DBA8027 PRODUCT DESIGN & DEVELOPMENT C M

3 100
OBJECTIVES:
 Understand the application of structured methods to develop a product
UNIT I INTRODUCTION - Defining Product, Types of products. Product development -
characteristics, duration and cost, challenges. Development Process: Generic Process – Adapting to
product types. Evaluation–decay curve– cost expenditure curve.

UNIT II PRODUCTPLANNING - Product Planning Process –Steps. Opportunity identification –

break down structure-product development charter. Product Life Cycle. Technology Life Cycle-
Understanding Customer Needs - Disruptive Technologies - Product Specification - Concept
Generation–Activity - Steps - Techniques.
UNIT III PRODUCT CONCEPT - Concept Selection - Importance, Methodology, concept
Screening, Concept Scoring. Concept Testing. Product Architecture-Definition, Modularity,
implication, Establishment, Delayed Differentiation, Platform Planning.
UNIT IV INDUSTRIAL DESIGN TOOLS - Industrial Design, Design for Manufacturing - Value
Engineering - Ergonomics - Prototyping - Robust Design - Design for X – failure rate curve- product
use testing - Collaborative Product development – Product development economics – scoring model
– financial analysis.
UNIT V PATENTS - Defining Intellectual Property and Patents, Patent Searches and
Application, Patent Ownership and Transfer, Patent Infringement, New Developments and
International Patent Law.
 Product Architecture and Planning

UNIT I
LESSON 1 – PRODUCT AND TYPES OF PRODUCTS.

CONTENTS
Learning Objectives
Learning Outcomes
Overview
1.1 Definition and Levels/Layers of Product
1.1.1 Defining Product
1.1.2 Importances of Product
1.1.3 Features of Products
1.1.4 Levels/Layers of Product
1.2 Types of Products
1.2.1 Durability and Tangibility
1.2.2 User Products (Consumer Products and Industrial Products)
Summary
Self-Assessment Questions
References

LEARNING OBJECTIVES
After studying this lesson, students should be able to:
 Understanding the Product and its importance.
 Types of Products
 Importance of products and link between organization and a consumer

Learning Outcomes
Upon completion of this lesson, the students will be able to:
 Products and its layers
 Briefing features of products and its benefits
 Understanding classification of products

OVERVIEW
The economic success of most firms depends on their ability to identify the needs of
customers and to quickly create products that meet these needs and can be produced at low
cost. Achieving these goals is not exclusively a marketing problem, nor is it only a design
problem or a manufacturing problem; it is a product development problem involving all of
these functions. This book provides a collection of methods intended to enhance the abilities
of cross-functional teams to work together to develop products.
A product is something sold by an enterprise to its customers. Product development
is the set of activities beginning with the perception of a market opportunity and ending in
the production, sale, and delivery of a product. Although much of the material in this book
is useful in the development of any product, we explicitly focus on products that are
engineered, discrete, and physical. Because we focus on engineered products, the book
applies better to the development of power tools and computer peripherals than to
magazines or sweaters. Our focus on discrete goods makes the book less applicable to the
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development of products. Because of the focus on physical products, we do not emphasize

the specific issues involved in developing services or software. Even with these restrictions,
the methods presented apply well to a broad range of products, including, for example,
consumer electronics, sports equipment, scientific instruments, machine tools, and medical
devices.
The goal of this book is to present in a clear and detailed way a set of product
development methods aimed at bringing together the design, and manufacturing functions
of the enterprise. In this introductory chapter we describe some aspects of the industrial
practice of product development and provide a roadmap of the book.
1.1 Definition and Levels/Layers of Product
A product is the item offered for sale. A product can be a service or an item. It can
be physical or in virtual or cyber form. Every product is made at a cost and each is sold at a
price. The price that can be charged depends on the market, the quality, the marketing and
the segment that is targeted. Each product has a useful life after which it needs replacement,
and a life cycle after which it has to be re-invented. In FMCG parlance, a brand can be
revamped, re-launched or extended to make it more relevant to the segment and times, often
keeping the product almost the same.
1.1.1 Defining Product
A product is a bundle of attributes (features, functions, benefits, and uses) that a person
receives in an exchange. In essence, the term “product” refers to anything offered by a firm
to provide customer satisfaction, tangible or intangible. Thus, a product may be an idea
(recycling), a physical good (a pair of jeans), a service (banking), or any combination of the
three.
Broadly speaking, products fall into one of two categories: consumer products and business
products (also called industrial products and B2B products). Consumer products are
purchased by the final consumer. Business products are purchased by other industries or
firms and can be classified as production goods—i.e., raw materials or component parts
used in the production of the final product—or support goods—such as machinery, fixed
equipment, software systems, and tools that assist in the production process. Some products,
like computers, for instance, may be both consumer products and business products,
depending on who purchases and uses them.
The product fills an important role in the marketing mix because it is the core of the
exchange. Does the product provide the features, functions, benefits, and uses that the target
customer expects and desires? Throughout our discussion of product we will focus on the
target customer. Often companies become excited about their capabilities, technologies, and
ideas and forget the perspective of the customer. This leads to investments in product
enhancements or new products that don’t provide value to the customer—and, as a result,
are unsuccessful.
1.1.2 Importances of Product:
In our daily life, we buy different kinds of products so as to satisfy our varied needs. In
this way, we can say that the product is one which has the capacity to satisfy our
wants/needs. that is why the product is at the time defined as a bundle of potential utility. A
product may be regarded from the marketing viewpoint as a bundle of benefits which are
being offered to the consumer.
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1. Element of Marketing Mix: Product is the key element of the whole marketing
mix. All other elements that are price, promotion, and place mix are all dependent
and decided in accordance with the product.
2. Initiates Market Planning: Product is termed as the starting point and center of all
marketing programs. All marketing activities like sales promotion, advertising and
distribution are decided according to the nature of the product.
3. Competitive Weapon: Product is a powerful weapon of business to face strict
market competition. Businesses by efficiently producing products are able to provide
better quality at a lower cost which attracts more and more customers.
4. Means of Consumption and Satisfaction: Product is the center of consumption
and satisfaction of customers. People buy and consume different products for
satisfying their numerous needs.
5. Key to Market Success: Product is an important element for attaining success in the
market. If business is able to deliver products in accordance with customer
requirements, their product will widely be accepted. It will attract more customers
and will provide growth opportunities for the business.
6. Essential from Social Viewpoint: It is important from the viewpoint of society as it
provides numerous benefits to them. The product satisfies the wants of society,
improves their standard of living and also serves as a means of providing
employment opportunities to a large number of peoples involved in various
processes of the product.
1.1.3 Features of Products
The main characteristics or essential features of a product are as follows:
1. Customer Satisfaction: Products are the means through which customers fulfill
their needs and wants. It serves as a medium through which business offers service
to customers for satisfying their requirements.
2. Exchange value: The product should have an exchange value in monetary terms for
which it is exchanged with people. This enables the exchange of products between
the buyer and seller possible.
3. Tangibility: It is one of the important features of the product. The product should
have tangible attributes like it should be seen, touched or should have a physical
presence.
4. Intangible attributes: Product may be intangible which means that it does not have
any physical presence. In the case of availing services like banking, repairing, and
transportation, a product is intangible.
5. Associated attributes: The product should have differential and unique features that
make its identification and acceptance by buyers quite easy. It helps in product
differentiation and creating a better image.
1.1.4 Levels/Layers of Product
Marketers should need to think about different levels of a product in planning their
marketing programs. Different levels add different value to the customers. Marketers need
to understand that the concept of “product” is not simple. Product is the central
component of the marketing mix because other Ps in the marketing mix is just there to sell
the product.
Price reflects the initial cost to customers of obtaining the product; physical distribution
makes sure the product is available; promotion is just making sure the target customers
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learn and develop a need about the product. So when a customer is satisfied with the
product. That means the marketing mix has worked.
Product is the heart of the marketing mix; it is what finally makes or breaks a marketing
campaign. Understanding the levels of products helps to design the actual product and helps
to develop the marketing mix.
The five product levels are;

1. Core Benefit.
2. Generic Product or Basic Product.
3. Expected Level.
4. Augmented Product.
5. Potential Product.

Let’s example each level of a product;

1. Core Benefit
The first and the basic level is the core product/benefit the customers look at. It is the basic
good or service purchased, aside from its packaging or accompanying services. We buy a
product first because of its core or fundamental benefit – the problem it solves or the need it
satisfies.
From a bar soap, for example, the core benefit we look at is: it cleans our skin. While the
purchaser of a cosmetic item buys beauty, the purchaser of a lottery ticket buys hope, and so
on. A core product’s benefits range from tangible to intangible.

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2. Generic Product or Basic Product

The benefits that customers look at must be turned into a basic product by the marketer. A
calculator, for example, includes plastic, metal, electronic circuits, and a liquid display
crystal. The most fundamental level is the basic product, which seeks an answer to the
question: What is the buyer really buying? The basic product forms the nucleus of the total
product. It constitutes the problem-solving features or basic benefits that consumers seek
when they acquire a product.
A person buying a car acquires mobility, which enables him to move from one place to
another. Theodore Levitt has pointed out that buyers “do not buy quarter-inch drills; they
buy quarter-inch holes.”
3. Expected Product
The next level is the expected level. It includes a set of attributes and conditions that the
buyer expects which marketer should provide for purchase to take place. In the case of a
calculator, the buyers expect it to be handy, easy to operate, and so on.
4. Augmented Product
The Fourth Level of a Product is the Augmented Level or the augmented product. The
augmented product is what the customer is really buying. It is a good, service, or an idea
enhanced by its accompanying benefits. It is a combination of what the seller intends, and
the buyer perceives. An augmented product gives customers more than they expect. People
do not buy products; they buy the expectations of benefits. The marketing view demands the
active recognition of this and acts accordingly. Modern-day marketers compete with each
other through the augmented product. A marketer deciding to augment his product should
be well aware of the total consumption system of buyers.
Understanding the total consumption system means identifying the tasks customers perform
through the use of the product. Identifying this will give him leads on which he can augment
his product. In formulating the product augmentation policy, the marketer should take note
of a number of things. Since augmentation requires the company substantial costs, it should
know whether customers will be willing to take this load. After getting the augmented
benefits for sometimes, customers start thinking those as rights, i.e., they consider those
benefits as expected, not augmented. The company should, therefore, look for additional
benefits to offer.
The company should also note that soon after it offers augmented products at a premium
price, some competitors may start offering the basic or expected product at a much lower
price. This will obviously pull a significant number of customers, thus causing the firm a
fall in sales. The company should therefore remain ever alert so that augmentation yields the
desired result.
5. Potential Product
The last level of a product is the potential product. It encompasses all the augmentations and
transformations that the product might ultimately undergo in the future’. Augmentation, you
know, is concerned with what the product includes in the present term, where the potential
product is concerned with what may be added to the product in the future to make it more
desirable. The potential product is aimed at not only satisfying the customers but present the
product that delights and surprises the customers.
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The 3 Levels of Products!?

We just looked at the 5 levels of products, which is updated from the 3 levels of products.
Still understanding them is important as it shows how the product’s definition has changed
in modern times.

In designing a product, marketers need to consider a product on three levels.

First task; the most fundamental level is the core product, which seeks the answer to
the question: What is the buyer really buying?
The core product forms the nucleus of the total product, indicates the problem-solving
features or core benefits that consumers look for on the product. A toaster needs to toast,
micro-oven needs to cook the food – no matter how many smart features a company gives
with them. A smart toaster or micro-oven will fail in the market if it is not adequate to cook
meals.
So, in designing a product, marketers must start with defining the core of benefits, that is,
the functional features the product will possess
The 2nd task of a marketer is to build an actual product surrounding the core
product.
Actual products usually have as many as five characteristics; a quality level, features,
design, a brand name, and packaging. For instance, Sony’s – Eye Master Television set is an
actual product. Its name, parts, styling, features, packaging, and other attributes have all
been combined carefully to deliver the core benefit -entertainment through watching TV
programs.
Finally, third task; the marketer must build an augmented product around the core and
actual products by adding extra consumer services and benefits. Sony must offer more than
just a television set.

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It must provide consumers with a complete solution to their operating problems. Sony and
its dealers also might give buyers a warranty on spare parts and better quality, free lessons
on use methods, quick repair services when needed, and a telephone number to call if they
have any query.
Consumers consider all of these augmentations as an important component of the total
product. Therefore, a product is something more than a combination of tangible features. To
the consumers, products are complex bundles of benefits that satisfy their needs.
Final Words
In developing products, marketers first must carefully identify the core consumer needs the
product will satisfy. Then the actual product should be designed along with appropriate
ways to augment it for creating the bundle of benefits for the purpose of ensuring maximum
satisfaction to the consumers.
1.2 TYPES OF PRODUCTS
Marketers have traditionally classified products on the basis of characteristics: durability,
tangibility, and user (consumer or industrial). Each product type has an appropriate
marketing-mix strategy.
1.2.1 Durability and Tangibility
Products can be classified into three groups, according to durability and tangibility:
1. Nondurable goods are tangible goods normally consumed in one or a few uses, like food
and soap. Because these goods are consumed quickly and purchased frequently, the
appropriate strategy is to make them available in many locations, charge only a small
markup and advertise heavily to induce trial and build preference.
2. Durable goods are tangible goods that normally survive many uses: Refrigerators,
Machine tools, and Clothing. Durable products normally require more personal selling and
services command a higher margin and require more seller guarantees.
3. Services are intangible, inseparable, variable, and perishable products. As a result, they
normally require more quality control, supplier credibility, and adaptability. Examples
include haircuts, legal advice, and appliance repairs.
1.2.2 User Products (Consumer Products and Industrial Products)
Marketers consider goods primarily in terms of whom they are being targeted. They classify
goods based on whether they are consumer goods or industrial goods.
Generally, products are classified into two types;
1. Consumer Products (convenience products, shopping products, specialty products,
unsought products).
2. Industrial Products (capital goods, raw materials, component parts, major equipment,
accessory equipment, operating supplies, and services).

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Consumer products are those which are bought by consumers for ultimate consumption and
not for resale. These goods can be further classified based on how consumers buy them.
Consumer products include (1) convenience products, (2) shopping products, (3) specialty
products, and (4) unsought products.
Industrial products are those intended for use in making other products or operating a
business or institution. Thus, industrial products are differentiated from consumer products
based on their ultimate use. The types of Industrial goods are raw materials, component
parts, major equipment, accessory equipment, operating supplies, and services.
Let’s understand the main two types of product and their subcategories one by one.
1. Consumer Products
Consumer products are those designed to satisfy the needs and want of the ultimate
consumer. But, this is not an adequate definition for marketing purposes. The consumer
goods category is far too broad and diverse to be meaningful when developing product
strategies. Consumer goods include everything from fresh corn to advanced electronic
games and home video recorders, from sweaters and jeans to books and pens. As a result of
this variation, marketing executives must further classify these goods, focusing on the
buying processes consumers use.

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The four subgroups of consumer products are;

i. Convenience Products.
ii. Shopping Products.
iii. Specialty Products.
iv. Unsought Products.

The marketing methods of these products varies because the way the consumers buy them
differ. Marketing consideration for various consumer products are shown below:

Marketing Type of Consumer Product

Considerations
Convenience Shopping Specialty Unsought

Strong brand
Frequent Less frequent
preference and Little product
purchase, little purchase, much
loyalty, special awareness,
planning, little planning, and
Customer purchase effort, knowledge (or
comparison or shopping effort,
buying behavior little if a little or even
shopping effort, comparison of
comparison of negative
low customer brands on price,
brands, low interest)
involvement quality, style
price sensitivity

Price Low price Higher price High price Varies

Exclusive
Widespread
Selective distribution in
distribution,
Distribution distribution in only one or a Varies
convenient
fewer outlets few outlets per
locations
market area

Advertising and More carefully Aggressive

personal selling targeted advertising and
Mass promotion
Promotion by both promotion by personal selling
by the producer
producer and both producers by producers
resellers and resellers. resellers

Major
Toothpaste, Luxury goods,
appliances, Life insurance
magazines, such as Rolex
Examples televisions,
laundry watches or fine Red Cross
furniture,
detergent crystal blood donations
clothing

Let us now have a brief idea on each of the different types of product:
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i. Convenience Goods
These are products that consumers want to buy with as little difficulty and physical effort as
possible. Consumers know what they want., usually have purchased the product before, and
perhaps above all, do not want to spend considerable time making the purchase. Goods
falling into this group are known as convenience goods – they are the goods that the
customer usually purchases frequently, immediately, and with a minimum of effort in
comparison and buying.
A large number of products, of course, fall into this group. Milk, soap, candies, and various
other low-cost goods for which consumers are not totally brand loyal are examples of
convenience goods. Marketing executives are especially careful to make sure that this type
of product is readily available. These goods, therefore, receive widespread distribution.
Marketing executives recognize that consumers do not view all of the convenience products
alike. Or example, bread is a convenience item for some people who do not demand only
one brand. If a store does not carry a particular brand, another will be readily substituted.
Other consumers, however, are very loyal to a specific brand and will go out of their way to
find it. Marketers have identified four subgroups of convenience goods: staple, impulse,
emergency.
a) Staple goods
Those goods that the consumer buys on a very regular basis plans for the purchase, and
tends to be somewhat brand loyal. Ballpoint-pens soft drinks, pickles, tobacco products,
etc., are usually considered as staple goods. Brand loyalty for these particular products
stems from the desire to simplify the buying process by automatically selecting one brand
and minimizing purchasing time.
b) Impulse goods
Impulse goods are purchased without conscious forethought – they are the result of a
sudden but strongly felt need. Magazines, street foods, ice cream, are examples of impulse
items. One of the most common misconceptions about impulse goods is that they are bought
irrationally. Though such purchases are not preplanned, they satisfy consumer needs, and
therefore cannot be viewed as wasteful.
c) Emergency goods
These goods are closely related in some respects to impulse items because they are not
preplanned purchases. Emergency goods differ from impulse goods because they may be
planned for on short notice, but more importantly, are purchased to satisfy an immediate
and pressing situation. Candles, matches, antiseptics are certainly emergency goods.
ii. Shopping Products
Shopping goods are those consumer goods which the customer in the process of selection
and purchase characteristically compares on such bases as suitability, quality, price, and
style. Shopping products are infrequently purchased products that customers plan and
compare carefully on brands, price, quality, and style. Consumers devote much time and
effort in obtaining information and making comparisons in case of buying shopping
products.
For example, refrigerators, air coolers, televisions, washing machines, and clothing are
shopping products.
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In this category, marketing executives generally distinguish the shopping products into two
types;
1. Homogeneous shopping goods.
2. Heterogeneous shopping goods.
Homogeneous Shopping Goods
Shopping goods that consumers believe to be essentially the same in terms of quality, price,
styling and suitability for their needs are called homogeneous shopping goods. The buyer
considers homogeneous products similar in quality, such as refrigerators, but they think that
prices are different for which they tend to make comparisons.
Heterogeneous Shopping Goods
Heterogeneous shopping goods are products in which consumers perceive some discernible
differences in suitability, quality, price, or styling. Whether real or imagined, the differences
are important enough to cause consumers to evaluate the trade-offs between them.
Reversibly, in heterogeneous products such as clothing, consumers consider product
features more important than price. So a trader of heterogeneous shopping products must
carry varied assortment to cater to individual tastes and should employ well-trained
salespeople to provide information and advice to buyers.

iii. Specialty Products

Specialty products are characterized by strong brand preferred and loyalty, special purchase
effort, little comparison of brands, and/or price sensitivity. These goods include those
consumer goods with unique characteristics and/or brand identification for which a
significant group of buyers is habitually willing to make a special purchasing effort.

The most important factors distinguishing specialty items from other goods are their high
brand recognition and the degree to which consumers will actively seek them. Here
consumers have particular preferences and will make concerted efforts to find them.
Examples include expensive men’s suits, fancy groceries, health foods, hi-fi components,
and photographic equipment.

The unique feature of specialty products is that the buyer will look for only a specific brand.
The consumer does not care for substitutes but tries to procure the wanted brand, which may
require considerable time and effort. Most specialty goods are relatively expensive, carry
high-profit margins for the seller, and are available in a limited number of outlets. They are
sold in a few outlets because consumers are unwilling to accept substitutes and will seek out
stores carrying the brands of their choice.

iv. Unsought Products

Unsought products are those consumer products of who’s existence the consumers are not
aware of. If they know about these products, they may not think of buying. “Unsought
goods are goods that potential customers do not yet want or know they can buy. Therefore,
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they don’t search for them at all. Consumers probably wouldn’t buy these goods if they saw
them – unless promotion could show their value”. Consumers do not consciously want or
actively seek out unsought goods. Consumers have no intention of buying the product in the
first place.

Examples include life insurance and eye donations to the Eye Banks. As their characteristics
indicate, unsought products need aggressive advertising and personal selling by producers
and resellers. The challenge involved in selling unsought products has led to developing
some of the most advanced personal selling methods. Costly personal selling is often
required since people often avoid these products.

2. Industrial Products

Industrial goods are those purchased by organizations for use either in other products or in
their operations. Manufacturers, commercial businesses, non-profit institutions, and
government agencies buy industrial goods. Industrial goods can be classified into raw
materials, component parts, major equipment, accessory equipment, operating supplies, and
services. If a consumer buys an air conditioner for use at home, the air conditioner is a
consumer product. If the same consumer buys the same air conditioner for use in his
factory, it is an industrial product.

Industrial goods can be classified into;

i. Capital goods.
ii. Raw materials.
iii. Component parts.
iv. Major equipment.
v. Accessory equipment.
vi. Operating supplies.
vii. Services.

A brief discussion of these different types of industrial product can be presented as under;
i. Capital goods
Capital goods are industrial products that are directly used in production. Capital goods
consist of installations and accessory equipment. Buildings, plants, and machinery are
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examples of installations. Installations are usually bought directly from the producer.
Accessory equipment includes workman’s tools and office equipment like calculators, fax
machines, etc. Accessory equipment is marketed through intermediaries because the buyers
of those products are scattered over a large geographic area, and individual purchase
volume is small.
ii. Raw Materials
These are industrial goods that will be used in the making of other products. Included in this
category are natural resources such as forest products, minerals, water, oceanic products,
and agricultural products and livestock. In most instances, raw materials lose their
individual identities when used in the final product. Materials and parts become a part of the
buyer’s product through further processing. They include raw materials and manufactured
materials and parts. Raw materials include farm products and natural products such as jute,
cotton, wheat, fruits, crude petroleum, coal, iron ore, and natural gas.
Farm products are supplied by many small producers who sell them to intermediaries. These
intermediaries then process and sell them. Natural products are of big bulk and low unit
value and to be transported from producer to user. Producers of natural products are few in
number and large. They market their products directly to industrial users. Manufactured
materials and parts include component matters such as iron, yarn, cement, and wires, and
component parts such as small motors, tires, and casting. Component materials usually are
processed further.
For example, the pulp is made into paper. Component parts enter into the finished product
wholely. For example, amplifiers are fixed in CD players. Generally, manufactured
materials and parts are sold directly to industrial users. In marketing manufactured materials
and parts, more emphasis is given on price, and service is given more attention than
branding and advertising.
iii. Component Parts
Unlike raw materials, parts usually have been processed before being used in the finished
product. Although they may not be visible, parts are left intact and assembled into the total
product.
iv. Major Equipment
This category comprises industrial products used to make, process, or sell other goods.
These include machinery, typewriters, computers, automobiles, tractors, engines, and so on.
Normally, they are relatively expensive and have a useful life over one year. Major
equipment is not limited solely to the production process. It is found in wholesale (e.g.,
forklifts) and retail (e.g., cash registers) operations.
v. Accessory Equipment
This equipment includes industrial products used to facilitate the production process or
middleman sales. It does not become part of the finished product but aids in the overall
production or selling effort. Accessory equipment would include tools, shelving, and many
other products that tend to have a lower cost and shorter life than major equipment.
vi. Operating Supplies
Supplies include operating supplies like office stationery, repair, and maintenance items.
Supplies can be treated as convenience products of the industrial market as they are
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purchased with minimal effort. These are products that are incidental to the production or
selling functions. Included in this category are low cost and quickly (within one year) used
up in the company’s operations. Pencils, papers, lubricating oils, cash register, tape, and
maintenance and repair items are included in this category.
vii. Services
Business services include maintenance and repair services, factory premise cleaning, office
equipment repair, and business consultancy services. These services are generally provided
through contracts by small producers and manufacturers of the original equipment. Services
normally should not be considered as a separate product classification. Depending on the
particular service, they are either consumer or industrial goods. They are activities, benefits,
or satisfactions offered for sale or are provided in connection with the sale of goods.
Industrial services are purchased for use in producing the buyer’s products or, more
frequently, general operations. Like consumer services, industrial services are not as
standardized as goods, nor are they as tangible or as durable. As the complexities of
business increase, so does the need for a specialized service. Professional services like
accounting, advertising, marketing research, legal advice, and management consulting rely
on more and more.
Final Words: Product Classification Requires for Developing Effective Marketing
Strategies
Marketers begin with developing product classification schemes to formulate effective
marketing strategies. They classify products and services into two broad categories based on
the types of consumers that use them.
Let’s analyze the difference in marketing strategies that require for the consumer and
industrial products. Industrial products are usually standardized then consumer products that
require frequent changes in fashion and style. Advertising is an important promotional tool
for consumer products, but may not be so in the case of industrial products. Personal selling
and after-sales service are generally more important for industrial products. Industrial
products generally involve high-value purchases, and this involves competitive bidding
based on price competition. Selling is done based on quality or tangible attributes. However,
consumer products are very often sold for psychological satisfaction.
For example, the Fair & Lovely offers you fair skin complexion like a film star.
(Presumption that film stars do have lovely complexions, as they appear to have on the
screen.) But they are facing a backlash as they are marginalizing the people of color, and
promoting fairer skin is better. So consumer products need very microscopic to board
analysis before making a marketing decision. Consumer products require elaborate channels
of distribution, but industrial products are sold through fewer outlets and often directed by
the organization.
These are some of the salient features of the marketing of consumer products against
industrial products. A more detailed treatment will follow in subsequent units on promotion
and physical distribution.

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Summary
 A product is something that is manufactured for sale in the market. Customer needs
are met by the usage of products. Product is one of the main components of
marketing—all marketing activities revolve around the product.
 A product is what a seller has to sell and what a buyer has to buy it satisfies the
needs of customers. Customers purchase products because they are capable of
realizing some benefits to the purchaser.
 Product refers to a good or service that satisfies the needs and wants of customers. It
is offered in the market by an organization to earn revenue by meeting the
requirements of customers. Product is an asset of an organization and referred as the
backbone of marketing mix.
 Products are tangible in nature, customers can touch, seen or feel a products. For
example, car, book, computer etc.
 Service products are intangible in nature, services like, consultancy, banking,
insurance etc.
 It can be a single commodity or a service; a group of commodities or a group of
services; a product service combination, or even a combination of several products
and services.

SELF-ASSESSMENT QUESTIONS
Short Answer Questions
1. Define product.
2. What are tangible products?
3. What are intangible products?
4. What is the difference between a physical product and a service?
5. What do you mean by industrial goods?
6. What are the elements of a product?
7. What are homogenous products?
8. What are heterogeneous products?
9. Which category of a product does capital item belong? Give example.
10. What are unsought goods?
11. Explain what specialty goods are.
12. What do you mean by target audience?
13. Explain augmented product layer briefly.
14. What is value proposition?
15. How are materials and parts categorised with products?
16. What are capital items?
17. Explain how industrial goods can be applied to product management.

Long Answer Questions

1. Explain the meaning of product and its benefits.
2. What is the importance of product in business? Explain briefly.
3. What are the layers of a product?
4. Describe the importance of a product in any business.
5. With help of a chart, distinguish between goods and services.
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6. How products are classified based on durability? Give examples.

7. How consumer goods are classified based on usage? Give examples.
8. Briefly explain the types of products.
9. Write short notes on the following:
(a) Augmented Product Layer (b) Potential Product Layer
(c) Convenience Goods (d) Specialty Goods

References
 Jayachandran, S., Marketing Management, 1 st Edition, Excel Books, New Delhi,
2009.
 Mathur, U.C, Product & Brand Management, 2 nd Edition, Excel Books, New Delhi,
2012.
 Srivastava, R.K., Product Management & New Product Development, 2 nd Edition,
Excel Books, New Delhi, 2014.

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LESSON 2 – NEW PRODUCT DEVELOPMENT, ADAPTION AND EVALUATION

OF PRODUCT DEVELOPMENT.
CONTENTS
Learning Objectives
Learning Outcomes
Overview
2.1 Developing New Products
2.1.1 Definitions
2.1.2 Types of New Products
2.1.3 Basic Conditions/Features of a New Product
2.1.4 Reasons for Developing a New Product
2.1.5 Constraints in Developing New Products
2.2 NEW PRODUCT DEVELOPMENT PROCESS
2.2.1 Idea Generation
2.2.2 Idea Screening
2.2.3 Concept Development & Testing
2.2.4 Market Strategy/Business Analysis
2.2.5 Product Development
2.2.6 Market Testing
2.2.7 Market Entry/Commercialization
2.3 ADOPTION AND EVALUATION PROCESS
2.3.1 Consumer Adoption Process
2.3.2 Evaluation Process
Summary
Self-Assessment Questions
References

OVERVIEW
We have considered the role of new products throughout this module. It is important to
introduce new products in order to have a balanced portfolio containing products at the
various stages of the product life cycle. We have not yet focused on ways of
creating successful new products.
In this module we will discuss a standard, somewhat fixed new-product development
process. The logic behind this rather rigid process is that it requires a great deal of discipline
to create new products. It’s expensive to launch a successful new product—but it’s far more
expensive to launch an unsuccessful products. For these reasons, organizations invest a lot
in the creation and refinement of their new-product development processes. It helps them
raise the odds that they’ll be successful.
There are probably as many varieties of new-product development systems as there are
types of companies, but most of them share the same basic steps or stages—they are just
executed in different ways. Below, we have divided the process into eight stages, grouped
into three phases; subsequent readings will discuss these phases in greater detail. Many of
the activities are performed repeatedly throughout the process, but they become more
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concrete as the product idea is refined and additional data are gathered. For example, at each
stage of the process the product team is asking, “Is this a viable product concept?” but the
answers change as the product is refined and more market perspectives can be added to the
evaluation.
2.1 Developing New Products
Concept of a new product is important for the managers. Both newly established as well as
existing companies face the problem of developing of a new product. Buyers do want some
elements of newness in a product. Newness may be in terms of production, marketing,
place, service, use, or price.
New product is one that offers new benefits or features. It differs significantly from the
products currently available in the market in terms of uses, appearance, performance, taste,
price, and construction. New product is one, which is perceived as a new by consumers. It
may be original product, improved product, modified product, or new brand. Various issues
are related to a new product, such as how to develop a new product, how to launch it, how
to manage it, why it fails, what precautions should be taken to reduce its failure rate, and
many other such aspects.
2.1.1 Definitions:
Term ‘new product’ has been defined as under:
1. A product that is offered for the first time to particular groups of buyers is a new product.
2. A new product is one, which differs significantly from the products available in the
market in forms of qualities, features, or both.
3. A product that is perceived by the consumers as a new can be said as a new product. It
must be new for consumers.
2.1.2 Types of New Products:
A new product is one, which is perceived as a new by consumers. If we consider this
definition, we may find various types of new products. Allen and Hamilton have identified
six categories of a new products.
1. New to the World:
It is really innovative, is entered for the first time in the world. The product was not
previously available in the World. For example, pills to cure the incurable diseases like aids,
diabetes etc., or completely pollution free vehicle may be a new product.
2. New Product Line:
In an established market, when a new product line is introduced, it is a new product. For
example, introduction of car in the market by Bajaj Auto Limited can be a new product.
3. Addition to the Existing Product Line:
When some models or styles are added in the existing product line, it can be a new product.
As per example, CBZ and PASSION models introduced by Hero Honda in its two-wheeler
product line were new products.
4. Improvement in Existing Product:
In this case, new features, qualities, or services are added in the existing product. Example
is, Pentium IV computer is the improvement over Pentium III.
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5. Repositioning:
Repositioning consists of introducing the existing product in a new segment or a territory.
6. Cost reduction:
Selling a high-priced product at a lower price or at a concessional rate becomes a new
product. For those who could not afford the product in the past, now they can use the same
product as a new.
2.1.3 Basic Conditions/Features of a New Product:
A product can be said as a new one if it satisfies following conditions:
1. It must be perceived as a new one by buyers.
2. It must differ significantly from the products offered by the competitors.
3. Consumer must accept it.
4. It must be distributable safely and normally.
5. It must have effective packing, branding, and labeling.
6. It must provide satisfactory performance.
7. It must be produced within permissible limit of costs.
2.1.4 Reasons for Developing a New Product:
A new product, may be called innovation, seems to be necessary due to an enormous
number of factors. The dynamic nature of business environment offers only two options –
be innovative, or die. Marketer has to search for superior ways to meet increasing
expectations. Those companies fail to respect or respond the need of time have to withdraw
from the market. Innovation or new product development directly concerns with firm’s
survival, growth, and development. A marketer continuously tries to offer superior product
to his consumers.
He desires to offer more satisfaction than competitors. He also attempts to match goods and
services with changing needs and wants of the target market. As per change in the fashion,
preference, habits, and attitudes of consumers, a company must change its offer/product.
New products are primarily developed to meet market expectations. However, there are
some other dominants factors forcing a marketer to go for developing new products.
Main factors or reasons for developing a new product have been described as follows:
1. Changes in Market:
Today’s market is much dynamic as compared to the past. Due to increased education,
borderless marketing, severe competition, and availability of a number of substitutes have
posed tremendous challenges for today’s marketers. Market fashion, preference, and habits
are constantly changing and marketer finds no option except to respect such market
changes, by positive response in terms of innovation. Thus, consumer behaviour is one of
the dominant reasons for innovation.
2. Changes in Technology:
Due to continuous technological development, new production methods are invented. Old
technology and production methods are replaced by newer ones. A company spends a large
amount of money for technological research. To match the technological changes, new
products are developed.
3. Increasing Competition:
Increasing competition is one of significant reasons leading to go for innovation. Every
company struggles to attract and maintain consumers by offering superior products. To offer
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more competitive advantages and to satisfy consumer more effectively and efficiently, the
product innovation seems to be necessary.
4. Diversification of Risk:
In many cases, a company develops new products just to diversify risk. Existing products
may not be capable to match with market needs and wants. By offering more varieties, a
company can minimize the degree of obsolescence. Thus, the need for continuous
innovation arises because older products are thrown out of market.
5. Reputation and Goodwill:
To create image and reputation as an innovative and dynamic firm, the innovation is
adopted. Company wishes to convince the market that it tries seriously to meet consumer’s
expectations. Obviously, a company developing new products periodically has more
reputation, and can attract consumers easily.
6. Utilization of Excess Capacity:
Excess capacity may be in form of production capacity or human skills. To utilize
maximum plant and material capacity, a company may go for developing a new product.
Sometimes, excess managerial or human capacity may also tempt the company to opt for
innovation.
7. Seasonal Fluctuations:
Sometimes, new products are developed just to minimize seasonal fluctuations in demand.
By producing new product, a company can meet seasonal requirements of market. Market is
satisfied due to matching products in each of the seasons, and company can get attractive
business.
8. Growth and Development:
Innovation is an effective way to win more market share or sales. Marketer can exploit
emerging opportunities by innovative products. When it is not possible to accelerate growth
rate by the existing products, a company prefers to develop new products to expand its
market, maximize sales, and earn more profits.
2.1.5 Constraints in Developing New Products:
Why Does A New Product Fail?
To develop a new product successfully is not an easy game. One has to make a lot of
exercise to minimize the rate of failure. There are a large number of factors leading to
failure of innovation. As per the rough estimate, in developing countries, more than half of
newly developed products fail. Same is the case in developed countries. The fundamental
question is: Why does a new product fail? Which are the reasons leading to a higher rate of
failure?
We may find following causes for failure of new products:
1. Shortage of new ideas is the main constraint. Because of shortage of new ideas, it is
difficult to offer a distinct product to market.
2. High cost of developing new products is another obvious reason. Development costs and
production costs are so high to offer new product at a competitive rate/price.
3. Long time period requires for developing a new product. When the product is introduced
after considerable time tag, it fails to match the needs and wants of market.
4. Fragmented or small market is another problem leading to failure of new products. Due to
small market or limited market, heavy expenses cannot be recovered.
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5. Social and government constraints play a vital role in producing and marketing of new
products.
6. Due to dynamic nature of market, a new product has a shorter life span. A product
introduced may not serve the market effectively for a long period of time. Before it
reasonable establishes, it is replaced by the newer products. Competition has dominant role
in this regard.
7. Heavy capital investment is one of the major problems in developing new products.
Development, production, and marketing of new products need a heavy investment. Many
firms are afraid of new products due to inability to invest the huge fund.
8. Successful development of innovation requires integrated efforts. In case organisation
fails to integrate efforts of different departments and people, the failure is certain.
9. Failure of company to formulate effective marketing strategies, including product, price,
promotion, and place.
10. Sometimes, natural and man-made calamities also contribute to failure of the
innovation.
Essentials or Requirements for Successful Development of New Products:
Based upon possible causes leading to new product failures, following factors (also called
essentials, precautions or requirements) must be considered:
1. Adequate market demand
2. Market trends and economic conditions
3. Compatibility with the present production and marketing structure
4. Availability of funds
5. Competitiveness
6. Managerial experience and ability
7. Suitability with objective, image, and goodwill of company
8. Time period, or gestation period
9. Legal and social aspects
10. Internal integration and cooperation.
2.2 NEW PRODUCT DEVELOPMENT PROCESS
Every New Product Development journey starts with an idea, which forms the foundation
for further development. These new project development journeys have the potential to
cause a digital disruption when the new product successfully meets a need in a way that is
unique, untried, and out-of-the-box. When a product solves the end user’s problems, the
business achieves product-market fit.
There are plentiful New Product Development examples for taking inspiration from, such as
Trello for task management and tracking, Zoom for video communication, Dropbox for
cloud storage, Figma for designers working remotely, Air Table for relational data
management, and so on.
Beginning the New Product Development process takes tact and planning. According to
Gartner, many organizations believe in involving customers at an early stage of the New
Product Development process. These organizations give precedence to involving the
customers at an early stage of the New Product Development process to gain a better
understanding of their problems before strategizing around processes, tools, and technology.

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Here is a guide that provides a comprehensive walk-through of the New Product

Development stages:

What is New Product Development (NPD)?

New product development is the process of converting an idea into a workable software
product.
The New Product Development (NPD) process is about grabbing the market opportunity
that revolves around customer needs, checking the idea’s feasibility, and delivering working
software.
On the other hand, Product Development is an umbrella term that sticks to the six stages of
software development lifecycle and works on launching products that already have a Proof
of Concept (POC). The New Product Development approach revolves around working on
an entirely new idea, where the uncertainty around its development and subsequent adoption
is high.
The seven stages of the New Product Development process include — idea generation, idea
screening, concept development, and testing, building a market strategy, product
development, market testing, and market commercialization.

Here is an insight into each of these stages for understanding how to develop a new product:
Seven Stages of New Product Development Process

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Building new products and services can be a process filled with uncertainty. However,
following the systematic New Product Development process can help businesses gain
clarity and confidence in what they are building.
2.2.1 Idea Generation
The goal should be to generate many worthy ideas that can form the foundation for the New
Product Development strategy. The major focus for stage 1 should be to arrange
brainstorming sessions where solving customer problems is given precedence. This phase is
not about generating foolproof ideas that are ready for implementation. Instead, raw and
unproven ideas that can be shortlisted later should be discussed.
Here’s how a business can do that:
1. Emphasize on Customer Problems, The problem that is well described is a problem half-
solved. Here’s how to identify the issues that the target audience is facing:
a. Personal Problems
It is a good idea to look at problems that the business is itself facing to come up with the
idea. All a business needs to do is focus on that specific problem and build a solution that
can be tagged a “one for all” solution to the common problem.
To start with, a business needs to understand the human story behind digital offerings. For
instance, Jeff Lawson, the founder of Twilio, has an interesting story behind its
communication-based software product launch. He was associated with three business
companies in the past, and all of them lacked one thing — Productivity.
When he was driven to start again with something of his own, he knew that he needed to
cover up the communication gaps as these were, in his experience, the biggest hurdles on
the path to productivity. That is when product innovation happened in the form of Twilio.
The product building and launching had its ups and downs, but his conviction to have this
product led to a great business idea. Here is an inspiring extract of his speech from the Web
Summit.
b. Qualify Each of the Listed Problems
This step helps check the feasibility of the shortlisted problems and their solutions based on
the 4U approach by Michael Skok, the founder of Startup Secrets. The 4U stands for:

Taking a deeper look at each of these aspects in detail will provide greater clarity.
 Unworkable: Figure out whether the brainstormed product concepts will address
some real problems. Will the product be able to fill the existing customer
experience gaps and will the product achieve product-market fit?
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 Unavoidable: Is the problem the product will address unavoidable to the extent that
it becomes mandatory to comply? It is necessary to find out whether solving that
problem is a choice or a compulsion.
 Urgent: Is the problem urgent and is a solution highly demanded by the target
market? If the answer is affirmative, this could be a chance to cover the white space
in the market with the original product.
 Underserved: Are there no available products that address the existing user
problems? Look for the whitespace in the market and hold on to the idea that looks
promising.
c. Coming Up With Possible Solutions
If a problem has been identified, it’s time to look for possible solutions. For every user
problem, there ought to be potential New Product Development opportunities.
Here’s the workflow that starts from a problem and ends up with strategizing around the
solution.

In all, no matter how common or uncommon the problem is, the solution should be unique.
Even if a product already exists, ensure that the product can solve problems differently.
For instance, Slack and Zoom are both SaaS products that focus on promoting
communication and collaboration. Zoom, however, does this differently by also enabling
the conducting of webinars. In other words, webinars are their unique selling point (USP).
d. Narrowing Down Problems + Solutions
Create a comparison chart that lists all the shortlisted problems along with the solutions.
Circulate the findings across the organizational structure to come up with a viable problem
set.
In case the stakeholders are not convinced regarding the shortlisted idea, try the Replicate,
Re-Purpose, and Upgrade approach.
 Replicate: This focuses on creating a similar product as that of a competitor but
launching it in new market conditions. When done with launching the minimum
viable product (MVP), the strategy should be to expand the business by introducing
out-of-the-box and unique features later on.
 Re-Purpose: This focuses on rewiring an existing business model. For instance,
LinkedIn introduced LinkedIn Learning, an e-learning platform for professionals.
This product was similar to an e-learning platform for students, however, they built
new opportunities for expanding the target audience and market share.
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 Upgrading: This concept of New Product Development revolves around

introducing a new business model that is better than existing solutions. Better could
mean improved performance, better speed, addressing the challenges that a
competitor is facing, or introducing added functionalities.
2.2.2 Idea Screening
This New Product Development stage revolves around choosing the one idea that has the
highest potential for success. Put all the ideas available on the table for internal review. That
is, turn to people with industry knowledge and experience in the field for idea screening.
For a new product development idea, having a proof of concept (POC) should hold
precedence as it helps check the feasibility of the idea. There is no point in zeroing in on an
idea that is not technically feasible to build.
Consult the Agile Development team. Their expertise can help with understanding the
technical side of things, which, in turn, can assist with shortlisting ideas worth building a
PoC for. SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis can be
another good practice to consider when shortlisting New Product Development ideas. In a
SWOT analysis, the Agile Development team, the product owner, the scrum master, and the
product manager conduct a detailed analysis of the idea to identify an idea where strengths
and opportunities overpower threats and weaknesses.
Conducting a SWOT is relatively simple. Getting started only requires a simple 2×2 grid:

In conclusion, the New Product Development idea should be unique so that people do not
need to be convinced to pay for it.
2.2.3 Concept Development & Testing
Before starting with the New Product Development process, building a detailed version of
the idea and the user stories should be given priority. This value proposition evaluation is
the first step towards concept development and testing. At the very least, it ensures that
problems in the approach are discovered sooner and the team can course-correct earlier.
That helps to ensure that technical debts will not accumulate. There is a 17% chance that [your]
startup’s idea fails, just because it was a poor product.

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The easy-to-follow concept development steps include:

1. Quantifying Gain/Pain Ratio
A business needs to create an insightful picture of the product from the user’s perspective.
This can be achieved by calculating the gain/pain ratio, where:
Gain = Benefits of the product for the customer. What is in it for them? Pain = The efforts
made by the customer to understand and use the product.
2. Conducting a Competitor Analysis
Knowing about existing market players is a critical strategic step to consider. Understanding
the competition makes it easier to infer:
 Where the competitor lacks
 Where is the scope for improvement
 Existing white space in the market
3. Enlisting the Major Product Features
The user stories involved in the New Product Development software project will make or
break a business. When creating a list of such features, it is imperative to know — how is it
an innovative feature, and how is it going to solve a problem?
4. Create a Value Proposition Chart
Even after being convinced of the wisdom & the utility of an idea, being able to state it
clearly to the end-user, in their context, is quite a different story altogether. The end-user
needs to be given a clear picture of what the new product is capable of doing.
This clean & presentable fashion can be best represented in the form of a value proposition
chart. The format of which should include:

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5 Concept Testing
Once the value proposition is ready, it is time to present it to the set of selected customers.
How they perceive the idea is the test of the efforts so far. If the idea doesn’t look
promising, it is wise to repeat the idea screening steps to develop a new product.
Meaningful insight can be gained by focusing on four critical aspects:
 Identification of the focus group, i.e., people who would benefit from the new product
under development.
 Assessment of other alternatives that can be presented to the focus group.
 Development of a foolproof plan for the New Product Development that includes all
stages from feature development, marketing, pricing, and distribution.
 Positioning of the product’s unique features into the customers’ minds to enhance
findability and discoverability.
The concept testing report would look something like this:

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2.2.4 Market Strategy/Business Analysis

Marketing strategy is all about drafting a way to reach out to the targeted audience. Perhaps
the best and most straightforward method is to follow McCarthy’s 4Ps of marketing for a
New Product Development project.

Category Meaning Purpose

Product Finalizing the software product Product Design

based on the concept testing Branding Strategy
report Level of services offered

Price Strategizing around product Pricing Strategy

licensing cost, estimating profit Discounting Policies
margins, and creating an Payment Modes
unbeatable marketing strategy

Promotion Distinguishing the new solution Balancing advertising, marketing, and public
from others by highlighting the relations strategy
hero point or unique feature The mediums to reach out to the target
audience
Maintaining a fair to-and-fro customer
communication frequency limit

Placement Communicating how it solves Finalizing product distribution strategies

the key problems of the Defining the product’s scope, i.e., local vs
customer Global

This business analysis will help to determine whether the New Product Development efforts
are worth the financial investment or not (i.e., will it create a continuous stream of value)?
It is important to strategize in an informed way about the selling price by identifying the
base price of the product. The best way to identify the base price is:
1. Cost-Based Pricing Model
Here, the initial production cost is added to the markup percentage to come up with the new
product’s final price.

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Applying the cost-plus pricing formula:

 Production cost = Technology cost + development cost + licensing cost = $100
 Markup% = 50%
 Price = $150
If a business analysis team applies the psychological price trick (i.e., ending the final price
with 5 or 9 digits) chances of conversions increase.
So, if the psychological pricing is to play, the $150 price will become $149.9.
2. Market-Focused Pricing
This pricing is inferred after a thorough analysis of the pricing model of similar products in
the target market.
The market-oriented pricing follows the trajectory:

The factors to consider when selecting a competitive price:

 Price Above Market: A higher price is suitable when proceeding with New Product
Development initiatives that solve an urgent problem of the customers.
 Copy Market: Selling the new product at the same price as the competitors can
initially be a safer move. However, marketing efforts would have to be ramped up to
score better than the competitor.
 Price Below Market: A lower price bracket than the competitor is recommended to
attract customers that can be converted into loyal ones over time, even if the new
product solves things differently.
2.2.5 Product Development
When the New Product Development idea is in place, the market strategy is documented,
and the business analysis is completed, it is time to move on with the product development
cycle.
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The New Product Development starts with developing the prototype followed by MVP.
1. Prototype
This focuses on creating the UI/UX for the product, which is then shared with the
stakeholders. This helps in visualizing how the product will look and whether it complies
with ergonomics best practices.
2. Minimum Viable Product (MVP)
This focuses on working on the user stories in Agile for the New Product that will set it
apart from others. Once the design, development, and testing are done, the MVP is launched
in the market with minimal features. The future iterations depend on the initial response.
The best way to approach New Product Development is to rely on Agile Product
Development that focuses on incremental and iterative development while promoting
collaboration and communication.
This is better than the waterfall approach as it allows for to-and-fro movement across the
development cycle as new user requirements emerge. Though the development stages of
Waterfall and Agile are similar, these software development methodologies differ.

