IntrODUCtIOn new product and service innovation is con.docx

IntrODUCtIOn
new product and service innovation is concerned with putting
new ideas into practice by embedding them in services and
products. innovation is the act of introducing new ideas, design
is about making those ideas practical. this is why the activity
of product and service innovation and the activity of design
are so closely linked. Both are important because products
and services are often the first thing that customers see of
a company. so they should have an impact. and although
operations managers may not always have full responsibility
for service and product innovation, they always have some
kind of responsibility, if only to provide the information and
advice upon which successful product or service development
depends. But increasingly operations mangers are expected
to take a greater and more active part in product and service
innovation. unless a service, however well conceived, can be
implemented, and unless a product, however well designed,
can be produced to a high standard, they can never bring their
full benefits. Figure 4.1 shows where this chapter fits into
the
overall operations model.
product and service innovation 4
Direct
Operations
performance
The
structure

and scope of
operations
Operations
strategy
Operations
management
Product
and service
innovation
Topic covered in
this chapter
Operations
management
Direct
Design Develop
Deliver
Figure 4.1 this chapter examines product and service
innovation
❯ What is product and service
innovation?
❯ What is the strategic role of
product and service innovation?
❯ What are the stages of product

and service innovation?
❯ What are the benefits of
interactive product and service
innovation?
Key questions
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110 PART ONE DIRECTING THE OPERATION
WHAT IS PRODUCT AND SERVICE INNOVATION?
There are a number of terms that we will use in this chapter
that have similar meanings, and
are defined by different authorities in different ways, or overlap
to some extent, and yet are
related to each other. For example, what is ‘innovation’? Is it
the same as ‘creativity’? How
does ‘design’ relate to both terms? So a sensible first step might
be to establish how we will be
using these terms.
Innovation, design and creativity
Given that this chapter is about product and service innovation,
we will start with what exactly
we mean by ‘innovation’. In fact there are many definitions.
The term is notoriously ambiguous
and lacks either a single definition or measure. It is ‘ a new
method, idea, product, etc. ’ ( Oxford
English Dictionary ), ‘ change that creates a new dimension of
performance ’ (Peter Drucker, a
well-known management writer), ‘ the act of introducing

something new ’ ( American Heritage
Dictionary ), ‘ a new idea, method or device ’ (Webster Online
Dictionary), ‘ new knowledge incor-
porated in products, processes and services ’. 1 What runs
through all these definitions is the idea of
novelty and change. Innovation is simply about doing something
new. But it is worth noting that
the idea of innovation is both broader and more complete than
that of ‘invention’. An ‘invention’
is also something that is novel or unique (usually applied to a
device or method), but it does not
necessarily imply that the novel device or method has the
potential to be practical, economic or
capable of being developed commercially. Innovation goes
further than ‘invention’. It implies not
just the novel idea, but also the process of transforming the idea
into something that provides
a return for an organization’s customers, owners, or both. The
study of innovation, what influ-
ences it, and how to manage it, is a huge subject and beyond the
scope of this book. However,
there is one particular attribute that is central to innovation –
creativity. ‘Creativity’ is the ability
to move beyond conventional ideas, rules or assumptions, in
order to generate significant new
ideas. It is a vital ingredient in innovation. It is seen as
essential not just in product and ser-
vice innovation, but also in the design and management of
operations processes more generally.
Partly because of the fast-changing nature of many industries, a
lack of
creativity (and consequently of innovation) is seen as a major
risk.
So, if creativity is an essential ingredient of innovation, and

innova-
tion implies making novel ideas into practical, commercial
form, what
is the process that transforms innovative ideas into something
more
concrete? It is ‘design’. Innovation creates the novel idea;
design makes
it work in practice. Design is to ‘ conceive the looks,
arrangement, and workings of something. A
design must deliver a solution that will work in practice. ’
Design is also an activity that can be
approached at different levels of detail. One may envisage the
general shape and intention of
something before getting down to defining its details (we will
observe this later in this chapter
when we examine the process of product and service design, and
when we look at process design
in Chapter 6 ). Figure 4.2 illustrates the relationship
between creativity, innovation and design as
we use the terms here. These concepts are intimately related,
which is why we treat them in the
same chapter. First we will look at some of the basic ideas that
help to understand innovation.
✽ ✽ ✽ Operations principle Operations principle
Operations principle
Is an essential
ingredient of…
That defines the
characteristics of…
That is transformed into a

practical proposition by…
The use of
imagination or
original ideas
Doing
something
new
Defining the looks,
arrangement and
workings of something
The nature and
characteristics of the
organization’s o�erings
Creativity Innovation Design Products and services
Figure 4.2 The relationship between creativity, innovation,
and design
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CHAPTER 4 PRODUCT AND SERVICE INNOVATION 111
OPERATIONS
IN PRACTICE
When Apple introduced the original iPhone, the world

of smartphones was changed for ever. It was arguably
one of the most influential products ever to be launched
in the consumer technology market and set the bench-
mark for the (many) smartphones that came after it. It
sold millions worldwide and helped to make Apple into
the world’s most valuable company. Yet how Apple and
its visionary then leader, Steve Jobs, managed the inno-
vation process remained something of a secret for years
after the product’s launch. Originally visualized as a tab-
let computer, work on the iPhone was initiated partly
because of the success of the firm’s earlier product, the
iPod music player. It was the profound effect that the
iPod had on the music industry that encouraged Apple
to consider what other markets it could challenge. Yet, it
was a technological breakthrough, the multi-touch dis-
play , which allowed the company to change course. As
Steve Jobs said later, ‘ I had this idea about having a glass
display, a multi-touch display you could type on. I asked
our people about it. And six months later they came back
with this amazing display. [When] we got inertial scroll-
ing working and some other things, I thought, “my God,
we can build a phone with this” and we put the tablet
aside, and we went to work on the phone. ’ But making the
multi-touch display a working proposition was challeng-
ing for Apple’s engineering team. The team had to create
an entirely new way in which users could interact with
their phones. There were many novel unsolved prob-
lems to overcome. Every single part of the design had
to be rethought to adapt to touch. For example, engi-
neers had to make scrolling work on the iPhone not only
when a user’s finger moved up and down, but also when
a user’s thumb moved in an arc across the screen. And
there were many other obstacles to overcome, some
which seemed almost insurmountable. Sir Jonathan Ive,
Senior Vice-President of Design at Apple, has admitted
that issues with the touchscreen were so difficult that it

brought the project to the brink of being aborted. ‘ There
were multiple times when we nearly shelved it because
there were fundamental problems that we couldn't solve ’,
said Sir Jonathan. ‘ I would put the phone to my ear and
my ear dialled a number. The challenge is that you have
to then detect all sorts of ear shapes, chin shapes, skin col-
our and hairdos. We had to develop technology, basically
a number of sensors, to inform the phone that “this is now
going up to an ear, please deactivate the touchscreen”. ’
Security during development was obsessively tight.
For example, the senior Apple executive in charge of
developing what would later become known as the iOS
operating system was told that he could choose anyone
he wanted from within Apple to join the embryonic
iPhone team, but he was not allowed to hire anybody
from outside the company. He could not even convey
to potential team members exactly what they would be
working on, just that it was a new and exciting project and
that they would have to ‘ work hard, give up nights, and
work weekends for years ’. When the development team
formed, it was located on a separate and secured floor
on Apple’s campus. The development area was ‘locked
down’ with extensive use of badge readers and cameras.
Team members might have to show their badges five or
six times to gain access. Within Apple, the code name for
the iPhone project was ‘Project Purple’ with the devel-
opment area itself called the ‘purple dorm’ because the
team worked continuously and so closely together that it
felt ‘like a college dorm’. It smelled like pizza.
The aesthetics of the iPhone were treated as being
just as important as the iPhone technology. This was
the responsibility of Apple’s secretive industrial design
group. Apple designer Christopher Stringer said that

