Chapter 3: Product Planning

Product Design and DevelopmentFourth Edition

by Karl T. Ulrich and Steven D. Eppinger

Session Outline

• Product development opportunities Sourcing ideas on a regular basis

• Market competition Planning products w.r.t competition

• Technology The concept of technology S-curves

• Portfolio planning The need for balanced portfolios; product-process change map & aggregate product planning

• Mission statements For each project

Objectives & Strategy

• Product development teams generally begin with a project mission statement. – This relates strongly to concepts of corporate strategy.

• A cross-functional planning process develops the product development team's mission statement.

• Note: The multiple-product, multiple-project context of product development in established firms.– The ability to choose the right set of development projects and to

define the scope of these projects in such a way that they are complementary

PlanningPlanning

Product Development Process

ConceptDevelopment

ConceptDevelopment

System-LevelDesign

System-LevelDesign

DetailDesign

DetailDesign

Testing andRefinement

Testing andRefinement

ProductionRamp-Up

ProductionRamp-Up

Four Phases of Product Development

The product planning phase precedes the product development process.(i.e., before substantial resources are applied)

It considers the portfolio of projects that an organization might pursue

Product Planning

• Ensures product development projects support the broader business strategy of the company.

Addresses:• 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 projects?

Product Development Teams

• Work on selected projects and start with a mission.The mission statement answers:• 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 products?• What are the manufacturing and service goals and

constraints?• What are the financial targets for the project?• What are the budget and the time frame for the project?

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 through proper allocation of resources.

The planning process considers:• Product dev. Opportunities identified from various sources• Suggestions from marketing, research, customers, current

product development teams• Benchmarking of competitors

Inefficiencies

Some inefficiencies in organizations that do not engage in product planning:

• 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 the projects.

Xerox Lakes Project Example

Xerox Document Centre 265

Xerox’s Competitive Strategy Exploit

technological innovation in a rapidly changing

market

DIGITAL COPIER PLATFORM

(AS OPPOSED TO EXISTING LIGHT LENS )

TQ-1: How might a portfolio of development projects differ for product technologies at position A or B?

Concept of S-Curves

Draw S-curves of your choice. What are the disruptive technologies here? What dimensions of performance are affected?

The Product Plan

The product plans developed by keeping in mind:• Company’s goals• Capabilities• Constraints• Competitive environment

The product plan is regularly updated to reflect changes in:• Competitive environment• Technology• Info on successes of existing products

Product Plan

Exh 3-2: The product plan identifies the portfolio of projects to be pursued by the development organization. This plan divides projects into four categories.

The Product Planning 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 processes.Note: Selecting a promising project is iterative in nature

Step 1: Identify opportunitiesSources of product development opportunities:

– Marketing/Sales – Research/Technology Development (Xerox PARC) – PD Teams – Manufacturing – Customers – Third party: Suppliers, Inventors, and business partners– Other business groups (Xerox Supplies Division)

Some proactive approaches:– Document frustrations and complaints– Study Competitors’ products (Competitive benchmarking)– Track the status of emerging technologies– More…see text

XeroxSome opportunity statements proposed at Xerox:• Create a document distribution system in which a networked

printing, device resides on each office worker’s desk and automatically drives mail and other documents.

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

Opportunity statement: Lakes Project• Develop a new black & white (B&W), digital, networkable,

document center platform for the office market, including scanning, storage, fax, distribution, and printing capabilities

Step 2: Evaluate and Prioritize ProjectsCompetitive strategies

– Technology leadership – Cost leadership – Customer focus– Imitative

Market Segmentation

Technology Trajectories

Product Platform Planning

Evaluating Fundamentally New Product Opportunities

Balancing the portfolio

• Technology leadership Basic R & D

• Cost leadership Superior manufacturing methods; Design for manufacturing to reduce costs

• Customer focus Rapid development of derivatives through carefully designed product platforms

• Imitative Fast development process

Competitive Strategies

NOTE XEROX: Paradigm shift in business practice to participate in digital revolution of office

aligned with the growth of the Internet….

from “print & then distribute”

to “distribute & then print”

Market Segmentation: Market Segment Map

Exh 3.4: Product segment map showing Xerox B&W digital products and the competition in three markets (Segmentation based on number of users sharing office equipment) . Key performance

dimensions pages per minute & networking capability

Technology Trajectories

Q: How near or far is the ultimate performance limit?

Exh 3.5: This technology S-curve illustrates that Xerox believed digital copier technologies were

just emerging and will improve product performance in 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.

Product Platform Planning: Platforms vs. Derivatives

Exh 3.6: 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)

Platform Set of assets shared across a set of products (e.g. components & sub assys)Derivatives For different segments

Exh 3.7: This technology roadmap shows the life cycles of several digital

photocopying technologies & identifies which technologies

would be used in each product. For Lakes

platform Higher speeds and color capabilities

required of its derivatives.

