1
Quality Function Deployment as a Strategic Tool
Instructor: Gregory H. Watson
Introduction to Strategy, Technology and Integration
ETM 5111 – Summer 2003
Session 3 – Part 3
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
2
What is QFD?
Quality Function Deployment
Quality Function Deployment (QFD) – a detailed system to translate
the needs of customers into product design requirements. QFD also
translates design requirements into component parts and processes for
producing them.
QFD provides a systematic way to record agreements on the means to
satisfy high priority customer requirements through the design of the
core product, its extended product and the production process. It is a
powerful design and documentation tool for recording product-level
decisions about customer needs, design rules, competitive positioning,
requirements for quality for suppliers as well as requirements of the
production process. QFD enables product design teams to prioritize
these competing needs, develop innovative responses, and orchestrate
successful cross-functional efforts to meet these needs.
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3
QFD Records Customer-Related Data:
Quality Function Deployment
Connecting the “voice of the
customer” with the “voice of
the process”.
Part
Data
Market
Data
House
of
Quality
#2
Key
Design
Parameters
Design
Data
Process Variables
(HOW’s)
House
of
Quality
#3
Key
Process
Variables
Manufacturing Processes
(HOW’s)
Key Processes
(WHAT’s)
Key
Market
Requirements
Process
Data
Part Characteristics
(HOW’s)
Part Characteristics
(WHAT’s)
House
of
Quality
#1
Functional Requirements
(WHAT’s)
Customer Requirements
(WHAT’s)
Functional Requirements
(HOW’s)
House
of
Quality
#4
Key
Production
Processes
QFD records data from all customer segments in the design process and shows
how it translates into product design, part production and final assembly.
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4
Good Design Tracks Customer Issues:
Define how the company’s product line addresses market requirements.
Kano Feature Designator
Voice of the Customer
Customer Identification
Customer Category
© Copyright 2003 by Gregory H. Watson. All rights reserved.
Symbol
Relationship Strong
Weight
9
Competitive Feature Analysis
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Customer Complaints
Technical or Business
Process Requirements
Customer Satisfaction
Alignment Matrix
Customer-to-Business
Requirements
Need -- Do
Relationships
Customer Importance
Market Segment
Business Requirements
(Voice of the Shareholder)
Moderate
3
Weak
1
5
QFD supports product line management:
Customer
Input
Level
A
Level
B
Level
C
Product Life Cycle
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Supplier
Output
Operating
System
6
Customer-focused approach to design:
• What is the best way to integrate these ideas and develop a
balanced design that satisfies these, often conflicting,
requirements?
 The Kano model of customer requirements for delivery of
quality
 Quality Function Deployment (QFD) as a tool for program
management and documentation of progress
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7
QFD listens to the “voice of the customer”:
•
•
•
•
•
•
•
•
•
Prioritize important from mundane product requirements.
Divide generic features from special features (functions).
Differentiate the value of various product features.
Establish target values for product functions.
Identify the critical part parameters for process control.
Plan the process characteristics for production of parts.
Set supplier requirements for manufacturing.
Link with work instructions and operating specifications.
Determine the training requirements for workers.
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Voice of the Customer -- Input for QFD
All customer segments are represented: all of the major, targeted
consumer and distribution segments, as well as internal customers
of the design (e.g., product marketing and design engineering).








