New Product Development Tools 1

- Analytical Hierarchy Process

(AHP)
Analytical
Hierarchy
Process (AHP)
M MMaking
Examples of Goals, Criterion
and Alternatives
 Analytica
l Hierarchy AHP enables managers to
Process make potentially more
(AHP) effective decisions by
structuring and evaluating the
Beauty started when
relative attractiveness of
people began to choose. competing options for any
Roberto Benigni
type of managerial decision.
 Problems are
decomposed
into a number
of criterion (and sub criterion if any)
and
Alternatives
 Product /
Choosing a portable
Consumer
GOAL research
music player

CRITERION Screen Battery Weight

Storage Size Life

64 Gb ~ 5 in
32 Gb ~ 10 hrs ~ 100 gms
~ 4 in
16 Gb ~ 20 hrs ~ 150 gms
~ 3.5 in
8 Gb ~ 40 hrs ~ 200 gms
~ 3 in

Cowon Sony NW iPod touch FiiO A&

ALTERNATIVES (2019) M11
Plenue Norma
 Choosing a
Techno-
Entrepreneurship
Choosing an area within Project
GOAL Health Tech

Individual Project
CRITERION characteristics characteristics

Market
Education Experience Resources /Competition Location

Elderly
Digital Indoor air Brain
Care/
ALTERNATIVES Preventive quality therapy
Connected
health technology technology
health
 Choosing
exceptional ideas
Choosing an exceptional
GOAL idea for NPD in your
business

Market Fit Risks Uncertainty

CRITERION Technology Fit

Differentiation Payoffs Mitigation

Timing Price
Manufacturing Losses
Logistics Product
Design
line
Materials/Comp
onents

ALTERNATIVES Idea 1 Idea 2 Idea 3 Idea 4 Idea 4

INTENSITY DEFINITION EXPLANATION

1 Equal Importance Two elements contribute equally to objective

3 Moderate Importance Experience and judgement moderately favour one over another

5 Strong importance Experience and judgement moderately favour one strongly over another

7 Very strong importance One element is favoured very strongly over another; its dominance is
demonstrated in practice

9 Extreme importance The evidence favouring one element over another is of the highest possible
order of affirmation.

2, 4, 6, 8 Intermediate Values When compromise is needed

Pairwise comparisons

9
Pair-Wise Comparison example
Suppose we have two types of apples, which one would you like
better than the other and how much you like it in comparison with
the other.

Extremely Strongly Equal Strongly Extremely

9 7 5 3 1 3 5 7 9
Gala apple Granny smith
Very Slightly Slightly Very
Strongly Strongly
Pair-Wise Comparison example
If you like the Gala better than Granny Smith, you tick a mark
between number 1 and 9 on left side, while if you favour Granny
Smith more than Gala, then you mark on the right side. For instance
I strongly favour Gala to Granny Smith, then I give a mark of 5 on
the left.

Extremely Strongly Equal Strongly Extremely

9 7 5 3 1 3 5 7 9
Gala apple Granny smith
Very Slightly Slightly Very
Strongly Strongly
If we have 9 7 5 3 1 3 5 7 9
Gala apple Granny smith
three types
of apples,
then we have
9 7 5 3 1 3 5 7 9
Golden
three Gala apple
delicious
comparisons.
2

9 7 5 3 1 3 5 7 9
Granny smith Golden
delicious
 Number of Comparisons

Number of 2 3 4 5 6 7 𝑛
Things
Number of 1 3 6 10 15 21 𝑛(𝑛 − 1)
Comparisons 2
Fully Worked
out
example
Example: Bluetooth Ear Bud selection
Objective
Selecting a new Bluetooth device
Criteria
Sound, Design (size, features), Battery life
Alternatives
https://www.techradar.com/news/best-true-wireless-earbuds-the- best-
airpod-alternatives-around

Please note the reviews are updated frequently, so the products will
have been updated from what is used in this analysis.
 Hierarchy tree
Selecting a Wireless
GOAL Ear bud