their objective was to create a ‘ new, original, and beau-
tiful object [that was] so wonderful that you couldn't
imagine how you'd follow it ’ . The design group, Stringer
explained, was composed of 16 ‘maniacal’ individuals
who shared one singular purpose – to ‘ imagine prod-
ucts that don't exist and guide them to life ’. Team mem-
bers worked closely together, often gathering around a
‘kitchen table’ where they exchanged ideas, often in a
‘brutally honest’ way. To the designers, even the tiniest
How the iPhone disrupted the smartphone market 2
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The innovation S-curve
When new ideas are introduced in services, products or
processes, they rarely have an impact
that increases uniformly over time. Usually performance follows
an S-shaped progression.
So, in the early stages of the introduction of new ideas,
although (often large) amounts of
resources, time and effort are needed to introduce the idea,
relatively small performance
improvements are experienced. However, with time, as
experience and knowledge about
the new idea grow, performance increases. But as the idea
becomes established, extending
its performance further becomes increasingly difficult, see
Figure 4.3 (a). But when one idea
reaches its mature, ‘levelling-off’ period, it is vulnerable to a
further new idea being intro-
duced which, in turn, moves through its own S-shaped
progression. This is how innovation
works, the limits of one idea being reached which prompts a
newer, better idea, with each
new S-curve requiring some degree of redesign, see Figure
4.3 (b).
Incremental or radical innovation
An obvious difference between how the pattern of new ideas
emerges in different operations
or industries is the rate and scale of innovation. Some
industries, such as telecommunica-

tions, enjoy frequent and often significant innovations. Others,
such as house building, do
have innovations, but they are usually less dramatic. So some
innovation is radical, result-
ing in discontinuous, ‘breakthrough’ change, while other
innovations are more incremental
leading to smaller, continuous changes. Radical innovation
often includes large technolog-
ical advancements which may require completely new
knowledge and/or resources making
existing services and products obsolete and therefore non-
competitive. Incremental innova-
tion, by contrast, is more likely to involve relatively modest
technological changes, built upon
existing knowledge and/or resources so existing products and
services are not fundamentally
of details were important. They often would create up
to 50 designs of a single component before moving on
to computer-aided design modelling and the creation of
physical mock-ups.
The fact that the Apple designers overcame several
technology and production bugs during its development
is partly a testament to the design team’s belief, both
in their technological skills and in their understanding
of what people will buy. Yet Apple avoids conducting
market research when designing its products, a policy
introduced by Steve Jobs, its late chief executive. ‘ We
absolutely don't do focus groups ’, said Ive. ‘ That’s designers
and leaders abdicating responsibility. That’s them looking
for an insurance policy, so if something goes wrong, they
can say, well this focus group says that only 30 per cent of
people are offended by this and, look, 40 per cent think
it’s OK. What a focus group does is that it will guarantee

mediocrity. ’
P
er
fo
rm
an
ce
Time
Slow
introduction Obstacles to
further
development
overcome
Idea approaches
its natural limits
P
er
fo
rm
an
ce
Time

Progressive
introduction
of new
innovative
ideas
(a) The basic S-shaped improvement in performance (b)
Innovation following multiple S-shaped curves
Figure 4.3 The S-shaped curve of innovation
M04_SLAC8678_08_SE_C04.indd 112 6/2/16 12:59 PM
changed. This is why established companies may favour
incremental innovation because they
have the experience of building up a significant pool of
knowledge (on which incremental
innovation is based). In addition, established companies are
more likely to have a mindset
that emphasizes continuity, perhaps not even recognizing
potential innovative opportunities
(see the ‘Operations in practice’ case on Kodak). New entrants
to markets, however, have no
established position to lose, nor do they have a vast pool of
experience. They may be more
likely to try for more radical innovation.
The Henderson–Clark model
Although distinguishing between incremental and radical
innovation is useful, it does

not fully make clear why some companies succeed or fail at
innovation. Two researchers,
Henderson and Clark,3 looked at the question of why some
established companies sometimes
fail to exploit seemingly obvious incremental innovations. They
answered this question by
dividing the technological knowledge required to develop new
products and services into
‘knowledge of the components of knowledge’ and ‘knowledge
of how the components of
knowledge link together’. They called this latter knowledge
‘architectural knowledge’. Figure
4.4 shows what has become known as the Henderson–Clark
model. It refines the simpler idea
of the split between incremental and radical innovation. In this
model incremental innovation
is built upon existing component and architectural knowledge,
whereas radical innovation
changes both component and architectural knowledge. Modular
innovation is built on exist-
ing architectural knowledge, but requires new knowledge for
one or more components. By
contrast, architectural innovation will have a great impact upon
the linkage of components
(or the architecture), but the knowledge of single components is
unchanged.
So, for example, in healthcare services, simple (but useful and
possibly novel at the time)
innovations in a primary-care (general practitioner) doctors’
clinic, such as online appoint-
ment websites, would be classed as incremental innovation
because neither any elements nor
the relationship between them are changed. If the practice
invests in a new diagnostic heart
scanner, that element of their diagnosis task has been changed

and will probably need new
knowledge, but the overall architecture of the service has not
been changed. This innovation
High impact on
architectural knowledge
Low impact on architectural
knowledge
High impact on
component knowledge
Low impact on
component knowledge
Radical
innovation
Architectural
innovation
Modular
innovation
Incremental
innovation
New scanner
Walk-in service
Primary healthcare
example
Direct call-up
service Telemedicine

Figure 4.4 The Henderson–Clark model
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would be classed as ‘modular’. An example of architectural
innovation
would be the practice providing ‘walk-in’ facilities in the local
city cen-
tre. It would provide more or less the same service as the
regular sur-
gery (no new components), but the relationship between the
service
and patients has changed. Finally, if the practice adopted some
of the
‘telemedicine’ technology that monitors patient signs and can
react
to significant changes in patient condition, then this would be
radi-
cal innovation. The components are novel (monitors) as is the
overall
architecture of the service (distance diagnosis).
WHAT IS THE STRATEGIC ROLE OF PRODUCT
AND SERVICE INNOVATION?
Innovation is a risky business. Not every idea is transformed,
or is capable of being incorpo-
rated into the design of a successful product or service.
Sometimes this is because an inno-
vative idea is just too challenging, at least with realistically
available technology, or under

prevailing market conditions. Sometimes the development cost
is out of the reach of the busi-
ness that had the original idea. Ideas may be abundant, but
resources are limited. Yet despite
the obstacles to successful innovation, almost all firms strive to
be innovative. The reason is
that there is overwhelming evidence that innovation can
generate significant payback for the
organizations that manage the incorporation of innovative ideas
in the design of their prod-
ucts and services. What matters is the ability to identify the
innovations and manage their
transformation into effective designs so that they can sustain
competitive advantage and/or
generate social payback.
Design makes innovative ideas useful
It is worth repeating why design is so important. Good design
takes innovative ideas and
makes them practical. Good design also communicates the
purpose of the product or ser-
vice to its market, and brings financial rewards to the business.
Product and service design,
therefore, can be seen as starting and ending with the customer.
So the design activity has
one overriding objective: to provide products, services and
processes which will satisfy the
operation’s customers. Product designers try to achieve
aesthetically pleasing designs which
meet or exceed customers’ expectations. They also try to design
a product which performs
well and is reliable during its lifetime. 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 expectations. Yet at the

same time the service must
be within the capabilities of the operation and be delivered at
reasonable cost.
Operations principle Operations principle Operations principle
Critical commentary
Remember that not all new services and products are created in
response to a clear
and articulated customer need. While this is usually the case,
especially for products
and services that are similar to (but presumably better than)
their predecessors, more
radical innovations are often brought about by the innovation
itself creating demand.
Customers do not usually know that they need something
radical. For example, in the
late 1970s people were not asking for microprocessors – they
did not even know what
they were. They were improvised by an engineer in the USA for
a Japanese customer
who made calculators. Only later did they become the enabling
technology for the PC
and after that the innumerable devices that now dominate our
lives.
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Design pays for itself 4

There is an increasingly common acceptance that design can
add very significant value to all
types of organization. A growing number of books, articles,
reports and blogs have looked at
companies and the benefits that they have gained by taking the
design process seriously. This
interest in design is partly because of the success of companies
like Apple (see the ‘Operations
in practice’ case earlier in this chapter), which are regarded as
excellent at design. Numerous
authors have confirmed the impact of design on performance.
One report from the Design
Council in the UK has shown that, on average, for every £1
businesses invest in design, they
gain over £4 net operating profit, over £20 net turnover and
over £5 net exports. 5
Design can add value to any organization. In particular, good
design practice can:
● drive and operationalize innovation, increasing market
share and opening up new markets;
● differentiate products and services, making them more
attractive to customers, while
increasing consistency in the company’s range, and helping to
ensure successful product
launches;
● strengthen branding, so that products and services
embody a company’s values;
● reduce the overall costs associated with innovation,
through more efficient use of
resources, reduced project failure rate and faster time to market.

