impacts.” Exhibit 7-11 shows some sketches of concepts arising from the combination of the fragments “rotary motor with transmis- sion,” “spring,” and “single impact.” Exhibit 7-12 shows a sketch of a concept arising from the combination of “rotary motor with transmission,” “spring,” and “multiple im- pacts.” Exhibit 7-13 shows some sketches of concepts arising from the combination of “linear motor,” “moving mass,” “and single impact.”

Concept Generation 135

Rotary motor with transmission

Linear motor

Spring

Moving mass

Solenoid

Single impact

Multiple impacts

Push nail

Rail gun

Accumulate Energy

Convert Electrical Energy to Translational Energy

Apply Translational

Energy to Nail

EXHIBIT 7-10 In this solution concept, a solenoid compresses a spring and then releases it repeatedly in order to drive the nail with multiple impacts.

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Two guidelines make the concept combination process easier. First, if a fragment can be eliminated as being infeasible before combining it with other fragments, then the num- ber of combinations the team needs to consider is dramatically reduced. For example, if the team could determine that the rail gun would not be feasible under any condition, they could reduce the number of combinations from 24 to 18. Second, the concept combination table should be concentrated on the subproblems that are coupled. Coupled subproblems are those whose solutions can be evaluated only in combination with the solutions to other subproblems. For example, the choice of the specific electrical energy source to be used

136 Chapter 7

Rotary motor with transmission

Linear motor Moving mass

Solenoid

Single impact

Multiple impacts

Push nail

Rail gun

Accumulate Energy

Convert Electrical Energy to Translational Energy

Apply Translational

Energy to Nail

Spring

EXHIBIT 7-11 Multiple solutions arising from the combination of a motor with transmission, a spring, and single impact. The motor winds a spring, accumulating potential energy that is then delivered to the nail in a single blow.

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(e.g., battery versus wall outlet), although extremely critical, is somewhat independent of the choice of energy conversion (e.g., motor versus solenoid). Therefore, the concept combination table does not need to contain a column for the different types of electrical energy sources. This reduces the number of combinations the team must consider. As a practical matter, concept combination tables lose their usefulness when the number of columns exceeds three or four.

Managing the Exploration Process The classification tree and combination tables are tools that a team can use somewhat flexibly. They are simple ways to organize thinking and guide the creative energies of the team. Rarely do teams generate only one classification tree and one concept combination table. More typically the team will create several alternative classification trees and several

Concept Generation 137

EXHIBIT 7-12 Solution from the combination of a motor with transmission, a spring, and multiple impacts. The motor repeatedly winds and releases the spring, storing and delivering energy over several blows.

Rotary motor with transmission

Linear motor Moving mass

Solenoid

Single impact

Multiple impacts

Push nail

Rail gun

Accumulate Energy

Convert Electrical Energy to Translational Energy

Apply Translational

Energy to Nail

Spring

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concept combination tables. Interspersed with this exploratory activity may be a refining of the original problem decomposition or the pursuit of additional internal or external search. The exploration step of concept generation usually acts more as a guide for further creative thinking than as the final step in the process.

Recall that at the beginning of the process the team chooses a few subproblems on which to focus attention. Eventually the team must return to address all of the subproblems. This usually occurs after the team has narrowed the range of alternatives for the critical subprob- lems. The nailer team narrowed its alternatives to a few chemical and a few electric concepts and then refined them by working out the user interface, industrial design, and configura- tion issues. One of the resulting concept descriptions is shown in Exhibit 7-14.

138 Chapter 7

EXHIBIT 7-13 Solutions from the combination of a linear motor, a moving mass, and single impact. A linear motor accelerates a massive hammer, accumulating kinetic energy that is delivered to the nail in a single blow.

Rotary motor with transmission

Linear motor Moving mass

Solenoid

Single impact

Multiple impacts

Push nail

Rail gun

Accumulate Energy

Convert Electrical Energy to Translational Energy

Apply Translational

Energy to Nail

Spring

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Step 5: Reflect on the Solutions and the Process

Although the reflection step is placed here at the end for convenience in presentation, reflec- tion should in fact be performed throughout the whole process. Questions to ask include:

• Is the team developing confidence that the solution space has been fully explored?

• Are there alternative function diagrams?

• Are there alternative ways to decompose the problem?

• Have external sources been thoroughly pursued?

• Have ideas from everyone been accepted and integrated in the process?

The nailer team members discussed whether they had focused too much attention on the energy storage and conversion issues in the tool while ignoring the user interface and overall configuration. They decided that the energy issues remained at the core of the problem and that their decision to focus on these issues first was justified. They also wondered if they had pursued too many branches of the classification tree. Initially they had pursued electrical, chemical, and pneumatic concepts before ultimately settling on an electric concept. In hindsight, the chemical approach had some obvious safety and cus- tomer perception shortcomings (they were exploring the use of explosives as an energy source). They decided that although they liked some aspects of the chemical solution, they should have eliminated it from consideration earlier in the process, allowing more time to pursue some of the more promising branches in greater detail.

Concept Generation 139

EXHIBIT 7-14 One of several refined solution concepts.

Courtesy of Product Genesis, Inc.

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The team explored several of these concepts in more detail and built working proto- types of nailers incorporating two fundamentally different directions: (1) a motor wind- ing a spring with energy released in a single blow, and (2) a motor with a rotating mass that repeatedly hit the nail at a rate of about 10 cycles per second until the nail was fully driven. Ultimately, the multiblow tool proved to be the most technically feasible approach and the final product (Exhibit 7-1) was based on this concept.

Summary A product concept is an approximate description of the technology, working principles, and form of the product. The degree to which a product satisfies customers and can be successfully commercialized depends to a large measure on the quality of the underlying concept.

• The concept generation process begins with a set of customer needs and target specifi- cations and results in a set of product concepts from which the team will make a final selection.

• In most cases, an effective development team will generate hundreds of concepts, of which 5 to 20 will merit serious consideration during the subsequent concept selection activity.

• The concept generation method presented in this chapter consists of five steps:

1. Clarify the problem. Understand the problem and decompose it into simpler sub- problems.

2. Search externally. Gather information from lead users, experts, patents, published literature, and related products.

3. Search internally. Use individual and group methods to retrieve and adapt the knowledge of the team.

4. Explore systematically. Use classification trees and combination tables to organize the thinking of the team and to synthesize solution fragments.

5. Reflect on the solutions and the process. Identify opportunities for improvement in subsequent iterations or future projects.

• Although concept generation is an inherently creative process, teams can benefit from using a structured method. Such an approach allows full exploration of the design space and reduces the chance of oversight in the types of solution concepts considered. It also acts as a map for those team members who are less experienced in design prob- lem solving.

• Despite the linear presentation of the concept generation process in this chapter, the team will likely return to each step of the process several times. Iteration is particularly common when the team is developing a radically new product.

• Professionals who are good at concept generation seem to always be in great demand as team members. Contrary to popular opinion, we believe concept generation is a skill that can be learned and developed.

140 Chapter 7

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References and Bibliography Many current resources are available on the Internet via www.ulrich-eppinger.net

Pahl and Beitz were the driving force behind structured design methods in Germany. We adapt many of their ideas for functional decomposition.

Pahl, Gerhard, Wolfgang Beitz, Jörg Feldhusen, and Karl-Heinrich Grote, Engineering Design, third edition, K. Wallace and L. Blessing, translators, Springer- Verlag, New York, 2007.

Hubka and Eder have written in a detailed way about systematic concept generation for technical products.

Hubka, Vladimir, and W. Ernst Eder, Theory of Technical Systems: A Total Concept Theory for Engineering Design, Springer-Verlag, New York, 1988.

Von Hippel reports on his empirical research on the sources of new product concepts. His central argument is that lead users are the innovators in many markets.

von Hippel, Eric, The Sources of Innovation, Oxford University Press, New York, 1988.

VanGundy presents dozens of methods for problem solving, many of which are directly applicable to product concept generation.

VanGundy, Arthur B., Jr., Techniques of Structured Problem Solving, second edition, Van Nostrand Reinhold, New York, 1988.

Von Oech provides dozens of good ideas for improving individual and group creative performance.

von Oech, Roger, A Whack on the Side of the Head: How You Can Be More Creative, revised edition, Warner Books, New York, 1998.

Terwiesch and Ulrich present several useful tips for idea generation as inputs to the search for outstanding opportunities. Many of the same approaches apply to the concept generation activity.

Terwiesch, Christian, and Karl T. Ulrich, Innovation Tournaments: Creating and Selecting Exceptional Opportunities, Harvard Business Press, Boston, May 2009.

McKim presents a holistic approach to developing creative thinking skills in individuals and groups.

McKim, Robert H., Experiences in Visual Thinking, second edition, Brooks/Cole Publishing, Monterey, CA, 1980.

Interesting research on a set of standard “templates” for identifying novel product concepts has been done by Goldenberg and Mazursky.

Goldenberg, Jacob, and David Mazursky, Creativity in Product Innovation, Cambridge University Press, Cambridge, 2002.

The following are two of the better English-language publications on TRIZ. Altshuller, Genrich, 40 Principles: TRIZ Keys to Technical Innovation, Technical Innovation Center, Worcester, MA, 1998.

Terninko, John, Alla Zusman, and Boris Zlotin, Systematic Innovation: An Introduction to TRIZ, St. Lucie Press, Boca Raton, FL, 1998.

Concept Generation 141

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McGrath presents studies comparing the relative performance of groups and individuals in generating new ideas.

McGrath, Joseph E., Groups: Interaction and Performance, Prentice Hall, Englewood Cliffs, NJ, 1984.

Engineering handbooks are handy sources of information on standard technical solutions. Three good handbooks are:

Avallone, Eugene A., Theodore Baumeister III, and Ali Sadegh (eds.), Marks’ Standard Handbook of Mechanical Engineering, eleventh edition, McGraw-Hill, New York, 2006.

Perry, Robert H., Don W. Green, and James O. Maloney (eds.), Perry’s Chemical Engineers’ Handbook, seventh edition, McGraw-Hill, New York, 1997.

Sclater, Neil, and Nicholas P. Chironis, Mechanisms and Mechanical Devices Sourcebook, fourth edition, McGraw-Hill, New York, 2006.

Exercises 1. Decompose the problem of designing a new barbecue grill. Try a functional decompo-

sition as well as a decomposition based on the user interactions with the product.

2. Generate 20 concepts for the subproblem “prevent fraying of end of rope” as part of a system for cutting lengths of nylon rope from a spool.

3. Prepare an external-search plan for the problem of permanently applying serial num- bers to plastic products.

Thought Questions 1. What are the prospects for computer support for concept generation activities? Can

you think of any computer tools that would be especially helpful in this process?

2. What would be the relative advantages and disadvantages of involving actual custom- ers in the concept generation process?

3. For what types of products would the initial focus of the concept generation activity be on the form and user interface of the product and not on the core technology? Describe specific examples.

4. Could you apply the five-step method to an everyday problem like choosing the food for a picnic?

5. Consider the task of generating new concepts for the problem of dealing with leaves on a lawn. How would a plastic-bag manufacturer’s assumptions and problem decom- position differ from those of a manufacturer of lawn tools and equipment and from those of a company responsible for maintaining golf courses around the world? Should the context of the firm dictate the way concept generation is approached?

142 Chapter 7

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Concept Selection

143

Courtesy of Novo Nordisk Pharmaceuticals, Inc.

C H A P T E R E I G H T

EXHIBIT 8-1 One of the existing outpatient syringes.

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144 Chapter 8

A medical supply company retained a product design firm to develop a reusable syringe with precise dosage control for outpatient use. One of the products sold by a competitor is shown in Exhibit 8-1. To focus the development effort, the medical supply company identified two major problems with its current product: cost (the existing model was made of stainless steel) and accuracy of dose metering. The company also requested that the product be tailored to the physical capabilities of the elderly, an important segment of the target market. To summarize the needs of its client and of the intended end users, the team established seven criteria on which the choice of a product concept would be based:

• Ease of handling.

• Ease of use.

• Readability of dose settings.

• Dose metering accuracy.

• Durability.

• Ease of manufacture.

• Portability.

The team described the concepts under consideration with the sketches shown in Ex- hibit 8-3. Although each concept nominally satisfied the key customer needs, the team was faced with choosing the best concept for further design, refinement, and production. The need to select one syringe concept from many raises several questions:

• How can the team choose the best concept, given that the designs are still quite abstract?

• How can a decision be made that is embraced by the whole team?

• How can desirable attributes of otherwise weak concepts be identified and used?

• How can the decision-making process be documented?

This chapter uses the syringe example to present a concept selection methodology ad- dressing these and other issues.

Concept Selection Is an Integral Part of the Product Development Process

Early in the development process the product development team identifies a set of cus- tomer needs. By using a variety of methods, the team then generates alternative solution concepts in response to these needs. (See Chapter 5, Identifying Customer Needs, and Chapter 7, Concept Generation, for more detail on these activities.) Concept selection is the process of evaluating concepts with respect to customer needs and other criteria, com- paring the relative strengths and weaknesses of the concepts, and selecting one or more concepts for further investigation, testing, or development. Exhibit 8-2 illustrates how the concept selection activity is related to the other activities that make up the concept development phase of the product development process. Although this chapter focuses on the selection of an overall product concept at the beginning of the development process, the method we present is also useful later in the development process when the team must select subsystem concepts, components, and production processes.

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Concept Selection 145

While many stages of the development process benefit from unbounded creativity and divergent thinking, concept selection is the process of narrowing the set of concept alternatives under consideration. Although concept selection is a convergent process, it is frequently iterative and may not produce a dominant concept immediately. A large set of concepts is initially winnowed down to a smaller set, but these concepts may subsequently be combined and improved to temporarily enlarge the set of concepts under consideration. Through several iterations a dominant concept is finally chosen. Exhibit 8-4 illustrates the successive narrowing and temporary widening of the set of options under consideration during the concept selection activity.

All Teams Use Some Method for Choosing a Concept

Whether or not the concept selection process is explicit, all teams use some method to choose among concepts. (Even those teams generating only one concept are using a method: choosing the first concept they think of.) The methods vary in their effectiveness and include the following:

• External decision: Concepts are turned over to the customer, client, or some other ex- ternal entity for selection.

• Product champion: An influential member of the product development team chooses a concept based on personal preference.

• Intuition: The concept is chosen by its feel. Explicit criteria or trade-offs are not used. The concept just seems better.

• Multivoting: Each member of the team votes for several concepts. The concept with the most votes is selected.

• Web-based survey: Using an online survey tool, each concept is rated by many people to find the best ones.

• Pros and cons: The team lists the strengths and weaknesses of each concept and makes a choice based upon group opinion.

• Prototype and test: The organization builds and tests prototypes of each concept, mak- ing a selection based upon test data.

• Decision matrices: The team rates each concept against prespecified selection criteria, which may be weighted.

Identify Customer

Needs

Establish Target

Specifications

Generate Product

Concepts

Select Product

Concept(s)

Test Product

Concept(s)

Set Final

Specifications

Plan Downstream Development

Development Plan

Mission Statement

Build and Test Models and Prototypes

Benchmark Competitive Products

Perform Economic Analysis

EXHIBIT 8-2 Concept selection is part of the overall concept development phase.

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146 Chapter 8

EXHIBIT 8-3 Seven concepts for the outpatient syringe. The product development team generated the seven sketches to describe the basic concepts under consideration.

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Concept Selection 147

EXHIBIT 8-3 Continued

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The concept selection method in this chapter is built around the use of decision matri- ces for evaluating each concept with respect to a set of selection criteria.

A Structured Method Offers Several Benefits

All of the front-end activities of product development have tremendous influence on eventual product success. Certainly the response of the market to a product depends criti- cally on the product concept, but many practitioners and researchers also believe that the choice of a product concept dramatically constrains the eventual manufacturing cost of the product. A structured concept selection process helps to maintain objectivity through- out the concept phase of the development process and guides the product development team through a critical, difficult, and sometimes emotional process. Specifically, a struc- tured concept selection method offers the following potential benefits:

• A customer-focused product: Because concepts are explicitly evaluated against customer-oriented criteria, the selected concept is likely to be focused on the customer.

• A competitive design: By benchmarking concepts with respect to existing designs, de- signers push the design to match or exceed their competitors’ performance along key dimensions.

148 Chapter 8

EXHIBIT 8-4 Concept selection is an iterative process closely related to concept generation and testing. The concept screening and scoring methods help the team refine and improve the concepts, leading to one or more promising concepts upon which further testing and development activities will be focused.

concept generation

concept screening

concept scoring

concept testing

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• Better product-process coordination: Explicit evaluation of the product with respect to manufacturing criteria improves the product’s manufacturability and helps to match the product with the process capabilities of the firm.

• Reduced time to product introduction: A structured method becomes a common lan- guage among design engineers, manufacturing engineers, industrial designers, market- ers, and project managers, resulting in decreased ambiguity, faster communication, and fewer false starts.

• Effective group decision making: Within the development team, organizational phi- losophy and guidelines, willingness of members to participate, and team member ex- perience may constrain the concept selection process. A structured method encourages decision making based on objective criteria and minimizes the likelihood that arbitrary or personal factors influence the product concept.

• Documentation of the decision process: A structured method results in a readily un- derstood archive of the rationale behind concept decisions. This record is useful for assimilating new team members and for quickly assessing the impact of changes in the customer needs or in the available alternatives.

Overview of Methodology

We present a two-stage concept selection methodology, although the first stage may suf- fice for simple design decisions. The first stage is called concept screening and the sec- ond stage is called concept scoring. Each is supported by a decision matrix that is used by the team to rate, rank, and select the best concept(s). Although the method is structured, we emphasize the role of group insight to improve and combine concepts.

Concept selection is often performed in two stages as a way to manage the complexity of evaluating dozens of product concepts. The application of these two methods is illus- trated in Exhibit 8-4. Screening is a quick, approximate evaluation aimed at producing a few viable alternatives. Scoring is a more careful analysis of these relatively few concepts in order to choose the single concept most likely to lead to product success.

During concept screening, rough initial concepts are evaluated relative to a common reference concept using the screening matrix. At this preliminary stage, detailed quantita- tive comparisons are difficult to obtain and may be misleading, so a coarse comparative rating system is used. After some alternatives are eliminated, the team may choose to move on to concept scoring and conduct more detailed analyses and finer quantitative evaluation of the remaining concepts using the scoring matrix as a guide. Throughout the screening and scoring process, several iterations may be performed, with new alternatives arising from the combination of the features of several concepts. Exhibits 8-5 and 8-7 il- lustrate the screening and scoring matrices, using the selection criteria and concepts from the syringe example.

Both stages, concept screening and concept scoring, follow a six-step process that leads the team through the concept selection activity. The steps are:

1. Prepare the selection matrix.

2. Rate the concepts.

3. Rank the concepts.

4. Combine and improve the concepts.

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5. Select one or more concepts.

6. Reflect on the results and the process.

Although we present a well-defined process, the team, not the method, creates the concepts and makes the decisions that determine the quality of the product. Ideally, teams are made up of people from different functional groups within the organization. Each member brings unique views that increase the understanding of the problem and thus fa- cilitate the development of a successful, customer-oriented product. The concept selection method exploits the matrices as visual guides for consensus building among team mem- bers. The matrices focus attention on the customer needs and other decision criteria and on the product concepts for explicit evaluation, improvement, and selection.

Concept Screening

Concept screening is based on a method developed by the late Stuart Pugh in the 1980s and is often called Pugh concept selection (Pugh, 1990). The purposes of this stage are to narrow the number of concepts quickly and to improve the concepts. Exhibit 8-5 illus- trates the screening matrix used during this stage.

Step 1: Prepare the Selection Matrix To prepare the matrix, the team selects a physical medium appropriate to the problem at hand. Individuals and small groups with a short list of criteria may use matrices on paper similar to Exhibit 8-5 or Appendix A for their selection process. For larger groups a chalkboard or flip chart is desirable to facilitate group discussion.

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EXHIBIT 8-5 The concept-screening matrix. For the syringe example, the team rated the concepts against the reference concept using a simple code (+ for “better than,” 0 for “same as,” – for “worse than”) in order to identify some concepts for further consideration. Note that the three concepts ranked “3” all received the same net score.

Concepts

A B C D E F G Master Rubber (Reference) Swash Lever Dial Selection Criteria Cylinder Brake Ratchet Plunge Stop Ring Set Screw

Ease of handling 0 0 – 0 0 – – Ease of use 0 – – 0 0 + 0 Readability of settings 0 0 + 0 + 0 + Dose metering accuracy 0 0 0 0 – 0 0 Durability 0 0 0 0 0 + 0 Ease of manufacture + – – 0 0 – 0 Portability + + 0 0 + 0 0

Sum +’s 2 1 1 0 2 2 1 Sum 0’s 5 4 3 7 4 3 5 Sum –’s 0 2 3 0 1 2 1

Net Score 2 –1 –2 0 1 0 0 Rank 1 6 7 3 2 3 3 Continue? Yes No No Combine Yes Combine Revise

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Next, the inputs (concepts and criteria) are entered on the matrix. Although possibly generated by different individuals, concepts should be presented at the same level of detail for meaningful comparison and unbiased selection. The concepts are best portrayed by both a written description and a graphical representation. A simple one-page sketch of each con- cept greatly facilitates communication of the key features of the concept. The concepts are entered along the top of the matrix, using graphical or textual labels of some kind.

If the team is considering more than about 12 concepts, the multivote technique may be used to quickly choose the dozen or so concepts to be evaluated with the screening matrix. Multivoting is a technique in which members of the team simultaneously vote for three to five concepts by applying “dots” to the sheets describing their preferred concepts. See Chapter 3, Opportunity Identification, for a description of multivoting applied to a broad set of product opportunities. The concepts with the most dots are chosen for concept screening. It is also possible to use the screening matrix method with a large number of concepts. This is facilitated by a spreadsheet and it is then useful to transpose the rows and columns. (Ar- range the concepts in this case in the left column and the criteria along the top.)

The selection criteria are listed along the left-hand side of the screening matrix, as shown in Exhibit 8-5. These criteria are chosen based on the customer needs the team has identified, as well as on the needs of the enterprise, such as low manufacturing cost or minimal risk of product liability. The criteria at this stage are usually expressed at a fairly high level of abstraction and typically include from 5 to 10 dimensions. The selec- tion criteria should be chosen to differentiate among the concepts. However, because each criterion is given equal weight in the concept screening method, the team should be care- ful not to list many relatively unimportant criteria in the screening matrix. Otherwise, the differences among the concepts relative to the more important criteria will not be clearly reflected in the outcome.

After careful consideration, the team chooses a concept to become the benchmark, or reference concept, against which all other concepts are rated. The reference is generally either an industry standard or a straightforward concept with which the team members are very familiar. It can be a commercially available product, a best-in-class benchmark product that the team has studied, an earlier generation of the product, any one of the concepts under consideration, or a combination of subsystems assembled to represent the best features of different products.

Step 2: Rate the Concepts A relative score of “better than” (+), “same as” (0), or “worse than” (–) is placed in each cell of the matrix to represent how each concept rates in comparison to the reference con- cept relative to the particular criterion. It is generally advisable to rate every concept on one criterion before moving to the next criterion. However, with a large number of con- cepts, it is faster to use the opposite approach—to rate each concept completely before moving on to the next concept.

Some people find the coarse nature of the relative ratings difficult to work with. How- ever, at this stage in the design process, each concept is only a general notion of the ultimate product, and more detailed ratings are largely meaningless. In fact, given the imprecision of the concept descriptions at this point, it is very difficult to consistently compare concepts to one another unless one concept (the reference) is consistently used as a basis for comparison.

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When available, objective metrics can be used as the basis for rating a concept. For example, a good approximation of assembly cost is the number of parts in a design. Simi- larly, a good approximation of ease of use is the number of operations required to use the device. Such metrics help to minimize the subjective nature of the rating process. Some objective metrics suitable for concept selection may arise from the process of establishing target specifications for the product. (See Chapter 6, Product Specifications, for a discus- sion of metrics.) Absent objective metrics, ratings are established by team consensus, al- though secret ballot or other methods may also be useful. At this point the team may also wish to note which selection criteria need further investigation and analysis.

Step 3: Rank the Concepts After rating all the concepts, the team sums the number of “better than,” “same as,” and “worse than” scores and enters the sum for each category in the lower rows of the matrix. From our example in Exhibit 8-5, concept A was rated to have two criteria better than, five the same as, and none worse than the reference concept. Next, a net score can be cal- culated by subtracting the number of “worse than” ratings from the “better than” ratings.

Once the summation is completed, the team rank-orders the concepts. Obviously, in general those concepts with more pluses and fewer minuses are ranked higher. Often at this point the team can identify one or two criteria that really seem to differentiate the concepts.

Step 4: Combine and Improve the Concepts Having rated and ranked the concepts, the team should verify that the results make sense and then consider if there are ways to combine and improve certain concepts. Two issues to consider are:

• Is there a generally good concept that is degraded by one bad feature? Can a minor modification improve the overall concept and yet preserve a distinction from the other concepts?

• Are there two concepts that can be combined to preserve the “better than” qualities while annulling the “worse than” qualities?

Combined and improved concepts are then added to the matrix, rated by the team, and ranked along with the original concepts. In our example, the team noticed that con- cepts D and F could be combined to remove several of the “worse than” ratings to yield a new concept, DF, to be considered in the next round. Concept G was also considered for revision. The team decided that this concept was too bulky, so the excess storage space was removed while retaining the injection technique. These revised concepts are shown in Exhibit 8-6.

Step 5: Select One or More Concepts Once the team members are satisfied with their understanding of each concept and its relative quality, they decide which concepts are to be selected for further refinement and analysis. Based upon previous steps, the team will likely develop a clear sense of which are the most promising concepts. The number of concepts selected for further review will be limited by team resources (personnel, money, and time). In our example, the team se- lected concepts A and E to be considered along with the revised concept G+ and the new

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concept DF. Having determined the concepts for further analysis, the team must clarify which issues need to be investigated further before a final selection can be made.

The team must also decide whether another round of concept screening will be per- formed or whether concept scoring will be applied next. If the screening matrix is not seen to provide sufficient resolution for the next step of evaluation and selection, then the concept-scoring stage with its weighted selection criteria and more detailed rating scheme would be used.

Step 6: Reflect on the Results and the Process All of the team members should be comfortable with the outcome. If an individual is not in agreement with the decision of the team, then perhaps one or more important criteria are missing from the screening matrix, or perhaps a particular rating is in error, or at least is not clear. An explicit consideration of whether the results make sense to everyone re- duces the likelihood of making a mistake and increases the likelihood that the entire team will be solidly committed to the subsequent development activities.

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EXHIBIT 8-6 New and revised concepts for the syringe. During the selection process, the syringe team revised concept G and generated a new concept, DF, arising from the combination of concepts D and F.

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Concept Scoring

Concept scoring is used when increased resolution will better differentiate among com- peting concepts. In this stage, the team weighs the relative importance of the selection criteria and focuses on more refined comparisons with respect to each criterion. The con- cept scores are determined by the weighted sum of the ratings. Exhibit 8-7 illustrates the scoring matrix used in this stage. In describing the concept scoring process, we focus on the differences relative to concept screening.

Step 1: Prepare the Selection Matrix As in the screening stage, the team prepares a matrix and identifies a reference concept. In most cases a computer spreadsheet is the best format to facilitate ranking and sensitivity analysis. The concepts that have been identified for analysis are entered on the top of the matrix. The concepts have typically been refined to some extent since concept screening and may be expressed in more detail. In conjunction with more detailed concepts, the team may wish to add more detail to the selection criteria. The use of hierarchical rela- tions is a useful way to illuminate the criteria. For the syringe example, suppose the team decided that the criterion “ease of use” did not provide sufficient detail to help distin- guish among the remaining concepts. “Ease of use” could be broken down, as shown in Exhibit 8-8, to include “ease of injection,” “ease of cleaning,” and “ease of loading.” The level of criteria detail will depend upon the needs of the team; it may not be necessary to expand the criteria at all. If the team has created a hierarchical list of customer needs, the secondary and tertiary needs are good candidates for more detailed selection criteria. (See

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EXHIBIT 8-7 The concept-scoring matrix. This method uses a weighted sum of the ratings to determine concept ranking. While concept A serves as the overall reference concept, the separate reference points for each criterion are signified by bold rating values.

Concept

A DF E G+ (Reference) Master Cylinder Lever Stop Swash Ring Dial Screw+

Selection Weighted Weighted Weighted Weighted Criteria Weight Rating Score Rating Score Rating Score Rating Score

Ease of handling 5% 3 0.15 3 0.15 4 0.2 4 0.2 Ease of use 15% 3 0.45 4 0.6 4 0.6 3 0.45 Readability of settings 10% 2 0.2 3 0.3 5 0.5 5 0.5 Dose metering accuracy 25% 3 0.75 3 0.75 2 0.5 3 0.75 Durability 15% 2 0.3 5 0.75 4 0.6 3 0.45 Ease of manufacture 20% 3 0.6 3 0.6 2 0.4 2 0.4 Portability 10% 3 0.3 3 0.3 3 0.3 3 0.3

Total Score 2.75 3.45 3.10 3.05 Rank 4 1 2 3

Continue? No Develop No No

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Chapter 5, Identifying Customer Needs, for an explanation of primary, secondary, and tertiary needs, and see Appendixes A and B for examples of hierarchical selection criteria.)

After the criteria are entered, the team adds importance weights to the matrix. Several different schemes can be used to weight the criteria, such as assigning an importance value from 1 to 5, or allocating 100 percentage points among them, as the team has done in Exhibit 8-7. There are marketing techniques for empirically determining weights from customer data, and a thorough process of identifying customer needs may result in such weights (Urban and Hauser, 1993). However, for the purpose of concept selection the weights are often determined subjectively by team consensus.

Step 2: Rate the Concepts As in the screening stage, it is generally easiest for the team to focus its discussion by rating all of the concepts with respect to one criterion at a time. Because of the need for additional resolution to distinguish among competing concepts, a finer scale is now used. We recommend a scale from 1 to 5:

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EXHIBIT 8-8 Hierarchical decomposition of selection criteria. In conjunction with more detailed concepts, the team may choose to break down criteria to the level of detail necessary for meaningful comparison.

Ease of Injection

Ease of CleaningEASE OF USE

Ease of Loading

Relative Performance Rating

Much worse than reference 1 Worse than reference 2 Same as reference 3 Better than reference 4 Much better than reference 5

Another scale, such as 1 to 9, may certainly be used, but finer scales generally require more time and effort.

A single reference concept can be used for the comparative ratings, as in the screen- ing stage; however, this is not always appropriate. Unless by pure coincidence the refer- ence concept is of average performance relative to all of the criteria, the use of the same reference concept for the evaluation of each criterion will lead to “scale compression” for some of the criteria. For example, if the reference concept happens to be the easiest con- cept to manufacture, all of the remaining concepts will receive an evaluation of 1, 2, or 3 (“much worse than,” “worse than,” or “same as”) for the ease-of-manufacture criterion, compressing the rating scale from five levels to three levels.

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To avoid scale compression, it is possible to use different reference points for the various selection criteria. Reference points may come from several of the concepts under consideration, from comparative benchmarking analysis, from the target values of the product specifications, or other means. It is important that the reference point for each criterion be well understood to facilitate direct one-to-one comparisons. Using multiple reference points does not prevent the team from designating one concept as the overall reference for the purposes of ensuring that the selected concept is competitive relative to this benchmark. Under such conditions the overall reference concept will simply not receive a neutral score.

Exhibit 8-7 shows the scoring matrix for the syringe example. The team believed that the master cylinder concept was not suitable as a reference point for two of the criteria, and other concepts were used as reference points in these cases.

Appendix B illustrates a more detailed scoring matrix for which the team rated the concepts on each criterion with no explicit reference points. These ratings were accom- plished by discussing the merits of every concept with respect to one criterion at a time and arranging the scores on a 9-point scale.

Step 3: Rank the Concepts Once the ratings are entered for each concept, weighted scores are calculated by multiply- ing the raw scores by the criteria weights. The total score for each concept is the sum of the weighted scores:

S r w j i

n

ij i =

= Σ

1

where

rij = raw rating of concept j for the ith criterion wi = weighting for ith criterion n = number of criteria Sj = total score for concept j

Finally, each concept is given a rank corresponding to its total score, as shown in Exhibit 8-7.

Step 4: Combine and Improve the Concepts As in the screening stage, the team looks for changes or combinations that improve concepts. Although the formal concept generation process is typically completed before concept selection begins, some of the most creative refinements and improvements occur during the concept selection process as the team realizes the inherent strengths and weak- nesses of certain features of the product concepts.

Step 5: Select One or More Concepts The final selection is not simply a question of choosing the concept that achieves the highest ranking after the first pass through the process. Rather, the team should explore this initial evaluation by conducting a sensitivity analysis. Using a computer spreadsheet, the team can vary weights and ratings to determine their effect on the ranking.

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By investigating the sensitivity of the ranking to variations in a particular rating, the team members can assess whether uncertainty about a particular rating has a large impact on their choice. In some cases they may select a lower-scoring concept about which there is little uncertainty instead of a higher-scoring concept that may possibly prove unwork- able or less desirable as they learn more about it.

Based on the selection matrix, the team may decide to select the top two or more con- cepts. These concepts may be further developed, prototyped, and tested to elicit customer feedback. See Chapter 9, Concept Testing, for a discussion of methods to assess customer response to product concepts.

The team may also create two or more scoring matrices with different weightings to yield the concept ranking for various market segments with different customer prefer- ences. It may be that one concept is dominant for several segments. The team should also consider carefully the significance of differences in concept scores. Given the resolution of the scoring system, small differences are generally not significant.

For the syringe example, the team agreed that concept DF was the most promising and would be likely to result in a successful product.

Step 6: Reflect on the Results and the Process As a final step the team reflects on the selected concept(s) and on the concept selection process. In some ways, this is the “point of no return” for the concept development pro- cess, so everyone on the team should feel comfortable that all of the relevant issues have been discussed and that the selected concept(s) have the greatest potential to satisfy cus- tomers and be economically successful.

After each stage of concept selection, it is a useful reality check for the team to review each of the concepts that are to be eliminated from further consideration. If the team agrees that any of the dropped concepts is better overall than some of those retained, then the source of this inconsistency should be identified. Perhaps an important criterion is missing, not weighted properly, or inconsistently applied.

The organization can also benefit from reflection on the process itself. Two questions are useful in improving the process for subsequent concept selection activities:

• In what way (if at all) did the concept selection method facilitate team decision making?

• How can the method be modified to improve team performance?

These questions focus the team on the strengths and weaknesses of the methodology in relation to the needs and capabilities of the organization.

Caveats

With experience, users of the concept selection methods will discover several subtleties. Here we discuss some of these subtleties and point out a few areas for caution.

• Decomposition of concept quality: The basic theory underlying the concept selection method is that selection criteria—and, by implication, customer needs—can be evaluated independently and that concept quality is the sum of the qualities of the concept relative to each criterion. The quality of some product concepts may not be easily decomposed into a set of independent criteria, or the performance of the concept relative to the differ- ent criteria may be difficult to relate to overall concept quality. For example, the overall

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appeal or performance of a tennis racquet design may arise in a highly complex way from its weight, ease of swinging, shock transmission, and energy absorption. Simply choosing a concept based on the sum of performance relative to each criterion may fail to capture complex relationships among these criteria. Keeney and Raiffa (1993) discuss the problem of multiattribute decision making, including the issue of nonlinear relation- ships among selection criteria.

• Subjective criteria: Some selection criteria, particularly those related to aesthetics, are highly subjective. Choices among alternatives based solely on subjective criteria must be made carefully. In general, the development team’s collective judgment is not the best way to evaluate concepts on subjective dimensions. Rather, the team should narrow the alternatives to three or four and then solicit the opinions of representative customers from the target market for the product, perhaps using mock-ups or models to represent the concepts. (See Chapter 9, Concept Testing.)

• To facilitate improvement of concepts: While discussing each concept to determine its rating, the team may wish to make note of any outstanding (positive or negative) attri- butes of the concepts. It is useful to identify any features that could be applied to other concepts, as well as issues that could be addressed to improve the concept. Notes may be placed directly in the cells of the selection matrix. Such notes are particularly use- ful in step 4, when the team seeks to combine, refine, and improve the concepts before making a selection decision.

• Where to include cost: Most of the selection criteria are adaptations of the customer needs. However, “ease of manufacturing” and “manufacturing cost” are not customer needs. The only reason customers care about manufacturing cost is that it establishes the lower bound on sale price. Nevertheless, cost is an extremely important factor in choosing a concept, because it is one of the factors determining the economic success of the product. For this reason, we advocate the inclusion of some measure of cost or ease of manufacturing when evaluating concepts, even though these measures are not true customer needs. Similarly, there may be needs of other stakeholders that were not expressed by actual customers but are important for economic success of the product.

• Selecting elements of aggregate concepts: Some product concepts are really aggrega- tions of several simpler concepts. If all of the concepts under consideration include choices from a set of simpler elements, then the simple elements can be evaluated first and in an independent fashion before the more complex concepts are evaluated. This sort of decomposition may follow partly from the structure used in concept generation. For example, if all of the syringes in our example could be used with all of several dif- ferent needle types, then the selection of a needle concept could be conducted indepen- dently of the selection of an overall syringe concept.

• Applying concept selection throughout the development process: Although through- out this chapter we have emphasized the application of the method to the selection of a basic product concept, concept selection is used again and again at many levels of detail in the design and development process. For example, in the syringe example, concept selection could be used at the very beginning of the development project to decide between a single-use or multiple-use approach. Once the basic approach had been determined, concept selection could be used to choose the basic product concept, as illustrated in this chapter. Finally, concept selection could be used at the most de- tailed level of design for resolving decisions such as the choice of colors or materials.

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Summary Concept selection is the process of evaluating concepts with respect to customer needs and other criteria, comparing the relative strengths and weaknesses of the concepts, and selecting one or more concepts for further investigation or development.

• All teams use some method, implicit or explicit, for selecting concepts. Decision tech- niques employed for selecting concepts range from intuitive approaches to structured methods.

• Successful design is facilitated by structured concept selection. We recommend a two- stage process: concept screening and concept scoring.

• Concept screening uses a reference concept to evaluate concept variants against selec- tion criteria. Concept scoring may use different reference points for each criterion.

• Concept screening uses a coarse comparison system to narrow the range of concepts under consideration.

• Concept scoring uses weighted selection criteria and a finer rating scale. Concept scor- ing may be skipped if concept screening produces a dominant concept.

• Both screening and scoring use a matrix as the basis of a six-step selection process. The six steps are:

1. Prepare the selection matrix.

2. Rate the concepts.

3. Rank the concepts.

4. Combine and improve the concepts.

5. Select one or more concepts.

6. Reflect on the results and the process.

• Concept selection is applied not only during concept development but throughout the subsequent design and development process.

• Concept selection is a group process that facilitates the selection of a winning concept, helps build team consensus, and creates a record of the decision-making process.

References and Bibliography Many current resources are available on the Internet via www.ulrich-eppinger.net

The concept selection methodology is a decision-making process. Souder outlines other decision techniques.

Souder, William E., Management Decision Methods for Managers of Engineering and Research, Van Nostrand Reinhold, New York, 1980.

For a more formal treatment of multiattribute decision making, illustrated with a set of eclectic and interesting case studies, see Keeney and Raiffa.

Keeney, Ralph L., and Howard Raiffa, Decisions with Multiple Objectives: Preferences and Value Trade-Offs, Cambridge University Press, New York, 1993.

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Pahl and Beitz’s influential engineering design textbook contains an excellent set of systematic methods. The book outlines two concept selection methods similar to concept scoring.

Pahl, Gerhard, Wolfgang Beitz, Jörg Feldhusen, and Karl-Heinrich Grote, Engineering Design: A Systematic Approach, third edition, K. Wallace and L. Blessing, translators, Springer-Verlag, New York, 2007.

Weighting alternatives for selection is not a new idea. The following is one of the earlier references for using selection matrices with weights.

Alger, J.R., and C.V. Hays, Creative Synthesis in Design, Prentice Hall, Englewood Cliffs, NJ, 1964.

The concept-screening method is based upon the concept selection process presented by Stuart Pugh. Pugh was known to criticize more quantitative methods, such as the concept- scoring method presented in this chapter. He cautioned that numbers can be misleading and can reduce the focus on creativity required to develop better concepts.

Pugh, Stuart, Total Design, Addison-Wesley, Reading, MA, 1990.

Concept scoring is similar to a method often called the Kepner-Tregoe method. It is described, along with other techniques for problem identification and solution, in their text.

Kepner, Charles H., and Benjamin B. Tregoe, The Rational Manager, McGraw-Hill, New York, 1965.

Urban and Hauser describe techniques for determining the relative importance of different product attributes.

Urban, Glen L., and John R. Hauser, Design and Marketing of New Products, second edition, Prentice Hall, Englewood Cliffs, NJ, 1993.

Otto and Wood present a method to include certainty bounds with the ratings given to concepts in concept scoring. These can be combined to derive an estimate of the error in selecting the highest-scoring concept and to compute a confidence interval for the results.

Otto, Kevin N., and Kristin L. Wood, “Estimating Errors in Concept Selection,” ASME Design Engineering Technical Conferences, Vol. DE-83, 1995, pp. 397–412.

Exercises 1. How can the concept selection methods be used to benchmark or evaluate existing prod-

ucts? Perform such an evaluation for five automobiles you might consider purchasing.

2. Propose a set of selection criteria for the choice of a battery technology for use in a portable computer.

3. Perform concept screening for the four pencil holder concepts shown below. Assume the pencil holders are for a member of a product development team who is continually moving from site to site.

4. Repeat Exercise 3, but use concept scoring.

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Thought Questions 1. How might you use the concept selection method to decide whether to offer a single

product to the marketplace or to offer several different product options?

2. How might you use the method to determine which product features should be stan- dard and which should be optional or add-ons?

3. Can you imagine an interactive computer tool that would allow a large group (say, 20 or more people) to participate in the concept selection process? How might such a tool work?

4. What could cause a situation in which a development team uses the concept selection method to agree on a concept that then results in commercial failure?

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Appendix A

Concept-Screening Matrix Example This matrix was created and used by a development team designing a collar to hold weights onto a barbell.

Concepts

Selection Master Velcro Rubber Alligator 4-Part Torsional Screw Wing Hose C- Spring- Magnetic Threaded Criteria Handcuff Lock Belt Belt Clip Latch (REF) Spring Type Nut Clothespin Clamp Clamp Loaded Bar Plates Bar

Functionality Lightweight + 0 + + + 0 + – – + 0 0 + + 0 Fits different bars + 0 + + + 0 0 0 0 + 0 + 0 – 0 Weights secured 0 0 – – 0 0 0 – + – 0 0 – 0 + laterally

Convenience Tighten from 0 0 0 0 0 0 – – – 0 – 0 + + – end/side Does not roll 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Change weights 0 0 0 0 0 0 0 0 0 0 0 0 + + 0 without removing collar Convenience of 0 0 + + 0 0 – – – 0 – 0 + + – placement when changing weights

Ergonomics Secure/release + 0 – – + 0 – – – 0 – – + – – (one motion) Low force to 0 0 0 0 – 0 – 0 0 0 0 0 + – 0 secure/release RH/LH usage 0 0 0 0 0 0 0 – – 0 – – 0 0 – Not slippery 0 0 + + 0 0 0 0 0 0 0 0 + + 0 when wet Use with one hand + 0 0 0 + 0 0 0 0 0 0 0 + + 0

Durability Longevity – – – – 0 0 0 + 0 0 + + – – +

Other Cost of raw 0 0 + + 0 0 0 0 – + 0 0 – – – materials Manufacturability 0 – + + 0 0 0 + – + + 0 – – – Uses existing 0 0 0 0 0 0 0 0 0 0 0 0 – 0 – weight bars

Sum +’s 4 0 6 6 4 0 1 2 1 4 2 2 8 6 2 Sum 0’s 11 14 7 7 11 16 11 8 8 11 10 12 3 4 7 Sum –’s 1 2 3 3 1 0 4 6 7 1 4 2 5 6 7

Net Score 3 –2 3 3 3 0 –3 –4 –6 3 –2 0 3 0 –5 Rank 1 10 1 1 1 7 12 13 15 1 10 7 1 7 15

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Concept A Concept C Concept F Concept I Concept J Concept K Concept O

Weighted Weighted Weighted Weighted Weighted Weighted Weighted Selection Criteria Weight Rating Score Rating Score Rating Score Rating Score Rating Score Rating Score Rating Score

Flexible Use 20 Use in different locations 15 7 105 7 105 8 120 6 90 6 90 5 75 7 105 Holds different beverages 5 5 25 5 25 3 15 4 20 5 25 3 15 3 15

Maintains Drink Condition 15 Retains temperature of drink 13 5 65 5 65 5 65 1 13 5 65 5 65 5 65 Prevents water from getting in 2 5 10 7 14 5 10 5 10 5 10 5 10 5 10

Survives Boating Environment 5 Doesn’t break when dropped 1 6 6 6 6 9 9 7 7 5 5 9 9 6 6 Resists corrosion from sea spray 2 7 14 7 14 8 16 8 16 5 10 9 18 7 14 Floats when it falls in water 2 5 10 6 12 8 16 4 8 5 10 8 16 7 14

Keeps Drink Container Stable 20 Prevents spilling 7 3 21 4 28 3 21 5 35 5 35 3 21 3 21 Prevents bouncing in waves 6 7 42 8 48 7 42 5 30 5 30 7 42 7 42 Will not slide during pitch/roll 7 5 35 5 35 5 35 5 35 5 35 5 35 5 35

Requires Little Maintenance 5 Easily stored when not in use 1 7 7 6 6 8 8 9 9 4 4 8 8 7 7 Easy to maintain a clean 2 6 12 6 12 3 6 4 8 5 10 5 10 6 12 appearance Allows liquid to drain 2 5 10 5 10 5 10 5 10 5 10 5 10 5 10 out bottom

Easy to Use 15 Usable with one hand 5 7 35 7 35 7 35 6 30 5 25 7 35 7 35 Easy/comfortable to grip 5 8 40 8 40 6 30 5 25 5 25 6 30 8 40 Easy to exchange beverage 2 5 10 5 10 5 10 8 16 5 10 5 10 5 10 containers Works reliably 3 3 9 3 9 3 9 3 9 4 12 4 12 3 9

Attractive in Environment 10 Doesn’t damage boat surface 5 8 40 8 40 8 40 8 40 8 40 6 30 8 40 Attractive to look at 5 7 35 8 40 3 15 4 20 5 25 5 25 8 40

Manufacturing Ease 10 Low-cost materials 4 5 20 4 16 7 28 8 32 4 16 8 32 6 24 Low complexity of parts 3 4 12 3 9 7 21 4 12 3 9 8 24 5 15 Low number of assembly steps 3 5 15 5 15 8 24 3 9 3 9 8 24 6 18

Total Score 578 594 585 484 510 556 587 Rank 4 1 3 7 6 5 2

Appendix B

Concept-Scoring Matrix Example A development team generated this matrix while selecting a new concept for a spillproof beverage holder to be used on boats. Note that in this case the team chose not to define a single concept as the reference for all of the selection criteria.

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Concept Testing

Courtesy of emPower Corporation

C H A P T E R N I N E

EXHIBIT 9-1 A prototype of emPower Corporation’s electric scooter product concept.

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The emPower Corporation, a start-up company, had developed a new product concept to address the personal transportation market. Exhibit 9-1 shows a photograph of a proto- type of the product. The concept was a three-wheeled electric-powered scooter that could be folded up and carried easily. emPower wished to assess the customer response to this concept in order to decide whether to proceed with its development and to support the company’s financing efforts.

In this chapter, we focus primarily on testing done during the concept development phase. In a concept test, the development team solicits a response to a description of the product concept from potential customers in the target market. This type of testing may be used to select which of two or more concepts should be pursued, to gather information from potential customers on how to improve a concept, and to estimate the sales potential of the product. Note that various other types of testing with potential customers may be completed at times other than during concept development. For example, some kind of customer test, usually based on only a verbal description of a concept, may be used in identifying the original product opportunity that forms the basis of the mission statement for the project. A test may also be used to refine the demand forecast after the develop- ment of a product is nearly complete, but before a firm commits to full production and launch.

Exhibit 9-2 shows concept testing relative to other concept development activities. Concept testing is closely related to concept selection (Chapter 8) in that both activities aim to further narrow the set of concepts under consideration. However, concept testing is distinct in that it is based on data gathered directly from potential customers and relies to a lesser degree on judgments made by the development team. The reason that concept testing generally follows concept selection is that a team cannot feasibly test more than a few concepts directly with potential customers. As a result, the team must first narrow the set of alternatives under consideration to very few. Concept testing is also closely re- lated to prototyping (Chapter 14), because concept testing invariably involves some kind of representation of the product concept, often a prototype. One of the end results of a concept test may be an estimate of how many units of the product the company is likely to sell. This forecast is a key element of the information used in making an economic analy- sis of the product (Chapter 17).

A team may choose not to do any concept testing at all if the time required to test the concept is large relative to the product life cycles in the product category, or if the cost of testing is large relative to the cost of actually launching the product. For example, in the Internet software business, some observers and practitioners argue that just launching a

Identify Customer

Needs

Establish Target

Specifications

Generate Product

Concepts

Test Product

Concept(s)

Set Final

Specifications

Plan Downstream Development

Development Plan

Mission Statement Select

Product Concept(s)

Perform Economic Analysis

Benchmark Competitive Products

Build and Test Models and Prototypes

EXHIBIT 9-2 Concept testing in relation to other concept development activities.

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product and iteratively refining it with subsequent product generations is a better strategy than carefully testing a concept before developing it fully. While perhaps appropriate for some products, this strategy would be foolish in the development of, for example, a new commercial airplane, where development costs and time are huge and failure can be di- sastrous. Most product categories fall between these extremes, and in most cases some form of concept testing is warranted.

This chapter presents a seven-step method for testing product concepts:

1. Define the purpose of the concept test.

2. Choose a survey population.

3. Choose a survey format.

4. Communicate the concept.

5. Measure customer response.

6. Interpret the results.

7. Reflect on the results and the process.

We illustrate this method with the scooter example.

Step 1: Define the Purpose of the Concept Test

As a first step in concept testing, we recommend that the team explicitly articulate in writing the questions that the team wishes to answer with the test. Concept testing is es- sentially an experimental activity, and as with any experiment, knowing the purpose of the experiment is essential to designing an effective experimental method. This step is closely analogous to “defining the purpose” in prototyping. (See Chapter 14, Prototyp- ing.) The primary questions addressed in concept testing are typically:

• Which of several alternative concepts should be pursued?

• How can the concept be improved to better meet customer needs?

• Approximately how many units are likely to be sold?

• Should development be continued?

Step 2: Choose a Survey Population

An assumption underlying the concept test is that the population of potential custom- ers surveyed reflects that of the target market for the product. If the survey population is either more or less enthusiastic about the product than will be the eventual target audience for the product, then inferences based on the concept test will be biased. As a result, the team should choose a survey population that mirrors the target market in as many ways as possible. In the actual survey, the first few questions are called the screener questions and generally are used to verify that the respondent fits the definition of the target market for the product.

