To reach your goalTo reach your goalyou must take the first stepyou must take the first step

There is only one boss.There is only one boss.

The The CUSTOMER!CUSTOMER!

And he can fire anyone in the And he can fire anyone in the company from the chairman oncompany from the chairman ondown, simply by spending hisdown, simply by spending hismoney somewhere else.money somewhere else.

SAM WALTONSAM WALTON

• 96 % don’t complain about rude or discourteous service.

• 90 % will not buy again or come back.

• Each will tell at least 9 other people.

• 13% will tell more than 20 people.

• 96 % don’t complain about rude or discourteous service.

• 90 % will not buy again or come back.

• Each will tell at least 9 other people.

• 13% will tell more than 20 people.

Tales of Unhappy CustomersTales of Unhappy Customers

Product Life CycleProduct Life CycleProduct Life CycleProduct Life Cycle

AnnualAnnualSalesSales

AnnualAnnualProfitsProfits

ProductProductPlanningPlanning

IntroductionIntroductionGrowthGrowth

MaturityMaturityDeclineDecline

Step 1

IdeaGeneration

Step 1

IdeaGeneration

The Planning ProcessThe Planning ProcessThe Planning ProcessThe Planning Process

20 -25 new ideas for 20 -25 new ideas for every new productevery new product

20 -25 new ideas for 20 -25 new ideas for every new productevery new product

Step 1

IdeaGeneration

Step 1

IdeaGeneration

The Planning ProcessThe Planning ProcessThe Planning ProcessThe Planning Process

Step 2

Screening

Step 2

ScreeningDiscard most ideasDiscard most ideasduring screeningduring screening

Discard most ideasDiscard most ideasduring screeningduring screening

Threshold is 800 - reject alternativeThreshold is 800 - reject alternative

Preference MatrixPreference Matrix

Performance Criterion Weight Score Weighted Score

Market potential 30 8 240

Unit profit margin 20 10 200

Operations compatibility 20 6 120

Competitive advantage 15 10 150

Investment required 10 2 20

Project risk 5 4 20

750

Step 1

IdeaGeneration

Step 1

IdeaGeneration

The Planning ProcessThe Planning ProcessThe Planning ProcessThe Planning Process

Step 2

Screening

Step 2

ScreeningDiscard most ideasDiscard most ideasduring screeningduring screening

Discard most ideasDiscard most ideasduring screeningduring screening

Step 1

IdeaGeneration

Step 1

IdeaGeneration

The Planning ProcessThe Planning ProcessThe Planning ProcessThe Planning Process

Step 2

Screening

Step 2

ScreeningStep 3

Developmentand Testing

Step 3

Developmentand Testing

Design prototypesDesign prototypesConduct Market testsConduct Market tests

Design prototypesDesign prototypesConduct Market testsConduct Market tests

Step 1

IdeaGeneration

Step 1

IdeaGeneration

The Planning ProcessThe Planning ProcessThe Planning ProcessThe Planning Process

Step 2

Screening

Step 2

ScreeningStep 3

Developmentand Testing

Step 3

Developmentand Testing

Step 4

Final Design

Step 4

Final Design

Pilot production,Pilot production,Promotion startsPromotion starts

Pilot production,Pilot production,Promotion startsPromotion starts

Step 1

IdeaGeneration

Step 1

IdeaGeneration

The Planning ProcessThe Planning ProcessThe Planning ProcessThe Planning Process

Step 2

Screening

Step 2

ScreeningStep 3

Developmentand Testing

Step 3

Developmentand Testing

Step 4

Final Design

Step 4

Final Design

BREAK EVEN ANALYSISBREAK EVEN ANALYSISBREAK EVEN ANALYSISBREAK EVEN ANALYSIS

Total Revenue = Total CostTotal Revenue = Total Cost

P P = = FF + c+ c QQ

( P - c )( P - c )

QQ

QQ = = FF

QQ( P - c )( P - c )

= = FF

bebe

.. ..

Total annualrevenues

Total annualcost

Fixed Cost

Dollars400

300

200

100

25% 50% 75% 100%

Loss

Profit

Break-evenquantity

% of capacity

Total annualrevenues

Total annualcost

Fixed Cost

Dollars400

300

200

100

Break-evenquantity

% capacity

25% 50% 75% 100%

Total Cost

of B

Dollars

20000

15000

10000

5000

5000 10000 15000 20000

Break-evenquantity

units = Qunits = Q

Total CostTotal Costof Aof A

$70000 + $10 x = $50000 + $12 x

$20000 = 2 x $10000 = x = Breakeven

Product QualityProduct Quality

Reliability: Probability that a component (or several components working together) will function properly for a given period of time.

ReliabilityReliability

Reliability of System = Combined Reliabilities of all components

or mathematically, R = R x R x R 1 2 3s

R = .9 x .8 x .99 = .713 = 71.3%s

.9 .8 .99

ReliabilityReliability

R = .9 + .9 (1 - .9) x .8 + .8 (1 - .8) x .99 = .94 = 94 %s

.9 .8 .99

If the system reliability is too low, we can improve it by building in redundancy in some or all of the components.

.9 .8

Product/Process MatrixProduct/Process MatrixProduct/Process MatrixProduct/Process Matrix

ProcessProcessFocusFocus

IntermediateIntermediateStrategyStrategy

ProductProductFocusFocus

Volume/StandardizationVolume/Standardization

ProcessProcessChoiceChoice

HIGHHIGHLOWLOW

Product/Process MatrixProduct/Process MatrixProduct/Process MatrixProduct/Process Matrix

ProcessProcessFocusFocus

Volume/StandardizationVolume/Standardization

ProcessProcessChoiceChoice

HIGHHIGHLOWLOW

More customizationMore customizationMore resource flexibilityMore resource flexibilitymore labor intensivemore labor intensiveless vertical integrationless vertical integration

More customizationMore customizationMore resource flexibilityMore resource flexibilitymore labor intensivemore labor intensiveless vertical integrationless vertical integration

Product/Process MatrixProduct/Process MatrixProduct/Process MatrixProduct/Process Matrix

ProductProductFocusFocus

Volume/StandardizationVolume/Standardization

ProcessProcessChoiceChoice

HIGHHIGHLOWLOW

More standardizationMore standardizationmore capital intensivemore capital intensivemore vertical integrationmore vertical integration

More standardizationMore standardizationmore capital intensivemore capital intensivemore vertical integrationmore vertical integration