Design for Six Sigma

for Service
Other Books in the Six Sigma Operational Methods Series

⋅
Michael Bremer Six Sigma Financial Tracking and Reporting
⋅
Parveen S. Goel, Rajeev Jain, and Praveen Gupta Six Sigma for Transactions
and Service
⋅
Praveen Gupta The Six Sigma Performance Handbook
Thomas McCarty, Lorraine Daniels, Michael Bremer, and Praveen
⋅
Gupta The Six Sigma Black Belt Handbook
⋅
Alastair Muir Lean Six Sigma Statistics
⋅
Andrew Sleeper Design for Six Sigma
Design for Six Sigma
for Service

Kai Yang, Ph.D.

Department of Industrial and
Manufacturing Engineering
Wayne State University
Detroit, Michigan

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CONTENTS

Preface vii
Acknowledgments xi

Chapter 1. Six Sigma in Service Organizations 1

1.1 Introduction to the Service Industry 1

1.2 Success Factors for Service Organizations 6
1.3 Overview of Six Sigma 12
1.4 Six Sigma for Service 21

Chapter 2. Design for Six Sigma Road Map for Service 25

2.1 Introduction 25
2.2 Why Use Design for Six Sigma in the Service Industry? 27
2.3 Design for Six Sigma Phases for Service Product 30
2.4 Design for Six Sigma Phases for Service Process 42

Chapter 3. Value Creation for Service Product 47

3.1 Introduction 47
3.2 Value and Its Elements 48
3.3 Maximize Customer Value by Service Product Design 55

Chapter 4. Customer Survey Design, Administration, and Analysis 57

4.1 Introduction 57
4.2 Survey Instrument Design 65
4.3 Administering the Survey 72
4.4 Survey Sampling Method and Sample Size 73

Chapter 5. Customer Value Management 83

5.1 Introduction 83
5.2 Market-Perceived Quality Profile 84
5.3 Market-Perceived Price Profile 88
5.4 Customer Value Map 89
5.5 Competitive Customer Value Analysis 94
5.6 Customer Value Deployment 94

Chapter 6. Quality Function Deployment 101

6.1 Introduction 101

6.2 History of QFD 103
6.3 QFD Benefits, Assumptions, and Realities 103
6.4 QFD Methodology Overview 104
6.5 Kano Model of Quality 111
6.6 QFD Analysis 112
6.7 Example 113
6.8 QFD Case Study: Yaesu Book Center 122
6.9 Summary 126

v
vi Contents

Chapter 7. Value Engineering 129

7.1 Introduction 129

7.2 Information Phase 133
7.3 Creative Phase 164
7.4 Evaluation Phase 166
7.5 Planning Phase 172
7.6 Reporting Phase 174
7.7 Implementation Phase 176
7.8 Value-Engineering Case Studies 180

Chapter 8. Brand Development and Brand Strategy 187

8.1 Introduction 187

8.2 The Anatomy of Brands 190
8.3 Brand Development 206

Chapter 9. Theory of Inventive Problem Solving (TRIZ) 227

9.1 Introduction 227

9.2 TRIZ Fundamentals 231
9.3 TRIZ Problem-Solving Process 243
9.4 Technical Contradiction Elimination and Inventive Principles 246
9.5 TRIZ Applications in the Service Industry 254
9.6 Business Inventive Principles 255
Appendix A: Contradiction Table of Inventive Principles 284
Appendix B: Business Contradiction Matrix 290

Chapter 10. Design and Improvement of Service Processes—

Process Management 299

10.1 Introduction 299

10.2 Process Basics 303
10.3 Process Types and Process Performance Metrics 311
10.4 Process Mapping 355
10.5 Lean Operation Principles 362
10.6 Process Management Procedures 377
10.7 A Process Management Case Study 380

Chapter 11. Statistical Basics and Six Sigma Metrics 393

11.1 Introduction 393

11.2 Descriptive Statistics 394
11.3 Random Variables and Probability Distributions 399
11.4 Quality Measures and Six Sigma Metrics 405

Chapter 12. Theory of Constraints 413

12.1 Introduction 413

12.2 Basic Concepts in the Theory of Constraints 416
12.3 Theory of Constraints Implementation Process 421
12.4 Change Management 427

References 431
Index 437
 PREFACE

Six Sigma is the fastest-growing business management system in industry

today. It has been credited with saving billions of dollars for companies over
the past 10 years. Developed by Motorola in the mid 1980s, the methodology
became well known only after Jack Welch from GE made it a central focus
of his business strategy in 1995. In the last few years, the Six Sigma
movement started spreading from manufacturing industries into various
service sectors, such as banking, insurance, hospitals, schools, and many
other service organizations. Many service organizations that implemented
Six Sigma reported huge successes.

One of the new developments in Six Sigma is Design for Six Sigma (DFSS).
DFSS is a systematic methodology that uses tools, training, and project
management discipline to optimize the design process of products, services,
and processes in order to achieve superior designs to maximize customer
value at Six Sigma quality levels. In contrast to regular Six Sigma, charac-
terized by DMAIC (define, measure, analyze, improve, and control), which
emphasizes process improvement without fundamental design change,
DFSS emphasizes the importance of the design. DFSS contends that only
superior design can create products or services with high customer value,
low design vulnerability, and high quality. In recent years, DFSS is getting
more attention because of its perceived benefits.

Can DFSS be applied to the service industry? Based on the author’s

extensive research, the answer is a resounding yes.

The service industry exhibits some distinct features that are not found in the
manufacturing industry. Based on the work of Sasser, Olsen, and Wyckoff
(Sasser et al. 1978), these distinct features include:
1. Many services are intangible; they are not things like hardware.
2. Many services are perishable; they cannot be inventoried.
3. Services often produce heterogeneous output.
4. Services often involve simultaneous production and consumption.
However, no matter what type of service organizations they are, there are
three aspects of services that are detrimental to service quality and customer
satisfaction (Ramaswamy 1996):

vii

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viii Preface

Service Product Service product refers to the service output’s

attributes or the service items provided to the customers. For example,
in restaurant service, the service product includes meals, use of dining
utensils, tables, and chairs, music played if needed, and so on. In
healthcare service, the service product includes diagnosis, treatment,
and care items.
Service Delivery Process Service delivery process refers to the
process that delivers or maintains the service products for customers.
For example, in a car rental center, the service process includes all steps
needed to rent a car to renters. These steps include collecting the
driver’s license and credit card, checking car availability, filling and
printing the contract, obtaining customer signature, delivering the car
key and contract to the customer, locating the car, and so on.
Customer-Provider Interaction In a service process, there is also a
human interaction aspect, that is, the interaction between customers
and service providers. The quality of this interaction will greatly
influence customer satisfaction. For example, in the car rental
business, the representative should greet customers politely, ask
customers their preference of cars, and patiently explain all the options.

Clearly, a customer-value-based superior design and planning in a service

product will make services more attractive to customers, and therefore
attract more customers and create more revenue for service organizations.
Superior designs in service delivery processes will increase the efficiencies
of service processes and reduce cost, and therefore increase the profit for
service organizations. Excellent designing, planning, and managing of
customer-provider interactions will also certainly improve customer satis-
faction level and will help to retain customers.

The primary objective of this book is to provide a systematic framework for

implementing DFSS in various service industries. From the above dis-
cussion, it is clear that DFSS in the service industry should support the
following two key activities:
1. Design and planning of service products
2. Design and management of service delivery processes

Chapter 1 of this book begins with the discussion of several key features of
service industries and key success factors for service organizations. Chapter 1
also introduces the concept of Six Sigma and how it should be implemented
in the service industry.
 Preface ix

Chapter 2 introduces DFSS and discusses how itshould be implemented in

service industries. In this book, DFSS for service includes two distinct
aspects—DFSS for service products and DFSS for service delivery process.
The DFSS roadmap for service products and DFSS roadmap for service
delivery process are discussed separately.

Chapters 3 through 9 are methodology chapters on DFSS for service

products, which discuss important methods that are useful in DFSS for
service products. Specifically, Chapter 3 discusses the concept of customer
value and how to create value by service product design. Value creation is a
key component for business success.

In order to design the services that are attractive to customers, we first need
to know “what customers want.” Chapter 4 discusses customer survey
design, administration, and analysis. The customer survey is an important
activity for obtaining the voice of customers.

Chapter 5 discusses customer value management, which is an important

technique to design the survey and obtain key information to develop service
designs that are attractive to customers and are competitive in the market
place.

Chapter 6 presents the quality deployment method (QFD), a powerful

method to guide and plan activities to achieve customer desires. QFD was
originally developed in Japan and is now widely used all over the world.
Two examples of applying QFD in service industries are presented.

Chapter 7 presents the method of value engineering. Value engineering is an

effective method of designing products or services that can satisfy design
objectives, yet minimize cost.

Chapter 8 discusses brand development and brand strategy. The success of

a service organization is largely dependent on its brand image and customer
opinion. Designing of a service product should be consistent with its desired
brand image.

Chapter 9 presents the theory of inventive problem solving (TRIZ), which

was developed in the former Soviet Union. TRIZ is a very powerful method
that makes innovation a routine activity. TRIZ was first developed for
technical innovation. Recently, there have been some good extensions of
TRIZ into business innovation practices. This chapter will start with general
discussions of TRIZ, followed by TRIZ practices in service industries.
x Preface

Chapters 10 and 12 are methodology chapters on DFSS for service

processes. Chapter 10 gives a very comprehensive discussion of service
process design and improvement. All service delivery processes can be
classified into the following 10 categories as follows:
• Office processes
• Service factory
• Pure service shop
• Retail service store
• Professional service
• Telephone service
• Project shop
• Transportation service
• Logistics and distribution
• Purchasing and supply chain
In this chapter, we discuss each of these processes in detail, and present
many effective process diagnosis, design, and improvement methods, such
as value stream mapping and lean operation principles. A detailed service
process redesign case study is presented at the end of this chapter.

Chapter 12 discusses the theory of constraint, which is an excellent method

to analyze and improve service processes in an efficient manner.

Chapter 11 is a reference chapter, which provides the necessary statistical

background for service DFSS practitioners.

This book presents DFSS for the service environment in a very clear way and
provides practical guidance for Six Sigma practitioners in service industries.

Kai Yang
 ACKNOWLEDGMENTS

In preparing this book I received advice, help, and encouragement from

several people. I would like to thank Dr. O. Mejabi, who helped me in writing
on service process management and preparing a good case study. I would
also like to thank David Reeve for his help in the value engineering area and
Dr. Rajesh Jugulum and Dr. Jayant Trewn for their valuable input.

Readers’ comments and suggestions would be greatly appreciated. I will

give serious consideration to your suggestions for future editions. Please
contact me at: ac4505@wayne.edu; kyang@simplexsystems.com; http://
simplexsystems.com/LeanPD.htm. Also, I am conducting public and in-house
Six Sigma and DFSS workshops and provide consulting services.

xi

Copyright © 2005 by The McGraw-Hill Companies, Inc. Click here for terms of use.
ABOUT THE AUTHOR
Kai Yang, Ph.D., has wide experience in quality and reliability
engineering. The Executive Director of Enterprise Excellence
Institute, a renowned quality engineering organization based in
West Bloomfield, Michigan, he is co-author of the influential
Design for Six Sigma: A Roadmap for Product Development.
He is also Professor of Industrial and Manufacturing
Engineering at Wayne State University, Detroit.

Copyright © 2005 by The McGraw-Hill Companies, Inc. Click here for terms of use.
 Chapter

Six Sigma in
1
Service Organizations

1.1 Introduction to the Service Industry

Entities in the service industry are called service organizations. Many service
organizations are profit-earning business enterprises, such as restaurants,
hotels, and retail stores; some service organizations are nonprofit organi-
zations, such as universities and post services. In any service organization,
however, one or more kinds of services are provided to customers. The
service industry exhibits some distinct features that are not found in the man-
ufacturing industry. Based on the work of Sasser, Olsen, and Wyckoff (1978),
these distinct features include
1. Many services are intangible; they are not things like hardware.
2. Many services are perishable; they cannot be inventoried.
3. Services often produce heterogeneous output.
4. Services often involve simultaneous production and consumption.
However, behind these apparent differences, there are also many simi-
larities between the manufacturing and service industries. Figure 1.1
shows a generic business operation model for manufacturing-oriented
companies.

A manufacturing-oriented company will provide one or many kinds of

products to its customers. In any manufacturing-oriented company, there
will always be a core operation, which is usually the product development
and manufacturing process. Besides the core operation, there are also many
other business processes, such as business management, financial operation,
marketing, personnel, and supplier management.

Figure 1.2 illustrates a business operation model for many service organi-
zations. In this model, the service organization has a headquarter and many

Copyright © 2005 by The McGraw-Hill Companies, Inc. Click here for terms of use.
2 Chapter One

Products

Core operation
Product development
and manufacturing

Business processes

Business management

Supplier management

Information technology

Figure 1.1 Business Operation Model for Manufacturing-Oriented Companies

branches. Each branch is a service delivery process. The service process

delivers services to customers. The services provided to customers, no matter
how intangible, can be treated as service products. For example, in the
restaurant business, the meal provided to customers and the music played
could be treated as service products; in the insurance business, the insurance
policy and processed claims can also be treated as service products. In service
organizations, usually the service delivery processes and services are closely
related; many of them are in the same place. For example, in the restaurant
business, the service delivery process includes the kitchen operation, order
taking, the hostess, and the cashier; in the insurance business, the service
delivery process includes the insurance agent, insurance policy paperwork
processing, insurance claim processing, and information systems.

Service products Service products

Service delivery Service delivery

process process

Business processes
Business management
Supplier management
Information technology

Figure 1.2 Business Operation Model for Many Service Organizations

 Six Sigma in Service Organizations 3

Of course, there are many other types of service organizations. Some service
organizations are one-shop organizations. Others, such as Amazon.com,
interact with customers mostly via the Internet. For these organizations, the
service process is centralized and the customers are everywhere in the world.
It is a “one shop for the whole world” organization. Based on the classi-
fication by Schmenner (1994), and Harrell and Tumay (1995), there are
10 kinds of service processes as follows:
1. Office
2. Service factory
3. Pure service shop
4. Retail service store
5. Professional service
6. Telephone service
7. Project shop
8. Transportation service
9. Logistics and distribution
10. Purchasing and supply chain
However, no matter what type of service organizations you look at, there are
three aspects of services that are detrimental to service quality and customer
satisfaction (Ramaswamy 1996). These are
Service Product Service product refers to the service output attributes to
the customers, or the service items provided to the customers. For example,
in restaurant service, the service product includes the meals; use of dining
utensils, tables, and chairs; and music played if needed. In health-care
service, the service product includes diagnosis, treatment, and care items.
Service Delivery Process Service delivery process refers to the
process that delivers service products to customers or maintains the
service products. For example, in a car rental center, the service process
includes all steps needed to rent a car to a customer. These steps include
collect driver’s license and credit card, check car availability, fill and
print contract, obtain customer signature, deliver car key and contract
to customer, and locate the car.
Customer-Provider Interaction In service process, there is also a
human interaction aspect, that is, the interaction between customers
and service providers. The quality of this interaction will greatly
influence customer satisfaction. For example, in the car rental business,
the representative should greet customers politely, ask customers their
car preference, and patiently explain all the options.

Table 1.1 gives a comprehensive summary of the features of service

products, service delivery process, and customer-provider interaction for
4
Table 1.1 Service Types and Service Features

Service Customer-
Service Delivery Provider
Service Type Features Examples Products Process Interaction

Office processes Sequence of Insurance, Finished Paperwork Usually happens at

(transaction paperwork, mortgage paperwork processing the beginning
process) data entries, and loan. and the end of a
and decisions transaction

Service factory Front room and Restaurant, Meals, Back room is similar Important. Usually
back room, copy centers copies, to factory. happens during the
high equipment binders whole process
requirement

Pure service shop Front room Hospitals, Diagnosis and Multiple steps; Important. Usually
and back treatments, service process happens during
room, highly repair shop, repairs, varies from the whole process
customized court rulings customer to
service customer.

Retail service Large facility, Supermarket, Selection of goods, Purchasing Usually happens at
store many choices hardware nice layouts and shipping, checkout
of goods, stores and labeling inventory and during
customer management, in-store help
self-service checkout
 Professional Usually small Tax service, Knowledge-based Each service is a Important. Usually
service number of consulting, output project, but there happens during the
experts, high architectural (documents, is a lot of whole service
cost on labor service reports, designs) customer input. process

Telephone service Telephone Call centers, Advice, Call routing, Very important
interactions, mail order center, reservations, phone system
no face-to-face technical support orders

Project shop One big project Software Software, R&D Project, long Usually happens
at a time development, discoveries, duration at the beginning
R&D projects patents possible and the end

Logistic and Ship goods from FedEx, moving Deliver goods to Routing, scheduling, Usually happens at
distribution place to place company correct sorting, book- the time of cus-
destinations keeping, all types tomer order and
without damage of transportation customer receiving

Transportation Ship people from Airlines, buses Move people to right Routing, Important. Usually
place to place place with right time scheduling, happens during
and take care of transportation the whole process
them during travel

Purchasing Purchasing and Purchasing Purchase Vendor identification Important. Usually

and supply inventory and supplier and supply parts evaluation, and happens during
keeping management and goods at right selection; the whole
department time, right price contracting, process
and firms and deliver to ordering and
right places purchasing; payment
5
6 Chapter One

10 types of service processes. More detailed discussions on service

processes are given in Chap. 10.

1.2 Success Factors for Service Organizations

For profit-earning service organizations, profitability is one of the most important

factors for success. High profitability is determined by strong sales and overall
low cost in the whole enterprise operation. It is common sense that
Business profit = revenue – cost (1.1)
In addition,
Revenue = sales volume × price (1.2)

Here price means the sustainable price, that is, the price level that customers
are willing to pay with satisfaction.

Many researchers (Sheridan 1994, Gale 1994) have found that both sales
volume and sustainable price are mostly determined by customer value. As
a matter of fact, it is customers’ opinions that will determine a product’s
fate. Customers’ opinions will decide the price level, the size of the market,
and the future trend of this product family. When a product has a high
customer value, it often is accompanied by an increasing market share,
increasing customer enthusiasm toward the product, word-of-mouth praises,
a reasonable price, a healthy profit margin for the company that produces it,
and increasing name recognition.

Sherden (1994) and Gale (1994) provided a good definition for customer
value. They define the customer value as perceived benefit (benefits) minus
perceived cost (liabilities), or specifically as
Customer value = benefits – liabilities (1.3)

The benefits include the following categories:

1. Functional benefits
a. Product functions, functional performance levels
b. Economic benefits, revenues (for investment services)
c. Quality and reliability
2. Psychological benefits
a. Prestige and emotional factors, such as brand-name reputation
b. Perceived dependability (for example, people prefer a known brand
product over an unknown brand product)
 Six Sigma in Service Organizations 7

c. Social and ethical reasons (for example, environmentally friendly

brands)
d. Psychological awe (Many first-in-market products or services not
only may provide unique functions but also give customers a
tremendous psychological thrill; for example, the first copy
machine really impressed customers)
e. Psychological effects of competition
3. Service and convenience benefit
a. Availability (ease with which the product or service can be accessed)
b. Ease of obtaining correctional service in case of product problem
or failure
The liabilities include the following categories:
1. Economical liabilities
a. Price
b. Acquisition cost (such as transportation cost, shipping cost, time
and effort spent to obtain the service)
c. Usage cost (additional cost to use the product or service in addition
to the purchasing price, such as installation)
d. Maintenance costs
e. Ownership costs
f. Disposal costs
2. Psychological liabilities
a. Uncertainty about product or service dependability
b. Self-esteem liability of using unknown brand product
c. Psychological liability of low-performance product or service
3. Service and convenience liability
a. Liability due to lack of service
b. Liability due to poor service
c. Liability due to poor availability (such as delivery time, distance to
shop)

Even for nonprofit service organizations, it is not desirable to lose money. In

addition, it is a natural goal for all service organizations to maximize customer
value. Who doesn’t want their customers to be satisfied?

Clearly, higher customer value means higher revenue, and profitability is

key for business success. Therefore, business success has to be achieved by
the two following success factors:
• Maximize customer value
• Minimize cost
8 Chapter One

Then the next important question is, in a service organization, how can these
two success factors (that is, maximizing customer value and minimizing
cost) be achieved? This question can be answered by studying the rela-
tionship between these two success factors and the three important aspects
of service (service product, service delivery process, and customer-provider
interaction).

Table 1.2 summarizes how service product, service delivery process, and
customer-provider interaction will affect customer value and total cost. The
table shows that excellent service product, excellent service delivery process,
and excellent customer-provider interaction are really the keys to delivering
high customer value with low cost.

According to Rohit Ramaswamy (1996), excellent service product,

service delivery process, and customer-provider interaction can be accom-
plished by superior service design and superior service delivery. Figure 1.3
shows the contents of service design and service delivery activities and
their relationships.
Service Product Design Service product design refers to the design of
service output attributes to the customers, or the service items provided
to the customers. For example, in restaurant service, the service product
design includes the menu design, decisions on what kind of dining
utensils to use, and service protocols.
Service Facility Design Service facility design refers to the design of
the physical layout of the facility where the service is delivered. For
example, in restaurant service, the facility design includes the design of
the restaurant’s kitchen, dining hall interior, decoration, layout, and
lighting. The quality of the facility design will directly affect the service
process delivery; for example, in the restaurant business, the design and
layout of the kitchen directly affects the quality and speed of the meal
service. The quality of the facility’s front room (the portion of the
facility that is visible to customers) design will directly affect
customers’ consumption process of the service, as well as customers’
perception of the quality of the service.
Service Process Design Service process design refers to the designing
of the service process that is needed to deliver service products to customers
or maintain the service products. For example, in a car rental center, the
service process includes all steps needed to rent a car to a customer.
These steps include collect driver’s license and credit card, check car
availability, fill and print contract, obtain customer signature, deliver car
key and contract to customer, and locate the car.
 Table 1.2 How Service Quality Affects Customer Value and Total Cost

Customer Value

Benefits Liabilities

Convenience Psychological Functional Convenience Psychological Price Total Cost

Service Important Very Important Very Important Important Very Important Very Important Very Important
Product Having a good Good service The design and Same reason as Same reasons as What goes into What goes into
service location product design offering of the for convenience for psycho- the service the service
and service plan coordinated right service benefits logical benefits product design product will
makes a with brand product is the will absolutely absolutely affect
difference. development most important affect the cost the cost.
will create a key to providing and price.
good psycho- functional
logical impact benefits to
on customers. customers.
Quality and reli-
ability make
customers feel
secure.

Service Very Important Important Important Very Important Important Very Important Very Important
Delivery Good and Efficient, and Service delivery Same reason as Same reason as Efficient process Efficient
Process efficient service timely service process has to for convenience for convenience will lower the process will
delivery saves delivery makes deliver the benefits benefits cost, so it may lower the cost.
customers much customers service product lower the price.
trouble. satisfied and reliably and con-
happy. sistently.
9

(Continued)
10

Table 1.2 How Service Quality Affects Customer Value and Total Cost (Continued)

Customer Value

Benefits Liabilities

Convenience Psychological Functional Convenience Psychological Price Total Cost

Customer- Related Very Important Related Related Very Important Related some- Related some-
Provider Better Person-to-person Adequate Same reason Same reason as what what
Interaction customer- interaction interaction as for con- for psychological
provider com- directly affects will make venience benefits
munication what customers customers benefits
will help think. feel good
customers. about
services,
and com-
munication
helps in
delivering
services that
fulfill
customer
needs.
 Six Sigma in Service Organizations 11

Service design

Service Service Service

product facility process
design design design

Service delivery

Service Service Customer

delivery encounter provider
process environment interaction

Figure 1.3 Service Design and Delivery (Adapted from Ramaswamy 1996)

Service Delivery Process The service delivery process is the

execution of the designed service process steps in order to deliver the
desirable service products to customers. The ideal service delivery
process can deliver the routine service smoothly, effortlessly, and pre-
dictably; it also has the flexibility to deal with abnormal service
requirements, personalized services, and difficult situations.
Service Encounter Environment The service encounter envi-
ronment is the environment in which the service is delivered and the
customer-provider interaction takes place. For example, in a hospital,
the service environment includes all the places where patients will
possibly stay, such as offices, emergency rooms, and hospital beds. In
many service operations, service encounters happens in front rooms. A
clean, well-lit, and comfortable service encounter environment will
make customers feel good.
Customer-Provider Interaction In service process, there is also the
human interaction aspect; for example, in the car rental business, the
representative should greet customers politely and ask customers their
car preference. The whole service process includes both the execution
of process steps and human interaction.

From the preceding discussion, we can see that the excellent service
product, service delivery process, and customer-provider interaction can be
12 Chapter One

accomplished by superior service design as well as flawless and efficient

service delivery. It is the author’s belief that Six Sigma can be a tremendous
help in service design and service delivery. The fundamental aspects of Six
Sigma are discussed in Sec. 1.3.

1.3 Overview of Six Sigma

1.3.1 What Is Six Sigma?

Six Sigma is a business strategy that provides businesses with the tools to
improve the capability of their business processes. In Six Sigma, a process
is the basic unit for improvement. A process could be a product or a service
that a company provides to outside customers, or it could also be an internal
process within the company, such as a billing process or a production process.
In Six Sigma, the purpose of process improvement is to increase a process’
performance and decrease its performance variation. This increase in per-
formance and decrease in process variation will lead to a reduction in
defects and an improvement in profits, employee morale, quality of product,
and eventually to business excellence.

Six Sigma is the fastest growing business management system in industry

today. It has been credited with saving billions of dollars for companies over
the past 10 years. Developed by Motorola in the mid-1980s, the methodology
only became well known after Jack Welch, from GE, made it the central
focus of his business strategy in 1995.

Compared with other quality initiatives, the key difference of Six Sigma
is that it applies not only to product quality, but also to all aspects of
business operation by improving key processes. For example, Six Sigma
can be used to help create well-designed, highly reliable, and consistent
customer billing systems, cost control systems, and project management
systems.

1.3.2 Six Sigma in a Nutshell

Six Sigma is not just statistical jargon; it is a comprehensive business

strategy with multiple aspects. Figure 1.4 illustrates the whole picture of Six
Sigma. There are five aspects of Six Sigma: fundamental beliefs, organi-
zational infrastructure, training, project execution, and methods and tools.
We present a general overview of all these aspects.
 Six Sigma in Service Organizations 13

Fundamental
beliefs

Organizational Project
infrastructure execution

Training Methods and

tools

Figure 1.4 The Five Aspects of Six Sigma

Fundamental Beliefs

Product, Process, and People

No matter what kind of business enterprise we look at, whether it is a
manufacturing-oriented company, for which the business operation model
illustrated by Fig. 1.1 will apply, or a service-oriented company, for which
the business operation model illustrated by Fig. 1.2 will apply, we can see
clearly that excellent products and excellent processes are the key to
business success. What is a process? Caulkin (1989) defines it as being a
“continuous and regular action or succession of actions, taking place or
carried on in a definite manner, and leading to the accomplishment of some
result; a continuous operation or series of operations.” Keller et al. (1999)
defines the process as “a combination of inputs, actions and outputs.” Figure 1.5
gives a general description for all kinds of processes.

Clearly, the process model shown in Fig. 1.5 can be used to characterize
almost all kinds of business operations, such as service processes, product
development, financial transactions, and customer billing. Of course, all
processes are designed and operated by people. Therefore, in order to
achieve business excellence, the only factors that really matter are excellent
products, processes, and people (3 Ps).

Do the Right Things, and Do Things Right

The sentence “Do the right things, and do things right” best captures the
essence of Six Sigma. Do the right things means that whether it is a product
or a process, it has to do the right thing for the customer. For a product, it
14 Chapter One

Materials

Procedures

Methods
Products
Information (including
specifications)

Services
People
Process
Skills
Information
Knowledge

Training
Paperwork
Plant/equipment

Inputs Outputs

Figure 1.5 A Diagram of a Process (Oakland, 1994)

means that the product has to be designed perfectly so it captures maximum

customer value; the product should deliver superior performance to its
customers. Do things right means that a product or a process should be able
to perform consistently and defect-free.

Actually, the name Six Sigma came from statistical terminology. Sigma, or
s, means “standard deviation.” For a normal distribution, the probability of
falling within a ±6 sigma range around the mean is 0.9999966. In a pro-
duction process, the Six Sigma standard means that the process will produce
defectives at the rate of 3.4 defects per million units. Clearly Six Sigma
indicates a degree of extremely high consistency and extremely low vari-
ability. In statistical terms, the purpose of Six Sigma is to reduce variation
to achieve very small standard deviations.

A perfect product or process is one that will do the right things, and do
things right. A perfect example is an Olympic gymnast. If an athlete wants
to win a gold medal, he or she must first do right things; that is, he or she
must be able to design and execute absolutely world-class routines (10.0-point
performance). The routine has to beat those of all competitors, and impress
the judges and audience. A 9.0-point routine, no matter how flawless and
consistent, will not do the job. Secondly, the athlete has to do things right
every time. If the athlete can sometimes do an excellent job, but sometimes
does a poor job, he or she will not be able to win the gold medal.
 Six Sigma in Service Organizations 15

Organizational Infrastructure

In order to achieve perfect products and processes in a business enterprise, an

organization needs to build an infrastructure to manage and execute Six Sigma
improvement activities. The hierarchy of members in a typical Six Sigma orga-
nizational infrastructure is illustrated in Fig. 1.6.
Champion The Champion is responsible for coordinating the
business road map to achieve a Six Sigma quality goal. He or she will
select Six Sigma projects, execute control, and alleviate roadblocks for
the Six Sigma projects in his or her area of responsibility.
Master Black Belt The Master Black Belt is a mentor, trainer, and
coach of Black Belts and others in the organization. He or she will
bring the broad organization up to the required Six Sigma professional
competency level.
Black Belt A Black Belt is a team leader implementing the Six Sigma
methodology on projects. He or she introduces the methodology and
tools to team members and the broader organization.
Green Belt A Green Belt is either an important team member who
helps the Black Belt, or a leader of successful, small, focused departmental
projects.

Leader on
Champion

Master Black Belt

(MBB)

Black Belts (BB)

Green Belts (GB)

Project team members

Figure 1.6 Six Sigma Organizational Infrastucture

16 Chapter One

Project Team Members Project team members participate on the

project teams and support the goals of the project, typically in the
context of their existing responsibilities. Team members are expected
to continue to utilize learned Six Sigma methodology and tools as part
of their normal job.

Training

All Six Sigma professionals undergo various trainings depending on their

duties. For example, Black Belt training usually takes 4 weeks. Black Belt
candidates learn some basics of business processes, project management,
team leadership skills, process maps, and many statistical methods. In order
to get a Black Belt certificate, the Black Belt candidate needs to complete
one or several projects, and these projects should show verifiable financial
benefits to the company.

Project Execution

Six Sigma activities are featured by doing projects, a lot of projects. The
goal for each project is usually about improving one process at a time.

In Six Sigma there are sophisticated operation procedures for the following
project aspects:
• Projection selection
• Projection flowchart
• Project management
• Project evaluation

Project Selection
The Six Sigma leadership team will select projects based on the following
characteristics:
1. The project should have a strong tie to business bottom lines. The
projects should have a substantially positive impact on profits, have
strategic importance, and enhance customer satisfaction and loyalty.
2. Project results should be visible and measurable. For a regular Six Sigma
process improvement project it is desirable to see meaningful results
within 6 months. The project goals can be quantified and measured.
3. Project should be feasible. The project scope should not be too big, the
project tasks should not be too difficult to be handled by the current
Six Sigma project team members, and the potential solutions should
be relatively low cost.
 Six Sigma in Service Organizations 17

Project Flowchart
A typical Six Sigma process improvement project usually follows a DMAIC
project flowchart. The DMAIC means the following five project steps:
define, measure, analyze, improve, control. Specifically, they are
1. Define the problem and customer requirements.
2. Measure the defects and process operation.
3. Analyze the data and discover causes of the problem.
4. Improve the process to remove causes of defects.
5. Control the process to make sure defects do not reoccur.

Project Management
During each project execution, periodical reviews are conducted to find out
project progress, identify the project bottlenecks, and resolve problems.
Many details of the project, such as time, resource, work force, and task
completion are recorded and monitored carefully.

Project Evaluation
On completion of each Six Sigma project, the real financial benefits will
be tracked and verified by financial accounting personnel within the
company.

Methods and Tools

Many methods and tools are used in the regular Six Sigma process
improvement (DMAIC) activities. Six Sigma Green Belts and Black Belts
will go through rigorous trainings to learn these methods and tools and
apply them in the projects. The commonly used methods and tools include
Business process map: Process flowcharts.
Project management: Critical path method (CPM), project evaluation,
and review techniques (PERT), Microsoft project management.
Team and leadership: Team works, team communication, and facil-
itation.
Probability and statistics: Probability distributions, mean, variance,
hypothesis testing, confidence intervals, and so on.
Simple graphic tools: Histogram, scatter plot, Pareto charts, and so
on.
Advanced statistical tools: Linear regression, design of experiments,
multivari charts, control charts, process capabilities, measurement
system analysis, and so on.
Basic Lean Manufacturing: Seven wastes, Kaizen, and so on.
18 Chapter One

Summary of Six Sigma

1. Six Sigma is a comprehensive strategy that provides businesses with

organizational infrastructure, discipline, training, and tools to improve
the capabilities of their business processes. Compared with other
quality initiatives, the key difference of Six Sigma is that it not only
applies to product quality, but also to all aspects of business operation.
Six Sigma is a method for business excellence.
2. Six Sigma tries to achieve business excellence by improving products,
processes, and people. By excellence we mean do the right things, and
do things right.
3. The Six Sigma organization infrastructure consists of Six Sigma pro-
fessionals, such as the Champion, Master Black Belts, Black Belts,
and Green Belts. All Six Sigma professionals are trained with Six
Sigma tools and methods.
4. Six Sigma activities are project-based activities. Six Sigma tries to
achieve business excellence by doing one project at a time. It has
sophisticated project selection, project flowchart, project man-
agement, and project evaluation procedures. Each project should
provide visible benefits to a company’s bottom line with verifiable
financial results. The project activities are led and executed by
members of the Six Sigma organizational infrastructure.

1.3.3 Design for Six Sigma and Lean Six Sigma

The Six Sigma movement started with regular Six Sigma process
improvement activities featured by DMAIC. This DMAIC strategy does not
involve any changing or redesigning of the fundamental structure of the
underlying process. It involves finding solutions to eliminate the root causes
of performance problems in the process and of performance variation, while
leaving the basic process intact. The goals for DMAIC projects are usually
related to reducing defects, variations, and costs from poor quality.

However, after several years of application, this Six Sigma process

improvement strategy (DMAIC) encountered a few problems:
1. In many cases, the Six Sigma DMAIC strategy is applied to many
processes. It takes a lot of effort to make some processes become more
capable, less variational, and defect-free. However, it is often found
later that many of these processes are redundant and wasteful. From a
lean manufacturing point of view, these processes should have been
eliminated or simplified in the first place.
2. Some processes are fundamentally flawed in their design, and DMAIC-
based projects will not yield sufficient improvement for these processes.
 Six Sigma in Service Organizations 19

3. DMAIC-based strategy mostly focuses on variation and defect

reduction. So it mostly accomplishes “do things right.” It does not
address the problems of higher performance levels and higher customer
value nor does it adequately address the issue of “do the right thing.”
In order to overcome these three deficiencies, two other Six Sigma strategies
were proposed in recent years. One is Design for Six Sigma (DFSS)
(Chawdhury 2002, Yang and El-Haik 2004); the other is Lean Six Sigma
(George 2003).

Design for Six Sigma

Design for Six Sigma was first proposed to be applied to the process of new
product development for the manufacturing industry. It is a systematic
methodology that uses tools, training, project management, and discipline
to optimize the design process of products, in order to achieve superior
designs to maximize customer value at Six Sigma quality levels.

In the manufacturing industry, DFSS is needed because

• The design decisions made during the early stages of the design life
cycle have the largest impact on total cost and quality of the system. It
is often claimed that up to 80 percent of the total cost is incurred in the
concept development phase (Fredrikson, 1994).
• Poor design concepts adopted in the early design stage are easy to
correct at the early stage of the product development cycle, but are very
costly to correct at later stages.
• Superior customer value, creative concept, and robust performances of
the products are intrinsically determined in the early design stage.

DFSS can
• Design products with maximum customer value.
• Do design right upfront, to avoid costly design-build-test-fix cycles.
• Bring creativity in design.
• Reduce design vulnerabilities.
• Make design robust.
• Shorten lead times, cut development and manufacturing costs, and
lower total life cycle cost to improve the quality of the design.
Besides statistical methods, DFSS uses many other system design methods
such as quality function deployment (QFD), theory of inventive problem
solving (TRIZ), axiomatic design, value engineering, and the Taguchi
method. DFSS is also a project-based activity. The DFSS projects usually
take a longer time to finish, but they also have greater impacts. The most
popular DFSS project procedures are
20 Chapter One

1. IDOV (Identify, Design, Optimize and Verify): The IDOV project proce-
dure is usually used for new designs.
2. DMADV (Define, Measure, Analyze, Design, and Verify): The DMADV
procedure is usually used for redesign projects.
The DFSS strategy can also be applied to processes, because in many cases
the original design of the process is fundamentally flawed; merely patching
the holes in the process will not yield satisfactory performances. DFSS for
Process is a Six Sigma approach that will involve changing or redesigning
the fundamental structure of the underlying process. The goal of DFSS for
Process is to design or restructure the process in order to intrinsically
achieve maximum performance.

DFSS for Process is needed

• When a business chooses to replace, rather than repair, one or more
core processes.
• When a leadership or Six Sigma team discovers that simply improving
an existing process will never deliver the level of quality customers are
demanding.
• When the business identifies an opportunity to offer an entirely new
product or service.
Technical approaches for DFSS for Process are thoroughly discussed in
Chap. 10.

Lean Six Sigma

Lean Six Sigma (George 2003) is a combination of lean manufacturing

(Womack 2000, Liker 2004) and regular Six Sigma process improvement
strategy featured by DMAIC. Lean manufacturing practice is based on the
Toyota production system, which features the following principles.
1. There are many wastes (muda) in production processes. The wastes
are the activities that do not add value to the products. These are
• Overproduction
• Unnecessary inventory
• Unnecessary transportation
• Unnecessary movement
• Waiting
• Defective product
• Overprocessing
The muda should be eliminated from process steps. A value stream
map is an effective way to find muda and guide process improvement
 Six Sigma in Service Organizations 21

2. The ideal production process should be a continuous one-piece flow.

3. A “pull” system should be used to avoid overproduction.
4. “Quick setup time” techniques should be used to ensure a smooth
process flow and to handle multiple product line 5.
5. Cellular manufacturing should be used to reduce travel distance and
ensure quick flow.
These five principles will be thoroughly discussed in Chap. 10.

The Lean Six Sigma approach is purely a process-based approach; it does

not involve product design activities. In Lean Six Sigma implementation
practice, usually lean manufacturing principles are used first to eliminate
unnecessary process steps and even unnecessary processes. Clearly, this
includes reducing process costs (by eliminating non-value-added steps) and
improving process efficiency (by reducing process lead time and increasing
throughput). Then DMAIC activities will follow to reduce the variations in
the process and improve process capability.

1.3.4 The Roles of DMAIC, DFSS, and Lean in Business Excellence

Based on the discussion in Sec. 1.2, the two key factors for business success are
1. Maximize customer value
2. Minimize cost
Customer value is defined as the total benefits minus the total liabilities
from the products to customers. There are functional, psychological, and
convenience benefits. Most, if not all, of these benefits have to be designed
into the products. Therefore, DFSS is the most important activity in increasing
the total benefits portion of the customer value. DMAIC relates to the
variation reduction and defect reduction and to the functional benefit the
product provides for customers. It also relates to reducing the cost of poor
quality. Lean manufacturing practice is mostly concerned with cost
reduction and efficiency improvement practices; it does not relate to product
design. In summary, Table 1.3 lists the relative importance of various Six
Sigma activities in improving customer value and reducing cost.

1.4 Six Sigma for Service

As discussed in Sec. 1.3, Six Sigma is not just statistical jargon. It is a

comprehensive business strategy that has fundamental beliefs, organi-
zational infrastructure, training, projects, methods, and tools. To a larger
22 Chapter One

Table 1.3 Relative Importance of Six Sigma Activities in Improving Customer

Value and Reducing Cost

Maximize customer value DFSS, DMAIC, Lean

Minimize cost Lean, DFSS, DMAIC

Note: Six Sigma activities are listed in order of importance, the first item being of greatest
importance.

extent, it involves extensive cultural changes both within organizations

and in relationships with suppliers. Under the Six Sigma framework, it is
very easy to add such new twists as Lean Six Sigma and DFSS into com-
panywide Six Sigma activities. You can simply let a few existing Six Sigma
professionals take some additional lean manufacturing and DFSS training,
and initiate Lean Six Sigma and DFSS projects on top of existing Six Sigma
projects. Therefore, Six Sigma is very flexible in adding and adapting
emerging methods and business approaches to existing Six Sigma activities.
In the actual implementation, most companies customize Six Sigma
approaches to their own special circumstances.

Six Sigma started in the manufacturing industry and has been spreading
steadily into the service industry, such as health care, banking, and insurance.
Many Lean Six Sigma and DMAIC type projects are reported in various
service industries relating such diverse objectives as error reduction, cost
cutting, cycle time, and lead time reduction (George 2003).

As we discussed earlier, there are three important aspects of service quality:

1. Service product
2. Service delivery process
3. Customer-provider interaction
Currently, most reported Six Sigma activities in the service industry involve
using either Lean Six Sigma or DMAIC in improving the service delivery
process. Not much has been done in designing and improving the service
product and customer-provider interaction. On the other hand, service
delivery processes contain many varieties of process types, as introduced in
Table 1.1 and will be thoroughly discussed in Chap. 10. Besides lean manu-
facturing approaches, many other methods, such as process management and
discrete event simulation can also be used to help in redesigning and
improving the service delivery process.
 Six Sigma in Service Organizations 23

Recall from Fig. 1.3 that the two most important activities in service are
1. Service design
a. Service product design
b. Service facility design
c. Service process design
2. Service delivery
a. Service delivery process
b. Service encounter environment
c. Customer-provider interaction

It is clear that almost all current Six Sigma activities in service industries
only involve the service delivery process portion of service delivery activity.
Not many Six Sigma activities have been reported in service design.
However, if the quality of the service product design and service process
design is poor, this can be very detrimental to the success of service
organizations.

Just as many approaches of Six Sigma that were originally developed in the
manufacturing industry can be adapted into the service industry and achieve
great success, DFSS can also be adapted into the service industry and
achieve amazing results. Because the manufacturing industry is global and
is under hypercompetition, many service industries, such as health care, are
so inefficient that there are many “low-hanging fruits” ready to be picked,
yet since the service sector accounts for a big portion of the gross domestic
product (GDP) in the developed world, the potential for Six Sigma to gain
in the service industry is very big.

This book is fully devoted to discussing DFSS for service industries. The
DFSS approach in this book has two aspects: DFSS for service product and
DFSS for service process. Chapter 2 will discuss the DFSS project pro-
cedures for both service product and service process. Chapters 3 through 9
will cover the technical aspects of DFSS for service product. Chapter 10
discusses the technical aspects of DFSS for service process. Chapter 11 is a
reference chapter on necessary statistical techniques used in this book, and
Chap. 12 discusses an important technique in service process management, the
theory of constraints.
This page intentionally left blank
 Chapter

Design for Six Sigma

2
Road Map for Service

2.1 Introduction

This chapter provides an introduction to Design for Six Sigma (DFSS)

theory, implementation processes, and applications. The material presented
herein is intended to give the reader an understanding of what DFSS is and
of its uses and benefits. After reading this chapter, readers should have a suf-
ficient knowledge of DFSS to assess how it could be used in relation to their
jobs and to identify their needs for further learning.

The theoretical foundation for DFSS comes from several sources:

• Customer-oriented design
• System design and creative design
• Taguchi method and “fire-prevention” philosophy

2.1.1 Customer-Oriented Design

The customer-oriented design is a development process of transforming

customers’ wants into design solutions that are useful to the customer. In
simple words, customer-oriented design translates the voice of the customer
(VOC) into products and services. Firms listening to the VOC have dis-
covered that the financial results are tremendous, with returns occurring
roughly one to two years after deployment. Companies as varied as
Cummins, 3M, Samsung, and Bank of America are publicized examples.
Bank of America alone noted that it has captured over a billion dollars due
to added revenue generation.

Several important methods that relate to customer-oriented design

originated from Japan, including quality function deployment (QFD)

25

Copyright © 2005 by The McGraw-Hill Companies, Inc. Click here for terms of use.
26 Chapter Two

(Cohen, 1988, 1995), the Kano model, and the KJ method. Quality function
deployment is a work template that can be used to derive product design
parameters and specifications from the voices of customers. The voices of
customers are usually obtained from customer surveys, customer focus
groups, or other means.

However, the mere knowledge of “what customers want our product or

service to do for them” is not enough to create successful products or
services that generate high sale volumes, premium prices, and an excellent
reputation, because customers’ opinions on products or services not only are
influenced by products and services’ functionalities, but also by many psy-
chological factors, as well as convenience factors. The customer value
concept that we discussed in Chap. 1 (Gale 1994, Sheridan 1994) is an
excellent model that relates customer opinions to product and service
values. Brand identity and brand reputation (Chap. 8) is an important part of
the product and service values. Therefore, the design of the product or
service should be coordinated with brand development.

For service industries, the relationship between customers and service

providers is even closer than that of manufacturing industries; customer-
oriented design should be even more important for the success of service
organizations.

2.1.2 System Design and Creative Design

After we fully understand the voices of customers, we need to create the

designs that can make the voices of customers into realities, that is, products
and services. We also need to be able to produce these products and services
efficiently and at low cost. This design generation task could be very chal-
lenging, especially if we deal with high technologies. The important
theories in this area include axiomatic design (Suh 1990) and the theory of
inventive problem solving (TRIZ) (Altshuller 1984). Axiomatic design
theory tries to develop several generic design principles that can be used to
evaluate designs and discover design vulnerabilities. TRIZ is based on
thorough studies of patents and discoveries and has developed a rich pool of
principles, methods, and knowledge base to generate creative designs.
Again, axiomatic design and TRIZ were developed in manufacturing-
related areas; however, many researchers (Mann 2004) are extending TRIZ
into nontechnical areas.

