Product Design Strategy

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CHAPTER I1.1 INTRODUCTIONDesign strategyis a discipline which helps firms determine what to make and do, why do it and how to innovate contextually, both immediately and over the long term. This process involves the interplay betweendesignandbusiness strategy.While not always required, design strategy often usessocial researchmethods to help ground the results andmitigate the riskof any course of action. The approach has proved useful for companies in a variety of strategic scenarios.New product development is an important way for businesses to stay ahead of the competition and continue to appeal to the changing needs of existing customers. In addition, new product development can open up new marketing channels and help to increase market share. There are a variety of strategies that can be used for effective product development.Product design is cross-functional, knowledge-intensive work that has become increasingly important in today's fast-paced,globallycompetitive environment. It is a key strategic activity in many firms because new products contribute significantly to sales revenue. When firms are able to develop distinctive products, they have opportunities to command premium pricing. Product design is a critical factor in organizational success because it sets the characteristics, features, and performance of the service or good that consumers demand. The objective of product design is to create a good or service with excellent functional utility and sales appeal at an acceptable cost and within a reasonable time. The product should be produced using high-quality, low-cost materials and methods. It should be produced on equipment that is or will be available when production begins. The resulting product should be competitive with or better than similar products on the market in terms of quality, appearance, performance, service life, and price.1.2 OBJECTIVES OF THE STUDY To study importance of product design strategies. To study impact of designing strategies on products.1.3 SCOPE OF THE STUDY The study helps in a better and clear understanding of importance of designing strategies of product.1.4 RESEARCH METHODOLOGYSecondary sources:The methodology of the collection of data with reference to the secondary data was taken from different published books, journals and government websites.Analysis of data:The data collected from secondary sources has been edited by preparing tables, charts and statistical tools have been applied which have been explained in various parts of the study.

1.5 REVIEW OF LITERATURE1. Henry W. Stoll in his book Product Design Methods and Practices states product design is generally conducted by a manufacturing enterprise whose primary purpose is to manufacture and sell products for a profit. Although product design is an extremely important activity performed within the manufacturing enterprise, it is just one of a variety of activities which must be performed well if the firm is to survive and prosper in the long term. How these other activities and concerns enable and/or constrain the product design process is therefore of key importance in good design.2. Kesheng Wang, George L. Kovacs, Michael Wozny in their book Knowledge Enterprise: Intelligent Strategies in product design, Manufacturing, and Management says the productivity efficiency of manufacturing enterprises can be affected by product design, manufacturing enterprises can be affected by product design, manufacturing decisions and production management. With recent advances in computers and manufacturing techniques, powered data acquisition systems are actively in use in manufacturing enterprises. This supports huge datasets which are related to bill of material, product design, process planning and scheduling, process and systems, monitoring and diagnosis, and market forecasting, which are collected and stored in databases at various stages for easy manufacturing. The knowledge which is valuable for enterprises including rules, regulars, clusters, patterns, association and dependencies, etc. is hidden in the datasets.3. Ireneusz Zbicinski, John Stavenuiter &Barbara Kozlowska in their book, Product Design and Life Cycle Assessment mentions the production process is essentially a wastisation process of labour and resources. Every process of production and consumption begins with an intellectual act, recognizing the use potential embodied in a part of nature and landscape, be it land for grazing, wood for construction or ores for mining. In the next step, a value is attributed to what is now no longer perceived as a part of nature but a resource. This attribution of a value refers to the potential market value of the resources, i.e. the demand that people other than the owners have, not to any kind of intrinsic value. The resource is exploited if this market value is higher than the cost of waste production, overburden, drainage water, wastes heaps are all parts of nature which have been in the way of commercial exploitation of a resourses. So every production process necessarily begins with waste generation, and with negative environmental impacts.1.6 LIMITATIONS It is based on secondary data. It focuses only on designing strategies of products.

