Designing for Customer Value


Design engineering has been revolutionized through the application of new digital technology. Some major trends are virtualization and three- dimensional printing. Virtualization enables design concepts to be created, inspected, and tested using computers without actually creating a physical object. Prototypes can then be built using three-dimensional printing technology with the appropriate materials. Algorithms based on data models virtually test design concepts to find flaws or better solutions. Artificial intelligence is used to aid designers by identifying relationships and patterns to quickly solve complicated problems, and artificial intelligence communicates with engineers through speech technology to make designs easier to use. Virtualization also provides numerous potential solutions to engineering problems represented by creating mathematical models and algorithms, which is known as generative design.

Design engineering is also focused on connecting machines, people, resources, and computers into expanded networks utilizing global 5G bandwidth with connections to multiple types of devices and sensors, i.e., the IoT. There are now more than 20 billion devices connected to networks. This ecosystem enables machine-to-machine and machine-to- human connections. In conjunction with artificial intelligence, all systems are becoming “smart,” including cities, homes, cars, manufacturing, and distribution networks of all types.

Artificial intelligence can also be programed into robots having the manual dexterity to build products or to deliver services, as well as to assist design activities by building complicated, precision prototypes or testing them under adverse conditions. This reduces engineering lead time and risk during laboratory and field trials. These also have practical applications to manufacturing, services, and supply chains. Modern design engineering is blurring the lines between physical machines, people, and digitalization through virtualization and artificial intelligence. The world has now begun a fourth industrial revolution.

Product and service design has a direct impact on an organization’s operations. Understanding the tools, methods, and concepts of design will enable process-improvement experts to significantly improve operational efficiency. Design drives a major part of cost over the life cycle of products and services. These costs include direct labor, materials, capital equipment purchases, inventory investment, and other costs. The deployment of best- in-class design practices reduces total life cycle cost and time to market and results in higher quality. Building a core competency in the design of products and services helps organizations compete more effectively. Best- in-class design practices are also available to competitors for the efficient design of products and services. The purpose of this chapter is to present basic and well-accepted design concepts for immediate use by your organization. The discussion will be focused on applications to products and services.

How does an organization measure the effectiveness and efficiency of its design activities? Table 4.1 lists ten common metrics organizations use to measure key attributes of its design process. The first metric is time from concept to market. The ability to bring a new concept quickly and efficiently to market or to commercialize it greatly increases an organization’s


Competitive Product and Service Design


1. Time from concept to market.

2. Number of changes to final design.

3. Percentage of warranty cost to revenue.

4. Percentage of maintenance cost to revenue.

5. Total customer life cycle cost.

6. Market share percentage of new products introduced within the past five years.

7. Actual standard cost versus target cost.

8. Percentage excess and obsolete inventory caused by design changes.

9. Design costs as a percentage of total revenue.

10. Function and feature cost ratio compared to competitors.

market share. This is important for some industries where an organization’s market share significantly increases if it is the first to market with a new product or service. A second metric is the number of changes to the final design after it is released to operations. Getting to market first is important, but, if a product or service contains defects, then its life cycle cost will increase, and there will be process issues and customer complaints resulting in refunds for defective products or services. The metric of the percentage of warranty cost to revenue measures defects found by customers, whereas percentage of maintenance cost to revenue evaluates high maintenance costs that impact customers.

At a higher level, designs are measured using total customer life cycle cost. This is a major competitive differentiator. As an example, the total ownership costs of an automobile depends on several factors, including fuel costs. Higher miles-per-gallon fuel economy will attract customers, although the selling price may be a little higher if ownership costs are lower over its life cycle. The ratio of new products to old should be higher in a best-in-class organization. Market share should also be higher as measured by market share percentage of new products.

Metrics that evaluate cost efficiency include the actual standard cost versus target cost, percentage excess and obsolete inventory caused by design changes, and design cost as a percentage of total revenue. Finally, function and feature cost ratio compared to competitors is a measure of the value of features and functions from a customer perspective and relative to competitors.

A common model for design consists of the five phases shown in Figure 4.1 These include concept creation and approval, development of alternative designs, prototype development and testing, pilot tests of the new design under actual operating conditions, and the commercial launch. This model forms a basis for managing design deliverables across multifunctional groups and to provide feedback for improvement. Figure 4.1 shows that the design phases overlap. This implies that communication occurs between teams such as marketing, production, and others. It facilitates a collaborative project management approach in which crossfunctional teams work with together through the five design phases.

The design process has common activities. These are listed in Table 4.2. The first is the identification and translation of customer requirements into design elements to meet specifications. Specifications are “calibrated” to the voice of the customer (VOC). Typical tools used to execute these activities include marketing research tools and methods, quality function


Design phases.


Common Design Activities



Translation of voice of the customer into design specifications

Marketing research tools and methods, quality function deployment, competitive analysis and benchmarking, target costing, etc.

Gathering information relevant to constructing the design

Concurrent engineering, design reviews, historical performance data, manufacturing and supplier data

Continuous improvement of design process to reduce cycle time, reduce costs, and improve quality

Computer-aided design, computer-aided engineering, etc.

Leveraging technology to increase analytical efficiency

Monte Carlo simulation, finite element analysis, experimental design, statistical tolerances

Project inceptions and management

Design reviews, Gantt charts, etc.

deployment (QFD), competitive analysis and benchmarking, target costing, and others. Marketing research and QFD were discussed in Chapter 3 as integrated qualitative and quantitative methods that help identify customer preferences and value expectations. The “target cost” for the product or service is based on marketing research and competitive analysis. Setting a target cost is important to ensure cost effective and profitable design. A design team uses target costing component by component, including associated services such as delivery, setup or installation, and maintenance support across the life cycle.

The next activity is to bring together the information needed to start creating design alternatives or solutions. Information from prior or similar designs is very useful in the evaluation process. New technology such as computer-aided design, rapid prototyping, simulation algorithms, computer-aided manufacturing, statistical tolerance testing, and others accelerate the design process. Effective project management and team building are critical for project success as the design project proceeds through the five phases of concept, design, prototyping, piloting, and launch.

Design practices vary by industry and with specific products or services. Creativity is very high when there is little required structure for the design (i.e., few customer or marketing requirements) and design constraints are low (i.e., when there are fewer requirements specified in advance). As the design constraints increase or have been determined in advance, then available solutions are less. If the constraints are minor, the design requirements are less limiting and teams can efficiently work to identify solutions. There are also several ways that a design process can fail. One of the most obvious is designing at the very edge of technical feasibility or organizational capability. Other risks include designing products and services that require large capital investment, are subject to changes in customer requirements or demand, or fail to efficiently use the necessary design tools and methods. Organizational and team dysfunctions also increase risk.

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