For service industries, creativity is also very important for business success.
The creative business operation models, such as those of Amazon.com and
 Design for Six Sigma Road Map for Service 27

Domino’s Pizza, have created tremendous successes and revenues for these
companies. Chapter 9 of this book will discuss the TRIZ method and its
extensions in business management.

2.1.3 Taguchi Method and Fire Prevention Philosophy

The method of robust design as suggested by G. Taguchi (1985, 1990, 1996)

is also called the Taguchi method. In this method, a good design is one
where products from the design are robust to usage conditions, envi-
ronmental conditions, and manufacturing variation. The robust design is
also based on the idea of “design it right the first time.” The Taguchi
method’s emphasis is on doing a good job in the early design stage so that
you can prevent problems in the manufacturing stage and after the product
goes to market. We can also call this approach fire prevention, instead of
“fire fighting” where fire fighting is the practice of correcting errors and
mistakes; caused by improper designs.

The Taguchi method is an integration of some sound design principles with

experimental design methods (DOE). Ideal function, orthogonal array
experiment, and signal-to-noise ratio (S/N) are among several important
techniques in the Taguchi method (Yang 2003).

The techniques used in the Taguchi method may not be easily used in service
industry circumstances. However, Taguchi’s emphasis on doing a better job
in design and on fire prevention makes a lot of sense in the service industry
as well.

2.2 Why Use Design for Six Sigma in the Service Industry?

Nobody in the service industry would dispute the importance of service

quality, customer orientation, and efficiency. There are vast amounts of lit-
erature and case studies on service quality (Ramaswamy 1996). However,
instead of focusing on the millions of customers served satisfactorily and
without incident, the literature often concentrates on the heroic efforts made
by some individual employees to provide extraordinary services during
some special and unique service encounter. The importance of service
product design and service process design is rarely mentioned.

In the service industry, service managers have not paid much attention to
planned and systematic service design. Most often, services are put together
haphazardly, relying on a mixture of judgment and past experience
28 Chapter Two

(Ramaswamy, 1996). In a study on the approaches used to develop new

services in the financial sector, de Brentani (1993) said, “. . . companies tend
to use a hit-and-miss approach when planning new services where ideas are
generated and defined in a haphazard fashion, limited customer research is
carried out prior to planning the design, service designs often lack creativity
and precision and do not incorporate the appropriate technology, testing for
possible fail points is rarely done, and market launch is often characterized
by trial and error.” Service managers compensate for the lack of sound
service design by trying to please the customers through ad hoc activities;
the process improvement is mostly hit-and-run. These are clearly expensive
methods and are not competitive in the long run.

Many service sectors, such as health care, suffer from low efficiency and
extremely high cost. In many developed countries, especially the United
States, health-care costs have become a heavy burden to the whole national
economy and global competitiveness.

Fortunately, many service sectors, especially, health care and banking, are
adopting Six Sigma approaches in their businesses. Many of them are starting
to reap the benefits from Six Sigma. Clearly, Do the right things and Do things
right are all it takes to make successful service products and service processes.
However, merely using DMAIC-based process improvements will not be suf-
ficient to raise the service quality and efficiency to the best possible level.

As we discussed in Chap. 1, there are two important aspects in service

operation: service design and service delivery. Service design refers to the
elements that are planned into service, including the features offered by
service, the nature of facilities where service is provided, and the processes
through which the service is delivered. The quality of the service design
determines the ability of the service to effectively and efficiently supply the
performance level expected by customers. The service design will determine
what is offered in the service and service performance level (Do the right
things), as well as the stability and reproductibility of the service per-
formance (Do things right).

Service delivery refers to the manner in which the service is offered during
customer encounters. It is the system operation aspect of the service process.
DMAIC-based process improvement focuses on the service delivery aspect
of the service operation. Similar to the limitations of the DMAIC-based
approach in the manufacturing industry, if the service design is basically
flawed, the DMAIC-based approach will not be able to make a fundamental
difference in guiding design or design changes.
 Design for Six Sigma Road Map for Service 29

However, as we discussed in Chap. 1, DFSS is a Six Sigma–based approach

in guiding design activities. Specifically, DFSS is a systematic methodology
that uses tools, training, project management, and discipline, to optimize the
design process during the designing of products, services, and processes, in
order to achieve superior designs to maximize customer value at Six Sigma
quality levels. DFSS is also a problem-preventing methodology that guides
the new design and redesign processes by using a DFSS road map that
focuses on defect prevention and value creation. This is accomplished
through Six Sigma (DFSS) projects.

Since good service design has a big impact on service quality, it is natural
for a Six Sigma service company to extend Six Sigma activities in the
service design area in order to raise its service performance level, service
quality, and service efficiency to a whole new level. This is the essence of
DFSS in the service industry.

However, when implementing DFSS in the service industry, we have to

realize that unlike the manufacturing industry, the service industry has many
special features as follows:
1. Some manufactured products have a long product development lead
time [from a few months (consumer goods) to tens of years (defense
industry)] and heavy research and development (R&D) expenditure.
The design and build time in the service industry can be much shorter,
and R&D expenditure is usually much less. Of course, there could be
exceptions; for example, software development can be a costly and
lengthy process.
2. There are more direct customer interactions with service providers
than with providers in the manufacturing industry; the intangible psy-
chological factors, such as personal image, word of mouth, and brand
image usually play a larger role.
3. Service industries usually work in a more volatile marketplace, where
the market situation changes very quickly. There are usually frequent
service redesigns.
4. When service redesign happens, usually when the service product
(service offerings) changes, the corresponding service delivery process
will also change. However, there are plenty of cases where only the
service process changes.
Therefore, the implementation of DFSS in the service industry has to take
into account these special features. The DFSS road map introduced in this
book is tailored to fit the special needs of the service industry. It has the
following features:
30 Chapter Two

1. Since redesign occurs frequently in the service industry, the project

road map that we selected is DMADV (define, measure, analyze,
design, verify) instead of IDOV (identify, design, optimize, verify),
because IDOV is more appropriate for completely new design projects
in the manufacturing industry.
2. Since service product design and service process design usually go
hand in hand, we are providing DFSS road maps for both the service
product design and service process design.

2.3 Design for Six Sigma Phases for Service Product

DFSS for service product has the following five phases:

1. Define (D) the project goals.
2. Measure (M) and determine customer needs and specifications.
3. Analyze (A) the design options to meet customer needs.
4. Design (D) (in detail) the service product to meet customer needs.
5. Verify (V) the design performance and ability to meet customer needs.

2.3.1 Phase 1: Define

The objective of this phase is to define the DFSS project goals and scope.
This phase has the following steps.

Step 1: Draft Project Charter

• Business case
• Goals and objectives of the project
• Milestones
• Project scope, constraints, and assumptions
• Team memberships
• Roles and responsibilities
• Preliminary project plan

Step 2: Identify the Key Customers of Services

In this step, customers are fully identified and their needs collected and
analyzed, with the help of customer surveys.

Step 3: Identify Customer and Business Requirements

In this step, customers are fully identified and their needs collected and ana-
lyzed, with the help of quality function deployment (QFD) and Kano analysis.
 Design for Six Sigma Road Map for Service 31

Then the most appropriate set of critical-to-satisfaction (CTS) metrics are

determined in order to measure and evaluate the design.

The detailed subtasks in this step include

• Identify methods of obtaining customer needs and wants.
• Obtain customer needs and wants and create a VOC list.
• Translate the items on the VOC list into functional and measurable
requirements.
• Finalize requirements.
• Identify CTSs as critical-to-quality, critical-to-delivery, critical-to-cost, etc.
DFSS tools used in this phase include
• Market and customer surveys
• Quality function deployment
• Kano analysis

Example 2.1: Customer Needs for Restaurant Service

This example (from Ramaswamy 1996) shows how VOC data can be used to
derive key CTS metrics in the restaurant business. The VOC data are often dis-
organized, nonspecific, and nonquantitative. Table 2.1 is the list of customer
needs for restaurant service.

An affinity diagram or the KJ method (Shigeru 1988) can be used to analyze

and organize the voices of customers into a CTS tree. A CTS tree is a refined
multilevel attribute that characterizes some critical characteristics for
customer satisfaction. An affinity diagram is a well-known method that was
developed in Japan, and it is a standard technique used in Six Sigma. By
using the affinity diagram, the following three-level preliminary CTS tree is
derived from the VOC data in Table 2.1 and is listed in Table 2.2.

Therefore, the first-level CTS factors are

Satisfying food
Clean and attractive surroundings
Good service

The second-level CTSs explain the first-level CTSs, and they are the
aggregated categories of original customer statements. For a complete set of
CTSs, we still need quantitative measures. For example, “short wait for table”
is one third-level CTS, but how short is short? 5 minutes? or 10 minutes?
Similarly, the CTS “food tastes good” does not indicate whether our food
tastes good enough now. Also, we need to know the relative importance of
each CTS item; for example, for the average customer which is more
important, the taste or the nutrition of the food? All this needed information
can be found by many means, such as by a specially designed customer survey,
32 Chapter Two

Table 2.1 List of Customer Needs for Restaurant Service

1. Food tastes good 20. Can order quickly

2. Unusual items on menu 21. Know how long a wait for table

3. Hot soup, cold ice cream 22. Food is healthy

4. Feel full after the meal 23. Menu items easy to understand

5. Don’t feel overfull after meal 24. Prompt delivery after ordering

6. Food looks appetizing 25. Get what was ordered

7. Food courses arrive on table 26. Get the correct bill

at right time

8. Don’t feel hungry one hour 27. Billed as soon as meal is over
after meal

9. Clean restrooms 28. Shouldn’t feel rushed out of

restaurant

10. Clean tables 29. Make me feel at home

11. Clean plates and silverware 30. Order additional items quickly

12. Clean, well-dressed 31. Errors and problems quickly

employees resolved

13. Light not too bright 32. Errors and problems satisfactorily
resolved

14. Light not too dim 33. Staff willing to answer questions

15. Shouldn’t feel too crowded 34. Greeted immediately on being seated
in space

16. Don’t want noisy atmosphere 35. Waiter should be patient while
ordering

17. Want smoke-free atmosphere 36. Fill water glass promptly without
asking

18. Wide choice of food 37. Polite, friendly staff

19. Enough time to read menu 38. Short wait for table

Source: Ramaswamy (1996).

 Design for Six Sigma Road Map for Service 33

Table 2.2 Three-Level Preliminary CTS Tree for Restaurant Service

First Level Second Level Third Level

Satisfying food Tasty food Food tastes good

Balance of flavors
Hot soup, cold ice cream
Food looks appetizing
Food is healthy
Enough food Feel full after meal
Don’t feel overfull after meal
Don’t feel hungry one hour after meal
A lot of variety Wide choice of food
Unusual items on menu

Clean and attractive Clean facility Clean restrooms

surroundings Clean tables
Clean plates and silverware
Clean, well-dressed employees
Comfortable Light not too bright
atmosphere Light not too dim
Shouldn’t feel crowded in space
Don’t want noisy atmosphere
Smoke-free atmosphere

Good service Friendly and Make me feel at home

knowledgeable Staff willing to answer questions
staff Polite, friendly staff
Waiter should be patient while
ordering
Menu items easy to understand
Shouldn’t feel rushed out of restaurant
Fill water glass promptly without
asking
Enough time to read menu

Quick Short wait for table

and correct Know how long a wait for table
service Can order quickly
Greeted immediately on being seated
Prompt delivery after ordering
Get what was ordered
Order additional items quickly
Food courses arrive on table
at right time

(Continued)
34 Chapter Two

Table 2.2 Three-Level Preliminary CTS Tree for Restaurant Service (Continued)

First Level Second Level Third Level

Accurate Get the correct bill

billing Billed as soon as meal is over
Problems and Errors and problems quickly resolved
complaints Errors and problems satisfactorily
addressed resolved
effectively
oS

Source: Ramaswamy (1996).

competitor benchmarking, or the “mysterious customer” approach. The mysterious

customer approach is to hire either employees or temporary helpers as mys-
terious customers. These mysterious customers are paid to visit competitors’
facilities, as well as your own facility, and fill out a number of specially
designed questionnaires after each visit. Some stopwatch activities may also
be included to time such measures as the service waiting time and the time
needed to deliver the meal. With the help of mysterious customers, clear, quan-
titative measures can be developed. For example, if in the best competitor’s
place, the waiting time is no longer than 5 minutes, and if waiting time is
really important in customers’ eyes, then you need to set the goal to have the
waiting time be less than 5 minutes. If mysterious customers found that your
competitor offers better tasting food, then you need to work on how to make
your food taste better. Many times, these kinds of activities are carried out in
the second phase of DFSS, the measure phase.

2.3.2 Phase 2: Measure

The goal of this phase is to measure and determine customer needs and
specifications. This phase has the following steps.

Step 1: Identify, Quantify, and Prioritize Customer Needs in Order of

Importance

Specifically, we need to establish the measurable metric for each CTS and
establish the ranking or priority score of each CTS.

Step 2: Identify the Performance Metrics Required by the Service That

Meet These Customer Needs

If a customer need is only a fuzzy description, for example, in the restaurant

service case, “short wait for table” is a customer need, but what is it,
 Design for Six Sigma Road Map for Service 35

precisely? And how short is short? We may want to develop some detailed,
quantifiable performance metrics such as
1. Time between arrival and seating
2. Time between seating and menu delivery
3. Time between menu delivery and order taking
4. Time between order taking and meal delivery
Of course, there are some customer needs that are difficult to measure and
quantify, for example, “taste of food.” However, we can always develop
evaluation standards such as tasting scores, just like wine tasting scores.
Together with competitive benchmarking, we can develop workable per-
formance metrics for all important customer needs.

Step 3: Measure Our Current Performances and Measure and Analyze

Competitors’ Performances by Using the Performance Metrics Developed
in Step 2

After the performance metrics are determined, it is time to measure our

current performance levels. If possible, we should measure and compare
our performances with our major competitors’ performances.

Step 4: Determine the Relationship between Performance Metrics and

Customer Satisfaction and Determine the Specifications for Performance
Metrics

Not every performance metric is equally important; some performance

metrics are much more important than others in terms of their contribution
to customer values. Chapters 3 to 5 of this book discuss in detail how to
design customer surveys to determine the relationship between per-
formance metrics and customer value and develop priorities among per-
formance metrics. Chapter 5 also discusses how to develop the
specifications for performance metrics. For example, if “time between
order taking and meal delivery” is a key performance metric, and we find
that most of our competitors’ average time between order taking to meal
delivery is less than 15 minutes, then naturally we should set our speci-
fication on the time between order taking and meal delivery to be less than
15 minutes on average.

Example 2.2: Measure the Performances of Restaurants

This example (adapted from Ramaswamy 1996) is a continuation of Example 2.1,
assuming that the following performance metrics are developed to measure the
performances of restaurants:

• Degree of waiter patience

• Degree of waiter responsiveness
36 Chapter Two

• Degree of waiter knowledge

• Degree of waiter friendliness
• Time between seating and menu delivery
• Time between menu delivery and order taking
• Time between ordering and meal delivery
• Percent of bills produced without errors
Mysterious customer studies and competitive benchmarking on several com-
petitors yield the results shown in Table 2.3.

Clearly this example illustrates how we can develop two different kinds of
measurable performance metrics. One is an evaluation score type, such as the
degree of waiter patience; the other is a measurable performance metric, such
as the time between ordering to meal delivery. Competitor benchmarking can
be used to design our performance specifications, as illustrated in Our Desired
Performance row in Table 2.3. The performance gaps on performance metrics
can be used to guide our redesign practice.

The DFSS tools used in this phase are

• Customer survey
• Customer value management
• Basic statistical analysis, such as mean, standard deviation, and con-
fidence interval

2.3.3 Phase 3: Analyze

The objective of this phase is to generate and analyze the design options to
meet customer needs. This phase has the following steps.

Step 1: Translate Customer Requirements and Performance Metrics to

Service Product Functions and Functional Requirements

Customer requirements (CTSs) give us ideas about what will make customers
satisfied, but they can’t be used directly as the requirements for our service
product design. We need to identify the relevant service product functions that
deliver these customer needs and translate customer requirements to service
functional requirements. The QFD technique (described in Chap. 6) and the
value engineering technique described in Chap. 7 can be used to identify
service product functions and identify functional requirements.

Example 2.3: Restaurant Service Again

For example, in the restaurant service example, customers would like shorter
waiting times, such as the waiting time between menu delivery and order
taking, and the time from order taking to meal delivery. But these customer
requirements are not service product functions. From a functional analysis
 Table 2.3 Results of Mysterious Customer Studies and Competitive Benchmarking

Time Time Between Percent of

Degree of Time Between Ordering Bill Produced
Waiter Degree of Degree of Degree of Between Menu Delivery and Meal Without
Patience Responsiveness Knowledge Friendliness Seating and Order Delivery Errors

Performance One grade One grade Two grades One grade Achieved 3-min gap 2-min gap 5% gap
gap short short short short

Our desired Exceptional Exceptional Exceptional Exceptional <5 min <5 min 10 min 95%
performance

Our restaurant Excellent Excellent Good Excellent <5 min <8 min 12 min 90%

Vive la France Good Exceptional Excellent Good <10 min <10 min 20 min >90%

Downtown Excellent Excellent Excellent Exceptional <5 min < 8 min 15 min >90%
steakhouse

Sarah’s Good Good Good Good <5 min <5 min 10.5 min >92%
Seafood
House
37
38 Chapter Two

point of view (value engineering), the service functions performed from menu
delivery to order taking include the following:
1. (Customers) obtain information on available food items
2. (Customers) select food items
3. Record selected food items
The corresponding functional requirements are
1. Customers can obtain information on available food items easily, quickly,
clearly and with full explanation.
2. Customer can select food items easily, quickly, and with explanation.
3. Selected food items can be recorded easily, quickly, and mistake-free.
The service functions performed from order taking to meal delivery include the
following:
1. Transmit (ordered food items) information to kitchen.
2. Prepare food items (in kitchen).
3. Cook food items.
4. Put food items in container.
5. Deliver cooked food items to the right customer.
The corresponding functional requirements are
1. Ordered food items’ information can be transmitted to kitchen quickly
and mistake-free.
2. Food items can be prepared quickly, and correctly.
3. Food items can be cooked correctly and quickly.
4. Food items will be put in correct containers and in the right way.
5. Cooked food items can be delivered to customers quickly, in the right
condition and mistake-free.

Step 2: Generate Design Alternatives for the Services

After the determination of service product functions and functional

requirements, we need to generate design ideas to satisfy these functional
requirements. There are two possibilities; one is that there are existing ideas
that can be used to develop this design. The other possibility is that brand-
new creative design ideas can be generated. The value engineering technique
(Chap. 7) and the theory of inventive problem solving (TRIZ) (Chap. 9) are
good techniques to develop creative designs. The type of design alternatives
generated and the design requirements should also take into consideration
the company’s brand development strategy and the company’s desirable
brand image. Brand development is discussed in Chap 8.

Example 2.4: Restaurant Service

This example (adapted from Ramaswamy 1996) is a continuation of Example
2.3. Of course, all the service functions and functional requirements can be
 Design for Six Sigma Road Map for Service 39

accomplished by “good old ways.” However, there are several noncon-

ventional design alternatives. For the functions
1. (Customers) obtain information on available food items
2. (Customers) select food items
3. Record selected food items
the design alternatives could be
1. Customer-operated terminal system: A hand-touch screen is available at
the vicinity of each dinner table, the menu appears on the screen, and
explanations and pictures of each item can be shown. Customers can
make their selections on the terminal; the selections can be confirmed at
the terminal and sent to the kitchen. The screen will indicate when the
meal is ready. Of course, the customer can choose to have a waiter, but if
customers choose to use the touch screen, the tip can be waived. The
potential benefits of this design include shortened ordering time and
reduced ordering errors.
2. Menu designed with check boxes: Customers can check the items they
want and give the menu to the waiter. The potential benefits of this design
include an easy and quick customer ordering process.
3. Waiter food expertise training: Waiters receive food expertise training
including the history of menu items, ingredients used, and cooking
techniques. The potential benefit of this design alternative is the ability to
provide better information about food items to customers.
4. Dim sum–type ordering and delivery: The foods are cooked and put in
containers, the containers are put on carts, and the waiters move the carts
around the dining area allowing customers to see immediately what they
will get and to order on the spot.

Step 3: Evaluate Design Alternatives

Several design alternatives might be generated in this last step. We need to

evaluate them and make a final determination on which concept will be
used. Many methods can be used for design evaluation, including the Pugh
concept selection technique, and design reviews. After design evaluation, a
winning concept will be selected. During the evaluation, many weaknesses
of the initial set of design concepts will be exposed and the concepts will be
revised and improved.

DFSS tools used in this phase are

• TRIZ
• QFD
• Value engineering
• Brand development
• Design review
• Simulation
40 Chapter Two

2.3.4 Phase 4: Design

The goal of this phase is to develop a detailed service product design to

meet customer needs. The result of this phase is an optimized design with
all functional requirements released at the Six Sigma performance level. As
the concept design is finalized, there are still a lot of design parameters that
can be adjusted and changed. With the help of computer simulation, design
review, failure modes and effects analysis (FMEA), and some simple sta-
tistical analysis, the detailed design will be determined.

It is common that the detailed design on service products cannot be

completed without completion of the corresponding service process design
or redesign. Service process design (or redesign) can follow the DFSS
phases for service process that will be discussed in Sec. 2.4.

A good design should have the following properties:

• Superior performance
• High performance capability
• Robustness
Superior performance means the new design can achieve high performance
metrics. For example, in the restaurant service case, if we redesign the
ordering procedure, a good design would be one that has shorter ordering
times and fewer mistakes. If we redesign the kitchen workflow process, a
good design would be one that has shorter cooking times, better-tasting
food, and less waste in the kitchen.

High performance capability means the newly designed service can perform
consistently and has very few mistakes. For example, McDonald’s is famous
for its high consistency in worldwide operations; no matter where you go in
the world, you can expect that the same food item in one McDonald’s will
be cooked in the same way and will have a similar taste to that in another
McDonald’s and the kitchen productivity will be the same in both.

Robustness means that a newly designed service will perform consistently

for various operating conditions and various types of customers.

The following are some general design principles that can help in
developing service designs that have high capability and robustness
(Ramaswamy 1996):
• Selection of technologies with large capacities so that resources are not
stressed
 Design for Six Sigma Road Map for Service 41

• Use of modular designs where it is easy to add incremental capacity

units
• Multiple and backup service centers that provide a better ability to
manage volumes
• Accurate distribution of input volumes by using automated telephone
systems
• Transferring some functional responsibilities to customers through
better partnerships
• Designing processes to address special events or natural disasters
• Automation of routine and repetitive steps
• Process simplification and reduction of steps
• Reduction of paperwork flow through information technology
• Convenient electronic access to documentation
• Procedures for efficient cross-organizational and cross-process handoffs
The DFSS tools used in this phase are
• Design and simulation tools
• Value engineering
• Process management (Chap. 10)
• Statistics, capability analysis (Chap. 11)
• Design review
• Robustness assessment

2.3.5 Phase 5: Verify

The goal of this phase is to verify the design performance and ability to
meet customer needs. This phase has the following activities.

Step 1: Pilot Test and Refining

No service should go directly to market without first piloting and refining.

Here we can use design failure mode effect analysis (DFMEA) as well as pilot
and small-scale implementations to test and evaluate real-life performance.
The detailed activities in this step include the following:
• Select the members of the testing team.
• Select the customers to be involved in the test (by invitation).
• Select the locations for the test.
• Specify the design characteristics to be tested.
• Define the performance measures.
• Conduct test, collect data, and analyze performance.
• Determine causes of performance problems.
• Correct deficiencies in design, implementation, and testing.
42 Chapter Two

Step 2: Validation and Process Control

In this step we will validate the service process capability of the new service
and make sure that the actual process capability is acceptable. The process
control procedures will be established.

Step 3: Full Commercial Rollout and Handover to New Process Owner

As the new service is validated and process control is established, we will

launch a full-scale commercial rollout, which together with the supporting
processes can be handed over to design and process owners, complete with
requirements settings and control and monitoring systems. The DFSS tools
used in this phase are
• Process capability analysis
• Statistical data collection and analysis
• Poka-Yoke, mistake-proofing
• Process control plan

2.4 Design for Six Sigma Phases for Service Process

Many service process design tasks are process redesign. So a DMADV road
map is used. Chapter 10 of this book has a very comprehensive and in-depth
discussion on service process designs. DFSS for service process also has
five phases:
1. Define (D) the project goals.
2. Measure (M) process performance metrics and determine performance
requirements.
3. Analyze (A) existing design and generate alternative process design
options to meet the performance needs.
4. Design (D) (in detail) the process and evaluate design alternatives.
5. Verify (V) the process performance and ability to meet performance
needs.

2.4.1 Phase 1: Define

The objective of this step is to define the DFSS project goals and scope.
This phase has the following steps.

Step 1: Draft Project Charter

• Business case
• Goals and objectives of the project
 Design for Six Sigma Road Map for Service 43

• Milestones
• Project scope, constraints, and assumptions
• Team memberships
• Roles and responsibilities
• Preliminary project plan

Step 2: Identify the Key Customers of the Process

In this step, customers are fully identified and their needs collected and
analyzed. In process design, the customers could be internal and/or external.
For example, the customers of a restaurant kitchen include both internal
customers, such as waiters, and external customers, such as the restaurant
patrons. The identification of key customers will help to develop appropriate
process performance metrics.

Step 3: Develop a Process Map

In this step, the detailed process map(s) should be developed by using the
process mapping techniques discussed in Chap. 10. There are several tech-
niques, such as process flow chart, IDEF0 process map, value stream map, and
simulation model. Several different process maps can be established simulta-
neously. For example, for the same process, you can draw a regular process
flowchart and a value stream map as well as a discrete event simulation model.

Step 4: Define Process Performance Metrics

In this step, the key process performance metrics should be defined by the
DFSS team with the help of customers and management. Chapter 10
provides a very thorough discussion on process types and corresponding
process performance metrics. It can be used to help identify and define
appropriate performance metrics. The DFSS tools used in this phase include
• Process flowchart
• IDEF0 map
• Value stream map
• Simulation model
• Process management
All these tools are discussed in Chap. 10.

2.4.2 Phase 2: Measure

The goal of this phase is to measure process performance metrics and

determine performance requirements.
44 Chapter Two

Step 1: Measure the Current Process Performance Levels Based on

Process Performance Metrics

For example, in the restaurant service case, if the performance metrics for
the kitchen workflow process are
• Time from ordering to meal delivery
• Taste of food
Then the time from ordering to meal delivery can be measured by a
stopwatch; a sample (such as 50) of such time measurements can be taken
and recorded. The mean, standard deviation, and range can be used as the
basic statistical estimates for performance evaluation. The histogram of this
data set can be used as the basis for simulation model parameters. The taste
of food can be measured by a scaled taste evaluation.

Step 2: Determine Performance Requirements That Meet

These Customer Needs

In this step, the required target values for all process performance metrics
should be established. These target values could be based on competitive
benchmarking. The DFSS tool used in this phase is basic statistical analysis.

2.4.3 Phase 3: Analyze

The objective of this phase is to analyze the existing design and generate
alternative process design options to meet the performance needs. This
phase has the following steps.

Step 1: Perform a Process Diagnosis for the Current Process

The goal of process diagnosis is to identify the key weaknesses of the

process and provide the guidelines for process redesign and improvements.
The following approaches are often used in process diagnosis:
1. Value stream map analysis: A value stream map can expose non-
value-added activities and process efficiency problems. By using lean
operating principles to analyze the current state value map, possible
improvement ideas can be generated.
2. Process map analysis: A real detailed process map may expose
“hidden factories,” that is, unnecessary loops and steps. This process
map analysis may help to generate process improvement ideas.
3. Process analysis based on process types: The knowledge outlined in
Sec. 10.3 can also be used to analyze the possible weaknesses of the
process. For example, if we find that our process is an office process
but we use a job shop type of layout, then we can immediately know
 Design for Six Sigma Road Map for Service 45

that this process type is inefficient for our office process and probably
we should change to using several lean work cells.
4. Cause-and-effect diagram: Also called fishbone diagram analysis.
5. Data collection: Collecting such data as the waiting time, process
time, and equipment and operator utilization for each process step
may help to identify the weak links and bottlenecks of the process.
6. Process simulation: For many service processes, discrete event sim-
ulation can be a very useful tool to evaluate the current process and
identify weak links and bottlenecks.

Step 2: Generate New Design Alternatives

After the process diagnosis step, the weaknesses and bottlenecks of the
process are found. Now is the time to propose the process change and
generate the new designs. The new design can be generated based on
1. Applying lean operation principles: Such as the future state value
stream map derived by applying lean operation principles on current
state value map.
2. Brainstorming: The DFSS team can use brainstorming to generate
new designs.
3. Process knowledge: The process knowledge described in Sec. 10.3
can be used to generate design ideas. For example, if we identify our
process as a project shop–type process, then the redesign solution
should be based on project management techniques, such as redividing
the work breakdown structure, generating a different project network,
and redistributing the resource allocation.
The DFSS tools used in this phase include
• Process management
• Lean operation principles
• Value stream map
• Simulation

2.4.4 Phase 4: Design

The goal of this phase is to design (in detail) the process and evaluate design
alternatives. A discrete event simulation experiment can be used as a
valuable tool to try out each design alternative. The evaluation of the sim-
ulation results will help us to select the best design alternative. The DFSS
tools used in this phase include
• Process management
• Simulation
46 Chapter Two

2.4.5 Phase 5: Verify

The goal of this phase is to verify the process performance and ability to
meet performance needs. The following steps are needed in this phase.

Step 1: Pilot Test and Refining

A pilot process should be implemented. Its performances will be measured

and evaluated in detail. Refinements may be found in different areas, from
the sequence of steps in the process, to the configuration of tools and
resources selected, and even the documentation of the process manual. The
validation plan and all the necessary follow-through should be overseen by
the DFSS team in order to determine that all the process needs will be met.

Step 2: Validation and Process Control

In this step we will validate the service process capability of the new service
and make sure that the actual process capability is acceptable. The process
control procedures will be established.

Step 3: Full-Scale Rollout and Handover to New Process Owner

As the new service is validated and process control is established, we will

launch a full-scale rollout. The new process can be handed over to process
owners, complete with requirement settings and control and monitoring
systems.
 Chapter

Value Creation for

3
Service Product

3.1 Introduction

The bottom line for every company is not its short-term profitability but the
value of its products in the eyes of customers, often called customer values.
Short-term profitability reflects a company’s recent history and past strengths,
but without everlasting enthusiasm from its customers, a company may not last.

As a matter of fact, it is customers’ opinions that determine a product’s fate.

Customers’ opinions decide the price level, the size of the market, and the
future trend of a product family. A product with high customer value often
has increasing market share, increasing customer enthusiasm toward the
product, word-of-mouth praises, a reasonable price, a healthy profit margin
for the company that produces it, and increasing name recognition. Clearly,
the ability to design and deliver service products that have high customer
value is the key to success for service organizations.

There are plenty of books and articles that discuss issues related to customer
value. The famous book Market Ownership by William Sherden (1994) has
an excellent chapter on customer value. Bradley Gale’s book Managing
Customer Value (1994) also presents workable methods to survey and
deploy customer value into product and service design. Many value engi-
neering books and articles (Park 1999) provide detailed value definition and
quantitative methods for value analysis and cost reduction. Quality function
development (QFD) (Cohen 1988, 1995) is an excellent method developed
in Japan that can be used to deploy customer wants into product design,
including service product design. Using well-designed surveys is a basic
way to obtain customers’ opinions. There are some excellent articles in the
literature regarding customer survey design (Rea and Parker 1992).
Customer value is also highly related to brand recognition. Usually,

47

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48 Chapter Three

customers are willing to pay more to buy a product with a well-established

brand name than a similar product with no name recognition, so brand building
should be an important strategic consideration in service product design and
customer value enhancement. There are books and articles on brand strategy
and its relationship with customer value. Innovation and uniqueness is another
huge factor for customer value. Customers may be willing to pay a premium
price for a unique product or a first-of-its-kind product.

In this book, we will develop a comprehensive strategy that integrates all

these wonderful methods in order to create superior customer values for
service products. This chapter outlines this customer value creation strategy
and provides overviews for all these methods. Section 3.2 will formally
define customer value and its components. Section 3.3 will give an overview
to all relevant methods that can be used to design customer values into
service products. Section 3.4 will give a value creation road map to service
product design.

3.2 Value and Its Elements

Value is one of the most frequently used words, yet the concept of value is
one of the most confusing. The nature of value has been extensively studied
by many researchers. One school of such researchers are value engineering
or value analysis professionals.

Based on Park (1999), one of the leaders in the field of value engineering,
“Cost is a fact, it is a measure of the amount of money, time, labor, and any
other expenses necessary to obtain a requirement. Value, on the other hand,
is a matter of opinion of the buyer or customer as to what the product is
worth, based on what it does to him/her. In addition, a person’s measure of
value is constantly changing to meet a specific situation.”

The Merriam-Webster Online dictionary (www.m-w.com) lists the following

definitions for value:
1. A fair return or equivalent in goods, services, or money for something
exchanged
2. The monetary worth of something : marketable price
3. Relative worth, utility, or importance
The American Heritage Dictionary defines value as follows:
1. An amount, as of goods, services, or money, considered to be a fair
and suitable equivalent for something else; a fair price or return.
 Value Creation for Service Product 49

2. Monetary or material worth.

3. Worth in usefulness or importance to the possessor; utility or merit.
Value is also related to worth. Worth is defined as the quality that renders
something desirable or valuable or useful.

Many value engineering researchers discuss the nature of value extensively.

Fallon (1980) states that worth is a simple concept; it becomes value when
it is related to cost. He further states that cost is a necessary component of
value. O’Brien (1986) further defines value as the ratio of worth and cost. In
this definition, worth is defined as an appraisal of the properties of product,
so it is essentially an appraisal of the function of the product. In other words,
value is the ratio of function to the cost. In this case, the function is defined
as what the product does for the customer.

Many value engineering researchers and practitioners have developed

several precise definitions for value. Several of them are listed here.
(Bryant 1986)
wants + needs
Value V =
resources
sell functions + use functions
=
dollar + people
(Harris 1968)
worth
V=
effort
(Kaufman 1981)
functions
V=
cost
(Wasserman 1977)

function utility performance

V= = =
cost cost cost
(Fallon 1980)
objectives
V=
cost
In each of these definitions, the denominator is a unit that can be measured
by dollars, effort, resources, work force, and so on. Eventually they can all
50 Chapter Three

be converted to dollars. We can say that all these definitions converge to the
denominator that is a measure of cost. The numerators converge to a
measure of functions, or performances. Therefore in value engineering,
value is measured primarily as a function-to-cost ratio. A product with better
functionality and lower cost gives a higher value.

In value engineering, if a product or method can accomplish a given

function with the lowest cost compared with all competitors, then this
product or method is called the best value. Clearly, a higher function-to-
cost ratio is important for increasing value in the eyes of customers.
However, in this author’s opinion, the function-to-cost ratio alone is not
sufficient to provide an adequate measure for customer value for the
following two reasons:
1. It is a convention that people also like to measure value in dollars. In value
engineering, sometimes the best value of a function is also defined as the
lowest cost to accomplish that function, that is, in dollars. But this def-
inition is not consistent with the definition that value is function divided
by cost. (Does this imply that function has the unit of dollars squared?)
2. There are many cases where two products have exactly the same
function, but people are willing to pay different prices for them. For
example, the Toyota Corolla is actually exactly the same car as the
GEO Prizm, but people are willing to pay $300 more to buy a Toyota
Corolla. As another example, the same item in a neighborhood con-
venience store will usually sell at a significantly higher price than that
in a large discount chain store. So the function-to-cost ratio alone
cannot explain the value in the eyes of customers adequately.

Sherden (1994) and Gale (1994) provided a broader definition for customer
value. In their view, the customer value is defined as perceived benefit
(benefits) minus perceived cost (liabilities), specifically,
Value = benefits – liabilities
The benefits include
1. Functional benefits
a. Product functions, functional performance levels,
b. Economic benefits, revenues (for investment services)
c. Reliability and durability
2. Psychological benefits
a. Prestige and emotional factors, such as brand name reputation
b. Perceived dependability (for example, people prefer a known-
brand product to an unknown-brand product)
 Value Creation for Service Product 51

c. Social and ethical reasons (for example, environmentally friendly

brands)
d. Psychological awe (many first-in-market products not only may
provide unique functions but also give customers tremendous psy-
chological thrill, for example, the first copy machine really
impressed customers)
e. Psychological effects of competition
3. Service and convenience benefits
a. Availability (ease with which the product or service can be
accessed)
b. Ease with which correctional service in case of product problem or
failure can be obtained
The liabilities include
1. Economical liabilities
a. Price
b. Acquisition cost (such as transportation cost, shipping cost, time
and effort spent to obtain the service)
c. Usage cost (additional cost to use the product or service in addition
to the purchase price, such as installation)
d. Maintenance costs
e. Ownership costs
f. Disposal costs
2. Psychological liabilities
a. Uncertainty about product or service dependability
b. Self-esteem liability of using unknown brand product
c. Psychological liability of low-performance product or service
3. Service and convenience liabilities
a. Liability due to lack of service
b. Liability due to poor service
c. Liability due to poor availability (such as delivery time, distance
to shop)
Clearly, this definition of customer value contains much more information
than simply function and cost, and it is also in the unit of dollars, or monetary
worth.

3.2.1 Value and Other Commonly Used Metrics

There are other product metrics that can very easily be mixed in with the
concept of value. These metrics include price, performance, cost, and
quality. Let us discuss the similarities and differences of value and these
metrics.
52 Chapter Three

Value and Price

Some economists define value as price; however, as we discussed earlier,

price is only one factor that affects value. Specifically, price is one important
element in customer costs (economic liabilities). In general, customers’
acceptance of a high selling price of a product indicates that the product has
superior benefits in the eyes of the customers. A higher price may provide a
higher profit margin to the company that sells the product; however, the
sales volume of this product can be sustained only if customers think that
this product will provide more benefits than costs, that is, high customer
value. Higher customer value can come from providing more benefits for
lower prices. The gap between customers, perceived benefits versus costs
determines the magnitude of the overall attractiveness to customers and,
thus, determines the size of the market, sales volume, and market share.

Value and Performance

Performance is also called “function.” The function of a product is what the

product is supposed to do for customers. As we discussed earlier, function is
only one component of benefits; superior customer value is the difference
between all benefits minus all costs. Therefore, a product with more and better
functions may not always be a better value. Also, a function can create value
only if that function is what customers definitely need. In 1979 the American
Can Company thought that a product with more and better functions would
always sell, so it designed a stronger paper towel called BOLT. It looked and
performed like cloth, and it was sold at a higher price than regular paper towels.
However, this product turned out to be a total failure, because the customers did
not perceive a benefit in a paper towel that could be washed. Actually, in many
cases, customers usually enjoy a product change that adds more functions
without increasing price, and very often they would be delighted to see a product
change that reduces some functions together with a much lower price. Adding
and improving functions with a higher price is usually a risky strategy.

Value and Cost

The company’s costs in producing a product usually do not relate to

customer value. The company could provide a product with a lot of features
and high cost that customers do not appreciate. However, reducing costs
will provide either a better profit margin or more room for price reduction.

Value, Quality, and Perceived Quality

Like value, quality is also a very tricky concept to define. Different people, even
different quality gurus, define quality differently. The American Society for
 Value Creation for Service Product 53

Quality (ASQ) defines quality as: “A subjective term for which each person has
his or her own definition. In technical usage, quality can have two meanings:
1. the characteristics of a product or service that bear on its ability to satisfy
stated or implied needs. 2. a product or service free of deficiencies.”

The first meaning in this definition, “the characteristics of a product or service

that bear on its ability to satisfy stated or implied needs” refers to customer
preferred performance and function. The second definition, “a product or
service free of deficiencies,” is definitely related to dependability and reli-
ability. In comparison to customer value, we can see that value is a much
broader concept. Only some aspects of value are related to quality.

Quality is also determined by personal opinion; it is largely subjective and

psychologically related. This is the meaning of “A subjective term for which
each person has his or her own definition” in the ASQ’s quality definition.
For example, a drug with a brand name may have exactly the same func-
tionality and the same manufacturing quality as a generic drug; however, a
substantial portion of consumers will still consider the drug with a brand
name to have higher quality. The overall customer opinion on the quality
level of a particular product or service is also called perceived quality. The
perceived quality level is a better indicator of the customer value. There are
primarily two components in perceived quality. One is the technical
component that relates to such factors as performance, functionality,
dependability, and defective level; the other is the psychological component
of quality, such as brand image.

3.2.2 The Versatility and Dynamics of Value

Since value is a matter of opinion, it may mean different things to different

people. We call this the versatility of value. Value may also change over
time with the change of people’s minds and lifestyles, and we call it the
dynamics of value.

The versatility of value reflects the fact that the marketplace consists of different
people; it is difficult to find even two people who have exactly the same opinion.
In marketing science, people can be divided into market segments. For a par-
ticular kind of product or service, the customers in each segment display similar
behaviors and opinions. Some products or services can only find customers in a
niche market, that is, a particular market segment. For example, a good state-of-
the-art computer engineering book can only be sold at university campuses and
to computer engineers; this book is useless to an animal trainer. Some products
or services can find customers in mass markets; for example, the products and
54 Chapter Three

services such as vegetables, fruits, pencils, and personal banking services can
find customers all over the social spectrum.

In order to be successful in the presence of versatility of value and vastly

different customer opinions, it is important to know the types of market that
your product or service is in and understand what values from your product
or service can be brought to customers.

The value of even a single product or service can be broken down into
several categories:
• Use value. Properties that make something work (also called functional
value)
• Esteem value. Properties that make something desirable to own (also
called emotional or psychological value)
• Exchange value. Properties that make it possible to exchange one thing
for another
For example, the use value of an airline ticket is the ability to let a customer
take an airplane from point A to point B; even a coach class ticket is able to
provide that use value. A business class ticket provides a little bit more
functional value, such as better seating and better food, but it provides sub-
stantial esteem value, that is, the feeling of “I am special, I have special
status.” A coach class ticket deals with a mass market; the business class
ticket deals with a niche market.

If we want to enhance the value of our product or service so we can be more

successful in the marketplace, we need to determine what will make it more
valuable. But value is a matter of customer opinion. We need to understand
what makes people motivated and excited.

Abraham Maslow developed a simple scale to define the psychological

needs of people. He called this scale the hierarchy of needs, as illustrated in
Fig. 3.1. Dr. Maslow said that people are motivated to do different things at
different levels of psychological development or different levels of society.
He divided these motivational factors into five different basic needs. As
each need is satisfied, other higher needs arise. Although the lower-level
needs may never disappear, they become weaker or less important. A person
may have several needs at the same time, but one need is dominant.

Dr. Maslow’s theory provides a lot of insights about customers’ buying

motivation. For example, customers in developing countries usually prefer
products that address basic needs, robust in harsh user conditions, low cost,
 Value Creation for Service Product 55

Self actuation
Esteem
Belonging
Safety
Relative importance

Survival

Psychological development
Figure 3.1 Value and Psychological Development

and without fancy features. This fact shows that survival and safety needs are
predominant for these consumers. In more affluent countries, printing some
sports star’s figure on cereal boxes might be a very effective way to increase
sales because it addresses the esteem and belonging needs for many children.

The customer value is also very dynamic; that is, it changes over time. Many
factors can change customers’ preferences and tradeoffs, such as economic
conditions, new technologies, and the evolution of customer psychological
development.

The oil price change will affect people’s attitude toward the types of cars
they like. Bad economic times, fierce competition, and a tough job market
can make discount chain stores the favorite shopping place. A strong com-
petitor’s emergence in a market segment will greatly change the expec-
tations for a particular product or service.

3.3 Maximize Customer Value by Service Product Design

One of the most important keys for a service organization to succeed in the
marketplace is to design customer values into service product design. In
order to accomplish this, the service organization needs to do the following:
1. Find out what customers really need by marketing research.
2. Analyze customer values.
3. Deploy customer values into service product design.
56 Chapter Three

There are many methods that can be used to accomplish these tasks. They
are summarized here.

3.3.1 Methods to Identify Customer Needs

The customer survey is an important tool to get information about what

customers really want. Chapter 4 gives a detailed description of all
important customer survey issues and techniques, such as selecting survey
samples, designing and conducting survey questionnaires, and analyzing
survey data.

3.3.2 Methods to Analyze Customer Values

Customer value management (Gale 1994) contains several powerful

techniques to quantitatively identify the relative importance of various
factors, such as functions, availability, and psychological aspects, that con-
tribute to customer values. Customer value management will be discussed
in Chap. 5.

3.3.3 Methods to Deploy Customer Values

into Service Product Design

Quality function deployment (QFD) is a Japanese-initiated technique that

deploys quality into design. QFD uses a matrix-like template, called a house
of quality, to facilitate the design process. Chapter 6 discusses QFD in a
service industry framework.

Value engineering is a well-established, step-by-step technique that has

been used to design products with superior functions and lower cost.
Chapter 7 discusses the value engineering technique in a service industry
framework.

Brand name recognition is an important part of value. The product with

good brand recognition will usually enhance the product value greatly. In
service product design, brand name building should be an important con-
sideration. Chapter 8, ‘Brand Development and Brand Strategy’ gives a road
map to brand name building.

The theory of inventive problem solving (TRIZ) is an established method used

to guide innovation in product design. In recent years, there are many articles
in the literature that discuss applying TRIZ in the service industry. Chapter 9
provides a brief discussion of TRIZ in a service industry environment.
 Chapter

Customer Survey Design,

4
Administration, and Analysis

4.1 Introduction

One of the most important success factors in designing superior service

products is to know your customers. For a Six Sigma company, the design
decision should be driven by the voices of customers. For the service
industry, obtaining detailed customer data is even more important because
maintaining customers’ loyalty is extremely vital for the survival of a
service institution. The customer survey is an essential tool that can yield
information about customer expectations and customer satisfactions and
assist in creating strategies for improvement.

Commercial enterprises use customer survey findings to formulate

marketing strategies and design their products. Television and radio
programs are evaluated and scheduled largely based on the results of
consumer surveys. Libraries, restaurants, financial institutions, and recre-
ational facilities use customer surveys to gather information about customer
composition and customer desires.