Customer product preference survey results.
Customer satisfaction survey results.
Customer complaints, suggestions, and concerns.
Customer warranty information from field service.
Customer focus group findings.
Competitive product analysis.
Product teardown analysis.
Product pricing study results.
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9
Bad design quality limits operations quality:
Design
Quality
Management
Level
A
Level B
Design
Features
vs.
Part
Characteristics
• Focus on operations control
• Assures delivery of design
• Corrective actions maintain
•
designed performance
Continuous improvement to
process increases efficiency
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© Copyright 2003 by Gregory H. Watson. All rights reserved.
• Focus on design excellence
• Assures desirable product
• Preventive action eliminates
potential for failures
• Breakthrough product design
enhances competitiveness
Level C:
Part
Characteristics
vs.
Process
Characteristics
Operations
Quality
Management
Level D:
Process
Characteristics
vs.
Operating
Systems
10
Design quality management:
•
•
•
•
•
•
•
•
•
•
Goal is to gain market share in targeted profitable segments
Assures desirable product delivered to the market place
Management sets target date for product launch
Excellent measurement capability essential to results
People monitor critical parameters to assure robust design
Emphasis on time-to-market for sales opportunity window
Standard for outcome evaluation: profitable market share
Improvement delivers better features or more reliable design
Responsibility for execution excellence pushed to suppliers
Tools of operations quality management:
Value Engineering
Project Management
Reliability Engineering
Six Sigma Statistical Tools
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11
Operations quality management:
•
•
•
•
•
•
•
•
•
•
Goal is delivery consistency of excellent outcomes
Assures delivery of “designed-in” quality performance
Management sets targets to define “operational excellence”
Excellent measurement capability essential to results
People monitor processes to assure conformance to targets
Emphasis on rapid turnaround for problem correction
Standard for outcome evaluation: customer perception
Improvement focuses on cost reduction or process stability
Responsibility for execution pushed to the lowest level
Tools of operations quality management:
Problem Solving Process
Meeting Management
Process Management
Inspection and Testing
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12
Satisfying customer needs through design:
Product
Planning
QFD
QFD translates the
voice of customers
into the languages of
processes and
products.
Product
Design
Process
Design
Customer
Focus
Production
Process
Reliability
Engineering
Value
Engineering
Technology
Readiness
Product planning and value engineering must go hand-in-hand
in order to deliver customer requirements at a reasonable cost.
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13
Quality Function Deployment Process
Level A
Customer
Requirements
vs.
Design
Features
FAST
FMEA
FTA
DoE
VAVE
•
•
•
•
Gather customer requirements for all types of customers.
Specify performance level desired and achieved.
Provide competitive assessment of features and functions.
Relate customer requirements to design features.
Level B
Design
Features
vs.
Part
Characteristics
MSA
GDT
Cp/CpK
DFA
•
•
•
•
•
•
•
•
Specify how to deliver design features.
Identify critical performance factors.
Link design features to specifications.
Track development of design maturity.
Level C:
Part
Characteristics
vs.
Process
Characteristics
SPC
Identifies supplier control plan. DFM
Identifies special test equipment.
Specifies work instructions.
Identifies operator training requirements.
Control Plan
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•
•
•
•
Specify part features.
Set critical parameters.
Fix part tolerances.
Establish control limits.
Level D:
Process
Characteristics
vs.
Operating
System
14
Methods associated with QFD:
•
•
•
•
•
•
•
•
•
•
•
•
•
FAST - Function Analysis System Technique
FMEA - Failure Mode Effects Analysis
FTA - Fault Tree Analysis
DoE - Design of Experiments
VAVE - Value Analysis/Value Engineering
MCA - Measurement Capability Analysis
GDT - Geometric Dimensioning and Tolerancing
CpK - Process Capability Study
DFA - Design for Assembly
DFM - Design for Manufacturing
SPC - Statistical Process Control
CPR - Cost Price Ratio
CPM - Customer Process Matrix
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© Copyright 2003 by Gregory H. Watson. All rights reserved.
15
QFD and related product documentation:
Level A
Customer
Requirements
vs.
Design
Features
•
•
•
•
Market launch plan.
Product advertising literature and customer fact sheets.
Customer satisfaction survey questionnaire.
Product level quality plan.
Level B
Design
Features
vs.
Part
Characteristics
•
•
•
•
Product design specification.
Part design drawings.
Receiving inspection plans.
Product and part level test plans.
Level C:
Part
Characteristics
vs.
Process
Characteristics
•
•
•
•
Process control equipment specifications.
Test equipment specifications.
Information system requirements.
Production maintenance requirements.
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•
•
•
•
Component quality plan.
Process control plan.
Work instructions.
Training schedule.
Level D:
Process
Characteristics
vs.
Operating
System
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Voice of the process: QFD output
Critical design question: what do we need to know? A
few of the answers include:
• Critical part parameters.
• Measurement capability requirements.
• Part characteristics testing requirements.
• Material testing requirements.
• Process control requirements.
• Test equipment requirements.
• Operator training requirements.
Most engineers would provide this information as part of
their product development process. QFD assures that it
is linked to the customer requirements that identify a need
for performance and makes explicit any trade-offs that are
required in potential areas of conflict between customer
needs and design implementation.
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17
QFD provides:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Identification of product features and source of the stated requirements.
Comparison of features with competitive products.
Rating of the importance of the features to customers.
Comparison of the projected performance levels to current performance.
Comparison of customer requirements with product features.
Specification of the technological limits of product features.
Identification of interactions among design components.
Factorial analysis of product elements of a designed experiment.
Specification of critical parameters for testing.
Support for process capability studies and statistical control parameters.
Linkage of product requirements to manufacturing control methods.
Linkage to supplier control plans and testing procedures.
Identification of design elements on the project critical path.
Linkage to specification documents and product bill of materials.
Means for recording the progress of the program’s design.
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QFD level “A” matrix