CHAPTER 022.1 PRODUCT DESIGN: A KEYTO ORGANIZATIONAL SUCCESSProduct design is an essential activity for firms competing in a global environment. Product design drives organizational success because it directly and significantly impacts nearly all of the critical determinants for success. Customers demand greater product variety and are quick to shift to new, innovative, full-featured products. In addition, customers make purchase decisions based on a growing list of factors that are affected by product design. Previously, customers made purchase decisions based primarily on product price and/or quality. While these factors are still important, customers are adding other dimensions such as customizability, order-to-delivery time, product safety, and ease and cost of maintenance. Environmental concerns are expanding to include impacts during production, during the product's operating life, and at the end of its life (recycle-ability). In addition, customers demand greater protection from defective products, which leads to lower product liability losses. Safer and longer lasting products lead to enhanced warrantee provision, which, in turn, impact customer satisfaction and warrantee repair costs.Programs and activities are being put in place so organizations can cope with these dimensions. Organizations are embracing concepts such asmass customization, design for manufacturing and assembly, product disposal, quality function deployment, and time-based competition.They are using technology such asrapid prototypingandcomputer-aided designto examine how products function, how much they may cost to produce, and how they may impact the environment. Firms are searching for and implementing new technologies to determine ways to design better products. They are examining legal and ethical issues in product design as well as the impact of product design on the environment.The job of bringing product innovations to market is challenging for most manufactures. Today, many companies are outsourcing some of their design to third par- ties, or setting up their own design centers in geographically dispersed areas.Global product design is not a brand new idea; about one-half of manufacturers surveyed have had a global design strategy in place for longer than one year. As design teams be- come more physically dispersed, the complexity of managing the product development process has intensified. As these networks of design resources are formed, new chal- lenges have come into play based on the relationships between the product managers and the global design centers.2.2THE INCREASING IMPORTANCEOF PRODUCT DESIGNProduct design is more important than ever because customers are demanding greater product variety and are switching more quickly to products with state-of-the-art technology. The impacts of greater product variety and shorter product life cycles have a multiplicative effect on the number of new products andderivative products that need to be designed. For example, just a few years ago, a firm may have produced four different products and each product may have had a product life cycle of ten years. In this case, the firm must design four new products every ten years. Today, in order to be competitive, this firm may produce eight different products with a life cycle of only five years; this firm must introduce eight new products in five years. That represents sixteen new products in ten years or one product every seven and one-half months. In this fast-paced environment, product design ceases to be an ad hoc, intermittent activity and becomes a regular and routine action. For an organization, delays, problems, and confusion in product design shift from being an annoyance to being life threatening.Product Design is one of the most important non-price factors which determines the success of a product. The role of product design changes throughout the life-cycle of a product. In the initial product development stage, the role of design is to create a marketable product from an innovation. The product may create a need where none existed before, or quite different products may be competing with others in the same market. As the product life cycle matures, more competitors enter the market and the chief role of design is in product differentiation; through quality, appearance, performance, ease of use, reliability, reparability and so on.The importance of design as a non-price factor and the role of design in determining the production and running costs of a product lies in the theory that: A purchaser will chose a better designed, higher quality product when given the choice of two products of similar price. A purchaser will chose the cheaper of two products of similar design and quality.In reality, purchaser choice will also be influenced by various other non-price factors such as availability, advertising, company image, and ideology. In addition, price is often regarded as an indication of quality. Finally, purchasers can also chose between a product or a service. A number of studies have shown that innovativeness and technical sophistication are the non-price factors which most determine competitive success in international markets.While product design is generally considered to be a non-price factor it also important to consider the influence of design upon product price. Product design effects the cost of production through the choice and use of materials and how the product is assembled. Design also influences after-sales maintenance and running costs. Running costs are often calculated as being integral to the price of a product in purchasers decisions. Therefore it is simplistic to view design as purely a non-price factor.In the UK, studies of the return of investment in design have been carried out by the Design Innovation Group of Open University and Manchester Institute of Science and Technology. One study showed that 'Design Conscious Firms' had a three per cent higher return on capital, one per cent higher profit margin, 28 per cent higher Turnover growth and a seven per cent higher capital growth than a representative sample.Macroeconomic factors and design: In industrialised countries, the link between design of products and industrial competitiveness has increasingly been acknowledged by economists and policy makers as well as by designers themselves.In the UK, two important reports stimulated debate into the important role of design in competitiveness: the Corfield Report on Product Design (NEDO, 1979) and the Finniston Report, 'Engineering our Future' (Finniston, 1980). The reports suggested that Britain was declining industrially through loss of market share to other countries, especially Germany and Japan, both of which were renowned for the high quality and design of their products. The reports pointed to a cause being the UK's relative lack of investment in Research and Development and Product Design. Walsh et. al. (1992: 4) summarises the main findings of these reports:Since the Second World War, and particularly since the late 1950s, the creation and manufacture of well-designed products, across the whole spectrum of innovation, have become essential to the success both of individual companies and national economies...our research has shown that those firms that invest resources and professional expertise in product and industrial design in both traditional and new industries have been commercially more successful than firms that pay less attention to these aspects of design.Such has been the concern in the UK with the country's decline in the share of the world's manufactured products, that during the 1980s, the Conservative government significantly departed from their policy of reducing public spending when they funded a new initiative to directly subsidise product design within firms (the Support for Design Scheme). Margaret Thatcher (1992) cited in Walsh et. al. (1992: 69) wrote of the importance of product design:There are many ingredients for success in the market-place. But I am convinced that British industry will never compete if it forgets the importance of good design. By 'design' I do not just mean 'appearance'. I mean all the engineering and industrial design that goes into a product from the idea stage to the production stage, and which is so important in ensuring that it works, that it is reliable, that it is good value and that it looks good. In short it is good design which makes people buy products and which gives products a good name. It is essential to the future of our industry.These reports and government initiatives have been reflected in other reports relating to design in Japan, Germany, France, UK, Scandinavia.According to Braunerhjelm and Fors, comparative advantage can be regarded from two perspectives, static or dynamic. In this analysis, static comparative advantage includes the fixed factors of production such as physical capital, labour, human capital, labour skill, land and natural resources. Dynamic comparative advantage is the ability to upgrade skills, adopt new technologies, introduce innovative products and production techniques and the transfer of these technologies between companies in a country. Therefore, goods competing on price, compete on a static comparative advantage whereas goods which are of higher value added, more technically sophisticated and differentiated, require that dynamic comparative advantage be present (Braunerhjelm and Fors, 1994: 7). Thus product design, as a process, is a factor of dynamic comparative advantage. Braunerhjelm makes two important points regarding dynamic comparative advantage; firstly, with dynamic comparative advantage it is more difficult to predict which firms will succeed, since success depends on individual companies internal capacity to innovate and adapt. Secondly, in an open international economy, it will be more difficult to predict winners