Product Platform Planning: Technology Roadmap

Note: decisions about product platforms are closely related to the

technology development efforts of the firm

Some criteria for evaluating fundamentally new product opportunities:– Market size (units/year * average price)– Market growth rate (percent per year)– Competitive intensity (#competitors & their strengths)– Depth of the firm’s existing knowledge of the markets– Depth of the firm’s existing knowledge of technology– Fit with the firm’s other products– Fit with the firm’s capabilities– Potential for patents or other barriers to competition– Existence of a product champion within the firm

Evaluating Fundamentally New Product Opportunities

• Exh 3.8: The product-process change matrix– The extent to which the project involves changes in the product line

and/or the production processes– Helps identify projects breakthrough opportunities as well as

incremental improvements

• Firms typically benefit from a diverse set of projects

• Firm’s choice of competitive strategy influences product development portfolio:

(FIRM STRATEGY) (PORTFOLIO)– LOW COST STRATEGY MORE OF PRODUCTION PROCESS IMPROVEMENT PROJECTS– HIGH PRODUCT VARIETY DERIVATIVE PRODUCTS UPON EXISTING PLATFORMS– TECHNOLOGICAL SUPERIORITY TECH DEV. & BREAKTHROUGH PROJECTS

Balancing the portfolio

Product-Process Change MatrixExtent of Production Process Changes

Ext

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NewCore

Process

NextGeneration

Process

SingleDepartment

Upgrade

Tuning andIncremental

Changes

NoProcessChange

NewCore

Product

NextGeneration

Product

Additionto Product

Family

MinorProduct

Enhancement

NoProductChange

LakesProject

Research andTechnology

Development

BreakthroughDevelopment

Projects

PlatformDevelopment

Projects

DerivativeProduct

Development

CurrentProduct/Process

Support

Step 3:Allocate Resources & Plan Timing

Resource Allocation– Careful use of the limited development resources– Avoid starting too many projects. May result in:

• Skilled engineers and managers stretching their capabilities• Affects productivity, time-to-market, quality, and profitability

– Aggregate Product Planning (Exh 3.9): • makes efficient use of resources within budgeted resources

Project Timing– Timing of product introductions– Technology readiness– Market readiness– Competition

The Product Plan (Exhibit: 3.2)– Set of projects approved by the planning process and sequenced in time.– Mix of: Fundamentally new product, platform and derivative projects.– Updated periodically as a part of the strategic planning activity.

Aggregate Resource Planning. .

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Exh 3.9: Aggregate Resource Planning

Product Plan

Exh 3-2: The product plan identifies the portfolio of projects to be pursued by the development organization. This plan divides projects into four categories.

The Product Plan (Exhibit: 3.2)•Set of projects approved by the planning process and sequenced in time.•Mix of: Fundamentally new product, platform and derivative projects.•Updated periodically as a part of the strategic planning activity.

Step 4: Complete Pre-Project PlanningProduct Vision Statement

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

Mission Statements– Brief (one sentence) description of the product– Key business goals– Target market(s) for the product– Assumptions and constraints that guide the development effort– Stakeholders

Assumptions and constraints– Manufacturing– Service– Environment

Staffing and other pre-project planning activities

Lakes Project Mission StatementProduct Description Networkable, digital machine with copy, print, fax, and scan functionsKey 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 4thQ 1997Primary Market Office departments, mid-volume (40-65 ppm, above 42,000 avg. copies/mo.)Secondary Markets Quick-print market Small ‘satellite’ operationsAssumptions 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 USA and EuropeStakeholders Purchasers and Users Manufacturing Operations Service Operations Distributors and Resellers

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

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 4thQ 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 USA and Europe

Stakeholders Purchasers and Users Manufacturing Operations Service Operations Distributors and Resellers

Lakes Project Mission Statement

Assumptions & ConstraintsSome may ask:• Why manufacturing, Service and Environmental strategies

should be part of the mission statement for a new product?

Some may even hold: • Decisions about these issues should arise from customer needs

for new products and should not be determined in advance.

Why then do we have Xerox mentioning these in the project mission statement?

Assumptions & Constraints (contd..)

• For complex projects (as in this Xerox example), the design of the manufacturing systems are equally complex.– Thus manufacturing facilities involved in the product need to be identified

very early in the process.

• Some product requirements cannot be derived strictly from customer needs. – Environmentally responsible design (as a Corporate Responsibility of

Xerox

Mission statements must reflect such corporate objectives and constraints.

Assumptions & Constraints (contd..)For Lakes Project of Xerox

Manufacturing• Capabilities, capacities, and constraints of existing manufacturing processes

– Which internal production facility to be used?– What key suppliers to be involved and when?

– For Xerox: Input devises at Canada, Output devices in Brazil etc.

Service• Note: Customer service and service revenue important in this business• Strategic goals for improving service quality

– Designing components requiring few parts – Designing for ease of serviceability (quick service)

Environment• Design for environment

– Developing new products with environmental sustainability– Xerox’s “Zero to landfill” policy with an energy efficiency goal “most efficient machine in its

class”– Remanufacture or recycle [no part should be disposed by the customer to end up in a landfill]

Step 5: Reflect on the Results & the Process

Some suggested questions:• 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 resources allocated product development adequate to pursue the

firm’s competitive strategy?• Have creative ways of leveraging finite resources been considered…?• Does the core team accept the challenges of the resulting mission

statement• Are the elements of the mission statement consistent?• Are assumptions listed in the mission statement really necessary or is the

project over-constrained? Will the development team have the freedom to develop the best possible design?

• How can the product planning process be improved?