A new strategy for product development
The design-to-value (DTV) model for product development has become popular in recent years, more for its promise than its results. DTV theoretically provides a framework for manufacturers to cut costs in certain procurement and design areas that least affect the value of the product while adding features that customers want. In reality, though, at most companies the structure of the organization — particularly its product development flow chart — and the corporate culture are not equipped to fully embrace the benefits that DTV potentially provides
At most manufacturers, product development is in the hands of isolated silos, separate functions with disparate priorities that are unable to communicate well with each other. As a result, companies fail to realize the full potential of their products in terms of cost, features, life cycle, market share, profits, and customer loyalty — and they forfeit critical short- and long-term earnings in the process.
To avoid the shortcomings of design-to-value implementations, a different approach is needed — a method that Strategy& calls holistic value design. This framework for product development success emphasizes the management of product cost and value across the organization during the development process. Holistic value design is a multidimensional, multifunctional approach to product development that offers pivotal pathways for procurement, design, engineering, and manufacturing to collaborate in driving the most effective outcomes in product development activities.
To do this, holistic value design takes into account a product’s performance, features, and recurring and nonrecurring costs as well as other essential attributes such as weight, life cycle, carbon footprint, and brand value, which helps organizations use product development tools and make product development decisions. The holistic value design framework typically leads to higher customer value for the same production costs or sales price, or lower costs and higher profitability for the same customer benefits.
For many companies, product development efforts have seemed too complex to fix — and as a result, they have settled for less than advantageous outcomes. In slow-moving markets, it may be possible to get away with one-dimensional, non-collaborative approaches to product production, hoping that customer loyalty will maintain sales and that competition will not impact results. In virtually every industry today — as digitalization, more rapid innovation, and a greater number of consumer channels are taking hold — this relative passivity toward product design is not workable. Profits and market share depend on a more holistic, cross-functional, and even aggressive embrace of tools and frameworks to manage costs, materials, designs, assembly, and brand augmentation for products throughout their life span. Anything less cedes market position to rivals.