The advantage of Agile is that it speeds up the software development process while
maintaining communication and synchronization across the development teams.

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2.2.6 Market Testing

This step in New Product Development aims to reduce the uncertainty revolving around the
success of the software product. In other words, this step revolves around checking the
viability of the new product or its marketing campaign.
There are two market testing strategies to follow:
1. Alpha Testing
The test engineers deployed in the organization use and judge the product based on
performance. After checking the product’s performance, the test engineers map the
marketing mix results with the product created.
If any issues are found, changes are planned and implemented before the final go-ahead.
2. Beta Testing
The target groups or customers use the product and give their unbiased feedback to the
organization.
This strategy is about listening to the voice of customers (VOC). If any issues are reported,
they are moved back to the development team for fixtures.
Here is how Alpha and Beta testing are different from each other:

There is also a third form of market testing that applies to product validation. This market
testing approach is called the In-Home Usage Test (IHUT). Here, the product developed is
provided to intended customers, who will ultimately use the product.
These users should be allowed to use the product, and then their feedback should be
recorded. This is another successful way to test the market the product is built for. Their
feedback can form the foundation for further improvements.

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2.2.7 Market Entry/Commercialization

Commercialization is an umbrella term that entails varied strategies to ensure the success of
the new product. Here is what commercialization includes:

If all the mentioned strategies fall right in place, nothing can stop a product from getting
attention and being a product-market fit. Here are some must-do marketing activities that
will help the product gain traction:
1. Marketing the Concept Over Product
The idea here is simple: talk about the concept and the product’s intent instead of endlessly
boasting about the product features. In short, answer how the product will make the
customer’s life easier.
When HubSpot, a marketer’s product, was launched, it was not much of a success. Sadly,
their customers did not understand the intent of the now successful product.
So, how did they change the game?
They chose to market their unique selling point instead of marketing and promoting the
entire product. That unique selling point was inbound marketing.
They started to create awareness around inbound marketing and instantly became a
recognized leader in the software product industry. Sometimes the right marketing is all a
product needs for the magnet effect.
2. Having a Brand Voice
A unique mindset and a unique voice always gain an all-ears audience. This is where the
marketing team plays a significant role. They need to establish an effective communication
style that represents the brand in the best manner.
Be it blogs, emails, or even the website content, all of these elements need to be well
thought out and clear in their message. In the end, these elements should hold the power to
intrigue the target audience.
3. Conducting Intriguing Webinars
Webinars are one way to attract quality leads. Conduct webinars that talk about how the
new product will benefit the audience and describe the features that are being introduced.
Webinars can also help promote findability and discoverability:
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 Findability: It is easy to find and use features that the customer is aware of.
 Discoverability: It is easy to find and use features that the customer has no
knowledge about.
Now that remote work is gaining traction, webinars are an even more effective way to reach
a target audience. Talk about the product, describe its features, and witness a positive
impact on the bottom line.
Benefits of the New Product Development Process
Here are some of the benefits of sticking to the New Product Development process:
 Helps check the technical feasibility of the idea
 Ensures faster time to market
 Effectively addresses the customer needs
 Multiplies the chances of success
 Reduces technical debt
 Better management of the feature creep
 Negates the opportunity cost

2.3 ADOPTION AND EVALUATION PROCESS

2.3.1 Consumer Adoption Process
Philip Kotler considers five steps in consumer adoption process, such as awareness,
interest, evaluation, trial, and adoption. On the other hand, William Stanton considers six
steps, such as awareness stage, interest and information stage, evaluation stage, trial stage,
adoption stage, and post-adoption stage. We will follow six steps.
1. Awareness Stage:
Individual consumer becomes aware of the innovation. He is exposed to innovation but
knows very little regarding the innovation. He has only limited information about it. He is
aware of either by discussion with friends, relatives, salesmen, or dealers. He gets idea
about a new product from various means of advertising like newspapers, magazines,
Internet, television, outdoor media, etc. At this stage, he doesn’t give much attention to the
new product.
2. Interest and Information Stage:
In this stage, the consumer becomes interested in innovation and tries to collect more
information. He collects information from advertising media, salesmen, dealers, current
users, or directly from company. He tries to know about qualities, features, functions, risk,
producers, brand, colour, shape, price, incentives, availability, services, and other relevant
aspects. Simply, he collects as much information as he can.
3. Evaluation Stage:
Now, accumulated information is used to evaluate the innovation. The consumer considers
all the significant aspects to judge the worth of innovation. He compares different aspects of
innovation like qualities, features, performance, price, after-sales services, etc., with the
existing products to arrive at the decision whether the innovation should be tried out.

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4. Trial Stage:
Consumer is ready to try or test the new product. He practically examines it. He tries out the
innovation in a small scale to get self-experience. He can buy the product, or can use free
samples. This is an important stage as it determines whether to buy it.
5. Adoption Stage:
If trial produces satisfactory results, finally the consumer decides to adopt/buy the
innovation. He decides on quantity, type, model, dealer, payment, and other issues. He
purchases the product and consumes individually or jointly with other members.
6. Post Adoption Behaviour Stage:
This is the last stage of consumer adoption. If a consumer satisfies with a new product and
related services, he continues buying it frequently, and vice-versa. He becomes a regular
user of innovation and also talks favourable to others. This is a crucial step for a marketer.
In every stage of consumer adoption, a marketer is required to facilitate consumers. He must
take all possible actions to make them try, buy, and repeat buy the innovation. Be clear that
every type of consumer (innovators, early adopters, early majority, late majority, or
laggards) follows all the stages of adoption process, but takes different amount of time to
adopt the innovation.
2.3.2 Evaluation Process
An evaluation of new product success reveals that some of these successful products came
by accident, some because of new consumer requirements and some because of the need to
beat the competition. The introduction of the products was either to meet a changing
product market situation or for an altogether new market situation. Therefore, the innovative
companies have to monitor the changes in technology, in consumer tastes and emerging
competition. New product ideas emerge either through internal processes or from external
sources. Therefore, the management has to decide whether they would like to have, internal
systems of new product development through own research and development process or by
external sources like merger, take over or through licensing facility.
Let us look at the evolution of Indian car industry in the last ten years. Once upon a time,
one had to pay a premium and wait for six months for a car to be delivered, but after the
entry of Maruti in the small car segment, the story has changed. Maruti’s success invited
more competition and now the market is flooded with different types of cars. These cars are
available at different pricing points and with different features and technical specifications.
Now even Maruti is being threatened in the small car segment by the news of launch of a
small car by Tata Motors called ‘People’s Car.’
Post purchase evaluation is likely to have important implications because of the expenses
involved or the complexity of many products and the rapid changes in technology. The
Evaluation Process of the new product development involves the forecasting of risk, cost
and time dimensions. Under this, there are two evaluation tools:
Decay Curve (Mortality Curve): In product development, a decay curve is a graphic
representation of the survival of new product ideas. Each item is subjected to screening and
analysis, development and letting.
More and more products are dropped from further consideration until only a small
percentage ever reaches the commercialisation stage. The decay curve is the representation
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of the funnelling effect that the NPD process reflects and suggests how stringent the product
development process is in reducing the total sample of product concepts to eventually
launch and product.

Figure 2.5: Decay Curve

Cost Expenditure Curve: This curve depicts the cumulative percentage of cost virus the
cumulative percentage of time. By developing an expenditures curve, product planners can,
benchmark company product development projects to determineit costs are running too high
virus time.

Figure 2.6: Cost and Expenditure Curve

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Summary
 Business firms always try to find new market by innovation and research they create
new products to satisfy the changing demand of customers. We can see new
products especially in the field of electronic and computer.
 It is a core need that underlies the existence of a product family. These products
satisfy a core need of the group of people or of an individual.
 All the product classes that can satisfy a core need with reasonable effectiveness. It
comprises of varieties of product within this group, which compete with one another
to satisfy the same need.
 The group of products within the product family recognized as having a certain
functional coherence. A group of products, within this family of products, having
similar characteristics are labelled as product class or product category.
 The group of products within a product class which are closely related to each other
since they perform a similar function, are sold to the same customer groups, are
marketed through the same outlets or channels, or fall within the given price ranges.
 The group of items within a product line that encompasses one of several possible
forms of the product. Eg. Chicken burger.
 The distinct unit within a brand or product line which is distinguishable by size,
shape, price, appearance, or some other attribute.

SELF-ASSESSMENT QUESTIONS
Short Answer Questions
1. Define new product development.
2. What is the role of a new product development?
3. Explain benefits of new product development.
4. What is business analysis?
5. What do you mean by evaluation of a new product?
6. List the ways in which new product development can have cost implications.
7. What does gauging the interest of a customer mean with reference to product
development?
8. Explain how new product development takes place in an international organization.
9. Give two examples of products that have been transitioned and introduced in the
market.
10. Give two examples of products that were introduced and hugely failed.
11. What is idea generation?
12. What do you mean by diffusion?
13. Is market research important to new product development? Support your answer
with an example.
14. Write short notes on the following:
(a) Test marketing (b) New Product Development
15. Briefly explain what the ways to select a new product are.
16. Draw the mortality curve.
17. Mention the stages in product adoption.
18. Draw the cost expenditure curve.

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Long Answer Questions

1. Define a new product. Give example of three products you consider as new.
2. What steps would you recommend for generating new product ideas for a car
manufacturer?
3. Briefly explain what the stages of new product development are. Also, give
examples and a chart to explain the same.
4. If developing new products is risky. Why do companies bother to spend huge sums
of money in this effort?
5. What is the significance of innovations for the society?
6. Write short notes on the following:
(a) Idea Screening (b) Test Marketing
(c) Commercialisation (d) Business Analysis
7. Evaluate different methods companies use to conduct test marketing.
8. Why do companies conduct test marketing when the product concept has already
shown promising potential?
9. Discuss the adoption process of an innovation.

References
 Panda, T.K., Marketing Management, 2nd Edition, Excel Books, New Delhi, 2012
 Mathur, U.C, Product & Brand Management, 2 nd Edition, Excel Books, New Delhi,
2012.

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UNIT II
LESSON 3 – PRODUCT PLANNING PROCESS AND PRODUCT LIFE CYCLE
CONTENTS
Learning Objectives
Learning Outcomes
Overview
3.1 Product Planning Process
3.1.1 Phases of the Product Planning Process
3.1.2 Identify Opportunities
3.1.3 Breakdown Structure
3.1.4 Product Development Charter
3.2 Product Life Cycle
3.2.1 Pioneer or Follower
3.2.2 Stages of Product Life Cycle and Marketing Strategies of Each PLC Stage
Summary
Self-Assessment Questions
References

LEARNING OBJECTIVES
After studying this lesson, students should be able to:
 Understand the product planning process
 List the phases of product planning
 Explain the concept of product life cycle
LEARNING OUTCOMES
Upon completion of the lesson, students are able to demonstrate a good understanding of:
 Able to explain product planning process
 Able to determine phases of product planning
 Able to identifying stages in the product life cycle
 Able to analyzing implications and limitations of product life cycle concept

OVERVIEW
In order to maximise his sales revenue and profits, a business firm must continuously adjust
and adapt its products and services to the changing requirements of customers. From time-
to- time, it may have to design and develop new products.
Product planning is the process of searching ideas for new products, screening them
systematically, converting them into tangible products and introducing the new product in
the market. It also involves the formation of product policies and strategies.
Product planning includes improvements in existing products as well as deletion of
unprofitable or marginal products. It also encompasses product design and engineering
which is also called product development. Product planning comprises all activities starting
with the conception of product idea and ending up with full scale introduction of the product
in the market.

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It is a complex process requiring effective coordination between different departments of

the firm. It is intimately related with technical operations of the organisation, particularly
with engineering, research and development departments. Any product has two broad
objectives—immediate objectives and ultimate objectives. Immediate objectives include
satisfaction of immediate needs of consumers, increasing sales, utilising idle plant capacity,
etc. Permanent or ultimate objectives consist of reduction in production costs, creation of
brand loyalty, monopolising the market, etc.
The term product life cycle refers to the length of time a product is introduced to
consumers into the market until it's removed from the shelves. The life cycle of a product
is broken into four stages—introduction, growth, maturity, and decline. This concept is
used by management and by marketing professionals as a factor in deciding when it is
appropriate to increase advertising, reduce prices, expand to new markets, or redesign
packaging. The process of strategizing ways to continuously support and maintain a
product is called product life cycle management.
3.1 Product Planning Process
The product planning process is a sequential set of steps encapsulating a given product’s
entire life cycle. The first step is ideation. The last step is plotting how to sunset a
product. Many different skills, methods, tools, and stakeholders are involved in various
aspects and phases.
The only true consistent figure in this process is product management. Product managers
take the reigns as early as product definition and concept vetting. They bring it to life,
nurture its growth, and ultimately put it to bed one final time.
3.1.1 Phases of the Product Planning Process
Before diving headfirst into any of the strategic phases of the product planning process, it’s
essential to understand all the steps. While mostly discrete activities, they do build on each
other. A faulty foundation can result in a wobbly, flawed future.

1. Product Concept Development

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This initial phase might be the most fun and creative stage in the product lifecycle, and it’s
the most critical. Businesses come up with lots of ideas. So only the most promising
projects must get the traction and resources they deserve.
So, once there’s an initial idea internal folks are excited about, it’s time to employ some of
the available tools and techniques for some quick market validation. These tests give the
team confidence they’re onto something with real promise.
A key step in this phase is product discovery. This process gives the product team a much
deeper understanding of the problems potential customers face and the user personas the
solution can target. Without a solid foundation of who the product is for and which of their
pain points it solves, there’s little hope of finding product-market fit. Armed with a good
idea and a solid understanding of the key problem, the concept is then fleshed out while
gathering additional information.
Carefully plan the steps involved in testing your new product development (NPD) ideas. For
every 7 new product ideas developed, 1 becomes successful. Defining your new product
concept and testing it with your market will help you determine whether your new product
idea will be a success. The concept development and testing stage of NPD can be time-
intensive, but it will help you avoid unnecessary costs later by ensuring you pursue the best
new product concept in your market.
2. Competitive analysis
If a company has stumbled onto a great idea, there’s a high likelihood they’re not the only
ones to have this epiphany. That’s why the next step is surveying the landscape. You do this
to see how the product concept compares to what’s already available or under development.
The goal here is to understand the other options potential customers already have.
Sometimes there will be a direct competitor with a relatively similar offering. There may be
broader solutions that include similar functionality to the product in question. Just as
importantly, an effective competitive analysis must include completely unexpected, less-
than-elegant workaround solutions potential customers use to solve their pain points.
This includes using spreadsheets for building product roadmaps, authoring code in a plain
text editor, or building animations in PowerPoint. People often use the tools they already
have at their disposal. Changing those behaviors may be just as important and challenging
as taking on direct competitors.
3. Market Research
Still not done with homework! Now that the business has a handle on how its solution fits
into the scene, it’s time to see if its differentiated approach to solving user problems holds
up. Market research typically involves both qualitative and quantitative research. Surveys
and aggregated data can indicate trends, help calculate the total addressable market, and
serve as valuable input to the prioritization process.
Meanwhile, qualitative research can help product teams get to the “why” at the heart of the
solution. Using focus groups, interviews, and other in-depth research methods. These
methods add both color and a sense of humanity to the research and development process.
An added benefit is that they challenge assumptions.

4. Minimum Viable Product development

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The tail end of the market research phase may also entail developing a Minimum Viable
Product. An MVP is functional for gauging the reaction and interest of likely buyers. It only
includes the most vital features and functionality based on the business’s understanding of
which user stories customers need most. It is laser-focused on solving core problems.
During MVP definition and development, the team may begin employing prioritization
frameworks. MVPs determine which items would deliver the most “bang for the buck” and
must be in place for the initial product offering. Frameworks focused on core functionality
versus product line expansion are a good fit at this time. Examples include the jobs-to-be-
done framework, which ensures the business is building products customers actually want
and use.
By getting something to the market quickly, the company can validate its concept and
generate user feedback. This is crucial during these early stages. It serves to inform for
adjustments to perform key tasks at launch, and the value proposition and messaging
matches the offering.
5. Introduction and launch
With “Version 1.0” about to become a reality, it’s time to take this idea to market. Even if it
still bears a “beta” label. The hard work of generating awareness and demand often starts
well before the “download” link goes live.
The product marketing team should be generating demand and building some buzz for the
offering in anticipation of the release.
Using A/B testing on different messaging and price points to build up a list of interested
parties and validate the value proposition’s efficacy. Press and analysts are briefed in
advance and given product demos. This seeds the media market with coverage when the
grand unveiling occurs.
A robust mechanism for soliciting, collecting, aggregating, and analyzing user
feedback must be in place at launch. Asses the first impressions and the efficacy of different
campaign messages and tactics. The results inform plans and how to allocate resources for
wider promotion and growth.
Employing product analytics and customer research, product teams can begin measuring
product-market fit. If gaps are identified, they can be added to the product backlog in
preparation for future prioritization and product road mapping activities.
6. Product lifecycle
Mature products enter a new phase of existence. Typically, this is a cycle of iterative
improvements and modifications. Interspersed with more significant expansions (or
removal) of functionality and capabilities.
At this point, the product roadmap becomes indispensable. As processes mature, release
cadences are established, and the focus shifts to enhancements and growth. KPIs, goals,
outcomes, and objectives will evolve throughout the product lifecycle. It will shift based on
both the success and struggles of the product as well as the organization.
While rarely boring, this is the most predictable and routine phase of the product lifecycle.
Suppose the product continues to find traction and adequate growth while establishing
profitability. This phase may last for years, if not decades assuming the product remains
viable and there’s a persistent market for it.
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To synchronize strategic objectives with resource allocation and development

priorities, structure a product roadmap using themes. Themes are excellent to ensure efforts
remain focused on what matters most. This method still gives the implementation team
some latitude in an Agile development framework.
7. Sunset
All things must end. For some lucky product management professionals, this never happens
on their watch. However, statistically, there’s a pretty good chance they’ll have to say
goodbye to an entire product or major component at some point during their career.
This isn’t always a bad thing. In fact, it’s just an inevitable part of the strategic phases of the
product planning process. It’s a phase in which you are retiring a product due to a superior
offering’s arrival. Another reason is a dwindling need for a particular solution. This is
because the problem is no longer acute enough to warrant a product.
But wrapping up a longstanding offering has many implications. Using a checklist can
ensure all the aspects are properly addressed during the wind-down period.
3.1.2 Identify Opportunities
The planning process begins with the identification of product development opportunities.
Such opportunities may involve any of the four types of projects defined above. This step
can be thought of as the opportunity funnel because it brings together inputs from across the
enterprise. Opportunities may be collected passively, but we also recommend that the firm
explicitly attempt to generate opportunities.
When employed actively, the opportunity funnel collects ideas continuously, and new
product opportunities may arise at any time. As a way of tracking, sorting, and refining
these opportunities, we recommend that each promising opportunity be described in a short,
coherent statement and that this information be collected in a database. Several Web-based
idea management systems are available for gathering and storing information on
opportunities, although a simple list in a spreadsheet may be sufficient.
At Xerox, many opportunities had been gathered and discussed. Some were simple
enhancements to existing products, and others were proposals for products based on entirely
new technologies. Following are some examples of opportunity statements similar to those
proposed at Xerox:
 Create a document distribution system in which a networked printing device resides
on each office worker’s desk and automatically delivers mail and other documents.
 Create document delivery software that allows the digital delivery and storage of
most intra-organizational documents via a worker’s personal computer.
This opportunity statement eventually became the Lakes project:
 Develop a new black and white (B&W), digital, networkable, document center
platform for the office market, including scanning, storage, fax, distribution, and
printing capabilities.

3.1.3 Breakdown Structure

Work Breakdown Structure
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Work Breakdown Structure (WBS) is the most important project management tool. WBS
captures the entire project scope of work in a very objective fashion. A well designed WBS
guides the project team to do project planning, project execution and project control
effectively.
WBS is a hierarchical decomposition of project work into smaller and more manageable
components.
Usage of WBS:
 Planning and budgeting
 Scheduling
 Estimating costs
 Analysing cost drivers
 Identifying risks
 Making resource assignments
 Measuring and controlling performance
 Configuration management (work added or deleted)
 Communicating with the customer and other key stakeholders (especially about
scope)
 Does NOT describe work at the smallest sub-tasks
How to develop a Work Breakdown Structure
Making a WBS is a team effort. The core team members of the project will follow the
below steps in making a WBS.
1. Identify the major components of the project. The major components will be shown
as the level 2 items of the WBS.
2. The project can be visualized as consisting of major functions, or phases or
deliverables in the 2nd level.
3. Each major component from 2nd level will further be decomposed by the team to
smaller and more manageable components.
4. The team continues to decompose until they identify the work packages. A work
package is the smallest deliverable, which further cannot be decomposed as
deliverables.
5. Carefully identified work packages will form the basis for understanding the entire
project work in sufficient detail.
6. Work packages will be used for estimating the duration, resource and cost for each
of them.
7. During decomposition, the team can use their past experience or the template of a
WBS from a similar project they would have done.
8. A code of account is used to assign a unique code to each element in the WBS. The
unique code is used for tracking the status. The code of each work element can be
mapped to the organization’s accounting system for tracking project expenditure.
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9. Making a WBS requires creative thinking and immense experience to make it

meaningful and useful.
10. Over decomposition of work may lead to unnecessary wasted management efforts.
Product Breakdown Structure
A product breakdown structure is an effective tool that details the physical components of a
particular product, or system, under consideration. The formal PBS comes in the form of a
hierarchy. It begins with the final product at the top of the hierarchy followed by the sub-
categorized elements of the product. The product breakdown structure is similar to the work
breakdown structure (WBS).
Like WBS, a product breakdown structure serves to reduce a complex project, or product,
into manageable components. As a result, teams can obtain a clear understanding of a
product, its components, and what is required to provide those components. Figure 1
(below) is a sample product breakdown structure.

As mentioned previously, the PBS is very similar to the work breakdown structure which is
also a common project management tool. Unlike the WBS, which focuses on the work
assigned in a project, the PBS focuses on the product itself. Moreover, the PBS is primarily
composed of the physical elements of a product.
Why Do Project Teams Need a Product Breakdown Structure? Need a Product
Breakdown Structure?
The PBS is essentially the breakdown of a product into its required components. The
purpose of this breakdown is to provide a visual representation of a products components
and the relationship between those components. In turn, product planners are provided with
a visual representation that provides clear understanding for what the end product requires.
The process of creating a PBS begins with a project team disassembling a product into its
subsequent products. The PBS is a hierarchal structure that begins with the main product
which is subdivided into smaller systems.

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Product Breakdown Structure Development Guidelines

The following guidelines should be considered when creating a product breakdown
structure:
 The top level represents the final product
 Sub-deliverables contain subcomponents of the final product
 Identify product components through group collaboration
 Product descriptions can be a useful component of the product breakdown
structure
Product Breakdown Structure vs. Work Breakdown Structure
The main difference between PBS and WBS is that the product management structure only
includes the physical elements of a product. These physical elements entail the physical,
conceptual, or functional elements of a product. WBS, on the other hand, incorporates the
necessary data and service elements along with the physical product elements that the PBS
provides. More simply put, PBS focuses on the product whereas WBS focuses on the work
required in a project.

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Tools to Create a Product Breakdown Structure

Developing a Product Breakdown Structure is a group effort and requires multiple
perspectives and insight for the particular product. One method used to collect various input
is to hold a brainstorming session between multiple department representatives. Team
members can collaborate and share thoughts with simple materials such as a whiteboard,
note cards, or sticky note pads.
As ideas develop, cards posted on a wall can be reorganized while the team discusses the
different components required for the end product. MindView is a mind mapping
software package that supports work breakdown structures, project outlines, Gantt charts,
and exports easily into Microsoft Project for further schedule definition. Figure 3 provides
an example of a work breakdown structure using MindView.

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These simple brainstorming sessions do not require technology. However, without a

technological approach, ideas are difficult to share and distribute to electronic format.
Fortunately, there are several tools available that are suited specifically for such
brainstorming sessions. Such technological tools like MindView support mind mapping,
brainstorming, and product breakdown structures.
3.1.4 Product Development Charter
A product development charter is a helpful tool for communicating proposed Product details
and making resource allocation decisions.
Concept of a new product is important for the managers. Both newly established as well as
existing companies face the problem of developing of a new product. Buyers do want some
elements of newness in a product. Newness may be in terms of production, marketing,
place, service, use, or price.
New product is one that offers new benefits or features. It differs significantly from the
products currently available in the market in terms of uses, appearance, performance, taste,
price, and construction. New product is one, which is perceived as a new by consumers.
It may be original product, improved product, modified product, or new brand. Various
issues are related to a new product, such as how to develop a new product, how to launch it,
how to manage it, why it fails, what precautions should be taken to reduce its failure rate,
and many other such aspects.
A new product, may be called innovation, seems to be necessary due to an enormous
number of factors. The dynamic nature of business environment offers only two options –
be innovative, or die. Marketer has to search for superior ways to meet increasing
expectations.
Those companies fail to respect or respond the need of time have to withdraw from the
market. Innovation or new product development directly concerns with firm’s survival,
growth, and development. A marketer continuously tries to offer superior product to his
consumers.
3.2 Product Life Cycle
The product life cycle is a series of stages progressing from its initial entry to its ultimate
withdrawal from the market. Contemporary marketers try to plan for the life of the product
before it is ever introduced. They try to maximize profits over the entire period. It is on the
market, not just in the initial stage.
It is interesting to note that not all products, of course, have the same life cycles. Some of
them will live longer than others, and some will reach their maturity sooner than others. It is
also to note that many products will never complete their normal life cycles; they will
abruptly the well before they never mature. The life cycle approach is an effective tool for
management to plan for each stage of a product’s life.
Product Life- Cycle Meaning
The concept of a product moving through various life stages has been of interest to
marketers for the last few decades. The basic life-cycle analysis is that a new product starts
in the introductory stage, moves next to a growth stage, then to maturity, and eventually to
decline and possibly death.

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Before looking at the stages, let us have an idea of how the knowledge of a product life-
cycle can help you to be successful as a strategic marketing planner. The knowledge of the
product life-cycle can help you in the following ways:
 Depending upon the life-cycle stage, product-market attractiveness will decline as
the product advances through the stages to say that a product has a limited life.
 Recognition of life-cycle stresses the importance of new product planning since
older products are not likely to grow and contribute to profits as much as new
products.
 The emphasis upon corporate and marketing functions will vary depending upon the
life-cycle stage.
 The management requirements at different stages also vary. An entrepreneur, for
example, may be critical to getting a new product properly launched, whereas a
person who will exercise tight control on finances is often needed during the
maturity stage.
Nature of Product Life Cycle – Why Understanding the Product Life Cycle in
Important
Of course, each product has its unique life-cycle. In some cases, the pattern of growth-
maturity-decline may be quite rapid, while in others, the product can sell at a saturation
level for a very long period. It is also important to recognize that brands are subject to
similar life cycle stages, although generally of a shorter duration.
The marketing manager must be aware of what stage in the life cycle the brand and the
product have reached. As competition increases, brand life cycles tend to shorten, requiring
the introduction of new marketing strategies designed either to increase sales or to kill off
one brand to make way for a new one.
Forecasting product life cycles and when a product is about to move into a new stage is not
easy. However, the danger signals heralding a decline are clear enough – declining sales or
market share, especially with one particular brand or product in the product line.
Understanding the relationship between a product and its life cycle enables marketing
managers to plan their campaigns more effectively and be in a better position to judge
product sales and profit potential. The value in understanding the nature of the product life-
cycle is in its relationship with marketing strategy. It will alert the company to the need for
positive action at the so-called ‘threshold point,’ where some change to strategy will be
essential if the product is to continue. But beyond this, the marketing mix will be different
for every stage of the life-cycle.
3.2.1 PIONEER OR FOLLOWER
Many corporate innovators see strategy or planning as anathema to their creativity. Strategy
is “old thinking”, not compatible with an Agile world.
We disagree. We believe that companies need to set clear objectives for their innovation
strategy to ensure that they achieve real impact. At the highest level, a company needs to
make two decisions:
 Does the company, as a whole, want to be a pioneer or follower in its industry?
 In what areas does the company want to be a pioneer?
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Surprisingly few companies have a clear view of where they want to be pioneers, and how
this impacts the way they think about and organise their innovation activities.
Here are five things you need to consider before allocating responsibility for innovation in
your company.
Pioneers have taken a deliberate gamble that they can create competitive advantage by
adopting technologies or business models early or have a belief that inaction would create a
competitive disadvantage that cannot be overcome by ‘following fast’. In fact, if neither of
these conditions are satisfied for a particular research idea, pioneers should question
whether a watching-brief would not be the action with the best risk/return profile.
Pioneers will be looking not only at technology and business models that are ready for the
‘rocket fuel’ but also ones which are still finding the product-market fit. Their belief in the
first mover advantage means that they need to be bringing things to market in the industry,
not only accelerating proven models.
Pioneers could be either large insurers and reinsurers (such as those developing blockchain
through the consortium B3i) or niche players looking for advantage in their area (e.g. Euler
Hermes). Either way, they need to move fast when they see an opportunity or their research
will be futile.
It is impossible even for pioneers to lead in all areas. They must therefore choose in which
areas to focus their innovation activities – for example a technology, a value chain element,
customer segment.
Followers are more cautious. They monitor the market and quickly invest when an s-curve
takes hold, or when they see an opportunity to build on top of the established s-curve – for
example a niche AI proposition harnessing the broader learnings of the pioneers. For these
insurers market intelligence is key, as well as the opportunity to move fast when they need
to follow.
Most importantly for followers, there is seldom a reason for them to look beyond
technologies and business models outside the ‘rocket fuel’ bucket.
For both pioneers and followers, an operating model that allows innovation to be executed
is critical. As we say in our 2018 InsurTech Impact 25 report, “there are no prizes for
identifying a trend”. The only prize is for those who “engage effectively and profitably”
with the winning InsurTechs.
We don’t see a role for insurance incumbents in making the technology work. This is
the role of non-corporate VCs. (Corporate VCs can be helpful funding ideas through the
product-market phase in their industry – but this is a topic for another post.)
Advantages and Risks of Pioneer and Follower Strategies
Pioneers gain advantage by making first moves in technology, product or marketing
innovation. These advantages are called first-mover advantages. Other enterprises are
followers, they aim to maximize the late-mover advantages and to minimize late-mover
disadvantages.
First-mover advantages are:
1) owning the positive image and reputation of being a pioneer,

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2) reduction of total costs through control of new technology, and supply and distribution
channels,
3) the creation of a base of loyal customers,
4) having the ability to make imitation by competitors as difficult as possible.
Pioneers try to make a competitive advantage through being first in a new field. Building a
competitive advantage is a time consuming process (time is the horizontal axis on figure 1)
and is called the build-up period. This period can be minimized if an enterprise already has
the necessary resources in place and the customer response is positive and rapid. Build-up
periods can be longer if demand growth is weak, or the technology takes several years to
perfect, or if it takes time to establish manufacturing capacity.
The size of advantage is shown on the vertical axis. It can be large or. After the build-up
period comes the benefit period during which a company enjoys the benefits of competitive
advantage. The length of this period depends on both the responses of the followers and the
success of pioneers in enhancing and strengthening their position in the market. The overall
magnitude of pioneer competitive advantage depends on the extent to which followers:
1) benefit from the difference between innovation costs and imitation costs,
2) exploit saving innovation costs,
3) capitalize on the pioneer’s mistakes,
4) benefit from economies of scope, and
5) influence/change consumer preferences .
If followers are successful, the period of competitive advantage erosion begins.

Figure 1. Building and Eroding of Competitive Advantage

Generally, the greatest first-mover advantage is in being the market leader and in
maximizing early revenues from the products/services. Thanks to the initial temporary
monopoly from innovation, pioneers are in a position to charge higher prices for their
products, and thus maximise profits. This strategy is popularly called “skimming the

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cream”. Pioneers can also create new sources of revenue through licensing, but this
generally produces the lowest rewards for entrepreneurship.
In most cases, pioneers continue to hold the biggest market share even after the entry of
followers into the same market. High profitability can be maintained through high entry
barriers in the form of resource control (control of technology, locations, managers and key
employees).Also, the inevitable learning curve can positively influence the pioneer’s market
share. These advantages are summarized in the teachings of one of the greatest military
theorists ever, Chinese general Sun Tzu. Sun Tzu wrote: “Generally, whoever comes first to
the battlefield, and awaits the enemy, will be rested; but, whoever comes last and has to
gostraight into battle, will be tired. So, one who is skilled in war constrains the others but is
not constrained by the others”.
High switching costs also benefit the pioneer. There is inevitably a cost to the customer to
switch to a follower’s product. Naturally, a pioneer has to continuously improve his own
product, in case followers offer an alternative whose enhanced performance outweighs
switching costs.
The main first-mover disadvantages are:
1) free–rider benefits to followers,
2) market and technological uncertainties,
3) unforeseen changes in technology or customer needs, and
4) incumbent inertia
Which results in the gradual updating of existing technology, rather than the
adoption of new and improved technologies. Several factors influence the size of the risk in
being a pioneer. For instance, R&D (research and development) costs involved in
innovation can be so high that they may not be recovered in revenues. It is logical that the
risks associated in a completely new product are greater than those associated with
incremental product changes.
Another difficult task faced by pioneers is in creating primary demand for a completely new
- and non-branded - product. Educating customers about a novel product can be very
expensive. Nevertheless, pioneers usually have longer market lives than their followers. In
contrast, followers try to create selective demand, for a specific brand. In their case,
technological standard has been established by the pioneer, hence they avoid these costs.
Bandwagon effects can increase the risk to followers. Bandwagons appear when companies
make strategic decisions - such as new-product development, technological innovation, or
even an acquisition - in response to the actions of other companies. Institutional bandwagon
pressures appear when non-adopters are pressured to mimic the actions of early adopters to
avoid appearing different. Competitive bandwagon pressures appear when non-adopters fear
they may be disadvantaged. Bandwagon companies often base decisions on informal
information, ignoring criteria used in rational decision making processes. Very often
heuristics are used, thus “company XYZ has an excellent track record, so, if we follow
them, we will not make a mistake”.
Networks are currently envisaged as company environments in which value for customers is
created. Consequently, when discussing new management challenges, we compare how
networks compete against networks, rather than companies competing against companies.
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This has implications with respect to choice of pioneer or follower strategies. New products
created through effective cooperation of networked members are more likely to dominate
new markets. There are also associated risks.
In the context of networking achieving pioneering advantages, consider innovation
ecosystems. Innovation ecosystems are forms of strategic alliances focused on new
technology and new product development. Through them, firms combine their individual
offerings (in the form of parts) into a coherent, customer facing solution (in the form of a
final product). The total risk in these innovation ecosystems consists of initiative risk,
interdependence risk, and integration risk.
Initiative risk is a type of risk inherent in every new venture. There are a lot of unknowns
with the launch of any new product or service, both technical (does it do what it’s supposed
to) and with respect to marketing (is it acceptable to the customer).
Interdependence risk is associated with the uncertainties of coordinating the relevant
contributors. We can estimate the joint probability that different partners will be able to
satisfy their commitments within a specific time frame. For instance, suppose that each of
three suppliers has a 0.9 probability of success in developing a part of the whole product. In
that case, the probability of launching the new product on time is 0.66, or 66%. This
probability is the product of the probabilities for successful completion of every partner, i.e.
0.9 x 0.9 x 0.9.
The final type is integration risk. It is concerned with the uncertainties in the adoption
process across the value chain. Time is required for all intermediaries in value chains
to become aware of the product, sample it, and make orders. Logically, the more
intermediaries, the bigger the integration risk for customer acceptance and loyalty.
For instance, a flat-screen TV manufacturer needs eight months to bring a new screen
to production. End consumers need four months to become aware of a new product
before they start to buy it in significant numbers. Realistically, suppliers need six
months to develop inputs for flat-screen manufacturers. If we add two months for the
distributors to stock the product and train the sales force, the integration period will
be 20 months (8+4+6+2). If a flat-screen manufacturer is able to allocate additional
resources and reduce development time by 50%, a saving of four months will be made.
Now, the total integration period will be 16 months (4+4+6+2), and there is a greater
chance of achieving the product-launch target.
3.2.2 Stages of Product Life Cycle and Marketing Strategies of Each PLC Stage
Every product launched in the market will have a life, the span of which can not be known
earlier. However, companies want their products to enjoy long lives and expect lucrative
profits out of their sales.
Companies recognize that each product will have a life cycle, although its exact shape and
length can not be anticipated. A product life cycle (PLC) is the course that a product’s sales
and profits take over its lifetime.

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A product life cycle normally looks like a bell-shaped curve showing four stages at different
points of the curve. The four stages of the product life cycle are;
1. Introduction. 2. Growth. 3. Maturity. 4. Decline.
However, before the ‘introduction’ stage of the product life cycle. The product must be
defined and developed.
Many consider ‘product development’ as the first step of the product life cycle. Still, it is a
different world altogether, so ‘product development is not considered part of PLC. During
product development, there are no sales, and the company’s investment costs rise.
The introduction stage shows low sales numbers as the product is being introduced in the
market. Profit is zero or negative in this stage because of the heavy expenses of product
introduction.
With proper marketing, a product can go into the growth stage. During the growth stage,
sales rise rapidly as consumers begin to accept the product. The production runs become
longer, and economies of scale are achieved, reducing per-unit cost and also helping profits
to increase rapidly.
During the maturity stage of the product life cycle, the sharp growth in sales begins to
slow, and profits at the beginning of this stage decline.
The most notable characteristic of this stage is the peaking of the product’s sales and profit
curves. At the beginning of the maturity stage, sales continue to grow but at a much slower
rate. Towards the end of this stage, sales and profits will start to fall fairly rapidly. This
stage is characterized by severe competition as many brands enter the market. To combat
competition, marketing costs increase substantially results in a reduction in profits.
For any product, its PLC will go to the decline stage, where the product’s sales and profits
fall very quickly, and most competitors leave the market. Some products face quick death,
and some remain in the mature stage for a long time; some products reverted to the growth
stage through aggressive promotion or repositioning. New technology or a new social trend
may cause the product to turn downward in sales sharply. When this happens, marketers
consider removing items from the product line to eliminate those not yielding a profit.

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Product Life Cycle Stages and Marketing Strategies

Introduction Growth Maturity Decline

Characteristics

Rapidly rising
Sales Low sales Peak sales Declining sales
sales

High cost per The average cost Low cost per Low cost per
Costs
customer per customer customer customer

Profits Negative Rising profits High profits Declining profits

Customers Innovators Early adopters Middle majority Laggards

Stable number
Competitors Few Growing number beginning to Declining number
decline

Strategies

Offer product
Offer a basic Diversify brand Phase-out weak
Product extensions,
product and models items
service, warranty

Price to penetrate Price to match or

Price Use cost-plus Cut-price
the market beat competitors

Go selective:
Build more
Build selective Build intensive phase out
Distribution intensive
distribution distribution unprofitable
distribution
outlets

Build product Reduce to the

Build awareness Stress brand
awareness among level needed to
Advertising and interest in the differences and
early adopters and retain the most
mass market benefits
innovators loyal customers

Reduce to take
Use heavy sales Increase to
advantage of Reduce to a
Sales Promotion promotion to encourage brand
heavy consumer minimal level
entice trial switching
demand

Let’s try to understand better each of the stages and the corresponding marketing strategies
of the product life cycle.
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Stage 1: Introduction
When a product is commercialized, the product will enter the introduction stage of its life
cycle. Sales growth of a product is likely to be low at the introductory stage due to several
reasons.
 First, it may take time to make the product available in different markets.
 Second, it may take time for a company to expand its production capacity.
 Third, the company may experience technical difficulties at the initial stage.
 Fourth, establishing adequate distribution may consume a fairly long time.
 Fifth, the company may also face difficulties changing consumers’ established
behavioral patterns to buy its product.
New products usually do not earn a profit in the introductory stage. Investments in research,
manufacturing, and marketing often exceed revenues until sales have grown to sizable
figures.
The company needs to spend a significant amount of money on obtaining an adequate
distribution of the product. During this stage, potential buyers must be aware of the
product’s features, uses, and advantages, which cost a substantial amount of money to the
firm. Companies focus on the high-income group at the introductory stage to buy their
products because products are priced higher at this stage.
High prices are diseconomies of scale of production at this stage and higher expenditures in
areas mentioned above. The high price results in low sales during this stage. As a result, the
profit curve is typically negative. Because of this unprofitability, the new product’s
development and production must often be subsidized by the cash and profits generated by
older products.
Marketing Strategies in the Introduction Stage
Marketing managers need to formulate strategies regarding marketing mix elements for the
introductory stage of the product. You know that the basic marketing mix elements are:
product, price, promotion, and distribution.
Regarding the marketing mix elements, a company may decide to pursue a skimming or
penetration strategy. It may either go for rapid skimming or slow skimming strategy.
Similarly, the company may decide to pursue rapid penetration or slow penetration strategy.
Rapid Skimming Strategy
In case the company decides to follow the rapid skimming strategy, it sets the price
arbitrarily high to capture the early purchaser of the product. This strategy is used to
maximize short-term profit. Companies under this strategy may also go for producing
higher quality products, promoting them aggressively, and distributing them through
selective distribution channels.
This strategy may work well;
 if a substantial percentage of potential buyers are unaware of the product;
 they will be willing to buy it once they are informed of the product’s existence;
 they will be ready to pay a premium price since the product is of higher quality; and,
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 the distribution matches their requirements.

Slow Skimming Strategy
Under the slow skimming strategy, a product is offered to the market at a high price, but the
promotion is not as aggressive as the rapid skimming strategy. The company can gain a
substantial amount of profit following such a strategy. Since the promotion costs are lower
but the price is high, it enables the firm to make a sizeable profit. A company may be
successful in using the slow skimming strategy;
 if most potential buyers are informed of the product,
 ready to pay a premium price, and
 competition is either nonexistent or slim.
Rapid Penetration Strategy
In contrast, in the rapid penetration strategy, the firm sets the price at a low level but
aggressively promotes it. The intention is to discourage competition and appeal to a greater
portion of the segment on the onset. A company may effectively use this strategy if the
market size is significantly large, the majority of the market is unaware of the product and is
very much price-sensitive, and there is a small potential competition.
By lowering the price and earning a smaller gross margin, fewer competitors will be
attracted to the marketplace than if a skim strategy were used. The executive has extra time
to solidify its position in the market and capture a greater market share.
Slow Penetration Strategy
Under the slow penetration strategy, a product is introduced in the marketplace at a low
price. The promotion under this policy is not aggressive as well.
If the company senses that the size of the market is substantially large, buyers are mostly
aware of the product and price-sensitive, and competition is existent, it may decide to
pursue the slow-penetration strategy. It will help the company capture a significant portion
of the market, taking advantage of its high price and low promotion costs.
Penetration strategy is normally used when the executive intends to keep the product on the
market through all or most of the life cycle. Instead of quickly recouping costs and
generating profits as would occur with a skim strategy, the marketing executive hopes for
even greater long-term profits. Although firms have used both strategies successfully,
penetration is the most common. It is used for nearly all types of products, while skim is
typically reserved for fashion, fad, and novelty items with fairly short life spans.
Stage 2: Growth
During the growth stage, sales rise rapidly; profits reach a peak and then start to decline.
The growth stage of the product life-cycle is characterized by several new factors.
 First, sales and profits grow rapidly.
 Second, competitors have attracted to the growing market often more competitors
enter than will survive.
 Third, cash flow may still be negative because of the firm’s efforts to establish a
strong market share ahead of competitors.
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In this stage, the product enjoys a high degree of prosperity.