2.3 PRODUCT DESIGN AND SUPPLYCHAIN MANAGEMENTProduct design can also be an important mechanism for coordinating the activities of key supply chain participants. As organizations outsource the production of sub-assemblies and components, they also may be asking suppliers to participate in product design. As they outsource design capabilities it is essential that they manage and coordinate the flow of information among the supply chain participants. This can be especially important as firms outsource components to two or more suppliers. Now, there may be important design interfaces among two, three, or more suppliers. These interfaces must be properly managed to ensure cost effective and timely designs. Clearly, information and communication technologies become important parts of this effort.2.4 STAGES OF PRODUCT DEVELOPMENTA product usually starts as a concept which, if feasible, develops into a design, then a finished product. The following seven phases can be identified in a variety of product design and development projects.

1. Identification of needs, feasibility study and concept selection, 2. System-level design, detail design and selection of materials and processes3. Testing and refinement4. Manufacturing the product5. Launching the product6. Selling the product, and 7. Planning for its retirement. A. Feasibility studyElements of feasibility study include:1. Market research 2. Product specifications 3. Concept generation, screening and selection 4. Economic analysis 5. Selecting optimum solutionB. Product specificationsProduct specifications give precise and measurable description of the expected product performance based on the qualitative descriptions of the customer needs.For example, a specification of the total weight of the product must be less than 5 kg can be based on the customer need of a light weight product and the observation that the lightest competing product is 5 kg. Similarly, a specification of average time to unpack and assemble the product is less than 22 min can be based on a customer need of the product is easy to assemble and the observation that the competing product needs 24 minutes to unpack and assemble.C. Concept generation and screeningProduct specifications are then used to develop different product concepts that satisfy customer needs. Some of the concepts may be generated by the development team as novel solutions but others may be based on existing solutions or patents. The different concepts are then compared in order to select the most promising option. The Pugh method is useful as an initial concept screening tool.