1. Customer needs organized by targeted
market segments.
2. Customer importance rankings.
3. Design features that address the
identified customer requirements.
 4. Interactions among design issues and
requirements.
5. Technical requirements for each design
requirement.
6. Product features analysis.
7. Product requirements analysis.
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 Customer needs by market segment:
•
Customer requirements are statements of need
that are recorded in the “voice (actual words) of the
customer.”

• Requirements should be grouped by the source of


 the customer information (typically by major
customer segment) as well as the criteria used to
choose the product in a competitive procurement.
• Customer identification should include the market

segment targeted (such as distribution channel,
internal functional organization) and the level of the
QFD Level “A” Matrix person who is providing the comment (such as
decision-maker, buyer, user, or internal positions
like product design engineer, product marketing
WHAT?
engineer, etc.).

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 Customer importance ratings:
•
In the column next to customer requirements
the importance ratings by the customer are

recorded.

• Customers evaluate the importance of each
product requirement using a scale - where 1 is
low and 10 is high - to indicate the relative



importance of each feature that they specify.
• These importance ratings are usually done
during a customer focus group or taken from a

product preference survey which also solicits
“needs.”
QFD Level “A” Matrix • Customer importance ratings are also paired
with competitive comparisons that are reported
in section 6.
WHY?
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© Copyright 2003 by Gregory H. Watson. All rights reserved.
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Customer needs and importance ratings:
Purchase Criteria Customer Exact Customer Importance
General Specific Mkt Type Comments
Rating
• Customer needs answer
the basic question: “What
does this specific customer
want?”
• Customer needs also
humanize the technological
emphasis of designers by
personalizing the voice
of the customer for each of
the different categories or
types of customers.
• Generic buying criteria are
used to group all data from
market segments to more
clearly identify why
customers want each of
their requests and what
specifically will satisfy this
request.
How can
I use the
product?
Product
Availability
Product
Reliability
Service
Quality
Support
Quality
Innovation
Cost
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© Copyright 2003 by Gregory H. Watson. All rights reserved.
22
 Design features and functionality:

•
In order to meet a customer need -- whether it
is spoken by an external or internal customer -
the team must initiate a product requirement
which will become a feature of the design.


 • Design features should be grouped according
to functional concept in order to identify sets of
functions that will become a sub-assembly or
module with related functionality.

• Design features imply functionality in the final
product. Using the FAST methodology, a team
QFD Level “A” Matrix can determine the specific functional
requirements of each feature as well as logical
relationships among design features.
HOW?
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 Interactions among design features:
• In many products, functions of some design
features may interact to some degree with
other features. This interaction may cause
problems in the design and implementation of

the product or offer opportunities for more
efficient designs by integrating these features.

It is always helpful to identify what features
have positive or negative inter-relationships.


