Chapter 5: The Design of Products and Services

Introduc�on

Products and services are o�en the first thing that customers see of a company, so they
should have an impact. And although opera�ons managers may not have direct responsibility
for product and service design, they always have an indirect responsibility to provide the
informa�on and advice upon which successful product or service development depends.

But increasingly opera�ons managers are expected to take a more ac�ve part in product and
service design. Unless a product, however well designed, can be produced to a high standard,
and unless a service, however well conceived, can be implemented, the design can never bring
its full benefits. Figure 5.1 shows where this chapter fits into the overall opera�ons model.

Why is good design so important?

Good design sa�sfies customers, communicates the purpose of the product or service to its
market and brings financial rewards to the business. The objec�ve of good design, whether of
products or services, is to sa�sfy customers by mee�ng their actual or an�cipated needs and
expecta�ons.
 This, in turn, enhances the compe��veness of the organiza�on. Product and service design,
therefore, can be seen as star�ng and ending with the customer. So the design ac�vity has one
overriding objec�ve: to provide products, services and processes which will sa�sfy the
opera�on’s customers.

Product designers try to achieve aesthe�cally pleasing designs which meet or exceed
customers’ expecta�ons. They also try to design a product which performs well and is reliable
during its life�me. Further, they should design the product so that it can be manufactured easily
and quickly. Similarly, service designers try to put together a service which meets, or even
exceeds, customer expecta�ons. Yet at the same �me the service must be within the
capabili�es of the opera�on and be delivered at reasonable cost.

Design helps businesses connect strongly with their customers by an�cipa�ng their real
needs. That in turn gives them the ability to set themselves apart in increasingly tough markets.
Furthermore, using design both to generate new ideas and turn them into reality allows
businesses to set the pace in their markets and even create new ones rather than simply
responding to the compe��on.

What is designed in a product or service?

All products and services can be considered as having three aspects:

• a concept, which is the understanding of the nature, use and value of the service or
product;

• a package of ‘component’ products and services that provide those benefits defined in
the concept;

• the process, which defines the way in which the component products and services will
be created and delivered.

The concept

Designers o�en talk about a ‘new concept’. This might be a concept car specially created for
an interna�onal show or a restaurant concept providing a different style of dining. The concept
is a clear ar�cula�on of the outline specifica�on including the nature, use and value of the
product or service against which the stages of the design and the resultant product and/or
service can be assessed.

For example, a new car, just like exis�ng cars, will have an underlying concept, such as an
economical two-seat conver�ble sports car, with good road-holding capabili�es and firm,
sensi�ve handling, capable of 0–100 kph in seven seconds and holding a bag of golf clubs in the
boot. Likewise a concept for a restaurant might be a bold and brash dining experience aimed at
the early 20s market, with contemporary décor and music, providing a range of freshly made
pizza and pasta dishes.

Although the detailed design and delivery of the concept requires designers and opera�ons
managers to carefully design and select the components of the package and the processes by
which they will be created or delivered, it is important to realize that customers are buying
more than just the package and process; they are buying into the par�cular concept.

The package of products and services

Normally the word product implies a tangible physical object, such as a car, washing
machine or a watch, and the word ‘service’ implies a more intangible experience, such as an
evening at a restaurant or a nightclub. In fact, as we discussed in Chapter 1, most, if not all,
opera�ons produce a combina�on of products and services. The purchase of a car includes the
car itself and the services such as ‘warran�es’, ‘a�er-sales services’ and ‘the services of the
person selling the car’.

The restaurant meal includes products such as ‘food’ and ‘drink’ as well as services such as
‘the delivery of the food to the table and the aten�ons of the wai�ng staff ’. It is this collec�on
of products and services that is usually referred to as the package that customers buy.

Some of the products or services in the package are core, that is they are fundamental to
the purchase and could not be removed without destroying the nature of the package. Other
parts will serve to enhance the core. These are suppor�ng goods and services. In the case of the
car, the leather trim and guarantees are suppor�ng goods and services. The core good is the car
itself.

At the restaurant, the meal itself is the core. Its provision and prepara�on are important but
not absolutely necessary (in some restaurants you might serve and even cook the meal
yourself). By changing the core, or adding or subtrac�ng suppor�ng goods and services,
organiza�ons can provide different packages and in so doing create quite different concepts. For
instance, engineers may wish to add trac�on control and four-wheel drive to make the two-
seater sports car more stable, but this might conflict with the concept of an ‘economical’ car
with ‘sensi�ve handling’.