Often a product addresses multiple market segments. In such cases, an accurate concept test requires that potential customers from each target segment be surveyed. Surveying every possible segment may be prohibitively expensive in cost or time, and in

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such cases, the team may choose to survey potential customers from only the largest seg- ment. However, when only one segment is sampled, inferences about the response of the entire market are likely to be biased.

For the scooter, there were two primary consumer segments: college students and urban commuters. The team decided to form a survey population from both segments. The team had also identified several smaller secondary segments, including transporta- tion for factory and airport employees.

The sample size of the survey should be large enough that the team’s confidence in the results is high enough to guide decision making. Sample sizes for concept testing are sometimes as small as 10 (e.g., when gathering qualitative feedback on a new surgi- cal device for a highly specialized procedure) or as large as 1,000 (e.g., when trying to quantitatively assess the potential demand for a new portable telephone that is targeted at a market segment comprising 10 million households). Although there are no simple formulas for determining sample size, some of the factors driving sample size are shown in Exhibit 9-3.

Depending on the desired data to be collected from the concept-testing process, the team may actually structure multiple surveys with different objectives. Each of these sur- veys may involve a different sample population and a different sample size. The emPower team performed two different concept tests. In early concept testing, the team sampled only a dozen or so potential customers to solicit feedback on the attractiveness of the basic concept. Later, the team performed a purchase-intent survey of 1,000 customers. This survey was used to make a demand forecast on which financing decisions were based. Because of the importance of this objective, the team felt that the time and expense associated with such a large sample were justified.

Step 3: Choose a Survey Format

The following formats are commonly used in concept testing:

• Face-to-face interaction: In this format, an interviewer interacts directly with the respondent. Face-to-face interactions can take the form of intercepts (i.e., stopping people at a mall, in a park, or on a city street), interviews prearranged by telephone,

Factors Favoring a Smaller Factors Favoring a Larger Sample Size Sample Size

• Test occurs early in concept development process.

• Test is primarily intended to gather qualitative data.

• Surveying potential customers is relatively costly in time or money.

• Required investment to develop and launch the product is relatively small.

• A relatively large fraction of the target market is expected to value the product (i.e., many positively inclined respondents can be found without a large sample).

EXHIBIT 9-3 Factors leading to relatively smaller or larger survey sample sizes.

• Test occurs later in concept development process.

• Test is primarily intended to assess demand quantitatively.

• Surveying customers is relatively fast and inexpensive.

• Required investment to develop and launch the product is relatively high.

• A relatively small fraction of the target market is expected to value the product (i.e., many people have to be sampled to reliably estimate the fraction that values the product).

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interviews with potential customers at a trade-show booth, or focus groups (i.e., prear- ranged group discussions with 6–12 people).

• Telephone: Telephone interviews may be prearranged and targeted at very specific individuals (e.g., pediatric dentists) or may be “cold calls” of consumers from a target population.

• Postal mail: In mail surveys, concept-testing materials are sent and respondents are asked to return a completed form. Postal surveys are somewhat slower than other methods and suffer from relatively poor response rates. Some kind of incentive—often cash or a gift—is sometimes offered to increase response.

• Electronic mail: Electronic mail surveys are very similar to postal mail surveys, ex- cept that (as of this writing) respondents seem slightly more likely to reply than via postal mail. With the proliferation of unwanted e-mail, this tendency may not persist. Many electronic mail users react extremely negatively to unsolicited commercial cor- respondence. We therefore recommend that electronic mail surveys be used only when respondents are likely to perceive a benefit to their participation, or when the team has already established some kind of positive relationship with the target population.

• Internet: Using the Internet, a team may create a virtual concept-testing site in which survey participants can observe concepts and provide responses. An electronic mail message is usually used to recruit respondents to visit the test site.

Each of these formats presents risks of sample bias. For example, the use of electronic formats may bias the sample toward those who are technologically sophisticated. For some products, this sophistication is part of the profile of the target market (e.g., the tar- get market for Internet software products is likely to be comfortable with electronic sur- vey formats). Conversely, an Internet survey might be a particularly bad format for testing a television-based computer concept targeted at people without personal computers.

Exploratory testing, typical in the early phases of concept development, benefits from open-ended interactive formats. We recommend that the team use face-to-face formats when presenting multiple concept alternatives or when soliciting ideas for improving a concept. In these settings, the product developers themselves benefit from performing the interviews because they can directly observe reactions to the product in rich detail. As the purpose of the concept test becomes more focused, more structured formats such as mail and telephone become more appropriate. If the questions are very focused, the team can hire a market research firm to implement the concept test. When gathering data intended primarily for use in forecasting demand, third parties are generally used to collect the data in face-to-face formats. This helps to avoid a sympathy bias—respondents indicating that they like the concept in order to please an anxious product developer.

Step 4: Communicate the Concept

The choice of survey format is closely linked to the way in which the concept will be communicated. Concepts can be communicated in any of the following ways, listed in order of increasing richness of the description.

• Verbal description: A verbal description is generally a short paragraph or a collection of bullet points summarizing the product concept. This description may be read

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by the respondent or may be read aloud by the person administering the survey. For ex- ample, the scooter concept might be described as follows:

The product is a lightweight electric scooter that can be easily folded and taken with you inside a building or on public transportation. The scooter weighs about 25 pounds. It travels at speeds up to 15 miles per hour and can go about 12 miles on a single charge. The scooter can be recharged in about two hours from a standard electric outlet. The scooter is easy to ride and has simple controls—just an accelerator button and a brake.

• Sketch: Sketches are usually line drawings showing the product in perspective, per- haps with annotations of key features. Exhibit 9-4 shows a sketch of the scooter concept.

• Photos and renderings: Photographs can be used to communicate the concept when appearance models exist for the product concept. Renderings are nearly photo-realistic illustrations of the concept. Renderings can be created with pens and markers or using computer-aided design tools. Exhibit 9-5 shows a rendering of the scooter created using computer-aided design software.

• Storyboard: A storyboard is a series of images that communicates a temporal se- quence of actions involving the product. For example, one of the potential benefits of the scooter is that it can be easily stored and transported. This scenario is illustrated in the storyboard in Exhibit 9-6.

• Video: Video images allow even more dynamism than the storyboard. With video, the form of the product itself can be clearly communicated, as can the way in which the product is used. The scooter team used a video in its purchase-intent survey. The

EXHIBIT 9-4 Sketch of scooter concept.

Sketch by David Wallace

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EXHIBIT 9-5 Rendering of the scooter from computer-aided design software.

Courtesy of emPower Corporation

EXHIBIT 9-6 Storyboard illustrating storage, transportation, and use scenarios.

Courtesy of emPower Corporation

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video showed students and commuters riding prototypes of the product and showed an animation of the folding mechanism.

• Simulation: Simulation is generally implemented as software that mimics the func- tion or interactive features of the product. Simulation would probably not be the ideal way to communicate the key features of a scooter, but in some other cases simulation can be effective. For example, in testing controls for electronic devices, a visual image of the de- vice can be created on the computer screen, and the user can control the simulated device via a touch screen or mouse clicks and can observe simulated displays and sounds.

• Interactive multimedia: Interactive multimedia combines the visual richness of video with the interactivity of simulation. Using multimedia, you can display video and still images of the product. The respondent can view verbal and graphical information and can listen to audio information. Interaction allows the respondent to choose from among several sources of available information on the product, and in some cases to experience the controls and displays of a simulated product. Unfortunately, the development of mul- timedia systems remains expensive and therefore may be justified only for large product development efforts.

• Physical appearance models: Physical appearance models, also known as “looks-like” models, vividly display the form and appearance of a product. They are often made of wood or polymer foams and are painted to look like real products. In some cases, limited functionality is included in the model. The scooter team built several looks-like models, one of which was articulated so that the folding feature could be demonstrated. Exhibit 9-7 shows a photograph of this model.

EXHIBIT 9-7 Appearance model of the scooter concept.

Courtesy of emPower Corporation

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• Working prototypes: When available, working prototypes, or works-like models, can be useful in concept testing. However, the use of working prototypes is also risky. The primary risk is that the respondents will equate the prototype with the finished product. In some cases, prototypes perform better than the ultimate product (e.g., because the proto- type uses better, more expensive components such as motors or batteries). In most cases, the prototype performs worse than the ultimate product and is almost always less visu- ally attractive than the ultimate product. Sometimes separate works-like and looks-like prototypes can be used, one to illustrate how the product will appear in production and the other to illustrate how it would work. Exhibit 9-8 shows a working prototype of the scooter, which was used in some early concept testing.

Matching the Survey Format with the Means of Communicating the Concept The choice of survey format is tightly linked to the means of communicating the product concept. For example, the team obviously cannot demonstrate the scooter with a working model using a telephone survey. Exhibit 9-9 identifies which means of communicating concepts are appropriate for each survey format.

Issues in Communicating the Concept When communicating the product concept, the team must decide how aggressively to promote the product and its benefits. The scooter could be described as an “electric- powered personal mobility device” or as an “exciting new electric scooter that provides

EXHIBIT 9-8 Working prototype of the scooter concept.

Courtesy of emPower Corporation

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freedom from gridlock.” In our view, the description of the concept should closely mirror the information that the user is likely to consider when making a purchase decision. If highly promotional information is used, it can be labeled as a “sample advertisement,” perhaps supplemented by mock-ups of “magazine articles” or “comments by current owners” providing additional descriptions of the product.

Researchers and practitioners argue endlessly about whether the purchase price of the product should be included as part of the concept description. Price is a very powerful lever on customer response, and, therefore, pricing information can dramatically influ- ence the results of a concept test. We recommend that price be omitted from the concept description unless the price of the product is expected to be unusually high or low. For example, the primary benefit of a concept may be that it provides basic functionality at a very low price. In this case, price must be included as part of the concept descrip- tion. Conversely, a product may provide extremely high performance or unique features, but only at a relatively high price. In this case, price must also be included as part of the concept description. When the price of the product is likely to be quite similar to existing products and to customer expectations, price can be omitted from the concept description. Instead of including price in the concept description, we suggest that the respondent be asked explicitly what his or her expectation of price would be. If the resulting customer expectations differ substantially from the team’s pricing plans, then the team may need to either consider modifications to the concept or repeat the concept test including price as a product attribute. Because the scooter was a new product category, for which customers had not developed clear pricing expectations, the emPower team chose to include their target price as part of the concept description.

Instead of showing a single concept, the team may choose to ask a respondent to select from several alternatives. This approach is attractive when the team is trying to decide among several concepts under consideration. A variant on this approach is to present the concept for the new product along with descriptions and pictures of the most successful existing products. This approach has the advantage of allowing respondents to directly assess attributes of the product concept in comparison to those of competitors. Assuming the products would be equally distributed and promoted, this approach also allows the team to estimate potential market share. Using a forced-choice survey technique is likely to be most effective in cases for which there is a narrowly defined product category with relatively few existing products.

EXHIBIT 9-9 Appropriate- ness of different survey formats for different ways of communicating the product concept.

Electronic Postal Face-to- Telephone Mail Mail Internet Face

Verbal description • • • • • Sketch • • • • Photo or rendering • • • • Storyboard • • • • Video • • Simulation • • Interactive multimedia • • Physical appearance model • Working prototype •

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Step 5: Measure Customer Response

Most concept test surveys first communicate the product concept and then measure customer response. When a concept test is performed early in the concept development phase, customer response is usually measured by asking the respondent to choose from two or more alternative concepts. Additional questions focus on why respondents react the way they do and on how the product concepts could be improved. Concept tests also generally attempt to measure purchase intent. The most commonly used purchase-intent scale has five response categories:

• Definitely would buy.

• Probably would buy.

• Might or might not buy.

• Probably would not buy.

• Definitely would not buy.

There are many alternatives to this scale, including providing seven or more response cat- egories or asking respondents to indicate a numerical probability of purchase.

Exhibit 9-10 shows an example of a survey form for the scooter. This form was de- signed to be an interview guide for a face-to-face format in which both a brochure and a working prototype were used to communicate the product concept.

Step 6: Interpret the Results

If the team is simply interested in comparing two or more concepts, interpretation of the results is straightforward. If one concept dominates the others and the team is confident that the respondents understood the key differences among the concepts, then the team can simply choose the preferred concept. If the results are not conclusive, the team may decide to choose a concept based on cost or other considerations, or may decide to offer multiple versions of the product. Note that care must be applied in making this judgment for cases in which manufacturing costs are dramatically different among the concepts under comparison and in which no price information is communicated to the respondents. In such cases, respondents may be biased to select the most costly alternative.

In many cases the team is also interested in estimating the demand for a product in the period following launch, usually one year. Here we present a model for estimating the sales potential of durables. By durables we mean products that last several years, and for which there is, therefore, a negligible repeat-purchase rate. These products are in contrast to consumer packaged goods, like razor blades, toothpaste, or frozen food, for which fore- casting models must consider rates of trial and subsequent repeat purchase.

Before proceeding with the model, we note that forecasting sales of new products is subject to a great deal of uncertainty and exhibits notoriously high errors. Nevertheless, forecasts do tend to be correlated with actual demand and so provide useful information to the team.

We estimate Q, the quantity of the product expected to be sold during a time period, as

Q = N × A × P

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N is the number of potential customers expected to make purchases during the time period. For an existing and stable product category (e.g., bicycles) N is the expected number of purchases to be made of existing products in the category over the time period.

A is the fraction of these potential customers or purchases for which the product is avail- able and the customer is aware of the product. (In situations where awareness and availability are assumed to be separate independent factors, they are multiplied together to generate A.)

P is the probability that the product is purchased if available and if the customer is aware of it. P is estimated in turn by

P = Cdefinitely × Fdefinitely + Cprobably × Fprobably

EXHIBIT 9-10 Example interview guide (abridged) for a concept test of the electric scooter.

CONCEPT TEST SURVEY— Electric Powered Personal Transportation Device I am gathering information for a new transportation product and am hoping that you would be willing to share your

opinions with me.

Are you a college student?___________ <If the response is no, thank the respondent and end the survey.>

Do you live between one and three miles from campus?_____________

Do you travel distances of one to three miles between classes or other activities during your day?_________ <If the response is no to this and the previous question, thank the respondent and end the survey.>

How do you currently get to campus from your home: _______________

How do you currently get around campus during the day: _______________

Here is a brochure for the product. <Show the brochure.>

The product is a lightweight electric scooter that can be easily folded and taken with you inside a building or on public transportation. The scooter weighs about 25 pounds. It travels at speeds of up to 15 miles per hour and can go about 12 miles on a single charge. The scooter can be recharged in about two hours from a standard electric outlet. The scooter is easy to ride and has simple controls—just an accelerator button and a brake.

If the product were priced at $689 and were available from a dealer on or near campus, how likely would you be to purchase the scooter within the next year?

❏ ❏ ❏ ❏ ❏

I would definitely not I would probably not I might or might not I would probably I would definitely purchase the scooter purchase the scooter purchase the scooter purchase the scooter purchase the scooter

Would you be interested in test riding a prototype of the product?

<Provide operating instructions and fit the helmet.>

Based on your experience with the product, how likely would you be to purchase the product within the next year?

❏ ❏ ❏ ❏ ❏

I would definitely not I would probably not I might or might not I would probably I would definitely purchase the scooter purchase the scooter purchase the scooter purchase the scooter purchase the scooter

How might this product be improved? <Ask open-ended questions to elicit feedback on the concept.>

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Fdefinitely is the fraction of survey respondents indicating in the concept test survey that they would definitely purchase (often called the “top box” score).

Fprobably is the fraction of survey respondents indicating that they would probably pur- chase (often called the “second box” score).

Cdefinitely and Cprobably are calibration constants usually established based on the experi- ence of a company with similar products in the past. Generally the values of Cdefinitely and Cprobably fall in these intervals: 0.10 < Cdefinitely < 0.50, 0 < Cprobably < 0.25. Absent prior history, many teams use values of Cdefinitely = 0.4 and Cprobably = 0.2. Note that these val- ues reflect the typical bias of respondents to overestimate the probability that they would actually purchase the product.

Among other possible schemes for estimating P is a function that includes the fraction of respondents in all of the response categories, not just the top two.

For a product associated with an entirely new category (e.g., portable commuter scoot- ers), the interpretation of these variables is slightly different. In this case, N is the number of customers in the target market for the new product, and P is the probability of a target- market customer purchasing the product within a given time period, often a year. Note that this interpretation is reflected in the survey questions in Exhibit 9-10, in which the respondent is asked to indicate the likelihood of purchase “within the next year.”

To clarify the model, consider these two numerical examples corresponding to two dif- ferent market segments and possible product positionings for the scooter concept.

Scooter Sold as Single-Person Transportation in Large Factories This is an existing category. Assume that scooters are currently sold into this market at a rate of 150,000 units per year (N = 150,000). Assume that the company sells the product through a single distributor that accounts for 25 percent of the sales in this category (A = 0.25). Assume that results from a concept test with factory managers responsible for purchasing trans- portation devices indicate a definitely-would-buy fraction of 0.30 and probably-would- buy fraction of 0.20. If we use a value of 0.4 for Cdefinitely and 0.2 for Cprobably, then

P = 0.4 × 0.30 + 0.2 × 0.20 = 0.16 and

Q = 150,000 × 0.25 × 0.16 = 6,000 units/year

Scooter Sold to College Students This is a new category and therefore poses a much more difficult estimation challenge. First, what should be the value of N? Strictly speak- ing (as of this writing) there are very few existing sales of electric scooters to college stu- dents. However, we could define N several other ways. For example, how many students purchase bicycles or motor scooters intended for basic transportation of up to two miles. This number is approximately 1 million per year. Alternatively, how many students must travel distances of between one and three miles either in commuting from home or travel- ing between classes or other school activities. This number is approximately 2 million. Assume that we sample students in this second group, and that we obtain a definitely- would-buy fraction of 0.10 and a probably-would-buy fraction of 0.05. (Note that these numbers represent the fraction of respondents that indicate intent to purchase within one year.) Further assume that the company plans to sell the scooter through bicycle stores near campuses and advertise in campus newspapers, for the 100 largest college campuses in the United States. Based on this plan, the company expects that 30 percent of the students

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in the target market will be aware of the product and have convenient access to a dealer. If we use a value of 0.4 for Cdefinitely and 0.2 for Cprobably, then

P = 0.4 × 0.10 + 0.2 × 0.05 = 0.05

and

Q = 2,000,000 × 0.30 × 0.05 = 30,000 units in the first year

The results of forecasts based on concept testing should be interpreted with caution. Some firms, mostly after repeated experience with similar products, have achieved im- pressive levels of accuracy in their forecasts. While forecasts do tend to be correlated with actual sales, most individual forecasts exhibit substantial errors. Some of the factors that can cause actual purchase patterns to differ from the purchase intentions expressed in surveys include:

• Importance of word-of-mouth: When the benefits of a product are not immediately obvious, the enthusiasm of existing users may be an important factor in generating de- mand. This factor is not generally captured in concept testing.

• Fidelity of the concept description: If the actual product differs substantially from the description of the product in the concept test, then actual sales are likely to differ from the forecast.

• Pricing: If the price of the product deviates substantially from the price indicated in the survey, or from the expectations of survey respondents, then forecasts are likely to be inaccurate.

• Level of promotion: Spending on advertising and other forms of promotion can in- crease demand for most products. The influence of promotion is accounted for only weakly in the forecasting model via the awareness/availability term and via the materi- als used to present the concept(s).

Step 7: Reflect on the Results and the Process

The primary benefit of the concept test is in getting feedback from real potential customers. The qualitative insights gathered through open-ended discussions with respondents about the proposed concepts may be the most important result of concept testing, especially early in the development process. The team should reflect on this evidence as well as on the nu- merical outcome of its forecast.

The team benefits from thinking about the impact of the three key variables in the forecasting model: (1) the overall size of the market, (2) the availability and awareness of the product, and (3) the fraction of customers who are likely to purchase. Considering alternative markets for the product can sometimes increase the first factor. The second factor can be increased through distribution arrangements and promotion plans. The third factor can be increased through changes to the product design (and possibly advertising) that improve the attractiveness of the product. In considering these factors, a sensitivity analysis can yield useful insights and aids in decision making. For example, what would be the impact on sales if the team were able to secure a partnership with a retailer and therefore increase A by 20 percent?

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Concept Testing 179

In reflecting on the results of the concept test, the team should ask two key diagnostic questions. First, was the concept communicated in a way that is likely to elicit customer response that reflects true intent? For example, if one of the primary benefits of the concept is its aesthetic appeal, was the concept presented in a way that this aspect of the product was clear to respondents? Second, is the resulting forecast consistent with observed sales rates of similar products? For example, if only 1,000 gasoline-powered GoPed scooters (a competing product) are currently sold to college students each year, why does the emPower team believe it will sell 30 times as many of its product?

Finally, we note that experience with a new product is likely to be applicable to future, similar products. The team can benefit from its experience by documenting the results of its concept testing and by attempting to reconcile these results with subsequent observa- tions of product success.

Summary A concept test solicits a direct response to a description of the product concept from po- tential customers in the target market. Concept testing is distinct from concept selection in that it is based on data gathered directly from potential customers and relies to a lesser degree on judgments made by the development team.

• Concept testing can verify that customer needs have been adequately met by the prod- uct concept, assess the sales potential of a product concept, and/or gather customer information for refining the product concept.

• Concept testing is appropriate at several different points in the development process: when identifying the original product opportunity, when selecting which of two or more concepts should be pursued, when assessing the sales potential of a product con- cept, and/or when deciding whether to continue further development and commercial- ization of the product.

• We recommend a seven-step method for testing product concepts:

1. Define the purpose of the concept test.

2. Choose a survey population.

3. Choose a survey format.

4. Communicate the concept.

5. Measure customer response.

6. Interpret the results.

7. Reflect on the results and the process.

References and Bibliography Many current resources are available on the Internet via www.ulrich-eppinger.net

Crawford and Di Benedetto examine some forecasting models of frequently purchased goods.

Crawford, C. Merle, and C. Anthony Di Benedetto, New Products Management, eighth edition, McGraw-Hill, New York, 2005.

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Jamieson and Bass review methods for interpreting purchase-intent data and discuss the factors that may explain differences between stated intention and behavior.

Jamieson, Linda F., and Frank M. Bass, “Adjusting Stated Intention Measures to Predict Trial Purchase of New Products: A Comparison of Models and Methods,” Journal of Marketing Research, Vol. 26, August 1989, pp. 336–345.

When forecasting the growth of a new product category, diffusion models, which are discussed by Mahajan et al., may be useful.

Mahajan, Vijay, Eitan Muller, and Frank M. Bass, “Diffusion of New Products: Empirical Generalizations and Managerial Uses,” Marketing Science, Vol. 14, No. 3, Part 2 of 2, 1995, pp. G79–G88.

Vriens and his colleagues report on a study of the differences in concept testing results using verbal descriptions and pictorial descriptions of products.

Vriens, Marco, Gerard H. Loosschilder, Edward Rosbergen, and Dick R. Wittink, “Verbal versus Realistic Pictorial Representations in Conjoint Analysis with Design Attributes,” Journal of Product Innovation Management, Vol. 15, No. 5, 1998, pp. 455–467.

Dahan and Srinivasan show that the results of concept testing using the Internet are very similar to those using physical models of the product concepts.

Dahan, Ely, and V. Srinivasan, “The Predictive Power of Internet-Based Product Concept Testing Using Visual Depiction and Animation,” Journal of Product Innovation Management, Vol. 17, No. 2, March 2000, pp. 99–109.

Urban et al. report on the use of multimedia systems for describing product concepts and simulating sources of consumer information.

Urban, Glen L., John R. Hauser, William J. Qualls, Bruce D. Weinberg, Jonathan D. Bohlmann, and Roberta A. Chicos, “Information Acceleration: Validation and Lessons from the Field,” Journal of Marketing Research, Vol. 34, February 1997, pp. 143–153.

Exercises 1. What are some different ways you could communicate a concept for a new user inter-

face for an automotive audio system? What are the strengths and weaknesses of each approach?

2. Roughly estimate N for the following products. List your assumptions.

a. A sleeping pillow for air travelers. b. An electronic weather station (monitoring temperature, pressure, humidity, etc.) for

homes.

Thought Questions 1. Why do you think respondents typically overestimate the likelihood that they will pur-

chase a product?

2. When might it not be advantageous to communicate the product concept to potential customers using a working prototype? Under what circumstances is it better to use some other format?

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Appendix

Estimating Market Sizes Rough estimates of market size can often be made through comparisons with similar products or with known sizes of demographic groups. Exhibits 9-11 and 9-12 contain some numbers that may be useful.

106 107 108 109

Population of the World

Population of Europe

Population of Asia

Population of North America

Population of South America

Population of Africa

Population of Oceania

Population of the United States

Annual births in the United States

Adults in the United States age 18–24

Higher-education students in the United States

Households in the United States

United States households with income >US$50,000

United States households with income >US$75,000

United States households with income >US$100,000

EXHIBIT 9-11 Approximate population and demographic data as of 2011.

Source: U.S. Government Statistics

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EXHIBIT 9-12 Approximate annual sales volume of miscellaneous products. These figures represent the volume of a typical single model produced by a single manufacturer.

10 100 1000 104

Volume (units/year)

105 106 107 108 109

Electronics manufacturing equipment

Medical imaging equipment

"Cut-and-Sew" fabric product like a backpack

Mountain bike

Gadgets sold through specialty retailers

Luxury sedan

Hand tool

Cordless drill

Sport utility vehicle

Toys

Desktop computers

Coffeemaker

Mobile telephone

Single-use medical device (e.g., syringe)

Portable music player

Inexpensive ballpoint pens

Razor blade cartridge

Commercial airplane

Source: Various

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Product Architecture

183

C H A P T E R T E N

EXHIBIT 10-1 Three Hewlett-Packard printers from the same product platform: an office model, a photo model, and a model including scanning capability.

Courtesy of Hewlett-Packard Company

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A product development team within Hewlett-Packard’s home printing division was con- sidering how to respond to the simultaneous pressures to increase product variety and to reduce manufacturing costs. Several of the division’s printer products are shown in Exhibit 10-1. Ink jet printing had become the dominant technology for consumer and small-office printing involving color. Excellent black and white print quality and near- photographic color print quality could be obtained using a printer costing less than $200. Driven by the increasing value of color ink jet printers, sales of the three leading competi- tors together were millions of units per year. However, as the market matured, commercial success required that printers be tuned to the subtle needs of more focused market seg- ments and that the manufacturing costs of these products be continually reduced.

In considering their next steps, the team members asked:

• How would the architecture of the product impact their ability to offer product variety?

• What would be the cost implications of different product architectures?

• How would the architecture of the product impact their ability to complete the design within 12 months?

• How would the architecture of the product influence their ability to manage the devel- opment process?

Product architecture is the assignment of the functional elements of a product to the physical building blocks of the product. We focus this chapter on the task of establishing the product architecture. The purpose of the product architecture is to define the basic physical building blocks of the product in terms of what they do and what their interfaces are to the rest of the device. Architectural decisions allow the detailed design and testing of these building blocks to be assigned to teams, individuals, and/or suppliers, such that development of different portions of the product can be carried out simultaneously.

In the next two sections of this chapter, we define product architecture and illustrate the profound implications of architectural decisions using, as examples, the Hewlett- Packard printer and several other products. We then present a method for establishing the product architecture and focus on the printer example for illustration. (Note that the details of the printer example have been somewhat disguised to preserve Hewlett- Packard’s proprietary product information.) After presenting the method, we discuss the relationships among product architecture, product variety, and supply-chain performance, and we provide guidance for platform planning, an activity closely linked to the product architecture.

What Is Product Architecture? A product can be thought of in both functional and physical terms. The functional ele- ments of a product are the individual operations and transformations that contribute to the overall performance of the product. For a printer, some of the functional elements are “store paper” and “communicate with host computer.” Functional elements are usually de- scribed in schematic form before they are reduced to specific technologies, components, or physical working principles.

The physical elements of a product are the parts, components, and subassemblies that ultimately implement the product’s functions. The physical elements become more

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defined as development progresses. Some physical elements are dictated by the product concept, and others become defined during the detail design phase. For example, the DeskJet embodies a product concept involving a thermal ink delivery device, imple- mented by a print cartridge. This physical element is inextricably linked to the product concept and was essentially an assumption of the development project.

The physical elements of a product are typically organized into several major physi- cal building blocks, which we call chunks. Each chunk is then made up of a collection of components that implement the functions of the product. The architecture of a product is the scheme by which the functional elements of the product are arranged into physical chunks and by which the chunks interact.

Perhaps the most important characteristic of a product’s architecture is its modularity. Consider the two different designs for bicycle braking and shifting controls shown in Ex- hibit 10-2. In the traditional design (left), the shift control function and the brake control function are allocated to separate chunks, which in fact are mounted in separate locations on the bicycle. This design exhibits a modular architecture. In the design on the right, the shift and brake control functions are allocated to the same chunk. This design exhibits an integral architecture—in this case motivated by aerodynamic and ergonomic concerns.

A modular architecture has the following two properties:

• Chunks implement one or a few functional elements in their entirety.

• The interactions between chunks are well defined and are generally fundamental to the primary functions of the product.

The most modular architecture is one in which each functional element of the product is implemented by exactly one physical chunk and in which there are a few well-defined interactions between the chunks. Such a modular architecture allows a design change to be made to one chunk without requiring a change to other chunks for the product to func- tion correctly. The chunks may also be designed quite independently of one another.

The opposite of a modular architecture is an integral architecture. An integral architecture exhibits one or more of the following properties:

EXHIBIT 10-2 Two models of bicycle brake and shifting controls. The product on the left exemplifies a modular architecture; the product on the right has a more integral architecture.

Courtesy of Shimano

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• Functional elements of the product are implemented using more than one chunk.

• A single chunk implements many functional elements.

• The interactions between chunks are ill defined and may be incidental to the primary functions of the products.

A product embodying an integral architecture will often be designed with the highest possible performance in mind. Implementation of functional elements may be distributed across multiple chunks. Boundaries between the chunks may be difficult to identify or may be nonexistent. Many functional elements may be combined into a few physical components to optimize certain dimensions of performance; however, modifications to any one particular component or feature may require extensive redesign of the product.

Modularity is a relative property of a product architecture. Products are rarely strictly modular or integral. Rather, we can say that they exhibit either more or less modularity than a comparative product, as in the brake and shift controls example in Exhibit 10-2.

Types of Modularity Modular architectures comprise three types: slot, bus, and sectional (Ulrich, 1995). Each type embodies a one-to-one mapping from functional elements to chunks and well- defined interfaces. The differences between these types lie in the way the interactions between chunks are organized. Exhibit 10-3 illustrates the conceptual differences among these types of architectures.

• Slot-modular architecture: Each of the interfaces between chunks in a slot-modular architecture is of a different type from the others, so that the various chunks in the product cannot be interchanged. An automobile radio is an example of a chunk in a slot-modular architecture. The radio implements exactly one function, but its interface is different from any of the other components in the vehicle (e.g., radios and speedom- eters have different types of interfaces to the instrument panel).

• Bus-modular architecture: In a bus-modular architecture, there is a common bus to which the other chunks connect via the same type of interface. A common example of a chunk in a bus-modular architecture would be an expansion card for a personal computer. Nonelectronic products can also be built around a bus-modular architecture. Track lighting, shelving systems with rails, and adjustable roof racks for automobiles all embody a bus-modular architecture.

Slot-Modular Architecture

Bus-Modular Architecture

Sectional-Modular Architecture

EXHIBIT 10-3 Three types of modular architectures.

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• Sectional-modular architecture: In a sectional-modular architecture, all interfaces are of the same type, but there is no single element to which all the other chunks attach. The assembly is built up by connecting the chunks to each other via identical inter- faces. Many piping systems adhere to a sectional-modular architecture, as do sectional sofas, office partitions, and some computer systems.

Slot-modular architectures are the most common of the modular architectures because for most products each chunk requires a different interface to accommodate unique interactions between that chunk and the rest of the product. Bus-modular and sectional- modular architectures are particularly useful for situations in which the overall product must vary widely in configuration, but whose chunks can interact in standard ways with the rest of the product. These situations can arise when all of the chunks can use the same type of power, fluid connection, structural attachment, or exchanges of signals.

When Is the Product Architecture Defined? A product’s architecture begins to emerge during concept development. This happens informally—in the sketches, function diagrams, and early prototypes of the concept development phase. Generally, the maturity of the basic product technology dictates whether the product architecture is fully defined during concept development or during system-level design. When the new product is an incremental improvement on an existing product concept, then the product architecture is defined within the product concept. This is for two reasons. First, the basic technologies and working principles of the product are predefined, and so conceptual-design efforts are generally focused on better ways to em- body the given concept. Second, as a product category matures, supply chain (i.e., produc- tion and distribution) considerations and issues of product variety begin to become more prominent. Product architecture is one of the development decisions that most impacts a firm’s ability to efficiently deliver high product variety. Architecture therefore becomes a central element of the product concept. However, when the new product is the first of its kind, concept development is generally concerned with the basic working principles and technology on which the product will be based. In this case, the product architecture is often the initial focus of the system-level design phase of development.

Implications of the Architecture

Decisions about how to divide the product into chunks and about how much modularity to impose on the architecture are tightly linked to several issues of importance to the entire enterprise: product change, product variety, component standardization, product perfor- mance, manufacturability, and product development management. The architecture of the product therefore is closely linked to decisions about marketing strategy, manufacturing capabilities, and product development management.

Product Change Chunks are the physical building blocks of the product, but the architecture of the product defines how these blocks relate to the function of the product. The architecture therefore also defines how the product can be changed. Modular chunks allow changes to be made to a few isolated functional elements of the product without necessarily affecting

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the design of other chunks. Changing an integral chunk may influence many functional elements and require changes to several related chunks.

Some of the motives for product change are:

• Upgrade: As technological capabilities or user needs evolve, some products can ac- commodate this evolution through upgrades. Examples include changing the processor board in a computer printer or replacing a pump in a cooling system with a more pow- erful model.

• Add-ons: Many products are sold by a manufacturer as a basic unit, to which the user adds components, often produced by third parties, as needed. This type of change is common in the personal computer industry (e.g., third-party mass storage devices may be added to a basic computer).

• Adaptation: Some long-lived products may be used in several different use environ- ments, requiring adaptation. For example, machine tools may need to be converted from 220-volt to 110-volt power. Some engines can be converted from a gasoline to a propane fuel supply.

• Wear: Physical elements of a product may deteriorate with use, necessitating re- placement of the worn components to extend the useful life of the product. For example, many razors allow dull blades to be replaced, tires on vehicles can usually be replaced, most rotational bearings can be replaced, and many appliance motors can be replaced.

• Consumption: Some products consume materials, which can then be easily replen- ished. For example, copiers and printers frequently contain print cartridges, cameras take film cartridges, glue guns consume glue sticks, torches have gas cartridges, and watches contain batteries, all of which are generally replaceable.

• Flexibility in use: Some products can be configured by the user to provide different capabilities. For example, many cameras can be used with different lens and flash op- tions, some boats can be used with several awning options, and fishing rods may ac- commodate several rod-reel configurations.

• Reuse: In creating subsequent products, the firm may wish to change only a few func- tional elements while retaining the rest of the product intact. For example, consumer electronics manufacturers may wish to update a product line by changing only the user interface and enclosure while retaining the inner workings from a previous model.

In each of these cases, a modular architecture allows the firm to minimize the physical changes required to achieve a functional change.

Product Variety Variety refers to the range of product models the firm can produce within a particular time period in response to market demand. Products built around modular product archi- tectures can be more easily varied without adding tremendous complexity to the manu- facturing system. For example, Swatch produces hundreds of different watch models, but can achieve this variety at relatively low cost by assembling the variants from different combinations of standard chunks (Exhibit 10-4). A large number of different hands, faces, and wristbands can be combined with a relatively small selection of movements and cases to create seemingly endless combinations.

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Component Standardization Component standardization is the use of the same component or chunk in multiple prod- ucts. If a chunk implements only one or a few widely useful functional elements, then the chunk can be standardized and used in several different products. Such standardization allows the firm to manufacture the chunk in higher volumes than would otherwise be pos- sible. This in turn may lead to lower costs and increased quality. For example, the watch movement shown in Exhibit 10-4 is identical for many Swatch models. Component stan- dardization may also occur outside the firm when several manufacturers’ products all use a chunk or component from the same supplier. For example, the watch battery shown in Exhibit 10-4 is made by a supplier and standardized across several manufacturers’ product lines.

Product Performance We define product performance as how well a product implements its intended func- tions. Typical product performance characteristics are speed, efficiency, life, accuracy, and noise. An integral architecture facilitates the optimization of holistic performance characteristics and those that are driven by the size, shape, and mass of a product. Such characteristics include acceleration, energy consumption, aerodynamic drag, noise, and aesthetics. Consider, for example, a motorcycle. A conventional motorcycle architecture assigns the structural-support functional element to a frame chunk and the power-conversion functional element to a transmission chunk. Exhibit 10-5 shows a photograph of the BMW R1100RS. The architecture of this motorcycle assigns both the structural-support function and the power-conversion function to the transmission chunk. This integral ar- chitecture allows the motorcycle designers to exploit the secondary structural properties of the transmission casing in order to eliminate the extra size and mass of a separate

EXHIBIT 10-4 Swatch uses a modular architecture to enable high-variety manufacturing.

Photo by Stuart Cohen

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frame. The practice of implementing multiple functions using a single physical element is called function sharing. An integral architecture allows for redundancy to be eliminated through function sharing (as in the case of the motorcycle) and allows for geometric nest- ing of components to minimize the volume a product occupies. Such function sharing and nesting also allow material use to be minimized, potentially reducing the cost of manu- facturing the product.

Manufacturability In addition to the cost implications of product variety and component standardization described above, the product architecture also directly affects the ability of the team to design each chunk to be produced at low cost. One important design-for-manufacturing (DFM) strategy involves the minimization of the number of parts in a product through component integration. However, to maintain a given architecture, the integration of

EXHIBIT 10-5 The BMW R1100RS motorcycle. This product exhibits function sharing and an integral architecture with the design of its transmission chunk.

Courtesy of BMW Motorcycle Group

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physical components can only be easily considered within each of the chunks. Component integration across several chunks is difficult, if not impossible, and would alter the architecture dramatically. Because the product architecture constrains subsequent detail design decisions in this way, the team must consider the manufacturing implica- tions of the architecture. For this reason DFM begins during the system-level design phase while the layout of the chunks is being planned. For details about the implementa- tion of DFM, see Chapter 13, Design for Manufacturing.

Product Development Management Responsibility for the detail design of each chunk is usually assigned to a relatively small group within the firm or to an outside supplier. Chunks are assigned to a single individual or group because their design requires careful resolution of interactions, geo- metric and otherwise, among components within the chunk. With a modular architecture, the group assigned to design a chunk deals with known, and relatively limited, functional interactions with other chunks. If a functional element is implemented by two or more chunks, as in some integral architectures, detail design will require close coordination among different groups. This coordination is likely to be substantially more involved and challenging than the limited coordination required among groups designing different chunks in a modular design. For this reason, teams relying on outside suppliers or on a geographically dispersed team often opt for a modular architecture in which development responsibilities can be split according to the chunk boundaries. Another possibility is to have several functional elements allocated to the same chunk. In this case, the work of the group assigned to that chunk involves a great deal of internal coordination across a larger group.

Modular and integral architectures also demand different project management styles. Modular approaches require very careful planning during the system-level design phase, but detail design is largely concerned with ensuring that the teams assigned to chunks are meeting the performance, cost, and schedule requirements for their chunks. An integral architecture may require less planning and specification during system-level design, but such an architecture requires substantially more integration, conflict resolution, and coor- dination during the detail design phase.

Establishing the Architecture

Because the product architecture will have profound implications for subsequent product development activities and for the manufacturing and marketing of the completed prod- uct, it should be established in a cross-functional effort by the development team. The end result of this activity is an approximate geometric layout of the product, descriptions of the major chunks, and documentation of the key interactions among the chunks. We rec- ommend a four-step method to structure the decision process, which is illustrated using the DeskJet printer example. The steps are:

1. Create a schematic of the product.

2. Cluster the elements of the schematic.

3. Create a rough geometric layout.

4. Identify the fundamental and incidental interactions.

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Step 1: Create a Schematic of the Product A schematic is a diagram representing the team’s understanding of the constituent elements of the product. A schematic for the DeskJet is shown in Exhibit 10-6. At the end of the concept development phase, some of the elements in the schematic are physical concepts, such as the front-in/front-out paper path. Some of the elements correspond to critical components, such as the print cartridge the team expects to use. However, some of the elements remain described only functionally. These are the functional elements of the product that have not yet been reduced to physical concepts or components. For example, “display status” is a functional element required for the printer, but the particular ap- proach of the display has not yet been decided. Those elements that have been reduced to physical concepts or components are usually central to the basic product concept the team has generated and selected. Those elements that remain unspecified in physical terms are usually ancillary functions of the product.

The schematic should reflect the team’s best understanding of the state of the product, but it does not have to contain every imaginable detail, such as “sense out-of-paper

Print Cartridge

Supply DC

Power

Control Printer

Communicate with Host

Command Printer

Position Paper

in Y-Axis

Position Cartridge in X-Axis

Store Output

Store Blank Paper

Provide Structural Support

Enclose Printer

Accept User

Inputs

Display Status

Connect to

Host

"Pick" Paper

flow of forces or energy

flow of material

flow of signals or data

EXHIBIT 10-6 Schematic of the DeskJet printer. Note the presence of both functional elements (e.g., “Store Output”) and physical elements (e.g., “Print Cartridge”). For clarity, not all connections among elements are shown.

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condition” or “shield radio frequency emissions.” These and other more detailed func- tional elements are deferred to a later step. A good rule of thumb is to aim for fewer than 30 elements in the schematic, for the purpose of establishing the product architecture. If the product is a complex system, involving hundreds of functional elements, then it is useful to omit some of the minor ones and to group some others into higher-level func- tions to be decomposed later. (See Defining Secondary Systems, later in this chapter.)

The schematic created will not be unique. The specific choices made in creating the schematic, such as the choice of functional elements and their arrangement, partly define the product architecture. For example, the functional element “control printer” is repre- sented as a single centralized element in Exhibit 10-6. An alternative would be to distrib- ute the control of each of the other elements of the product throughout the system and have coordination done by the host computer. Because there is usually substantial latitude in the schematic, the team should generate several alternatives and select an approach that will facilitate the consideration of several architectural options.

Step 2: Cluster the Elements of the Schematic The challenge of step 2 is to assign each of the elements of the schematic to a chunk. One possible assignment of elements to chunks is shown in Exhibit 10-7, where nine chunks are used. Although this was the approximate approach taken by the DeskJet team, there are several other viable alternatives. At one extreme, each element could be assigned to its own chunk, yielding 15 chunks. At the other extreme, the team could decide that the product would have only one major chunk and then attempt to physically integrate all of the elements of the product. In fact, consideration of all possible clusterings of elements would yield thousands of alternatives. One procedure for managing the complexity of the alternatives is to begin with the assumption that each element of the schematic will be as- signed to its own chunk, and then to successively cluster elements where advantageous. To determine when there are advantages to clustering, consider these factors, which echo the implications discussed in the previous section:

• Geometric integration and precision: Assigning elements to the same chunk allows a single individual or group to control the physical relationships among the elements. Elements requiring precise location or close geometric integration can often be best designed if they are part of the same chunk. For the DeskJet printer, this would suggest clustering the elements associated with positioning the cartridge in the x-axis and posi- tioning the paper in the y-axis.

• Function sharing: When a single physical component can implement several func- tional elements of the product, these functional elements are best clustered together. This is the situation exemplified by the BMW motorcycle transmission (Exhibit 10-5). For the DeskJet printer, the team believed that the status display and the user controls could be incorporated into the same component, and so clustered these two elements together.

• Capabilities of vendors: A trusted vendor may have specific capabilities related to a project, and in order to best take advantage of such capabilities a team may choose to cluster those elements about which the vendor has expertise into one chunk. In the case of the DeskJet printer, an internal team did the majority of the engineering design work, and so this was not a major consideration.

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• Similarity of design or production technology: When two or more functional elements are likely to be implemented using the same design and/or production technology, then incorporating these elements into the same chunk may allow for more economical de- sign and/or production. A common strategy, for example, is to combine all functions that are likely to involve electronics in the same chunk. This allows the possibility of implementing all of these functions with a single circuit board.

• Localization of change: When a team anticipates a great deal of change in some ele- ment, it makes sense to isolate that element into its own modular chunk, so that required changes to the element can be carried out without disrupting any of the other chunks. The Hewlett-Packard team anticipated changing the physical appearance of the product over its life cycle, and so chose to isolate the enclosure element into its own chunk.

• Accommodating variety: Elements should be clustered together to enable the firm to vary the product in ways that will have value for customers. The printer was to be sold

Print Cartridge

Supply DC

Power

Control Printer

Communicate with Host

Command Printer

Position Paper

in Y-Axis

Position Cartridge in X-Axis

Store Output

Store Blank Paper

Provide Structural Support

Enclose Printer

Accept User

Inputs

Display Status

Connect to

Host

"Pick" Paper

Chassis

Enclosure

Print Mechanism

Paper Tray

Logic Board

Host Driver Software

Power Cord and "Brick"

User Interface Board

EXHIBIT 10-7 Clustering the elements into chunks. Nine chunks make up this proposed architecture for the DeskJet printer.

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around the world in regions with different electrical power standards. As a result, the team created a separate chunk for the element associated with supplying DC power.

• Enabling standardization: If a set of elements will be useful in other products, they should be clustered together into a single chunk. This allows the physical elements of the chunk to be produced in higher quantities. Hewlett-Packard’s internal standardiza- tion was a key motive for using an existing print cartridge, and so this element is pre- served as its own chunk.

• Portability of the interfaces: Some interactions are easily transmitted over large dis- tances. For example, electrical signals are much more portable than are mechanical forces and motions. As a result, elements with electronic interactions can be easily separated from one another. This is also true, but to a lesser extent, for fluid connec- tions. The flexibility of electrical interactions allowed the Hewlett-Packard team to cluster the control and communication functions into the same chunk. Conversely, the elements related to paper handling are much more geometrically constrained by their necessary mechanical interactions.

Step 3: Create a Rough Geometric Layout A geometric layout can be created in two or three dimensions, using drawings, com- puter models, or physical models (of cardboard or foam, for example). Exhibit 10-8 shows a geometric layout of the DeskJet printer, positioning the major chunks. Creating a geometric layout forces the team to consider whether the geometric interfaces among the chunks are feasible and to work out the basic dimensional relationships among the

EXHIBIT 10-8 Geometric layout of the printer.

Chassis

Paper

Roller/Guide

Print Cartridge

Paper Tray

Enclosure

Logic Board

Print Mechanism

Paper Tray

User Interface Board

Print Cartridge

Logic Board

Chassis

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chunks. By considering a cross section of the printer, the team realized that there was a fundamental trade-off between how much paper could be stored in the paper tray and the height of the machine. In this step, as in the previous step, the team benefits from gen- erating several alternative layouts and selecting the best one. Layout decision criteria are closely related to the clustering issues in step 2. In some cases, the team may discover that the clustering derived in step 2 is not geometrically feasible and thus some of the elements would have to be reassigned to other chunks. Creating the rough layout should be coordinated with the industrial designers on the team in cases where the aesthetic and human interface issues of the product are important and strongly related to the geometric arrangement of the chunks.

Step 4: Identify the Fundamental and Incidental Interactions Most likely a different person or group will be assigned to design each chunk. Because the chunks interact with one another in both planned and unintended ways, these differ- ent groups will have to coordinate their activities and exchange information. In order to better manage this coordination process, the team should identify the known interactions between chunks during the system-level design phase.

There are two categories of interactions between chunks. First, fundamental interactions are those corresponding to the lines on the schematic that connect the chunks to one another. For example, a sheet of paper flows from the paper tray to the print mechanism. This interaction is planned, and it should be well understood, even from the very earliest schematic, as it is fundamental to the system’s operation. Second, incidental interactions are those that arise because of the particular physical implemen- tation of functional elements or because of the geometric arrangement of the chunks. For example, vibrations induced by the actuators in the paper tray could interfere with the precise location of the print cartridge in the x-axis.

While the fundamental interactions are explicitly represented by the schematic showing the clustering of elements into chunks, the incidental interactions must be docu- mented in some other way. For a small number of interacting chunks (fewer than about 10), an interaction graph is a convenient way to represent the incidental interactions. Exhibit 10-9 shows a possible interaction graph for the DeskJet printer, representing the known incidental interactions. For larger systems this type of graph becomes confusing,

EXHIBIT 10-9 Incidental interaction graph.

Enclosure

Chassis

Paper Tray Print Mechanism

User Interface Board

Logic Board

Power Cord and "Brick"

Host Driver Software

RF Interference RF Shielding Thermal Distortion

Thermal DistortionVibration

Styling

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and an interaction matrix is useful instead and can be used to display both fundamental and incidental interactions. See Eppinger (1997) for an example of using such a matrix, which is also used to cluster the functional elements into chunks based on quantifica- tion of their interactions.

The interaction graph in Exhibit 10-9 suggests that vibration and thermal distortion are incidental interactions among the chunks that create heat and involve positioning mo- tions. These interactions represent challenges in the development of the system, requiring focused coordination efforts within the team.

We can use the mapping of the interactions between the chunks to provide guidance for structuring and managing the remaining development activities. Chunks with important interactions should be designed by groups with strong communication and coordination between them. Conversely, chunks with little interaction can be designed by groups with less coordination. Eppinger (1997) describes a matrix-based method for prescribing such system-level coordination needs in larger projects.

It is also possible, through careful advance coordination, to develop two interacting chunks in a completely independent fashion. This is facilitated when the interactions be- tween the two chunks can be reduced in advance to a completely specified interface that will be implemented by both chunks. It is relatively straightforward to specify interfaces to handle the fundamental interactions, while it can be difficult to do so for incidental interactions.

Knowledge of the incidental interactions (and sometimes of the fundamental interac- tions as well) develops as system-level and detail design progress. The schematic and the interaction graph or matrix can be used for documenting this information as it evolves. The network of interactions among subsystems, modules, and components is sometimes called the system architecture.

Delayed Differentiation

When a firm offers several variants of a product, the product architecture is a key deter- minant of the performance of the supply chain—the sequence of production and distribu- tion activities that links raw materials and components to finished products in the hands of customers.

Imagine three different versions of the printer, each adapted to a different electrical power standard in three different geographic regions. Consider at what point along the supply chain the product is uniquely defined as one of these three variants. Assume that the supply chain consists of three basic activities: assembly, transportation, and packag- ing. Exhibit 10-10 illustrates how the number of distinct variants of the product evolves as the product moves through the supply chain. In scenario A, the three versions of the printer are defined during assembly, then transported, and finally packaged. In scenario B, the assembly activity is divided into two stages, most of the product is assembled in the first stage, the product is then transported, assembly is completed, and finally the product is packaged. In scenario B, the components associated with power conversion are as- sembled after transportation, and so the product is not differentiated until near the end of the supply chain.

