Lean Design - Excerpt from book by Ron Mascitelli (5)

Section 3.1 - The Product Line as a "System"
(Note that only the first seven pages of this section are presented here - the entire section is available as a downloadable PDF file)

        You’ve volunteered to coach a youth soccer team and you’re determined to lead your kids to victory. What should your training strategy be? Should you focus on each team member’s individual skills, or emphasize teamwork and cooperation? Is it best for one or two superstars to carry the team, or should you try to balance each member’s abilities so that no one person dominates the game? The problem with sports analogies like this one (for which I refuse to apologize) is that the reality of competition rarely supports the great “lessons” we are supposed to learn from them. Clearly, I am trying to build a case for teamwork and cooperation. Yet plenty of successful sports franchises have been built around a single superstar player, and teams that are loaded with talent often win championships without much teamwork.
        The same is true in business (see, there was a reason for the analogy after all). There are many firms that have been supported for years by one or two “superstar” products. Pharmaceutical manufacturers are an excellent example. One breakthrough drug can sustain a firm through years of failed new product attempts. Likewise, businesses that are well-positioned in a hot market have little need for “cooperation” among their products. If margins are high enough and demand is strong enough, a bit of inefficiency can easily be absorbed. Many high-tech firms fall into this category, including telecoms, semiconductor fabricators, software designers, and so on.
        Now, here’s my long awaited point. You might win at sports with one or two superstars, and you might win with a bunch of talented but uncooperative individual contributors, but you will win if you have both talent and cooperation. In business, you can manage to keep the doors open with one or two profitable products, but why not thrive and flourish by embedding cooperation and synergy into your product design strategy? The most dramatic opportunities for your firm to boost overall profits require that you treat your entire line of products as a profit-maximizing system. To accomplish this, however, you must first learn the art of systems thinking.

A Holistic Approach to Design

        There are some words in the English language that we use every day but have no idea what they really mean. The word “system” is an excellent example. There are laundry-cleaning systems, and computer systems, and sewer systems, and even shaving systems, so evidently these things are everywhere. But what makes a system a system? Well, there are, in fact, several specific criteria that must be met for something to truly be a system (despite what some advertisements might lead you to believe). First of all, a system must consist of more than one element or component. Second, a system must perform at least one function that cannot be accomplished without cooperation among its elements. Finally, the system must receive some form of feedback, meaning that the way in which the world interacts with the system must in some way influence how the system behaves, as shown in Figure 3.1. If these three criteria are met, then you’ve got a system on your hands. Hence, for a laundry detergent to be a real system, it must: a) consist of more than one type of cleaning agent, b) be able to clean certain types of laundry only if these multiple cleaning agents work together synergistically, and c) react in some way to the type of dirt being removed.
        Somehow I can’t picture a group of advertising executives sitting around a table ticking off these three criteria before approving an advertisement that uses the word “system.” Yet for our purposes, these criteria are critical, because true systems have some predictable behaviors that can help us make more money. Picture in your mind every product that your firm produces (or at least all products within a business unit). If managed properly, this suite of products can constitute a system for profit maximization, or they can remain a bunch of isolated loaners that gain no benefit from their brethren.
        For a product line to behave like a system, it must meet our three criteria. First, there must be more than one product in the line. Ok, that one is probably fairly easy. Next, the various products within the product line must work together synergistically to accomplish the function of the system. Since the function that we have defined for our system is to make maximum profits, the products within your firm must somehow be working together to increase profitability. This one is a bit harder, n’est pas? Luckily, the final criterion is also relatively easy. The feedback for a product-line system comes from the sales and profit dollars generated in the marketplace. A negative or positive response from the market is detectable almost immediately, and provided that the system reacts to this feedback (such as by changing the type of products offered), we are in good shape.
        So how do we meet criterion number two? Suppose, for example, that our current products each use their own unique set of fasteners. If we could define a common fastener that would work for all of our products, we would increase our profits across the board. Why, you ask? Because we could purchase the common fastener in higher volumes (there-by gaining quantity discounts), and we would have fewer parts in our inventory that need to be purchased, received, inspected, counted, stored, moved, etc. As trivial as this example may seem, the cost savings that can be derived from parts-count-reduction initiatives can be dramatic.
        There are a number of other ways in which multi-product synergies can help maximize profits, as shown in Figure 3.2. In almost every case, some form of commonality is involved. Common parts, as mentioned above, are only the beginning. How about common capital equipment, shared workcells, common raw-material stock, standardized testing and inspection, and so on? In fact, an ideal product line would consist of products that are virtually indistinguishable from a manufacturing standpoint. The problems they solve might be very different, but there are huge economies of scope among them. To accomplish this, however, we must do some things that may seem counterintuitive.
        For example, we may need to actually increase the cost of one product to capture significant savings across our entire product line. Suppose we have ten products within a product line and eight of them require enclosures made of stainless steel. The other two products are lower-priced models that can be sold with just a painted metal enclosure. It would increase the cost of the low-priced models to use stainless steel instead, but overall it might be cheaper than maintaining an inventory of plain sheet metal and a painting facility that would otherwise be unnecessary. We have to look beyond the superficial to see the network of synergies that lies below the surface of any product family.