All of these benefits are strategic in that they very significantly
affect the future of a busi-
ness. As one company boss said, ‘ design is everything, because
without it we have no business…
There is intense competition, and anybody can design a decent
product. They can't all design out-
standing products. So, design is the differentiator .’
OPERATIONS
IN PRACTICE
The once mighty Eastman Kodak
Company dominated the pho-
tographic and film markets for
decades. But no longer: 30 years
ago it employed over 140,000
people and made substantial
profits; by 2010 it had shrunk to
around 19,000, with regular quar-
terly losses. This dramatic fall
from grace is usually put down to
the company ’s failure to see the
approach of digital photography or fully appreciate how
it would totally undermine Kodak’s traditional products.
Yet, ironically, Kodak was more than ahead of its com-
petitors than most people outside the company realized.
It actually invented the digital camera. Sadly, though, it
lacked the foresight to make the most of it. For years the
company had, as one insider put it, ‘ too much technology
in its labs rather than in the market ’.
It was back in 1975 when a newly hired scientist at
Kodak, Steve Sasson, was given the task of research-
ing how to build a camera using a comparatively new
type of electronic sensor – the charged-coupled device
(CCD). He found little previous research so he used

the lens from a Kodak motion-picture camera, an ana-
logue-to-digital converter, some
CCD chips and some digital cir-
cuitry that he made himself. By
December 1975 he had an oper-
ational prototype. Yet the advance
was largely, although not com-
pletely, ignored inside the com-
pany. ‘ Some people talked about
reasons it would never happen,
while others looked at it and real-
ized it was important ’, he says. He
also decided not to use the word ‘digital’ to describe his
trial product. ‘ I proposed it as filmless photography, an
electronic stills camera. Calling it “digital” would not have
been an advantage. Back then “digital” was not a good
term. It meant new, esoteric technology. ’ Some resistance
came from genuine, if mistaken, technical reservations.
But others feared the magnitude of the changes that
digital photography could bring. Objections ‘ were com-
ing from the gut: a realization that [digital] would change
everything – and threaten the company’s entire film-based
business model ’ . Some see Kodak’s reluctance to aban-
don its traditional product range as understandable. It
was making vast profits and as late as 1999 it was making
over $3 billion from film sales. Todd Gustavson, Curator
The sad tale of Kodak and its digital camera 6
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The design activity is itself a process
Producing design innovations for products and services is itself
a process that conforms to the
input–transformation–output model described in Chapter 1 .
Although organizations will have
their own particular ways of managing innovation and design,
the design process itself is essen-

tially very similar across a whole range of industries. It
therefore has to
be designed and managed like any other process. Broadly, the
better the
design process is managed, the better the products and service
offering.
Figure 4.5 illustrates the design activity as an input–
transformation–
output diagram. The transformed resource inputs will consist
mainly of
information in the form of market forecasts, market preferences,
techni-
cal data, potential design ideas, and so on. It is these ideas and
informa-
tion that will be transformed in the design process into the final
design. Transforming resource
inputs includes the operations and design managers who manage
the process, together with
specialist technical staff with the specific knowledge necessary
to solve design problems. They
also may include suppliers, other collaborators, and even
especially interested customer groups
(sometimes called ‘lead users’) who are brought in to provide
their expertise. Transforming
resources may also include computer-aided design (CAD)
equipment and software.
Design process objectives
The performance of the design process can be assessed in much
the
same way as we would consider the products and services that
result
from it, namely in terms of quality, speed, dependability,
flexibility

and cost. Here we also include ‘sustainability’ as a design
objective. It
is, of course, included as part of the ‘triple bottom line’
objectives, as
explained in Chapter 2 , but because product and service
design has
such an influence on sustainability, we include it alongside our
normal operational-level
objectives. These performance objectives have just as much
relevance for innovation as they
do for the ongoing delivery of offerings once they are
introduced to the market.
of Technology at the George Eastman House Museum,
says that ‘ Kodak was almost recession-proof until the
rise of digital. A film-coating machine was like a device
that printed money. ’ So Kodak’s first digital camera, the
Quicktake, was licensed to and sold by Apple in 1994.
In 2012 Kodak filed for bankruptcy protection.
OutputsInputs
Transformed resources, e.g.
• Technical information
• Market information
• Time information
• Design ideas
Transforming resources, e.g.
• Test and design equipment
• Design and technical sta�
• Lead user (customer) feedback

• Supplier advice
• Collaborators
Designs produced to
appropriate standards of…
• Quality
• Speed
• Dependability
• Flexibility
• Cost
• Sustainability
The product/service
design innovation
process
Figure 4.5 The design activity is itself a process
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What does quality mean for the design process?
Design quality is not always easy to define precisely, especially
if customers are relatively sat-
isfied with existing product and service offerings. Many

software companies talk about the
‘I don't know what I want, but I'll know when I see it’
syndrome, meaning that only when
customers use the software are they in a position to articulate
what they do or do not require.
Nevertheless, it is possible to distinguish high- and low-quality
designs (although this is easier
to do in hindsight) by judging them in terms of their ability to
meet market requirements. In
doing this, the distinction between the specification quality and
the conformance quality of
designs is important. No business would want a design process
that was indifferent to ‘errors’
in its designs, yet some are more tolerant than others. For
example, in pharmaceutical devel-
opment the potential for harm is particularly high because drugs
directly affect our health.
This is why the authorities insist on such a prolonged and
thorough ‘design’ process (more
usually called ‘development’ in that industry). Although
withdrawing a drug from the market
is unusual, it does occasionally occur. Far more frequent are the
‘product recalls’ that are rela-
tively common in, for example, the automotive industry. Many
of these are design related and
the result of ‘conformance’ failures in the design process. The
‘specification’ quality of design
is different. It means the degree of functionality, or experience,
or aesthetics, or whatever
the product or service is primarily competing on. Some
businesses require product or service
designs that are relatively basic (although free from errors),
while others require designs that
are clearly special in terms of the customer response they hope
to elicit.

What does speed mean for the design process?
The speed of design matters more to some industries than
others. For example, design inno-
vation in construction and aerospace happens at a much slower
pace than in clothing or
microelectronics. However, rapid design innovation or ‘time-
based competition’ has become
the norm for an increasing number of industries. Sometimes this
is the result of fast- changing
consumer fashion. Sometimes a rapidly changing technology
base forces it. Telecoms, for
example, are updated frequently because their underlying
technology is constantly improv-
ing. Yet, no matter what the motivation, fast design brings a
number of advantages:
● Early market launch – an ability to innovate speedily is
that product and service offerings
can be introduced to the market earlier and thus earn revenue
for longer, and may com-
mand price premiums.
● Starting design late – alternatively, starting the design
process later may have advantages,
especially where either the nature of customer demand or the
availability of technology is
uncertain and dynamic, so fast design allows design decisions to
be made closer to the time
when product and service offerings are introduced to the
market.
● Frequent market stimulation – rapid innovations allow
frequent new or updated offerings
to be introduced into the market.
What does dependability mean for the design process?

Rapid design processes that cannot be relied on to deliver
dependably are, in reality, not fast
at all. Design schedule slippage can extend design times, but,
worse, a lack of dependability
adds to the uncertainty surrounding the innovation process.
Conversely, processes that are
dependable minimize design uncertainty. Unexpected technical
difficulties, such as suppliers
who themselves do not deliver solutions on time, customers or
markets that change during
the innovation process itself, and so on, all contribute to an
uncertain and ambiguous design
environment. Professional project management (see Chapter 19)
of the innovation process
can help to reduce uncertainty and prevent (or give early
warning of) missed deadlines, pro-
cess bottlenecks and resource shortages. However, external
disturbances to the innovation
process will remain. These may be minimized through close
liaison with suppliers as well as
market or environmental monitoring. Nevertheless, unexpected
disruptions will always occur
and the more innovative the design, the more likely they are to
occur. This is why flexibility
M04_SLAC8678_08_SE_C04.indd 117 6/2/16 12:59 PM
within the innovation process is one of the most important ways
in which dependable deliv-
ery of new product and service offerings can be ensured.
What does flexibility mean for the design process?