Postponing the differentiation of a product until late in the supply chain is called delayed differentiation or simply postponement, and may offer substantial reductions

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Scenario A: Early Differentiation

B

C

A

B

C

A

B

C

A

Assembly

Differentiation Transport Inventory of Three Models

Scenario B: Postponement

B

C

A

B

C

A

Partial Assembly

Transport Inventory of One Subassembly

Delayed Differentiation

EXHIBIT 10-10 Postponement involves delaying differentiation of the product until late in the supply chain. In scenario A, three versions of the product are created during assembly and before transportation. In scenario B, the three versions of the product are not created until after transportation.

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in the costs of operating the supply chain, primarily through reductions in inventory requirements. For most products, and especially for innovative products, demand for each version of a product is unpredictable. That is, there is a component of demand that varies randomly from one time period to the next. To offer consistently high product availability in the presence of such demand uncertainty requires that inventory be held somewhere near the end of the supply chain. (To understand why this is so, imagine a McDonald’s restaurant trying to respond to minute-to-minute fluctuations in demand for french fries if it peeled, cut, and fried potatoes only after an order was placed. Instead, it maintains an inventory of cooked french fries that can be quickly scooped into a package and deliv- ered.) For printers, transportation by ship between production and distribution sites may require several weeks. So to be responsive to fluctuations in demand, substantial invento- ries must be held after transportation. The amount of inventory required for a given target level of availability is a function of the magnitude of the variability in demand.

Postponement enables substantial reductions in the cost of inventories because there is substantially less randomness in the demand for the basic elements of the product (e.g., the platform) than there is for the differentiating components of the variants of the prod- uct. This is because in most cases demand for different versions of a product is somewhat uncorrelated, so that when demand for one version is high, it is possible that demand for some other version of the product will be low.

Two design principles are necessary conditions for postponement.

1. The differentiating elements of the product must be concentrated in one or a few chunks. In order to differentiate the product through one or a few simple process steps, the differentiating attributes of the product must be defined by one or a few compo- nents of the product. Consider the case of the different electrical power requirements for printers in different geographical regions. If the differences between a product adapted for 120VAC power in the United States and 220VAC power in Europe were associated with several components distributed throughout the product (e.g., power cord, power switch, transformer, rectifier, etc., all in different chunks), there would be no way to delay differ- entiation of the product without also delaying the assembly of these several chunks. (See Exhibit 10-11, top.) If, however, the only difference between these two models is a single chunk containing a cord and a power supply “brick,” then the difference between the two

EXHIBIT 10-11 To enable postponement, the differentiating attributes of the product must be concentrated in one or a few chunks. In the top case, the power supply is distributed across the cord, enclosure, chassis, and logic board. In the bottom case, the power supply is confined to the cord and a power supply “brick.”

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versions of the product requires differences in only one chunk and one assembly opera- tion. (See Exhibit 10-11, bottom.)

2. The product and production process must be designed so that the differentiat- ing chunk(s) can be added to the product near the end of the supply chain. Even if the differentiating attributes of the product correspond to a single chunk, postponement may not be possible. This is because the constraints of the assembly process or product design may require that this chunk be assembled early in the supply chain. For example, one could envision the consumer packaging of the printer (i.e., the printed carton) being a primary differentiating chunk because of different language requirements for different markets. If transporting the product from the factory to the distribution center required that the printer be assembled into its carton, then it would be impossible to postpone the differentiation of the product with respect to packaging type. To avoid this problem, Hewlett-Packard de- vised a clever packaging scheme in which molded trays are used to position several dozen bare assembled printers on each of several layers of a large shipping pallet, which can then be wrapped with plastic film and loaded directly into a shipping container. This approach allows differentiation of the carton to occur after the printers have been transported to the distribution center and the appropriate power supply installed.

Platform Planning

Hewlett-Packard provides DeskJet products to customers with different needs. For illustrative purposes, think of these customers as belonging to three market segments: family, student, and small-office/home-office (SOHO). To serve these customers, Hewlett-Packard could develop three entirely different products, it could offer only one product to all three segments, or it could differentiate these products through differ- ences in only a subset of the printer components. (See Chapter 4, Product Planning, for discussion of related decisions.)

A desirable property of the product architecture is that it enables a company to offer two or more products that are highly differentiated yet share a substantial fraction of their components. The collection of assets, including component designs, shared by these products is called a product platform. Planning the product platform involves managing a basic trade-off between distinctiveness and commonality. On the one hand, there are mar- ket benefits to offering several very distinctive versions of a product. On the other hand, there are design and manufacturing benefits to maximizing the extent to which these dif- ferent products share common components. Two simple information systems allow the team to manage this trade-off: the differentiation plan and the commonality plan.

Differentiation Plan The differentiation plan explicitly represents the ways in which multiple versions of a product will be different from the perspective of the customer and the market. Exhibit 10-12 shows an example differentiation plan. The plan consists of a matrix with rows for the differentiating attributes of the printer and with columns for the different ver- sions or models of the product. By differentiating attributes, we mean those characteris- tics of the product that are important to the customer and that are intended to be different across the products. Differentiating attributes are generally expressed in the language of

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specif ications, as described in Chapter 6, Product Specif ications. The team uses the differentiation plan to codify its decisions about how the products will be different. Unconstrained, the differentiation plan would exactly match the preferences of the customers in the market segments targeted by each different product. Unfortunately, such plans generally imply products that are prohibitively costly.

Commonality Plan The commonality plan explicitly represents the ways in which the different versions of the product are the same physically. Exhibit 10-13 shows a commonality plan for the printer example. The plan consists of a matrix with rows representing the chunks of the pro- duct. The third, fourth, and fifth columns correspond to the three different versions of the product. The second column indicates the number of different types of each chunk that are implied by the plan. The team fills each cell in the remaining columns with a label for each different version of a chunk that will be used to make up the product. Unconstrained, most manufacturing engineers would probably choose to use only one version of each chunk in all variants of the product. Unfortunately, this strategy would result in products that are undifferentiated.

EXHIBIT 10-12 An example differentiation plan for a family of three printers.

Differentiating SOHO (Small Office, Attributes Family Student Home Office)

Black print quality “Near Laser” quality 300dpi “Laser” quality 600dpi “Laser” quality 600dpi Color print quality “Near photo” quality Equivalent to DJ600 Equivalent to DJ600 Print speed 6 pages/minute 8 pages/minute 10 pages/minute Footprint 360mm deep × 400mm wide 340mm deep × 360mm wide 400mm deep × 450mm wide Paper storage 100 sheets 100 sheets 150 sheets Style “Consumer” “Youth consumer” “Commercial” Connectivity to computer USB and parallel port USB USB Operating system Macintosh and Windows Macintosh and Windows Windows compatibility

EXHIBIT 10-13 An example commonality plan for a family of three printers.

Number SOHO (Small Office, Chunks of Types Family Student Home Office)

Print cartridge 2 “Manet” cartridge “Picasso” cartridge “Picasso” cartridge Print mechanism 2 “Aurora” series Narrow “Aurora” series “Aurora” series Paper tray 2 Front-in front-out Front-in front-out Tall front-in front-out Logic board 2 “Next gen” board “Next gen” board “Next gen” board with parallel port Enclosure 3 Home style Youth style Soft office style Driver software 5 Version A-PC, Version B-PC, Version C Version A-Mac Version B-Mac

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Managing the Trade-Off between Differentiation and Commonality The challenge in platform planning is to resolve the tension between the desire to dif- ferentiate the products and the desire for these products to share a substantial fraction of their components. Examination of the differentiation plan and the commonality plan reveals several trade-offs. For example, the student printer has the potential to offer the benefit of a small footprint, which is likely to be important to space-conscious college students. However, this differentiating attribute implies that the student printer would require a different print mechanism chunk, which is likely to add substantially to the investment required to design and produce the printer. This tension between a desire to tailor the benefits of a product to the target market segment and the desire to minimize investment is highlighted when the team attempts to make the differentiation plan and the commonality plan consistent. We offer several guidelines for managing this tension.

• Platform planning decisions should be informed by quantitative estimates of cost and revenue implications: Estimating the profit contribution from a one-percentage- point increase in market share is a useful benchmark against which to measure the potential increase in manufacturing and supply-chain costs of additional versions of a chunk. In estimating supply-chain costs, the team must consider the extent to which the differentiation implied by the differentiation plan can be postponed or whether it must be created early in the supply chain.

• Iteration is beneficial: In our experience, teams make better decisions when they make several iterations based on approximate information than when they agonize over the details during relatively fewer iterations.

• The product architecture dictates the nature of the trade-off between differentiation and commonality: The nature of the trade-off between differentiation and commonality is not fixed. Generally, modular architectures enable a higher proportion of compo- nents to be shared than integral architectures. This implies that when confronted with a seemingly intractable conflict between differentiation and commonality, the team should consider alternative architectural approaches, which may provide opportunities to enhance both differentiation and commonality.

For the printer example, the tension between differentiation and commonality might be resolved by a compromise. The revenue benefits of a slightly narrower student printer are not likely to exceed the costs associated with creating an entirely different, and narrower, print mechanism. The costs of different print mechanisms are likely to be especially high given that the print mechanism involves substantial tooling investments. Also, because the print mechanism is created early in the supply chain, postponement of differentiation would be substantially less feasible if it required different print mechanisms. For these reasons, the team would most likely choose to use a single, common print mechanism and forgo the possible revenue benefits of a narrower footprint for the student printer.

Related System-Level Design Issues

The four-step method for establishing the product architecture guides the early system- level design activities, but many more detailed activities remain. Here we discuss some of

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the issues that frequently arise during subsequent system-level design activities and their implications for the product architecture.

Defining Secondary Systems The schematic in Exhibit 10-6 shows only the key elements of the product. There are many other functional and physical elements not shown, some of which will only be conceived and detailed as the system-level design evolves. These additional elements make up the secondary systems of the product. Examples include safety systems, power systems, status monitors, and structural supports. Some of these systems, such as safety systems, will span several chunks. Fortunately, secondary systems usually involve flexible connections such as wiring and tubing and can be considered after the major architectural decisions have been made. Secondary systems cutting across the boundaries of chunks present a special management challenge: Should a single group or individual be assigned to design a secondary system even though the system will be made up of components re- siding in several different chunks? Or should the group or individuals responsible for the chunks be responsible for coordinating among themselves to ensure that the secondary systems will work as needed? The former approach is more typical, where specific indi- viduals or subteams are assigned to focus on the secondary systems.

Establishing the Architecture of the Chunks Some of the chunks of a complex product may be very complex systems in their own right. For example, many of the chunks in the DeskJet printer involve dozens of parts. Each of these chunks may have its own architecture—the scheme by which it is divided into smaller chunks. This problem is essentially identical to the architectural challenge posed at the level of the entire product. Careful consideration of the architecture of the chunks is nearly as important as the creation of the architecture of the overall product. For example, the print cartridge consists of the subfunctions store ink and deliver ink for each of four colors of ink. Several architectural approaches are possible for this chunk, includ- ing, for example, the use of independently replaceable reservoirs for each ink color.

EXHIBIT 10-14 Specification of interface between black print cartridge and logic board.

Line Name Properties

1 PWR-A �12VDC, 5mA

2 PWR-B �5VDC, 10mA

3 STAT TTL

4 LVL 100K�-1M�

5 PRNT1 TTL

6 PRNT2 TTL

7 PRNT3 TTL

8 PRNT4 TTL

9 PRNT5 TTL

10 PRNT6 TTL

11 GND

Black Print Cartridge

Logic Board

1

11

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Creating Detailed Interface Specifications As the system-level design progresses, the fundamental interactions indicated by lines on the schematic in Exhibit 10-6 are specified as much more detailed collections of signals, material flows, and exchanges of energy. As this refinement occurs, the specification of the interfaces between chunks should also be clarified. For example, Exhibit 10-14 shows an overview of a possible specification of an interface between a black print cartridge and a logic board for a printer. Such interfaces represent the “contracts” between chunks and are often detailed in formal specification documents.

Summary Product architecture is the scheme by which the functional elements of the product are arranged into physical chunks. The architecture of the product is established during the concept development and system-level design phases of development.

• Product architecture decisions have far-reaching implications, affecting such things as product change, product variety, component standardization, product performance, manufacturability, and product development management.

• A key characteristic of a product architecture is the degree to which it is modular or integral.

• Modular architectures are those in which each physical chunk implements a specific set of functional elements and has well-defined interactions with the other chunks.

• There are three types of modular architectures: slot-modular, bus-modular, and sectional-modular.

• Integral architectures are those in which the implementation of functional elements is spread across chunks, resulting in ill-defined interactions between the chunks.

• We recommend a four-step method for establishing the product architecture:

1. Create a schematic of the product. 2. Cluster the elements of the schematic. 3. Create a rough geometric layout. 4. Identify the fundamental and incidental interactions.

• This method leads the team through the preliminary architectural decisions. Subse- quent system-level and detail design activities will contribute to a continuing evolution of the architectural details.

• The product architecture can enable postponement, the delayed differentiation of the product, which offers substantial potential cost savings.

• Architectural choices are closely linked to platform planning, the balancing of differ- entiation and commonality when addressing different market segments with different versions of a product.

• Due to the broad implications of architectural decisions, inputs from marketing, manu- facturing, and design are essential in this aspect of product development.

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References and Bibliography

Many current resources are available on the Internet via www.ulrich-eppinger.net

The basic concepts of product architecture and its implications are developed and discussed in this article.

Ulrich, Karl, “The Role of Product Architecture in the Manufacturing Firm,” Research Policy, Vol. 24, 1995, pp. 419–440.

Many of the issues involved in establishing a product architecture are treated from a slightly different perspective in the systems engineering literature. Hall provides an overview along with many relevant references. Maier and Rechtin discuss the architecture of complex systems.

Hall, Arthur D., III, Metasystems Methodology: A New Synthesis and Unification, Pergamon Press, Elmsford, NY, 1989.

Maier, Mark W., and Eberhardt Rechtin, The Art of Systems Architecting, second edition, CRC Press, Boca Raton, FL, 2000.

The linkage between product variety and product architecture is discussed by Pine in the context of mass customization, or very high variety manufacturing.

Pine, B. Joseph, II, Mass Customization: The New Frontier in Business Competition, Harvard Business School Press, Boston, 1992.

Clark and Fujimoto discuss the practice of “black box” supplier interactions in their book on product development in the automobile industry. In this situation, the manufacturer specifies only the function and interface of a chunk or component and the supplier handles the detailed implementation issues.

Clark, Kim B., and Takahiro Fujimoto, Product Development Performance: Strategy, Organization, and Management in the World Auto Industry, Harvard Business School Press, Boston, 1991.

Alexander and Simon are among the earliest authors to discuss the partitioning of a system into minimally interacting chunks.

Alexander, Christopher, Notes on the Synthesis of Form, Harvard University Press, Cambridge, MA, 1964.

Simon, Herbert, “The Architecture of Complexity,” in The Sciences of the Artificial, third edition, MIT Press, Cambridge, MA, 1996. (Based on an article that appeared originally in 1965.)

Eppinger has developed matrix-based methods to help analyze system architectures based on documentation of the interactions between chunks and the teams that implement the chunks.

Eppinger, Steven D., “A Planning Method for Integration of Large-Scale Engineering Systems,” International Conference on Engineering Design, ICED 97, Tampere, Finland, August 1997, pp. 199–204.

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Further detail on delayed differentiation and supply-chain performance may be found in the work of Lee and colleagues.

Lee, Hau L., “Effective Inventory and Service Management through Product and Process Re-Design,” Operations Research, Vol. 44, No. 1, 1996, pp. 151–159.

Lee, Hau L., and C. Tang, “Modelling the Costs and Benefits of Delayed Product Differentiation,” Management Science, Vol. 43, No. 1, January 1997, pp. 40–53.

Lee, Hau L., Cory Billington, and Brent Carter, “Hewlett-Packard Gains Control of Inventory and Service through Design for Localization,” Interfaces, August 1993, pp. 1–11.

The platform planning method presented in this chapter is derived in part from Robertson and Ulrich’s more comprehensive discussion.

Robertson, David, and Karl Ulrich, “Planning for Product Platforms,” Sloan Management Review, Vol. 39, No. 4, Summer 1998, pp. 19–31.

Exercises 1. Draw a schematic for a wristwatch, using only functional elements (without assuming

any particular physical working principles or components).

2. Describe the architecture of a Swiss army knife. What advantages and disadvantages does this architecture provide?

3. Take apart a small electromechanical product (which you are willing to sacrifice if necessary). Draw a schematic including the essential functional elements. Identify two or three possible clusterings of these elements into chunks. Is there any evidence to suggest which architecture was chosen by the development team?

Thought Questions 1. Do service products, such as bank accounts or insurance policies, have architectures?

2. Can a firm achieve high product variety without a modular product architecture? How (or why not)?

3. The argument for the motorcycle architecture shown in Exhibit 10-5 is that it allows for a lighter motorcycle than the more modular alternative. What are the other advan- tages and disadvantages? Which approach is likely to cost less to manufacture?

4. There are thousands of architectural decisions to be made in the development of an automobile. Consider all of the likely fundamental and incidental interactions that any one functional element (say, safety restraints) would have with the others. How would you use the documentation of such interactions to guide the decision about what chunk to place this functional element in?

5. The schematic shown in Exhibit 10-6 includes 15 elements. Consider the possibility of assigning each element to its own chunk. What are the strengths and weaknesses of such an architecture?

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Industrial Design

C H A P T E R E L E V E N

EXHIBIT 11-1 Evolution of Motorola flip phones. Shown (clockwise from top left) are the MicroTAC (1989), StarTAC (1993), V60 (2001), and RAZR (2004) models.

Courtesy of Motorola Inc.

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In 2003, Motorola launched a product development effort to augment its very successful but aging lines of flip-style (or clamshell) mobile telephones with an exciting new prod- uct. The StarTAC and V-series platforms had each seen several generations of products released since the early 1990s, eventually including models for every major worldwide market and standard.

The RAZR design emerged from a product vision to be “thin to win”— considerably thinner than other mobile telephones on the market and striking in its iconic new form. This design required a new architecture, entirely distinct from the existing product plat- forms. Upon its introduction in 2004, customers judged the ultra-thin RAZR design, shown in Exhibit 11-1, to be just as radical as its Motorola flip-phone predecessors when they were released.

Sales to early adopters came quickly after a successful market introduction in which Hollywood celebrities were shown with the product. Surpassing Motorola’s expectations, RAZR sales reached millions of units within one year of launch. This success can be attributed to several factors:

• Small size and weight: With its slimmer form factor, the RAZR was “more pocket- able” than other mobile phone models. The RAZR had a thickness of 14 millimeters and a weight of 95 grams, making it the thinnest and one of the lightest mobile phones on the market at the time.

• Performance features: The RAZR featured an integrated VGA camera; a large, backlit keypad; and a large, bright, color display for new video and graphic applications. In- stead of a headset jack, the RAZR utilized Bluetooth networking for wireless headset accessories. Superior signal reception and transmission were achieved with a novel layout in which the phone’s antenna was positioned below the keypad and away from the user’s fingers, which can block weak signals.

• Superior ergonomics: The RAZR’s sleek, ergonomic design complemented the human face. The shape of the handset, particularly the angled position of the display with respect to the keypad section, conformed to the user for superior comfort. The spac- ing and position of the buttons on the keypad were based on accepted standards, and extensive testing allowed for fast and accurate dialing. The folding design allowed the user to answer or end calls by opening or closing the phone with one hand, aided by a recess between the two sections of the clamshell. New software for navigation and new shortcuts for entering text facilitated use of text messaging and other applications.

• Durability: As with all Motorola products, the RAZR was designed to meet rigorous specifications. It could be dropped from a height of more than 1 meter onto a cement floor or sat upon in the open position without sustaining any damage. The RAZR could also withstand temperature extremes, humidity, shock, dust, and vibration.

• Materials: The RAZR utilized several advanced materials to enhance both perfor- mance and appearance. These included a laser-cut keypad with laser-etched patterns, magnesium hinge, ultra-thin anodized aluminum housing, polycarbonate composite antenna housing, and chemically annealed glass with a thin-film coating.

• Appearance: The sleek design and metallic finishes gave the RAZR a futuristic look associated with innovation. Because of its aesthetic appeal and highly recognizable appearance, the RAZR quickly became somewhat of a status symbol for early adopters and created strong feelings of pride among owners.

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Industrial Design 209

The RAZR development team included electrical, mechanical, materials, software, and manufacturing engineers, whose contributions were instrumental in developing the tech- nologies and manufacturing processes that allowed the product to achieve its form factor, performance, and weight. However, without the contributions of industrial designers, who defined the size, shape, and human factors, the RAZR would never have taken its innova- tive, ultra-thin form. In fact, the Motorola team could easily have developed “just another phone,” smaller and lighter than the previous flip-phone models. Instead, a revolutionary concept generated by the industrial designers on the team turned the project into a dra- matic success.

Industrial designers are primarily responsible for the aspects of a product that relate to the user’s experience—the product’s aesthetic appeal (how it looks, sounds, feels, smells) and its functional interfaces (how it is used). For many manufacturers, industrial design has historically been an afterthought. Managers used industrial designers to style, or “gift wrap,” a product after its technical features were determined. Companies would then market the product on the merits of its technology alone, even though customers certainly evaluate a product using more holistic judgments, including ergonomics and style.

Today, a product’s core technology is generally not enough to ensure commercial suc- cess. The globalization of markets has resulted in the design and manufacture of a wide array of consumer products. Fierce competition makes it unlikely that a company will enjoy a sustainable competitive advantage through technology alone. Accordingly, com- panies such as Motorola are increasingly using industrial design as an important tool for both satisfying customer needs and differentiating their products from those of their com- petition.

This chapter introduces engineers and managers to industrial design (ID) and explains how the ID process takes place in relation to other product development activities. We refer to the RAZR example throughout this chapter to explain critical ideas. Specifically, this chapter presents:

• A historical perspective on ID and a working definition of ID.

• Statistics on typical investments in ID.

• A method for determining the importance of ID to a particular product.

• The costs and benefits of investing in ID.

• How ID helps to establish a corporation’s identity.

• Specific steps industrial designers follow while designing a product.

• A description of how the ID process changes according to product type.

• A method for assessing the quality of the ID effort for a completed product.

What Is Industrial Design?

The birth of ID is often traced to western Europe in the early 1900s. (See Lorenz, 1986, for an account of the history of ID, which is summarized here.) Several German com- panies, including AEG, a large electrical manufacturer, commissioned a multitude of craftspeople and architects to design various products for manufacture. Initially, these early European designers had little direct impact on industry; however, their work resulted in lasting theories that influenced and shaped what is today known as industrial design.

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Early European approaches to ID, such as the Bauhaus movement, went beyond mere functionalism; they emphasized the importance of geometry, precision, simplicity, and economy in the design of products. In short, early European designers believed that a product should be designed “from the inside out.” Form should follow function.

In the United States, however, early concepts of ID were distinctly different. While early European industrial designers were architects and engineers, most industrial design- ers in America were actually theater designers and artist-illustrators. Not surprisingly, ID in the United States was often at the service of sales and advertising, where a product’s exterior was all important and its insides mattered little. Pioneers in U.S. industrial design, including Walter Dorwin Teague, Norman Bel Geddes, and Raymond Loewy, emphasized streamlining in product design. This trend is best evidenced in U.S. products of the 1930s. From fountain pens to baby buggies, products were designed with nonfunctional aero- dynamic shapes in an attempt to create product appeal. The auto industry provides an- other example. The shapes of European automobiles of the 1950s were fairly simple and smooth, while U.S. cars of the same era were decorated with such nonfunctional features as tailfins and chrome teeth.

By the 1970s, however, European design had strongly influenced American ID, largely through the works of Henry Dreyfuss and Eliot Noyes. Heightened competition in the marketplace forced companies to search for ways to improve and differentiate their prod- ucts. Increasingly, companies accepted the notion that the role of ID needed to go beyond mere shape and appearance. Success stories such as Bell, Deere, Ford, and IBM, all of which effectively integrated ID into their product development process, helped further this thinking.

By 2000, industrial design became widely practiced in the United States by profes- sionals in many diverse settings ranging from small design consulting firms to in-house design offices within large manufacturing companies. Motorola’s industrial designers comprise a department titled “consumer experience design” and participate fully in all new product development efforts.

The Industrial Designers Society of America (IDSA) defines industrial design as “the professional service of creating and developing concepts and specifications that optimize the function, value, and appearance of products and systems for the mutual benefit of both user and manufacturer.” This definition is broad enough to include the activities of the entire product development team. In fact, industrial designers focus their attention upon the form and user interaction of products. Dreyfuss (1967) lists five critical goals that industrial designers can help a team to achieve when developing new products:

• Utility: The product’s human interfaces should be safe, easy to use, and intuitive. Each feature should be shaped so that it communicates its function to the user.

• Appearance: Form, line, proportion, and color are used to integrate the product into a pleasing whole.

• Ease of maintenance: Products must also be designed to communicate how they are to be maintained and repaired.

• Low costs: Form and features have a large impact on tooling and production costs, so these must be considered jointly by the team.

• Communication: Product designs should communicate the corporate design philoso- phy and mission through the visual qualities of the products.

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Industrial designers are typically educated in four-year university programs where they study sculpture and form; develop drawing, presentation, and model-making skills; and gain a basic understanding of materials, manufacturing techniques, and finishes. In industrial practice, designers receive additional exposure to basic engineering, advanced manufacturing/fabrication processes, and common marketing practices. Their ability to express ideas visually can facilitate the process of concept development for the team. In- dustrial designers may create most of the concept sketches, models, and renderings used by the team throughout the development process, even though the ideas come from the entire team.

Assessing the Need for Industrial Design

To assess the importance of ID to a particular product, we first review some investment statistics and then define the dimensions of a product that are dependent upon good ID.

Expenditures for Industrial Design Exhibit 11-2 shows approximate values of investment in ID for a variety of products. Both the total expenditures on ID and the percentage of the product development budget invested in ID are shown for consumer and industrial products spanning various indus- tries. These statistics should give design teams a rough idea of how much ID investment will be required for a new product.

The exhibit shows that the range of expenditures on ID is tremendous. For products with relatively little user interaction such as some types of industrial equipment, the cost of ID is only in the tens of thousands of dollars. On the other hand, the development of an intensely visual and interactive product such as an automobile requires millions of dollars of ID effort. The relative cost of ID as a fraction of the overall development budget also shows a wide range. For a technically sophisticated product, such as a new aircraft, the ID cost can be insignificant relative to the engineering and other development expenditures. This does not suggest, however, that ID is unimportant for such products; it suggests only that the other development functions are more costly. Certainly the success of a new automobile design is highly dependent on its aesthetic appeal and the quality of the user interfaces, two dimensions largely determined by ID; yet the ID expense of $10 million is modest, relative to the entire development budget.

How Important Is Industrial Design to a Product? Most products on the market can be improved in some way or another by good ID. All products that are used, operated, or seen by people depend critically on ID for commer- cial success.

With this in mind, a convenient means for assessing the importance of ID to a particu- lar product is to characterize importance along two dimensions: ergonomics and aesthet- ics. (Note that we use the term ergonomics to encompass all aspects of a product that relate to its human interfaces.) The more important each dimension is to the product’s success, the more dependent the product is on ID. Therefore, by answering a series of questions along each dimension we can qualitatively assess the importance of ID.

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Ergonomic Needs

• How important is ease of use? Ease of use may be extremely important both for frequently used products, such as an office photocopier, and for infrequently used products, such as a fire extinguisher. Ease of use is more challenging if the product has multiple features and/or modes of operation that may confuse or frustrate the user. When ease of use is an important criterion, industrial designers will need to ensure that the features of the product effectively communicate their function.

• How important is ease of maintenance? If the product needs to be serviced or repaired frequently, then ease of maintenance is crucial. For example, a user should be able to clear a paper jam in a printer or photocopier easily. Again, it is critical that the features of the product communicate maintenance/repair procedures to the user. However, in many cases, a more desirable solution is to eliminate the need for maintenance entirely.

• How many user interactions are required for the product’s functions? In general, the more interactions users have with the product, the more the product will depend on ID. For example, a doorknob typically requires only one interaction, whereas a laptop computer may require a dozen or more, all of which the industrial designer must understand in depth. Furthermore, each interaction may require a different design approach and/or additional research.

Handheld Medical Instrument

Handheld Vacuum

Desktop Computer Peripheral

Large-Scale Medical Equipment

Medical Imaging Equipment

Automobile

Mobile Phone

Jumbo Jet

Handheld Power Tool

Industrial Food Processing Equipment

Total Expenditures on Industrial Design, $ Thousands

Percentage of Product Development Budget Spent on Industrial Design, %

30

20

10

0 10 100 1,000 10,000 100,000

EXHIBIT 11-2 Industrial design expenditures for some consumer and industrial products.

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Industrial Design 213

• How novel are the user interaction needs? A user interface requiring incremental improvements to an existing design will be relatively straightforward to design, such as the buttons on a new desktop computer mouse. A more novel user interface may require substantial research and feasibility studies, such as the “click wheel” on the early Apple iPod music player.

• What are the safety issues? All products have safety considerations. For some prod- ucts, these can present significant challenges to the design team. For example, the safety concerns in the design of a child’s toy are much more prominent than those for a new computer mouse.

Aesthetic Needs

• Is visual product differentiation required? Products with stable markets and technol- ogy are highly dependent upon ID to create aesthetic appeal and, hence, visual dif- ferentiation. In contrast, a product such as a computer’s internal disk drive, which is differentiated by its technological performance, is less dependent on ID.

• How important are pride of ownership, image, and fashion? A customer’s perception of a product is in part based upon its aesthetic appeal. An attractive product may be associated with high fashion and image and will likely create a strong sense of pride among its owners. This may similarly be true for a product that looks and feels rugged or conservative. When such characteristics are important, ID will play a critical role in determining the product’s ultimate success.

• Will an aesthetic product motivate the team? A product that is aesthetically appealing can generate a sense of team pride among the design and manufacturing staff. Team pride helps motivate and unify everyone associated with the project. An early ID con- cept gives the team a concrete vision of the end result of the development effort.

To demonstrate this method, we can use the above questions to assess the importance of industrial design in the development of the Motorola RAZR phone. Exhibit 11-3 displays the results of such analysis. We find that both ergonomics and aesthetics were extremely important for the RAZR. Accordingly, ID did indeed play a large role in deter- mining many of the product’s critical success factors.

The Impact of Industrial Design

The previous section focused primarily upon the importance of ID in satisfying customer needs. Next we explore both the direct economic impact of investing in ID as well as its impact on corporate identity.

Is Industrial Design Worth the Investment? Managers will often want to know, for a specific product or for a business operation in gen- eral, how much effort should be invested in industrial design. While it is difficult to answer this question precisely, we can offer several insights by considering the costs and benefits. The costs of ID include direct cost, manufacturing cost, and time cost, described next.

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Critical for a mobile telephone because it may be used frequently, may be needed in emergency situations, and can be operated by motorists while driving. The product’s function must be communicated through its design.

As with many integrated electronics products there is very little maintenance required.

There are many important user interactions such as entering text, dialing and storing numbers, sending and receiving calls, taking photos, Internet access.

Design solutions associated with some of the customer interactions were straightforward, such as the numeric keypad, because there is a wealth of human factors data that dictate the basic dimensions. However, other interfaces, such as the one-handed operation of such a thin phone, were quite different from earlier models and therefore required careful study.

There were few safety issues for ID to consider on the RAZR itself. However, because many customers use mobile telephones in automobiles, a line of Bluetooth wireless accessories needed to be designed for safe, convenient, hands-free operation.

There were hundreds of models of mobile phones on the market when the RAZR was introduced. Its appearance was essential for differentiation.

The RAZR was intended to be a highly visible product used by people for business and personal communication in public areas. It had to be stunningly attractive in everyday use.

The RAZR’s novel form turned out to be an important inspiration to the development team and a selling point for senior management.

Ergonomics Ease of use

Ease of maintenance

Quantity of user interactions

Novelty of user interactions

Safety

Aesthetics Product differentiation

Pride of ownership, fashion, or image

Team motivation

Needs Level of Importance Explanation of Rating

Low Medium High

EXHIBIT 11-3 Assessing the importance of industrial design for Motorola’s RAZR mobile phone.

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• Direct cost is the cost of the ID services. This quantity is determined by the number and type of designers used, duration of the project, and number of models required, plus material costs and other related expenses. In 2011, ID consulting services in the United States cost $75 to $300 per hour, with most of the work being done by junior- level designers in the lower half of this price range and senior designers contributing relatively few hours of more strategic work in the higher half of the range. Additional charges include costs for models, photos, and other expenses. The true cost of internal corporate design services is generally about the same.

• Manufacturing cost is the expense incurred to implement the product details created through ID. Surface finishes, stylized shapes, rich colors, and many other design details can increase tooling cost and/or production cost. Note, however, that many ID details can be implemented at practically no cost, particularly if ID is involved early enough in the process (see below). In fact, some ID inputs can actually reduce manufacturing costs—particularly when the industrial designer works closely with the manufacturing engineers.

• Time cost is the penalty associated with extended lead time. As industrial designers attempt to refine the ergonomics and aesthetics of a product, multiple design iterations and/or prototypes will be necessary. This may result in a delay in the product’s intro- duction, which will likely have an economic cost.

The benefits of using ID include increased product appeal and greater customer satis- faction through additional or better features, strong brand identity, and product differenti- ation. These benefits usually translate into a price premium and/or increased market share (as compared to marketing the product without the ID efforts).

These costs and benefits of ID were estimated as part of a study conducted at MIT that assessed the impact of detail design decisions on product success factors for a set of competing products in the market (automatic drip coffeemakers). Although the rela- tion is difficult to quantify precisely, this study found a significant correlation between product aesthetics (as rated by practicing industrial designers) and the retail price for each product, but no correlation between aesthetics and manufacturing cost. The researchers could not conclude whether the manufacturers had priced their products optimally and could not determine unequivocally if aesthetics of the products enabled manufacturers to garner higher prices. However, the study suggests that an increase in price of $1 per unit for typical sales volumes would be worth several million dollars in profits over the life of these products. Industrial designers asked to price design services for such products gave a range from $75,000 to $250,000, suggesting that if ID could add even one dollar’s worth of perceived benefit to the consumer, it would pay back handsomely (Pearson, 1992).

A second study, conducted at the Open University in England, also suggests that investing in ID yields a positive return. This study tracked the commercial impact of invest- ing in engineering and ID for 221 design projects at small and medium-sized manufacturing firms. The study found that investing in industrial design consultants led to profits in over 90 percent of all implemented projects, and when comparisons were possible with previous, less ID-oriented products, sales increased by an average of 41 percent (Roy and Potter, 1993). More recent studies have assessed ID effectiveness and the integration of ID into the product development process and found positive correlations between these ID measures and corporate financial performance (Gemser and Leenders, 2001; Hertenstein et al., 2005).

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For a specif ic project decision, performing simple calculations and sensitivity analyses can help quantify the likely economic returns from ID. For example, if invest- ing in ID will likely result in a price premium of $10 per unit, what will be the net economic benefit when summed over the original market sales projections? Similarly, if investing in ID will likely result in a greater demand for the product—by, say, 1,000 units per year—what will be the net economic benefit when summed at the original unit price? The rough estimates of these benefits can be compared to the expected cost of the ID effort. Spreadsheet models are commonly used for this kind of financial decision making and can easily be applied to estimate the expected payback of ID for a project. (Chapter 17, Product Development Economics, describes a method for developing such a financial model.)

How Does Industrial Design Establish a Corporate Identity? Corporate identity is derived from “the visual style of an organization,” a factor that affects the firm’s positioning in the market (Olins, 1989). A company’s identity emerges primarily through what people see. Advertising, logos, signage, uniforms, buildings, packaging, and product designs all contribute to creating corporate identity.

In product-based companies, ID plays an important role in determining the company’s identity. Industrial design determines a product’s style, which is directly related to the public perception of the firm. When a company’s products maintain a consistent and recognizable appearance, visual equity is established. A consistent look and feel may be associated with the product’s color, form, style, or even its features. When a firm enjoys a positive reputation, such visual equity is valuable, as it can create a positive association with quality for future products. Some companies that have effectively used ID to estab- lish visual equity and corporate identity through their product lines include:

• Apple Inc.: The original Macintosh had a small, upright shape and a benign buff col- oring. This design purposely gave the product a nonthreatening, user-friendly look that has since been associated with all of Apple’s products. More recent Apple designs have striking lines and innovative styling in silver, black, and white finishes.

• Rolex Watch Co.: The Rolex line of watches maintains a classic look and solid feel that signifies quality and prestige.

• Braun GmbH: Braun kitchen appliances and shavers have clean lines and basic colors. The Braun name has long been associated with simplicity and quality.

• Bang & Olufsen a/s: B&O high-fidelity consumer electronics systems are designed to have sleek lines and impressive visual displays, providing an image of technological innovation.

• BMW AG: BMW automobiles, known for luxury features and driver-oriented perfor- mance, display exterior styling features that have evolved slowly, retaining the equity associated with the brand.

• Motorola, Inc.: The original MicroTAC and StarTAC mobile phones were recognized as Motorola’s leading-edge flip-phone innovations. The later RAZR model also used a folding clamshell concept in a much thinner form factor, emphasizing Motorola’s leadership in a rapidly evolving industry.

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The Industrial Design Process

Many large companies have internal industrial design departments. Small companies tend to use contract ID services provided by consulting firms. In either case, industrial design- ers should participate fully on cross-functional product development teams. Within these teams, engineers will generally follow a process to generate and evaluate concepts for the technical features of a product. In a similar manner, most industrial designers follow a process for designing the aesthetics and ergonomics of a product. Although this approach may vary depending on the firm and the nature of the project, industrial designers also generate multiple concepts and then work with engineers to narrow these options down through a series of evaluation steps.

Specifically, the ID process can be thought of as consisting of the following phases:

1. Investigation of customer needs.

2. Conceptualization.

3. Preliminary refinement.

4. Further refinement and final concept selection.

5. Control drawings or models.

6. Coordination with engineering, manufacturing, and external vendors.

This section discusses each of these phases in order, and the following section will dis- cuss the timing of these phases within the overall product development process.

1. Investigation of Customer Needs The product development team begins by documenting customer needs as described in Chapter 5, Identifying Customer Needs. Because industrial designers are skilled at recog- nizing issues involving user interactions, ID involvement is crucial in the needs process. For example, in researching customer needs for a new medical instrument, the team would study an operating room, interview physicians, and conduct focus groups. While involve- ment of marketing, engineering, and ID certainly leads to a common, comprehensive under- standing of customer needs for the whole team, it particularly allows the industrial designer to gain an intimate understanding of the interactions between the user and the product.

Unlike many development efforts, the RAZR project did not rely heavily upon focus groups or formal market research. Motorola believed that the high level of secrecy sur- rounding the project, and the difficulty in gaining customer input for next-generation products, made these techniques impractical. Instead, the team used extensive input from Motorola employees to understand the evolution of user needs. Marketing personnel stressed the importance of Motorola’s leadership in form factor and style. Engineering supplied information on technical limitations involving materials and geometry of com- ponents. Motorola’s research on consumer perceptions of quality in mobile phones re- vealed that while light weight was desirable, the phone’s density was also critical, resulting in a target specification for overall density.

2. Conceptualization Once the customer needs and constraints are understood, the industrial designers help the team conceptualize the product. During the concept generation stage engineers naturally

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focus their attention upon finding solutions to the technical subfunctions of the product. (See Chapter 7, Concept Generation.) At this time, the industrial designers concentrate upon creating the product’s form and user interfaces. Industrial designers make simple sketches, known as thumbnail sketches, of each concept. These sketches are a fast and inexpensive medium for expressing ideas and evaluating possibilities. Exhibit 11-4 shows two such sketches from the RAZR project.

The proposed concepts may then be matched and combined with the technical solu- tions under exploration. Concepts are grouped and evaluated by the team according to the customer needs, technical feasibility, cost, and manufacturing considerations. (See Chapter 8, Concept Selection.)

It is unfortunate that in some companies, industrial designers work quite independently from engineering. When this happens, ID is likely to propose concepts involving strictly form and style, and there are usually numerous iterations when engineering finds the concepts technically infeasible. Firms have therefore found it beneficial to tightly coordi- nate the efforts of industrial designers and engineers throughout the concept development phase so that these iterations can be accomplished more quickly—even in sketch form.

3. Preliminary Refinement In the preliminary refinement phase, industrial designers build models of the most prom- ising concepts. Soft models are typically made in full scale using foam or foam-core board. They are the second-fastest method—only slightly slower than sketches—used to evaluate concepts.

Although generally quite rough, these models are invaluable because they allow the development team to express and visualize product concepts in three dimensions. Concepts are evaluated by industrial designers, engineers, marketing personnel, and (at times) potential customers through the process of touching, feeling, and modifying the models. Typically, designers will build as many models as possible depending on time and financial constraints. Concepts that are particularly difficult to visualize require more models than do simpler ones.

The RAZR industrial designers used numerous soft models to assess the overall size, proportion, and shape of many proposed concepts. Of particular concern was the feel of the product in the hand and against the face. These attributes can only be assessed using physical models. A soft model from the RAZR project, made using rapid prototyping technology, is shown in Exhibit 11-5.

4. Further Refinement and Final Concept Selection At this stage, industrial designers often switch from soft models and sketches to hard models and information-intensive drawings known as renderings. Renderings show the details of the design and often depict the product in use. Drawn in two or three dimen- sions, they convey a great deal of information about the product. Renderings are often used for color studies and for testing customers’ reception to the proposed product’s fea- tures and functionality. A rendering from the RAZR project is shown in Exhibit 11-4.

The final refinement step before selecting a concept is to create hard models. These models are still technically nonfunctional yet are close replicas of the final design with a very realistic look and feel. They are made from wood, dense foam, plastic, or metal; are painted and textured; and have some “working” features such as buttons that push or

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sliders that move. Because a hard model can cost thousands of dollars, a product develop- ment team usually has the budget to make only a few.

For many types of products, hard models are fabricated to have the intended size, density, weight distribution, surface finish, and color. Hard models can then be used by industrial designers and engineers to further refine the final concept specifications. Fur- thermore, these models can also be used to gain additional customer feedback in focus groups, to advertise and promote the product at trade shows, and to sell the concept to senior management within an organization.

Exhibit 11-5 shows one of the several hard models built during the RAZR develop- ment process. Extensive usability testing was begun with the RAZR hard models. Tests identified the need for larger keypad buttons on a thinner phone. Designers also realized the need to locate the volume control buttons on the side of the display housing for easier

EXHIBIT 11-4 Two quick thumbnail concept sketches (left) and a more detailed colored rendering (right) showing evolution of the RAZR concept.

EXHIBIT 11-5 A soft model (left) and a hard model (right) used by the RAZR industrial designers to study alternative forms.

Courtesy of Motorola Inc.

Courtesy of Motorola Inc.

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access when open, rather than on the side of the keypad housing. They also found that this location required reversal of the ��� functionality of these buttons when the flip is opened.

5. Control Drawings or Models Industrial designers complete their development process by making control drawings or control models of the final concept. Control drawings or models document functionality, features, sizes, colors, surface finishes, and key dimensions. Although they are not de- tailed part drawings (known as engineering drawings), they can be used to fabricate final design models and other prototypes. Typically, these drawings or models are given to the engineering team for detailed design of the parts. Exhibit 11-6 shows one view of the control model of the final RAZR design.

6. Coordination with Engineering, Manufacturing, and External Vendors

The industrial designers must continue to work closely with engineering and manufactur- ing personnel throughout the subsequent product development process. Some industrial design consulting firms offer quite comprehensive product development services, includ- ing detailed engineering design and the selection and management of outside vendors of materials, tooling, components, and assembly services.

The Impact of Computer-Based Tools on the ID Process Since the 1990s, computer-aided design (CAD) tools have had a significant impact on industrial designers and their work. Using modern 3D CAD tools, industrial designers can generate, display, and rapidly modify three-dimensional designs on high-resolution computer displays. In this manner, ID can potentially generate a greater number of detailed concepts more quickly, which may lead to more innovative design solutions. The visual realism of 3D CAD images can enhance communication within the product development team and eliminate much of the inaccuracy of the manually generated sketches historically provided by industrial designers (Cardaci, 1992). Furthermore, 3D CAD systems may be used to generate control models or drawings, and these data can be directly transferred to engineering design systems, allowing the entire develop- ment process to be more easily integrated. Exhibit 11-7 shows a 3D CAD model of the RAZR.

EXHIBIT 11-6 Side view of the RAZR control model defining the final RAZR shape and dimensions.

Courtesy of Motorola Inc.

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Management of the Industrial Design Process

Industrial design is typically involved in the overall product development process dur- ing several different phases. The timing of the ID effort depends upon the nature of the product being designed. To explain the timing of the ID effort it is convenient to classify products as technology-driven products and user-driven products.

• Technology-driven products: The primary characteristic of a technology-driven product is that its core benefit is based on its technology, or its ability to accomplish a specific technical task. While such a product may have important aesthetic or ergonomic re- quirements, consumers will most likely purchase the product primarily for its techni- cal performance. For example, a hard disk drive for a computer is largely technology driven. It follows that for the development team of a technology-driven product, the en- gineering or technical requirements will be paramount and will dominate development efforts. Accordingly, the role of ID is often limited to packaging the core technology. This entails determining the product’s external appearance and ensuring that the product communicates its technological capabilities and modes of interaction to the user.

• User-driven products: The core benefit of a user-driven product is derived from the functionality of its interface and/or its aesthetic appeal. Typically there is a high degree of user interaction for these products. Accordingly, the user interfaces must be safe, easy to use, and easy to maintain. The product’s external appearance is often important to differentiate the product and to create pride of ownership. For example, an office

EXHIBIT 11-7 3D CAD concept image created using Pro/ENGINEER software.

Courtesy of Motorola Inc.

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chair is largely user driven. While these products may be technically sophisticated, the technology does not differentiate the product; thus, for the product development team, the ID considerations will be more important than the technical requirements. The role of engineering may still be important to determine any technical features of the prod- uct; however, since the technology is often already established, the development team focuses on the user aspects of the product.

Exhibit 11-8 classifies a variety of familiar products. Rarely does a product belong at one of the two extremes. Instead, most products fall somewhere along the continuum. These classifications can be dynamic. For example, when a company develops a product based on a new core technology, the company is often interested in bringing the product to market as quickly as possible. Because little emphasis is placed on how the product looks or is used, the initial role of ID is small. However, as competitors enter the market, the product may need to compete more along user or aesthetic dimensions. The product’s orig- inal classification shifts, and ID assumes an extremely important role in the development process. One classic example is the Apple MacBook laptop computer. The core benefit of the first Apple laptop was its technology (a highly portable computer using the Macintosh operating system). As competition entered this market, however, Apple relied heavily on ID to create aesthetic appeal and enhanced utility, adding to the technical advantages of subsequent models.

Timing of Industrial Design Involvement Typically, ID is incorporated into the product development process during the later phases for a technology-driven product and throughout the entire product development process for a user-driven product. Exhibit 11-9 illustrates these timing differences. Note that the ID process is a subprocess of the product development process; it is parallel but not sepa- rate. As shown in the exhibit, the ID process described above may be rapid relative to the overall development process. The technical nature of the problems that confront engineers in their design activities typically demands substantially more development effort than do the issues considered by ID.

Exhibit 11-9 shows that for a technology-driven product, ID activities may begin fairly late in the program. This is because ID for such products is focused primarily on packaging issues. For a user-driven product, ID is involved much more fully. In fact, the ID process may dominate the overall product development process for many user-driven products.

Super Computer

Desktop Computer

Hard Disk Drive

Mobile Phone

Laptop Computer

Automobile

Camera

Wristwatch Coffeemaker

Office Chair

Technology-Driven Products

User-Driven Products

EXHIBIT 11-8 Classification of some common products on the continuum from technology-driven product to user- driven product.

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Exhibit 11-10 describes the responsibilities of ID during each phase of the product development process and how they relate to the other activities of the development team. As with the timing of ID involvement, the responsibilities of ID may also change according to product type.

Product Development Process

Industrial Design Processes

System- Level Design

Detail Design, Testing, and Refinement

Production Ramp-Up

Concept Testing

Concept Generation & Selection

Identification of Customer Needs

Planning

Concept Development

Technology-Driven Products

User-Driven Products

EXHIBIT 11-9 Relative timing of the industrial design process for two types of products.

EXHIBIT 11-10 The role of industrial design according to product type.

Product Development Activity

Type of Product

Technology-Driven User-Driven

Identification of Customer Needs ID typically has no involvement. ID works closely with marketing to identify customer needs. Industrial designers participate in focus groups or one-on-one customer interviews.

Concept Generation and Selection ID works with marketing and engineering to ensure that human factors and user-interface issues are addressed. Safety and maintenance issues are often of primary importance.

ID generates multiple concepts according to the industrial design process flow described earlier.

Concept Testing ID helps engineering to create prototypes, which are shown to customers for feedback.

ID leads in the creation of models to be tested with customers by marketing.

System-Level Design ID typically has little involvement. ID narrows down the concepts and refines the most promising approaches.

Detail Design, Testing, and Refinement

ID is responsible for packaging the product once most of the engineering details have been addressed. ID receives product specifications and constraints from engineering and marketing.

ID selects a final concept, then coordinates with engineering, manufacturing, and marketing to finalize the design.

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Assessing the Quality of Industrial Design

Assessing the quality of ID for a finished product is an inherently subjective task. How- ever, we can qualitatively determine whether ID has accomplished its goals by consid- ering each aspect of the product that is influenced by ID. Below are five categories for evaluating a product. These categories roughly match Dreyfuss’s five critical goals for ID, presented earlier in this chapter. We use these categories to develop specific questions, allowing the product to be rated along five dimensions. Exhibit 11-11 demonstrates this method by showing results for the RAZR.

1. Quality of the User Interface This is a rating of how easy the product is to use. Interface quality is related to the prod- uct’s appearance, feel, and modes of interaction.

• Do the features of the product effectively communicate their operation to the user?

• Is the product’s use intuitive?

• Are all features safe?

• Have all potential users and uses of the product been considered?

Examples of product-specific questions include:

• Is the grip comfortable?

• Does the control knob turn easily and smoothly?

• Is the power switch easy to locate?

• Is the display easy to read and understand?

2. Emotional Appeal This is a rating of the overall consumer appeal of the product. Appeal is achieved in part through appearance, feel, sound, and smell.

• Is the product attractive? Is it exciting?

• Does the product express quality?

• What images come to mind when viewing it?

• Does the product inspire pride of ownership?

• Does the product evoke feelings of pride among the development team and sales staff?

Examples of product-specific questions include:

• How does the car door sound when slammed?

• Does the hand tool feel solid and sturdy?

• Does the appliance look good on the kitchen counter?

3. Ability to Maintain and Repair the Product This is a rating of the ease of product maintenance and repair. Maintenance and repair should be considered along with the other user interactions.

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• Is the maintenance of the product obvious? Is it easy?

• Do product features effectively communicate disassembly and assembly procedures?