 • An arbitrary scale is used to rate the degree of
relationship between the specified features:
+ 9 = strong positive,
+ 3 = weak positive,

0 = no apparent relationship
QFD Level “A” Matrix
- 3 = weak negative, and
- 9 = strong negative.
WHY NOT?
• A way to develop suspicions for hypotheses.
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Design features and functional interactions:
3
• Relationships among features and
functions are shown in the top
graph diagram and the strength of
9
each pair of relationships is also - 9
3
-3
indicated.
9
Product
Functions
Design
Features
9
3
3
-9
-3
-3
3
3
9
9
3
9
9
9
-3
Function 1
9
Function 2
3
Function 3
F
e
a
t
u
r
e
F
e
a
t
u
r
e
F
e
a
t
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r
e
F
e
a
t
u
r
e
F
e
a
t
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r
e
F
e
a
t
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r
e
F
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a
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F
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F
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a
t
u
r
e
A
B
C
D
E
F
G
H
I
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25
 Technical requirements of design features:

• Defines “how much” -- or the magnitude of the
design features. Specific rows will include the

following information:
• Target values of design features



• Competitive comparison of values
• Trends in performance improvement
• Physical limits of performance
• Field service return information

• Special technical requirements
QFD Level “A” Matrix • Applicable government standards
• Applicable industry standards
HOW MUCH?
• Applicable environmental standards
• Applicable safety standards
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Technical product requirements:
• Specified technical product
requirements include those
characteristics like competitive
performance, process control
data, field failure data,
performance limits due to
physics, and information about
standard levels of performance
or product requirements.
• The relative importance of
each design requirement is
given by the sum of each
column’s design feature-tocustomer requirement
indicators multiplied by its
importance weight.
• Potential safety hazards and
environmental effects are also
flagged.
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Importance Weight
Relative Importance
Current Value
Technical Comparison
Best Internal
Competitor A
Competitor B
Competitor C
Performance Limit
Improvement Available
Target Value for Feature
Parameter Control Method
Process Control Point
Service Information
Field Failure Rate
Product Returns
Complaints
Special Technical Data
Government Standards
Industry Standards
Company Standards
Potential Safety Hazards
Environmental Impact
27
 Product features analysis:
• The competitive information contained in the
competitive product analysis section of the QFD
table is a compilation of data from sources like

the marketing Strength-Weakness- Opportunity
Threat (SWOT) analysis and product teardown
(reverse engineering). This answers the


 question who does this best?
• In addition to this SWOT analysis, one column
is used to indicate the type of requirement that
has been stated as the voice of the customer

using the three levels of performance described
by the Kano Model where:
QFD Level “A” Matrix
2 = Leadership level,
1 = Competitive level, and
WHO?
0 = Standard level of performance.
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Competitive product analysis – 1:
• A five point scale is used in this analysis
to indicate the perceived degree of
competitive advantage for customer
requirements differences of one point or
less are not usually discernable to
customers; however, a difference of two
or more points is noticed by customers.
• Competitive products that have a two
point or more advantage in requirements
judged by external customers as very
important, can make a recognized sales
claim in their product advertising which
customers will acknowledge as valid.
• Assessments against the top three
competitive products are presented in a
head-to-head analysis for each critical
customer requirement (also a technical
analysis comparing the relative feature
performance for competing products is
presented in section 5 QFD A matrix).
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Degree of Current Planned Sales Gain
Importance Level
Level
Point Ratio
Us A B C Us A B C
29
Competitive product analysis – 2:
Competitive
Features
1
2
3
Feature 1
Feature 2
Feature 3
.
.
.
Feature n
4
5
Own Company
Main Competitor
A one point rating difference is perceivable by customers. This means that
whenever a one point difference is achieved, then that feature may be used
to differentiate a product. This type of feature may become a ‘sales point’ if
the value perceived by customers is significant.
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Competitive product analysis – 3:
• Competitive product analysis is an
ratio of the relative improvement in
the new design feature over the best
performance in a competitive
product feature.
• The planned improvement ratio is
own company planned level of
performance divided by projected
competitive performance gain.
• The Kano performance weight is
assessed for one of 3 capability
levels: Leadership = 2, Competitive
= 1 and Standard = 0.
• The Relative Importance is the sum
of the row’s customer requirements
multiplied by the product of the
Planned Improvement Ratio and
Kano Performance Factor,
normalized to 100%.
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Competitive
Planned
Kano
Relative
Product Improvement Performance Importance
Analysis
Ratio
Weight
31
 Product requirements analysis:
• At the intersection of each and row (customer
requirements) and each column (design
features) the cell is used to indicate the

strength of the relationship between these
factors.