Flexibility in the innovation process is the ability to cope with
external or internal change.
The most common reason for external change is because
markets, or specific customers,
change their requirements. Although flexibility may not be
needed in relatively predictable
markets, it is clearly valuable in more fast-moving and volatile
markets, where one’s own cus-
tomers and markets change, or where the designs of
competitors’ offerings dictate a matching
or leapfrogging move. Internal changes include the emergence
of superior technical solu-
tions. In addition, the increasing complexity and
interconnectedness of product and service
components in an offering may require flexibility. A bank, for
example, may bundle together a
number of separate services for one particular segment of its
market. Privileged account hold-
ers may obtain special deposit rates, premium credit cards,
insurance offers, travel facilities,
and so on, together in the same package. Changing one aspect of
this package may require
changes to be made in other elements. So extending the credit
card benefits to include extra
travel insurance may also mean the redesign of the separate
insurance element of the pack-
age. One way of measuring innovation flexibility is to compare
the cost of modifying a design
in response to such changes against the consequences to
profitability if no changes are made.
The lower the cost of modifying an offering in response to a
given change, the higher is the
level of flexibility.
What does cost mean for the design process?
The cost of innovation is usually analysed in a similar way to

the ongoing cost of delivering
offerings to customers. These cost factors are split up into three
categories: the cost of buying
the inputs to the process, the cost of providing the labour in the
process, and the other general
overhead costs of running the process. In most in-house
innovation processes the latter two
costs outweigh the former.
One way of thinking about the effect of the other innovation
performance objectives on
cost is shown in Figure 4.6. Whether caused by quality errors,
an intrinsically slow innovation
process, a lack of project dependability, or delays caused
through inflexibility, the end result
is that the design is late. Delayed completion of the design
results in both more expenditure
on the design and delayed (and probably reduced) revenue. The
combination of these effects
usually means that the financial break-even point for a new
offering is delayed far more than
the original delay in its launch.
What does sustainability mean for the design process?
The sustainability of a design innovation is the extent to which
it benefits the ‘triple bot-
tom line’ – people, planet and profit. When organizations carry
out their design innova-
tion activities, they should consider their objectives in relation
to this triple bottom line.
The design innovation process is particularly important in
ultimately impacting the ethical,
environmental and economic well-being of stakeholders. And
incorporating sustainability
criteria in the design process is increasingly common.
Sometimes this is because of exter-

nal pressures, such as new legislation, sometimes because of
changing customer attitudes.
For example, some innovation activity is particularly focused on
the ethical dimension of
sustainability. Banks have moved to offer customers ethical
investments that seek to maxi-
mize social benefit as well as financial returns. Such
investments tend to avoid businesses
involved in weaponry, gambling, alcohol and tobacco, for
example, and favour those pro-
moting worker education, environmental stewardship and
consumer protection. Other
examples of ethically focused innovations include the
development of ‘fair-trade’ products.
Similarly, garment manufacturers may establish ethical trading
initiatives with suppliers;
supermarkets may ensure animal welfare for meat and dairy
products; online companies
may institute customer complaint charters.
M04_SLAC8678_08_SE_C04.indd 118 6/2/16 12:59 PM
Design innovation may also focus on the environmental
dimension of sustainability.
Critically examining the components of products towards a
change of materials in the
design could significantly reduce the environmental burden.
Examples include the use
of organic cotton or bamboo in clothing; wood or paper from
managed forests used in
garden furniture, stationery and flooring; recycled materials for
carrier bags; and natural

dyes in clothing, curtains and upholstery. Other innovations
may be more focused on the
use stage of an offering. The MacBook Air, for example,
introduced an advanced power
management system that reduced its power requirements. In the
detergent industry,
Unilever and Proctor & Gamble have developed products that
allow clothes to be washed
at much lower temperatures. Architecture firms are increasingly
designing houses that
can operate with minimal energy or use sustainable sources of
energy such as solar pan-
els. Some innovations focus on making product components
within an offering easier to
recycle or remanufacture once they have reached the end of
their life. For example, some
food packaging has been designed to break down easily when
disposed of, allowing its
conversion into high-quality compost. Mobile phones are often
designed to be taken apart
at the end of their life, so valuable raw materials can be reused.
In the automotive indus-
try, over 75 per cent of materials are recycled.
WHAT ARE THE STAGES OF PRODUCT
AND SERVICE INNOVATION?
Fully specified designs rarely spring, fully formed, from a
designer’s
imagination. The design activity will generally pass through
several
key stages. These form the sequence shown in Figure 4.7 ,
although in
practice designers will often recycle or backtrack through the
stages.
Nor is this sequence of stages descriptive of the stages used by

all
Delay in
time to
market
Cash
Delay in
financial
break-even
Sales revenue
Cash flow
Delayed sales revenue
Delayed cash flow
Development costs
Development costs of delayed project
Time
Figure 4.6 Delay in time to market of new innovations not
only reduces and delays revenues, but also increases the
costs of development. The combination of both of these effects
usually delays the financial break-even point far
more than the delay in the launch

M04_SLAC8678_08_SE_C04.indd 119 6/2/16 12:59 PM
companies, yet most will use some stage model similar to this
one. It moves from the concept
generation stage to a screening stage, a preliminary design stage
that produces a design to be
evaluated and prototyped before reaching the final design.
Concept generation
This is where innovative ideas become the inspiration for new
service or product concepts.
And innovation can come from many different sources:
● Ideas from customers – Marketing, the function generally
responsible for identifying new
service or product opportunities, may use market research tools
for gathering data from
customers in a structured way to test out ideas or check services
or products against prede-
termined criteria.
● Listening to customers – Ideas may come from customers
on a day-to-day basis; from
complaints, or from everyday transactions. Although some
organizations may not see
gathering this information as important (and may not even have
mechanisms in place to
facilitate it), it is an important potential source of ideas.
● Ideas from competitor activity – Most organizations
follow the activities of their compet-

itors. A new idea from a competitor may be worth imitating or,
better still, improved upon.
Taking apart a competitor’s product or service to explore
potential new ideas is called
‘reverse engineering’. Some aspects of services may be difficult
to reverse-engineer (espe-
cially ‘back-office’ services) as they are less transparent to
competitors.
● Ideas from staff – The contact staff in a service
organization or the salesperson in a
product-oriented organization could meet customers every day.
These staff may have good
ideas about what customers like and do not like. They may have
gathered suggestions from
customers or have ideas of their own. One well-known example
– which may be urban
myth – is that an employee at Swan Vestas, the matchmaker,
suggested having one instead
of two sandpaper strips on the matchbox. It saved a fortune!
● Ideas from research and development – Many
organizations have a formal research
and development (R&D) function. As its name implies, its role
is twofold. Research devel-
ops new knowledge and ideas in order to solve a particular
problem or to grasp an oppor-
tunity. Development utilizes and operationalizes the ideas that
come from research. And
although ‘development’ may not sound as exciting as ‘research’,
it often requires as much
creativity and even more persistence. One product has
commemorated the persistence
of its development engineers in its company name. Back in 1953
the Rocket Chemical
Company set out to create a rust-prevention solvent and

degreaser to be used in the aero-
space industry. It took them 40 attempts to get the water-
displacing formula worked out.
So that is what they called the product. WD-40 literally stands
for Water Displacement,
40th attempt.
Open sourcing – using a ‘development community’7
Not all ‘products’ or services are created by professional,
employed designers for com-
mercial purposes. Many of the software applications that we all
use, for example, are
developed by an open community, including the people who use
the products. If you use
Google, the Internet search facility, or use Wikipedia, the
online encyclopaedia, or shop at
Concept
generation
Concept
screening
Preliminary
design
Evaluation
and
improvement
Prototyping
and final
design