Examples of product-specific questions include:

• How easy and obvious is it to clear a paper jam in the printer?

• How difficult is it to disassemble and clean the food processor?

• How long does it take to change the batteries in the remote controller?

In general, the RAZR was both easy to use and comfortable. Calls could be answered by simply opening the display, numbers and text could be easily entered using the keypad, and the functions were readily accessible using the navigation buttons. The RAZR’s drawbacks included a keypad that could be difficult to use for customers with large fingers or long fingernails. In some markets, carriers had specified that Motorola customize the software interface in ways that negatively impacted usability.

The RAZR had a high emotional appeal that stemmed from its ultra-thin form, pocketability, and finishes.

Although maintenance and repair were not of primary importance to the customer, the RAZR rated high in this category. The battery charged very quickly and could be removed and replaced easily.

The final design included only those features that satisfied real customer needs. Materials were selected for durability and manufacturability, to withstand extreme conditions, to meet environmental regulations, and to create an attractive appearance.

The RAZR’s appearance was clearly unique. It was easily identified when viewed in a public area or next to a competitor’s product.

1. Quality of the User Interface

2. Emotional Appeal

3. Ability to Maintain and Repair the Product

4. Appropriate Use of Resources

5. Product Differentiation

Assessment Category Performance Rating Explanation of Rating

Low Medium High

EXHIBIT 11-11 Assessment of industrial design’s role in the RAZR development project.

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4. Appropriate Use of Resources This is a rating of how well resources were used in satisfying the customer needs. Resources typically refer to the dollar expenditures on ID and other functions. These factors tend to drive costs such as manufacturing. A poorly designed product, one with unnecessary features, or a product made from an exotic material will affect tooling, manufacturing processes, as- sembly processes, and the like. This category asks whether these investments were well spent.

• How well were resources used to satisfy the customer requirements?

• Is the material selection appropriate (in terms of cost and quality)?

• Is the product over- or underdesigned (does it have features that are unnecessary or neglected)?

• Were environmental/ecological factors considered?

5. Product Differentiation This is a rating of a product’s uniqueness and consistency with the corporate identity. This differentiation arises predominantly from appearance.

• Will a customer who sees the product in a store be able to identify it because of its appearance?

• Will it be remembered by a consumer who has seen it in an advertisement?

• Will it be recognized when seen on the street?

• Does the product fit with or enhance the corporate identity?

From an ID perspective, as shown in Exhibit 11-11, the RAZR was an excellent product. It was novel, recognizable, durable, easy to fabricate, and had strong customer appeal. Since these features were extremely important to the consumer, ID played a critical role in determining the immediate market success of the product.

Summary This chapter introduces the topic of industrial design, explains its benefits to product quality, and illustrates how the ID process takes place.

• The primary mission of ID is to design the aspects of a product that relate to the user: aesthetics and ergonomics.

• Most products can benefit in some way or another from ID. The more a product is seen or used by people, the more it will depend on good ID for its success.

• For products that are characterized by a high degree of user interaction and the need for aesthetic appeal, ID should be involved throughout the product development pro- cess. Early involvement of industrial designers will ensure that critical aesthetic and user requirements will not be overlooked or ignored by the technical staff.

• When a product’s success relies more on technology, ID can be integrated into the development process later.

• Active involvement of ID on the product development team can help to promote good communication between functional groups. Such communication facilitates coordina- tion and ultimately translates into higher-quality products.

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References and Bibliography Many current resources are available on the Internet via www.ulrich-eppinger.net

For more information about industrial design—its history, impact, future, and practice— the following books and articles are recommended. The brief history of ID presented in this chapter was adapted from Lorenz’s book.

Caplan, Ralph, By Design: Why There Are No Locks on the Bathroom Doors in the Hotel Louis XIV, and Other Object Lessons, St. Martin’s Press, New York, 1982.

Dreyfuss, Henry, “The Industrial Designer and the Businessman,” Harvard Business Review, November 1950, pp. 77–85.

Dreyfuss, Henry, Designing for People, Paragraphic Books, New York, 1967.

Harkins, Jack, “The Role of Industrial Design in Developing Medical Devices,” Medical Device and Diagnostic Industry, September 1992, pp. 51–54, 94–97.

Lorenz, Christopher, The Design Dimension: Product Strategy and the Challenge of Global Marketing, Basil Blackwell, Oxford, UK, 1986.

Lucie-Smith, Edward, A History of Industrial Design, Van Nostrand Reinhold, New York, 1983.

Norman discusses good and bad examples of product design across a range of consumer products and provides principles and guidelines for good design practice. In Emotional Design, he explains how people connect with and react to the products they buy and use.

Norman, Donald A., The Design of Everyday Things, Doubleday, New York, 1990.

Norman, Donald A., Emotional Design: Why We Love (or Hate) Everyday Things, Basic Books, New York, 2004.

Boatwright and Cagan argue that many successful products are designed to connect with customers through strong, positive emotions.

Boatwright, Peter, and Jonathan Cagan, Built to Love: Creating Products That Captivate Customers, Berrett-Koehler, San Francisco, 2010.

Computer-aided industrial design (CAID), introduced in this article by Cardaci, has become an important part of ID practice today, replacing traditional rendering in many situations.

Cardaci, Kitty, “CAID: A Tool for the Flexible Organization,” Design Management Journal, Design Management Institute, Boston, Vol. 3, No. 2, Spring 1992, pp. 72–75.

The following studies are among the very few that have critically assessed the value of ID to products and their manufacturers. A 1994 issue of Design Management Journal and a 2005 issue of Journal of Product Innovation Management were devoted to this topic.

Design Management Journal, Vol. 5, No. 2, Spring 1994.

Gemser, Gerda, and Mark A. A. M. Leenders, “How Integrating Industrial Design in the Product Development Process Impacts on Company Performance,” Journal of Product Innovation Management, Vol. 18, No. 1, January 2001, pp. 28–38.

Hertenstein, Julie H., Marjorie B. Platt, and Robert W. Veryzer, “The Impact of Industrial Design Effectiveness on Corporate Financial Performance,” Journal of Product Innovation Management, Vol. 22, No. 1, January 2005, pp. 3–21.

Journal of Product Innovation Management, Vol. 22, No. 1, January 2005.

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228 Chapter 11

Pearson, Scott, “Using Product Archaeology to Understand the Dimensions of Design Decision Making,” S. M. Thesis, MIT Sloan School of Management, May 1992.

Roy, Robin, and Stephen Potter, “The Commercial Impacts of Investment in Design,” Design Studies, Vol. 14, No. 2, April 1993, pp. 171–193.

Olins describes how a firm develops a corporate identity through design and communication.

Olins, Wally, Corporate Identity: Making Business Strategy Visible through Design, Harvard Business School Press, Boston, 1989.

Several excellent case studies involving the ID process and product development issues surrounding ID have been written by the Design Management Institute. Also the publications @ Issue (semiannually), Innovation (quarterly), and I.D. (bimonthly) include case studies, examples, and discussion of ID practices.

@ Issue: The Journal of Business and Design, Corporate Design Foundation, Boston.

Design Management Institute, Boston, www.dmi.org.

I.D. Magazine, F�W Publications, Inc., New York.

Innovation, Industrial Designers Society of America, Dulles, VA.

While industrial designers are best found through personal referral, IDSA publishes a list of ID firms and consultants.

Industrial Designers Society of America, Dulles, VA, www.idsa.org.

Exercises

1. Visit a local specialty store (e.g., kitchen supplies, tools, office supply, gifts) and pho- tograph (or purchase) a set of competing products. Assess each one in terms of the five ID quality categories as shown in Exhibit 11-11. Which product would you purchase? Would you be willing to pay more for it than for the others?

2. Develop several concept sketches for a common product. Try designing the product form both “from the inside out” and “from the outside in.” Which is easier for you? Possible simple products include a stapler, a garlic press, an alarm clock, a reading light, and a telephone.

3. List some firms that you feel have a strong corporate identity. What aspects of their products helped to develop this identity?

Thought Questions

1. By what cause-and-effect mechanism does ID affect a product’s manufacturing cost? Under what conditions would ID increase or decrease manufacturing cost?

2. What types of products might not benefit from ID involvement in the development process?

3. The term visual equity is sometimes used to refer to the value of the distinctive appear- ance of a firm’s products. How is such equity obtained? Can it be “purchased” over a short time period, or does it accrue slowly?

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Design for Environment

229

C H A P T E R T W E L V E

EXHIBIT 12-1 Three chairs in Herman Miller’s line of office seating products. Shown (from left to right) are the Aeron (1994), Mirra (2004), and Setu (2009).

Courtesy of Herman Miller, Inc.

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In June 2009, Herman Miller, Inc., a U.S.-based office furniture manufacturer, launched the Setu multipurpose chair. The Setu (named after the Hindi word for bridge) aims to set new standards of simplicity, adaptability, and comfort for multipurpose seating while being environmentally friendly. The Setu chair is one product in a very successful line of office seating, including also the Aeron and Mirra chairs shown in Exhibit 12-1.

Herman Miller designed the Setu chair in collaboration with Studio 7.5, a design firm based in Germany. Multipurpose chairs, such as the Setu, are used where people sit for relatively short periods, such as conference rooms, temporary workstations, and collabor- ative spaces. (This is in contrast to a task chair in which the user sits for longer periods.) Studio 7.5 found that many chairs in office spaces where people spend from a few min- utes to a few hours at a time were uncomfortable and misadjusted. Moreover, most chairs are made with materials and processes that are harmful to the environment. Studio 7.5 recognized a market need for a new and innovative multipurpose chair—one combining comfort, design for environment, and a compelling price.

The core of Setu is a flexible spine, molded of two polypropylene materials and engi- neered to achieve comfort for nearly everybody (see Exhibit 12-2). As the user sits and re- clines, the spine flexes, providing comfort and back support throughout the full range of tilt. Without any tilt mechanism and with only one adjustment (height), the chair is significantly lighter weight, less complex, and lower cost than the Aeron and Mirra task chairs.

The Setu chair emerged from Herman Miller’s commitment to minimizing the environ- mental impacts of their products and operations, and provides a great example of how to incorporate environmental considerations into the product development process. The Setu is designed for material recycling and is produced using environmentally safe materials and renewable energy. The following factors explain its level of environmental performance:

• Environmentally friendly materials: The Setu multipurpose chair consists of envi- ronmentally safe and nontoxic materials such as 41 percent (by weight) aluminum, 41 percent polypropylene, and 18 percent steel.

EXHIBIT 12-2 The spine of the Setu chair is a combination of two polypropylene materials precisely engineered to flex and support as the user moves in the chair.

Courtesy of Herman Miller, Inc.

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Design for Environment 231

• Recycled content: The Setu is made of 44 percent recycled materials (by weight, com- prising 23 percent postconsumer and 21percent postindustrial recycled content).

• Recyclability: The Setu is 92 percent recyclable (by weight) at the end of its use- ful life. Steel and aluminum components are 100 percent recyclable. Polypropylene components are identified with a recycling code whenever possible to aid in returning these materials to the recycling stream. (Of course, recycling of industrial materials depends on the availability of such recycling streams.)

• Clean energy: Setu is manufactured on a production line that utilizes 100 percent green power (half from wind turbines and half from captured landfill off-gassing).

• Emissions: No harmful air or water emissions are released during Setu’s production.

• Returnable and recyclable packaging: Setu components are received by Herman Miller from a network of nearby suppliers in molded tote trays that are returned to the suppliers for reuse. Outgoing packaging materials include corrugated cardboard and a polyethylene plastic bag, both materials capable of repeated recycling.

Design for environment (DFE) is a way to include environmental considerations in the product development process. This chapter presents a method for DFE, using the Herman Miller Setu chair as an example to illustrate the successful application of the DFE process.

What Is Design for Environment?

Every product has environmental impacts. DFE provides organizations with a practical method to minimize these impacts in an effort to create a more sustainable society. Just as effective design for manufacturing (DFM) practice has been shown to maintain or im- prove product quality while reducing costs (see Chapter 13, Design for Manufacturing), practitioners of DFE have also found that effective DFE practice can maintain or improve product quality and cost while reducing environmental impacts.

Environmental impacts of a product may include energy consumption, natural resource depletion, liquid discharges, gaseous emissions, and solid waste generation. These im- pacts fall into two broad categories—energy and materials—and both represent critical environmental problems that need to be solved. For most products, addressing the energy problem means developing products that use less energy and that use renewable energy. To address the materials problem is not as straightforward. Therefore, much of the focus of DFE in this chapter is on choosing the right materials for products and making sure they can be recycled.

During the early stages of the product development process, deliberate decisions about material use, energy efficiency, and waste avoidance can minimize or eliminate environ- mental impacts. However, once the design concept is established, improving environmen- tal performance generally involves time-consuming design iterations. DFE therefore may involve activities throughout the product development process and requires an interdis- ciplinary approach. Industrial design, engineering, purchasing, and marketing all work together in the development of environmentally friendly products. In many cases product development professionals with specialized DFE training lead the DFE efforts within a project. However, all product development team members benefit from understanding the principles of DFE.

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Two Life Cycles Life cycle thinking is the basis of DFE. This helps to expand the traditional manufac- turer’s concern with the production and distribution of its products to comprise a closed- loop system relating the product life cycle to the natural life cycle, both of which are illustrated in Exhibit 12-3. The product life cycle begins with the extraction and process- ing of raw materials from natural resources, followed by production, distribution, and use of the product. Finally, at the end of the product’s useful life there are several recovery options—remanufacturing or reuse of components, recycling of materials, or disposal through incineration or deposit in a landfill. The natural life cycle represents the growth and decay of organic materials in a continuous loop. The two life cycles intersect, as shown in the diagram, with the use of natural materials in industrial products and with the reintegration of organic materials back into the natural cycle.

While most product life cycles take place over a few months or years, the natural cycle spans a wider range of time periods. Most organic materials (plant- and animal-based) can decay relatively quickly and become nutrients for new growth of similar materials. However, other natural materials (such as minerals), are created on a much longer time scale, and so are considered to be nonrenewable natural resources. Therefore, depositing most mineral-based industrial materials into landfills does not readily re-create similar industrial materials for perhaps thousands of years (and often creating unnatural concen- trations of certain harmful wastes).

Each of the product life cycle stages may consume energy and other resources and may generate emissions and waste, all of which have environmental impacts. From this life cycle perspective, in order to reach conditions of environmental sustainability, the materials in products must be balanced in a sustainable, closed-loop system. This gives rise to three challenges of product design to reach sustainability, which are also repre- sented in the life cycle diagram of Exhibit 12-3.

EXHIBIT 12-3 The natural life cycle and the product life cycle.

Resources

Recovery

Use

Distribution

Product “Industrial” Life Cycle

Natural “Biological”

Life Cycle

Production Materials

Deposit

Nonrenewable Resources

Natural Decay

Toxics

Organics

Inorganics

Renewable Resources

Postconsumer Recycling

Reuse

Remanufacturing

Postindustrial Recycling

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Design for Environment 233

1. Eliminate use of nonrenewable natural resources (including nonrenewable sources of energy).

2. Eliminate disposal of synthetic and inorganic materials that do not decay quickly.

3. Eliminate creation of toxic wastes that are not part of natural life cycles.

Organizations committed to DFE intend to work toward achieving these sustainability conditions over time. DFE helps these organizations to create better products by choosing materials carefully and by enabling proper recovery options so that the materials used in products can be reintegrated either into the product life cycle or into the natural life cycle.

Environmental Impacts Every product may have a number of environmental impacts over its life cycle. The fol- lowing list explains some of the environmental impacts deriving from the manufacturing sector (adapted from Lewis et al., 2001):

• Global warming: Scientific data and models show that the temperature of the earth is gradually increasing as a result of the accumulation of greenhouse gases, particulates, and water vapor in the upper atmosphere. This effect appears to be accelerating as a result of emissions of carbon dioxide (CO2), methane (CH4), chlorofluorocarbons (CFCs), black carbon particles, and nitrogen oxides (NOx) from industrial processes and products.

• Resource depletion: Many of the raw materials used for production, such as iron ore, gas, oil, and coal, are nonrenewable and supplies are limited.

• Solid waste: Products may generate solid waste throughout their life cycle. Some of this waste is recycled, but most is disposed in incinerators or landfills. Incinerators generate air pollution and toxic ash (which goes into landfills). Landfills may also create concentrations of toxic substances, generate methane gas (CH4), and release groundwater pollutants.

• Water pollution: The most common sources of water pollution are discharges from in- dustrial processes, which may include heavy metals, fertilizers, solvents, oils, synthetic substances, acids, and suspended solids. Waterborne pollutants may affect ground- water, drinking water, and fragile ecosystems.

• Air pollution: Sources of air pollution include emissions from factories, power- generating plants, incinerators, residential and commercial buildings, and motor vehicles. Typical pollutants include CO2, NOx, sulfur dioxide (SO2), ozone (O3), and volatile organic compounds (VOCs).

• Land degradation: Land degradation concerns the adverse effects that raw material extraction and production, such as mining, farming, and forestry, have on the environ- ment. The effects include reduced soil fertility, soil erosion, salinity of land and water, and deforestation.

• Biodiversity: Biodiversity concerns the variety of plant and animal species, and is affected by land clearing for urban development, mining, and other industrial activities.

• Ozone depletion: The ozone layer protects the earth against the harmful effects of the sun’s radiation. It is degraded by reactions with nitric acid (created by the burning of fossil fuels) and chorine compounds (such as CFCs).

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History of Design for Environment The birth of DFE is often traced to the early 1970s. Papanek (1971) challenged designers to face their social and environmental responsibilities instead of only commercial interests. The World Commission on Environment and Development’s Brundtland Report (1987) first defined the term sustainable development as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

In the 1990s, several influential books about environmentally friendly design were published. Burall (1991) argued that there was no longer a conflict between a green ap- proach to design and business success. Fiksel (1996; revised 2009) discussed how DFE integrates life cycle thinking into new product and process development. As the DFE pro- cess matured, Brezet and van Hemel (1997) provided a practical guide called Ecodesign. Also in the 1990s the Technical University of Delft, Philips Electronics, and the Dutch government collaborated to develop a life cycle analysis software tool providing metrics to assess the overall environmental impact of a product.

Today’s sustainable development movement embraces the broader concept of sustain- able product design (Bhamra and Lofthouse, 2007), which includes not only DFE but also the social and ethical implications of products. Even though authors have used vari- ous terminology for environmentally friendly design approaches, the terms green design, ecodesign, sustainable design, and DFE are more or less synonymous today.

Herman Miller’s Journey toward Design for Environment Many manufacturing firms have begun to embrace DFE. However, few have done so to the extent of Herman Miller, where DFE is central to its corporate strategy. Herman Miller strives to maintain high product quality standards while incorporating increasingly more environmentally friendly materials, manufacturing processes, and product function into every new product design.

In 1999, Herman Miller formed a design for environment (DFE) team. This team is re- sponsible for developing environmentally sensitive design standards for new and existing Herman Miller products. McDonough Braungart Design Chemistry (MBDC), a product and industrial process design firm based in Virginia, supports the DFE team in its mis- sion. McDonough and Braungart (2002) stated in their book, Cradle to Cradle: Remaking the Way We Make Things, that the traditional DFE approach—designing products that are merely less harmful to the environment due to incremental improvements such as reduced energy use, waste generation, or use of toxic materials—is not sufficient because such products are still unhealthy for the environment. To advance from less harmful to truly environmentally friendly products, McDonough and Braungart introduced a DFE method that focuses on three key areas of product design:

• Material chemistry: What chemicals comprise the specified materials? Are they safe for humans and the environment?

• Disassembly: Can the products be taken apart at the end of their useful life in order to recycle their materials?

• Recyclability: Do the materials contain recycled content? Are the materials readily separable into recycling categories? Can the materials be recycled at the end of the product’s useful life?

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Design for Environment 235

To implement DFE, Herman Miller has built a team of DFE experts who work on every new product development team. With MBDC, they have created a materials database and a DFE assessment tool, which provide metrics to guide design decisions throughout the product development process.

The Design for Environment Process

Effective implementation of DFE includes activities throughout the product development pro- cess. The steps of the DFE process are shown in Exhibit 12-4. Despite the linear presentation of the steps, product development teams will likely repeat some steps several times, making DFE an iterative process. The following sections describe each step of the DFE process.

Detail Design

1. Set DFE Agenda

Concept Development

System-Level Design

Product Planning

3. Select DFE Guidelines

2. Identify Potential Environmental Impacts

4. Apply DFE Guidelines to Initial Design(s)

5. Assess Environmental Impacts

7. Reflect on DFE Process and Results

6. Refine Design

Process Improvement

Compare to DFE Goals

EXHIBIT 12-4 The DFE process involves activities throughout the product development process.

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Step 1: Set the DFE Agenda: Drivers, Goals, and Team

The DFE process begins as early as the product planning phase with setting the DFE agenda. This step consists of three activities: identifying the internal and external drivers of DFE, setting the environmental goals for the product, and setting up the DFE team. By setting the DFE agenda, the organization identifies a clear and actionable path toward environmentally friendly product design.

Identify the Internal and External Drivers of DFE The planning phase of DFE begins with a discussion of the reasons why the organization wishes to address the environmental performance of its products. It is useful to document both the internal drivers and the external drivers of DFE. This list may evolve over time, as changes in technology, regulation, experience, stakeholders, and competition each affect the capability and challenges of the organization.

Internal drivers are the DFE objectives within the organization. Typical internal drivers of DFE are (adapted from Brezet and van Hemel, 1997):

• Product quality: A focus on environmental performance may raise the quality of the product in terms of functionality, reliability in operation, durability, and repairability.

• Public image: Communicating a high level of environmental quality of a product can improve a company’s image.

• Cost reduction: Using less material and less energy in production can result in consid- erable cost savings. Generating less waste and eliminating hazardous waste results in lower waste disposal costs.

• Innovation: Sustainable thinking can lead to radical changes in product design and may foster innovation across the whole company.

• Operational safety: By eliminating toxic materials, many DFE changes can help im- prove the occupational health and safety of employees.

• Employee motivation: Employees can be motivated to contribute in new and creative ways if they are able to help reduce the environmental impacts of the company’s prod- ucts and operations.

• Ethical responsibility: Interest in sustainable development among managers and prod- uct developers may be motivated in part by a moral sense of responsibility for conserv- ing the environment and nature.

• Consumer behavior: Wider availability of products with positive environmental bene- fits may accelerate the transition to cleaner lifestyles and demand for greener products.

External drivers of DFE typically include environmental regulations, customer prefer- ences, and the offerings of competitors, such as (from Brezet and van Hemel, 1997):

• Environmental legislation: Product-oriented environmental policy is developing rapidly. Companies must not only understand the myriad regulations in the various regions where they operate and sell products, but also be able to anticipate future

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legislation. The focus of recent legislation is shifting from the prohibition of certain materials to broader producer responsibility, including take-back obligations.

• Market demand: Today, companies operate in a business environment of increasingly well-informed industrial customers and end users who may demand sustainable prod- ucts. Negative publicity, blogs, and boycotts of products, manufacturers, or retailers can have considerable impact on sales. Of course, the opposite positive effect is be- coming more powerful as well.

• Competition: Sustainability activities undertaken by competitors can lead to pressure for more emphasis on DFE. Setting a high environmental standard may create a first- mover advantage.

• Trade organizations: Trade or industrial organizations in some branches of industry— such as packaging and automobile manufacturing—encourage companies to take envi- ronmental action by sharing technology and establishing codes of conduct.

• Suppliers: Suppliers influence company behavior by introducing more sustainable materials and processes. Companies may choose to audit and confirm environmental declarations of their suppliers.

• Social pressures: Through their social and community contacts, managers and employ- ees may be asked about the responsibility that their business takes for the environment.

Key DFE drivers for the Setu chair were market demand, innovation, and Herman Miller’s commitment to environmental responsibility. Studio 7.5 and Herman Miller de- veloped the early Setu concepts with these drivers in mind.

Set the DFE Goals An important activity in the product planning phase is to set the environmental goals for each product development project. Many organizations have established a strategy that in- cludes long-term environmental goals. These goals define how the organization complies with environmental regulations and how the organization reduces the environmental impacts of its products, services, and operations.

In 2005, Herman Miller set its long-term environmental goals for the year 2020:

• Zero landfill.

• Zero hazardous waste generation.

• Zero harmful air emissions.

• Zero process water use.

• All green electrical energy use.

• All buildings certified to meet environmental efficiency standards.

• All sales from products created with the DFE process.

To achieve the long-term goals, specific environmental goals may be set for every prod- uct during the planning phase. These individual goals also allow the organization to make progress toward the long-term strategy. Exhibit 12-5 lists examples of DFE goals, arranged according to the product life cycle. Based on an understanding of which life cycle stages contribute significant environmental impacts, goals may be developed accordingly.

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Herman Miller understands that the primary environmental impacts of their office fur- niture products are in the materials, production, and recovery stages. For the Setu chair, Herman Miller aimed to use exclusively materials with low environmental impact, facili- tate product disassembly, and enable recycling.

Set Up the DFE Team DFE requires participation by many functional experts on the product development proj- ect. The typical composition of a DFE team (often a subteam within the overall project team) consists of a DFE leader, an environmental chemistry and materials expert, a man- ufacturing engineer, and a representative from the purchasing and supply chain organiza- tion. Of course, the DFE team composition depends on the organization and needs of the specific project, and may also include marketing professionals, outside consultants, sup- pliers, or other experts.

Herman Miller created their DFE team in 1999 to work with the designers and engi- neers on every product development project to review material chemistry, disassembly, recyclability, incoming and outgoing packaging, energy sources and uses, and waste gen- eration. The DFE team is involved as early as possible to ensure that DFE considerations

Life Cycle Stage Example Design for Environment Goals

Materials • Reduce the use of raw materials. • Choose plentiful, renewable raw materials. • Eliminate toxic materials. • Increase the energy efficiency of material extraction processes. • Reduce discards and waste. • Increase the use of recovered and recycled materials.

Production • Reduce the use of process materials. • Specify process materials that can be fully recovered and recycled. • Eliminate toxic process materials. • Select processes with high energy efficiency. • Reduce production scrap and waste.

Distribution • Plan the most energy-efficient shipping. • Reduce emissions from transport. • Eliminate toxic and dangerous packaging materials. • Eliminate or reuse packaging.

Use • Extend useful product life. • Promote use of products under the intended conditions. • Enable clean and efficient servicing operations. • Eliminate emissions and reduce energy consumption during use.

Recovery • Facilitate product disassembly to separate materials. • Enable the recovery and remanufacturing of components. • Facilitate material recycling. • Reduce waste volume for incineration and landfill deposit.

EXHIBIT 12-5 Example DFE goals, arranged according to the product life cycle stages. Adapted from Giudice et al. (2006).

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Design for Environment 239

are taken into account right from the start. By working closely with each product develop- ment team, the DFE team provides the tools and knowledge for making environmentally sound design decisions.

Step 2: Identify Potential Environmental Impacts

Within the concept development phase, DFE begins by identifying the potential environ- mental impacts of the product over its life cycle. This enables the product development team to consider environmental impacts at the concept stage even though little or no specific data (regarding material and energy use, emissions, and waste generation) are yet available for the actual product and a detailed environmental impact assessment is not yet possible. In the case of product redesign, however, relevant data may be provided by impact analysis of some existing products. (See life cycle assessment methods in step 5 below.)

Exhibit 12-6 shows a chart that can be used to qualitatively assess the environmental impacts over the product life cycle. The chart is an adaption of the LiDS Wheel (Brezet and van Hemel, 1997) and the EcoDesign Web (Bhamra and Lofthouse, 2007). To create this chart, the team asks, “What are the significant sources of potential environmental im- pact in each life cycle stage?” Specific questions for each stage are given in Exhibit 12-7 and may be helpful in conducting this qualitative analysis.

The team lists for each life cycle stage the anticipated key environmental impacts. The height of each bar in the chart represents the team’s judgment about the overall magnitude of the potential environmental impacts and therefore where to focus their DFE efforts. For some products (e.g. automobiles, electronic devices) the most significant impacts are found to be in the use stage. For other products (e.g. clothing, office furniture) the great- est impacts may be in the materials, production, and recovery stages. Exhibit 12-6 shows a qualitative life cycle assessment for office furniture in general. This understanding guided DFE in the Setu chair project.

Materials Production Distribution Use Recovery

Life Cycle

Environmental Impacts

Water pollution from factory discharges

Waste generation during production

Air pollution from factory emissions

Air pollution due to transportation

emissions

Waste generation from packaging

Landfill leads to land degradation

Landfill generates methane and groundwater

pollutants

Waste generation during recovery

process

Incineration generates air pollution and

toxic ash

Natural resource depletion

Land degradation due to mining

Emissions and waste generation

from mining

Reduced biodiversity due to deforestation

Abrasion of materials

Maintenance and cleaning materials

EXHIBIT 12-6 The qualitative life cycle assessment represents the team’s estimate of the potential types and magnitudes of environmental impacts of the product over its life cycle. This chart depicts the types of impacts most relevant to office furniture products such as the Setu chair.

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Step 3: Select DFE Guidelines

Guidelines help product design teams to make early DFE decisions without the type of detailed environmental impact analysis that is only possible after the design is more fully specified. Relevant guidelines may be selected based in part on the qualitative assessment of life cycle impacts (from step 2). Selecting relevant guidelines during the concept devel- opment phase allows the product development team to apply them throughout the product development project.

Exhibit 12-8 shows a compilation of DFE guidelines based on a study by Telenko et al. (2008). Each life cycle stage has its own DFE guidelines that provide product development teams with instructions on how to reduce the environmental impacts of a product. A more detailed list of DFE guidelines is provided in the appendix to this chapter. Many of the guide- lines relate to selection of materials. This underscores the central role of materials in DFE.

Life Cycle Stage Questions

Materials • How much, and what types of recyclable materials will be used? • How much, and what types of non recyclable materials will be used? • How much, and what types of additives will be used? • What is the environmental profile of the materials? • How much energy will be required to extract these materials? • Which means of transport will be used to procure them?

Production • How many, and what types of production processes will be used? • How much, and what types of auxiliary materials are needed? • How high will the energy consumption be? • How much waste will be generated? • Can production waste be separated for recycling?

Distribution • What kind of transport packaging, bulk packaging, and retail packaging will be used (volumes, weights, materials, reusability)?

• Which means of transport will be used?

Use • How much, and what type of energy will be required? • How much, and what kind of consumables will be needed? • What will be the technical lifetime? • How much maintenance and repairs will be needed? • What and how much auxiliary materials and energy will be required? • What will be the aesthetic lifetime of the product?

Recovery • How can the product be reused? • Will the components or materials be reused? • Can the product be quickly disassembled using common tools? • What materials will be recyclable? • Will recyclable materials be identifiable? • How will the product be disposed?

EXHIBIT 12-7 Typical questions for consideration of the environmental impacts of each life cycle stage. Adapted from Brezet and van Hemel (1997).

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Life Cycle Stage Design for Environment Guidelines

Materials Sustainability of resources • Specify renewable and abundant resources.* • Specify recyclable and/or recycled materials.* • Specify renewable forms of energy.*

Healthy inputs and outputs • Specify nonhazardous materials.* • Install protection against release of pollutants

and hazardous substances. • Include labels and instructions for safe

handling of toxic materials.*

Production Minimal use of resources • Employ as few manufacturing steps as in production possible.* • Specify materials that do not require surface

treatments or coatings.* • Minimize the number of components.* • Specify lightweight materials and

components.*

Distribution Minimal use of resources • Minimize packaging. in distribution • Use recyclable and/or reusable packaging

materials. • Employ folding, nesting, or disassembly to

distribute products in a compact state. • Apply structural techniques and materials to

minimize the total volume of material.

Use Efficiency of resources • Implement default power-down for during use subsystems that are not in use. • Use feedback mechanisms to indicate how

much energy or water are being consumed. • Implement intuitive controls for resource-

saving features.

Appropriate durability • Consider aesthetics and functionality to ensure the aesthetic life is equal to the technical life.

• Facilitate repair and upgrading. • Ensure minimal maintenance. • Minimize failure modes.

Recovery Disassembly, separation, • Ensure that joints and fasteners are easily and purification accessible.* • Specify joints and fasteners so that they are

separable by hand or with common tools.* • Ensure that incompatible materials are easily

separated.*

EXHIBIT 12-8 Design for environment guidelines arranged according to the life cycle stage of a product. Based on Telenko et al. (2008). Guidelines used in the Setu project are identified with an asterisk.

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For the Setu project, the DFE experts provided the product development team with several guidelines. These guidelines are identified with an asterisk in Exhibit 12-8.

Step 4: Apply the DFE Guidelines to the Initial Product Design

As the product architecture is developed during the system-level design phase (see Chap- ter 10, Product Architecture), some initial material choices are made along with some of the module design decisions. It is beneficial, therefore, to apply the relevant DFE guide- lines (selected in step 3) at this point. In this way, the initial product design may have lower environmental impacts.

The Setu team wanted the chair to be lightweight in order to reduce materials use and transportation impacts (application of the DFE guideline: Specify lightweight materials and components). They achieved this by developing a concept and product architecture that avoided an under-seat tilt mechanism and other complexities. This helped to reduce the chair’s weight by as much as 20 pounds (9 kg). The Setu team also looked for new ways to ease the disassembly of the Setu in order to facilitate recycling. They placed each joint where it is eas- ily accessible and also ensured that Setu’s components are separable by hand or with common tools (application of the DFE guidelines: Ensure that joints and fasteners are easily accessible; Specify joints and fasteners so that they are separable by hand or with common tools).

In the detail-design phase, the exact materials specifications, detailed geometry, and manufacturing processes are determined. Application of the DFE guidelines in detail design is essentially the same as in system-level design; however, at this point many more decisions are being made and environmental factors can be considered with greater precision. By specifying low-impact materials and reducing energy consumption, product development teams create more environmentally friendly products. Furthermore, the DFE guidelines may inspire product development teams to come up with improvement in the functionality and durability of the product, which may lead to significant lower environmental impacts.

The Setu spine geometry, shown in Exhibit 12-9, was inspired by the human backbone. Studio 7.5 designers prototyped many iterations of the spine in order to achieve proper support and recline (see Exhibit 12-10). Once the shape of the spine was set, the team had to find materials that suited both the functional and environmental requirements.

EXHIBIT 12-9 The Setu spine was inspired by the human backbone.

Courtesy of Studio 7.5 and Herman Miller, Inc.

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Design for Environment 243

To specify materials that fit the environmental and functional requirements, the develop- ment team used Herman Miller’s proprietary materials database. The database, maintained together with MBDC, considers the safety and environmental impacts of each material and classifies them into one of four categories: green (little to no hazard), yellow (low to moderate hazard), orange (incomplete data), and red (high hazard). Herman Miller’s aim was to use only materials that rank yellow or green for all new products.

For example, polyvinyl chloride (PVC) is classified as a red material. PVC is a poly- mer that is commonly used in furniture and other products due to its low cost and high strength. However, both the production and the incineration of PVC releases toxic emis- sions. To avoid using materials that are toxic to humans and the environment (application of the DFE guideline: Specify nonhazardous materials), the engineers specified safer ma- terials such as polypropylene and avoided PVC entirely.

Step 5: Assess the Environmental Impacts

The next step is to assess, to the extent possible, the environmental impacts of the product over its entire life cycle. To do so with precision requires a detailed understanding of how the product is to be produced, distributed, used over its lifetime, and recycled or disposed

Courtesy of Studio 7.5 and Herman Miller, Inc.

EXHIBIT 12-10 The design team prototyped many variations of Setu’s spine and related components.

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at the end of its useful life. This assessment is generally done on the basis of the detailed bill of materials (BOM), including sources of energy, component material specifications, suppliers, transportation modes, waste streams, recycling methods, and disposal means. Several quantitative life cycle assessment (LCA) tools are available to conduct such an environmental assessment. These tools range in price and complexity and would be se- lected based on the types of materials and processes involved, and the precision required of the analysis.

LCA requires a significant amount of time, training, and data. Many LCA analyses are comparative and provide a basis for considering the environmental performance of prod- uct design alternatives. Commercial LCA software is becoming widely used in product design, and supporting data are available for common materials, production processes, transport methods, energy generation processes, and disposal scenarios.

Herman Miller uses their own proprietary DFE assessment tool, developed for them by MBDC. The DFE tool consists of a spreadsheet interface and the materials database using the color coding described above. The tool considers four factors for each component in the product:

1. Material chemistry: Fraction of the materials by weight that are the safest possible in terms of human toxicity and environmental concerns.

2. Recycled content: Fraction of the materials by weight that are postindustrial or post- consumer recycled content.

3. Disassembly: Fraction of the materials by weight that can be readily disassembled.

4. Recyclability: Fraction of the materials by weight that are recyclable.

Once the initial Setu design was established, the chair was divided into modules, with different teams assigned to develop each module. As each team designed their module, the DFE team assessed the design using the DFE tool.

Compare the Environmental Impacts to DFE Goals This step compares the environmental impacts of the evolving design to the DFE goals established in the planning phase. If several design options were created in the detail- design phase, they may now be compared to judge which one has the lowest environmen- tal impacts. Unless the product development team is very experienced in DFE, the design will generally have much room for improvement. Usually several DFE iterations are re- quired before the team is satisfied that the product is as good as it should be from a DFE perspective.

Step 6: Refine the Product Design to Reduce or Eliminate the Environmental Impacts

The objective of this step and subsequent DFE iterations is to reduce or eliminate any significant environmental impacts through redesign. The process repeats until the environ- mental impacts have been reduced to an acceptable level and the environmental perfor- mance fits the DFE goals. Redesign for ongoing improvement of DFE may also continue after production begins. For the Aeron and Mirra chairs (shown in Exhibit 12-1), Herman

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Design for Environment 245

Miller made several modifications to materials specifications and sources since the initial release of these products, reducing their environmental impacts.

After several design iterations, the Setu team developed a way to co-mold the spine using two different polypropylene materials that are compatible for recycling without separation. The inner and outer rails of the spine are made of a polypropylene- and-glass composite, while the connecting spokes are molded using a more flexible polypropylene-and-rubber composite (see Exhibit 12-11). Setu’s aluminum base is an example of “minimal design.” Uncoated and unpolished, with no finishing labor and no harmful toxins, it is durable and has less environmental impacts than traditionally finished chair bases.

One of the difficult trade-offs addressed in the development of Setu was related to se- lection of materials for the arms of the chair. While they were determined to avoid using PVC, the team was not able to mold the arms using all olefinic materials (such as poly- propylene) due to concerns of durability and fatigue failure. The Setu arms, therefore, were molded from nylon and over-molded with a thermoplastic elastomer. Because these materials are not chemically compatible for recycling, this decision limited the chair’s overall recyclability.

Step 7: Reflect on the DFE Process and Results

As with every aspect of the product development process, the final activity is to ask:

• How well did we execute the DFE process?

• How can our DFE process be improved?

• What DFE improvements can be made on derivative and future products?

Courtesy of Herman Miller, Inc.

EXHIBIT 12-11 The final design of the Setu spine (left) and aluminum base (right).

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Based on Herman Miller’s DFE assessment tool, on a scale of 0 to 100 percent, with 100 percent being a truly “cradle-to-cradle” product, the Setu chair achieved a rating of 72 percent, as shown in Exhibit 12-12.

The Setu team was pleased with the chair in terms of ease of disassembly and feasibil- ity of recycling. Over the course of developing the Setu, the chair’s recyclability score moved up and down and eventually dropped from 99 percent to 92 percent due to the material selection trade-off in design of the arms. One very important achievement made during the development of the Setu to enable its recyclability was a change in the spine’s materials. Early iterations used dissimilar materials bonded together, which could not be recycled. The DFE team challenged the Setu team to innovate further. The resulting solu- tion is constructed of two materials that are compatible for recycling without separation. Unfortunately, such a solution could not be developed for the Setu arms, and incompat- ible bonded materials were used there.

While highly successful in terms of implementing DFE, the Setu chair still had some negative environmental impacts, particularly in terms of material chemistry and use of re- cycled content, as shown in Exhibit 12-12. This reflects the reality that creating a perfect product from a DFE perspective is a goal that may take years to achieve. Effective DFE requires a product development team that strives for continuous improvement. The DFE team may be able to further develop the Setu chair to reduce some of the known impacts. For example, molding the Setu arms entirely using polypropylene would likely improve recyclability and reduce cost, but would also require addressing several very challenging technical issues.

To further improve their DFE process, Herman Miller began to use LCA software to monitor their DFE results and to guide further refinement of their products. They next planned to integrate “carbon footprint” into their DFE tool. The carbon footprint of a product is the amount of greenhouse gas emissions caused by the product, usually expressed in terms of the equivalent mass of CO2 emitted. The consideration of carbon footprint would further affect Herman Miller’s material choices. For example, based only on recyclability and environmental toxicity, aluminum is an environmentally friendly ma- terial. However, considering the carbon footprint of aluminum, it may be a less favorable choice (compared to steel, for example) due to the amount of energy required to produce new aluminum. Recycled aluminum, however, uses much less energy, so this analysis also depends upon the sources of the materials and energy used to process the metals.

DFE Assessment Factor Setu Score Factor Weight Weighted Score

Material Chemistry 50% 33.3% 16.7% Recycled Content 44% 8.4% 3.7% Disassembly 86% 33.3% 28.6% Recyclability 92% 25.0% 23.0%

Overall Score 100% 72%

EXHIBIT 12-12 Herman Miller’s DFE assessment tool considers four factors and computes the weighted overall score of 72 percent for the Setu chair.

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Design for Environment 247

Summary Every product has environmental impacts over its life cycle. Design for environment (DFE) provides companies with a practical method to minimize or eliminate these envi- ronmental impacts.

• Effective DFE maintains or improves product quality and cost while reducing environ- mental impacts.

• DFE expands the traditional manufacturer’s focus to consider the full product life cycle and its relationship to the environment. It begins with the extraction and process- ing of raw materials from natural resources, followed by production, distribution, and use of the product. Finally, at the end of the product’s useful life are several recovery options: remanufacturing or reuse of components, recycling of materials, or disposal through incineration or deposition in a landfill, to reintegrate the product into a closed- loop cycle.

• DFE may involve activities throughout the product development process and requires an interdisciplinary approach. Industrial design, engineering, purchasing, and market- ing all work together in the development of environmentally friendly products.

• The DFE process consists of seven steps. Product development teams will likely repeat some steps several times.

1. Set the DFE agenda: drivers, goals, and team.

2. Identify potential environmental impacts.

3. Select DFE guidelines.

4. Apply the DFE guidelines to the initial product design.

5. Assess the environmental impacts.

6. Refine the product design to reduce or eliminate the environmental impacts.

7. Reflect on the DFE process and results.

References and Bibliography Many current resources are available on the Internet via www.ulrich-eppinger.net

There are several texts covering the topic of DFE. Bhamra and Lofthouse provide an introduction to design for sustainability and a description of several strategic tools that can be used for DFE such as the EcoDesign Web. Fiksel’s book is a comprehensive guide to DFE as a life cycle approach to new product and process development. Lewis et al. provide an overview and description of the environmental impacts and several environmental assessment tools.

Bhamra, T., and V. Lofthouse, Design for Sustainability: A Practical Approach, Gower, UK, 2007.

Fiksel, J. R., Design for Environment: A Guide to Sustainable Product Development, second edition, McGraw-Hill, New York, 2009.

Lewis, H., J. Gertsakis, and T. Grant, Design and Environment: A Global Guide to Designing Greener Goods, Greenleaf Publishing Limited, Sheffield, UK, 2001.

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A number of authors have argued persuasively for due consideration of environmental impacts in design. Burall concluded that there is no longer a conflict between a green approach to design and business success. McDonough and Braungart explain that the conflict between industry and the environment is not an indictment of commerce but rather an outgrowth of purely opportunistic design. Papanek challenged designers to face their social and environmental responsibilities instead of only commercial interests. The Brundtland Report (1987) first defined the term sustainable development.

Burall, P., Green Design, Design Council, London, 1991.

McDonough, W., and M. Braungart, Cradle to Cradle: Remaking the Way We Make Things, North Point Press, New York, 2002.

Papanek, V., Design for the Real World: Human Ecology and Social Change, Van Nostrand Reinhold Co., New York, 1971.

World Commission on Environment and Development, The Brundtland Report: Our Common Future, Oxford University Press, London, 1987.

Portions of the DFE method presented in this chapter are derived from various sources. The internal and external drivers for DFE are based on Brezet and van Hemel’s Ecodesign work. The DFE goals are adapted from the environmental strategies listed by Giudice et al. The DFE guidelines are derived from the comprehensive compilation by Telenko et al. The materials-based emphasis of DFE reflects the cradle-to-cradle concept explained by McDonough and Braungart.

Brezet, H., and C. van Hemel, Ecodesign: A Promising Approach to Sustainable Production and Consumption, TU Delft, Netherlands, 1997.

Giudice, F., G. La Rosa, and A. Risitano, Product Design for the Environment: A Life Cycle Approach, CRC Press Taylor & Francis Group, Boca Raton, FL, 2006.

Telenko, C., C. C. Seepersad, and M. E. Webber, A Compilation of Design for Environment Principles and Guidelines, ASME DETC Design for Manufacturing and the Life Cycle Conference, New York, 2008.

The International Organization for Standardization (ISO) has developed internationally agreed standards for LCA, known as ISO 14040.

International Organization for Standardization, Environmental Management: Life Cycle Assessment—Principles and Framework, European Committee for Standardization, Brussels, 2006.

Exercises 1. List at least 10 types of environmental impacts over the life cycle of your personal

computer or mobile phone. Chart these as in Exhibit 12-6, representing your judgment of the relative impact of each life cycle stage.

2. Disassemble a simple product, such as a ballpoint pen. Suggest two ways to reduce its environmental impacts.

3. For the product considered in Exercise 1, compute its environmental impact score using any LCA analysis tool available to you.

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Design for Environment 249

Thought Questions 1. What are some of the ways in which you have become more aware of your own envi-

ronmental impact in recent years?

2. For the Setu chair, what types of environmental impacts would be in the use stage of its life cycle?

3. In what ways can DFE help to improve the quality of a product, in terms of its func- tionality, reliability, durability, and reparability?

4. For each life cycle stage, identify a product or service that has high environmental im- pacts during the particular life cycle stage. Then, suggest a new or existing product or service that provides the same functionality with lower (or without any) environmental impacts.

5. How would you explicitly include renewable and nonrenewable energy in the life cycle diagram in Exhibit 12-3? Draw such a diagram and explain it.

6. Explain the relationship between DFE and DFM. Consider, for example, those DFE guidelines related to production in Exhibit 12-8.

7. Consider the DFE assessment tool used by Herman Miller (Exhibit 12-12), which computed the weighted sum of scores for material chemistry, use of recycled content, ease of disassembly, and recyclability. What modifications would you propose to cre- ate a DFE assessment tool for a different type of product, such as an automobile or a mobile phone?

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Appendix

Design for Environment Guidelines Telenko et al. (2008) compiled an extensive list of DFE guidelines based on a number of sources covering a range of industries. Each life cycle stage has its own DFE guide- lines that provide product development teams with suggestions to reduce environmental impacts. The list below is based upon the compilation by Telenko et al.

Life Cycle Stage: Materials Ensure Sustainability of Resources

1. Specify renewable and abundant resources.

2. Specify recyclable or recycled materials, especially those within the company or for which a market exists or needs to be stimulated.

3. Layer recycled and virgin material where virgin material is necessary.

4. Exploit unique properties of recycled materials.

5. Employ common and remanufactured components across models.

6. Specify mutually compatible materials and fasteners for recycling.

7. Specify one type of material for the product and its subassemblies.

8. Specify noncomposite, nonblended materials and no alloys.

9. Specify renewable forms of energy.

Ensure Healthy Inputs and Outputs

10. Install protection against release of pollutants and hazardous substances.

11. Specify nonhazardous and otherwise environmentally “clean” substances, especially in regards to user health.

12. Ensure that wastes are water-based or biodegradable.

13. Specify the cleanest source of energy.

14. Include labels and instructions for safe handling of toxic materials.

15. Specify clean production processes for the product and in selection of components.

16. Concentrate toxic elements for easy removal and treatment.

Life Cycle Stage: Production Ensure Minimal Use of Resources in Production

17. Apply structural techniques and materials to minimize the total volume of material.

18. Specify materials that do not require additional surface treatment, coatings, or inks.

19. Structure the product to avoid rejects and minimize material waste in production.

20. Minimize the number of components.

21. Specify materials with low-intensity production and agriculture.

22. Specify clean, high-efficiency production processes.

23. Employ as few manufacturing steps as possible.

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Design for Environment 251

Life Cycle Phase: Distribution Ensure Minimal Use of Resources in Distribution

24. Replace the functions and appeals of packaging through the product’s design.

25. Employ folding, nesting, or disassembly to distribute products in a compact state.

26. Specify lightweight materials and components.

Life Cycle Stage: Use Ensure Efficiency of Resources During Product Use

27. Implement reusable supplies for ensuring the maximum usefulness of consumables.

28. Implement fail-safes against heat and material loss.

29. Minimize the volume and weight of parts and materials to which energy is trans- ferred.

30. Specify best-in-class, energy-efficient components.

31. Implement default power-down for subsystems that are not in use.

32. Ensure rapid warm-up and power-down.

33. Maximize system efficiency for an entire range of usage conditions.

34. Interconnect available flows of energy and materials within the product and between the product and its environment.

35. Incorporate partial operation and permit users to turn off systems partially or completely.

36. Use feedback mechanisms to indicate how much energy or water is being consumed.

37. Incorporate intuitive controls for resource-saving features.

38. Incorporate features that prevent waste of materials by the user.

39. Use default mechanisms to automatically reset the product to its most efficient setting.

Ensure Appropriate Durability of the Product and Components

40. Reutilize high-embedded energy components.

41. Plan for ongoing efficiency improvements.

42. Improve aesthetics and functionality to ensure the aesthetic life is equal to the technical life.

43. Ensure minimal maintenance and minimize failure modes in the product and its components.

44. Specify better materials, surface treatments, or structural arrangements to protect products from dirt, corrosion, and wear.

45. Indicate on the product which parts are to be cleaned/maintained in a specific way.

46. Make wear detectable.

47. Allow easy repair and upgrading, especially for components that experience rapid change.

48. Require few service and inspection tools.

49. Facilitate testing of components.

50. Allow for repetitive disassembly and reassembly.

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Life Cycle Stage: Recovery Enable Disassembly, Separation, and Purification of Materials and Components

51. Indicate on the product how it should be opened and make access points obvious.

52. Ensure that joints and fasteners are easily accessible.

53. Maintain stability and part placement during disassembly.

54. Minimize the number and variety of joining elements.

55. Ensure that destructive disassembly techniques do not harm people or reusable com- ponents.

56. Ensure that reusable parts can be cleaned easily and without damage.

57. Ensure that incompatible materials are easily separated.

58. Make component interfaces simple and reversibly separable.

59. Organize a product or system into hierarchical modules by aesthetic, repair, and end- of-life protocol.

60. Implement reusable/swappable platforms, modules, and components.

61. Condense into a minimal number of parts.

62. Specify compatible adhesives, labels, surface coatings, pigments, and the like that do not interfere with cleaning.

63. Employ one disassembly direction without reorientation.

64. Specify all joints so that they are separable by hand or only a few, simple tools.

65. Minimize the number and length of operations for detachment.

66. Mark materials in molds with types and reutilization protocols.

67. Use a shallow or open structure for easy access to subassemblies.

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Courtesy of General Motors Corp.