D. Economic analysisThe economic analysis section of the feasibility study normally provides an economic model that estimates:(1) The development costs, (2) The initial investment that will be needed, (3) The manufacturing costs, and (4) The income that will result for each of the selected concepts. The economic analysis also estimates sources and cost of financing based on the rate of interest and schedule of payment.E. Selecting an optimum solutionFactors involved in selecting an optimum solution: Customer needs Physical characteristics of size and weight Expected life and reliability under service conditions Energy needs Maintenance requirements and operating costs Availability and cost of materials and manufacturing processes Environmental impact Quantity of production Expected delivery date.

F. Launching and selling the product1. Launching the product Project planning and scheduling Manufacturing Quality control Packaging Marketing 2. Selling the product: Cost of product engineering Actual manufacturing cost Sales expense and administrative cost Selling price2.5 MASS CUSTOMIZATIONMass customizationis the low-cost, high-quality, large volume delivery of individually customized products. It is the ability to quickly design and produce customized products on a large scale at a cost comparable to non-customized products. Customization, cost effectiveness is the ability to produce highly differentiated products without increasing costs, significantly. Consumers expect to receive customized products at close to mass-production prices. Customization volume effectiveness is the ability to increase product variety without diminishing production volume. As markets become more and more segmented and aggregate demand remains constant or increases, firms must continue to design and produce high volumes across the same fixed asset base. Customization responsiveness is the ability to reduce the time required to deliver customized products and to reorganize design and production processes quickly in response to customer requests. It would be counter-productive to pursue mass customization if a customized product takes too long to produce. Speed in product design and production is an indispensable criterion for evaluating an organization's mass customization capability.2.6 DESIGNS FOR MANUFACTURINGAND ASSEMBLYImproving manufacturability is an important goal for product design. A systems approach to product design that was developed by two researchers from England, Geoffrey Boothroyd and Peter Dewhurst, is called design for manufacturability and assembly (DFMA). It can be a powerful tool to improve product quality and lower manufacturing cost. The approach focuses on manufacturing issues during product design. DFMA is implemented through computer software that identifies designs concepts that would be easy to build by focusing on the economic implications of design decisions. These decisions are critical even though design is a small part of the overall cost of a product because design decisions fix 70 to 90 percent of the manufacturing costs. In application, DFMA has had some startling successes. With the DFMA software,Texas Instrumentsreduced assembly time for aninfraredsighting mechanism from 129 minutes to 20 minutes.IBMsliced assembly time for its printers from thirty minutes to three minutes.Firms are recognizing that the concept behind DFMA can also be extended beyond cost control to design products that are easy to service and maintain. To do this effectively, service and maintenance issues should be considered at the earliest stages of the design. Also, firms will be required to examine disposal during product design as they become liable forrecyclingthe products they make. It can be easier to recycle products if those factors are part of the product design paradigm.2.7 DISPOSAL AND PRODUCT DESIGNDisposal is becoming an increasingly important part of product design. The European Union is taking the lead by requiring that most of an automobile is recycled by the year 2010. This requirement has a major impact on product design. The most obvious effect is to change the notion that a consumer is the final owner for a product. With this approach, the product returns to the manufacturer to be recycled and the recycling process should begin in product design. Vehicles should be designed so they can be disassembled and recycled easily. The designers should avoid exotic materials that are difficulty to recycle. For example, parts that have plastic and metal fused together should not be used in applications where they are difficult to separate. The designers should determine which parts will be designed to be refurbished and reused, and which will be designed to be discarded, broken down, and recycled. All this should be done without adding costs or reducing product quality.2.8 QUALITYFUNCTION DEPLOYMENTProduct design shapes the product's quality. It defines the way that good and service functions. Quality has at least two components. First, the product must be designed to function with a high probability of success, or reliability; that is, it will perform a specific function without failure under given conditions. When product reliability increases, the firm can extend the product's warrantee without increasing customer claims for repairs or returns. Warrantees for complex and expensive items such as appliances are important selling points for customers. Second, quality improves when operating or performance characteristics improve even though reliability does not. The goals of product design should be greater performance, greater reliability, and lower total production and operating costs. Quality and costs should not be viewed as atrade-offbecause improvements in product and process technologies can enhance quality and lower costs.Quality function deploymentis being used by organizations to translate customer wants into working products. Sometimes referred to as the house of quality, quality function deployment (QFD) is a set of planning and communication routines that focus and coordinate actions and skills within an organization. The foundation of the house of quality is the belief that a product should be designed to reflect customers' desires and tastes. The house of quality is a framework that provides the means for inter-functional planning and communications. Through this framework, people facing different problems and responsibilities can discuss various design priorities.2.9 PROTOTYPINGEngineering and operations combine to develop models of products called prototypes. These may be working models, models reduced in scale, or mock-ups of the products. Where traditional prototype development often takes weeks or months, the technology for rapid prototyping has become available. Some companies are using the same technology that creates virtual reality to develop three-dimensional prototypes. Other firms employ lasers to make prototypes by solidifying plastic in only a few minutes; this process can produce prototypes with complex shapes. Prototyping should increase customer satisfaction and improve design stability, product effectiveness, and the predictability of final product cost and performance.