The process

The package of components which makes up a product, service or process are the
‘ingredients’ of the design. However, designers need to design the way in which they will be
created and delivered to the customer – this is process design.
 For the new car the assembly line has to be designed and built which will assemble the
various components as the car moves down the line. New components such as the cloth roof
needs to be cut, s�tched and trimmed. The gear box needs to be assembled. And all the
products need to be sourced, purchased and delivered as required. All these and many other
manufacturing processes, together with the service processes of the delivery of cars to the
showrooms and the sales processes, have to be designed to support the concept.

Likewise in the restaurant, the manufacturing processes of food purchase, prepara�on and
cooking needs to be designed, just as the way in which the customers will be processed from
recep�on to the bar/wai�ng area to the table and the way in which the series of ac�vi�es at the
table will be performed in such a way as to deliver the agreed concept.

The stages of design – from concept to specifica�on

Fully specified designs rarely spring, fully formed, from a designer’s imagina�on. To get
to a final design of a product or service, the design ac�vity must pass through several key
stages. These form an approximate sequence, although in prac�ce designers will o�en recycle
or backtrack through the stages. We will describe them in the order in which they usually occur,
as shown in Figure 5.3. First comes the concept genera�on stage that develops the overall
concept for the product or service. The concepts are then screened to try to ensure that, in
broad terms, they will be a sensible addi�on to its product/service por�olio and meet the
concept as defined. The agreed concept has then to be turned into a preliminary design that
then goes through a stage of evalua�on and improvement to see whether the concept can be
served beter, more cheaply or more easily. An agreed design may then be subjected to
prototyping and final design.

Concept genera�on

The ideas for new product or service concepts can come from sources outside the
organiza�on, such as customers or compe�tors, and from sources within the organiza�on, such
as staff (for example, from sales staff and front-of-house staff) or from the R&D department.

Ideas from customers

 Marke�ng, the func�on generally responsible for iden�fying new product or service
opportuni�es, may use many market research tools for gathering data from customers in a
formal and structured way, including ques�onnaires and interviews. These techniques, however,
usually tend to be structured in such a way as only to test out ideas or check products or
services against predetermined criteria. Listening to the customer, in a less structured way, is
some�mes seen as a beter means of genera�ng new ideas.

Focus groups

for example, are one formal but unstructured way of collec�ng ideas and sugges�ons
from customers. A focus group typically comprises 7–10 par�cipants who are unfamiliar with
each other but who have been selected because they have characteris�cs in common that
relate to the par�cular topic of the focus group. Par�cipants are invited to ‘discuss’ or ‘share
ideas with others’ in a permissive environment that nurtures different percep�ons and points of
view, without pressurizing par�cipants. The group discussion is conducted several �mes with
similar types of par�cipants in order to iden�fy trends and paterns in percep�ons.

Listening to customers

Ideas may come from customers on a day-to-day basis. They may write to complain
about a par�cular product or service, or make sugges�ons for its improvement. Ideas may also
come in the form of sugges�ons to staff during the purchase of the product or delivery of the
service. Although some organiza�ons may not see gathering this informa�on as significant (and
may not even have mechanisms in place to facilitate it), it is an important poten�al source of
ideas. An excep�on is described in the short case ‘Customers design their own services’.

Ideas from compe�tor ac�vity

All market-aware organiza�ons follow the ac�vi�es of their compe�tors. A new idea may
give a compe�tor an edge in the marketplace, even if it is only a temporary one, then
compe�ng organiza�ons will have to decide whether to imitate or alterna�vely to come up with
a beter or different idea. Some�mes this involves reverse engineering, that is taking apart a
product to understand how a compe�ng organiza�on has made it. Some aspects of services
may be more difficult to reverse engineer (especially back-office services) as they are less
transparent to compe�tors. However, by consumer tes�ng a service, it may be possible to make
educated guesses about how it has been created. Many service organiza�ons employ ‘testers’
to check out the services provided by compe�tors.

Ideas from staff

The contact staff in a service organiza�on or the salesperson in a product-oriented

organiza�on could meet customers every day. These staff may have good ideas about what
customers like and do not like. They may have gathered sugges�ons from customers or have
ideas of their own as to how products or services could be developed to meet the needs of their
customers more effec�vely.

Ideas from research and development

One formal func�on found in some organiza�ons is research and development. As its name
implies, its role is twofold. Research usually means atemp�ng to develop new knowledge and
ideas in order to solve a par�cular problem or to grasp an opportunity. Development is the
atempt to u�lize and opera�onalize the ideas that come from research.