As it gains market acceptance, the channels of distribution become more open as
wholesalers and retailers increase their willingness to carry the product. This prosperity may
also attract other companies, and the greatest number of competitors enter the market. Faced
with a growing choice of products, the consumer may become confused and uncertain about
selecting. The market is turbulent during the growth stage as competitors enter and fight for
shares.
Even measuring the exact market share is difficult since the new users are growing. This
does not mean that there are no profits at this stage. Any resulting profits are used up in
reinvestment to further the product’s growth. It is likely that a company earns more profit
during this stage as sales go up and promotion expenditures are spread over larger sales
volume. Moreover, as the company gains experience, the cost of production per unit comes
down, resulting in higher profit.
Marketing Strategies in the Growth Stage
Since the competition is increasing and the market is expanding during the growth stage, the
marketing executive moves away from a strategy of cultivating demand to one of market
entrenchment – the struggle for brand acceptance and market share. In a related sense, the
increased competition and the desire to build a larger market share tend to reduce some
slight price reductions. However, the price still stays relatively high, and the company reaps
substantial profits.
The marketer’s role during the growth stage becomes one of persuading consumers and
constantly reminding them about the product’s benefits, ensuring convenience of purchase
by maximizing distributive outlets, manipulating price to keep the product competitive, and
reinforcing the brand image associated with the product. The growth stage is critical to a
product’s survival because competitive reactions to the product’s success during this period
will affect its life expectancy.
In the growth stage;
 A firm implements a marketing strategy to encourage strong brand loyalty and
competes with aggressive emulators of the product.
 An enterprise tries to strengthen its market share by identifying the product’s
benefits and by emphasizing these benefits.
 A company at this stage may also go for aggressive price cuts. It may also expand
product lines and offer greater variety to combat competition.
 Another possibility is to follow a strategy of market segmentation and sell the
product under a variety of brands owned by distributors or other producers.
 A company may also engage in a creative promotional campaign to attract potential
buyers.
 Marketers may also modify warranty and service conditions to make them more
attractive than before.
 The other option could be to make the product widely available to reach the mass
market.
Following one or more of these strategies can place the company in competitive standing.
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Stage 3: Maturity
In almost all of the products, there will be a time when sales growth will slow down. This is
the stage that we term the maturity stage of a product’s life cycle.
At this stage, products have leveling demand, and competition will minimize the profit
potential. At this stage, a company requires a highly efficient organization, such as a
functional pyramid type, to maximize profits from steady sales. The most notable
characteristic of the maturity stage is the peaking of the product’s sales and profit curves.
We can divide this stage into three parts.
 Growth maturity is the first phase of this stage when the sales growth rate starts
declining. Though sales continue to grow at this phase, the rate is much slower. All
of the distribution channels are covered as the product reaches this stage. A product
reaches most of the potential customers except a few laggards who may start buying
during this phase.
 The second phase is of the stage is stable maturity, where the market already
becomes saturated and, as a result, sales flatten. Since the market is already
saturated, the number of future sales will depend on the replacement purchase and
population growth.
 The last phase of this stage is decaying maturity when sales will start falling fairly
rapidly. This stage is characterized by extreme competition, as many competing
brands are available in the marketplace.
Competitors emphasize improvements and differences in their versions of the product.
Consequently, weaker competitors at this stage are squeezed out or lose interest in the
product. Companies that did not establish a healthy market share during the growth stage
drop out. Sales growth slows as most potential customers have been reached.
Profits are high but begin to decline as market leaders cut prices to gain market share.
Profits remain large and mature products become the cash cows of the company, providing
funds for the development of new products. The price of a product will also drop sharply at
this stage because of the widespread availability of a substitute.
As the sales growth slows down, it creates overcapacity problems for the firms, making
competition severe. To survive in the face of extreme competition, firms increase their
advertising, promotion, and research and development expenditures significantly. These
increased expenditures further reduce the profits of the firms. This situation compels weaker
firms to withdraw themselves from the market, and as a result, only the competent ones
survive.
Among the survivors, there are two types of firms – those who are giants, including the
quality leader, service leader, and cost leader, and those who are serving and satisfying their
small target markets – that operate in the marketplace.
Marketing Strategies in the Maturity Stage
To compete in this type of market environment effectively, the marketing executive will
expand the product line by making a variety of models and styles to broaden the product’s
appeal, producing something for everybody in hopes of sustaining sales.
By doing this, however, the product’s costs increase as shorter manufacturing runs are
needed for each model, and style and inventories are built up, all of which create
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diseconomies of scale. The combined effect of lower prices and higher costs results in a
declining profit curve.
In fact, during the latter part of the maturity stage, some competitors will withdraw their
products because insufficient or no profits remain. Those who remain in the market make
fresh promotional and distribution efforts; advertising and dealer-oriented promotion are
common during this stage. There is no reason to think that a mature product is static;
improvements can be made on the basic product, and variations can be offered. Although
market leaders generally have the resources to expand their offerings, gaining market share
is difficult and expensive. Therefore, the best-managed companies try to hold and improve
their share slightly while diverting profits from successful mature products into the
development and introduction of new ones. A company at this point has to look at the merits
for revitalizing the product or allowing it to decline slowly or killing it off and planning a
replacement.
There are many ways a company can rejuvenate its products, and the method it will choose
will depend on the reason or reasons for the product’s initial decline. Suppose this occurred
through the introduction of a new competitive product with additional benefits. In that case,
the company might choose to add similar benefits to its product, to add new but different
services, or to reduce the present price and emphasize its value for money, perhaps trying to
reach a new, more price-sensitive market in doing so.
On the other hand, in the company’s view, the competitive product is not superior to its
own, the decision may be taken merely to increase advertising spending or introduce a sales
promotion to regain market share. Marketing is about selecting strategies that are either
designed to counteract threats or to take advantage of opportunities in the marketplace.
If you remember the ‘four Ps’ of marketing, you will realize that the action a firm can take
is limited to one of four areas: it can alter the product, the price, the promotional campaign,
or the place – where and how the product can be bought. The purpose of any one of the
above strategies is to expand the market size. A company can do this by converting
nonusers into users, entering into the new market segment(s), winning competitors’
customers, ensuring repeat sales, increasing the volume of usage peruse by the customers,
and broadening the product’s uses.
Stage 4: Decline
At some point in time, the sale of a product is bound to decline. This point is termed as the
decline or the final stage of the product’s life cycle. Most products eventually pass from
maturity to a fourth stage of the life-cycle: decline and eventual elimination. This stage is
characterized by a further dropout of competitors until only a few remain.
At this stage, profits begin to fall sharply, often because of the excess capacity of the firm.
The promotion of the product is reduced or discontinued. Any remaining profit will not be
reinvested in the product; no attempt will be made to rebuild demand. However, careful
management can extend a declining product’s life for some time to come. There are several
reasons why a product declines.
 One of the important reasons is the availability of new innovative products as a
result of technological development.
 The other could be the change in social trends or customers’ habits, which may
cause the product to take a sharp turn downward in terms of sales.
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 Because of the declining profits, firms change their approach;

 Some of the firms are found to withdraw themselves from the marketplace. The
remaining firms may reduce the variety they offer to make their operations more
economical.
 Others may withdraw themselves from unprofitable segments. Yet some others may
reduce their promotion budgets significantly to reduce the prices of their offers
further.
 Some of the companies may also decide to increase their product’s price because
consumers buying the product are frequently buying it as a replacement or a
specialty need.
Only when firms begin to clear out inventories to withdraw the product will they decrease
price.
Perhaps a very limited number of firms will find this stage profitable. The production costs
will be fairly low, and the marketing efforts will all but cease, making it possible to earn a
respectable profit margin.
Thus, a company may continue to sell the product for a relatively long time.
At some point in the decline stage, however, the marketing executive will have to withdraw
the product. An acceptable level of profitability may no longer exist, or the product’s and
the company’s image begins to suffer as the remaining customers shift to newer items. As a
product’s sales decline, so does its image of respectability and quality, and the company
cannot afford to be closely associated with it. A marketer can follow the harvesting strategy,
divestiture strategy, niche or focus strategy, differentiation strategy, low-cost strategy for
a declining industry.
Marketing Strategies in the Decline Stage
Although there is little that can be done about basic shifts in consumer preferences and the
entry of competitive items, the firm has a wide range of alternatives that can be exercised
for products with falling sales. Before one decides on alternatives, it is imperative to
identify the marginal products. After they are identified, managers need to
arrive at decisions regarding their fate.
It is one of the most serious tasks of marketers to identify weak or marginal products. In
smaller companies, managers know of the declining products, and hence a formal review
procedure need not be followed. Where product lines are broad, a committee should work to
identify the weak items. This responsibility should not entirely be the rest of the marketing
department because of the danger of bias.
The committee of product review should consist of executives from marketing, production,
purchasing, control, personnel, and research and development departments. The review
process should include a two-stage procedure.
Products should first be screened based on sales trends, market share trends, gross margin
trends, and overhead trends. A particular product fails to pass minimum standards on the
above factors; it should undergo further analyses based on some other factors. In the second
stage, products should be scaled based on market potential, contribution, relationship to
sales of other products, and so on.
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This analysis will help the company decide on the strategies regarding the products. These
strategies could be;
 Perhaps the easiest solution to declining sales is to move the product into new
foreign or domestic markets.
 This may require the addition of new distributors or the enlargement of the existing
sales force.
 Companies may try to find new uses of the product among the current users.
 Companies may try to revive aging products by redesigning packages and increasing
convenience for the customers.
 Companies may also spend heavily on different consumer deals, displays, and so on.
 Companies may also try to revive declining products by changing the ad firm with
the hope of a more creative advertisement campaign to be developed and launched
by the new firm.
Based on the analysis made by the product review committee, a company may decide to
drop an existing item from its product line (s). The first strategy that a company may pursue
regarding this is to do nothing and wait until there are no longer any orders for the item.
Here the company can drop all promotional activities and rely solely on repeat purchases
from current customers. Another strategy could be to continue selling a declining product
but contract with another company to manufacture it.
Yet, another option could be to produce the item but selling through other under licensing
arrangements. The other strategy is to sell the product to another firm and let them worry
about manufacturing and marketing the item. When none of the above strategies is suitable,
the firm should dispose of the product with minimal inconvenience to the parties concerned.

Summary

 The strategic phases of the product planning process is a sequential set of steps
encapsulating a given product’s entire life cycle. The first step is ideation. The last
step is plotting how to sunset a product. Many different skills, methods, tools, and
stakeholders are involved in various aspects and phases.
 The only true consistent figure in this process is product management. Product
managers take the reigns as early as product definition and concept vetting. They
bring it to life, nurture its growth, and ultimately put it to bed one final time.
 A product life cycle is the amount of time a product goes from being introduced
into the market until it's taken off the shelves.
 There are four stages in a product's life cycle—introduction, growth, maturity, and
decline.
 The concept of product life cycle helps inform business decision-making, from
pricing and promotion to expansion or cost-cutting.
 Newer, more successful products push older ones out of the market.

SELF-ASSESSMENT QUESTIONS
Short Answer Questions
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1. Define product-planning process.

2. What is market research?
3. What does CBS stand for?
4. What is the use of CBS?
5. What does studying the market imply?
6. Briefly explain the product introduction stage.
7. What do you mean by SWOT?
8. What does the classical “S” curve describe?
9. What does the product life cycle convey?
10. List the stages in the product life cycle.
11. Give an example of a product in the decline stage of its product life cycle.
12. Give an example of a product in maturity stage of its product life cycle.
13. Diagrammatically explain breakdown structure.
14. Diagrammatically explain the common product life curves.
15. When does the need for a product breakdown structure arise?
16. With the help of a diagram, explain the product life cycle curves.
17. Give an example of a product in introductory stage of its product life cycle.
18. Distinguish between product breakdown structure and work breakdown structure.

Long Answer Questions

1. Suggest marketing strategies for a consumer durable product during its growth, and
maturity stages.
2. Describe different stages of product life cycle. Do all products follow this pattern?
3. What is the importance of product life cycle for companies?
4. Identify three products, which you think are in their decline stage of life cycle. Why
do you think companies are discontinuing them?
5. Name two products and two services that you think are in their introductory stage.
What are their chances of success to reach growth stage? Give your reasons.
6. Identify the stage of life cycle of computer notebooks in India. Give your reasons.
7. What are the advantages of being a pioneer company and a follower company in a
product category?
8. Write short notes on the following:
(a) Opportunity Identification (b) Breakdown Structure
(c) Product Development Charter (d) Whether to be a Pioneer or
Follower
9. Explain the product life cycle and all its stages along with examples.

References
 Jayachandran, S, Marketing Management, 1st Edition, Excel Books, New Delhi,
2009.
 Panda, T.K., Marketing Management, 2 nd Edition, Excel Books, New Delhi, 2012.
 Mathur, U.C, Product & Brand Management, 2 nd Edition, Excel Books, New Delhi,
2012.
 Srivastava, R.K., Product Management & New Product Development, 2 nd Edition,
Excel Books, New Delhi, 2014.
LESSON 4 – TECHNOLOGY LIFE CYCLE AND CONCEPT GENERATION
CONTENTS
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Learning Objectives
Learning Outcomes
Overview
4.1 Technology Life Cycles
4.1.1 Stages of Technology Life Cycle
4.1.2 Technology Adoption Life Cycle and Understanding Customer Needs
4.1.3 Disruptive Technologies
4.1.4 Writing a Good Product Specification
4.2 CONCEPT GENERATION
4.2.1 Common Dysfunctions during Concept Generation
4.2.2 Concept Generation - Five-Step Method
4.2.3 Techniques of Concept Generation
Summary
Self-Assessment Questions
Reference
LEARNING OBJECTIVES
After studying this lesson, students should be able to:
 Understand the technology life cycle concept and its phases
 Understand the Adoption Life Cycle and Customer Needs
 Understand the importance of disruptive technologies and product specification
LEARNING OUTCOMES
Upon completion of the lesson, students are able to demonstrate a good understanding of:
 basics of technology life cycle and its phases
 explain technology adoption life cycle and identifying customer needs
 recall concept generation and determine techniques of concept generation

OVERVIEW
The technology life-cycle (TLC) describes the commercial gain of a product through the
expense of research and development phase, and the financial return during its "vital life".
Some technologies, such as steel, paper or cement manufacturing, have a long lifespan (with
minor variations in technology incorporated with time) while in other cases, such as
electronic or pharmaceutical products, the lifespan may be quite short.[1]
The TLC associated with a product or technological service is different from product life-
cycle (PLC) dealt with in product life-cycle management. The latter is concerned with the
life of a product in the marketplace with respect to timing of introduction, marketing
measures, and business costs. The technology underlying the product (for example, that of a
uniquely flavoured tea) may be quite marginal but the process of creating and managing its
life as a branded product will be very different.
The technology life cycle is concerned with the time and cost of developing the technology,
the timeline of recovering cost, and modes of making the technology yield a profit
proportionate to the costs and risks involved. The TLC may, further, be protected during its
cycle with patents and trademarks seeking to lengthen the cycle and to maximize the profit
from it.

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The product of the technology may be a commodity such as polyethylene plastic or a

sophisticated product like the integrated circuits used in a smartphone.
The development of a competitive product or process can have a major effect on the
lifespan of the technology, making it shorter. Equally, the loss of intellectual property rights
through litigation or loss of its secret elements (if any) through leakages also work to reduce
a technology's lifespan. Thus, it is apparent that the management of the TLC is an important
aspect of technology development.
Most new technologies follow a similar technology maturity lifecycle describing
the technological maturity of a product. This is not similar to a product life cycle, but
applies to an entire technology, or a generation of a technology.
Technology adoption is the most common phenomenon driving the evolution of industries
along the industry lifecycle. After expanding new uses of resources they end with
exhausting the efficiency of those processes, producing gains that are first easier and larger
over time then exhaustingly more difficult, as the technology matures.
4.1 Technology Life Cycles
Technology Life cycles are a very useful way to understand how products and technology
evolve over time. They are very useful in tracking product and process differentiation. They
can be used to understand the evolution, growth, and decline of ideas and phenomena in the
physical world, the plant and animal kingdom, and technology. The most commonly used
life cycles in business are the technology life cycles and the product life cycles. They are
used to track the diffusion of technologies and products.
Diffusion is the acceptance, adoption, and awareness of a technology or a product by
individuals. The technology and product life cycles are essentially the same, except the
product life cycle is focused on selling products while the technology life cycle is focused
on innovation. The technology and product life cycles consists of four phases that follow the
classic S-curve and they consist of awareness (Innovation & Syndication), growth
(Expansion), maturity, and a decline of interest in the technology (see Figure 4.1
"Technology Life Cycle").

Fig 4.1 Technology Life Cycle

The technology life cycle (TLC) describes the costs and profits of a product from
technological development phase to market maturity to eventual decline. Research and
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development (R&D) costs must be offset by profits once a product comes to market.
Varying product lifespans mean that businesses must understand and accurately project
returns on their R&D investments based on potential product longevity in the market.
Due to rapidly increasing rates of innovation, products such as electronics and
pharmaceuticals in particular are vulnerable to shorter life cycles (when considered against
such benchmarks as steel or paper). Thus TLC is focused primarily on the time and cost of
development as it relates to the projected profits. TLC can be described as having four
distinct stages:
4.1.1 Stages of Technology Life Cycle :
1) Innovation Stage
The first and foremost stage of the Technology Life Cycle represents the innovation or the
birth of the new product, software, material or the processes that are a result of the thorough
research and development activities. In the R & D department of the company, various new
ideas are planned, developed, tested, designed, and executed depending on the company
resources and the current needs and demands of the market. This stage is quite time to
consume in nature as the ideas need to be tested and verified considering the various
internal and external forces affecting the operations of the business.
2) Syndication Stage
The syndication stage of the Technology Life Cycle focuses on the commercialization and
demonstration of the new technology developed. The products, processes or material with
the optimal potential for success are utilized on the immediate basis. In the research and
development departments, many innovations are put on hold and only a percentage of the
same are utilized for the commercial purposes. The outcome of the same largely depends on
the economic factors along with the technical and non-technical factors.
 Growth – This phase covers the timeframe from product invention to the point at
which out-of-pocket costs are fully recovered. At this junction the goal is to see to the
rapid growth and distribution of the invention and leverage the competitive advantage
of having the newest and most effective product.
 Maturity – As the new innovation becomes accepted by the general population and
competitors enter the market, supply begins to outstrip demand. During this stage,
returns begin to slow as the concept becomes normalized.
3) Diffusion Stage
This stage focuses on the penetration of the new technology developed in the market and the
technology is widely accepted by its potential users owing to its innovation and novel
ideation. All this results in the higher profits, enhanced brand value, and elevated revenue
generation for the company making it a market leader. But it is important to take note that
the demand and supply side of factors jointly influence the rate of diffusion of the
technology.
4) Substitution Stage
The substitution is the last and final stage of the Technology Life Cycle and represents the
decline in the use of the technology due to its replacement with another technology that is
far more better, novel, and innovative in nature catering to the current needs and demands of
the target market. The time frame of the substitution stage depends on the dynamics of the
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market and the various technical and non-technical factors influence the rate of the
substitution of the technology.
4.1.2 Technology Adoption Life Cycle and Understanding Customer Needs
Product development and capitalizing on the new invention covers the business side of these
R&D investments in technology. The other important consideration is the differentiation in
consumer adoption of new technological innovations. These have also been distributed into
phases which effectively summarize the demographic groups presented during each stage of
TLC:

Fig 4.2 Technology Adoption Life Cycle

Technology adoption life cycle: This adoption chart highlights the way in which
consumers embrace new products and services.
 Innovators – These are risk-oriented, leading-edge minded individuals who are
extremely interested in technological developments (often within a particular
industry). Innovators are a fractional segment of the overall consumer population.
 Early Adopters – A larger but still relatively small demographic, these individuals
are generally risk-oriented and highly adaptable to new technology. Early adopters
follow the innovators in embracing new products, and tend to be young and well-
educated.
 Early Majority – Much larger and more careful than the previous two groups, the
early majority are open to new ideas but generally wait to see how they are received
before investing.
 Late Majority – Slightly conservative and risk-averse, the late majority is a large
group of potential customers who need convincing before investing in something
new.
 Laggards – Extremely frugal, conservative, and often technology-averse, laggards
are a small population of usually older and uneducated individuals who avoid risks
and only invest in new ideas once they are extremely well-established.
Taking these two models into consideration, a business unit with a new product or service
must consider the scale of investment in R&D, the projected life cycle the technology will
likely maintain, and the way in which customers will adopt this product. By leveraging
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these models, businesses and institutions can exercise some foresight in ascertaining the
returns on investment as their technologies mature.
4.1.3 Disruptive Technologies
The technological innovations on a given industry, the concept of performance
trajectories—the rate at which the performance of a product has improved, and is expected
to improve, over time—can be helpful. Almost every industry has a critical performance
trajectory. In mechanical excavators, the critical trajectory is the annual improvement in
cubic yards of earth moved per minute. In photocopiers, an important performance
trajectory is improvement in number of copies per minute. In disk drives, one crucial
measure of performance is storage capacity, which has advanced 50% each year on average
for a given size of drive.
Different types of technological innovations affect performance trajectories in different
ways. On the one hand, sustaining technologies tend to maintain a rate of improvement; that
is, they give customers something more or better in the attributes they already value. For
example, thin-film components in disk drives, which replaced conventional ferrite heads
and oxide disks between 1982 and 1990, enabled information to be recorded more densely
on disks. Engineers had been pushing the limits of the performance they could wring from
ferrite heads and oxide disks, but the drives employing these technologies seemed to have
reached the natural limits of an S curve. At that point, new thin-film technologies emerged
that restored or sustained the historical trajectory of performance improvement.
On the other hand, disruptive technologies introduce a very different package of attributes
from the one mainstream customers historically value, and they often perform far worse
along one or two dimensions that are particularly important to those customers. As a rule,
mainstream customers are unwilling to use a disruptive product in applications they know
and understand. At first, then, disruptive technologies tend to be used and valued only in
new markets or new applications; in fact, they generally make possible the emergence of
new markets. For example, Sony’s early transistor radios sacrificed sound fidelity but
created a market for portable radios by offering a new and different package of attributes
small size, light weight, and portability.

Fig 4.3 Disruptive Technologies

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In the history of the hard-disk-drive industry, the leaders stumbled at each point of
disruptive technological change: when the diameter of disk drives shrank from the original
14 inches to 8 inches, then to 5.25 inches, and finally to 3.5 inches. Each of these new
architectures initially offered the market substantially less storage capacity than the typical
user in the established market required. For example, the 8-inch drive offered 20 MB when
it was introduced, while the primary market for disk drives at that time mainframes required
200 MB on average. Not surprisingly, the leading computer manufacturers rejected the 8-
inch architecture at first. As a result, their suppliers, whose mainstream products consisted
of 14-inch drives with more than 200 MB of capacity, did not pursue the disruptive products
aggressively. The pattern was repeated when the 5.25-inch and 3.5-inch drives emerged:
Established computer makers rejected the drives as inadequate, and, in turn, their disk-drive
suppliers ignored them as well.
But while they offered less storage capacity, the disruptive architectures created other
important attributes—internal power supplies and smaller size (8-inch drives); still smaller
size and low-cost stepper motors (5.25-inch drives); and ruggedness, light weight, and low-
power consumption (3.5-inch drives). From the late 1970s to the mid-1980s, the availability
of the three drives made possible the development of new markets for minicomputers,
desktop PCs, and portable computers, respectively.
A Product Specification, commonly referred to as a product spec, is an important product
document that outlines key requirements for building a new feature, functionality, or
product. Like a blueprint, a product spec contains key information (e.g., target users,
business needs, goals, and other essential details) to help guide the product team in building
a successful product.
An effective product spec is concise, brief, and not overly technical. It should answer these
key questions:
1. What are we building, and why?
2. What should this new product achieve?
3. How do we measure success?
Why Is a Product Spec Important?
A product spec is a critical early step for product development as it requires critical
thinking in the initial stages of fleshing out a new idea. It effectively communicates what’s
you’re building and for whom, and what the outcome should be. Additionally, it provides
essential context for those who will be developing the product. It also serves as
a guideline for product teams to follow throughout the development process. And a really
good product spec provides clarity, which streamlines development, keeps teams on track,
and helps avoid costly miscommunication.
4.1.4 Writing a Good Product Specification
Follow these five key steps when creating your product spec:
Step 1: Review Customer Feedback
Whether it’s in the form of customer complaints, questions, suggestions, or feature requests,
understanding your customers’ pain is essential in identifying the problem your product
aims to solve.

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Step 2: Initiate Internal Discussions

Create opportunities for colleagues on the product team and across the organization to
chime in and feel connected to the development process. It invites a fresh, broad
perspective.
Step 3: Determine Product Requirements
Figure out the requirements necessary to build the product and achieve the desired outcome.
Step 4: Conduct User Testing
Create a prototype that your closest customers can test. It will help you understand which
features are essential and which ones are rarely (or never) used, and also what triggers
frustration or confusion.
Step 5: Revise and Release
Apply the valuable insights discovered during user testing to revise your product spec.
When you feel confident about the adjustments, send your product specifications to the
development team to begin building the product.
Product Specification Chart
1. Create the Specification Table:
(a) Label column one “User Problem”
(b) Label column two “Root Problem”
(c) Label column three “Solution Goal”
(d) Label column four “Metrics”
2. Fill out the Table:
(a) List the User Problem (either come from the customer or are classifications of
customer requirements)
(b) List the Root Problem for each general one.
(c) List the solution for each User and Root problem.
(d) List the metrics for each general one.
Characteristics of a Product Specification Chart
 Specific: The product specification is specific enough that everyone knows what the
deliverables will be. The language is clear and concise.
 Measurable: Each specific requirement has a measurable acceptable performance.
 Attainable: The product specifications are attainable.
 Results-oriented: The product specification is a result, not a method.
 Time bound: The product specification is practical given the time constraints of the
course.

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Table 4.1 Product Specification Chart

Product Specification Process

1. Set Target Specifications
(a) Based on customer needs and benchmarks
(b) Develop metrics for each need
(c) Set ideal and acceptable values
2. Refine Specifications
(a) Based on selected concept and feasibility testing
(b) Technical and economic modelling
(c) Trade-offs is critical
3. Reflect on the Results and the Process
(a) Critical for ongoing improvement.
4.2 CONCEPT GENERATION
Concept generation represents a set of activities that a team/company will complete
to amass multiple product concepts. Some call this the ideation stage. Depending on the
nature of the product development process and company strategy, these concepts may be
broad (and unrelated) in nature or narrow in scope. Overall, the purpose of the concept
generation stage is to iterate as many concepts as possible, screen these concepts, and then
determine the most valid concepts for further development.
After identifying a set of customer needs and establishing target product specifications, the
team faced the following questions:
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 What existing solution concepts, if any, could be successfully adapted for this
application?
 What new concepts might satisfy the established needs and specifications?
 What methods can be used to facilitate the concept generation process?
A product concept is an approximate description of the technology, working principles, and
form of the product. It is a concise description of how the product will satisfy the customer
needs. A concept is usually expressed as a sketch or as a rough three-dimensional model
and is often accompanied by a brief textual description. The degree to which a product
satisfies customers and can be successfully commercialized depends to a large measure on
the quality of the underlying concept. A good concept is sometimes poorly implemented in
subsequent development phases, but a poor concept can rarely be manipulated to achieve
commercial success. Fortunately, concept generation is relatively inexpensive and can be
done relatively quickly in comparison to the rest of the development process. For example,
concept generation had typically consumed less than 5 percent of the budget and 15 percent
of the development time in previous nailer development efforts. Because the concept
generation activity is not costly, there is no excuse for a lack of diligence and care in
executing a sound concept generation method.
Good concept generation leaves the team with confidence that the full space of alternatives
has been explored. Thorough exploration of alternatives early in the development process
greatly reduces the likelihood that the team will stumble upon a superior concept late in the
development process or that a competitor will introduce a product with dramatically better
performance than the product under development.
4.2.1 Common Dysfunctions during Concept Generation
Common dysfunctions exhibited by development teams during concept generation include:
 Consideration of only one or two alternatives, often proposed by the most assertive
members of the team.
 Failure to consider carefully the usefulness of concepts employed by other firms in
related and unrelated products.
 Involvement of only one or two people in the process, resulting in lack of confidence
and commitment by the rest of the team.
 Ineffective integration of promising partial solutions.
 Failure to consider entire categories of solutions.
A structured approach to concept generation reduces the incidence of these problems by
encouraging the gathering of information from many disparate information sources, by
guiding the team in the thorough exploration of alternatives, and by providing a mechanism
for integrating partial solutions. A structured method also provides a step-by-step procedure
for those members of the team who may be less experienced in design-intensive activities,
allowing them to participate actively in the process.
4.2.2 Concept Generation - Five-Step Method
This chapter presents a five-step concept generation method. Solution concepts are then
identified for the sub-problems by external and internal search procedures. Classification
trees and concept combination tables are then used to systematically explore the space of
solution concepts and to integrate the sub-problem solutions into a total solution. Finally,
the team takes a step back to reflect on the validity and applicability of the results, as well as
on the process used.
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This chapter will follow the recommended method and will describe each of the five steps
in detail. Although we present the method in a linear sequence, concept generation is almost
always iterative. Like our other development methods, these steps are intended to be a
baseline from which product development teams can develop and refine their own unique
problem-solving style.
Our presentation of the method is focused primarily on the overall concept for a new
product; however, the method can and should be used at several different points in the
development process. The process is useful not only for overall product concepts but also
for concepts for subsystems and specific components as well. Also note that while the
example in this chapter involves a relatively technical product, the same basic approach can
be applied to nearly any product.

Fig 4.4 Concept Generation - Five-Step Method

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The methods of problem decomposition are:

 Decompose by function: use of block diagrams approach, for example, photocopier.
 Decomposition by sequence of user actions: For example, the nailer problem might
be broken down into three user actions: moving the tool to the gross nailing position,
positioning the tool precisely, and triggering the tool. This approach is often useful
for products with very simple technical functions involving a lot of user interaction.
 Decomposition by key customer needs: For the nailer, this decomposition might
include the following sub-problems: fires nails in rapid succession, is lightweight,
and has a large nail capacity. This approach is often useful for products in which
form, and not working principles or technology, is the primary problem. Examples
of such products include toothbrushes (assuming the basic brush concept is retained)
and storage containers.
The goal of decomposition are:
 Goal is to divide a complex problem into simpler problems such that these problems
can be tackled in a focused way.
 Once decomposition is complete, the team chooses the sub-problems that are most
critical to the success of the product and that most likely to benefit from novel or
creative solutions.
Here are the top six data collection methods:
1. Interviews
2. Questionnaires and surveys
3. Observations
4. Documents and records
5. Focus groups
6. Oral histories
1. Interviews
If you asked someone completely unaware of data analysis how to best collect
information from people, the most common answer would likely be interviews.
Almost anyone can come up with a list of questions, but the key to efficient
interviews is knowing what to ask. Efficiency in interviewing is crucial because,
of all the primary data collection methods, in-person interviewing can be the
most expensive.
There are ways to limit the cost of interviews, such as conducting them over the
phone or through a web chat interface. But sometimes an in-person interview can
be worth the cost, as the interviewer can tailor follow-up questions based on
responses in a real-time exchange. Interviews also allow for open-ended
questions. Compared to other primary data collection methods, such as surveys,
interviews are more customizable and responsive.
2. Questionnaires and surveys
Questionnaires and surveys can be used to ask questions that have closed-ended
answers.
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Data gathered from questionnaires and surveys can be analyzed in many different
ways. You can assign numerical values to the data to speed up the analysis. This
can be useful if you’re collecting a large amount of data from a large population.
To be meaningful, surveys and questionnaires need to be carefully planned.
Unlike an interview, where a researcher can react to the direction of a
respondent’s answers, a poorly designed questionnaire will lead the study
nowhere quickly. While surveys are often less expensive than interviews, they
won’t be valuable if they aren’t handled correctly. Surveys can be conducted as
interviews, but in most cases, it makes sense to conduct surveys using forms.
Online forms are a modern and effective way to conduct surveys. Unlike written
surveys, which are static, the questions presented in online forms can change
according to how someone responds thanks to the conditional logic form feature.
For instance, if you use Jot form to create your forms, when someone answers no
to a question about allergies, they won’t have to scroll past all of the related
follow-up questions about specific allergies. Instead, they’ll go immediately to a
question on a different topic.
3. Observation
Observation involves collecting information without asking questions. This
method is more subjective, as it requires the researcher, or observer, to add their
judgment to the data. But in some circumstances, the risk of bias is minimal.
For example, if a study involves the number of people in a restaurant at a given
time, unless the observer counts incorrectly, the data should be reasonably
reliable. Variables that require the observer to make distinctions, such as how
many millennials visit a restaurant in a given period, can introduce potential
problems.
In general, observation can determine the dynamics of a situation, which
generally cannot be measured through other data collection techniques.
Observation also can be combined with additional information, such as video.
4. Documents and records
Sometimes you can collect a considerable amount of data without asking anyone
anything. Document- and records-based research uses existing data for a study.
Attendance records, meeting minutes, and financial records are just a few
examples of this type of research.
Using documents and records can be efficient and inexpensive because you’re
predominantly using research that has already been completed. However, since
the researcher has less control over the results, documents and records can be an
incomplete data source.
5. Focus groups
A combination of interviewing, surveying, and observing, a focus group is a data
collection method that involves several individuals who have something in
common. The purpose of a focus group is to add a collective element to
individual data collection.

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A focus group study can ask participants to watch a presentation, for example,
then discuss the content before answering survey or interview-style questions.
Focus groups often use open-ended questions such as, “How did you feel about
the presentation?” or “What did you like best about the product?” The focus
group moderator can ask the group to think back to the shared experience, rather
than forward to the future. Open-ended questions ground the research in a
particular state of mind, eliminating external interference.
6. Oral histories
At first glance, an oral history might sound like an interview. Both data
collection methods involve asking questions. But an oral history is more
precisely defined as the recording, preservation, and interpretation of historical
information based on the opinions and personal experiences of people who were
involved in the events.
Unlike interviews and surveys, oral histories are linked to a single phenomenon.
For example, a researcher may be interested in studying the effect of a flood on a
community. An oral history can shed light on exactly what transpired. It’s a
holistic approach to evaluation that uses a variety of techniques.
As in interviewing, the researcher can become a confounding variable. A
confounding variable is an extra, unintended variable that can skew your results
by introducing bias and suggesting a correlation where there isn’t one.
The classic example is the correlation between murder rates and ice cream sales.
Both figures have, at one time or another, risen together. An unscientific
conclusion may be that the more people buy ice cream, the higher the occurrence
of murder.
However, there is a third possibility that an additional variable affects both of
these occurrences. In the case of ice cream and murder, the other variable is the
weather. Warmer weather is a confounding variable to both murder rates and ice
cream sales.
4.2.3 Techniques of Concept Generation
 Concept Classification Tree
A classification tree is a structural mapping of binary decisions that lead to a
decision about the class (interpretation) of an object (such as a pixel). Although
sometimes referred to as a decision tree, it is more properly a type of decision tree
that leads to categorical decisions.
 Concept Combination Table
Concept combination tables are used to explore systematically and to integrate sub-
problem solutions into a total solution. This paper decomposes problems by key
stakeholder needs, which is an approach most useful for products in which form is
the primary problem

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Fig 4.5 Concept Classification Tree

The concept classification tree is used to divide the entire space of possible solutions into
several distinct classes that will facilitate comparison and pruning. An example of a tree for
the nailer. The branches of this tree correspond to different energy sources.
The classification tree provides at least four important benefits:
1. Pruning of less promising branches: If by studying the classification tree the team is
able to identify a solution approach that does not appear to have much merit, then this
approach can be pruned and the team can focus its attention on the more promising branches
of the tree. Pruning a branch of the tree requires some evaluation and judgment and should
therefore be done carefully, but the reality of product development is that there are limited
resources and that focusing the available resources on the most promising directions is an
important success factor. For the nailer team, the nuclear energy source was pruned from
consideration. Although the team had identified some very intriguing nuclear devices for
use in powering artificial hearts, they felt that these devices would not be economically
practical for at least a decade and would probably be hampered by regulatory requirements
indefinitely.
2. Identification of independent approaches to the problem: Each branch of the tree can be
considered a different approach to solving the overall problem. Some of these approaches
may be almost completely independent of each ther. In these cases, the team can cleanly
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divide its efforts among two or more individuals or task forces. When two approaches both
look promising this division of effort can reduce the complexity of the concept generation
activities. It also may engender some healthy competition among the approaches under
consideration. The nailer team found that both the chemical/explosive branch and the
electrical branch appeared quite promising. They assigned these two approaches to two
different sub-teams and pursued them independently for several weeks.
3. Exposure of inappropriate emphasis on certain branches: Once the tree is constructed,
the team is able to reflect quickly on whether the effort applied to each branch has been
appropriately allocated. The nailer team recognized that they had applied very little effort to
thinking about hydraulic energy sources and conversion technologies. This recognition
guided them to focus on this branch of the tree for a few days.
4. Refinement of the problem decomposition for a particular branch: Sometimes a
problem decomposition can be usefully tailored to a particular approach to the problem.
Consider the branch of the tree corresponding to the electrical energy source. Based on
additional investigation of the nailing process, the team determined that the instantaneous
power delivered during the nailing process was about 10,000 watts for a few milliseconds
and so exceeds the power that is available from a wall outlet, a battery, or a fuel cell (of
reasonable size, cost, and mass). They concluded, therefore, that energy must be
accumulated over a substantial period of the nailing cycle (say 100 milliseconds) and then
suddenly released to supply the required instantaneous power to drive the nail. This quick
analysis led the team to add a sub-function (“accumulate translational energy”) to their
function diagram . They chose to add the sub-function after the conversion of electrical
energy to mechanical energy, but briefly considered the possibility of accumulating the
energy in the electrical domain with a capacitor. This kind of refinement of the function
diagram is quite common as the team makes more assumptions about the approach and as
more information is gathered.
The classification tree shows the alternative solutions to the energy source sub-problem.
However, there are other possible trees. The team might have chosen to use a tree
classifying the alternative solutions to the energy delivery sub-problem, showing branches
for single impact, multiple impacts, or pushing. Trees can be constructed with branches
corresponding to the solution fragments of any of the sub-problems, but certain
classifications are more useful. In general, a sub-problem whose solution highly constrains
the possible solutions to the remaining sub-problems is a good candidate for a classification
tree.
For example, the choice of energy source (electrical, nuclear, pneumatic, etc.) constrains
whether a motor or a piston-cylinder can be used to convert the energy to translational
energy. In contrast, the choice of energy delivery mechanism (single impact, multiple
impacts, etc.) does not greatly constrain the solutions to the other sub-problems. Reflection
on which sub-problem is likely to most highly constrain the solutions to the remaining sub-
problems will usually lead to one or two clear ways to construct the classification tree.
Concept Combination Table
The concept combination table provides a way to consider combinations of solution
fragments systematically. Exhibit 7-9 shows an example of a combination table that the
nailer team used to consider the combinations of fragments for the electrical branch of the
classification tree. The columns in the table correspond to the sub-problems identified. The
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entries in each column correspond to the solution fragments for each of these sub-problems
derived from external and internal search. For example, the sub-problem of converting
electrical energy to translational energy is the heading for the first column. The entries in
this column are a rotary motor with a transmission, a linear motor, a solenoid, and a rail
gun.
Potential solutions to the overall problem are formed by combining one fragment from each
column. For the nailer example, there are 24 possible combinations (4 × 2 × 3). Choosing a
combination of fragments does not lead spontaneously to a solution to the overall problem.
The combination of fragments must usually be developed and refined before an integrated
solution emerges. This development may not even be possible or may lead to more than one
solution, but at a minimum it involves additional creative thought. In some ways, the
combination table is simply a way to make forced associations among fragments in order to
stimulate further creative thinking; in no way does the mere act of selecting a combination
yield a complete solution.

Fig 4.6 Concept Combination Table

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Summary
 The Technology Life Cycle in is embryonic, growth and maturity.
 The technology adoption life cycle model is used to explain how people respond to
product and service innovations that require the end user to change their past
behaviour.
 The technology adoption life cycle is a sociological model that describes the
adoption or acceptance of a new product or innovation, according to the
demographic and psychological characteristics of defined adopter groups. The
process of adoption over time is typically illustrated as a classical normal
distribution.
 Radical innovations typically end sometimes modular or architectural innovations,
find their way into the market through the deployment of disruptive technologies in
new products. Different technologies influence product performance in different
ways.
 By documenting the product and its features, the specification can be a useful
screening tool to identify when a pre-production product differs from one on the
store shelf, signalling the possibility of a material or design change, and potentially a
non-compliant product.
 A product concept should describe how the new product will appeal to its target
market. While the product concept is based upon the idea that customers prefer
products that have the most quality, performance, and features, some customers
prefer a product that is simpler and easier to use.

SELF-ASSESSMENT QUESTIONS
Short Answer Questions
1. What are the stages of a technology life cycle.
2. What is the diffusion stage?
3. What is diffusion of innovations?
4. When does the mature technology period start?
5. Diagrammatically explain the adoption rate curve.
6. How could disruptive technologies threaten market leaders?
7. What is product specification?
8. What are the reasons for product specification?
9. Mention the stages of an adoption cycle.
10. What are the characteristics of a product specification chart?
11. What is innovation and syndication?
12. Briefly mention the process of product specification.
13. Mention the techniques of concept generation.
14. List common dysfunctions during Concept Generation.
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15. Mention the process of making a product specification chart.

16. Mention the Concept Generation Steps.
17. Give example of a disruptive technology.
Long Answer Questions
1. Explain the technology life cycle.
2. Explain the factors influencing the causes for product failures.
3. Explain the technology adoption life cycle concept.
4. Explain with example the life changes in a technology that you have experienced.
5. Explain the concept generation techniques.
6. What are disruptive technologies? Explain with the help of an example and a graph.
7. Write short notes on the following:
(a) Concept Generation (b) Product Specification
(c) Disruptive Technologies (d) Adopters of TLC
8. What are the methods and goals of problem decomposition?

References
 Jayachandran, S, Marketing Management, 1st Edition, Excel Books, New Delhi,
2009.
 Panda, T.K., Marketing Management, 2nd Edition, Excel Books, New Delhi, 2012.
 Mathur, U.C, Product & Brand Management, 2 nd Edition, Excel Books, New Delhi,
2012.
 Srivastava, R.K., Product Management & New Product Development, 2 nd Edition,
Excel Books, New Delhi, 2014.

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UNIT III
LESSON 5 – PRODUCT CONCEPT SELECTION, SCREENING, SCORING & TESTING
CONTENTS
Learning Objectives
Learning Outcomes
Overview

5.1 Concept Selection

5.1.1 Concept Selection Is an Integral Part of the Product Development

Process

5.1.2 Method for Choosing a Concept

5.1.3 A Structured Method Offers Several Benefits

5.1.4 Overview of Methodology

5.2 Concept Screening

5.3 Concept Scoring

5.3.1 Caveats

5.4 Concept Testing

Summary
Self-Assessment Questions

References
LEARNING OBJECTIVES
After studying this lesson, students should be able to:
 Understand the product selection process
 Know the concept of concept screening and scoring
 Understand the concept of concept testing
LEARNING OUTCOMES
Upon completion of the lesson, students are able to:
 Explain the product concept
 Briefing the concept selection of concept screening and scoring
Knowing the importance of structured concept selection and concept testing

OVERVIEW
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We learned from the previous lesson that product specifications define the product structure
and framework of the product. Once we have passed through the phase of concept
generation, we pass on to the stage of product concept i.e., the Selecting and testing the final
concept.

Concept selection is an activity in the product design process, where alternative concepts
are compared and a decision is made to select the alternatives which proceed into the later
phases of design. Several authors have raised concept selection as one of the most critical
issues in design.

There are at least three remarkable challenges in concept selection. First, the nature of
available information is usually based on subjective perceptions and speculations, and
accurate calculations are seldom available. Second, the stake-holders, users, designers and
producers, can have conflicting requirements concerning e.g. product design and
manufacturing, or product performance and sales price. And third, the freezing of product
concept can have far-reaching effects on product costs and customer satisfaction, which can
only be fixed with additional costs and time

5.1 Concept Selection

A medical supply company retained a product design firm to develop a reusable
syringe with precise dosage control for outpatient use. One of the products sold by
a competitor is shown in Fig 5.1. To focus the development effort, the medical supply
company identified two major problems with its current product: cost (the
existing model was made of stainless steel) and accuracy of dose metering. The
company also requested that the product be tailored to the physical capabilities of the
elderly, an important segment of the target market. To summarize the needs of its
client and of the intended end users, the team established seven criteria on which the
choice of a product concept would be based:
1. Ease of handling.
2. Ease of use.
3. Readability of dose settings.
4. Dose metering accuracy.
5. Durability.
6. Ease of manufacture.
7. Portability.
The team described the concepts under consideration with the sketches shown in
Exhibit 8-3. Although each concept nominally satisfied the key customer needs, the
team was faced with choosing the best concept for further design, refinement, and
production. The need to select one syringe concept from many raises several
questions:
 How can the team choose the best concept, given that the designs are still quite
abstract?
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 How can a decision be made that is embraced by the whole team?

 How can desirable attributes of otherwise weak concepts be identified and used?
 How can the decision-making process be documented?
This chapter uses the syringe example to present a concept selection methodology
addressing these and other issues.

Fig. 5.1. One of the existing outpatient syringes

Fig 5.2. Concept selection is part of the overall concept development phase.
5.1.1 Concept Selection Is an Integral Part of the Product Development Process
Early in the development process the product development team identifies a set of customer
needs. By using a variety of methods, the team then generates alternative solution concepts
in response to these needs. Concept selection is the process of evaluating concepts with
respect to customer needs and other criteria, com- paring the relative strengths and
weaknesses of the concepts, and selecting one or more concepts for further investigation,
testing, or development. Fig 5.2. illustrates how the concept selection activity is related to
the other activities that make up the concept development phase of the product development
process. Although this chapter focuses on the selection of an overall product concept at the
beginning of the development process, the method we present is also useful later in the
development process when the team must select subsystem concepts, components, and
production processes.
While many stages of the development process benefit from unbounded creativity
and divergent thinking, concept selection is the process of narrowing the set of concept
alternatives under consideration. Although concept selection is a convergent process, it is
frequently iterative and may not produce a dominant concept immediately. A large set of
concepts is initially winnowed down to a smaller set, but these concepts may subsequently
be combined and improved to temporarily enlarge the set of concepts under consideration.
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Through several iterations a dominant concept is finally chosen. Fig 5.4 illustrates the
successive narrowing and temporary widening of the set of options under consideration
during the concept selection activity.
5.1.2 Method for Choosing a Concept
Whether or not the concept selection process is explicit, all teams use some method to
choose among concepts. (Even those teams generating only one concept are using a method:
choosing the first concept they think of.) The methods vary in their effectiveness and
include the following:
External decision: Concepts are turned over to the customer, client, or some other ex-
ternal entity for selection.
Product champion: An influential member of the product development team chooses a
concept based on personal preference.
Intuition: The concept is chosen by its feel. Explicit criteria or trade-offs are not used. The
concept just seems better.
Multivoting: Each member of the team votes for several concepts. The concept with the
most votes is selected.
Web-based survey: Using an online survey tool, each concept is rated by many people to
find the best ones.
Pros and cons: The team lists the strengths and weaknesses of each concept and makes a
choice based upon group opinion.
Prototype and test: The organization builds and tests prototypes of each concept, mak - ing
a selection based upon test data.
Decision matrices: The team rates each concept against pre-specified selection criteria,
which may be weighted.

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Fig 5.3.Seven concepts for the outpatient syringe. The product development team generated
the seven sketches to describe the basic concepts under consideration.

Continued

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Fig 5.4.Concept selection is an iterative process closely related to concept generation and
testing. The concept screening and scoring methods help the team refine and improve the
concepts, leading to one or more promising concepts upon which further testing and
development activities will be focused.

The concept selection method in this chapter is built around the use of decision matri- ces
for evaluating each concept with respect to a set of selection criteria.
5.1.3 A Structured Method Offers Several Benefits
All of the front-end activities of product development have tremendous influence on
eventual product success. Certainly the response of the market to a product depends criti-
cally on the product concept, but many practitioners and researchers also believe that the
choice of a product concept dramatically constrains the eventual manufacturing cost of the
product. A structured concept selection process helps to maintain objectivity through- out
the concept phase of the development process and guides the product development team
through a critical, difficult, and sometimes emotional process. Specifically, a struc- tured
concept selection method offers the following potential benefits:
A customer-focused product: Because concepts are explicitly evaluated against customer-
oriented criteria, the selected concept is likely to be focused on the customer.
A competitive design: By benchmarking concepts with respect to existing designs,
designers push the design to match or exceed their competitors’ performance along key
dimensions.
Better product-process coordination: Explicit evaluation of the product with respect to
manufacturing criteria improves the product’s manufacturability and helps to match the
product with the process capabilities of the firm.
Reduced time to product introduction: A structured method becomes a common lan-
guage among design engineers, manufacturing engineers, industrial designers, market- ers,
and project managers, resulting in decreased ambiguity, faster communication, and fewer
false starts.
Effective group decision making: Within the development team, organizational phi-
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losophy and guidelines, willingness of members to participate, and team member ex-
perience may constrain the concept selection process. A structured method encourages
decision making based on objective criteria and minimizes the likelihood that arbitraryor
personal factors influence the product concept.

Documentation of the decision process: A structured method results in a readily un-

derstood archive of the rationale behind concept decisions. This record is useful for
assimilating new team members and for quickly assessing the impact of changes in the
customer needs or in the available alternatives.
5.1.4 Overview of Methodology
We present a two-stage concept selection methodology, although the first stage may suf-
fice for simple design decisions. The first stage is called concept screening and the sec- ond
stage is called concept scoring. Each is supported by a decision matrix that is used by the
team to rate, rank, and select the best concept(s). Although the method is structured, we
emphasize the role of group insight to improve and combine concepts.
Concept selection is often performed in two stages as a way to manage the complexity of
evaluating dozens of product concepts. The application of these two methods is illus- trated
in Fig 5.4. Screening is a quick, approximate evaluation aimed at producing a few viable
alternatives. Scoring is a more careful analysis of these relatively few concepts to choose
the single concept most likely to lead to product success.
During concept screening, rough initial concepts are evaluated relative to a common
reference concept using the screening matrix. At this preliminary stage, detailed quantita-
tive comparisons are difficult to obtain and may be misleading, so a coarse comparative
rating system is used. After some alternatives are eliminated, the team may choose to move
on to concept scoring and conduct more detailed analyses and finer quantitative evaluation
of the remaining concepts using the scoring matrix as a guide. Throughout the screening and
scoring process, several iterations may be performed, with new alternatives arising from the
combination of the features of several concepts. Table 5.1.and 5.2. illustrate the screening
and scoring matrices, using the selection criteria and concepts from the syringe example.
Both stages, concept screening and concept scoring, follow a six-step process that leads the
team through the concept selection activity. The steps are:
1. Prepare the selection matrix.
2. Rate the concepts.
3. Rank the concepts.
4. Combine and improve the concepts.
5. Select one or more concepts.
6. Reflect on the results and the process.
Although we present a well-defined process, the team, not the method, creates the
concepts and makes the decisions that determine the quality of the product. Ideally,
teams are made up of people from different functional groups within the organization.
Each member brings unique views that increase the understanding of the problem
and thus facilitate the development of a successful, customer-oriented product. The
concept selec- tion method exploits the matrices as visual guides for consensus
building among team members. The matrices focus attention on the customer needs
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and other decision criteria and on the product concepts for explicit evaluation,
improvement, and selection.