Customer surveys of only a sample of customers are taken to learn about the
whole population of a customer base. The sample may contain as few as 30
(a small sample) to as many as 30,000 or more (a very large sample) people.
The data obtained on the survey are then analyzed. The survey method is
based on sound statistical principles, and over 70 years of modern survey
practices show that the predictions based on information from a survey of a
relatively small sample are usually quite accurate.

4.1.1 Customer Survey Types

There are three types of customer survey methods: mail out, telephone, and
in-person.

57

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58 Chapter Four

Mail-Out Surveys

The mail-out survey involves mailing printed questionnaires to a sample of

predesignated potential respondents. Respondents are asked to complete the
questionnaire and mail it back to the survey researcher.

The advantages of the mail-out survey include the following:

1. Low cost: Other survey techniques require trained interviewers, and
in-person interviews may incur high travel costs.
2. Convenience: The questionnaire can be completed at the respondent’s
convenience.
3. Privacy: Because there is no personal contact, the respondents may
feel more comfortable and their privacy is preserved.
4. Lack of time pressure: The respondents can take their time to complete
the questionnaire and consult their personal records if necessary.

The disadvantages of the mail-out survey include the following:

1. Lower response rate than with other methods: The mail-out survey
response rate usually ranges from 20 to 30 percent in the worst case to
85 to 90 percent in the best case. Therefore, an adequate number of
mail-out questionnaires and many follow-ups are needed to achieve
the desired sample size.
2. Comparatively long time period: Questionnaires from the mail-out
survey usually take a few weeks to be returned.
3. Self-selection: The survey researcher only receives the returned ques-
tionnaires. The people who choose to fill out and return the ques-
tionnaires may not adequately represent the population. For example,
people who have low reading and writing proficiency may never return
their questionnaires; thus they will not be represented in the sample.

In-Person Interviews

In-person interviews are conducted by an interviewer who talks directly to

respondents to get the information.

The advantages of the in-person interview include the following:

1. High response rate: The response rate of the in-person interview is
much higher than that of mail-out surveys.
2. Ability to contact hard-to-reach population: Certain groups are
difficult to reach by mail or telephone; the in-person interview is the
only way to reach them.
 Customer Survey Design, Administration, and Analysis 59

3. Greater complexity: Because of the direct interaction between the

interviewer and respondents, complex questions can be asked and
further explained if necessary.
4. Shorter time to finish the survey

The disadvantages of the in-person interview include following:

1. High cost: In-person interviews can be very costly due to work force
requirements, travel expenses, interviewer training, and so on.
2. Interviewer bias: The interviewer may subconsciously introduce
personal bias and affect respondents’ choices in answering questions.
3. Greater stress: The interviewing process is usually very stressful for
both the interviewer and respondent.

Telephone Surveys

The telephone survey is a method of collecting information through

telephone interviews between a trained interviewer and respondents.

The advantages of the telephone survey include the following:

1. Rapid response: The telephone interview usually gets results more
quickly than that of in-person interviews and mail-out surveys.
2. Lower cost: The cost of a telephone survey is usually much less than that
of an in-person interview, and it can be less costly than a mail-out survey.
3. Privacy: The respondents’ privacy is better preserved than with in-
person interviews.

The disadvantages of the telephone survey include the following:

1. Less control: The interviewer has less control in the interview process
than the interviewer of an in-person interview since the respondent
can hang up the phone easily.
2. Stress: Like telemarketing, receiving a stranger’s call may be very
annoying for many respondents.
3. Lack of visual material: A telephone interview cannot use visual aids,
such as maps, charts, and pictures to explain the survey questions.

Other Methods Used to Gather Information

Besides customer surveys, there are several other methods that can be used
to gather customer information. These methods include secondary research,
direct measurement, and direct involvement.
60 Chapter Four

Secondary Research
The customer information may already exist somewhere, such as in
libraries, government agencies, and, more recently, on the Internet. In
secondary research, the researcher tries to retrieve this information. Data
mining techniques (Berry and Linoff 2000, Edelstein 1999) have been
developed to dig important information from these huge data sources and
gain valuable clues to guide sales and promotion efforts. Data mining is a
process of analyzing data and summarizing it into a useful, informational
format. It is primarily used by companies with a strong customer focus,
such as retail, financial, communication, and marketing organizations. It
enables these companies to determine relationships among internal factors
such as price, product positioning, and staff skills, and external factors
such as economic indicators, competitions, and customer demographics.
Data mining enables companies to determine the impact of these factors on
sales, customer satisfaction, and corporate profitability, and develop
marketing and sales strategies to enhance corporate performance and cut
down on losses.

Direct Measurement
This technique involves direct counting, testing, or measuring of data.
Typical examples of direct measurement are testing cholesterol levels,
monitoring customer arrival times and duration in a service institution,
and recording and counting the type and number of errors in insurance
claims.

Direct Involvement
This technique is practiced by Toyota. The key idea is to ask the product
design leaders to actually play the role of a consumer and practice the
product usage process. One story (Liker 2004) stated that a Japanese design
leader, who had never been to the United States, was assigned to design a
car for the North American market. To overcome his lack of knowledge of
this market, he actually traveled to the United States, rented a car, and drove
through all 50 U.S. states and 13 Canadian provinces to experience the
actual driving and car usage conditions in North America. Because of this
first-hand experience, he made a few very good changes in the car design.

4.1.2 Stages of the Customer Survey

Customer survey research is a well-established area. A step-by-step

procedure is available to guide the whole customer survey process. In this
 Customer Survey Design, Administration, and Analysis 61

section, the stages of a typical customer survey are outlined and discussed.
We first give a brief overview of each of the following stages:
Stage 1: Establishment of goals and objectives of the survey
Stage 2: The survey schedule and budget
Stage 3: Establishment of an information base
Stage 4: Determination of population and sampling frame
Stage 5: Determination of sample size and sample selection procedure
Stage 6: Design of the survey instrument
Stage 7: Pretest of survey instrument
Stage 8: Selection and training of survey interviewers
Stage 9: Implementation of the survey
Stage 10: Data analysis and report

Stage 1: Establishment of Goals and Objectives of the Survey

The most important, and often the most challenging, part of survey design
is clarifying survey intent and scope. This is where knowledge about your
own business is essential. Survey specialists cannot do this step for you
because they are not the experts of your own business. Only you know what
is most important to your business or program.

The following aspects are essential in establishing the goals and objectives
of your survey.

Determine Survey Purpose. The most critical part of survey design is a

clearly defined statement of purpose and a well-structured view of what you
will do with your newly acquired information. Surveys are decision-making
tools. They have little value if you are not clear on the decisions your survey
will support. It might be helpful to complete the following phrases in order
to figure your real intent in this survey study.
• I want to do a survey because ______.
• I intend to use the information I am seeking by ______.
• The information to be gathered will enable me to decide ______.
• I am prepared to implement change as a result of this survey because
______.

Identify Who Will Use the Results and How the Results Will be Communicated.
Surveys are communication tools. It is important to understand who will use the
survey results and what type of information they respond to. Avoid the common
pitfall of assuming others share your tastes in data. Although marketing staff
may be comfortable with focus group results, a technical audience may want
62 Chapter Four

statistics. Leaders often want both numbers and human-interest perspectives

when making decisions. Thus, a quantitative survey paired with selected case
studies can be the most compelling for this group. Completing the following
statements may help you to define the survey audience.
• The users of survey results include ______.
• The group(s) I will provide with information include ______.
• They want the information in order to ______.
• The way(s) they like to receive information include ______.

Identify What Specific Information Is Needed and When. This next level of
refinement identifies and double-checks the information needed from the
survey process. Completing the following statements may help you pri-
oritize your information needs.
• The information I really need is ______.
• I need this information because ______.
• My top-priority information needs are ______.

Develop specific research questions that need to be answered. For example,

if you are looking for information on a proposed product, identify the new
product’s elements and the concerns you have about each of them. Also,
consider how your choice of survey information will protect the participants’
privacy.

Once you have prioritized your information needs, determine when surveying
should begin and how often it should occur. Answering the following
questions will help you decide.
• How soon will I need information from this survey?
• How often does significant change occur in my process, in my customers
or their lives, or in the environment in which this process operates?
• How often do I need updated information to manage my process or
program?
• How often do survey users need updated information?

Determine how often to survey by weighing the potential benefit derived from
resurveying versus the investment in resources—both yours and your
customers. As a rule, the time period between surveys should be short enough
to give you reliable information, yet long enough that your customers will not
feel bothered. Several factors drive survey frequency, including survey length
and complexity, changes in your customer base, changes in your service or
product delivery process, and seasonality of services or products.
 Customer Survey Design, Administration, and Analysis 63

Stage 2: The Survey Schedule and Budget

After the goals and objectives of the customer survey are determined, the survey
researcher should establish a budget and timetable for the duration of this survey
project. Ideally, the money and time resources devoted to your survey will be
driven by the importance of the decisions you will make based on the data.
Consider the following questions when scoping your resource requirements.
• What is the value of the information I am seeking?
• What are the potential consequences of the decisions I will make based
on this information?
• What is the cost of not having survey data?
• What staff and other resources are currently available?
• What staff and other resources do I need?
Then determine the resource requirements by identifying the staff and
financial resources that can be devoted to the project. It is important to agree
about resource issues to ensure you have the capability to deliver a survey that
meets your overall expectations. You may have internal resources, such as
trained interviewers or data analysts. If not, consider whether you are willing
to contract out for these services. Limitations on resource requirements will
shape the entire survey design process. The timetable should be flexible
enough to accommodate unforeseen delays.

Stage 3: Establishment of an Information Base

Before developing a survey instrument (questionnaire), it is necessary to

gather information about the subject matter under investigation from
interested parties and individuals. The purpose of this stage is to develop the
information base for the questionnaire. A focus group meeting is usually the
key activity in this stage. The focus group consists of carefully selected
customer representatives, company marketing representatives, product
development people, and so on. A typical size of a focus group ranges from
5 to 12. In this focus group meeting, based on the goals and objectives of the
survey established in stage 1, an exhaustive list of raw questions will be
developed and they will serve as a basis to develop the survey instrument.

Stage 4: Determination of Population and Sampling Frame

The population is the entire set of people, organizations, households, etc., that
are addressed by your survey research. For example, for a fast-food chain, the
relevant population will be fast-food eaters. For a suburban hospital, the pop-
ulation will be residents in the neighboring area. The portion of the population
that can be identified to be interviewed is called the sampling frame.
64 Chapter Four

For example, the population of fast-food eaters may include all people except
homeless and sick people. But if a telephone interview is to be conducted, only
the people with known telephone number can be reached, so “people with a
telephone number” will be the sampling frame for fast-food eaters. The concepts
of population and sampling frame will be discussed further in Sec. 4.4.

Stage 5: Determination of Sample Size and Sample Selection Procedure

The survey researcher will have to select a sample that adequately represents
the population under study. In general, larger samples will yield greater
accuracy than small samples in terms of analysis results. The sample size is
usually determined by balancing between analysis accuracy and the increased
cost and time due to larger sample size. Once the sample size is determined,
the method of sampling will be determined. The commonly used sampling
methods include random sampling, stratified random sampling, and cluster
sampling. The sample size determination and sampling methods will be
discussed in Sec. 4.4.

Stage 6: Design of the Survey Instrument

The development of a survey instrument or questionnaire is a key component

of the customer survey. At this stage, a survey researcher must design a series
of unbiased, well-structured questions that can systematically obtain the
information based on the survey goals and objectives developed in stage 1.
The input from the focus group is a major source for survey questions. The
development of a questionnaire can be an extremely detailed and time-
consuming process. The best-designed questionnaire should be short and
concise with well-worded questions. Long and wordy questionnaires will
often result in a lower response rate and a higher survey cost. The design of
the survey instrument is discussed in Sec. 4.2.

Stage 7: Pretest of the Survey Instrument

After a draft questionnaire is designed, it is important to pretest the ques-

tionnaire with a small group of respondents. During this pretest, poorly
worded questions will be identified and refined. The refined questionnaire
will have a better quality.

Stage 8: Selection and Training of Survey Interviewers

For telephone and in-person interviews, trained interviewers are required.

The source of interviewers can be college students, part-time workers, and
so on. Interviewers should be familiar with the questionnaire and know how
to handle uncooperative respondents.
 Customer Survey Design, Administration, and Analysis 65

Stage 9: Implementation of the Survey

The administering of the survey instrument is a very crucial stage of the

customer survey. It is very important to abide by the sampling procedure to
ensure the validity of the survey. It is also very important to stick to the time
schedule of the survey process. Care must be taken to ensure the privacy of
the respondents and minimize their inconvenience. The implementation of
the survey is further discussed in Sec. 4.3.

Stage 10: Data Analysis and Report

The data from returned questionnaires will be summarized and analyzed by

statistical methods, and the final findings of the analysis will be reported.
Section 4.5 will discuss details of data analysis and report.

4.2 Survey Instrument Design

One of the key tasks in the customer survey is the questionnaire development
process. The main issues in questionnaire development include the type of
questions, the wording of questions, the sequence of questions, and the
length of the questionnaire.

4.2.1 Types of Questions

There are two types of questions in the customer survey: closed-ended

questions and open-ended questions.

Closed-Ended Questions

Closed-ended questions provide a fixed list of alternative responses and ask

respondents to select one or more alternatives as the best answer(s) for the
question. Closed-ended questions have many different formats.

Multiple-Choice Questions
A multiple-choice question has a list of answers and usually asks for a fact.
Only one answer is supposed to be applicable. Here is an example of a
multiple choice question:
What department do you work in?
a. Sales
b. Marketing
c. Manufacturing
d. Research
66 Chapter Four

When you construct this kind of question, you must be careful to make sure
the list of answers that you offer to your respondents is exhaustive and
mutually exclusive.

In the example question, if someone works in the personnel department, he or

she will not be able to find an appropriate answer. In such a case, this question
has an inadequate number of answers. It is also recommended that the total
number of answers in a multiple-choice question be no more than 10 to 12.

Checklist or Inventory Questions

A checklist or inventory question asks respondents what subset of items on
a list would apply to them. Here is an example of a checklist question:
Please indicate from what sources you obtain information about new
music and movies? Check all that apply.
______ Radio ______ Television ______ Internet
______ Newspaper ______ Friend ______ Magazine
______ Other (please specify)
Clearly in this question, more than one answer may apply.

Rating Questions
A rating question asks the respondent to use a given scale to judge
something. Here is an example of a rating question:
Please rate your instructor’s teaching ability in the following categories
on a 1 to 5 scale, where 1 is very poor, 3 is average, and 5 is excellent.
Rating Category
______ Course contents
______ Instruction
______ Office hours

The Pros and Cons of Closed-Ended Questions

The advantages of closed-ended questions include
1. The set of answers in a closed-ended question is uniform, so it is easy
to compare the differences among respondents.
2. The uniformity in the set of answers for each question will make
computer data entry easier.
3. The fixed list of answers tends to make the question clearer to the
respondent.
 Customer Survey Design, Administration, and Analysis 67

The disadvantages of closed-ended questions include

1. Closed-ended questions compel respondents to choose the closest rep-
resentation of their actual response on the list of prespecified answers,
which may deviate from their true opinions.
2. When respondents are unsure of what is the best answer, they may
choose a random answer, which will lead to errors.

Level of Measurements in Closed-Ended Questions

Before being analyzed, the survey data should be organized as variables. A

variable is a specific characteristic of the population, such as age, sex,
preference, and rating. Depending on the design of the questions and answers,
the variables used in the survey have different measurement properties, referred
to as levels of measurement or measurement scales. The commonly used meas-
urement scales include nominal, ordinal, and interval. In survey design, there
is a specially designed interval scale called the Likert scale. We are going to
discuss these in detail.

Nominal Scale
The nominal level of measurement simply places the survey answers into
categories. For example, a variable such as political party preference in the
United States can be categorized as three classes, Democrat, Republican, or
Independent. In nominal scale, survey data can be placed into categories
and their frequency of occurrences counted. There is no ranking or ordering
of the categories.

Ordinal Scale
The ordinal level of measurement goes one step beyond the nominal scale;
it ranks the categories by a certain criterion. For example, the education
levels of people can be classified into the following categories: high
school graduate or lower, two-year college degree, bachelor’s degree,
master’s degree, and Ph.D. degree. Clearly, we can rank these education
levels; a Ph.D. is certainly higher than a master’s, for example, but it is
difficult to define a numerical difference between these educational
achievements.

The Interval Scale

The interval level of measurement gives the greatest amount of information
about the variables. It labels, orders, and uses numerical units of measure to
indicate the exact value of each category. For example, variables such as
income, age, and weight are in interval scales.
68 Chapter Four

Likert Scale
The Likert scale (after Rensis Likert) is used for the measurement of attitudes
and opinions. A Likert scale may contain several items such as strongly
agree, agree, neutral, disagree, or strongly disagree. Here is an example:
Netscape is easier to use than Microsoft Internet Explorer.
1. Strongly disagree
2. Disagree
3. Neutral
4. Agree
5. Strongly agree
Sometimes, a numerical scale is explicitly displayed in the questionnaire:
What is your general impression of how the Port city government
affects your business?
Highly Highly
negative positive
1 2 3 4 5
______ ______ ______ ______ ______

Likert items are ordinally scaled. It is not assumed that the difference
between the choices of strongly agree and agree is the same size as the dif-
ference between the choices of agree and neutral. However, in survey data
analysis, it is general practice to treat the Likert scale as an interval scale.
For example, in college course evaluations, there are many Likert scale
questions about a professor’s course teaching; the scores from all students
for each question are averaged as the evaluation score. Clearly this treatment
assumes that the Likert scale is an interval scale.

Open-Ended Questions

Open-ended questions deal with situations where the list of possible

answers is very long or it is very difficult to construct an exhaustive list.
Here are some examples:
What is your favorite place to go for summer vacation? ______
How long have you and your family lived in your current place? ______
What is the first foreign language you learned? ______
Open-ended questions allow respondents to provide longer, more complex
answers than for closed-ended questions. There are several disadvantages to
 Customer Survey Design, Administration, and Analysis 69

open-ended questions. First, open-ended questions will elicit some irrelevant

answers. Second, it takes a lot more effort to analyze open-ended questions,
since the number of distinct answers from all respondents may be very high
and messy, Thirdly, open-ended questions are difficult to analyze by sta-
tistical methods, because statistical methods require some degree of data
standardization.

Overall, it is highly recommended that most survey questions be in the form

of closed-ended questions to ensure a higher response rate, shorter ques-
tionnaire completion time, and easier data analysis.

4.2.2 The Wording of Survey Questions

The wording of survey questions is very important for a successful customer

survey. Good survey questions should be
1. Clear, easily understandable, and stated in a direct and straightforward
way
2. Specific and precisely stated so the respondent knows exactly what is
being asked
3. Unambiguous and unequivocal so there is only one way to understand
or interpret what the question is asking about
4. Simple and brief rather than complicated, cluttered, and long-winded
5. Stated in terms that your respondents are likely to be familiar and
comfortable with, without using complex technical terminology,
jargon, or overly sophisticated wording
Good survey questions should not be
1. Leading. They should not draw the respondent toward a specific
answer or make some answers clearly unattractive or undesirable.
2. Multipurpose. They should not ask about two or more things together
in the same question.
3. Threatening. They should not make the respondent uncomfortable or
put the respondent in a difficult or compromising position.

Example 4.1: Here Is an Example of a Multiple Purpose Question

Do you believe the development of the I-696 freeway entrance will affect the
image and property value for our whole subdivision?

Yes____ No____

This question is difficult to answer, because a yes or no answer indicates that the
respondent feels that both the image and property value will be affected in the
70 Chapter Four

same way. However, the respondent might feel that the image of the community
will increase, because of the better freeway access, but the property value will go
down due to increased traffic, noise, and commercial development.

Example 4.2
If a survey question is worded as “What is your income?”, it will generate all
kinds of answers, such as annual income, hourly pay, monthly income, or total
household income. This is an example of an ambiguous question. A better
wording of the question would be

What is your total annual income before taxes?

a. Below $20,000
b. $20,001 to $40,000
c. $40,001 to $60,000
d. $60,001 to $80,000
e. $80,001 to $100,000
f. Over $100,000

4.2.3 Order of Questions in Surveys

The order in which questions are presented can affect the overall customer
survey significantly. A poorly organized questionnaire can confuse the
respondents, bias their responses, and jeopardize the quality of the survey.

It is a good idea to start the survey with some easy introductory questions.
Here are some examples:
Do you own a car?
Yes______ No______
Do you have an e-mail address?
Yes______ No______
How long have you lived in the current property?
______ (years)
You should save more complicated questions that may require some careful
thought for later after you warm up the respondents with introductory
questions.

There are several typical organizational patterns for survey questions:

1. Chronological order: The questions are in sequential or temporal
order, for instance, from most recent to least recent.
2. Funnel pattern: From general to specific.
 Customer Survey Design, Administration, and Analysis 71

3. Inverted funnel: From specific to general.

4. Tree pattern: The questions branch out in different directions,
depending on the respondent’s answers to early questions.
The question organizational pattern should be chosen based on the goals
and objectives of the customer survey. Usually, topically related questions
should be grouped together.

Example 4.3: The Following Is an Example of a Good Grouping of

Questions

1. How would you describe the current relationship between labor and
management?

Good ____ Fair ____ Poor ____

2. During the past five years, do you think this labor-management relationship has

Improved ____ Remained the same ____ Worsened ____

3. In what way do you think the labor-management relationship can be improved?

These three questions are related and in logical order. However, let’s we put the
following three questions together.

1. Do you or your coworker participate in a company-sponsored suggestion

program?

Yes ____ No ____

2. During the last five years, do you think this labor-management relationship has

Improved ____ Remained the same ____ Worsened ____

3. Would you be interested in a job training program?

Yes ____ No ____

The respondents will be able to answer these questions, but they may get dis-
oriented after answering 10 or more of these kinds of misplaced questions.

4.2.4 Questionnaire Length

The questionnaire should be as concise as possible while covering the

necessary subjects based on the goals and objectives of the survey. Practice
has shown that when the survey becomes too long, the response rate and the
quality of the answers will go down significantly.

As a general guideline, telephone interviews should be less than 20 minutes;

mail-out questionnaires should not take more than 30 minutes to answer;
72 Chapter Four

the in-person interview should be limited to less than an hour. Ideally, the
telephone survey should take between 10 to 15 minutes, mail-out surveys
should take about 15 minutes, and in-person interviews should take less
than 30 minutes.

4.3 Administering the Survey

Once the survey instrument is designed, pretested, and revised, it is time to

administer the survey. For different survey methods, that is, mail-out,
telephone, and in-person, the way of administering the survey will be
different. In this section, we are going to discuss how to administer the
survey for each of these cases.

4.3.1 Administering a Mail-Out Survey

In a mail-out survey, the questionnaire should be designed in the form of a

booklet in order to ensure a professional appearance. Any resemblance to an
advertisement brochure should be strictly avoided. The professional appearance
of the questionnaire is very important to ensure a satisfactory response rate.
There should be adequate spacing between questions. A good cover letter is
very important to explain the purpose of the survey. The questionnaire should be
designed such that it is very convenient for respondents to mail it back.

There are two ways to present the questionnaires to respondents. Questionnaires

can be personally delivered to respondents. This method is more costly in
terms of time and effort, but it is likely to result in a higher response rate, a
more rapid response, a higher percentage of completed questions in the ques-
tionnaire, and perhaps more valid and accurate responses. The other method
is the direct mailing of questionnaires to respondents; this method will usually
result in a lower response rate. Some remedies for this include follow-up
mailings, or follow-up phone calls. Usually these follow-ups should be done
three to four weeks after the questionnaires are sent by mail. Direct mailing
plus the follow-ups usually will achieve a 50 to 60 percent response rate.
Additional follow-ups may raise the response rate to over 70 percent.

4.3.2 Administering a Telephone Survey

The telephone survey is less complex to implement than the mail-out survey.
The most important aspect of the telephone survey is the selection and training
of telephone interviewers. A good source of possible interviewers is uni-
versity students, especially graduate students. The interviewers usually first
study the questionnaire by themselves. Then they are trained in pretest results,
potential tough issues of the questionnaire, and many general ethical issues.
 Customer Survey Design, Administration, and Analysis 73

Interviewers should not introduce any bias in the interview process and should
not express any opinions in response to the answers from the respondents.

Many companies that conduct telephone interviews use computer-assisted

telephone systems where the interviewer sits at a computer that dials the
telephone number and puts the questions to be asked on the screen so the
interviewer can read them to the respondents. The software that manages
this can take care of the data entry and coding, as the interviewer uses the com-
puter’s keyboard or mouse to indicate the respondent’s answers to the questions.

4.3.3 Administering an In-Person Survey

In-person interviews are the most expensive to conduct, in terms of both time
and money, and the most intrusive method. A major strength of the in-person
interview is the ability to deal with complex topics. Because you can see how
respondents react to the questions as you ask them, you will have a better
idea how well they understand the questions and what confuses them. You
will also have opportunities to resolve any glitches in the interview process.

The selection and training of in-person interviewers is even more important

than that of telephone interviewers. The selection methods and training of
interviewers are almost the same as that of telephone interviewers.

4.4 Survey Sampling Method and Sample Size

The main goal of a customer survey is to produce an accurate picture about

the population based on the information drawn from a scientifically selected
subset from that population. Sampling is necessary because it is impractical
to seek information from every member of the population. In this sampling
process, first we need to determine our population. Then we need to define
a sampling frame that is a list of elements in the population that may be
selected in the sample. Thirdly, we need to identify a sampling method,
that is, a method to select a subset from the sampling frame. Before we do
the sampling, we need to identify what is the adequate sample size for this
survey in order to ensure the credibility of the survey data analysis. In this
section, we are going to discuss these issues.

4.4.1 Population and Sampling Frame

The first consideration in survey sampling is the specification of the unit of

analysis. The unit of analysis is the individual, object, institution, or group
that bears relevance to the survey study. For example, for a fast-food chain
74 Chapter Four

owner, the individual consumer could be the unit of analysis; for a mortgage
lending operation, each household could be the unit of analysis; for a
medical equipment supplier, each hospital or clinic could be the unit of
analysis. The population is defined to be the collection of units of analysis
that findings of the survey will apply to. For example, the population of fast-
food chain customers is the collection of all potential individual customers
that the chain can reach; the population of the customers for a mortgage
lending operation is the collection of all the households that the lending
operation could do business with; the population of the customers for a
medical equipment supplier is the collection of all potential hospitals and
clinics that could do business with this supplier.

However, in any population, usually not all the units of analysis can be
identified and reached. For example, if a population is to be the people living
within a metropolitan area, then the unit of analysis will be each single resident.
From a practical point of view, it is unlikely that all the residents of this metro-
politan area can be identified and reached. People are born and people die;
people move in and out. There are people who do not have telephones or stable
living places. Usually only a portion of the population is identifiable and
reachable; this portion of the population is often called a working population.
From the working population, it is possible to develop a list of units of analysis
that can be readily reached in our customer survey. This list is called the
sampling frame. For example, if the population is all the residents in a metro-
politan area, then the working population could be all residents that can be
reached by phone, and the sampling frame could be the residents listed in the
local telephone directory. Some other possible sources for the sampling frame
include voter lists; utility (gas, electric, water, and so on) customer lists; motor
vehicle registrants; magazine and newspaper subscriber lists.

With most sampling frames you will have to deal with some of the following
problems:
1. Missing elements: Legitimate members of the population not
included in the sampling frame. For example, in some polls of U.S.
elections in 2004, only traditional phone users were polled; people
with cell phones only were not selected in the poll list. Therefore, a
sizeable portion of young professionals was left out.
2. Foreign elements: Some people’s names are listed in the sample
frame, but they are actually no longer in the population. For example,
people could have moved out a while ago but their names are still in
the phone directory.
3. Duplicated elements: Population members listed more than once in
the sample frame.
 Customer Survey Design, Administration, and Analysis 75

In all these situations you need to determine how many missing, foreign, and
duplicated elements are in the sampling frame and how big a proportion
these wrong elements are as a percentage of the whole group of sampling
frame elements. If this proportion is large and it will affect the accuracy of
the poll, you should consider the possibility of using a different sampling
frame. For example, as stated before, in some of the opinion polls of the U.S.
2004 election, people with cell phones only were excluded in the opinion
poll sampling frame. If the portion of people excluded was a sizeable portion
of voters and their opinions were significantly different than those of tra-
ditional phone users, then this opinion poll might be rather unreliable.

4.4.2 Sampling Methods

Probability Sampling versus Nonprobability Sampling

Sampling methods can be classified into probability sampling and nonprob-

ability sampling. Probability sampling is used when you would like to draw
conclusions on the whole population based on the data you collected in the
sample. If your goal is just to learn something about the sample and you do
not intend to draw conclusions on the whole population, then probability
sampling is not necessary.

There are two characteristics of probability sampling:

1. The probability of selection is equal for all elements of the sampling
frame at all stages of the sampling process.
2. The selection of one element from the sampling frame is independent
of the selection of any other element.
For example, consider a sampling frame of 1000 people whose names
are written on equal-sized pieces of paper and where these paper pieces
are thoroughly mixed and selected one by one without the names on the
paper pieces being seen. If we assume that 100 people will be selected
for this sample, then the probability of selecting any person in the first
draw is 1/1000; the selection of any person in the second draw is 1/999;
… ; and selection of any person in the 100th draw is 1/901. Though the
probability of selecting a particular person is slightly different in each
draw, within each draw, the probability of selection for all the available
people is the same; this is consistent with the first rule of probability
sampling: The probability of selection is equal for all elements of the
sampling frame at all stages of the sampling process. Also, the prob-
ability of selecting a particular person is clearly independent of previous
drawings of other people, so this sampling practice is an example of
probability sampling.
76 Chapter Four

There are several methods of probability sampling: random sampling, sys-

tematic sampling, stratified random sampling, and cluster sampling. We
discuss each of these probability sampling methods and nonprobability
sampling in detail.

Random Sampling

The best-known probability sampling method is random sampling. In the

random sampling method, each unit in the sampling frame is assigned a
distinct number. Then the units are chosen at random by a process that does
not favor certain numbers or certain patterns of numbers. The chosen units
will become the sample. A commonly used method to randomly choose
units from the sampling frame is the use of the table of random numbers.
Table 4.1 shows a portion of a table of random numbers.

Suppose there are 1000 people in the sampling frame and we want to select
a random sample of 30 people. Each person will be assigned a number
ranging from 000 to 999. Using Table 4.1, we can then arbitrarily select
three digits from the five digits given. For example, we can choose the last
three digits. In this case we will select the people with numbers 073, 849,
761, 622, 905, 276, 837, … ,033.

For large samples the use of a random number table will become tedious
and time-consuming, so computer-generated random numbers can be used
to select a random sample.

Systematic Sampling

Systematic sampling is an adaptation of the random sampling method. It is

used when the sampling frame is quite large and the sampling units cannot
be easily numbered. For example, if a sampling frame has 3,000,000 people

Table 4.1 A Portion of a Table of Random Numbers

1 2 3 4 5 6

1 77073 51849 15761 85622 38905 72276

2 20837 95047 50724 16922 04405 30858

3 37504 15645 36630 28216 10056 97628

4 40392 58557 60446 11553 60013 38037

5 53408 14205 33152 70651 17314 93033

 Customer Survey Design, Administration, and Analysis 77

on the list and a sample of 1500 people is required, a random sampling

approach might be unrealistic, simply because numbering 3,000,000 people
is already a big task. If the original list of these 3,000,000 is randomly dis-
tributed, we can select sample units by selecting them from the list at fixed
intervals (every nth entry, for example, every 20th car on the highway, every
50th customer in a store). In this example, if we want to select 1500 people,
because 3,000,000/1500 = 2000, we can select 1 out of every 2000 people
in the sampling frame. In this case, if we start with a random starting point
and then select a person after we count every 2000th sampling unit, this
procedure will create a random sample of 1500 people.

Stratified Random Sampling

Stratified sampling assumes that the sampling frame consists of several

mutually exclusive groups, called strata. In stratified random sampling, the
total number of samples is divided among strata by a predetermined pro-
portion. Then, random samples are taken from each stratum. For
example, in a community, assume that 60 percent of the population is white,
15 percent is black, 15 percent is Hispanic, and 10 percent is Asian. If a
sample of 1000 people is needed, the stratified sampling method will divide
these 1000 people into four ethnic groups based on the proportion in the
population. So 600 samples will be allocated to whites, 150 samples to
blacks, 150 samples to Hispanics, and 100 samples to Asians. Then these
600 people in the “white” strata will be randomly selected from the white
sampling frame, 150 samples of blacks will be randomly selected from the
black sampling frame, and so on.

Cluster Sampling

Cluster sampling deals with the situation in which there is a hierarchy of

sampling units. The primary sampling unit is a group (or cluster), such as
counties, cities, schools, or subdivisions. The secondary sampling units are
the individual elements within these clusters from which the information is
to be collected. For example, if we want to study the needs of first and
second graders, it is difficult to directly locate the sampling frame from a
raw population list, such as a telephone directory. It is easy to identify the
clusters, such as public and private schools, in which there are first grade
and second grade classrooms. After we select a subset of classrooms, we
can randomly select sample units from these classrooms.

Nonprobability Sampling

In nonprobability sampling, the probability that a particular unit will be

selected is unknown. In this case, we cannot generalize the finding within the
sample to the population because we cannot assume any valid statistical
78 Chapter Four

relationship between the sample and population or use such a useful prob-
ability distribution model as the normal distribution. However, nonprob-
ability sampling can still be helpful. It is much easier to select a sample and
get a feel of what a portion of customers may think. For example, nonprob-
ability sampling can be used to quickly select a small sample of respondents
(say 30) to pretest a survey instrument. Although the conclusion from these
30 people cannot be generalized to the general population, a lot of short-
comings of the survey instrument can be identified.

There are a few commonly used nonprobability sampling methods. The

most commonly used sampling method is the sidewalk survey. The
interviewer, for instance, may interview passersby near a shopping center,
assuming the general population is the shoppers. In this approach, the
sampling frame is not explicitly identified and numbered; the probability of
selecting any particular passerby is unknown. The advantage of this approach
is the ability to get a lot of information quickly. The other commonly used
nonprobability sampling technique is snowball sampling. Snowball sampling
is particularly beneficial in instances where it is difficult to identify potential
respondents. Once a few respondents are identified and interviewed, they are
asked to identify others who might qualify as respondents. Soon the list of
respondents will be increased.

4.4.3 Sample Size Determination

One critical question in a survey project is how many units in a sample are
needed so that the analysis result derived by this sample can be generalized
to the whole population. The answer to this question depends on two key
factors. One key factor is what level of accuracy is required in this study; the
greater level of accuracy required in the study, the larger the sample size
needed. The other factor is the cost and time that we would like to spend in
this survey study; a larger sample size will certainly mean higher cost and
longer time. Therefore, the sample size is mostly determined by the tradeoff
between desired level of accuracy and cost and time.

Determination of Sample Size for Variables Expressed in Proportions

In survey data analysis, many variables are expressed in terms of proportions.

For example, we could ask customers:
Do you like the service of ABC Bank?
Yes _______ No _______
The proportion of people in the survey sample answering yes, which is often
called the sample proportion p̂ , is frequently used as the statistical estimate
 Customer Survey Design, Administration, and Analysis 79

of population proportion p, where p is the real proportion of customers who

like ABC Bank’s service. Of course, we would like p̂ as close to p as
possible. From the properties of the normal distribution, and if the random
sampling method is used, the probability distribution of p̂ is

p(1 − p) ⎞
pˆ ~ N ⎛ p, (4.1)
⎝ n ⎠

The 100(1 − α)% confidence interval for p is

p(1 − p) pˆ (1 − pˆ )
pˆ ± Za / 2 ≈ pˆ ± Za / 2 (4.2)
n n

We can use ∆ p = Za / 2 p(1n− p ) ≈ Za / 2 p(1n− p ) to represent the half width of

ˆ ˆ

the confidence interval for p. The magnitude of ∆p represents the accuracy

of p̂ as an estimator of p, because

P( pˆ − ∆ p ≤ p ≤ pˆ + ∆ p ) = (1 − a )100% (4.3)

∆p is also called the margin of error.

Example 4.4
In a customer satisfaction survey, the preliminary results indicate that the pro-
portion of unsatisfied customers is very close to the proportion of satisfied
customers. What sample size is needed if we want the accuracy of the survey to
be within ±3 percent of the true proportion, with 95% confidence?

In this case, clearly p ≈ 50%, from the problem, statement, we want

p(1 − p)
∆ p = Za / 2 = 3%
n

Therefore
2
⎛Z p(1 − p) ⎞
n=⎜ a2 ⎟ (4.4)
⎝ ∆ p ⎠

is the sample size formula for this case. Specifically,

2
⎛ 1.96 × 0.5(1 − 0.5) ⎞
n=⎜ ⎟ = 1067
⎝ 0.03 ⎠

for this example, where Z0.025 = 1.96.

So a sample of 1067 or more people is needed to ensure the accuracy of ±3 percent.

80 Chapter Four

Table 4.2 Minimum Sample Sizes for Proportions

Sample Size
Confidence Interval
(Margin of Error, %) 95% Confidence 99% Confidence

±1 9,604 16,590

±2 2,401 4,148

±3 1,067 1,844

±4 601 1,037

±5 385 664

±6 267 461

±7 196 339

±8 151 260

±9 119 205

±10 97 166

Table 4.2 lists the relationship between sample size, margin of error, and
confidence level.

Determination of Sample Size for Variables Expressed in Proportions

When the Population Is Small

The sample size rule specified by Eq. (4.4) is based on the assumption that
the population size is infinite or very large. In some survey studies, however,
the population size is rather limited. For example, the customer base for a
medical equipment supplier will consist of a number of hospitals and
clinics; the population size will be in hundreds in the best circumstance. If
the population size, say N, is known, then according to Rea and Parker
(1992), the sample size n can be calculated by

Za2 / 2 [ p(1 − p)]N

n= (4.5)
Za / 2 [ p(1 − p)] + ( N − 1)∆2p
2
 Customer Survey Design, Administration, and Analysis 81

Example 4.5
In a customer satisfaction survey, the preliminary results indicate that the pro-
portion of unsatisfied customers is very close to the proportion of satisfied
customers, and the population size is N = 2500. What sample size is needed if
we want the accuracy of the survey to be within ±3 percent of the true pro-
portion, with 95% confidence?

Using Eq. (4.5)

Za2 / 2 [ p(1 − p)]N 1.96 2 × (0.5 × 0.5)(2500)

n= 2 =
= 749
2
Z
a /2 [ p(1 − p)] + ( N − 1)∆ p 1.96 × (0.5 × 0.5) + 2499 × (0.03)2
2

This sample size is smaller than that of Example 4.4.

Determination of Sample Size for Interval-Scale Variables

In survey analysis, some variables are interval-scale variables. For example,
personal income, age, and evaluation scores based on the Likert scale are all
interval-scale variables. The population means of these interval-scale variables
m are usually of interest. The sample mean of the interval-scale variable x is
often used as the statistical estimate of population mean m. Similarly, we would
like m as close to m as possible. From the properties of the normal distribution,
and if the random sampling method is used, the probability distribution of x is

⎛ s 2⎞
x ~ N ⎜ m, ⎟ (4.6)
⎝ n ⎠

The 100(1 − a)% confidence interval for µ is

s
x ± Za /2 = x ± ∆m (4.7)
n

where ∆m is the margin of error for µ.

By using the relationship

s
∆ m = Za /2 (4.8)
n

we can derive the sample size rule:

Za2s 2
n= (4.9)
∆2m
82 Chapter Four

Example 4.6
In a survey study of household incomes for county Y, the preliminary estimate
of average household income is $40,000 and the standard deviation is estimated
to be $6000. If we would like to determine a survey sample size so that the
margin of error for the average household income is no more than $1000, what
is the minimum sample size, if a confidence level of 95% is desired?

Using Eq. (4.9),

Za2s 2 1.96 2 × 6000 2

n= = = 139
∆2m 1000 2

Therefore, a minimum sample size of 139 households is required.

Determination of Sample Size for Interval-Scale Variables When the

Population Is Small

The sample size rule specified by Eq. (4.9) is based on the assumption that
the population size is infinite or very large. In some survey studies,
however, the population size is rather limited. If the population size, say
N, is known, then according to Rea and Parker (1992), the sample size n
can be calculated by

Za2 / 2s 2 (4.10)
n=
∆2m + Za2 / 2s 2 ( N − 1)

Example 4.7
In a survey study of household incomes for county Y, the preliminary estimate
of average household income is $40,000 and the standard deviation is estimated
to be $6000. If we would like to determine a survey sample size so that the
margin of error for the average household income is no more than $1000, and
it is known that the total number of households in county Y is 5000, what is the
minimum sample size, if a confidence level of 95% is desired?

By using Eq. (4.10)

Za2 / 2s 2 1.96 2 × 6000 2

n= = = 135
∆ + Za / 2s ( N − 1) 1000 + (1.96 2 × 6000 2 ) 4999
2
m
2 2 2
 Chapter

Customer Value Management

5
5.1 Introduction

In Chap. 3 we illustrated that customer value is the difference between

benefits and liabilities, that is,
Value = benefits – liabilities

where the benefits consist of

1. Functional benefits
2. Psychological benefits
3. Service and convenience benefits
and the liabilities consist of
1. Economical liabilities (customer costs)
2. Psychological liabilities
3. Service and convenience liabilities
For any product or service, the company that provides more value to its
customers than its competitors will eventually gain in sales and profitability.
However, for each particular product or service, the profile of benefits and
liabilities will be very different, and customers view each item’s benefits
and liabilities with different relative importance. When a product or service
has several competitors, it is necessary to do better in the areas that
customers view as very important.

B. Gale (1994) developed a systematic approach that tries to maximize

customer value in providing products and services. This approach consists
of the following steps:
1. Conduct customer surveys in order to get the information about relative
importance ratings of the aspects of a particular product or service that
matter to customers, and customers’ ratings of the company’s product

83

Copyright © 2005 by The McGraw-Hill Companies, Inc. Click here for terms of use.
84 Chapter Five

or service together with those of competitors; Gale called this step of

compiling the market-perceived quality profile.
2. Collect information about the price of the company’s product or
service or combined customer costs, together with competitors’ prices
or combined customer costs. Gale calls this step of compiling the
market-perceived price profile.
3. Complete a comprehensive customer value evaluation of the
company’s product or service compared with competitors, Gale calls
this step of compiling the customer value map.
4. Complete an area-to-area competitive analysis, so the critical areas
can be identified in order to gain a competitive advantage.
5. Deploy the critical improvement into the product or service design.
In this chapter, we discuss this customer value management in detail.
Section 5.2 discusses all aspects of establishing a market-perceived quality
profile. Section 5.3 gives details about how to establish a market-perceived
price profile. Section 5.4 discusses the customer value map, Sec. 5.5
discusses area-to-area competitive analysis, and Sec. 5.6 covers the QFD-
like approach to improve product service design to maximize market-
perceived customer value.

5.2 Market-Perceived Quality Profile

In the customer value management approach, all non-cost-related attributes,

such as functional benefits, psychological benefits, and service and con-
venience benefits are considered to be components of market-perceived
quality. If a product or service can offer a higher market-perceived quality
than all competitors yet have its cost under control, then clearly this product
will have a competitive edge. The market-perceived quality profile is a
detailed quality scorecard that provides quantitative quality ratings of a
company’s own product versus competitors’ products on all important non-
cost-related attributes.

According to Gale (1994), creating the market-perceived quality profile

involves the following steps:
1. In forums such as focus groups, ask customers in the targeted market,
including both your customers and competitors’ customers, to list the
factors, other than price, that are important in their purchase decisions.
2. Establish how the various nonprice factors are weighted in the
customer’s decision, usually by simply asking customers to tell you how
they weigh the various factors, distributing 100 points among them.
 Customer Value Management 85

3. Ask well-informed customers, including both yours and those of your

competitors, how you and your competitors perform on the various
quality attributes. Then for each attribute, divide the score of the
product or service you are studying by the scores of competitors’
products. This gives you the performance ratio on that attribute.
Multiply each ratio by the weight of that attribute. And add the results
to get an overall market-perceived quality score.
Table 5.1 is an example of a market-perceived quality profile for frozen
chicken (Gale 1994). In this table, the first column lists all the important non-
cost-related quality attributes in the chicken business: yellow bird, meat-to-
bone, and so on. The second column of this table lists the relative importance
rating for the attributes listed in column 1; the relative importance ratings
add up to 100 percent. For example, the yellow bird attribute accounts for
10 percent of relative importance; the fresh attribute accounts for 15 percent
of relative importance. These importance ratings are obtained from a specially
designed customer survey. The third column of this table lists the average
customer rating of our business’s product for each quality attribute. The
highest possible score is 10.0; the lowest possible score is 1.0. These scores
are also computed based on a specially designed customer survey. Column 4
of this table lists the average customer ratings of competitors’products for each
customer attribute. The fifth column lists the ratio of column 3 to column 4,
that is, the average customer rating of our product versus the average customer
rating of competitors’ products. Clearly, if this ratio is less than one, then it
means that in this quality attribute category, our product performs worse than
that of our average competitor; if this ratio is greater than one, then it means
that in this quality category, our product performs better than that of our
average competitor. The values in the last column, column 6, are obtained by
multiplying the value from column 5 (the ratio) times that in column 2 (the
relative importance score). Clearly, if all the ratios are equal to one, then it
means that our product is an average product in comparison with those of
competitors. Then the total score in column 6 will be equal to 100, and our
market-perceived quality score will be 100. The product with a market-
perceived quality score of larger than 100 is considered to be a competitive
product; the higher the score, the more competitive the product is.

The information used to compile the market-perceived quality profile, such as

that of Table 5.1, can also be obtained by conducting a special kind of customer
survey. A design of this kind of customer survey form is illustrated in Table 5.2.

