Design to Value

The Art of Unlocking the Hidden Value in Product Design: "

The Big Idea

Because they lack the ability to evaluate and make effective design trade-offs, companies often fail to capture full value from their innovation investments. Unlocking the hidden value in product design requires managers to focus on both cost and value early in product development.

Decisions early in the design process lock in more than 80 percent of a product’s value and cost. A structured, data-based approach to these decisions can create substantial value. To implement such an approach, managers need to know how to make decisions involving trade-offs among such factors as product cost, supply chain complexity, customer value, development cost, and time-to-market. Specifically, they need to know how changing any of these factors will affect other factors.

A number of design approaches can be used to lower product costs, including: 1) intelligent specifications; 2) design-driven cost reductions; 3) increased commonality and design reuse; and 4) product architecture planning. In order to make objective trade-offs between cost and value, a means to quantify the impact of design choices on customer value is needed. Established methodologies like QFD, Conjoint Analyses, and Pugh Matrices make it possible to provide the objective linkages between design and value.

Ideally, every design choice is cost-engineered bottom-up and decided relative to the expected impact on customer value. It is possible to encourage better decisions merely by making the impact of specific design choices visible.

The Case

A leading consumer products company had cut costs in response to stiff pricing pressure, but its pipeline of new ideas was drying up. Competitors were churning out new products and product extensions. The company needed to innovate economically, but did not understand how design choices affected customer value and total cost — in part because the design process did not include such critical functions as supply chain, operations, and sales.

Booz Allen Hamilton worked closely with a cross-functional client team to build a comprehensive cost model. Concurrently, the team worked with sales and marketing to develop a standard process making customer needs and preferences a design priority. The process achieved both cost reduction and value improvement. Finally, a governance model defined a formal organizational structure, roles and responsibilities, and performance measures for designing to value.

Overall the program more than doubled the client’s rate of cost reduction and in numerous cases yielded product improvements that increased customer value. After a very successful pilot period, the proven returns of the process led the company’s executive team to formalize the new organization and funding. Over a year later, the process continues to gain momentum.

The Application

Design to Value is not a one-time improvement effort, but rather an ongoing, systematic approach to profit improvement. Design-to-Value principles apply not just in new product development, but to existing products as well. It is inherently a cross-functional effort and may require a rethinking of functional roles, responsibilities, and incentives. Integration of suppliers is critical to optimizing choices for the extended value chain. Booz Allen has substantial experience with clients across various industries in improving Design-to-Value capabilities. A typical project would have five phases and last approximately four months."