5.2 Concept Screening

Concept screening is based on a method developed by the late Stuart Pugh in the
1980s and is often called Pugh concept selection (Pugh, 1990). The purposes of
this stage are to narrow the number of concepts quickly and to improve the concepts.
Table 5.1 illustrates the screening matrix used during this stage.
Step 1: Prepare the Selection Matrix
To prepare the matrix, the team selects a physical medium appropriate to the problem at
hand. Individuals and small groups with a short list of criteria may use matrices on paper
similar to Exhibit 8-5 or Appendix A for their selection process. For larger groups a
chalkboard or flip chart is desirable to facilitate group discussion.
Table 5.1. The concept-screening matrix. For the syringe example, the team rated the
concepts against the reference concept using a simple code (1 for “better than,” 0 for
“same as,” 2 for “worse than”) to identify some concepts for further consideration. Note
that the three concepts ranked “3” all received the same net score.
Concepts

A B C D
Selection E F G
Criteria Master Rubbe (Reference
Swash Lever Dial
Cylinde r Ratche ) Plunge
Ring Set Screw
r Brake t Stop
Ease of
0 0 – 0 0 – –
handling
Ease of use 0 – – 0 0 + 0
Readability
0 0 + 0 + 0 +
of settings
Dose
metering 0 0 0 0 – 0 0
accuracy
Durability 0 0 0 0 0 + 0
Ease of
manufactur + – – 0 0 – 0
e
Portability + + 0 0 + 0 0
Sum +’s 2 1 1 0 2 2 1
Sum 0’s 5 4 3 7 4 3 5
Sum –’s 0 2 3 0 1 2 1

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Net Score 2 –1 –2 0 1 0 0
Rank 1 6 7 3 2 3 3
Ye Combin Revis
Continue? Yes No No Combine
s e e
Next, the inputs (concepts and criteria) are entered on the matrix. Although possibly
generated by different individuals, concepts should be presented at the same level of detail
for meaningful comparison and unbiased selection. The concepts are best portrayed by both
a written description and a graphical representation. A simple one-page sketch of each con-
cept greatly facilitates communication of the key features of the concept. The concepts are
entered along the top of the matrix, using graphical or textual labels of some kind.
If the team is considering more than about 12 concepts, the multivoting technique may be
used to quickly choose the dozen or so concepts to be evaluated with the screening matrix.
Multivoting is a technique in which members of the team simultaneously vote for three to
five concepts by applying “dots” to the sheets describing their preferred concepts. See
Chapter 3, Opportunity Identification, for a description of multivoting applied to a broad
set of product opportunities. The concepts with the most dots are chosen for concept
screening. It is also possible to use the screening matrix method with a large number of
concepts. This is facilitated by a spreadsheet and it is then useful to transpose the rows and
columns. (Arrange the concepts in this case in the left column and the criteria along the top.)
The selection criteria are listed along the left-hand side of the screening matrix, as shown
in T ab le 5 . 1 .These criteria are chosen based on the customer needs the team has
identified, as well as on the needs of the enterprise, such as low manufacturing cost or
minimal risk of product liability. The criteria at this stage are usually expressed at a fairly
high level of abstraction and typically include from 5 to 10 dimensions.
The selection criteria should be chosen to differentiate among the concepts; however,
because each criterion is given equal weight in the concept screening method, the team
should be careful not to list many relatively unimportant criteria in the screening matrix.
Otherwise, the differences among the concepts relative to the more important criteria will
not be clearly reflected in the outcome.
After careful consideration, the team chooses a concept to become the benchmark, or
reference concept, against which all other concepts are rated. The reference is generally
either an industry standard or a straightforward concept with which the team members
are very familiar. It can be a commercially available product, a best-in-class benchmark
product that the team has studied, an earlier generation of the product, any one of the
concepts under consideration, or a combination of subsystems assembled to represent the
best features of different products.
Step 2: Rate the Concepts
A relative score of “better than” (1), “same as” (0), or “worse than” (2) is placed in each cell
of the matrix to represent how each concept rates in comparison to the reference concept
relative to the particular criterion. It is generally advisable to rate every concept on one
criterion before moving to the next criterion; however, with a large number of concepts, it is
faster to use the opposite approach—to rate each concept completely before moving on to
the next concept.

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Some people find the coarse nature of the relative ratings difficult to work with; how- ever,
at this stage in the design process, each concept is only a general notion of the ultimate
product, and more detailed ratings are largely meaningless. In fact, given the imprecision of
the concept descriptions at this point, it is very difficult to consistently compare concepts to
one another unless one concept (the reference) is consistently used as a basis for
comparison.
When available, objective metrics can be used as the basis for rating a concept. For
example, a good approximation of assembly cost is the number of parts in a design.
Similarly, a good approximation of ease of use is the number of operations required to use
the device. Such metrics help to minimize the subjective nature of the rating process. Some
objective metrics suitable for concept selection may arise from the process of establishing
target specifications for the product. Absent objective metrics, ratings are established by
team consensus, although secret ballot or other methods may also be useful. At this point
the team may also wish to note which selection criteria need further investigation and
analysis.
Step 3: Rank the Concepts
After rating all the concepts, the team sums the number of “better than,” “same as,” and
“worse than” scores and enters the sum for each category in the lower rows of the matrix.
From our example in Table 5.1., concept A was rated to have two criteria better than, five
the same as, and none worse than the reference concept. Next, a net score can be calculated
by subtracting the number of “worse than” ratings from the “better than” ratings.
Once the summation is completed, the team rank-orders the concepts. Obviously, in general
those concepts with more pluses and fewer minuses are ranked higher. Often at this point
the team can identify one or two criteria that really seem to differentiate the concepts.
Step 4: Combine and Improve the Concepts
Having rated and ranked the concepts, the team should verify that the results make sense
and then consider if there are ways to combine and improve certain concepts. Two issues to
consider are:
• Is there a generally good concept that is degraded by one bad feature? Can a minor
modification improve the overall concept and yet preserve a distinction from the other
concepts?
• Are there two concepts that can be combined to preserve the “better than” qualities
while annulling the “worse than” qualities?
Combined and improved concepts are then added to the matrix, rated by the
team, and ranked along with the original concepts. In our example, the team noticed
that concepts D and F could be combined to remove several of the “worse than”
ratings to yield a new concept, DF, to be considered in the next round. Concept G
was also considered for revision. The team decided that this concept was too
bulky, so the excess storage space was removed while retaining the injection
technique. These revised concepts are shown in Fig5.5.
Step 5: Select One or More Concepts
Once the team members are satisfied with their understanding of each concept and its
relative quality, they decide which concepts are to be selected for further refinement and
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analysis. Based upon previous steps, the team will likely develop a clear sense of which are
the most promising concepts. The number of concepts selected for further review will be
limited by team resources (personnel, money, and time). In our example, the team selected
concepts A and E to be considered along with the revised concept G1 and the

Fig 5.5. New and revised concepts for the syringe. During the selection process, the
syringe team revised concept G and generated a new concept, DF, arising from the
combination of concepts D and F.
New concept DF. Having determined the concepts for further analysis, the team must
clarify which issues need to be investigated further before a final selection can be made.
The team must also decide whether another round of concept screening will be per-
formed or whether concept scoring will be applied next. If the screening matrix is not
seen to provide sufficient resolution for the next step of evaluation and selection, then the
concept-scoring stage with its weighted selection criteria and more detailed rating scheme
would be used.
Step 6: Reflect on the Results and the Process
All of the team members should be comfortable with the outcome. If an individual is not in
agreement with the decision of the team, then perhaps one or more important criteria are
missing from the screening matrix, or perhaps a particular rating is in error, or at least is
not clear. An explicit consideration of whether the results make sense to everyone reduces
the likelihood of making a mistake and increases the likelihood that the entire team will be
solidly committed to the subsequent development activities.
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Table 5.2. The concept-scoring matrix. This method uses a weighted sum of the ratings to
determine concept ranking. While concept A serves as the overall reference concept, the
separate reference points for each criterion are signified by bold rating values.
Concept
A DF E G+ Dial
Screw+
(Reference) Leve Swash
Master r Ring
Cylinder Stop
Selection
Weighted

Weighted
Weighted

Weighted
Score

Score
Weight

Rating

Rating
Rating

Rating
Score

Score
Criteria

Ease of 5% 3 0.15 3 0.15 4 0.2 4 0.2

handling
Ease of use 15% 3 0.45 4 0.6 4 0.6 3 0.45
Readability 10% 2 0.2 3 0.3 5 0.5 5 0.5
of settings
Dose 25% 3 0.75 3 0.75 2 0.5 3 0.75
metering
accuracy
Durability 15% 2 0.3 5 0.75 4 0.6 3 0.45
Ease of 20% 3 0.6 3 0.6 2 0.4 2 0.4
manufacture
Portability 10% 3 0.3 3 0.3 3 0.3 3 0.3
Total Score 2.75 3.45 3.10 3.05
Rank 4 1 2 3
Continue? No Deve No No
lop

5.3 Concept Scoring

Concept scoring is used when increased resolution will better differentiate among com-
peting concepts. In this stage, the team weighs the relative importance of the selection
criteria and focuses on more refined comparisons with respect to each criterion. The con-
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cept scores are determined by the weighted sum of the ratings. Exhibit 8-7 illustrates the
scoring matrix used in this stage. In describing the concept scoring process, we focus on the
differences relative to concept screening.
Step 1: Prepare the Selection Matrix
As in the screening stage, the team prepares a matrix and identifies a reference concept. In
most cases a computer spreadsheet is the best format to facilitate ranking and sensitivity
analysis. The concepts that have been identified for analysis are entered on the top of the
matrix. The concepts have typically been refined to some extent since concept screen- ing
and may be expressed in more detail. In conjunction with more detailed concepts, the
team may wish to add more detail to the selection criteria. The use of hierarchical relations
is a useful way to illuminate the criteria. For the syringe example, suppose the team decided
that the criterion “ease of use” did not provide sufficient detail to help dis- tinguish among
the remaining concepts. “Ease of use” could be broken down, as shown in Exhibit 8-8, to
include “ease of injection,” “ease of cleaning,” and “ease of loading.” The level of criteria
detail will depend upon the needs of the team; it may not be necessary to expand the
criteria at all. If the team has created a hierarchical list of customer needs, the secondary
and tertiary needs are good candidates for more detailed selection criteria.

Fig 5.6. Hierarchical decomposition of selection criteria. In conjunction with more detailed
concepts, the team may choose to break down criteria to the level of detail necessary for
meaningful comparison.
After the criteria are entered, the team adds importance weights to the matrix. Several
different schemes can be used to weight the criteria, such as assigning an importance value
from 1 to 5, or allocating 100 percentage points among them, as the team has done in
Exhibit 8-7. There are marketing techniques for empirically determining weights from
customer data, and a thorough process of identifying customer needs may result in such
weights (Urban and Hauser, 1993); however, for the purpose of concept selection the
weights are often determined subjectively by team consensus.
Step 2: Rate the Concepts
As in the screening stage, it is generally easiest for the team to focus its discussion by
rating all of the concepts with respect to one criterion at a time. Because of the need for
additional resolution to distinguish among competing concepts, a finer scale is now used.
We recommend a scale from 1 to 5:
Relative Performance Rating
Much worse than reference 1
Worse than reference 2

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Same as reference 3
Better than reference 4
Much better than reference 5
Another scale, such as 1 to 9, may certainly be used, but finer scales generally require more
time and effort. A single reference concept can be used for the comparative ratings, as in the
screening stage; however, this is not always appropriate. Unless by pure coincidence the
reference concept is of average performance relative to all of the criteria, the use of the
same ref- erence concept for the evaluation of each criterion will lead to “scale
compression” for some of the criteria. For example, if the reference concept happens to be
the easiest con- cept to manufacture, all of the remaining concepts will receive an evaluation
of 1, 2, or 3 (“much worse than,” “worse than,” or “same as”) for the ease-of-manufacture
criterion, compressing the rating scale from five levels to three levels.
To avoid scale compression, it is possible to use different reference points for the various
selection criteria. Reference points may come from several of the concepts under
consideration, from comparative benchmarking analysis, from the target values of the
product specifications, or other means.
It is important that the reference point for each criterion be well understood to facilitate
direct one-to-one comparisons. Using multiple reference points does not prevent the team
from designating one concept as the overall reference for the purposes of ensuring that the
selected concept is competitive relative to this benchmark. Under such conditions the
overall reference concept will simply not receive a neutral score.
Exhibit 8-7 shows the scoring matrix for the syringe example. The team believed that the
master cylinder concept was not suitable as a reference point for two of the criteria, and
other concepts were used as reference points in these cases.
Appendix B illustrates a more detailed scoring matrix for which the team rated the
concepts on each criterion with no explicit reference points. These ratings were accom-
plished by discussing the merits of every concept with respect to one criterion at a time and
arranging the scores on a 9-point scale.
Step 3: Rank the Concepts
Once the ratings are entered for each concept, weighted scores are calculated by
multiply- ing the raw scores by the criteria weights. The total score for each concept
is the sum of the weighted scores

Were
rij 5 raw rating of concept j for the ith criterion
wi 5 weighting for ith criterion
n 5 number of criteria
S j 5 total score for concept j
Finally, each concept is given a rank corresponding to its total score, as shown
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in Table 5.2.
Step 4: Combine and Improve the Concepts
As in the screening stage, the team looks for changes or combinations that improve
concepts. Although the formal concept generation process is typically completed before
concept selection begins, some of the most creative refinements and improvements occur
during the concept selection process as the team realizes the inherent strengths and weak-
nesses of certain features of the product concepts.
Step 5: Select One or More Concepts
The final selection is not simply a question of choosing the concept that achieves the highest
ranking after the first pass through the process. Rather, the team should explore this initial
evaluation by conducting a sensitivity analysis. Using a computer spreadsheet, the team can
vary weights and ratings to determine their effect on the ranking.
By investigating the sensitivity of the ranking to variations in a particular rating, the team
members can assess whether uncertainty about a particular rating has a large impact on their
choice. In some cases they may select a lower-scoring concept about which there is little
uncertainty instead of a higher-scoring concept that may possibly prove unwork- able or less
desirable as they learn more about it.
Based on the selection matrix, the team may decide to select the top two or more con-
cepts. These concepts may be further developed, prototyped, and tested to elicit customer
feedback. Concept Testing, for a discussion of methods to assess customer response to
product concepts.
The team may also create two or more scoring matrices with different weightings to
yield the concept ranking for various market segments with different customer prefer-
ences. It may be that one concept is dominant for several segments. The team should also
consider carefully the significance of differences in concept scores. Given the resolution of
the scoring system, small differences are generally not significant.
For the syringe example, the team agreed that concept DF was the most promising and
would be likely to result in a successful product.
Step 6: Reflect on the Results and the Process
As a final step the team reflects on the selected concept(s) and on the concept selection
process. In some ways, this is the “point of no return” for the concept development pro-
cess, so everyone on the team should feel comfortable that all of the relevant issues have
been discussed and that the selected concept(s) have the greatest potential to satisfy
customers and be economically successful.
After each stage of concept selection, it is a useful reality check for the team to review
each of the concepts that are to be eliminated from further consideration. If the team agrees
that any of the dropped concepts is better overall than some of those retained, then the
source of this inconsistency should be identified. Perhaps an important criterion is missing,
not weighted properly, or inconsistently applied.
The organization can also benefit from reflection on the process itself. Two questions
are useful in improving the process for subsequent concept selection activities:
• In what way (if at all) did the concept selection method facilitate team decision
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making?
• How can the method be modified to improve team performance?
These questions focus the team on the strengths and weaknesses of the methodology in
relation to the needs and capabilities of the organization.

5.3.1 Caveats

With experience, users of the concept selection methods will discover several subtleties.
Here we discuss some of these subtleties and point out a few areas for caution.
• Decomposition of concept quality: The basic theory underlying the concept selection
method is that selection criteria—and, by implication, customer needs—can be evaluated
independently and that concept quality is the sum of the qualities of the concept relative to
each criterion. The quality of some product concepts may not be easily decomposed into a
set of independent criteria, or the performance of the concept relative to the differ- ent
criteria may be difficult to relate to overall concept quality. For example, the overall
appeal or performance of a tennis racquet design may arise in a highly complex way from
its weight, ease of swinging, shock transmission, and energy absorption. Simply choosing
a concept based on the sum of performance relative to each criterion may fail to capture
complex relationships among these criteria. Keeney and Raiffa (1993) discuss the problem
of multiattribute decision making, including the issue of nonlinear relation- ships among
selection criteria.
• Subjective criteria: Some selection criteria, particularly those related to
aesthetics, are highly subjective. Choices among alternatives based solely on subjective
criteria must be made carefully. In general, the development team’s collective judgment is
not the best way to evaluate concepts on subjective dimensions. Rather, the team should
narrow the alternatives to three or four and then solicit the opinions of representative
customers from the target market for the product, perhaps using mock-ups or models to
represent the concepts. (See Concept Testing.)
• To facilitate improvement of concepts: While discussing each concept to determine its
rating, the team may wish to make note of any outstanding (positive or negative) attributes
ofthe concepts. It is useful to identify any features that could be applied to other concepts, as
well as issues that could be addressed to improve the concept. Notes may be placed directlyin
the cells of the selection matrix. Such notes are particularly useful in step 4, when the team
seeks to combine, refine, and improve the concepts before making a selection decision.

•Where to include cost: Most of the selection criteria are adaptations of the customer needs;
however, “ease of manufacturing” and “manufacturing cost” are not customer needs. The
only reason customers care about manufacturing cost is that it establishes the lower bound
on sale price. Nevertheless, cost is an extremely important factor in choosing a concept,
because it is one of the factors determining the economic success of the product. For this
reason, we advocate the inclusion of some measure of cost or ease of manufacturing when
evaluating concepts, even though these measures are not true customer needs. Similarly,
there may be needs of other stakeholders that were not expressed by actual customers but
are important for economic success of the product.
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•Selecting elements of aggregate concepts: Some product concepts are really aggrega- tions
of several simpler concepts. If all of the concepts under consideration include choices from
a set of simpler elements, then the simple elements can be evaluated first and in an
independent fashion before the more complex concepts are evaluated. This sort of
decomposition may follow partly from the structure used in concept generation. For
example, if all of the syringes in our example could be used with all of several different
needle types, then the selection of a needle concept could be conducted inde- pendently of
the selection of an overall syringe concept.
•Applying concept selection throughout the development process: Although through- out
this chapter we have emphasized the application of the method to the selection of a basic
product concept, concept selection is used again and again at many levels of detail in the
design and development process. For example, in the syringe example, concept selection
could be used at the very beginning of the development project to decide between a single-
use or multiple-use approach. Once the basic approach had been determined, concept
selection could be used to choose the basic product concept, as illustrated in this chapter.
Finally, concept selection could be used at the most detailed level of design for resolving
decisions such as the choice of colors or materials.

5.4 Concept Testing

Fig5.7. A prototype of EM Power Corporation’s electric scooter product concept

Fig 5.8. Concept testing in relation to other concept development activities.

The EM Power Corporation, a start-up company, had developed a new product concept to
address the personal transportation market. Fig 5.7. Shows a photograph of a proto- type of
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the product. The concept was a three-wheeled electric-powered scooter that could be folded
up and carried easily. EM Power wished to assess the customer response to this concept to
decide whether to proceed with its development and to support the company’s financing
efforts.
In this chapter, we focus primarily on testing done during the concept development
phase. In a concept test, the development team solicits a response to a description of the
product concept from potential customers in the target market. This type of testing may be
used to select which of two or more concepts should be pursued, to gather information from
potential customers on how to improve a concept, and to estimate the sales potential of the
product. Note that various other types of testing with potential customers may be completed at
times other than during concept development. For example, some kind of customer test,
usually based on only a verbal description of a concept, may be used in identifying the orig
inal product opportunity that forms the basis of the mission statement for the project. A test
may also be used to refine the demand forecast after the development of a product is nearly
complete, but before a firm commits to full production and launch. Fig 5.8 shows concept
testing relative to other concept development activities. Concept testing is closely related to
concept selection in that both activities aim to further narrow the set of concepts under
consideration; however, concept testing is distinct in that it is based on data gathered
directly from potential customers and relies to a lesser degree on judgments made by the
development team. The reason that concept testing generally follows concept selection is
that a team cannot feasibly test more than a few concepts directly with potential customers.
As a result, the team must first narrow the set of alternatives under consideration to very
few.
Concept testing is also closely related to prototyping because concept testing invariably
involves some kind of representation of the product concept, often a prototype. One of the
end results of a concept test may be an estimate of how many units of the product the
company is likely to sell. This forecast is a key element of the information used in making
an economic analysis of the product.
A team may choose not to do any concept testing at all if the time required to test the
concept is large relative to the product life cycles in the product category, or if the cost of
testing is large relative to the cost of actually launching the product. For example, in the
Internet software business, some observers and practitioners argue that just launching a
product and iteratively refining it with subsequent product generations is a better strategy
than carefully testing a concept before developing it fully. While perhaps appropriate for
some products, this strategy would be foolish in the development of, for example, a new
commercial airplane, where development costs and time are huge and failure can be
disastrous. Most product categories fall between these extremes, and in most cases some
form of concept testing is warranted.
This chapter presents a seven-step method for testing product concepts:
1. Define the purpose of the concept test.
2. Choose a survey population.
3. Choose a survey format.
4. Communicate the concept.
5. Measure customer response.
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6. Interpret the results.

7. Reflect on the results and the process.
We illustrate this method with the scooter example.

Step 1: Define the Purpose of the Concept Test

As a first step in concept testing, we recommend that the team explicitly articulate in
writing the questions that the team wishes to answer with the test. Concept testing is
essentially an experimental activity, and as with any experiment, knowing the purpose of
the experiment is essential to designing an effective experimental method. This step is
closely analogous to “defining the purpose” in prototyping. The primary questions
addressed in concept testing are typically:
1. Which of several alternative concepts should be pursued?
2. How can the concept be improved to better meet customer needs?
3. Approximately how many units are likely to be sold?
4. Should development be continued?
Step 2: Choose a Survey Population
An assumption underlying the concept test is that the population of potential customers
surveyed reflects that of the target market for the product. If the survey population is either
more or less enthusiastic about the product than will be the eventual target audience for the
product, then inferences based on the concept test will be biased. As a result, the team
should choose a survey population that mirrors the target market in as many ways as
possible. In the actual survey, the first few questions are called the screener questions and
generally are used to verify that the respondent fits the definition of the target market for the
product.
Often a product addresses multiple market segments. In such cases, an accurate concept
test requires that potential customers from each target segment be surveyed. Surveying
every possible segment may be prohibitively expensive in cost or time, and in such cases,
the team may choose to survey potential customers from only the largest segment; however,
when only one segment is sampled, inferences about the response of the entire market are
likely to be biased.
For the scooter, there were two primary consumer segments: college students and urban
commuters. The team decided to form a survey population from both segments. The team
had also identified several smaller secondary segments, including transportation for factory
and airport employees.
Table 5.3. Factors leading to relatively smaller or larger survey sample sizes.
Factors Favoring a Smaller Sample Size Factors Favoring a Larger Sample Size
 Test occurs early in concept development  Test occurs later in concept
process. development process.
 Test is primarily intended to gather  Test is primarily intended to
qualitative data. assess demand quantitatively.
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 Surveying potential customers is relatively  Surveying customers is relatively

costly in time or money. fast and inexpensive.
 Required investment to develop and  Required investment to develop
launch the product is relatively small. and launch the product is relatively high.
 A relatively large fraction of the target  A relatively small fraction of the
market is expected to value the product target market is expected to value the
(i.e., many positively inclined respondents product (i.e., many people have to be
can be found without a large sample) sampled to reliably estimate the fraction
that values the product).

The sample size of the survey should be large enough that the team’s confidence in the
results is high enough to guide decision making. Sample sizes for concept testing are
sometimes as small as 10 (e.g., when gathering qualitative feedback on a new surgical
device for a highly specialized procedure) or as large as 1,000 (e.g., when trying to
quantitatively assess the potential demand for a new portable telephone that is targeted at a
market segment comprising 10 million households). Although there are no simple formulas
for determining sample size, some of the factors driving sample size are shown in
Table.5.3.
Depending on the desired data to be collected from the concept-testing process, the team
may actually structure multiple surveys with different objectives. Each of these surveys
may involve a different sample population and a different sample size. The EM Power team
performed two different concept tests. In early concept testing, the team sampled only a
dozen or so potential customers to solicit feedback on the attractiveness of the basic
concept. Later, the team performed a purchase-intent survey of 1,000 customers. This
survey was used to make a demand forecast on which financing decisions were based.
Because of the importance of this objective, the team felt that the time and expense
associated with such a large sample were justified.

Step 3: Choose a Survey Format

The following formats are commonly used in concept testing:

Face-to-face interaction: In this format, an interviewer interacts directly with the
respondent. Face-to-face interactions can take the form of intercepts (i.e., stopping
people at a mall, in a park, or on a city street), interviews prearranged by
telephone, interviews with potential customers at a trade-show booth, or focus
groups (i.e., prearranged group discussions with 6–12 people).
Telephone: Telephone interviews may be prearranged and targeted at very specific
individuals (e.g., pediatric dentists) or may be “cold calls” of consumers from a target
population.
Postal mail: In mail surveys, concept-testing materials are sent and respondents are
asked to return a completed form. Postal surveys are somewhat slower than other
methods and suffer from relatively poor response rates. Some kind of incentive—often
cash or a gift—is sometimes offered to increase response.
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Electronic mail: Electronic mail surveys are very similar to postal mail surveys, except
that (as of this writing) respondents seem slightly more likely to reply than via postal mail.
With the proliferation of unwanted e-mail, this tendency may not persist. Many
electronic mail users react extremely negatively to unsolicited commercial co-
respondence. We therefore recommend that electronic mail surveys be used only when
respondents are likely to perceive a benefit to their participation, or when the team has
already established some kind of positive relationship with the target population.
Internet: Using the Internet, a team may create a virtual concept-testing site in which
survey participants can observe concepts and provide responses. An electronic mail
message is usually used to recruit respondents to visit the test site.
Each of these formats presents risks of sample bias. For example, the use of electronic
formats may bias the sample toward those who are technologically sophisticated. For some
products, this sophistication is part of the profile of the target market (e.g., the tar- get
market for Internet software products is likely to be comfortable with electronic sur- vey
formats). Conversely, an Internet survey might be a particularly bad format for testing a
television-based computer concept targeted at people without personal computers.
Exploratory testing, typical in the early phases of concept development, benefits from
open-ended interactive formats. We recommend that the team use face-to-face formats
when presenting multiple concept alternatives or when soliciting ideas for improving a
concept. In these settings, the product developers themselves benefit from performing the
interviews because they can directly observe reactions to the product in rich detail. As the
purpose of the concept test becomes more focused, more structured formats such as mail
and telephone become more appropriate. If the questions are much focused, the team can
hire a market research firm to implement the concept test. When gathering data intended
primarily for use in forecasting demand, third parties are generally used to collect the
data in face-to-face formats. This helps to avoid a sympathy bias—respondents indicating
that they like the concept to please an anxious product developer.
Step 4: Communicate the Concept
The choice of survey format is closely linked to the way in which the concept will be
communicated. Research into the use of sketches to represent concept alternatives finds that
respondents react more favorably to representations that are more realistic (e.g., ren derings)
rather than stylized or rough sketches (Macomber and Yang, 2011). However, most
importantly, alternative concepts should be presented in an identical manner—using the
same media and the same level of detail—so that respondents can make fair
Comparisons among ideas. Concepts can be communicated in any of the following ways,
listed in order of increasing richness of the description.
Verbal description: A verbal description is generally a short paragraph or a collection of
bullet points summarizing the product concept. This description may be read by the
respondent or may be read aloud by the person administering the survey. For example,
the scooter concept might be described as follows:
The product is a lightweight electric scooter that can be easily folded and taken with you
inside a building or on public transportation. The scooter weighs about 25 pounds. It
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travels at speeds up to 15 miles per hour and can go about 12 miles on a single charge. The
scooter can be recharged in about two hours from a standard electric outlet. The scooter is
easy to ride and has simple controls—just an accelerator button and a brake.
Sketch: Sketches are usually line drawings showing the product in perspective, per- haps
with annotations of key features. Fig 5.9. Shows a sketch of the scooter concept.
Photos and renderings: Photographs can be used to communicate the concept when
appearance models exist for the product concept. Renderings are nearly photo-realistic
illustrations of the concept. Renderings can be created with pens and markers or using
computer-aided design tools. Fig 5.10. shows a rendering of the scooter created using
computer-aided design software.

Fig 5.9. Sketch of scooter concept. Fig 5.10. Rendering of the scooter
from computer-aided design software.
Storyboard: A storyboard is a series of images that communicates a temporal sequence of
actions involving the product. For example, one of the potential benefits of the scooter is
that it can be easily stored and transported. This scenario is illustrated in the storyboard in
Fig 5.11.
Video: Video images allow even more dynamism than the storyboard. With video, the
form of the product itself can be clearly communicated, as can the way in which the
product is used. The scooter team used a video in its purchase-intent survey. The video
showed students and commuters riding prototypes of the product and showed an
animation of the folding mechanism.
Simulation: Simulation is generally implemented as software that mimics the func- tion or
interactive features of the product. Simulation would probably not be the ideal way to
communicate the key features of a scooter, but in some other cases simulation can be
effective. For example, in testing controls for electronic devices, a visual image of the
device can be created on the computer screen, and the user can control the simulated
device via a touch screen or mouse clicks and can observe simulated displays and sounds.
Interactive multimedia: Interactive multimedia combines the visual richness of video with
the interactivity of simulation. Using multimedia, you can display video and still images of the
product. The respondent can view verbal and graphical information and can listen to audio
information. Interaction allows the respondent to choose from among several sources of
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available information on the product, and in some cases to experience the controls and
dis- plays of a simulated product. Unfortunately, the development of multimedia systems
remainsexpensive and therefore may be justified only for large product development efforts.
Physical appearance models: Physical appearance models, also known as “looks-like”
models, vividly display the form and appearance of a product. They are often made of
wood or polymer foams and are painted to look like real products. In some cases, limited
functionality is included in the model. The scooter team built several looks-like models,
one of which was articulated so that the folding feature could be demonstrated. Fig 5.12.
shows a photograph of this model.
Working prototypes: When available, working prototypes, or works-like models, can be
useful in concept testing; however, the use of working prototypes is also risky. The
primary risk is that the respondents will equate the prototype with the finished
product. In some cases, prototypes perform better than the ultimate product (e.g.,
because the prototype uses better, more expensive components such as motors or
batteries). In most cases, the prototype performs worse than the ultimate product
and is almost always less visually attractive than the ultimate product. Sometimes
separate works-like and looks-like prototypes can be used, one to illustrate how the
product will appear in production and the other to illustrate how it would work. Fig
shows a working prototype of the scooter, which was used in some early concept testing.

Fig 5.11. Storyboard illustrating Fig 5.12. Appearance

storage, transportation, and use scenarios model of the scooter concept

Fig 5.13 Working prototype of the scooter concept

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Matching the Survey Format with the Meansof Communicating the Concept
The choice of survey format is tightly linked to the means of communicating the product
concept. For example, the team obviously cannot demonstrate the scooter with a working
model using a telephone survey. Table 5.4 identifies which means of communicating
concepts are appropriate for each survey format.
Issues in Communicating the Concept
When communicating the product concept, the team must decide how aggressively to
promote the product and its benefits. The scooter could be described as an “electric-
powered personal mobility device” or as an “exciting new electric scooter that provides.
Table 5.4. Appropriateness of different survey formats for different ways of
communicating the product concept

Electronic Postal Face-to-

Telephone Internet
Mail Mail Face

Verbal description • • • • •
Sketch • • • •
Photo or rendering • • • •
Storyboard • • • •
Video • •
Simulation • •
Interactive multimedia • •
Physical appearance model •
Working prototype •
Freedom from gridlock.” In our view, the description of the concept should closely mirror
the information that the user is likely to consider when making a purchase decision. If
highly promotional information is used, it can be labeled as a “sample advertisement,”
perhaps supplemented by mock-ups of “magazine articles” or “comments by current
owners” providing additional descriptions of the product.
Researchers and practitioners argue endlessly about whether the purchase price of the
product should be included as part of the concept description. Price is a very powerful
lever on customer response, and, therefore, pricing information can dramatically influ-
ence the results of a concept test. We recommend that price be omitted from the concept
description unless the price of the product is expected to be unusually high or low. For
example, the primary benefit of a concept may be that it provides basic functionality at a
very low price. In this case, price must be included as part of the concept description.
Conversely, a product may provide extremely high performance or unique features, but
only at a relatively high price. In this case, price must also be included as part of the con-
cept description. When the price of the product is likely to be quite similar to existing
products and to customer expectations, price can be omitted from the concept description.
Instead of including price in the concept description, we suggest that the respondent be
asked explicitly what his or her expectation of price would be. If the resulting customer
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expectations differ substantially from the team’s pricing plans, then the team may need to
either consider modifications to the concept or repeat the concept test including price as a
product attribute. Because the scooter was a new product category, for which customers
had not developed clear pricing expectations, the emPower team chose to include their
target price as part of the concept description.
Instead of showing a single concept, the team may choose to ask a respondent to select
from several alternatives. This approach is attractive when the team is trying to decide
among several concepts under consideration. A variant on this approach is to present the
concept for the new product along with descriptions and pictures of the most successful
existing products. This approach has the advantage of allowing respondents to directly
assess attributes of the product concept in comparison to those of competitors. Assuming
the products would be equally distributed and promoted, this approach also allows the
team to estimate potential market share. Using a forced-choice survey technique is likely
to be most effective in cases for which there is a narrowly defined product category with
relatively few existing products.

Step 5: Measure Customer Response

Most concept test surveys first communicate the product concept and then measure cus-
tomer response. When a concept test is performed early in the concept development
phase, customer response is usually measured by asking the respondent to choose from
two or more alternative concepts. Additional questions focus on why respondents react
the way they do and on how the product concepts could be improved. Concept tests also
generally attempt to measure purchase intent. The most commonly used purchase-intent
scale has five response categories:
 Definitely would buy.
 Probably would buy.
 Might or might not buy.
 Probably would not buy.
 Definitely would not buy.
There are many alternatives to this scale, including providing seven or more response
cat- egories or asking respondents to indicate a numerical probability of purchase.
Table 5.5 shows an example of a survey form for the scooter. This form was designed
to be an interview guide for a face-to-face format in which both a brochure and a
working prototype were used to communicate the product concept.

Step 6: Interpret the Results

If the team is simply interested in comparing two or more concepts, interpretation of the
results is straightforward. If one concept dominates the others and the team is confident
that the respondents understood the key differences among the concepts, then the team
can simply choose the preferred concept. If the results are not conclusive, the team may
decide to choose a concept based on cost or other considerations, or may decide to offer
multiple versions of the product. Note that care must be applied in making this judgment
for cases in which manufacturing costs are dramatically different among the concepts
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under comparison and in which no price information is communicated to the

respondents. In such cases, respondents may be biased to select the most costly
alternative.
In many cases the team is also interested in estimating the demand for a product in the
period following launch, usually one year. Here we present a model for estimating the
sales potential of durables. By durables we mean products that last several years, and for
which there is, therefore, a negligible repeat-purchase rate. These products are in contrast
to consumer packaged goods, like razor blades, toothpaste, or frozen food, for which
forecasting models must consider rates of trial and subsequent repeat purchase.
Before proceeding with the model, we note that forecasting sales of new products is
subject to a great deal of uncertainty and exhibits notoriously high errors. Nevertheless,
forecasts do tend to be correlated with actual demand and so provide useful information
to the team.
We estimate Q, the quantity of the product expected to be sold during a time period, as
Q5N3A3P
CONCEPT TEST SURVEYElectric Powered Personal Transportation Device
I am gathering information for a new transportation product and am hoping that you
would be willing to share your opinions with me.
Are you a college student?
<If the response is no, thank the respondent and end the survey.>
Do you live between one and three miles from campus?
Do you travel distances of one to three miles between classes or other activities during your
day?
<If the response is no to this and the previous question, thank the respondent and end the
survey.>
How do you currently get to campus from your home:
How do you currently get around campus during the day: Here is a brochure for the product.
<Show the brochure.>
The product is a lightweight electric scooter that can be easily folded and taken with you
inside a building or on public transportation. The scooter weighs about 25 pounds. It travels
at speeds of up to 15 miles per hour and can go about 12 miles on a single charge. The
scooter can be recharged in about two hours from a standard electric outlet. The scooter is
easy to ride and has simple controls—just an accelerator button and a brake.
If the product were priced at $689 and were available from a dealer on or near campus, how
likely would you be to purchase the scooter within the next year?
Table 5.5 Example interview guide (abridged) for a concept test of the electric scooter.
I would I would I might or might I would I would
definitely not probably not not purchase the probably purchase the
purchase the purchase the scooter purchase the scooter
scooter scooter scooter
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Would you be interested in test riding a prototype of the product?

<Provide operating instructions and fit the helmet.>
Based on your experience with the product, how likely would you be to purchase the
product within the next year?
I would I would I might or might I would I would
definitely not probably not not purchase the probably purchase the
purchase the purchase the scooter purchase the scooter
scooter scooter scooter
How might this product be improved?
<Ask open-ended questions to elicit feedback on the concept.>

N is the number of potential customers expected to make purchases during the time
period. For an existing and stable product category (e.g., bicycles) N is the expected
number of purchases to be made of existing products in the category over the time period. A
is the fraction of these potential customers or purchases for which the product is avail- able
and the customer is aware of the product. (In situations where awareness and availability are
assumed to be separate independent factors, they are multiplied together to generate A.)
P is the probability that the product is purchased if available and if the customer is
aware of it. P is estimated in turn by
P 5 Cdefinitely 3 Fdefinitely 1 Cprobably 3 Fprobably
Fdefinitely is the fraction of survey respondents indicating in the concept test survey that
they would definitely purchase (often called the “top box” score).
Fprobably is the fraction of survey respondents indicating that they would probably pur-
chase (often called the “second box” score).
Cdefinitely and Cprobably are calibration constants usually established based on the experi-
ence of a company with similar products in the past. Generally the values of Cdefinitely and
Cprobably fall in these intervals: 0.10 < Cdefinitely < 0.50, 0 < Cprobably < 0.25. Absent prior
history, many teams use values of Cdefinitely = 0.4 and Cprobably = 0.2. Note that these val- ues
reflect the typical bias of respondents to overestimate the probability that they would
actually purchase the product.
Among other possible schemes for estimating P is a function that includes the fraction of
respondents in all of the response categories, not just the top two.
For a product associated with an entirely new category (e.g., portable commuter
scooters), the interpretation of these variables is slightly different. In this case, N is the
number of customers in the target market for the new product, and P is the probability of a
target- market customer purchasing the product within a given time period, often a year.
Note that this interpretation is reflected in the survey questions in table 5.5, in which the
respondent is asked to indicate the likelihood of purchase “within the next year.”
To clarify the model, consider these two numerical examples corresponding to two
different market segments and possible product positionings for the scooter concept.
Scooter Sold as Single-Person Transportation in Large Factories This is an existing
category. Assume that scooters are currently sold into this market at a rate of 150,000 units
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per year (N = 150,000). Assume that the company sells the product through a single
distributor that accounts for 25 percent of the sales in this category (A = 0.25). Assume that
results from a concept test with factory managers responsible for purchasing trans-
portation devices indicate a definitely-would-buy fraction of 0.30 and probably-would- buy
fraction of 0.20. If we use a value of 0.4 for Cdefinitely and 0.2 for Cprobably, then
P 5 0.4 3 0.30 1 0.2 3 0.20 5 0.16
and
Q 5 150,000 3 0.25 3 0.16 5 6,000 units/year
Scooter Sold to College Students This is a new category and therefore poses a much more
difficult estimation challenge. First, what should be the value of N? Strictly speak- ing (as
of this writing) there are very few existing sales of electric scooters to college stu- dents;
however, we could define N several other ways. For example, how many students purchase
bicycles or motor scooters intended for basic transportation of up to two miles. This
number is approximately 1 million per year. Alternatively, how many students must travel
distances of between one and three miles either in commuting from home or travel- ing
between classes or other school activities. This number is approximately 2 million. Assume
that we sample students in this second group, and that we obtain a definitely- would-buy
fraction of 0.10 and a probably-would-buy fraction of 0.05. (Note that these numbers
represent the fraction of respondents that indicate intent to purchase within one year.)
Further assume that the company plans to sell the scooter through bicycle stores near
campuses and advertise in campus newspapers, for the 100 largest college campuses in the
United States. Based on this plan, the company expects that 30 percent of the students in the
target market will be aware of the product and have convenient access to a dealer. If we use
a value of 0.4 for Cdefinitely and 0.2 for Cprobably, then
P 5 0.4 3 0.10 1 0.2 3 0.05 5 0.05
and
Q 5 2,000,000 3 0.30 3 0.05 5 30,000 units in the first year
The results of forecasts based on concept testing should be interpreted with caution. Some
firms, mostly after repeated experience with similar products, have achieved impressive levels
of accuracy in their forecasts. While forecasts do tend to be correlated with actual sales, most
individual forecasts exhibit substantial errors. Some of the factors that can cause actual pur-
chase patterns to differ from the purchase intentions expressed in surveys include:
Importance of word-of-mouth: When the benefits of a product are not immediately
obvious, the enthusiasm of existing users may be an important factor in generating
demand. This factor is not generally captured in concept testing.
Fidelity of the concept description: If the actual product differs substantially from the
description of the product in the concept test, then actual sales are likely to differ from the
forecast.
Pricing: If the price of the product deviates substantially from the price indicated in the
survey, or from the expectations of survey respondents, then forecasts are likely to be
inaccurate.

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Level of promotion: Spending on advertising and other forms of promotion can increase
demand for most products. The influence of promotion is accounted for only weakly in the
forecasting model via the awareness/availability term and via the materi- als used to
present the concept(s).

Step 7: Reflect on the Results and the Process

The primary benefit of the concept test is in getting feedback from real potential customers.
The qualitative insights gathered through open-ended discussions with respondents about the
proposed concepts may be the most important result of concept testing, especially early in the
development process. The team should reflect on this evidence as well as on the numerical
outcome of its forecast.
The team benefits from thinking about the impact of the three key variables in the forecast-
ing model: (1) the overall size of the market, (2) the availability and awareness of the product,
and (3) the fraction of customers who are likely to purchase. Considering alternative markets
for the product can sometimes increase the first factor. The second factor can be increased
through distribution arrangements and promotion plans. The third factor can be increased
through changes to the product design (and possibly advertising) that improve the attractive-
ness of the product. In considering these factors, a sensitivity analysis can yield useful insights
and aids in decision making. For example, what would be the impact on sales if the team were
able to secure a partnership with a retailer and therefore increase A by 20 percent?
In reflecting on the results of the concept test, the team should ask two key diagnostic
questions. First, was the concept communicated in a way that is likely to elicit customer
response that reflects true intent? For example, if one of the primary benefits of the
concept is its aesthetic appeal, was the concept presented in a way that this aspect of the
product was clear to respondents? Second, is the resulting forecast consistent with observed
sales rates of similar products? For example, if only 1,000 gasoline-powered GoPed
scooters (a competing product) are currently sold to college students each year, why does
the emPower team believe it will sell 30 times as many of its product?
Finally, we note that experience with a new product is likely to be applicable to future,
similar products. The team can benefit from its experience by documenting the results of its
concept testing and by attempting to reconcile these results with subsequent observa- tions
of product success.

Summary
 Concept selection is the process of evaluating concepts with respect to customer
needs and other criteria, comparing the relative strengths and weaknesses of the
concepts, and selecting one or more concepts for further investigation or
development.
 All teams use some method, implicit or explicit, for selecting concepts. Decision
techniques employed for selecting concepts range from intuitive approaches to
structured methods.
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 Successful design is facilitated by structured concept selection. We recommend a

two- stage process: concept screening and concept scoring.
 Concept screening uses a reference concept to evaluate concept variants against
selection criteria. Concept scoring may use different reference points for each
criterion.
 Concept screening uses a coarse comparison system to narrow the range of
concepts under consideration.
 Concept scoring uses weighted selection criteria and a finer rating scale. Concept
scoring may be skipped if concept screening produces a dominant concept.
 A concept test solicits a direct response to a description of the product concept
from potential customers in the target market. Concept testing is distinct from
concept selec- tion in that it is based on data gathered directly from potential
customers and relies to a lesser degree on judgments made by the development
team.
 Concept testing can verify that customer needs have been adequately met by the
prod- uct concept, assess the sales potential of a product concept, and/or gather
customer information for refining the product concept.
 Concept testing is appropriate at several different points in the development
process: when identifying the original product opportunity, when selecting which
of two or more concepts should be pursued, when assessing the sales potential of a
product concept, and/or when deciding whether to continue further development
and commercialization of the product.

SELF-ASSESSMENT QUESTIONS
Short Answer Questions
1. Define concept selection.
2. What is the need for structured concept selection?
3. List the two step concept selection methodology.
4. What is the importance of structured concept selection?
5. Define concept screening.
6. Define concept scoring.
7. Define concept testing.
8. How is the concept testing supposed to be reliable?
9. List the six step concept screening process.
10. Concept selection is an iterative process. How?

Long Answer Questions

1. What is a concept selection development funnel? Explain with a diagram.
2. What is the importance of structured concept selection?
3. Differentiate between concept screening and scoring with the help of a matrix.
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4. What are the two ways of concept selection? Explain with matrix.
5. What is concept screening and PCC?
6. Write a short case study on concept testing.
7. Write short notes on the following:
(a) Concept Testing (b) Concept Scoring
(c) Concept Screening (d) Concept Selection
8. How can the concept selection methods be used to benchmark or evaluate existing
products? Perform such an evaluation for five automobiles you might consider
purchasing.
9. Propose a set of selection criteria for the choice of a battery technology for use in a
portable computer.
10. Perform concept screening for the four pencil holder concepts shown below.
Assume the pencil holders are for a member of a product development team who
is continually moving from site to site.
11. Repeat Exercise 3, but use concept scoring.

Zip Pouch Screw Cap Clam Shell Slider

12. What are some different ways you could communicate a concept for a new user
interface for an automotive audio system? What are the strengths and weaknesses
of each approach?
13. Roughly estimate N for the following products. List your assumptions.
a. A sleeping pillow for air travelers.
b. An electronic weather station (monitoring temperature, pressure, humidity,
etc.) for homes.
References
• Keeney, Ralph L., and Howard Raiffa, Decisions with Multiple Objectives: Preferences
and Value Trade-Offs, Cambridge University Press, New York, 1993.
• Alger, J.R., and C.V. Hays, Creative Synthesis in Design, Prentice Hall, Englewood
Cliffs, NJ, 1964.
• Kepner, Charles H., and Benjamin B. Tregoe, The Rational Manager, McGraw-Hill,
New York, 1965.
• Urban, Glen L., and John R. Hauser, Design and Marketing of New Products, second
edition, Prentice Hall, Englewood Cliffs, NJ, 1993.
• Crawford and Di Benedetto examine some forecasting models of frequently purchased
goods. Crawford, C. Merle, and C. Anthony Di Benedetto, New Products
Management, eleventh edition, McGraw-Hill, New York, 2015.
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LESSON 6 – PRODUCT ARCHITECTURE AND PLANNING.

CONTENTS
Learning Objectives
Learning Outcomes
Overview
6.1 Product Architecture – Introduction
6.2 Types of Modularity
6.3 Implications of the Architecture
6.3.1 Product Change
6.3.2 Product Variety
6.3.3 Component Standardization
6.3.4 Product Performance
6.3.5 Manufacturability
6.4 Product Development Management
6.5 Establishing the Architecture
6.6 Delayed Differentiation
6.7 Platform Planning
6.7.1 Differentiation Plan
6.7.2 Commonality Plan
6.7.3 Managing the Trade-Off between Differentiation and Commonality
6.8 Related System-Level Design Issues
6.8.1 Defining Secondary Systems
6.8.2 Establishing the Architecture of the Chunks
6.8.3 Creating Detailed Interface Specifications
Summary
Self-Assessment Questions
References
LEARNING OBJECTIVES
After studying this lesson, students should be able to:
 Understand the product selection concept
 Outline the steps taken to get to a final concept
 Concept testing is a concept you should be familiar

LEARNING OUTCOMES
Upon completion of the lesson, students are able to understanding of:
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 basics of product architecture and its characteristics

 explain types of product architecture
 establishment and implications of product architecture
 explain product test and refinement
 determine delayed differentiation

OVERVIEW
Product Architecture is the process of creating a schematic for a product and its various
functions. Rather than representing the product as a prototype, the product is broken down
into its base components and expressed geometrically. This makes redundancies more
apparent and better expresses the relationships between different features.

This concept may sound more complicated than it is. But in reality, creating a product
architecture is a fairly simple exercise. The idea is to map the product's functions and
features, rather than the product's physical design.
6.1 Product Architecture - Introduction
A product development team within Hewlett-Packard’s home printing division was
considering how to respond to the simultaneous pressures to increase product variety
and to reduce manufacturing costs. Several of the division’s printer products are shown in
Fig 6.1. Ink jet printing had become the dominant technology for consumer and small-
office printing involving color. Excellent black and white print quality and near-
photographic color print quality could be obtained using a printer costing less than $200.
Driven by the increasing value of color ink jet printers, sales of the three leading
competitors together were millions of units per year; however, as the market matured,
commercial success required that printers be tuned to the subtle needs of more focused
market segments and that the manufacturing costs of these products be continually reduced.

Fig 6.1 Three Hewlett-Packard printers from the same product platform: an office model, a photo model, and
a model including scanning capability.

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In considering their next steps, the team members asked:

 How would the architecture of the product impact their ability to offer
product variety?
 What would be the cost implications of different product architectures?
 How would the architecture of the product impact their ability to
complete the design within 12 months?
 How would the architecture of the product influence their ability to manage the
development process?
Product architecture is the assignment of the functional elements of a product to the
physical building blocks of the product. We focus this chapter on the task of establishing
the product architecture. The purpose of the product architecture is to define the basic
physical building blocks of the product in terms of what they do and what their interfaces
are to the rest of the device. Architectural decisions allow the detailed design and testing of
these building blocks to be assigned to teams, individuals, and/or suppliers, such that
development of different portions of the product can be carried out simultaneously.
In the next two sections of this chapter, we define product architecture and illustrate
the profound implications of architectural decisions using, as examples, the Hewlett-
Packard printer and several other products. We then present a method for establishing
the product architecture and focus on the printer example for illustration. (Note that the
details of the printer example have been somewhat disguised to preserve Hewlett-
Packard’s proprietary product information.) After presenting the method, we discuss the
relationships among product architecture, product variety, and supply-chain performance,
and we provide guidance for platform planning, an activity closely linked to the product
architecture.