The survey population should include the customers of our company, as

well as all consumers who purchase this kind of product or service,
including the customers of competitors. For example, if our company is
86

Table 5.1 Market-Perceived Quality Profile in Chicken Business

Industry Comparison Quality Scores

Customer’s
Weight of Perdue (Our Ratio (Ours/Competitor)
Quality Attributes Business) (1 = Lowest, Average (ratio > 1.0 means Customer
Attributes (Total = 100) 10 = Highest) Competitor “better than competitor”) Weight × Ratio

Yellow bird 10 8.1 7.2 8.1/7.2 = 1.13 11.3 = 1.13 × 10

Meat-to-bone 20 9.0 7.3 1.23 24.6 = 1.23 × 20

No pinfeathers 20 9.2 6.5 1.42 28.4

Fresh 15 8.0 8.0 1.00 15.0

Availability 10 8.0 8.0 1.00 10.0

Brand image 25 9.4 6.4 1.47 36.8

Total 100 126.1 = market-

perceived
quality score
 Table 5.2 Survey Form for Customer Values

Performance Scores 1–10

(1 = Lowest, 10 = Highest)
Quality Importance
(Nonprice) Weights Company A Company B Company C Company D
Attributes (Add Up to 100) (Our Company) (Competitor 1) (Competitor 2) (Competitor 3)
1

8
9

10

Sum of importance weights = 100

Price (perceived transaction price)

Price competitiveness
87
88 Chapter Five

Table 5.3 Quality Profile Studies of Gallbladder Operations: Endo-Surgery versus

Traditional Surgery

Industry
Comparison Quality Scores
Customer’s
Weight of Customer
Quality Attributes Weight ×
Attributes (Total = 100) Endo Traditional Ratio Ratio

At home 40 1–2 6–8 weeks 3.0 120

recovery weeks
period

Hospital stay 30 1–2 3–7 days 2.0 60

days

Complica- 10 0–5% 1–10% 1.5 15

tions rate

Postoperative 5 0.5–1 3–5 inch 1.4 7

scar inch

Operation 15 0.5–1 1–2 hours 2.0 30

time hour

Total 100 232 =

market-
perceived
quality
score

McDonald’s, then the survey population should be the customers for all
fast-food chains and should include the customer population of Burger
King, Wendy’s, and so on.

Clearly, if we collect enough finished survey forms from customers, we will

be able to fill in all the information needed in a market-perceived quality
profile study. Besides customer survey data, functional data can also be used
in a market-perceived quality profile study. Table 5.3 gives such an example.

5.3 Market-Perceived Price Profile

For some industries, such as retailing, the price of a particular item is one-
shot, so it is very clearly understood. In this case, the price comparison is
 Customer Value Management 89

simply one dollar amount versus another dollar amount. For many other
businesses, the overall customer cost structure is rather complicated. For
example, the cost-related factors in purchasing a car might involve trade-in
allowance, rebate, and finance rate, besides the purchase price of the car. In
such a case, the construction of the market-perceived price profile is
necessary, because it will integrate all the cost factors and compile a
combined price score.

The construction of the market-perceived price profile is very similar to that

of the market-perceived quality profile. Customers are asked to list the
factors that affect their perception of a product’s cost. Table 5.4 is an
example of a market-perceived price profile in the luxury car market.

However, it is people’s convention that the lower the price, the better.
Having a higher customer satisfaction score value in price level is counter-
intuitive. In the example of Table 5.4, Acura’s market-perceived price score
is 118.7. Since it is more than 100, this means that the Acura’s overall price
level is more attractive (lower) than other competitors. However, using the
inverse score 84.2 is more intuitively appealing.

If we just compare a one-shot purchasing price, a simple price ratio can be

used. For example, if Acura’s price is $35,200, and the average competitor’s
price is $40,000, then the price ratio is $35,200 $40,000 = 0.88. If a per-
centage score is used, then the relative price ratio is 0.88 × 100 = 88. If a
relative price ratio of a product is less than 100, then its price level is lower
than that of its competitors’ products.

5.4 Customer Value Map

The customer value map is a very useful tool to identify the competitive
position of a particular product in comparison with other competitors’
products. A product is competitive if it has high customer benefit and low
customer cost. The customer benefit can be well represented by the market-
perceived quality score that we discussed in Sec. 5.2, and the customer cost
position can be well represented by the relative price ratio that we discussed
in Sec. 5.3.

The customer value map is a two-dimensional plot of the market-perceived

quality score on the horizontal axis versus the relative price ratio on the
vertical axis. Figure 5.1 illustrates what a customer value map looks like. In
this customer value map, each dot represents a particular product. The
position of the dot depends on the values of its market-perceived quality
90

Table 5.4 Market-Perceived Price Profile: Luxury Cars

Industry Comparison Quality Scores

Customer’s
Price Weight of Acura (Our Ratio (Ours/Competitor)
Satisfaction Attributes Business) (1 = Lowest, Average (ratio > 1.0 means Customer
Attributes (Total = 100) 10 = Highest) Competitor “better than competitor”) Weight × Ratio

Purchase price 60 9 7 1.29 = 9/7 77.4 = 1.29 × 60

Trade-in 20 6 6 1.0 20 = 1.0 × 20

allowance

Resale price 10 9 8 1.13 11.3

Finance rates 10 7 7 1.00 10.0

Total 100 118.7 = market-

perceived price
score

Relative price 84.2 = (1/118.7) ×

ratio 100
 Customer Value Management 91

Low value, high cost

Worse
customer value
Higher price

Fair value
zone
Relative price ratio

100
High value,
Lower price

low cost

Better
customer value

Lower score 100 Higher score

Market-perceived quality score
Figure 5.1 Customer Value Map

score and relative price ratio. The diagonal line in the customer value map
represents where the market-perceived quality score is equal to the relative
price ratio. For example, if a product has a market-perceived quality score
equal to 80, and its relative price ratio is equal to 80, then the dot repre-
senting this product will be on the diagonal line. This is a low-value, low-
price product. Similarly, if a product has a market-perceived quality score of
120, and the relative price ratio is also 120, then this product will also be on
the diagonal line and it is a high-price, high-value product. Overall, the
region around the diagonal line can be called the fair-value zone. The
products in the fair-value zone can be considered to be average products.
The products in the lower right-hand corner of the customer value map are
featured by a lower relative price ratio and a higher market-perceived quality
score. We can call these products high-value, low-price products. They have
a superior competitive position and are poised to gain market share.
Products in the upper left-hand corner of the customer value map are
featured by a high relative price ratio and a low market-perceived quality
score. We can call these low-value, high-price products. They have an
inferior competitive position in the marketplace and are vulnerable to losing
market share.
92 Chapter Five

Example 5.1
Here is an example of a toaster customer value analysis. Table 5.5 lists the
market-perceived quality scores and prices for 15 brands of toasters. By using
the data from Table 4.5, we can draw the customer value map shown in Fig. 5.2.

From the customer value map, the products above the diagonal line are the
ones that have a low customer value. Products 1 and 3 (Cuisinart CPT-60
and KitchenAid) have a good market-perceived quality score but are very
high in price. Product 9 (Oster) has a below-average market-perceived
quality score but has a high price. Products 5, 6, and 11 (Cuisinart CPT-30,

Table 5.5 Market-Perceived Quality Profile and Price Profile for Toasters

Market-Perceived Relative
Name of Toaster Quality Score Toaster Price Price

1. Cuisinart CPT-60 128 $70 215

2. Sunbeam 119 28 85

3. KitchenAid 117 77 237

4. Black & Decker 112 25 77

5. Cuisinart CPT-30 109 40 123

6. Breadman 107 35 108

7. Proctor-Silex 22425 104 15 46

8. Krups 101 32 98

9. Oster 94 45 138

10. Toastmaster B1021 91 16 49

11. Proctor-Silex 22415 87 35 108

12. Toastmaster B 1035 84 21 65

13. Betty Crocker 84 25 77

14. Proctor-Silex 22205 83 11 34

15. Rival 80 13 40

Average 100 $33 100

 Customer Value Management 93

250
3
1

200

150
9
Relative price

5
6
11
100
8
2
13
4
12
50

15 10 7
14

0
0 50 100 150
Market-perceived quality score
Figure 5.2 Customer Value Map of Toasters

Breadman, and Proctor-Silex 22415) are also relatively high in price and
low in performance, but they are close to fair-value zone. Products 2, 4, and 7
(Sunbeam, Black & Decker, and Proctor-Silex 22425) are low-price, high-
performance products. Products 10, 12, 14, and 15 (Toastmaster B1021,
Toastmaster B 1035, Proctor-Silex 22205, and Rival) are low-price,
reasonable-performance products. Products 8 and 13 (Krups and Betty
Crocker) have better than average customer value but they are in the fair-
value zone.

Overall, the products that are located in the lower-right portion of the chart
have a better customer value; the further products deviate from the fair
value line, the better is their customer value. In Fig. 5.2, products 2, 4, and 7
are in the lower-right portion and have the largest distances from the fair-
value line, so they have the best customer value. Product 2 has a higher
price, so it is a best-value product at a higher price level. Product 7 has a
lower price, so it is a best-value product at a low price level. Similarly, the
products located in the upper-left corner of the chart have a worse customer
value; the further products deviate from the fair-value line, the worse their
customer value.
94 Chapter Five

5.5 Competitive Customer Value Analysis

Competitive customer value analysis is a graphical display chart that can be

used to compare your product versus competitors’ products in important
aspects of customer value. This analysis will show you which areas are the
most important to focus on to improve your product most effectively.

Here we can use the following example to show how competitive customer
value analysis works. Table 5.6 shows a market-perceived quality profile of
two printers, printer A (our printer) and printer B (competitor’s printer).
Table 5.7 shows the market-perceived price profile of these two printers.
Figure 5.3 shows a head-to-head customer value area chart that compares
printers A and B. Each bar represents a market-perceived quality charac-
teristic. The horizontal dimension of the bar shows how much our product
is better or worse than our competitor’s product. The thickness of each bar
is proportional to the relative importance of each characteristic. So the total
area in white represents our advantage; the total shaded area represents our
disadvantage. Our goal will be to maximize the white area and minimize the
shaded area in the most effective way.

Figure 5.4 shows a head-to-head market-perceived price ratio chart for

printers. Again, each bar represents a customer cost component, its hor-
izontal dimension represents how much better or worse our product’s price
compares with our competitor’s price, and the bar’s thickness represents the
relative importance of that cost component in the eyes of customers. So the
total area in white minus the total shaded area represents our product’s cost
advantage; the larger the cost advantage, the more competitive is our
product in price.

5.6 Customer Value Deployment

After our competitive customer value analysis and relative price ratio
analysis, we need to find an effective way to overcome our disadvantages
and strengthen our existing advantages in order to improve our customer
values and win over the competition. To do that, we need to identify the
critical areas of the company that are related to our key market-perceived
quality factors and market-perceived customer cost areas.

A quality function deployment (QFD) like template can be very useful in

deploying key customer values into our process improvements. Table 5.8
shows the customer value deployment matrix for the printer case. In this
 Table 5.6 Market-Perceived Quality Profile of Two Printers

Industry Comparison Quality Scores

Customer’s
Weight of Printer A (Our Printer B Ratio (Ours/Competitor)
Quality Attributes Printer) (1 = Lowest, (Competitor’s (ratio > 1.0 means Customer
Attributes (Total = 100) 10 = Highest) Printer) “better than competitor”) Weight × Ratio

Machine uptime 25 8 7 1.14 = 8/7 28.5 = 1.14 × 25

Print speed 15 9 8 1.13 17.0

Image quality 15 7 8 0.88 13.2

Ease of use 5 4 7 0.57 2.85

Service 15 5 7 0.71 10.65

response time

Repair time 15 5 6 0.83 12.45

Quality of service 10 7 7 1.0 10.0

Total 100 94.65 = market-

perceived
quality score
95
96

Table 5.7 Market-Perceived Price Profile: Printers

Industry Comparison Quality Scores

Price Customer’s Weight of Printer B

Satisfaction Attributes Printer A (Our (Competitor’s Relative Price Customer
Attributes (Total = 100) Printer) Printer) Ratio Weight × Ratio

Purchase price 40 $508 $585 0.87 = 508/585 34.8 = 0.87 × 40

Service and repair 30 $60/year $65/year 0.92 = 60/65 27.6

Toner 20 $235/year $235/year 1.0 20

Paper 10 $124/year $101/year 1.23 12.3

Total 100 94.7 = relative

price ratio
 Customer Value Management 97

0.6 0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.4

Machine up time

Print speed

Image quality

Ease of use
Service response
time

Repair time

Quality of service

Figure 5.3 Head-to-Head Customer Value Area Chart for Printers

0.6 0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.4

Purchase price

Service and repair

Toner

Paper

Figure 5.4 Head-to-Head Market-Perceived Price Ratio Area Chart for Printers
98

Table 5.8 Customer Value Deployment Matrix for Printer Example

Quality Quality Sales and

Attributes Design Manufacturing Control Service Distribution Marketing

Machine uptime 3 9 9

Print speed 9 3 3

Image quality 9 9 9 9

Ease of use 9 9 3

Service response time 9 9

Repair time 9 9

Quality of service 9
 Customer Value Management 99

matrix, correlation scores of 9, 3, 1, and 0 are used. A score of 9 means

“very much related,” a score of 3 means “related,” a score of 1 means
“slightly related,” and a score of zero means “not related.”

For example, in the “machine uptime” category, quality control and manu-
facturing are very critical in ensuring printer dependability; product design
is also related to the dependability of the printer. In the “ease of use”
category, of course, design is very important in creating a printer that is easy
to use. However, sometimes there is a gap between a customer perceived
quality image and the real quality level. For example, printer A may actually
be easy to use, but because of poorly written customer instructions, poor
service support, and poor marketing, a significant portion of customers may
have developed a stereotype that printer A is hard to use. The right way to
overcome this problem may not be to redesign the printer. Instead, a com-
prehensive strategy that includes improving customer service, rewriting
customer instructions, and developing the right marketing message might
be the right way.
This page intentionally left blank
 Chapter

Quality Function Deployment

6
6.1 Introduction

In the context of Design for Six Sigma (DFSS), quality function deployment
(QFD) is best viewed as a planning tool that relates a list of delights, wants,
and needs of customers to design technical functional requirements. With
the application of QFD, possible relationships are explored between quality
characteristics expressed by customers and substitute quality requirements
expressed in engineering terms (Cohen 1988, 1995; Clausing 1994). In the
context of DFSS, we will call these requirements critical-to characteristics,
which include subsets like critical-to-quality, and critical-to-delivery char-
acteristics. In the QFD methodology customers define the product using
their own expressions which usually do not carry any significant technical
terminology. The voice of the customer (VOC) can be discounted into a list
of needs used later as input to a relationship diagram, which is called QFD’s
house of quality.

Knowledge of customer needs is a must requirement in order for a company

to maintain and increase its position in the market. Correct market predictions
are of little value if the requirements cannot be incorporated into the design at
the right time. Critical-to-innovation and critical-to-market characteristics are
critical because companies that are first to introduce new concepts at six-
sigma (6σ) levels usually capture the largest share of the market. Wrestling
market share away from a viable competitor is more difficult than wrestling
market share away from a first producer into a market. One major advantage
of a QFD is attainment of the shortest development cycle, which is gained by
companies with the ability and desire to satisfy customer expectations.
Another significant advantage is the improvement gained in the design family
of the company resulting in increased customer satisfaction.

The team should take the time required to understand customer wants and to
plan the project more thoughtfully. Using QFD, the DFSS team will be able

101

Copyright © 2005 by The McGraw-Hill Companies, Inc. Click here for terms of use.
102 Chapter Six

to anticipate failures and avoid major downstream changes. Quality function

deployment prevents downstream changes by an extensive planning effort at
the beginning of the DFSS design or redesign project. The team will employ
marketing and product planning inputs to deploy customer expectations
through design, process, and production planning and all across functional
departments. This will assure resolution of issues, lean design, and focus on
those potential innovations (delighters) that are important to the customer.

Figure 6.1 shows that a company using QFD places more emphasis on
responding to problems early in the design cycle. Intuitively, it incurs more
time, cost, and energy to implement a design change at production launch
than at the concept phase because more resources are required to resolve
problems than to preclude their occurrence in the first place.

Quality function deployment translates customer needs and expectations

into appropriate design requirements. The intent of QFD is to incorporate
the voice of the customer into all phases of the product development cycle,
through production and into the marketplace. With QFD, quality is defined
by the customer. Customers want products, processes, and services that
throughout their lives meet customers’ needs and expectations at a cost that
represents value. The results of the process being customer driven are total
quality excellence, greater customer satisfaction, increased market share,
and potential growth.

The real value of QFD is its ability to direct the application of other DFSS
tools like statistical process control (SPC) and robustness to those entities

Expected resource
level with QFD Actual resource level

Post-release
Resource

Unplanned
resources

Time
Figure 6.1 QFD Effect on Project Resources
 Quality Function Deployment 103

that will have the greatest impact on the ability to design and satisfy the
needs of the customers, both internal and external. Quality function
deployment is a zooming tool that identifies the significant design elements
on which to focus design and improvement efforts and other resources. In
the context of QFD, planning is key and is enhanced by reliable information
in benchmarking and testing.

The objectives of this chapter are to

1. Provide Black Belts, Green Belts, and other readers with the knowledge
and skills they need to define quality function deployment
2. Identify the four key elements of any QFD chart
3. Provide a basic understanding of the overall four phases of QFD
methodology
4. Define the three quality features of the Kano model

6.2 History of QFD

Quality function development was created by Mitsubishi Heavy Industry at

Kobe Shipyards in the early 1970s. Stringent government regulations for
military vessels coupled with the large capital outlay per ship forced Kobe
Shipyard’s management to commit to upstream quality assurance. The Kobe
engineers drafted a matrix, which related all the government regulations,
critical design requirements, and customer requirements to company
technical controlled characteristics of how the company would achieve
them. In addition, the matrix also depicted the relative importance of each
entry, making it possible for important items to be identified and prioritized
to receive a greater share of the available company resources.

Winning is contagious. Other companies adopted QFD in the mid-1970s.

For example, the automotive industry applied the first QFD to the rust
problem. Since then, QFD usage has grown as a well-rooted methodology
into many American businesses. It has become so familiar because of its
adopted commandment: Design it right the first time.

6.3 QFD Benefits, Assumptions, and Realities

The major benefit of QFD is customer satisfaction. QFD gives customers what
they want, such as a shorter development cycle. Failures and redesign peaks
(Fig. 6.1) are avoided during prelaunch, and know-how knowledge as it relates
to customer demand is preserved and transferred to the next design team.
104 Chapter Six

Before QFD can be implemented, a multidisciplinary DFSS team needs to

be in place and more time should be spent upstream understanding customer
needs and expectations and defining the product or service in greater detail.

There are many initial realistic concerns that must be addressed in order to
implement QFD successfully. For example, departments represented in the
team do not tend to talk to one another. In addition, market research
information is not technically or design focused, and QFD is more easily
applied to incremental design than to brand creative design. The traditional
reality that problem prevention is not rewarded as well as problem solving
will be faced initially be the DFSS team. This “reality” will fade away as the
team embarks on its project using the rigor of DFSS.

6.4 QFD Methodology Overview

Quality function deployment is accomplished by multidisciplinary DFSS

teams using a series of charts to deploy critical customer attributes
throughout the phases of design development. QFD is usually deployed in
multiple phases. Figure 6.2 shows the typical four-phase deployment in a
typical manufacturing setting. The four phases are
Phase 1: CTS planning
Phase 2: Functional requirements
Phase 3: Design parameters planning
Phase 4: Process variables planning

Hows
CTS
requirements
Hows
Functional
Customer
attributes

House of
Whats

requirements Hows
quality Design
requirements

1 parameters
House of Process
Whats
CTS

requirements

quality variables
Functional

Prioritized
Whats

2 House of
CTS quality
parameters

requirements
Design

3 House of
Whats

Prioritized quality
functions 4
Prioritized
parameters
Prioritized
variables

Figure 6.2 Four Phases of QFD in Manufacturing Application

 Quality Function Deployment 105

In a typical service industry setting, QFD can be deployed in two phases, as

illustrated in Fig. 6.3.

QFD uses many techniques in an attempt to minimize and ease the task of
handling large numbers of functional requirements that might be
encountered. Applications in the range of 130 (functions) × 100 (customer
features) were recorded (Hauser and Clausing 1988). One typical grouping
technique that may be used initially in a QFD study is the affinity diagram.
The affinity diagram is a hierarchical grouping technique, which is used to
consolidate multiple unstructured ideas generated by the voice of the
customer. It operates based on intuitive similarities that may be detected
from low-level stand-alone ideas (bottom) to arrangements of classes of
ideas (up). This bundling of customer features is a critical step. It requires a
cross-functional team that has multiple capabilities such as the ability to
brainstorm, evaluate, and revolutionize existing ideas in pursuit of iden-
tifying logical (not necessarily optimum) groupings and, hence, minimizing
the overall list of needs into manageable classes.

Another technique is the tree diagram, which is a step beyond the affinity
diagram. The tree diagram is used mainly to fill the gaps and cavities not
detected previously in order to achieve a more completed structure leading
to more ideas. Such expansion of ideas will allow the structure to grow but
at the same time will provide more vision into the voice of the customer
(Cohen 1988).

The house of quality (Fig. 6.4) is the relationship foundation of QFD.

Employment of the house will result in improved communication,
planning, and design activity. This benefit extends beyond the QFD team to

Hows
CTS Operation
requirements variables
requirements
Customer
attributes

House of House of
Whats

Whats
CTS

quality quality
1 2

Prioritized Prioritized
CTS operation
requirements variables

Figure 6.3 Multiple-Phase QFD in Service Application

106 Chapter Six

CTS correlation

CTS
requirements
(Hows)
Direction of improvement
Customer desirability
Customer attributes
(Whats)

Relationship Planning
matrix matrix

Importance rating
Competitive
benchmarks

Targets and limits

Figure 6.4 House of Quality

the whole organization. Defined customer wants through QFD can be

applied to many similar products and form the basis of a corporate memory
on the subject of critical-to-satisfaction (CTS) requirements. As a direct
result of the use of QFD, customer intent will become the driver of the
design process as well as the catalyst for modification to design solution
entities. In Fig. 6.4, we have the following components that constitute the
house of quality (Cohen 1988):

Customer Attributes (Whats)

Customer attributes (Whats) are obtained from the voice of the customer
through surveys, claim data, warranties, and promotion campaigns. Usually
customers use fuzzy expressions in characterizing their needs with many
dimensions to be satisfied simultaneously. Affinity and tree diagrams may
be used to complete the list of needs. Most of these Whats are very general
ideas that require more detailed definition. For example, customers often say
they want to purchase a “stylish” or “cool” product. “Being cool” may be a
very desirable feature, but since it has different interpretations to different
 Quality Function Deployment 107

people, it cannot be acted upon directly. Legal and safety requirements or

other internal wants are considered extensions to the Whats. The Whats can
be characterized using the Kano model (Sec. 6.5).

Hows

Hows are design features derived by the DFSS team to answer the Whats. Each
of the initial Whats needs operational definitions. The objective is to determine
a set of CTS requirements with which Whats can be materialized. The
answering activity translates customer expectations into design criteria such as
speed, torque, and time to delivery. For each What, there should be one or more
Hows that describe a means of attaining customer satisfaction. For example, a
“cool car” can be achieved through a stylish body (different and new), seat
design, leg room, lower noise, harshness, and vibration requirements. At this
stage only overall requirements that can be measured and controlled need to be
determined. These substitute for the customer needs and expectations and are
traditionally known as substitute quality characteristics. In this book, we will
adopt the critical-to terminology aligning with Six Sigma.

Teams should define the Hows in a solution-neutral environment and not be

restricted by listing specific parts and processes. Just itemize the means (the
Hows) whereby the list of Whats can be realized. One-to-one relationships
do not usually exist in the real world, and many Hows will relate to many
customer wants. In addition, each How will have some direction of
goodness or improvement as illustrated in the following figure:

Direction of improvement

Maximize 1.0
Target 0.0
Minimize −1.0

The circle represents the nominal-the-best target case.

Relationship Matrix
The process of relating Whats to Hows often becomes complicated by the
absence of one-to-one relationships as some of the Hows affect more than
one What. In many cases, they adversely affect one another. Hows that could
have an adverse effect on another customer want are important. For
example, “cool” and “stylish” are two of the Whats that a customer would
want in a vehicle. The Hows that support the “cool” attribute are lower
noise, roominess, and seat design requirements among others. These Hows
will also have some effect on the “stylish” attribute as well. A relationship
is created in the house of quality (HOQ) between the Hows as columns
108 Chapter Six

and the Whats in the rows. The relationship in every (What, How) cell
can be displayed by placing a symbol representing the cause-and-effect
relationship strength in that cell. When employees at the Kobe Shipyards
developed this matrix in 1972, they put the local horse racing symbols into
their QFD as relationship matrix symbols; for example, double-centered
circles mean a strong relationship, one circle means a medium strength rela-
tionship, and the triangle indicates a weak relationship. Symbols are used
instead of direct numbers because they can be identified and interpreted
easily and quickly. Different symbol notations have been floating around,
and we found the following to be more common than others:
Standard 9-3-1
Strong 9.0
Moderate 3.0
Weak 1.0

After determining the strength of each (What, How) cell, the DFSS team
should take the time to review the relationship matrix. For example, blank
rows or columns indicate either gaps in the team’s understanding or a
deficiency in fulfilling customer attributes. A blank row shows a need to
develop a How for the What in that row indicating a potentially unsatisfied
customer attribute. When a blank column exists, one of the Hows does not
impact any of the Whats. Delivering that How may require a new What that
has not been identified, or it might be a waste. The relationship matrix gives
the DFSS team the opportunity to revisit its work leading to better planning
and therefore better results.

What is needed is a way to determine to what extent the CTS requirement at

the head of the column contributes to meeting the customer attribute at the
beginning of the row. This is a subjective weighing of the possible cause-
and-effect relationships.

To rank order the CTS requirements and customer features, we multiply the
numerical value of the symbol representing the relationship by the customer
desirability index. This product when summed over all the customer features
in the Whats array provides a measure of the relative importance of such
CTS requirements to the DFSS team and is used as a planning index to
allocate resources and efforts, comparing the strength, importance, and
interactions of these various relationships. This importance rating is called
the technical importance rating.

Importance Ratings

Importance ratings are a relative measure indicating the importance of each

What or How to the design. In QFD, there are two importance ratings:
 Quality Function Deployment 109

1. The customer desirability index is obtained from the voice of the

customer activities such as surveys and clinics and is usually rated on
a scale from 1 (not important) to 5 (extremely important) as follows:
Direction of improvement

Extremely important 5.0

Very important 4.0
Somewhat important 3.0
A little important 2.0
Not important 1.0

2. The technical Importance Rating is calculated as follows:

a. By convention, each symbol in the relationship matrix receives a
value representing the strength in the (What, How) cell.
b. These values are then multiplied by the customer desirability index,
resulting in a numerical value for the symbol in the matrix.
c. The technical importance rating for each How can then be found by
adding together the values of all the relationship symbols in each
column.
Technical importance ratings have no physical interpretation; their
values lie in their ranking relative to one another. They are utilized to
determine which Hows take priority and should be allocated the most
resources. In doing so, the DFSS team should use the technical
importance rating as a main metric coupled with other factors like
difficulty, innovation, cost, reliability, timing, and all other measures
in their project charter.

Planning Matrix

The planning matrix is used to make comparisons of competitive performance

and identification of a benchmark in the context of ability to meet specific
customer needs. It is also used as a tool to set goals for improvement using a
ratio of performance (goal rating/current rating). Hauser and Clausing (1988)
view this matrix as a perceptual map in trying to answer the following
question: How can we change the existing product or develop a new one to
reflect customer intent given that the customer is more biased toward certain
features? The product of customer value, the targeted improvement ratio for
the raw (feature), and the sales point, which is a measure of how the raw
feature affects sales, will provide a weighted measure of the relative
importance of this customer feature to be considered by the team.

Hows Correlation (The Roof)

Each cell in the roof is a measure of the possible correlation of two different
Hows. The use of this information improves the team’s ability to develop a
systems perspective for the various Hows under consideration.
110 Chapter Six

The correlation matrix is one of the more commonly used optional extensions
to the original QFD developed by Kobe engineers. Traditionally, the major
task of the correlation matrix is to make tradeoff decisions by identifying the
qualitative correlations between the various Hows. This is a very important
function in the QFD because Hows are most often correlated. For example,
assume a matrix contains quality and cost objectives. The design engineer is
looking to decrease cost, but any improvement in this aspect will have a
negative effect on the quality. This is called a negative correlation, and it
must be identified so that a tradeoff can be addressed. Tradeoffs are usually
accomplished by revising the long-term objectives (How Muchs). These
revisions are called realistic objectives. Using the negative correlation
example just discussed, in order to resolve the conflict between cost and
quality, the cost objective would be changed to a realistic objective.

In the correlation matrix, once again, symbols are used for ease of reference
to indicate the different levels of correlation as shown in the following figure:

Trade offs

Synergy + 1.0
Compromise − −1.0

If one How directly supports another How, a positive correlation is

produced.

Targets (How Much)

For every How shown on the relationship matrix, a How Much should be
determined. The goal here is to quantify the customers’ needs and expec-
tations and create a target for the design team. The How Muchs also create
a basis for assessing success. For this reason, Hows should be measurable.
It is necessary to review the Hows and develop a means of quantification.
Target orientation to provide a visual indication of the target type is usually
optional. In addition, the tolerance around targets needs to be identified,
based on the company marketing strategy and contrasting it with the best-
in-its-class competitor. This tolerance will be cascaded down using the
axiomatic design method.

Competitive Assessments or Benchmarking

Competitive assessments are used to compare the competition’s design with

the team design. There are two types of competitive assessments:
1. Customer competitive assessment: Found to the right of the rela-
tionships matrix in the planning matrix. Voice of the customer (VOC)
 Quality Function Deployment 111

activities (e.g., surveys) are used to rate the Whats of the various
designs in a particular segment of the market.
2. Technical competitive assessment: Found at the bottom of the rela-
tionships matrix. It rates Hows for the same competitor from a
technical perspective.

The assessments should align; a conflict between them indicates a failure by

the team to understand the VOC. In case of a conflict, the team needs to
revisit the Hows array and check its understanding of the array. The team
should contrast that understanding with VOC data. Further research may be
needed. The team may then add new Hows that reflect customer perceptions.
Any unexpected items that violate conventional wisdom should be noted for
future reference. Situations like this can only be resolved by having the DFSS
team involved in the QFD, instead of having only marketing people
comparing competitive designs. In this way, the team that is responsible for
designing for customer attributes will interpret exactly what those wants are.

6.5 Kano Model of Quality

In QFD, voice of the customer activities such as market research, provide

the array of Whats that represent customer attributes. Such Whats are
“spoken” by the customer and are called performance quality or one-
dimensional. However, more Whats have to be addressed than just those
directly spoken by the customer. As Fig. 6.5 shows, there are also unspoken
Whats. Unspoken Whats are the basic features that customers automatically
assume the design will have. Such Whats are implied in the functional
requirements of the design or assumed from historical experience. For
example, customers automatically expect their lawnmower to cut grass to
the specified level, but they would not discuss it on a survey unless they had
trouble with one in the past. Unspoken wants have a weird property. They
do not increase customer satisfaction. However, if they are not delivered,
they have a strong negative effect on customer satisfaction.

Another group of unspoken Whats can be categorized as innovations or

delighters. These pleasant surprises increase customer satisfaction in a
nonlinear fashion. For example, in the automotive industry, van owners
were delighted by the second van side door and by baby seat anchor bolts.

Design features may change position on the Kano model over time. In the
1990s, the second side door in a caravan was a pleasant surprise for
customers, but now, on most models, the second door is standard and
112 Chapter Six

Excitement
quality

satisfaction
Performance

Customer
quality

“Wow!”
Degree of CTS
achievement

… Basic
of quality
re
mo Unspoken wants
ve
Gi

Figure 6.5 Kano Model of Customer Attributes

expected to be installed without a specific request. The ideal DFSS project plan
would include all three types of quality features: excitement quality (unspoken
latent demands), performance quality (spoken and one-dimensional), and basic
quality (unspoken or assumed).

6.6 QFD Analysis

The completion of the first QFD house of quality may give the DFSS team
a false impression that its job is completed. In reality, all the team’s work to
this point has been to create a tool that will guide future efforts toward
deploying the VOC into the design. QFD matrix analysis in every phase will
lead to the identification of design weaknesses, which must be dealt with as
potential strength opportunities to make the product or service best in its
class. A relatively simple procedure for analyzing the house of quality phase
is to address the following points:
• Blank or weak columns: These indicate Hows that do not strongly relate
to any customer attribute. The “How” that relates to a blank or weak
column could be deleted.
• Blank or weak rows: These indicate customer attributes that are not
being strongly addressed by a How. In this case, another ‘How’ or
 Quality Function Deployment 113

Hows should be added so that the blank or weak rows are changed to
stronger rows.
• Conflicts: Determine whether the technical competitive assessment is
in conflict with the customer competitive assessment.
• Significance: Determine which Hows are significant, that is, those that
relate to many customer attributes, safety and regulatory issues, and
internal company requirements.
• Eye-opener opportunities: If the team’s company and competitors are
doing poorly, the DFSS team should seize the opportunity to deliver on
these sales points, which may be treated as delighters in the Kano
model initially.
• Benchmarking: The team should take the opportunity to incorporate the
competitor’s highly rated Hows. It is advisable for the team to modify
and incorporate benchmarking and not resort to creation.

6.7 Example

This example is a QFD study conducted by a DFSS team. The following are
highlights of the QFD example.

Project Objective

Design a global commercial process with Six Sigma performance.

Project Problem Statement

• Sales cycle time (lead generation to full customer setup) exceeds 182
business days. Internal and external customer specifications range from
1 to 72 business days.
• Only 54 percent of customer service requests are closed by the com-
mitment date. The customers expect 100 percent of their service
requests to be completed on time.
• None of the commercial processes is standard or is Six Sigma capable.

Business Case

• There is no consistent, global process for selling to, setting up, and
servicing accounts.
• Current sales and customer service information management systems do
not enable a measurement of accuracy and timeliness on a global basis.
• Enterprise-wide customer care is a must be requirement; failure to
improve the process threatens growth and retention of the portfolio.
114 Chapter Six

Project Goals

• Reduce prospecting cycle time from 16 to 5 business days.

• Reduce discovery cycle time from 34 to 10 business days.
• Reduce the close-the-deal cycle time from 81 to 45 business days
(all sales metrics net of customer-wait time).
• Reduce setup cycle time from 51 to 12 business days.
• Increase the percentage of service requests closed by the commitment
date from 54 percent (1.6σ) to 99.97 percent (5.0σ).
The following are the QFD steps.

Step 1: Identify the Whats and Hows and their Relationship

The DFSS team identifies customers and establishes customer wants,
needs, delights, and usage profiles. Corporate, regulatory, and social
requirements should be identified also. The value of this step is to greatly
improve the understanding and appreciation DFSS team members have
for customer, corporate, regulatory, and social requirements. The DFSS
team, at this stage, should be expanded to include market research. A
market research professional might help the Black Belt assume
leadership during startup activities and perhaps later remain an active
participant as the team gains knowledge about customer engagement
methods. The Black Belt should put plans in place to collaborate with
identified organizations and/or employee relations to define tasks and
plans in support of the project and to train team members in customer
processes, and forward-thinking methods such as brainstorming,
visioning, and conceptualizing.

The DFSS team should focus on the key customers to optimize decisions
around them and try to include as many additional customers as possible.
The team should establish customer environmental conditions and customer
usage and operating conditions, study customer demographics and profiles,
conduct customer performance evaluations, and understand the per-
formance of the competition. In addition, the team should
• Establish a rough definition of an ideal service
• Listen to the customer and capture wants and needs through interviews,
focus groups, customer councils, field trials, field observations,
surveys, etc.
• Analyze customer complaints and assign satisfaction performance
ratings to attributes
• Acquire and rank these ratings with the QFD process
 Quality Function Deployment 115

• Study all available information about the service including marketing

plans
• Create innovative ideas, delights, and new wants by investigating
improved functions and cost of ownership and matching service
functions with needs, experience, and customer beliefs
• Innovate to avoid compromising for bottlenecks, conflicts, and constraints
• Benchmark the competition to improve weak areas

The following Whats are used.

Direction of improvement
Available products
Professional staff
Flexible processes
Knowledgeable staff
Easy-to-use products
Speedy processes
Cost-effective products
Accuracy

Step 2: Identify the Hows and Relationship Matrix

The purpose of this step is to define a “good” product or process in terms of

customer expectations, benchmark projections, institutional knowledge,
and interface requirements, and to translate this information into CTS
requirements. These will then be used to plan an effective and efficient
DFSS project.

One of the major reasons for customer dissatisfaction and warranty costs is
that the design specifications do not adequately reflect customer use of the
product or process. Too many times the specification is written after the design
is completed, or it is simply a reflection of an old specification that was also
inadequate. In addition, a poorly planned design commonly does not allocate
activities or resources in areas of importance to customers and wastes engi-
neering resources by spending too much time in activities that provide
marginal value. Because missed customer requirements are not targeted or
checked in the design process, procedures to handle field complaints for these
items are likely to be incomplete. Spending time on overdesigning and
overtesting items, not important to customers, is wasteful. Similarly, not
spending development time in areas important to customers is not only a
missed opportunity, but significant warranty costs are sure to follow.
116 Chapter Six

In DFSS, time is spent upfront understanding customer wants, needs, and

delights together with corporate and regulatory requirements. This under-
standing is then translated into CTS requirements which then drive
product and process design. The CTS attributes (Hows) are given in the
following diagram as well as the relationship matrix to the Whats. A
mapping begins by considering the high-level requirements for the
product or process. These are the true CTS requirements that define what
the customer would like if the product or process were ideal. This consid-
eration of a product or process from a customer perspective must address
the requirements from higher-level systems, internal customers (such as
manufacturing, assembly, service, packaging, and safety), external
customers, and regulatory legislation. Customer Whats are not easily
operational in the world of the Black Belt. For this reason it is necessary
to relate true quality characteristics to CTS requirements—design charac-
teristics that may be readily measured and, when properly targeted, will
substitute or assure performance to the Whats. This diagram, which relates
true quality characteristics to substitute quality characteristics, is called a
relationship matrix.

Importance to the customer

Meet time expectations
Know my business and offers
Save money and enhance productivity
Do it right the first time
Consultative
Know our products and processes
Talk to one person
Answer questions
Courteous
Adequate follow-up

The logic of a matrix is several levels deep. A tree diagram, one of the new
seven management tools, is commonly used to create the logic associated
with the customer. The mapping of customer characteristics to CTS
attribute characteristics is extremely valuable when done by the DFSS
team. A team typically begins differing in opinion and sharing stories and
experiences when the logic is only a few levels deep. An experiment may
even be conducted to better understand the relationships. When
completed, the entire team understands how product and process charac-
teristics that are detailed on drawings relate to functions that are important
to customers.
 Quality Function Deployment 117

Save money and enhance productivity

Know our products and processes

Know my business and offers
Importance to the customer
Meet time expectations

Do it right the first time

Adequate follow-up
Talk to one person
Answer questions
Direction or improvement
Maximize 1.0

Consultative
Target 0.0

Courteous
Minimize −1.0

10
2
3
4
5
6
7
8
9
1
1

Direction of improvement 1
Available products 1 2.0
Professional staff 2 3.0
Flexible processes 3 4.0
Knowledgeable staff 4 4.0
Easy-to-use products 5 4.0
Speedy processes 6 5.0
Cost-effective products 7 5.0
Accuracy 8 5.0
9

Figure 6.6 The Whats, the Hows, and the Relationship Matrix

The full QFD phases 1 and 2 are given in Figs. 6.6 to 6.9. The following
analysis applies to phase 1. The readers are encouraged to analyze the
phase 2 as an exercise.

The Hows Importance Calculation

Importance ratings are a relative comparison of the importance of each What

or How to the quality of the design. The 9-3-1 relationship matrix strength
rating is used. These values are multiplied by the customer importance rating
obtained from customer engagement activities (like surveys) resulting in a
numerical value. The Hows importance rating is summed by adding all values
of all relationships. For example, the importance rating of the first How of
Fig. 6.7 is calculated as 2.0 × 3.0 + 4.0 × 3.0 + 4.0 × 3.0 + 4.0 × 3.0 + 5.0 × 9.0
+ 5.0 × 3.0 = 102. Other How importance ratings can be calculated accordingly.
 118

Target
Minimize

attributes
Accuracy
Maximize

Our product

Target values
Professional staff
Available products

Speedy processes
Flexible processes
Knowledgeable staff
Easy-to-use products

Competitor 2: Dealers
Cost-effective products
Chapter Six

0.0
1.0

−1.0

Competitor 1: Rental car

Direction or improvement

Direction of improvement

Competitor 4: Competitor B
Competitor 3: Competitor A
Relative importance of product

Figure 6.7 Phase 1 QFD

8
7
6
5
4
3
2
Importance of product attributes 1
9
1
1 Importance to the customer

8 5.0
7 5.0
6 5.0
5 4.0
4 4.0
3 4.0
2 3.0
1 2.0
1 = 80% first call resolution 3 3 4 4 2 11.8 102.0 1 Meet time expectations
2 Discovery document 100% complete 4 3.5 2 3 3 14.9 129.0 2 Know my business and offers
3 Deliver 100% of productivity promises 3 3 3 2.5 4 13.9 120.0 3 Save money and enhance productivity
4 = 80% first call resolution 3 3 3 3 3 14.6 126.0 4 Do it right the first time
5 80% of AMs/CSAs score >= 2 on 3 3 2 3 4 10.6 92.0 5 Consultative
competency model
6 80% of AMs/CSAs score >= 2 on 0 0 0 0 4 15.4 133.0 6 Know our products and processes
competency model
7 >= 80% first call resolution 3.5 3.5 4 4 3.5 7.6 66.0 7 Talk to one person
8 >= 80% first call resolution 3.5 3.5 3.5 3.5 3.5 6.6 57.0 8 Answer questions
9 80% of AMs/CSAs score >= 2 on 3 3 3 3 3 3.1 27.0 9 Courteous
competency model
100% service requests closed by
10 promise 3 3 2.5 4 2 1.5 13.0 10 Adequate follow-up
date
Max = 5.0
Synergy

Our product
Compromise

Competitor 1: Rental
Trade offs

Competitor 2: Dealers
Competitor 3: Competitor A
1.0
−1.0

Competitor 4: Competitor B
Min = 1.5

9
8
7
6
5
4
3
2
1
 Quality Function Deployment 119

Use of standardized documents and tools

Relative importance of part attributes

Updating of customer account data

Importance of the part attributes

Direction of improvement

Close the deal cycle time

% of employees trained

Prospecting cycle time

Discovery cycle time

Setup cycle time

Systems uptime
Direction of improvement

Target values
Maximize 1.0
Target 0.0
Minimize −1.0
1
1
2
3
4
5
6
7
8

2
3
Direction of improvement 1
First call resolution % 1 5103.0 15.8 = 80% first call resolution 1
100% of service requests resolved by
% Svc Req Res by promise date 2 5004.0 15.5 2
promise date
% Total portfolio reviewed/year 3 4266.0 13.2 10% 3
% Discovery document complete 4 3618.0 11.2 100% 4
Sales cycle time 5 1911.0 5.9 60 days 5
Customer satisfaction rating 6 3927.0 12.1 6
% AMCSAs >= 2 competency
7 3159.0 9.8 80% 7
model
Average speed of answer 8 1278.0 4.0 80% of calls answered in <24 seconds 8
Losses due to price 9 1356.0 4.2 <10% 9
% CSAs >= 27 call coaching 10 2718.0 8.4 80% 10
24.9 647.7
Used 90% of the time 22.7 590.3
18.6 483.3
17.1 443.7
7.8 202.9
3.4 89.6
3.4 89.6
2.0 53.2

Importance of process attributes 1

Relative importance of process Standard 9-3-1
2
attributes Strong 9.0
Target values 3 Moderate 3.0
95% system uptime

Weak 1.0
Nightly update

10 days
45 days
12 days
5 days
100%
1
2
3
4
5
6
7
8

Figure 6.8 Phase 2 QFD

Phase 1 QFD Diagnostics

Weak Whats
The Black Belt needs to identify Whats with only weak or no relationships.
Such situations represent a failure to address a customer attribute. When this
occurs, the company should try to develop CTS(requirements) to address
this What. Sometimes the team may discover that present technology can
not satisfy the What. The DFSS team should resort to customer surveys and
assessment for review and further understanding.

No such What exists in our example. The closest to this situation is

“Available products” in row 1 and “Easy-to-use products” in row 5 (see
Figs. 6.6 and 6.7). It was highlighted as the weakest What but not weak
enough to warrant the preceding analysis. However, the team is encouraged
to strengthen this situation by a CTS requirement with a strong relationship.
120 Chapter Six

Relative importance of product attributes

Save money and enhance productivity

Know our products and processes

Importance of product attributes

Know my business and offers

Competitor 3: Competitor A
Competitor 4: Competitor B
Direction of improvement

Competitor 1: Rental car

Meet time expectations

Do it right the first time

Competitor 2: Dealers
10 Adequate follow-up
Talk to one person
Answer questions
Direction of improvement

Target values
Consultative

Our product
Maximize 1.0

Courteous
Target 0.0
Minimize −1.0
1
1
2
3
4
5
6
7
8
9

2
3
4
5
6
7
8
Direction of improvement 1
Meet time expectations 1 102.0 11.8 2 4 4 3 3
= 80% first call resolution 1
Know my business and Discovery document 100%
2 129.0 14.9 3 3 2 3.5 4 2
offers complete
Save money and enhance Deliver 100% of productivity
3 120.0 13.9 4 2.5 3 3 3 3
productivity promises
Do it right the first time 4 126.0 14.6 3 3 3 3 3 = 80% first call resolution 4
80% of AMs/CSAs score >=2
Consultative 5 92.0 10.6 4 3 2 3 3 5
on competency model
Know our products and 80% of AMs/CSAs score >=2
6 133.0 15.4 3 0 0 0 0 6
processes on competency model
Talk to one person 7 66.0 7.6 3.5 4 4 3.5 3.5 >= 80% first call resolution 7
Answer questions 8 57.0 6.6 3.5 3.5 3.53.5 3.5 >= 80% first call resolution 8
80% of AMs/CSAs score >=2
Courteous 9 27.0 3.1 3 3 3 3 3 9
on competency model
100% service requests closed
Adequate follow up 10 13.0 1.5 2 4 2.5 3 3 10
by promise date
3 3 4 4 2 11.8 102.0
4 3.5 2 3 3 14.9 129.0
3 3 3 2.5 4 13.9 120.0
3 3 3 3 3 14.6 126.0

0 0 0 0 3 15.4 133.0
3 3 2 3 4 10.6 92.0

66.0
57.0
27.0
13.0

Importance of product
1
attributes
Trade offs
Relative importance of
3.5 3.5 4 4 3.5 7.6
3.5 3.5 3.5 3.5 3.5 6.6
3.1
1.5

2
product attributes Synergy + 1.0
Our product 3 − −1.0
3 3 3 3 3
3 3 2.5 4 2

Compromise
Competitor 1: Rental car 4
Competitor 2: Dealers 5
Competitor 3: Competitor A 6
Competitor 4: Competitor B 7
Target values 8
80% of AMs/CSAs score >=2 on competency model
80% of AMs/CSAs score >=2 on competency model

80% of AMs/CSAs score >=2 on competency model

100% service requests closed by promise date
Deliver 100% of productivity promises
Discovery document 100% complete

>= 80% first call resolution

>= 80% first call resolution
= 80% first call resolution

= 80% first call resolution

10
1
2
3
4
5
6
7
8
9

Figure 6.9 Correlation.