• The strength of the relationship is indicated
by a forced weighting scale where Strong = 9,



Moderate = 3 and Weak = 1. A solid circle is
often used to indicate a strong relationship, an
open circle usually represents the moderate
relationship and an open triangle indicates

weak relationships.
QFD Level “A” Matrix • If more than 50% of the cells have some
relationships, then the level of detail in
customer requirements or in the design
WHAT vs. HOW
features is too great.
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32
Policy Deployment & the Process of Management
Instructor: Gregory H. Watson
Introduction to Strategy, Technology and Integration
ETM 5111 – Summer 2003
Session 3 – Part 3
Oklahoma State University
© Copyright 2003 by Gregory H. Watson. All rights reserved.
33
Competitive product line analysis:
2
1
6
3
Product A
5
Product D
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Relative market share and
revenue ranking for leading
head-to-head competitors.
Dimensions of product
line competitiveness.
This ‘war map’ compares a
company’s product line to the
market share of the dominant
participants in its market.
Based on this analysis, the
company can choose where
it should best allocate its
resources across the product
lines to meet its top priority
strategic objectives.
34
Policy management system components:
Executive
Responsibility
Shared
Responsibility
Policy Setting
Policy Review
Senior
Management
Responsibility
Policy Deployment
Policy Implementation
Middle
Management
Responsibility
Organizations that win over time “plan their work and work their plan.” Strategy realization
is achieved by a disciplined approach for setting direction and executing that direction by the
effective use of an organization’s resources. Policy management sets the strategic direction,
identifies business goals, and formulates and deploys major change management projects to
accomplish the desired outcome. It describes how strategy cascades from vision to execution
through a collaborative engagement of workers and includes feedback communication details
such as performance self-assessment and management review.
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Measurement linkage aligns action on policy:
Objectives cascade & performance targeting negotiation process:
Policy Deployment includes:
Strategic Plan
Annual Plan
 Targets
 Means to achieve targets
 Measures of performance
Implementation Plan
Business Fundamentals
Business
Measurement
System
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Competitiveness is the result of both
product and process technology.
Process Technology
Technology-related business policy:
Product Technology
• Technology innovation is a driver of business strategy.
• Policy decisions management must make:
– Invest in product or process technology?
– Proprietary or open architecture for technology?
– Develop or acquire technology?
– Purchase or license technology?
– Barter intellectual property for technology?
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37
Technology implementation mapping:
Product A Product B Product C … Product I
Technology 1
Technology 2
Technology 3
.
.
.
Technology n
What is the
best sequence
in which to
introduce new
product and
process
technology?
To maximize
competitiveness
balance product
and process
technology
investments.
Process A Process B Process C … Process I
Technology 1
Technology 2
Technology 3
.
.
.
Technology n
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Managing the product concept trade-offs:
• Good engineering is the result of smart trade-offs.
• Smart trade-offs require accurate evaluation of priorities and value.
• Smart trade-offs are not about either/or but about how much should
be invested in time, cost, functions/features and performance
• Major conflicting factors not only conflict among themselves, but
within a major conflicting factor, sub-factors may also conflict (i.e.,
speed and heat).
• Each potential conflict should not be specified as a point but as a
window with a target and a threshold amount.
• Value of a factor increases once its window “threshold” is crossed.
• No value is accrued until the window “threshold” is crossed.
• Failure to cross one of the major factor “thresholds” usually means a
failed product.
• Remember the golden rule of trading: Everything costs something!
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Business impact of technology strategy:
Technology
Forecast
Corporate
Knowledge
Exploratory
Research
Technology
Portfolio
Analysis
Research
Funding
Allocation
Business
Case
New
Venture
N
E
W
New Field
(Expanded
Market)
P
R
O
J
E
C
T
S
Technology
Strategy
“All change happens one project at a time and in no other way.”
~ Dr. Joseph M. Juran
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40
Importance of Technology in Market
Technology portfolio analysis:
Analysis of the corporate
High
technology portfolio must
assess the current state of
Create Strategic
technology knowledge,
Commit
Technology
the development strategy
Resources
Alliances
for acquisition or pursuit of
advanced technology, and
the forecast of next
technological advances
and rank these according
Milk the
