Product and Service Design

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Product and Service Design

This week’s articles present examples of how integrating product and service design into Operations Management can support organizational strategy and increase competitive advantage.

  • Which key takeaways from this week's readings did you find most useful? Why?
  • Select any product or service that you are familiar with, either as a provider or as a consumer. Describe how effective its design is in meeting customer needs.

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HBR.ORG June 2011 reprint R1106F Spotlight on Product Innovation Innovating On the Cheap A practical guide to creating new products without starting from scratch by Lance A. Bettencourt and Scott L. Bettencourt This document is authorized for use only by Ryan Bradley in Operations Management at Strayer University, 2019. Spotlight on Product Innovation Spotlight ARTWORK Josef Schulz, Braun Weiss, 2009 C-print, 100 x 130 cm Innovating On the Cheap 2 Harvard Business Review June 2011 This document is authorized for use only by Ryan Bradley in Operations Management at Strayer University, 2019. For article reprints call 800-988-0886 or 617-783-7500, or visit hbr.org R A practical guide to creating new products without starting from scratch by Lance A. Bettencourt and Scott L. Bettencourt Rain Bird is a unique business. But at the same time, it is like so many other businesses: Its product line is specialized—it makes sprinklers and other irrigation systems for lawns and gardens. To keep growing, it must continually introduce new offerings that appeal to consumers and excite retail channel buyers. And like most companies, Rain Bird has felt pressured to spend less on innovation in a down economy. At the best of times, innovation investments can be painful. Typically, success rates are low, and returns on investment far from assured. The returns that do materialize, moreover, rarely do so in the short term. That makes innovation hard to justify when cash is tight—even when everyone knows it’s essential to the company’s long-term success. How did it happen, then, that in 2010 Rain Bird was able to introduce a new product line, based on proprietary technology, and see an almost instant payback? Its Convert to Drip line, as it is called, enables a gardener to convert a portion of a watering system from sprinkler to drip action in a matter of minutes. That’s a capability that both retailers and customers value. As we head into the 2011 summer season, sales of the new line continue to grow. (Note that one of the coauthors of this piece, Scott, was formerly Rain Bird’s national retail sales manager.) Rain Bird realized returns quickly because it was able to bring the Convert to Drip line to market only June 2011 Harvard Business Review 3 This document is authorized for use only by Ryan Bradley in Operations Management at Strayer University, 2019. Spotlight on Product Innovation nine months after it was conceived and to introduce it at a small fraction of the cost traditionally associated with new product development. And it could do that because the big-idea innovation at the heart of the new line wasn’t actually brand-new at all. It was found in work that Rain Bird had already done. The Bird in the Hand Saved from a Sidelined Project A standout feature of Ryobi’s lithium One+ products—their neon green color—was borrowed from research done for a canceled product line. Most managers think an innovation must be something absolutely, completely new—new to the world, ideally, and new to the company at the very least. Yet the reality is that almost all companies have previous discoveries with overlooked innovation or market potential. Those innovation prospects are the proverbial bird in the hand: The work is done, and the risks are low. All it takes to realize a substantial and swift payback is for the company to recognize what it has. In the case of the Convert to Drip line, that bird in the hand was the DC-6, which had been on the market for a few years. Rain Bird’s offerings featured two basic kinds of products: drip and spray. The DC-6 was part of the drip offerings, but it had an unheralded capability: It could replace a spray-head nozzle to get drip action out of what would usually be a sprinkler. At some point, Rain Bird noticed that something out of the ordinary was going on in one of its retail accounts. Sales of the DC-6 had suddenly taken off. The retailer’s merchandiser, it turned out, had stocked the DC-6 alongside spray products rather than with the drip systems. The unexpected surge gave Rain Bird a new insight: It had underestimated the number of customers who would be interested in converting their sprinklers to drip. Capitalizing on that realization was an easy next step. Rain Bird changed the name of the product and the messaging around it to reposition it for the job it filled. The company also expanded on the concept, creating variations focused on customers’ needs to water trees and shrubs, vegetable gardens, or areas of mixed use (perhaps featuring some planters, some turf). The success of Convert to Drip products illustrates how readily innovation can enhance the bottom line when it leverages assets your company already owns. The challenge, of course, lies in uncovering the hidden possibilities. In the following pages we’ll explore the six distinct types of “innovation in hand” we’ve seen in companies and suggest ways that anyone can make the search for such opportunities more systematic. 