In this chapter we are mainly concerned with the ‘development’ part of R&D – for example,
exploi�ng new ideas that might be afforded by new materials or new technologies. And
although ‘development’ does not sound as exci�ng as ‘research’, it o�en requires as much
crea�vity and even more persistence.

Concept screening

Not all concepts which are generated will necessarily be capable of further development
into products and services. Designers need to be selec�ve as to which concepts they progress to
the next design stage. The purpose of the concept-screening stage is to take the flow of
concepts and evaluate them. Evalua�on in design means assessing the worth or value of each
design op�on, so that a choice can be made between them. This involves assessing each
concept or op�on against a number of design criteria.

While the criteria used in any par�cular design exercise will depend on the nature and
circumstances of the exercise, it is useful to think in terms of three broad categories of design
criteria:

The feasibility of the design op�on – can we do it?

– Do we have the skills (quality of resources)?

– Do we have the organiza�onal capacity (quan�ty of resources)?

– Do we have the financial resources to cope with this op�on?

The acceptability of the design op�on – do we want to do it?

– Does the op�on sa�sfy the performance criteria which the design is trying to achieve?

(These will differ for different designs.)

– Will our customers want it?

– Does the op�on give a sa�sfactory financial return?

The vulnerability of each design op�on – do we want to take the risk? That is,

– Do we understand the full consequences of adop�ng the op�on?

– Being pessimis�c, what could go wrong if we adopt the op�on? What would be the

consequences of everything going wrong? (This is called the ‘downside risk’ of an

op�on.)
The design ‘funnel’

Applying these evalua�on criteria progressively reduces the number of op�ons which
will be available further along in the design ac�vity. For example, deciding to make the outside
casing of a camera case from aluminum rather than plas�c limits later decisions, such as the
overall size and shape of the case.

This means that the uncertainty surrounding the design reduces as the number of
alterna�ve designs being considered decreases. Figure 5.5 shows what is some�mes called the
design funnel, depic�ng the progressive reduc�on of design op�ons from many to one. But
reducing design uncertainty also impacts on the cost of changing one’s mind on some detail of
the design. In most stages of design the cost of changing a decision is bound to incur some sort
of rethinking and recalcula�on of costs.

Preliminary design

Having generated an acceptable, feasible and viable product or service concept, the next stage
is to create a preliminary design. The objec�ve of this stage is to have a first atempt at both
specifying the component products and services in the package and defining the processes to
create the package.

Specifying the components of the package

The first task in this stage of design is to define exactly what will go into the product or
service: that is, specifying the components of the package. This will require the collec�on of
informa�on about such things as the constituent component parts which make up the product
or service package and the component (or product) structure, the order in which the
component parts of the package have to be put together.

For example, the components for a remote mouse for a computer may include upper
and lower casings, a control unit and packaging, which are themselves made up of other
components. The product structure shows how these components fit together to make the
mouse (see Figure 5.6).

Reducing design complexity

Simplicity is usually seen as a virtue among designers of products and services. The most
elegant design solu�ons are o�en the simplest. However, when an opera�on produces a variety
of products or services (as most do), the range of products and services considered as a whole
can become complex, which in turn increases costs.

Designers adopt a number of approaches to reducing the inherent complexity in the

design of their product or service range. Here we describe three common approaches to
complexity reduc�on – standardiza�on, commonality and modulariza�on.

Standardiza�on

Opera�ons some�mes atempt to overcome the cost penal�es of high variety by

standardizing their products, services or processes. This allows them to restrict variety to that
which has real value for the end customer. O�en it is the opera�on’s outputs which are
standardized. Examples of this are fast-food restaurants, discount supermarkets or telephone-
based insurance companies. Perhaps the most common example of standardiza�on are the
clothes which most of us buy.

Although everybody’s body shape is different, garment manufacturers produce clothes in

only a limited number of sizes. The range of sizes is chosen to give a reasonable fit for most
body shapes.

To suit all their poten�al customers and/or to ensure a perfect fit, garment manufacturers
would have to provide an unfeasibly large range of sizes. Alterna�vely, they would need to
provide a customized service. Both solu�ons would have a significant impact on cost.

Commonality

Using common elements within a product or service can also simplify design complexity.
Using the same components across a range of automobiles is a common prac�ce. Likewise,
standardizing the format of informa�on inputs to a process can be achieved by using
appropriately designed forms or screen formats. The more different products and services can
be based on common components, the less complex it is to produce them.

