Chapter five

Strategies for product

development

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 What is strategy?
 While operational effectiveness means performing similar activities
better than rivals,

 Strategy refers to performing different activities than rivals or

performing similar activities in different ways.

 Product development strategies deal with developing products

having competitive advantage over rivals either:

using different activities ( using simultaneous approach while rivals

follow sequential approach thus decreasing their time to market).
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 Cont.…

 performing the activities in product development differently e.g.

Using computer aided manufacturing
Strategic management is characterized by:
Looking out – exploring environments beyond the boundary of the
organization ( competitors, customers, suppliers, stakeholders,
government... )
Looking in – assessing internal strengths and weaknesses and
improving the weaker ones ( assessing available technology, finance,
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marketing, engineering...)
Cont..
 If a company has state-of-the-art technology and key design
specialist engineers – it may follow design based incremental
strategy for new product development.

 If it has good market researchers and flexibility of production, it

can go for market driven strategy.

Looking ahead – forward looking to achieve company objectives –

‘the best way to predict the future is to create it’
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Points to be considered while developing strategy for
product development

Internal functions External parties

 Marketing  Market
 Finance  Customer
 Design/engineering  Supplier
 Manufacturing  Competitors
 Research and development  Other stakeholders

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 Market-Driven New Product Development Process

 It is product development strategy in which the specific reason for

innovation comes from the marketplace.
 Market-driven NPD process identifies customers' value-based
needs and turns those needs (expressed as customer requirements)
into successful products.
 It is highly based on market research.
 It tries to meet the ever changing consumers’ need.
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Cont.….

 Using this approach to understand the voice of the customers,

companies may probe their customer's beliefs, desires, &
environment and use the results to answer the following key
product development questions:
 What are the meaningful customer/market requirements for a new
or enhanced product?

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 Which customer requirement will the product development effort

target to create competitive differentiation in the market?

 What trade-offs can be made and how will these affect the

product?

 Which product features represent value for customers and which

exceed customer expectations?

 What are critical customer and market timing requirements?

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Cont.….
 How much will it cost to build this product; what is the value to the
market place?

 Marketing of products is changing from mass marketing to segmentation

and even micromarketing.

 So companies can produce products targeted at group of customers or

individual customers.

 E.g. of individual marketing: a swim wear manufacturer using a

computer/camera system in retail stores to design custom-tailored
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swimsuits for consumers.

Cross Functional Product Development Team

 New product development requires cross-functional collaboration

involving the marketing, finance, R&D, design and production
functions.
 Effective cross-functional collaboration lowers costs and reduces
product defects, which means that products can be offered at a
lower price with higher quality.

 Marketing
 Mediates the interaction between the firm and its customers.
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Cont.
Due to its direct communication with customers, It facilitates:

 recognition of product opportunities,

 definition of market segments,

 identification of customer requirements,

 Asks production for the products mostly needed by consumers, provides

comments for improvement...

 Sets target prices

 Promotes new products 04/24/2021 11

Cont.…
Manufacturing

 Responsible for creating and operating production systems for new

product development.

 Changes designs on paper to actual products,

 Requests engineering for new product designs based on demand of

marketing,

 Manufacturing capability and flexibility is critical for product

development.
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Cont.…

Design/engineering or/and R&D

 Defines the physical form of a product to satisfy customer needs.

 Changes customer requirements in to product specifications

 Key factor to differentiate a product from that of competitors.

 It has critical role in the development of a product exploiting the

available technology at most.

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Cont.…
 Creates specification for the required materials,

 Provides designs for manufacturing department,

 Specifications of required materials is used for purchasing purpose,

Finance
 Checks financial feasibility of projects

 Checks costs of development

 Finances projects

 Cheeks progress of projects and budget utilization

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 Cont..

 A cross functional new product development team consists of

individuals from those functions.

 Team decision making takes trade-off from the different functions.

 Functions will cooperate in the execution of new product project as

they have representatives in the development team.