Figure 4.7 The stages of product/service design innovation
M04_SLAC8678_08_SE_C04.indd 120 6/2/16 1:00 PM
Amazon, you are using open-source software. The basic concept
of open-source software
is extremely simple. Large communities of people around the
world, who have the abil-
ity to write software code, come together and produce a
software product. The finished
product is not only available to be used by anyone or any
organization for free, but also
regularly updated to ensure it keeps pace with the necessary
improvements. The produc-
tion of open-source software is very well organized and, like its
commercial equivalent,
is continuously supported and maintained. However, unlike its
commercial equivalent,
it is absolutely free to use. Over the last few years the growth of
open source has been
phenomenal, with many organizations transitioning over to
using this stable, robust and
secure software. With the maturity that open-source software
now has to offer, organ-
izations have seen the true benefits of using free software to
drive down costs and to
establish themselves on a secure and stable platform. Open
source has been the biggest
change in software development for decades and is setting new
open standards in the
way software is used. The open nature of this type of
development also encourages com-

patibility between products. BMW, for example, was reported to
be developing an open-
source platform for vehicle electronics. Using an open-source
approach, rather than using
proprietary software, BMW can allow providers of
‘infotainment’ services to develop com-
patible, plug-and-play applications.
Crowdsourcing8
Closely related to the open sourcing idea is that of
‘crowdsourcing’. Crowdsourcing is the
process of getting work or funding, or ideas (usually online),
from a crowd of people.
Although in essence it is not a totally new idea, it has become a
valuable source of ideas
largely through the use of the Internet and social networking.
For example, Procter &
Gamble, the consumer products company, asked amateur
scientists to explore ideas for a
detergent dye whose colour changes when enough has been
added to dishwater. Other uses
of the idea involve government agencies asking citizens to
prioritize spending (or cutting
spending) projects.
Parallel-path approach
Because the likelihood of successful innovation coming from a
single source of ideas is highly
uncertain, it has been argued that firms could improve the odds
of innovation success by
using what is sometimes termed a ‘parallel-path strategy’. This
simply means utilizing a vari-
ety of different sources and approaches to generating ideas.
Traditionally, it was assumed that there was a trade-off between

the depth and breadth
of the usefulness of the ideas that can come from various
sources. One could pursue a
few sources of ideas in depth or a wide range of sources in a
relatively shallow manner.
In addition, the marginal cost of exploring a new source may
increase as the number of
sources examined increases. So, the breadth of knowledge
sources also may be subject to
diminishing marginal returns. However, more recent research9
suggests that firms also
may improve their odds of successful innovation by accessing a
large number of knowl-
edge sources.
Ideas management
Obtaining new product or service ideas (or indeed any
innovative ideas) from employ-
ees was traditionally done through the use of paper-based
‘suggestion schemes’ where
employees placed their ideas in a ‘suggestion box’. Such
schemes were often only partly
effective, yielding few, low-quality ideas. Unless the running of
the scheme was well
resourced it could be difficult to guarantee that all ideas were
evaluated consistently and
quickly. Also, the scheme could lose credibility unless
employees could track their ideas to
confirm that they ‘didn't just disappear’. However, the advent of
‘idea management’ soft-
ware tools has overcome some of these difficulties. Ideas
management systems are a type
of enterprise software (often web-based) that can help
operations to collect ideas from
M04_SLAC8678_08_SE_C04.indd 121 6/2/16 1:00 PM

employees, assess them and, if appropriate, implement them
quickly and efficiently. Such
systems can track ideas all the way though from inception to
implementation, making
it much easier to understand important performance measures
such as where ideas are
being generated, how many ideas submitted are actually
implemented, the estimated cost
savings from submitted ideas and any new revenues generated
by implemented ideas.
Often ideas management systems are used to focus ideas on
specific organizational tar-
gets and objectives, which it is claimed improved both the
quality and quantity of ideas,
when compared with ‘open’ suggestion schemes.
Concept screening
Not all concepts which are generated will necessarily be
capable of further development into
products and services. Designers need to be selective as to
which concepts they progress to
the next design stage. The purpose of the concept-screening
stage is to evaluate concepts by
assessing the worth or value of design options. This involves
assessing each concept or option
against a number of design criteria. While the criteria used in
any particular 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 option – can we do it?
● Do we have the skills (quality of resources)?
● Do we have the organizational capacity (quantity of
resources)?
● Do we have the financial resources to cope with this
option?
OPERATIONS
IN PRACTICE
It sounds like a joke, but it is a genuine product innovation
motivated by a market need. It is green, square and comes
originally from Japan. It is a square watermelon! Why
square? Because Japanese grocery stores are not large
and space cannot be wasted. Similarly a round water-
melon does not fit into a refrigerator very conveniently.
There is also the problem of trying to cut the fruit when it
keeps rolling around. So an innovative farmer from Japan’s
south-western island of Shikoku solved the problem with
the idea of making a cube-shaped watermelon which
could easily be packed and stored. But there is no genetic
modification or clever science involved in growing water-
melons. It simply involves placing the young fruit into
wooden boxes with clear sides. During its growth, the fruit
naturally swells to fill the surrounding shape. Now the
idea has spread from Japan. ‘ Melons are among the most
delicious and refreshing fruit around but some people find
them a problem to store in their fridge or to cut because
they roll around ’, said Damien Sutherland, the exotic fruit
buyer from Tesco, the UK supermarket. ‘ We've seen sam-
ples of these watermelons and they literally stop you in their
tracks because they are so eye-catching. These square mel-
ons will make it easier than ever to eat because they can be
served in long strips rather than in the crescent shape .’ But
Square watermelons! 10

not everyone liked the idea. Comments on news websites
included: ‘ where will engineering every day things for our
own unreasonable convenience stop? I prefer melons to be
the shape of melons! ’; ‘ they are probably working on straight
bananas next! ’; and ‘ I would like to buy square sausages
then they would be easier to turn over in the frying pan.
Round sausages are hard to keep cooked all over .’
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M04_SLAC8678_08_SE_C04.indd 122 6/2/16 1:00 PM
● The acceptability of the design option – do we want to
do it?
● Does the option satisfy the performance criteria which
the design is trying to achieve?
(These will differ for different designs.)
● Will our customers want it?
● Does the option give a satisfactory financial return?
● The vulnerability of each design option – do we want to
take the
risk? That is:
● Do we understand the full consequences of adopting the
option?
● Being pessimistic, what could go wrong if we adopt the
option?
What would be the consequences of everything going wrong?
(This is called the ‘downside risk’ of an option.)
The design ‘funnel’
Applying these evaluation criteria progressively reduces the
number of options which will
be available further along in the design activity. For example,
deciding to make the outside
casing of a camera case from aluminium rather than plastic
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 alternative designs being considered
decreases. Figure 4.8 shows
what is sometimes called ‘the design funnel’, depicting the
progressive reduction of design
options from many to one. But reducing design uncertainty also
impacts the cost of chang-
ing 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
recalculation of costs. Early on in the
design activity, before too many fundamental decisions have
been made, the costs of change
are relatively low. However, as the design progresses the
interrelated and cumulative deci-
sions already made become increasingly expensive to change.
Preliminary design
Having generated an acceptable, feasible and viable product or
service concept the next stage
is to create a preliminary design. The objective of this stage is
to have a first attempt at specify-
ing the individual components or elements of the products and
services, and the relationship
between them, which will constitute the final offering.
Figure 4.8 The design funnel – progressively reducing the
number of possibilities until the final design is reached
M04_SLAC8678_08_SE_C04.indd 123 6/2/16 1:00 PM