What Is Product Architecture?

A product can be thought of in both functional and physical terms. The functional elements
of a product are the individual operations and transformations that contribute to the
overall performance of the product. For a printer, some of the functional elements are
“store paper” and “communicate with host computer.” Functional elements are usually
described in schematic form before they are reduced to specific technologies, components,
or physical working principles.
The physical elements of a product are the parts, components, and subassemblies
that ultimately implement the product’s functions. The physical elements become more
defined as development progresses. Some physical elements are dictated by the product
concept, and others become defined during the detail design phase. For example, the Desk
Jet embodies a product concept involving a thermal ink delivery device, implemented by a
print cartridge. This physical element is inextricably linked to the product concept and was
essentially an assumption of the development project.
The physical elements of a product are typically organized into several major physical
building blocks, which we call chunks. Each chunk is then made up of a collection of
components that implement the functions of the product. The architecture of a product
is the scheme by which the functional elements of the product are arranged into physical
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chunks and by which the chunks interact.

Perhaps the most important characteristic of a product’s architecture is its modular
ity. Consider the two different designs for bicycle braking and shifting controls shown in
Exhibit 10-2. In the traditional design (left), the shift control function and the brake control
function are allocated to separate chunks, which in fact are mounted in separate locations
on the bicycle. This design exhibits a modular architecture. In the design on the right, the
shift and brake control functions are allocated to the same chunk. This design exhibits an
integral architecture—in this case motivated by aerodynamic and ergonomic concerns.
A modular architecture has the following two properties:
• Chunks implement one or a few functional elements in their
entirety.
• The interactions between chunks are well defined and are
generally fundamental to theprimary functions of the product.
The most modular architecture is one in which each functional element of the product is
implemented by exactly one physical chunk and in which there are a few well-defined
interactions between the chunks. Such a modular architecture allows a design change to be
made to one chunk without requiring a change to other chunks for the product to func tion
correctly. The chunks may also be designed quite independently of one another.
The opposite of a modular architecture is an integral architecture. An integral architecture
exhibits one or more of the following properties:

Fig 6.2 Two designs of bicycle brake and shift controls. The levers on the left exemplify a modular architecture;
the lever on the right uses an integral architecture.
 Functional elements of the product are implemented using more than one chunk.

 A single chunk implements many functional elements.

 The interactions between chunks are ill defined and may be incidental to the
primaryfunctions of the products.
A product embodying an integral architecture will often be designed with the
highest possible performance in mind. Implementation of functional elements may
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be distributed across multiple chunks. Boundaries between the chunks may be

difficult to identify or may be nonexistent. Many functional elements may be
combined into a few physical components to optimize certain dimensions of
performance; however, modifications to any one particular component or feature
may require extensive redesign of the product.
Modularity is a relative property of a product architecture. Products are rarely
strictly modular or integral. Rather, we can say that they exhibit either more or
less modularity than a comparative product, as in the brake and shift controls
example in Fig 6.2.
6.2 Types of Modularity
Modular architectures comprise three types: slot, bus, and sectional (Ulrich, 1995).
Each type embodies a one-to-one mapping from functional elements to chunks and
well- defined interfaces. The differences between these types lie in the way the
interactions between chunks are organized. Fig 6.3. illustrates the conceptual
differences among these types of architectures.
 Slot-modular architecture: Each of the interfaces between
chunks in a slot-modular architecture is of a different type from the others, so that
the various chunks in the product cannot be interchanged. An automobile radio is
an example of a chunk in a slot-modular architecture. The radio implements exactly
one function, but its interface is different from any of the other components in the
vehicle (e.g., radios and speedometers have different types of interfaces to the
instrument panel).
 Bus-modular architecture: In a bus-modular architecture, there is
a common bus to which the other chunks connect via the same type of interface.
A common example of a chunk in a bus-modular architecture would be an
expansion card for a personal computer. Non electronic products can also be built
around a bus-modular architecture. Track lighting, shelving systems with rails, and
adjustable roof racks for automobiles all embody a bus-modular architecture.

Fig. 6.3. Three types of modular architectures.

• Sectional-modular architecture: In a sectional-modular architecture, all interfaces are of
the same type, but there is no single element to which all the other chunks attach. The
assembly is built up by connecting the chunks to each other via identical inter- faces.
Many piping systems adhere to a sectional-modular architecture, as do sectional sofas,
office partitions, and some computer systems.
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Slot-modular architectures are the most common of the modular architectures because
for most products each chunk requires a different interface to accommodate unique
interactions between that chunk and the rest of the product. Bus-modular and sectional-
modular architectures are particularly useful for situations in which the overall product
must vary widely in configuration, but whose chunks can interact in standard ways with
the rest of the product. These situations can arise when all of the chunks can use the same
type of power, fluid connection, structural attachment, or exchanges of signals.
When Is the Product Architecture Defined?
A product’s architecture begins to emerge during concept development. This happens
informally—in the sketches, function diagrams, and early prototypes of the concept
development phase. Generally, the maturity of the basic product technology dictates
whether the product architecture is fully defined during concept development or during
system-level design. When the new product is an incremental improvement on an existing
product concept, then the product architecture is defined within the product concept. This
is for two reasons. First, the basic technologies and working principles of the product are
predefined, and so conceptual-design efforts are generally focused on better ways to
embody the given concept. Second, as a product category matures, supply chain (i.e.,
production and distribution) considerations and issues of product variety begin to become
more prominent. Product architecture is one of the development decisions that most
impacts a firm’s ability to efficiently deliver high product variety. Architecture therefore
becomes a central element of the product concept; however, when the new product is the
first of its kind, concept development is generally concerned with the basic working
principles and technology on which the product will be based. In this case, the product
architecture is often the initial focus of the system-level design phase of development.

6.3 Implications of the Architecture

Decisions about how to divide the product into chunks and about how much modular-
ity to impose on the architecture are tightly linked to several issues of importance to the
entire enterprise: product change, product variety, component standardization, product
performance, manufacturability, and product development management. The architecture
of the product therefore is closely linked to decisions about marketing strategy, manufac-
turing capabilities, and product development management.
6.3.1 Product Change
Chunks are the physical building blocks of the product, but the architecture of the product
defines how these blocks relate to the function of the product. The architecture therefore
also defines how the product can be changed. Modular chunks allow changes to be
made to a few isolated functional elements of the product without necessarily affecting
the design of other chunks. Changing an integral chunk may influence many functional
elements and require changes to several related chunks.
Some of the motives for product change are:
 Upgrade: As technological capabilities or user needs evolve, some
products can accommodate this evolution through upgrades. Examples include changing
the processor board in a computer printer or replacing a pump in a cooling system with a
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more powerful model.

 Add-ons: Many products are sold by a manufacturer as a basic unit, to
which the user adds components, often produced by third parties, as needed. This type of
change is common in the personal computer industry (e.g., third-party mass storage
devices maybe added to a basic computer).
 Adaptation: Some long-lived products may be used in several different
use environments, requiring adaptation. For example, machine tools may need to be
converted from 220-volt to 110-volt power. Some engines can be converted from a
gasoline to a propane fuel supply.
 Wear: Physical elements of a product may deteriorate with use,
necessitating replacement of the worn components to extend the useful life of the
product. For example, many razors allow dull blades to be replaced, tires on vehicles
can usuallybe replaced, most rotational bearings can be replaced, and many appliance
motorscan be replaced.
 Consumption: Some products consume materials, which can then be
easily replenished. For example, copiers and printers frequently contain print cartridges,
cameras take film cartridges, glue guns consume glue sticks, torches have gas cartridges,
and watches contain batteries, all of which are generally replaceable.
 Flexibility in use: Some products can be configured by the user to
provide different capabilities. For example, many cameras can be used with
different lens and flash options, some boats can be used with several awning
options, and fishing rods may accommodate several rod-reel configurations.
 Reuse: In creating subsequent products, the firm may wish to
change only a few functional elements while retaining the rest of the product
intact. For example, consumer electronics manufacturers may wish to update a
product line by changing only the user interface and enclosure while retaining the
inner workings from a previous model.
In each of these cases, a modular architecture allows the firm to minimize the physical
changes required to achieve a functional change.
6.3.2 Product Variety
Variety refers to the range of product models the firm can produce within a particular time
period in response to market demand. Products built around modular product architectures
can be more easily varied without adding tremendous complexity to the manufacturing
system. For example, Swatch produces hundreds of different watch models, but can
achieve this variety at relatively low cost by assembling the variants from different
combinations of standard chunks (Fig 6.4). A large number of different hands, faces, and
wristbands can be combined with a relatively small selection of movements and cases to
create seemingly endless combinations.

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Fig 6.4 Swatch uses a modular architecture to enable high-variety manufacturing

6.3.3 Component Standardization
Component standardization is the use of the same component or chunk in multiple
products. If a chunk implements only one or a few widely useful functional elements, then
the chunk can be standardized and used in several different products. Such standardization
allows the firm to manufacture the chunk in higher volumes than would otherwise be pos
sible. This in turn may lead to lower costs and increased quality. For example, the watch
movement shown in Fig 6.4. Is identical for many Swatch models. Component
standardization may also occur outside the firm when several manufacturers’ products all
use a chunk or component from the same supplier. For example, the watch battery shown
in fig 6.4 is made by a supplier and standardized across several manufacturers’ product
lines.
6.3.4 Product Performance
We define product performance as how well a product implements its intended functions.
Typical product performance characteristics are speed, efficiency, life, accuracy, and noise.
An integral architecture facilitates the optimization of holistic performance characteristics
and those that are driven by the size, shape, and mass of a product. Such characteristics include
acceleration, energy consumption, aerodynamic drag, noise, and aesthetics. Consider, for
example, a motorcycle. A conventional motorcycle architecture assigns the structural-
support functional element to a frame chunk and the power-conversion functional element
to a transmission chunk. Fig 6.5. Shows a photograph of the BMW R1100RS. The
architecture of this motorcycle assigns both the structural-support function and the power-
conversion function to the transmission chunk. This integral architecture allows the motor-
cycle designers to exploit the secondary structural properties of the transmission casing to
eliminate the extra size and mass of a separate frame. The practice of implementing

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Fig. 6.5 The BMW S1000RR motorcycle. This product exhibits function sharing and an
integral architecture with the design of its transmission chunk.
Multiple functions using a single physical element is called function sharing. An integral
architecture allows for redundancy to be eliminated through function sharing (as in the case of
the motorcycle) and allows for geometric nesting of components to minimize the volume a
product occupies. Such function sharing and nesting also allow material used to be
minimized, potentially reducing the cost of manufacturing the product.
6.3.5 Manufacturability
In addition to the cost implications of product variety and component standardization
described above, the product architecture also directly affects the ability of the team to
design each chunk to be produced at low cost. One important design-for-manufacturing
(DFM) strategy involves the minimization of the number of parts in a product through
component integration; however, to maintain a given architecture, the integration of
physical components can only be easily considered within each of the chunks. Component
integration across several chunks is difficult, if not impossible, and would alter the
architecture dramatically. Because the product architecture constrains subsequent detail
design decisions in this way, the team must consider the manufacturing implications of the
architecture. For this reason DFM begins during the system-level design phase while the
layout of the chunks is being planned. For details about the implementation of (DFM)
Design for Manufacturing.
6.4 Product Development Management
Responsibility for the detail design of each chunk is usually assigned to a relatively
small group within the firm or to an outside supplier. Chunks are assigned to a single
individual or group because their design requires careful resolution of interactions,
geometric and otherwise, among components within the chunk. With a modular
architecture, the group assigned to design a chunk deals with known, and relatively limited,
functional interactions with other chunks. If a functional element is implemented by two
or more chunks, as in some integral architectures, detail design will require close
coordination among different groups. This coordination is likely to be substan tially
more involved and challenging than the limited coordination required among groups
designing different chunks in a modular design. For this reason, teams relying on outside
suppliers or on a geographically dispersed team often opt for a modular architecture in
which development responsibilities can be split according to the chunk boundaries. Another
possibility is to have several functional elements allocated to the same chunk. In this case,
the work of the group assigned to that chunk involves a great deal of internal coordination
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across a larger group.

Modular and integral architectures also demand different project management styles.
Modular approaches require very careful planning during the system-level design phase,
but detail design is largely concerned with ensuring that the teams assigned to chunks are
meeting the performance, cost, and schedule requirements for their chunks. An integral
architecture may require less planning and specification during system-level design, but
such an architecture requires substantially more integration, conflict resolution, and co-
ordination during the detail design phase.

6.5 Establishing the Architecture

Because the product architecture will have profound implications for subsequent product
development activities and for the manufacturing and marketing of the completed product,
it should be established in a cross-functional effort by the development team. The end
result of this activity is an approximate geometric layout of the product, descriptions of the
major chunks, and documentation of the key interactions among the chunks. We
recommend a four-step method to structure the decision process, which is illustrated using
the Desk Jet printer example. The steps are:
1. Create a schematic of the product.

2. Cluster the elements of the schematic.

3. Create a rough geometric layout.
4. Identify the fundamental and incidental interactions.
Step 1: Create a Schematic of the Product
A schematic is a diagram representing the team’s understanding of the constituent elements
of the product. A schematic for the Desk Jet is shown in Fig 6.6. At the end of the concept
development phase, some of the elements in the schematic are physical concepts, such as
the front-in/front-out paper path. Some of the elements correspond to critical components,
such as the print cartridge the team expects to use; however, some of the elements remain
described only functionally. These are the functional elements of the product that have not
yet been reduced to physical concepts or components. For example, “display status” is a
functional element required for the printer, but the particular approach of the display has
not yet been decided. Those elements that have been reduced to physical concepts or
components are usually central to the basic product concept the team has generated and
selected. Those elements that remain unspecified in physical terms are usually ancillary
functions of the product.
The schematic should reflect the team’s best understanding of the state of the product,
but it does not have to contain every imaginable detail, such as “sense out-of-paper
condition” or “shield radio frequency emissions.” These and other more detailed functional
elements are deferred to a later step. A good rule of thumb is to aim for fewer than 30
elements in the schematic, for the purpose of establishing the product architecture. If the
product is a complex system, involving hundreds of functional elements, then it is useful to
omit some of the minor ones and to group some others into higher-level functions to be
decomposed later.
The schematic created will not be unique. The specific choices made in creating the
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schematic, such as the choice of functional elements and their arrangement, partly define
the product architecture. For example, the functional element “control printer” is
represented as a single centralized element in fig 6.6. An alternative would be to distribute
the control of each of the other elements of the product throughout the system and have
coordination done by the host computer. Because there is usually substantial latitude in the
schematic, the team should generate several alternatives and select an approach that will
facilitate the consideration of several architectural options.

Fig 6.6 Schematic of the Desk Jet printer. Note the presence of both functional
elements (e.g., “Store Output”) and physical elements (e.g., “Print Cartridge”).
For clarity, not all connections among elements are shown.
Step 2: Cluster the Elements of the Schematic
The challenge of step 2 is to assign each of the elements of the schematic to a chunk.
One possible assignment of elements to chunks is shown in fig 6.7, where nine chunks are
used. Although this was the approximate approach taken by the Desk Jet team, there are
several other viable alternatives. At one extreme, each element could be assigned to its
own chunk, yielding 15 chunks. At the other extreme, the team could decide that the
product would have only one major chunk and then attempt to physically integrate all of
the elements of the product. In fact, consideration of all possible clustering’s of
elements would yield thousands of alternatives. One procedure for managing the
complexity of the alternatives is to begin with the assumption that each element of the
schematic will be assigned to its own chunk, and then to successively cluster elements
where advantageous. To determine when there are advantages to clustering, consider these
factors, which echo the implications discussed in the previous section:
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 Geometric integration and precision: Assigning elements to the same

chunk allows a single individual or group to control the physical relationships among
the elements. Elements requiring precise location or close geometric integration
can often be best designed if they are part of the same chunk. For the Desk Jet
printer, this would suggest clustering the elements associated with positioning the
cartridge in the x-axis and positioning the paper in the y-axis.
 Function sharing: When a single physical component can implement several
functional elements of the product, these functional elements are best clustered
together. This is the situation exemplified by the BMW motorcycle transmission (fig
6.5). For the Desk Jet printer, the team believed that the status display and the
user controls could be incorporated into the same component, and so clustered
these two elements together.
 Capabilities of vendors: A trusted vendor may have specific capabilities
related to a project, and to best take advantage of such capabilities a team may
choose to cluster those elements about which the vendor has expertise into one
chunk. In the case of the Desk Jet printer, an internal team did the majority of the
engineering design work, and so this was not a major consideration.
 Similarity of design or production technology: When two or more functional
elements are likely to be implemented using the same design and/or production
technology, then incorporating these elements into the same chunk may allow for
more economical design and/or production. A common strategy, for example, is to
combine all functions that are likely to involve electronics in the same chunk. This
allows the possibility of implementing all of these functions with a single circuit
board.
 Localization of change: When a team anticipates a great deal of change in
some element, it makes sense to isolate that element into its own modular chunk, so
that required changes to the element can be carried out without disrupting any of
the other chunks. The Hewlett-Packard team anticipated changing the physical
appearance of the product over its life cycle, and so chose to isolate the enclosure
element into its own chunk.
 Accommodating variety: Elements should be clustered together to enable
the firm to vary the product in ways that will have value for customers. The printer
was to be sold around the world in regions with different electrical power standards.
As a result, the team created a separate chunk for the element associated with
supplying DC power.
 Enabling standardization: If a set of elements will be useful in other
products, they should be clustered together into a single chunk. This allows the
physical elements of the chunk to be produced in higher quantities. Hewlett-
Packard’s internal standardization was a key motive for using an existing print
cartridge, and so this element is pre- served as its own chunk.

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Fig 6.7. Clustering the elements into chunks. Nine chunks make up this proposed
architecture for the DeskJet printer.
 Portability of the interfaces: Some interactions are easily transmitted over large
distances. For example, electrical signals are much more portable than are mechanical
forces and motions. As a result, elements with electronic interactions can be easily
separated from one another. This is also true, but to a lesser extent, for fluid
connections. The flexibility of electrical interactions allowed the Hewlett-Packard team to
cluster the control and communication functions into the same chunk. Conversely, the
elements related to paper handling are much more geometrically constrained by their
necessary mechanical interactions.
Step 3: Create a Rough Geometric Layout
A geometric layout can be created in two or three dimensions, using drawings,
computer models, or physical models (of cardboard or foam, for example). Fig 6.8
Shows a geometric layout of the Desk Jet printer, positioning the major chunks. Creating
a geometric layout forces the team to consider whether the geometric interfaces among
the chunks are feasible and to work out the basic dimensional relationships among the
chunks. By considering a cross section of the printer, the team realized that there was a
fundamental trade-off between how much paper could be stored in the paper tray and the
height of the machine. In this step, as in the previous step, the team benefits from
generating several alternative layouts and selecting the best one. Layout decision criteria
are closely related to the clustering issues in step 2. In some cases, the team may
discover that the clustering derived in step 2 is not geometrically feasible and thus some of
the elements would have to be reassigned to other chunks. Creating the rough layout
should be coordinated with the industrial designers on the team in cases where the
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aesthetic and human interface issues of the product are important and strongly related to
the geometric arrangement of the chunks.

Fig 6.8. Geometric layout of the printer

Step 4: Identify the Fundamental and Incidental Interactions

Most likely a different person or group will be assigned to design each chunk. Because
the chunks interact with one another in both planned and unintended ways, these different
groups will have to coordinate their activities and exchange information. To better
manage this coordination process, the team should identify the known interactions between
chunks during the system-level design phase.
There are two categories of interactions between chunks. First, fundamental interactions
are those corresponding to the lines on the schematic that connect the chunks to one
another. For example, a sheet of paper flows from the paper tray to the print mechanism.
This interaction is planned, and it should be well understood, even from the very earliest
schematic, as it is fundamental to the system’s operation. Second, incidental interactions
are those that arise because of the particular physical implementation of functional
elements or because of the geometric arrangement of the chunks. For example,
vibrations induced by the actuators in the paper tray could interfere with the precise
location of the print cartridge in the x-axis.
While the fundamental interactions are explicitly represented by the schematic showing
the clustering of elements into chunks, the incidental interactions must be documented in
some other way. For a small number of interacting chunks (fewer than about 10), an
interaction graph is a convenient way to represent the incidental interactions. Fig 6.9.
Shows a possible interaction graph for the Desk Jet printer, representing the known
incidental interactions. For larger systems this type of graph becomes confusing, and an
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interaction matrix is useful instead and can be used to display both fundamental and
incidental interactions. See Eppinger (1997) for an example of using such a matrix, which
is also used to cluster the functional elements into chunks based on quantification of their
interactions.
The interaction graph in Exhibit 10-9 suggests that vibration and thermal distortion are
incidental interactions among the chunks that create heat and involve positioning motions.
These interactions represent challenges in the development of the system, requiring focused
coordination efforts within the team.
We can use the mapping of the interactions between the chunks to provide guidance
for structuring and managing the remaining development activities. Chunks with important
interactions should be designed by groups with strong communication and coordination
between them. Conversely, chunks with little interaction can be designed by groups with
less coordination. Eppinger (1997) describes a matrix-based method for pre- scribing such
system-level coordination needs in larger projects.

Fig 6.9. Incidental interaction graph.

It is also possible, through careful advance coordination, to develop two interacting chunks
in a completely independent fashion. This is facilitated when the interactions between the
two chunks can be reduced in advance to a completely specified interface that will be
implemented by both chunks. It is relatively straightforward to specify interfaces to handle
the fundamental interactions, while it can be difficult to do so for incidental interactions.
Knowledge of the incidental interactions (and sometimes of the fundamental interactions
as well) develops as system-level and detail design progress. The schematic and the
interaction graph or matrix can be used for documenting this information as it evolves.
The network of interactions among subsystems, modules, and components is sometimes
called the system architecture.

6.6 Delayed Differentiation

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When a firm offers several variants of a product, the product architecture is a key
determinant of the performance of the supply chain—the sequence of production and
distribution activities that links raw materials and components to finished products in the
hands of customers.
Imagine three different versions of the printer, each adapted to a different electrical power
standard in three different geographic regions. Consider at what point along the supply
chain the product is uniquely defined as one of these three variants. Assume that the supply
chain consists of three basic activities: assembly, transportation, and packaging. Fig 6.10.
Illustrates how the number of distinct variants of the product evolves as the product moves
through the supply chain. In scenario A, the three versions of the printer are defined during
assembly, then transported, and finally packaged. In scenario B, the assembly activity is
divided into two stages, most of the product is assembled in the first stage, the product is
then transported, assembly is completed, and finally the product is packaged. In scenario B,
the components associated with power conversion are assembled after transportation, and so
the product is not differentiated until near the end of the supply chain.
Postponing the differentiation of a product until late in the supply chain is called delayed
differentiation or simply postponement, and may offer substantial reductions in the costs
of operating the supply chain, primarily through reductions in inventory requirements. For
most products, and especially for innovative products, demand for each version of a product
is unpredictable. That is, there is a component of demand that varies randomly from one
time period to the next. To offer consistently high product availability in the presence of
such demand uncertainty requires that inventory be held somewhere near the end of the
supply chain. (To understand why this is so, imagine a McDonald’s restaurant trying to
respond to minute-to-minute fluctuations in demand for French fries if it peeled, cut, and
fried potatoes only after an order was placed. Instead, it maintains an inventory of cooked
French fries that can be quickly scooped into a package and delivered.) For printers,
transportation by ship between production and distribution sites may require several weeks.
So to be responsive to fluctuations in demand, substantial inventories must be held after
transportation. The amount of inventory required for a given target level of availability is a
function of the magnitude of the variability in demand.
Postponement enables substantial reductions in the cost of inventories because there is
substantially less randomness in the demand for the basic elements of the product (e.g., the
platform) than there is for the differentiating components of the variants of the product.
This is because in most cases demand for different versions of a product is somewhat
uncorrelated, so that when demand for one version is high, it is possible that demand for
some other version of the product will be low.
Two design principles are necessary conditions for postponement.
1. The differentiating elements of the product must be concentrated in one or a few
chunks. To differentiate the product through one or a few simple process steps, the
differentiating attributes of the product must be defined by one or a few components
of the product. Consider the case of the different electrical power requirements for
printers in different geographical regions. If the differences between a product
adapted for 120VAC power in the United States and 220VAC power in Europe were
associated with several components distributed throughout the product (e.g., power
cord, power switch, transformer, rectifier, etc., all in different chunks), there would
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be no way to delay differ- entiation of the product without also delaying the assembly
of these several chunks. (See Exhibit 10-11, top.) If, however, the only difference
between these two models is a single chunk containing a cord and a power supply
“brick,” then the difference between the two versions of the product requires
differences in only one chunk and one assembly opera- tion. (See Fig 6.10 – 6.11,
bottom.)

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Fig 6.10. Postponement involves delaying differentiation of the product until late in the
supply chain. In scenario A, three versions of the product are created during assembly and
before transportation. In scenario B, the three versions of the product are not created until
after transportation.

Fig 6.11 To enable postponement, the differentiating attributes of the product must be
concentrated in one or a few chunks. In the top case, the power supply is distributed
across the cord, enclosure, chassis, and logic board. In the bottom case, the power
supply is confined to the cord and a power supply “brick.”

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2. The product and production process must be designed so that the differentiat- ing
chunk(s) can be added to the product near the end of the supply chain. Even if the
differentiating attributes of the product correspond to a single chunk, postponement may not
be possible. This is because the constraints of the assembly process or product design may
require that this chunk be assembled early in the supply chain. For example, one could
envision the consumer packaging of the printer (i.e., the printed carton) being a primary
differentiating chunk because of different language requirements for different markets. If
transporting the product from the factory to the distribution center required that the printer
be assembled into its carton, then it would be impossible to postpone the differentiation of
the product with respect to packaging type. To avoid this problem, Hewlett-Packard devised a
clever packaging scheme in which molded trays are used to position several dozen bare
assembled printers on each of several layers of a large shipping pallet, which can then be
wrapped with plastic film and loaded directly into a shipping container. This approach allows
differentiation of the carton to occur after the printers have been transported to the distribution
center and the appropriate power supply installed.

6.7 Platform Planning

Hewlett-Packard provides Desk Jet products to customers with different needs. For
illustrative purposes, think of these customers as belonging to three market segments: family,
student, and small-office/home-office (SOHO). To serve these customers, Hewlett-Packard
could develop three entirely different products, it could offer only one product to all three
segments, or it could differentiate these products through differences in only a subset of
the printer components.
A desirable property of the product architecture is that it enables a company to offer two or
more products that are highly differentiated yet share a substantial fraction of their
components. The collection of assets, including component designs, shared by these products
is called a product platform. Planning the product platform involves managing a basic trade-
off between distinctiveness and commonality. On the one hand, there are market benefits to
offering several very distinctive versions of a product. On the other hand, there are design
and manufacturing benefits to maximizing the extent to which these different products share
common components. Two simple information systems allow the team to manage this trade-
off: the differentiation plan and the commonality plan.
Table 5.6. An example differentiation plan for a family of three printers.
Differentiating SOHO (Small
Attributes Family Studen Office, Home
Office)
t
Black print “Near Laser” quality “Laser” quality “Laser” quality
quality Color 300dpi “Near photo” 600dpi 600dpi
print qualityPrint quality Equivalent to Equivalent to
speed Footprint 6 pages/minute DJ600 DJ600 10
pages/minute
Paper storage 360mm deep × 400mm 8 pages/minute
Style 400mm deep ×
wide 100 sheets 340mm deep ×
Connectivity to 360mm wide100 450mm wide150
“Consumer” sheets
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computer USB and parallel port sheets “Commer

Operating Macintosh and “Youth cial” USB
Windows
system consumer” Windows
compatibility USB
Macintosh and
Windows

Table 5.7. An example commonality plan for a family of three printers.

Numbe SOHO (Small
r of Office, Home
Chunks Famil Student
Types y Office)

Print 2 “Manet” cartridge “Picasso” “Picasso” cartridge

cartridge cartridge
Print 2 “Aurora” series Narrow “Aurora” “Aurora” series
mechanism series
Paper tray 2 Front-in front-out Front-in front-out Tall front-in front-
out
Logic board 2 “Next gen” board “Next gen” board “Next gen” board
with parallel port
Enclosure 3 Home style Youth style Soft office style
Driver 5 Version A-PC, Version B-PC, Version C
software
Version A-Mac Version B-Mac

6.7.1 Differentiation Plan

The differentiation plan explicitly represents the ways in which multiple versions of a
product will be different from the perspective of the customer and the market. Table 5.6.
Shows an example differentiation plan. The plan consists of a matrix with rows for the
differentiating attributes of the printer and with columns for the different versions or models
of the product. By differentiating attributes, we mean those characteristics of the product that
are important to the customer and that are intended to be different across the products.
Differentiating attributes are generally expressed in the language of specifications, a nd
Product Specifications. The team uses the differentiation plan to codify its decisions about
how the products will be different. Unconstrained, the differentiation plan would exactly
match the preferences of the customers in the market segments targeted by each different
product. Unfortunately, such plans generally imply products that are prohibitively costly.
6.7.2 Commonality Plan
The commonality plan explicitly represents the ways in which the different versions of the
product are the same physically. Exhibit 10-13 shows a commonality plan for the printer
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example. The plan consists of a matrix with rows representing the chunks of the pro- duct. The
third, fourth, and fifth columns correspond to the three different versions of the product. The
second column indicates the number of different types of each chunk that are implied by
the plan. The team fills each cell in the remaining columns with a label for each different
version of a chunk that will be used to make up the product. Unconstrained, most
manufacturing engineers would probably choose to use only one version of each chunk in
all variants of the product. Unfortunately, this strategy would result in products that are
undifferentiated.
6.7.3 Managing the Trade-Off between Differentiationand Commonality
The challenge in platform planning is to resolve the tension between the desires to
differentiate the products and the desire for these products to share a substantial fraction
of their components. Examination of the differentiation plan and the commonality plan
reveals several trade-offs. For example, the student printer has the potential to offer the
benefit of a small footprint, which is likely to be important to space-conscious college
students; however, this differentiating attribute implies that the student printer would require
a different print mechanism chunk, which is likely to add substantially to the investment
required to design and produce the printer. This tension between a desire to tailor the
benefits of a product to the target market segment and the desire to minimize investment is
highlighted when the team attempts to make the differentiation plan and the commonality
plan consistent. We offer several guidelines for managing this tension.
 Platform planning decisions should be informed by quantitative
estimates of cost and revenue implications: Estimating the profit contribution
from a one-percentage- point increase in market share is a useful benchmark
against which to measure the potential increase in manufacturing and supply-
chain costs of additional versions of a chunk. In estimating supply-chain costs, the
team must consider the extent to which the differentiation implied by the
differentiation plan can be postponed or whether it must be created early in the
supply chain.
 Iteration is beneficial: In our experience, teams make better
decisions when they make several iterations based on approximate information
than when they agonize over the details during relatively fewer iterations.
 The product architecture dictates the nature of the trade-off between
differentiation and commonality: The nature of the trade-off between
differentiation and commonality is not fixed. Generally, modular architectures
enable a higher proportion of components to be shared than integral
architectures. This implies that when confronted with a seemingly intractable
conflict between differentiation and commonality, the team should consider
alternative architectural approaches, which may provide opportunities to enhance
both differentiation and commonality.
For the printer example, the tension between differentiation and commonality might be
resolved by a compromise. The revenue benefits of a slightly narrower student printer are not
likely to exceed the costs associated with creating an entirely different, and narrower, print
mechanism. The costs of different print mechanisms are likely to be especially high given
that the print mechanism involves substantial tooling investments. Also, because the print
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mechanism is created early in the supply chain, postponement of differentiation would be

substantially less feasible if it required different print mechanisms. For these reasons, the
team would most likely choose to use a single, common print mechanism and forgo the
possible revenue benefits of a narrower footprint for the student printer.

6.8 Related System-Level Design Issues

The four-step method for establishing the product architecture guides the early system- level
design activities, but many more detailed activities remain. Here we discuss some of the
issues that frequently arise during subsequent system-level design activities and their
implications for the product architecture.
6.8.1 Defining Secondary Systems
The schematic in fig 6.6 Shows only the key elements of the product. There are many other
functional and physical elements not shown, some of which will only be conceived and
detailed as the system-level design evolves. These additional elements make up the
secondary systems of the product. Examples include safety systems, power systems, status
monitors, and structural supports. Some of these systems, such as safety systems, will span
several chunks. Fortunately, secondary systems usually involve flexible connections such as
wiring and tubing and can be considered after the major architectural decisions have been
made. Secondary systems cutting across the boundaries of chunks present a special
management challenge: Should a single group or individual be assigned to design a
secondary system even though the system will be made up of components re-siding in
several different chunks? Or should the group or individuals responsible for the chunks be
responsible for coordinating among themselves to ensure that the secondary systems will
work as needed? The former approach is more typical, where specific individuals or sub-
teams are assigned to focus on the secondary systems.
6.8.2 Establishing the Architecture of the Chunks
Some of the chunks of a complex product may be very complex systems in their own right.
For example, many of the chunks in the Desk Jet printer involve dozens of parts. Each of
these chunks may have its own architecture—the scheme by which it is divided into smaller
chunks. This problem is essentially identical to the architectural challenge posed at the level
of the entire product. Careful consideration of the architecture of the chunks is nearly as
important as the creation of the architecture of the overall product. For example, the print
cartridge consists of the sub functions store ink and deliver ink for each of four colors of
ink. Several architectural approaches are possible for this chunk, including, for example, the
use of independently replaceable reservoirs for each ink color.
6.8.3 Creating Detailed Interface Specifications
As the system-level design progresses, the fundamental interactions indicated by lines on
the schematic in Fig 6.6 are specified as much more detailed collections of signals, material
flows, and exchanges of energy. As this refinement occurs, the specification of the
interfaces between chunks should also be clarified. For example, Fig 6.12 shows an
overview of a possible specification of an interface between a black print cartridge and a logic
board for a printer. Such interfaces represent the “contracts” between chunks and are often
detailed in formal specification documents.

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Fig. 6.12 Specification of interface between black print cartridge and logic board.

Summary
 Product architecture is the scheme by which the functional elements of the product
are arranged into physical chunks. The architecture of the product is established
during the concept development and system-level design phases of development.
 Product architecture decisions have far-reaching implications, affecting such things
as product change, product variety, component standardization, product
performance, manufacturability, and product development management.
 A key characteristic of a product architecture is the degree to which it is modular or
integral.
 Modular architectures are those in which each physical chunk implements a specific
set of functional elements and has well-defined interactions with the other chunks.
 There are three types of modular architectures: slot-modular, bus-modular, and
sectional-modular.
 Integral architectures are those in which the implementation of functional elements
is spread across chunks, resulting in ill-defined interactions between the chunks.
 We recommend a four-step method for establishing the product architecture:
1. Create a schematic of the product.
2. Cluster the elements of the schematic.
3. Create a rough geometric layout.
4. Identify the fundamental and incidental interactions.
 This method leads the team through the preliminary architectural decisions. Subse-
quent system-level and detail design activities will contribute to a continuing
evolution of the architectural details.
 The product architecture can enable postponement, the delayed differentiation of
the product, which offers substantial potential cost savings.
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 Architectural choices are closely linked to platform planning, the balancing of differ-
entiation and commonality when addressing different market segments with
different versions of a product.
 Due to the broad implications of architectural decisions, inputs from marketing,
manu- facturing, and design are essential in this aspect of product development.

SELF-ASSESSMENT QUESTIONS
Short Answer Questions
1. What is product architecture?
2. When is the influence of architecture felt?
3. Mention the types of product architecture?
4. What is modular architecture?
5. What are the types of modular architecture?
6. What do you understand by product change?
7. Define delayed differentiation.
8. What is platform planning?
9. What are the benefits of platform planning?
10. What is product test and refinement?
11. What do you mean by detailed design?

Long Answer Questions

1. What are the features of product architecture?
2. What are the challenges faced within platform planning?
3. Explain the types of modular architecture.
4. Distinguish between integral and modular architecture.
5. Mention the types of product architecture. Give examples.
6. What are the fundamentals of platform planning?
7. Write short notes on the following:
(a) Product Development Management (b) Slot Modular Architecture
(c) Sectional Modular Architecture (d) Bus Modular Architecture
8. Draw a schematic for a wristwatch, using only functional elements (without assuming
any particular physical working principles or components).
9. Describe the architecture of a Swiss army knife. What advantages and disadvantages
does this architecture provide?
10. Take apart a small electromechanical product (which you are willing to sacrifice if
necessary). Draw a schematic including the essential functional elements. Identify two
or three possible clusterings of these elements into chunks. Is there any evidence to
suggest which architecture was chosen by the development team?
11. Do service products, such as bank accounts or insurance policies, have architectures?
12. Can a firm achieve high product variety without a modular product architecture? How
(or why not)?
13. The argument for the motorcycle architecture shown in Exhibit 10-5 is that it allows
for a lighter motorcycle than the more modular alternative. What are the other
advantages and disadvantages? Which approach is likely to cost less to manufacture?
14. There are thousands of architectural decisions to be made in the development of an
automobile. Consider all of the likely fundamental and incidental interactions that any
one functional element (say, safety restraints) would have with the others. How would
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you use the documentation of such interactions to guide the decision about what
chunk to place this functional element in?
15. The schematic shown in Exhibit 10-6 includes 15 elements. Consider the possibility
of assigning each element to its own chunk. What are the strengths and weaknesses of
such an architecture?
References
 Hall, Arthur D., III, Metasystems Methodology: A New Synthesis and Unification,
Pergamon Press, Elmsford, NY, 1989.
 Clark, Kim B., and Takahiro Fujimoto, Product Development Performance: Strategy,
Organization, and Management in the World Auto Industry, Harvard Business School
Press, Boston, 1991.
 Pine, B. Joseph, II, Mass Customization: The New Frontier in Business
Competition,Harvard Business School Press, Boston, 1992.
 Maier, Mark W., and Eberhardt Rechtin, The Art of Systems Architecting, 3rd edition,
CRC Press, Boca Raton, FL, 2009.

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UNIT IV
LESSON 7 – INDUSTRIAL DESIGN

CONTENTS
Learning Objectives
Learning Outcomes
Overview
7.1 Understanding Industrial Design
7.1.1 History of Industrial Design
7.1.2 Objectives of Industrial Design
7.1.3 Functions of Industrial Design
7.1.4 Changing Role of Industrial Design
7.1.5 The Foundation of Product Development
7.2 Industrial Design for Manufacturing (DFM)
7.3 Value Engineering
7.4 Ergonomics
7.5 Prototyping
7.5.1 Need for a Prototype
7.5.2 Advantages of a Prototype
7.5.3 Developing a Prototype
7.5.4 Bringing It to the Pros
7.5.5 Why is a Prototype Useful to Design for Manufacture?
Summary
Self-Assessment Questions
References

OVERVIEW
Industrial design is a process of design applied to physical products that are to be
manufactured by mass production. It is the creative act of determining and defining a
product's form and features, which takes place in advance of the manufacture or production
of the product. It consists purely of repeated, often automated, replication, while craft-based
design is a process or approach in which the form of the product is determined by the
product's creator largely concurrent with the act of its production.
All manufactured products are the result of a design process, but the nature of this process
can vary. It can be conducted by an individual or a team, and such a team could include
people with varied expertise (e.g. designers, engineers, business experts, etc.). It can
emphasize intuitive creativity or calculated scientific decision-making, and often emphasizes
a mix of both. It can be influenced by factors as varied as materials, production
processes, business strategy, and prevailing social, commercial, or aesthetic
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attitudes. Industrial design, as an applied art, most often focuses on a combination of

aesthetics and user-focused considerations, but also often provides solutions for problems of
form, function, physical ergonomics, marketing, brand development, sustainability, and sales
7.1 Understanding industrial design
The design of mass-produced consumer products. Industrial designers, often trained
as architects or other visual arts professionals, are usually part of a larger creative team. Their
primary responsibility is to help produce manufactured items that not only work well but
please the eye and, therefore, have a competitive advantage over similar products. The work
of an industrial designer often relates to or includes graphic design, such
as advertising and packaging, corporate imagery and branding, and interior design (also
called interior architecture or environmental design), the arrangement of man-made spaces.
7.1.1 History of Industrial Design
The first attributed use of the term “industrial design” in 1919 is credited to Joseph
Claude Sinel, a self-proclaimed “industrial designer.” However, many argue that the
discipline began at least a decade before. Christopher Dresser is generally considered the first
independent industrial designer. Then there is the Practical Draughtsman's Book of Industrial
Design, printed in 1853. Together, these data points anchor the beginning of design as a
profession between 1850 and 1900.
Common Design Skill Sets: The Rhode Island School of Design was founded in 1877. But,
it was not until the Carnegie Institute of Technology opened its design program in 1934 that
historians began to recognize design as a profession. For the next 50 years, until the
appearance of consumer electronics devices, the profession remained in the hands of
individuals whose talents were sought as employees or consultants.
The Design Industry: By the 1980s, business demand for design skills had grown to the
point where profitable design consultancies could be formed. Firms like Alessi (1921),
Teague (1926), Design Concepts (1967), Frogg Design (1969), and others pre-date this
period, but then growth exploded. Driven by broadening consumer electronics markets, the
advent of global competition, shortening product life cycles, and the rapid evolution of CAD
into 3D design and surface modeling, design grew from a profession into an industry. RKS
(1980), Continuum (1983), Seymourpowell (1984), KartenDesign (1984), IDEO (1991), and
dozens of other companies were in business by the mid-1990s.
Design Specialization: During the past 30 years, User Interface Design has already separated
from generalized Industrial Design as a specialty. Sustainable Design is close behind and
Additive Design is on the doorstep as 3D printing matures into Additive Manufacturing.
Meanwhile, Design for the IIoT and IoT and Design for Big Data Analytics will both soon
distinguish themselves as well. If you are a designer, or an engineer who does a lot of
designing, this would be a good time to read the tea leaves and pick your spots accordingly.
Trade schools and academic institutions now offer specialty degrees, and history tells us that
is a meaningful development.
7.1.2 Objectives of industrial design
Industrial design refers to the process in which the product or its components are
modified or improved so as to yield better results. The main objective of the industrial design
services is to make the product equally beneficial for both the user and the manufacturer who
produces it.
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The manufacturer should be able to get profits from the sale and at the same time, the
product should be worth of the buyers’ money. The industrial designers often have to look
into other details too, apart from the features of the product. These include the interface
design, packaging techniques, exhibits, ergonomics etc. They try to bring in novelty and
stand apart in the market.
The electronics industry is one of the main fields which make use of the industrial
design services to the maximum. The industrial electronics design services are on the rise,
with the increase in competition. The designers focus on the product, its components and also
the enclosure design. Industrial designing concentrates equally on the usability and physical
appearance of the product. The product must be aesthetic enough to persuade the prospect
into purchase, as well as useful so that the buyers remain satisfied. Before the designing
process, a research on the similar products and the preferences of the prospects is done. The
design is then modeled and tested before they are finalized.
CAD designs and other 3D softwares are widely used by the industrial designers and
engineers. Though these are greatly helpful, creativity is a major factor that should
complement the knowledge of softwares, for an industrial designer to become successful.
7.1.3 Functions of industrial design
Industrial designers develop aspects of a product that create emotional connections
with the user. They integrate all aspects of form, fit and function, optimising them to create
the best possible user experience. They also create visually appealing designs that can stand
the test of time and ensure that the product is ergonomically suited to fit the user, including
how they will functionally relate, interface or live with the product.
How successfully they are able to do this can often determine the success of a product
in the market. Firms that leave industrial design to the end of the engineering lifecycle, or out
completely will struggle to find success in consumer-driven markets.
Industrial designers face a number of challenges, as manufacturers face more competition and
faster development cycles than ever before. Alongside this, consumers are becoming ever
more discerning and global competition continues to rise. Design and engineering teams are
increasingly geographically spread, and elements of the design and engineering processes are
often outsourced.
Globalisation means that industrial designers now have to take both human factors
and demographics into account during the design phase. Not only do they have to consider
different body shapes and sizes, genders and age ranges – but when catering to a global
audience, there are different cultures, expectations, infrastructures, beliefs and preferences as
well.
As such, pressure is being put on industrial designers from every angle. They have to
operate in a fragmented development environment, but still develop products faster, without
compromising on style or materials. Even how something is packaged can have an impact on
sales.
An industrial designer’s role in the product development process is to establish the
design language of a product, as well as the corporate branding and identity. They are a vital
element of the process because they have insight into market trends and consumer
preferences. While most people will have an understanding of their own preferences and
those of friends and family, an industrial designer brings together a creative design element
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with a much deeper understanding of markets and trends. In an increasingly globalised

product market, this is more important than ever before.
In order to deliver innovative designs that are functional, manufacturable and
affordable, it is critical that industrial designers work with and satisfy the needs of all of the
major stakeholders across the product lifecycle, including executive management, marketing,
engineering and manufacturing. An industrial designer also has to be able to offer a lot of
options and flexibility, working closely with the engineers to determine how to manage costs
through the use of different manufacturing techniques, materials or functions.
To achieve this, industrial design and styling needs to be performed early in the product
development process. It must be able to accommodate frequent change, as new opportunities
and new requirements arise. Distinctive design and styling gives companies across almost all
industries a significant competitive advantage. But in today’s markets, form, fit and function
are equally important since they are crucial factors that determine whether customers have a
positive experience with a product each and every time they use it. The most effective way to
accomplish this is for the industrial design process to be tightly integrated into the whole
product development lifecycle.
Integrated design tools allow designers to explore forms more freely while providing
engineering and manufacturing teams with earlier visibility into design concepts. This
enables them to provide valuable feedback before critical design decisions are made.
Similarly, visualisation of this data at all levels makes it possible to accelerate design
decision making, thus reducing overall product development times. One critical aspect that is
often disconnected is the ability to dynamically evaluate the aesthetics and its impact on the
design. Visualisation tools help designers evaluate and make decisions on which materials are
best to use and how the product will look and be perceived in the market in an immersive,
digital environment before any physical prototypes are made.
Design reuse is another element that can significantly benefit the design process as a whole.
Reuse is typically only considered as something relevant to standard parts and engineering,
but an integrated design platform offers unique capabilities that designers can leverage too.
When separate groups are able to work simultaneously in an integrated environment, all data
can be reused throughout the complete product development process. This helps speed up the
design process by enabling designers to capture unique elements of a design and providing a
means for them to be easily reused.
The key factors to enabling cutting-edge industrial design are flexibility, collaboration
and integration. An integrated and collaborative platform can work to synchronise a design’s
form, fit and function considerations with the requirements of other disciplines involved in
the concept-to-market process. Through greater support of the early design process, it
becomes possible to realise improvements in design productivity and quality.
There are increasing needs to deliver the right product to the market the first time. In
order to achieve this, companies need better collaboration across product disciplines. They
need ways to work across geographies, through faster design iterations as well as capture and
reuse product knowledge earlier in the design process. It’s because of these demands that
companies are finding it very appealing to change the way they are traditionally doing
business and move from niche tools and design silos towards integrated solutions.
These factors are the impetus behind Siemens PLM Software’s development of NX,
which provides flexible, idea-sparking tools atop a practical architecture that maintains
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downstream data integrity through data associativity. This enables industrial designers to
explore shape and style while establishing a seamless transition into the company’s
engineering, simulation and manufacturing domains.
NX delivers flexible, robust computer-aided industrial design and styling software
that accelerates product engineering by providing fast concept design and modelling. This is
the perfect culmination of form, fit and function working together and is the future of
industrial design.
7.1.4 Changing role of industrial design
The Role of Industrial Design in Meeting Users’ Needs
Products do not exist in a vacuum. They serve a purpose. They solve problems. They make
someone’s life easier. Or faster. Or more joyful. Or even allow someone to accomplish
something they otherwise couldn’t. Products are generally not intended to be manufactured
and then be locked in a room to never be touched by human hands. Sometimes the contact is
more limited than others but someone, at some point in time, does something with the
product. They use it. And that is because products have a user.
Sometimes that user is fully engaged. For instance, someone using a hammer. Other
times the user is more passive, as in the case of something like a computer server where there
is set up involved and possibly interaction for maintaining the product. The majority of the
time, if the product is performing as intended, it operates independently. But in both instances
there is interaction between human and product. Sometimes the product is as straightforward
as a salt shaker, while other times it’s as complex as the Space Shuttle. But complexity does
not determine worth.
A coffee cup is certainly not as complex as a personal computer, but it deserves
thoughtful design nonetheless. It serves a purpose and it has a user. There are decisions to be
made in designing that coffee cup that are going to affect a person’s level of satisfaction with
the product, for better or for worse. The criterion that each person uses to evaluate their level
of satisfaction with a product is going to be very individual, often dependent on the target
audience and market intent. But, consciously or not, people will make a decision as to how
successful the product is. Or isn’t.
7.1.5 The foundation of product development
This is where industrial design comes in. Industrial design could be described as the
foundation of product development. Industrial design is the process of developing products
that blend function, aesthetics, and value for the benefit of the end users and the people that
make them. Industrial design establishes a product’s form, how the user interacts with the
product, and helps define the products features. It starts the process of making decisions on
material choices, environmental impact, and manufacturing methods. And it can even
influence entire business strategies.
The process starts with a question: Why?
What is the reason for the product’s being? What problem is being addressed here?
What user need are we trying to meet? The answers to these questions can be a vast
continuum of interlacing criteria. The answers are often driven by a range of criteria from
filling a hole in an existing corporate product line to starting an entirely new company
centered around a new product that will save a person’s life in a medical emergency. The
reason can be to create or improve or optimize.
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Industrial Design finds solutions to the questions

Think a little further about the coffee cup example above. There could be a lot of
answers to the question “why”.
 Is the intent to design a coffee cup that is more impact resistant?
 Does the target user have dexterity issues that mean ergonomics play a bigger roll?
 Does a manufacturer simply need a lower cost product to fill a gap in their product
line?
 Are we trying to solve a problem with sanitation issues, maybe washing the cups in a
large volume institutional scenario?
 Is cup to be mobile?
 What about hot and cold?
 Or maybe the main focus is simply whimsy. Something to bring a smile to someone’s
face on a Monday morning.
Whatever the reason for being, in the example above or for any product, the best
product design is user driven and should start with insights gleaned from careful observation
and understanding of the scenarios in which the target users interact with the product.
Everything is built on solving the problem
Beauty is important, but a product can’t be only skin deep. The most beautiful product
in the world won’t succeed if they don’t function. Technology is great. Technology is cool.
Technology is fun. But products that are simply developed because “we can” often fail
because they eventually result in people asking “did I really need this?”. Aesthetics and
technology, whether it’s making things beautiful and enjoyable or making things easier to
use, should be applied to serve the user. There always needs to be a “why”.
Firm design maturity
Maturity models for building the best experience can be captured from different
perspectives. Most of them were draw up around 2005. At that time, the customer centricity
was already present in many companies and began to be visible, not only at the operational
level of the organization, but also tactical and even became part of the strategy. The fact that
the organization is mature means that customer (human, in broader sense) is taken into
account when deciding on the direction of the company. The Customer’s Voice, together with
Business and Technology, shapes the vision, mission and company’s strategy (Fig 7.1).