4 Harvard Business Review June 2011 Failure to Launch Whenever an innovative product is introduced, several stars have managed to align. Not only must the product satisfy a market need, but its pricing, technical performance, and channel appeal must be worked out, along with many other considerations. We know of great product ideas that never got off the drawing board because the manufacturing costs would be too high or because certain technical hurdles couldn’t be overcome. Other innovative concepts have been rejected because they didn’t jibe with key channel partners’ goals. And sometimes a perfectly viable offering doesn’t see the light of day because it is part of an entire product line that gets scuttled. When a product concept fails to launch, it tends to be set aside and labeled a loser, if not utterly forgotten. But in almost every case, the considerable development time and funds expended on it yielded something useful—if not the whole concept, then some part of it—and that something might be just what’s needed today. This turned out to be the case when Ryobi Tools introduced a 10-inch band saw in 2004 that featured a dust collection system called Silent Vac. That was a new concept to customers but rather an old idea to people at Ryobi: The Silent Vac had been developed years earlier for a benchtop sander that never made it to market. It isn’t only technical innovation that can be resuscitated after a failure to launch. A lot of fresh thinking, from promotional strategies to industrial design, goes into a new offering. In 2007, when Ryobi launched its line of lithium One+ power tools, it was able to draw on work from another sidelined project. The new tools had a lot going for them in terms of performance, but their initial appearance lacked punch. Home Depot buyers were interested but not excited. Ryobi looked back at some color research done for a product line that had been canceled and decided to use it for the lithium One+ products. The neon green that had tested well in that old research became a standout feature of the successful new line. Ryobi’s experiences suggest that a firm should create a storehouse of rejected product concepts and make a habit of revisiting it. In light of current projects and industry changes, is renewed potential there? Do the failed concepts have innovative features that might apply to different markets? Are the reasons that the innovation didn’t fly even still relevant? Technology advances can overcome technical hurdles, and manufacturing advances can overcome product cost hurdles. If the obstacles have disappeared, the com- This document is authorized for use only by Ryan Bradley in Operations Management at Strayer University, 2019. For article reprints call 800-988-0886 or 617-783-7500, or visit hbr.org Idea in Brief Even when money is tight, it’s possible to launch new offerings that excite customers and respond to unserved needs. The trick is to find assets already in hand that can be brought to market with minimal effort and resources. Managers should look for six kinds of “in hand” innovation: 1. Innovations that were previously developed but never launched, owing to circumstances that may have changed. 2. Features of past products that may meet newly critical customer needs. pany may have an innovative product ready to go to market with only a modest investment. Ahead of Their Time Sometimes the route to low-cost innovation is not a product that never launched but one that did go to market—but had features that were not fully appreciated. The teams tasked with introducing an offering always face the challenge of framing its value proposition in the most concise and compelling way. To do so, they focus attention on a small set of important customer needs that the product satisfies in a distinctive manner. Usually, that laser focus means that not all the new product’s benefits get communicated. Out of 10 good things that could be said about its unique and meaningful attributes, seven might go unmentioned. Times change, however, and customer needs that were secondary in importance yesterday may be primary today. Often a company already has a product that meets the newly critical needs. Sometimes, the perfect product has simply been flying under the radar, but more often, a feature or a technological capability within a product has been overlooked. When Rain Bird first introduced its innovative spray nozzles, the Dual Spray series, their number one selling point was that they solved a coverage problem. If you’ve ever used a spray sprinkler, you know the downside: As it moves through its compass points to water a large circle of lawn, it overshoots the area closest to the nozzle, leaving a brown spot. Rain Bird’s solution to this problem was a nozzle with a second opening to distribute water within that zone. A by-product of this innovation was that less water was needed to cover the same area. Today home owners don’t like brown spots any better, but water conservation has become a major concern—especially given many municipalities’ new restrictions on usage. As a result, Rain Bird has up- 3. Existing offerings that should be repositioned, because customers like them for unforeseen reasons. 