2.10 COMPUTER-AIDED DESIGNCurrently, business managers and engineers perceive computer-aided design (CAD) as a tool to assist engineers in designing goods. CAD uses computer technology and a graphic display to represent physical shapes in the same way that engineering drawings have in the past. It is used in the metalworking industry to display component parts, to illustrate size and shape, to show possible relationships to other parts, and to indicate component deformation under specified loads. After the design has been completed, the engineer can examine many different views or sections of the part and finally send it to aplotterto prepare drawings. This capability greatly reduces engineering time and avoids routine mistakes made in analysis and drawing. It significantly increases productivity and reduces design time, which allows faster delivery.Applications of CAD systems are not limited to producing goods. While it's true that services do not have physical dimensions, the equipment and facilities used to produce services do. For example, the service stalls in an automotive center or rooms in an emergency medical center have physical characteristics that can be represented by the interactive graphics capabilities of a CAD system.

CHAPTER 33.1 ELEMENTS OF PRODUCT STRATEGYCompanies carefully plan the life of a product from launch to discontinuance. Product managers tie each step of product strategy to consumer reaction to the product. If the product sells well, they expand the strategy to increase the product's distribution. If the product fails to meet sales projections, they accelerate it discontinuance. Become familiar with the key elements in a product marketing strategy that you will use to drive revenue and develop advertising campaigns.A. Target MarketYour target market is the demographic you feel will be most interested in purchasing a product. Some of the subcategories used to identify a target market are age, gender, geographic location, occupation, income and family situation such as single or married with children. You can establish a target market by using historical data for similar products, conducting market surveys with test subjects that fit into many potential demographic groups and by examining the consumer tendencies of various groups.B. PricingThe revenue generated from a product strategy relies on an accurate pricing element. Product price consists of the cost to manufacture market and distribute the product along with a desired profit margin. Profit margin can be a percentage of the total selling price or it can be a set amount. For example, you can determine that profit needs to be 40 percent of the final selling price or that profit can be set at $15 per unit. The method used to set profit is based on company policy.C. DifferentiationYour competition figures into many elements of your product strategy. One element that will guide product advertising is differentiating your product from the competition's. Determine what your product offers that the competition does not and use that information in your advertising and marketing materials. It can be easier to focus in on one or two significant differences rather than trying to fill advertising material up with a comprehensive comparison chart.D. ScheduleA product strategy has a beginning and an ending. Create the strategy time line and develop milestones for measuring the progress of the campaign. A schedule makes it easier to create deadlines for items such as product improvements, development of marketing materials and reaching revenue projections.3.2 RELATIONSHIP BETWEEN PRODUCT DESIGN & BUSINESS STRATEGYCompeting in a free market populated with giant multinational companies requires the development of new products to maintain a share of the market. As a result, rapid, effective product design and market introduction are essential ingredients of a firm's business strategy.A. Product DesignProduct development is a three-stage process in which marketing establishes product requirements, a design team develops a working prototype and production engineers then determine how the product will be manufactured. A concept design is used to evaluate product ideas for initial market testing. If a review by potential customers or salespeople suggests the product has market potential, a design specification that addresses such product characteristics as appearance and function is created and market-tested. If the market test is successful, embodiment design is initiated to identify design options. The design options lead to implications for product development. A preferred product design is then selected and tested. A successful market test leads to a detailed product design and a design for manufacture, which leads to the creation of a production prototype. The prototype is then formally approved.