 Minimizes new product failure as poor ideas will be dropped out in

the process.
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 Design based incremental strategy

 Companies based on technological innovations providing basic

improvements to products and processes and,

 Topological improvements giving product variety,

 This is preferable when companies have confidence in their design

engineers and they are innovative.

 Most of the time information from customers is useful in order to

compare the new product with the existing products.
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 Cont..
 Customer information is beneficial to incremental development
rather than innovative ones.

 In some cases customers lack the competence for suggesting

valuable developments – e.g. Electronic products

 Cost of customer involvement may not be justifiable ( cost benefit

analysis).

 Push strategy – companies develop products, then find market for

them.
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Customer involvement in new product development

 Effective new product development may need more expertise than

found in the company - from consultants and customers.

 Relationship marketing makes customers as partners rather than

source of information for market research.

Three different levels of relationships

1) Transactional relationships, involving no integration between

supplier and customer and the supplier’s offering is undifferentiated
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from that of others.

Cont..

2) Facilitative relationships, in which the customer also wishes to

acquire relatively undifferentiated products at lowest cost but both
parties are willing to invest in activity links and resource ties to
increase the cost benefits of the relationship.

3) Integrative relationships, wherein the customer expects benefits

beyond those of lower costs and extending to the revenue benefits
of enhanced performance of its own offering. This is customer
involvement strategy. 04/24/2021 19
Cont..

 Companies may develop close relations with a few partner customers that
participate actively in the new product development process and.

 Use the other customers merely as sources for supporting information through
market research.

 Customer involvement occurs in different phases of the new product

development process.

 Some customers are only involved in the initial stages of the process –
idea generation 04/24/2021 20
Cont.….

 The final stages – market testing and

 Others interact continuously with the provider during the

entire course of development – idea generation, concept testing,

product developing ....

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Supplier Involvement in Product Development

 When a company decides that quality, time and cost objective of

product development can not be achieved internally, it may work with
suppliers.

 Purchasing contributes to the decision whether to include suppliers in

new product development through supplier evaluation.

 Close cooperation, joint setting of goals, measurement and integration

of suppliers in new product development projects is important.
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 Cont.…

Advantages
 Reduced development and manufacturing time – increased communication
results in better design with fewer iteration of redesign,

 better design results in better manufacturability and faster

manufacturing process resulting in shorter development time.

 Decreased costs and increased quality – due to less rework and fewer
scrap cost will drop and suppliers knowledge will improve quality.

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Cont.….

Challenges
 Lack of trust hinders the relationship between companies – suppliers are
afraid that once customers know cost and other information,

 the supplier will loose its negotiating power and profit margins will be
squeezed.

 Change resistance – customer’s designers may not be willing to let

supplier’s designers participate in the design process or management
may not be will to control the process. 04/24/2021 24
 Principles for good engineering and product development

Quality is a must – TQM approach

 the concepts of TQM should be applied at the level of the whole
company and at the level of engineering and product development.
 With the aim of providing, continue providing its customers with
products and services that satisfy their needs and delight them.

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 Cont.…

A bias for cycle time reduction

 Reduction of lead times opens up new market opportunities and
improve profits.
 Reduce market risk by reducing the time between product
specification and product delivery.
 Enables to incorporate customers feedback in new product and
improve quality sooner than rivals.
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Cont..

A bias for innovation

Innovative solutions including:-

 New materials- introduce new alternative effective material
 Empowering employees – innovative new way to organize production,
encourage participation and equal responsibility among group
members and flexible working environment.

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Cont..

Online support – assess the technical drawing of products, data

booklets, installation, operating instructions and service kits, and up-
to-date technical information about the product.
Coherent vision, strategy, plan and metrics
Vision, Strategy, plan and their implementation makes the
organization to behave in a way that enables it to meet its objectives.

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Cont..
 Metrics – that quantify the objectives helps to measure achievements and
improve performance.