Develop Exit
to their importance to the
Cash Cow
Strategy
market and organization’s
relative technology lead
Low
over its competitors to
Low
High determine the appropriate
Relative Technology Market Advantage
strategy.
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Relative product position and attractiveness:
Two perspectives are necessary to see clearly:
Business Assessment
Technical Assessment
High
Create Strategic
Technology
Alliances
Commit
Resources
Develop Exit
Strategy
Milk the
Cash Cow
Importance of Technology
Business Profit Potential
High
Source
Technology
Develop
Technology
Minimize
Technology
Maintain
Advantage
Low
Low
Low
High
Competitive Position
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Low
High
Competitive Position
42
Business dimensions to add technical value:
Business Value-Adding Chain
Input
Operations
Output
Sales
Service
Technology Value-Adding Opportunities:
•Supplier
Communication
•Manufacturing
•Distribution System
Technology
Communication
•Materials Technology
•Material Handling •Machine Tool
•Material Handling
Technology
Technology
Technology
•Packaging
•Storage
Technology
•Packaging
Technology
•Maintenance
Technology
Technology
•Testing Technology •Testing Technology •Testing Technology
•Information System
•Information
Technology
•Information System
System Technology
Technology
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•Media Technology •Service Notice
Communication
•Communication
System Technology •Diagnostic Testing
Technology
•Sales Point
Technology
•Information
System Technology
•Information
System Technology
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Market Alignment
Project criteria: Technology push or market pull?
Criteria for evaluating
High
new product development
projects should include
both an assessment of
Market
“Star” Quality
market alignment (or how
Pull
Project
close is it to what the
customer wants) and
technology alignment (or
how close to the leading
technology edge is the
Technology
Nonnew product in terms of
Push
Competitive
customer-recognizable
technology). Star projects
Low
win because they are
Low
High strong in both market and
Technology Alignment
technology dimensions.
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Designing a revolution or an evolution?
Revolution – First of Class Products
• Start-up markets
• Start-up companies
• Breakthrough technology
Evolution – Variant Products
•Established markets
•Established companies
•Established volume products
• The choice of type, amount and rate of technology transition and
innovation introduced in each product is the critical responsibility
of the R&D manager and may be incorporated into the product
design rules.
• Need to take into consideration many factors presented in the
following table and chart.
• Too little or too much, too fast or too slow at the wrong time can
be devastating.
• The right choice can mean success!
• Bottom line: “Do what’s Prudent”
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Making the right design choices:
Revolution
Start-up
Evolution
Transition
Matured
Innovation
stimulated by:
Product function /
performance
Product
variations
Cost & quality
improvement
Predominant
type of
innovation
Major product changes
Major process
for volume
Incremental
product,
cost & quality
Product line
Diverse / custom
One product with
volume
Standard products
Production
Process
Flexible, easy change
Controlled
changes
Efficient but
change hard
Equipment
General purpose
skill labor
Semi-automated
High- automation,
minimum labor
Materials
Industry available
Specialized
Specialized, vertical
integration
Plant
Small scale
General purpose
Large scale, product
specific
Management
Informal,
entrepreneurial
Project / task
groups
Formal, structure, rules
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Current trends in technology application:
• Product-specific trends:
– Shorter life cycles with faster time-to-market development need.
– Lower cost per function but with increased capability
– Increased quality and reliability
• Significantly less “R” than “D” (almost all “D”).
• Internal basic research rapidly diminishing: supplied by Japan Inc.,
industry infrastructure or global universities. “Applied” only remains in
industry.
• Increased technology acquired by “acquisitions” while less is internally
developed.
• More incremental technology and less revolutionary technology.
• Less vertical integration with more dependence on supplier and shared
development.
• Global design centers develop products & processes but local factories
produce volume in global regions.
• New technologies developed and integrated simultaneously with new
product development.
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Where does technology come from?
Technology Sources:
Research
Consortiums
Acquisitions
Joint Ventures
Collaborators
Testing
Labs
Universities
Licensing
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Internal
Sources
Consultants
Suppliers
Specialized
Companies
Minority Equity
48
How is technology access acquired?
Typical Reasons:
• Time, speed, and cost.
• Lack of critical knowledge/expertise in the field.
• Dilution of resources or engineering development focus.