4. Elements of bundled offerings that could stand alone. 5. New combinations of elements, in which the bundled value to customers is greater than the sum of the parts. 6. Overdesigned offerings that could be pared down for less-demanding customer segments. Innovation is associated in many minds with bold bets on next-generation solutions. But for marketers with little appetite for high risks and distant paybacks, an innovation in the hand is worth two in the lab. Create a storehouse of rejected product concepts, and revisit it regularly. dated its positioning and begun actively promoting the increased efficiency of the Dual Spray series. The company has taken a capability it had all along—an innovation in hand—and by featuring it more prominently in communications to retailers, caused them to take a renewed look at the series for premium shelf placement and product bundling. How can your company uncover innovative features or capabilities that are hiding within a current solution? The best way is to develop an up-to-date prioritization of customer needs and then reassess the capabilities of existing products in light of it. The good news is that product managers within your organization already possess the technical insight required for this task. The trick is to identify not only the needs that are most relevant to customers now but those that may be in the future, and closely monitor how their significance to customers changes. Companies must focus on the job customers are trying to get done (in this instance, watering their lawns) and document the criteria by which they judge how well a product does it (the desired outcomes, such as minimal brown spots and less water use). Periodically examining those criteria will help companies discover product features that may be ahead of their time. Renewed by repositioning A surge in sales revealed that the DC-6 served a strong customer need Rain Bird had underestimated. Once Rain Bird changed the name and the messaging and added new variations on the product, it swiftly realized a substantial payback. Limited Vision Now let’s turn to the type of innovation in hand Rain Bird found it had with its DC-6 product. What was going on there? June 2011 Harvard Business Review 5 This document is authorized for use only by Ryan Bradley in Operations Management at Strayer University, 2019. Spotlight on Product Innovation Spun OUT OF a package deal Craftsman’s work lights, which originally were bundled with other tools, became top sellers when sold as stand-alone products. Sometimes an offering succeeds—to an extent— despite its marketing. Companies can launch products but have an imperfect understanding of how customers are using them or why they choose them. Ideally, of course, marketers understand the job that customers are hiring the product to do and tie its position, branding, and messaging to that job. But companies do not always make the connection between the product and the job clear. Sometimes customers are left to figure it out on their own. And fortunately, sometimes they do. Whether by reading the fine print of brochures, talking with friends, or—most likely these days—interacting with people on the internet, customers find out about products that fill their needs even when the company behind them isn’t getting the word out. The first hint may be an unusual blip on the sales radar as the product becomes popular even in the absence of advertising or other promotion. Unusual sales growth often coincides with an external trend that elevates the importance of a job the product does. (For example, kelp suddenly started flying off the shelves of California health food stores in March 2011, when fears of radiation from Japan’s failed reactor made kelp’s iodine, a natural defense against thyroid cancer, suddenly valuable to consumers.) Rain Bird’s customers had to discover on their own that the DC-6 was a solution to their need to convert spray nozzles to drip watering. It wasn’t merchandised in the section of the store where its buyers—customers of spray products—were likely to shop. Its packaging didn’t call attention to the job it got done. Even the product’s name—a letter-­number combination, like something out of a catalog—revealed a limited strategic vision. It may well be that your company is also, thanks to limited vision, failing to capitalize fully on an offering. To find this kind of in-hand innovation, ask yourself: Have we made the connection clear between the products we offer and the jobs