Modulariza�on

The use of modular design principles involves designing standardized ‘sub-components’

of a product or service which can be put together in different ways. It is possible to create wide
choice through the fully interchangeable assembly of various combina�ons of a smaller number
of standard sub-assemblies; computers are designed in this way, for example These
standardized modules, or sub-assemblies, can be produced in higher volume, thereby reducing
their cost. Similarly, the package holiday industry can assemble holidays to meet a specific
customer requirement, from predesigned and purchased air travel, accommoda�on, insurance
and so on.

Defining the process to create the package

The product/service structure and bill-of-materials specifies what goes into a product. It
is around this stage in the design process where it is necessary to examine how a process could
put together the various components to create the final product or service. At one �me this
ac�vity would have been delayed un�l the very end of the design process. However, this can
cause problems if the designed product or service cannot be produced to the required quality
and cost constraints. For now, what is important to understand is that processes should at least
be examined in outline well before any product or service design is finalized.
Design evalua�on and improvement

The purpose of this stage in the design ac�vity is to take the preliminary design and see
whether it can be improved before the product or service is tested in the market. A number of
techniques can be employed at this stage to evaluate and improve the preliminary design. Here
we treat three which have proved par�cularly useful:

• quality func�on deployment (QFD);

• value engineering (VE);

• taguchi methods.

Quality func�on deployment

The key purpose of quality func�on deployment is to try to ensure that the eventual design
of a product or service actually meets the needs of its customers. Customers may not have been
considered explicitly since the concept genera�on stage and therefore it is appropriate to check
that what is being proposed for the design of the product or service will meet their needs.

It is a technique that was developed in Japan at Mitsubishi’s Kobe shipyard and used
extensively by Toyota, the motor vehicle manufacturer, and its suppliers. It is also known as the
‘house of quality’ (because of its shape) and the ‘voice of the customer’ (because of its
purpose).

The technique tries to capture what the customer needs and how it might be achieved.
Figure 5.9 shows an example of quality func�on deployment being used in the design of a new
informa�on system product.
 The QFD matrix is a formal ar�cula�on of how the company sees the rela�onship between
the requirements of the customer (the whats) and the design characteris�cs of the new product
(the hows). The matrix contains various sec�ons, as explained below:

• The whats, or ‘customer requirements’, are the compe��ve factors which customers find
significant. Their rela�ve importance is scored, in this case on a ten-point scale, with
accurate scoring the highest.

• The compe��ve scores indicate the rela�ve performance of the product, in this case on
a 1–5 scale. Also indicated are the performances of two compe�tor products.

• The hows, or ‘design characteris�cs’ of the product, are the various ‘dimensions’ of the
design which will opera�onalize customer requirements within the product or service.
 • The central matrix (some�mes called the rela�onship matrix) represents a view of the
interrela�onship between the whats and the hows. This is o�en based on value
judgements made by the design team. The symbols indicate the strength of the
rela�onship – for example, the rela�onship between the ability to link remotely to the
system and the intranet compa�bility of the product is strong.

• The botom box of the matrix is a technical assessment of the product. This contains the
absolute importance of each design characteris�c. (For example, the design
characteris�c ‘interfaces’ has a rela�ve importance of (9 5) + (1 9) = 54.). This is also
translated into a ranked rela�ve importance. In addi�on, the degree of technical
difficulty to achieve high levels of performance in each design characteris�c is indicated
on a 1–5 scale.

• The triangular ‘roof’ of the ‘house’ captures any informa�on the team has about the
correla�ons (posi�ve or nega�ve) between the various design characteris�cs.

Value engineering

The purpose of value engineering is to try to reduce costs, and prevent any unnecessary
costs, before producing the product or service. Simply put, it tries to eliminate any costs that do
not contribute to the value and performance of the product or service.

Value analysis is the name given to the same process when it is concerned with cost
reduc�on a�er the product or service has been introduced.) Value-engineering programs are
usually conducted by project teams consis�ng of designers, purchasing specialists, opera�ons
managers and financial analysts.

The chosen elements of the package are subject to rigorous scru�ny by analyzing their
func�on and cost, then trying to find any similar components that could do the same job at a
lower cost.

The team may atempt to reduce the number of components or use cheaper materials or
simplify processes. For example, Motorola used value engineering to reduce the number of
parts in its mobile phones from ‘thousands’ to ‘hundreds’ and even fewer, with a dras�c
reduc�on in processing �me and cost.