• Ease of availability & access outside.
• Leverage available resources & share risk.
How to act in the acquisition process:
• Be a customer – know what you want and who you are getting it from
• Insure they know: What you want, what and when to deliver it and
how, when and what they will be paid.
• Be prepared to accept the cost and schedule negotiated.
• Manage, direct and review progress against the plan
Remember – While you are buying a deliverable, the quality of the
product is your company’s responsibility!
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Managing your technology acquisition policy:
• R&D manager’s responsibility is to provide the “right technology
at the right time.”
• All sources of technology should be considered.
• If it is available somewhere, its the job of the R&D manager to
find it, bring it home, and make it part of your portfolio.
The only threat from an outside source of technology is if
your competitor has access and you don’t!
• Look at external sources of technology as your global R&D lab!
• Be knowledgeable about the capabilities/technologies that exist.
• Spend time & resources identifying potential sources before the
actual need.
• Kill the not-invented-here or “NIH” attitude!
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Relative merits of technology sources:
Relationship
Major Advantages
Major Disadvantages
Acquisition
Control of technology.
Rapid development & market entry.
Rapid access to technology.
Reduces legal exposure.
Loss of key people or
entrepreneurial culture.
Limited/no future help. Requires
internal capability to develop.
Joint venture
Utilize complementary skills.
Shares risk/rewards.
Loss of control. Potential conflicts
between parties.
Minority Interest
Minimizes investment.
Maintains entrepreneurial zeal.
Lack of control/direction.
Potential loss to buyout.
Option for future license
Modest up-front payment.
Time to view progress.
Price escalates with progress.
Shows lack of commitment.
Joint development
Utilizes complementary technical
resources. Shares risk/rewards.
Maintains interest of both parties.
Loss of control.
Potential conflict in direction and
priorities, as well as future market
R&D contract
Expands R&D capacity without
Increase in headcount. Covers
areas w/o inside expertise. No long
term commitment.
Lack of strong incentive to
complete on time & budget.
Lack of day-to-day control &
direction.
University research
funding
Sow many seeds with small dollars.
Focused activities.
Requires internal attention &
resources to evaluate &
assimilate
Exclusive license
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Management-induced sourcing problems:
•
•
•
•
•
•
•
•
•
•
Sourcing is not viewed or managed as a strategic business process.
Failure to maintain consistency of purpose in building supplier base.
Unequal emphasis placed on various stages of the process.
People issues (ownership, capability, conflict of job responsibilities and
time allocation, NIH, etc.).
Inadequate planning, organization and internal support.
Underestimating routine management and transition to production task.
Failure to find the best source.
Failure to properly evaluate the source.
Failure of both parties to specify and communicate exact requirements
and expectations up front.
Failure to address alignment of business and legal relationships up front.
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Scheduling technology integration:
• Begins with the technology strategy
• Output of technology planning
Integrates
• Technology forecast inputs
• Technology road map inputs
• Product road map inputs
• Technology alignment process
To schedule technology you must:
•
Start with the product ship date and
• Work backward to a development commencement date.
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What happens if you delay product development?
•
Weight each conflicting Target Factor (and sub-factor) in relative
importance on a scale of 1-10 (10 = highest).
Example:
Time
Cost
Functions / Features
Performance
•
•
•
10
7
6
8
Relative weights are used to evaluate and make engineering trade-off
decisions and determine their impact on schedule slippage or gains.
CAUTION: Trade-offs which cause a threshold to be missed, even on a
low weighted factor, are not acceptable (without marketing assessment
and modification of the threshold) and should be considered only as a
last resort.
Good evaluation and trade-off of conflicting factors can be important in
the technology smoothing process, as well as a vital tool in meeting the
product marketing window requirements.
Evaluate using: Analytical Hierarchy Method (AHP)
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Economic impact of product launch:
Market
Window of
Opportunity
Economic Value
Economic
Value
Contribution
Time
Minimum
IRR - COC
Threshold
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Target
Value
IRR = Internal Rate of Return
COC = Cost of Capital
55
Design leveraging – the need:
• Are based on proven designs with added important innovations.
• Rediscovering the wheel, will at best, delay the design of the wagon
and often provides a bumpy ride – only redesign what must be unique.