they help customers do? Have some jobs grown in importance since these products were launched? If so, can any of the products we already have help customers get them done? Then there’s the other way of asking the question: What products are seeing unanticipated applications? In the vernacular of the pharmaceutical industry, what “off-label” uses have come to light? Clearly, if such uses are ill-advised (as they are with medicines and other carefully regulated products), it’s vital for the company to know about them and 6 Harvard Business Review June 2011 actively discourage them. But if customers are using a product in a perfectly valid way that the company had not thought about, the company may be sitting on an innovation. It may simply need to align branding and messaging with the new use. Alternatively, it may be able to optimize an existing product to perform the job customers are trying to do. All Bundled Up Companies often bundle products together, either to increase perceptions of value among customers or to simplify the purchasing decision by combining components of a solution. Sometimes the bundling involves selling complementary items, such as shampoo and conditioner or a computer and software, together. Other times, one product is being given away with the purchase of another, such as a toy with a kid’s meal. An in-hand innovation can be wrapped up in such a bundle, waiting to get out. The managers of Craftsman, a brand of tools owned by Sears, discovered precisely such an opportunity by happenstance in 2005. In a focus group convened to learn customers’ opinions of a line of power tools, a participant lambasted Craftsman for a promotion bundling a work-space light with a cordless drill. Skeptical of the “free with purchase” offer, the participant figured the price must actually include the cost of the light, and he hated the idea that he might have paid more because of it. However, when the moderator inquired if he would like Craftsman to take his light back, the answer was a resounding no. “That light is my most used tool,” the participant said. “I wish I had another.” With that, a metaphorical light went on for the Craftsman marketers who were watching. The work-space light had never been offered for sale on its own; it had only been bundled with the drill to promote sales. Clearly, it had the potential to succeed as a stand-alone offering. Within six months, Craftsman launched its new line of C3 power tools. It included multiple products that already existed in the company’s portfolio but had previously been offered only in bundles or kits. Among them were the Craftsman C3 19.2-volt Work Light and the Craftsman C3 19.2-volt Fluorescent Light. Within two years of their introduction, those lights were the two top sellers in the entire C3 line, with the exception of replacement batteries. To uncover an innovation that is currently all bundled up, a company should first ask sales and customer service personnel if customers are trying This document is authorized for use only by Ryan Bradley in Operations Management at Strayer University, 2019. For article reprints call 800-988-0886 or 617-783-7500, or visit hbr.org If customers are using a product in a valid way you hadn’t thought of, you may be sitting on an innovation. to buy individual items within a bundle. That is a leading indicator that the items can satisfy a need above and beyond other solutions on the market. The other questions to consider are these: Do any products or services that we offer only as part of a bundle address jobs for which customers already hire or might hire stand-alone solutions? Are some features or services in a bundled offering more innovative than others in helping customers get a job done? Affirmative responses to either question suggest opportunities to disaggregate bundles and offer innovations individually. Unrelated Family If companies can discover innovation-in-hand opportunities by selling some bundled items separately, the opposite is also true: They can create considerable additional value by selling previously unbundled items together. Many companies overlook such meaningful opportunities because they fail to consider product and service complementarities from the customer’s perspective of getting an entire job done. Until 2004, Microsoft viewed its Software Assurance offering simply as a vehicle for the efficient purchase of upgrades. In exchange for a flat fee, corporate customers who signed a multiyear contract received operating system upgrade rights. However, with renewal rates declining, Microsoft looked at upgrades from a different angle: as one step in the job of managing the life cycle of a software license. That life cycle included assessing upgrade needs, implementing licensing renewals, and managing software licenses once purchased. Microsoft realized that Software Assurance was helping customers with just one tiny piece of that job. Many of the customers’ most important unmet needs related to the other steps in the job. The company also realiz ...
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