Weak Hows
The team needs to look for blank or weak Hows (all entries are inverted
deltas). This situation occurs when CTS requirements are included that
do not really reflect the customer attributes being addressed by the QFD. The
Black Belt and his or her team may consider eliminating CTS requirements
 Quality Function Deployment 121

from further deployment if they do not relate to basic quality or performance

attributes in the Kano model. The theme of DFSS is to be customer driven
and to work on the right items; otherwise, we are creating a design “hidden
factory.”

In our example, the CTS requirement “Adequate follow-up” is weak (rated

13 on the importance rating). However, the What “Easy to use products” has
no strong relationship with any CTS requirements and eliminating
“Adequate follow-up” may weaken the delivery of this What even further.

Conflicts
The DFSS team needs to look for cases where technical benchmarking rates
their product or service high but the customer assessment is low. Miscon-
ceptions of customer attributes is the major root cause of these cases. The
team together with marketing can remedy these situations.

In our example, “Cost-effective products,” a What, is addressed by many CTS

requirements including “Save money and enhance productivity.” The customer
rates our product as weak (rating 2), while the technical assessment is rated the
highest (rating 4). Who is right? Conflicts may be a result of a failure to
understand the customer and must be resolved prior to further progress.

Strengths
By identifying the CTS requirements that contain the most 9 ratings, the DFSS
team pinpoints which CTS requirements have a significant impact on the total
design. Changes in these characteristics will greatly affect the design, and such
effects propagate via the correlation matrix to other CTS requirements causing
positive and negative implications. The following CTS requirements are sig-
nificant as implied by their importance ratings and number of 9 ratings in their
relationships to Whats: “Meet the expectations,” “Know my business and
offers,” “Save money and enhance Productivity,” “Do it right the first time,”
and “Know our products and processes.” Examining the correlation matrix
(Fig. 6.9), we have positive correlation all over except in the cell “Do it right
the first time” and “Meet time expectations.”

Eye-Openers
The DFSS team should look at customer attributes where
1. Their design as well as their competitors are performing poorly
2. The Whats are performing poorly compared to their competitors for
benchmarking
3. CTS requirements need further development in phase 2
122 Chapter Six

We can pencil in “Flexible processes” in the first category and “Accuracy”

and “Easy-to-use products” in the second category. The CTS requirements
that deliver these Whats should receive the greatest attention as they
represent potential payoffs. Benchmarking areas represent the Whats where
competitors are highly rated and it is highly desirable to incorporate their
designs. This saves design and research time.

The highest CTS requirements with the largest importance ratings are the
most important. For example, “Know our products and processes” has the
highest rating at 133. This rating is so high because it has three strong rela-
tionships to the Whats. The degree of difficulty is medium (rating 3) in the
technical benchmarking. In addition any CTS requirement that has a
negative or strong relationship with this CTS requirement in the correlation
matrix should be addressed in phase 2.

6.8 QFD Case Study: Yaesu Book Center

This case study is from Akao (1990). The Yaesu Book Center is a bookstore
in Japan. When it first opened, the store had few employees experienced in
bookselling. Most of the business was conducted by employees who had
recently graduated from school. In spite of that, the Yaesu Book Center
attracted a great deal of attention and was highly regarded by book lovers.

The Yaesu Book Center has its own quality control (QC) circle. In the QC
circle, the area managers are also group leaders. The QC circle determined
that the following three things are essential to satisfy customers’ needs:
1. Have enough books available
2. Have enough product information
3. Provide enough service
The QC circle members also found that they did not have enough
information to figure out how to accomplish the preceding three objectives
due to the following:
1. Specific customer demands were not clear.
2. There were no specific quantitative measurements for customer
demands.
3. The relationship between the customers’ demands and the Yaesu Book
Center’s service product was not clear.
To solve these problems, the voices of customers were collected and a two-
phase QFD was conducted by the Yaesu Book Center to improve the
bookstore operation. This QFD study was conducted by the following steps:
 Quality Function Deployment 123

Step 1: Determine Customer Attributes (Whats)

First, a lot of customer demands were collected by customer surveys and

interviews. The “raw” customer demands are in the customers’ own words.
In a brainstorming session, this raw customer information was translated
into a set of better-defined customer attributes. The following procedures
were used in this translation process:
• Vague comments were changed into precise expressions.
• Comments expressed in negative conditions were changed into positive
comments.
• Comments were grouped into subcategories, and similar subcategories
were combined.
• Customer attributes were fitted into tree diagrams.
Figure 6.10 illustrates a partial tree diagram that organizes the customer
attributes in this case.

Customer
satisfaction

Pleasantness Fast

Service Goods Information

Special-event Location, facility Available Clean Publisher Market

Convenience
information atmosphere inventory books information information
Heat and air conditioning
Has lobby for reading, resting, and coffee shop
Has escalator and bathroom
Bright store interior
Information board
Outside sign, show window
Reference corner
Search for books

Can get available book quickly

Offer rapid special-order service
Free delivery
Fast delivery

Has collections of books and stories

Has books not available in other stores
Has related books
Has best sellers
Has the books customers want
All books are displayed
Clean books

Figure 6.10 Customer Attributes in the Yaesu Book Center

124 Chapter Six

Step 2: Determine Quality Characteristics (Hows)

Quality characteristics are extremely important, so the Yaesu Book Center

QC circle made a great effort to identify them. A partial list of quality char-
acteristics is given in Fig. 6.11. A three-level hierarchy of quality charac-
teristics was used.

Step 3: Assign Degree of Importance to Customer Attributes

The survey questionnaire given in Table 6.1 is used to collect customer

importance ratings for each customer attribute. It serves as a basis for
determining importance ratings in the QFD study.

Step 4: Determine Operation Items

In this case, operation items are what bookstore management and employees
are actually doing in their work. Eventually, the QFD study should provide
guidelines as to which operation, items were not done enough before and
how much effort should go into doing them now. These operation items are
organized in a tree diagram and illustrated in Fig. 6.12.

Step 5: Two-phase QFD Analysis for the Yaesu Book Center

Based on the work in the first four steps, two QFD house of quality charts were
developed for the Yaesu Book Center. The first house of quality chart relates
customer attributes to quality characteristics; the second house of quality chart
relates quality characteristics to operations items. The partial listings of these
two houses of quality are illustrated in Figs. 6.13 and 6.14.

Pleasant
First level Fast
atmosphere

Product Product
Second level Service
arrangement knowledge
Time required to deliver

Number of master
Degree of looking
for missing books

books to the store

Number of books
Compliance rate

Progress in job
that got dirty

training plan

fire drills

Third level

Figure 6.11 Quality Characteristics (Hows)

 Table 6.1 Survey Questionnaire

How important are the following items in a bookstore. Please rank from 1 to 5.

1 4
Not Important 2 3 Somewhat 5
at All Not Important Neither Important Important

1. Has a good variety of best sellers 1 2 3 4 5

2. Scheduled date for availability of 1 2 3 4 5

out-of-stock books is clear

3. Has a good variety of art books 1 2 3 4 5

4. Has a variety of books on sociology, 1 2 3 4 5

literature, science, and history

M
13. The store clerks look hard for 1 2 3 4 5
books for the customers

14. Can easily find books you want 1 2 3 4 5

15. Book classifications are easy 1 2 3 4 5

to understand

16. Attractive, easy-to-find book displays 1 2 3 4 5

125

17. Books are always clean 1 2 3 4 5

126 Chapter Six

After sales During sales Before sales

Deliver Customer Inspection

Additional Data Merchandise
special service and and
orders analysis control
orders sales display

Rearranges stacks and fills the shelves

Corrects wrong classifications
Checks fixtures
Inspects the facilities
Makes rounds in the store
Delivery date table
Delivery
Checking special order status
Placing customer special orders
Ordering
Investigation on back shortages?
Looking for new merchandise
Follow-up investigation
Check stock

Analyses resoks of special events

Special slip order analysis
Schedule analysis
Sales slip analysis

Stocking
Fill in
Arranging shelves
Stocking shelves

Gives in-house information

Gets orders
Checks for causes of out of order
Searches
Answers questions

Figure 6.12 Operation Items

After constructing two QFD charts, the QC circle found that there was one
major problem in the book center: The customer attribute “book classi-
fication is easy to understand” was rated very high in customer survey
results, but by QFD analysis, the rating for this is not high with current
operation items. The following corrections were made:
1. If a book could fall into more than one category, then it would be
displayed in all these categories.
2. Point-of-purchase clerks are placed in the boundary areas between
book sections.

6.9 Summary

Quality function deployment (QFD) is a planning tool used to translate

customer needs and expectations into the appropriate design actions. This
tool stresses problem prevention with an emphasis on results in customer
satisfaction, reduced design cycle time, optimum allocation of resources,
and fewer changes. Together with other DFSS tools and concepts, it also
makes it possible to release the designed entity at the six sigma level. Since
 Quality Function Deployment 127

Quality characteristics
Service
Reception and Goods
response to Environ-
Availability Orders
customers ment

Degree of satisfaction
Immediate response

Customer reception
Service satisfaction

Product knowledge
Clear classification

Rate of availability

Procurement time
Importance rating

Order lead time

Damage rate
Delivery sale
Waiting time
Easy to find

Cleanliness

Lighting
Can tell the book is in stock 2.9
Can tell why not in stock 6.0
Can tell if book is available
Can give date of availability 0.1
Can tell detailed book description
Can find related book 1.8
Offer information on the contents
Information list of books available
Has large variety and volume of books 4.0
Has books not available in other stores 1.3
Customer attributes

Has newly published books 0.2

Has many specialty books
Easy to find books 4.3
Classification is easy to understand 5.8
Signs are easy to see 5.0
Display is easy to see 2.5
Has clean books 2.5
Has product knowledge 3.4
Kind and polite 3.8
0.1

Assistance in looking for books 3.4

Figure 6.13 House of Quality Phase 1

the customer defines quality, QFD develops customer and technical

measures to identify areas for improvement.

QFD translates customer needs and expectations into appropriate design

requirements by incorporating the voice of the customer into all phases of
the DFSS algorithm, through production and into the marketplace. In the
context of DFSS, the real value of QFD is its ability to direct the application
of other DFSS tools to those entities that will have the greatest impact on the
team’s ability to design a product, service, or process that satisfies the needs
and expectations of the customers, both internal and external.
128 Chapter Six

Operation items

Before sales During sales After sales

Analyzes results of special events

Checks for cause of out of stock
Correcting wrong classifications

Check status of special orders

Rearrange stocks/fill shelves

Gives in-house information

Special order slip analysis

Make records in the store

Looks for missing books

Places special orders
Inspects the facilities

Sales slip analysis

Schedule analysis
Answer questions
Checks fixtures

Add on orders
Check stock
Gets orders
Searches

Delivers
Clear classification
Immediate response
Rate of availability
Degree of satisfaction
Easy to find
Quality characteristics

Service satisfaction
Waiting time
Product knowledge
Customer reception
Order lead time
Delivery rate
Procurement time
Cleanliness

Lighting
Damage rate

Figure 6.14 House of Quality Phase 2

The following items are a review of the different parts of the house of
quality. The Whats represent customer needs and expectations. The Hows
are CTS requirements, or substitute quality characteristics for customer
requirements that the company can design and control. Relationships are
identified between what the customer wants and how those wants are to
be realized. Qualitative correlations are identified between the various
Hows. Competitive assessment and importance ratings are developed as
a basis for risk assessment when making decisions relative to tradeoffs
and compromises.
 Chapter

Value Engineering
7
7.1 Introduction

For any service product, customer value and satisfaction can be improved
by increasing customer benefits and reducing cost. Among the customer
benefits, functional benefits are of key importance. People pay for functions,
not for hardware, not for paperwork. For example, people go to a fast-food
restaurant to buy such functions as relieving hunger, getting nutrition, and
getting taste. People go to hospitals, not to buy doctor’s time, surgery, or
hospital beds, but to buy such functions as curing a disease and relieving
symptoms. Value engineering is a systematic, team-oriented, creative
approach that seeks to deliver customer-desired functions with lower cost.

The Society of American Value Engineers (SAVE) defines the term value
engineering as follows:
Value engineering is the systematic application of recognized
techniques which identify the functions of a product or service,
establish a monetary value for that function and provide the
function at the lowest cost.
However, value engineering is not merely a cost-cutting program; it only
cuts unnecessary cost. Unnecessary cost is the cost that can be removed
without affecting the functional performance of the product or service. In
the value-engineering approach, it is important to maintain a high level of
functional performance while cutting cost. That is, the new design coming
out of a value-engineering project should have the same or better functional
performance than the old design. It has been estimated that 30 percent of the
cost of an average product or service is unnecessary. This unintentional cost
is the result of habits, attitudes, and all other human factors.

Value engineering originated at the General Electric Company in 1947.

Mr. Harry Erlicher, vice president of purchases, noted that during wartime, it

129

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130 Chapter Seven

was frequently necessary to make substitutions for the critical materials that
not only satisfied the required functions but also gave better performance
and lower cost. He reasoned that if it was possible to do this in wartime, it
might be possible to develop a system that could be applied as a standard
procedure to normal operations to increase a company’s efficiency and
profit. Mr. L. D. Miles was assigned to study the possibility, and the result
was a systematic approach to problem solving based on functional per-
formance that he called value analysis.

Value analysis, value engineering, value management, value assurance, and

value control are all the same in that they make use of the same set of
techniques developed by Mr. Miles in 1947. In many cases, the title tends to
describe how the system is being applied. Value analysis is generally con-
sidered to apply to removing cost from a product. Value engineering and
value assurance are applied in the development phase to keep cost out of a
product. Value management and value control are overall programs that
recognize that value techniques can be applied in business operations.

Value engineering was first applied in product development, manufacturing,

and the construction industry. Since the 1970s, value engineering started to
be applied in the service industry. David Reeve’s (D. Reeve 1975) case
study on the youth service bureau was among the first successful case
studies in service organizations. Since then, successful value engineering
service case studies are reported in retail, finance, health care, photo shops,
and many others.

Value engineering achieves results by following a well-organized, planned

approach. It identifies unnecessary cost and applies creative problem-
solving techniques to remove it. The three basic steps in this planned
approach are
1. Identify the functions. (What does the product or service do for
customers?)
2. Evaluate the functions. (What is the lowest cost to create these
functions?)
3. Develop alternatives. (What else will do the job?)

Identify the Functions

Function is the very foundation of value engineering. The concern is not with
the part or act itself but with what it does; what is its function? It may be said
that function is the objective of the action being performed by the product or
system. Function is the property that makes something work or sell. We pay
 Value Engineering 131

for a function, not hardware, not paperwork. Hardware has no value; only
function has value. We pay to retrieve information, not file papers.

Defining functions is not always easy. It takes practice and experience to

properly define a function. It must be defined in the broadest possible
manner so that the greatest number of potential alternatives can be
developed to satisfy the function. A function must also be defined using two
words, a verb and a noun. If the function has not been defined in two words,
the problem has probably not been properly defined.

Function is a forcing technique, which tends to break down barriers to visu-

alization by concentrating on what must be accomplished, rather than the
present way a task is being done. Concentrating on function opens the way
to new innovative approaches through creativity. Some examples of simple
functions are as follows: create design, evaluate information, determine
needs, grow wealth, and enclose space.

There are two types of functions, basic and secondary. The basic function
describes the most important action performed. The secondary function
supports the basic function and almost always adds cost.

Evaluate the Functions

After the functions have been defined and identified as basic or secondary,
we must evaluate them to determine if they are worth their cost. This step is
usually done by comparison with something that is known to be a best cost.
Best cost is the lowest overall cost to reliably provide a function.

Develop Alternatives

Function has been defined as the property that makes something work or
sell, and the best cost is the lowest overall cost to reliably provide the
function. In value engineering analysis, if we find that the current cost to
provide a function is significantly higher than the best cost, then we need to
ask: What else will do the job? That is, we will try to develop alternative
ways to perform this function.

In order to develop alternatives, we make maximum use of imagination and

creativity. This is where team action makes a major contribution. The basic
tool is brainstorming. In brainstorming, we follow a rigid procedure in
which alternatives are developed and tabulated with no attempt to evaluate
them. Evaluation comes later. At this stage, the important thing is to develop
the revolutionary solution to the problem.
132 Chapter Seven

Free use of imagination means free from the constraints of past habits and
attitudes. A seemingly wild idea may trigger the best solution to the problem
in someone else. Without a free exchange of ideas, the best solution may
never be developed. A skilled leader can produce outstanding results by brain-
storming and by providing simple thought stimulation at the proper time.

7.1.1 Evaluation, Planning, Reporting, and Implementation

The creative phase does not usually result in concrete ideas that can be
directly developed into outstanding products. The creative phase is an
attempt to develop the maximum number of possible alternatives to satisfy
a function. These ideas or concepts must be screened, evaluated, combined,
and developed to finally produce a practical recommendation. It requires
flexibility, tenacity, visualization, and frequently the application of special
methods designed to aid in the selection process. The process is carried out
during the evaluation and planning phases of the job plan and is covered in
detail in those sections of the text.

The recommendations must be accepted as part of a design or plan to be

successful. In short, they must be sold. They must show the benefits to be
gained, how these benefits will be obtained, and finally, proof that the ideas
will work. This takes time, persistence, and enthusiasm, and details of a rec-
ommended procedure are covered in Sec. 7.6 of the text.

7.1.2 The Job Plan

These are the basic features that make value engineering an effective tool.
All are applied in a step-by-step approach to a value study. The approach is
called the job plan and is broken down into six steps:
1. Information phase
2. Creative phase
3. Evaluation phase
4. Planning phase
5. Reporting phase
6. Implementation phase
Each step is designed to lead to a systematic solution to the problem after
consideration of all the factors involved.

We are going to discuss these six steps in the value engineering job plan in
Secs. 7.2 to 7.7. Section 7.8 will discuss a value engineering project in the
service industry.
 Value Engineering 133

7.2 Information Phase

The first phase of the value engineering job plan is the information phase.
It is the most time-consuming yet most important phase. In this phase, we
collect all the necessary raw information for the project, including relevant
product descriptions, process flowcharts and layouts, and all relevant cost
information. Based on the information collected in this phase, we will
produce three important documents for the project: (1) the functions list,
(2) the cost-function work sheet, and (3) the FAST (function analysis
system technique) diagram. The function list is a complete list of all
functions needed in order for the product to work properly; each function
is defined and classified. The cost-function work sheet is a complete cost
breakdown calculation for all the product elements (subtasks, items, or
components) as well as for all the functions; the cost-function work sheet
also lists the actual cost and best cost for each function. The FAST diagram
is very important and provides an exact logical linkage among all
functions. The actual cost and the best cost for each function are also
recorded in the FAST diagram.

The information phase is broken down into three distinctly separate

parts.
1. Information development
a. Information collection
b. Cost visibility
c. Set goal for achievement
2. Function determination
a. Define functions
b. Eliminate duplication
3. Function analysis and evaluation
a. Construct FAST diagram
b. Function and cost analysis
c. Function evaluation
d. Identify problem areas
e. Compare potential benefit to goal for achievement
The work done in the information phase is the basis for the development
of alternative low-cost methods to perform the required functions. If the
functions have not been properly defined and evaluated, then the correct
analysis will not be performed and the most satisfactory problem
solution is not likely to be developed; if the cost figures are incorrect
and/or incomplete, then the low-cost solution will not be identified
correctly.
134 Chapter Seven

7.2.1 Information Development

The first part of the information phase is the development of all available
information concerning the project. This includes drawings, process sheets,
flowcharts, procedures, and any other available material. It is important to
discuss the project with people who are in a position to provide reliable
information and to verify that honest wrong impressions are not being
collected; that is, it may have been fact at one time, but is no longer valid.

It is very important that good human relations be used during this data- and
information-collecting phase. Get the person responsible for the project or
development in the first place to help, by showing the person how he or she
will be able to profit from successful results of the completed study.

The project identification checklist, illustrated by Table 7.1, details all the
information required for study. If the data or information are not on hand, it
will be necessary to obtain them. Table 7.1 is a basic information data sheet
that should be filled out as a first step to identify the project. A brief
description of the project should be written under operations and per-
formance to be certain all the team members are in at least basic agreement
as to the product or process operation.

Cost Visibility

The next step toward a problem solution is to complete the cost visibility
section of the cost-function work sheet as illustrated in Table 7.2. This cost-
function work sheet is one of the important documents that should be
produced in the information phase. The left portion of this work sheet is the
cost visibility portion. By cost visibility we mean that we make all costs
visible in a very detailed fashion, no ambiguity, no misunderstanding.

Table 7.1 Project Identification Checklist (Service Industry)

1. Flowcharts, organization charts

2. Detailed transaction data

3. Facility layout

4. Service product profile,

5. Cost data (labor, overheads, material)

6. Work instructions
 Table 7.2 Cost-Function Work Sheet

Cost Visibility Cost-Function Analysis

F1 F2
Total Cost $ Cost Elements Function 1 . . .

Material Labor Burden

Item No. Name ($) ($) ($)

1.

2.

3.

M
Cost total

Best cost
135
136 Chapter Seven

Cost visibility is required in order to identify the areas of high and unnecessary
costs and to find ways to reduce or eliminate these costs.

Cost-visibility techniques are well-ordered and range from very simple to

highly complex. These techniques do not tell us where unnecessary costs
are; they tell us where high costs are. This is important because they identify
a starting point.

The following is a list of definitions commonly used in cost visibility

analysis.
Cost The amount of money, time, labor, etc., required to obtain
anything. In business, the cost of making or producing a product or
providing a service.
Fixed Cost Cost elements that do not vary with the level of activity
(insurance, taxes, plant, and depreciation).
Actual Cost Costs actually incurred during the performance of a
process. They include labor, material, and burden applied in accordance
with local ground rules.
Incremental Cost Not all variable costs vary in direct proportion to the
change in the level of activity. Some costs remain the same over a given
number of production units or transactions, but rise sharply to new
plateaus at certain incremental changes. The costs thus effected are
incremental costs.
Material All hardware, raw material, and purchased items consumed
in producing a product item.
Labor Work force needed to produce a product or perform a service.
Burden (Overhead) Includes all costs incurred by the company that
cannot be traced directly to specific products. The accounting
department determines burden rates. These are assigned to individual
operations on a formula basis. Burden consists of both fixed and
variable categories, and separate rates are often established for each.
The method of assigning burden differs from industry to industry and
even from one company to another within an industry. Any quantifiable
product factor may serve as a basis for assignment of burden, as long as
consistent use of the factor across the entire product line results in a full
and equitable burden distribution.
Fixed Burden Includes all continuing costs regardless of the pro-
duction volume for a given item, such as salaries, building rent, real
estate taxes, and insurance.
 Value Engineering 137

Variable Burden Includes costs that increase or decrease as the

volume rises or falls. Indirect materials, indirect labor, electricity used
to operate equipment, water, and certain perishable tooling are also
included in this classification.
Allowance All costs other than material, labor, and burden that must
be included in the total cost of a product, such as packaging materials,
scrap, inventory losses, and inventory costs.
Total Cost Includes production cost plus profit and other expenses.
The following expenses are usually added to production cost by the sales
and/or accounting departments to make up the total cost.
Administrative and Commercial Costs Costs incurred in the adminis-
tration of the company, research, and selling of the product. They are
usually a factor represented as a percentage of production cost.
Freight Cost Shipping and handling costs.
Profit Amount earned in producing a product or a service. It is usually
applied as a percentage of production cost.

Sources of Cost Information

The application of cost-visibility techniques begins with an analysis of total

cost, progresses through an analysis of cost elements, and finally ends with
an analysis of component or process costs. To perform these steps the best
cost information available is required. This information will be available
from sources such as
Accounting: Current and historical costs (actual costs)
Purchasing: Cost of purchased items
Suppliers: Estimates and/or quotations, costs, process information, and
material prices

In the service industry, labor usually accounts for a big portion of cost. In order
to figure out the exact labor cost component in each item, some traditional
motion-time study has to be performed. For example, in the health-care industry,
the doctor’s time is an important source of cost because it is very expensive. If
we conduct a value-engineering study on emergency care, we may have to use
a stopwatch to track the doctor’s time usage for patient visits. After recording
the time for a sufficient number of patient visits, we can calculate the average
doctor time and use that as a basis in computing the doctor’s cost.

Review this cost data in accordance with the process outlined in the text
on cost visibility, and make a preliminary judgement of the potential profit
138 Chapter Seven

improvement. Consider the factors involved, and set a goal for

achievement that will provide a profitable position. The target should
indicate a 30 to 100 percent cost reduction to be practical. It may seem
improbable that this can be achieved; however, it is a target to work
toward. A check against this target will be made at the completion of the
information phase.

Example 7.1: A Cost-Visibility Work Sheet of a Youth Assistance Program

David Reeve (1975) did a value-engineering study on the youth assistance
program for Oakland County, Michigan. This was one of the very first case studies
of value engineering for a government or service organization. The purpose of the
youth assistance program was to help troubled teenagers so they would not
become problems for society. There are two major activities in the youth assistance
program, prevention and rehabilitation. Each activity was to be accomplished
through various meetings, contacts, field visits, and office activities.

Tables 7.3 and 7.4 provide cost-visibility sections of the cost-function work
sheets for rehabilitation and prevention, respectively. In these cost-visibility
calculations, the labor cost is computed based on labor hour times labor rate.
The labor hours are determined based on the historical records of meeting
length, interview time duration, and so on.

Example 7.2: A Cost-Visibility Work Sheet of an Automobile Hood Latch

Table 7.5 gives a hardware cost-visibility worksheet for an automobile hood latch.

Project Scope

It is now possible to make a preliminary determination of the project scope.

By considering the new project as outlined on the project identification
sheet, the present cost and target for improvement, and the time available
for the study, we can define the scope of the project. Limiting or expanding
the scope of a study depends on the objective and the time allowed for the
study. In project work, the analysis of function should first be performed
upon the total process. If the objectives of the value-engineering study are
not achieved at that level, the next lower level should be studied and so on
down to the lowest level of indenture. The lower the level of indenture, the
more detailed and complex the study might become. This may require
additional time in the present study or future studies to consider segments
identified by function analysis.

7.2.2 Function Determination

The information on hand, together with an analysis of costs, can be used to

define the initial scope of the project. The product or process has been defined
 Value Engineering 139

Table 7.3 Cost Visibility of Rehabilitation per Case

Total Cost = $109.64/case Cost Elements

Item Total
No. Name Material Labor Burden Cost ($)

1. Client contact 27.19 27.19

2. Organization contact 11.04 11.04

3. Secretarial center office 6.07 6.07

4. Secretarial field office 31.12 31.12

5. Case management 11.59 11.59

6. General administration 2.21 2.21

7. Grant administration 1.38 1.38

8. Others 4.42 4.42

9. Travel time 5.11 5.11

10. Administration meetings 1.17 1.17

11. Supervisory meetings 4.69 4.69

12. Training meetings 2.35 2.35

13. Statistical meetings 0.97 0.97

14. Evaluation meetings 0.34 0.34

and its cost evaluated by the cost-visibility study. It is now possible to start to
define the functions to be performed or that are being performed by the system.

What Is a Function?

The usual definition of function is the property that makes something work or
sell. Miles defines function as a want to satisfy a requirement. Function is the
end result desired by the consumer. Function is what is paid for. Function is a
requirement, a goal, or an objective.

A function is not an action; it is the objective of an action. For example,

“file paper” is an action. But what is the objective or purpose of the action?
We file papers not because we enjoy putting papers in folders or cabinets,
140 Chapter Seven

Table 7.4 Cost Visibility of Prevention per Case

Total Cost = $41.75/case Cost Elements

Item Total
No. Name Material Labor Burden Cost ($)

1. Client contact 1.17 1.17

2. Organization contact 2.90 2.90

3. Secretarial center office 3.45 3.45

4. Secretarial field office 8.56 8.56

5. Case management 0.28 0.28

6. General administration 2.07 2.07

7. Grant administration 0.28 0.28

8. Others 2.55 2.55

9. Travel time 2.90 2.90

10. Administration meetings 1.86 1.86

11. Supervisory meetings 4.90 4.90

12. Training meetings 0.41 0.41

13. Statistical meetings 0.14 0.14

14. Evaluation meetings 0.21 0.21

15. Advisory council 2.76 2.76

meetings

16. Citizen committee 1.24 1.24

meetings

17. Citizen subcommittee 6.07 6.07

meetings

but because we want to keep a record so that we can use it later. Therefore,
the objective of filing papers is actually to store information. In this case, the
correct function name is “store information.” So the function is the desirable
result to be accomplished by an action. The action is one method that can
be used to accomplish the objective.
 Value Engineering 141

Table 7.5 Cost Visibility of Automobile Hood Latch

Total Cost = $2.616 Cost Elements ($)

Material Labor Burden Total

Item (Total (Total (Total Cost
No. Part Name 1.545) 0.713) 0.358) (Total 2.616)

1. Primary spring 0.219 0 0.035 0.254

2. Detent spring 0.09 0 0.015 0.1046

3. Hook spring 0.09 0 0.015 0.1046

4. Pivot rivets 0.09 0.005 0.015 0.1104

5. Hook pivot 0.08 0.005 0.015 0.0988

6. Fork bolt 0.04 0.096 0.014 0.158

7. Mounting bracket 0.426 0.198 0.101 0.7253

8. Back plate 0.08 0.149 0.037 0.2661

9. Secondary hook 0.26 0.151 0.067 0.4776

10. Detent level 0.11 0.099 0.034 0.2429

11. Grease 0.02 0.005 0.004 0.0291

12. Sleeve 0.04 0.005 0.007 0.0523

The basic rule is to define functions using two words, a verb and a noun.
The resultant definition should be such that it is not restrictive in that it
defines a method for performance. An abstract definition will offer an
opportunity for creative questions that may produce a number of alter-
natives. For example, using “file papers” as the definition of a function
may limit our thought on using papers, folders, and cabinets. By using the
more generic definition of “store information,” we can open our thoughts
to other ideas such as computers, and CDs to read, retrieve and catalog
information.

It is also important that the function be measurable in some unit term such
as weight, cost, volume, time, or space. In some cases, the measure may be
satisfaction, desire, or some other abstract measure that will require more
142 Chapter Seven

subjective analysis but can still be measured by comparative techniques.

The following are some examples of function definitions:

Verb Noun Unit

Create Design Time

Confirm Design Time

Authorize Program Cost

Measure Performance Workerhours

In his book Techniques of Value Analysis, Mr. Miles recognized the difficulty
of applying this technically simple concept. He said, “While the naming of
functions may appear simple, the exact opposite is the rule. In fact, naming
them articulately is so difficult, and requires such precision in thinking, that
real care must be taken to prevent the abandonment of the task before it is
accomplished.” He also said, “Intense concentration, even what appears to be
over concentration of mental work on these functions, forms the basis for
unexpected steps of advancement of value in the product or service.”

The two-word definition of functions is the most difficult naming method.

There is some feeling among value-engineering practitioners that it is
unnecessary to struggle for two-word definitions; three-word definitions or
short-statement definitions should do the job. However, the value-engi-
neering practitioners also found that if the goal of value-engineering study
is to generate creative design solutions, then two-word functions are
imperative. If the function cannot be defined in two words, more under-
standing is required. It is a struggle to define good functions, but the result
is worth the struggle. The two-word function definition is a forcing
technique that requires consensus among team members, eliminates
confusion, creates in-depth understanding of the requirement, clarifies
overall knowledge of the project, and ultimately breaks down barriers to
visualization so necessary to help define the creative questions that will lead
to new, outstanding solutions to the project.

Types of Functions

In value engineering a function is defined as something that makes a product

work or sell. There are two types of functions, work and sell. Work is the
function that does the job that customers want. Sell is the function that adds
appeal for customers to buy.
 Value Engineering 143

Different categories of verbs and nouns are used to express the work and
sell functions. A work function is always expressed by an action verb and a
measurable noun that establish a quantitative statement. A sell function is
always expressed by a passive verb and a nonmeasurable noun that establish
a qualitative measurement.

The following tables provide examples of work functions and sell functions:

Work Functions

Verb Noun Unit

Collect Payment Dollar

Remove Kidney Time and/or cost

Transfer Fund Dollar/time

Sell Assets Dollar/cost

Sell Functions

Verb Noun

Increase Beauty

Improve Style

Increase Prestige

The separation of work and sell functions helps us to define a function more
precisely. In defining the work function, the use of measurable nouns
provides us with a quantitative means of measuring the work functions.
Work functions provide use value. In the case of sell functions, since they
are in most cases subjective in nature, their measurement is extremely
difficult. Sell functions usually provide prestige value to customers. The
separation of work and sell functions can also help us to identify the pro-
portion of cost allocated to use value and prestige value.

All functions can also be divided into two levels of importance, basic
functions and secondary functions. The basic functions are those functions
that fulfill the primary purpose for a product or service. Secondary functions
are those functions that do not directly fulfill the primary purpose of the
product or service but support the primary purpose. The result of function
determination should be a completed function list as illustrated in Table 7.6.
144 Chapter Seven

Table 7.6 Function List

Project Name: Scope Includes:

Scope Does Not Include:

List All Functions Function Types

Verb Noun Basic Second Work Sell Remarks

1.

2.

3.

4.

Example 7.3: Pencil Function Determination

Figure 7.1 shows a pencil. A pencil has five parts: lead, body, paint, band and eraser.
In value engineering, it is a rule of thumb that even a very simple product such as a
pencil will have quite a few functions. It is easier to figure out a pencil’s function by
looking into its five parts. Table 7.7 gives a summary of functions performed by the
parts of a pencil. Table 7.8 gives a function list for the whole pencil.

Example 7.4: Function List of Oakland County Youth Assistance Program

This example is a continuation of Example 7.1 (Reeve 1975). In that example
we listed all the organizational activities that support a youth assistance
program and their cost calculation. Reeve (1975) determined 41 functions in
this program. Table 7.9 lists a portion of these 41 functions.

Reeve also provided a glossary of functions, which gives a detailed definition for
each function. In a value-engineering project, it is highly recommended that such
a glossary be developed and that consensus be secured from group members on
the definition of each function. Therefore, in later discussions, every team
member will be on the same page when each function is discussed. Here is a
portion of the glossary of functions for this youth assistance program project:

Identify Need Time spent in written and oral communication, that is,
conferences, letters, interviews, etc., with school personnel and/or other

Lead Body
Paint Band Eraser

Figure 7.1 A Pencil

 Value Engineering 145

Table 7.7 Function List of Pencil Parts

Function

Part Verb Noun

Lead Make Marks

Eraser Remove Marks

Band Secure Eraser

Improve Appearance

Body Support Lead

Transmit Force

Accommodate Grip

Display Information

Paint Protect Wood

Improve Appearance

referral sources regarding potential referrals, in order to determine the need for
the referral process.

Assist Client Includes counseling; offering alternatives; providing a

referral service; indicating community programs; helping kids get to camp;
talking to teachers, police, or other authorities on client’s behalf; and aiding
parents and children.

Eliminate Deviancy The client returns to homeostatic position and

development of modification technique to reach normative behavior patterns
(measured by time spent).

Define Problems All communication with client, parents, and referral

sources for the purpose of describing the client’s problem behavior.

Creativity and Function Definition

The ultimate objective of value engineering is to create a better product or

service design. Creativity is very important in creating a new and better
design. What makes people more creative? The consensus seems to be that
to be creative, one must be able to see beyond the conscious, the existing.
146
Table 7.8 Function List of a Pencil

Project Name: Pencil Scope Includes:

Scope Does Not Include:

List All Functions Function Types

Verb Noun Basic Second Work Sell Remarks

1. Make Marks √ √

2. Remove Marks √ √

3. Secure Eraser √ √

4. Improve Appearance √ √

5. Support Lead √ √

6. Transmit Force √ √

7. Accommodate Grip √ √

8. Display Information √ √

9. Protect Wood √ √

10. Improve Appearance √ √

Table 7.9 A Partial List of Functions for a Youth Assistance Program

List All Functions

Verb Noun Basic Second Remarks

1. Identify Need √
2. Define Problem √
3. Plan Treatment √
4. Diagnose Problems √
5. Obtain Information √
6. Involve Client √
7. Identify Client √
8. Utilize Resource √
9. Assist Client √
10. Improve Process √
11. Indicate Trend √
12. Maintain Record √
13. Establish Standard √
14. Analyze Data √
15. Terminate Contact √
16. Evaluate Process √
17. Eliminate Deviancy √
18. Plan Activities √
19. Determine Needs √
20. Set Goals √
21. Secure Action √
22. Provide Alternatives √
23. Develop Programs √
24. Establish Trust √
25. Exhibit Concern √
26. Improve Programs √
27. Evaluate Programs √

147
148 Chapter Seven

What is the ingredient that some people have that makes it possible for
them to break the barriers to visualization, to be able to look at something
and immediately think of new and exciting possibilities for products,
services, methods, or other useful or satisfying subjects? This is a
provocative question that produces many and varied opinions but no clear-cut
formula for producing creative people. It is known that a creative person is
somewhat different. It is also known that a creative person exhibits certain
characteristics. However, given the same characteristics, another person
may not prove to be creative. Many people feel that the seeds for creativity
exist in every person. If this is true, it would be exciting to discover the
means to release these seeds to foster their growth for the benefit of
humankind.

In all probability, at least one of the ingredients of creative people is the

ability to visualize, to detach themselves from reality, and to see beyond
the stated problem, the object, or the material facts. A creative person must
be able to create concepts, broaden and develop them, analyze and examine
them, and out of it all select a new idea, new approach, or new solution to a
requirement or problem.

According to L. Miles:
1. Creative thinking is constrained by the physical shape or concept of
existing products and services.
2. Concentrating on function helps to break down the barriers to visual-
ization and offers outstanding opportunities for creativity.
The conventional approach to product or process improvement is to try to
make the existing product work better, cost less, or meet some other
objective. Creativity is stifled because the existing form constrains thinking.

The function approach is truly different. It breaks the project into requirements
called functions. The process of defining function becomes a method to break
the barriers to visualization to make entirely new solutions possible.

The concept is disarmingly simple. It is easy to understand without learning

complex systems or studying complex technology. However, the ability to
use the system comes only from a thorough understanding of the principles
and the determination and discipline to use them.

Function analysis is basic to the system and starts with a need to understand
the term function and how to define functions that will offer creative oppor-
tunities. Function definition and function analysis provide a major discipline
 Value Engineering 149

for helping a person or group of persons visualize beyond their normally

accepted standards. In fact, the forcing and struggle necessary to properly
define a function make it possible for someone to look at what has been
seen many times before and see new and different things, to see the
problem in a new light. It can help someone achieve the ability to visualize
beyond the stated problem, as outstanding people have been able to do,
throughout the ages.

This means that not only is function the basic ingredient of value engi-
neering, but it provides the opportunity for a person to break down barriers
to seeing new things, to eliminate prejudices, and to come up with insights
never before thought possible.

Functions for Creativity

In the definition of function, it is important that several key questions be

kept in mind at all times. These questions are
• What are we really trying to do when we perform this action? Why is it
necessary to do this?
• Why is this part or action necessary?
Specific answers to these questions will aid you in zeroing in on a useful
definition.

It is also necessary to be aware that the functions of a product will be different

depending on who (for example, the plant manager, the product, or the
customer) is using it. Role playing the parts of these different people will
assist you in determining all these functions. This role playing may be
difficult at first, but it becomes easier with practice. The idea is to “let the job
be the boss,” as Kettering said. Be the crankshaft. What do you do? How do
you feel? Act the part of the customer. What do you see? What does it do for
you? If you were the plant manager, what would you want? How would you
get it? This system helps to eliminate bias in that functions can be defined
from all viewpoints and sorted out in the FAST diagram through cause-and-
effect relationships for maximum understanding and subject evaluation.

Start at the Top

In defining functions, first start with the assembly, complete process,

program, organization, or whatever the total project may be. Define the
functions. Do not haggle over whether the function has been properly
defined at this stage; it can be redefined later. Write every thought down so
it will not be forgotten.
150 Chapter Seven

After it is believed that all functions of the assembly have been defined, take
each part or segment of the system and define the function of each. There
will be some duplication, but this will be screened out later.

After all functions have been defined, screen the list to eliminate duplicate
functions and redefine functions for clarity of understanding. Now, screen
the list again to define the basic function. The basic function is the function
upon which all other system functions depend. If the basic function is not
needed, none of the other functions will be needed.

In many cases, a number of functions beyond the system scope will be

defined. These are called high-order functions and are those functions that
cause the basic function to be performed. A detailed discussion of the scope
and high- and low-order functions is beyond the intent of this orientation
and are mentioned here only to note that it is not necessary to struggle over
this step as the scope will become clear during the construction of a FAST
diagram. The team may even reconsider the original scope and redefine the
scope because of the new understanding of the overall project.

By application of the function definition principles cited here the end result
will be clearly understandable, be measurable for use in cost-function
analysis and function evaluation, and lead to outstanding opportunities in
the creative phase.

7.2.3 Function Analysis and Evaluation

After the functions have been determined, identify the basic function or
functions, as well as all the supporting functions. It is time to create a
functional analysis system technique (FAST) diagram. The functional
analysis system technique was developed by Charles Bethway in 1964, and
first presented and published as a paper at the Society of American Value
Engineers Conference in 1965. FAST contributed significantly to the most
important activity in the value-engineering project, the function analysis
and evaluation.

A FAST diagram is a logic chart that organizes the functions of a project and
arranges them in a cause-and-effect relationship. Construction of a FAST
diagram is necessary to ensure that the functions have been properly defined
and that nothing has been overlooked. Although it follows a simple concept,
the process of creating a FAST diagram is often difficult and frustrating, and
it forces people to think out their project in a detailed and precise manner.
Construction of a FAST diagram creates a focal point for the entire project,
 Value Engineering 151

because eventually, all important information on the project is precisely

defined and displayed in the FAST diagram. The FAST diagram is especially
useful in dealing with projects where there might be widely different opinions,
fuzzy understandings, and cloggy definitions among team members, all of
which are very common in the analysis of organizations, operations, and the
service industry. Construction of a FAST diagram tends to pull together the
thinking process of a group to create a dynamic, enthusiastic team.

Determining the basic function is the first step in the construction of a FAST
diagram. The basic function is the function that cannot be eliminated unless
the product is eliminated. There may be more than one, but an effort should
be made to determine the one most likely basic function. We will use
Example 7.5 as a starting point to discuss the FAST diagram.

Example 7.5: Portion of FAST Diagram for Youth Assistance Program

This example is a continuation of Example 7.4. Of all the functions defined in
Example 7.4, eliminate deviancy, identify needs, and assist clients are con-
sidered to be basic functions, because if any of these functions are not
performed, the whole youth assistance program will not perform as intended.
We can easily notice that the functions are not working in isolation; they are
related to each other depending on the overall mission of the system. We can
ask the question, Why do we need these three basic functions, that is, eliminate
deviancy, identify needs, and assist clients? If we think really hard, we may get
to the conclusion: Ah ha, because this is a youth assistance program, all we
want to do is change the life of these troubled youth so they can become better
kids. Then we may come to another function: modify behavior. That is, the
three basic functions are needed because we want to modify behavior. Figure 7.2
illustrates this relationship.

Why How

Eliminate
deviancy

Modify Identify
behavior needs

Assist
clients

Figure 7.2 Relationships between Basic Functions and Higher-Order Functions

152 Chapter Seven

At the top of Fig. 7.2, a why-how arrow tells the relationships among these four
functions. To modify behavior, you have to do all three functions, eliminate
deviancy, identify needs, and assist clients. Why do we need to perform these
three functions? Because we want to modify behavior.
In a similar manner, we can expand Fig. 7.2 by adding more functions, as
illustrated by Fig. 7.3. Again, the function on the left gives the reason why the
functions on the right should be performed, and the functions on the right tell
how the function on the left can be accomplished. For example, the function to
the right of “eliminate deviancy” is “plan activities”; the function to the right of
“plan activities” is “determine needs.” Why do we plan activities? Because we
want to eliminate deviancy. Why do we determine needs? Because we want to
plan activities. How do we eliminate deviancy? By planning activities! How do
we plan activities? By determining needs!

Now we are ready to go over the details about establishing the FAST
diagram for a value-engineering project. The general format of a FAST
diagram is illustrated in Fig. 7.4.

We now define the terminologies used in the FAST diagram.

Scope of the Project The scope of the project is depicted as two vertical
dotted lines. The scope lines bound the project under study or a portion
of the problem with which the study team is concerned.
Highest-Order Function(s) The objective or output of the basic
function(s) and subject under study is referred to as the highest-order
function(s); it appears outside the left scope line and to the left of the
basic function(s). Any function to the left of another on the primary
path is a higher-order function.

How Why

Eliminate Plan Determine

deviancy activities needs

Modify Identify Define Plan

behavior needs problems treatment

Assist Improve
client process

Figure 7.3 Part of FAST Diagram for Youth Assistance Program

 Value Engineering 153

Minor primary path

How Why
Independent
Dependent
function
function
(supporting)
Objectives
or
specifications

Highest-order Lowest-
Basic Dependent
functions order function
function function
(output) (input)

Major primary path

Activity
When

Scope of the project

Figure 7.4 FAST Diagram Format

Lowest-Order Function(s) The functions to the right and outside of the

right scope line represent the input side that “turn on” or initiate the
subject under study and are known as lowest-order functions. Any
function to the right of another function on the critical path is a lower-
order function.