EXHIBIT 13-1 The General Motors 3.8-liter V6 engine.

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General Motors Powertrain Division manufactures about 3,500 3.8-liter V6 engines every day (Exhibit 13-1). Facing such high production volumes, the company had a strong inter- est in reducing the cost of the engine while simultaneously enhancing its quality. A team was formed to improve one of the most expensive subassemblies in the engine: the air intake manifold. (The intake manifold’s primary function is to route air from the throttle to the intake valves at the cylinders.) The original and redesigned intake manifold assem- blies are shown in Exhibit 13-2. This chapter presents a method of design for manufactur- ing using the GM V6 intake manifold as an example.

EXHIBIT 13-2 The original and redesigned air intake manifolds. The body of the original manifold (top) is made of cast aluminum. The redesigned manifold (bottom) is made of molded thermoplastic composite.

Photos by Stuart Cohen

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Design for Manufacturing 255

Design for Manufacturing Defined

Customer needs and product specifications are useful for guiding the concept phase of product development; however, during the later development activities teams often have difficulty linking needs and specifications to the specific design issues they face. For this reason, many teams practice “design for X” (DFX) methodologies, where X may cor- respond to one of dozens of quality criteria such as reliability, robustness, serviceability, environmental impact, or manufacturability. The most common of these methodologies is design for manufacturing (DFM), which is of universal importance because it directly ad- dresses manufacturing costs.

This chapter is primarily about DFM, but it is also intended to illustrate, by example, these general principles, which apply to methodologies for achieving any of the Xs in DFX:

• Detail-design decisions can have substantial impact on product quality and cost.

• Development teams face multiple, and often conflicting, goals.

• It is important to have metrics with which to compare alternative designs.

• Dramatic improvements often require substantial creative efforts early in the process.

• A well-defined method assists the decision-making process.

Manufacturing cost is a key determinant of the economic success of a product. In simple terms, economic success depends on the profit margin earned on each sale of the product and on how many units of the product the firm can sell. Profit margin is the dif- ference between the manufacturer’s selling price and the cost of making the product. The number of units sold and the sales price are to a large degree determined by the overall quality of the product. Economically successful design is therefore about ensuring high product quality while minimizing manufacturing cost. DFM is one method for achieving this goal; effective DFM practice leads to low manufacturing costs without sacrificing product quality. (See Chapter 17, Product Development Economics, for a more detailed discussion of models relating manufacturing costs to economic success.)

DFM Requires a Cross-Functional Team Design for manufacturing is one of the most integrative practices involved in product de- velopment. DFM utilizes information of several types, including (1) sketches, drawings, product specifications, and design alternatives; (2) a detailed understanding of production and assembly processes; and (3) estimates of manufacturing costs, production volumes, and ramp-up timing. DFM therefore requires the contributions of most members of the development team as well as outside experts. DFM efforts commonly draw upon exper- tise from manufacturing engineers, cost accountants, and production personnel, in ad- dition to product designers. Many companies use structured, team-based workshops to facilitate the integration and sharing of views required for DFM.

DFM Is Performed throughout the Development Process DFM begins during the concept development phase, when the product’s functions and specifications are being determined. When choosing a product concept, cost is almost always one of the criteria on which the decision is made—even though cost estimates at this phase are highly subjective and approximate. When product specifications are

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finalized, the team makes trade-offs between desired performance characteristics. For example, weight reduction may increase manufacturing costs. At this point, the team may have an approximate bill of materials (a list of parts) with estimates of costs. During the system-level design phase of development, the team makes decisions about how to break up the product into individual components, based in large measure on the expected cost and manufacturing complexity implications. Accurate cost estimates finally become available during the detail-design phase of development, when many more decisions are driven by manufacturing concerns.

Overview of the DFM Process Our DFM method is illustrated in Exhibit 13-3. It consists of five steps plus iteration:

1. Estimate the manufacturing costs.

2. Reduce the costs of components.

3. Reduce the costs of assembly.

4. Reduce the costs of supporting production.

5. Consider the impact of DFM decisions on other factors.

As shown in Exhibit 13-3, the DFM method begins with the estimation of the manu- facturing cost of the proposed design. This helps the team to determine at a general level which aspects of the design—components, assembly, or support—are most costly. The team then directs its attention to the appropriate areas in the subsequent steps. This pro- cess is iterative. It is not unusual to recompute the manufacturing cost estimate and to improve the design of the product dozens of times before agreeing that it is good enough. As long as the product design is improving, these DFM iterations may continue even until pilot production begins. At some point, the design is frozen (or “released”), and any further modifications are considered formal “engineering changes” or become part of the next generation of the product.

In the next section, we use the original GM V6 intake manifold as an example and explain how manufacturing costs are determined. Then, recognizing that accurate cost estimates are difficult (if not impossible) to obtain, we present several useful methods for reducing the costs of components, assembly, and production support. We use the rede- signed intake manifold and other products as examples to illustrate these DFM principles. Finally, we discuss the results achieved through DFM and some of the broader implica- tions of DFM decisions.

Step 1: Estimate the Manufacturing Costs

Exhibit 13-4 shows a simple input-output model of a manufacturing system. The inputs include raw materials, purchased components, employees’ efforts, energy, and equipment. The outputs include finished goods and waste. Manufacturing cost is the sum of all of the expenditures for the inputs of the system and for disposal of the wastes produced by the system. As the metric of cost for a product, firms generally use unit manufacturing cost, which is computed by dividing the total manufacturing costs for some period (usually a quarter or a year) by the number of units of the product manufactured during that period. This simple concept is complicated in practice by several issues:

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• What are the boundaries of the manufacturing system? Should the field service opera- tions be included? What about product development activities?

• How do we “charge” the product for the use of expensive general-purpose equipment that lasts for many years?

• How are costs allocated among more than one product line in large, multiproduct manufacturing systems?

These are issues around which much of the field of managerial accounting is built, and we do not treat them in depth here. Nevertheless, we will be mindful of these complica- tions as we discuss cost and DFM in this chapter.

EXHIBIT 13-3 The design for manufacturing (DFM) method.

Proposed Design

Estimate the Manufacturing

Costs

Reduce the Costs of Assembly

Reduce the Costs of Components

Reduce the Costs of Supporting

Production

Consider the Impact of DFM Decisions on

Other Factors

Recompute the Manufacturing

Costs

N

Y

Acceptable Design

Good Enough

?

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Exhibit 13-5 shows one way of categorizing the elements of manufacturing cost. Under this scheme, the unit manufacturing cost of a product consists of costs in three categories:

1. Component costs: The components of a product (also simply called parts of the product) may include standard parts purchased from suppliers. Examples of standard components include motors, switches, electronic chips, and screws. Other components are custom parts, made according to the manufacturer’s design from raw materials, such as sheet steel, plastic pellets, or aluminum bars. Some custom components are made in the manufacturer’s own plant, while others may be produced by suppliers according to the manufacturer’s design specifications.

2. Assembly costs: Discrete goods are generally assembled from parts. The process of as- sembling almost always incurs labor costs and may also incur costs for equipment and tooling.

EXHIBIT 13-4 A simple input-output model of a manufacturing system.

Raw Materials

Labor

Purchased Components

Energy Supplies Services

Equipment Information Tooling

Waste

Finished GoodsMANUFACTURING SYSTEM

Components Assembly Overhead

Standard Custom Labor

Raw Material Processing Tooling

Equipment and Tooling Support

Indirect Allocation

Manufacturing Cost

EXHIBIT 13-5 Elements of the manufacturing cost of a product.

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3. Overhead costs: Overhead is the category used to encompass all of the other costs. We find it useful to distinguish between two types of overhead: support costs and other indirect allocations. Support costs are the costs associated with materials handling, qual- ity assurance, purchasing, shipping, receiving, facilities, and equipment/tooling mainte- nance (among others). These are the support systems required to manufacture the prod- uct, and these costs do greatly depend upon the product design. Nevertheless, because these costs are often shared by more than one product line, they are lumped together in the category of overhead. Indirect allocations are the costs of manufacturing that can- not be directly linked to a particular product but that must be paid for to be in business. For example, the salary of the security guard and the cost of maintenance to the building and grounds are indirect costs because these activities are shared among several different products and are difficult to allocate directly to a specific product. Because indirect costs are not specifically linked to the design of the product, they are not relevant to DFM, even though they do contribute to the cost of the product.

Transportation Costs The model of manufacturing cost in Exhibit 13-5 does not include any costs for transport- ing finished goods through the distribution system. Manufacturing often occurs at a location a great distance from the eventual customer. Although the DFM method presented here does not explicitly include transportation expense, estimating those costs is relatively easy. For instance, most goods are transported overseas using standard shipping containers, which hold about 70 cubic meters of cargo. In most cases, these containers are shipped from one location to another at a fixed cost. Currently the cost of shipping a container between Asia and the United States is roughly 6,000 USD, resulting in a shipping cost rate of 86 USD/m3. Rates for air freight and trucking, although based on a combination of weight and volume, are also readily available. Based on these rates, the product design team can easily include transportation costs in its analysis, and doing so may be warranted when the team faces design decisions involving the physical volume or weight of the product.

Fixed Costs versus Variable Costs Another way to divide manufacturing costs is between fixed costs and variable costs. Fixed costs are those that are incurred in a predetermined amount, regardless of how many units of the product are manufactured. Purchasing the injection mold required for the new intake manifold is an example of a fixed cost. Whether 1,000 or 1 million units are produced, the fixed cost of the mold is incurred and does not change. Another exam- ple is the cost of setting up the factory work area for the intake manifold assembly line. This cost is also fixed, regardless of how many units are produced. Despite the terminol- ogy, however, no cost is truly fixed. If we quadruple the production quantity, we may have to build another production line. Conversely, we may be able to consolidate two assembly cells if we cannot use all the capacity due to dramatically lower production quantities. When considering a cost as fixed, ranges of production quantities and the assumed time horizon should be specified.

Variable costs are those incurred in direct proportion to the number of units pro- duced. For example, the cost of raw materials is directly proportional to how many intake

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manifolds are produced, and therefore to how many 3.8-liter V6 engines are made. As- sembly labor is sometimes considered a variable cost as well because many firms can ad- just the staffing of assembly operations by shifting workers to other areas on short notice.

The Bill of Materials Because manufacturing cost estimation is fundamental to DFM, it is useful to keep this information well organized. Exhibit 13-6 shows an information system for recording manufacturing cost estimates. It basically consists of a bill of materials (BOM) augmented with cost information. The BOM (usually pronounced bomb) is a list of each individual component in the product. Frequently the BOM is created using an indented format in which the assembly “tree structure” is illustrated by the indentation of compo- nents and subassembly names.

The columns of the BOM show the cost estimates broken down into fixed and variable costs. The variable costs may include materials, machine time, and labor. Fixed costs con- sist of tooling and other nonrecurring expenses (NRE) such as specialized equipment and one-time setup costs. The tooling lifetime is used to compute the unit fixed cost (unless the tool’s expected lifetime exceeds the product’s lifetime volume, in which case the lower product volume is used). To compute total cost, overhead is added according to the firm’s accepted cost accounting scheme. Note that additional fixed costs, such as depreciation of capital equipment used for several products, are often also included in the overhead charge.

EXHIBIT 13-6 Indented bill of materials showing cost estimates for the original intake manifold and related components. The EGR (exhaust gas recirculation), PCV (positive crankcase ventilation), and vacuum block components are included here to facilitate comparison with the redesigned manifold assembly.

Processing Total Unit Tooling Tooling Total Unit Purchased (Machine Assembly Variable and Other Lifetime, Fixed Total Component Materials � Labor) (Labor) Cost NRE, K$ K units Cost Cost

Manifold machined

casting 12.83 5.23 18.06 1960 500+ 0.50 18.56 EGR return pipe 1.30 0.15 1.45 1.45 PCV assembly Valve 1.35 0.14 1.49 1.49 Gasket 0.05 0.13 0.18 0.18 Cover 0.76 0.13 0.89 0.89 Screws (3) 0.06 0.15 0.21 0.21 Vacuum source block assembly Block 0.95 0.13 1.08 1.08 Gasket 0.03 0.05 0.08 0.08 Screw 0.02 0.09 0.11 0.11

Total Direct Costs 17.35 5.23 0.95 23.53 1960 0.50 24.03 Overhead Charges 2.60 9.42 1.71 0.75 14.48 Total Cost 38.51

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Estimating the Costs of Standard Components The costs of standard components are estimated by either (1) comparing each part to a sub- stantially similar part the firm is already producing or purchasing in comparable volumes or (2) soliciting price quotes from vendors or suppliers. The costs of minor components (e.g., bolts, springs, and inserts) are usually obtained from the firm’s experience with similar com- ponents, while the costs of major components are usually obtained from vendor quotes.

In obtaining price quotes, the estimated production quantities are extremely important. For example, the unit price on a purchase of a dozen screws or inserts may be 10 times higher than the unit prices paid by GM when purchasing 100,000 of these parts every month. If the anticipated production quantities are high enough, an application engineer or sales engineer is usually quite willing to work with the development team to specify a component properly. For internally fabricated standard components, if the required quan- tities are high, there may not be available production capacity, necessitating the purchase of additional equipment or the use of outside suppliers.

Some suppliers will design and fabricate a custom variation to a standard component if production quantities are high enough. For example, small electric motors, such as those found in powered hand tools, are often designed and built specifically for the product ap- plication. If the production quantities are high enough (say, 100,000 per year in this case), these custom motors are quite economical ($1 to $5 per unit, depending on the performance characteristics). For the intake manifold, the volumes are sufficiently high that custom studs, bushings, and other parts may not cost much more than standard components. However, as we discuss later, introducing new parts can add substantial cost and complexity to the pro- duction system and field service operations, which increases the support costs.

Vendors for most standard components can be found in the Thomas Register of American Manufacturers or by looking for company names on components used in related products. To obtain a price quote, first request a catalog or product literature (now gener- ally available on the Internet). Then, either choose a part number or, if a custom component will be used, write a one-page description of the requirements of the component. Next, telephone the vendor, ask to speak to someone in “sales,” and request price information. Make sure to inform vendors that the information is for estimation purposes only; other- wise, they may claim they do not have enough information to determine exact prices.

Estimating the Costs of Custom Components Custom components, which are parts designed especially for the product, are made by the manufacturer or by a supplier. Most custom components are produced using the same types of production processes as standard components (e.g., injection molding, stamping, machining); however, custom parts are typically special-purpose parts, useful only in a particular manufacturer’s products.

When the custom component is a single part, we estimate its cost by adding up the costs of raw materials, processing, and tooling. In cases where the custom component is actually an assembly of several parts, then we consider it a “product” in and of itself; to arrive at the cost of this “product” we estimate the cost of each subcomponent and then add assembly and overhead costs (these costs are described below). For the purposes of this explanation, we assume the component is a single part.

The raw materials costs can be estimated by computing the mass of the part, allowing for some scrap (e.g., 5 percent to 50 percent for an injection molded part, and 25 percent

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to 100 percent for a sheet metal part), and multiplying by the cost (per unit mass) of the raw material. A table of raw material costs is given in Appendix A (Exhibit 13-17).

Processing costs include costs for the operator(s) of the processing machinery as well as the cost of using the equipment itself. Most standard processing equipment costs between $25 per hour (a simple stamping press) and $75 per hour (a medium-sized, computer-controlled milling machine) to operate, including depreciation, maintenance, utilities, and labor costs. Estimating the processing time generally requires experience with the type of equipment to be used. However, it is useful to understand the range of typical costs for common production processes. For this purpose, tables of approximate processing times and costs are given in Appendix B for a variety of stampings, castings, injection moldings, and machined parts.

Tooling costs are incurred for the design and fabrication of the cutters, molds, dies, or fixtures required to use certain machinery to fabricate parts. For example, an injection molding machine requires a custom injection mold for every different type of part it pro- duces. These molds generally range in cost from $10,000 to $500,000. Approximate tool- ing costs are also given for the parts listed in Appendix B. The unit tooling cost is simply the cost of the tooling divided by the number of units to be made over the life of the tool. A high-quality injection mold or stamping die can usually be used for a few million parts.

The cost of the original intake manifold’s machined casting is estimated as shown in Exhibit 13-7. Note that the estimate reveals that the cost is dominated by the expense of the aluminum material. We will see that the redesign using a composite material not only reduced the material costs but also eliminated machining and allowed many features to be formed into the molded body.

Estimating the Cost of Assembly Products made of more than one part require assembly. For products made in quantities of less than several hundred thousand units per year, this assembly is almost always performed manually. One exception to this generalization is the assembly of electronic circuit boards, which is now almost always done automatically, even at relatively low volumes.

Manual assembly costs can be estimated by summing the estimated time of each assembly operation and multiplying by a labor rate. Assembly operations require from about 4 seconds to about 60 seconds each, depending upon the size of the parts, the

EXHIBIT 13-7 Cost estimate for the original intake manifold. Note that the processing costs for casting and machining reflect the costs for a complete casting line and several machining stations.

Variable Cost

Materials 5.7 kg aluminum at $2.25/kg $12.83 Processing (casting) 150 units/hr at $530/hr 3.53 Processing (machining) 200 units/hr at $340/hr 1.70

Fixed Cost

Tooling for casting $160,000/tool at 500K units/tool (lifetime) 0.32 Machine tools and fixtures $1,800,000/line at 10M units (lifetime) 0.18

Total Direct Cost $18.56

Overhead charges $12.09

Total Unit Cost $30.65

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Design for Manufacturing 263

difficulty of the operation, and the production quantities. At high volumes, workers can specialize in a particular set of operations, and special fixtures and tools can assist the assembly. Appendix C contains a table of approximate times for manual assembly of various products, which is helpful in estimating the range of times required for assembly operations. A popular method for estimating assembly times has been developed over the past 30 years by Boothroyd Dewhurst Inc. and is now available as a software tool. This system involves a tabular information system for keeping track of the estimated assembly times for each part. The system is supported by a comprehensive database of standard handling and insertion times for a wide range of situations. Special software is also avail- able for estimating the assembly cost of electronic circuit boards.

Assembly labor can cost from less than $1 per hour in low-wage countries to more than $40 per hour in some industrialized nations. In the United States, assembly labor is likely to cost between $10 and $20 per hour. (Each firm has different assembly labor cost structures, and some industries, such as the automobile and aircraft industries, have substantially higher cost structures.) These figures include an allowance for benefits and other worker-related ex- penses and are meant to reflect the true cost to the firm of assembly labor.

Consider the redesigned intake manifold. The assembly cost of the PCV (positive crankcase ventilation) valve assembly is estimated as shown in Exhibit 13-8.

Estimating the Overhead Costs Accurately estimating overhead costs for a new product is difficult, and the industry prac- tices are not very satisfying. Nevertheless, we will describe the standard industry practice here and identify some of its problems. Applying the overhead estimation schemes used by most firms is simple. Estimating the actual overhead costs incurred by the firm due to a particular product is not. The indirect costs of supporting production are very difficult to track and assign to particular product lines. The future costs of supporting production are even more difficult to predict for a new product.

Most firms assign overhead charges by using overhead rates (also called burden rates). Overhead rates are typically applied to one or two cost drivers. Cost drivers are param- eters of the product that are directly measurable. Overhead charges are added to direct costs in proportion to the drivers. Common cost drivers are the cost of any purchased materials, the cost of assembly labor, and the number of hours of equipment time the product consumes. For example, the overhead rate for purchased materials might be 10 percent and the overhead rate for assembly labor might be 80 percent. (Of course, pur- chased components already have the vendor’s overhead included in the price; we only add the purchasing overhead.) Under these conditions, a product containing $100 of purchased components and $10 of assembly labor would incur $18 of overhead costs

EXHIBIT 13-8 Assembly cost estimation for the PCV valve assembly of the redesigned intake manifold.

Component Quantity Handling Time Insertion Time Total Time

Valve 1 1.50 1.50 3.00 O-rings 2 2.25 4.00 12.50 Spring 1 2.25 6.00 8.25 Cover 1 1.95 6.00 7.95 Total Time (seconds) 31.70 Assembly Cost at $45/hour $0.40

Source: Manual assembly tables in Boothroyd and Dewhurst, 1989

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(10 percent of $100 plus 80 percent of $10). Some typical overhead structures are given in Appendix D for different types of products and firms.

The problem with this scheme is that it implies that overhead costs are directly pro- portional to the cost drivers. A thought experiment reveals that this cannot always be so: Most firms use “cost of purchased materials” as one cost driver, yet why would any of their overhead costs actually change if a vendor of a $50 component raises its price to $60? The answer is that they would not change at all. Overhead rates are used as a conve- nient way to account for overhead costs, but this scheme can yield inaccurate estimates of the true costs experienced by the manufacturer to support production.

This problem is partially addressed by activity-based costing (ABC) methods (Kaplan, 1990). Under the ABC approach, a firm utilizes more and different cost drivers and al- locates all indirect costs to the associated cost drivers where they fit best. As a result, the firm may have overhead rates applied to various dimensions of product complexity (such as the number of different machining operations required or the number of different com- ponents or suppliers needed), in addition to overhead on tooling, materials, machine time, and direct labor. For the purposes of estimating manufacturing costs, the use of more cost drivers not only allows more accurate overhead cost estimates to be made but also provides important insights for reducing overhead costs by focusing attention on the cost drivers.

Step 2: Reduce the Costs of Components For most highly engineered discrete goods the cost of purchased components will be the most significant element of the manufacturing cost. This section presents several strate- gies for minimizing these costs. Many of these strategies can be followed even without the benefit of accurate cost estimates. In this case, these strategies become design rules, or rules of thumb, to guide DFM cost reduction decisions.

Understand the Process Constraints and Cost Drivers Some component parts may be costly simply because the designers did not understand the capabilities, cost drivers, and constraints of the production process. For example, a designer may specify a small internal corner radius on a machined part without realizing that physi- cally creating such a feature requires an expensive electro-discharge machining (EDM) op- eration. A designer may specify dimensions with excessively tight tolerances, without un- derstanding the difficulty of achieving such accuracy in production. Sometimes these costly part features are not even necessary for the component’s intended function; they arise out of lack of knowledge. It is often possible to redesign the part to achieve the same performance while avoiding costly manufacturing steps; however, to do this the design engineer needs to know what types of operations are difficult in production and what drives their costs.

In some cases, the constraints of a process can be concisely communicated to design- ers in the form of design rules. For example, the capabilities of an automatic laser cutting machine for sheet metal can be concisely communicated in terms of allowable material types, material thicknesses, maximum part dimensions, minimum slot widths, and cutting accuracy. When this is possible, part designers can avoid exceeding the normal capabili- ties of a process and thereby avoid incurring unusually high costs.

For some processes, the cost of producing a part is a simple mathematical function of some attributes of the part, which would be the cost drivers for the process. For example,

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Design for Manufacturing 265

a welding process could have a cost directly proportional to two attributes of the product: (1) the number of welds and (2) the total length of welds the machine creates.

For processes whose capabilities are not easily described, the best strategy is to work closely with the people who deeply understand the part production process. These manu- facturing experts will generally have plenty of ideas about how to redesign components to reduce production costs.

Redesign Components to Eliminate Processing Steps Careful scrutiny of the proposed design may lead to suggestions for redesign that can result in simplification of the production process. Reducing the number of steps in the part fabri- cation process generally results in reduced costs as well. Some process steps may simply not be necessary. For example, aluminum parts may not need to be painted, especially if they will not be visible to the user of the product. In some cases, several steps may be eliminated through substitution of an alternative process step. A common example of this strategy is “net-shape” fabrication. A net-shape process is one that produces a part with the final in- tended geometry in a single manufacturing step. Typical examples include molding, casting, forging, and extrusion. Frequently designers are able to use one of the net-shape processes to create a part that is very close to the final requirement (near net shape) and may demand only minor additional processing (e.g., drilling and tapping a hole, cutting to length).

The original intake manifold required an expensive casting, followed by several ma- chining operations. The redesigned manifold is molded in two parts to net shape. The cost estimate for these two moldings is shown in Exhibit 13-9. (Compare with Exhibit 13-7.)

Choose the Appropriate Economic Scale for the Part Process The manufacturing cost of a product usually drops as the production volume increases. This phenomenon is labeled economies of scale. Economies of scale for a fabricated component occur for two basic reasons: (1) fixed costs are divided among more units and (2) variable costs become lower because the firm can justify the use of larger and more efficient processes and equipment. For example, consider an injection-molded plastic part. The part may require a mold that costs $50,000. If the firm produces 50,000 units of the part over the product’s lifetime, each part will have to assume $1 of the cost of the mold. If, however, 100,000 units are produced, each part will assume only $0.50 of the

EXHIBIT 13-9 Cost estimate for the redesigned intake manifold (two moldings).

Variable Cost

Materials (manifold housing) 1.4 kg glass-filled nylon at $2.75/kg $ 3.85 Materials (intake runner insert) 0.3 kg glass-filled nylon at $2.75/kg 0.83 Molding (manifold housing) 80 units/hr at $125/hr 1.56 Molding (intake runner insert) 100 units/hr at $110/hr 1.10

Fixed Cost

Mold tooling (manifold housing) $350,000/tool at 1.5M units/tool $ 0.23 Mold tooling (intake runner insert) $150,000/tool at 1.5M units/tool 0.10

Total Direct Cost $ 7.67

Overhead charges $ 5.99

Total Unit Cost $13.66

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cost of the mold. As production volumes increase further, the firm may be able to justify a four-cavity mold, for which each cycle of the molding machine produces four parts instead of one. As shown in Exhibit 13-9, the tooling costs for the redesigned intake man- ifold are quite high; however, spread over the life of the tool, the unit fixed cost is small.

Processes can be thought of as incurring fixed and variable costs. Fixed costs are in- curred once per part type regardless of how many parts are produced. Variable costs are incurred each time a part is made. Processes with inherently low fixed costs and high variable costs, such as machining, are appropriate when few parts will be made, while processes with inherently high fixed costs and low variable costs, such as injection mold- ing, are appropriate when many parts will be made. This concept is illustrated by the graph in Exhibit 13-10. As shown in the exhibit, if production volume is expected to be below 1,000 units, machining would be more economical; otherwise, injection molding would incur lower total costs.

Standardize Components and Processes The principle of economies of scale also applies to the selection of components and processes. As the production volume of a component increases, the unit cost of the component decreases. Quality and performance often increase as well with increasing production quantities because the producer of the component can invest in learning and improvement of the component’s design and its production process. For a given expected product volume, the benefits of substantially higher component volumes can be achieved through the use of standard components.

Standard components are those common to more than one product. This standard- ization may occur within the product line of a single firm or may occur, via an outside supplier, across the product lines of several firms. For example, the use of the 3.8-liter V6 engine in several GM cars is an example of internal standardization. The use of a common 10-millimeter socket head cap screw across several auto manufacturers is an example of external standardization. In either case, all other things being equal, the component unit cost is lower than if the component were used in only a single product.

EXHIBIT 13-10 Total cost of a hypothetical part as a function of the number of units produced for injection molding versus machining.

Mold Cost of $10,000 Fixture

Cost of $1,000

1,000 Units

$1/Unit Materials and Processing

$10/Unit Materials and Processing

Machining

Injection Molding

Number of Units Produced

To ta

l C o

st , $

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The redesigned intake manifold is used on all of GM’s 3.8-liter V6 engines, even though each particular vehicle application requires different EGR (exhaust gas recircula- tion) return and vacuum hose routings. To accommodate this, the new intake manifold has two standard interfaces, a vacuum port and an EGR port. For each vehicle model, a custom vacuum block and EGR adapter are used. This allows the major component, the intake manifold, to be standardized internally, rather than using a different manifold for each vehicle.

Components may also be standardized within the same model. For example, most auto manufacturers use the same type of wheel on the right and left side of their cars, even though this causes directional “spokes” to have different orientations on different sides (Exhibit 13-11).

Adhere to “Black Box” Component Procurement A component cost reduction strategy used effectively in the Japanese auto industry is called black box supplier design. Under this approach, the team provides a supplier with only a black box description of the component—a description of what the component has to do, not how to achieve it (Clark and Fujimoto, 1991). This kind of specification leaves the vendor with the widest possible latitude to design or select the component for minimum cost. An additional advantage of this approach is that it relieves the internal team of the responsibility to engineer and design the component. Successful black box development efforts require careful system-level design and extremely clear definitions of the functions, interfaces, and interactions of each component. (See Chapter 10, Product Architecture.)

For the redesigned intake manifold, the PCV valve assembly was designed by GM’s AC Rochester Division, which supplies the component. The supplier was given system- level specifications and complete responsibility for the performance of this subsystem.

EXHIBIT 13-11 An example of standardization within a model. Wheels of the Ford Explorer are the same on the right and left sides of the car.

Courtesy of Ford Motor Co.

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Step 3: Reduce the Costs of Assembly Design for assembly (DFA) is a fairly well-established subset of DFM that involves minimizing the cost of assembly. For most products, assembly contributes a relatively small fraction of the total cost. Nevertheless, focusing attention on assembly costs yields strong indirect benefits. Often as a result of emphasis on DFA, the overall parts count, manufacturing complexity, and support costs are all reduced along with the assembly cost. In this section, we present a few principles useful to guide DFA decisions.

Keeping Score Boothroyd and Dewhurst (1989) advocate maintaining an ongoing estimate of the cost of assembly. In addition to this absolute score, they propose the concept of assembly efficiency. This is measured as an index that is the ratio of the theoretical minimum as- sembly time to an estimate of the actual assembly time for the product. This concept is useful in developing an intuition for what drives the cost of assembly. The expression for the DFA index is

DFA index (Theoretical minimum number of parts) (3 seconds)

Estimated total assembly time = ×

To determine the theoretical minimum number of parts, ask the following three questions of each part in the proposed assembly. Only parts satisfying one or more of these condi- tions must “theoretically” be separate.

1. Does the part need to move relative to the rest of the assembly? Small motions that can be accomplished using compliance (e.g., elastic hinges or springs) do not count.

2. Must the part be made of a different material from the rest of the assembly for funda- mental physical reasons?

3. Does the part have to be separated from the assembly for assembly access, replace- ment, or repair?

The “3 seconds” in the numerator reflects the theoretical minimum time required to handle and insert a part that is perfectly suited for assembly. One can think of this as the average time (sustainable over a whole work shift) required to assemble a small part that is easy to grasp, requires no particular orientation, and demands no special insertion effort; such an operation is as fast as placing a ball into a circular hole with adequate clearance.

Integrate Parts If a part does not qualify as one of those theoretically necessary, then it is a candidate for physical integration with one or more other parts. The resulting multifunctional component is often very complex as a result of the integration of several different geometric features that would otherwise be separate parts. Nevertheless, molded or stamped parts can often incorporate additional features at little or no added cost. Exhibit 13-12 shows the throttle- body end of the redesigned intake manifold. Integrated into this component are the attach- ments for the EGR return and the vacuum source block. These attachments use a molded “push in and turn” geometry, eliminating the need for several threaded fasteners.

Part integration provides several benefits:

• Integrated parts do not have to be assembled. In effect, the “assembly” of the geometric features of the part is accomplished by the part fabrication process.

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• Integrated parts are often less expensive to fabricate than are the separate parts they replace. For molded, stamped, and cast parts, this cost savings occurs because a single complex mold or die is usually less expensive than two or more less complex molds or dies and because there is usually less processing time and scrap for the single, inte- grated part.

• Integrated parts allow the relationships among critical geometric features to be con- trolled by the part fabrication process (e.g., molding) rather than by an assembly pro- cess. This usually means that these dimensions can be more precisely controlled.

Note, however, that part integration is not always a wise strategy and may be in con- flict with other sound approaches to minimizing costs. For example, the main intake man- ifold assembly on the old design was a single cast piece, requiring extensive machining. The team replaced this part with two less-expensive, injection-molded pieces. This is an example of disintegrating parts in order to achieve benefits in the piece-part production costs.

Maximize Ease of Assembly Two products with an identical number of parts may nevertheless differ in required as- sembly time by a factor of two or three. This is because the actual time to grasp, orient, and insert a part depends on the part geometry and the required trajectory of the part insertion. The ideal characteristics of a part for an assembly are (adapted from Boothroyd and Dewhurst, 1989):

• Part is inserted from the top of the assembly. This attribute of a part and assembly is called z-axis assembly. By using z-axis assembly for all parts, the assembly never has to be inverted, gravity helps to stabilize the partial assembly, and the assembly worker can generally see the assembly location.

EXHIBIT 13-12 Integration of several features into a single component. The EGR return and vacuum source ports are molded into the redesigned intake manifold.

Photo by Stuart Cohen

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• Part is self-aligning. Parts that require fine positioning in order to be assembled re- quire slow, precise movements on the part of the assembly worker. Parts and assembly sites can be designed to be self-aligning so that fine motor control is not required of the worker. The most common self-alignment feature is the chamfer. A chamfer can be implemented as a tapered lead on the end of a peg, or a conical widening at the open- ing of a hole.

• Part does not need to be oriented. Parts requiring correct orientation, such as a screw, require more assembly time than parts requiring no orientation, such as a sphere. In the worst case, a part must be oriented correctly in three dimensions. For example, the following parts are listed in order of increasing requirements for orientation: sphere, cylinder, capped cylinder, capped and keyed cylinder.

• Part requires only one hand for assembly. This characteristic relates primarily to the size of the part and the effort required to manipulate the part. All other things being equal, parts requiring one hand to assemble require less time than parts requiring two hands, which in turn require less effort than parts requiring a crane or lift to assemble.

• Part requires no tools. Assembly operations requiring tools, such as attaching snap rings, springs, or cotter pins, generally require more time than those that do not.

• Part is assembled in a single, linear motion. Pushing in a pin requires less time than driving a screw. For this reason, numerous fasteners are commercially available that require only a single, linear motion for insertion.

• Part is secured immediately upon insertion. Some parts require a subsequent secur- ing operation, such as tightening, curing, or the addition of another part. Until the part is secured, the assembly may be unstable, requiring extra care, fixtures, or slower assembly.

Consider Customer Assembly Customers may tolerate completing some of the product assembly themselves, espe- cially if doing so provides other benefits, such as making the purchase and handling of the packaged product easier. However, designing a product such that it can be easily and properly assembled by the most inept customers, many of whom will ignore directions, is a substantial challenge in itself.

Step 4: Reduce the Costs of Supporting Production

In working to minimize the costs of components and the costs of assembly, the team may also achieve reductions in the demands placed on the production support functions. For example, a reduction in the number of parts reduces the demands on inventory manage- ment. A reduction in assembly content reduces the number of workers required for pro- duction and therefore reduces the cost of supervision and human resource management. Standardized components reduce the demands on engineering support and quality con- trol. There are, in addition, some direct actions the team can take to reduce the costs of supporting production.

It is important to remember that manufacturing cost estimates are often insensitive to many of the factors that actually drive overhead charges. (Recall the discussion of overhead cost estimation above.) Nevertheless, the goal of the design team in this respect

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should be to reduce the actual costs of production support even if overhead cost estimates do not change.

Minimize Systemic Complexity An extremely simple manufacturing system would utilize a single process to transform a single raw material into a single part—perhaps a system extruding a single diameter of plastic rod from plastic pellets. Unfortunately, few such systems exist. Complexity arises from variety in the inputs, outputs, and transforming processes. Many real manufacturing systems involve hundreds of suppliers, thousands of different parts, hundreds of people, dozens of types of products, and dozens of types of production processes. Each variant of suppliers, parts, people, products, and processes introduces complexity to the system. These variants must usually be tracked, monitored, managed, inspected, handled, and in- ventoried at tremendous cost to the enterprise. Much of this complexity is driven by the design of the product and can therefore be minimized through smart design decisions.

Exhibit 13-13 shows a simple “scorecard” of manufacturing complexity useful for re- minding designers of how the product design drives the complexity of the manufacturing system. The team establishes a score for the initial design and then uses changes in the score as a measure of success in reducing complexity. Note that the drivers given in the scorecard shown are generic categories. In practice, the team develops this list (and may prioritize it with weightings) based on the realities and constraints of the firm’s production environment. Firms that use activity-based costing usually know quite well their primary drivers of com- plexity, as these are the cost drivers they use in allocating overhead. As a simple substitute for an accurate support cost model, such a scorecard allows the team to make informed decisions without formally estimating the indirect costs of production.

Error Proofing An important aspect of DFM is to anticipate the possible failure modes of the production system and to take appropriate corrective actions early in the development process. This strategy is known as error proofing. One type of failure mode arises from having slightly different parts that can be easily confused. Examples of slightly different parts are screws differing only in the pitch of the threads (e.g., 4 � .70 mm and 4 � .75 mm screws) or in the direction of turning (left- and right-handed threads), parts that are mirror images of each other, and parts differing only in material composition.

We recommend either that these subtle differences be eliminated or that slight differ- ences be exaggerated. Exhibit 13-14 shows an example of exaggerating subtle differences between parts: the left and right versions of the reel lock on a videocassette, which are

EXHIBIT 13-13 Scorecard of manufacturing complexity.

Drivers of Complexity Rev. 1 Rev. 2

Number of new parts introduced to the manufacturing system 6 5 Number of new vendors introduced to the manufacturing system 3 2 Number of custom parts introduced to the manufacturing system 2 3 Number of new “major tools” (e.g., molds and dies) introduced to the manufacturing system 2 2 Number of new production processes introduced to the manufacturing system 0 0

Total 13 12

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mirror images of each other, are molded in two different colors. Color coding allows the parts to be identified easily and differentiated in materials handling and assembly.

Step 5: Consider the Impact of DFM Decisions on Other Factors

Minimizing manufacturing cost is not the only objective of the product development process. The economic success of a product also depends on the quality of the product, the timeliness of product introduction, and the cost of developing the product. There may also be situations in which the economic success of a project is compromised in order to maximize the economic success of the entire enterprise. In contemplating a DFM deci- sion, these issues should be considered explicitly.

The Impact of DFM on Development Time Development time can be precious. For an automobile development project, time may be worth as much as several hundred thousand dollars per day. For this reason, DFM deci- sions must be evaluated for their impact on development time as well as for their impact on manufacturing cost. While saving $1 in cost on each manifold would be worth perhaps $1 million in annual cost savings, it would almost certainly not be worth causing a six- month delay in an automobile program.

The relationship between DFM and development time is complex. Here, we note a few aspects of the relationship. The application of some of the DFA guidelines may result in very complex parts. These parts may be so complex that their design or the procurement of their tooling becomes the activity that determines the duration of the overall development effort (Ulrich et al., 1993). The cost benefits of the DFM decision may not be worth the delay in project duration. This is particularly true for products competing in dynamic markets.

The Impact of DFM on Development Cost Development cost closely mirrors development time. Therefore, the same caution about the relationship between part complexity and development time applies to development

EXHIBIT 13-14 Left and right reel locks inside a videocassette (top center). The two nearly identical parts are color coded to avoid confusion.

Photo by Stuart Cohen

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cost. In general, however, teams that aggressively pursue low manufacturing costs as an integral part of the development process seem to be able to develop products in about the same time and with about the same budget as teams that do not. Part of this phenomenon certainly arises from the correlation between good project management practices and the application of sound DFM methods.

The Impact of DFM on Product Quality Before proceeding with a DFM decision, the team should evaluate the impact of the deci- sion on product quality. Under ideal circumstances, actions to decrease manufacturing cost would also improve product quality. For example, the new GM manifold resulted in cost reduction, weight reduction, and improved engine performance. It is not uncommon for DFM efforts focused primarily on manufacturing cost reduction to also result in im- proved serviceability, ease of disassembly, and recycling. However, in some cases actions to decrease manufacturing cost can have adverse effects on product quality (such as reli- ability or robustness), so it is advisable for the team to keep in mind the many dimensions of quality that are important for the product.

The Impact of DFM on External Factors Design decisions may have implications beyond the responsibilities of a single develop- ment team. In economic terms, these implications may be viewed as externalities. Two such externalities are component reuse and life cycle costs.

• Component reuse: Taking time and money to create a low-cost component may be of value to other teams designing similar products. In general, this value is not explicitly accounted for in manufacturing cost estimates. The team may choose to take an action that is actually more costly for their product because of the positive cost implications for other projects.

• Life cycle costs: Throughout their life cycles, certain products may incur some com- pany or societal costs that are not (or are rarely) accounted for in the manufacturing cost. For example, products may contain toxic materials requiring special handling in disposal. Products may incur service and warranty costs. Although these costs may not appear in the manufacturing cost analysis, they should be considered before adopting a DFM decision. Chapter 12, Design for Environment, provides a detailed method of addressing life cycle costs.

Results

During the 1980s, design-for-manufacturing practices were put into place in thousands of firms. Today DFM is an essential part of almost every product development effort. No longer can designers “throw the design over the wall” to production engineers. As a result of this emphasis on improved design quality, some manufacturers claim to have reduced production costs of products by up to 50 percent. In fact, comparing current new product designs with earlier generations, one can usually identify fewer parts in the new product, as well as new materials, more integrated and custom parts, higher-volume standard parts and subassemblies, and simpler assembly procedures.

A sketch of the redesigned intake manifold is shown in Exhibit 13-15. This DFM ef- fort achieved impressive results. Exhibit 13-16 shows the cost estimate for the redesigned

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EXHIBIT 13-15 The redesigned intake manifold.

Courtesy of General Motors Corp.

EXHIBIT 13-16 Cost estimate for the redesigned intake manifold.

Processing Total Unit Tooling Tooling Total Unit Purchased (Machine Assembly Variable and Other Lifetime, Fixed Total Component Materials � Labor) (Labor) Cost NRE, K$ K units Cost Cost

Manifold housing 3.85 1.56 5.41 350 1500 0.23 5.65 Intake runner insert 0.83 1.10 0.13 2.05 150 1500 0.10 2.15 Steel inserts (16) 0.32 1.00 1.32 1.32 EGR adapter 1.70 0.13 1.83 1.83 PCV valve Valve 0.85 0.04 0.89 0.89 O-rings(2) 0.02 0.16 0.18 0.18 Spring 0.08 0.10 0.18 0.18 Cover 0.02 0.10 0.12 0.12 Vacuum source block 0.04 0.06 0.10 0.10

Total Direct Costs 7.71 2.66 1.71 12.08 500 0.33 12.41 Overhead Charges 1.16 4.79 3.08 0.50 9.52 Total Cost 21.93

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intake manifold. (Compare with Exhibit 13-6.) The improvements over the previous de- sign include:

• Unit cost savings of 45 percent.

• Mass savings of 66 percent (3.3 kilograms).

• Simplified assembly and service procedures.

• Improved emissions performance due to routing of EGR into the manifold.

• Improved engine performance due to reduced air induction temperatures.

• Reduced shipping costs due to lighter components.

• Increased standardization across vehicle programs.

For this product, the manufacturing cost savings alone amount to several million dol- lars annually. The other benefits listed above are also significant, although somewhat more difficult to quantify.

Summary Design for manufacturing (DFM) is aimed at reducing manufacturing costs while simul- taneously improving (or at least not inappropriately compromising) product quality, de- velopment time, and development cost.

• DFM begins with the concept development phase and system-level design phase; in these phases important decisions must be made with the manufacturing cost implica- tions in mind.

• DFM utilizes estimates of manufacturing cost to guide and prioritize cost reduction efforts. Cost estimation requires expertise with the relevant production processes. Sup- pliers and manufacturing experts must be involved in this process.

• Since accurate cost estimation is very difficult, much of DFM practice involves mak- ing informed decisions in the absence of detailed cost data.

• Component costs are reduced by understanding what drives these costs. Solutions may involve novel component design concepts or the incremental improvement of existing designs through simplification and standardization.

• Assembly costs can be reduced by following well-established design-for-assembly (DFA) guidelines. Components can be redesigned to simplify assembly operations, or components can be eliminated entirely by integration of their functions into other com- ponents.

• Reduction of manufacturing support costs begins with an understanding of the drivers of complexity in the production process. Design decisions have a large impact on the costs of supporting production. Choices should be made with these effects in mind, even though overhead cost estimates are often insensitive to such changes.

• DFM is an integrative method taking place throughout the development process and requiring inputs from across the development team.

• DFM decisions can affect product development lead time, product development cost, and product quality. Trade-offs will frequently be necessary between manufacturing cost and these equally important broader issues.

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References and Bibliography Many current resources are available on the Internet via www.ulrich-eppinger.net

Two articles describe the needs, methods, and success of DFM in the 1980s. Dean, James W., Jr., and Gerald I. Susman, “Organizing for Manufacturable Design,” Harvard Business Review, January–February 1989, pp. 28–36.

Whitney, Daniel E., “Manufacturing by Design,” Harvard Business Review, July– August 1988, pp. 83–91.

There are numerous documented examples of DFM success. One classic example is the story of the IBM Proprinter, described by Dewhurst and Boothroyd.

Dewhurst, Peter, and Geoffrey Boothroyd, “Design for Assembly in Action,” Assembly Engineering, January 1987.

There are many references available to aid in component design, materials choice, manufacturing process selection, and understanding of process capabilities. Here are several sources that offer specific guidelines for hundreds of applications, materials, and processes.

Bolz, Roger W., Production Processes: The Productivity Handbook, fifth edition, Industrial Press, New York, 1981.

Bralla, James G. (ed.), Design for Manufacturability Handbook, McGraw-Hill, New York, 1999.

Cubberly, William H., and Ramon Bakerjian, Tool and Manufacturing Engineers Handbook, Society of Manufacturing Engineers, Dearborn, MI, 1989.

Farag, Mahmoud M., Materials Selection for Engineering Design, Prentice Hall, London, 1997.

Poli, Corrado, Engineering Design and Design for Manufacturing: A Structured Approach, Butterworth-Heinemann, 2001.

Trucks, H. E., Designing for Economical Production, second edition, Society of Manufacturing Engineers, Dearborn, MI, 1987.

Gupta et al. provide a review of state-of-the-art manufacturability analysis methods and related DFM research.

Gupta, Satyandra K., et al., “Automated Manufacturability Analysis: A Survey,” Research in Engineering Design, Vol. 9, No. 3, 1997, pp. 168–190.

The Thomas Register is useful for identifying suppliers of components, tooling, machinery, and other industrial products.

Thomas Register of American Manufacturers, Thomas Publishing Company, New York, published annually. Also available on the Internet.

The most popular method for DFA is by Boothroyd and Dewhurst. Software is also available to aid in estimating costs for both manual and automatic assembly, as well as a wide range of component costs.

Boothroyd, Geoffrey, and Peter Dewhurst, Product Design for Assembly, Boothroyd Dewhurst, Inc., Wakefield, RI, 1989.

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Boothroyd, Geoffrey, Peter Dewhurst, and Winston A. Knight, Product Design for Manufacture and Assembly, second edition, Marcel Dekker, New York, 2002.

Detailed research on automated assembly has resulted in guidelines for designing products suited for assembly automation.

Boothroyd, Geoffrey, Assembly Automation and Product Design, Marcel Dekker, New York, 1992.

Nevins, James L., and Daniel E. Whitney, Concurrent Design of Products and Processes, McGraw-Hill, New York, 1989.

Whitney, Daniel E., Mechanical Assemblies: Their Design, Manufacture, and Role in Product Development, Oxford University Press, New York, 2004.

Kaplan and others describe the development of activity-based costing systems, which provide insight into a firm’s cost drivers and facilitate more accurate cost estimation.

Kaplan, Robert S. (ed.), Measures for Manufacturing Excellence, Harvard Business School Press, Boston, 1990.

Clark and Fujimoto conducted a comprehensive study of product development in the world automobile industry. They provide an interesting analysis and discussion of the concept of black box component design.

Clark, Kim B., and Takahiro Fujimoto, Product Development Performance: Strategy, Organization, and Management in the World Auto Industry, Harvard Business School Press, Boston, 1991.

Ulrich et al. describe the trade-off between development time and manufacturing cost. They also describe an effort to model support costs in some detail.

Ulrich, Karl, Scott Pearson, David Sartorius, and Mark Jakiela, “Including the Value of Time in Design-for-Manufacturing Decision Making,” Management Science, Vol. 39, No. 4, April 1993, pp. 429–447.

Ulrich and Pearson present a method for studying products, their costs, and some of the many detail design decisions resulting in the artifacts we see.

Ulrich, Karl T., and Scott Pearson, “Assessing the Importance of Design through Product Archaeology,” Management Science, Vol. 44, No. 3, March 1998, pp. 352–369.

Exercises 1. Estimate the production cost for a simple product you may have purchased. Try

costing a product with fewer than 10 components, such as a floppy disk, a pen, a jackknife, or a baby’s toy. Remember that one reasonable upper bound for your es- timate, including overhead, is the wholesale price (between 50 percent and 70 per- cent of retail).

2. Suggest some potential cost-reducing modifications you could make to improve the product costed above. Compute the DFA index before and after these changes.

3. List 10 reasons why reducing the number of parts in a product might reduce produc- tion costs. Also list some reasons why costs might increase.

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Thought Questions 1. Consider the following 10 “design rules” for electromechanical products. Do these

seem like reasonable guidelines? Under what circumstances could one rule conflict with another one? How should such a trade-off be settled? a. Minimize parts count. b. Use modular assembly. c. Stack assemblies. d. Eliminate adjustments. e. Eliminate cables. f. Use self-fastening parts. g. Use self-locating parts. h. Eliminate reorientation. i. Facilitate parts handling. j. Specify standard parts.

2. Is it practical to design a product with 100 percent assembly efficiency (DFA index = 1.0)? What conditions would have to be met? Can you think of any products with very high (greater than 75 percent) assembly efficiency?

3. Is it possible to determine what a product really costs once it is put into production? If so, how might you do this?

4. Can you propose a set of metrics that would be useful for the team to predict changes in the actual costs of supporting production? To be effective, these metrics must be sensitive to changes in the design that affect indirect costs experienced by the firm. What are some of the barriers to the introduction of such techniques in practice?

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Design for Manufacturing 279

EXHIBIT 13-17 Range of costs for common engineering materials. Price ranges shown correspond to various grades and forms of each material, purchased in bulk quantities (2011 prices).

Source: Adapted from David G. Ullman, The Mechanical Design Process, third edition, McGraw-Hill, New York, 2003

$0.10 $1 $10 $100 $1,000

Dollars/Kilogram

1020 steel1040 steel4140 steel4340 steel

S304 stainless steel

S316 stainless steel01 tool steel Gray cast iron

2024 aluminum

3003 or 5005 aluminum 6061 aluminum 7075 aluminum70/30 brass

#110 Copper alloyTitanium 6-4

Magnesium AZ91D

ABS

Polycarbonate (PC)Nylon 6/6

Polypropylene (PP) Polystyrene (PS) Alumina ceramic

Graphite (Graphitized Carbon) Douglas Fir/Pine

Oak Fiberglass/Epoxy

Graphite/Epoxy

Appendix A

Materials Costs

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Appendix B

Component Manufacturing Costs The exhibits in this appendix show example components and their cost data for computer-numerical control (CNC) machining (Exhibit 13-18), injection molding (Exhibit 13–19), progressive die stamping (Exhibit 13-20), and sand casting and investment casting (Exhibit 13-21). The purpose of these examples is to show, in general terms, what typ- ical operations cost and how the cost structure of each process is affected by part complexity.