Value engineering requires innova�ve and cri�cal thinking, but it is also carried out using a
formal procedure. The procedure examines the purpose of the product or service, its basic
func�ons and its secondary func�ons. Taking the example of the remote mouse used
previously:
 • the purpose of the remote mouse is to communicate with the computer;

• the basic func�on is to control presenta�on slide shows;

• the secondary func�on is to be plug-and-play compa�ble with any system.

Taguchi methods

The main purpose of Taguchi methods, as advocated by Genichi Taguchi, is to test the
robustness of a design. The basis of the idea is that the product or service should perform in
extreme condi�ons. A telephone, for example, should s�ll work even when it has been knocked
onto the floor. Although one does not expect customers to knock a telephone to the floor, this
does happen and so the need to build strength into the casing should be considered in its
design. Likewise, a pizza parlor should be able to cope with a sudden rush of customers and a
hotel should be able to cope with early arrivals.

Product and service designers therefore need to brainstorm to try to iden�fy all the possible
situa�ons that might arise and check that the product or service is capable of dealing with those
that are deemed to be necessary and cost-effec�ve. In the case of an adventure holiday, for
example, service designers need to plan for such con�ngencies as:

• foul weather – the need for bad-weather alterna�ves;

• equipment failure – the provision of enough equipment to cover for maintenance;

• staff shortages – flexible working to allow cover from one area to another;

• accidents – the ability to deal with an accident without jeopardizing the other children
in

• the group, with easily accessible first-aid equipment, and using facili�es and equipment

• that are easy to clean and unlikely to cause damage to children;

• illness – the ability to deal with ill children who are unable to take part in an ac�vity.

The task is then to achieve a design which can cope with all these uncertain�es. The major
problem designers face is that the number of design factors which they could vary to try to cope
with the uncertain�es, when taken together, is very large. For example, in designing the
telephone casing there could be many thousands of combina�ons of casing size, casing shape,
casing thickness, materials, join�ng methods, etc. Performing all the inves�ga�ons (or
experiments, as they are called in the Taguchi technique) to try to find a combina�on of design
factors which gives an op�mum design can be a lengthy process. The Taguchi procedure is a
sta�s�cal procedure for carrying out rela�vely few experiments while s�ll being able to
determine the best combina�on of design factors.

Prototyping and final design

At around this stage in the design ac�vity it is necessary to turn the improved design into a
prototype so that it can be tested. It may be too risky to go into full produc�on of the
telephone, or the holiday, before tes�ng it out, so it is usually more appropriate to create a
prototype.

Product prototypes include everything from clay models to computer simula�ons. Service
prototypes may also include computer simula�ons but also the actual implementa�on of the
service on a pilot basis. Many retailing organiza�ons pilot new products and services in a small
number of stores in order to test customers’ reac�on to them.

Increasingly, it is possible to store the data that define a product or service in a digital
format on computer systems, which allows this virtual prototype to be tested in much the same
way as a physical prototype. This is a familiar idea in some industries such as magazine
publishing, where images and text can be rearranged and subjected to scru�ny prior to them
exis�ng in any physical form. This allows them to be amended right up to the point of
produc�on without incurring high costs.

Now this same principle is applied to the prototype stage in the design of three-dimensional
physical products and services. Virtual reality-based simula�ons allow businesses to test new
products and services as well as visualize and plan the processes that will produce them.
Individual component parts can be posi�oned together virtually and tested for fit or
interference. Even virtual workers can be introduced into the prototyping system to check for
ease of assembly or opera�on.

Computer-aided design (CAD)

CAD systems provide the computer-aided ability to create and modify product drawings.
These systems allow conven�onally used shapes (called en��es), such as points, lines, arcs,
circles and text, to be added to a computer-based representa�on of the product.

The simplest CAD systems model only in two dimensions in a similar way to a conven�onal
engineering ‘blueprint’. More sophis�cated systems can model products in three dimensions.
They may do this either by represen�ng the edges and corners of the shape (known as a wire-
frame model) or by represen�ng it as a full solid model.
 The most obvious advantage of CAD systems is that their ability to store and retrieve design
data quickly, as well as their ability to manipulate design details, can considerably increase the
produc�vity of the design ac�vity. In addi�on to this, however, because changes can be made
rapidly to designs, CAD systems can considerably enhance the flexibility of the design ac�vity,
enabling modifica�ons to be made much more rapidly.