B. Business StrategyA business strategy is a plan that guides a company to profitable operations. A strategy ensures that a company retains the loyalty of important customers through product extensions (new products based on current offerings), changes in a product mix (a range of complementary products) and adjustments to prices or costs. Strategy reflects decisions regarding what products to market and what products to abandon.C. Product Design and StrategyCustomers make purchase decisions based on price, quality and product design. As a result, product design strategy is a key element of an organization's business strategy in that the former determines the characteristics and performance of new services and goods that can contribute in a significant way to sales revenue. Product design is the means by which customer demand for new and varied products can be met, a key focus of business strategy.D. ImplementationCustomers seek custom products, the timely delivery of products, safe products, products that are simple to use and products that require little maintenance as well as products that are low in cost, high in quality and backed by warranties. In addition, some customers consider the environmental impact of a product in terms of its production, function and disposal. These customer preferences are key considerations in the development of both a product design strategy and a business strategy.3.3 LEGAL AND ETHICAL ISSUESIN PRODUCT DESIGNThe responsibility of an organization and its managers to see that the goods and services they produce do not harm consumers? Legally, it is very clear that organizations are responsible for the design and safe use of their products. Consumers who believe they have been damaged by a poorly designed good or service have legal recourse under both civil and criminal statutes. Often, however, only the most serious and obvious offenses are settled in this way. More difficult ethical issues in product design result when the evidence is not as clear. For example, what responsibilities does a power tool manufacturer have with respect to product safety? Does a power saw manufacturer have the responsibility to design its product so that it is difficult for a child to operate? Suppose a parent is using a power saw and is called away to the telephone for a few minutes. A ten-year old may wander over, press the trigger and be seriously injured. Designing the saw so it has a simple and inexpensive lockout switch that would have to be pressed simultaneously when the trigger is pressed would make it more difficult for the accident to happen. What is the responsibility of the parent? What is the responsibility of the company?A. PRODUCT DESIGNAND THE ENVIRONMENTOrganizations consider product design a critical activity to the production of environmentally friendly products. Organizations increasingly recognize that being good corporate citizens increases sales.

Fast-food restaurants have begun recycling programs and redesigned packaging materials and systems in response to customer concerns. In other cases, being a good corporate citizen and protecting a company's renewable resources go well together; there are win-win opportunities where an organization can actually design products and processes that cut costs and increase profits by recapturing pollutants and reducing solid waste.B. OVERVIEW OF PRODUCTDESIGN PROCESSProduct design time can be reduced by using a team approach and the early involvement of key participants including marketing, research and development, engineering, operations, and suppliers. Early involvement is an approach to managing people and processes. It involves an upstream investment in time that facilitates the identification and solution of down-stream problems that would otherwise increase product design and production costs, decrease quality, and delay product introduction.