Setup:

Tooling:

Material:

Processing:

Setup:

Tooling:

Material:

Processing:

Setup:

Tooling:

Material:

Setup: Material:

Processing:

Tooling: Processing:

Fixed Costs Variable Costs Volume Total UnitCost

1

10

100

$75.00

$21.00

$15.50

1

10

100

$386.00

$102.50

$74.15

1

10

100

$646.00

$241.00

$200.50

1

10

100

$612.00

$396.00

$374.40

0.75 hr. at $60/hr.

programming: 0.25 hr. at $60/hr.

6 min./unit at $60/hr.

1.75 hr. at $60/hr.

programming: 1.0 hr. at $60/hr. Fixtures: $150

55 min./unit at $60/hr.

5.5 hr. at $60/hr.

2.0 hr. at $60/hr.

programming: 2.0 hr. at $60/hr.

programming: 2.0 hr. at $60/hr.

6 hr./unit at $60/hr.

2.85 hr./unit at $60/hr.

stock: 1.11 kg of 6061 aluminum

$9 ea.

stock: 1.96 kg of 6061 aluminum

$16 ea.

stock: 4.60 kg of ultra-high molecular weight polyethylene

$25 ea.

stock: 1.50 kg of 6061 aluminum

$12 ea.

a.

b.

c.

d.

EXHIBIT 13-18 CNC machining cost examples CNC machining example components and cost data.

Notes: 1. Programming time is a one-time expense and is included here in tooling costs. 2. Material prices assume low volumes and include cutting charges. 3. Processing costs include overhead charges.

Source: Photos by Stuart Cohen. Examples and data courtesy of Ramco, Inc.

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Design for Manufacturing 281

EXHIBIT 13-19 Injection molding cost examples Injection molding example components and cost data.

$18K 8 cavities/mold

no actions

$10K 1 cavity/mold

no actions

2 cavities/mold no actions

3 retracting pins

1 cavity/mold 1 action

4 retracting pins

Setup:

Tooling:

Material:

Processing:

Setup:

Tooling:

Material:

Processing:

Setup:

Tooling:

Material:

Processing:

Setup:

Tooling:

Material:

Processing:

Fixed Costs Variable Costs Volume Total UnitCost

10K

100K

1M

$1.915

$0.295

$0.133

10K

100K

1M

$1.507

$0.607

$0.517

10K

100K

1M

$2.125

$0.505

$0.343

10K

100K

1M

$11.085

$3.885

$3.165

1000 pcs/hr. on an 1800 KN press

at $40/hr.

160 pcs/hr. on a 900 KN press

at $42/hr.

95 pcs/hr. on a 2700 KN press

at $48/hr.

240 pcs/hr. on an 800 KN press

at $42/hr.

45 g of linear low density

polyethylene (LLDPF)

$0.075 ea.

10 g of steel-filled

polycarbonate (PC)

$0.244 ea.

22 g of modified polyphenylene

oxide (PPO)

$0.15 ea.

227 g of polycarbonate (PC) with 8 brass inserts

$2.58 ea.

$80K

$18K

a.

b.

c.

d.

Notes: 1. Setup costs (only a few hours in each case) are negligible for high-volume injection molding. 2. Processing costs include overhead charges.

Source: Photos by Stuart Cohen. Examples and data courtesy of Lee Plastics, Inc., and Digital Equipment Corporation

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282 Chapter 13

EXHIBIT 13-20 Stamping cost examples Volume progressive die stamping example components and cost data.

$22K

$71K

$11K

$195K

Setup:

Tooling:

Material:

Processing:

Setup:

Tooling:

Material:

Processing:

Setup:

Tooling:

Material:

Processing:

Setup:

Tooling:

Material:

Processing:

Fixed Costs Variable Costs Volume Total UnitCost

100K

1M

10M

$0.281

$0.083

$0.063

100K

1M

10M

$0.775

$0.136

$0.072

100K

1M

10M

$0.248

$0.149

$0.140

100K

1M

10M

$2.516

$0.761

$0.585

3000 pcs/hr. on a 550 KN press

at $63/hr.

4300 pcs/hr. on a 550 KN press

at $140/hr.

700 pcs/hr. on a 1000 KN press

at $200/hr.

4800 pcs/hr. on a 650 KN press

at $50/hr.

2.2g 70/30 Brass

$0.040 ea.

3.5 g 304 SST

$0.032 ea.

19.2 g 102 copper

$0.128 ea.

341 g galvanized steel

$0.28 ea.

a.

b.

c.

d.

Notes: 1. Setup costs (only a few hours in each case) are negligible for high-volume stamping. 2. Material weights represent the finished stampings. Material costs include scrap. 3. Hourly processing costs are not only driven by press size, but also can include ancillary processing equipment, such as in-die tapping. 4. Processing costs include overhead charges.

Source: Photos by Stuart Cohen. Examples and data courtesy of Brainin Advance Industries and other sources

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Design for Manufacturing 283

EXHIBIT 13-21 Casting cost examples Sand casting (top) and investment casting (bottom) example components and cost data.

$1.8K 8 impressions/pattern

no core

$2.4K 2 impressions/pattern

1 core

Setup:

Tooling:

Material:

Processing:

Setup:

Tooling:

Material:

Processing:

Setup:

Tooling:

Material:

Processing:

Setup:

Tooling:

Material:

Processing:

Fixed Costs Variable Costs Volume Total UnitCost

10

100

1000

$180.91

$18.91

$2.71

10

100

1000

$243.95

$27.95

$6.35

120 pcs/hr. at $46/hr.

30 pcs/hr. at $46/hr.

570 g of gray cast iron

$0.53 ea.

2,600 g of gray cast iron

$2.42 ea.

$1.5K no cores

$7K 3 cores

Fixed Costs Variable Costs Volume Total UnitCost

10

100

1000

$163.21

$28.21

$14.71

10

100

1000

$750.40

$120.40

$57.40

4 pcs/hr. at $50/hr.

1 pc/hr. at $50/hr.

260 g of yellow brass

$0.713 ea.

180 g of 712 aluminum

$0.395 ea.

a.

b.

c.

d.

Notes: 1. Setup is not generally charged in costing. 2. Processing costs include overhead charges.

Source: Photos by Stuart Cohen. Examples and data courtesy of Cumberland Foundry Co., Inc. (sand casting), and Castronics, Inc. (investment casting)

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284 Chapter 13

Terminology The following terminology applies to all of the tables in this appendix:

• Setup is the work required to prepare the equipment for a production run. Setup costs are charged for each run.

• Tooling costs are incurred in advance of the first production run, and tooling can usu- ally be reused for later production runs. However, in very high-volume production runs, tooling wears out and therefore is a recurring expense. Tooling costs may be spread over the entire production volume or may be charged separately. CNC program- ming time is generally also a one-time expense, like a tooling cost.

• Material types are listed for each part. Material weights and costs include processing scrap and waste.

• Processing costs vary with the type of manufacturing equipment used and include charges for both machine time and labor.

While fixed costs (setup and tooling) are sometimes billed separately from material and processing costs, for these examples, fixed costs are spread over the production vol- ume shown. Unit costs are calculated as

Total unit cost Setup costs Tooling costs

Volume Variable costs= + +

The cost rates given include overhead charges, so these data are representative of cus- tom components purchased from suppliers.

Description of Processes CNC machining includes computer-controlled milling and turning processes. CNC ma- chines are highly flexible due to automatic tool-changing mechanisms, multiple work axes, and programmable computer control. To produce a particular part, a machinist must first program the cutting tool trajectories and tool selections into the machine’s computer. Also, fixtures or other tooling may be utilized to produce multiple parts more efficiently. Once the program is written and fixtures are made, subsequent production runs can be set up much more quickly.

Injection molding is the process of forcing hot plastic under high pressure into a mold, where it cools and solidifies. When the part is sufficiently cool, the mold is opened, the part is ejected, the mold closes, and the cycle begins again. Mold complexity depends highly on the part geometry; undercuts (features that would prevent the part from ejecting out of the mold) are achieved using mold “actions” or “retracting pins.”

Progressive die stamping is the process of passing a sheet or strip of metal through a set of dies to cut and/or form it to a desired size and shape. While some stampings require only cutting, formed stampings are made by bending and stretching the metal beyond its yield point, thereby causing permanent deformation.

Sand castings are created by forming a sand mold from master patterns (tooling in the shape of the final part). Special binders are mixed with the sand to allow the sand to re- tain shape when packed around the pattern to create a single-use mold. Internal cavities in a casting can be created using additional sand cores inside the outer mold. Molten metal

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Design for Manufacturing 285

is then poured into the mold where the metal cools and solidifies. Once cool, the sand is broken off to reveal the metal casting. Sand castings generally require subsequent ma- chining operations to create finished components.

Investment castings are made by first creating a temporary wax pattern, using master tooling. The wax pattern is then dipped or immersed in plaster or ceramic slurry, which is allowed to solidify. The form is then heated, melting out the wax and leaving behind only the thin shell as a mold. Molten metal is then poured into the mold, where it cools and so- lidifies. When the metal is cool, the mold is broken off to reveal the metal part.

Detailed process descriptions for the above and numerous other processes, as well as more detailed cost estimating techniques, can be found in the reference books listed for this chapter.

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Appendix C

Assembly Costs

EXHIBIT 13-22 Assembly costs Assembly data for common products. Obtained using Boothroyd Dewhurst Inc. DFA Software.

No. of Parts

No. of Unique Parts

No. of Fasteners

Product Part Data Assembly Times(Seconds)

Total

Slowest Part

Fastest Part

16 125.7

12 9.7

0 2.9

No. of Parts

No. of Unique Parts

No. of Fasteners

Total

Slowest Part

Fastest Part

34 186.5

25 10.7

5 2.6

266.0

No. of Parts

No. of Unique Parts

No. of Fasteners

Total

Slowest Part

Fastest Part

49

43 14.0

5 3.5

277.0/138.0*

No. of Parts

No. of Unique Parts

No. of Fasteners

Total

Slowest Part

Fastest Part

56/17*

44/12* 8.0/8.0*

0/0* 0.75/3.0*

*Data for the mouse are given as: total components (including electronic)/mechanical components only. Notes: 1. This table gives manual assembly times, which can be converted to assembly costs using applicable labor rates. 2. Assembly times shown include times for individual part handling and insertion, as well as other operations such as subassembly handling and insertion,

reorientations, and heat riveting.

Source: Photos by Stuart Cohen. Data obtained by using Boothroyd Dewhurst Inc. DFA software

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Design for Manufacturing 287

Component Time (Seconds)

Min Max Avg

7.5 13.1

3.5 8.0

10.3

5.9

Component Time (Seconds)

Min Max Avg

3.1 10.1

2.6 14.0

6.6

8.3

Snap-fit

Screw

Spring

Pin

EXHIBIT 13-23 Typical handling and insertion times for common components.

Appendix D

Cost Structures

Type of Firm Cost Calculation

Electromechanical products manufacturer (Traditional cost structure)

Precision valve manufacturer (Activity-based cost structure)

Heavy equipment component manufacturer (Activity-based cost structure)

Cost � (113%) � (Materials cost) � (360%) � (Direct labor cost)

Cost � (108%) � [(Direct labor cost) � (Setup labor cost)

� (160%) � (Materials cost) � ($27.80) � (Machine hours) � ($2,000.00) � (Number of shipments)]

Cost � (110%) � (Materials cost) � (109%) � [(211%) � (Direct labor cost) � ($16.71) � (Machine hours)

� ($33.76) � (Setup hours) � ($114.27) � (Number of production orders) � ($19.42) � (Number of material handling loads) � ($487.00) � (Number of new parts added to the

system)]

EXHIBIT 13-24 Typical cost structures for manufacturing firms.

Source: Manual assembly tables in Boothroyd and Dewhurst, 1989

Sources, top to bottom: Unpublished company source; Harvard Business School cases: Destin Brass Products Co., 9-190-089, and John Deere Component Works, 9-187-107

Notes: 1. This table shows total costs per customer order. 2. Materials costs include costs of raw materials and purchased components.

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Prototyping

289

C H A P T E R F O U R T E E N

EXHIBIT 14-1 PackBot mobile robot by iRobot.

Courtesy of iRobot Corp.

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The iRobot PackBot line of tactical mobile robots was designed by iRobot Corporation to assist law enforcement and military personnel to conduct operations in dangerous environments. For example, PackBot robots were used to help search for survivors in the wreckage of the World Trade Center in September 2001. They have assisted military operations around the world, and they are used by police for bomb retrieval and disposal. The mobile chassis of the PackBot accepts a wide range of payloads, including a robotic arm that can be fitted with a gripper, video camera, lighting, acoustic sensors, chemi- cal and radiation detectors, or specialized equipment such as that needed for disarming bombs. Exhibit 14-1 shows the PackBot configured with a robotic arm, camera, gripper, and fiber-optic communications tether. Exhibit 14-2 shows the PackBot ready for use in the field.

The PackBot may be carried by military troops, thrown through a window, or dropped off a fire truck into a wide range of challenging and unpredictable situations. In developing the PackBot, the product development team at iRobot utilized various forms of prototypes throughout the product development process. Prototypes not only helped develop a successful product quickly, but also helped ensure the reliability of the PackBot in the field.

This chapter defines prototype, explains why prototypes are built, and then presents several principles of prototyping practice. The chapter also describes a method for planning prototypes before they are built. The PackBot is used as an illustrative ex- ample throughout.

EXHIBIT 14-2 The PackBot ready for deployment in a military search operation.

Courtesy of iRobot Corp.

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Prototyping 291

Understanding Prototypes

Although dictionaries define prototype as a noun only, in product development practice the word is used as a noun, a verb, and an adjective. For example:

• Industrial designers produce prototypes of their concepts.

• Engineers prototype a design.

• Software developers write prototype programs.

We define prototype as “an approximation of the product along one or more dimensions of interest.” Under this definition, any entity exhibiting at least one aspect of the product that is of interest to the development team can be viewed as a prototype. This definition deviates from standard usage in that it includes such diverse forms of prototypes as concept sketches, mathematical models, simulations, test components, and fully functional preproduction versions of the product. Prototyping is the process of developing such an approximation of the product.

Types of Prototypes Prototypes can be usefully classified along two dimensions. The first dimension is the degree to which a prototype is physical as opposed to analytical. Physical prototypes are tangible artifacts created to approximate the product. Aspects of the product of interest to the development team are actually built into an artifact for testing and experimentation. Examples of physical prototypes include models that look and feel like the product, proof-of-concept prototypes used to test an idea quickly, and experimental hardware used to validate the functionality of a product. Exhibit 14-3 shows three forms of physical prototypes used for diverse purposes. Analytical prototypes represent the product in a nontangible, usually mathematical or visual, manner. Interesting aspects of the product are analyzed, rather than built. Examples of analytical prototypes include computer simulations, systems of equations encoded within a spreadsheet, and computer models of three-dimensional geometry. Exhibit 14-4 shows three forms of analytical prototypes used for diverse purposes.

The second dimension is the degree to which a prototype is comprehensive as opposed to focused. Comprehensive prototypes implement most, if not all, of the attributes of a product. A comprehensive prototype corresponds closely to the everyday use of the word prototype, in that it is a full-scale, fully operational version of the product. An example of a comprehensive prototype is one given to customers in order to identify any remaining design flaws before committing to production. In contrast to comprehensive prototypes, focused prototypes implement one, or a few, of the attributes of a product. Examples of focused prototypes include foam models to explore the form of a product and hand-built circuit boards to investigate the electronic performance of a product design. A common practice is to use two or more focused prototypes together to investigate the overall performance of a product. One of these prototypes is often a “looks-like” prototype, and the other is a “works-like” prototype. By building two separate focused prototypes, the team may be able to answer its questions much earlier than if it had to create one integrated, comprehensive prototype.

Exhibit 14-5 displays a plot with axes corresponding to these two dimensions. Several different prototypes from the PackBot example are shown on this plot. Note that focused

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292 Chapter 14

EXHIBIT 14-3 Examples of physical prototypes in the PackBot project. (a) Looks-like model for customer communication and approval, (b) wheel prototype under load during creep testing, (c) sand test of the complete system.

Courtesy of iRobot Corp.

(a)

(b)

(c)

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Prototyping 293Prototyping 293

EXHIBIT 14-4 Examples of analytical prototypes of the PackBot. (a) 3D CAD rendering created for a customer proposal, (b) finite-element analysis of wheel spoke geometry, (c) dynamic simulation model.

Courtesy of iRobot Corp.

(a)

(b)

(c)

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prototypes can be either physical or analytical, but that for tangible manufactured products, fully comprehensive prototypes must generally be physical. Prototypes sometimes contain a combination of analytical and physical elements. For example, control hardware including the user interface for the PackBot could be linked to a software simulation of the PackBot dynamic motion. Some analytical prototypes can be viewed as being more “physical” than others. For example, a video animation of the PackBot’s dynamic balance based on simula- tion of the physical interactions of its components is, in one sense, more physical than a set of equations approximating the overall balance of the same mechanism.

What Are Prototypes Used For? Within a product development project, prototypes are used for four purposes: learning, communication, integration, and milestones.

Learning Prototypes are often used to answer two types of questions: “Will it work?” and “How well does it meet the customer needs?” When used to answer such questions, prototypes serve as learning tools. In developing the wheels for the PackBot, the team built focused-physical prototypes of the novel spiral spoke geometry of the wheels. The wheels were mounted to a weighted platform and dropped at various heights to test the shock absorption properties and the strength of the wheels. Exhibit 14-6 shows several of the wheel prototypes and one of the impact tests. Also in development of the wheel design, mathematical models of the spokes were analyzed to estimate the stiffness and strength of the wheels. This is an example of a focused-analytical prototype used as a learning tool.

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Gripper Geometry and Pad Coating Pull Test

Math Model of Motor Performance

FEA of Heat Dissipation

3D CAD Model

Color Rendering

Beam Bending Equations of Wheel Spoke Geometry

Wheel Impact Test

System-Level Drop Test

Beta Prototype for Field Testing

Alpha Prototype for System Integration

Full Dynamic Simulation

Full-Scale Foam Model

User Interface Hardware Linked to Dynamic Simulation

Testbed with New Software on Old Model

Not Generally Feasible

Physical

Analytical

Focused Comprehensive

EXHIBIT 14-5 Types of prototypes. Prototypes can be classified according to the degree to which they are physical and the degree to which they implement all of the attributes of the product.

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Communication Prototypes enrich communication with top management, vendors, partners, extended team members, customers, and investors. This is particularly true of physical prototypes: a visual, tactile, three-dimensional representation of a product is much easier to understand than a verbal description or even a sketch of the product. When developing new payload capabilities for the PackBot, communication among engineers, managers, suppliers, and customers is enhanced through the use of “look and feel” prototypes. New customers often fail to appreciate the small size of the “crush zone” into which the PackBot payload must fit; however, a physical model clearly illustrates this space constraint. The rough physical prototype shown in Exhibit 14-3(a) was used to communicate to early customers the physical size of the PackBot and the range of mobil- ity of its camera support arm. This model was constructed from components using stereo- lithography rapid prototyping technology, assembled, and painted to represent the actual size and appearance of the product.

Integration Prototypes are used to ensure that components and subsystems of the product work together as expected. Comprehensive physical prototypes are most effective as integra- tion tools in product development projects because they require the assembly and physical interconnection of all the parts and subassemblies that make up a product. In doing so, the

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EXHIBIT 14-6 PackBot wheel prototypes (top) and impact testing (bottom).

Courtesy of iRobot Corp.

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prototype forces coordination between different members of the product development team. If the combination of any of the components of the product interferes with the overall func- tion of the product, the problem may be detected through physical integration in a compre- hensive prototype. Common names for these comprehensive physical prototypes are testbed, alpha, beta, or preproduction prototypes. Two such prototypes of the PackBot are shown in Exhibit 14-7. In the alpha prototype, the radios are visible in the center of the robot. In the beta prototype, the radios were integrated into the body for protection from damage. Exten- sive testing of the alpha prototype helped identify several improvements to the track system, which was redesigned before the beta prototype was built. Further testing of the beta proto- type included a wide range of field conditions, such as mud, sand, and water testing.

Prototypes also help integrate the perspectives of the different functions represented on a product development team (Leonard-Barton, 1991). A simple physical model of the form of a product can be used as the medium through which the marketing, design, and manufacturing functions agree on a basic design decision.

Many software development processes use prototypes to integrate the activities of dozens of software developers. Microsoft, for example, employs a “daily build,” in which a new version of the product is compiled at the end of every day. Software developers “check in” their code by a fixed time of day (e.g., 5:00 p.m.) and a team compiles the code to create a new prototype version of the software. The most recent version of the software is then tested and used by everyone on the team, in a practice Microsoft calls “eating your own dog food.” This practice of creating daily comprehensive prototypes en- sures that the efforts of the developers are always synchronized and integrated. Any con- flicts are detected immediately and the team can never diverge more than one day from a working version of the product (Cusumano, 1997).

Milestones Particularly in the later stages of product development, prototypes are used to demonstrate that the product has achieved a desired level of functionality. Milestone prototypes provide tangible goals, demonstrate progress, and serve to enforce the sched- ule. Senior management (and sometimes the customer) often requires a prototype that demonstrates certain functions before allowing the project to proceed. For example, in many government procurements, a prototype must pass a “qualification test” and later

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EXHIBIT 14-7 Alpha (left) and beta (right) prototypes of the PackBot.

Courtesy of iRobot Corp.

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a “first-article test” before a contractor can proceed with production. A major milestone for the PackBot development was a test conducted by the U.S. Army. During this test the PackBot prototype was thrown out of a moving vehicle and controlled by a soldier with minimal training in an unknown environment. There could be no failures of the PackBot system and its user interface in order to pass this test.

While all types of prototypes are used for all four of these purposes, some types of proto- types are more appropriate than others for some purposes. A summary of the relative appropri- ateness of different types of prototypes for different purposes is shown in Exhibit 14-8.

Principles of Prototyping

Several principles are useful in guiding decisions about prototypes during product development. These principles inform decisions about what type of prototype to build and about how to incorporate prototypes into the development project plan.

Analytical Prototypes Are Generally More Flexible Than Physical Prototypes Because an analytical prototype is a mathematical approximation of the product, it will generally contain parameters that can be varied in order to represent a range of design alternatives. In most cases, changing a parameter in an analytical prototype is easier than changing an attribute of a physical prototype. For example, consider an analytical prototype of the PackBot drivetrain that includes a set of equations representing the electric motor. One of the parameters in the mathematical model of the motor is the stall torque. Varying this parameter and then solving the equations is much easier than changing an actual motor in a physical prototype. In most cases, the analytical prototype not only is easier to change than a physical prototype but also allows larger changes than could be made in a physical prototype. For this reason, an analytical prototype frequently precedes a physical prototype. The analytical prototype is used to narrow the range of feasible parameters, and then the physical prototype is used to fine-tune or confirm the design. See Chapter 15, Robust Design, for a detailed example of the use of an analytical prototype to explore several design parameters.

Physical Prototypes Are Required to Detect Unanticipated Phenomena A physical prototype often exhibits unanticipated phenomena completely unrelated to the original objective of the prototype. One reason for these surprises is that all of

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Learning Communication Integration Milestones

Focused analytical • Focused physical • • Comprehensive physical • • • •

EXHIBIT 14-8 Appropriateness of different types of prototypes for different purposes (• = more appropriate, = less appropriate). Note that fully comprehensive analytical prototypes are rarely possible for physical products.

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EXHIBIT 14-9 A prototype may reduce the risk of costly iteration. Taking time to build and test a prototype may allow the development team to detect a problem that would otherwise not have been detected until after a costly development activity, such as building an injection mold.

Build Injection

Mold

Test Part Fit

Test Part Fit

Build Prototype

Part

Build Injection

Mold

Test Part Fit

Probability of success

0.70

Probability of success

0.70

Probability of success

0.95

Probability of iteration

0.30

Probability of iteration

0.05

Probability of iteration

0.30

Conventional Process

Process with Prototyping

the laws of physics are operating when the team experiments with physical prototypes. Physical prototypes intended to investigate purely geometric issues will also have ther- mal and optical properties. Some of the incidental properties of physical prototypes are irrelevant to the final product and act as annoyances during testing. However, some of these incidental properties of physical prototypes will also manifest themselves in the final product. In these cases, a physical prototype can serve as a tool for detecting un- anticipated detrimental phenomena that may arise in the final product. For example, in a pull test of various PackBot gripper finger coatings, the team discovered that some of the coatings with good grip characteristics had poor durability. Analytical prototypes, in contrast, can never reveal phenomena that are not part of the underlying analytical model on which the prototype is based. For this reason at least one physical prototype is almost always built in a product development effort.

A Prototype May Reduce the Risk of Costly Iterations Exhibit 14-9 illustrates the role of risk and iteration in product development. In many situations, the outcome of a test may dictate whether a development task will have to be

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repeated. For example, if a molded part fits poorly with its mating parts, the mold tooling may have to be rebuilt. In Exhibit 14-9, a 30 percent risk of returning to the mold-building activity after testing part fit is represented with an arrow labeled with a probability of 0.30. If building and testing a prototype substantially increases the likelihood that the subsequent activities will proceed without iteration (e.g., from 70 percent to 95 percent, as indicated in Exhibit 14-9), the prototype phase may be justified.

The anticipated benefits of a prototype in reducing risk must be weighed against the time and money required to build and evaluate the prototype. This is particularly important for comprehensive prototypes. Products that are high in risk or uncertainty, because of the high costs of failure, new technology, or the revolutionary nature of the product, will benefit from such prototypes. On the other hand, products for which failure costs are low and the technology is well known do not derive as much risk- reduction benefit from prototyping. Most products fall between these extremes. Exhibit 14-10 represents the range of situations that can be encountered in different types of development projects.

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Cost of Comprehensive Prototype (Time or Money)

Te ch

n ic

al o

r M

ar ke

t R

is k

H ig

h Lo

w

Low High

One prototype may be built for verification.

Examples: printed goods

Many comprehensive prototypes built.

Analytical prototypes used extensively.

Carefully planned compre- hensive prototypes.

Sometimes the first unit built is actually sold.

Examples: airplanes, satellites, automobiles

Examples: software, consumer products

Few or no comprehensive prototypes built.

Examples: commercial buildings, ships

EXHIBIT 14-10 The use of comprehensive prototypes depends on the relative level of technical or market risk and the cost of building a comprehensive prototype.

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A Prototype May Expedite Other Development Steps Sometimes the addition of a short prototyping phase may allow a subsequent activity to be completed more quickly than if the prototype were not built. If the required additional time for the prototype phase is less than the savings in duration of the subsequent activity, then this strategy is appropriate. One of the most common occurrences of this situation is in mold design, as illustrated in Exhibit 14-11. The existence of a physical model of a geometrically complex part allows the mold designer to more quickly visualize and design the mold tooling.

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Conventional Process

Process with Prototyping

Part Design

Part Design

Mold Design

Mold Design

Prototype

Mold Fabrication

Mold Fabrication

Time

EXHIBIT 14-11 Role of a prototype in expediting another step. Taking time to build a prototype may enable more rapid completion of a subsequent step.

System Design

System Design

Prototype Circuit Board

Software Test

PC Board Fabrication

System Assembly and Test

PC Board Fabrication

Software Test

System Assembly and Test

Process with Prototyping

Conventional Process

EXHIBIT 14-12 Use of a prototype to remove a task from the critical path.

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A Prototype May Restructure Task Dependencies The top part of Exhibit 14-12 illustrates a set of tasks that are completed sequentially. It may be possible to complete some of the tasks concurrently by building a prototype. For example, a software test may depend on the existence of a physical circuit. Rather than waiting for the production version of the printed circuit board to use in the test, the team may be able to rapidly fabricate a prototype (e.g., a hand-built board) and use it for the test while the production of the printed circuit board proceeds.

Prototyping Technologies

Hundreds of different production technologies are used to create prototypes, particularly physical prototypes. Two technologies have emerged as particularly important in the past 20 years: three-dimensional computer modeling (3D CAD) and free-form fabrication.

3D CAD Modeling and Analysis Since the 1990s, the dominant mode of representing designs has shifted dramatically from drawings, often created using a computer, to 3D computer-aided design models, known as 3D CAD models. 3D CAD models represent designs as collections of 3D solid entities, each usually constructed from geometric primitives, such as cylinders, blocks, and holes.

The advantages of 3D CAD modeling include the ability to easily visualize the three-dimensional form of the design; the ability to create photo-realistic images for assessment of product appearance; the ability to automatically compute physical prop- erties such as mass and volume; and the efficiency arising from the creation of one and only one canonical description of the design, from which other, more focused descrip- tions, such as cross-sectional views and fabrication drawings, can be created. Through the use of computer-aided engineering (CAE) tools, 3D CAD models have begun to serve as analytical prototypes. In some settings this can eliminate one or more physi- cal prototypes. When 3D CAD models are used to carefully plan the final, integrated assembly of the product and to detect geometric interference among parts, this may indeed eliminate the need for a full-scale prototype. For example, in the development of the Boeing 777 and 787 jets, the development teams were able to avoid building full-scale wooden prototype models of the planes, which had historically been used to detect geometric interferences among structural elements and the components of vari- ous other systems, such as hydraulic lines. Using a 3D CAD model of an entire product in this manner is known, depending on the industry setting, as a digital mock-up, digital prototype, or virtual prototype.

3D CAD models are also the underlying representation for many types of computer- based analyses. Forms of CAE include finite-element analysis of thermal flow or stress dis- tribution, virtual crash testing of automobiles, kinematic and dynamic motion of complex mechanisms, all of which have become more sophisticated every year. In the PackBot de- velopment, engineers conducted finite-element analysis of structural integrity to understand impact stresses at various drop and crash angles. Exhibit 14-13 shows one such analytical result, based on a 3D CAD model of the PackBot. Engineers also computed heat flows and thermal dissipation performance using finite-element analysis based on 3D CAD models.

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Free-Form Fabrication In 1984, the first commercial free-form fabrication system was introduced by 3D Systems. This technology, called stereolithography, and dozens of competing technologies that followed it, create physical objects directly from 3D CAD models, and can be thought of as “three-dimensional printing.” This collection of technologies is often called rapid prototyping. Most of the technologies work by constructing an object, one cross-sectional layer at a time, by depositing a material or by using a laser to selectively solidify a liquid or powder. The resulting parts are most often made from plastics, but other materials are available, including wax, paper, ceramics, and metals. In some cases the parts are used directly for visualization or in working prototypes. However, the parts are often used as patterns to make molds or patterns from which parts with particular material properties can then be molded or cast.

Free-form fabrication technologies enable realistic 3D prototypes to be created ear- lier and less expensively than was possible before. When used appropriately, these pro- totypes can reduce product development time and/or improve the resulting prod- uct quality. In addition to enabling the rapid construction of working prototypes, these technologies can be used to embody product concepts quickly and inexpensively, increasing the ease with which concepts can be communicated to other team members, senior managers, development partners, or potential customers. For example, the PackBot prototype shown in Exhibit 14-3(a) was made of components fabricated using stereolithography in only four days.

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EXHIBIT 14-13 Finite-element analysis of the PackBot side plate based on a 3D CAD model. The image shows the stress distribution upon side impact at the rear wheel.

Courtesy of iRobot Corp.

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Planning for Prototypes

A potential pitfall in product development is what Clausing called the “hardware swamp” (Clausing, 1994). The swamp is caused by misguided prototyping efforts, that is, the building and debugging of prototypes (physical or analytical) that do not substantially contribute to the goals of the overall product development project. One way to avoid the swamp is to carefully define each prototype before embarking on an effort to build and test it. This section presents a four-step method for planning each prototype during a product development project. The method applies to all types of prototypes: focused, comprehensive, physical, and analytical. A template for recording the information generated from the method is given in Exhibit 14-14. We use the Pack- Bot wheel prototype and impact test shown in Exhibit 14-6 as an example to illustrate the method.

Step 1: Define the Purpose of the Prototype Recall the four purposes of prototypes: learning, communication, integration, and mile- stones. In defining the purpose of a prototype, the team lists its specific learning and communication needs. Team members also list any integration needs and whether or not the prototype is intended to be one of the major milestones of the overall product development project.

For the wheel prototypes, the purpose was to determine the shock absorption characteristics and robustness of the wheels using various geometry and materials. While these learning prototypes were primarily focused on performance, the team was also considering the manufacturing cost of the materials, some of which were not moldable and must be machined.

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Name of Prototype PackBot Wheel Geometry/Impact Test

Purpose(s) • Select final wheel spoke geometry and materials based on strength and shock absorption characteristics.

• Confirm that wheels absorb shock to withstand impact and protect the PackBot and its payload.

Level of Approximation

Experimental Plan

• Correct wheel spoke geometry, materials, and platform load.

• Build 12 test wheels using six different materials, each with two spoke shapes.

• Mount the wheels to the test fixture. • Conduct impact tests at a range of drop heights.

Schedule 1 August select wheel designs and materials 7 August complete design of test fixture

14 August wheels and test fixture constructed 15 August assembly completed 23 August testing completed 25 August analysis of test results completed

EXHIBIT 14-14 Planning template for the PackBot wheel geometry/impact test prototypes.

Courtesy of iRobot Corp.

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Step 2: Establish the Level of Approximation of the Prototype Planning a prototype requires definition of the degree to which the final product is to be approximated. The team should consider whether a physical prototype is necessary or whether an analytical prototype would best meet its needs. In most cases, the best proto- type is the simplest prototype that will serve the purposes established in step 1. In some cases, an earlier model serves as a testbed and may be modified for the purposes of the prototype. In other cases, an existing prototype or a prototype being built for another pur- pose can be utilized.

For the wheel prototype, the team decided that materials and geometry of the wheel were critical attributes related to impact performance, so the prototype needed to be con- structed carefully with these attributes in mind. However, other aspects of the wheel could be ignored, including the production method (molding versus machining), the attachment to the drive system and the track belt, and the color and overall appearance of the wheel. A member of the team had previously explored an analytical model of the wheel spoke bending performance and felt that the physical prototype was necessary to verify her analysis. She had discovered that there was a basic trade-off between shock absorption, which required more flexible spokes, and strength of the wheel, which required larger spokes. The team used the analytical prototype to determine the wheel spoke dimensions that would be investigated with the physical prototype.

Step 3: Outline an Experimental Plan In most cases, the use of a prototype in product development can be thought of as an experiment. Good experimental practice helps ensure the extraction of maximum value from the prototyping effort. The experimental plan includes the identification of the variables of the experiment (if any), the test protocol, an indication of what measurements will be performed, and a plan for analyzing the resulting data. When many variables must be explored, efficient experiment design greatly facilitates this process. Chapter 15, Robust Design, discusses design of experiments in detail.

For the wheel prototype tests, the team decided to vary only the materials and web geometry of the spokes. Based on the analytical models, two spoke shapes were selected for testing. Six different materials were also chosen, for a total of 12 test designs. The team designed a weighted platform to which each wheel could be mounted and a test apparatus for dropping the platform at various heights. They decided to instrument the platform to measure the acceleration forces transmitted through the wheels to the PackBot upon im- pact. After each test, they inspected the wheel for damage in the form of cracks or plastic deformation before increasing the test height. These test results would not only be used to choose the best spoke geometry and material, but also to improve the analytical model for future use, which may eliminate further physical prototyping of modified wheel designs.

Step 4: Create a Schedule for Procurement, Construction, and Testing Because the building and testing of a prototype can be considered a subproject within the overall development project, the team benefits from a schedule for the prototyping activ- ity. Three dates are particularly important in defining a prototyping effort. First, the team defines when the parts will be ready to assemble. (This is sometimes called the “bucket of parts” date.) Second, the team defines the date when the prototype will first be tested.

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(This is sometimes called the “smoke test” date, because it is the date the team will first apply power and “look for smoke” in products with electrical systems.) Third, the team defines the date when it expects to have completed testing and produced the final results.

For the wheel prototypes, no assembly was involved, so when parts were available the prototypes could be assembled and tested rather quickly. The team planned for eight days of testing and two days of analysis.

Planning Milestone Prototypes The above method for planning a prototype applies to all prototypes, including those as simple as the wheel geometry and those as complex as the beta prototype of the en- tire PackBot. Nevertheless, the comprehensive prototypes a team uses as development milestones benefit from additional planning. This planning activity typically occurs in conjunction with the overall product development planning activity at the end of the concept development phase. In fact, planning the milestone dates is an integral part of establishing an overall product development project plan. (See Chapter 18, Managing Projects.)

All other things being equal, the team would prefer to build as few milestone proto- types as possible because designing, building, and testing comprehensive prototypes con- sumes a great deal of time and money. However, in reality, few highly engineered products are developed with fewer than two milestone prototypes, and many efforts require four or more.

As a base case, the team should consider using alpha, beta, and preproduction prototypes as milestones. The team should then consider whether any of these milestones can be eliminated or whether in fact additional prototypes are necessary.

Alpha prototypes are typically used to assess whether the product works as intended. The parts in alpha prototypes are usually similar in material and geometry to the parts that will be used in the production version of the product, but they are usually made with prototype production processes. For example, plastic parts in an alpha prototype may be machined or rubber molded instead of injection molded as they would be in production.

Beta prototypes are typically used to assess reliability and to identify remaining bugs in the product. These prototypes are often given to customers for testing in the intended use environment. The parts in beta prototypes are usually made with actual production processes or supplied by the intended component suppliers, but the product is usually not assembled with the intended final assembly facility or tooling. For example, the plastic parts in a beta prototype might be molded with the production injection molds but would probably be assembled by a technician in a prototype shop rather than by production workers or automated equipment.

Preproduction prototypes are the first products produced by the entire production process. At this point the production process is not yet operating at full capacity but is making limited quantities of the product. These prototypes are used to verify pro- duction process capability, are subjected to further testing, and are often supplied to preferred customers. Preproduction prototypes are sometimes called pilot-production prototypes.

The most common deviations from the standard prototyping plan are to eliminate one of the standard prototypes or to add additional early prototypes. Eliminating a proto- type (usually the alpha) may be possible if the product is very similar to other products

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the firm has already developed and produced, or if the product is extremely simple. Additional early prototypes are common in situations where the product embodies a new concept or technology. These early prototypes are sometimes called experimental or en- gineering prototypes. They usually do not look like the final product, and many of the parts of the prototype are not designed with the intention of eventually being produced in quantity.

Once preliminary decisions have been made about the number of prototypes, their characteristics, and the time required to assemble and test them, the team can place these milestones on the overall time line of the project. When the team attempts to schedule these milestones, the feasibility of the overall product development schedule can be as- sessed. Frequently a team will discover, when working backward from the target date for the product launch, that the assembly and test of one milestone prototype overlaps or is perilously close to the design and fabrication of the next milestone prototype. If this overlapping happens in practice, it is the worst manifestation of the “hardware swamp.” When prototyping phases overlap, there is little transfer of learning from one prototype to the next, and the team should consider omitting one or more of the prototypes to allow the remaining prototypes to be spread out more in time. During project planning, overlap- ping prototyping phases can be avoided by beginning the project sooner, delaying product launch, eliminating a milestone prototype, or devising a way to accelerate the develop- ment activities preceding each prototype. (See Chapter 18, Managing Projects, for some techniques for achieving this acceleration.)

Summary Product development almost always requires the building and testing of prototypes. A prototype is an approximation of the product on one or more dimensions of interest.

• Prototypes can be usefully classified along two dimensions: (1) the degree to which they are physical as opposed to analytical and (2) the degree to which they are compre- hensive as opposed to focused.

• Prototypes are used for learning, communication, integration, and milestones. While all types of prototypes can be used for all of these purposes, physical prototypes are usu- ally best for communication, and comprehensive prototypes are best for integration and milestones.

• Several principles are useful in guiding decisions about prototypes during product development:

• Analytical prototypes are generally more flexible than physical prototypes.

• Physical prototypes are required to detect unanticipated phenomena.

• A prototype may reduce the risk of costly iterations.

• A prototype may expedite other development steps.

• A prototype may restructure task dependencies.

• 3D CAD modeling and free-form fabrication technologies have reduced the relative cost and time required to create and analyze prototypes.

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• A four-step method for planning a prototype is:

1. Define the purpose of the prototype. 2. Establish the level of approximation of the prototype. 3. Outline an experimental plan. 4. Create a schedule for procurement, construction, and testing.

• Milestone prototypes are defined in the product development project plan. The number of such prototypes and their timing is one of the key elements of the overall develop- ment plan.

References and Bibliography Many current resources are available on the Internet via www.ulrich-eppinger.net

Clausing describes some of the pitfalls in prototyping, including the “hardware swamp.” Clausing, Don, Total Quality Development, ASME Press, New York, 1994.

Leonard-Barton describes how prototypes are used for the integration of different product development functions.

Leonard-Barton, Dorothy, “Inanimate Integrators: A Block of Wood Speaks,” Design Management Journal, Vol. 2, No. 3, Summer 1991, pp. 61–67.

Cusumano describes Microsoft’s use of the “daily build” in its software development process. The daily build is an extreme example of using comprehensive prototypes to force integration.

Cusumano, Michael A., “How Microsoft Makes Large Teams Work Like Small Teams,” Sloan Management Review, Fall 1997, pp. 9–20.

Schrage presents a view of product development centered around the role of prototyping and simulation in the innovation process.

Schrage, Michael, Serious Play: How the World’s Best Companies Simulate to Innovate, Harvard Business School Press, Boston, 2000.

Thomke explains the relationship between effective prototyping methods and successful innovation. He argues that new technologies are changing the economics of experimentation, leading to greater product development process performance.

Thomke, Stefan H., Experimentation Matters: Unlocking the Potential of New Technologies for Innovation, Harvard Business School Press, Boston, 2003.

Kelley and Littman’s presentation of IDEO’s highly successful product development process includes a description of how IDEO uses prototypes to solve problems (learning), to engage customers (communication), and to move projects forward through an iterative process (milestones).

Kelley, Tom, with Jonathan Littman, The Art of Innovation: Lessons in Innovation from IDEO, America’s Leading Design Firm, Doubleday, New York, 2001.

Two books written for general audiences contain very interesting accounts of prototyping. Sabbagh’s book on the development of the Boeing 777 contains riveting accounts of brake

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system tests and wing strength tests, among others. Walton’s book on the development of the 1996 Ford Taurus contains fascinating descriptions of prototyping and testing in the automobile industry. Particularly engaging is the description of testing heaters in northern Minnesota in midwinter, using development engineers as subjects.

Sabbagh, Karl, Twenty-First-Century Jet: The Making and Marketing of the Boeing 777, Scribner, New York, 1996.

Walton, Mary, Car: A Drama of the American Workplace, Norton, New York, 1997.

Wall, Ulrich, and Flowers provide a formal definition of the quality of a prototype in terms of its fidelity to the production version of a product. They use this definition to evaluate the prototyping technologies available for plastic parts.

Wall, Matthew B., Karl T. Ulrich, and Woodie C. Flowers, “Evaluating Prototyping Technologies for Product Design,” Research in Engineering Design, Vol. 3, 1992, pp. 163–177.

Wheelwright and Clark describe the use of prototypes as a managerial tool for major product development programs. Their discussion of periodic prototyping cycles is particularly interesting.

Wheelwright, Stephen C., and Kim B. Clark, Revolutionizing Product Development: Quantum Leaps in Speed, Efficiency, and Quality, The Free Press, New York, 1992.

Exercises 1. A furniture manufacturer is considering a line of seating products to be fabricated

by cutting and bending a recycled plastic material available in large sheets. Create a prototype of at least one possible chair design by cutting and bending a sheet of paper or cardboard. (You may wish to design the chair with a sketch first, or just start working with the sheet directly.) What can you learn about the chair design from your prototype? What can’t you learn about the chair design from such a pro- totype?

2. Position the chair prototype described in Exercise 1 on the plot in Exhibit 14-5. For which of the four major purposes would a product development team use such a prototype?

3. Devise a prototyping plan (similar to that in Exhibit 14-14) for investigating the comfort of different types of handles for kitchen knives.

4. Position the prototypes shown in Exhibits 14-3, 14-4, 14-6, 14-7, and 14-13 on the plot in Exhibit 14-5. Briefly explain your reasoning for each placement.

Thought Questions 1. Many product development teams separate the “looks-like” prototype from the

“works-like” prototype. They do this because integrating both function and form is difficult in the early phases of development. What are the strengths and weaknesses of this approach? For what types of products might this approach be dangerous?

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2. Today there are several technologies able to create physical parts directly from 3D CAD files (e.g., stereolithography and selective laser sintering). How might a team use such rapid prototyping technologies during the concept development phase of the product development process? Might these technologies facilitate identifying customer needs, establishing specifications, generating product concepts, selecting product concepts, and/or testing product concepts?

3. Some companies have reportedly abandoned the practice of doing a customer test with the early prototypes of their products, preferring instead to go directly and quickly to market in order to observe the actual customer response. For what types of products and markets might this practice make sense?

4. Is a drawing a physical or an analytical prototype?

5. Microsoft uses frequent comprehensive prototypes in its development of software. In fact, in some projects there is a “daily build,” in which a new version of the product is integrated and compiled every day. Is this approach only viable for software products, or could it be used for physical products as well? What might be the costs and benefits of such an approach for physical products?

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Robust Design

C H A P T E R F I F T E E N

311

Courtesy of Ford Motor Co.

EXHIBIT 15-1 Rear seat belt experiment. This experiment was run on a simulation model to explore many design parameters and noise conditions.

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Ford Motor Company safety engineers were working with a supplier to better understand the performance of rear seat belts. In any conventional seat belt system with lap and shoulder belts, if the lap portion of the belt rides upward, the passenger may slide beneath it, potentially resulting in abdominal injury. This phenomenon, called “submarining,” is related to a large number of factors, including the nature of the collision, the design of the vehicle, the properties of the seats and seat belts, and other conditions. Based on experimentation, simulation, and analysis, Ford engineers hoped to determine which of the many factors were most critical to passenger safety and to avoiding submarining. The image shown in Exhibit 15-1 depicts the model used in Ford’s simulation analysis.

This chapter presents a method for designing and conducting experiments to improve the performance of products even in the presence of uncontrollable variations. This method is known as robust design.

What Is Robust Design?

We define a robust product (or process) as one that performs as intended even under nonideal conditions such as manufacturing process variations or a range of operating situ- ations. We use the term noise to describe uncontrolled variations that may affect perfor- mance, and we say that a quality product should be robust to noise factors.

Robust design is the product development activity of improving the desired perfor- mance of the product while minimizing the effects of noise. In robust design we use experiments and data analysis to identify robust setpoints for the design parameters we can control. A robust setpoint is a combination of design parameter values for which the product performance is as desired under a range of operating conditions and manufactur- ing variations.

Conceptually, robust design is simple to understand. For a given performance target (safely restraining rear-seat passengers, for example), there may be many combinations of parameter values that will yield the desired result. However, some of these combinations are more sensitive to uncontrollable variation than others. Because the product will likely operate in the presence of various noise factors, we would like to choose the combination of parameter values that is least sensitive to uncontrollable variation. The robust design process uses an experimental approach to finding these robust setpoints.

To understand the concept of robust setpoints, consider two hypothetical factors affecting some measure of seat belt performance, as shown in Exhibit 15-2. Assume that factor A has a linear effect, fA, on performance and factor B has a nonlinear effect, fB. Further consider that we can choose setpoints for each factor: A1 or A2 for factor A, and B1 or B2 for factor B. Assuming that the effects of fA and fB are additive, a combination of A1 and B2 will provide approximately the same level of overall performance as a combination of A2 and B1. Manu- facturing variations will be present at any chosen setpoint, so that the actual value may not be exactly as specified. By choosing the value of B1 for factor B, where the sensitivity of the response to factor B is relatively small, unintended variation in factor B has a relatively small influence on overall product performance. Therefore, the choice of B1 and A2 is a more robust combination of setpoints than the combination of B2 and A1.

The robust design process can be used at several stages of the product development process. As with most product development issues, the earlier that robustness can be considered in the product development process, the better the robustness results can be.

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Robust design experiments can be used within the concept development phase as a way to refine the specifications and set realistic performance targets. While it is beneficial to consider product robustness as early as the concept stage, experiments for robust design are used most frequently during the detail-design phase as a way to ensure the desired product performance under a variety of conditions. In detail design, the robust design ac- tivity is also known as parameter design, as this is a matter of choosing the right setpoints for the design parameters under our control. These include the product’s materials, dimen- sions, tolerances, manufacturing processes, and operating instructions.

For many engineering design problems, equations based on fundamental physical prin- ciples can be solved for robust parameter choices. However, engineers generally cannot fully model the kinds of uncertainties, variations, and noise factors that arise under real conditions. Furthermore, the ability to develop accurate mathematical models is limited for many engineering problems. For example, consider the difficulty of accurately modeling the seat belt submarining problem under a wide variety of conditions. In such situations, empirical investigation through designed experiments is necessary. Such experiments can be used to directly support decision making and can also be used to improve the accuracy of mathematical models.

In the case of the seat belt design problem, Ford’s engineers wished to test a range of seat belt design parameters and collision conditions. However, crash testing is very ex- pensive, so Ford worked with its seat belt supplier to develop a simulation model, which was calibrated using experimental crash data. Considering the hundreds of possible design parameter combinations, collision conditions, and other factors of interest, the engineers chose to explore the simulation model using a carefully planned experiment. Although simulation requires a great deal of computational effort, the simulation model still al- lowed Ford engineers to run dozens of experiments under a wide variety of conditions, which would not have been possible using physical crash testing.

A1

fA

A2

Response to Factor A

fB

B1

Response to Factor B

B2

EXHIBIT 15-2 Robust design exploits nonlinear relationships to identify setpoints where the product performance is less sensitive to variations. In this example, the chosen value for the factor A setpoint does not affect robustness, whereas that of factor B does. Choosing B1 minimizes the effect of variation in factor B on overall performance.

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For the Ford seat belt design team, the goals of this designed experiment were to learn:

• What combination of seat, seat belt, and attachment parameters minimizes rear-seat passenger submarining during a crash.

• How submarining is affected by uncontrollable conditions. What combination of de- sign parameters is most robust to such noise factors?

Design of Experiments The approach to robust design presented in this chapter is based on a method called design of experiments (DOE). In this method, the team identifies the parameters that can be controlled and the noise factors it wishes to investigate. The team then designs, conducts, and analyzes experiments to help determine the parameter setpoints to achieve robust performance.

In Japan during the 1950s and 1960s, Dr. Genichi Taguchi developed techniques to apply DOE to improve the quality of products and manufacturing processes. Beginning with the quality movement of the 1980s, Taguchi’s approach to experimental design started to have an impact on engineering practice in the United States, particularly at Ford Motor Company, Xerox Corporation, AT&T Bell Laboratories, and through the American Supplier Institute (which was created by Ford).