The terms higher- and lower-order functions should not be interpreted as

relative importance, but rather the input and output side of the process. As
an example, “receiving objectives” could be a lowest-order function, with
“satisfying those objectives” being the highest-order function. How best to
accomplish the satisfy objectives (highest-order function) is therefore the
scope of the problem under study.
Basic Function(s) Those function(s) to the immediate right of the left
scope line represent the purpose of the mission or the subject under study.
By definition, basic functions cannot change. Secondary functions can
be changed, combined, or eliminated.
Concept All functions to the right of the basic function(s) describe the
approach to achieve the basic function(s). The concept represents either
the existing conditions (as is) or proposed approach (should be). Which
approach to use (current or proposed) is determined by the task team
and the nature of the problem under study.
Objectives or specifications are particular
Objectives or Specifications
parameters or requirements that must be achieved to satisfy the
154 Chapter Seven

highest-order function in its operating environment. Although

objectives or specifications are not in themselves functions, they may
influence the method selected to best achieve the basic function(s) and
satisfy the user’s requirements. Note: The use of objectives or specifi-
cations in the FAST process is optional.
Primary Path Functions Any function on the How or Why logic is a
primary path function. If the function along the Why direction enters
the basic function(s), it is a major primary path; otherwise it will be
identified as an independent (supporting) function and be a minor
critical path. Supporting functions are usually secondary. They exist to
achieve the performance levels specified in the objectives or specifi-
cations of the basic functions or because a particular approach was
chosen to implement the basic function(s). Independent functions
(above the critical path) and activities (below the critical path) are the
result of satisfying the When question.
Dependent Functions Starting with the first function to the right of the
basic function, each successive function is dependent on the one to its
immediate left (higher-order function) for its existence. That dependency
becomes more evident when the How question and direction is
followed.
Independent (or supporting) Function(s) Independent (or sup-
porting) functions do not depend on another function or method
selected to perform that function. Independent functions are located
above the critical path function(s) and are considered secondary
with respect to the scope, nature, and level of the problem, and its
critical path.
Activity The method selected to perform a function (or a group of
functions) is an activity.

7.2.4 Symbols and Graphs Used in FAST Diagram Construction

Why, How, and When

Figure 7.5 show the directions in a FAST diagram. The How and Why
directions are always along the primary path, whether it is a major or minor
primary path. The When direction indicates an independent or supporting
function (up) or an activity (down). We have already discussed the How and
Why directions in Example 7.5. The lower-order function on the How
direction (immediate right) always explains how a particular function can be
accomplished; the higher-order function on the Why direction (immediate
left) always tells the reason why a particular function should be performed.
 Value Engineering 155

Independent
function

When
How
Why
Function Function
Function
(higher order) (lower order)
When

Activity

Figure 7.5 Directions in FAST Diagram

All the functions and/or activities along the When direction with a particular
function will happen at the same time. We detect these functions or activities
by asking the question, When a function occurs, what else happens? The
independent functions and supporting functions are listed above the par-
ticular function; the activities will be listed under the particular function.

Common Symbols Along a Primary Path

In a primary path of a FAST diagram, it is possible that several functions have

to be performed simultaneously as the precondition for lower-order
function(s). Sometimes, these functions are related by logical AND, and
sometimes they are related by logical OR. Figs. 7.6 to 7.9 illustrate such cases.

In both Figs. 7.6 and 7.7, the fork is read as “and.” In Fig. 7.6, how do you
build the swim club? By constructing the pool and constructing the club
house. “Construct pool” and “construct club house” are equally important.
In Fig. 7.7, how do you determine compliance deviations? By analyzing the
design and reviewing proposals. However, “analyze design” is more
important than “review proposals.”

Construct
pool
Build Contract
swim club builder
Construct
club house

Figure 7.6 Two Equally Important Functions in AND Relation

156 Chapter Seven

Determine Analyze Determine

compliance design criteria
deviations

Review
proposals

Figure 7.7 Two Unequally Important Functions in AND Relation

In both Figs. 7.8 and 7.9, the multiple exit lines represent an OR. In Fig. 7.8,
how do you convert books (to delivery)? By extending bookings or fore-
casting orders, not both. “Extend bookings” and “forecast orders” are
equally important. In Fig. 7.9, how do you identify discrepancies? By mon-
itoring performance or evaluating the design. However, “evaluate design” is
less important than monitor performance.

Symbols Along the When Direction

In the FAST diagram, the When direction is the vertical direction. When
several functions are located along the same vertical line, it means that these
functions will be performed at the same time. In addition, when these
functions are connected by lines, it means that there is an AND relationship
among these functions. Figure 7.10 illustrates such an example.

In Fig. 7.10, when you influence the customer, you inform the customer and
apply skills. If it is necessary to rank the AND functions, those closest to the
primary path should be the most important.

Now that we have discussed symbols and notation used in the FAST
diagram, we are ready to go over the step-by-step procedure to complete the
FAST diagram.

Extend
bookings
Convert
bookings
(to delivery)
Forecast
orders

Figure 7.8 Two Equally Important Functions in OR Relation

 Value Engineering 157

Monitor
Identify performance
discrepancies

Evaluate
design

Figure 7.9 Two Unequally Important Functions in OR Relation

7.2.5 Step-by-Step Procedure to Establish FAST Diagram

Step 1: List all functions by using the function list illustrated by Table 7.6.
Be sure to identify each function by a verb and noun. Identify basic
functions and secondary functions.
Step 2: Prepare a 1" × 2" card for each function. Take a close look at
all functions and try to identify the relationships among all functions.
We can use the following logical questions for this purpose:
How is this function accomplished?
Why is this function performed?
When is this function performed?
Select the function that you think is the basic function, and apply the logic
questions to the right and left of the basic function. To determine the
function to the right ask, How is this function performed? To determine
the function to the left ask, Why is this function performed? Repeat this
process until the lowest-order function is included. The path of functions
thus created is called a primary path. We may get multiple primary paths.
Step 3: When the primary path has been selected and positioned on the
chart, position all secondary functions that did not fit into the primary
path by applying the When question and add them above or below
the primary path depending on whether they are supporting
functions, independent functions, or actions. If the secondary
functions are actually objectives or specifications, put them into the
upper-left corner of the FAST diagram.

Apply
skill

Inform
customer

Reach Influence Demonstrate

agreement customer capabilities

Figure 7.10 AND Relationship on When Direction

158 Chapter Seven

Example 7.6 illustrates this step-by-step process.

Example 7.6: Cigarette Lighter FAST Diagram

Figure 7.11 shows a typical cigarette lighter. Before constructing the FAST
diagram, assume that we have compiled the function list illustrated in Table 7.10.
First, we pick up the basic function “produce flame” and ask the Why and
How questions as illustrated by Fig. 7.12. The basic function of a cigarette
lighter is to produce a flame. By answering the question, Why produce a
flame? we get the higher-order function “ignite cigarette.” By answering the
question, how do we produce a flame? we get the lower-order function “ignite
fuel.” We then can ask a further question, How do we ignite the fuel? By
answering this question, we find that we need two lower-order functions to be
performed, “produce spark” and “release fuel.” These two functions are of
equal importance; therefore, we add these two functions in the FAST diagram,
as illustrated in Fig. 7.13.

Now we could continue to ask Why and How questions to find lower-order
functions for the “release fuel” and “produce spark” functions, and continue
this process. We would end up with the diagram illustrated by Fig. 7.14. The
functions picked in the figure form the primary path of the FAST diagram of the
cigarette lighter.

There are still many functions in the function list that cannot be fitted into
the primary path. By asking the When question, we can fit the rest of the
functions into the FAST diagram. The final FAST diagram is illustrated by
Fig. 7.15.

7.2.6 Cost-Function Relationship

The completion of the FAST diagram makes it possible to complete the

cost-function work sheet. The cost-function work sheet lists all
functions versus all parts of a product or actions of a system, procedure,
or administrative activity. The objective is to convert product cost to
function cost.

Figure 7.11 A Cigarette Lighter

 Value Engineering 159

Table 7.10 Function List of Cigarette Lighter

Verb Noun Basic Second Remarks

1. Produce Flame √

2. Protect Flame √

3. Manage Flame √

4. Ignite Fuel √

5. Release Fuel √

6. Produce Spark √

7. Control Flow √

8. Restrict Exit √

9. Energize Particles √

10. Strike Flint √

11. Generate Heat √

12. Contain Fuel √

13. Open Valve √

14. Depress Lever √

15. Enclose Fuel √

16. Rub Material √

17. Rotate Wheel √

18. Apply Force √

19. Activate Thumb √

20. Accommodate Hand √

21. Stimulate Muscle √

The cost of each piece of hardware or service activity is redistributed to the

function performed. This proportional redistribution of cost to function
requires information, experience, and judgment, and all team members must
contribute their expertise.
160 Chapter Seven

Why Produce How?

flame

Ignite Produce Ignite

cigarette flame fuel

Figure 7.12 Start-up of FAST Diagram Construction

After the cost of each part or action has been redistributed to the functions
performed, the cost columns are totaled to obtain the function cost. This
cost is then placed on the FAST diagram. The FAST diagram then becomes
a very valuable tool. It tells what is happening, why, how, when, and what it
costs to perform the function. It is now possible to evaluate the functions to
determine if they are worth what is being paid for them. In other words, a
value must be set on each function.

Determining the value of each function is a subjective process. However, it is a

key element in the value process. Comparing the function cost to function value
provides an immediate indication of the benefit being obtained for expended
funds. The ratio of value cost to function cost is the performance index. The sum
of all values is the value of the system or the lowest cost to reliably provide the
basic function. It should be compared to the preliminary goal set earlier.

It may be that the new goal is considerably higher than the original. If this
is the case, an evaluation of the diagram will indicate what must be done to
achieve the original goal. It may indicate an entirely new concept is
required, or it may be that it will be acceptable to settle for less. It is often
the case that the original goal and the new value are close. An analysis of the
function costs will again indicate necessary action.

Release How?
fuel

Ignite Produce Ignite

cigarette flame fuel

Produce How?
spark

Figure 7.13 Partial FAST Diagram for Cigarette Lighter

 Value Engineering 161

Open Depress
valve level
Release
fuel
Contain Enclose Apply
Ignite Produce Ignite fuel fuel force
cigarette flame fuel

Produce Energize Strike Rub

spark particles flint material

Figure 7.14 Primary Path of FAST Diagram for Cigarette Lighter

This analysis clearly defines the task for product improvement. It breaks the
problem down into functions that must be improved, revised, or eliminated
to achieve the goal. The FAST diagram clearly identifies functions and their
relationship to each other. Cost visibility analysis can identify high-cost
areas. We now are ready to identify the relationship between cost and
function. Specifically, we are ready to identify the cost for each function.
Also, after clearly defining each function, we are able to identify the best
cost for each function. The difference between current cost and the best cost
is the profit improvement target. This provides us with an estimate of profit
improvement potential. Table 7.11 provides an example of cost-function
work sheet based on Example 7.3.

How Why

Manage Control Restrict

flame flow exit Open Depress
valve level
Protect Release
flame fuel
Contain Enclose Apply Activate Stimulate
Ignite Produce Ignite fuel fuel force thumb muscle
cigarette flame fuel
Accommodate
Produce Energize Strike Rub hand
spark particles flint material
When
Rotate
wheel
Scope

Figure 7.15 FAST Diagram for Cigarette Lighter

162

Table 7.11 Cost-Function Work Sheet for Pencil

Functions

Remove Secure Improve Make Transmit Accommodate Display Support Protect

Marks Eraser Appearance Marks Force Grip Information Lead Wood

Pencil Cost
Components (Cents) % Cost % Cost % Cost % Cost % Cost % Cost % Cost % Cost % Cost

Eraser .43 100 0.43

Metal band .25 50 0.13 25 .06 25 .06

Lead 1.2 100 1.2

Body .94 50 .47 10 .09 40 .38

Paint 0.10 50 .05 50 .05

Total cost 2.92 16 .43 5 .13 4 .11 40 1.2 17 .53 3 .09 13 .38 2 .05

Best cost .34 .10 .10 0.8 .30 .09 .28 .04

Profit .09 .03 .01 0.4 0.03 .0 0.1 0.01

improvement
potential
 Value Engineering 163

We now need to determine the cost of each function by distributing the cost
of each part to its related function. For example, the cost for the pencil body
is 0.94 cent, 50 percent of the pencil body cost is used to perform the
function “transmit force,” 40 percent of its cost is used to perform the function
“support lead,” 10 percent of its cost is used to perform the function “display
information.” This breakdown of cost is based on qualified judgment from
the whole team. It is subjective; hopefully it is not too biased because it is
based on the consensus of the team. By adding all the cost portions from all
relevant parts for a function, we can get the cost for performing that
function. For example, in Table 7.11, the cost of the “transmit force”
function consists of 25 percent of the metal band cost, which is 0.06 cent,
and 50 percent of the pencil body cost, which is 0.47 cent; therefore the cost
of the “transmit force” function is 0.53 cent.

We also need to determine the best cost for each function. By definition, the
best cost is the lowest cost to adequately and reliably provide the function.
The best way to determine the best cost of a function is by comparison to
another function that we know there is a ‘best deal.’ For example, if a
function is “tell time,” then we need to know what is the time precision
requirement. The required precision might be ± 30 seconds after a month of
use. Next, we will find a watch that has just enough to provide time with this
precision reliably. This watch should not provide any other functions, such
as decoration or brand-name recognition. In this way, a cheap, no-brand,
plain, 99-cent electronic watch might be adequate. Then the best cost for the
“tell time” function is 99 cents. To make sure we determine the best value,
we can ask the following questions:

1. Can we do without it? (If yes, the best cost is zero.)

2. Does it need all its features? (If no, get rid of all unnecessary features
and then figure out the best cost.)
3. Is anyone buying it for less?
4. Is there something better that can do the job?
5. Can it be made by a less costly method?
6. Can a standard item be used?
7. Can another dependable supplier provide it for less?
8. Would you pay the price if you were spending your own money?

The best cost is not always lower than the current cost. As stated before, by
definition, the best cost is the lowest cost to adequately and reliably provide
this function. It is possible that in the current system this function is not ade-
quately and reliably provided. In this case, we may have to increase the cost
for this function. This is also why question 4 (Is there something better that
can do the job?) is asked.
164 Chapter Seven

Function number
Cost

3 $4.69
Plan
treatment
$4.07

Best cost
Function name

Figure 7.16 A Fully Marked Function Block in a FAST Diagram

The cost and the best cost for functions are also often marked in a FAST
diagram. A fully marked function block in a FAST diagram has the format
indicated by Fig. 7.16. Figure 7.17 gives a portion of the FAST diagram for
the youth assistance program with fully marked function blocks.

After the FAST diagram is fully developed and the cost-function work sheet
is fully filled, we will get into the next stage of the value-engineering job
plan, the creation stage.

7.3 Creative Phase

At the end of the information phase, we have listed all relevant functions for
the project, filled out the cost-function work sheet, and developed the FAST
diagram. The difference between the cost and the best cost of each function
is the profit improvement potential. The functions that have high profit
improvement potentials are the perfect candidates for cost saving. The
creative phase of the value-engineering project is to use team members’ cre-
ativity to develop alternative solutions to perform the functions that have
high profit improvement potentials. The creative phase is where free

1 0.0 2 0.0 3 $4.69 4 $3.85 5 $6.88

Direct Prescribe Plan Diagnose Collect
behavior action treatment problem information
0.0 0.0 $4.07 $2.42 $9.42

Figure 7.17 A Portion of the FAST Diagram with Fully Marked Function Blocks
for the Youth Assistance Program
 Value Engineering 165

development of ideas is fostered. These ideas will form the basis for
concepts that will lead to recommendations for improvement.

Brainstorming is extremely helpful in the creative phase of the value-

engineering project. It helps to loosen up the mental barriers to creativity
for the group, in order to create a great volume of ideas. In the beginning of
brainstorming, the quantity of ideas is important. Though many obvious
wrong ideas will be generated, the more ideas generated, the better the
chance that some really brilliant but nonobvious idea will be among them.
This large number of ideas will be screened and evaluated in the next stage.

In the brainstorming process, an atmosphere is generated that permits each

person to freely depart from his or her mental barriers. It is in this process
that you may hear yourself differently and feel uncomfortable; this is a
necessary stretch that pushes you to think more freely and more creatively.
The brainstorming session should follow a specific set of ground rules.
These are necessary to ensure the proper environment for idea development.

The first step in brainstorming is to select questions for discussion. These

questions are often selected based on the functions that have high profit
improvement potentials. The question is often in the form, What else can
perform this function? The questions are then presented to the group, and
the group will toss out ideas regarding the question. Any idea is acceptable,
and no discussion is allowed. For each question, it is desirable that at least
one new idea should be generated that has never been thought of before.

The following ground rules for brainstorming must be followed to ensure

success:

1. No criticism allowed during the session.

2. A peer group is desired. Never have members of high-level man-
agement or their assistants attend.
3. Quantity is desired. The more ideas there are, the more likelihood of at
least one outstanding item.
4. Six to ten participants is best.
5. No publicity on the session after its completion.
6. Combine ideas.
7. Wild ideas wanted. Usually the first 90 percent of all ideas will be
those that have come up before.
8. Record all ideas; on paper is best.

Table 7.12 gives a template for idea generation. The function under dis-
cussion is “enhance appearance” for a decoration.
166 Chapter Seven

Table 7.12 Idea Generation Form

What Else Will Do the Job?

Function: Enhance Appearance

1. Use laminate instead of paint

2. Use stainless-steel parts

3. Use plastic material

4. Use curves instead of sharp edges

5. Delete complicated features

6. Paint parts individually before assembly

7. Use chrome plating

8. Use multicolor paint

9. Use gold material

7.4 Evaluation Phase

Evaluating the ideas developed during the creative phase is a critical step in
the value-engineering job plan. The ideas generated will include practical
suggestions as well as wild ideas. Each and every idea must be evaluated
without prejudice to determine if it can be used or what characteristics of
the idea may be useful.

Proper evaluation of the ideas is a critical step. Remember, if an idea is

discarded without thorough evaluation, the key to a successful solution may
be lost. The time to create ideas is in the creative phase. If an idea is
discarded, there may not be another opportunity to develop it again.

During the screening process, it must be kept in mind that the objective is not
to discard ideas but to look for the good in them. All too frequently, a new idea
will create a negative reaction, for example, “That’s a great idea but let me tell
you what is wrong with it.” We should say, “That’s a great idea. What can we
do to make it work?” There never seems to be any problem thinking of reasons
why something will not work. However, developing ways to make an idea
work takes ingenuity. How can we make it work or what is there about this
idea we can use should be the state of mind during the screening process.
 Value Engineering 167

Evaluation processes can range from the simple to the complex. The method
selected depends to some degree on the quantity and quality of ideas
generated. The number of ideas can run from less than a hundred to over a
thousand depending on the scope of the project. The first screening of the
list should be to eliminate the ones that obviously are of no use to the
project. However, each idea must be reviewed with a positive attitude. Look
for the good rather than the bad and do not be too critical.

The following process is suggested for initial screening.

Step 1: Each item on the idea generation form will be read. Each team
member will vote whether to keep the idea for future evaluation or drop
it. This is an impulse decision. Each person will decide by his or her
initial reaction as to whether to keep the idea or drop it. However, if one
person on the team wants to keep the idea, it must be kept on the list
without question. During this initial screening, there should be no dis-
cussion of the idea; only a yes or no vote is acceptable. The result will
be elimination of the obviously impractical ideas for this project.
Step 2: Then each of the remaining items on the list will be read, and
the group will discuss each idea. Table 7.13 can be used as a template
for this step. The intent is to determine what there is about each idea
that may be useful and decide whether to keep it on the list or to drop
it. It will be found that at this stage many ideas will combine with

Table 7.13 Idea Screening Work Sheet 1

Ideas Implementation Cost Development Cost Total Cost

1.

2.

3.

4.

5.

6.

7.

8.

9.
168 Chapter Seven

other ideas to form basic groups or categories such as materials,

methods, and organization. The discussion may also result in new
ideas that can be added to the list.
Step 3: After the initial screening process has been completed, it will
be necessary to resort to systems designed to aid in identifying the
best choice and an alternative, or to rank and weigh alternatives. It is
always important to have a second choice to fall back on, just in case
the first choice cannot be implemented for reasons that may not
become apparent until detailed development is under way. When the
initial list of ideas has been reduced to a choice of only a few alter-
natives, the simple system illustrated in Table 7.14 may be used. This
sheet identifies the advantages and disadvantages of each alternative
concept. In most cases, an idea with more advantages than disad-
vantages listed will be the first choice. However, there may be an
overpowering disadvantage that creates a serious roadblock. Can it
be eliminated? If it can, the choice may be clear. If it cannot, the
second alternative may be the best choice.

Table 7.14 Idea Screening Work Sheet 2

Idea 1 Idea 2

Advantage Disadvantage Advantage Disadvantage

Idea 3 Idea 4

Advantage Disadvantage Advantage Disadvantage

 Value Engineering 169

There may also be situations where the choice of alternatives will require
more complex systems to aid in the evaluation process. Two systems favored
because of their convenience, simplicity, and effectiveness are Pareto voting
and paired comparisons. They may be used separately, or in sequence
depending on the situation. Each of these systems is described in detail in
the following text. They have been found applicable in a large number of
cases and are extremely useful.

There are also cases involving high risk or a substantial amount of money
where even more detailed analysis is required. These may be situations
where risk is critical and alternatives and tradeoffs are necessary. In these
cases, a matrix analysis may be necessary.

Experience has shown that this evaluation process is a difficult task. The
impulse to quickly screen through the list to zero in on the best ideas must
be controlled. The mass of data must be handled systematically to obtain
maximum benefit from the creative phase. Careful screening is essential to
isolating the best concept to carry over into the planning phase where the
idea will be developed into a practical recommendation for action.

7.4.1 Selection and Screening Techniques

A difficult problem that frequently confronts decision makers is the need to

organize a large amount of data, so that one or several of the most important
items may be identified. It may be required to determine which of several
alternatives appears to be the best, or it may be necessary to select a number
of items so that they may be ranked and weighted by order of importance or
some other criteria.

Experience has shown that most people are not able to handle this task
quickly and effectively. For this reason, it was decided to develop a simple
method that would be applicable in most cases. More complex situations
may require more sophisticated methods. However, experience has shown
that a combination of two simple methods, Pareto voting and paired com-
parisons, will satisfy a majority of requirements.

A literature search by the author identified 13 methods for evaluating data

to aid in decision making. The methods are listed in Appendix 2 along with
references, so that further in-depth study by the reader can be made.

Pareto Voting

Pareto voting is based on Pareto’s law of maldistribution. Alfredo Pareto

(1846–1923), a political economist, observed a common tendency of wealth
170 Chapter Seven

and power to be unequally distributed. This observation has been refined to

the degree that it can be said that there is an 80/20 percent relationship
between similar elements.

For example, 20 percent of the parts in an assembly contain 80 percent of

the cost. This is very useful information in cost estimating; however, the
relationship holds for many diverse examples such as the following:
Twenty percent of the states use 80 percent of the fuel oil.
Twenty percent of the activities create 80 percent of the budgeted
expense.
Twenty percent of the items sold generate 80 percent of the profit.
In value engineering it is frequently necessary to select the best ideas, the
highest value functions, the highest potential projects, or any of a number of
other requirements. It has been found that the application of Pareto voting
can help to simplify the list and will, in most cases, ensure that the most
important items have been selected. It also produces results quickly and can
be incorporated into the value-engineering process to allow continuous
operations without undue disruptions.

Pareto voting is conducted by requesting each team member to select what

they believe are the items or elements that have the greatest effect on the
system. This list of items is limited to 20 percent of the total number of
items. For example, each team member would be allowed to select 6 items
out of a list of 30. The vote is taken on an individual basis to obtain as much
objectivity as possible.

The resultant lists are then compared and arranged into a new consolidated
list, in descending order, by the number of votes each item received. Usually,
several items will have been selected by two or more team members. The top
10 to 15 items are then ranked and weighted in a second step by using paired
comparisons.

Example 7.7: Pareto Voting

This example refers to the idea generation form used in Table 7.10. A team
of six people will conduct a Pareto voting on the nine ideas; each member
can only vote for two ideas, so a total of 12 votes will be received. The
number of votes for each idea will be tallied; the result is summarized in
Table 7.15.

Paired Comparisons

Paired comparisons, or numerical evaluation as it is sometimes called,

compares a list of items to rank and weights them in order of importance or
 Value Engineering 171

Table 7.15 Pareto Voting

What Else Will Do the Job?

Votes
Rank Function: Enhance Appearance Received

1. Use laminate instead of paint 5

2. Paint parts individually before assembly 4

3. Use curves instead of sharp edges 2

4. Use plastic material 1

5. Use stainless-steel parts 0

6. Delete complicated features 0

7. Use chrome plating 0

8. Use multicolor paint 0

9. Use gold material 0

some other criteria. Ranking is the assignment of a preferred order of

importance to a list of items. Weighting is the determination of the relative
degree of difference between items.

In paired comparisons each item is compared to every other item on the list
in turn, using a simple matrix. It is most convenient for up to 15 items. A
comparative decision is made between any two items on a two- or three-
level basis. In a two-level comparison, 2 = major difference and 1 = minor
difference. In a three-level comparison, 3 = significant difference, 2 =
moderate difference, and 1 = minimal difference.

Example 7.8 shows how paired comparison works.

Example 7.8: Paired Comparison for Pencil Improvement

This example refers to the case presented in Example 7.3. After some dis-
cussion by the team about how to improve the pencil, several ideas about cost
reduction for the pencil are proposed (see Table 7.16).

The next step will be to evaluate idea A with respect to B, idea A versus C, and
so on, for all possible pairs. Is A or B a better idea based on cost, benefit,
customer satisfaction, etc.? Table 7.17 summarizes the comparisons for all
possible pairs. When comparing A and B, a B-2 result indicates the team thinks
that idea B is moderately better than A. Similarly, when comparing A and C, an
A-1 result indicates that the team thinks idea A is minimally better than C.
172 Chapter Seven

Table 7.16 Pencil Improvement Ideas

Key Letter Idea

A Eliminate paint

B Reduce the length of lead

C Remove eraser

D Stain wood in lieu of paint

E Make body out of paper

After the team compare all pairs, all the boxes in Table 7.15 will be filled. The
values for each idea are then added up, A = 1, B = 2 + 3 + 2 + 1 = 8, etc. Table 7.18
summarizes the values for each idea in this paired-comparison study. Clearly,
ideas B and E are the top choices.

The whole evaluation stage may go through several screening steps.

Table 7.19 is a convenient template to use to record the whole evaluation
stage.

7.5 Planning Phase

After the evaluation phase, we have a final list of ideas at hand that are ready
to be recommended to the management for implementation. Now is the time
to develop the best ideas in detail so recommendations can be made

Table 7.17 Paired Comparison of Pencil Ideas

B C D E

A B-2 A-1 D-2 E-2

B B-3 B-2 B-1

C D-1 E-3

D E-2

3 Significant
2 Moderate
1 Minimal
 Value Engineering 173

Table 7.18 Final Evaluation Results for Paired Comparison

Key Letter Idea Value

A Eliminate paint 1

B Reduce the length of lead 8

C Remove eraser 0

D Stain wood in lieu of paint 3

E Make body out of paper 7

convincingly. At this stage, we need to determine costs more accurately and

discuss proposed solutions with relevant people. We need to get the latest
material, labor, process, and cost data. We shall develop a cooperative
atmosphere with everyone able to contribute to a successful problem
solution, refine the cost of each solution, and determine the best and
alternate recommendations for the performance of basic functions.

Table 7.19 Idea Screening Result

What Else Will Do the Job?

First Second Final
Function: Enhance Appearance Screening Screening Screening

1. Use laminate instead of paint √

2. Use stainless-steel parts √

3. Use plastic material √

4. Use curves instead of sharp edges √ √

5. Delete complicated features √

6. Paint parts individually before √ √ √

assembly

7. Use chrome plating

8. Use multicolor paint

9. Use gold material

174 Chapter Seven

Table 7.20 Identify Roadblocks

Best Idea: Reduce the Length of Lead

Roadblock Where/Why Action Required

Differ from Design/out of 1. Show that people seldom

traditional design specification use the full pencil length
practice Marketing/bad 2. Show that good style and
customer image low price is more important to
customers

Alternative Idea: Use Body out of Paper

Roadblock Where/Why Action Required

Effect on strength Design/no previous Show strength/durability test

and durability experience with results
unknown this design

Perceived as a Marketing/no Show this new design can

risk idea idea if customer make pencil body self-peeling
will buy in to expose lead, no need for
pencil sharpeners

For a successful project completion, we need to determine potential

roadblocks, where they may come up, and how they may be eliminated.
Table 7.20 can be used as a template.

In the planning stage, it is also very important to discuss how this project
can be sold and implemented. Table 7.21 is a planning form that lists the
names of all persons who will be involved in accepting and implementing
the proposal. We need to figure out possible problem areas and decide how
they can be eliminated.

7.6 Reporting Phase

The object of the study is to develop a successful recommendation for

improvement in products, systems, organizations, etc., and therefore, in
turn, profits. For the study to be worth anything to you and your company, it
must be presented so it will be accepted and implemented. Your best rec-
ommendation is prepared for presentation to the responsible organization.
Before and after costs and potential savings must be shown and clearly
 Value Engineering 175

Table 7.21 Action Plan for Selling Value Engineering (VE) Ideas

How to Solve
Department Supervisors Action Required Problem Problems

1.

2.

3.

4.

5.

6.

7.

defined. Sketches should show the basic changes in whatever detail is

necessary to prove results. It may be necessary to provide simple models in
some cases. You should list all advantages and disadvantages and show how
the disadvantages were considered in your decision. If the procedure has been
followed, all necessary data should be available in your notes and records.

It is important to realize that it is necessary to present the recommendation

in a manner that will clearly demonstrate the advantages of its acceptance
from the standpoint of the organization required to implement it. The
importance of the reporting phase should not be overlooked. If the recom-
mendations are not presented properly and effectively, the result may be the
loss of a good idea or an excellent recommendation.

The work sheets provided in this chapter have been developed to provide
all the information necessary to prepare an effective recommendation.
They are complete and concise. The next step is to arrange the material
so that it will sell your idea. One of the most important considerations
here is to provide complete information. Failure to provide complete
information has been proven to be a major cause for rejection of a
proposal. Persons who are required to review or approve proposals of one
type or another will verify that it is rare when complete information is
provided. In fact, the government made an analysis of 90 rejected contractor
proposals submitted to them for approval and found that 40 percent of the
rejections were the result of incomplete or inaccurate technical or cost
information.
176 Chapter Seven

Some of the factors covered in the preparation of the final recommendation

and report are listed here:
1. Plan the proposal to cover all the facts. Do not skip an important consid-
eration on the basis that it can be considered later. Do not plan surprises.
2. Justify the recommendation on both technical and economic grounds.
Show the risk involved, as well as the rewards, and the cost to verify the
idea, as well as total lifetime program costs such as design and devel-
opmental expenses, capital investments necessary for buildings, and tools.
3. Indicate the effect on corporate profit, competitive position, or other
important factors.
4. Discuss the proposal with people who will be affected by the idea.

7.7 Implementation Phase

7.7.1 Introduction

The objective of a value-engineering study is the successful incorporation

of recommendations into the product or operations. However, a successful
project often starts back at the beginning. Each project must be thoroughly
analyzed to determine its potential for benefit and the probability of
implementation. This is as important as the knowledge and skill required to
apply the system to attain successful results.

An excellent idea is worthless unless it can be properly implemented. If it is

not implemented, no one will obtain the benefit. It must also be implemented
in the manner intended. Unfortunately, there have been many cases on record
where the idea could not be implemented because of the high cost to make
the change. There are other cases where the recommendations were not
properly understood and implementation resulted in increased cost. This
often results in disillusionment or the feeling that value engineering does not
work for our problems. Actually in most cases, the real problem was that the
problem was not properly diagnosed. It was not that value engineering does
not work; it was inefficient preliminary analysis and preparation.

It does not seem reasonable to expend the effort and funds required to make
a value study without first having done the necessary work to assure that the
project is practical, that it can be implemented, and that the necessary funds
and work force will be available.

Selection of projects is a part of the entire value-engineering imple-

mentation process. Many times management will assume that any project
 Value Engineering 177

will prove profitable. This is not always the case. The project must be
practical in relationship to its effect on the organization.

To aid in the selection of projects, development of people, implementation

of projects, and all the other aspects necessary to successfully achieve the
stated objective, we have prepared some guidelines. They are guidelines,
not rules, since every organization is different and successful value-
engineering operations must be integrated into operations to become part of
the day-to-day decision-making process of the company.

To begin with, we will look at the overall organization and implementation

of value-engineering operations. Then we will look at some of the details
that make for success.

7.7.2 Goal for Achievement

What do we want to get from value engineering? What will be the objective?
This is the first question to answer.

Value engineering can increase productivity, reduce product cost, improve

quality, reduce administrative costs, and provide a number of other benefits
that may be critical to operations. Whatever the goal, it should be defined in
specific terms: increase productivity by a specific percent, reduce product
cost by a specific number of dollars per unit, etc. Whatever the initial goal
may be, it can be revised and broadened as skill in application and imple-
mentation of the process develops, and understanding and credibility
increase.

Value engineering is a people-oriented program, designed to help people

do a better job by aiding them in breaking down constraints to under-
standing. It provides some very specific methods and systems to achieve
results.

Since people perform a wide range of jobs in an organization, it is

certainly logical to expect that if they can be provided with a system that
can help them do a better job, anything that they are expected to do can
be improved. In the end it is people who do the thinking. If they can
improve their performance, everyone will benefit. This has been the
experience of value engineered professionals. Many people, highly
skilled in their jobs, have developed new insights that have created break-
throughs in technology as well as major organizational and operational
improvements.
178 Chapter Seven

The goal for achievement should be known to everyone. It can be product-

oriented, or directed toward manufacturing or administrative operations. It
need not be companywide. However, the scope can be broadened at any
time. Once the goal has been determined, the means to achieve the objective
can be developed.

7.7.3 Develop a Plan

There are five steps to incorporating value engineering into operations:

1. Evaluate the system.
2. Define an objective.
3. Develop a plan and organization to achieve the objective.
4. Understand the principles.
5. Implement the plan.
Each step can be approached in a number of different ways. However, there
are certain specific problems to be considered and pitfalls to be avoided in
each. Understanding the problems and pitfalls rather than outlining a
specific method or procedure should provide the necessary guidelines for an
effective operation. In many cases, a consultant can aid in the initial stages
and support each step of the process, by providing the broad range of his or
her experience for the client to build upon. However, it is important that the
consultant have the type and quality of experience needed to ensure success.

The coordinator should be required to select a consultant, develop an edu-

cational plan, aid in organizing and conducting workshops, and identify
people who may be developed into value specialists. The extent of these
programs will depend upon the size and scope of the company.

From what we have noted here, it is obvious that the problem is complex
from the standpoint of options. However, successful operations do not have
to be extensive. Starting small and developing successfully is preferred to a
lot of noise and a big crash because of poor planning.

Attitude

One of the most important factors in value engineering is attitude; attitude

of management and people on task teams. A positive, cooperative, sup-
portive attitude is required. In many cases value engineering actually
requires a new management style. It cuts across organizational lines, looks
at taboo aspects of a problem, and recommends drastic changes compared
to the past. To accept these disruptions to the old way of doing business
requires faith, understanding, and a positive attitude.
 Value Engineering 179

In most cases whenever a new idea is presented to an American group, the

initial reaction is negative. The first remarks are, “It’s interesting but let
me tell you what’s wrong with it.” The best approach to this reaction is to
listen carefully. They may have some ideas you overlooked. After all
negative reaction has run out, be prepared to ask some specific positive
questions of the group that will develop positive responses. For example,
“I understand your difficulty in producing this in the plant. What do you
think we would have to do to make this practical? Do you see any changes
we might make to satisfy our methods?” This will usually work to achieve
a positive result.

Never argue. In many cases it is beneficial to solicit negative ideas, but be

prepared to develop positive questions. Our attitude is that we must begin
to ask, What’s good about this idea? How will it help us to do a better
job?

Changing people’s attitudes is difficult and may never happen, but under-
standing the reasons behind the negative reaction should make it possible to
persuade most people that they can benefit from success. Remember, there
is a risk of failure in new ideas. New ideas require change, and they may not
work. People want proof. It has to work before they will support it. However,
maybe you can show them that the benefits are greater than the risks. The
best way to change people’s attitudes is to show that top management is
interested in value engineering and expects participation and results in
achieving the stated goals.

Value Council

The value council is a small group of high-level executives who oversee

operations. In a small company, it might be chaired by the president, or in a
large company, by a division manager.

The council should be staffed with people who have the authority to make
decisions relative to acceptance and/or rejection of proposals and author-
ization of funds and work force changes. They set the attitude, develop the
environment, break bottlenecks, and by their interest and visibility create
credibility to participation and provide authority to operations.

It is important that members of the council make every effort to attend

council meetings except in cases of dire emergency. When a member is
unable to attend, he or she should authorize a key assistant to attend. If
council members’ attendance degenerates, the message sent is that they are
losing interest.
180 Chapter Seven

7.8 Value-Engineering Case Studies

7.8.1 Automobile Dealership Construction

This case study is from Park (1999). A large real-estate company built and
maintained many automobile dealership facilities all over the country. One
major problem faced by this company was the long duration required from
dealership project authorization to dealer occupancy. History showed that
this long duration in construction cycle would cause a tremendous dollar
amount in lost sales, so the company wanted to use value-engineering
techniques to shorten this cycle.

At the start of this project, it was found that the average duration from site
selection and land purchasing to construction and leasing was 502 days, or
about 1 1−2 years. A review of the project process flowchart identified the
activities that were eating up these 502 days. They included selecting and
obtaining the options on the land, topographical surveys, soil borings,
facility layouts, bid estimates and analysis, budget reviews, design, con-
struction, and many others.

In this value-engineering project, a FAST diagram was developed, as

illustrated in Fig. 7.18. The twenty or so functions illustrated consumed
these 502 days. Out of these 30 functions, three functions, “resolve
restrictions,” “obtain data,” and “construct facility,” took 85 percent of the
time. This evaluation was obtained by using time, instead of cost, as a
measure in the FAST diagram.

As a result of project recommendations, the project process procedure

was revised to make it possible to conduct several of the long-term
activities in parallel with other activities. For example, approval for early
site work was obtained from property owners before ownership was
transferred so that topographic surveys and soil boring could be made as
soon as possible. Standard designs were developed for several parts of the
facility to reduce overall design and development time, and a single source
contracting procedure was developed to reduce contractor project
interface.

The result of these recommendations was a potential average saving of

262 days, or a 47 percent average saving in time per project. Based on the
average annual construction program the yearly benefit in increased rent
would be over $1,250,000 per year. The additional increased vehicle sales
were not included in the benefit.
 Value Engineering 181

How Select Review

vendor bids

Scope Assure
competence

Lease Construct Award Secure Prepare Develop

dealership facility purchase order approvals proposal layout

Establish
budget
Resolve
restriction
When Purchase
property

Why Scope

Analyze Secure Obtain Assign Issue Obtain

conditions option data responsibility authorization approval

Estimate
cost

Identify
requirements

Negotiate
contract

Figure 7.18 FAST Diagram for Automobile Dealership Construction

7.8.2 Engineering Department Organization Analysis

This case study is from Park (1999). A leading automobile company spent
about $200 million dollars per year and employed 4000 people, including
engineers, designers, technicians, technical specialists, and financial
analysts. An economical downturn forced the company to cut costs. A
painful lesson had been learned from across-the-board budget cuts, for
which an equal share of the budget was cut across all departments. The
result of this kind of budget cut was that some vital operations were
seriously damaged; others simply slid by. This time, the situation was
critical, the budget had already been cut several times, and no one knew
where to look next. A value-engineering project was initiated in order to
identify hidden, unnecessary costs.

In this project, after 72 hours of total effort by a team of six people, a FAST
diagram was developed that had 72 functions. The chart was then
thoroughly discussed to ensure that it covered all aspects of the operation,
and a glossary of the functions was made to ensure future understanding.
182 Chapter Seven

Table 7.22 gives a partial list of functions for this engineering operation.
Here is a sample term from the glossary of functions:
Create Design To generate a new system, assembly, or component,
measured by time, which include time to come up with design ideas, design
and layout time, engineers’ working time, programming time and etc.
The FAST diagram provided some interesting information. Most importantly,
it showed that many functions were performed to satisfy functions outside the
scope of engineering responsibilities. Many of these functions contributed to
higher-order functions to support other company operations, such as the pur-
chasing and legal departments.

The next step was to determine how much each function cost and how funds
were distributed among all the functions. To do that, departmental managers
were asked to distribute their departmental cost by function. Cost-function
work sheets were filled out. One portion of a cost-function work sheet is
illustrated in Table 7.23.

A partial FAST diagram is illustrated in Fig. 7.19. As we can see in the

FAST diagram, 43 percent of the available funds went to confirming the
design and only 14 percent went to creating the design. This is considered a
poor distribution of funds. Team members thought that this lopsided fund
distribution was a major source of the problem and across-the-board budget
cuts would likely create a big problem in new product design.

It was recognized that confirming the design was a required function.

However, changing the way that this function was performed would offer
opportunities to make a major improvement in productivity and could
improve the overall engineering operation and obtain more efficient use of

Table 7.22 Partial List of Functions in Engineering Operation

Verb Noun Verb Noun

Create Design Prepare Plan

Transmit Information Negotiate Alternatives

Evaluate Information Evaluate Capabilities

Confirm Design Allocate Resources

Model Concept Appropriate Fund

 Table 7.23 Cost-Function Work Sheet

Cost (Hours) Functions

Item Trans. Create Auth. Conf. Evaluate Collect Make

No. Activity Hours Info. Design Prog. Design Info. Data Model

1. Manager 1,300 100 60 40 150 40

2. Secretary 1,736 1,000 60 60

3. Design 1,438 40 40 60 40 40
supervisor

4. Engineering 1,344 20 100 40 80 80 40

supervisor

5. Development 2,270 160 280

supervisor

6. Technical 1,078 200 40

specialist

7. Sr. design 2,790 40 200 40 160 200 120

engineers

8. Sr. development 2,790 320 1,290 560 120

engineers
183

(Continued)
184

Table 7.23 Cost-Function Work Sheet (Continued)

Cost (Hours) Functions

Item Trans. Create Auth. Conf. Evaluate Collect Make

No. Activity Hours Info. Design Prog. Design Info. Data Model

9 Design engr 11,109 280 3,360 140 420 560 560

10 Development 22,560 1,200 4,200 3,000 750

engr

11 Design leader 4,909 190 480 180 180

12 Technician 22,204 8,320 1040 780

13 Modeler 17,580 4,800

14 Clerk 3,392 880 800 400

15 Mechanics 26,528 4,800 8,600

16 Material $198,000

Total Material

Total Hours
 Value Engineering 185

43.1% total budget

Confirm
design
8.80% 13.6%
Produce Transmit Create Authorise Prepare Establish Utilise
product information design program plan need knowledge
Determine
Confirm direction
information

Support
activity

Figure 7.19 FAST Diagram for Engineering Operation

engineering funds. The immediate recommendation was to review all

areas involved in the “confirm design” function. By following the value-
engineering job plan, major changes were made in several areas that sub-
stantially increased output, cost saving, and avoidance of major capital
investment. A substantial cost reduction was achieved without affecting the
vital design functions.
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 Chapter

Brand Development
8
and Brand Strategy

8.1 Introduction

Famous brand names make a big difference in the marketplace. Figure 8.1
shows that several T-shirts are made of exactly the same fabric, the same
style, and the same quality, but because they have different brand names, the
retailing prices of these T-shirts are vastly different.

A good brand name brings extra value to the product and the company
that makes the product. McDonald’s, Coca-Cola, Disney, Kodak, and
Sony are among the most globally recognized names in the world
(Kochan et al., 1997). The name recognition of these brands brings
tremendous marketplace successes and high profitability. In modern history,
brand development is one of the key sources of competitive advantage for
companies worldwide. Brands are regarded among the most valuable assets
owned by a company (Batra 1993, Davis 2000). Some brands are valued so
highly that companies have paid huge amounts of money to acquire the
rights to them. For example, in 1988 Philip Morris bought Kraft, the maker
of cheese products, for $12.9 billion, a sum that was four times the value of
the assets of the company (Murphy 1989). Sometimes companies that have
good brand names can defend their market positions for a long period of
time (Arnold 1992), as illustrated by Table 8.1.

What is a brand? Why do brand names have such magical power? What is
the importance of brand names in developing a service product? These are
some of the questions that we try to answer in this chapter.

The Merriam-Webster Dictionary, a brand is defined as “a mark made by

burning with a hot iron to attest manufacture or quality or to designate
ownership,” or “a characteristic or distinctive kind.” Peter Kotler (1984) defines

187

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188 Chapter Eight

Figure 8.1 The Power of Brand Names

a brand as “a name, term, symbol, or design, or a combination of them, which

is intended to signify the goods or services of one seller or group of sellers
and to differentiate them from those of their competitors.” Scott Davis (2000)
defines a brand as “an intangible but critical component of what a company
stands for,” and “a brand is a set of promises, it implies trust, consistency, and
a defined set of expectations. The strongest brands in the world own a place in
the consumer’s mind, and when they are mentioned almost everyone thinks of
the same things.” Mercedes Benz stands for prestige and the ultimate driving
experience; Ralph Lauren stands for classic looks, high status, and pride.

The strongest brands usually stand for superior functions, benefits, and quality;
without these, you cannot be the strongest brand in the world. However, superior
functions, benefits, and quality alone will not make the strongest brands. Does

Table 8.1 Leading U.S. Brands from 1933 to 1990

Brand Market

Eastman Kodak Cameras/film

Del Monte Canned Fruit

Wrigley Chewing gum

Nabisco Baked goods

Gillette Razors

Coca-Cola Soft drinks

Campbells Soup

Ivory Soap

Goodyear Tires

Source: Arnold (1992).

