Product design, development and
value analysis MM523
Dr. David Kinahan
Risk management
－A process whereby decisions are made
to accept a known or assessed risk
and/or the implementation of actions to
reduce the consequences of
occurrence.
Risk
Assessment of risk needs to examine
the following two aspects of failure
1. Probability of failure
2. Consequences of failure
Consider these in relation to jumping
a ditch:
－Probability of failure = f(width).
－Consequence of failure = f(depth)
Risk types
－Environmental
－Oil
－Sewage
－Personal health and safety
－using equipment
－work conditions
－Software data handling systems
－Failure
－Hacking / Security
－Investment
－Technological
－Competitor has advantage
－Marketing
－Commercial
－Insurance costs
Choice of project or design
idea for development
－All risk types can effect the choice of
best project or design idea.
－While staying within regulations and
maintaining a good company profile,
maximising the return on investment
(ROI) is a key objective for a company
－The project that gives the largest ratio of
income to expenditure is preferable.
Merit models
－ Provide a way to assess various
projects or design ideas
－ Can be difficult to use
－ subjective nature of attributing values to
the variables.
－ Market and technological risk are
however particularly relevant from the
product designers point of view.
Project merit model Example
(Ansoff & Stewart 1967)
－Mp = (Mt + Mb) * E * Ps * Pp * S / (Cd * J)
where:
－Mp = figure of merit,
－Mt = technological merit,
－Mb = business merit,
－E = estimated total earnings over lifetime,
－Ps = probability of success,
－Pp = probability of successful market penetration,
－S = strategic fit,
－Cd = total development time,
－J = savings factor from shared resources.
－Figure of risk
－Mr = Car / Mp = total cost / Mp
Anshof Matrix Model
• Market Penetration: Increase sales of existing product to existing market.
• Product Development: New product in existing market
• Market Development: New market with existing product.
• Diversification: New markets with new products!
Market and technology risk
－Market risk
－market requirements not identified properly
－requirements identified but not been adequately
recorded in the Product Design Specification (PDS)
－requirements have changed since initial market
assessment.
－Technology risk
－adequate technical solution not available for part of the
product’s sub-system;
－identified solution turns out to be inadequate:
－cost,
－time for development
－incompatibility, …;
－supplier fails to find a suitable solution of sub-system
*Assume management is efficient / making positive contribution
Under and over-managed projects
Undermanaged
Ideally managed
Overmanaged
Minimum production Management
development time overhead Variation from optimal
(optimal)
Product lead time
－Short lead time products are more prone to technological risk
than market risk.
－The market demand is not likely to change much in the short lead
time for many electronic goods for example.
－The rush to market however opens the possibility for technological
risk
－A smartphone will be in demand in 1 year
－A competitor may launch a phone with superior technology
－Long-lead time products where the market place / demand can
change considerably within the time period.
－An aircraft can take years to develop
－Flying in the 1950s was luxury and high-end
－Concorde development started in late 1950s
－By mid-1960s there were 64 airframes on order
－By early 1970s
－Oil crisis
－Changing demand for air-transport was for economy/lower-cost
－Only 14 aircraft went into commercial operation
－Air France
－British Airways
Evaluating risk
－Identify risk elements early on in PDP
－Includes all sub-systems in a project
－Include interfaces between sub-systems
－Assign
－technology risk factor, Rd
－consequence of failure risk factor, Rc.
－Usually range from 1 (low) to 5 (high)
－Overall risk, R = Rd Rc (ranging from
1 to 25).
Risk map – Boston matrix
Eliminate risks
in this area
Probability
of failure
Mitigate risks
in this area
Severity of failure
Risk management
－The control of risk in a project is
management’s responsibility. Management
should insure to:
- involve the key players early on;
- commence at project conception;
- identify the risks (difficulties and
consequences)
- ensure each risk has an ‘owner’;
- classify and assess the risks;
- use cost/benefit analysis to justify risk
mitigation decisions
Digital Camera Risk Factors
Assembly Sub-system Difficulty risk Consequence Risk Risk description Staff member
factor risk factor
Electronic control Auto-focus 1 4 4 Well know technology R.F.
Display 2 2 4 Know technology D.G.
Storage 2 3 6 Known technology E.G.
File manipulation 2 2 4 Know technology E.G.
Image adjustments 4 1 4 Electronic features adjustments may take too E.G.
much memory
Memory Card 1 3 3 Well know technology R.F.
Connection to CCD chip 3 3 9 Complicated to perform in real time. R.F.
Technology not currently available in-house
Connection to external download 1 5 5 Well know technology R.F.
Lens system Eyepiece 1 1 1 Well know technology O.C.
Focusing lens 1 3 3 Well know technology E.F.
Focusing system 1 3 3 Well know technology E.F.
LCD display Screen protection 1 2 2 Well know technology A.S.
Interface to electronics 1 4 4 Well know technology D.G.
Power supply Four day continuous operation 4 2 8 Latest battery technology needs to be B.M.
researched
Internal battery interface 1 2 2 Well know technology B.M.
External battery interface 1 2 2 Well know technology B.M.
External mains supply 1 5 5 Well know technology B.M.
Risk management
－Outcome of R&D is in general difficult to predict
－Therefore the PDP should wherever possible use
outcomes from already completed R&D projects
－Existing technology and standard parts should be used.
－Limit new untried technologies to sub-systems where
there is a proven alternative readily available.
－Critical if project has a tight schedule
－Pay greater attention to higher risk factors
－Model and assess the proposed solution as soon as
possible
－Physical models have the secondary advantage of
enabling customer feedback to be obtained.
Product value analysis
－Objective of maximising profit is sustained
by increasing demand.
－The customer must therefore perceive the
product to be good value.
－Good value
－lower cost
－desirable features
－high quality
－Reliability
－Value = Trade-off of Cost vs Features
In product value analysis we only consider features that
the customer perceives as important!
Function / Component
－Value of individual Features / Functions can be
assessed
－Air conditioning in a car
－The functions are next related to the product
components.
－A function / component interaction chart is useful for this.
－Cost of producing a component can now be divided
between the functions that it contributes to.
－A cost attribution chart facilitates this step.
－The value analysis matrix can now be formulated.
－This is the main tool used to present information on the cost
of providing each of the user valued functions.
• Can be subjective (especially function)
• Typically estimates
• Can be applied to a competitors product (on the same graph)
Value analysis matrix
Functions
Part Part
cost (€) cost (%)
Components (Parts)
Function cost (€)
Function cost (%) 100
Value analysis and engineering
－Value analysis is concerned with the
application of value improvement techniques to
existing products.
－Useful tool for benchmarking against competitors
products with respect to cost and functionality.
－Value engineering applies these principles
during the product concept phase.
－Less information is generally available in this case.
－Value engineering study and risk analysis provides
basis on which concept related decisions can be
taken.
－Early decisions to ensure a product offers value!
Difficulties with the value
assessment
－A cost of a critical part may need to be
divided between all functions of a sub-
system.
－Attributing a cost to quality (or implied
quality) might not be easy
－Highly subjective
－The cost of aesthetics (an item which can
be included in the value analysis matrix)
can be difficult to distinguish from the
production of the product housing for
example.
