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Aiming at competitive products and delighted
    customers in the time of recession

        Juhani Anttila                            Kari Jussila
        International Academy for Quality (IAQ)   Aalto University, School of Science
        Helsinki, Finland                         Espoo, Finland
        juhani.anttila@telecon.fi ,               kari.jussila@aalto.fi
        ww.QualityIntegration.biz




1   March 21, 2013                                                                These pages are licensed
                                                                         under the Creative Commons 3.0 License
                                                                         http://creativecommons.org/licenses/by/3.0
                                                                                    (Mention the origin)
Aiming at competitive products and delighted
    customers in the time of recession

               Main themes of the paper:

                   1.    Extended product concept
                   2.    Product characteristics and quality, and customer satisfaction
                   3.    Processes and technologies
                   4.    Product and corporate brands
                   5.    Challenges at the time of recession




2
    xxxx/20.6.2012/jan
Processes and product in a Business Connection

             Organizations in business connection:
                                                                  Customer (Product recipient)
             Supplier (Product producer)
                                                     Product
                                                 (Goods + Service)


            Supplier’s business processes
                                                         Customer’s business processes

                                     Business interface
                                   (business interactions)


                         Partner

                                      Process is activity and product its result.
3                                     Product use and perception reveal value and satisfaction.
    2499/15.2.2013/jan
Understanding the concept “product”

            Product:
            ”result of a process”
                  Normally many processes are involved in producing a product,
                   and processes may be in different organizations.
                  A product includes always service, and may also include goods.
            Service
            ”result of processes performed at the interface between the supplier and the customer”
                   Service is the essential part of all products, or factually all products are composite
                    products consisting of goods and services.
                   There is no justification to use a phraseology ”products and services” or ”products
                    or services” that factually means “goods and services”.
                   Value of goods may only be achieved through using the goods. Hence, also goods
                    may be seen as service providers.

            The value of a product is co-created by both the supplier and the customer.
4
    4023/12.2.2013/jan      (Ref.: ISO 9000)
A product consists of goods and services

           Product = Result of processes                                        Pure goods
                   = Goods + Services                                         100%     0%

                         Value provided for the customer is based on
                         both goods and services. The role of service
                         is dominant, and especially today increasing.
                                                                            Goods       Service
                         The goods value may be achieved only by using        value     value
                         the goods. Hence, also goods may be seen as a to customer      To customer
                         type of service provider.

                                                                                0%     100%
                                                                                Pure service




5
    2321/15.2.2013/jan
Three elements of a composite product
    producing value to the customer

             The product is composed of three elements that create value to the customer (“Value
             adding channels”):
                   - G: Goods service: Value from using the goods element
                   - H: Human service: Value from human services
                   - A: Automatic service: Value from automatic or mechanical services
                                                G


                    Each point within the                          The composite product and its
                    triangle represents                            elements co-create added-value P
                    a particular product.                          to the user with his/her process(es):
                                                                          P = uH + vA + wG
                                            v                      u, v, and w are contributory portions of
                                                                   different product elements to the value
                                                  P       u

                                                              Tendency
                                                      w
6
                        H                                                   A
    1628/3.2.2013/jan

