Following the discussion on the timing of innovation projects, the S curve model, and the discussion on levels of innovation, the spectrum between breakthrough and incremental development, the next step is to define exactly what to develop. We saw that listening to the voice of the customer and a voice of other stakeholders is a crucial success factor. Translating the voice of the customer along with the needs and expectations of the other stakeholders into their features and functions or specifications of a product or a service is an important process in new product development. We will discuss this process in this lecture. As we saw with the discussion on critical success factors, providing unique and significant value to the customer is critical to the success of new product development projects. Measuring value and the tools and techniques by which the voice of the customer can be translated into specific product or service with a clear value proposition is an important issue in new product development. We will discuss the process and tools that support value analysis by a single decision maker or by a multifunctional team. The process starts with the market research aiming at defining the target market. It continues with an effort to define the needs and expectations of the customers and other stakeholders by listening to the voice, and translating these needs and expectations into a measure of benefits of value that the project is expected to generate. The first step in measuring the value of new product development projects is to define the term value, and to develop a way to measure it. Based on the Merriam-Webster dictionary, a simple measure of value is the market price or monetary wars of a product or service. The problem in applying this definition in the new product development area is that it is difficult to access the market price or real monetary wars of a new product that is not developed yet and not available on the market yet. Marketing experts are trying to solve this problem by using Conjoint Analysis. Conjoint Analysis is a marketing technique used to quantify the value people place on different features, functions or components parts of a product or a service. We will discuss a measure of value based on the voice of the customer combined with the needs and expectations of other stakeholders. The first step is to look at existing measures. One possibility is to look at quality and its measurement. Qualities close to value as we can see from the way ISO 8402-1986 defines quality as the totality of features and characteristics of a product or a service that blurs into ability to satisfy stated or implied needs. Thus, one can look at the voice of the customers through the quality of a product or service, and its ability to satisfy stated or implied needs. A measure for quality might be used as a surrogate measure for value. It is possible to measure value by combining several models developed by different people, in different times, in different locations. Specifically, we will look at the Kano Model, the Analytical Hierarchy Process or AHP model, and the Quality Function Development or QFD model. Let's start by defining the term model as it is used in this lecture. A model is a simplified presentation of reality. We use models when a problem is too complicated to solve directly because it is too big or too complex or some information or data is missing, and the information we have on the real problem is incomplete. In other words, we make simplifying assumptions to describe the complex real problem by a simple model. A good example is the use of models in a map like the map we used to classify new product development projects. Consider the case of a visitor to a foreign country who has to take an underground train from his hotel to a business meeting. The underground network in major cities is a very complex system with many lines that criss-cross each other at different levels, and many trains traveling on these lines at different times in different speeds. Yet by using a simple model, a small map of the underground system, most people are able to find the way quite easily. The map is a simplified presentation of the real system, because it has only two dimensions that simplify the three dimensional reality. It is much smaller than the real system. And it is static while the real system is dynamic, and the trains move between stations. Yet, the map is a great help in solving the real problem of navigating in the metro system, and most users of such maps can solve the problem and finds a way in the system. There are different kinds of models. Some of those are Rafique presentations such as a map, that present reality. There are mathematical models composed of equations like the models developed by Newton in classical mechanics, and used to calculate the speed of an object all the time it will take to move from point A to Point B. Another example is a financial model used to estimate the net present value or the internal rate of return of investment. Some models are templates for example the collection of templates available in Microsoft Office for different kinds of documents. Checklists may also serve as models for example in aviation, checklists are used to help pilots perform the important steps that must be taken before takeoff. All of these models are designed to help in solving real problems that might be quite complex and difficult to solve. The first model is that we will discuss is the Kano model. The Kano model looks at the relationship between customer satisfaction and the quality of a product. In the Kano model, there are three levels of quality. The first level is known as basic quality. It includes requirements that must be satisfied to provide minimum satisfaction. If these requirements are not satisfied, the product is unacceptable. For example, take the ability of a car to be driven on the left hand side of