Time-based competitors are discovering that reducing product design time improves the productivity of product design teams. To reduce time, firms are reorganizing product design from an "over-the-wall" process to a team-based concurrent process. Over-the-wall means to proceed sequentially with the limited exchange of information and ideas. When this approach is used, problems are often discovered late because late-stage participants are excluded from decisions made early in the process. As a result, poor decisions are often made.Product design is a labor-intensive process that requires the contribution of highly trained specialists. By using teams of specialists, communications are enhanced, wait time between decisions is reduced, and productivity is improved. Participants in this team-based process make better decisions faster because they are building a shared knowledge base that enhances learning and eases decision-making. By sharing development activities, design decisions that involve interdependencies between functional specialists can be made more quickly and more effectively. This reorganized process creates a timely response to customer needs, a more cost-effective product design process, and higher-quality products at an affordable price.There are several reasons why early involvement and concurrent activities bring about these improvements. First, product design shifts from sequential, with feedback loops that occur whenever a problem is encountered, to concurrent, where problems are recognized early and resolved. The ability to overlap activities reduces product design time. Second, when a team of functional specialists works concurrently on product design, the participants learn from each other and their knowledge base expands. People are better able to anticipate conflicts and can more easily arrive at solutions. As a result, the time it takes to complete an activity should decline. Third, fewer changes later in the process results in faster and less expensive product design. When problems are discovered late, they take more time and money to solve.Product design requires the expertise and decision-making skills of all parts of the organization. Marketing, engineering, operations, finance, accounting, and information systems all have important roles. Marketing's role is to evaluate consumer needs, determine potential impact of competitive pressure, and measure the external environment. Engineering's role is to shape the product through design, determine the process by which the product will be made, and consider the interface between the product and the people. Operations' role is to ensure that the product can be produced in full-scale production. Finance's role is to develop plans for raising the capital to support the product in full-scale production and to assist in the evaluation of the product's profit potential. Accounting and information systems provide access to information for decision making. Cross-functional teamwork and knowledge sharing are thus keys to success.

chapter 4The useful life of consumer products, being the amount of time between buying and discarding them, is getting ever shorter. What's more, most of these products are still functioning when they are discarded. Combine these facts with the rather steep and extremely volatile rise in the price of raw materials over the past decade and the predicted growth in global demand for raw materials and energy, and it becomes instantly clear that continuity and cost of supply are potentially major business risks. However, business risks often come along together with business opportunities, and it is exactly these that a project called Products That Last aims to explore.Funded by the Dutch Ministry of Economic Affairs and led by the Industrial Design Engineering faculty at Delft University of Technology, Products That Last brings together companies and organisations that aim to be leaders in sustainability and the circular economy, one of which is Philips. Products that Last is about finding successful business models and design strategies to create value for companies and consumers in a circular economy through longer-lasting products, while minimising the consumption of resources.4.1 NEW OPPORTUNITIESAlthough recycling has recently received a lot of attention in the business world, extending the useful life of products is about more than just recycling materials. It intervenes at product level and effectively slows down the pace at which products are put through recycling loops. Perhaps even more importantly, extending the useful life of products creates opportunities for designing and marketing value adding services, which have already proven even more profitable than sales of additional units of product.Business models based on the 'sell more, sell faster' principle, which have dominated our linear Western economies since the Industrial Revolution are not suited to accommodating longer-lasting products and their services. The success of a circular economy depends on new business models that are able to truly capitalise on longer product lifespans over time. Research into companies that have successfully promoted longer-lasting products has narrowed down the myriad of business model options into five distinct business model archetypes, which have proven capable of capturing value from longer-lasting products.4.2 STARTING POINT FOR DESIGNThe five business model archetypes for Products That Last are intended to serve as a starting point for businesses and designers in thinking about longer-lasting products in a circular economy. They range from being primarily about product to being primarily about service.