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Rovinj2013

  • 1. Aiming at competitive products and delighted customers in the time of recession Juhani Anttila Kari Jussila International Academy for Quality (IAQ) Aalto University, School of Science Helsinki, Finland Espoo, Finland juhani.anttila@telecon.fi , kari.jussila@aalto.fi ww.QualityIntegration.biz 1 March 21, 2013 These pages are licensed under the Creative Commons 3.0 License http://creativecommons.org/licenses/by/3.0 (Mention the origin)
  • 2. Aiming at competitive products and delighted customers in the time of recession Main themes of the paper: 1. Extended product concept 2. Product characteristics and quality, and customer satisfaction 3. Processes and technologies 4. Product and corporate brands 5. Challenges at the time of recession 2 xxxx/20.6.2012/jan
  • 3. Processes and product in a Business Connection Organizations in business connection: Customer (Product recipient) Supplier (Product producer) Product (Goods + Service) Supplier’s business processes Customer’s business processes Business interface (business interactions) Partner Process is activity and product its result. 3 Product use and perception reveal value and satisfaction. 2499/15.2.2013/jan
  • 4. Understanding the concept “product” Product: ”result of a process”  Normally many processes are involved in producing a product, and processes may be in different organizations.  A product includes always service, and may also include goods. Service ”result of processes performed at the interface between the supplier and the customer”  Service is the essential part of all products, or factually all products are composite products consisting of goods and services.  There is no justification to use a phraseology ”products and services” or ”products or services” that factually means “goods and services”.  Value of goods may only be achieved through using the goods. Hence, also goods may be seen as service providers. The value of a product is co-created by both the supplier and the customer. 4 4023/12.2.2013/jan (Ref.: ISO 9000)
  • 5. A product consists of goods and services Product = Result of processes Pure goods = Goods + Services 100% 0% Value provided for the customer is based on both goods and services. The role of service is dominant, and especially today increasing. Goods Service The goods value may be achieved only by using value value the goods. Hence, also goods may be seen as a to customer To customer type of service provider. 0% 100% Pure service 5 2321/15.2.2013/jan
  • 6. Three elements of a composite product producing value to the customer The product is composed of three elements that create value to the customer (“Value adding channels”): - G: Goods service: Value from using the goods element - H: Human service: Value from human services - A: Automatic service: Value from automatic or mechanical services G Each point within the The composite product and its triangle represents elements co-create added-value P a particular product. to the user with his/her process(es): P = uH + vA + wG v u, v, and w are contributory portions of different product elements to the value P u Tendency w 6 H A 1628/3.2.2013/jan
  • 7. What is the product, and what are the processes involved? Essential questions: 1. What is the product, incl. a) The service, and b) The goods? 2. How the customer value is being created, through a) The value creating processes, and b) The structures supporting the processes? 7 4024/12.2.2013/jan
  • 8. Service is result of processes, Examples • Tourist service • Health care service – Memorable experience – Health, well-being • Restaurant service • Telecom service – Well-nourished, fullness – Completed phone call • Entertainment service • Transport service – Emotional response – Material, people transported • Design service • Maintenance service – Product specifications, prototype – Equipment repaired • Training /education service • Lawyer service – Skills, competence – Trial supported • Financial service • Consulting service – Loan – Development supported 8 0817/13.2.2013/jan
  • 9. General systematic grouping of inherent characteristics of any product (7E+3S) Effective- Ergo- Serve- Social per- ness & nomics ability(*) Security Esthetic Ethics formance Ecology Economy Efficiency Quantitative sufficiency Environmental compatibility Dependability The product performance characteristics may be Reliability designed systematically and performance objectively by the product Maintainability developer but they are always performance perceived comprehensively All product characteristics Maintenance support and subjectively by the are interlinked with each others performance product user. 9 0375/3.2.2013/jan (*) accessibility + retainability
  • 10. Quality  Grade (of a product) quality (of a product) - degree to which a set of inherent characteristics (of the product) fulfils requirements grade (of requirements) - category or rank given to the different requirements for the products having the same functional use Note: - requirement (generated by an interested party): need or expectation that is stated, generally implied or obligatory - interested party: person or group having an interest in the performance or success of an organization (a product) 10 0017/30.11.2008/jan (Ref.: ISO 9000)
  • 11. Customer perception Low High Satisfaction Indifference Dissatisfaction High Low 11 2318/14.10.2008/jan