the road in a particular country. If the steering wheel is on the wrong side, basic quality requirements are not met. The basic quality relates to the primary functions or regulatory requirements that are considered mandatory and are frequently mentioned only when they are absent and cause dissatisfaction. If these primary functions are not delivered, the customer will not be satisfied with the product and will not purchase it, and she might even consider it useless. The second level of quality requirements in the Carneal model refers to performances that are represent the main function of the product. For example, the ability of an electric car to carry passengers over a minimum distance without charging the batteries. For most customers, as the number of passenger increases and the travel distance increases, customer satisfaction increase as well. In a similar way, the reliability and durability of a car are primary functions, and as these improve, the level of satisfaction increases. There might be a minimum acceptable value of performance. Quality below that minimum may indicate that the product is not acceptable. There might be also a maximum level above which any improvement in the performance level does not add to the quality of the product. The third level of quality requirements refer to the bells and whistles of performances beyond and above expectations, such as the ability of a car to travel on a road without a driver, or the ability of an electric car that use solar energy to charge its battery. The car is acceptable without these quality parameters but their presence may increase the satisfaction of some customers dramatically and therefore, are considered the lighting features and functions. The Carneal model integrates the three levels into a simple visual map, and it helps loop all the development teams focus on the quality parameters most important for a specific customer, a segment of the market, or an entire market. Another important model is a checklist of requirements that are common to many products, services and markets. This checklist is designed to help the multi-functional team working on the front end planning of a new product development project to identify the most important needs and expectations, and to map these needs and expectations using the Carneal model. The first item on the checklist is primary characteristics of fitness of use. These primary characteristics are the performance, the way the product or service fits the customer defined purpose. Performance fits very well with the Carneal model that we discussed earlier. Performances are defined for specific operating conditions and represent the viewpoint of the different stakeholders such as the customer, designers, manufacturers, marketing and logistics experts. Features are the bells and whistles, typically the delighting aspects in the Carneal model, as they provide extra value above and beyond the primary performances. Reliability is a measure of system probability to function as designed when needed within a specified time period. Poor reliability, causes dissatisfaction of customers who do not get the performances or service they expect when they need it. Poor reliability may cause extra cost for example, the cost of backup systems. Many products and services are useless if they do not meet applicable rules, regulations or standards. All the regulations are mandatory. A safety belt in a car is an example of such rules and regulations in many countries. Standards may not be mandatory but a product that does not meet specific standards, like a smartphone that does not meet WiFi standards, may be less attractive and provide little value to the customers. Durability is the economic and technical service duration of a product. Customer expectations with respect to durability depends on the specific product. Most people use laptop computers or smartphones less than five years. And therefore, durability of five years coupled with high reliability may present a high value in these markets. Furniture on the other hand is expected to last much longer and deterioration after five years will probably cause dissatisfaction. Serviceability is the speed, courtesy, competence, and ease of repair should the product fail. The value of a product depends on the service available when the product owner needs it. Poor service, often otherwise quality product, may reduce its overall value. Service is an important part of the useful life of a product. If a smartphone breaks down, most customers expect service in a short time and in many cases, even a replacement phone till the broken phone is repaired. Deciding on the kind of service that will be provided, where service centers will be located, how much inventory of spare parts should be carried in each service center, and how to train and allocate service personnel to service centers are all affecting the value of a product. Aesthetics is the way the product feels and looks. Aesthetics may be important to some customers in some markets. The problem is that aesthetics reflect individual preferences, and finding a single design that appeals to every potential customer is difficult or sometimes even impossible. Customization by using a platform with many glocal, global design with a local touch variations, may be a value-added designing feature for some products in some markets. Perceived quality is built over time based on the other performance measures that we discussed. Organizations that over many years design, manufacture, sell and service high quality products, build a reputation and loyalty to the brand. This loyalty is based on perceived quality, that provides high value to the customers. In many markets, past performances of products and services created a loyal community of customers that based on their past experience, see added value in purchasing from a reputable manufacturer that they have good experience with.