Sound Design Battery

CRITERION

ALTERNATIVES Jabra Elite Sport Sony WF-1000X B&O Beoplay E8 Onkyo W800BT

16
Step 1: Pairwise
comparison of
Criterion
 9 7 5 3 1 3 5 7 9
Sound Design

2
9 7 5 3 1 3 5 7 9 Battery
Sound

Design 9 7 5 3 1 3 5 7 9
Battery
 We need to put the
comparisons in a matrix
now !
 Comparing Sound with Design and Battery
20

Sound Design Battery

Sound 1

Design 1

Battery 1

First, all diagonal cells will be 1, because the criterion

are being compared against themselves ! (Sound vs
Sound, Design vs Design, Battery vs Battery)
 Comparing Sound with Design and Battery
21
Sound is strongly (5) more favourable
than Design

Sound Design Battery

Sound is just slightly
(2) favourable than battery.
Sound 1 5 2

Design 1

Battery 1
 Comparing Battery and Design
22

Sound Design Battery

Sound 1 5 2

Design 1

Battery 2 1

Battery is just slightly (2)

favourable than design.
 Completing the rest of the cells
23 Sound is strongly (5) more favourable
than Design

If sound is strongly favourable

(5), then design will be less Sound Design Battery
favourable to sound. i.e. a 5 th
Sound 5
(1/5) of sound.
Design 1/5

Battery
 Completed Matrix
24

Sound Design Battery

Sound 1 5 2

Design 1/5 1 1/2

Battery 1/2 2 1
 Ok we have done pairwise
comparison, but how important
are each of the criterion really !
 Sound Design Battery
Sound 1 5 2
Design 1/5 (0.2) 1 1/2 (0.5)
Battery 1/2 (0.5) 2 1
Sum 1.7 8 3.5

First make Column Sums

26
 SOUND DESIGN BATTERY

Sound 1/1.7 = 0.588 5/8 = 0.625 2/3.5 = 0.571

Design 0.2/1.7 = 0.118 1/8 = 0.125 0.5/3.5 = 0.143

Battery 0.5/1.7 = 0.294 2/8 = 0.25 1/3.5 = 0.286

1 1 1

Now divide each cell by the respective column sum. Note the
sum of each column must now be 1.

27
 SOUND DESIGN BATTERY ROW
AVERAGE

Sound 0.588 0.625 0.571 0.5947

Design 0.118 0.125 0.143 0.1287

Battery 0.294 0.25 0.286 0.2766

Next take the row average.

Note the sum of row averages must be 1.

28
 Summing up

SOUND 0.5947 (or 59.47% weight)

DESIGN 0.1287 (or 12.87% weight)
BATTERY 0.2766 (or 27.66% weight)
 Summing up

Selecting a Wireless Ear bud 1.00

Sound 0.5947 Design 0.1287 Battery 0.2766

Step 2: How good are the
alternatives (Jabra, Sony
etc) on each of the
criterion (Sound, Battery,
Design) ?
Lets do for
Sound first
 Jabra Sony

9 7 5 3 1 3 5 7 9

Remember that
because there Jabra 2
B&O
are four 9 7 5 3 1 3 5 7 9
alternatives,
the number of
comparisons is
6. Continued Jabra Onkyo

on next slide. 9 7 5 3 1 3 5 7 9
 Sony 2 B&O

9 7 5 3 1 3 5 7 9

… Contd.
Sony Onkyo

9 7 5 3 1 3 5 7 9

B&O 2 Onkyo

9 7 5 3 1 3 5 7 9
 We need to put the
comparisons in a matrix
now !
 Comparing the alternatives
36
Jabra Sony B&O Onkyo

Jabra 1

Sony 1

B&O 1

Onkyo 1

First, all diagonal cells will be 1, because the

alternatives are being compared against themselves !
(Jabra vs Jabra, Sony vs Sony etc.)
 Then fill the main comparisons
from slides 33 and 34.
37

Jabra Sony B&O Onkyo

Jabra 1 1 2 3

Sony 1 2 3

B&O 1 2

Onkyo 1
 Then fill the inverse cells to complete
38 the ‘sound’ matrix

Jabra Sony B&O Onkyo

Jabra 1 1 2 3

Sony 1 1 2 3

B&O 1/2 1/2 1 2

Onkyo 1/3 1/3 1/2 1

 Ok we have done pairwise
comparison, but how do the
alternatives rank on sound !
 First make Column Sums

