Kahsu Mebrahtu (Asst.
Professor)
MBA PROGRAMME
MEKELLE UNIVERSITY,CBE
Kahsu Mebrahtu, Mekelle University, College of
Business and Economics
• New products and services are the lifeblood of an
organization:
It provides a competitive edge by bringing
new ideas to the market quickly
Strategically, it defines a firm’s customers ,
as well as its competitors
It capitalizes on a firm’s core competencies
and determines what new competencies
need to be developed
An effective design process:
Matches product or service characteristics
with customer requirements
Ensures that customer requirements are
met in the simplest and least costly manner
Reduces the time required to design a
new product or service , and
Minimizes the revisions necessary to
make a design workable
Kahsu Mebrahtu, Mekelle University, College
of Business and Economics
PART I: PRODUCT DESIGN
What is product? What is new product?
Product design :
Defines the appearance of the product
Sets standards for product performance
Specifies which materials are to be used and
Determines dimensions and tolerances
Kahsu Mebrahtu, Mekelle University, College of
Business and Economics 3-4
Strategies for New-Product
Introduction
Market Pull (“We Make What We Can Sell”)
Technology Push (“We Sell What We Can Make”)
Inter-functional View
Competitors :
Perceptual maps
Benchmarking and
Reverse engineering
Kahsu Mebrahtu, Mekelle University, College of
Business and Economics 3-5
New Product Development Process
Concept Development
Development of Detailed Product Design&
Prototyping
Pilot Production/Testing
Mass Production and Commercialization
Kahsu Mebrahtu, Mekelle University, College of
Business and Economics 3-6
Stage I. Concept Development & Feasibility Study
This involves: Generating Ideas for the new product
New ideas can be generated from:
.. The market
.. Within the company (technology push& inter-functional)
..Competitors
Market surveys , focus groups and interview are important tools to
get product ideas from customers.
Brain storming, panel discussions , Delphi-method etc are
important tools in generating ideas from within.
Marketing and sales departments have big role at this stage .
The outputs of this stage should be :
..concept design and defining the target market
Kahsu Mebrahtu, Mekelle University, College of
Business and Economics 3-7
cont… Feasibility Study
• At this stage the promising concepts undergo a feasibility study that
includes several analyses:
Market analysis- assesses whether there is enough demand
for the proposed product –this requires customer survey
Economic analysis –estimating production and development
costs and comparing with estimated sales volume (tools
such as cost/benefit analysis , net present value or IRR.
Technical and strategic analyses –answer questions such as:
Does the new product require new technology
Is the risk or capital investment excessive
Does the company have sufficient labour and management skills
Does the new product provides a competitive advantage for the
company
Kahsu Mebrahtu, Mekelle University, College of
Business and Economics 3-8
Performance specification-
Performance specifications are written for product
concepts that pass the feasibility study and are
approved for development
Kahsu Mebrahtu, Mekelle University, College of
Business and Economics
Stage II. Development of Detailed Product Design&
Prototyping
• This stage includes performing the following activities:
A. Rapid Prototyping
-This involves building a prototype , testing the prototype, revising the design,
retesting etc.
B. Form Design-refers to the physical appearance of the product-
its shape, colour, size ,and style
Aesthetics such as image , market appeal and personal
identification
C. Functional Design
This is concerned with how the product performs .
It seeks to meet the performance specifications of fitness for use by the customer
Kahsu Mebrahtu, Mekelle University, College of
Business and Economics 3 - 10
Cont…
• How ever the detailed product design need to be
evaluated in terms of the following criteria:
Achievement of customer requirements
and product specifications
Expected quality and reliability of the
product
Reducibility of the product cost
The impact on production of the company’s
other products
Kahsu Mebrahtu, Mekelle University, College of
Business and Economics 3 - 11
Stage III: Pilot Production/Testing
This stage requires the following activities :
Small quantity production
Market test of the sample products
Gathering customer opinion on the sample
products
Based on the customer feedback making the
necessary design changes in the product
STAGE IV : Mass Production and
Commercialization
Kahsu Mebrahtu, Mekelle University, College of
Business and Economics 3 - 12
Design for Environment
Design for environment
designing a product from material that can be recycled
design from recycled material
design for ease of repair
minimize packaging
minimize material and energy used during manufacture,
consumption and disposal
Extended producer responsibility
holds companies responsible for their product even after its
useful life
Copyright 2006 John Wiley &
Sons, Inc. 5-13
Value analysis (VA)
Can we do without it?
Does it do more than is required?
Does it cost more than it is worth?
Can something else do a better job?
Can it be made by
a less costly method?
with less costly tooling?
with less costly material?
Can it be made cheaper, better, or faster by
someone else?
Copyright 2006 John Wiley &
Sons, Inc. 5-14
Modular Design
Allow greater variety
Develop a series of basic product components
(modules) for later assembly
Reduces complexity and costs associated with large
number of product variations
Kahsu Mebrahtu, Mekelle University, College of
Business and Economics 3 - 15
Kahsu Mebrahtu, Mekelle University, College of
Business and Economics
Special Considerations in Service
Design
Services are intangible Service is inseparable
from delivery
Service output is
variable Services are consumed
more often than
Service have higher products
customer contact
Services can be easily
emulated(copied or
imitated )
Services are perishable
Copyright 2006 John Wiley &
Sons, Inc. 5-17
Service Design Process
Service concept
purpose of a service; it defines target market and
customer experience
Service package
mixture of physical items(like facility, food, drinks in a
restaurant )
sensual benefits ( like taste, aroma of the food etc in a
restaurant , and
psychological benefits( like rest, relaxation, comfort,
status and sense of well-being in a restaurant)
Service specifications
performance specifications
design specifications
delivery specifications
Copyright 2006 John Wiley &
Sons, Inc. 5-18
High v. Low Contact Services
Design High-Contact Service Low-Contact Service
Decision
Facility Convenient to customer Near labor or
location transportation
source
Facility Must look
layout Designed for
presentable , efficiency
accommodate
customer needs and
facilitate interaction
with the customer
Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Competitive
Advantage (New York:McGraw-Hill, 2001), p. 210
Copyright 2006 John Wiley &
Sons, Inc. 5-19
High v. Low Contact Services
(cont.)
Design High-Contact Service Low-Contact Service
Decision
Quality More variable since Measured against
control customer is involved in established
process; customer
expectations and standards; testing
perceptions of quality and rework possible
may differ; customer to correct defects
present when defects
occur
Capacity Excess capacity Planned for average
required to handle demand
peaks in demand
Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Competitive
Advantage (New York:McGraw-Hill, 2001), p. 210
Copyright 2006 John Wiley &
Sons, Inc. 5-20
High v. Low Contact Services
(cont.)
Design Decision High-Contact Service Low-Contact Service
Worker skills Must be able to interact Technical skills
well with customers
and use judgment in
decision making
Scheduling Must accommodate Customer
customer schedule concerned only
with completion
date
Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Competitive
Advantage (New York:McGraw-Hill, 2001), p. 210
Copyright 2006 John Wiley &
Sons, Inc. 5-21
The Service Triangle
The Service
Strategy
The
Customer
The The
Systems People
Kahsu Mebrahtu, Mekelle University, College of
Business and Economics 3 - 22
Service Strategy: Focus and Advantage
Performance Priorities
• Treatment of the customer
• Speed and convenience of service delivery
• Price
• Variety
• Quality of the tangible goods
• Unique skills that constitute the service offering
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Business and Economics 3 - 23
End
Thank You
Kahsu Mebrahtu, Mekelle University, College of
Business and Economics 3 - 24