 Brand Development and Brand Strategy 189

McDonald’s offer much better food than Burger King? Is Starbuck’s much
better than Caribou Coffee in terms of the coffee it offers? Probably not.
The difference between the top brand and second-tier brands is mostly psy-
chological. Research in psychology has shown that the name recognition
alone can result in more positive feelings toward nearly everything, whether
it is music, people, words, or brands. In a study, respondents were asked to
taste each of three samples of peanut butter. One of these samples contained
an unnamed superior (preferred in blind tests 70 percent of the time) peanut
butter. Another contained an inferior (not preferred in taste test) peanut
butter labeled with a brand name known to the respondents but neither
purchased nor used by them before. Surprisingly, 73 percent of respondents
selected the brand name (inferior) option as being the best-tasting peanut
butter. This test result clearly shows the power of brand-name recognition.
A mere name recognition will make people feel an inferior peanut butter
tastes better than an actually better-tasting peanut butter. From this example,
we can see clearly that consumers’ psychology plays a very important role
in brand-name strength. Davis (2000) calls this consumer psychological
reaction to brand names PATH; it is the acronym for promise, acceptance,
trust, and hope. A strong brand makes the intangible feelings of promise,
acceptance, trust, and hope tangible.

The benefits from strong brands are numerous; Davis (2000) listed the
following benefits:
1. Seventy-two percent of customers say that they will pay a 20 percent
premium for their brand of choice, relative to the closest competitive
brand; 50 percent of customers will pay a 25 percent premium; 40
percent of customers will pay up to a 30 percent premium.
2. Twenty-five percent of customers state that price does not matter if
they are buying a brand that owns their loyalty.
3. Over 70 percent of customers want to use a brand to guide their purchase
decision, and over 50 percent of purchases are actually brand driven.
4. Peer recommendation influences almost 30 percent of all purchases
made today, so a good experience by one customer with your brand
may influence another’s purchase decision.
5. More than 50 percent of consumers believe a strong brand allows for
more successful new product introductions, and they are more willing to
try a new form of a preferred brand because of the implied endorsement.
These benefits clearly indicate that strong brands do create tremendous
values for the companies who own them, so the making of strong brands
should be an integral part of product development strategy. The making of a
strong brand, usually called brand development, is a very elaborate process;
190 Chapter Eight

it involves the coordinated efforts of product development, marketing,

promotion, customer service, and corporate leadership. Since the strength
of the brand is directly related to the value of service products, the people
who work on product development must understand the basics of brand
development.

This chapter covers the important aspects of brand development. Section 8.2
makes a deep dive into the question, What is a brand? Section 8.3 discusses
the brand development process. Section 8.4 discusses the role of brand
development in the Design for Six Sigma practice.

8.2 The Anatomy of Brands

Strong brands have magical power to add value to products and bring
customer loyalty. It is really important to understand how strong brands
influence consumers’ minds and what are essential components of a strong
brand. In this section we are going to discuss all important aspects of brands.

8.2.1 People’s Buying Behavior and Brands

According to Arnold (1992), the power of brands can be explained by some

truths about how people make buying decisions:
1. Most customers, especially consumers in the mass market, will not
understand a product or service as well as the company selling it. Most
customers only have some superficial knowledge about the product or
service, and many are not even interested in product or service details.
2. Customers will perceive a product or service in their own terms. Since
the customers usually only have imperfect knowledge about the
product or service, customers have to select some attributes that are
most obvious to them and will develop their perceptions based on their
opinion of these attributes. For example, airline customers may rate
the airline based on the things they see; if they see there are stains on
the flip-down table or see an imperfect bathroom, they may doubt the
whole operation of the airplane, including the airplane engine main-
tenance. Customers may judge a detergent by its smell, not by how
well it washes. Different customers may choose different attributes;
every customer has a personalized view.
3. Customers’ perception often focuses on benefits of the product or
service. The benefits are what a product or service can do for a
customer. Each customer may see different benefits; some of them
may see some functional benefits, while others are more interested in
 Brand Development and Brand Strategy 191

emotional benefit. For example, some kids would like to buy cereal
with a sports star on the box for the sake of emotional benefit, not the
taste of the cereal itself.
4. Customer perception is not always at a conscious level. If we ask a
customer why a product or service is chosen, sometimes we may get
a rational answer, and sometimes we may not. Even if there is a
rational answer, it may not be the whole story. Feelings about a
product or service may not be easily articulated, because these
feelings are complex, hard to explain, sometimes subconscious, and
may not be rational.
Because the relationship between customers and the things they buy is
complex, brand names become a short cut for customers to choose the
products or services. When customers gradually develop a positive per-
ception about a product or service, the thing that they remember about the
product or service is its brand name. The feelings and perceptions are often
contagious; these customers will spread their feelings and perceptions to
friends, family members and other people with similar opinions and this
will create a snowball effect. Watkins (1986) used Fig. 8.2 to illustrate the
model of customer choice:

Customers derive their buying decision making by a complex set of per-

ceptions and demands. Therefore, a successful brand should also address
many elements of customer perception and demand. The following criteria
for a successful brand is adapted from Arnold (1992):
1. On the product or service level, it must deliver the functional benefits
to meet the market need at least as well as the competition. No product
or service will survive in the long run if it does not perform. A brand
is not merely the creation of advertising and packaging.
2. A first-of-its-kind product or service in a particular area is a strong
basis to build a brand. However, the brand will not be successful in the
long run if it cannot make customers satisfied. When competing in a
crowded market with many existing brands of similar products, a
newcomer has to provide a significant advantage in some area of
benefits (functionality, price, emotional) in order to compete effectively
with incumbent brands.

Regular
Knowledge Brand Brand Brand brand
Unawareness Awareness
of features preference trial repurchase repeat
purchase

Figure 8.2 Model of Customer Choice (Watkins 1986)

192 Chapter Eight

3. Besides the functional benefits, a brand will have to offer intangible

benefits, such as emotional, belonging, prestige, or style, in order to shine.
Figure 8.1 is a perfect example of this. People are willing to pay a high
price for a top-brand T-shirt for the sake of pride, belonging, and prestige.
4. The benefits offered by a brand should be consistent with each other and
present a unified character or personality. If the benefits offered from the
same brand are too confusing, or change from time to time, it will drive
customers away. This is because customers will often come to a quick
and superficial conclusion when purchasing a product. Customers form
a stereotype about a brand quickly; if they like the brand, they will stick
with it. For example, both McDonald’s and Chinese restaurants are
providing foods, and both will have loyal customers based on
customers’ perception about the food. If a McDonald’s store starts
offering some Chinese food, though it is a good food, it will really send
a very confusing signal to customers, and finally many customers may
be turned away. To maintain a brand, a company must actively manage
the personality of the brand to make it clear and consistent over time.
5. The benefits offered by a brand must be wanted by the customer. No
brand image, however clear and consistent, is of any use unless it
meets customer wants. If people’s wants have changed, the benefits
offered by the brand will have to change.

Brands have a magical power, and brand building is an important element in

value creation. To build a strong brand, we first need to know what are the
essential elements of a brand and how these elements are related to each
other really well. In the next few subsections, we will discuss some important
concepts about the essential elements of a brand, such as brand identity and
brand equity.

8.2.2 Brand Identity

What Is Brand Identity?

Customers’ perceptions about a brand are very much similar to people’s per-
ceptions about a person. A person’s name is simply a symbol. People form an
opinion about a person based on their perceptions. They may ask themselves,
What is this person good at? What is his or her personality? What does this
person look like? What does he or she stand for? What are his or her core values?
and so on. The answers to these questions allow people to form a perception of
the person’s identity. According to David Aaker (1996), brand identity “provides
direction, purpose and meaning for the brand.” Specifically, he said:
Brand identity is a unique set of brand associations that the brand
strategist aspires to create or maintain. These associations represent
 Brand Development and Brand Strategy 193

what the brand stands for and imply a promise to customers from
the organization members. Brand identity should help establish a
relationship between the brand and the customer by generating a
value proposition involving functional, emotional, or self-expressive
benefits.

Brand Identity Models

There are several models that describe what brand identity is. Aaker (1996)
proposed a brand identity model based on four perspectives: (1) brand as
product, (2) brand as organization, (3) brand as person, and (4) brand as
symbol. Davis (2000) used the brand image model, which has two com-
ponents: brand association and brand persona.

Aaker’s Brand Identity Model

Figure 8.3 illustrates the framework of Aaker’s brand identity model. As stated,
this model describes brands from four perspectives, but a brand may not
actually employ all of them. It may employ only a subset of these perspectives.
For brands that relate to a larger corporation and its products, it is very likely

Strategic Brand Analysis

Customer Analysis Competitor Analysis Self-analysis
Trend Brand image and identity Existing brand image
Motivation Strength, strategies Brand heritage
Unmet needs Vulnerabilities Strengths and capabilities
Segmentation Organization values

Brand Identity

Brand as Product Brand as Organization Brand as Person Brand as Symbol

1. Product scope 7. Organization attributes 9. Personality 11. Visual image
2. Product functions (innovation, consumer 10. Brand-customer 12. Brand heritage
3. Quality and concern, trustwor- relationship
performance thiness, etc.)
4. Uses 8. Local vs. global
5. Users
6. Country of origin

Value Proposition Credibility

Functional Emotional Self-expressive
benefits benefits benefits Support other brands

Brand–Customer Relationship

Figure 8.3 Brand Identity Model (Adapted from Aaker 1996)

194 Chapter Eight

that all four perspectives are employed. Brand identity is a perception in

customers’ minds that results from their entire experience with the products
and services of that brand. What perception customers get depends on the
products and services themselves, on how customers are treated by the
company, as well as on advertisements and promotions. Ultimately, however,
it depends on the company’s business strategy and business operation. To build
a strong brand, it is desirable that the company should carefully design a good
brand identity for their products or services and make this ideal brand identity
a reality. On the top of Fig. 8.3, a strategic brand analysis is performed first.
Strategic brand analysis consists of three components: customer analysis, com-
petitor analysis, and self-analysis. The purpose of strategic brand analysis is to
provide a basis on which to design an appropriate brand identity for the product
or service offered by the company. The details of strategic brand analysis will
be discussed in Sec. 8.4. To design a good brand identity, we need to consider
all four perspectives though we may not deploy all of them. We describe these
four perspectives of brand identity in detail.

The Brand as a Product: Product-Related Associations

Product-related association is always an important part of brand identity,
because customers are buying the product. The product-related association
has the following aspects:
1. The product scope: This aspect deals with what product class the
brand is associated with. For example, McDonald’s is associated with
the product class of fast food; Visa is associated with credit cards;
Hertz is associated with rental cars. For an unsuccessful brand, when
the brand name is mentioned, most people do not know what product
class it is related to. For a nondominant brand, when the brand name
is mentioned, people know what product class it is related to. However,
for a dominant brand, only the product class needs to be mentioned
and most people will recall the name of the brand. For example, when
“soft drink” is mentioned, the name Coca-Cola will at least be thought
about once. On the other hand, when Faygo, a nondominant brand is
mentioned, some people will recognize it is a soft drink brand;
however, many people will not recall Faygo as a soft drink choice.
2. Product functions: This aspect deals with what functional benefits, as
well as some emotional benefits, the product or product class that is
related to the brand can provide to customers. How well this aspect
will perform depends on how well the customers’ needs (told and
untold) are met. For example, McDonald’s functional benefits include
all their breakfast and ordinary meal items, hamburgers, fries, soft
drinks; fast purchase cycle time (time from ordering to getting the
food); Happy Meals and toys; playgrounds; unrivaled worldwide
 Brand Development and Brand Strategy 195

product consistency; and clean restrooms. McDonald’s emotional

benefits include friendly service and being kid-friendly.
3. Quality and performance: This aspect deals with how well and how
consistently the functional and emotional benefits are provided. For
example, fast purchase cycle time is a key functional benefit for
McDonald’s, but how fast and how consistent is a matter of quality
and performance. McDonald’s is famous for its unrivaled worldwide
product consistency, which is also a matter of quality. For products
with similar functional benefits, the performance level is dealing with
how well these functional benefits are delivered. For example,
Mercedes, Buick, and Kia all produce cars, but the performance levels
of the cars are different.
4. Uses: This aspect deals with the particular use or application associated
with a brand. For example, Gatorade specializes in providing a drink for
athletes to maintain a high level of performance.
5. Users: This aspect deals with the type of users targeted by a particular
brand. For example, Motherhood Maternity targets pregnant women,
and its products are for pregnant women.
6. Country of origin: Association of a brand with a country of origin
will add credibility if the country that the brand relates to is good in
this product area. For example, French fashion is more highly regarded
than French electronic goods.

A product-related association is an important part of brand identity. After

all, people are buying products and the benefits related to product functions.
However, if the brand identity is only associated with product attributes, it
will have serious limitations. Specifically some of these limitations are as
follows (Aaker 1996):
1. Failure in brand differentiation: A product attribute can be extremely
important to customers, but if all brands are perceived to be adequate
on this attribute, it does not differentiate the brand. For example, in the
hotel business, cleanliness is always rated as one of the most important
attributes to customers. Thus it would be appropriate for cleanliness to
be a part of Hilton’s brand identity. However, because all hotels are
expected to be clean, it will not be a brand differentiator. Without
brand differentiation, the brand name will not stand out in customers’
minds when the product is needed.
2. Easy to copy: Product functional benefits are easy to copy. A brand that
relies on the superior performance of functional attributes will eventually
be beaten, because functional attributes are transparent, a fixed target. If
the brand name does not have a psychological dimension, a low-cost
competitor could easily nudge the brand out of the marketplace.
196 Chapter Eight

3. Limitation on brand extension: An overly strong association to par-

ticular product attributes may limit the ability for a brand name to
extend to other fields. For example, both GM and Ford have strong
financial arms, and they make a profit out of them. However, they are
mostly automobile-related financial operations. Because of the over-
whelming brand association with the auto industry, if would be hard for
them to stretch into non-auto-related financial operations in a big way.
4. Limitation on business strategy change: An overly strong association
to particular product attributes will limit a brand’s ability to respond to
changing markets. The Atkins brand is closely associated with the
Atkins diet theory. It is doing fine today. However, if the Atkins diet
theory becomes out of favor, this brand will have a big problem.
Therefore, it is important for a brand name to address other perspectives of
brand identity.

The Brand as Organization

The brand as organization perspective focuses on attributes of the organization
rather than on those of the product or service. Such organizational attributes as
innovation, a drive to quality, and concern for the environment are created by
the people, culture, values, and programs of the company. Some organization-
related attributes can also be related to product; for example, innovation and
quality could also be related to product design. However, when these attributes
are related to the organization, they usually mean different things such as
culture and values. For example, Toyota’s lean manufacturing principles are
easy to copy from a procedural point of view; however, it is Toyota’s culture
that is really difficult to imitate. And this is why so many companies want to
implement lean manufacturing but fail to reach its full benefits (Liker 2004).

Organizational attributes are more enduring and more resistant to com-

petitive claims than are product attributes. First, it is much easier to copy a
product than to duplicate an organization with unique people, values, and
culture. Second, organizational attributes usually apply to a set of product
classes, and a competitor with a single product class is difficult to match.
Third, the organizational attributes such as an innovative and quality culture
are difficult to measure and communicate, so it is difficult for a competitor
to convince consumers that it has closed a conceived gap.

The Brand as Person

The brand as person perspective suggests a brand identity that is richer and
more interesting than one based on product attributes. Like a person, a brand
can be perceived as being upscale, competent, impressive, trustworthy, fun,
 Brand Development and Brand Strategy 197

casual, youthful, and so on. The most important concept here is the brand
personality. A brand personality can be defined as the set of human charac-
teristics associated with a given brand. Thus it includes such characteristics
as gender, age, and socioeconomic class, as well as such classic human per-
sonality traits as warmth, concern, and sentimentality.

A brand personality can create a strong brand in several ways. First, it can
help to create a self-expressive benefit that becomes a vehicle for the
customer to express his or her own personality. For example, a rich man
may want to drive a Mercedes Benz to show his affluence and pride. Second,
brand personality can be the basis of a relationship between the customer
and the brand. For example, the Harley Davidson brand has the personality
of a rugged, free-wheeling, outdoors guy. It helps the buyer use the product
as an identifier for his or her own personality. Third, a brand personality
may help communicate product attributes.

A customer’s perceived brand personality is created by many factors. Some of

the factors are product-related, and some are non product related. Table 8.2
summarizes these factors:

Product-related characteristics could be the primary drivers of a brand per-

sonality. Even the product class can affect the personality. For example, a bank

Table 8.2 Brand Personality Drivers

Product-Related Characteristics Nonproduct-Related Characteristics

Product class User image

Package Sponsorship

Price Symbol

Attributes Age

Ad style

Country of origin

Company image

CEO

Celebrity endorsers

Source: Aaker (1996).

198 Chapter Eight

or insurance company tends to assume a “banker” personality (competent,

serious, male, older, upper class). Huggies’ packaging always features healthy,
happy kids.

Price is a complex factor in brand personality; if the price is low, it may

attract low-end buyers and thus increase sales, but on the other hand, it also
gives the brand a “cheapo” image. If the products related to a brand have top
performance and top quality, a higher price actually may psychologically
give an image of a prestigious brand. Product attributes also affect brand
personality; for example, the strong flavor in Marlboro brand cigarettes
suggests a rugged male personality.

Nonproduct-related characteristics could also affect the brand personality.

Important nonproduct-related characteristics are listed in Table 8.2. The
user image refers to either the profile of typical users (the people who use
the brand) or idealized users (as portrayed in advertising and elsewhere).
The user image can be a powerful driver for brand image; for example, the
Marlboro man is the defining image of Marlboro’s brand personality, a
free-spirited, rugged man. Sponsorship of particular events can influence
a brand’s personality; for example, Nautica sponsorship of Olympic
swimming events gives its brand of swimming wear a personality of a world
class swimmer. How long a brand has been in the market (age) can affect its
personality. An old brand usually gives a “traditional” or “reliable, but old
fashioned” brand personality. A newcomer tends to have a younger brand
personality. A brand symbol can have a powerful influence on the brand per-
sonality because it is visible every time a consumer sees the advertisement
or product. The “Intel inside” symbol created a very strong psychological
impact on buyers that a computer without Intel’s CPU would not be as good.
Marlboro country and the Maytag repairman are among the most successful
brand symbols that provide desirable stereotypes in customers’ minds. The
country of origin is also a very powerful opinion-shaping factor of brand
personality; a German brand might capture some perceived characteristics
of German people (precise, serious, hardworking, and so on). A CEO’s per-
sonality, such as Bill Gates of Microsoft, influences people’s perception of
a company and its products. Celebrity endorsements can also be influential.
For example, Michael Jordan’s endorsement of Gatorade gave the brand a
personality of a strong, thirsty athlete. Advertisement style and company
image affect brand personality as well.

Value Proposition
The purpose of having products or a product class under a brand name
is to provide customers with benefits. There are many kinds of benefits.
 Brand Development and Brand Strategy 199

In Aaker’s brand identity model illustrated in Fig. 8.3, three kinds of benefits
are listed: functional, emotional, and self-expression. For each brand, the
benefits that are offered will be different. Aaker (1996) calls this the value
proposition. Specifically, a brand value proposition is a statement of the
functional, emotional, and self-expressive benefits delivered by the brand
that provide value to the customer. An effective value proposition should
lead to a brand-customer relationship and drive purchase decisions.

The concepts of functional, emotional, and self-expressive benefits are

explained as follows:
1. Functional benefits: Functional benefits are the aggregated product
functions that a product provides to customers. The functional benefits of
a car include movement from point A to B, change of directions and
speed, a nice driving environment, and styling. Besides some must-have
functions, a brand often provides some functional benefits that are special
features. For example, Volvo is featured by its safety and durability,
7-Eleven is featured by its convenience, and Nordstrom is featured by its
customer service. Functional benefit is important; if a brand can
dominate a key functional benefit for which the customers really care, it
can dominate its product class. The challenge is to select functional
benefits that will “ring the bell” with customers. Just delivering this
functional benefit is not enough though; customers buy products based
on perceived quality and perceived functional superiority. Convincing
customers that the brand is truly the leader in a key functional area might
be more challenging than delivering these key functional benefits.
2. Emotional benefits: When purchasing or using a particular brand
gives customers a positive feeling, that brand is providing them with
an emotional benefit. For example, you feel safe when you drive a
Volvo and you feel important when you shop at Nordstrom. The strong
brand value proposition often includes an emotional benefit, on top of
functional benefits. If a brand only has functional benefits, it is vul-
nerable, because if a low-cost producer can duplicate the same
functional benefits, the price of the brand product must be lowered or
it will be priced out of the market. Emotional benefits are more
complex and much more difficult to copy. They are intertwined with
functional benefits. Therefore it is important to study the relationship
between functional attributes and emotional benefits.
3. Self-expressive benefit: Some customers use brands to show
themselves off. We call this the self-expressive benefit. For example,
some youngsters buy fashions from the Gap to show off themselves;
likewise, a successful businessperson might drive a Lincoln, Lexus, or
Mercedes Benz.
200 Chapter Eight

Example 8.1: McDonald’s Brand Identity

McDonald’s is one of the most successful global brands. Its brand identity can
be summarized as follows:

Brand as Product

Product scope: Fast food, children’s entertainment, eating spaces

Product functions:
Variety of fast-food items: hamburgers, Big Mac, Happy Meals, Egg
McMuffin, etc.
Service: Fast, accurate, friendly, and hassle-free
Cleanliness: Spotless in eating spaces, restrooms, and counter;
Low prices
Quality and performance: Consistent temperature, taste, portion, layout, dec-
oration, cleanliness all over the world
User: Family and kids are the focus, but company serves a wide clientele
Country of origin: United States

Brand as Organization

Convenience: McDonald’s is the most convenient quick-service restaurant. It is

located close to where people live, work, and travel; features efficient, time-
saving service, and serves easy to eat food.

Brand Personality

Family-oriented, all-American, genuine, wholesome, cheerful, fun

Brand as Symbol

Logo: Golden arches

Characters: Ronald McDonald; McDonald’s doll and toys

Value Proposition

Functional benefits: Good-tasting burgers, fries, and drinks; extras such as

playgrounds, prizes, and games
Emotional benefits: Kids fun via excitement of birthday parties; joy from toys
and playgrounds; the feeling of special family times

Davis’ Brand Image Model

Scott Davis (2000) developed a brand image model. The brand image has
two components: brand associations and brand persona. Brand associations
describe what kinds of benefits the brand delivers to customers and the role
it plays in their lives. Brand persona is a description of the brand in terms of
human characteristics. The brand image model is a concise model for the
brand identity. We will discuss brand associations and brand persona in
detail.
 Brand Development and Brand Strategy 201

Brand Associations
Brand associations relate to the product, service, and organization aspects
of the brand. They describe a hierarchy of benefits that a brand provides to
its customers. Brands associations are best described by the brand value
pyramid, which is illustrated in Fig. 8.4. The features and attributes layer is
at the bottom of this pyramid. Here the features and attributes are the most
essential product functions, performances, and quality levels that must be
delivered to customers in order for the brand to survive in the marketplace.
The benefits layer is at the middle of pyramid. Here the benefits are
additional functional and/or emotional benefits that the brand provides to its
customers, given that the features and attributes have been satisfactorily
provided by the brand. The beliefs and values layer is at the top of the
pyramid; this layer represents the emotional, spiritual, and cultural values
that are addressed by the brand, given that all the benefits from the benefits
layer and features and attributes layer have been provided by the brand.

Many brands may not be able to fill all the layers of the brand value pyramid.
If a brand cannot fill the bottom layer, then it cannot even deliver the most
basic benefits to its customers for this kind of product and this brand will
fail in the long run. If a brand can only fill the bottom layer, then it is a very
marginal brand, nothing special. It is an essential commodity, such as raw
cotton, raw sugar, or it is the leftmost no-brand T-shirt in Fig. 8.1, Its market

The emotional, spiritual, Most meaningful and most

cultural values being difficult to imitate, but
addressed Beliefs hardest to deliver
and
values

The functional or
emotional benefits
Benefits
provided to
customers
Easiest to
Features and/or deliver, but
functions that least meaningful
must be Features and attributes and most easily
delivered to imitated
customers

Figure 8.4 Brand Value Pyramid (Davis, 2000)

202 Chapter Eight

survival is mostly dependent upon having a low price. If a brand fills or

somewhat fills the middle layer, it becomes a surviving brand. It is better
than the commodity. The most powerful brands fill all the layers in the brand
value pyramid.

Figure 8.5 shows Ralph Lauren’s brand value pyramid. Ralph Lauren has
achieved the strongest brand status in its product class. Many brands can
deliver the features and attributes illustrated in Fig. 8.5, that is, offering high
quality, durable, and classic-looking clothes. But few of them can say their
clothes allow their customers to make a statement. Wearing Ralph Lauren
clothes is like driving a Mercedes Benz in its appeal to social status. The
psychological benefits of this kind of brand name usually take years to
evolve; they are difficult to explain and even more difficult to duplicate.

Brand Persona
According to Davis (2000), brand persona is the set of human characteristics
that consumers associate with the brand, such as personality, appearance,
values, likes and dislikes, gender, size, shape, ethnicity, intelligence, socioe-
conomic class, and education. Brand persona brings the brand to life, and

Beliefs and
Proud
values
Self-esteem
Confident
Happiness
Fulfilled

Associated with most

Benefits
respected designer
High status
Customers feel like they are in style

Wide variety of clothes and accessories

Highest quality and durability
Features
Classic looking
and attributes
Competitively priced
Serves multiple types of customers

Figure 8.5 Ralph Lauren’s Brand Value Pyramid (Davis, 2000)

 Brand Development and Brand Strategy 203

customers subconsciously decide if they want to be associated with this

brand, just like they decide if they want to be associated with other people.
If a brand persona is unpopular and unattractive, then it will affect the sale.
The brand persona here is very similar to the brand personality in Aaker’s
brand identity model.

Example 8.2: Brand Personas for Mail Services

This example is from Davis (2000). Table 8.3 lists the brand personas of three
major mail carriers: Federal Express, U.S. Post Office, and UPS.

8.2.3 Brand Equity

Brand equity is the set of assets (and liabilities) that is linked to a brand
name and symbol. The brand equity adds (or subtracts) the value provided
by a product or service to a firm and/or that firm’s customers (Aaker 1996).

During the 1980s, a lot of research was done to define and estimate the true
value of brands to the competitive position of enterprises (Keller 1993,
Aaker 1991, Farquhar 1989, Tauber 1988). There were two reasons for this

Table 8.3 Brand Personas for Three Mail Carriers

FedEx U.S. Post Office UPS

Male or Female Male Male

Young Old Middle-aged

Athletic Grumpy Evolving

Friendly Not reliable Inconsistent

Prompt Low technology Friendly

Dependable Unsophisticated Brown uniforms

Energetic Overweight Unionized

High technology Complacent Okay service

Problem solvers Slow Professional

Motivated Rigid International

Professional Problem makers Problem solvers

204 Chapter Eight

(Keller 1993). The first reason was an accounting one, and it was to better
estimate the value of brands more precisely for the balance sheet especially
in cases of mergers, acquisitions, and divestitures. The second reason was a
strategy-based motivation to improve marketing productivity (Keller 1993).

Brand equity provides a mechanism for capturing the marketing effects

uniquely attributable to the brand (Keller 1993). Aaker’s brand equity model
(Aaker 1991, p. 269) is one of the best-known models of brand equity. It is
a tool for understanding the linkage between the brand and the value it
provides the firm and its customers beyond what is inherent in the functional
attributes of the products and services. The brand equity model defines five
dimensions of value that the brand provides the firm: brand loyalty, name
awareness, perceived quality, brand associations, and other proprietary
brand assets (Fig. 8.6). Each of these dimensions is important in influencing
customers’ purchasing decisions, and thus, is a contributor toward the
viability of the enterprise. The strategic role of each of these brand equity
dimensions will be described in more detail.

Brand Loyalty

In a competitive environment the ability of a company to retain its existing

customers is of key importance. Brand loyalty is a key factor influencing the
repeat-buying behavior of customers (Keller 1993), and it reduces vulner-
ability to competitive actions in the marketplace. Secondly, it reduces the
cost of doing business for a company because it is more expensive for a
business to try to acquire new customers than to retain existing ones,
especially when the existing ones are satisfied with the brand (Aaker 1991).
Thirdly, brand loyalty can be powerful leverage for negotiating more
favorable terms in the distribution channels (Aaker 1991).

Name Awareness

Brand-name awareness relates to the likelihood that a brand name will come
to mind and the ease with which it does so. Brand-name awareness consists
of two dimensions: brand recall and brand recognition. Brand recognition
reflects a familiarity gained from past experience with the brand (Aaker
1996). Studies have shown that people often buy a brand because they are
familiar with it (Aaker 1991). Brand recall refers to how strongly the brand
comes to mind when the consumer thinks about that product category or the
needs fulfilled by that product category (Keller 1993). Brand-name
awareness plays an important role in consumer decision making because it
allows the brand to be included in the consideration set, which is a pre-
requisite for its eventual choice.
 Brand Development and Brand Strategy 205

• Reduced marketing costs

• Trade leverage
• Attracting new customers
Brand
loyalty
Create awareness

Reassurance
• Time to respond to
competitive threats
• Provides value to customer
by enhancing customer’s:
• Anchor to which other
Interpretation/processing
associations can be of information
attached
Confidence in the
Brand • Familarity-liking purchase decision
awareness
• Signal of
Use satisfaction
substance/commitment
• Brand to be considered

Brand • Reason to buy

equity • Differentiate/position
Perceived
• Price
quality • Provides value to firm by
• Channel member interest
enhancing:
• Extension

Efficiency and
effectiveness of
• Help process/retrieve marketing programs
information
Brand loyalty
• Differentiate/position
Prices/margins
Brand
Brand extensions
• Reason-to-buy
associations
• Create positive
Trade leverage
attitude/feelings
Competitive advantage
• Extensions

Other
proprietary
• Competitive advantage
brand
assets

Figure 8.6 Brand Equity Model (Aaker 1991, 1996)

Perceived Quality

Perceived quality is part of the human experience and is developed entirely

from the perspective of the consumer, based on those product attributes that
are important to them. Perceived quality may be different from the actual
quality of the product. Studies have shown that the customer’s perception of
quality has one of the greatest impacts on the financial performance of a
company (Buzzell et al. 1987, p. 7; Jacobson and Aaker 1987; Anderson et al.
1994). A study of 33 publicly traded stocks over a 4-year period demon-
strated that perceived quality had an impact on stock return (Aaker 1996).
206 Chapter Eight

Perceived quality is a key strategic variable for many companies (Aaker

1996), and it is a key-positioning dimension for corporate brands.

Brand Associations
Brand associations can be anything that connects the customer to the brand
(Aaker 2000). These associations help determine the brand image with the
customer and marketplace. Brand associations can be hard—related to
specific perceptions of tangible functional attributes, such as, speed, user-
friendliness, taste, and price. Brand associations can also be soft—emotional
attributes like excitement, fun, trustworthiness, and ingenuity (Biel 1993).
Apple is an example of a brand with values that have resonated with those
of its target audience. Emphasizing values such as fun, excitement,
innovation, and humor (Kochan 1997), the company has succeeded in
carving out a niche for itself in the highly competitive personal computer
marketplace (Levine 2003).

Other Proprietary Brand Assets

Beyond their use as a tool in achieving a competitive advantage, brands are

also a financial asset to a company. Successful brands can be traded or used
to increase the valuation of a company during a corporate acquisition.

8.3 Brand Development

Strong brands can create tremendous values for the companies that own
them. Developing strong brands that lead the market is always one of the
most important goals for companies, that strive to excel in the marketplace.
The brand development process develops strong brands that fit the owner
companies’ business goals and their comparative advantages.

The objective of a brand development process is to create a brand that

achieves and maintains the intended position in the minds of customers
within the targeted market group. In other words, the brand development
process must create a brand image in the minds of customers that reflects the
brand identity defined by the company. The creation of this brand position in
the minds of customers involves the creation of the brand identity, the trans-
mission of the brand image to customers, and the receipt and acceptance of
this image by customers, as illustrated by Fig. 8.7. This process is influenced
by a variety of factors, which include the nature of the brand identity, organ-
ization factors, the communications media, and market forces.
 Brand Development and Brand Strategy 207

Sender Media Receiver

Brand identity

Signal Brand
transmitted image

Organization
factors
Market factors
(controllable)
(competition
and noise,
uncontrollable)

Figure 8.7 Brand Identity Transmission Process

In this section, we will first identify and discuss the factors that influence the
brand development and then will discuss several key steps in the brand
development process.

8.3.1 Key Factors in Brand Development

There are many factors that affect the brand development process. They can
be categorized into two classes: controllable and uncontrollable. The con-
trollable factors are those over which the company that owns the brand will
have some degree of control. The uncontrollable factors are those over
which the company will have little or no control. These controllable and
uncontrollable factors are also illustrated in Fig. 8.7.

Controllable Factors

There are three classes of controllable factors. The first is brand identity.
The second is called marketing mix factor, or the 4 Ps: product, price,
promotion, and place. The third is time to market. In brand development,
these factors can be used to shape a desirable brand image by the company
and transmit this brand image to customers.

Brand Identity
Brand identity was thoroughly discussed in Sec. 8.2.2. If we use Aaker’s
brand identity model, then there are four perspectives: brand as product,
brand as organization, brand personality, and brand symbol. Clearly, the
company that owns the brand has full control of the brand symbol, a good
degree of control over product development, and a relatively good degree of
control over organization behavior. Brand personality takes years to form; it
is more difficult to change.
208 Chapter Eight

In brand development, the company should design a desirable brand identity

based on a thorough analysis of the marketplace, competitors, and the
relative strengths and weaknesses of the company itself, in order to achieve
the best customer brand image possible.

Product
Customers do not buy brand symbols; they purchase products. Initially,
customers may be influenced by advertisements or their friends’ advice to
try a product with a certain brand name, but the product has to perform up
to customers’ expectations. If the product performs equal to or better than
customers’ expectations, the perceived brand image will be confirmed
by customers’ experience; that will trigger word-of-mouth recommendations,
sales will grow, and the positive brand image will spread among more and
more customers. In order to accomplish this, it is very important that the
actual product characteristics, such as functions, performances, and quality
levels, be consistent with the brand identity. Therefore, product development
has to go hand in hand with brand identity design; the product development
process has to be in tune with brand development.

Price
The role of price in brand development is quite interesting. The brand price
is related to the benefits that the brand provides, as illustrated by Fig. 8.8. If
a price is too high relative to the benefits that the brand provides, the
perceived value in customers’ minds will be low. Customers will think this
brand is overpriced. However, if the benefits that the brand provides are
high, but the price is low relative to the benefits, the customers’ reaction can
be quite complex. Theoretically, customers will be happy to get more and
spend less, but the perception of a “cheapo” product may creep in, which
may undercut the brand image. Usually, benefits are the main focus for
brand identity creation. If you have more benefits and customers are happy

Functional Emotional Self-expressive

benefit Relative
benefit benefit price

Value proposition

Figure 8.8 The Relationship Between Price and Benefits of a Brand (Aaker 1996)
 Brand Development and Brand Strategy 209

with them, it is always easy to raise the price to match the benefits. If the
benefits are really low in comparison with other brands, the price will have
nowhere to go but lower.

Promotion (Communication)
The effectiveness of the communications campaign is a critical factor in
creating the desired brand position and image (Aaker 1996). The purpose
of marketing programs, such as advertising, is to transmit the brand image
in order to increase brand awareness and create a strong, favorable, and
unique brand identity in the customer’s mind. The strength of the brand
image is greatly influenced by the communications in the marketing
programs, particularly by the effectiveness with which the brand identity is
integrated into the marketing programs (Keller 1993). Given the many
choices of media available, selecting the correct media mix to reach the
targeted audience and ensuring that the message is integrated is a key factor
in creating a distinct brand image.

Place (Distribution)
Distribution channels used to deliver products to customers are also very
important factors for brand development. It is important that the distribution
channels deliver the goods to the right customers. The key variables in the
selection of distribution channels include the type of channels, the number
of outlets, the locations of outlets, and stock levels. The distribution process
of the products should be synchronized with the promotion activities so that
the desired customers will know what and where the products are. An
efficient distribution process will give customers service benefits and reduce
the hassles in obtaining the products, thus enhancing the brand image.

Time to Market
Brands that are able to position themselves first in the minds of their
customers have the best chance of achieving the highest brand awareness
(Reis 1981). So the ability to be first in the marketplace will affect the ability
to create a strong brand. However, this factor is not totally controllable,
because it also depends on the competition from competitors.

Uncontrollable Factors

Uncontrollable factors in brand development are mostly marketing factors,

as illustrated in Fig. 8.7. The demographics of the target population for a
brand is an uncontrollable factor. It includes age group, income level, sex,
marital status, area of residence, location, social group membership, and
stage in life. The variation in demographics makes the targeted customers
210 Chapter Eight

very inhomogeneous, so the brand image that the company tries to communicate
to customers will be perceived differently. For example, a particular brand
image might be very attractive to one age group, but unattractive to all other age
groups.

Culture is also an important uncontrollable factor. People from different

cultural backgrounds and business clients from different corporate cultures
will see things in different ways, so cultural factors may affect how
customers perceive the brand image.

Competitive activity is clearly a very important, uncontrollable factor. The

number of competitors and the relative strength of competitors will make a
tremendous impact on brand image. Therefore, it is critical to conduct a
competitive analysis in the early stages of the brand development process.

The customer is another uncontrollable factor. Clearly, the company that owns
the brand cannot control customers. Customers are at the receiving end of the
brand and its associated products. The products and service must meet the
needs and wants of customers. The company cannot control the customers,
but it can try to understand the customers’ needs. The ability of the product or
service to meet the needs of its customers is a critical factor in creating the
brand loyalty that will determine the success or failure of the brand.

8.3.2 Overview of the Brand Development Process

There have been different processes proposed for brand development. These
processes are fundamentally based on two paradigms. The first paradigm
views the brand development process as being closely associated with the
development and marketing of new products (Watkins 1986). In this
paradigm, the brand development process is called the classical brand man-
agement process (Aaker 2000) , and it consists of the following steps:
1. Market exploration
2. Preliminary financial analysis and screening
3. Formal business analysis and planning
4. Product and brand development
5. Product testing
6. Product launch

Recent trends in brand development have elevated brand management to a

more strategic position within the organization, as defined by the brand
leadership model (Aaker 2000) and brand asset management process
 Brand Development and Brand Strategy 211

Table 8.4 Paradigms of the Brand Development Process

Classical Brand Brand Leadership

Features Management Model Model

Perspective Tactical and reactive Strategic and visionary

Brand manager status Less experienced, short Higher in the

time horizon organization, longer
time horizon

Conceptual model Brand image Brand equity

Focus Short-term financials Brand equity measures

Product-market scope Single products and Multiple products and

markets markets

Brand structures Simple Complex brand structures

Number of brands Focus on single brands Category focus––

multiple brands

Country scope Single country Global perspectives

Brand manager’s Coordinator of limited Team leader of multiple

communication role options communication options

Communication focus External/customer External and internal

Driver of strategy Sales and share Brand identity

Source: Adapted from Aaker (2000).

(Davis 2000). The differences between the two brand development

paradigms are shown in Table 8.4.

The new paradigm for the brand development and management is more
focused on the management of the brand as a strategic asset of the company
(Arnold 1992; Davis 2000; and Aaker 1996). The brand development
process defined from this paradigm generally consists of the following
phases (Fig. 8.9):
1. Brand strategy analysis
2. Brand strategy development
3. Brand implementation
4. Brand evaluation
We discuss these four phases in detail.
212 Chapter Eight

Brand strategy analysis phase

Brand vision Customer Self- Competitor

development analysis analysis analysis

Brand strategy development phase

Product- Communications Develop Determine

Brand
brand & marketing channel pricing
positioning
coordination strategy strategy strategy

Brand implementation phase

Communication &
Public
marketing the
relations
brand

Brand evaluation phase

Measuring the
return on brand
investment

Figure 8.9 Brand Development Process

8.3.3 Brand Strategy Analysis

The strategy analysis phase in brand development focuses on understanding

the brand’s competitive position in the marketplace. It also looks at the
ability of the company to influence this positioning through its capabilities
and the attributes of its products and services. The steps of the strategy
analysis phase are described in the following:

Brand Vision Development

The brand vision is a short, succinct statement of what the brand is intended
to become and what is to be achieved at some point in the future, often
stated in competitive terms. Brand vision refers to the category of intentions
that are broad, all-intrusive, and forward thinking. It is the image that a
business must have of its goals before it sets out to reach them. It describes
aspirations for the future, without specifying the means that will be used to
achieve those desired ends.
 Brand Development and Brand Strategy 213

IBM’s brand vision is stated as follows:

At IBM, we strive to lead in the creation, development, and manu-
facturing of the industry’s most advanced information tech-
nologies, including computer systems, software, networking
systems, storage devices, and microelectronics. We translate these
advanced technologies into value for our customers through pro-
fessional solutions and service businesses throughout the world.

According to Davis (2000), a good brand vision should have four com-
ponents: (1) a statement of the overall goal of the brand, (2) the target market
that the brand will pursue, (3) the points of differentiation that the brand will
strive for, and (4) the overall financial goals for which the brand will be
accountable. Davis (2000) gives an example of such a brand vision statement:
Around the world, our eye care brand will stand for leadership in
visual care. Consumers and the professional channel will recognize
us as the industry leader in visual care solutions, including the best
service, follow-up, expertise, and product innovation. Our brand
will help us fill one-third of our stated financial growth gap through
price premiums, better relationships with the channel, and close-in
brand extensions.
Development of a brand vision links the brand development process to the
strategic objectives of the company. This linking is an important step to
ensure the necessary top management and financial commitment to the
brand (Davis 2000). During this step the strategic and financial goals of the
brand are defined, and the commitment of senior management to the goals
and objectives of the brand are obtained.

Customer Analysis

The activities in this step are focused on understanding the trends,

motivation, and unmet needs of the various segments of the customer market
(Aaker 1996). This step creates an understanding of how the “customer
thinks and acts and why and how they make a purchasing decision” (Davis
2000). The objectives of this step are fourfold (Aaker 1996):
1. To determine the functional, emotional, and self-expressive benefits
that customers seek when they buy and use the brand. Customer
surveys are usually needed to determine these benefits as well as the
relative importance of these benefits. The following set of questions is
used to assess the functional benefits:
• What functional benefits are relevant to customers?
• What is the relative importance of each functional benefit?
• Can benefit segments be identified?
214 Chapter Eight

Emotional and self-expressive benefits are more subtle than functional

benefits and are thus more difficult to determine.
2. To understand the different segments of the customer market and their
different needs, wants, and behaviors. We need to find out how the market
segments. Because different market segments may have different
functional, emotional and self-expressive benefit needs, they may respond
differently to a brand promotion program. There are many possible seg-
mentation schemes; however, in the brand development process, the major
task is to find out which segments are the most attractive target for the
brand and most relevant to the brand identity development. Therefore, the
commonly used segmentation schemes include segmentation by benefits
sought and segmentation by price sensitivity.
3. To understand trends occurring in the customer markets so that the
current and future positioning of the brand can be better assessed. By
trends we mean the dynamics of the market and how the demand
pattern will change. Analysis of market data, such as sales volume
trends and profitability prospects of the submarkets, may help to
understand market trends. Understanding market trends provides
insight into changing motivations and emerging segments with
strategic importance. For example, in the coffee market, the sales of
regular supermarket brands declined from 1962 to 1993, but gourmet
coffee and coffeehouse sales increased. If a company is in the coffee
business, this information will certainly help to develop the position of
its brand in future markets.
4. To identify customer needs that current products do not meet. Unmet
needs are customer needs that are not met by existing products in the
market. They are strategically important because they can represent
opportunities for a company to make beneficial moves in the market. For
example, Black & Decker organized a focus group of 50 power tool
owners. The executives of Black & Decker visited the focus group
members’ homes and found out several major unmet needs. One of the
problems with cordless drills is that they run out of battery power before
the job is done. Black & Decker responded by offering detachable battery
packs that could be recharged quickly. Tool owners can have several
battery packs charged and when one battery runs out while they are
working, they can replace it with another in no time and recharge the run-
out battery. Several of these kinds of design moves really give Black &
Decker’s Quantum brand a core identity and competitive advantage.

Self-Analysis

The objective of this step is for management to examine the strengths and
weaknesses of its brand’s current situation, so as to understand how the
 Brand Development and Brand Strategy 215

brand is positioned in the marketplace and what circumstances contributed

to the achievement of this current position (Arnold 1992). The areas
analyzed during this step include
1. The current brand image, i.e., What is the perception of the brand in
the marketplace? This analysis can be done by using a customer
survey (Chap. 4). The following types of questions should be included
in the survey:
• How is the company’s brand perceived?
• What associations are linked with the brand?
• Why do customers like the brand? Why do customers not like the
brand?
• How does a company’s brand differ from competing brands?
• What benefits do customers get from the brand?
• Has the company’s brand changed over time? If yes, how?
• For different market segments, does the company’s brand image
differ? If yes, then how does it differ?
• Does the company’s brand have a personality? If yes, then what is it?
• What are the intangible attributes and benefits of the brand?
In assessing the current brand image, it is important that customer
research include a study of not only product-related attributes but also
of nonproduct-related attributes, such as organizational association,
brand personality, brand-customer relationships, and emotional and
self-expressive benefits.
2. The fundamental values of the brand, i.e., What does the brand stand
for? Is it for fun, luxury, or an active lifestyle? What is the heritage
of the brand? Besides studying the current image of the brand, it is
important to understand the heritage of the brand. Any surviving
brand has some reasons why it survived; it must have done
something right. Many brands get into trouble because they deviate
from their heritage. Arbitrary changes in brand identity may hurt a
brand more than help it. The answers to such questions as, Who were
the early pioneers of the brand? How did it originate? What was the
brand image when it first started? can help to understand the brand
heritage.
3. Links and associations to other brands. Some companies offer several
brands of products or services. In this case, a change in one brand position
may affect other brands offered by the company. So the brand position
decision should not be made in isolation. Each brand should have well-
defined roles, and all brands offered by the company should work together
in a synergistic manner.
4. The strengths and weaknesses of product and service offerings and the
capabilities of the organization, i.e., What is the organization good at?
216 Chapter Eight

For a realistic brand strategy, the desired brand identity should be

supported by the organizational strength of the company. It is
necessary to find out the company’s and products’ strengths and
weaknesses. We need to find out what the company is good at, what
the company is not good at, and how and how much these weaknesses
can be changed. If a company is pursuing a goal that cannot be sub-
stantiated due to its weakness, then the goal will not be achieved.

