Design-to-Value Exercise Helps Company Innovate Products, Compete More Effectively 


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Design-to-Value Exercise Helps Company Innovate Products, Compete More Effectively



Senior executives at a large, low-cost manufacturer of appliances and white goods were concerned about the sluggish performance of its household fan business. It had long been among the top local players in the company’s home country, an emerging market, but was now losing domestic share in two important - and fiercely competitive - product categories.

A stagnant product portfolio was partly to blame. The company had been focusing on operations and had neglected to revisit fan designs for a couple of years. Meanwhile, an innovative upstart, also from an emerging market, had begun competing with the manufacturer, both at home and in developed markets. The threat served as a wake-up call: establishing a stronger platform for growth, would require the company to step up its product development capabilities while maintaining - or even improving upon - its low-cost edge.

The company started by conducting research to identify unmet needs among middle-income (and aspiring middle-income) families in emerging markets. As these approaches started generating concepts for new products, the company ran surveys that forced consumers to choose between various product features and price points and then used conjoint analysis to discern how much customers were willing to pay for various options.

Its results were intriguing. For example, the ethnographers observed that urban middle-class aspirants hated how dirty the blades of ceiling fans became after prolonged use. Conjoint analysis showed that some consumers would pay a premium for models that were easier to clean.

Similarly, the work identified profitable niches for fans with built-in, rechargeable batteries (in case of power outages), as well as portable models for families that wanted one fan to serve several household purposes. The company began pursuing these and other designs, including concepts tailored for consumers in developed countries.

Next, the executives brought together a group of designers, purchasers, marketers, product engineers, and others to conduct a series of product teardowns involving the company’s - and the competitors' - fans. By seeing how different models stacked up, the executives hoped to spark fresh thinking that would improve the new designs and to learn whether competing products had unexpected cost or technological advantages.

The exercise helped the company to meet both its goals. Purchasers and product engineers, for instance, believed that the company was already striking the right balance between quality and price in its materials and components. Yet the teardown showed that as compared with competitors, the company was “overbuilding” its products significantly and that identical -or even better - product performance was possible at a lower cost if the team was willing to rethink its design approaches. Some of the resulting design changes were quite straightforward and even, in retrospect, obvious. Yet the team acknowledged that the new ideas did not click until the teardown, when the evidence was spread out on the table for discussion.

By modifying the cover of household fan, for example, the team made it unnecessary to include an internal bracket assembly that had supported the original cover - a savings of 7 percent per unit. This change, like most of the cost-saving opportunities was invisible to customers and did not matter to them. Yet the collective impact was huge - helping the company to reduce the total cost of manufacturing its fans by more than 10 percent, against a cost base that was already quite competitive. Meanwhile, consumers liked the new designs, which contributed to a 50 percent operating-profit jump during the first year and helped the company gain the number-two spot in the market (up from number three) over that time span.

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