Jabra Sony B&O Onkyo

Jabra 1 1 2 3
Sony 1 1 2 3
B&O 1/2 1/2 1 2
Onkyo 1/3 1/3 1/2 1
Sum 2.833 2.833 5.5 9
40
 Jabra Sony B&O Onkyo
Jabra 0.353 0.353 0.364 0.33
Sony 0.353 0.353 0.364 0.33
B&O 0.176 0.176 0.182 0.22
Onkyo 0.118 0.118 0.09 0.11
1 1 1 1
Now divide each cell by the respective column
sum. Note the sum of each column must now be
1.

41
 Jabra Sony B&O Onkyo Row
average
Jabra 0.353 0.353 0.364 0.33 0.35
Sony 0.353 0.353 0.364 0.33 0.35
B&O 0.176 0.176 0.182 0.21 0.19
Onkyo 0.118 0.118 0.09 0.11 0.11

Now calculate the row average.

42
 Summing up for Sound

Therefore,
Jabra for Sound,
0.35 Jabra and Sony are best performing,
with Sony
B&O ranked second
0.35
and Onkyo ranked last.
B&O 0.19
Onkyo 0.11
Do the
same for
Design
…
 2
Jabra Sony
9 7 5 3 1 3 5 7 9

Remember that
because there Jabra B&O
are four 9 7 5 3 1 3 5 7 9
alternatives,
the number of
comparisons is
6. Continued Jabra Onkyo

on next slide. 9 7 5 3 1 3 5 7 9
 Sony 2 B&O

9 7 5 3 1 3 5 7 9

… Contd.
Sony Onkyo

9 7 5 3 1 3 5 7 9

B&O Onkyo

9 7 5 3 1 3 5 7 9
Summing Jabra 0.37
up
for Design Sony 0.19

… B&O 0.37
Onkyo 0.07

Jabra and B&O have the best

design, followed by Sony and lastly
by Onkyo
 Since we have objective values for
Battery time, this can be used to
determine the relative ranking of
What about alternatives; however this is not
obligatory. Pairwise comparisons may
ranking by Battery still be used when you want to also
include more subjective and objective
? measures such as battery type and
number of charge cycles.

BATTERY 𝐵 𝑎 𝑡 𝑡 𝑒 𝑟 𝑦 𝑇𝑖
TIME 𝑚𝑒
( HRS) 𝑇𝐵𝑇

Jabra 4.5 0.148

Sony 3 0.098
Though Onkyo has the lowest ranked sound
and design, it has the best battery. B&O 8 0.262

Onkyo 15 0.492

Total 30.5 (TBT ) 1

Summing up the ranking of the alternatives
for various criterion

Sound Design Battery

Jabra 0.35 0.37 0.148

Sony 0.35 0.19 0.098

B&O 0.19 0.37 0.262

Onkyo 0.11 0.07 0.492

Step 3: But how to trade-off
between all the different criterion
and what is the overall rank of
each product?
 We know the weight for each criterion ! (see slide 29)

Sound Design Battery

Weights 0.5947 0.1287 0.2766
Jabra 0.35 0.37 0.148
Sony 0.35 0.19 0.098
B&O 0.19 0.37 0.262
Onkyo 0.11 0.07 0.492
 Sound Design Battery Overall Weighted rank
Weights 0.5947 (S) 0.1287 (D) 0.2766 (B)
Jabra 0.35 (JaS) 0.37 (JaD) 0.148(JaB) = JaS x S + JaD x D + JaB x B
= 0.297
Sony 0.35 (SoS) 0.19 (SoD) 0.098(SoB) = SoS x S + SoD x D + SoB x B
= 0.26