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Fig 7.1. Forces that shape the company’s strategy and operations (Sanders, Stappers, 2008).
The design discipline and its focus on the customer (human), however, despite
considering this area as a one of the dominant, it may still be seen only as a process or
resource. Human factor should not be therefore presented as a separate area, but as a
foundation for Technology and Business (Fig 7.2). It has also its further consequences in
building the organization structure and decision-making processes.

Fig 7.2. Relationships between Business, Technology and Design.

The most mature companies are those which, since the beginning of their activity, have
constituted the customer-centric approach as the core of their philosophy and operate through
it. There are also companies that started their operations 10 and more years ago and have to
make up a debt to customers. The last type of companies are those which do not take into
account the needs of their customers. They developed products and services to their own
satisfaction and then put them on the market in the hope that it will meet also the consumers’
satisfaction. In 2006 Jakob Nielsen presented the UX Maturity Model that presents the stages
of assimilation and adaptation of the user experience in the organization. Although this model
applies to UX, it in fact refers to every aspects of building an organization around the needs of
its customers (customer-centric). Renato Feijó (2010) after Jakob Nielsen has simplify and
evolve the model (Fig. 7.3). The model is built on the assumption that to truly achieve
customer-centricity, companies step up through the same sequence of steps and increase
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gradually their level of customer orientation. The following levels of UX are: Unrecognized,
Interested, Invested, Co

Fig. 7.3 The Maturity Model (Renato Feijó, 2010), adaptation.

Starting from the 1st level, Unrecognized, the client was not at all considered when
creating products and services. In early days of computing (1945–1965) hardware was
expensive and people needed to adjust to computers, not the other way. The inherited
ignorance of customer needs after these times is still present in many companies. After 1965
computers became cheaper and companies paid attention to how people use them, however, it
was not about providing people with the best experience, but about making computers more
efficient and affordable. It quickly became clear that the focus on the customer brings benefits
for the company. For example, by conducting simple usability tests, critical errors could be
identified very early. It saved developers’ time and resulted in faster increments. These
benefits were already visible at the level of operations, but they were still ignored at the level
of strategy management. This is the 2rd level of maturity. At the 3rd level outputs from UX
projects convinced top management that the whole company will profit from improving the
experience of users.
UX at this stage is financed and has the opportunity to specialize. Small and quick to
implement improvements are the main focus, because they quickly bring the value for the
company. More complex UX projects appear at the stage to justify increased investments. At
the level of Commitment, UX is an integral part of the product or service development
process. UX is managed by experts in the are, not randomly selected departments and it scales
within the company. At this stage, experience metrics appear. The customer’s voice matters
when making decisions. The budget for user research gets bigger, which gives the opportunity
to choose more sophisticated methods. There is space not only for introducing improvements,
but showing possible ways to innovate. The 5th level customer-centricity is one of the pillars
of the company. Executives build the strategy base on customers’ needs.
Data determines what should be built and actions are prioritized according to the
business value of their user experience. Projects that do not get UX resources are at least
consulted before the release. This also brings a change in the role of the UX specialist — not
only as a member of the project team, but as a consultant and somewhat of a decision maker.
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The last level is difficult to achieve and few companies present it. This is the moment when
data does not define the priorities of an individual projects, but determines in what project the
company should invest. UX determines hence company’s overall direction and priorities. The
experience is not just about projects. It spills over all areas of the company, including the
experience of its employees and cooperation with suppliers.
According to Jakob Nielsen (2006), companies spend approximately 2 to 3 years in
each of these stages. It takes about 20 years to get to the 5th level. The company’s intention to
develop a customer-centric approach can be recognized through 4 behaviors: organization has
people and resources to improve customer experience, there are advanced tools and various
capabilities, metrics are pre-defined and specific deliverables are required, organizational
structure facilitate effective experience improvements.
Strategic shift to the 6th level requires a change of identity for the whole organization. These
are therefore very long-term processes that touch the core of the organization. The 6 most
important dimensions are: strategy, customer, technology, structure, culture and operations.
The difficulty of this transformation means that the company’s first steps are towards
changing processes and structure. If the first step that the company does is to determine the
value and meaning for the customer — strategy, then the mature Experience design is truly
embedded.
7.2 Industrial design for Manufacturing (DFM)
Designing for Manufacturing and Assembly (DFM or DFMA) is a critical part of the product
development cycle. It involves optimizing the design of your product for its manufacturing
and assembly process, merging the design requirements of the product with its production
method. Employing DFM tactics reduces the cost and difficulty of producing a product while
maintaining its quality.
Five principles are examined during a DFM. They are:
1. Process
2. Design
3. Material
4. Environment
5. Compliance/Testiing
Ideally, DFM needs to occur early in the design process, well before tooling has begun. In
addition, properly-executed DFM needs to include all the stakeholders — engineers,
designers, contract manufacturer, moldbuilder and material supplier. The intent of this “cross-
functional” DFM is to challenge the design — to look at the design at all levels: component,
sub-system, system, and holistic levels — to ensure the design is optimized and does not have
unnecessary cost embedded in it.
Why is Design for Manufacturing Important?
Cost reduction: Around 70% of the manufacturing costs of a product can be derived from
design decisions like materials and manufacturing method. The remaining 30% of the costs
make up production decisions like process planning and tool selection. Focusing on design
optimization reduces the cost of manufacturing.
Basics of Effective Design for Manufacturing
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Standardization: Standardization cuts costs by reducing inventory and scale-up needs. Here
are some ways to think about part standardization:
 Design parts that can be reused within a product or shared between product lines.
 Standardize your hardware within your products to reduce inventory needs.
 Make your designs modular to simplify product changes or redesigns.
 Use standard components instead of custom-made ones where you can.

Standardization and design simplicity can reduce inventory needs.

Design Simplicity: Simplifying your design cuts down on the time and inventory needed to
make your product, which correlates to its cost. To simplify your product, you can:
 Minimize assembly steps and inventory by making multi-functional parts.
 Use designed-in alignment or quick securing methods like snap fits. Fastening
techniques including bolting or glueing take longer to secure and require more
inventory.
 Test your improved designs quickly with 3D printed prototypes.
Alignment and Compliance: Errors in alignment can damage parts or equipment, reducing
yield or even causing line shutdown. Tweak your designs to account for slop, misalignment,
and tolerance stackup by doing any of the following:
 Resolve assembly issues by analyzing how tolerances will stack up in your assembly.
 Design integrated part features to help with alignment during assembly.
 Add tapers or chamfers to guide components during assembly insertion steps.

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3D printed mounts on a fixture plate align and orient pipe fittings in a robotic workcell to
improve line efficiency.
Setup Time Reduction: Reduce setup time by reducing the number of operations required
per part, or simplifying assembly steps with 3D printed fixtures and workflow improvements.
 Reduce the number of setups or rotations required per part or assembly.
 3D print custom workholding to drop setup time and assist workers with alignment,
inspection, and assembly.
 Assess where your line could be upgraded with improved tools or workstations.
Where to Start With Design for Manufacturing
Communication: Iteration in product design goes both ways. Work with the people on the
factory floor to iterate and improve upon your design, because they’ve often experienced
many of the production problems first-hand!
Process: What manufacturing method would be most cost-effective for production? Additive,
subtractive, or forming? Well-designed parts should be optimized for their manufacturing
process – and can even take advantage of it to further simplify a design. Analyzing the
process by which each part is made can lead to simpler setups and operations to reduce part
cost.
Materials: Your material choice can impact your cost, part quality, and manufacturing
method. What properties does your part require? How many cycles should it last? Are there
any weight requirements?
Infrastructure: How is your production line set up and supported? Just as you would
optimize a part design for its manufacturing process, you can optimize your production
workflow for its manufacturing facility.
How Does 3D Printing Fit in to Design for Manufacturing?

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The key value of additive manufacturing as used in DFM lies in rapid iteration and
improvement. It increases your productivity by reducing the time and cost to get a part made
– whether it’s a prototype, a tool, or a final part.
7.3 VALUE ENGINEERING
Value engineering is a systematic, organized approach to providing necessary
functions in a project at the lowest cost. Value engineering promotes the substitution of
materials and methods with less expensive alternatives, without sacrificing functionality. It
is focused solely on the functions of various components and materials, rather than their
physical attributes. Value engineering is also called value analysis. Value Engineering is a
conscious and explicit set of disciplined procedures designed to seek out optimum value for
both initial and long-term investment. First utilized in the manufacturing industry during
World War II, it has been widely used in the construction industry for many years.
Value Engineering (VE) is not a design/peer review or a cost-cutting exercise. VE is a
creative, organized effort, which analyzes the requirements of a project for the purpose of
achieving the essential functions at the lowest total costs (capital, staffing, energy,
maintenance) over the life of the project. Through a group investigation, using experienced,
multi-disciplinary teams, value and economy are improved through the study of alternate
design concepts, materials, and methods without compromising the functional and value
objectives of the client.
The Society of American Value Engineers (SAVE) was formed in 1959 as a
professional society dedicated to the advancement of VE through a better understanding of
the principles, methods, and concepts involved. Now known as SAVE International, SAVE
has grown to over 1,500 members and currently has over 350 active Certified Value
Specialists (CVS) in the U.S. Requirements for registration as a CVS were developed by
SAVE at the request of the U.S. General Services Administration in the early 1970's. VE can
be applied at any point in a project, even in construction. However, typically the earlier it is
applied the higher the return on the time and effort invested. The three main stages of a
project and VE's application are described below.
Planning
At the Planning stage of development, there are additional benefits to be derived from a
Value Engineering Workshop. An independent team can:
Review the program
 Perform a functional analysis of the facility
 Obtain the owner/users definition of value
 Define the key criteria and objectives for the project
 Verify/validate the proposed program
 Review master plan utility options (e.g. Central Utility Plant versus individual
systems)
 Offer alternative solutions (square footage needs per function, adjacency solutions,
etc.)
 Verify if the budget is adequate for the developed program
The benefits are tremendous.

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 Any changes to the program at this stage have very little if any impact on schedule
and A/E time and redesign costs.
 The project will be developed with fewer changes, redesigns, and a greater
understanding by all parties of what the final function and space allocations will be.
 An independent team can bring a fresh outside view of alternate solutions from other
similar projects.

Design
This is the stage that most VE participants are used to becoming involved, when the
design has at least made it to the schematic stage. Most government agencies require at least
one VE session at the design stage on projects over a certain $ size. The primary tool
available to the VE team is the Workshop—typically a 40-hour session (or less for smaller or
less complex projects). The Workshop is an opportunity to bring the design team and client
together to review the proposed design solutions, the cost estimate, and proposed
implementation schedule and approach, with a view to implementing the best value for the
money. The definition of what is good value on any particular project will change from client
to client and project to project.
Methodology And Approach
During the actual Workshop portion of the VE study, the five-step Job Plan is
followed, as prescribed by SAVE International:
The VE Job Plan follows five key steps:
1. Information Phase
2. Speculation (Creative) Phase
3. Evaluation (Analysis) Phase
4. Development Phase (Value Management Proposals)
5. Presentation Phase (Report/Oral Presentation)
These five key steps are described as follows:

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1. Information Phase
At the beginning of the VE Study, it is important to:
 Understand the background and decisions that have influenced the development of the
design through a formal design presentation by the design A/E.
 Analyze the key functional issues governing the project. The functions of any facility
or system are the controlling elements in the overall VE approach. This procedure
forces the participants to think in terms of function, and the cost and impacts
associated with that function.
 Define Owner's objectives and key criteria governing the project.
 Determine Owner's definition of Value.
2. Speculation (Creative) Phase
This step in the VE study involves the listing of creative ideas.
 The VE Team thinks of as many ways as possible to provide the necessary function
within the project areas at a lesser initial or Life-Cycle Cost which represent improved
value to the client.
 Judgment of the ideas is prohibited.
 The VE Team is looking for quantity and association of ideas, which will be screened
in the next phase of the study.
 Many of the ideas brought forth in the creative phase are a result of work done in the
function analysis. This list may include ideas that can be further evaluated and used in
the design.
3. Evaluation (Analysis) Phase
In this phase of the Project, the VE Team, together with the Client and/or Users,
 Defines the criteria to be used for evaluation.
 Analyses and judges the ideas resulting from the creative session. Ideas found to be
impractical or not worthy of additional study are discarded. Those ideas that represent
the greatest potential for cost savings and value improvement are developed further. A
weighted evaluation is applied in some cases to account for impacts other than costs
(such as schedule impacts, aesthetics, etc.).
4. Development Phase
During the development phase of the VE study, many of the ideas are expanded into
workable solutions. The development consists of:
 Description of the recommended design change.
 Descriptive evaluation of the advantages and disadvantages of the proposed
recommendation.
 Cost comparison and LCC calculations.
 Each recommendation is presented with a brief narrative to compare the original
design method to the proposed change.

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 Sketches and design calculations, where appropriate, are also included in this part of
the study.
5. Presentation Phase
The last phase of the VE Study is the presentation of the recommendations in the form of a
written report. A briefing/oral presentation of results is made to the Client and Users, as well
as the Design Team representatives. The recommendations, the rationale that went into the
development of each proposal, and a summary of key cost impacts are presented at that time
so that a decision can be made as to which Value Management proposals will be accepted for
implementation and incorporation into the design documents. In addition to the monetary
benefits, a VE Workshop provides a valuable opportunity for key project participants to come
together, then step aside and view the project from a different perspective. The VE process
therefore produces the following benefits:
 Opportunity to explore all possible alternatives
 Forces project participants to address "value" and "function"
 Helps clarify project objectives
 Identifies and prioritizes Client's value objectives
 Implements accepted proposals into design
 Provides feedback on results of the study
Construction
During this phase value engineering is still possible through the use of Value Engineering
Change Proposals (VECP). Contractors can be provided monetary incentives to propose
solutions that offer enhanced value to the owner, and share in the financial benefits realized.
Clearly the owner must consider contractor-generated proposals very carefully, from a life-
cycle perspective and a liability perspective. The A/E team must be brought in to the
decision-making process to agree to the proposed change as not having any negative impact
on the overall design and building function. The evaluation of a VECP is treated similarly to
any change order during construction, with issues such as schedule and productivity impacts
being considered along with the perceived cost savings generated.
Conclusion
In the final analysis, Value Engineering is not only beneficial, but essential because:
 The functionality of the project is often improved as well as producing tremendous
savings, both initial and Life-Cycle Cost.
 A "second look" at the design produced by the architect and engineers gives the
assurance that all reasonable alternatives have been explored.
 Cost estimates and scope statements are checked thoroughly assuring that nothing has
been omitted or underestimated.
 Assures that the best value will be obtained over the life of the building
7.4 ERGONOMICS
Ergonomics can roughly be defined as the study of people in their working environment.
More specifically, an ergonomist (pronounced like economist) designs or modifies the work to
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fit the worker, not the other way around. The goal is to eliminate discomfort and risk of
injury due to work. In other words, the employee is our first priority in analyzing a
workstation. Officially: “Ergonomics (or human factors) is the scientific discipline concerned
with the understanding of the interactions among human and other elements of a system, and
the profession that applies theory, principles, data and methods to design in order to optimize
human well-being and overall system performance.”International Ergonomics Association
Executive Council, August 2000.When evaluating a job, looking for three main
characteristics known as Ergonomic Stressors: the force required to complete a task, any
awkward or static working postures adopted in completing a task, and the repetitiveness of a
task. Any of these factors, or any combination of these factors, may place someone at greater
risk for discomfort.

Purpose
The Department of Environment, Health and Safety’s (EHS) purpose is to help all UNC
employees create and maintain a healthy and safe working environment.
Goal
EHS wants to provide information and education to allow any employee to avoid injury. EHS
wants to educate people on the basics of ergonomics. Not only will they be able to help
themselves at work, but these principles can be applied to home, hobbies or help friends and
coworkers who may have similar issues. Remember, knowledge is contagious.
Services
Services EHS offer include:
Providing information about ergonomics
Providing consultation regarding workstation setup
Giving on-campus training on ergonomics (as requested)
Providing product evaluations
Providing an online self-assessment tool. This tool will walk the individual through a self
evaluation and provide the user with recommendations to modify their workstation.
What is ergonomics in the workplace?
Ergonomics is designing a job to fit the worker so the work is safer and more efficient.
Implementing ergonomic solutions can make employees more comfortable and increase
productivity.
What is a good example of ergonomics?

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Solution: Practice a Neutral Sitting Posture

Back should be straight with a slight lordosis (inward curve) in the lower spine. Neck and
head upright (ears aligned with your shoulders) Shoulders should be pulled back but relaxed.
No twisting or leaning on one side.Link between an ergonomic approach and the design
process.The design process should be structured methodically. Indeed, it is generally
accepted today that 75% of the total cost involved in the development and industrialization of
a product is determined at the very outset of the design process. Method in a design process
(Figure 2) involves an approach in which different ‘‘models’’ (language, technical
experience, know-how, etc.), on the one hand, and different ‘‘tools,’’ on the other hand, are
brought together. By tools here is understood all the techniques involved in the analysis of the
functioning of a part or the whole of the design process. Perceived Information Information
Processing and Decision-making Displays Information Status I N T E R F A C E
OPERATOR (Human) MACHINE (Computer) Motor Control responses for Control
Activation 848 Fig 2: Method Structure . Fig. 3: Spiral model for an ergonomics development
process . A general design procedure involves a group of project participants (marketing,
design, and manufacturing) and a number of phases (definition of needs, specifications,
general and detailed design). The approach adopted must achieve the highest possible
integration of these different elements if the project is to run smoothly. The spiral model
(Figure 3) makes use of both functional analysis and prototyping techniques. It allows for the
integration of all project participants before completion of each design phase. In addition,
prototypes—which are intermediary objects that each project participant readily
understands— re-enter attention on the product and improve communication in general.
Stage 1: Definition of user requirements (see Figure 3) and expectations after detailed
observation of the work process and work context. Employee characteristics (training,
anthropometrics measurements, etc.) are also defined during this phase. Product
specifications finally emerge from the study of user needs and work processes.
Stage 2: Design of a new product prototype based on tool specifications and laboratory
simulation and study of the biomechanical solicitation produced by the new product by
comparison with the product previously used. This stage includes all other phases— that is,
concept modeling, functionality modeling, functional prototyping (see Figure 3)—relating to
product function, styling, and so forth.
Stage 3: After formal completion of the second stage, test of prototypes by a large sample of
users in real workplace situations. The trial should be conducted over a sufficiently long
period (several weeks) and feedback on the user’s perception of the new product should be
regularly sought according to a procedure similar to that used in the first phase. If satisfactory
results are obtained, the product can then be considered duly certified for those situations in
which it has been tried and tested. Users must be trained and encouraged to use the
prototypes over a sufficiently long period before final judgment is given. 849 Fig.4: The user,
the product and the workplace interact with one another and they should be taken into
account in an ergonomic product design process. Figure 4 indicated the inter relationship
among users, products and workplaces. Users application depends on the product according
to the workplace position and environment need. So product design depends on the users
need and workplace requirements.
7.5 Prototyping

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Prototyping is the process of creating a sample product to be tested in a “real world”

environment. This sample product, also known as a prototype, is “an original model, form or
an instance that serves as a basis for other processes,” and is used to improve design
iterations before the product reaches its final stage.
Rapid prototyping is an accelerated version of prototyping that uses 3D CAD
software and 3D printing technology. It has been adopted by a variety of industries to test the
appearance and functionality of physical parts.
7.5.1 Need for a Prototype
The most important advantage of a prototype is that it simulates the real and future product. It
can help attract customers to invest in the product before allocating any resources needed for
implementation. You can test the design’s correctness before it comes into production and you
can discover design errors. Also, a prototype made available to a sample of users helps to find
out in advance how their product interacts with the product and meets their expectations.
7.5.2 Advantages of a Prototype
The main benefit of prototyping is that it results in a faster and more effective design cycle.
Because prototypes allow companies to test their design in the “real-world” environment, it is
easier to identify potential problems and prevent costly mistakes down the road. Designers
can pivot more quickly and interact with the design to troubleshoot and improve any problem
areas.
Rapid prototyping is particularly advantageous because it can produce prototypes days or
even weeks faster than traditional prototyping methods. A wide range of 3D printing
materials, including metals and engineer-grade thermoplastics, are available, giving designers
and engineers a physical representation of how their product will look, feel, and behave.
The major challenge for a designer or a developer is that he or she usually has to communicate
the look and feel of the product to their product management team. UI/UX has so many
aspects that highlighting the underlying core functionality while sharing designs with team
members can be a struggle, thus, making it difficult for stakeholders to comment and give
feedback. With prototyping you can combat all this along with the following benefits:
 Better understanding of the design intent: Prototyping not only presents a strong
visualisation of the design to understand the look and feel of the final product but it also
helps the team to comprehend better why they are designing, what they are designing and
for whom they are designing.
 Early Feedback: One of the most important aspect of product building process is to
gather feedback. With prototyping you can collect reviews at every stage of developing the
product — whether adding new features or redesigning parts of the product. Test what is
working for the audience and what is not. Define goals with your team members, the
management teams, external stakeholders, SMEs etc. and come to the best collective
decision.
 Early changes save time and cost: Changes towards the end would mean not just radical
restructuring but also more speculation and rework. With a preliminary model ready it is
always possible to make the desired changes early, because by that point no investment or
effort has gone into creating the full product.Thus, early changes help you achieve your

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goals faster. According to Ford, it saves up to $439k and months of lead-time through
rapid prototyping.
 Validation before development: Prototyping allows having multiple discussions between
iterations before getting into final development. This iterative process makes it easier for
you to have surety in what you are building is actually what is needed.
 User research and user testing: Users are supreme. So identifying your prospective user
set and collecting their ideas to serve them better is of utmost importance. Prototyping
helps you achieve that. In fact, the ultimate intent of creating a prototype is user testing
which tells you how usable and valuable your product is to the end user. You can gain
inputs and insights about how real users would actually use the product and what you can
improve to address their pain points.
7.5.3 Developing a Prototype
If you're wondering how to develop a prototype, the following steps will guide you through
the process. Developing a prototype for your product is an important step between designing
the product and producing it en masse. Before you can move on to production, you'll need to
refine your design and develop a working model.
1. First, find products that are similar to your design. Take them apart to get an insider
perspective on their function.
2. Using paper, draw what your idea will look like. Write or type out any additional
ideas. This will give you an idea of what the first prototype will be like and will help
you find flaws and other ways to improve the product's design before you spend the
time, effort, and money to build a prototype.
3. Hire a professional to assist you in developing a computer-aided design (CAD) of
your prototype. This design will be much more detailed than your sketch and will be
sent to the prototype maker to enable them to make the most detailed and accurate
prototype possible.
4. If possible, create a handmade version of your product. Having a sample in-hand will
make it much easier to discuss your parameters and ideas with the prototype maker. In
addition, it will allow you to further refine your idea.
5. Find a prototype maker that will fit your budget. Oftentimes, making a prototype can
be somewhat expensive. Decide which material you'll use for your prototype.
Prototype materials should be the same materials that you intend to use in the final
product.
6. As you meet with prototype-making companies, inquire about their credentials and
previous work to make sure that your prototype will be high quality and accurately
represent your design. Regardless of whether the company has worked cooperatively
with its clients in the past, obtain a nondisclosure agreement from them, unless you've
already acquired a patent.
7. Consider creating a prototype with 3D printing. These printers can use CAD
designs or 3D models to build a working prototype, layer by layer.
8. Raise funds by getting in touch with your family and friends first. You may still need
to approach other sources to turn production into a reality. Investors may be especially
useful during this stage.
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9. Fulfill your customers' orders and produce as much of your product as you can sell.
Constructing a prototype can be an expensive process, so make sure to avoid getting
stuck with a large inventory. As you sell your product, you'll need to improve upon
the initial design until it becomes a profitable and attractive.
7.5.4 Bringing It to the Pros
Once you've developed your prototype as far as you reasonably can, it's time to consider
hiring a professional to help you with the next steps. There are many avenues you can take at
this stage. You may wish to hire professional prototype developers, engineers and designers,
but others may be able to help you as well, including a handyman, a machinist or a student
from a local industrial design college. The complexity and materials to be used in your
specific product will help drive this decision. Your budget may also be a consideration--a
handyman or machinist, for example, will probably charge much less per hour than an
engineer, and their services may be perfectly sufficient if your design is relatively
straightforward.
You should also do your research and consider new and emerging technologies. For example,
when prototyping my own plastic products, I discovered a relatively new method of prototype
production that has saved me thousands of dollars. It's a process called rapid prototyping,
which uses a technology called stereolithography. It enables me to have plastic prototypes
made quickly from computer-aided drawings (CAD) by a large tooling machine, rather than
from an expensive injection mold. Rapid prototypes can cost as little as a few hundred dollars
each (depending on complexity), but they're often a bargain considering the alternatives. For
example, creating an injection mold for a product in the Unites States can cost anywhere from
$10,000 to $100,000.
The prototyping stage is a great time to use all your untapped creative ability and to explore
all the possibilities that are on the market. Don't limit yourself to any preconceived notions--
whether it comes to material use or the types of professionals you can consult--and explore as
much as you can as you begin bringing your product idea to life.
7.5.5 Why is a Prototype Useful to Design for Manufacture?
The primary reason for manufacturing prototypes of new products is to enable physical tests
to take place on a fully representative sample of the designed product, prior to full production
release.
These tests are useful as they can determine whether the product can do what it’s meant to.
Your tests should be as meaningful as possible to replicate the true operational environment
of the released product.
Sometimes the only way to confirm theoretical data is to perform physical tests and gather
empirical data for comparison. This may include verifying that the required functionality
exists across the full operational ranges of physical variables such as temperature, humidity,
vibration, pressure, voltage and frequency of operation and duration.

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Summary
 Industrial design is relevant to a wide variety of products of industry, fashion and
handicrafts from technical and medical instruments. Industrial design is also
important in relation to packaging, containers and “get-up” of products.
 Industrial design services are often provided within the context of cooperative
working relationships with other members of a development group. The industrial
designer expresses concepts that embody all relevant design criteria determined by the
group.
 Industrial designers, as professionals, are guided by their awareness of obligations to
fulfill contractual responsibilities to clients, to protect the public safety and well-
being, to respect the environment and to observe ethical business practice.
 Value engineering is a product development discipline-approach methodology that
focuses on assuring that the greatest functionality is provided for the least cost or
expense, to maximize value.
 Ergonomics is a science focused on the study of human fit, and decreased fatigue and
discomfort through product design.
 Building prototypes and models is an essential component of any design activity.
Modern product development is a multi-disciplinary effort that relies on prototyping
in order to explore new ideas and test them sufficiently before they become actual
products.

SELF-ASSESSMENT QUESTIONS
Short Answer Questions
1. What do you mean by industrial design?
2. What are the objectives of industrial design?
3. What are four stage models of design maturity?
4. Mention the functions of using a product industrial design.
5. What are the features of an industrial design?
6. What is design for manufacture?
7. What are the elements of DFM?
8. What are the studies of Value engineering?
9. Define value engineering.
10. What are the studies of Value engineering?
11. What do you understand by ergonomics?
12. Define rapid prototyping.
13. What are the points to be kept in mind while making a prototype?
14. Why is a prototype useful to design for manufacture?
15. What are the advantages of building a prototype?
Long Answer Questions
1. How did industrial design come into existence?
2. Explain how the role of industrial design has been evolving?
3. Enlist the stages in a firm’s ‘maturity’ in its use of professional design.
4. Explain with an example, why is it necessary to get a product designed?
5. Explain in detail what do you understand by Value Methodology.
6. Write short notes on the following:
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(a) Silent Design (b) Superficial Styling

(c) Designer Led Innovation (d) Strategic Design
7. Elucidate on the link between an ergonomic approach and the design process.
8. State five examples each of good and bad ergonomic planning gone into a product.

References:
 Ulrich, K.T., and Eppinger, S.D, Product design and development. McGraw-Hill.
New York, 1995.
 Kahn, K.B, New product forecasting: An applied approach. M.E. Sharpe, Inc.
Armonk, N.Y, 2006.
 Tatikonda, N, Management of Technology, First Edition, Excel Books. New Delhi,
India, 2010.
 Panda, T.K, Marketing Management, Second Edition, Excel Books. New Delhi, India,
2012.

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LESSON 8 – ECONOMICS
CONTENTS
Learning Objectives
Learning Outcomes
Overview
8.1 Robust Design
8.1.1 Design of Experiments
8.1.2 Taguchi’s Robust Design Method
8.1.3 Six Sigma Robust Design Method
8.1.4 Advantages of Robust Design
8.1.5 Disadvantages of Robust Design
8.2 Design for Excellence
8.2.1 Types of Design for X (DFX)
8.2.2 DFX Tools
8.2.3 Concurrent Engineering
8.2.4 Failure Rate Curve
8.3 Product Use Testing
8.4 Collaborative Product Development
8.5 Product Development Economics
8.6 Scoring Model
8.7 Financial Analysis
8.7.1 Developing Financial Models
Summary
Self-Assessment Questions
References

LEARNING OBJECTIVES
After studying this lesson, you should be able to:
 Understand the robust designing tools and CPD
 Knowing the importance of financial analysis to a new product

LEARNING OUTCOMES
Upon completion of the lesson, students are able to understanding of:
 basics of robust design and its advantages and disadvantages
 analyzing history and development of DFX
 concept of product use testing and explain collaborative product development
 determine product development economics, scoring model and financial analysis

OVERVIEW
Robust design (RD) is a powerful methodology for making products’ performance insensitive
to variations in manufacturing conditions, environmental variations and product to product
variation. Although it has been widely accepted for tackling variability problems in
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manufacturing processes, research has shown that very little has been done on the application
of such a powerful methodology in the UK manufacturing sector within the new product
development process (NPDP). Engineers and scientists in the UK organizations are far more
likely to use the traditional one factor at a time (OFAT) approach to experimentation than
RD. This paper investigates why RD is not commonly accepted and applied in the UK
manufacturing organizations as opposed to Japan and even the USA today. The paper will
also illustrate what benefits could be achieved if RD principles are effectively applied in the
NPDP in manufacturing organizations.
8.1 Robust Design
A robust design is a design which is sufficiently insensitive to variations. An optimal
design is a design which under given constraints performs optimally with respect to the
objective. An optimal robust design cannot be defined equally simple. However, an optimal
robust design performs nearly optimally for specific loading cases and is ”sufficiently”
independent of random variations. For instance, the outcome of a car crash event is preferably
independent of the angle of impact, variations in material properties, manufacturing process
variations, etc. The car should absorb the crash energy in a controlled manner, even though
the weight of the car has been minimised in order to decrease fuel consumption. The
ROBDES research project, Robust Design of Automotive Structures, aims at reducing the
influence of variations in impact loading situations. The objective is ”To develop tools and
guidelines for modelling of automotive structures subjected to impact loading conditions,
where focus is placed on an optimal and robust design.” Dealing with variations in
computational engineering is often a complex task since the computational efforts are
considerably increased when randomness is introduced. A crash simulation with the use of
the Finite Element Method (FEM) is no exception and, consequently, many simplifications
are made in order to retrieve approximate solutions faster.
8.1.1 Design of Experiments
Design of Experiments is based on the objective of desensitizing a product’s
performance characteristic(s) to variation in critical product and process design parameters.
Genichi Taguchi developed the concept of “loss to society”. In this concept, variability in
critical design parameters will increase the loss to society which is an expanded view of the
traditional, internally-oriented cost of quality. This is a quadratic relationship of increasing
costs (loss to society) as these critical design parameter values vary from the desired mean
value of the parameter.
To consider quality implications during design, the design process can be segmented
into three stages. The first stage, system design, establishes the functionality of the product,
the physical product envelope, and general specifications. The second stage, parameter
design, establishes specific values for design parameters related to physical and functional
specifications. It is during these first two stages that the designer has the greatest opportunity
to reduce product costs through effective functional design and parameter specification. The
third stage, tolerance design, establishes the acceptable tolerances around each parameter or
target. The third stage typically will add costs to the product through efforts to ensure
compliance with the tolerances associated with product parameters.
Since an organization cannot cost-effectively inspect quality into the product, it must
focus on minimizing variability in the product through product and process design and
control of processes. However, some variability is uncontrollable or very difficult to control.
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This difficult to control variation is referred to as noise. Noise is the result of variation in
materials, processes, the environment and the product’s use or misuse. Products need to be
designed so that they are robust – their performance is insensitive to this naturally occurring,
difficult to control variation.
Design of Experiments techniques provides an approach to efficiently designing
industrial experiments which will improve the understanding of the relationship between
product and process parameters and the desired performance characteristic. This efficient
design of experiments is based on a fractional factorial experiment which allows an
experiment to be conducted with only a fraction of all the possible experimental
combinations of parameter values. Orthogonal arrays are used to aid in the design of an
experiment. The orthogonal array will specify the test cases to conduct the experiment.
Frequently, two orthogonal arrays are used: a design factor matrix and a noise factor matrix,
the latter used to conduct the experiment is the presence of difficult to control variation so as
to develop a robust design. This approach to designing and conducting an experiment to
determine the effect of design factors (parameters) and noise factors on a performance
characteristic is represented below.

These experimental results can be summarized into a metric called the signal to noise
ratio which jointly considers how effectively the mean value (signal) of the parameter has
been achieved and the amount of variability that has been experienced. As a result, a designer
can identify the parameters that will have the greatest effect on the achievement of a
product’s performance characteristic.
The design parameters or factors of concern are identified in an inner array or design factor
matrix which specifies the factor level or design parameter test cases. The outer array or noise
factor matrix specifies the noise factor or the range of variation the product will be exposed to
in the manufacturing process, the environment or how the product used (conditions it is
exposed to). This experimental set-up allows the identification of the design parameter values
or factor levels that will produce the best performing, most reliable, or most satisfactory
product over the expected range of noise factors or environmental conditions.
After the experiments are conducted and the signal to noise ratio determined for each design
factor test case, a mean signal to noise ratio value is calculated for each design factor level or
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value. This data is statistically analyzed using analysis of variation (ANOVA) techniques.
Very simply, a design factor with a large difference in the signal noise ratio from one factor
setting to another indicates that the factor or design parameter is a significant contributor to
the achievement of the performance characteristic. When there is little difference in the signal
to noise ratio from one factor setting to another, this indicates that the factor is insignificant
with respect to the performance characteristic.
With the resulting understanding from the experiments and subsequent analysis, the designer
can:
 Identify parameter values which maximize achievement of performance characteristic
and minimize the effect of noise, thereby achieving a more robust design.
 Identify parameters that have no significant effect on performance. In these cases,
tolerances can be relaxed and cost reduced.
 Identify parameter values which reduce cost without affecting performance or
variation.
These steps take initial effort, but can reduce cost and improve the performance of the
product. In the past, the designer selected design parameters and tolerances and made system
design trade-offs in an intuitive manner, sometimes supported by limited analysis and trial
and error experimentation. However, an overall framework was lacking to make these
decisions. Design of Experiments techniques offer a framework for developing a more
rigorous understanding of the relationship between product and process parameters and the
achievement of a performance, reliability or quality characteristic, thereby leading to
improved design decisions. These techniques present a comprehensive approach experimental
design, analysis, and product and process design decision-making.
8.1.2 Taguchi’s Robust Design Method

Since 1960, Taguchi methods have been used for improving the quality of Japanese products
with great success. During the 1980’s, many companies finally realized that the old methods
for ensuring quality were not competitive with the Japanese methods. The old methods for
quality assurance relied heavily upon inspecting products as they rolled off the production
line and rejecting those products that did not fall within a certain acceptance range. However,
Taguchi was quick to point out that no amount of inspection can improve a product; quality
must be designed into a product from the start. It is only recently that companies in the
United States and Europe began adopting Taguchi’s robust design approaches in an effort to
improve product quality and design robustness.
What is robust design? Robust design is an “engineering methodology for improving
productivity during research and development so that high-quality products can be produced
quickly and at low cost”(Phadke, 1989). The idea behind robust design is to improve the
quality of a product by minimizing the effects of variation without eliminating the causes
(since they are too difficult or too expensive to control). His method is an off-line quality
control method that is instituted at both the product and process design stage to improve
product manufacturability and reliability by making products insensitive to environmental
conditions and component variations. The end result is a robust design, a design that has
minimum sensitivity to variations in uncontrollable factors.
Dr. Genichi Taguchi bases his method on conventional statistical tools together with some
guidelines for laying out design experiments and analyzing the results of these experiments.
Taguchi's approach to quality control applies to the entire process of developing and
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manufacturing a product— from the initial concept, through design and engineering, to
manufacturing and production. Taguchi methods are used to specify dimension and feature
detail and normally follow DFM activities. In the next section we discuss Taguchi’s concept
of a quality loss function. This is then followed by a detailed description of Taguchi’s
approach to parameter design.
8.1.3 Six Sigma Robust Design Method
The Six Sigma method which aims to reduce waste in the manufacturing and during the
operations phase mainly focuses on 1.) Increasing engineering productivity to quickly
develop new products at a low rate, and 2.) Management which is based on value; the Robust
Design centers on improving engineering productivity.
This Robust Design is focused on the improvement of the significant function or role of a
process or a product itself, therefore smoothing the progress of strategies and coexisting
engineering. The Taguchi (Robust Design) approach rooted on a so called Energy
Transformation method for engineering systems like electrical, chemical, mechanical and the
like. It is a unique method which makes use of the ideal function of a process or product in
contrast to the conventional approaches which mainly concentrate on “symptom analysis” as
a source for development or improvement towards the achievement of Robustness and
Quality Assurance.
To ensure or guarantee customer satisfaction, the Robust Design approach takes into account
both
1.) The noise considered as the variation from environmental to manufacturing and
component failure, and
2.) The cost considered as the rate of deterioration in the area. It is a technique for performing
experiments to look into processes or investigate on processes where the end result depends
on several factors such as inputs and variables without having a mind-numbing and
inefficient or too costly operation with the use of possible and feasible mixture of values of
the said variables. With a systematic choice of variable combination, dividing their individual
effects is possible.
The Robust Design method is an exclusive alternative for DOE or Design of
Experiments which differentiates itself from the traditional Design of Experiments focusing
on the most favorable design parameters to reduce discrepancy prior to attaining the average
values on output parameters. This innovative design to engineering signifies the most
important leap in process and product method ever since the beginning of the Quality
revolution. The Robust Design method or the Taguchi approach makes it possible for
engineers to:
 Improve processes and products which are intended under a broad variety of
consumer’s circumstances in their life cycle and making processes reliable and products
durable
 Capitalize and get the most out of robustness by developing the planned function of a
product by improving and expanding insensitivity to factors of noise which somehow
discredit performance
 Alter and develop formulas and processes of a product to arrive at the performance
desired at a reduced cost or the lowest rate possible but, at the shortest turnaround or time
frame
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 Make designs easier and processes at a reduced cost

Over the years, Six Sigma has made it possible to reduce cost by uncovering problems which
occur during manufacturing and resolving instant causes in the life cycle of a product. Robust
Design on the other hand has made it feasible to prevent issues or problems by rigorously
developing designs for both manufacturing process and product. The Robust Design follows
a crucial methodology to ensure a systematic process to attain a good output. Below are the 5
primary tools used in the Robust Design approach:
1. The P-Diagram. This is used to categorize variables into noise, signal or the input,
response or the output, and control factors related with a product.
2. The Ideal function. This Ideal Function is utilized to statistically or mathematically
identify the ideal or ultimate outline of the signal-response association as represented by
the design idea for developing the higher-level system work fault free.
3. Quadratic Loss Function. This is also termed the Quality Loss Function and is used
to measure the loss earned or acquired by the consumer or user from the intended
performance due to a deviation from it.
4. Signal-to-Noise Ratio. This is used to predict the quality of the field by going
through systematic laboratory tests or experiments.
5. Orthogonal Arrays. These are used to collect and gather reliable information about
control factors which are considered the design parameters with minimal number of tests
and experiments.
The following are the 4 main steps in Robust Parameter method:
1. Problem Formulation. This step would incorporate the identification of the main
function, development of the P-diagram, classifying the best function and signal to noise
or S/N ratio, and planning or strategizing the experiments. The tests or experiments
would involve altering the noise, control as well as the signal factor logically and
efficiently utilizing orthogonal arrays.
2. Gathering of Data. This is the stage where experiments or tests are performed in
either simulation or hardware. Having a full-scale example of the product for
experimentation purposes is not considered necessary or compulsory in this step. What’s
important or significant in this stage is to have a vital model or example of the product
which satisfactorily encapsulates the design idea or concept. As a result, experiments or
tests can be performed at a low cost or economically.
3. Factor Effects Analysis. This is the stage where results or outcome of the control
factors are estimated and such results are evaluated to identify and classify the most
favorable arrangement of the control variables or factors.
4. Prediction/Confirmation. This is the stage wherein predicting the performance or
operation of the product model under the most favorable arrangement of the control
variables or factors to confirm best conditions is done. After which, experiments are done
under such conditions as well as comparing the results observed with the underlying
predictions. If the outcome or results of the experiments done corresponds with the
predicted results or predictions, final results are then implemented. However, if
predictions do not match with the final results, the steps need to be repeated.

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A lot of companies worldwide have saved millions of dollars or even hundreds of millions
just by using the Taguchi approach. Telecommunications, software, electronics, xerography,
automobiles and other engineering fields are just some of the few businesses which have
already practiced the Robust Design method. With the Robust approach, rapid achievement to
the full technological capability of designs and higher profit can be considered consistent.
8.1.4 Advantages of Robust Design
Robust design has many advantages. For one, the effect of robustness on quality is great.
Robustness reduces variation in parts by reducing the effects of uncontrollable variation.
More consistent parts equals better quality.
Another advantage is that lower quality parts or parts with higher tolerances can be used and
a quality product can still be made. This saves the company money, because the less variable
the parts can be the more they cost.
A third advantage is that the product will have more appeal to the customer. Customers
demand a robust product that won't be as vulnerable to deterioration and can be used in a
variety of situations.
This method is also good, because you are designing the robustness into the product and
process instead of trying to fix variation problem after they occur.
8.1.5 Disadvantages of Robust Design
One of the disadvantages of robust design is that to effectively deal with the noise, the
designer must be aware of the noise. If there is a noise factor that is affecting the product and
the experiments run do not address it (intentionally or not), the only way that the product will
be robust to that variation is by luck.
Another disadvantage to robust design done Taguchi’s way is that the problem becomes large
quickly. If you had a lot of different things to consider as control variables and/or noise
variables, it would take a great deal of time to run all the experimental trials. Controlling
noise variables is expense, and when lots of trials are required the dollars add up.
Another disadvantage is that by using orthogonal arrays, it assumes the noise factors are
independent, which may be helpful in setting up the experiment, but is not necessarily a good
assumption.
8.2 Design for Excellence
Design for Excellence (aka Design for X, DFX) is a systematic approach to achieve a
targeted objective. X represents targeted objectives or characteristics of product or process.
DFX comes under the topic of DFSS which requires a cross-functional team approach with
the involvement of stakeholders.
In order to stay successful in the marketplace, companies need to meet customer
expectations. Continuous feedback mechanisms should inform efforts to understand and
solve these demands.

Typical Design for X (DFX) considerations:

 cost
 quality
 reliability
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 recyclability
8.2.1 Types of Design for X (DFX)
Design for Manufacturing/Assembly (DFM & DFMA)
Design for Manufacturing (DFM) deals with steps for improving manufacturing process to
make a good product with reduced manufacturing cost. Product design can be optimized to
achieve this goal.
Potential DFM factors:
 materials
 tooling
 environment
 testing
 tolerances

Design for Cost and Design to Cost (DTC)

Low cost cannot be managed into a product; it must be engineered into a product. This can be
challenging when a company has a fixed design cost yet still has to meet customer
expectations.

Design for cost and DTC consist of several life cycle cost controlling techniques. Designing
for cost works on engineering principles but DTC is more related to management
requirements.

DTC uses value analysis (aka Design to Value) to quantify the value that can be delivered to
the customer. Redesign and reworking costs should be considered.

Design for Testing/Testability (DFT)

Testing is a major part in in the process to ensure that products have predetermined quality
standards demanded by the customers. In this stage the team has to design steps that required
for validating the product to ensure that it doesn’t have any defects and it is properly
functioning.

Design for Maintainability (DFM)

Maintainability is how easily a product can be maintained. Here, the design team give
attention to reducing maintenance costs. Eg preventive maintenance and corrective
maintenance.

Design for Robustness

Robustness is the ability of the system to reduce variations while delivering defined outputs.
Chief considerations here are structural and environmental.
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Design for Supply Chain (DFSC)

Target here is to design a system with high supply chain efficiency, less inventory cost and
less or zero waste. Error detection should be considered in the design step.

Design for Safety

This is one of the important design aspects which every team has to be focused on. Not only
do strict safety regulations and requirements mandate safety standards, employee engagement
demands it.

DFS helps to bring illness & injuries to a minimum while maintaining productivity. Common
techniques could be as simple as adequate usage of personal protective equipment (PPE).

8.2.2 DFX Tools

Design for Excellence (aka Design for X, DFX) is a systematic approach to achieve a
targeted objective. X represents targeted objectives or characteristics of product or process.
DFX comes under the topic of DFSS which requires a cross-functional team approach with
the involvement of stakeholders.
In order to stay successful in the marketplace, companies need to meet customer
expectations . Continuous feedback mechanisms should inform efforts to understand and
solve these demands.
Typical Design for X (DFX) considerations:
 Cost
 Quality
 Reliability
 Recyclability
Types of Design for X (DFX)
Design for Manufacturing/Assembly (DFM & DFMA)
Design for Manufacturing (DFM) deals with steps for improving manufacturing process to
make a good product with reduced manufacturing cost. Product design can be optimized to
achieve this goal.
Potential DFM factors:
 Materials
 Tooling
 Environment
 Testing
 Tolerances
Design for Cost and Design to Cost (DTC)
Low cost cannot be managed into a product; it must be engineered into a product. This can be
challenging when a company has a fixed design cost yet still has to meet customer
expectations.
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Design for cost and DTC consist of several life cycle cost controlling techniques. Designing
for cost works on engineering principles but DTC is more related to management
requirements.
DTC uses value analysis (aka Design to Value) to quantify the value that can be delivered to
the customer. Redesign and reworking costs should be considered.
Design for Testing/Testability (DFT)
Testing is a major part in in the process to ensure that products have predetermined quality
standards demanded by the customers. In this stage the team has to design steps that required
for validating the product to ensure that it doesn’t have any defects and it is properly
functioning.