Designing Product Lines Instead of Products

If your firm is well down the road toward a lean enterprise, you may have considered abandoning those stogy old functional departments in favor of “value-stream teams.” A value-stream team sounds fancier than it really is; it is simply a cross-functional team that includes all skills needed to design, develop, launch, manufacture, and support an entire product line. These value-stream teams take the place of traditional functional departments and can improve operating efficiency considerably…provided that you survive the transition. Although there is merit to the BIG-THINK approach of reorganizing entire business units, this is a practical, little-think kind of guidebook. Hence, we will find a way to get some of the benefit of value-stream teams without the cultural and organizational turmoil.
Before I describe how this can be accomplished, a few definitions are in order:

Product Line – A product line is any collection of products that have a common configuration, market segment, technology, or some other logical similarity.

Product Platform – A subset or portion of a product that is common to multiple models (or versions) within a product line. Traditionally, platforms have been thought of as nearly finished products that have not yet received the customization that differentiates the various models. In the sections that follow, I will demonstrate how taking a much broader view of platforms can yield substantial cost savings.

Product Family – Similar to a product line, but often the commonality involved is in how the products are manufactured.

Line Extensions – These are models within a product line that have been added to capture new subsegments of the target market. Often a line extension is a relatively minor modification of an existing product within the line, such as offering a new color, size, or other superficial change.

Product-Line Roadmap – A strategic guide to the future of a product line. The hori-zonal axis represents time (typically in years), while the vertical axis represents the segments of the market that will be targeted. A product-line roadmap helps designers see opportunities to merge functions, provide for future extensions, implement low-cost customization, and other cost-saving measures that require some visibility into a product-line’s future.

        Armed with these definitions, we can introduce a new lean design tool; the Product-Line Optimization Team (PLOT), as described in Figure 3.3. The PLOT (god I love that acronym) is an ad hoc team that comes together for a specific purpose; to advise design teams on ways to capture multi-product cost savings. The PLOT consists of representatives from each critical design area, along with manufacturing, marketing, and possibly others. The goal is to establish a group that can visualize cross-product-line opportunities, so use your own judgment. Keep the membership relatively low (five to ten people is a good range) so that consensus is at least a possibility. Members should be explicitly identified, notified, and given basic instructions in the process that I will describe below. The team should come together whenever a new product design project is initiated, and will typically exist for only one day on each project. Just a quick infusion of great cost-saving ideas, without any muss, fuss, or waste.
        Upon the invitation of the project leader, a PLOT meeting is called at the beginning of each new product development project. A sample agenda and invitee list for such a meeting is shown in Figure 3.4. The duration of the meeting should scale to the complexity of the product; for single-function products a few hours should be plenty, whereas for major systems products, such as aircraft and automobiles, a week or more might be warranted. A standardized process is followed, based on a checklist such as the example provided in Figure 3.5. After pleasantries, the PLOT works its way through the checklist. For each cost-improvement opportunity, a brief brainstorming session is held to harvest ideas for cross-product-line cost savings. These suggestions are then rank-ordered by the team, based on two factors: potential impact on product-line profitability and ease of implementation on the current project. The entire team performs the ranking, using a 1-5 subjective scoring system. A “1” score for impact implies insignificant cost-saving potential, while a “5” score represents a major cost-improvement opportunity. For ease of implementation, a “1” score implies the idea is difficult to incorporate, while a “5” score indicates that the opportunity will require minimal time and effort. The two scores are then multiplied together (twenty-five is the highest possible total and one is the lowest) and recorded next to the appropriate idea.
        After a set period of brainstorming (which should scale to the size of the cost-saving opportunity), the PLOT moves on to the next item on the checklist until it is completed. The opportunities that receive the highest total scores are gathered up and provided to the new product design team as recommendations for action. It should be left to the design team to evaluate the practicality of each high-ranking suggestion and to validate its potential cost savings. It is not a good idea to require that PLOT-team recommendations be mandatory for design teams. The design team has a much more detailed knowledge of what is and is not possible for their specific product. Mandatory actions from a PLOT meeting would likely result in lots of wasted time chasing down rabbit trails just to prove that an idea is a turkey (sorry for the mixed metaphor). It is, however, entirely reasonable to consider incentivizing a design team to incorporate one or more product-line cost improvements into their product. What these incentives consist of depends on your culture, but I’ve found that money works quite well.