THE MODEL OF PRODUCT DEVELOPMENT

THE MODEL OF PRODUCT DEVELOPMENT 

A production process is the system of process equipment, work force, task specifications, material inputs, work

and information flows, etc. that are employed to produce a product or service. The basic idea underlying the proposed model of process development is that as a production process develops over time toward levels of improved output productivity, it does so with a characteristic evolutionary pattern: it becomes more capital intensive, direct labor productivity improves through greater division of labor and specialization, the flow of materials within the process takes on more of a straight line flow quality (that is flows are rationalized), the product design becomes more standardized, and the process scale becomes larger. Productivity gains result from concurrent and often incremental changes in these several variables, some of which are stimulated by changes in the market, external to the firm (i.e. volume and product standardization) and some of which arise from within the firm.

As a process continues to develop toward states of higher productivity through incremental changes in these factors, a cumulative effect is achieved that significantly alters the overall nature of the process.

Research on the product life cycle has started from the perspective of treating product characteristics as the unit of analysis, and several studies have shown a relationship with changing process characteristics. Studies of major products (petrochemicals, automotive, electronics) in international trade have demonstrated a consistent pattern [15].

Performance-maximizing. In the early phases of the product life cycle the rate of product change is expected to be rapid and margins to be large. A firm with a performance-maximizing strategy might be expected to emphasize unique products and product performance, often in the anticipation that a new capability will expand customer requirements. Performance-maximizing firms would be expected to rely more heavily on external sources of information, and on more diverse sources of information than would others. The critical insight for innovation is often obtained by identifying the relevant product requirements rather than in new scientific results or advanced technology.

Sales-maximizing. As experience is gained by both producers and users of a product, market uncertainty will be correspondingly reduced. We might expect a greater degree of competition based on product differentiation with some product designs beginning to dominate. Sales-maximizing firms would tend to define needs based on their visibility to the customer. Innovations leading to better product performance might be expected to be less likely, unless performance improvement is easy for the customer to evaluate and compare. The reduction in market need uncertainty, with greater diffusion of product use enables increased application of advanced technology as a source of further product innovation. At the same time forces that reduce the rate of product change and innovation are beginning to build up. This stage of product innovation roughly corresponds to the segmental stage of process evolution. Process changes will largely be stimulated by the demand for increased output and these may tend to be discontinuous (or major) process innovations that involve new methods of organization and product design as well as production.

Cost-minimizing. As the product life cycle evolves product variety tends to be reduced and the product becomes standardized. Then as a progression the basis of competition begins to shift to product price, margins are reduced, the industry often becomes an oligopoly, and efficiency and economies of scale are emphasized in production. As price competition increases production processes become more capital intensive and may be relocated to achieve lower costs of factor inputs. Relocation may shift capacity overseas. ~ The prospects for high rates of market and organizational growth from radical innovation, either product feature improvement or cost reduction, is not appreciable. Unfortunately the pay-off required to justify the cost of change is large while potential benefits are often marginal. Innovations will typically be developed by equipment suppliers for whom the incentives are relatively greater and adopted by the larger user firms [5].

The pattern of relationships between a segment's stage of development and innovation can be conceptualized as shown in Fig. 1. Changes in frequency of innovation are shown on the vertical axis and related to the stage of process and product development on the horizontal axis. A firm which does pursue the evolution of its process segment to the extreme however may find that it has achieved the benefits of high productivity only at the cost of decreased flexibility and innovative capacity. It must face competition from: innovative products that are produced by other more flexible segments that are more capable of substituting products, foreign imports, competing products from other industries with high cross-elasticity of demand, or process changes by customers to eliminate the product directly [2]. In other cases it may not be possible to achieve progression because of certain barriers or from a strategic point of view the firm may find it advantageous to inhibit progression by maintaining a high rate of product or model change. Any of these considerations may alter the path of procession for a particular segment without necessarily changing the relationship among the characteristics of strategy, innovation and process development, exhibited at a given stage for a given process segment.

 Fig1. Innovation and stage of development. 

FIG.I.

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