Design for Maintainability (DFM)

Maintainability is how easily a product can be maintained. Here, the design team give
attention to reducing maintenance costs. Eg preventive maintenance and corrective
maintenance.
Design for Robustness
Robustness is the ability of the system to reduce variations while delivering defined outputs.
Chief considerations here are structural and environmental.
Design for Supply Chain (DFSC)
Target here is to design a system with high supply chain efficiency, less inventory cost and
less or zero waste. Error detection should be considered in the design step.
Design for Safety
This is one of the important design aspects which every team has to be focused on. Not only
do strict safety regulations and requirements mandate safety standards, employee engagement
demands it.
DFS helps to bring illness & injuries to a minimum while maintaining productivity. Common
techniques could be as simple as adequate usage of personal protective equipment (PPE).
8.2.3 Concurrent Engineering
The automotive industry, in countries such as Brazil, China, India and East Europe, in contrast to
the North American and European markets, is in full expansion. Due to the huge competition in the
globalized automotive market, such countries face a challenge to continue this expansion. Especially
important in order to win this battle, will be their capacities to release new products in the market faster than
their competitors and with more cost efficiency, making an appropriate use of tools such as total quality
management, concurrent engineering and increasing the use of innovative concepts in production and
logistics.
Here the first innovative approach is to modify the information flow during the product design and
manufacturing process, leaving the traditional flow showed in Fig. 8.1 towards the concurrent engineering
approach (Fig. 8.2).
Thus, the plants of car makers and suppliers following the changes that have been occurring in Brazil
during the last decades also have to adapt to this new context. In the case of stamped steel’s sheet metal
components i.e., a metal forming project development, the time to complete
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Fig. 8.1. Conventional information flow in engineering design and manufacture

the tooling is long and spreads over the whole scheduled development cycle for releasing a new vehicle. So,
concurrent engineering concepts applied for stamped parts become extremely important to attain the goals
required for the project.
Among the initiatives of concurrent engineering, the approaches and tools of Design For Manufacturing
(DFM) are highlighted here in terms of a practical development process of side panels and doors of an
automotive body-in-white (BIW) example.

Fig. 8.2. Information in design & manufacture by concurrent engineering approach

The main proposal of concurrent engineering is to shorten a product development time through a
simultaneous time implementation of the several stages of the engineering activity in parallel and under a
concurrent mode offering all information required by all elements of the

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Fig 8.3(A). Relative importance of development steps on the final product cost

Fig. 8.3(B). Relative importance of development steps on final product cost after

8.2.4 Failure Rate Curve

The bathtub curve is widely used in reliability engineering and deterioration modeling. It
describes a particular form of the hazard function which comprises three parts:
 The first part is a decreasing failure rate, known as early failures.
 The second part is a constant failure rate, known as random failures.
 The third part is an increasing failure rate, known as wear-out failures.
The name is derived from the cross-sectional shape of a bathtub: steep sides and a flat
bottom.
The bathtub curve is generated by mapping the rate of early "infant mortality" failures when
first introduced, the rate of random failures with constant failure rate during its "useful life",
and finally the rate of "wear out" failures as the product exceeds its design lifetime.
In less technical terms, in the early life of a product adhering to the bathtub curve, the failure
rate is high but rapidly decreasing as defective products are identified and discarded, and
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early sources of potential failure such as handling and installation error are surmounted. In
the mid-life of a product—generally speaking for consumer products—the failure rate is low
and constant. In the late life of the product, the failure rate increases, as age and wear take
their toll on the product. Many electronic consumer product life cycles strongly exhibit the
bathtub curve.
While the bathtub curve is useful, not every product or system follows a bathtub curve hazard
function; for example, if units are retired or have decreased use during or before the onset of
the wear-out period, they will show fewer failures per unit calendar time (not per unit use
time) than the bathtub curve.

The 'bathtub curve' hazard function (upper solid line) is a combination of a decreasing
hazard of early failure (dotted line) and an increasing hazard of wear-out failure (dotted
line), plus some constant hazard of random failure (lower solid line).
8.3 Product Testing
Product Testing, also called consumer testing or comparative testing, is a process of
measuring the properties or performance of products. Product testing is any process by means
of which a researcher measures a product's performance, safety, quality, and compliance with
established standards. The primary element which constitutes an objective comparative test
program is the extent to which the researchers can perform tests with independence from the
manufacturers, suppliers, and marketers of the products.
Product testing seeks to ensure that consumers can understand what products will do for them
and which products are the best values. Product testing is a strategy to increase consumer
protection by checking the claims made during marketing strategies such as advertising,
which by their nature are in the interest of the entity distributing the service and not
necessarily in the interest of the consumer.
Product testing might be accomplished by a supplier such as Ipsos, manufacturer, an
independent laboratory, a government agency, etc. Often an existing formal test method is
used as a basis for testing. Other times engineers develop methods of test which are suited to
the specific purpose. Comparative testing subjects several replicate samples of similar
products to identical test conditions.
Product testing might have a variety of purposes, such as:
 Decide if a new product development program is on track: Demonstrate proof of concept
 Provide standard data for other R&D, engineering, and quality assurance functions
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 Provide a technical means of comparison of several options

 Provide evidence in legal proceedings: product liability, product claims, etc.
 Help solve problems with current product
 Help identify potential cost savings in products.
Product tests can be used for:
 Subjecting products to stresses and dynamics expected in use
 Reproducing the types of damage to products found from consumer usage
 Controlling the uniformity of production of products or components.

8.4 Collaborative Product Development

(Collaborative Product Design) (CPD) is a business strategy, work process and collection of
software applications that facilitates different organizations to work together on the
development of a product. It is also known as collaborative Product Definition
Management (CPDM).
Introduction
Although companies working together to develop a product in an extended enterprise is
nothing new and most of the collaborative software technology being used has been around
for some time, the bringing together of methods and software application tools into one
discipline is relatively resent. This has come about due to a number of factors:
 Increased globalization of commerce.
 Increasing number of corporations with departments in different locations needing to
work closer together.
 Outsourcing of tasks.
 Departments in same company (maybe due to takeovers and mergers) with different
technology formats having to work closer together.
 Companies working with partners who may have specialist knowledge.
 Increasing role of 1st tier supplier an their importance to OEMs

Exactly what technology comes under this title does vary depending on who you ask; it
however usually consists of the PLM areas of: Product Data Management (PDM); Product
visualization; team collaboration and conferencing tools; and supplier sourcing software. It is
generally accepted as not including CAD geometry authoring tools, but does include data
translation technology.
Collaborative Product Development: Pivoting, Not Passing Off
If your firm follows the classic waterfall approach, then you’re probably accustomed to
taking a new feature through a series of pass-offs between internal teams as it moves from
ideation to launch. Our recommended approach involves greater collaboration from start to
finish, even as different teams take the lead during different phases of the project. Instead of
pass-offs, we like to think of pivots. Leadership responsibilities change, but all hands stay on
the ball through each of a project’s multiple phases.

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Throughout, each team brings a unique and necessary perspective to your project, which may
look something like this:
 Product: Does the proposed feature make sense for our market? Will it make our
stakeholders happy? Where does it fall on the roadmap? Is this a high priority?
 UX: Are we asking “why” rather than just building a prescribed feature? What
problems are we solving? Are there multiple approaches we could take in building this
feature?
 Engineering: What technology can we explore? Is there something we haven’t
thought of yet? What is the effort level or time to build the ideas being explored?
Taken together, these unique perspectives give your team a wider, more seasoned perspective
that’s greater than the sum of its parts.
The collaborative product development approach that we recommend yields many additional
benefits that apply to new products and features alike. By structuring your development
process this way, your team will:
 Create internal unity and a sense of shared ownership as all teams align around
a singular vision. Including the whole team from the beginning gives each member of the
team a sense of ownership as they are encouraged to share their perspective and expertise
(rather than being handed a directive to build something they didn’t help curate).
 Foster innovation by including multiple perspectives during ideation. Including
the perspectives of all teams during ideation leads to more creative, out-of-the-box
solutions.
 Gain a better understanding of the technical options, possibilities, and costs of
your proposed feature. Including engineers from the outset ensures that you choose the
most appropriate technological solution to your problem.
 Avoid scope issues and address possible roadblocks upfront. Scope problems often
crop up when internal teams don’t communicate well about project specs on the front end.
With all teams in ongoing collaboration, you’ll keep your project scope in check and
proactively tend to possible issues.
 Create unity so that everyone works together harmoniously. When all teams work
collaboratively on a project, they work smarter and more efficiently. Another plus? They
tend to feel more invested in the project and its successful completion.
 Solve problems more quickly as they arise. When issues do crop up, your whole
team will already be in the know about what’s happening with your new feature, allowing
you to address problems with speed and agility.
 Keep projects on track more easily. When your whole team is familiar with a
project and where it stands at every turn, it never falls off the radar.
 Avoid costly communication breakdowns. Involving all teams in an ongoing way
means you’re better positioned to avoid costly mistakes and miscommunications.
8.5 Product Development Economics
Background

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“Development is the set of activities that transform a concept for satisfying perceived needs
into a product or service that is ready for the market,” (Johnson & Kirchain, 2011). In today’s
technology driven market, the importance of product development is well established. The
development phase not only helps to determine the functional performance of a product but
also helps to determine the financials of the product itself. In fact it is reported that between
70 and 90 percent of the project’s costs are decided in the early phases of the product
development (Bhimani & Mulder, 2001; Shehab & Abdalla, 2001). The rapid escalation in
technology has led to a shift in parameters that companies compete in to achieve maximum
profits. One of these is time-based competition, which is discussed in subsequent sections.
Time-based Competition
Concept that time is a resource and a firm that make better use of time (in responding to the
changing market situations) acquires a competitive advantage. The term was coined by the
consultant George of the Boston Consulting Group and popularized by his 1998
book Competing Against Time, in which he talks about the term time-based competition after
he realized how important it is to time the release of your product, and how long your product
development cycle is. He recognized the correlation between the change in profitability of a
product and the duration of its product cycle. In economics terms, he observed that sooner a
finished product was released in the market, it implied lesser development costs and after the
introduction of the product, being the pioneers in that field, i.e. being an innovator/the first
one to release the product, would lead to greater profits. In today’s world this is more relevant
than ever before considering the multiple patent wars going on i.e. the Apple vs. Samsung
patent wars. It is very important to be able to provide something to the market that is not
there already. This is made possible only when product development cycles are short and
efficient. However, it is also important to weight the decrease in development cycles, versus
the “finished-ness” of the product, which is discussed in later sections of this article. For
example, Clark (1989) estimates that if a certain car cost 10,000 dollars, every day’s delay in
the release of the product represents a million dollar loss for the company. Another
McKinsey study reports that a company loses about ten times of its after-tax profits for
shipping a product six-month’s late as compared to what it would lose by overspending 50%
more on product development. In their 1991 book Developing Products in Half the Time,
Smith and Reinertsen argue that it is necessary to adopt an incremental approach to product
innovation in order to reduce time to market. This is because incremental product innovation
reduces the amount of effort and learning that must be done and, consequently, the amount of
time needed to invest in the new product prior to its launch. Financially its implications
involve reduction of development costs since the same processes as before are being carried
out by essentially the same amount of labor as the reduction in the time-to-market is
stemming from concurrent-phase development and cross-functional development teams; the
labor costs are significantly reduced. Such a perspective has led some companies (e.g.,
General Electric, Hewlett Packard) to adopt time-to-market as their principal product
development metric.
Minimizing the Time-to-Market and the Balance with Product Performance
However, on the flipside of the argument for shorter product development cycles, it can
clearly be seen that there is a trade-off between minimizing the time-to-market, and optimal
performance of the new product. Even a minor increase in the performance of the product
could help the company grab a significant portion of the market share. While on the other
hand, this improvement in the product’s performance might take too long to be achieved and
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thus the company could lose out on the window of opportunity that it may have had in
releasing the product without the additional improvement. A very good example of such a
case would be Apple Computer’s Lisa Macintosh development in the early 1980s. The
project was very ambitious and aimed to greatly increase the product performance as well as
to improve the general manufacture process, but its introduction that was late by several
quarters drove apple earnings down to about half their initial value as it started out with in
1983.
The development capability hurdle needed to profitably undertake a new project increases
with the total existing product performance of all products readily available in the market. It
decreases with the product category demand rate, the profit margin, the market share lost to
the competitors, and the window of opportunity of releasing the new product. One of the
most important things to remember is that an improvement in the product’s performance does
not necessarily guarantee a shorter time-to-market. The basic breakdown of Cohen’s findings
are that if performance improvements are additive in nature, most of the limited time should
be spent on the stage that leads to the biggest net improvement, and is the most productive.
Another observation they made was that faster was not better if the product being replace has
a high margin or if the new product has a large market potential. It is always the best strategy
to take more time developing the product better if the product is going to face an intermediate
rivalry in the market. Care needs to be taken in minimizing the break-even time as it may lead
to a premature product introduction.

Case Study: Hewlett Packard

Hewlett Packard realized this balance between the two objectives of high product
performance target and a reduced time-to-market, with their BET metric i.e. Break-Even
Time, which was aimed at reducing the break-even time of their products by half. Fig 8.4
depicts the return map employed by HP for managing the development process of a new
pocket calculator. The breakeven point is when the total cumulative investment in the
development of the project is equal to the total cumulative net revenue. Reducing break-even
time can motivate the product development team to address the crucial balance between a
high product performance target and a short time-to-market. A significant improvement in the
product performance target is likely to increase the slope of the sales curve, at the cost of
delaying the new product launch. Incremental product improvements on the other hand, are
likely to generate sales curve that are less steep but which bring revenues to the firm earlier.
Again this trade-off varies from industry to industry and product to product and needs to be
studied closely, before the development strategy is chosen.

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Fig 8.4 The Return Map for the HP Pocket Calculator. Source: Adapted from Cohen et al.,
1996.
Application to Senior Design Project
The Blue Team’s Senior Project focuses on the development of a solar insolation calibrator.
When thinking about how we can achieve an acceptable balance between our product’s
performance and its development cycle, one of the most important things that needs to be
considered is to recognize and understand that product performance improvement processes
have a multistage nature. We need to evaluate each and every decision we make about out
project in terms of design and think if the amount of time/resources spent on the
implementation of a certain feature contributes enough to the product’s performance, i.e. adds
at least as much as the value of resources spent, if not more to it. It is helpful to study the
competitors, the market, already existing comparable products, and the nature of the product.
Other things to be considered are the productivity of certain design phases and the return on
the product improvement developmental processes.
8.6 Scoring Model in Project Management
A scoring model is a tool you use to assign a comparative value to one or more projects or
tasks. Scoring models allow governance teams to rank potential projects based on criteria
such as risk level, cost, and potential financial returns.
The type and weight of criteria you choose will affect the results, so select the most critical
factors for your organization and weigh them accordingly. While your company’s highest-
level decision makers will ultimately choose which elements are most important, a project
manager may facilitate this decision-making process by providing a survey or template to
determine the most important factors for each respondent.
Principles of a Scoring Model
A scoring model should be simple and customizable, as well as produce results that are easy
to understand. Scoring models provide insight into the overall value of a project, but since
“value” is subjective, your model must reflect your organization’s values.
To keep your model simple, choose up to five of the most crucial project criteria for your
organization. Once you select those criteria, consider the weight to give each of them; you
will likely find some factors to be more significant than others. Lastly, no matter what type of
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scoring model you use, make sure that the model’s findings are easy to understand. Include a
key the team can use to decode particular numbers or colors.
How to Use a Project Scoring Model

Project scoring models are a crucial tool for project selection. By creating a value-weighted
list to compare potential projects, an organization can easily identify where it should allocate
resources and identify its next course of action.
The ultimate goal of a scoring model is to prioritize a list of potential tasks or projects so that
the team gains a better understanding of what to tackle and when. For instance, you may not
have the resources to begin a high-priority project right away, but you may be able to
complete a smaller, lower-priority task while waiting for those resources to become available.
You can use many types of models, but in general, a project that scores higher on your matrix
is more important to the company. Model results are a great place to start, but you should also
consider other less tangible factors, such as the potential interruption of other projects,
interdepartmental timeline conflicts, or overall support for the project by the executive team.
To learn more about project selection, read our guide to project selection.
Scoring Criteria for Projects
The most common scoring criteria for projects include overall cost, time, and risk level.
Projects are more complicated than simple tasks, so it is essential to create a holistic view of a
venture when considering what criteria to include.
Keep things simple: Choose no more than five criteria when creating your model. Most
scoring models use a scale numbering between 0-5 to represent the importance of each
criteria to the organization.
The following are categories of criteria you may consider in your scoring model:
 Strategic Criteria: This category is generally the most intangible criteria, including
elements such as overall business strategies, existing offerings or product lines, and
market competitiveness. Strategic criteria can sometimes be difficult to quantify and
may benefit from being measured along with financial considerations.

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“At the end of the day, even if a project isn’t a financial success, it can still be good
for the company. We always ask ourselves, ‘Is this project going to help make our
company better?’ If yes, then it is a high priority,” says Jeremy Lyman, CEO and Co-
founder of Birch Coffee.
 Financial Criteria: You will typically display this figure as a range of costs for each
project element. The final calculation will rank projects on overall budget needs. This
figure is important but doesn’t tell the whole project story, so it is best to combine and
compare it against other factors.
 Risk Factors: Factor risks as negative or reversed values. For example, if the goal of
a scoring model is to determine the highest-scoring project, high-risk factors should
detract from — not add to — that total. For risk factors, consider setting your low-risk
value to 5 and your high-risk value to 0, so that high-risk factors do not add to your
total score.
In general, you should weight a number of these criteria against one another to gain the best
overall view into a complicated project. Your organization should come to an agreement
about which factors are most important, and then weight and compare them accordingly.
Consider administering a criteria selection survey to your governance board to help facilitate
the selection and weighting process.
Project Scoring Criteria Prioritization Template

Download Project Scoring Criteria Prioritization Template

Use this project scoring criteria template to help choose the most important criteria for your
organization. By recording the importance of each criteria to each decision maker, you can
see the average value of each factor and distribute the weight for each in your scoring
template accordingly.
Simplified Scoring Model in Project Management
Not every scoring model needs to reflect an entire project. You might need input on a few
elements or a final ranking of potential projects. In such cases, consider a pairwise model or
Eisenhower matrix.
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A pairwise model is a simple grid that you can use to compare multiple projects or elements
against each other, one at a time, to create a list in order of importance. An Eisenhower
matrix is an even simpler two-by-two grid that you can use to compare tasks by urgency and
importance.
Pairwise Project Prioritization Template

Use this template to prioritize a list of tasks or projects against one another. Identify the most
important element in each row with a ranking of 1; the template will tally your score and
create a list of tasks in order of descending importance.
Weighted Scoring Model for Project Selection
A weighted scoring model creates a value-weighted numerical score for potential projects
that is unique to the team. By carefully selecting your criteria and weighting them by
importance, you can generate a score that helps you compare projects.
A weighted scoring model has the advantage of allowing a team to rank certain criteria as
more important than others. Using this model, you can emphasize your specific needs while
still factoring multiple variables into your selection process.
How to Build a Scoring Model in Project Management in Four Steps
There are four key steps to building scoring models for any kind of project. You need to have
a goal in mind, determine your scoring criteria, assign your scores to those criteria, and
compare the results of your aggregated data.
“Management teams need to craft a strategy, and then agree on criteria and weighting factors
for prioritizing projects,” Randall Englund, Executive Consultant for Englund Project
Management Consultancy. “Compare all projects against each other and repeat the process
for each criterion. The objective is to come up with an ordered list of projects.”
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1. Identify the Scoring Criteria: Survey your governance board and determine the
most relevant scoring criteria for your projects. If possible, limit your criteria to no
more than five factors for ease of comparison.
2. Weight the Scoring Criteria: Determine the weight of each criterion. They may all
be equal weight, or you may find that some criteria are more essential than others.
Consider using our scoring criteria selection template to prioritize your criteria and
simplify this process.
3. Record Your Input: Input your scores for each criterion and each project. Consider
finding an average score for each element from the scores of your individual selection
team members.
4. Analyze the Results: Compare the resulting scores and determine if you need more
information to reach a consensus. If two or more projects receive the same score,
consider comparing specific budgets or timelines to narrow the choice further.
Scoring Model in Project Management Example Template

Use this template to weight and help you select your next projects. Easily input your own
projects, weights, and criteria to customize this template to your needs. This matrix is
designed with many sample criteria, but you can customize it to fit your needs.

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“It can be challenging to know which projects to prioritize because people don’t know how to
segregate each project accordingly. With this method, it is easy to see the projects have a
higher priority than others based on urgency and importance. The hierarchy of the tasks in the
matrix is in descending order, so you should complete tasks that are at a higher level than
those found below them.”
For more information about calculating project priority, check out our free priority matrix and
project prioritization templates.
Project Prioritization Scoring Model
Project prioritization models compare a variety of factors, both tangible and intangible. A
prioritization model might consider elements such as customer opinion, as well as concrete
budgeting numbers. Weighted prioritization models are used to rank options to facilitate
project selection.
Benefits of Scoring Models in Project Selection
There are many benefits to using scoring models in the project selection process. You have
the ability to compare different types of projects and the ease of sharing those results. We’ve
asked our experts to expand on these benefits below:
 Compare Different Project Types: Scoring models can help you compare and
prioritize projects of different types or strategies against one another using more
concrete criteria.

“Decide on a mix of projects consistent with business strategy, such as 50 percent

platform projects, 20 percent derivative projects, 10 percent breakthrough projects,
and 10 percent partnerships,” suggests Englund. “Note that these weights total only 90
percent — taking a lesson from financial portfolio management, diversify the set of
projects by investing in some speculative projects as well.”
 Less Biased Ranking: Scoring models help create a list of projects with fewer
emotional decisions attached. Englund recommends that companies “[are] careful to
balance the important projects rather than giving in to urgent but not so important
demands.”
 Knowing When to Say No: Some projects sound great on the surface, but become
less so when you compare your scoring criteria. “It’s not just that you can be more
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selective — it’s that you need to be more selective. We need to work with companies
that align with our brand, and we’ll only do projects with companies that we think do
that,” Lyman says.
 Easy to Compare at a Glance: Assigning a numerical score to each potential project
aggregates diverse criteria into a simple, comparable form. By using the same criteria
for every project on a list, you can ensure that those scores reflect each other in a way
that you can reliably compare them.
 Organization and Ease of Sharing: Creating and using a scoring model is a great
way to share information with a team. Rather than having a governance board share
meeting notes, which may not tell a whole story, they can share a copy of their model,
so that stakeholders can see both the process and the results.
Disadvantages of Scoring Models in Project Selection
No model is perfect, and there is no one-size-fits-all solution to project selection. Our experts
share some difficulties with using scoring models, including their rigidity and the challenge
of assigning numerical values to abstract concepts.
 Requires Sufficient Weighting of Criteria: It can be difficult to weight criteria
against each other so that they truly reflect the values of a business. It is also possible
that the importance of those criteria will change over the course of a project, which
may be impossible to reflect in your model.
 Hard to Conceptualize Abstract Concepts: Some selection and prioritization
criteria are more abstract than others. It can be difficult to assign a numerical value to
customer satisfaction or community outreach, as opposed to budget numbers or
timelines.
 Limited View of Scope: It is impossible to anticipate every facet of a new venture,
and a scoring model can show you only so much. It is possible that you will overlook
important criteria in the selection process, which may pose large hurdles down the
line.
 Rigidity in Decision Making: Forms and templates often feel more rigid, which can
be less attractive for creative or startup-style business management. As Lyman says,
“We’re a smaller organization that doesn’t have a lot of different people to create
multiple teams to run multiple large projects. We find that models and software are
sometimes too rigid and waste time. We get in a room, and we talk, and we just know
intuitively what is more important.”
 Doesn’t Always Reflect Reality: A model cannot always predict what will happen in
a consumer market or a partnership with another business. “A lot of times I think
people will take on a project with the promise that it will bring more business,” says
Lyman. “We have put a lot of effort into things that ultimately didn’t pan out, and
sometimes that was out of our hands completely. Sometimes you have to make these
mistakes to learn. I hate saying no to a cool new project, but sometimes you have to.
You learn from experience. As you learn as a brand, you have more flexibility to
choose projects that will end up working for you.”
8.7 Financial Modeling

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A financial model is simply a tool that’s built in spreadsheet software such as MS Excel to
forecast a business’ financial performance into the future. The forecast is typically based on
the company’s historical performance, assumptions about the future, and requires preparing
an income statement, balance sheet, cash flow statement, and supporting schedules (known as
a 3 statement model). From there, more advanced types of models can be built such as
discounted cash flow analysis (DCF model), leveraged-buyout (LBO), mergers and
acquisitions (M&A), and sensitivity analysis. Below is an example of financial modeling in
Excel.

CFI’s Financial Modeling Courses.

What is a financial model used for?
The output of a financial model is used for decision making and performing financial
analysis, whether inside or outside of the company. Inside a company, executives will use
financial models to make decisions about:
 Raising capital (debt and/or equity)
 Making acquisitions (businesses and/or assets)
 Growing the business organically (e.g., opening new stores, entering new markets,
etc.)
 Selling or divesting assets and business units
 Budgeting and forecasting (planning for the years ahead)
 Capital allocation (priority of which projects to invest in)
 Valuing a business
 Financial statement analysis/ratio analysis

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 Management accounting
Who builds financial models?
There are many different types of professionals who build financial models. The most
common types of career tracks are investment banking, equity research, corporate
development, FP&A, and accounting (due diligence, transaction advisory, valuations, etc).
To learn more about jobs and careers that require building financial models, explore
our interactive career map.

How can you learn financial modeling?

The best way to learn financial modeling is to practice. It takes years of experience to
become an expert at building a financial model and you really have to learn by doing.
Reading equity research reports can be a helpful way to practice, as it gives you something to
compare your results to. One of the best ways to practice is to take a mature company’s
historical financials, build a flat-line model into the future, and calculate the net present value
per share. This should compare closely to the current share price or the target prices of equity
research reports.
It’s also important to establish a solid base understanding by taking
professional financial modeling training courses such as ours offered at CFI, with
many locations across North America or directly online. In the meantime, you may also be
interested in having a go at building your own financial models. Feel free to use our available
free templates to get a jump start before taking one of our courses.

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CFI’s Financial Modeling Courses.

8.7.1 Financial Modeling
1. Excel tips and tricks
 It’s very important to follow best practices in Excel when building a model. For more
details you can take our free Excel course, which outlines the following key themes:
 Limit or eliminate the use of your mouse (keyboard shortcuts are much faster)
 Use a blue font for hard-codes and inputs (formulas can stay black)
 Keep formulas simple and break down complex calculations into steps
 Ensure you know how to use the most important Excel formulas and functions
 Use INDEX and MATCH instead of VLOOKUP to query data
 Use the CHOOSE function to build scenarios
2. Formatting
It’s important to clearly distinguish between inputs (assumptions) in a financial model, and
output (calculations). This is typically achieved through formatting conventions, such as
making inputs blue and formulas black. You can also use other conventions like shading
cells or using borders.
3. Model layout and design
It’s critical to structure a financial model in a logical and easy to follow design. This typically
means building the whole model on one worksheet and using grouping to create different
sections. This way it’s easy to expand or contract the model and move around it easily.
The main sections to include in a financial model (from top to bottom) are:
 Assumptions and drivers
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 Income statement
 Balance sheet
 Cash flow statement
 Supporting schedules
 Valuation
 Sensitivity analysis
 Charts and graphs
Below is an example of the grouped sections of a well laid out financial model:

Get free financial modeling templates from CFI Marketplace.

How do you build a financial model? (10 Step Guide)
Financial modeling is an iterative process. You have to chip away at different sections until
you’re finally able to tie it all together. Below is a step-by-step breakdown of where you
should start and how to eventually connect all the dots. For much more detailed instruction,
and to work through your own Excel model, check out our financial modeling courses.
1. Historical results and assumptions
Every financial model starts with a company’s historical results. You begin building the
financial model by pulling three years of financial statements and inputting them into Excel.
Next, you reverse engineer the assumptions for the historical period by calculating things like
revenue growth rate, gross margins, variable costs, fixed costs, AP days, inventory days, and
AP days, to name a few. From there you can fill in the assumptions for the forecast period as
hard-codes.
2. Start the income statement
With the forecast assumptions in place, you can calculate the top of the income statement
with revenue, COGS, gross profit, and operating expenses down to EBITDA. You will have
to wait to calculate depreciation, amortization, interest, and taxes.

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Image: CFI’s Building a Financial Model in Excel Course.

3. Start the balance sheet
With the top of the income statement in place, you can start to fill in the balance sheet. Begin
by calculating accounts receivable and inventory, which are both functions of revenue
and COGS, as well as the AR days and inventory days assumptions. Next, fill in accounts
payable, which is a function of COGS and AP days.
4. Build the supporting schedules
Before completing the income statement and balance sheet, you have to create a schedule for
capital assets like Property, Plant & Equipment (PP&E), as well as for debt and interest. The
PP&E schedule will pull from the historical period and add capital expenditures and subtract
depreciation. The debt schedule will also pull from the historical period and add increases in
debt and subtract repayments. Interest will be based on the average debt balance.
5. Complete the income statement and balance sheet
The information from the supporting schedules completes the income statement and balance
sheet. On the income statement, link depreciation to the PP&E schedule and interest to the
debt schedule. From there, you can calculate earnings before tax, taxes, and net income. On
the balance sheet, link the closing PP&E balance and closing debt balance from the
schedules. Shareholder’s equity can be completed by pulling forward last year’s closing
balance, adding net income and capital raised, and subtracting dividends or shares
repurchased.
6. Build the cash flow statement
With the income statement and balance sheet complete, you can build the cash flow
statement with the reconciliation method. Start with net income, add back depreciation, and
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adjust for changes in non-cash working capital, which results in cash from operations. Cash
used in investing is a function of capital expenditures in the PP&E schedule, and cash from
financing is a function of the assumptions that were laid out about raising debt and equity.
7. Perform the DCF analysis
When the 3 statement model is completed, it’s time to calculate free cash flow and perform
the business valuation. The free cash flow of the business is discounted back to today at the
firm’s cost of capital (its opportunity cost or required rate of return). We offer a full suite of
courses that teach all of the above steps with examples, templates, and step-by-step
instruction. Read more about how to build a DCF model.
8. Add sensitivity analysis and scenarios
Once the DCF analysis and valuation sections are complete, it’s time to
incorporate sensitivity analysis and scenarios into the model. The point of this analysis is to
determine how much the value of the company (or some other metric) will be impacted by
changes in underlying assumptions. This is very useful for assessing the risk of an investment
or for business planning purposes (e.g., does the company need to raise money if sales
volume drops by x percent?).

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Image: CFI’s Sensitivity Analysis Course.

9. Build charts and graphs
Clear communication of results is something that really separates great from merely good
financial analysts. The most effective way to show the results of a financial model is through
charts and graphs, which we cover in detail in our advanced Excel course, as well as many of
the individual financial modeling courses. Most executives don’t have the time or patience to
look at the inner workings of the model, so charts are much more effective.

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Image: CFI’s Advanced Modeling Course (Amazon Case Study).

10. Stress test and audit the model
When the model is done, your work is not over. Next, it’s time to start stress-testing extreme
scenarios to see if the model behaves as expected. It’s also important to use the auditing tools
covered in our financial modeling fundamentals course to make sure it’s accurate and the
Excel formulas are all working properly.

Summary
 Industrial design must be robust in its nature and considering the noise factors.
 Robust Design method is central to improving engineering productivity.
 The cost of failure in the field the Robust Design method helps ensure customer
satisfaction.
 The goal of robust design is to come up with a way to make the final product
consistent when the process is subject to a variety of "noise".
 Innovation and New Product Development (NPD) involves three types of testing, viz.
concept testing, product testing and market testing.
 Collaborative product development and participation in a collaborative network of
enterprises is commonly assumed to bring valuable benefits to the involved entities,
including an increase in the ‘survival capability’ in a context of market turbulence as
well as the possibility of better achieving common goals.
 The typical bathtub curve and its “standard” shape have been widely accepted as an
engineering tool in reliability management (design for reliability) and training.

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SELF-ASSESSMENT QUESTIONS
Short Answer Questions
1. Define robust design.
2. State the advantages of robust design.
3. What is noise in robust design?
4. Why should robust design be used?
5. What is product development economics?
6. Define scoring model.
7. What is design for x?
8. What is bath-tub curve?
9. Give examples of breakdown costs.
10. Define product use testing.
11. What are the phases of a bath-tub curve?
12. What is the primary of goal of robust design?
Long Answer Questions
1. What are the advantages and disadvantages of robust design?
2. How has design for x come into existence?
3. How an industrial design is made robust?
4. What are the limitations of product use testing? Also provide a graph to explain how
it can cause losses.
5. Explain in detail about the importance of collaborative product development to an
organization.
6. What do you understand by the failure rate curve? Explain with the help of a graph.
7. Write short notes on the following:
(a) DFX and Concurrent Engineering (b) Portfolio Management
(c) Financial Analysis (d) Scoring Model
8. How does one confront challenges faced during financial modelling?
9. With the help of an example explain what is product development economics?

References

 Ueno, Kenzo (1997), Company-wide Implementations of Robust-Technology

Development, Asme Press. New York.
 Kotler, P. (1999). Kotler on Marketing: How to Create, Win, and Dominate Markets.
Free Press. New York
 Kahn, K.B. (2006). New product forecasting: An Applied Approach. M.E. Sharpe,
Inc.q. Armonk, N.Y.
 Tatikonda, N. (2010). Management of Technology, First Edition, Excel Books. New
Delhi, India.

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UNIT V
LESSON 9 – INTELLECTUAL PROPERTY AND PATENTS
CONTENTS
Learning Objectives
Learning Outcomes
Overview
9.1 Intellectual Property
9.1.1 Types of Intellectual Property
9.2 Patents
9.2.1 Concept of Patent
9.2.2 Patents Rules
9.2.3 Product/Process Patents
9.2.4 Duration of Patents
9.3 Patentable Subject Matter
9.3.1 Elements of Patentability

9.3.2 Inventive Step (Non-obviousness)

9.4 Non Patentable Subject Matter

9.5 Application for Patent
9.5.1 Form of application
9.5.2 Specification
9.5.5 Types of Patent Applications
9.6 Procedure - Filling of a Patent Application
9.6.1 Contents of Patent Application
9.6.2 E- Filing
9.7 Processing of Application
9.7.1 Initial processing
9.7.2 Scrutiny of Application
9.8 Publication of Application
9.8.1 Request for Examination
9.8.2 Reference for Examination
9.8.3 Examination of Application

9.9 Infringement of Patent

9.9.1 Potential infringement
9.10 PCT – The International Patent System
9.11 New Developments in IPR
9.11.1 Important IPR related matters to be addressed
9.11.2 Plant Varieties
9.11.3 International Applications Filed with Appropriate Office as Receiving Office
9.11.4 International Applications Designating or designating and Electing India
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Summary
Keywords
Self-Assessment Questions
Further Readings

Overview
Intellectual property (IP) refers to the creations of the human mind like inventions,
literary and artistic works, and symbols, names, images and designs used in commerce.
Intellectual property is divided into two categories: Industrial property, which includes
inventions (patents), trademarks, industrial designs, and geographic indications of source; and
Copyright, which includes literary and artistic works such as novels, poems and plays, films,
musical works, artistic works such as drawings, paintings, photographs and sculptures, and
architectural designs. Rights related to copyright include those of performing artists in their
performances, producers of phonograms in their recordings, and those of broadcasters in their
radio and television programs. Intellectual property rights protect the interests of creators by
giving them property rights over their creations.
The most noticeable difference between intellectual property and other forms of property,
however, is that intellectual property is intangible, that is, it cannot be defined or identified by
its own physical parameters. It must be expressed in some discernible way to be protectable.
Generally, it encompasses four separate and distinct types of intangible property namely —
patents, trademarks, copyrights, and trade secrets, which collectively are referred to as
“intellectual property.” However, the scope and definition of intellectual property is
constantly evolving with the inclusion of newer forms under the gambit of intellectual
property. In recent times, geographical indications, protection of plant varieties, protection
for semi-conductors and integrated circuits, and undisclosed information have been brought
under the umbrella of intellectual property.
9.1 Intellectual Property
The definition of intellectual property rights is any and all rights associated with intangible
assets owned by a person or company and protected against use without consent. Intangible
assets refer to non-physical property, including right of ownership in intellectual property.
9.1.1 Types of Intellectual Property
1. Patents 2. Domain names 3. Industrial design 4.Confidential information 5. Inventions 6.
Moral rights 7. Database rights 8. Works of authorship 9. Service marks 10. Logos 11.
Trademarks 12. Design rights 13. Business or trade names 14. Commercial secrets 15.
Computer software.

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Fig 9.1 Types of intellectual property

9.2 PATENTS
A patent is an exclusive right granted for an invention, which is a product or a process that
provides, in general, a new way of doing something, or offers a new technical solution to a
problem. To get a patent, technical information about the invention must be disclosed to the
public in a patent application.
Another definition of patent
A patent is the granting of a property right by a sovereign authority to an inventor. This grant
provides the inventor exclusive rights to the patented process, design, or invention for a
designated period in exchange for a comprehensive disclosure of the invention. They are a
form of incorporeal right
9.2.1 CONCEPT OF PATENT
The creative work of the human mind is protected through several measures and the main
motivation for the same is that such protection is a definite measure of encouragement for the
creative activity. Several forms of protection of the creative activity have come about
including those which are of particular interest in the industrial development. Patents being
one of them. Generally speaking, patent is a monopoly grant and it enables the inventor to
control the output and within the limits set by demand, the price of the patented products.
Underlying economic and commercial justification for the patent system is that it acts as a
stimulus to investment in the Industrial innovation. Innovative technology leads to the
maintenance of and increase in nations stock of valuable, tradeable and industrial assets.
The grant of first patent can be traced as far back as 500 B.C. It was the city dominated by
gaurmands, and perhaps the first, to grant what we now-a-days call patent right to promote
culinary art. For it conferred exclusive rights of sale to any confectioner who first invented a
delicious dish. As the practice was extended to other Greek cities and to other crafts and
commodities, it acquired a name ‘monopoly’, a Greek Portmanteau word from mono (alone)
and polein (sale).
Evidences of grant to private individuals by kings and rulers of exclusive property rights to
inventors dates back to the 14th Century, but their purpose varied throughout the history.
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History shows that in 15th Century in Venice there had been systematic use of monopoly
privileges for inventors for the encouragement of invention. Utility and novelty of the
invention were the important considerations for granting a patent privilege. The inventors
were also required to put their invention in commercial use within a specified period. In 16th
Century the German princes awarded inventors of new arts and machines and also took into
consideration the utility and novelty of inventions. Early laws in American colonies served
primarily to encourage foreign manufacturers to establish new industries in the colonies by
providing them protected domestic markets.
By the late 15th Century, the English monarchy increasingly started using monopoly
privilege to reward court favourites, to secure loyalty and to secure control over the industry
but these privileges were not used to encourage inventions. In 1623, the English Parliament
adopted a Statute of monopolies which recognised the inventors patent as a justifiable
monopoly to be distinguished from other monopoly privileges. The Statute outlawed the
awarding of monopoly privileges except for first and true inventor of a new manufacture.
In England during the 16th and 17th Century, the inventor’s patent of monopoly had become
of great national importance. From the mid-seventeenth Century through the mid-nineteenth
Century, the laws recognising the patent monopoly spread throughout Europe and North
America, but these privileges were not granted without the opposition.

The origin of the Indian Patent System could be traced to the Act of 1856 granting exclusive
privileges to inventors. The patent regime at the time of Independence was governed by the
Patents and Designs Act, 1911, which had provisions both for product and process patents. It
was, however, generally felt that the patent law had done little good to the people of the
country. The way the Act was designed benefited foreigners far more than Indians. It did not
help at all in the promotion of scientific research and industrialization in the country, and it
curbed the innovativeness and inventiveness of Indians.
Shortly after Independence, therefore, in 1949, a committee was constituted under the
chairmanship of Justice (Dr.) Bakshi Tek Chand, a retired judge of the Lahore High Court, to
undertake a comprehensive review of the working of the 1911 Act. The Committee
submitted its interim report on August 4, 1949 and the final report in1950 making
recommendations for prevention of misuse or abuse of patent rights in India. It also observed
that the Patent Act should contain a clear indication that food and medicine and surgical and
curative devices were to be made available to the public at the cheapest price commensurate
with giving reasonable compensation to the patentee. Based on the committee’s
recommendations, the 1911 Act was amended in 1950 (by Act XXXII of 1950) in relation to
working of inventions, including compulsory licensing and revocation of patents. In 1952, a
further amendment was made (by Act LXX of 1952) to provide for compulsory license in
respect of food and medicines, insecticide, germicide or fungicide, and a process for
producing substance or any invention relating to surgical or curative devices. The
committee’s recommendation prompted the Government to introduce a bill (Bill no. 59 of
1953) in Parliament, but the bill was not pressed and it was allowed to lapse.
In 1957, another committee came to be appointed under the chairmanship of Justice N.
Rajagopala Ayyangar to take a fresh look at the law of patent and to completely revamp
and recast it to best sub-serve the contemporary needs of the country. Justice Ayyangar’s
report specially discussed (a) patents for chemical inventions; and (b) patents for inventions
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relating to food and medicine. Justice Ayyangar submitted a comprehensive Report on Patent
Law Revision in September 1959 and the new law of patent, namely, the Patents Act, 1970,
came to be enacted mainly based on the recommendations of the report, and came into force
on April 20, 1972 replacing the Patents and Designs Act, 1911. However, the 1911 Act
continued to be applicable to designs.
PATENT ACT’S 1970
The Patents Act, 1970 remained in force for about 24 years without any change till December
1994. Being a landmark in the industrial development of India, the basic philosophy of the
Act is that patents are granted to encourage inventions and to secure that these inventions are
worked on a commercial scale without undue delay; and patents are granted not merely to
enable patentee to enjoy a monopoly for the importation of the patented article into the
country. The said philosophy is being implemented through compulsory licensing,
registration of only process patents for food, medicine or drug, pesticides and substances
produced by chemical processes which, apart from chemical substances normally understood,
also include items such as alloys, optical glass, semi-conductors, inter metallic compounds
etc. It may, however, be noted that products vital for our economy such as agriculture &
horticulture products, atomic energy inventions and all living things are not patentable.
Thus, the Patents Act 1970 was expected to provide a reasonable balance between adequate
and effective protection of patents on the one hand and the technology development, public
interest and specific needs of the country on the other hand.
Uruguay round of GATT negotiations paved the way for WTO. Therefore, India was put
under the contractual obligation to amend its Patents Act in compliance with the
provisions of TRIPS. India had to meet the first set of requirements on 1-1-1995.
Accordingly an Ordinance effecting certain changes in the Act was issued on 31st
December 1994, which ceased to operate after six months. Subsequently, another
Ordinance was issued in 1999. This Ordinance was subsequently replaced by the Patents
(Amendment) Act, 1999 that was brought into force retrospectively from 1st January,
1995. The amended Act provided for filing of applications for product patents in the areas
of drugs, pharmaceuticals and agro chemicals though such patents were not allowed.
However, such applications were to be examined only after 31-12-2004. Meanwhile, the
applicants could be allowed Exclusive Marketing Rights (EMR) to sell or distribute these
products in India, subject to fulfilment of certain conditions.
India amended its Patents Act again in 2002 through the Patents (Amendment) Act, 2002
increasing the term of patent to 20 years for all technology, Reversal of burden of proof,
compulsory licences etc. This Act came into force on 20th May 2003 with the introduction
of the new Patent Rules, 2003 by replacing the earlier Patents Rules, 1972.
The third amendment to the Patents Act 1970 was introduced through the Patents
(Amendment) Ordinance, 2004 w.e.f. 1st January, 2005 incorporating provisions for
granting product patent in all fields of Technology including chemicals, food, drugs &
agrochemicals. This Ordinance was later replaced by the Patents (Amendment) Act 2005
on 4th April, 2005 which is in force now having effect from 1-1-2005.
9.2.3 Patents Rules
Under the provisions of Section 159 of the Patents Act, 1970 the Central Government is
empowered to make rules for implementing the Act and regulating patent administration.
Accordingly, the Patents Rules, 1972 were notified and brought into force w.e.f.
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20.4.1972. These Rules were amended from time to time till 20th May 2003 when new
Patents Rules, 2003 were brought into force by replacing the 1972 rules. These rules were
further amended by the Patents (Amendment) Rules, 2005 and the Patents (Amendment)
Rules, 2006. The last amendments are made effective from 5th May 2006.
There are four Schedules to the Patents (Amendment) Rules 2005; the First Schedule
prescribes the fees to be paid; the Second Schedule specifies the list of forms and the texts
of various forms required in connection with various activities under the Patents Act.
These forms are to be used wherever required and if needed, they can be modified with the
consent of the Controller. The Third Schedule prescribes form of Patent to be issued on
Grant of the Patent. The Fourth Schedule prescribes costs to be awarded in various
proceedings before the Controller under the Act.
Salient Features of the ACT
A patent is an exclusive right granted by a country to the owner of an invention to make,
use, manufacture and market the invention, provided the invention satisfies certain
conditions stipulated in the law. Exclusivity of right implies that no one else can make,
use, manufacture or market the invention without the consent of the patent holder. This
right is available only for a limited period of time. However, the use or exploitation of a
patent may be affected by other laws of the country which has awarded the patent.
These laws may relate to health, safety, food, security etc. Further, existing patents in
similar area may also come in the way. A patent in the law is a property right and hence,
can be gifted, inherited, assigned, sold or licensed. As the right is conferred by the State, it
can be revoked by the State under very special circumstances even if the patent has been
sold or licensed or manufactured or marketed in the meantime. The patent right is
territorial in nature and inventors/their assignees will have to file separate patent
applications in countries of their interest, along with necessary fees, for obtaining patents
in those countries.
A patent is an official document given to an inventor by the government allowing him to
exclude anyone else from commercially exploiting his invention for a limited period which
is 20 years at present. As per the Supreme Court, the object of Patent Law is to encourage
scientific research, new technology and industrial progress. Grant of exclusive privilege to
own, use or sell the method or the product patented for a limited period, stimulates new
inventions of commercial utility. The price of the grant of the monopoly is the disclosure
of the invention at the Patent Office, which, after the expiry of the fixed period of the
monopoly, passes into the public domain [M/s Bishwanath Prasad v. Hindustan Metal
Industries, AIR1982 SC 1444]. By granting an exclusive right, patents provide incentives
to individuals, offering them recognition for their creativity and material reward for their
marketable inventions. In return for the exclusive right, the inventor has to adequately
disclose the patented invention to the public, so that others can gain the new knowledge
and can further develop the technology. The disclosure of the invention is thus an essential
consideration in any patent granting procedure.
9.2.3 PRODUCT/PROCESS PATENTS
Section 5 of the Patent Act 1970 had provided for grant of only process patents in certain
categories of inventions. It may be pointed out here that under the Patent Act, 1970, in all
other areas product and process patents could be issued and have been issued. The Paris
Convention has left this issue to be dealt with in the States legislation in a manner of its
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own choice.
The TRIPs Agreement under Article 27.1 stipulates that patents shall be available for any
inventions, whether products or processes in all fields of technology except for the
exclusion stipulated under Article 27.2 and 27.3.
Pursuant to the TRIPs agreement, the Patent Act, 1970 was amended in 2002. Section 5 of
the Patents Act, 1970 (as it stood after the 2002 amendments) provided that, in the case of
inventions being claimed relating to food, medicine, drugs or chemical substances, only
patents relating to the methods or processes of manufacture of such substances could be
obtained.
An explanation appended to the Section 5 provided that “chemical process” includes
biochemical, biotechnological and microbiological processes. Subsequently, Section 5 of
the Patents Act, 1970 was deleted by the Patents (Amendment) Act, 2005 that came into
force on 01.01.2005, thereby paving the way for product patents.
This deliberate strategy of denying product patent protection to pharmaceutical inventions
is traceable to the Ayyangar Committee Report, a report that formed the very basis of the
Patents Act, 1970. The Committee found that foreigners held between eighty and ninety
percent of Indian patents and that more than ninety percent of these patents were not even
worked in India. The Committee concluded that the system was being exploited by
multinationals to achieve monopolistic control over the market, especially in relation to
vital industries such as food, chemicals and pharmaceuticals.
The Patents Act has been amended keeping in view the development of technological
capability in India, coupled with the need for integrating the intellectual property system
with international practices and intellectual property regimes. The amendments have also
been aimed at making the Act a modern, harmonised and user-friendly legislation to
adequately protect national and public interests while simultaneously meeting India’s
international obligations.
9.2.4 DURATION OF PATENTS
Section 53 provides that the term of every patent granted after the commencement of the
Patents (Amendment) Act, 2002 and the term of every patent which has not expired and
has not ceased to have effect, on the date of such commencement, shall be twenty years
from the date of filing of application for the patent.
Explanation to Section 53(1) clarifies that the term of patent in case of international
applications filed under the PCT designating India, shall be twenty years from the
international filing date accorded under the Patent Cooperation Treaty.
A patent shall cease to have effect on the expiration of the period prescribed for the
payment of any renewal fee, if that fee is not paid within the prescribed period or within
such extended period as may be prescribed. Further on cessation of the patent right due to
non-payment of renewal fee or on expiry of the term of patent, the subject matter covered
by the said patent shall not be entitled to any protection.
Rule 80 requires that to keep a patent in force, the renewal fees specified in the First
Schedule should be paid at the expiration of the second year from the date of the patent or
of any succeeding year and the same should be remitted to the patent office before the
expiration of the second or the succeeding year. Sub-rule (1A) inserted by Patents
(Amendment) Rules, 2005 provides that the period for payment of renewal fees may be
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extended to such period not being more than six months if the request for such extension
of time is made in Form 4 with the fee specified in the First Schedule. While paying the
renewal fee, the number and date of the patent concerned and the year in respect of which
the fee is paid is required to be quoted. The annual renewal fees payable in respect of two
or more years may be paid in advance.
9.3 PATENTABLE SUBJECT MATTER
9.3.1 Elements of Patentability
As stated above, a patent is granted for an invention which may be related to any process
or product. An invention is different from a discovery. Discovery is something that already
existed but had not been found.
Not all inventions are patentable. An invention must fulfill certain requirements known as
conditions of patentability. The word “invention” under the Patents Act 1970 means “a
new product or process involving an inventive step and capable of industrial application.
(Section 2(1)(j)).
The patent must be in respect of an invention and not a discovery. The fundamental
principle of Patent Law is that a patent is granted only for an invention which must be new
and useful. That is to say, it must have novelty and utility. It is essential for the validity of
a patent that it must be the inventor’s own discovery as opposed to mere verification of
what was already known before the date of the patent… It is important to bear in mind
that in order to be patentable an improvement on something known before or a
combination of different matters already known, should be something more than a mere
workshop improvement; and must independently satisfy the test of invention or an
“inventive step”. To be patentable the improvement or the combination must produce a
new result, or a new article or a better or cheaper article than before.
“New invention” is defined as any invention or technology which has not been
anticipated by publication in any document or used in the country or elsewhere in the
world before the date of filing of patent application with complete specification, i.e., the
subject matter has not fallen in public domain or that it does not form part of the state of
the art [Section 2(1)(l); Where, capable of industrial application, in relation to an
invention, means that the invention is capable of being made or used in an industry
[Section 2(1)(ac)].
In Raj Prakash v. Mangat Ram Choudhary AIR 1978 Del.1, it was held that invention, as
is well known, is to find out some thing or discover some thing not found or discovered by
anyone before. It is not necessary that the invention should be any thing complicated. The
essential thing is that the inventor was first to adopt it. The principal therefore, is that
every simple invention that is claimed, so long as it is something which is novel or new,
it would be an invention and the claims and specifications have to be read in that light.
Therefore, the conditions of patentability are:
 Novelty
 Inventive step (non-obviousness) and
 Industrial applicability (utility)
Novelty
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A novel invention is one, which has not been disclosed, in the prior art where prior art
means everything that has been published, presented or otherwise disclosed to the public
on the date of patent (The prior art includes documents in foreign languages disclosed in
any format in any country of the world.) For an invention to be judged as novel, the
disclosed information should not be available in the 'prior art'. This means that there
should not be any prior disclosure of any information contained in the application for
patent (anywhere in the public domain, either written or in any other form, or in any
language) before the date on which the application is first filed i.e. the 'priority date'.
Therefore, an invention shall be considered to be new, if it does not form part of the prior
art. Although the term prior art has not been defined under the Indian Patents Act, it shall
be determined by the provisions of Section 13 read with the provisions of Sections 29 to
34.
(a) An invention shall not be considered to be novel if it has been anticipated by
publication before the date of the filing of the application in any of the specification filed
in pursuance of application for patent in India on or after the 1st day of January 1912.
(b) An invention shall not be considered to be novel if it has been anticipated by
publication made before the date of filing of the application in any of the documents in
any country.
(c) An invention shall not be considered to be novel if it has been claimed in any claim of
any other complete specification filed in India which is filed before the application but
published after said application.
(d) An invention shall not be considered to be novel if it has been anticipated having
regard to the knowledge, oral or otherwise, available within any local or indigenous
community in India or elsewhere.
In Ganendro Nath Banerji v. Dhanpal Das Gupta, AIR1945 Oudh 6, it was held that no
general rule can be laid down as to what does or does not constitute an invention. The
general criterion seems to be whether that which is claimed lies within the limits of
development of some existing trade, in the sense that it is such a development as an
ordinary person skilled in that trade could, if he wishes so to do, naturally, make without
any inventive step. But novelty need only be established in the process of manufacturing,
not in the article produced. Novel combination of two known ideas may be sufficient to
establish novelty of subject matter in this respect.
In Ram Narain Kher v. M/s Ambassador Industries, AIR 1976 Del 87, the Delhi High
Court has held that at the time the patent is granted to a party it is essential that the party
claiming patent should specify what particular features of his device distinguish it from
those which had gone before and show the nature of the improvement which is said to
constitute the invention. A person claiming a patent has not only to allege the
improvement in art in the form but also that the improvement effected a new and very
useful addition to the existing state of knowledge. The novelty or the invention has to be
succinctly stated in the claim.