1.The classic long-life model: primary revenue stream from sales of high-grade products (eg the German company Miele's washing machines) with a long useful life.2.The hybrid model: combination of a durable product and short-lived consumables (eg Oc-Canon, printers and copiers). Main revenue stream from repeat sales of the fast-cycling consumables.3.The gap-exploiter model: exploits 'lifetime value gaps' or leftover value in product systems. Main revenue stream from selling products, parts and services based on the mixed product life of components (eg printer cartridges outlasting the ink they contain, shoes lasting longer than their soles).4.The access model: provides product access rather than ownership (eg the Dutch company GreenWheels' shared car use). Main revenue stream from payments for product access.5.The performance model: delivers product performance rather than the product itself (eg hours of thrust in a Rolls- Royce, Power-by-the-Hour jet engines). Primary revenue stream from payments for performance delivered.4.3 COUNTERING OBSOLESCENCEThe Products That Last approach to designing products with extended life is aimed at maintaining product integrity. This means keeping a product as close as possible to its original state over time and eliminating the perceived reasons for it becoming obsolete.Clustering the results of existing research and conducting new analyses of companies and their longer-lasting products has led to the identification of six design strategies that can be applied to prevent, or at least postpone, perceived product obsolescence. These strategies are:1.Design for product attachment and trust is aimed at countering emotional obsolescence by creating products that will be loved, liked or trusted longer; for example the Patek Philippe watch.2.Design for product durability is aimed at countering functional obsolescence by developing products that can take wear and tear; for example the Miele washing machine.3.Design for standardisation and compatibility is aimed at countering systemic obsolescence by creating products with parts that fit other products as well; for example the Vitsoe wall shelving.4.Design for ease of maintenance and repair is aimed at countering functional obsolescence by enabling products to be maintained in tip-top condition; for example the Rolls Royce jet engine and the Philips pay-per-lux solution.5.Design for upgradability and adaptability is aimed at countering systemic obsolescence by allowing for future expansion and modification; for example the Kitchen Aid mixer.6.Design for disassembly and reassembly is aimed at countering systemic obsolescence by ensuring product parts can be separated and reassembled easily. For example the Oc-Canon document (re)production equipment and the Philips Healthcare refurbished systems.Together with Philips Research we are currently investigating how to apply design for product attachment and trust in consumer products. These six design strategies are not unique to any of the aforementioned business model archetypes, and their relative importance and usefulness will vary according to the context in which they are applied. As each model has its own mechanism for capturing value from longer-lasting products, it will also have a different set of critical success factors. All our research to date supports early adoption of one or more of the six design strategies for product life extension, at the same time as fostering long-term relationships with end-users and suppliers, and providing high-quality, tailor-made services.

CONCLUSIONSIn highly competing business environments, maintaining existing markets should be equally important than developing new markets. Product designers should take customer loyalty elements into account in their design works. The loyalty strategy framework should be integral. Any one single loyalty strategy along is incapable of handling long-term customer loyalty. To be effective, loyalty strategies are often in form of combinations. Normally, an effective product design that can help "lock" customers consists of 2-4 kinds of loyalty strategies. Each loyalty strategy might possess a specific, relative level of strategic interplay. In different product adoption phases and to different customer groups, effectiveness of a loyalty strategy may vary. So do strategy combinations. Strategic center changes as product adoption phase shifts. Each phase may have at least two core strategies.This paper adds understanding to strategic decision making in the context of small software product businesses. The framework both illustrates the scope of issues involved in strategic new product development for small software product businesses and serves as a checklist for managing, evaluating and improving management of product development as well as the development processes themselves. Despite the fact that todays turbulent market and technological environment make planning hard and there is a trend towards flexible, fragile development, we think that explicit planning at product strategy level has distinct value. Even in situations where planning is impossible, the planning process in itself can be valuable since it forces the company to identify and evaluate various options. Thus, we see our framework as complementing modern development approaches, not as contradictory or as a replacementfor them. Strategic perspective into product development, we are currently examining if the viewpoint it provides on reconciling strategy and product development can be used to focus process improvement efforts. A companys product development process should support its intended way of doing business, but explaining this relationship has to our knowledge received very little attention. We propose that the business strategy of the company should be reflected in its product development processes through decision-making at the product strategy level. For example, business needs provide constraints and requirements for future releases contents, timing and quality, and achieving these goals can be supported by proper development rhythm, requirements processes and quality strategies Because the elements in the decision areas are interrelated, changes in one area set constraints and requirements on how the other areas can and/or should be organised. For example, the need to release a product having a near-zero tolerance for defects sets demands on the quality strategy. This in turn places constraints on the release strategy (for example, release cycle length), the development model used, and so on. We hypothesise that in well-organised software companies the degree and causality of these interactions and dependencies can be traced to business needs. Exploring how companies business environments and desired ways of conducting business are reflected in their new product development could shed light on what kind of development processes and practices are suitable for different business models, and how development process capability in turn affects the set of feasible business models. By understanding the key factors involved, software process improvement can focus on the essentials, increasing the value of such work especially in those small companies having relatively ad hoc practices to start with.

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