Specifying the components of the design
The first task in this stage of design is to define exactly what
will go into the product or
service. This will require the collection of information 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
‘presentation’ mouse may include the
presentation mouse itself, a receiver unit and packaging. All
these three items are made up
of components, which are, in turn, made up of other
components, and so on. A ‘component
structure’ is the diagram that shows how these components all
fit together to make the final
product ( see Fig. 4.9 ).
Reducing design complexity
Simplicity is usually seen as a virtue among designers of
products and services. The most
elegant design solutions are often the simplest. However, when
an operation produces
a variety of products or services (as most do) the range of
products and services consid-
ered 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 prod-
ucts or service range. Here we describe three common

approaches
to complexity reduction: standardization, commonality and
modularization.
Standardization
Operations sometimes attempt to overcome the cost penalties 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. Often it is the operation’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
standardization is the clothes which
most us of 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 potential
customers and/or to ensure
a perfect fit, garment manufacturers would have to provide an
unfeasibly large range
of sizes. Alternatively, they would need to provide a customized
service. Both solutions
Critical commentary
Not everyone agrees with the concept of the design funnel. For
some it is just too
neat and ordered an idea to reflect accurately the creativity,
arguments and chaos
that sometimes characterize the design activity. First, they
argue, managers do not

start out with an infinite number of options. No one could
process that amount of
information – and, anyway, designers often have some set
solutions in mind, looking
for an opportunity to be used. Second, the number of options
being considered
often increases as time goes by. This may actually be a good
thing, especially if the
activity was unimaginatively specified in the first place. Third,
the real process of
design often involves cycling back, often many times, as
potential design solutions
raise fresh questions or become dead ends. In summary, the idea
of the design
funnel does not describe what actually happens in the design
activity. Neither does
it necessarily even describe what should happen.
M04_SLAC8678_08_SE_C04.indd 124 6/2/16 1:00 PM
would have a significant impact on cost. This control of variety
is an important issue with
most companies. A danger facing established operations is that
they allow variety to grow
excessively. They are then faced with the task of variety
reduction, often by assessing the
real profit or contribution of each service or product. Many
organizations have signif-

icantly improved their profitability by careful variety reduction.
In order to overcome
loss of business, customers may be offered alternative products
or services which provide
similar value.
Commonality
Using common elements within a product or service product can
also simplify design com-
plexity. Using the same components across a range of
automobiles is a common practice.
Likewise, standardizing the format of information inputs to a
process can be achieved by
using appropriately designed forms or screen formats. The more
different product and
services can be based on common components, the less complex
it is to produce them.
For example, the European aircraft maker, Airbus, has designed
its aircraft with a high
degree of commonality. This meant that 10 aircraft models
ranging from the 100-seat
A318 through to the world’s largest aircraft, the A380 with over
500 seats, feature vir-
tually identical flight decks, common systems and similar
handling characteristics. In
some cases, such as the entire A320 family, the aircraft even
share the same ‘pilot-type
rating’, which enables pilots with a single licence to fly any of
them. The advantages of
commonality for the airline operators include a much shorter
training time for pilots and
engineers when they move from one aircraft to another. This
offers pilots the possibility
of flying a wide range of routes from short haul to ultra-long
haul and leads to greater
efficiencies because common maintenance procedures can be

designed with maintenance
teams capable of servicing any aircraft in the same family.
Also, when up to 90 per cent
of all parts are common within a range of aircraft, there is a
reduced need to carry a wide
range of spare parts.
Level 3
Level 4
Level 2
Level 1
Remote presentation mouse
Receiver unit Packing
R/C
unit
USB
connector LeafletOuter
LogoMoulding Control unitMoulding
TransmitterButton
Upper cover
Main
assembly
Presentation mouse

Level 0
Figure 4.9 The component structure of a remote mouse
M04_SLAC8678_08_SE_C04.indd 125 6/2/16 1:00 PM
Modularization
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 combinations 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 reduc-
ing their cost. Similarly, the package holiday industry can
assemble holidays to meet a specific
customer requirement, from pre-designed and purchased air
travel, accommodation, insur-
ance, and so on. In education also there is an increasing use of
modular courses which allow
‘customers’ choice but permit each module to have economical
volumes of students.
OPERATIONS
IN PRACTICE
In 1907 a janitor called Murray Spangler put together a
pillowcase, a fan, an old biscuit tin, and a broom han-
dle. It was a great innovation – the world’s first vacuum

cleaner – but not one that he ever capitalized on. One
year later he had sold his patented idea to William
Hoover whose company went on to dominate the vac-
uum cleaner market for decades, especially in its US
homeland. Yet when Hoover’s market share dropped
significantly, it was because a futuristic looking and com-
paratively expensive rival product, the Dyson vacuum
cleaner, had jumped from nothing to a position where
it dominated the market. The product may have been
new, but the company was not. The Dyson product dates
back to 1978 when James (now Sir James) Dyson noticed
how the air filter in the spray-finishing room of a com-
pany where he had been working was constantly clog-
ging with power particles ( just like a vacuum cleaner bag
clogs with dust). So he designed and built an industrial
cyclone tower, which removed the powder particles by
exerting centrifugal forces. The question intriguing him
was: ‘ Could the same principle work in a domestic vacuum
cleaner? ’ Five years and five thousand prototypes later he
had a working design, since praised for its ‘uniqueness
and functionality ’. However, existing vacuum cleaner
manufacturers were not as impressed – two rejected the
design outright. So Dyson started making his new design
himself. Within a few years Dyson cleaners were, in the
UK, outselling the rivals who had once rejected them.
The aesthetics and functionality of the design help to
keep sales growing in spite of a higher retail price. To
Dyson, good ‘ is about looking at everyday things with
new eyes and working out how they can be made bet-
ter. It’s about challenging existing technology. ’ Then the
Dyson engineers took the technology one stage further
and developed core separator technology to capture
even more microscopic dirt. Dirt now goes through
three stages of separation. First, dirt is drawn into a pow-
erful outer cyclone. Centrifugal forces fling larger debris

such as pet hair and dust particles into the clear bin at
500 g (the maximum g -force the human body can take
is 8 g ). Second, a further cyclonic stage, the core separa-
tor, removes dust particles as small as 0.5 microns from
the airflow – particles so small you could fit 200 of them
on this full stop. Finally, a cluster of smaller, even faster
cyclones generates centrifugal forces of up to 150,000 g ,
extracting particles as small as mould and bacteria.
Other innovations followed. The Dyson Airblade is an
electric hand dryer that dries hands quicker (around 10
seconds) and uses less electricity than conventional hand
Innovative design from Dyson 11
▼
So
ur
ce
: D
ys
on
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Design evaluation and improvement
The purpose of this stage in the design innovation activity is to
take the preliminary design
and subject it to a series of evaluations to see if it can be

improved before the service or prod-
uct is tested in the market. There are a number of techniques
that can be employed at this
stage to evaluate and improve the preliminary design. Perhaps
the best known is quality func-
tion deployment (QFD).
Quality function deployment
The key purpose of QFD is to try to ensure that the eventual
innovation actually meets the
needs of its customers. 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 4.10 shows a simple QFD
matrix used in the design of a promo-
tional USB data storage pen. The QFD matrix is a formal
articulation of how the company
sees the relationship between the requirements of the customer
(the whats ) and the design
characteristics of the new product (the hows ):
● The whats , or ‘customer requirements’, are the list of
competitive factors which customers
find significant. Their relative importance is scored, in this case
on a 10-point scale, with
price scoring the highest.
● The competitive scores indicate the relative performance
of the product, in this case on a
1 to 5 scale. Also indicated are the performances of two
competitor products.

● The hows , or ‘design characteristics’ of the product,
are the various ‘dimensions’ of the
design, which will operationalize customer requirements within
the product or service.
● The central matrix (sometimes called the relationship
matrix) represents a view of the inter-
relationship between the whats and the hows . This is often
based on value judgements made
by the design team. The symbols indicate the strength of the
relationship. All the relation-
ships are studied, but in many cases, where the cell of the
matrix is blank, there is none.
● The bottom box of the matrix is a technical assessment
of the product. This contains the
absolute importance of each design characteristic.
● The triangular ‘roof’ of the ‘house’ captures any
information the team has about the corre-
lations (positive or negative) between the various design
characteristics
Prototyping and final design
At around this stage in the design activity it is necessary to
turn the improved design into a
prototype so that it can be tested. It may be too risky to launch
a product or service before
testing it out, so it is usually more appropriate to create a
‘prototype’ (in the case of a product)
or ‘trial’ (in the case of a service). Product prototypes include
everything from clay models
to computer simulations. Service trials may also include
computer simulations but also the
actual implementation of the service on a pilot basis. Many

retailing organizations pilot new
products and services in a small number of stores in order to
test customers’ reaction to them.
dryers. Then came the Dyson Air Multiplier™: fans and
fan heaters that work very differently to conventional
fans and electric heaters. They do not have fast- spinning
blades that chop the air and cause uncomfortable buf-
feting. Instead, they use Air Multiplier™ technology
to draw in air and amplify it up to 18 times, producing
an uninterrupted stream of smooth air. Sir James, who
remains chief engineer and sole shareholder in Dyson,
said the heater was part of the company’s effort to turn
itself into a ‘ broad-line technology company ’ rather than
being seen as only an appliance maker. ‘ I would not limit
the company to particular areas of technology or markets.
We are developing a range of technologies to improve
both industrial and consumer products so that the people
using them get a better experience than with the compa-
rable items that currently exist. ’
M04_SLAC8678_08_SE_C04.indd 127 6/2/16 1:00 PM
Virtual reality-based simulations 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 positioned 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 operation.