 Product family oriented business unit – are important because they provide a
way to simplify operations.

 They avoid the confusion and overlapping of processes that arise when
organizations tries to produce different types of products aimed at different
customers and markets at the same time.

 Listening to the voice of customers – key part of TQM

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Cont..

 Clearly defined and well-organized development process

 The cycle time of any development operation depends closely
on the development process.
 So organizations should look to find optimum process for its
product family at reduction of wastage, reduction of cost and fast
production.
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Cont..

Cross functional product development team

 People from different functions working together makes
development faster – as activities can be done in parallel.
 Quality will be improved because – people from different functions
work together to understand and solve development problems.
 Quicker process and higher quality – cheaper development

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Cont..

Supplier Involvement Early in the Product Development

 Allows organizations to make the best use of supplier skills and
knowledge.

Clearly defined development methodology

 Clearly defined rules for working together
 If all team members understand the approach for development, it
will provide the best result.
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Cont..

Highly skilled and well-trained people

 The heart of the organization are people and not machines
 The firm should have people who can work together, sharing their
knowledge, experience, saving time and money, and eliminating
errors of communication and ignorance.
 Trained to work with techniques, practices and systems that the
organization has chosen to use in the development process.
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Cont..

Computer aided design systems

 Much accurate and faster than people though they lack some design and
styling skills.

Digital product models under EDM and PDM control

 With paper based information management system, information easily gets lost,
or takes long time to find, information gets corrupted during communication,
the wrong version may be used and wrong configuration identified.

 EDM (enterprise data management ) and PDM (product data management)

solves the mentioned problems.
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Concurrent engineering
 It is also called simultaneous engineering
 It is a new approach adopted to improve the efficiency of product
design and reduce the product design & development cycle time.
 In the traditional approach, there is a wall between manufacturing
and design department.
 So, the communication gap should be reduced to increase the
performance, reliability and efficiency of the product.
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Cont.…
 Concurrent engineering refers to a new technique to product design in which
companies attempt to reduce elapsed time required to bring a new product to
market via:-

 integrating design engineering,

 manufacturing engineering,

 marketing,

 maintenance, vendors and quality engineering divisions and other company functions.

 This will reduce the product development cycle time, as some activities will be done
simultaneously. 04/24/2021 36
Cont.…
 In CE, those different functions can contribute to a product design
that is easy to manufacture, assemble, inspect, testable,
serviceable, maintainable, zero defect and safe – resulting in high
quality product to deliver customer satisfaction.

Principles of concurrent engineering

 CE brings together a wide spectrum of people from several
departments – needs team for its development.

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Cont.…

•Needs representatives from R&D, engineering, manufacturing,

materials management, quality assurance , marketing....
The team work has advantages:
Cooperation between specialists
•Systematic application of specific methods such as DFMA (design for
manufacturability and assembly)

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Cont.…

Ensure quicker optimization of design

Early detection of possible faults in product and production
planning.
Reduction of lead time and production cost
Improves quality

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Cont..
 One difference between the traditional and concurrent engineering is that in CE
very large number of changes take place at the beginning stage of product
development cycle and goes decreasing for the remaining period of the cycle.
 in traditional manufacturing the changes appear at every stage of the
development.
Advantages of concurrent engineering
 High performance
 Number of modifications will be only maximum at the beginning of the design.
 Rapid prototype is possible – class of technology that can automatically
construct physical model from CAD data. 04/24/2021 40
Cont.……

 Shorter lead time is required

 Product design responsibilities are shared by multi-displinary team.
 Integration of design and manufacturing
 Changes and modifications on the product cycle will be faster
 Frequent review of design and development process

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Thank you
04/24/2021 42
 Quiz 2 (5%)
1. New product development requires cross-functional collaboration
involving the marketing, finance, R&D, design and production
functions. explain briefly.(2.5 %)

2. Define product development Strategies.(2.5 %)

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