Chapter 4: Product and Service Design
Product Development: A process to generate concepts, designs, and plans for services and goods that an organization
can provide to its customer.
Product/service design directly affects:
• Product/service quality. Production/delivery cost. Customer satisfaction
Sources of product innovation:
• Customers. Managers. Marketing. Operations. Engineering.
• Research and Development (R&D): Organized efforts to increase scientific knowledge or product innovation &
• Basic research: advances knowledge about a subject without near-term expectations of commercial
• Applied research: achieves commercial applications.
• Development converts results of applied research into commercial applications.
• Reverse engineering is the dismantling and inspecting of a competitor’s product to discover product
improvements. Ford used this to create Taurus.
Major factors in strategy: Cost, Quality, Time-to-market, Customer satisfaction, Competitive advantage
A major trend in product design is an increased emphasis on customer satisfaction, reducing time to introduce new
products, and reducing time to produce and deliver product/service, environmental concerns, user friendly, products
that use less material.
Legal and ethical environmental issues:
Legal: FDA, OSHA, IRS
Product liability: A manufacturer is liable for any injuries or damages caused by a faulty product. Toys.
Uniform commercial code, Sales of Goods Act: Products carry an implication of merchantability and
Ethical: should company release product even if struggling with bugs
– Releasing products with defects
Product/service design activities:
• Translate customer wants and needs into product and service requirements
• Refine existing products and services
• Develop new products and services
• Formulate quality goals
• Formulate cost targets
• Construct and test prototypes
• Document specifications
Reasons for Product or Service Design: Be competitive
• Increase business growth & profits
• Avoid downsizing with development of new products
• Improve product quality
• Achieve cost reductions in labor or materials
Steps in developing a new product
1. Technical and economic feasibility studies: Determine the advisability of establishing a project for developing the
2. Prototype design: This design should exhibit the basic form, fit, and function of the final product.
3. Performance testing of prototype: Performance testing and redesign of the prototype continues until this design-
test-redesign process produces a satisfactorily performing prototype
4. Market sensing/evaluation and economic evaluation of the prototype: Accomplished by demonstrations to
potential customers, market test, or market surveys. If this last is favorable, economic evaluation of the prototype is
performed to estimate production volume, costs, and profits, if favorable, the project enters the production design
5. Design of production model: The initial design of the production model will not be the final design; the model will
evolve. 6. Market/performance/process testing and economic evaluation of production model: The production model should
exhibit: low cost, reliable quality, superior performance, the ability to be produced in the desired quantities on the
7. Continuous modification of production model: to adapt to changing market conditions, to adapt to changing
production technology, to allow for manufacturing improvements.
• About 5% of all new-product ideas survive to production, and only about 10% of these are successful.
• It is best to cancel unpromising new-product/service development projects early!
• Employees often become emotionally caught up in these projects and are overly optimistic
• An impartial management review board is needed for periodic reviews of the progress of these projects.
Improving the design of product/service
• Focus is improving performance, quality, and cost
• Objective is maintaining or improving market share of maturing products/services
• Little changes can be significant
• Small, steady (continuous) improvements can add up to huge long-term improvements
• Value analysis is practiced, meaning design features are examined in terms of their cost/benefit (value).
Designing for Ease of Production
– Specifications - Precise information about the characteristics of the product
– Tolerances - Minimum & maximum limits on a dimension that allows the item to function as designed
– Standardization - Reduce variety among a group of products or parts
– Simplification - Reduce or eliminate the complexity of a part or product
• Old viewpoint – high-quality products must be made in small quantities by expert craftsmen
• New viewpoint – high-qua