B&O 0.19 (BOS) 0.37 (BOD) 0.262(BOB) = BOS x S + BOD x D + BOB x B

= 0.23

Onkyo 0.11 (OnS) 0.07 (OnD) 0.492 (OnB) = OnS x S + OnD x D + OnB x B
= 0.21

For a specific earbud, multiply the rank value for a criterion by its weight and add
them up.
 Overall
Benefit
Trading of all the rank
benefits, Jabra is
the
best, Onkyo the Jabra 0.297
least. Sony 0.26
Sony and B&O are
somewhat in the B&O 0.23
middle.
Onkyo 0.21
Step 4: There is one last step. We
need to account for price and
calculate the value for money !
 Price ($) Price/TP Benefit Rank Value
(Price rank, (BR) for Clearly Jabra is
PR) Money still the best and
(BR/PR)
Onkyo still the
Jabra 143 0.194 0.297 = 0.297/0.194
= 1.53 least. But notice
Sony 154 0.208 0.26 =0.26/0.208 = that the gap has
1.23 widened between
B&O 212 0.287 0.23 =0.23/0.287 = Sony and B&O;
0.81 Sony is
Onkyo 229 0.31 0.21 =0.21/0.31 = significantly better
0.68
because it is lower
738 (TP)
Total priced.

Value for Money

 Advanced
(Optional) How do I
know that I am being
consistent in my
analysis ?
Let us do this for the three Criterion
weights (ranks).
Sound Design Battery
Remember the
Sound 1 5 2 completed pairwise
Design 1/5 1 1/2 matrix (slide 24)
and weights (slide
Battery 1/2 2 1
29) for the criterion

Sound Design Battery

Weights 0.5947 0.1287 0.2766

1. Multiply the values in each row by the
respective weight and add them up. Lets call
this value X.
Sound Design Battery X

0.5947 (W1) 0.1287 (W2) 0.2766 (W3)

Sound 1 (P1) 5 (P2) 2 (P3) = P1 x W1 + P2 x W2 + P3 x

W3 = 1.7914
Design 1/5 (P4) 1 (P5) ½ (P6) = P4 x W1 + P5 x W2 + P6 x
W3 = 0.38594
Battery ½ (P7) 2 (P8) 1 (P9) = P7 x W1 + P8 x W + P9 x W3
= 0.83135
2.Sanity check A. Divide X by the
respective weights and take the mean.
Sound Design Battery X Y = X/W

0.5947 0.1287 0.2766

(W1) (W2) (W3)
Sound 1 (P1) 5 (P2) 2 (P3) 1.7906 = 1.7906/W1 = 3.01

Desig 1/5 (P4) 1 (P5) ½ (P6) 0.3858 = 0.3858/W2 = 3.002

n
Batter ½ (P7) 2 (P8) 1 (P9) 0.8310 = 0.8310/W3 = 3.004
y
Mean 3.0055(Ymean)

If Ymean is greater than the number of criterion, then our calculations are correct. Ymean(3.0055) is greater than the
number of criterion (3, i.e. Sound, Design and Battery), hence our calculations are fine.
2. Sanity check B. Calculate the
Consistency Index and Consistency Ratio
𝐶𝑜𝑛𝑠𝑖𝑠𝑡𝑒𝑛𝑐𝑦 𝑖𝑛𝑑𝑒𝑥 n = number of criterion or
𝑌𝑚𝑒𝑎𝑛−𝑛 3.005−3 = 0.00277
𝐶𝐼 = 𝑛−1 = 3−1
alternatives

If your comparisons were completely random, then the Consistency index would be:

n 1 2 3 4 5 6 7 8 9 10
CI random 0 0 0.58 0.90 1.12 1.24 1.32 1.41 1.45 1.49

𝐶𝑜𝑛𝑠𝑖𝑠𝑡𝑒𝑛𝑐𝑦 𝑅𝑎𝑡𝑖𝑜 𝐶𝐼 0.00277 = 0.004775

𝐶𝑅 = 𝐶𝐼𝑟𝑎𝑛𝑑𝑜𝑚 = 0.58

CR values of less than 0.1 means our comparisons are consistent and not random, though slightly higher
values can still be accepted. Anything close to 0.58 in our case would mean random comparisons
You can do the same kind of sanity check when
each time you compare the four alternative ear buds
for a specific criterion i.e (a.) when you compare the
four alternatives based on sound, (b.) when you
compare based on design, and finally (c.) when you
compare based on battery.
References