9.3.2 Inventive Step (Non-obviousness)

Inventive step is a feature of an invention that involves technical advance as compared to

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existing knowledge or having economic significance or both, making the invention non
obvious to a person skilled in art. Here definition of inventive step has been enlarged to
include economic significance of the invention apart from already existing criteria for
determining inventive step.
An invention shall not be considered as involving an inventive step, if, having regard to
the state of the art, it is obvious to a person skilled in the art. The term "obvious" means
that which does not go beyond the normal progress of technology but merely follows
plainly or logically from the prior art, i.e. something which does not involve the exercise
of any skill or ability beyond that to be expected of the person skilled in the Art.
For this purpose a “person skilled in the art” should be presumed to be an ordinary
practitioner aware of what was general common knowledge in the relevant art at the
relevant date. In some cases the person skilled in the art may be thought of as a group or
team of persons rather than as a single person.
Industrial Applicability
An invention is capable of industrial application if it satisfies three conditions, cumulatively:
 can be made;
 can be used in at least one field of activity;
 can be reproduced with the same characteristics as many times as necessary.
1. An invention to be patentable must be useful. If the subject matter is devoid of
utility it does not satisfy the requirement of invention.
2. For the purpose of utility, the element of commercial or pecuniary success has no
relation to the question of utility in patent law.
3. The usefulness of an alleged invention depends not on whether by following the
directions in the complete specification all the results not necessary for commercial
success can be obtained, but on whether by such directions the effects that the
application/patentee professed to produce could be obtained.
4. The meaning of usefulness is therefore useful for the purpose indicated by the
applicant or patentee whether a non-commercial utility is involved.
5. The usefulness of the invention is to be judged, by the reference to the state of
things at the date of filingof the patent application, if the invention was then useful, the
fact that subsequent improvement have replaced the patented invention render it
obsolete and commercially of no value, does not invalidate the patent.
6. Speculation or imaginary industrial uses are not considered to satisfy the industrial
application requirement.
9.4 NON PATENTABLE SUBJECT MATTER
An invention may satisfy the condition of novelty, inventiveness and usefulness but it may
not qualify for a patent. The following are not inventions within the meaning of Section 3
of the Patents Act, 1970:
(a) an invention which is frivolous or which claims anything obviously contrary to well
established natural laws;
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(b) an invention the primary or intended use or commercial exploitation of which could
be contrary to public order or morality or which causes serious prejudice to human,
animal or plant life or health or to the environment;
(c) the mere discovery of a scientific principle or the formulation of an abstract theory
or discovery of any living thing or non-living substances occurring in nature;
(d) the mere discovery of a new form of a known substance which does not result in
the enhancement of the known efficacy of that substance or the mere discovery of any
property or mere new use for a known substance or of the mere use of a known process,
machine or apparatus unless such known process results in a new product or employs at
least one new reactant; Explanation to clause (d) clarifies that salts, esters, polymorphs,
metabolites, pure form, particle size, isomers, mixtures of isomers, complexes,
combinations and other derivatives of known substance shall be considered to be the
same substance, unless they differ significantly in properties with regard to efficacy.
(e) a substance obtained by a mere admixture resulting only in the aggregation of the
properties of the components thereof or a process for producing such substance;
(f) the mere arrangement or re-arrangement or duplication of known devices each
functioning independently of one another in a known way;
(g) omitted by Patents (Amendment) Act, 2002.
(h) a method of agriculture or horticulture;
(i) any process for the medicinal, surgical, curative, prophylactic diagnostic,
therapeutic or other treatment of human beings or any process for a similar
treatment of animals to render them free of disease or to increase their economic
value or that of their products;
(j) plants and animals in whole or any part thereof other than micro-organisms but
including seeds, varieties and species and essentially biological processes for
production or propagation of plants and animals;
(k) a computer programme per se other than its technical application to industry or a
combination with hardware;
(l) a literary, dramatic, musical or artistic work or any other aesthetic creation
whatsoever including cinematographic works and television productions;
(m) a mere scheme or rule or method of performing mental act or method of playing
game;
(n) a presentation of information;
(o) topography of integrated circuits;
(p) an invention which in effect, is traditional knowledge or which is an aggregation or
duplication of known properties of traditionally known component or
components.
Section 4 prohibits the grant of patent in respect of an invention relating to atomic energy
falling within Sub- section (1) of Section 20 of the Atomic Energy Act, 1962.
Section 20 of the Atomic Energy Act, 1962 contains special provision relating to inventions.
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Under Section 20 of the Atomic Energy Act, 1962 “no patents shall be granted for inventions
which in the opinion of the Central Government are useful for or relate to the production,
control, use or disposal of atomic energy or the prospecting, mining, extraction, production,
physical and chemical treatment, fabrication, enrichment, canning or use of any prescribed
substance or radioactive substance or the ensuring of safety in atomic energy operations”.
9.5 APPLICATION FOR PATENT
Section 6 of the Act provides that an application for a patent for an invention may be made
by any of the following persons either alone or jointly with another:
(a) by any person claiming to be the true and first inventor of the invention;
(b) by any person being the assignee of the person claiming to be the true and first
inventor in respectof the right to make such an application;
(c) By the legal representative of any deceased person who immediately before his
death was entitledto make such an application.
As per Section 2(1) (y), “true and first Inventor” does not include either the first importer
of an invention into India or a person to whom an invention is first communicated from
outside India. The applicant should disclose the name, address and nationality of the true
and first applicant.
Assignee can be a natural person or other than natural person like registered company,
research organization, educational institute or Government (S.2 (1) (s)). Assignee includes
assignee of the assignee also (S. 2(1) (ab)). ‘Proof of right’ to apply such as assignment
deed should be submitted by the assignee.
Legal representative means a person who in law represents the estate of a deceased person
(S.2 (1) (k)). In such a case, they should file death certificate etc. as proof of right. In case
of a convention application, the legal representative or assignee of the applicant in the
Convention Country can also file a Patent Application in India.
Legal representative means a person who in law represents the estate of a deceased person
(S.2 (1) (k)). In such a case, they should file death certificate etc. as proof of right. In case
of a convention application, the legal representative or assignee of the applicant in the
Convention Country can also file a Patent Application in India.
9.5.1 Form of application
Section 7 dealing with form of application requires every application for a patent to be
made for one invention only. Where the application is made by virtue of an assignment of
the right to apply for a patent for the invention, there shall be furnished with the
application proof of the right to make the application.
In respect of one single invention there must be one single patent. A patent may be in
respect of a substance or in respect of a process. But it is not possible to bifurcate a patent
and state that it relates to the substance and the other to the process. In order to have a
complete patent, the specifications and the claims must be clearly and distinctly
mentioned. [Imperial Chemical Industries Ltd. v. Controller General of Patents, designs &
Trade Mark & Another AIR 1978 Cal.77.]
Every international application under the Patent Cooperation Treaty (PCT) for a patent, as
may be filed designating India shall be deemed to be an application under the Act, if a
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corresponding application has also been filed before Controller in India. The filing date of
such application and its complete specification processed by patent office as designated
office or elected office shall be the international filing date accorded under the PCT.
Section 7(4) provides that every such application, not being a convention application or an
application filed under PCT designating India, shall be accompanied by a provisional or a
complete specification.
Mention should be made that obtaining patents can be a long and expensive process.
Fortunately for inventors several countries in 1970 decided to simplify the process for
protecting patents around the world by creating the Patent Cooperation Treaty (PCT).
Under the Patent Cooperation Treaty, inventors can submit just one international
application which is valid in any or all of the more than 120 countries that are members of
this Treaty. Inventors may apply for a patent either in all the member countries of PCT or
in selected group of countries. Only inventors who are citizens or residents of the member
countries of the PCT can use this easier system to file international patent applications.
9.5.2 Specification
In order to obtain a patent, an applicant must fully and particularly describe the invention
therein claimed in a complete specification. The disclosure of the invention in a complete
specification must be such that a person skilled in the art may be able to perform the
invention. This is possible only when an applicant discloses the invention fully and
particularly including the best method of performing the invention. The Specification is a
techno-legal document containing full scientific details of the invention and claims to the
patent rights. The Specification, thus, forms a crucial part of the Patent Application. It is
mandatory on the part of an applicant to disclose fully and particularly various features
constituting the invention. The Specification may be filed either as a provisional or as a
complete specification. The Specification (provisional or complete) is to be submitted in
Form-2 along with the Application in Form-1 and other documents, in duplicate, along
with the prescribed fee as given in the First Schedule. The first page of the Form 2 shall
contain:
(a) Title of the invention;
(b) Name, address and nationality of each of the applicants for the Patent; and
(c) Preamble to the description.
The title of the invention shall sufficiently indicate the specific features of the invention.
Every Specification whether provisional or complete shall describe the invention. The
applicant shall submit drawings, wherever required. The Controller may also require the
applicant to submit drawings, if necessary at the examination stage [Section 9, 10. Rule
13. Form-1, 2].
Such drawings shall form a part of the Specification and suitable references thereto shall
be made in the Specification. The Controller may require the applicant to submit, any
time before the grant, models or samples related to the invention for better illustration of
the invention. However, such models or samples shall not form part of the
Specification.
Provisional Specification
When the applicant finds that his invention has reached a stage wherein it can be
disclosed on paper, but has not attained the final stage, he may prepare a disclosure of
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the invention in the form of a written description and submit it to Patent Office as a
provisional specification which describes the invention.
A provisional specification secures a priority date for the application over any other
application which is likely to be filed in respect of the same invention being developed
concurrently.
Immediately on receiving the Provisional Specification the Patent Office accords a
filing date and application number to the Application.
Section 9 stipulates that an application for a patent accompanying a provisional
specification, a complete specification shall be filed within twelve months from the date
of filing of the application, and if the complete specification is not so filed, the
application shall be deemed to be abandoned.
If two provisional specifications filed by an applicant are cognate or if one is a
modification of the other, the applicant may file one complete specification covering
both the provisional applications. Such a complete specification shall have to be filed
within twelve months from the date of filing of the first provisional application. In such
cases, date of filing of application is the date of filing of the earliest provisional
specification and shall bear the number of that application.
An applicant may, within twelve months from the filing of a complete specification (not
being a convention application or a PCT National Phase Application), convert the same
into a provisional specification. Consequently, the applicant has to file a complete
specification within twelve months from the date of first filing.
A provisional specification (i.e. the one filed directly or the one converted from a
complete specification) may be postdated to the date of filing of the complete
specification.
Complete Specification
The complete specification is a techno-legal document which fully and particularly
describes the invention and discloses the best method of performing the invention. As
the complete specification is an extremely important document in the patent proceedings
it is advised that it should be drafted with utmost care without any ambiguity.
Important Elements of the Complete Specification
As per Section 10, every complete specification is required to -
(a) fully and particularly describe the invention and its operation or use and the
method by which it is tobe performed;
(b) disclose the best method of performing the invention which is known to the
applicant and for which he is entitled to claim protection; and
(c) end with a claim or claims defining the scope of the invention for which
protection is claimed; and
(d) Be accompanied by an abstract to provide technical information on the invention.

Also, make reference to deposit of the biological material in the International

Depository Authority, if applicable.
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However, the Controller may amend the abstract for providing better information to
third parties and if the applicant mentions a biological material in the specification
which may not be described in such a way as to satisfy clauses (a) and (b) above and if
such material is not available to the public, the application shall be completed by
depositing the material to an International Depository Authority under the Budapest
Treaty and by fulfilling the following conditions, namely:
(i) the deposit of the material shall be made not later than the date of filing the
patent application in India and a reference thereof shall be made in the
specification within the prescribed period;
(ii) all the available characteristics of the material required for it to be correctly
identified or indicated are included in the specification including the name,
address of the depository institution and the date and number of the deposit
of the material at the institution;
(iii) access to the material is available in the depository institution only after the
date of the application for patent in India or if a priority is claimed after the
date of the priority;
(iv) Disclose the source and geographical origin of the biological material in the
specification, when used in an invention.
A complete specification customarily begins after the title, with a general preamble
stating the subject to which the invention relates, followed by a detailed description of
one or more embodiments of the inventions. In an infringement action, the function of
the Court is to construe the claims which are alleged to have been infringed, without
reference to the body of the specification, and to refer to the body of the specification
only if there is any ambiguity or difficulty in the construction of the claims in question
[Farbwerke Hoechst v. Unichem Laboratories, AIR1969 Bom 255]
The requirements of the specifications have been discussed under Rule 13, 14, & 15.
In case of an international application designating India the title, description, drawings,
abstracts and claims filed with the application shall be taken as the complete
specification for the purposes of the Act. The claim or claims of a complete
specification shall relate to a single invention, or to a group of inventions linked so as to
form a single inventive concept, shall be clear and succinct and shall be fairly based on
the matter disclosed in the specification. [Section 10(4)(a)]
9.5.3 Types of Patent Applications
1. Ordinary Application, i.e., an Application which has been filed directly in the
Indian Patent Office.
2. Convention Application.

3. PCT Application.

4. Divisional Application, which can result from division of a Patent Application.

5. Patent of Addition, which may be filed subsequent to the Filing of an

Application for Patent, for an improvement or modification. [Section 7,
54,135]
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9.6 Procedure - Filling of a Patent Application

A patent application shall be filed on Form-1 along with Provisional / Complete
Specification, with the prescribed fee as given in First Schedule at an appropriate office.
However, a provisional specification cannot be filed in case of a Convention
Application (either directly or through PCT routes). Normal fee shall be applicable for
applications containing upto thirty pages in specification and upto 10 claims. If the
specification exceeds thirty pages or claims are more than ten in number, additional fee
as given in First Schedule is payable. [Section 7, First Schedule].
9.6.1 Contents of Patent Application
A patent application should contain:
1. Application for grant of patent in Form-1.

2. Applicant has to obtain a proof of right to file the application from the
inventor. The Proof of Right is either an endorsement at the end of the
Application Form-1 or a separate assignment.
3. Provisional / complete specification in Form-2.

4. Statement and undertaking under Section 8 in Form- 3, if applicable. An

applicant must file Form 3 either along with the application or within 6 months
from the date of application.
5. Declaration as to inventorship shall be filed in Form for Applications
accompanying a Complete Specification or a Convention Application or a PCT
Application designating India. However, the Controller may allow Form-5 to be
filed within one month from the date of filing of application, if a request is
made to the Controller in Form-4.
6. Power of authority in Form-26, if filed through a Patent Agent. In case a
general power of authority has already been filed in another application, a
self-attested copy of the same may be filed by the
Agent. In case the original general power of authority has been filed in another
jurisdiction, that fact may also be mentioned in the self-attested copy
7. Priority document is required in the following cases:

(a) Convention Application (under Paris Convention).

(b) PCT National Phase Application wherein requirements of Rule 17.1(a or b)

of regulations made under the PCT have not been fulfilled.
The priority document may be filed along with the application or before
the expiry of eighteen months from the date of priority, so as to enable
publication of the application. In case of a request for early publication, the
priority document shall be filed before/along with such request.
8. Every application shall bear the Signature of the applicant or authorized
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person / Patent Agent along with name and date in the appropriate space
provided in the forms.
9. The Specification shall be signed by the agent/applicant with date on the last
page of the Specification. The drawing sheets should bear the signature of an
applicant or his agent in the right hand bottom corner.
10. If the Application pertains to a biological material obtained from India, the
applicant is required to submit the permission from the National Biodiversity
Authority any time before the grant of the patent. However, it would be
sufficient if the permission from the National Biodiversity Authority is
submitted before the grant of the patent.
11. The Application form shall also indicate clearly the source of geographical
origin of any biological material used in the Specification, wherever applicable.
[Section 7. Rule 8, 12, 13, 135. Also Section 6 of the Biological Diversity Act,
2002 & Rule 17.1 of Regulations made under the PCT]
9.6.2 E- Filing
1. The Patent Office provides the facility to file a Patent Application online from
the native place of the agent of the applicant or applicant through e-filing.
2. For e-filing, applicant/agent must have a digital signature. For the first time,
applicant/agent has to register as a new user and has to create login ID and
password on the Patent office portal. (Rule 6. Details regarding procedure for
e-filing are provided at http://www.ipindia.nic.in.]
9.7 Processing of Application
9.7.1 Initial processing
1. On receipt of an application, the Office accords a date and serial number to
it. PCT national phase Applications and non-PCT Applications are identified by
separate serial numbers.
2. All applications and other documents are digitized, verified, screened,
classified and uploaded to theinternal server of the Office.
3. Patent applications and other documents are arranged in a file wrapper and
the Bibliographic sheet is prepared and pasted on the file cover, so that the
files move on for storing in the compactors.
4. The Application is screened for:

(a) International Patent Classification.

(b) Technical field of invention for allocation to an examiner in the respective

field.
(c) Relevance to defence or atomic energy.

(d) Correcting/completing the abstract, if required. If found not proper, the

abstract will be recasted suitably, so as to provide better information to
third parties. However, such amendments should not result in a change in
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the nature of invention.

5. Requests for examination are also accorded separate serial number.

9.7.2 Scrutiny of application

1. The Office checks whether the Application has been filed in appropriate
jurisdiction. If the jurisdiction is not appropriate, the application shall not be
taken on record and the applicant is informed accordingly.
2. The Office checks for proof of right to file the application. If the proof of right
is not filed along with the application, it shall be filed within a period of six
months from the date of filing of the application. Otherwise, the applicant
shall file the same along with a petition under Rule 137/138.
3. The Office checks whether the application and other documents have been
filed in the prescribed format i.e. prescribed forms, request, petitions,
assignment deeds, translation etc. Further, theOffice checks whether:
(a) the documents are prepared on a proper sized paper, typed in appropriate
font with proper spacing,
(b) the documents are duly signed,

(c) abstract, drawings (if any) have been filed in proper format,

(d) meaningful Claim(s) are present in a complete specification,

(e) Power of Attorney or attested copy of General Power of Attorney (if any) is
filed,
(f) Form-5 has been filed (along with complete after Provisional or for filing
PCT-NP/Convention Application),
(g) The invention has been assigned to another person and Form 6 has been
duly filed. If the right is assigned from an individual to a legal entity, the
legal entity is invited to pay the balance fees.
Secrecy directions and consequences there of
1. After the initial processing and scrutiny of the applications by the patent office, if in
the opinion of the Controller an invention pertains to a subject matter relevant for the
purpose of defence as notified by the Central Government, the Controller issues a
secrecy direction prohibiting the publication of the application to the applicant and
refers the matter to the Central Government for their consideration as to whether the
application is prejudicial to the defence of India.
2. The Central Government, after considering the merits of the secrecy direction, may
give notice to the Controller as to whether the secrecy direction needs to be continued
or not.
3. The Central Government reviews the matter at an interval of six months. The
applicant may request for a reconsideration of the secrecy direction and if the same is
found reasonable by the Controller, he may request the Central Government for a
review.
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4. If the Central Government is of the opinion that an invention in respect of which the
Controller has not imposed a secrecy direction and is relevant for defence purposes, it
may at any time before the grant of the patent notify the Controller to that effect.
Thereupon, the Controller invokes the provisions of Section 35(1).
5. So long as any directions under Section 35 are in force, the Controller shall not take
a decision on grant/refusal of the application. [Section 35, 36, 37, 38]
9.8 Publication of Application
Section 11A (1) provides that no application for patents shall ordinarily be open to
public for such period as may be prescribed. Sub-section (2) entitles an applicant to
request the Controller, in the prescribed manner, to publish his application at any time
before the expiry of the period prescribed under sub-section (1) and subject to the
provisions of sub-section (3). The Controller on receipt of such request shall publish
such application in the Official Journal as soon as possible. Every application for patent
shall be published on expiry of the period specified in sub-section (1) except those
applications in which secrecy direction is imposed under Section 35; or application has
been abandoned under section 9(1); or application has been withdrawn three months
prior to the period specified under sub-section (1).
Rule 24 dealing with procedure for publication of application provides that the period
for which an application for patent shall not ordinarily be open to public under Section
11A(1) shall be eighteen months from the date of filing of application or the date of
priority of the application, whichever is earlier. A request for publication under Section
11A (2) is required to be made in Form 9.
The publication of every application shall include the particulars of the date of
application, number of application, name and address of the applicant identifying the
application and an abstract. Upon publication of an application for a patent, the
depository institution shall make the biological material mentioned in the specification
available to the public. The patent office may, on payment of prescribed fee make the
specification and drawings, if any, of such application available to the public.
Section 11A(7) provides that on or from the date of publication of the application for
patent and until the date of grant of a patent in respect of such application, the applicant
shall have the like privileges and rights as if a patent for invention had been granted on
the date of publication of application. However, the applicant shall have no right to
institute any proceedings for infringement until the patent has been granted.
Additionally, the rights of a patentee in respect of applications made under Section 5(2)
before January 1, 2005 shall accrue from the date of grant of patent.
Moreover, after the patent is granted in respect of applications made under Section 5(2),
the patent holder shall only be entitled to receive reasonable royalty from such
enterprises which have made significant investment and were producing and marketing
concerned product prior to January 1, 2005 and which continue to manufacture the
product covered by the patent on the date of grant of the patent and no infringement
proceedings shall be instituted against such enterprises.
9.8.1 Request for Examination
1. As per Section 11B an application for a Patent will not be examined unless the

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applicant or any other person interested makes a request for examination in the
prescribed manner. The request is to be filed in Form-18 with the fee as prescribed in
First Schedule.
2. A request for examination has to be made within forty eight months from the date
of priority of the application or from the date of filing of the application, whichever is
earlier. If no such request for examination is filed within the prescribed time limit, the
application shall be treated as withdrawn by the applicant.
3. In a case where secrecy direction has been issued under Section 35, the request for
examination may be made within six months from the date of revocation of the
secrecy direction, or within forty-eight months from the date of filing or priority,
whichever is later.
4. The Office will not examine an application unless it is published and a request for
examination is filed.

5. When a request for examination is filed by a person interested other than the
applicant, the Examination
Report is sent to the applicant only, and intimation is given to the person interested.
[Section 11B & 35. Rule 24B]
9.8.2 Reference for Examination
1. Once a request for examination is received, and the application is published under
Section 11A, the application is taken up for Examination in the chronological order of
filing of request for examination.
2. The patent application is referred to an Examiner by the Controller for conducting
the formal as well as substantive examination as per the subject matter of the
invention vis-à-vis the area of specialization of the Examiner. At present, the Patent
Office has four examination groups based on the broad area of specialization viz.:
(a) Chemistry and allied subjects.
(b) Biotechnology, Microbiology and allied subjects.
(c) Electrical, Electronics & related subject
(d) Mechanical and other subjects.
The reference to the Examiner is made ordinarily within one month from the date of
publication or one month from the date of request for examination, whichever is later,
and is made in order in which the request is filed.
3. When an application is referred by the Controller, the Examiner makes a report on
the patentabilility as well as other matters ordinarily within one month but not
exceeding three months from the date of such reference. [ Section 11A, & 12.Rule 24B
(2)(i)]
9.8.3 Examination of Application
Section 12 dealing with examination of application provides that when the request for
examination has been filed in respect of an application for a patent in the prescribed
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manner under Section 11B (1) or (3), the application and specification and other
documents related thereto shall be referred at the earliest by the Controller to an
examiner for making a report to him in respect of the following matters, namely:
(a) whether the application and the specification and other documents relating thereto
are in accordance with the requirements of the Act and of any rules made
thereunder;
(b) whether there is any lawful ground of objection to the grant of the patent in
pursuance of the application;
(c) the result of investigations made under Section 13, and

(d) Any other matter which may be prescribed.

The examiner to whom the application and the specification and other documents
relating thereto are referred shall ordinarily make the report to the Controller within
the prescribed period.
9.9 Infringement of Patent
Infringement of Patent primarily refers to intrusion or violation of the rights of a Patentee
against which the Patentee has statutory rights. The factors that are essential in determining
infringement of a Patent are as under:
1. The infringement has to be determined with regard to what has been claimed as invention.
2. To determine whether the infringing activity violated any statutory rights conferred to the
Patentee. 3. To determine the infringer i.e. the person liable for the infringement.
4. To determine whether the infringing act fell within the excluded acts of Government use,
use of patented product or process for experiment or research, import of medicine or drug by
Government and patents in foreign vessels and aircrafts.
Scope of Patent Rights
Geographical scope and content-related scope determine the range of your patent protection.
Geographical Scope As soon as your patent is granted, you have the right to exclusively
utilize your invention, issue licenses, and prohibit others from using your invention. The
invention is only protected in countries in which the patent is valid. For example, a German
patent does not facilitate protection in the US market. Only a US patent can protect your
invention the United States. Your patent attorney will advise you regarding the best patent
strategy and will define with you in which regions a protection is necessary and reasonable.
Content-related Scope Besides the geographical range, the scope of the patent content plays a
major role in order to assess how strong your protection actually is.
First and foremost, this can be deduced from patent claims specified in your application filing
documents. The more far-reaching your claims, the stronger the protection of your
intellectual property. The number of claims and the phrasing of claims is very important. The
patent attorney can appraise how to phrase the claims of your application in order to
distinguish your invention from the state of the art, while at the same time protecting your
invention as deliberately as possible.
9.9.1 Potential infringement
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Section 19 provides that if in consequence of the investigations it appears to the

Controller that an invention in respect of which an application for a patent has been
made cannot be performed without substantial risk of infringement of a claim of any
other patent, he may direct that a reference to that other patent, be inserted in the
applicant’s complete specification by way of notice to the public within such time as
may be prescribed, unless:
(a) the applicant shows to the satisfaction of the Controller that there are
reasonable grounds for contesting the validity of the said claim of the other
patent; or
(b) the complete specification is amended to the satisfaction of the Controller.

Where after a reference to another patent has been inserted in a complete specification
in pursuance of a direction under Section 19(1):
(a) that other patent is revoked or otherwise ceases to be in force; or

(b) the specification of that other patent is amended by the deletion of the relevant
claim; or
(c) it is found, in proceedings before the court or the Controller, that the relevant
claim of that other patent is invalid or is not infringed by any working of the
applicant’s invention, the Controller may, on the application of the applicant
delete the reference to that other patent.

9.10 PCT – The International Patent System

The Patent Cooperation Treaty (PCT) assists applicants in seeking patent protection
internationally for their inventions, helps patent offices with their patent granting decisions,
and facilitates public access to a wealth of technical information relating to those inventions.
By filing one international patent application under the PCT, applicants can simultaneously
seek protection for an invention in a large number of countries
What is Patent Cooperation Treaty (PCT)?
The Patent Cooperation Treaty (PCT) is an international treaty administered by the World
Intellectual Property Organization (WIPO). The PCT System makes it possible to seek patent
protection for an invention simultaneously in a large number of countries by filing a single
“international” patent application instead of filing several separate national or regional patent
applications. The PCT System comprises 151 Contracting states (September 2016).
The granting of patents remains under the national or regional legislation of the national or
regional patent offices. It is called the “national phase”.
In the national phase, each patent office is responsible for processing the application in
accordance with its national patent laws, and for deciding whether to grant patent protection.
The time required for that processing varies across patent offices.
Advantages of the Patent Cooperation Treaty

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Applicants and patent offices of contracting states benefit from uniform formality
requirements, international search, supplementary international search and preliminary
examination reports, and centralized international publication a tent Agents.
Ownership And Forms Of Transfer Of Patents Rights In India
Introduction
Once a patent for an invention is granted, it is important to consider (1) if the
patentee/proprietor of the patent is going to manufacture, market, sell and/or distribute the
invention, (2) whether the patentee/proprietor of the patent is going to sell all rights in his/her
invention to someone else for a sum of money, or (3) if the patentee/proprietor of the patent
will license someone else to produce and bring the patented product to market under specified
terms by the Patentee that must be met for the licensee. This article discusses how one may
effect, use or monetize the patented invention.
A patent is considered as a transferrable property that can be transferred from the original
patentee to any other person by assignment or by operation of law. A patent can be licensed
or assigned only by the owner of the patent. In case of co-owners or joint-owners, a co-owner
can assign or license the patent only upon consent of the other owner(s).
Requirements for creation of any interest in a patent:
Section 68 of the Indian Patents Act 1970 provides for the mortgage of, license or creation of
any interest in the patent.
"Assignments, etc., not to be valid unless in writing and duly executed.1 —An assignment of a
patent or of a share in a patent, a mortgage, license or the creation of any other interest in a
patent shall not be valid unless the same were in writing and the agreement between the
parties concerned is reduced to the form of a document embodying all the terms and
conditions governing their rights and obligations and duly executed"

Requirements:
1. The assignment, mortgage or license should be reduced to writing in a document
embodying all the terms and conditions governing the rights and obligations between
the parties;
2. An application for registration of such document should be filed in the prescribed
manner in Form-16 within the time prescribed under section 68. The document when
registered will have effect from the date of execution.
Forms/Nature of Transfer of Patent Rights:
Grant of a Patent confers to a patentee the right to prevent others from making, using,
exercising or selling the invention without his permission. The following are the ways in
which a patentee can deal with the patent:
1. Assignment
2. Licenses
3. Transmission of patent by operation of law

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1. Assignment
The term 'assignment' is not defined in the Indian Patents Act. Assignment is an act by which
the patentee assigns whole or part of his patent rights to the assignee who acquires the right to
prevent others from making, using, exercising or vending the invention. There are three kinds
of assignments
 Legal Assignment
 Equitable Assignment
 Mortgage
Legal Assignment: An assignment (or an agreement to assign) of an existing patent is a legal
assignment, where the assignee may enter his name as the patent owner. A patent which is
created by deed can only be assigned by a deed. A legal assignee entitled as the proprietor of
the patent acquires all rights thereof.
Equitable Assignments: Any agreement including a letter in which the patentee agrees to
give a certain defined share of the patent to another person is an equitable assignment of the
patent. However an assignee in such a case cannot have his name entered in the register as the
proprietor of patent. But the assignee may have notice of his interest in the patent entered in
the register.
Mortgages: A mortgage is an agreement in which the patent rights are wholly or partly
transferred to assignee in return for a sum of money. Once the assignor repays the sum to the
assignee, the patent rights are restored to assignor/patentee. The person in whose favor a
mortgage is made is not entitled to have his name entered in the register as the proprietor, but
he can get his name entered in the register as mortgagee.
2. Licenses:
The Patents Act allows a patentee to grant a License by the way of agreement under section
70 of the Act. A patentee by the way of granting a license may permit a licensee to make, use,
or exercise the invention. A license granted is not valid unless it is in writing. The license is
contract signed by the licensor and the licensee in writing and the terms agreed upon by them
including the payment of royalties at a rate mentioned for all articles made under the patent.
Licenses are of the following types,

 Voluntary License
 Statutory License(such as compulsory License)
 Exclusive/Limited License
 Express/Implied License
Voluntary licenses:
It is the license given to any other person to make, use and sell the patented article as agreed
upon the terms of license in writing. Since it is a voluntary license, the Controller and the
Central government do not have any role to play. The terms and conditions of such agreement
are mutually agreed upon by the licensor and licensee. In case of any disagreement, the
licensor can cancel the licensing agreement.

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Statutory licenses:
Statutory licenses are granted by central government by empowering a third party to
make/use the patented article without the consent of the patent holder in view of public
interest. Classic example of such statutory licenses is compulsory licenses. Compulsory
licenses are generally defined as "authorizations permitting a third party to make, use, or sell
a patented invention without the patent owner's consent3.
Compulsory Licenses(CLs)
Though CLs works against the interest of the patent holder, it is granted under certain
provided conditions under the Patents Act. Under section 84 of the Indian Patents Act 1970,
any person can make an application for grant of a compulsory license for a patent after three
years, from the date of grant of that patent, on any of the following grounds:
(a) The reasonable requirements of the public with respect to the patented invention have not
been satisfied; (b) The patented invention is not available to the public at a reasonably
affordable price. (c) The patented invention has not worked in the territory of India.
Under Section 92 A of the Act, CLs can also be granted for exporting pharmaceutical
product(s) to any country incapable of manufacturing pharmaceutical products for the benefit
of the people in that country, further when working of the patent required another related
patent under Section 88 of the Act or on notification by the Central Government, the
controller can grant a license to an interested person. The Central or State Government can
use the invention or its process for its own purpose either with or without royalty.
Exclusive Licenses and Limited Licenses:
Depending upon the degree and extent of rights conferred on the licensee, a license may be
Exclusive or Limited License. An exclusive license excludes all other persons including the
patentee from the right to use the invention. Any one or more rights of the patented invention
can be conferred from the bundle of rights owned by the patentee. The rights may be divided
and assigned, restrained entirely or in part. In a limited license, the limitation may arise as to
persons, time, place, manufacture, use or sale.
Express and Implied Licenses:
An express license is one in which the permission to use the patent is given in express terms.
Such a license is not valid unless it is in writing in a document embodying the terms and
conditions. In case of implied license though the permission is not given in express terms, it
is implied from the circumstances. For example: where a person buys a patented article,
either within jurisdiction or abroad either directly from the patentee or his licensees, there is
an implied license in any way and to resell it.
3. Transmission of Patent by Operation of law
When a patentee dies, his interest in the patent passes to his legal representative; in case of
dissolution or winding up of a company or bankruptcy transmission of patent by operation of
law occurs.
9.11 New Developments in IPR
Intellectual property rights are the rights given to persons over the creations of their minds
and give the creator an exclusive right over the use of his/her creation for a certain period of

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time. The Indian Trade and Merchandise Marks Act 1884, was the first Indian Law regarding
IPR.
The first Indian Patent Law was enacted in 1856 followed by a series of Acts being passed.
They are Indian Patents and Designs Act in 1911 and Indian Copyright Act in 1914. Indian
Trade and Merchandise Marks Act and Indian Copyright Act have been replaced by Trade
and Merchandise Marks Act 1958 and Copyright Act 1957 respectively.
In 1948, the Indian Government appointed the first committee to review the prevailing
Patents and Designs legislation. In 1957, Government appointed Justice Rajagobala
Ayyangar Committee (RAC) to revise the Patent Law. Rajagobala Ayyangar Committee
submitted its report on 1959, the report tried to balance the constitutional guarantee of
economic and social justice enshrined in the preamble of the constitution.
This report provided the process for Patenting of drugs. This report outlined the policy behind
the Indian Patent system. The theory upon which the patent system is based on, i.e., an
opportunity of acquiring exclusive rights in an invention, stimulates technical process in four
ways.
1. Encourages research and invention.
2. Induces an inventor to disclose his discoveries.
3. Offers award for the expenses of developing inventions.
4. Provides an inducement to invest capital in new lines of production which might not
appear profitable.
Based on the Rajagobala Ayyangar Committee report, a Bill was introduced in the year 1965
and the bill was passed in the Lok Sabha but it lapsed in the Rajya Sabha and once again
lapsed in Lok Sabha in the year 1966 due to dissolution of Lok Sabha. But it was
reintroduced in 1967 and passed in 1970; the draft rules were incorporated in Patent Act and
passed in the year 1971. The following steps are being suggested with particular reference to
the situation in India regarding IPR in the national policy making. Intellectual Property
Rights are patents, copyrights, trademarks, geographical indicators, protection of undisclosed
information, layout designs of integrated circuits, industrial designs and traditional
knowledge that are recognized by the Trade Related Intellectual Property Rights agreement
(TRIPS) and governed by the WTO (World Trading Organization).
9.11.1 Important IPR related matters to be addressed.
1. Constitute an integrated single window National IPR commission to deal with IPR policy
issues.
2. Integrate national technology planning with IPR and trends in international technology
trade.
3. Implement a formal national IPR literacy mission
4. Set-up IPR training institutes to prepare technically qualified attorneys
5. Introduce an enabling national taxation policy to encourage innovation 6. Building of IPR
portfolio and its utilization in technology transfer and trade
7. Urgently modernize the IPR administrative structures in the country
8. Improve infrastructure for access and effective use of IPR information.
9. Harmonize the patent classification system to ease and optimize processes in patent
searching
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10. Re-structure the judiciary and enforcement machinery for professional and speedy
response to IPR issues
11. Training of corporate and institutional managers on effective management of IPR
12. Standardize models for valuation and audit of IPR 13. Evolve national taxation polices of
development, use and transactions linked to IPR. 14. Evaluation of an International
Intellectual Property Regime
In 1998, India became a member of the Paris Convention.
In 1960 the World Intellectual Property Organization was created. It governs the Paris and
Berne Convention. In 1967 World Intellectual Property Organization (WIPO) was established
by these conventions. In 1977 World Trade Organization (WTO) was created and become an
important international organization for the development and understanding of IPR; successor
to the General Agreement on Tariffs and Trade.
9.11.2 Plant Varieties
The protection of new plant varieties is another aspect of intellectual property rights. IPR
acknowledges the achievements of breeders of new plant varieties by giving them, for a
limited period, an exclusive right. To obtain such protection, the new varieties must satisfy
specific criteria. Variety is defined as a plant grouping within a single botanical taxon of the
lowest known rank. Provided that the herb should be new or novel, distinct, uniform, stable
and have a satisfactory denomination. The organization overseeing the protection of new
plant varieties is referred to as UPOV (The International Union for the Protection of New
Varieties of Plants).
9.11.3 International Applications Filed with Appropriate Office as Receiving Office
Rule 19 requires that an international application should be filed with the appropriate
office in triplicate either in English or in Hindi language. The fees payable in respect of
an international application filed with the appropriate office shall be, in addition to the
fees as specified in the regulations under the Treaty, the fees as specified in the First
Schedule to the Patents Rules, 2003. Where an international application filed with the
appropriate office has not been filed as specified above and the applicant desires that the
appropriate office should prepare the additional copies required, the fee for making such
copies shall be paid by the applicant. The appropriate office shall, on receipt of a request
from the applicant and on payment of the prescribed fee by him, prepare a certified copy
of the priority document and promptly transmit the same to the International Bureau of
the World Intellectual Property Organisation for the purpose of an international
application filed with the appropriate office with an intimation to the applicant and the
head office.
9.11.4 International Applications Designating or designating and Electing India
Rule 20 provides that an application corresponding to an international application under
the Patent Cooperation Treaty may be made in Form 1. However, the Patent office shall
not commence processing of an application filed corresponding to international
application designating India before the expiration of the time limit of thirty one
months from the priority date. However, the Patent Office may, on express request filed
in Form 18 alongwith the fee specified in First Schedule, process or examine the
application at any time before thirty one months from the priority date.
An applicant in respect of an international application designating India shall, before
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the prescribed period pay the prescribed national fee and other fees to the patent office
in the prescribed manner; and where the international application was either not filed or
has not been published in English, file with the patent office, a translation of the
application in English, duly verified by the applicant or the person duly authorized by
him that the contents thereof are correct and complete.
In terms of Rule 20(5) the translation of the international application should include a
translation in English of the description; the claims as filed; any text matter of the
drawings; the abstract; and in case the applicant has not elected India and if the claims
have been amended under Article 19, then the amended claims together with any
statement filed under the said Article; in case the applicant has elected India and any
amendments to the description, the claims and text matter of the drawings that are
annexed to the international preliminary examination report.
If the applicant fails to file a translation of the amended claims and annexures as above,
even after invitation from the appropriate office to do so, within a time limit as may be
fixed by that office having regard to the time left for meeting the requirements, the
amended claims and annexures shall be disregarded in the course of further processing
the application by the appropriate office. The applicant in respect of an international
application designating India is required to use Forms set out in the Second Schedule
before the appropriate office as designated office.
9.11.5 Filing of Priority Document
Rule 21 provides that where the applicant in respect of an international application
designating India has not complied with the requirements of paragraph (a) or paragraph
(b) of rule 17.1 of the regulations under the Treaty, the applicant shall file with the
patent office the priority document referred to in that rule before the expiration of the
specified time limit. Where priority document is not in the English language, an English
translation thereof duly verified by the applicant or the person duly authorized by him
shall be filed within the specified time limit. Where the applicant fails to comply with
the requirements as above, the appropriate office shall invite the applicant to file the
priority document or the translation thereof, as the case may be, within three months
from the date of such invitation, and if the applicant fails to do so, the claim of the
applicant for the priority shall be disregarded.

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Summary
• A patent is a temporary monopoly granted by a government to exclude others
from using, making, or selling an invention. Patent law is intended to balance an
incentive for invention with the free dissemination of information.
• Utility patents are the central element of the intellectual property for most
technology- based product development efforts.
• An invention can be patented if it is useful, novel, and nonobvious.

• The final invention that is patented is defined by the patent claims. The rest of
the patent application essentially serves as background and explanation in
support of the claims.
• We recommend a seven-step process for pursuing a patent:

1. Formulate a strategy and plan.

2. Study prior inventions.

3. Outline claims.

4. Write the description of the invention.

5. Refine claims.

6. Pursue application.

7. Reflect on the results and the process.

• Provisional patent applications and patent cooperation treaty (PCT) applications

can be used to minimize the costs of pursuing patent protection while preserving
all future options.

SELF-ASSESSMENT QUESTIONS
Short Answer Questions
1. Define intellectual property.
2. What are the forms of intellectual property?
3. What is a patent?
4. What is patent information?
5. List the purpose of patents.
6. Define ordinary application.
7. Define convention application.
8. Define PCT invention application.
9. What does the Indian Patents Act mention?
10. Briefly tell us about the history of patent law in India.
11. What are the benefits of viewing and reading about already existing patens?
12. How are patents classified? Give examples.
Long Answer Questions
1. What is the need of intellectual property?
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 Product and Types of Products

2. Briefly explain PCT-National Phase Application.

3. What do you mean by the PCT treaty?
4. What are the types of patent application in India?
5. What are the important features of a patent right?
6. What do you mean by new developments and international patent law?
7. What do you mean by patent ownership and transfer?
8. Find a patent number on a product that interests you. Look up the patent using an
online reference tool.
9. Draft a claim for the self-stick notepad invention marketed by 3M Corporation as the
Post-it note.
10. Generate one or more product concepts that are very different from the Coffin and
Sorensen inventions to address the problem of handling a hot coffee cup and that
don’t infringe the Coffin and Sorensen patents.
11. Controversy erupted in 1999 when the J.M. Smucker Company sued a Michigan
bakery, Albie’s, for infringing on its patent by marketing a crustless peanut butter and
jelly sandwich crimped on the edges. (See U.S. patent 6,004,596.) Albie’s argued that
the patent was issued in error because the invention was obvious. Look up the Smucker
pat ent. Do you believe that the Smucker’s invention is nonobvious? Why or why not?
12. Why might an inventor describe but not claim an invention in a patent?

References
 Coffin, David W., Recyclable Corrugated Beverage Container and Holder, United
States Patent 5,205,473, April 27, 1993.
 Pressman, David, and Thomas J. Tuytschaevers, Patent It Yourself, seventeenth
edition, Nolo Press, Berkeley, CA, 2014.
 Stim, Richard, Patent, Copyright & Trademark: An Intellectual Property Desk
Reference, thirteenth edition, Nolo Press, Berkeley, CA, 2014.

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