Taguchi receives credit for promoting several key ideas of experimental design for the development of robust products and processes. These contributions include introducing noise factors into experiments to observe these effects and the use of a signal-to-noise ratio metric including both the desired performance (signal) and the undesired effects (noise). While statisticians had been showing engineers how to run experiments for de- cades, it was not until Taguchi’s methods were widely explained to the U.S. manufactur- ing industry during the 1990s that experiments became commonly utilized to achieve robust design.

DOE is not a substitute for technical knowledge of the system under investigation. In fact, the team should use its understanding of the product and how it operates to choose the right parameters to investigate by experiment. The experimental results can be used in conjunction with technical knowledge of the system in order to make the best choices of parameter setpoints. Furthermore, the experimental results can be used to build better mathematical models of the product’s function. In this way, experi- mentation complements technical knowledge. For example, Ford engineers have basic mathematical models of seat belt performance as a function of passenger sizes and collision types. These models allow Ford to size the mechanical elements and to de- termine the belt attachment geometry. Based on empirical and simulation data, Ford’s analytical models and seat belt design guidelines gain precision over time, reducing the need for time-consuming empirical and simulation studies. Eventually, this techni- cal knowledge may improve to the point where only confirming tests of new seat belt configurations are required.

Basic experimental design and analysis for product development can be successfully planned and executed by the development team. However, the field of DOE has many advanced methods to address a number of complicating factors and yield more useful experimental results. Development teams thus can benefit from consulting with a statisti- cian or DOE expert who can assist in designing the experiment and choosing the best analytical approach.

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The Robust Design Process To develop a robust product through DOE, we suggest this seven-step process:

1. Identify control factors, noise factors, and performance metrics.

2. Formulate an objective function.

3. Develop the experimental plan.

4. Run the experiment.

5. Conduct the analysis.

6. Select and confirm factor setpoints.

7. Reflect and repeat.

Step 1: Identify Control Factors, Noise Factors, and Performance Metrics

The robust design procedure begins with identification of three lists: control factors, noise factors, and performance metrics for the experiment:

• Control factors: These are the design variables to be varied in a controlled manner during the experiment, in order to explore the product’s performance under the many combinations of parameter setpoints. Experiments are generally run at two or three discrete levels (setpoint values) of each factor. These parameters are called control fac- tors because they are among the variables that can be specified for production and/or operation of the product. For example, the webbing stiffness and coefficient of friction are control factors of interest for the experiment.

• Noise factors: Noise factors are variables that cannot be explicitly controlled during the manufacturing and operation of the product. Noise factors may include manufac- turing variances, changes in materials properties, multiple user scenarios or operat- ing conditions, and even deterioration or misuse of the product. If through special techniques the team can control the noise factors during the experiment (but not in production or operation), then variance can deliberately be induced during the experi- ment to assess its impact. Otherwise, the team simply lets the noise take place during the experiment, analyzes the results in the presence of typical variation, and seeks to minimize the effects of this variation. For seat belts to be used with a range of seats, the shape of the seat and the seat fabric must be considered noise factors. The goal is to design a seat belt system that works well regardless of the values of these factors.

• Performance metrics: These are the product specifications of interest in the experi- ment. Usually the experiment is analyzed with one or two key product specifications as the performance metrics in order to find control factor setpoints to optimize this performance. These metrics may be derived directly from key specifications where robustness is of critical concern. (See Chapter 6, Product Specifications.) For example, how far the passenger’s back or buttocks move forward during the collision would be possible performance metrics for the seat belt experiment.

For the seat belt design problem, the team held a meeting to list the control factors, noise factors, and performance metrics. As Taguchi teaches, they placed these lists into a single graphic, called a parameter diagram (or p-diagram), as shown in Exhibit 15-3.

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After listing the various factors, the team must decide which ones will be explored by experiment. When a large number of parameters are suspected of potentially affecting performance, the selection of critical variables can be substantially narrowed by using analytical models and/or by running a screening experiment with two levels for each of many factors. Then a finer experiment is run with two or more levels of the few param- eters believed to affect performance.

Ford engineers considered the lists shown in Exhibit 15-3. They chose to focus the experiment on exploration of seven seat belt parameters, holding constant the geometric locations of the three attachment points. They decided to use “back angle at peak” as the output metric, the angle that the passenger’s back makes with respect to vertical at the moment of maximum restraint. Back angle is a smaller-is-better performance metric, measured in radians.

A primary concern in this experiment was the effect of three particular noise factors: seat shape, fabric type, and severity of collision. Through preliminary analysis, the team found the best and worst combinations of these noise conditions with respect to the sub- marining effect. These three noise factors were thereby combined into two extreme noise conditions for the purposes of the experiment. This approach, known as compounded noise, can be helpful when many noise factors must be considered. (See Testing Noise Factors in step 3.)

Step 2: Formulate an Objective Function

The experiment’s performance metric(s) must be transformed into an objective function that relates to the desired robust performance. Several objective functions are useful in robust design for different types of performance concerns. They can be formulated either as functions to be maximized or minimized, and they include:

• Maximizing: This type of function is used for performance dimensions where larger values are better, such as maximum deceleration before belt slippage. Common forms of this objective function � are � = � or � = �2, where � is the mean of the experi- mental observations under a given test condition.

EXHIBIT 15-3 Parameter diagram used to design the seat belt experiment. Bold text indicates the performance metric used and the control factors and noise factors chosen for exploration.

Control Factors

Belt webbing stiffness Belt webbing friction Lap belt force limiter Upper anchorage stiffness Buckle cable stiffness Front seatback bolster Tongue friction Attachment geometry

Performance MetricsPassenger Restraint Process Back angle

Slip of buttocks Hip rotation Forward knee motionNoise Factors

Shape of rear seat Type of seat fabric Severity of collision Wear of components Positioning of passenger Positioning of belts on body Size of passenger Type of clothing fabric Web manufacturing variations Latch manufacturing variations

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• Minimizing: This type of function is used for performance dimensions where smaller values are better, such as back angle at peak deceleration. Common forms of this objective function are � = � or � = �2, where �2 is the variance of the experimental observations under a given test condition. Alternatively, such minimization objectives can be formulated as functions to be maximized, such as � = 1/ � or � = 1/�2.

• Target value: This type of function is used for performance dimensions where values closest to a desired setpoint or target are best, such as amount of belt slackening before restraint. A common maximizing form of this objective function is � = 1/(� – t)2, where t is the target value.

• Signal-to-noise ratio: This type of function is used particularly to measure robust- ness. Taguchi formulates this metric as a ratio with the desired response in the numerator and the variance in the response as the denominator. Generally the mean value of the desired response, such as the mean back angle at peak, is not difficult to adjust by changing control factors. In the denominator, we place the variance of this response (the noise response), which is to be minimized, such as the variance in back angle resulting from noise conditions. In practice, reducing variance is more difficult than changing the mean. By computing this ratio, we can highlight robust factor settings for which the noise response is relatively low as compared to the signal response. A common maximizing form of this objective function is � = 10 log (�2/�2).

The Ford statistician consulting with the team suggested two objective functions: the av- erage back angle at peak and the range of the back angle at peak (the difference between the maximum and minimum back angle at peak at the two noise conditions to be tested). Both of these are objectives to be minimized. Together these two metrics would provide deeper insight into the behavior of the system than either one alone.

Step 3: Develop the Experimental Plan

Statisticians have developed many types of efficient experimental plans. These plans lay out how to vary the factor levels (values of the control factors and possibly also some of the noise factors) in a series of experiments in order to explore the system’s behavior. Some DOE plans are more efficient for characterizing certain types of systems, while others provide more complete analysis.

Experimental Designs A critical concern in designing experiments is the cost of setting up and running the experimental trials. In situations where this cost is low, running a large number of trials and using an experimental design with resolution high enough to explore more factors, factor combinations, and interactions may be feasible. On the other hand, when the cost of experimentation is high, efficient DOE plans can be used that simultaneously change several factors at once. Some of the most popular experimental designs are listed below and depicted in Exhibit 15-4. Each one has important uses.

• Full factorial: This design involves the systematic exploration of every combination of levels of each factor. This allows the team to identify all of the multifactor interaction

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EXHIBIT 15-4 Several alternative experimental plans for seven factors (A, B, C, D, E, F, and G) at two levels each. The full-factorial experiment contains 27 � 128 trials, while the L8 orthogonal array design contains only 8 trials, denoted by the � marks in the matrices. The L8 orthogonal array plan is the one used for the seat belt experiment and is shown in conventional row/column format in Exhibit 15-5.

Full-Factorial Matrix 1/2 Fractional Factorial Matrix

A1 A2

B1 B2 B1 B2

C1 C2 C1 C2 C1 C2 C1 C2

D1 D2 D1 D2 D1 D2 D1 D2 D1 D2 D1 D2 D1 D2 D1 D2 E1 F1 G1 x

F1 G2 x

E1 F2 G1 x

F2

G2 x E1 F1 G1 x

F1 G2 x

E2 F2 G1 x

F2

G2 x

1/4 Fractional Factorial Matrix 1/8 Fractional Factorial Matrix

A1 A2

B1 B2 B1 B2

C1 C2 C1 C2 C1 C2 C1 C2

D1 D2 D1 D2 D1 D2 D1 D2 D1 D2 D1 D2 D1 D2 D1 D2 E1 F1 G1 x x

F1 G2 x x E1

F2 G1 x x

F2 G2 x x

E1 F1 G1 x x

F1 G2 x x

E2 F2 G1 x x

F2

G2 x x

A1 A2

B1 B2 B1 B2

C1 C2 C1 C2 C1 C2 C1 C2

D1 D2 D1 D2 D1 D2 D1 D2 D1 D2 D1 D2 D1 D2 D1 D2 E1 F1 G1 x x x x x x x x

F1 G2

E1 F2 G1

F2

G2 x x x x x x x x E1 F1 G1

F1 G2 x x x x x x x x

E2 F2 G1 x x x x x x x x

F2

G2

A1 A2

B1 B2 B1 B2

C1 C2 C1 C2 C1 C2 C1 C2

D1 D2 D1 D2 D1 D2 D1 D2 D1 D2 D1 D2 D1 D2 D1 D2 E1 F1 G1 x x x x x x x x x x x x x x x x

F1 G2 x x x x x x x x x x x x x x x x

E1 F2 G1 x x x x x x x x x x x x x x x x

F2

G2 x x x x x x x x x x x x x x x x E1 F1 G1 x x x x x x x x x x x x x x x x

F1 G2 x x x x x x x x x x x x x x x x

E2 F2 G1 x x x x x x x x x x x x x x x x

F2

G2 x x x x x x x x x x x x x x x x

A1 A2

B1 B2 B1 B2

C1 C2 C1 C2 C1 C2 C1 C2

D1 D2 D1 D2 D1 D2 D1 D2 D1 D2 D1 D2 D1 D2 D1 D2 E1 F1 G1 x x x x x x x x

F1 G2 x x x x x x x x

E1 F2 G1 x x x x x x x x

F2

G2 x x x x x x x x E1 F1 G1 x x x x x x x x

F1 G2 x x x x x x x x

E2 F2 G1 x x x x x x x x

F2

G2 x x x x x x x x

A1 A2

B1 B2 B1 B2

C1 C2 C1 C2 C1 C2 C1 C2

D1 D2 D1 D2 D1 D2 D1 D2 D1 D2 D1 D2 D1 D2 D1 D2 E1 F1 G1 x x x x x

F1 G2 x

E1 F2 G1 x

F2

G2 E1 F1 G1 x

F1 G2

E2 F2 G1

F2

G2

L8 Orthogonal Array (1/16 Fractional Factorial Matrix) One Factor at a Time

Source: Fractional factorial layouts adapted from Ross, 1996

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effects, in addition to the primary (main) effect of each factor on performance. This type of experiment is generally practical only for a small number of factors and levels and when experiments are inexpensive (as with fast software-based simulations or very flexible hardware). For an investigation of k factors at n levels each, the number of trials in the full-factorial experiment is nk. Full factorial experimentation is typically infea- sible for an experiment with greater than four to five factors.

• Fractional factorial: This design uses only a small fraction of the combinations used above. In exchange for this efficiency, the ability to compute the magnitudes of all the interaction effects is sacrificed. Instead, the interactions are confounded with other interactions or with some of the main factor effects. Note that the fractional factorial layout still maintains balance within the experimental plan. This means that for the several trials at any given factor level, each of the other factors is tested at every level the same number of times.

• Orthogonal array: This design is the smallest fractional factorial plan that still allows the team to identify the main effects of each factor. However, these main effects are confounded with many interaction effects. Nevertheless, orthogonal array layouts are widely utilized in technical investigations because they are extremely efficient. Taguchi popularized the orthogonal array DOE approach, even though statisticians had developed such plans several decades earlier and the roots of these designs can be traced back many centuries. Orthogonal array plans are named according to the number of rows (experiments) in the array: L4, L8, L9, L27, and so on. The appendix to this chapter shows several orthogonal array experimental plans.

• One factor at a time: This is an unbalanced experimental plan because each trial is conducted with all but one of the factors at nominal levels (and the first trial having all the factors at the nominal level). This is generally considered to be an ineffective way to explore the factor space, even though the number of trials is small, 1 � k (n – 1). However, for parameter optimization in systems with significant interactions, an adap- tive version of the one-at-a-time experimental plan has been shown to be generally more efficient than orthogonal array plans (Frey et al., 2003).

The Ford team chose to use the L8 orthogonal array experiment design because this plan would be an efficient way to explore seven factors at two levels each. Subsequent rounds of experimentation could later be used to explore additional levels of key parameters as well as interaction effects if necessary. The orthogonal array experimental plan is shown in Exhibit 15-5.

Testing Noise Factors Several methods are used to explore the effects of noise factors in experiments. If some noise factors can be controlled for the purpose of the experiment, then it may be possible to directly assess the effect of these noise factors. If the noise factors cannot be controlled during the experiment, we allow the noise to vary naturally and simply assess the prod- uct’s performance in the presence of noise. Some common ways to test noise factors are:

• Assign additional columns in the orthogonal array or fractional factorial layout to the noise factors, essentially treating the noise as another variable. This allows the effects of the noise factors to be determined along with the control factors.

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320 Chapter 15

• Use an outer array for the noise factors. This method tests several combinations of the noise factors for each row in the main (inner) array. An example of this approach is shown in the appendix, where the outer array consists of an L4 design, testing combi- nations of three noise factors by replicating each row four times.

• Run replicates of each row, allowing the noise to vary in a natural, uncontrolled man- ner throughout the experiment, resulting in measurable variance in performance for each row. With this approach, it is particularly important to randomize the order of the trials so that any trends in the noise are unlikely to be correlated with the systematic changes in the control factors. (See step 4.)

• Run replicates of each row with compounded noise. In this method, selected noise fac- tors are combined to create several representative noise conditions or extreme noise conditions. This approach also yields measurable variance for each row, which can be attributed to the effect of noise.

The Ford team chose to utilize the compounded noise approach in the seat belt experi- ment. The team tested each row using the two combinations of the three noise factors representing the best- and worst-case conditions. This resulted in 16 experimental runs for the L8 DOE plan, as shown in Exhibit 15-5.

EXHIBIT 15-5 Factor assignments and the L8 orthogonal array experiment design used for the seat belt experiment. This DOE plan tests seven factors at two levels each. Each row was replicated twice, under the two compounded noise conditions, yielding 16 test data points for analysis.

Factor Description

A Belt webbing stiffness: Compliance characteristic of the webbing measured in a tensile load machine

B Belt webbing friction: Coefficient of friction, which is a function of the belt weave and surface coating

C Lap belt force limiter: Allows controlled release of the seat belt at a certain force level D Upper anchorage stiffness: Compliance characteristic of the structure to which the

upper anchorage (D-loop) is mounted E Buckle cable stiffness: Compliance characteristic of the cables by which the buckle

is attached to the vehicle body F Front seatback bolster: Profile and stiffness of seatback where the knees may contact G Tongue friction: Coefficient of friction for the bearing area of the tongue, which slides

along the webbing

A B C D E F G N– N�

1 1 1 1 1 1 1 1

2 1 1 1 2 2 2 2

3 1 2 2 1 1 2 2

4 1 2 2 2 2 1 1

5 2 1 2 1 2 1 2

6 2 1 2 2 1 2 1

7 2 2 1 1 2 2 1

8 2 2 1 2 1 1 2

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Robust Design 321

Step 4: Run the Experiment

To execute the experiment, the product is tested under the various treatment conditions described by each row in the experimental plan. Randomizing the sequence of the experi- mental runs ensures that any systematic trend over the duration of the experiment is not correlated with the systematic changes to the levels of the factors. For example, if the ex- periments of the L8 plan are not randomized, and the test conditions drift over time, this effect may be incorrectly attributed to factor A because this column changes halfway through the experiment. For some experiments, changing certain factors may be so diffi- cult that all trials at each level of that factor are run together and only partial randomiza- tion may be achieved. In practice, randomize the trials whenever practical, and when not possible, validate the results with a confirmation run. (See step 6.)

In the seat belt experiment, each of the eight factor combinations in the L8 design was tested under the two compounded noise conditions. The 16 data points containing the back angle data are shown in Exhibit 15-6 in the columns titled N– and N�.

Step 5: Conduct the Analysis

There are many ways to analyze the experimental data. For all but the most basic analysis, the team benefits from consulting with a DOE expert or from referring to a good book on statis- tical analysis and experimental design. The basic analytical method is summarized here.

Computing the Objective Function The team will have already devised the objective functions for the experiment and will gen- erally have an objective related to the mean performance and the variance in performance. Sometimes the mean and variance will be combined and expressed as a single objective in the form of a signal-to-noise ratio. The values of the objective function can be computed for each row of the experiment. For the seat belt experiment, the columns on the right side of the table in Exhibit 15-6 show the computed objective function values (average back angle and range of back angle) for each row. Recall that these are both objectives to be minimized.

A B C D E F G N– N� Avg Range

1 1 1 1 1 1 1 1 0.3403 0.2915 0.3159 0.0488

2 1 1 1 2 2 2 2 0.4608 0.3984 0.4296 0.0624

3 1 2 2 1 1 2 2 0.3682 0.3627 0.3655 0.0055

4 1 2 2 2 2 1 1 0.2961 0.2647 0.2804 0.0314

5 2 1 2 1 2 1 2 0.4450 0.4398 0.4424 0.0052

6 2 1 2 2 1 2 1 0.3517 0.3538 0.3528 0.0021

7 2 2 1 1 2 2 1 0.3758 0.3580 0.3669 0.0178

8 2 2 1 2 1 1 2 0.4504 0.4076 0.4290 0.0428

EXHIBIT 15-6 Data obtained from the seat belt experiment.

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322 Chapter 15

Computing Factor Effects by Analysis of Means The most straightforward analysis to conduct will simply yield the main effect of each factor assigned to a column in the experiment. These main effects are called the factor effects. The analysis of means involves simply averaging all the computed objective func- tions for each factor level. In the L8 DOE example, the effect of factor level A1 (factor A at level 1) is the average of trials 1, 2, 3, and 4. Similarly, the effect of factor level E2 is the average of trials 2, 4, 5, and 7. The results of an analysis of means are conventionally shown on factor effects charts.

Exhibit 15-7 presents the factor effects charts for the seat belt example. These effects are plotted for each of the objective functions. Exhibit 15-7(a) plots the average perfor- mance at each factor level (the first objective function). This chart shows which factor lev- els can be used to raise or lower the mean performance. Recall that back angle at peak is to be minimized, and note that the chart suggests that factor levels [A1 B2 C2 E1 F1 G1] will

EXHIBIT 15-7 Factor effects charts for the seat belt experiment.

A ve

ra ge

B ac

k A

n g

le (

ra d

ia n

s)

0.30

A2

A1

B1

B2

C1

C2 E1

E2 F2

F1

G2

G1

D2D1

0.32

0.34

0.36

0.38

0.40

0.42

0.44

A B C D E F G

Control Factors

0.00

0.05

0.04

0.03

0.02

0.01

A B C D E F G

Control Factors

R an

ge o

f B

ac k

A n

g le

( ra

d ia

n s)

A1

A2

B1

B2

C1

C2

E1

E2

F2

F1 G2

G1

D2

D1

(a)

(b)

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Robust Design 323

minimize the average back angle metric. (Factor D appears to have no effect upon mean performance.) However, these levels will not necessarily achieve robust performance. Exhibit 15-7(b) is based on the range of performance at each factor level (the second ob- jective function). This chart suggests that levels [A2 B2 C2 D1 E1 F2 G1] will minimize the range of back angle at peak.

Taguchi recommends that the signal-to-noise ratio for each factor level be plotted in order to identify robust setpoints. Because the signal-to-noise ratio includes the mean performance in the numerator and the variance in the denominator, it represents a combination of these two objectives or a trade-off between them. Rather than specifically plotting the signal-to- noise ratio, many engineers and statisticians prefer to simply interpret the two objectives together, giving more control over the trade-off. To do so, the factor effects charts shown in Exhibit 15-7 can be compared in order to choose a robust setpoint in the next step.

Step 6: Select and Confirm Factor Setpoints

Analysis of means and the factor effects charts help the team determine which factors have a strong effect on mean performance and variance, and therefore how to achieve robust performance. These charts help to identify which factors are best able to reduce the product’s variance (robustness factors) and which factors can be used to improve the performance (scaling factors). By choosing setpoints based on these insights, the team should be able to improve the overall robustness of the product.

For example, consider the effects of factor A on both average and range of back angle in the experiment. The charts in Exhibit 15-7 show that level A1 would minimize back angle, but level A2 would minimize the range of back angle, representing a trade-off be- tween performance and robustness. A similar trade-off is evident in factor F. However, for factors B, C, D, E, and G, there is no such trade-off, and levels B2, C2, D1, E1, and G1 minimize both objectives.

Using factors B, C, D, E, and G to achieve the desired robustness and factors A and F to increase performance, Ford engineers selected the setpoint [A1 B2 C2 D1 E1 F1 G1]. As is usually the case, the chosen setpoint is not one of the eight orthogonal array rows tested in the experiment. Given that this setpoint has never been tested, a confirmation run should be used to ensure that the expected robust performance has been achieved.

Step 7: Reflect and Repeat

One round of experiments may be sufficient to identify appropriately robust setpoints. Sometimes, however, further optimization of the product’s performance is worthwhile, and this may require several additional rounds of experimentation.

In subsequent experimentation and testing, the team may choose to:

• Reconsider the setpoints chosen for factors displaying a trade-off of performance ver- sus robustness.

• Explore interactions among some of the factors in order to further improve the performance.

• Fine-tune the parameter setpoints using values between the levels tested or outside this range.

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324 Chapter 15

• Investigate other noise and/or control factors that were not included in the initial experiment.

As with all product development activities, the team should take some time to reflect on the DOE process and the robust design result. Did we run the right experiments? Did we achieve an acceptable result? Could it be better? Should we repeat the process and seek further performance/robustness improvement?

Caveats

Design of experiments is a well-established field of expertise. This chapter summarizes only one very basic approach in order to encourage the use of experimentation in product design to achieve more robust product performance. Most product development teams should include team members with DOE training or have access to engineers and/or stat- isticians with specialized expertise in design and analysis of experiments.

Obviously many assumptions underlie the type of analysis used in DOE. One basic as- sumption made in interpreting analysis of means is that the factor effects are independent, without interactions across the factors. In fact, most actual systems exhibit many interac- tions, but these interactions are often smaller than the main effects. Verification of this as- sumption is another motive for running confirming experiments at the chosen setpoints.

If necessary, experiments can be designed to specifically test interaction effects. This type of experiment is outside the scope of this chapter. DOE texts generally provide a number of ways to explore interactions across the factors, including the following:

• Assign specific interactions to be explored in certain columns of the orthogonal array (instead of using the column for a control factor).

• Execute a larger fractional factorial design.

• Use an adaptive one-at-a-time experimental plan (Frey et al., 2003).

Many advanced graphical and analytical techniques are available to assist in interpreta- tion of the experimental data. Analysis of variance (ANOVA) provides a way to assess the significance of the factor effects results in light of the experimental error observed in the data. ANOVA takes into account the number of observations made of each degree of free- dom in the experiment and the scale of the results to determine whether each effect is sta- tistically significant. This helps determine to what extent detailed design decisions should be based on the experimental results. However, ANOVA makes many more assumptions and can be difficult to set up properly, so it is also beyond the scope of this chapter. Refer to a DOE text (Ross, 1996; Montgomery, 2007) or consult with a DOE expert to assist with ANOVA.

Summary Robust design is a set of engineering design methods used to create robust products and processes.

• A robust product (or process) is one that performs properly even in the presence of noise effects. Noises are due to many kinds of uncontrolled variation that may affect

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Robust Design 325

performance, such as manufacturing variations, operating conditions, and product deterioration.

• We suggest an approach to the development of robust products based on design of ex- periments (DOE). This seven-step process for robust design is:

1. Identify control factors, noise factors, and performance metrics.

2. Formulate an objective function.

3. Develop the experimental plan.

4. Run the experiment.

5. Conduct the analysis.

6. Select and confirm factor setpoints.

7. Reflect and repeat.

• Orthogonal array experimental plans provide a very efficient method for exploring the main effects of each factor chosen for the experiment.

• To achieve robust performance, use of objective functions helps in capturing both mean performance due to each control factor and variance of performance due to noise factors.

• Analysis of means and factor effects charts facilitate the choice of robust parameter setpoints.

• Because many nuances are involved in successful DOE, most teams applying these methods will benefit from assistance by a DOE expert.

References and Bibliography Many current resources are available on the Internet via www.ulrich-eppinger.net

Phadke provides numerous examples and practical advice on application of DOE. Ross emphasizes insights gained through ANOVA analysis. Taguchi’s methods for experimental design and details about orthogonal array experimentation plans are explained in several texts, including Taguchi’s classic two-volume text translated into English.

Phadke, Madhav S., Quality Engineering Using Robust Design, Prentice Hall, Englewood Cliffs, NJ, 1989.

Ross, Phillip J., Taguchi Techniques for Quality Engineering, McGraw-Hill, New York, 1996.

Taguchi, Genichi, Introduction to Quality Engineering: Designing Quality into Products and Processes, Asian Productivity Organization (trans. and pub.), Tokyo, 1986.

Taguchi, Genichi, System of Experimental Design: Engineering Methods to Optimize Quality and Minimize Costs, two volumes, Louise Watanabe Tung (trans.), White Plains, NY, 1987.

Grove and Davis present a thorough explanation of experimental design techniques in engineering, including planning, running, and analyzing the experiments. A different analysis of Ford’s seat belt experiment is included in this text, as well as many more automotive applications of robust design.

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326 Chapter 15

Grove, Daniel M., and Timothy P. Davis, Engineering, Quality and Experimental Design, Addison-Wesley Longman, Edinburgh Gate, UK, 1992.

Several excellent texts provide detailed explanations of the use of statistical methods, fractional factorial experimental plans, analytical and graphical interpretations, and response surface methods.

Box, George E. P., J. Stuart Hunter, and William G. Hunter, Statistics for Experimenters: An Introduction to Design, Data Analysis, and Model Building, John Wiley and Sons, New York, 1978.

Box, George E. P., and Norman R. Draper, Empirical Model Building and Response Surfaces, John Wiley and Sons, New York, 1987.

Montgomery, Douglas C., Design and Analysis of Experiments, sixth edition, John Wiley and Sons, New York, 2007.

Recent research has renewed interest in one-at-a-time DOE plans. An adaptive one-factor- at-a-time approach has been shown to yield better performance optimization than the corresponding orthogonal array design for systems where the interaction effects are more significant than the noise and error effects.

Frey, Daniel D., Fredrik Engelhardt, and Edward M. Greitzer, “A Role for One- Factor-at-a-Time Experimentation in Parameter Design,” Research in Engineering Design, 2003, Vol. 14, No. 2, pp. 65–74.

DOE can be used in many aspects of product development. Almquist and Wyner explain how carefully planned experiments are effective in evaluating and tuning parameters of sales campaigns.

Almquist, Eric, and Gordon Wyner, “Boost Your Marketing ROI with Experimental Design,” Harvard Business Review, Vol. 79, No. 9, October 2001, pp. 135–141.

Exercises 1. Design an experiment to determine a robust process for making coffee.

2. Explain why the 1/4-fractional-factorial and orthogonal array plans shown in Exhibit 15-4 are balanced.

3. Formulate an appropriate signal-to-noise ratio for the seat belt experiment. Analyze the experimental data using this metric. Is signal-to-noise ratio a useful objective function in this case? Why or why not?

Thought Questions 1. If you are able to afford a larger experiment (with more runs), how might you best uti-

lize the additional runs?

2. When would you choose not to randomize the order of the experiments? How would you guard against bias?

3. Explain the importance of balance in an experimental plan.

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Robust Design 327

Appendix

Orthogonal Arrays DOE texts provide several orthogonal array plans for experiments. The simplest arrays are for two-level and three-level factor experiments. Using advanced techniques, DOE plans can also be created for mixed two-, three-, and/or four-level factor experiments and many other special situations. This appendix shows some of the basic orthogonal arrays from Taguchi’s text Introduction to Quality Engineering (1986). These plans are shown in row/column format, with the factor level assignments in the columns and the experimen- tal runs in the rows. The numbers 1, 2, and 3 in each cell indicate the factor levels. (Alter- natively, factor levels can be labeled as – and � for two-level factors or –, 0, and � for three levels.) Recall that the orthogonal arrays are named according to the number of rows in the design. Included here are the two-level arrays L4, L8, and L16 and the three- level arrays L9 and L27. Also shown is a DOE plan using the L8 inner array for seven control factors and the L4 outer array for three noise factors. This plan allows analysis of the effects of the three noise factors.

Two-Level Orthogonal Arrays

L4: 3 Factors at 2 Levels Each

A B C

1 1 1 1

2 1 2 2

3 2 1 2

4 2 2 1

A B C D E F G

1 1 1 1 1 1 1 1

2 1 1 1 2 2 2 2

3 1 2 2 1 1 2 2

4 1 2 2 2 2 1 1

5 2 1 2 1 2 1 2

6 2 1 2 2 1 2 1

7 2 2 1 1 2 2 1

8 2 2 1 2 1 1 2

L8: 7 Factors at 2 Levels Each

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328 Chapter 15

Three-Level Orthogonal Arrays

A B C D

1 1 1 1 1

2 1 2 2 2

3 1 3 3 3

4 2 1 2 3

5 2 2 3 1

6 2 3 1 2

7 3 1 3 2

8 3 2 1 3

9 3 3 2 1

L9: 4 Factors at 3 Levels Each

A B C D E F G H I J K L M N O

1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

2 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2

3 1 1 1 2 2 2 2 1 1 1 1 2 2 2 2

4 1 1 1 2 2 2 2 2 2 2 2 1 1 1 1

5 1 2 2 1 1 2 2 1 1 2 2 1 1 2 2

6 1 2 2 1 1 2 2 2 2 1 1 2 2 1 1

7 1 2 2 2 2 1 1 1 1 2 2 2 2 1 1

8 1 2 2 2 2 1 1 2 2 1 1 1 1 2 2

9 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2

10 2 1 2 1 2 1 2 2 1 2 1 2 1 2 1

11 2 1 2 2 1 2 1 1 2 1 2 2 1 2 1

12 2 1 2 2 1 2 1 2 1 2 1 1 2 1 2

13 2 2 1 1 2 2 1 1 2 2 1 1 2 2 1

14 2 2 1 1 2 2 1 2 1 1 2 2 1 1 2

15 2 2 1 2 1 1 2 1 2 2 1 2 1 1 2

16 2 2 1 2 1 1 2 2 1 1 2 1 2 2 1

L16: 15 Factors at 2 Levels Each

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Robust Design 329

A B C D E F G H I J K L M

1 1 1 1 1 1 1 1 1 1 1 1 1 1

2 1 1 1 1 2 2 2 2 2 2 2 2 2

3 1 1 1 1 3 3 3 3 3 3 3 3 3

4 1 2 2 2 1 1 1 2 2 2 3 3 3

5 1 2 2 2 2 2 2 3 3 3 1 1 1

6 1 2 2 2 3 3 3 1 1 1 2 2 2

7 1 3 3 3 1 1 1 3 3 3 2 2 2

8 1 3 3 3 2 2 2 1 1 1 3 3 3

9 1 3 3 3 3 3 3 2 2 2 1 1 1

10 2 1 2 3 1 2 3 1 2 3 1 2 3

11 2 1 2 3 2 3 1 2 3 1 2 3 1

12 2 1 2 3 3 1 2 3 1 2 3 1 2

13 2 2 3 1 1 2 3 2 3 1 3 1 2

14 2 2 3 1 2 3 1 3 1 2 1 2 3

15 2 2 3 1 3 1 2 1 2 3 2 3 1

16 2 3 1 2 1 2 3 3 1 2 2 3 1

17 2 3 1 2 2 3 1 1 2 3 3 1 2

18 2 3 1 2 3 1 2 2 3 1 1 2 3

19 3 1 3 2 1 3 2 1 3 2 1 3 2

20 3 1 3 2 2 1 3 2 1 3 2 1 3

21 3 1 3 2 3 2 1 3 2 1 3 2 1

22 3 2 1 3 1 3 2 2 1 3 3 2 1

23 3 2 1 3 2 1 3 3 2 1 1 3 2

24 3 2 1 3 3 2 1 1 3 2 2 1 3

25 3 3 2 1 1 3 2 3 2 1 2 1 3

26 3 3 2 1 2 1 3 1 3 2 3 2 1

27 3 3 2 1 3 2 1 2 1 3 1 3 2

L27: 13 Factors at 3 Levels Each

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330 Chapter 15

Combined Inner and Outer Arrays

A B C D E F G 1 2 2 1 Nc

1 1 1 1 1 1 1 1

2 1 1 1 2 2 2 2

3 1 2 2 1 1 2 2

4 1 2 2 2 2 1 1

5 2 1 2 1 2 1 2

6 2 1 2 2 1 2 1

7 2 2 1 1 2 2 1

8 2 2 1 2 1 1 2

L8 � L4: 7 Control Factors and 3 Noise Factors at 2 Levels Each

1 1 2 2 Na

1 2 1 2 Nb

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Patents and Intellectual Property

331

C H A P T E R S I X T E E N

EXHIBIT 16-1 Hot beverage insulating sleeve by David W. Coffin Sr. (U.S. Patent 5,205,473).

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332 Chapter 16

David Coffin, an individual inventor, developed a product concept and prototype for an insulating sleeve that would make a hot beverage cup more comfortable to hold (Exhibit 16-1). The product opportunity arose in the 1980s after many food vendors had aban- doned polystyrene foam hot beverage cups in favor of paper cups. The inventor was in- terested in commercialization and/or licensing his invention and sought protection of the intellectual property that he had created. This chapter provides an overview of intel- lectual property in the context of product development and provides specific guidance for preparing an invention disclosure or provisional patent application.

Within the context of product development, the term intellectual property refers to the legally protectable ideas, concepts, names, designs, and processes associated with a new product. Intellectual property can be one of the most valuable assets of firms. Unlike physical property, intellectual property cannot be secured with lock and key to prevent its unwanted transfer. Therefore, legal mechanisms have been developed to protect the rights of intellectual property owners. These mechanisms are intended to provide an incentive and reward to those who create new useful inventions, while at the same time encourag- ing the dissemination of information for the long-run benefit of society.

What Is Intellectual Property?

Four types of intellectual property are relevant to product design and development. Exhibit 16-2 presents a taxonomy of types of intellectual property. Although some areas overlap, and all four types of intellectual property may be present in a single product, a particular invention usually falls into one of these categories.

• Patent: A patent is a temporary monopoly granted by a government to an inventor to exclude others from using an invention. In the United States, a patent expires 20 years from the filing date. Most of the balance of this chapter focuses on patents.

• Trademark: A trademark is an exclusive right granted by a government to a trademark owner to use a specific name or symbol in association with a class of products or services. In the context of product development, trademarks are typically brands or product names. For example, JavaJacket is a trademark for an insulated cup holder, and companies other than Java Jacket, Inc., may not make unauthorized use of the word JavaJacket to refer to their own cup-holder products. In the United States, registration of a trademark is possible, but not strictly necessary to preserve the trademark rights. In most other countries, the rights of a trademark are gained through registration.

• Trade secret: A trade secret is information used in a trade or business that offers its owner a competitive advantage and that can be kept secret. A trade secret is not a right conferred by a government but is the result of vigilance on the part of an organization in preventing the dissemination of its proprietary information. Perhaps the most fa- mous trade secret is the formula for the beverage Coca-Cola.

• Copyright: A copyright is an exclusive right granted by a government to copy and distribute an original work of expression, whether literature, graphics, music, art, en- tertainment, or software. Registration of a copyright is possible but not necessary. A copyright comes into being upon the first tangible expression of the work and lasts for up to 95 years.

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Patents and Intellectual Property 333

This chapter focuses on patents. Appendix A to this chapter briefly discusses trademarks. We do not devote substantial attention here to copyrights and trade secrets, but several references to other resources appear at the end of the chapter.

Overview of Patents For most engineered goods, two basic types of patents are relevant: design patents and utility patents. (A third type of patent covers plants.) Design patents provide the legal right to exclude someone from producing and selling a product with the identical or- namental design described by the design patent. A design patent can be thought of as a “copyright” for the ornamental design of a product. Because design patents must be lim- ited to ornamental design, for most engineered goods, design patents are of very limited value. For this reason, the chapter focuses further on utility patents.

Patent law in most of the world evolved from English law and so patent laws in differ- ent countries are somewhat similar. This chapter uses U.S. law as a reference point, and so readers with intentions to obtain patents in other countries should carefully investigate the laws in those countries.

Fig 10

Utility Patents

Design Patents

Ornamental Design Only

Patents

1. Useful 2. Novel 3. Nonobvious

Plant Patents

New Plant

Trademarks

Word or Symbol

Intellectual Property

requires formal application not registered

Copyright

Original Work of

Expression

Trade Secret

Proprietary and Useful

24

21

200

22

may be registered, but not necessary

EXHIBIT 16-2 Taxonomy of types of intellectual property relevant to product design and development.

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Utility Patents United States law allows for patenting of an invention that relates to a new process, ma- chine, article of manufacture, composition of matter, or a new and useful improvement of one of these things. Fortunately, these categories include almost all inventions embodied by new products. Note that inventions embodied in software are sometimes patented, but usually the invention is described as a process or machine. Exhibit 16-3 shows the first page of a patent for the insulating sleeve invented by Coffin.

In addition, the law requires that patented inventions be:

• Useful: The patented invention must be useful to someone in some context.

• Novel: Novel inventions are those that are not known publicly and therefore are not evident in existing products, publications, or prior patents. The definition of novelty re- lates to disclosures of the actual invention to be patented as well. In the United States, an invention to be patented must not have been revealed to the public more than a year before the patent is filed.

• Nonobvious: Patent law defines obvious inventions as those that would be clearly evi- dent to those with “ordinary skill in the art” who faced the same problem as the inventor.

Usefulness is rarely a hurdle to obtaining a patent. However, the requirements that an invention be novel and nonobvious are the most common barriers to obtaining a patent.

About two-thirds of applications filed for patents result in issued patents. However, an issued patent is not necessarily valid. A patent may be challenged in a government court by a competitor at some point in the future. The validity of a patent is determined by, among other factors, the adequacy of the description in the patent and the novelty of the invention relative to the prior art. A tiny fraction of patents—a few hundred per year in the United States—are ever challenged in court. Of those challenged in recent years, just over half have been found to be valid.

An inventor associated with a patent is a person who actually created the invention individually or in collaboration with other inventors. In some cases the inventor is also the owner of the intellectual property. However, in most cases, the patent is assigned to some other entity, usually the inventor’s employer. The actual intellectual property rights associ- ated with a patent belong to the owner of the patent and not necessarily to the inventor. (Appendix B to this chapter provides some advice to individual inventors interested in commercializing their inventions.)

A patent owner has the right to exclude others from using, making, selling, or import- ing an infringing product. This is an offensive right, which requires that the patent owner sue the infringer. There are also defensive rights associated with patents. Any invention described in a patent, whether part of the claimed invention or not, is considered by the legal system to be known publicly and forms part of the prior art. This disclosure is a de- fensive act blocking a competitor from patenting the disclosed invention.

Preparing a Disclosure This chapter is focused on a process for preparing an invention disclosure—in essence a detailed description of an invention. This disclosure will be in the form of a patent appli- cation, which can serve as a provisional patent application and with relatively little addi- tional work could be a regular patent application. It is possible, even typical, for a patent

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Patents and Intellectual Property 335

EXHIBIT 16-3 The first page of U.S. Patent 5,205,473.

12

100

11 14

United States Patent [19] [11] Patent Number: 5,205,473 Coffin, Sr. [45] Date of Patent: Apr. 27, 1993

[54] RECYCLABLE CORRUGATED BEVERAGE CONTAINER AND HOLDER

[75] Inventor: David W. Coffin, Sr., Fayetteville, N.Y.

[73] Assignee: Design By Us Company, Philadelphia, Pa.

[21] Appl. No.: 854,425

[22] Filed: Mar. 19, 1992

[51] Int. Cl. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B65D 3/28 [52] U.S. CI. . . . . . . . . . . . . . . .229/1.5 B; 206/813; 220/441; 220/DIG. 30; 229/1.5 H; 229/DIG. 2; 493/296;493/907 [38] Field of Search . . . . . 229/1.5 B, 1.3 H, 4.5, 229/DIG. 2; 220/441, 671, 737–739, DIG. 30; 493/287, 296, 907, 908; 209/8, 47, 215; 206/813

[56] References Cited

U.S. PATENT DOCUMENTS

1,732,322 10/1929 Wilson et al. . . . . . . 220/DIG. 30 1,771,765 7/1930 Benson. . . . . . . . . . . . . . . 229/4.5 2,266,828 12/1941 Sykes . . . . . . . . . . . . . . .229/1.5 B 2,300,473 11/1942 Winkle . . . . . . . . . . . . . . . 229/4.5 2,503,815 3/1950 Harman 2,617,549 11/1952 Egger 2,641,402 6/1953 Bruun . . . . . . . . . . . . . . . 229/4.5 2,661,889 12/1953 Phinney . . . . . . . . . . . . . . 229/4.5

2,969,901 1/1961 Behrens . . . . . . . . . . . . .229/1.3 B 3,237,834 3/1966 Davis et al.. . . . . . . . . . .229/1.3 B 3,779,157 12/1973 Ross, Jr. et al. . . . . . . . . . . 53/527 3,785,254 1/1974 Mann 3,890,762 6/1975 Ernst et al. 3,908,523 9/1975 Shikays . . . . . . . . . . . . .229/1.5 B 4,080,880 3/1978 Shikay . . . . . . . . . . . . . . . 493/296 4,146,660 3/1979 Hall et al. 4,176,034 11/1979 Kelley. . . . . . . . . . . . . . . . . . 209/8 5,009,326 4/1991 Reaves et al. 5,092,485 3/1992 Lee . . . . . . . . . . . . . . . . .229/1.3 B

OTHER PUBLICATIONS

“The Wiley Encyclopedia of Packaging Technology”, John Wiley & Sons, pp. 66-69, 1986.

Primary Examiner—Gary E. Elkins Attorney, Agent, or Firm—Synnestvedt & Lochner

[57] ABSTRACT

Corrugated beverage containers and holders are which employ recyclable materials, but provide fluting structures for containing insulating air. These products are easy to hold and have a lesser impact on the environment than polystyrene containers.

18 Claims, 8 Drawing Sheets

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attorney to do much of the work described in the chapter. However, our belief is that hav- ing the inventor draft a detailed disclosure is the best way to communicate the inventor’s knowledge, even though in most cases a patent attorney will revise the disclosure to prepare the formal patent application. Although many readers will be able to complete a provisional patent application from the guidance provided here, this chapter is not a sub- stitute for competent legal advice. Inventors pursuing serious commercial opportunities should consult with a patent attorney after preparing their disclosure.

The steps in the process are:

1. Formulate a strategy and plan.

2. Study prior inventions.

3. Outline claims.

4. Write the description of the invention.

5. Refine claims.

6. Pursue application.

7. Reflect on the results and the process.

Step 1: Formulate a Strategy and Plan

In formulating a patent strategy and plan, a product development team must decide on the timing of the filing of a patent application, the type of application to be filed, and the scope of the application.

Timing of Patent Applications Legally, a U.S. patent application must be filed within one year of the first public disclo- sure of an invention. In much of the rest of the world, a patent must be filed before any public disclosure or within one year of filing a U.S. application, so long as the U.S. appli- cation is filed before public disclosure. In most cases, public disclosure is a description of the invention to an individual or group of people who are not obligated to keep the inven- tion confidential. Examples of such disclosure include: publication of invention details in a magazine or journal, presentation of a product at a trade show, display of the invention on a publicly accessible Web site, or test marketing of a product. (Most experts agree that a student’s class presentation of an invention is not public disclosure, as long as the class members have agreed to preserve the confidentiality of the invention and as long as mem- bers of the general public are not present.) We strongly recommend that inventors file pat- ent applications before any public disclosure. This action ensures that the option to file an international patent is preserved for one year. Fortunately, a provisional patent application may be filed at relatively little expense to preserve these rights.

Although we recommend that filing precede public disclosure, the inventor usually benefits by delaying the application until just before such disclosure. The principal advantage to waiting as long as possible is that the inventor has as much knowledge as possible about the invention and its commercialization. Very often what the inventor be- lieves are the key features of an invention early in the innovation process turn out to be less important than refinements developed later in the innovation process. By waiting, the inventor can ensure that the most important elements of the invention are captured in the patent application.

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The U.S. patent system grants priority among competing patent applications based on the date of invention, whereas the patent systems in much of the rest of the world grant priority based on the date of the patent application. Therefore, in the United States, inventors should carefully document the date of their inventions. This is best done by describing an invention in a bound notebook and then having a witness sign and date each page.

Type of Application A team faces two basic choices about the type of patent application to be pursued. First, the team must decide whether to file a regular patent application or a provisional patent appli- cation. Second, the team must decide whether to pursue domestic and/or foreign patents.

A regular patent application was the only option available to an inventor in the United States until substantial changes were made to patent law in 1995. Under current U.S. patent law, an inventor may file a provisional patent application. A provisional patent application needs only to fully describe the invention. It does not need to contain claims or comply with the formal structure and language of a regular patent application. The principal advantage of a provisional patent application is that it requires less cost and effort to prepare and file than a regular patent application, but it preserves all options to pursue further patent filings for a period of one year. Once a provisional patent application has been filed, a company may label its products “patent pending,” and it retains the right to file a foreign patent applica- tion and/or a regular patent application. The only fundamental disadvantage of a provisional patent application is that it delays the eventual issuance of a patent by up to one year, as the process of examining a patent application does not begin until a regular patent application is filed. Another possible disadvantage is that the preliminary nature of a provisional pat- ent application may lead to the use of less care in preparing the description of the invention than might be the case with a regular application. The description of the invention must be complete in a provisional patent application, and the regular patent application that follows cannot contain features that were not described in the provisional application.

Filing patents internationally is expensive and somewhat complex. The team should therefore consult with a patent professional about international patent strategy, as patent law varies somewhat from country to country. To obtain foreign patent rights, an applica- tion must eventually be filed in each country in which a patent is sought. (The European Community, however, acts as a single entity with respect to patent filing.) Foreign ap- plications can be expensive, costing up to $15,000 per country for filing fees, translation fees, and patent agent fees.

The expense of filing for foreign patents can be delayed, generally by 30 months, by filing a Patent Cooperation Treaty (PCT) application. A PCT application is filed in one country (e.g., the United States) but is designated as a PCT application, which is the beginning of a process by which foreign patents can be pursued. A PCT application costs only slightly more than a regular patent application in filing fees, but it allows for a substantial delay before application fees must be paid in the countries in which foreign patents are sought.

The provisional patent application and the PCT application together provide a vehicle for a small company or individual inventor to preserve most patent rights with relatively little cost. A typical strategy is to file a provisional patent application before any public disclosure of the invention; then, within one year, to file a PCT application with the U.S. patent office; then, when forced to act or abandon the application at some point in the

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future (usually a year or more away), to pursue actual foreign applications. This strategy allows a delay of two or more years before substantial legal and application fees must be paid. During this period, the team can assess the true commercial potential of the products embodying the invention and can estimate the value of more extensive patent protection.

Scope of Application The team should evaluate the overall product design and decide which elements embody inventions that are likely to be patentable. Typically the process of reviewing the product design will result in a list of elements that the team considers to be novel and nonobvious. The team should focus on those elements that present substantial barriers to competition, which are typically the elements that in the opinion of the team represent a substantial im- provement over the publicly known methods of addressing similar problems.

Complex products often embody several inventions. For example, a printer may em- body novel signal processing methods and novel paper handling techniques. Sometimes these inventions fall into very different classes within the patent system. As a result, a product development team may need to file multiple applications corresponding to the distinct classes of invention. For simple products or for products that embody a single type of invention, a single patent application usually suffices. The decision about whether to divide an application into multiple parts is complex and is best made in consultation with a patent attorney. However, all intellectual property rights are preserved even if a patent application is filed that contains multiple classes of inventions. In such cases, the patent office will inform the inventor that the application must be divided.

While defining the scope of the patent, the team should also consider who the inven- tors are. An inventor is a person who contributed substantially to the creation of the invention. The definition of an inventor for the purposes of patent law is subjective. For example, a technician who only ran experiments would not typically be an inventor, but a technician who ran experiments and then devised a solution to an observed problem with the device could be considered an inventor. There is no limit to the number of inventors named in a patent application. We believe that product development and invention are most often team efforts and that many members of the team who participated in concept generation and the subsequent design activities could be considered inventors. Failing to name a person who is an inventor can result in a patent being declared not valid.

Step 2: Study Prior Inventions

There are three key reasons for studying prior inventions, the so-called prior art. First, by studying the prior patent literature, design teams can learn whether an invention may infringe on existing unexpired patents. Although there is no legal barrier to patenting an invention that infringes on an existing patent, if anyone manufactures, sells, or uses a product that infringes upon an existing patent without a license, the patent owner may sue for damages. Second, by studying the prior art, the inventors get a sense of how similar their invention is to prior inventions and therefore how likely they are to be granted a broad patent. Third, the team will develop background knowledge enabling the members to craft novel claims.

In the course of product development efforts, most teams accumulate a variety of refer- ences to prior inventions. Some of the sources of information on prior inventions include:

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• Existing and historical product literature.

• Patent searches.

• Technical and trade publications.

Several good online reference sources can be used for searching patents. Simple keyword searches are often sufficient to find most relevant patents. It is important for the team to keep a file containing the prior art they are aware of. This information must be provided to the patent office shortly after filing the patent application.

In the Coffin patent for the cup holder shown in Exhibit 16-1, references to 19 other U.S. patents are cited along with a reference to a book. (The references cited by the inven- tor and by the patent examiner are listed on the first page of a patent. The first page of the Coffin patent is reproduced as Exhibit 16-3.) Among the prior art for the Coffin patent, for example, is a 1930 patent by Benson (1,771,765; “Waterproof Paper Receptacle”) in which a corrugated holder insulates a paper liner cup. The Benson patent describes a cup holder that fits underneath and into the bottom of the liner cup. This is one reason that the inven- tion in the Coffin patent is described as a tube with an opening at the top and bottom.