Computer-aided design (CAD)
CAD systems provide the computer-aided ability to create and
modify product drawings.
These systems allow conventionally used shapes such as points,
lines, arcs, circles and text
to be added to a computer-based representation of the product.
Once incorporated into the
design, these entities can be copied, moved about, rotated
through angles, magnified or
deleted. The designs thus created can be saved in the memory of
the system and retrieved
for later use. This enables a library of standardized drawings of
parts and components to be
built up. 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 productivity of the design activity. In addition to
this, however, because changes
can be made rapidly to designs, CAD systems can considerably
enhance the flexibility of the
design activity, enabling modifications to be made much more
rapidly. Further, the use of
standardized libraries of shapes and entities can reduce the
possibility of errors in the design.
Alpha and beta testing
A distinction that originated in the software development
industry, but has spread into other
areas, is that between the alpha and beta testing of a product or
service. Most software prod-
ucts include both alpha and beta test phases, both of which are
intended to uncover ‘bugs’
C

on
ne
ct
or
Hows
W
ha
ts
Competitive score
5 = Maximum
1 = Minimum
‘Hows’ vs ‘Hows’
Strong positive
Positive
Negative
Strong negative1 2 3 4 5
Technical evaluation
(5 is best)
Fi
ni

sh
P
ro
fil
e
Fl
as
h
ch
ip
C
as
in
g
m
at
l.
Im
po
rt
an
ce
to

cu
st
om
er
s‘Whats’ vs ‘Hows’
Strong relationship
Medium relationship
Weak relationship
1
2
3
4
5
4
3
2
7
6
10
Size
Robustness

Attach to key ring
Capacity
Print logo
Price
Figure 4.10 QFD matrix for a promotional USB data storage
stick
M04_SLAC8678_08_SE_C04.indd 128 6/2/16 1:00 PM
(errors) in the product. Not surprisingly alpha testing comes
before beta testing. Alpha testing
is essentially an internal process where the developers or
manufacturers (or sometimes an
outside agency that they have commissioned) examine the
product for errors. Generally, it is
also a private process, not open to the market or potential
customers. Although it is intended
to look for errors that otherwise would emerge when the product
is in use, it is in effect per-
formed in a virtual or simulated environment, rather than in ‘the
real world’. After alpha test-
ing, the product is released for beta testing. Beta testing is when
the product is released for
testing by selected customers. It is an external ‘pilot test’ that
takes place in the ‘real world’
(or near real world, because it is still a relatively small, and
short, sample) before commercial
production. By the time a product gets to the beta stage most of

the worst defects should have
been removed, but the product may still have some minor
problems that may only become
evident with user participation. This is why beta testing is
almost always performed at the
user’s premises without any of the development team present.
Beta testing is also sometimes
called ‘field testing’, pre-release testing, customer validation,
customer acceptance testing, or
user acceptance testing.
OPERATIONS
IN PRACTICE
Design innovation is not just confined to the initial
conception of a product; it also applies to the end of
its life. This idea is often called ‘designing for the circu-
lar economy’. The ‘circular economy’ is proposed as an
alternative to the traditional linear economy (or make–
use–dispose as it is termed). The idea is to keep products
in use for as long as possible, extract the maximum value
from them while in use, and then recover and regener-
ate products and materials at the end of their service life.
But the circular economy is much more than a concern
for recycling as opposed to disposal. The circular econ-
omy examines what can be done right along the supply
and use chain so that as few resources as possible are
used, then (and this is the important bit) recover and
regenerate products at the end of their conventional life.
This means designing products for longevity, reparability,
ease of dismantling and recycling.
Typical of the companies that have either adopted
this idea, or been set up specially to promote it, is
Newlife Paints, based on the south coast of England.
It ‘remanufactures’ waste water-based paint back into

a premium-grade emulsion. All products in the com-
pany’s paint range guarantee a minimum 50 per cent
recycled content, made up from waste paint diverted
from landfill or incineration. The idea for the company
began to take root in the mind of an industrial chemist,
Keith Harrison. His garage was becoming a little unruly,
after many years of do-it-yourself projects. Encouraged
by his wife to clear out the mess, he realized that the
stacked-up tins of paint represented a shocking waste. It
was then that his search began for a sensible and envi-
ronmentally responsible solution to waste paint. ‘ I kept
thinking I could do something with it, the paint had an
intrinsic value. It would have been a huge waste just to
throw it away ’, said the former industrial chemist. Keith
thought somebody must be recycling it, but no one
was, and he set about finding a way to reprocess waste
paint back to a superior-grade emulsion. After two years
of research, he successfully developed his technology,
which involves removing leftover paint from tins that
have been diverted from landfill, and blending and fil-
tering them to produce colour-matched new paints. The
company has also launched a premium brand, aimed
at affluent customers with a green conscience, called
Reborn Paints, the development of which was partly
funded by Akzo Nobel, maker of Dulux Paints. Although
Keith started small (in his garage) he now licenses his
technology to companies such as the giant waste com-
pany Veolia. ‘ By licensing we can have more impact and
spread internationally ’, he says. He also points out that
manufacturers could plan more imaginatively for the
Product innovation for the circular economy 12
▼

So
ur
ce
: N
ew
lif
e
Pa
in
ts
L
td
M04_SLAC8678_08_SE_C04.indd 129 6/2/16 1:00 PM
WHAT ARE THE BENEFITS OF INTERACTIVE
PRODUCT AND SERVICE INNOVATION?
Treating each stage of design innovation as totally separate and
sequential activities (as we
have just done) is a little misleading. As we said earlier, it is
common for companies to cycle
back through stages, sometimes several times. Also it is
increasingly common to break down
the once ridged boundaries between each stage in the design
innovation process. This applies
especially to the boundary between the design of the product or

service and the design of the
process that will produce it.
It is generally considered a mistake to separate product and
service design from process
design. Operations managers should have some involvement
from the initial evaluation of the
concept right through to the production of the product or service
and its introduction to the
market. Merging the stages of the design innovation process is
sometimes called ‘interactive
design’. The main benefit of merging stages is seen to be a
reduction in the elapsed time for
the whole design innovation activity, from concept through to
market introduction. This is
often called the time to market (TTM). The argument in favour
of reducing time to market is
that doing so gives increased competitive advantage. For
example, if it takes a company five
years to develop a product from concept to market, with a given
set of resources, it can intro-
duce a new product only once every five years. If its rival can
develop products in three years,
it can introduce its new product, together with its (presumably)
improved performance, once
every three years. This means that the rival company does not
have to make such radical
improvements in performance each time it introduces a new
product, because it is introduc-
ing its new products more frequently. In other words, shorter
TTM means that companies get
more opportunities to improve the performance of their services
or products.
Three factors in particular have been suggested which can
significantly reduce time to

market for a service or product:
● Simultaneous development of the various stages in the
overall process.
● An early resolution of design conflict and uncertainty.
● An organizational structure which reflects the
development project.
Simultaneous development
We described the design innovation process as essentially a set
of individual, predetermined
stages, each with a clear starting and an ending point. The
implicit assumption is that one
stage is completed before the next one commences. Indeed, this
step-by-step, or sequential,
approach has traditionally been the typical form of
product/service development. It has some
advantages. The process is easy to manage and control because
each stage is clearly defined.
In addition, each stage is completed before the next stage is
begun, so each stage can focus
its skills and expertise on a limited set of tasks. However, the
main problem of the sequential
approach is that it is both time consuming and costly. When
each stage is separate, with a
clearly defined set of tasks, any difficulties encountered during
the design at one stage might
necessitate the design being halted while responsibility moves
back to the previous stage.
This sequential approach is shown in Figure 4.11 (a).
Yet often there is really little need to wait until the absolute
finalization of one stage before
starting the next. For example, perhaps while generating the
concept, the evaluation activity

afterlife of their products. For example, simply adding
more symbols to packs to assist sorting waste paints into
types would help. ‘ At the moment we're fighting fires,
because the paints we pull out of the waste stream today
were manufactured five or so years ago, when the circular
economy was barely on the horizon ’, he says.
M04_SLAC8678_08_SE_C04.indd 130 6/2/16 1:00 PM
of screening and selection could be started. It is likely that
some con-
cepts could be judged as ‘non-starters’ relatively early on in the
pro-
cess of idea generation. Similarly, during the screening stage, it
is
likely that some aspects of the design will become obvious
before the
phase is finally complete. Therefore, the preliminary work on
these
parts of the design could be commenced at that point. This
principle
can be taken right through all the stages, one stage commencing
before the previous one has
finished, so there is simultaneous or concurrent work on the
stages ( see Fig. 4.11 (b)). (Note
that simultaneous development is often called simultaneous (or
concurrent) engineering in
manufacturing operations.)
First stage in the

innovation activity
Second stage in the
innovation activity
Third stage in the
innovation activity
(b) Simultaneous arrangement of the
stages in the innovation activity
(a) Sequential arrangement of the
stages in the innovation activity
etc.
etc.
= Communication between stages
First stage in the
innovation activity
Second stage in the
innovation activity
Third stage in the
innovation activity
Figure 4.11 (a) Sequential arrangement of the stages in the
design activity; (b) simultaneous
arrangement of the stages in the design activity