• Repeating failures waste time and effort and provides no added value
(also it makes you look silly when you redesign ‘failed’ features).
• Less than 25% of new product is new. The rest has been done before.
• Much of what you think is new is already being used and works well.
• Much of what you believe is a better way, has been tried and failed.
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Design leveraging – the practice:
• Search out what has been tried and what does and doesn’t work and
adapt the best – don’t over-engineer the hammer!
• Concentrate time and effort on the really “new” stuff – only if there is
time left over should you improve the “old” stuff.
• Design the product architecture with a plan for reuse and expansion by
using defined modular blocks or partitioned designs.
• Provide an easily available knowledge and documentation database.
• Maintain a disciplined product design process with frequent reviews.
• Conduct frequent dialog between technology sources and users.
• Implement compatible design tools across the organization.
• Develop a “book of sins” and require all project managers to ‘confess.’
• Design leverage environment to make it easier to leverage than not to.
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Personal reflection:
Think about product lines that had severe technical competition in
the market and failed to gain the advantage (e.g., Sony Betamax,
RCA VHS and Sony DVD in video recording; or IBM, Apple and
Compaq in compatible personal computers; or Kodak, Canon,
Sony in cameras, etc.). What caused the losing company to forfeit
their market advantage and the profitability that accompanies it?
What management decisions could have been made (in hindsight)
that could have prevented the loss of market share? How could a
technology strategy contribute to an improved understanding of the
underlying market forces? Do any of these companies show the
type of technological and business flexibility that could make them
long-term winners? How would you use the knowledge gained in
this session to enlighten your management team about its options
for technology integration with their business strategy?
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Assignment #3:
Instructor: Gregory H. Watson
Introduction to Strategy, Technology and Integration
ETM 5111 – Summer 2003
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Assignment #3:
Larry Bossidy and Ram Charan, Execution: The Discipline of Getting
Things Done (Crown, 2002), ISBN 0-609-610-570.
Topic: Managing for achievement – making projects happen
Read Bossidy & Charan’s book and prepare an essay using information from
today’s presentation, the concepts presented by Bossidy & Charan and your
business experience [for details that define the essay topic see the next slide].
Grading:
A+ – Demonstrated original thinking applying course material to experience
A – Demonstrated integration of course material and personal experience
B – Demonstrated understanding of Bossidy & Charan and today’s lecture
C – Demonstrated knowledge of Bossidy & Charan and today’s lecture
Length: Your MS Word document must be no more than 1000 words, but it
may include embedded PowerPoint or Excel graphics to illustrate points.
Due: Prior to Session 4 – Email using assignment submission process
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Assignment #3 – essay instructions continued:
Managing for Achievement – Making Projects Happen
Bossidy and Charan’s book Execution: The Discipline of Getting Things Done
provides insight into one of the great business turnarounds of the 20th century. While
analysis and planning are significant as overtures to the main opus – real success
comes from the discipline of action. Choose three points that are made in this book
and compare them with the paper that I wrote on policy deployment. How can this
policy deployment methodology be used as a link between the analysis and strategy
setting process and these concepts that drive the discipline of execution? Define a
clear management process and illustrate how Bossidy and Charan have influenced
your thinking (of course flattery by referencing my paper will also help considerably!).
Please footnote the points used from Bossidy and Charan for cross-reference and easy
identification. Your paper should be single-spaced and the length between 3-5 pages.
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Further reading:
• Want to learn more about this subject? Then read the
following books:
1.
Peter Schwartz, The Art of the Long View (New York: Doubleday, 1991).
2. Gregory H. Watson, Strategic Benchmarking (New York:
John Wiley & Sons, 1993).
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Next session:
• Read Bossidy & Charan book: Execution
• Prepare Assignment #3
• Decide what to do about ‘extra credit’ project – it will
be due at the same time as the final examination, but
you will want to get started on it as soon as you can.
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ETM – 5111:
End of Session 3
Instructor: Gregory H. Watson
Summer 2003
Session 3 – End of Part 3
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