Hypothesis Case Study 6: Hypothesis-testing practice-oriented research

We wanted to represent this expertise in a computer model of this firm’s product development process and of the market in such a way that we would be able to: 1. generate scenarios with different percentages of components of new products, for which standard designs were reused, in order to estimate the degree to which a shortening of the development process would occur, and 2. generate scenarios with different timings of the introduction of new products, as well as the attractiveness and price of these products, in order to estimate the resulting market share. We would then determine what level of reuse of standard designs would be required in this firm to produce new products of sufficiently high attractiveness, and at sufficiently low cost, for introducing them at a sufficiently low price to the market, at the right moment. Finally, we would deduce from our model of the development process of new products whether the required level of operations flexibility was pres- ent in this firm.

11.2.3 Measurement

We first explored the firm’s situation by arranging a “focus group” con- sisting of two senior managers from the functional area of product development. Although these two managers belonged to a single func- tional area, their background was different. The expertise of one was in marketing, whereas the expertise of the other was in technology development. Because they also knew other functional areas of the organization very well, they were able to represent those areas with an integrative view. We had meetings with this small group in a relaxed and informal setting in which we could optimally tap their knowledge and expertise. In the group sessions, we explored the nature of the market as well as the kind of competencies required from different functional areas. It was discussed whether the new product strategy of the firm was technology driven or market driven. An inventory was made of the activities in this company that are involved in creating, producing, and marketing new products. In a second stage of exploration, information was collected from vari- ous team leaders of product development projects, and from managers in marketing and technology development. We also reviewed relevant documents and publications concerning production attributes, tech- nology, product portfolio, and market position of competitors, as well as their competencies. Subsequently, in group discussions with team leaders a description of the development process of new products for one of the firm’s product groups was generated, in which it was specified how much time this firm usually spends in different stages of the devel- opment process and what are the determinants of the duration of each phase. This information about the current situation regarding this type of product was modelled in a computer simulation model Janszen, 2000. In a next step, the input from the interactive sessions with the focus group and the information collected from team leaders of different product development projects, from managers of functional areas, and from the firm’s documents, were used to estimate the effects of increased levels of reuse of standard designs on the duration of the development of new products in this product group. These estimates were discussed with team leaders and evaluated as realistic. In a similar way we developed, with the firm’s experts, a model of how the market share in this group of products is influenced by time of introduction, price, and attractiveness. Similarly, we developed scen- arios with different times of market launch, different levels of attrac- tiveness, and different price levels in order to estimate resulting market share in a manner deemed realistic by the firm’s experts.

11.2.4 Data analysis

We developed seven scenarios with different degrees of reuse of standard designs in new products, varying from 0 per cent to 30 per cent of the components of the new product. Figure 11.1 shows the annual sales volume in each of these seven scenarios. These results show that the annual sales volume could be increased by circa 50 per cent by reusing standard designs for up to 30 per cent of the components. 10 20 30 40 500 1,000 1,500 Percentage reuse sales volume a year x1,000 Figure 11.1 Effect of percentage reuse on sales volume a year