OPERATIONS
IN PRACTICE
Most companies are obsessed with reducing the time to
market (TTM) of their design process. Short TTM means
lower development costs and more opportunities to hit
the market with new designs. Some automobile com-
panies have reduced the design time for their products
to less than three years, while a new smartphone (a far
more dynamic market) can be developed in as little as six
months. So why does IKEA, the most successful homeware
retailer ever, take five years to design its kitchens? Because,
with the huge volumes that IKEA sells, development costs
are small compared with the savings that can result from
product designs that bring down the final price in its stores.
IKEA’s slow development process 13
▼
M04_SLAC8678_08_SE_C04.indd 131 6/2/16 1:00 PM
Hills Like White Elephants (1927)
By Ernest Hemingway
The hills across the valley of the Ebro were long and white. On
this side there was no shade and no trees and the station was
between two lines of rails in the sun. Close against the side of
the station there was the warm shadow of the building and a
curtain made of strings of bamboo beads hung across the open
door into the bar to keep out flies. The American and the girl
with him sat at a table in the shade outside the building. It was
very hot and the Express from Barcelona would come in forty
minutes. It stopped at this junction for two minutes and went on
to Madrid.

"What should we drink?" the girl asked. She had taken off her
hat and put it on the table.
"It's pretty hot," the man said.
"Let's drink beer."
"Dos cervezas," the man said into the curtain.
"Big ones?" a woman asked from the doorway.
"Yes. Two big ones."
The woman brought two glasses of beer and two felt pads. She
put the felt pads and the beer glasses on the table and looked at
the man and the girl. The girl was looking off at the line of
hills. They were white in the sun and the country was brown and
dry.
"They look like white elephants," she said.
"I've never seen one," the man drank his beer.
"No you wouldn't have."
"I might have," the man said." Just because you say I wouldn't
have doesn't prove anything."
The girl looked at the bead curtain. "They've painted something
on it," she said. "What does it say?"
"Anis del Toro. It's a drink."
"Could we try it?"
The man called "Listen" through the curtain. The woman came
out from the bar.
"Four reales."
"We want two Anis del Toro."
"With water?"
"Do you want it with water?"
"I don't know," the girl said. "Is it good with water?"
"It's all right."
"You want them with water?" asked the woman.
"Yes, with water."
"It tastes like licorice," the girl said.
"That's the way with everything."
"Yes," said the girl. "Everything tastes of licorice. Especially
all the things you've waited so long for like absinthe."
"Oh cut it out."

"You started it," the girl said. "I was being amused. I was
having a fine time."
"Well let's try and have a fine time."
"All right. I was trying. I said the mountains looked like white
elephants. Wasn't that bright?"
"That was bright."
"I wanted to try this new drink. That's all we do, isn't it? Look
at things and try new drinks."
"I guess so."
The girl looked across at the hills.
"They're lovely hills," she said. "They dont really look like
white elephants. I just meant the colouring of their skin through
the trees."
"Should we have another drink?"
"All right."
The warm wind blew the bead curtain against the table.
"The beer's nice and cool," the man said.
"It's lovely," the girl said.
"It's really an awfully simple operation," the man said. "It's not
really an operation at all."
The girl looked at the ground the table legs rested on.
"I know you wouldn't mind it, Jig. It's really not anything. It's
just to let the air in."
The girl did not say anything.
"I'll go with you and I'll stay with you all the time. They just let
the air in and then it's all perfectly natural."
"Then what will we do afterwards?"
"We'll be fine afterwards. Just like we were before."
"What makes you think so?"
"That's the only thing that bothers us. It's the only thing that's
made us unhappy."
The girl looked at the bead curtain, put her hand out and took
hold of two of the strings of beads.
"And you think then we'll be all right and be happy."
"I know we will. You dont have to be afraid. I've known lots of
people that have done it."

"So have I," said the girl. "And afterwards they were all so
happy."
"Well," the man said, "If you dont want to you dont have to. I
wouldn't have you do it if you didn't want to. But I know it's
perfectly simple."
"And you really want to?"
"I think it's the best thing to do. But I dont want you to do it if
you dont really want to."
"And if I do it you'll be happy and things will be like they were
and you'll love me?"
"I love you now. You know I love you."
"I know. But if I do it then it will be nice again if I say things
are like white elephants and you'll like it?"
"I'll love it. I love it now but I just can't think about it. You
know how I get when I worry."
"If I do it you won't ever worry?"
"I won't worry about that because it's perfectly simple."
"Then I'll do it. Because I don't care about me."
"What do you mean."
"I don't care about me."
"Well I care about you."
"Oh yes. But I don't care about me. And I'll do it and then
everything will be fine."
"I dont want you to do it if you feel that way."
The girl stood up and walked to the end of the station. Across
on the other side were fields of grain and trees along the banks
of the Ebro. For away beyond the river were mountains. The
shadow of a cloud moved across the field of grain and she saw
the river through the trees.
"And we could have all this," she said. "And we could have
everything and every day we make it more impossible."
"What did you say?"
"I said we could have everything."
"We can have everything."
"No we can't."
"We can have the whole world."

"No we can't."
"We can go everywhere."
"No we can't. It isn't ours anymore."
"It's ours."
"No it isn't. And once they take it away you never get it back."
"But they haven't taken it away."
"We'll wait and see."
"Come on back in the shade," he said. "You mustn't feel that
way."
"I dont feel any way," the girl said. "I just know things."
"I dont want you to do anything that you don't want to do —"
"Nor that isn't good for me," she said. "I know. Could we have
another beer?"
"All right. But you've got to realize —"
"I realize," the girl said. "Can't we maybe stop talking?"
They sat down at the table and the girl looked across at the hills
on the dry side of the valley and the man looked at her and at
the table.
"You've got to realize," he said, "that I don't want you to do it if
you don't want to. I'm perfectly willing to go through with it if
it means anything to you."
"Doesn't it mean anything to you? We could get along."
"Of course it does. But I don't want anybody but you. I don't
want anyone else. And I know it's perfectly simple."
"Yes you know it's perfectly simple."
"It's all right for you to say that but I do know it."
"Would you do something for me now?"
"I'd do anything for you."
"Would you please please please please please please please
stop talking?"
He did not say anything but looked at the bags against the wall
of the station. There were labels on them from all the hotels
where they had stopped.
"But I don't want you to," he said, "I don't care anything about
it."
"I'll scream," the girl said.

The woman came out through the curtains with two glasses of
beer and put them down on the damp felt pads. "The train comes
in five minutes," she said.
"What did she say?" asked the girl.
"That the train is coming in five minutes."
The girl smiled brightly at the woman to thank her.
"I'd better take the bags over to the other side of the station,"
the man said. She smiled at him.
"All right. Then come back and we'll finish the beer."
He picked up the two heavy bags and carried them around the
station to the other tracks. He looked up the tracks but could not
see the train. Coming back he walked through the bar room
where people waiting for the train were drinking. He drank an
Anis at the bar and looked at the people. They were all waiting
reasonably for the train. He went out through the bead curtain.
She was sitting at the table and smiled at him.
"Do you feel better?" he asked.
"I feel fine," she said. "There's nothing wrong with me. I feel
fine."

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