Step 3: Outline Claims

Issuance of a patent gives the owner a legal right to exclude others from infringing on the invention specifically described in the patent’s claims. Claims describe certain char- acteristics of the invention; they are written in formal legal language and must adhere to some rules of composition. In step 5 we describe how the formal legal language works. However, at this point in the process of preparing the disclosure, the team benefits from thinking carefully about what it believes is unique about the invention. We therefore rec- ommend that the team outline the claims. Don’t worry about legal precision at this point. Instead, make a list of the features and characteristics of the invention that the team be- lieves are unique and valuable. For example, an outline of the claims for the Coffin inven- tion might be:

• Use of corrugations as insulation, in many possible forms

• Corrugations on the inside surface of the tube

• Corrugations on the outside surface of the tube

• Corrugations sandwiched between two flat layers of sheet material

• Vertical orientation of flutes

• Flutes open at top and bottom of holder

• Corrugations with “triangle wave” cross section

• Corrugations with “sine wave” cross section

• Tubular form with openings at both ends

• In shape of truncated cone

• Recyclable materials

• Recyclable adhesive

• Recyclable sheeting

• Cellulose material

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• Biodegradable adhesive

• Surface to print on

• Holder folds flat along two fold lines

The outline of the claims provides guidance about what must be described in detail in the description.

Step 4: Write the Description of the Invention

The bulk of a patent application is formally known as the specification. To avoid confu- sion with our use of the word specifications in this book, we call the body of the patent application the description because this is the part of the application that actually de- scribes the invention. The description must present the invention in enough detail that someone with “ordinary skill in the art” (i.e., someone with the skills and capabilities of a typical practitioner working in the same basic field as the invention) could implement the invention. The description should also be a marketing document promoting the value of the invention and the weaknesses in existing solutions. The patent application will be read by a patent examiner, who will search and study prior patents. The description must convince the examiner that the inventors developed something useful that is different from existing inventions and that is nonobvious. In these respects one can think of the description as essentially a technical report on the invention. There are some formatting conventions for patent applications, although these are not strictly necessary for an inven- tion disclosure or a provisional patent application.

Patent law requires that the application “teach” with sufficient detail that someone “skilled in the art” could practice the invention. For example, in the Coffin patent, the inventor discloses that the adhesive to bond the flutes is “a recyclable, and preferably a biodegradable adhesive, for example, R130 adhesive by Fasson Inc., Grand Rapids, MI.” The requirement to completely teach the invention may be somewhat counterintuitive for someone accustomed to treating inventions confidentially. Patent law requires that inventors disclose what they know about the invention, but in exchange they are granted the right to exclude others from practicing the invention for a limited time period. This requirement reflects the basic tension in the patent system between granting a temporary monopoly to inventors in exchange for publication of information that will eventually be available for use by anyone.

A typical description includes the following elements:

• Title: Provide a short descriptive label for the invention, for example, “Recyclable Corrugated Beverage Container and Holder.”

• List of inventors: All inventors must be listed. A person should be listed as an inventor if he or she originated any of the inventions claimed in the application. There are no legal limits to the number of inventors and no requirements about the order in which inventors are listed. A failure to list an inventor could result in a patent eventually being declared not valid.

• Field of the invention: Explain what type of device, product, machine, or method this invention relates to. For example, the Coffin patent reads, “This invention relates to in- sulating containers, and especially to those which are recyclable and made of cellulosic materials.”

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• Background of the invention: State the problem that the invention solves. Explain the context for the problem, what is wrong with existing solutions, why a new solution is needed, and what advantages are offered by the invention.

• Summary of the invention: This section should present the substance of the invention in summarized form. The summary may point out the advantages of the invention and how it solves the problems described in the background.

• Brief description of the drawings: List the figures in the description along with a brief description of each drawing. For example, “Figure 10 is a perspective view of a pre- ferred embodiment illustrating internal flute portions in breakaway views.”

• Detailed description of the invention: This section of the description is usually the most comprehensive and contains detailed descriptions of embodiments of the inven- tion along with an explanation of how these embodiments work. Further discussion of the detailed description is provided below.

Figures Formal figures for patents must comply with a variety of rules about labeling, line weight, and types of graphical elements. However, for an invention disclosure or provisional pat- ent application, informal figures are sufficient and hand sketches or CAD drawings are perfectly appropriate. At some point after filing a regular patent application, the patent office will request formal figures, at which time a professional drafter may be hired to pre- pare formal versions of the necessary figures. Prepare enough figures to clearly show the key elements of the invention in the preferred embodiments that have been considered. A simple invention like the cup holder would probably require 5 to 15 figures.

The features shown in the figures may be labeled with words (e.g., “outer layer”), although to facilitate preparation of a regular patent application, the team may wish to use “reference numerals” on the figures right from the beginning. No rule stipulates that reference numerals must be uninterrupted and consecutive, so a convenient num- bering scheme uses reference numerals 10, 11, 12, and so on, for features that first appear in Figure 1; reference numerals 20, 21, 22, and so on, for features that first ap- pear in Figure 2; and so on. This way adding numerals to one figure does not influence the use of numerals in another figure. The same feature shown in more than one figure must be labeled with the same reference numeral, so some numerals will be carried over from one figure to another.

Writing the Detailed Description The detailed description describes embodiments of the invention. An embodiment is a physical realization of the claimed invention. Patent law requires that the application de- scribe the preferred embodiment—that is, the best way of practicing the invention. Typi- cally, a detailed description is organized as a collection of paragraphs, each describing an embodiment of the invention in terms of its physical structure along with an explanation of how that embodiment works.

A good strategy for writing the detailed description is to first create the figures that show embodiments of the invention. Next describe the embodiment by labeling each feature of the embodiment in the figure and explaining the arrangement of these features. Finally, ex- plain how the embodiment works and why the features are important to this function. This process is repeated for each of the embodiments described in the detailed description.

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Consider Figure 10 from the Coffin patent, shown here as Exhibit 16-4. A detailed de- scription might include language like the following:

A preferred embodiment of the invention is shown in Figure 10. A liner surface 22 and an outer surface 24 sandwich a corrugation 21. The assembly 200 forms a tubular shape whose diameter changes linearly with length so as to form a section of a truncated cone. The smooth outer surface 24 provides a smooth surface onto which graphics may be printed. Corrugation 21 is bonded to outer surface 24 and liner surface 22 with a recyclable adhesive.

The detailed description should show alternative embodiments of the invention. For ex- ample, in the Coffin patent, the invention features “flutes” that create an insulating air gap. In a preferred embodiment these flutes are formed by smooth wavy corrugations, with the smooth surface on the outside to allow for graphics to be easily printed on the sleeve. Alternative embodiments include triangle waves and/or sheet materials on either or both sides of the tube. These alternative embodiments are described in the detailed de- scription and shown in the figures. (See Exhibit 16-5.)

Defensive Disclosure The primary benefit of a patent is that it grants the owner offensive rights. That is, the owner has the right to prevent others from practicing the invention. However, patents also offer a subtle mechanism for taking defensive actions. A patent is considered prior art and so an invention that appears in a patent may not be patented in the future. For this reason, inventors

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EXHIBIT 16-4 Figure 10 from the Coffin patent.

24

21

200

22

F I G . 1 0

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may benefit from disclosing essentially every invention they considered that relates to the claimed invention no matter how wide ranging. This may be done in the detailed description. Even though these inventions may not actually be reflected in the claims of the patent, their disclosure becomes part of the prior art and therefore prevents others from patenting them. This defensive strategy may offer competitive advantages in fields of emerging technologies.

Step 5: Refine Claims

The claims are a set of numbered phrases that precisely define the essential elements of the invention. The claims are the basis for all offensive patent rights. A patent owner can prevent others from practicing the invention described by the claims only. The rest of the patent application is essentially background and context for the claims.

Writing the Claims Although claims must be expressed verbally, they adhere to a strict mathematical logic. Almost all claims are formulated as a recursive expression of the form

X � A � B � C . . . , where A � u � v � w . . . , B � . . .

This is expressed verbally as:

An X comprising an A, a B, and a C, wherein said A is comprised of a u, a v, and a w and wherein said B is . . .

Note that claims comply with some verbal conventions. The word comprising means “in- cluding but not limited to” and is almost always used as the equal sign in the expression. The first time an element, say a liner sheet, is named in a claim the inventor uses the indefi- nite article a as in “comprises a liner sheet.” Once this element has been named it is never referred to as the liner sheet, but always as said liner sheet. This is true for every subse- quent instance in which liner sheet is used in the claims. Although these conventions are

Patents and Intellectual Property 343

EXHIBIT 16-5 Figures 6a, 6b, 7a, and 7b from the Coffin patent showing alternative embodiments of the invention.

44 41

42

21 24

22

31

32

Fig . 7bFig . 7a

11

12

Fig . 6bFig . 6a

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not difficult to remember once learned, inventors preparing a disclosure for subsequent editing by a patent attorney should not worry too much about formal correctness of the lan- guage. The language is easily corrected when the formal patent application is prepared.

Multiple claims are arranged hierarchically into independent claims and dependent claims. Independent claims stand alone and form the root nodes of a hierarchy of claims. Dependent claims always add further restrictions to an independent claim. Dependent claims are typically written in this form:

The invention of Claim N, further comprising Q, R, and S . . .

or

The invention of Claim N, wherein said A . . .

Dependent claims essentially inherit all of the properties of the independent claim on which they depend. In fact, a dependent claim can be read as if all of the language of the independent claim on which it depends were inserted as a replacement for the introduc- tory phrase “The invention of Claim N.”

The dependent claims are important in that the patent office may reject the indepen- dent claim as obvious or not novel while allowing one or more dependent claims. In such cases, patentable material remains; the original independent claim can be deleted and the original dependent claim can be rewritten as an independent claim.

The elements of a claim form a logical and relationship. To infringe on a claim, a device must include each and every element named in the claim. If, for example, a com- petitive product were to use only three of four elements named in a claim, it would not infringe on the claim.

Consider this example from the Coffin patent (edited slightly for clarity).

Claim 1

A beverage container holder, comprising a corrugated tubular member comprising cellulosic material and at least a first opening therein for receiving and retaining a beverage container, said corrugated tubular member comprising fluting means for containing insulating air; said fluting means comprising fluting adhesively attached to a liner with a recyclable adhesive.

Claim 1 is an independent claim. Consider Claim 2, which is dependent on Claim 1.

Claim 2

The holder of claim 1, wherein said tubular member further comprises a second opening wherein said first opening and said second opening are of unequal cross-sectional dimensions.

This claim adheres to the logical structure shown in Exhibit 16-6. Let us reinforce the idea that a claim is formed of a logical “and” relation among its

elements. Claim 1 is for a holder that includes all of these elements:

• Corrugated tube

• Made of cellulosic material

• With a first opening

• With fluting means

• Made of flutes adhesively attached to a liner

• Using recyclable adhesive

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If a competing cup holder does not have every one of these elements, it does not infringe upon this claim. So, for example, if it were made of polystyrene, it would not infringe on this claim (no cellulosic material). Consider a patent by Jay Sorensen filed shortly after the Cof- fin patent. Sorensen’s patent is for a cup holder with a dimpled surface. (See Exhibit 16-7.) Because this invention does not have “fluting means” it does not infringe upon the Coffin patent. Sorensen’s claims include the following (edited slightly for clarity):

Claim 4

A cup holder comprising a band of material formed with an open top and an open bottom through which a cup can extend and an inner surface immediately adjacent to said cup, said band comprising a plurality of discrete, spaced-apart, approximately semi-spherically shaped depressions distributed on substantially the entire inner surface of said band so that each depression defines a non-contacting region of said band creating an air gap between said band and said cup, thereby reducing the rate of heat transfer through said holder.

At least two lessons can be derived from comparing the Coffin and Sorensen inven- tions. First, patents often provide relatively limited commercial advantages. In this case, by creating a cup holder with dimples instead of flutes, Sorensen was able to avoid in- fringing on the Coffin patent. In fact, both inventions are embodied by successful com- mercial products, but neither patent provides ironclad protection from competition. The second lesson is that the inventor should invest in considering as many ways as possible to achieve the desired function of the invention, in this case an insulating layer. Had Cof- fin thought of a dimpled surface, then this feature could have been described in his patent application. In the best case, the dimpled invention may have formed the basis for addi- tional claims in the patent. In the worst case, the description of the dimpled embodiment in the patent application would have been prior art and therefore prevented Sorensen from obtaining his patent. (It would not prevent Sorensen and others from practicing the dimpled invention unless it were claimed.)

Patents and Intellectual Property 345

EXHIBIT 16-6 The logical structure of Claims 1 and 2 from the Coffin patent. Note that Claim 2 is dependent on Claim 1 and simply adds further restrictions, a second opening and a relationship between the first and second openings.

holder

corrugated tube

Claim 1

Claim 2

first opening

second opening

unequal cross sections

bond

cellulosic material fluting means

recyclable adhesive

flutes liner

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Guidelines for Crafting Claims Several guidelines are helpful in crafting claims. Writing great claims is tricky, so we advise inventors to seek the help of an experienced patent attorney in refining a patent application.

• Always try to make a claim as general as possible. When a specific descriptor is used, try making it general. For example, Coffin’s patent speaks of a “tubular member” and not a “tube.”

• Avoid absolute definitions by using modifiers like “substantially,” “essentially,” and “approximately.”

• Attempt to create an invention that does not infringe on the draft claim, and then try to rewrite the claim or add an additional claim such that the hypothetical invention would infringe.

Step 6: Pursue Application

In most cases, the inventor will deliver the draft application to a patent attorney or other intellectual property professional for refinement and formal application. It is possible to file a patent application as an individual if severely budget constrained. Pressman provides detailed guidelines for doing this (Pressman, 2008). Note that the statutory re- quirements are administratively complex, and so we highly recommend that commercial

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44

28 32

38

5

30

10

16

12

14 5

5 52 52

50

48

46

10

54 12

14

EXHIBIT 16-7 Figure from the Sorensen patent (U.S. Patent 5,425,497, “dimpled cup holder”).

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product development teams retain a competent specialist to pursue any application to the patent office.

Once an invention disclosure is prepared, the team can proceed in four different ways, with the specific course of action dictated by the business context.

• The team can file a provisional patent application. An individual or small company can file a provisional patent application for less than $100 in filing fees. The applica- tion need contain only a description of the invention and need not comply with the formalities of a regular patent application. Once a provisional application is filed, a product may be labeled “patent pending.” If the team wishes to pursue a regular patent application, this application must be filed within one year of the filing of the provi- sional patent application. A provisional patent therefore acts as an option to pursue a regular patent application and allows the team time to pursue licensing or further in- vestigation before incurring the expense of a regular patent application.

• The team may file a regular patent application in the United States. This process costs about $500 in filing fees for a small company or individual, in addition to the legal fees for a patent attorney.

• The team may file a patent cooperation treaty or PCT application. A PCT application allows a single patent application in a single country, say the United States, to initiate the process of pursuing international patent protection. Eventually, the inventor must pur- sue patent protection in individual countries or collections of countries (e.g., European Union). However, the PCT process allows the first steps of the process to be carried out relatively efficiently and with a single point of contact. The entire process of pursuing for- eign patent rights is beyond the scope of this chapter. Consult a patent attorney for details.

• The team can defer application indefinitely. The team may delay in hope that future information will make a course of action obvious. In some cases, the team may decide not to pursue the invention and therefore may decide to abandon the patent application process. The consequences of delay may be substantial. If the invention is disclosed publicly, then all international patent rights are forgone. If a year passes after public disclosure without filing a regular patent application, then U.S. patent rights are also forgone. Nevertheless, the team may be able to defer any action for several months be- fore these eventualities are realized.

At some point after the team files a regular patent application or a PTO application, the patent office will issue an office action responding to the application. In almost all cases, a patent examiner will reject many or all of the claims as either obvious or not novel. This is the norm and it is part of a back-and-forth exchange between the patent office and inventor that should eventually result in claims that are patentable. Next, the inventor and patent attorney sharpen arguments, edit claims to reflect comments from the examiner, and respond to the office action with an amended application. Most appli- cations eventually result in an issued patent, although the claims rarely remain exactly as originally written.

The patent office does not review or act on provisional patent applications. It merely records their filing and stores the application for review when and if a regular application is filed.

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348 Chapter 16

Step 7: Reflect on the Results and the Process

In reflecting on the patent application or invention disclosure, the team should consider at least the following questions:

• What are the essential and distinctive features of the product concept, and therefore the invention? Are these features reflected in the description of the invention and in the claims? Does the description communicate the best way of practicing the invention?

• What is the timing of future required actions? The team’s patent attorney will typi- cally maintain a docket—essentially a calendar indicating when further actions must be taken to preserve patent rights. However, the inventor or someone within the team’s company should also be responsible for thinking about the actions that must be taken in the coming months.

• Which aspects of the process of preparing the patent application or invention disclo- sure went smoothly and which aspects require further efforts in the future?

• What did the team learn about the prior art that may inform future product develop- ment efforts? For example, are there valuable technologies that might be licensed from existing patent holders? Are competitors’ patents expiring, possibly allowing the team to use a convenient solution to a long-standing problem?

• How strong an intellectual property position does the team have? Are the features of the invention in the patent application so novel and valuable that they really prevent competitors from direct competition, or is the patent likely to be merely a deterrent to the most direct copies of the products that embody the invention?

• Did the team begin the process too early or too late? Was the effort rushed? What is the ideal timing for the next effort to prepare a patent application?

Summary • A patent is a temporary monopoly granted by a government to exclude others from

using, making, or selling an invention. Patent law is intended to balance an incentive for invention with the free dissemination of information.

• Utility patents are the central element of the intellectual property for most technology- based product development efforts.

• An invention can be patented if it is useful, novel, and nonobvious.

• The final invention that is patented is defined by the patent claims. The rest of the patent application essentially serves as background and explanation in support of the claims.

• We recommend a seven-step process for pursuing a patent:

1. Formulate a strategy and plan.

2. Study prior inventions.

3. Outline claims.

4. Write the description of the invention.

5. Refine claims.

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Patents and Intellectual Property 349

6. Pursue application.

7. Reflect on the results and the process.

• Provisional patent applications and patent cooperation treaty (PCT) applications can be used to minimize the costs of pursuing patent protection while preserving all future options.

References and Bibliography Many current resources are available on the Internet via www.ulrich-eppinger.net

The examples in the chapter are derived from the Coffin and Sorensen patents. Coffin, David W., Recyclable Corrugated Beverage Container and Holder, United States Patent 5,205,473, April 27, 1993.

Sorensen, Jay, Cup Holder, United States Patent 5,425,497, June 20, 1995.

Pressman’s book is a comprehensive guide to the details of patent law and provides a step-by-step process for writing a patent application and pursuing the application with the patent office. The book also contains valuable related information on licensing inventions.

Pressman, David, Patent It Yourself, thirteenth edition, Nolo Press, Berkeley, CA, 2008.

Stim provides an in-depth discussion of most aspects of intellectual property, including trademarks and copyrights.

Stim, Richard, Patent, Copyright & Trademark: An Intellectual Property Desk Reference, eleventh edition, Nolo Press, Berkeley, CA, 2010.

Exercises 1. Find a patent number on a product that interests you. Look up the patent using an

online reference tool.

2. Draft a claim for the self-stick notepad invention marketed by 3M Corporation as the Post-it note.

3. Draw a logic diagram of two claims for the patent in Exercise 1.

4. Generate one or more product concepts that are very different from the Coffin and Sorensen inventions to address the problem of handling a hot coffee cup and that don’t infringe the Coffin and Sorensen patents.

Thought Questions 1. Controversy erupted in 1999 when the J.M. Smucker Company sued a Michigan bak-

ery, Albie’s, for infringing on its patent by marketing a crustless peanut butter and jelly sandwich crimped on the edges. (See U.S. patent 6,004,596.) Albie’s argued that the patent was issued in error because the invention was obvious. Look up the Smucker pat- ent. Do you believe that the Smucker’s invention is nonobvious? Why or why not?

2. Why might an inventor describe but not claim an invention in a patent?

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Appendix A

Trademarks A trademark is a word or symbol associated with the products of a particular manufac- turer. Trademarks can form an important element of the portfolio of intellectual property owned by a company. Trademarks can be words, “word marks” (stylized graphics spelling out words), and/or symbols. Trademarks usually correspond to brands, product names, and sometimes to company names.

Trademark law is intended to prevent unfair competition, which could result if one manufacturer named its products like those of another in an attempt to confuse the pub- lic. In fact, to avoid confusion, when a manufacturer uses a competitor’s trademark in advertising, say for the purposes of comparison, it must by law indicate that the name is a trademark of the competitor.

Trademarks must not be purely descriptive. For example, although a company could not obtain a trademark on “Insulating Sleeve,” it could for names that are suggestive but not purely descriptive such as “Insleev,” “ThermaJo,” or “CupPup.”

In the United States, a federal trademark may be established merely by using the mark in interstate commerce. This is done by attaching “TM” to the word or symbol when used in advertising or labeling the product (e.g., JavaJacket™). Trademarks may also be registered at modest cost through the United States Patent and Trademark Office using a simple process. When registered, a trademark is denoted with the symbol ® (e.g., Coke®).

Given the importance of the Internet for communicating with customers, when creat- ing new product names, the team should strive to create trademarks that correspond ex- actly to domain names on the Internet.

Appendix B

Advice to Individual Inventors Most students of product development and product development professionals have at some point had an idea for a novel product. Often further thought results in a product con- cept, which sometimes embodies a patentable invention. A common misconception among inventors is that a raw idea or even a product concept is highly valuable. Here is some ad- vice based on observations of many inventors and product commercialization efforts.

• A patent can be a useful element of a plan for developing and commercializing a prod- uct. However, it is not really a central element of that activity. Patenting an invention can usually wait until many of the technical and market risks have been addressed.

• A patent by itself rarely has any commercial value. (An idea by itself has even less value.) To extract value from a product opportunity, an inventor must typically com- plete a product design, resolving the difficult trade-offs associated with addressing customer needs while minimizing production costs. Once this hard work is completed, a product design may have substantial value. In most cases, pursuing a patent is not

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worth the effort except as part of a larger effort to take a product concept through to a substantial development milestone such as a working prototype. If the design is proven through prototyping and testing, a patent can be an important mechanism for increas- ing the value of this intellectual property.

• Licensing a patent to a manufacturer as an individual inventor is very difficult. If you are serious about your product opportunity, be prepared to pursue commercialization of your product on your own or in partnership with a smaller company. Once you have demonstrated a market for the product, licensing to a larger entity becomes much more likely.

• File a provisional patent application. For very little money, an individual using the guidelines in this chapter can file a provisional application. This action provides patent protection for a year, while you evaluate whether your idea is worth pursuing.

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Product Development Economics

353

C H A P T E R S E V E N T E E N

Photo courtesy of Arne List

EXHIBIT 17-1 One of Polaroid’s digital color photo printers.

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A product development team at Polaroid Corporation was in the midst of developing a new photograph printer, the CI-700. Exhibit 17-1 shows one of Polaroid’s color photo printers. The CI-700 would produce instant full-color photographs from digital images stored in a computer. The primary markets for the product are the graphic arts, insurance, and real estate industries. During the CI-700’s development, the Polaroid product develop- ment team was faced with several decisions that it knew could have a significant impact on the product’s profitability:

• Should the team take more time for development in order to make the product avail- able on multiple computer “platforms,” or would a delay in bringing the CI-700 to market be too costly?

• Should the product use standard print media from Polaroid’s existing businesses or new and specialized premium-quality print media?

• Should the team increase development spending in order to increase the reliability of the CI-700?

The product development team needed tools to help it make these and other develop- ment decisions. This chapter presents an economic analysis method for supporting the decisions of product development teams. The process consists of two types of analysis, quantitative and qualitative. The emphasis in this chapter is on quick, approximate meth- ods for supporting decision making within the project team.

Elements of Economic Analysis

Quantitative Analysis There are several basic cash inflows (revenues) and cash outflows (costs) in the life cycle of a successful new product. Cash inflows come from product sales. Cash outflows in- clude spending on product and process development; costs of production ramp-up such as equipment purchases and tooling; costs of marketing and supporting the product; and ongoing production costs such as raw materials, components, and labor. The cumulative cash inflows and outflows over the life cycle of a typical successful product are presented schematically in Exhibit 17-2.

Economically successful products are profitable; that is, they generate more cumula- tive inflows than cumulative outflows. A measure of the degree to which inflows are greater than outflows is the net present value (NPV) of the project, or the value in today’s dollars of all of the expected future cash flows. The quantitative part of the economic analysis method described in this chapter estimates the NPV of a project’s expected cash flows. The method uses NPV techniques because they are easily understood and used widely in business. (Appendix A provides a brief tutorial on NPV.) The value of quantita- tive analysis is not only in providing objective evaluations of projects and alternatives but also in bringing a measure of structure and discipline to the assessment of product devel- opment projects.

Qualitative Analysis Quantitative analysis can capture only those factors that are measurable, yet projects often have both positive and negative implications that are diff icult to quantify. Also,

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Product Development Economics 355

quantitative analysis rarely captures the characteristics of a dynamic and competitive en- vironment. The chief executive of a major American corporation underscores this point: “I’ve had MBAs argue with me that a capital expenditure is wrong because it doesn’t have a payback within two or three years; they ignore the fact that if we don’t make the move, we’ll fall behind the rest of our industry in four or five years” (Linder and Smith, 1992). The method in this chapter uses qualitative analysis to capture some of these issues. Our approach to qualitative analysis is to consider specifically the interactions between the project and (1) the firm, (2) the market, and (3) the macroeconomic environment.

When Should Economic Analysis Be Performed? Economic analysis, which includes both quantitative and qualitative approaches, is useful in at least two different circumstances:

• Go/no-go milestones: For example, should we try to develop a product to address this market opportunity? Should we proceed with the implementation of a selected concept? Should we launch the product we have developed? These decisions typically arise at the end of each phase of development.

Cumulative Inflow or Outflow ($)

+$

–$

Sales Revenues

Development Cost Ramp-up Costs

Marketing and Support Costs

Production Cost

Time

EXHIBIT 17-2 Typical cash flows for a successful new product.

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• Operational design and development decisions: Operational decisions involve ques- tions such as: Should we spend $100,000 to hire an outside firm to develop this compo- nent in order to save two months of development time? Should we launch the product in four months at a unit cost of $450 or wait until six months when we can reduce the cost to $400?

The analysis done at the beginning of a project can usually be updated with current information so that it does not have to be created in its entirety each time. Used in this way, the analysis becomes one of the information systems the team uses to manage the development project.

Economic analysis can be carried out by any member of the development team. In small companies, the project leader or one of the members of the core project team will implement the details of the analysis. In larger companies, a representative from a finance or planning group may be appointed to assist the development team in performing the analysis. We emphasize that even when someone with formal training in financial mod- eling takes responsibility for this analysis, the entire team should fully understand the analysis and be involved in its formulation and use.

Economic Analysis Process We recommend the following four-step method for the economic analysis of a product development project:

1. Build a base-case financial model.

2. Perform a sensitivity analysis to understand the relationships between financial success and the key assumptions and variables of the model.

3. Use the sensitivity analysis to understand project trade-offs.

4. Consider the influence of the qualitative factors on project success.

The balance of this chapter is organized around these four steps.

Step 1: Build a Base-Case Financial Model

Constructing the base-case model consists of estimating the timing and magnitude of fu- ture cash flows and then computing the NPV of those cash flows.

Estimate the Timing and Magnitude of Future Cash Inflows and Outflows The timing and magnitude of the cash flows is estimated by merging the project sched- ule with the project budget, sales volume forecasts, and estimated production costs. The level of detail of cash flows should be coarse enough to be convenient to work with, yet it should contain enough resolution to facilitate effective decision making. The most basic categories of cash flow for a typical new product development project are:

• Development cost (all remaining design, testing, and refinement costs up to production ramp-up).

• Ramp-up cost.

• Marketing and support cost.

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• Production cost.

• Sales revenues.

Depending on the types of decisions the model will support, greater levels of detail for one or more areas may be required. More detailed modeling may consider these same five cash flows in greater detail, or it may consider other flows. Typical refinements include:

• Breakdown of production costs into direct costs and indirect costs (i.e., overhead).

• Breakdown of marketing and support costs into launch costs, promotion costs, direct sales costs, and service costs.

• Inclusion of tax effects, including depreciation and investment tax credits. (Tax effects are typically considered in even simple financial modeling. For the sake of clarity, however, we omit the tax effects in our examples.)

• Inclusion of such miscellaneous inflows and outflows as working capital requirements, cannibalization (the impact of the new product on existing product sales), salvage costs, and opportunity costs.

The financial model we use in this chapter is simplified to include only the major cash flows that are typically considered in practice, but conceptually it is identical to more complex models. The numerical values of the cash flows come from budgets and other estimates obtained from the development team, the manufacturing organization, and the marketing organization. Exhibit 17-3 shows the relevant financial estimates for the CI-700. (These data have been disguised to protect Polaroid’s proprietary financial information.) For a more detailed discussion of manufacturing costs, see Chapter 13, Design for Manufacturing. Note that all revenues and expenses to date are sunk costs and are irrelevant to NPV calculations. (The concept of sunk costs is reviewed in Appendix A.)

In order to complete the model, the financial estimates must be merged with tim- ing information. This can be done by considering the project schedule and sales plan. Exhibit 17-4 shows the project timing information in Gantt chart form for the CI-700. (For most projects, a time increment of months or quarters is most appropriate.) The re- maining time to market is estimated to be five quarters, and product sales are anticipated to last 11 quarters.

A common method of representing project cash flow is a table. The rows of the table are the different cash flow categories, while the columns represent successive time peri- ods. Usually this table is encoded in a computer spreadsheet to facilitate analysis. For this example, we assume that the rate of cash flow for any category is constant across any time period (e.g., total development spending of $5 million over one year is allocated equally to each of the four quarters); however, the values can be arranged in any way that best represents the team’s forecast of the cash flows. We multiply the unit sales quantity

Product Development Economics 357

EXHIBIT 17-3 CI-700 project budgets, sales volume forecasts, and production costs.

1. Development cost $5 million 2. Ramp-up cost $2 million 3. Marketing and support cost $1 million/year 4. Unit production cost $400/unit 5. Sales and production volume 20,000 units/year 6. Unit price $800/unit

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EXHIBIT 17-4 CI-700 project schedule from inception through market withdrawal.

by the unit price to find the total product revenues in each period. We also multiply the unit production quantity by the unit production cost to find the total production cost in each period. Exhibit 17-5 illustrates the resulting table.

Compute the Net Present Value of the Cash Flows Computing the NPV requires that the net cash flow for each period be determined, and then that this cash flow be converted to its present value (its value in today’s dollars), as shown in Exhibit 17-6. Consider, for example, the calculations for year 3, first quarter:

1. The period cash flow is the sum of inflows and outflows:

Marketing cost $ –250,000 Product revenues 4,000,000 Production cost –2,000,000 Period cash flow $1,750,000

2. The present value of this period cash flow discounted at 10 percent per year (2.5 percent per quarter) back to the first quarter of year 1 (a total of eight quarters) is

EXHIBIT 17-5 Merging the project financials and schedule into a cash flow table (all dollar values are in thousands in this and subsequent tables).

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$1,436,306. (The concepts of present value, net present value, and discount rate are reviewed in Appendix A.)

$1,750,000

. $1,436,306

1 0258 =

3. Project NPV is the sum of the discounted cash flows for each of the periods, or $8,203,000. (Here and in the rest of the chapter we round financial figures to the near- est one thousand dollars.)

The Base-Case Financial Model Can Support Go/No-Go Decisions and Major Investment Decisions The NPV of this project, according to the base-case model, is positive, so the model sup- ports and is consistent with the decision to proceed with development. Such modeling can also be used to support major investment decisions. Say, for example, that Polaroid was deciding between two different production facilities with different ramp-up, production, and support costs. The team could develop a model for each of the two scenarios and then compare the NPVs. The scenario with the higher NPV would better support the invest- ment decision. We now consider sensitivity analysis as a technique for readily understand- ing multiple scenarios for ongoing product development decisions.

Step 2: Perform Sensitivity Analysis

Sensitivity analysis uses the financial model to answer “what if ” questions by calculating the change in NPV corresponding to a change in the factors included in the model. Both internal and external factors influence project value. Internal factors are those over which the development team has a large degree of influence, including development pro- gram expense, development speed, production cost, and product performance. External factors are those that the team cannot arbitrarily change, including the competitive

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EXHIBIT 17-6 Total cash flows, present values, and net present value.

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environment (e.g., market response, actions of competitors), sales volume, and product price. (There may be disagreement over whether price is an internal or external factor. In either case, there is little disagreement that price is strongly influenced by the prices of competitive products and that it is coupled to sales volume.) While external factors are not directly controlled by product development teams, they are often influenced by the internal factors. The external and internal factors are shown in Exhibit 17-7.

Development Cost Example As a first example, let us consider the sensitivity of NPV to changes in development cost. By making incremental changes to development cost while holding other factors constant, we can see the incremental impact on project NPV. For example, what will be the change in NPV if development cost is decreased by 20 percent? A 20 percent decrease would lower the total development spending from $5 million to $4 million. If development time remains one year, then the spending per quarter would decrease from $1.25 million to $1 million. This change is simply entered in the model and the resulting NPV is calcu- lated. This change to the CI-700’s base-case model is shown in Exhibit 17-8.

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EXHIBIT 17-7 Key factors influencing product development profitability.

Internal Factors External Factors

Net Present Value

• Product Price • Sales Volume • Competitive Environment

• Development Expense

Investigation cost Development cost • Development Speed Investigation time Development time • Production Cost • Product Performance

PRODUCT DEVELOPMENT

PROJECT

EXHIBIT 17-8 CI-700 financial model with 20 percent decrease in development spending.

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A 20 percent decrease in development cost will increase NPV to $9,167,000. This represents a dollar increase of $964,000 and a percentage increase of 11.8 in NPV. This is an extremely simple case: we assume we can achieve the same project goals by spend- ing $1 million less on development, and we therefore have increased the project value by the present value of the $1 million in savings accrued over a time period of one year. The CI-700 development cost sensitivity analysis for a range of changes is shown in Exhibit 17-9. The values in the table are computed by entering the changes correspond- ing to each scenario into the base-case model and noting the results. It is often useful to know the absolute dollar changes in NPV as well as the relative percentage changes, so we show both in the sensitivity table.

Development Time Example As a second example, we calculate the development time sensitivities for the CI-700 model. Consider the impact on project NPV of a 25 percent increase in development time. A 25 percent increase in development time would raise the time from four quarters to five quarters. This increase in development time would also delay the start of produc- tion ramp-up, marketing efforts, and product sales. To perform the sensitivity analysis, we must make several assumptions about the changes. We assume the same total amount of development cost, even though we will increase the time period over which the spending occurs, thus lowering the rate of spending from $1.25 million to $1.0 million per quarter. We also assume that there is a fixed window for sales, which starts as soon as the product enters the market and ends in the fourth quarter of year 4. In effect, we assume we can sell product from the time we are able to introduce it until a fixed date in the future. Note that these assumptions are unique to this development project. Different product development projects would require different assumptions as appropriate. For example, we might have instead assumed that the sales window simply shifts in time by one quarter. The change to the CI-700’s financial model is shown in Exhibit 17-10.

Exhibit 17-11 presents the development time sensitivities for a range of changes. We can see that a 25 percent increase in development time will decrease NPV to $6,764,000. This represents a decrease in NPV of $1,439,000, or 17.5 percent.

We recommend that sensitivities be computed for each of the external and internal fac- tors, with the exception of the competitive environment, which is not explicitly contained in the base-case model. These sensitivity analyses inform the team about which factors

Product Development Economics 361

Change in Development Change in Change in Development Cost, Development Change in NPV, NPV, Cost, % $ Thousands Cost, $ Thousands NVP, % $ Thousands $ Thousands

50 7,500 2,500 –29.4 5,791 –2,412 20 6,000 1,000 –11.8 7,238 –964 10 5,500 500 –5.9 7,721 –482 base 5,000 base 0.0 8,203 0 –10 4,500 –500 5.9 8,685 482 –20 4,000 –1,000 11.8 9,167 964 –50 2,500 –2,500 29.4 10,615 2,412

EXHIBIT 17-9 CI-700’s development cost sensitivities.

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in the model have a substantial influence on NPV. This information is useful in helping the team understand which factors should be studied in more detail in order to refine and improve the base-case model. The information is also useful in supporting the operating decisions of the team, as discussed in the next step.

Sensitivity analysis shows that NPV is highly dependent on uncertainties in some base-case input values and less dependent on others. In addition, some of the input values used to compute the base case are more uncertain than others. For example, forecasted sales volume may be more uncertain than estimated unit production cost. By assuming a range of high and low values for any uncertain inputs in the financial analysis, the team can compute a range of possible values for NPV. The high and low values can be thought of as defining the range within which the team is highly confident the actual outcomes will fall. This analysis can be summarized in a tornado chart, showing the effect of each uncertainty on NPV.

For the CI-700 project, key uncertainties include the range of input values given in Exhibit 17-12. Changing these inputs in the model one at a time, holding everything else constant, yields the listed changes in NPV. Exhibit 17-13 shows these results graphically as a tornado chart.

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EXHIBIT 17-10 CI-700 financial model with 25 percent increase in development time.

EXHIBT 17-11 CI-700’s development time sensitivities.

Change in Development Change in Change in Development Time, Development Change in NPV, NPV, Time, % Quarters Time, Quarters NVP, % $ Thousands $ Thousands

50 6 2 –34.6 5,363 –2,840 25 5 1 –17.5 6,764 –1,439 base 4 base –0.0 8,203 0 –25 3 –1 18.0 9,678 1,475 –10 2 –2 36.4 11,190 2,987

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Step 3: Use Sensitivity Analysis to Understand Project Trade-Offs

Why would a product development team want to change the factors under its control? For instance, why should development time be increased if the change lowers the NPV of the project? Typically, the development team will make such a change only if some other offsetting gain is expected, such as a better-quality product with higher sales volumes. We therefore need to understand the relative magnitude of these financial interactions.

Product Development Economics 363

EXHIBIT 17-12 Assumptions about minimum and maximum values for the model parameters and their impact on NPV.

Nominal % % Model Value Mininum % Resulting Change Maximum % Resulting Change Parameter $ thousands Value Change NPV NPV Value Change NPV NPV

Development �1,250 �1,000 �20 9,167 12 �1,500 20 7,239 �12 cost

Ramp-up �1,000 �750 �25 8,662 6 �1,250 25 7,744 �6 cost

Marketing & �250 �200 �20 8,679 6 �325 30 7,488 �9 support cost

Sales volume 5,000 2,500 �50 �417 �105 7,500 50 16,822 105

Unit �0.4 �0.36 �10 9,927 21 �0.44 10 6,479 �21 production cost

Unit price 0.8 0.6 �25 �417 �105 0.8 0 8,203 0

EXHIBIT 17-13 Tornado chart illustrating the percentage change in NPV for minimum and maximum values for some of the model parameters, as listed in Exhibit 17-11. Parameters are shown in order of decreasing impact, giving the graph its tornado shape.

0–100% 100%

Development cost

Ramp-up cost

Marketing & support cost

Sales volume

Unit production cost

Unit price

Change in NPV

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Six Potential Interactions Development teams attempt to manage six potential interactions between the internally driven factors. These potential interactions are shown schematically in Exhibit 17-14. The potential interaction between any two internal factors depends on the characteristics of the specific product context. In many cases the interactions are trade-offs. For example, decreasing development time may lead to lower product performance. Increased product performance may require additional product cost. However, some of these interactions are more complex than a simple trade-off. For example, decreasing product development time may require an increase in development spending, yet extending development time may also lead to an increase in cost if the extension is caused by a delay in a critical task rather than by a planned extension of the schedule.

In general, these interactions are important because of the linkage between the internal factors and the external factors. For example, increasing development cost or time may enhance product performance and therefore increase sales volume or allow higher prices. Decreasing development time may allow the product to reach the market sooner and thus increase sales volume.

While accurate modeling of externally driven factors (e.g., price, sales volume) is often very difficult, the quantitative model can nevertheless support decision making. Re- call from our initial examples that the CI-700 development team was considering increas- ing development spending in order to develop a higher-quality product, which they hoped would lead to greater sales volume. The quantitative model can support this decision by answering the question of how much the sales volume would have to increase to justify the additional spending on development. We have calculated the sensitivity of NPV to changes in development cost (see Exhibit 17-9). We can also calculate the sensitivity of NPV to changes in sales volume (Exhibit 17-15). Say that the CI-700 development team is considering a 10 percent increase in development cost. From Exhibit 17-9 we found that this increase in spending will decrease NPV by 5.9 percent.

Now, what increase in volume would be necessary to at least compensate for the decrease in NPV? From Exhibit 17-15 we know that a 10 percent increase in sales vol- ume would increase NPV by 21 percent. It follows, under assumptions of linearity, that a

2.8 percent 10 5 9

21 0

×⎛

⎝⎜ ⎞

⎠⎟ .

. increase in sales volume would increase NPV by 5.9 percent. To

summarize, a 10 percent increase in development cost would decrease NPV by 5.9 percent. A 2.8 percent increase in sales volume is needed to offset the drop. While the

364 Chapter 17

EXHIBIT 17-14 Potential interactions between internally driven factors.

Adapted from Smith and Reinertsen, 1997

Development Time

Product Cost

Product Performance

Development Cost

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precise impact of the increased development spending on sales volume is not known, the model does provide a helpful guide for what magnitude of sales volume increase is needed to sustain particular increases in development cost.

Trade-Off Rules The near linearity of many sensitivity analyses allows the team to compute some trade-off rules to inform day-to-day decision making. These rules take the form of the cost per unit change in the internal and external factors. For example, what is the cost of a one-month delay in development time? What is the cost of a 10 percent development budget overrun? What is the cost of a $1 per unit increase in manufacturing cost? The trade-off rules are easily computed from the base-case model and can be used to inform the team of the rela- tive magnitude of the sensitivities of the project profitability on factors under its control. Exhibit 17-16 contains the rules for the CI-700.

The trade-off rules inform the original questions posed in the chapter introduction. The team decided that waiting for software that would allow the printer to be used with both Apple Macintosh and Microsoft Windows operating systems would delay product intro- duction by two months. It was calculated that the delay would have an approximate cost of $960,000. Rather than wait, the team reasoned that it could introduce the product before all printer drivers were available as long as the drivers were offered as soon as they were available. The media development group at Polaroid estimated that the development of a

Product Development Economics 365

Factor Trade-Off Rule Comments

Development time $480,000 per month change Assumes a fixed window of opportunity for sales.

Sales volume $1,724,000 per 10% change Increasing sales is a powerful way to increase profits; 10% is 500 units/quarter.

Product cost or sales price $43,000 per $1 change in cost or price A $1 increase in price or a $1 decrease in cost; each results in a $1 increase in unit profit margins.

Development cost $482,000 per 10% change A dollar spent or saved on development is worth the present value of that dollar; 10% is $500,000.

EXHIBIT 17-16 Trade-off rules for the CI-700 project.

EXHIBIT 17-15 CI-700’s sales volume sensitivities.

Change Sales Change Change in in Sales Volume, in Sales Change in NPV, NPV, Volume, % $ Thousands Volume NVP, % $ Thousands $ Thousands

30 6,500 1,500 63.0 13,375 5,172 20 6,000 1,000 42.0 11,651 3,448 10 5,500 500 21.0 9,927 1,724 base 5,000 base 0.0 8,203 0 –10 4,500 –500 –21.0 6,479 –1,724 –20 4,000 –1,000 –42.0 4,755 –3,448 –30 3,500 –1,500 –63.0 3,031 –5,172

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new print medium would cost more than $1 million and would take at least one year. The team decided that these time and budget penalties did not warrant the marginal increase in print size and quality that would be enabled by the new medium. Finally, the team felt that the reliability of the product could be dramatically improved with the addition of only one engineer and one technician to the team. This additional cost was expected to be approximately $100,000 for the remainder of the project. The team noted that they would have to increase sales by only 0.6 percent to justify this investment. Reliability was iden- tified as a key customer need, and so the team chose to aggressively pursue increased reliability.

Limitations of Quantitative Analysis Financial modeling and sensitivity analysis are powerful tools for supporting product development decisions, but these techniques have important limitations. One school of thought believes that rigorous financial analyses are required to bring discipline and control to the product development process. However, detractors argue that quantitative analysis suffers from some of the following problems:

• It focuses only on measurable quantities. Quantitative techniques like NPV empha- size and rely on that which is measurable. However, many critical factors impacting product development projects are difficult to measure accurately. In effect, quantitative techniques encourage investment in measurable assets and discourage investment in intangible assets.

• It depends on validity of assumptions and data. Product development teams may be lulled into a sense of security by the seemingly precise result of an NPV calculation. Financial analyses such as the ones we have shown in this chapter may seem to provide precise estimates of product development project value. However, such precision in no way implies accuracy. We can develop a highly sophisticated financial model of a product development project that computes project NPV to the fifth decimal place; yet if the assumptions and data of our model are not correct, the value calculated will not be correct. Consider the CI-700 development time sensitivity example’s assumption of a fixed product sales window. This assumption was useful, but its integrity can easily be questioned. Indeed, a different assumption could give dramatically different results.

• Bureaucracy reduces productivity. Detractors of financial analysis assert that such activities provide a high level of planning and control at the expense of product devel- opment productivity. According to detractors, extensive planning and review guarantee that a brilliantly conceived, well-engineered product will reach the market after its market window has already closed. Detractors also argue that overzealously applied “professional” management techniques stifle the product development process. Poten- tially productive development time is devoted to preparation of analyses and meetings. The cumulative effect of this planning and review can be a ballooning development process.

These concerns are generally quite valid. However, in our opinion, they are largely as- sociated with the blind application of the results of the quantitative analysis or arise from the combination of financial analysis with an already stifling bureaucracy. We reject the notion that quantitative analysis should not be done just because problems can arise from the blind application of the results. Rather, development teams should understand the

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strengths and limitations of the techniques and should be fully aware of how the models work and on what assumptions they are based. Furthermore, qualitative analysis, as dis- cussed in the next section, can remedy some of the inherent weaknesses in the quantita- tive techniques.

Step 4: Consider the Influence of the Qualitative Factors on Project Success

Many factors influencing development projects are difficult to quantify because they are complex or uncertain. We refer to such factors as qualitative factors. After providing a conceptual framework for qualitative analysis, we use examples from the CI-700 to illus- trate how the analysis is carried out.

Consider the following questions about the CI-700 project: Will knowledge gained from the CI-700 development spill over and be of benefit to other Polaroid development projects? How will competitors react to the introduction of the CI-700? Will competitors modify their own development efforts in response to Polaroid’s actions? Will there be significant fluctuations in the dollar/yen exchange rate that would change the cost of component parts?

Our quantitative model implicitly accounts for these and many other issues with sev- eral broad assumptions. The model assumes that decisions made by the project team do not affect actions of groups external to the project, or alternatively that the external forces do not change the team’s actions. This important assumption of our model is common to many other financial models and is called the ceteris paribus (other things being equal) assumption.

Projects Interact with the Firm, the Market, and the Macro Environment Decisions made within a project in general do have important consequences for the firm as a whole, for competitors and customers in the market, and even for the macroeconomic (macro) environment in which the market operates (Exhibit 17-17). Similarly, events and actions outside of a development project often significantly impact its value. Qualitative analysis focuses largely on these interactions. The most basic approach to qualitative analysis is to consider (1) the interactions between the project and the firm as a whole, (2) the interactions between the project and the market in which the product will be sold, and (3) the interactions between the project and the macro environment.

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EXHIBIT 17-17 The broader context of a development project.

Project

Firm

Market

Macro Environment

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Interactions between the Project and the Firm as a Whole

One assumption embedded in the quantitative model is that firm profit will be maximized if project profit is maximized. However, development decisions must be made in the con- text of the firm as a whole. The two key interactions between the project and the firm are externalities and strategic fit.

• Externalities: An externality is an “unpriced” cost or benefit imposed on one part of the firm by the actions of a second; costs are known as negative externalities and benefits as positive externalities. As an example of a positive externality, development learning on one project may benefit other current or future projects but is paid for by the first project. How should the other projects account for such benefits gained at no additional cost? How should the first project account for resources spent that benefit not only itself, but also other current or future projects?

• Strategic fit: Decisions of the development team must not only benefit the project, but also be consistent with the firm’s overall product plan and technology strategy. For example, how well does a proposed new product, technology, or feature fit with the firm’s resources and objectives? Is it compatible with the firm’s emphasis on technical excellence? Is it compatible with the firm’s emphasis on uniqueness?

Because of their complexity and uncertainty, externalities and strategic fit are very dif- ficult to quantify. This does not mean these issues should not be considered; rather, they must be considered qualitatively. See Chapter 4, Product Planning, for discussion of some strategic planning issues that cut across multiple projects.

Interactions between the Project and the Market

We have modeled explicitly only price and volume as the key externally driven factors. In effect, we have held the actions and reactions of the market constant. To model project value accurately, we must relax the ceteris paribus assumption to recognize that a devel- opment team’s decisions impact the market and that market events impact the develop- ment project. The market environment is impacted by the actions of not only the develop- ment team but also three other groups:

• Competitors: Competitors may provide products in direct competition or products that compete indirectly as substitutes.

• Customers: Customers’ expectations, incomes, or tastes may change. Changes may be independent or may be driven by new conditions in markets for complementary or sub- stitute products.

• Suppliers: Suppliers of inputs to the new product are subject to their own markets’ competitive pressures. These pressures may, indirectly through the value chain, impact the new product.

Actions and reactions of these groups most often impact expected price and volume, but they can have second-order effects as well. For example, consider a new competitor that has rapid product development cycles and that seems to value market share rather than short-term profitability. Clearly, the entrance of such a new competitor would change our expected price and volume. Further, we may attempt to accelerate our own develop- ment efforts in response. Thus, the competitor’s actions may impact not only our sales volume forecasts but also our planned development schedule.

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Interactions between the Project and the Macro Environment

We must relax the ceteris paribus assumption to take into account key macro factors:

• Major economic shifts: Examples of typical major economic shifts that impact the value of development projects are changes in foreign exchange rates, materials prices, or labor costs.

• Government regulations: New regulations can destroy a product development op- portunity. On the other hand, a shift in the regulatory structure of an industry can also spawn entire new industries.

• Social trends: As with government regulations, new social concerns such as in- creased environmental awareness can also destroy existing industries or create new ones.

Macro factors can have important impacts on development project value. However, these effects are difficult to model quantitatively because of inherent complexity and uncertainty.

The product development team for the CI-700 faced many qualitative issues during de- velopment of the product. We present three of the key qualitative issues that the Polaroid team encountered and describe the impacts of these issues on the project. The examples illustrate not only the limitations of quantitative analysis but also the importance of quali- tative analysis.