  • 12. How can I understand whether a customer is satisfied or not? • When asked, the reply is ”Yes” • Says he is even not asked • Tells this to his friends • Buys more of what he is satisfied • Buys something else, too Situation consists of a complex mixture of rational, non-rational (emotional) and irrational human phenomena: – satisfaction, dissatisfaction, indifference – confidence, trust – goodwill / badwill balance – to buy or not to buy 12 1199/17.7.2001/jan
  • 13. Linking product characteristics with customer preference and satisfaction Recognized professional approaches:  Kano model A theory of customer satisfaction and product development that identifies product qualities based on how they affect the customer's perception of the product (Noriaki Kano 1980)  QFD (Quality Function deployment) A method to transform user demands into design quality, to deploy the functions forming quality, and to deploy methods for achieving the design quality into subsystems and component parts, and ultimately to specific elements of the manufacturing process (Yoji Akao 1966)  Kansei engineering A method that aims the development or improvement of products and services by translating customer's psychological feelings and needs into product's design parameters (Mitsuo Nagamachi in the early 1970’s) 13 4025/20.2.2013/jan
  • 14. Linking customer’s perception with business processes Different business situations:  Products from a single organization: - Gaps in the organization‘s business processes impact on the customer‘s perception. The phenomenon is described by the ServQual model that was developed in the mid- 1980s by Zeithaml, Parasuraman & Berry. We have modified the model for the extended product and process concepts.  Products from business networks and ecosystems: - Product (and in particular service) is not produced only by one organization’s processes but by many organizations’ processes operating in a business network or an ecosystem. Different networks and ecosystems compete with each other. However, one organization has the commercial relationship with the customer.  Products from a networked community: - A customer is an independent and collaborating member of a network. He or she and also all the other network members produce something to and get something from the other network members. A network product is a cumulative result from network member’s value creating interactions with all other members. Network members also get value from the whole network through the general recognition or privileges of the network. 14 4027/20.2.2013/jan
  • 15. Linking product quality with the supplier’s business success, Customer satisfaction index (CSI) Perceived (+) Complaints quality (+) (-) (+) Customer Perceived (+/-) (+) satisfaction value Index, CSI (+) (+) Loyalty Expectations (+) Drivers Results CONSEQUENCES: Business success 15 0503/23.2.2013/jan (Ref. A. Westlund 1996)
  • 16. Technology challenges New technologies have essential impacts on We have been involved with the following product characteristics and the effectiveness examples of the ICT (information and and efficiency of the related processes. These Communication technology): technologies include:  Radio frequency identification  Information technology (RFID)  Biotechnology  Ubiquitous information technology  Nano- and microtechnology Internet internet of things (IoT) and  Optical technology machine-to-machine applications  Energy technology  Mobile payment technology  Social technology  Cloud services  Etc.  Mashup products. Traditional technological progress in products took place due to the sustaining technology, but today disruptive technology innovations present greater challenges. In addition to the impact on quality of products, the new technologies also have challenging influence e.g. on environmental, social, safety and security performance, including:  Environmental protection  Information security 16  Health risks 4026/20.2.2013/jan
  • 17. Product brand and its consistency with corporate brand in market communication • Brand value:  The overall value statement to the user • Brand authority:  Excellence aspects • Brand personality:  Rational brand characteristics Corporate brand  Emotional brand characteristics • Brand benefits: Consistency  Concrete value features in use • Brand service:  Service provision to the user Product brand 17 2448/15.12.2008/jan
  • 18. Attractiveness and consistency of the corporate and product brands Nokia Apple Samsung Lumia 920 iPhone 5 Galaxy S III 4 G 18 3549/20.2.2013/jan
  • 19. Conclusion: Aiming at competitive products and delighted customers at the time of recession The time of recession causes problems and Challenges for the time of recession in troubles in organizations: organizations:  Business competition becomes tougher  More competitiveness through flexibility,  Uncertainty and difficulty increase in effectiveness and efficiency, and related getting new capital managerial skills are required.  People and organizations decrease  Organizations need to address themselves spending money on consumer and into essential issues and strive for lean investment products solutions.  Revenue of firms declines  Quality approaches should be concentrated  Organizations encounter difficulties in on the basics, and systematic practices are not only to grow but to maintain beneficial. profitability • Producing competitive goods and  Self-sustaining negative attitude drives services to giving in to the business challenges • Creating overpowering customer value and satisfaction • Refining business process performance The recession is always a threat and an opportunity. Recession is the time of considering critically the old and courageously learning and innovating the new. 19 xxxx/20.6.2012/jan