Competitor Analysis

The competitor analysis is focused on understanding the current image,

positioning, strengths, and weaknesses of competitive brands in the mar-
ketplace, as well as the possible future trajectories of these competitive
brands (Aaker 1996). This analysis will develop an understanding of the
following aspects:
1. The customer’s perception of competitive brands. This information is
a fundamental input for brand identity determination. Because it tells
how customers perceive competitors’ brands, it provides a basis for
determining what needs to be done to differentiate the company’s
brand from competitors’ brands. It is important to find out what are the
functional benefits to customers, how these benefits compare with that
of the company’s brand, the brand-customer relationship, and brand
personality.
There are two sources from which to get this information. One is from a
customer survey study on competitors’ brands. The other is from com-
petitors’ own information; for example, competitors’ advertisements
and advertisement plans can provide clues as to what kind of brand
image they want customers to perceive.
2. Previous changes in competitive brand positioning and the future market
positioning (strategic brand objectives) of competitors. In the brand
development process, it is important to consider not only the current
images of competing brands but also past changes and possible future
changes in these images. A thorough examination of such changes can
provide useful information about the reasons for such changes and the
reality of the competitive environment.
3. Strengths and vulnerabilities of competitors. Information on strengths
and vulnerabilities of competitors provides valuable inputs for a
company’s brand position. It is difficult and costly to compete head to
head with the strong points of competitors. It is much easier to
compete in the areas in which your competitors are not strong.
 Brand Development and Brand Strategy 217

8.3.4 Brand Strategy Development

The purpose of the development phase is to develop the brand strategy.

During this phase the positioning of the brand is developed. Also channel
strategy, pricing strategy, and future extensions to the brand are developed or
aligned. The following describes the steps in the brand strategy development
phase.

Brand Positioning

“The brand position is part of the brand identity and value proposition that
is to be actively communicated to the target audience and that demonstrates
an advantage over competing brands” (Aaker 1996). The purpose of brand
positioning activities is to create an identity that provides the brand with a
unique, credible, sustainable, and valued place in customers’ minds (Davis
2000). The positioning of the brand is the place in customers’ minds that
the brand is intended to own (Davis 2000, Reis 1981). Positioning is the
process of determining the impact the message (the brand) will make on
the mind of the prospect (Reis 1981). The effect of the positioning is to
create the necessary associations customers will think of when they recall
the brand. Some examples of associations of some well-positioned brands
are given in Table 8.5.

A brand’s position should be updated every 3 to 5 years, or as often as

needed to update the company’s growth strategy. Senior management has to
lead in developing, updating, and implementing the brand position.

Table 8.5 Examples of Top Brands and Their Attributes

Brand Attributes

Disney Family fun entertainment

Nordstrom Highest level of retail service

Saturn Your car company

FedEx Guaranteed overnight delivery

Wal-Mart Low prices and good values

Hallmark Caring shared

Source: Davis (2000).

218 Chapter Eight

Brand positioning defines the following aspects of the brand’s position in

the marketplace:
1. The target market segment. The company that owns the brand needs to
know who are the intended customers for its brand. Customer surveys
and self-study can be used to determine the target market segment.
The following types of questions should be asked:
• Is the target market both identifiable and reachable?
• Would the current customers be part of our target market segment?
• Will the target market be attracted to our distinct brand identity?
• If we never served this market segment before, why do we want to
serve it now?
2. The business it provides to the market segment. The company that
owns the brand needs to know what kinds of businesses it will provide
and what kinds of businesses it will not provide in the target market
segment. Customer surveys and self-study can be used to determine
this. The following types of questions should be asked:
• What is the category, industry, or business that we compete in?
• How has this changed over time?
• Will the marketplace value and believe in our participation in this
business?
3. Key benefits and points of differentiation of the company’s products
and brand in the marketplace. The company that owns the brand needs
to know what differentiates its brand from other brands in the target
market segment, as well as what are the key benefits of its brand to
customers. Customer surveys and self-study can be used to determine
this. The following types of questions should be asked:
• Are our key benefits important to customers?
• Can we deliver these benefits satisfactorily?
• What are our key points of difference from other brands?
• Can we own these key points of difference over time?
• Are we competing at the features and attributes layer, the benefits
layer, or the beliefs and values layer? (See Fig. 8.4.)
4. The contract of the brand with the market, which defines its brand’s
promises (in terms of its products and service quality) to its customers.
The contract of the brand with the market is also called a brand
contract (Davis 2000). A brand contract is a list of all promises the
brand makes to customers. Such a contract is executed internally, but
it is defined and validated externally by the marketplace.

The brand contract is derived by analyzing

• The current promises the brand makes to the marketplace
 Brand Development and Brand Strategy 219

• Positive and negative feedbacks regarding current promises from

customers
• The results of the brand position analysis

Example 8.3: Starbucks’ Implicit Brand Contract

This example is from Davis (2000). Starbucks promises to do the following:

1. Provide the highest-quality coffee available on the market today

2. Offer customers a wide variety of coffee options as well as complementary
food and beverage items
3. Have an atmosphere that is warm, friendly, homelike, and appropriate for
having a conversation with a good friend or reading a book
4. Recognize that visiting Starbucks is as much about the experience of
drinking coffee as it is about coffee itself
5. Have employees who are friendly, courteous, outgoing, helpful, knowl-
edgeable, and quick to fill customer orders
6. Provide customers with the same experience at any one of the several
thousand Starbucks worldwide
7. Stay current with the times, meet customer needs, and help customers create
the Starbucks experience on their own terms
8. Provide customers with an environmentally friendly establishment
9. Educate customers on the different types of coffee offered

Five Principles of Effective Brand Positioning

Davis (2000) proposed five principles of effective brand positioning: value,
uniqueness, credibility, sustainability, and fit.
1. Value: The proposed brand position should provide the targeted
customers with superior values to that of competitors. It should provide
customers with functional, emotional, and self-expressive benefits that
a wide range of customers will appreciate and be willing to pay a
premium price to get.
2. Uniqueness: The proposed brand position should have some unique
attributes that no other competitors can deliver. These should be important
to and appreciated by customers. The uniqueness should make the
company’s brand stand out in the crowd.
3. Credibility: The proposed brand position should be implementable in
a credible manner, and the company’s effort should be able to make
customers believe that all the promises will be met. The brand position
should be in line with customers’ perception of the company’s ability.
4. Sustainability: Once a proposed brand position is implemented, it is
desirable that this brand position last as long as it can. Changing brand
positioning involves a lot of investment, and frequent change cuts
220 Chapter Eight

down on the credibility of the brand. A good brand position should be

difficult to copy by competitors and meet the customers’ changing
needs for a long time.
5. Fit: The brand position should fit the company’s objectives and culture.

Example 8.4: Several Bookstores’ Brand Positions

This example is from Davis (2000). Borders, Crown Books, Barnes & Noble,
and Amazon.com are four dominant booksellers in America. The following
table lists each of their unique brand positions.

Target Market Business Point of

Company Segment Provided Difference

Borders Individuals looking Books, music, Fun place

for a community multimedia, and to go
meeting place on-line

Crown Books Price-sensitive Bookstores Discount

individuals, pricing
strip-mall shoppers

Barnes & Noble Individuals looking Books, music, Library-like

for a quiet multimedia and setting
gathering place on-line

Amazon.com Individuals who are On-line books, Personalized

Internet-active and music, and many on-line service,
shop on-line other items huge variety

Product-Brand Coordination

After all, customers are buying products or services; a brand is a symbol and
a short cut for customers to use in selecting the products they need.
Customers’ total experience with the products, including purchasing,
consuming, and servicing, has to be in tune with the brand position. For
example, if a hospital’s brand position is to be the premier hospital of choice
that provides customers with an attentive team of caring experts working
together to provide the highest level of professional care, then every word
promised, such as premier, attentive, team, and caring, should have concrete
actions behind it. Table 8.6 provides an example of a well-coordinated
product-brand combination.
 Brand Development and Brand Strategy 221

Table 8.6 Product-Brand Coordination of a Hospital

Brand Position Product (Patient Treatments) Attributes

Premier hospital • Excellence in all performance metrics

• Staffed with first-class doctors, administrators, and nurses
• Excellent infrastructure, first-class equipment
• Modern appearance, spotless, well organized

Attentive team • Reduction of patients’ waiting time to industry’s best

• Reduction of unneeded paperwork, and tests
• Clearly explained treatment plan, hospital protocols,
discharge procedures
• Quick feedback to patients’ requests

Caring • Reduction of patients’ waiting time to industry’s best

• Caring nurses
• Prompt response to all patients’ care issues
• Excellent in-patient facility

Expert • Competent doctors

• State-of-the-art medical equipment and first-class
technical support

Highest-level of • Reduction of treatment errors and diagnostic errors

professional care to a minimum
• Reduction of unneeded treatment to a minimum

The following are the key issues in ensuring product-brand coordination:

1. The brand development team should include product development
people.
2. Key product development professionals should learn the basics in
brand development and management.
3. Brand positioning and product development should go hand in hand.

Communications and Marketing Strategy

Marketing determines what in the brand’s positioning will be commu-

nicated and how it will be communicated to the marketplace (Levine 2003).
There are numerous vehicles for communicating the brand to the mar-
ketplace, and these include
• Advertising
• Internet
• Public relations
222 Chapter Eight

• Trade and sales promotions

• Consumer promotions
• Direct marketing
• Event marketing
• Product placement
• Internal employee communications
In order for the brand to achieve its intended positioning in the marketplace, it
is very important that the brand image be communicated to the marketplace
through various vehicles using an integrated marketing communications
strategy (Davis 2000). The message delivered through all these vehicles must
be consistent and relate back to the brand image. The communications strategy
determines the best mix of vehicles in communicating the brand image.

Develop Channel Strategy

The objective of this step is to determine the appropriate distribution channel

strategy that will enhance the brand image, and in the case of existing brands
leverage the strength of the brand. The selection of the appropriate distribution
channel is very important because of the association that is created between
the image of the channel and that of the brand. Also, because a strong brand
can create a draw to a distribution channel, it is necessary during this step to
leverage the power of the brand to create the best distribution arrangements
and ensure more control over the distribution of products and services.

Determine Pricing Strategy

This step focuses on determining the correct pricing policy for the brand. A
brand’s price must be related to the benefits it provides (Aaker 1996). An
overpriced brand will not be rewarded in the marketplace, and an underpriced
brand can negate certain associations with the brand’s image. Also, the ability
to charge premium prices is one of the benefits of developing a strong brand
(Davis 2000), so this must be leveraged in determining the pricing strategy.

8.3.5 Brand Implementation

During this phase the plans developed in the brand strategy are executed.

Communicating and Marketing the Brand

The objective in this step is to communicate the brand to the marketplace

using the integrated marketing and communication strategy developed in the
previous phase. During this step, care is taken to use all the selected commu-
nication vehicles effectively to achieve the optimal sales per dollar spent.
 Brand Development and Brand Strategy 223

Also, in order to improve the effectiveness of the communications, it is

important at this stage, to track all marketing expenditures by product, pro-
motional tool, stage of the life cycle, and observed effects in order to
establish a baseline for the improvement of the usage of these tools.
Public Relations

The purpose of public relations in the development of the brand image is to

encourage the public to have positive feelings about the brand. However,
unlike marketing, which is an essential activity that is very visible in the
development of the brand, a well-executed public relations campaign is not
visible (Levine 2003, p. 17). The public relations activity achieves its objectives
by encouraging third parties to deliver positive messages about the brand.
These messages are usually delivered through news organizations and print
journalists in the form of news and press releases (Levine 2003, p. 17). Because
the company does not have any control over the news outlet, a challenge during
this step is ensuring that the delivered message is true to the brand image.

8.3.6 Brand Evaluation

Measuring the Return on Brand Investment

This purpose of this step is to measure the performance of the brand in the
marketplace. The classical brand management process emphasized two metrics:
recall and awareness of the brand (Davis 2000). However, these measures alone
are not suited for measuring the brand performance, as determined by the equity
value of the brand. In order to provide information for managing the brand as an
asset, brand performance measures should (Davis 2000)
• Provide an understanding of how the brand is performing internally and
externally
• Provide information about the return on investment of marketing and
branding strategies
• Assist the organization in its resource allocation decisions
• Provide information for rewards and incentive systems
Some of the additional brand performance measures include
• Acquired customers
• Lost customers
• Customer satisfaction
• Purchase frequency
• Market share
• Return on advertising
• Price premium
224 Chapter Eight

We use the legendary new Marlboro cigarette brand development process as

a comprehensive example to illustrate a successful brand development.

Example 8.5: New Marlboro Cigarette Brand Development

This example is from Arnold (1992). The Marlboro cigarette brand is the best-
selling packaged cigarette in the world. However, as recently as the late 1950s,
it was an old, dying, tobacco brand in the United States. In 1954, after careful
analysis of the trends in the tobacco market, the management of Philip Morris
made a number of key decisions on the changes of the brand position:

To match the newly designed brand image, the product was totally redesigned. At
that time, 90 percent of U.S. smokers used unfiltered cigarettes. The company
realized that the coming trend would be filters, and this could also help to

Old Marlboro New Marlboro

Mild tar blend Stronger blend

Less flavor More flavor

Nonfilter Filter

White pack design Red and white design

Older image More modern image

Aimed at women Aimed at men

Product-based advertising Imagery advertising

modernize the image of the brand. To change the perception that the Marlboro
cigarette is a mild cigarette for women, the flavor of the cigarette was made
stronger and the filter was covered in tobacco brown paper, indicating strength
and flavor. To shape the new Marlboro brand identity, a new advertisement
agency, Leo Burnett, was contracted by Phillip Morris to develop a campaign to
relaunch the brand using male role models in tough, rugged jobs, in order to
project a new Marlboro brand personality. At the beginning, pilots, deep-sea
fishermen, cowboys, and engineers were tried. In 1963, market research indicated
that Marlboro needed a more clear-cut identity. The Marlboro Man, symbolized
by a cowboy, was established.

Campaign guidelines were laid down as follows:

• The cowboy must symbolize the type of man that other men would prefer to
be like and women would like to be with.
• He must be believable.
 Brand Development and Brand Strategy 225

• Marlboro country must always be magnificent, never ordinary.

• Every ad in the campaign must be candid and have an impact.
• Variety must be achieved by rotation of cowboy portraits, smoking moments,
and magnificent country material.

To the present day these guidelines have been maintained throughout all media.
To ensure the projection of a consistent brand image, the Marlboro adver-
tisement and campaign style is highly consistent worldwide. After all these
efforts, the sales of Marlboro brand cigarettes steadily increased; by 1975,
Marlboro had grown to U.S. brand leadership.
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 Chapter

Theory of Inventive Problem

9
Solving (TRIZ)

9.1 Introduction

TRIZ (Teoriya Resheniya Izobreatatelskikh Zadatch) is the theory of

inventive problem solving (TIPS) developed in the Soviet Union starting in
the late 1940s. TRIZ was developed based on 1500+ person years of
research and study of many of the world’s most successful solutions of
problems from science and engineering, and systematic analysis of suc-
cessful patents from around the world, as well as the study of the psycho-
logical aspects of human creativity (Mann 2002).

Dr. Genrich S. Altshuller, the creator of TRIZ, started the investigation on

invention and creativity in 1946. After initially reviewing 200,000 former
Soviet Union patent abstracts, Altshuller selected 40,000 as representatives
of inventive solutions. He separated the patents’ different degrees of inven-
tiveness into five levels, with level 1 being the lowest and level 5 being the
highest. He found that almost all invention problems contain at least one
contradiction, where a contradiction is defined as a situation where an
attempt to improve one feature of the system detracts from another feature.
He found that the level of invention often depends on how well the contra-
diction is resolved.

Level 1. Apparent or Conventional Solution: 32 Percent; Solution by

Methods Well Known within Specialty

Inventions at level 1 represent 32 percent of the patent inventions and

employ obvious solutions drawn from only a few clear options. Actually
level 1 inventions are not real inventions but narrow extensions or
improvements of existing systems, which are not substantially changed due
to the application of the invention. Usually a particular feature is enhanced
or strengthened. Examples of level 1 inventions include increasing the

227

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228 Chapter Nine

thickness of walls to allow for greater insulation in homes or increasing the

distance between the front skis on a snowmobile for greater stability. These
solutions may represent good engineering, but contradictions are not
identified and resolved.

Level 2. Small Invention Inside Paradigm: 45 Percent; Improvement

of an Existing System, Usually with Some Compromise

Inventions at level 2 offer small improvements to an existing system by

reducing a contradiction inherent in the system while still requiring obvious
compromises. These solutions represent 45 percent of inventions. A level 2
solution is usually found through a few hundred trial-and-error attempts and
requires knowledge of only a single field of technology. The existing system
is slightly changed and includes new features that lead to definite impro-
vements. The new suspension system between the track drive and the frame of
a snowmobile is a level 2 invention. The use of an adjustable steering
column to increase the range of body types that can comfortably drive an
automobile is another example at this level.

Level 3. Substantial Invention Inside Technology: 18 Percent; Essential

Improvement of an Existing System

Inventions at level 3 significantly improve the existing system and represent

18 percent of the patents. At this level, an invention contradiction is resolved
with the existing system, often through the introduction of some entirely
new element. This type of solution may involve 100 ideas, tested by trial
and error. Examples include replacing the standard transmission of a car
with an automatic transmission, or placing a clutch drive on an electric drill.
These inventions usually involve technology that is integral to other
industries but is not well known within the industry in which the invention
problem arose. The resulting solution causes a paradigm shift within the
industry. A level 3 invention is found outside an industry’s range of accepted
ideas and principles.

Level 4. Invention Outside Technology: 4 Percent; New Generation

of Design Using Science, Not Technology

Inventions at level 4 are found in science, not in technology. Such break-

throughs represent about 4 percent of inventions. Tens of thousands of
random trials are usually required for these solutions. Level 4 inventions
usually lie outside the technology’s normal paradigm and involve using a
completely different principle for the primary function. In level 4 solutions,
the contradiction is eliminated because its existence is impossible within the
 Theory of Inventive Problem Solving (TRIZ) 229

new system. That is, level 4 breakthroughs use physical effects and phenomena
that had previously been little known within the area. A simple example
involves using materials with thermal memory (shape-memory metals) for
a key ring. Instead of taking a key on or off a steel ring by forcing the ring
open, the ring is placed in hot water. The metal memory causes it to open for
easy replacement of the key. At room temperature, the ring closes.

Level 5. Discovery: 1 Percent; Major Discovery and New Science

Inventions at level 5 exist outside the confines of contemporary scientific

knowledge. Such pioneering works represent less than 1 percent of
inventions. These discoveries require lifetimes of dedication for they
involve the investigation of tens of thousands of ideas. This type of solution
occurs when a new phenomenon is discovered and applied to the invention
problem. Level 5 inventions, such as lasers and transistors, create new
systems and industries. Once a level 5 discovery becomes known, sub-
sequent applications or inventions occur at one of the four lower levels. For
example, the laser, a technological wonder of the 1960s, is now used
routinely as a lecturer’s pointer and a land surveyor’s measuring
instrument.

Based on the extensive studies of inventions, other major findings of TRIZ

include the following:
1. Through inductive reasoning on millions of patents and inventions, we
can find a very small number of inventive principles and strategies that
summarize most innovations.
2. Outstanding innovations are often featured by complete resolution of
contradictions, not merely a tradeoff and compromise on contradictions.
3. Outstanding innovations are often featured by transforming wasteful,
or harmful elements in the system, into useful resources.
4. Technological innovation trends are highly predictable.

9.1.1 What Is TRIZ?

TRIZ is a combination of methods, tools, and a way of thinking (Mann

2002). The ultimate goal of TRIZ is to achieve absolute excellence in design
and innovation. In order to achieve absolute excellence, TRIZ has five key
philosophical elements.
1. Ideality: This is the ultimate criterion for system excellence; it is
the maximization of the benefits provided by the system, and min-
imization of the harmful effects and costs associated with the
system.
230 Chapter Nine

2. Functionality: This is the fundamental building block of system

analysis; it builds models about how a system works and how it creates
benefits, harm, and costs.
3. Resource: Maximum utilization of resources is one of the keys to
achieving maximum ideality.
4. Contradictions: A contradiction is a common inhibitor for increasing
functionality; removing the contradiction usually greatly increases the
functionality and raises the system to a totally new performance level.
5. Evolution: The evolution trend of the development of technological
systems is highly predictable, and it can be used to guide further
development.
Based on these five key philosophical elements, TRIZ developed a system
of methods. The methods defined here are a complete problem definition
and solving process. It is a four-step process, consisting of (1) problem def-
inition, (2) problem classification and tool selection, (3) solution generation,
and (4) evaluation.

Problem Definition

This is a very important step in TRIZ. If you can accurately define the right
problem, then you have 90 percent of the solution. The problem definition
step includes the following tasks:
• Function analysis: This includes the function modeling of the system
and analysis. This is the most important task in the definition step.
TRIZ has highly developed tools for function modeling and analysis.
• Technological evolution analysis: This step looks into the relative
maturity in technology development of all subsystems and parts. If a
subsystem and/or part is technically too mature, it may reach its limit in
performance and thus become a bottleneck for the whole system.
• Ideal final result: The ideal final result is the virtual limit of a system
in TRIZ. It may never be achieved, but it provides us with an ultimate
dream and will help us to think “out of the box.”

Problem Classification and Tool Selection

TRIZ has a large array of tools for inventive problem solving; however, we
must select the right tool for the right problem. In TRIZ, we must first
classify the problem type and then select the tools accordingly.

Solution Generation

In this step, we apply TRIZ tools to generate solutions for the problem. Because
TRIZ has a rich array of tools, it is possible to generate many solutions.
 Theory of Inventive Problem Solving (TRIZ) 231

Evaluation

In any engineering project, we need to evaluate the soundness of the new

solution. TRIZ has its own evaluation approach. However, other non-TRIZ
methods might also be used at this stage, such as axiomatic design and
design vulnerability analysis.

In subsequent sections, we first discuss the philosophical aspects of TRIZ in

order to lay a foundation for understanding. Then we discuss the four-step TRIZ
problem definition and solving process, together with the tools used in TRIZ.

9.2 TRIZ Fundamentals

Ideality, functionality, contradictions, use of resources, and evolution are

the pillars of TRIZ. These elements make TRIZ distinctively different from
other innovation and problem-solving strategies. In this section, we describe
all five elements.

9.2.1 Function Modeling and Functional Analysis

Function modeling and functional analysis originated in value engineering

(Miles 1961). A function is defined as the natural or characteristic action
performed by a product or service. Usually, a product or service provides
many functions. For example, an automobile provides customers with the
ability to get from point A to point B, with a comfortable riding envi-
ronment, air conditioning, music, and so on.

Among all functions, the most important is called the main basic function.
It is defined as the primary purpose or the most important action performed
by a product or service. The main basic function must always exist, although
methods or designs to achieve it may vary. For example, for an automobile,
the ability to get from point A to B is the main basic function.

Besides the main basic function, there are other useful functions as well; we
can call these secondary useful functions. There are several kinds of
secondary useful functions:
1. Secondary basic functions: These are not main basic functions, but
customers definitely need them. For example, providing a comfortable
riding environment is a must-have function for automobiles.
2. Nonbasic but beneficial functions: These are functions that provide
customers with esteem value, comfort, and so on. For example, the
paint finish on an automobile provides both basic and nonbasic
232 Chapter Nine

functions; it protects the automobile from corrosion and rust, as well

as creating a sleek look for the car.
Besides secondary useful functions, there are two other types of functions:
1. Supporting function: This function supports the main basic function
or another useful function. A supporting function results from the
specific design approach to achieve the main basic function or other
useful functions. As the design approach to achieve the main basic
function and other useful functions changes, supporting functions may
also change. There are at least two kinds of supporting functions,
assisting functions and correcting functions.
• Assisting functions: These functions assist other useful functions.
For example, the engine suspension system provides the function of
locking the position of the engine in the automobile so that the
engine can provide power without falling off the car.
• Correcting functions: These functions correct the negative effects
of another useful function. For example, the main basic function of
the water pump in the automobile internal combustion engine is to
circulate water in the engine system in order to cool it off; it is a cor-
recting function for the automobile engine. The main basic function
of the engine is to provide power for the automobile, but the internal
combustion engine also creates negative effects, such as heat. A
water pump’s function is to correct this negative effect. If we change
the design and use electricity as the power source of the automobile,
the function of a water pump will no longer be needed.
2. Harmful function: This is an unwanted, negative function caused by
the method used to achieve useful functions. For example, an internal
combustion engine not only provides power; it also generates noise,
heat, and pollution, and these are harmful functions.
In summary, the main basic function and secondary useful functions provide
benefits for the customer. Supporting functions are useful, at least they are
not harmful, but they do not provide benefits directly to the customer and do
incur costs. Harmful functions are not useful and provide no benefits at all.

Functional Statement

A function can be usually fully described in three parts: a subject, a verb,

and an object. For example, for the automobile, its main basic function can
be described as
Car moves people
(Subject) (Verb) (Object)
 Theory of Inventive Problem Solving (TRIZ) 233

For a toothbrush, its main basic function can be described as

Toothbrush brushes teeth
(Subject) (Verb) (Object)

Functional Analysis Diagram

The functional analysis diagram is a graphic tool used to describe and

analyze functions. The following graph is a typical template for a functional
analysis diagram:

Action
Subject or Object
field

Where the subject is the source of action, the object is the action receiver.
Action is the verb in the functional statement, and it is represented by an
arrow. In a technical system, the action is often accomplished by applying
some kind of field, such as a mechanical, electrical, or chemical field. For
example, the function “brush teeth” can be described by the following
functional analysis diagram:

Brush
Toothbrush Teeth
mech.

In the diagram, Mech. stands for “mechanical field.” Clearly, brushing teeth
is an application of one kind of mechanical field, force.

In the functional analysis diagram, there are four types of actions. They are
represented by four types of arrows as illustrated in Fig. 9.1.

Normal useful action

Insufficient useful action

Excessive useful action

Harmful action

Figure 9.1 Legends for Various Actions in the Functional Analysis Diagram
234 Chapter Nine

Example 9.1: Brushing Teeth

If we use a toothbrush correctly, and our teeth get cleaned properly, then we call
this brush action a normal useful action. We can illustrate this by the following
functional analysis diagram:

Brush
Toothbrush Teeth
mech.

However, if we use the toothbrush too gently and do not brush long enough, or
we use a worn toothbrush, then our teeth will not get enough cleaning. In this
case, we can use the following functional analysis diagram:

Brush
Toothbrush Teeth
mech.

Clearly, this is a case of an insufficient useful action.

If we use a very strong toothbrush and brush our teeth with much force and big
strokes, then our gums will get hurt, and so will our teeth. We can use the
following functional analysis diagram to describe this situation:

Brush
Toothbrush Teeth

Wear

Tear Gums

That is, the toothbrush delivers excessive brushing action to the teeth. The
excessive toothbrush action is harmful since it tears the gums and makes them
bleed. The teeth also may deliver a harmful action, by causing wearing of the
toothbrush.

Functional Modeling and Analysis Example

Figure 9.2 is a schematic view of an overhead projector. Figure 9.3 shows a

graph of the functional modeling and analysis diagram for the whole system.

In this functional analysis graph, E stands for electric field and M stands for
mechanical field. In this example, there are many chains of action; that is,
an object can be another object’s subject. Then we have a sequence of
subject-action-object-action chains. Each chain describes a complete
function. We can identify the following functions:
1. From electric power to image to screen, that is, the function of pro-
jecting an image in the film onto the screen. We can think of this as the
main basic function.
 Theory of Inventive Problem Solving (TRIZ) 235

SS4 height adjustment

(angle-adjusted mirror)
SS3 focusing device
(rack and pinion)

SS2 magnifying lens

SS1 projection lamp

SS5 cooling fan

SS6 power supply

regulator

Figure 9.2 Overhead Projector

2. From hand to focusing adjuster to mirror, that is, the function of

focusing the image. This is a secondary basic function.
3. From hand to angular adjuster to mirror, that is, the function of pro-
jecting the image to the right position on the screen. This is also a
secondary basic function.
4. From electric power to projection lamp to lens, etc. There is a harmful
function chain, there are several harmful functions that are all related
to unwanted heat, without correction, these harmful functions will
damage the film and device.
5. Because of the harmful function, we have to add a supporting function,
that is the chain from electric power to fan and end with lens and film.

M
Hand Focusing adjuster
M
M
Angular adjuster
M
Heat
E Light Light Focused
Electric E Projection Heat Heat Image
Lens Film Mirror Screen
power lamp

E Cold air
Cold air
Cold air

Fan

Figure 9.3 Whole System Functional Modeling and Analysis Diagram

236 Chapter Nine

This function is a correcting function to compensate for the negative

effect of the harmful function.

9.2.2 Resources

The maximum effective use of resources is very important in TRIZ. We also

need to think of resources and make use of them in creative ways.

The primary mission for any product or process is to deliver functions.

Because substances and fields are basic building blocks of functions, they
are important resources from the TRIZ point of view. However, substances
and fields are not sufficient by themselves to build and deliver functions.
Space and time are also needed; they are also important resources. From the
TRIZ point of view, an information and knowledge base about how to use
available resources is also an important resource.

We can segment resources into the following categories:

1. Substance resources
a. Raw materials and products
b. Waste
c. By-products
d. System elements
e. Substance from surrounding environments
f. Inexpensive substances
g. Harmful substances from the system
h. Altered substances from the system
2. Field resources
a. Energy in the system
b. Energy from the environment
c. Energy or field that can be built upon existing energy platforms
d. Energy or field that can be derived from system waste
3. Space resources
a. Empty space
b. Space at interfaces of different systems
c. Space created by vertical arrangement
d. Space created by nesting arrangement
e. Space created by rearrangement of existing system elements
4. Time resources
a. Prework period
b. Time slot created by efficient scheduling
c. Time slot created by parallel operation
d. Post work period
 Theory of Inventive Problem Solving (TRIZ) 237

5. Information and knowledge resources

a. Knowledge of all available substances (material properties, trans-
formations, etc.)
b. Knowledge of all available fields (field properties, utilizations, etc.)
c. Past knowledge
d. Other people’s knowledge
e. Knowledge of operation
6. Functional resources
a. Unutilized or underutilized existing system main functions
b. Unutilized or underutilized existing system secondary functions
c. Unutilized or underutilized existing system harmful functions
In TRIZ, it is more important to look into cheap, ready-to-use, abundant
resources than expensive, hard-to-use, and scarce resources. Here is an example.

Example 9.2: Cultivating Fish in Farmland

The southeastern part of China is densely populated, so land is a scarce
resource. Many pieces of land are used to plant rice. Agricultural experts
suggest that farmland can be used to cultivate fish while it is used to grow rice,
because in rice paddies, water is a free and ready resource, and the waste from
fish can be used as a fertilizer for the rice.

9.2.3 Ideality

Ideality is a measure of excellence. In TRIZ, ideality is defined by the

following ratio:

∑ benefits
Ideality = (9.1)
∑ costs + ∑ harm

where ∑ benefits = sum of values of system’s useful functions (Here the

supporting functions are not considered as useful functions, because they
will not bring benefits to customers directly; we consider supporting
functions to be part of the costs to make the system work.)

∑ costs = sum of expenses for systems performance

∑ harm = sum of all harm created by harmful functions
In Eq. (9.1), a higher ratio indicates a higher ideality. When a new system is
able to achieve a higher ratio than that of the old system, we consider it a
real improvement.

In TRIZ, there is a law of increasing ideality, which states that the

evolution of all technical systems proceeds in the direction of increasing
238 Chapter Nine

degree of ideality. The ideality of the system will increase in the following
cases:
1. Increasing benefits
2. Reducing costs
3. Reducing harm
4. Benefits increasing faster than costs and harm
From the TRIZ point of view, any technical system or product is not a goal
in itself. The real value of the product or system is in its useful functions.
Therefore, the better system is the one that consumes fewer resources in
both initial construction and maintenance.

When the ratio becomes infinite, we call this the ideal final result (IFR).
Thus, the IFR system requires no material, consumes no energy on space,
needs no maintenance, and will not break.

9.2.4 Contradiction

From the TRIZ standpoint, a challenging problem can be expressed as either

a technical contradiction or a physical contradiction.

Technical Contradiction

A technical contradiction is a situation where efforts to improve some

technical attributes of a system lead to deterioration of other technical
attributes. For example, as a container becomes stronger, it becomes heavier,
and faster automobile acceleration reduces fuel efficiency.

A problem associated with a technical contradiction can be resolved either by

finding a tradeoff between the contradictory demands or by overcoming the
contradiction. Tradeoff or compromise solutions do not eliminate the technical
contradictions, but rather soften them, thus retaining the harmful (undesired)
action or shortcoming in the system. Analysis of thousands of inventions by
Altshuller resulted in formulation of typical technical contradictions, such as
productivity versus accuracy, reliability versus complexity, and shape versus
speed. It was discovered that despite the immense diversity of technological
systems and even greater diversity of inventive problems, there are only about
1250 typical system contradictions. These contradictions can be expressed as a
table of contradiction of 39 design parameters (Table 9.1).

From the TRIZ standpoint, overcoming a technical contradiction is very

important, because by overcoming a contradiction, both attributes in the
contradiction can be improved drastically and the performance of the system
 Theory of Inventive Problem Solving (TRIZ) 239

Table 9.1 Thirty-nine Parameters

1. Weight of moving object 21. Power

2. Weight of nonmoving object 22. Waste of energy

3. Length of moving object 23. Waste of substance

4. Length of nonmoving object 24. Loss of information

5. Area of moving object 25. Waste of time

6. Area of nonmoving object 26. Amount of substance

7. Volume of moving object 27. Reliability

8. Volume of nonmoving object 28. Accuracy of measurement

9. Speed 29. Accuracy of manufacturing

10. Force 30. Harmful factors acting on object

11. Tension, pressure 31. Harmful side effects

12. Shape 32. Manufacturability

13. Stability of object 33. Convenience of use

14. Strength 34. Repairability

15. Durability of moving object 35. Adaptability

16. Durability of nonmoving object 36. Complexity of device

17. Temperature 37. Complexity of control

18. Brightness 38. Level of automation

19. Energy spent by moving object 39. Productivity

20. Energy spent by nonmoving object

will be raised to a whole new level. TRIZ developed many tools for elim-
ination of technical contradictions.

Physical Contradiction

A physical contradiction is a situation where a subject or an object has to be

in a mutually exclusive physical state. A physical contradiction has the
typical pattern: To perform function F1, the element must have property P,
240 Chapter Nine

but to perform function F2, it must have property –P, or the opposite of P.
For example, an automobile has to be light in weight (P) to have high fuel
economy (F1), but it also has to be heavy in weight (–P) in order to be stable
in driving (F2).

Example 9.3
Problem: Some buildings are supported by piles. The pile should have a sharp
tip to facilitate the driving process. However, the sharp piles have reduced
support capability. For better support capacity, the piles should have blunt
ends. However, it is more difficult to drive a blunt-tipped pile.
Contradiction: A pile should be sharp to facilitate the driving process, and it
should be blunt to provide better support of the foundation.
TRIZ Solution: The situation clearly calls for the solution providing separation
of contradictory properties in time. The pile is sharp during the driving
process, and then its base is expanded, which could be realized by a small
explosive charge.

During driving After driving

Explosives

Conventional design philosophy is based on compromises (tradeoffs).

Contrary to this approach, TRIZ offers several methods to overcome
physical contradictions completely.

9.2.5 S-curve and the Evolution of a Technical System

Based on research of the evolution histories of many technical systems,

TRIZ researchers have found that the trends of evolution of many technical
systems are very similar and predictable. They found that many technical
systems go through five stages in their evolution process. These five stages
are pregnancy, infancy, growth, maturity, and decline. If we plot a time line
on the horizontal axis (X axis), and plot
1. Performance
2. Level of inventiveness
3. Number of inventions (relating to the system)
4. Profitability of inventions
 Theory of Inventive Problem Solving (TRIZ) 241

on the verticle axis (Y axis), we get the four curves shown in Fig. 9.4.
Because the shape of the first curve (performance versus evolution stages)
(Fig. 9.4a) has an S-shape; it is also called an S-curve.

Pregnancy

For a technical system, its pregnancy stage is the time between an idea’s
inception and its birth. A new technological system emerges only after the
following two conditions are satisfied:
• There is a need for the function of this system
• There are means (technology) to deliver this function
The development of a technical system say, the airplane, can be used as an
example. The need for the function of the airplane, that is, “to fly” was there a
long time ago in many people’s dreams and desires. However, the technical
knowledge of aerodynamics and mechanics was not sufficient for the
development of human flight until the 1800s. The technologies for the airplane
became available after the development of glider flight in 1848 and the gasoline
engine in 1859. It was the Wright brothers who successfully integrated both
technologies in their aircraft in 1903—and a new technology got off the ground.

Decline
Level of inventiveness

Maturity Decline Maturity

Growth
Performance

Growth
Infancy

Infancy

Time Time
(a) (b)
Profitability of inventions

Decline
Maturity
Maturity Decline
Number of inventions

Growth
Growth
Infancy Infancy

Time
Time
(c) (d)

Figure 9.4 Curves of Technical System Evolution

242 Chapter Nine

Infancy

The birth of a new technical system is the starting point of the infancy stage;
it is the first stage of an S-curve. The new system appears as a result of a high-
level invention. Typically, the system is primitive, inefficient, and unreliable
and has many unsolved problems. It does, however, provide some new
functions or the means to provide the function. System development at this
stage is very slow, due to lack of human and financial resources. Many design
questions and issues must be answered. For example, most people may not be
convinced of the usefulness of the system, but a small number of enthusiasts
who believe in the system’s future continue to work toward its success.

In the infancy stage, the performance level is low and its improvement is
slow (Fig. 9.4a). The level of inventions is usually high, because the initial
concept is often very inventive and patentable. It is usually level 3, 4, or
even 5 (Fig. 9.4b). But the number of inventions in this system is usually
low (Fig. 9.4c), because the system is fairly new. The profit is usually
negative (Fig. 9.4d), because at this stage of the technology usually the
customers are few but the expense is high.

Growth (Rapid Development)

This stage begins when society realizes the value of the new system. By this
time, many problems have been overcome; efficiency and performance have
improved in the system, people and organizations invest money in deve-
lopment of the new product or process. This accelerates the system’s deve-
lopment, improving the results and, in turn, attracting greater investment.
Thus, a positive feedback loop is established, which serves to further
accelerate the system’s evolution.

In the growth stage, the improvement of performance level is quick (Fig. 9.4a)
because of the rapid increases in investment and the removal of many
technical bottlenecks. The level of inventions is getting lower because most
inventions in this stage deal with incremental improvements. They are
mostly level 1 or 2 (Fig. 9.4b), but the number of inventions is usually high
(Fig. 9.4c). The profit is usually growing fast (Fig. 9.4d).

Maturity

In this stage, system development slows as the initial concept upon which
the system was based nears exhaustion of its potential. Large amounts of
money and labor may have been expended; however, the results are usually
very marginal. At this stage, standards are established. Improvements occur
through system optimization and tradeoffs. The performance of the system
 Theory of Inventive Problem Solving (TRIZ) 243

New system

Infancy Growth Maturity

Performance

Effort (time)

Figure 9.5 S-curve for Two Generations of a System

still grows but at a slower pace (Fig. 9.4a). The level of invention is usually
low (Fig. 9.4b), but the the number of inventions in the forms of industrial
standards is quite high (Fig. 9.4c). The profitability is usually dropping
because of saturation of the market and increased competition (Fig. 9.4d).

Decline

At this stage, the limits of technology have been reached and no fun-
damental improvement is available. The system may no longer be needed,
because the function provided may no longer be needed.

It is really important to start the next generation of the technical system long
before the decline stage in order to avoid failure of the company. Figure 9.5
illustrates the S-curves of the succession of two generations of a technical
system.

9.3 TRIZ Problem-Solving Process

TRIZ has a four-step problem-solving process. The four steps are (1)
problem definition, (2) problem classification and problem tool selection, (3)
problem solution, and (4) solution evaluation. We describe each step in detail.

9.3.1 Problem Definition

Problem definition is a very important step. The quality of the solution is

highly dependent on the problem definition.
244 Chapter Nine

The problem definition starts with several questions:

1. What is the problem?
2. What is the scope of the project?
3. What subsystem, system, and components are involved?
4. Do we have a current solution? Why is the current solution not good?
These are common questions to be asked in any engineering project. By
answering them, we are able to define the scope of the project and focus on
the right problem area.

Besides answering these common questions, several TRIZ methods are also
very helpful in the problem definition stage.

Functional Modeling and Functional Analysis

After identifying the project scope, it is very helpful to establish the

functional model of the subsystem involved in this project. Functional
modeling and analysis enables us to see the problem more clearly and
precisely. We recall the toothbrush example (Example 9.1) to illustrate how
functional analysis can help in the problem definition.
Example 9.4: Toothbrush Problem Revisited
Assume that we are a toothbrush manufacturer and the current regular
toothbrush does not perform satisfactorily; that is, the teeth cannot be ade-
quately cleaned. We can first draw the following functional diagram:

Brush
Toothbrush Teeth
mech.

By analyzing the functional diagram, we may come up with the following

possibilities:

1. The current lack of performance may be caused by inadequate action; that

is, the actual functional diagram is the following:

Brush
Toothbrush Teeth
mech.

If that is the case, it belongs to the problem of inadequate functional per-

formance; we can use the TRIZ standard solution technique to resolve this
problem.
2. We may find the current functional model is too limiting, because the
function statement “toothbrush brush teeth” limits our solution to using only
a toothbrush and to use a mechanical action only. We can develop the
following alternative functional modeling:

Remove
Tooth cleaning
Dirt in teeth
device
 Theory of Inventive Problem Solving (TRIZ) 245

The subject toothbrush is replaced by the more general tooth cleaning device.
The object teeth is changed to dirt in teeth; it is more precise. The action brush
is changed to the more general term remove. Under this alternative functional
modeling, many possible choices of subjects and actions can be open for
selection. For example, we can use hydraulic action or chemical action to clean
teeth; we can even consider pretreatment of teeth to make them dirt-free and so
on. Clearly this alternative functional modeling opens up a lot of gates for
problem solving and innovation.

Ideality and Ideal Final Result

After functional modeling and functional analysis, we can evaluate the

ideality of the current system by using

∑ benefits
Ideality =
∑ costs + ∑ harm

Ideal final result means the ultimate optimal solution for the current system
in which

∑ Benefits → ∞ and ∑ Costs + ∑ harm → 0

By comparing the ideality of the current system with the ideal final result,
we can identify where the system improvement should go and what aspects
of the system should be improved. This will definitely help the problem def-
inition and identify what problem should be solved.

S-curve Analysis

It is very beneficial to evaluate the evolution stage of the current technical

system involved in any TRIZ project. For example, if our current subsystem
is at the growth stage, then we should focus our attention on gradual
improvement. If our subsystem is near the maturity stage, then we will know
that it is time to develop the next generation of this subsystem.

Contradiction Analysis

By using the method described in Sec. 9.2.4, we can identify if there are any
physical or technical contradictions in our current system. TRIZ has many
methods to resolve contradictions.

9.3.2 Problem Classification and Tool Selection

After we are finished with the problem definition, we should be able to

classify the problem into the following categories. For each category, there
are many TRIZ methods available to resolve the problem.
246 Chapter Nine

1. Physical contradiction
Methods: Physical contradiction-resolution by using separation
principles.
2. Technical contradiction
Methods: Inventive principles
3. Imperfect functional structures: This problem occurs when
• There are inadequate useful functions or lack of needed useful functions
• There are excessive harmful functions
Methods: Functional improvement methods and TRIZ standard solutions
4. Excessive complexity: This problem occurs when the system is too
complex and costly and some of its functions can be eliminated or
combined.
Methods: Trimming and pruning
5. System improvement: This problem occurs when the current system is
doing its job but enhancement is needed to beat the competition
Method: Evolution of technological systems
6. Develop useful functions: This problem occurs when we can identify
what useful functions are needed to improve the system but we do not
know how to create these functions.
Methods: Physical, chemical, and geometric effects database

9.3.3 Solution Generation

After problem classification, there are usually many TRIZ methods

available for solving the problem, so many alternative solutions could be
found. These solutions will be evaluated in the next step.

9.3.4 Concept Evaluation

There are many concept evaluation methods that can be used to evaluate
and select the best solution. These methods are often not TRIZ-related.
The frequently used concept evaluation methods include Pugh concept
selection, value engineering, and axiomatic design method.

9.4 Technical Contradiction Elimination and Inventive Principles

Genrich Altshuller analyzed more than 40,000 patents and identified about
1250 typical technical contradictions. These contradictions are further
expressed by a matrix of 39 by 39 engineering parameters. To resolve these
contradictions, Altshuller compiled 40 principles. Each of these principles
contains a few subprinciples, totaling up to 86 subprinciples.
 Theory of Inventive Problem Solving (TRIZ) 247

It should be noted that the 40 principles are formulated in a general way. If, for
example, the contradiction table recommends principle 30, flexible shell and
thin films, it means that the solution of the problem relates somehow to changing
the degree of flexibility or adaptability of the technical system being modified.

The contradiction table and the 40 principles do not offer the direct solution
to the problem; they only suggest the most promising directions for searching
for a solution. The problem solver has to interpret these suggestions and find
the way in which they can be applied to a particular situation.

Usually people solve problems by analogical thinking. We try to relate the

problem confronting us to some familiar standard class of problems
(analogs) for which a solution exists. If we draw upon the right analog, we
arrive at a useful solution. Our knowledge of analogous problems is the
result of educational, professional, and life experiences.

What if we encounter a problem analogous to one we have never faced?

This obvious question reveals the shortcomings of our standard approach to
invention problems. So, the contradiction table and 40 principles offer us
clues to the solution of problems with which we are not familiar.

When using the contradiction table and 40 principles, following this simple
procedure will be helpful:
1. Decide the attribute to be improved, and use one of the 39 parameters
in the contradiction table to standardize or model this attribute.
2. Answer the following questions:
a. How can this attribute be improved using conventional means?
b. Which attribute would be deteriorated, if conventional means were
used?
3. Select an attribute in the contradiction table corresponding to step 2b.
4. Using the contradiction table, identify the principles in the intersection
of the row (attribute improved) and column (attribute deteriorated) for
overcoming the technical contradiction.
Here we list the 40 principles as a reference.
1. Segmentation
• Divide an object into independent parts.
• Make an object easy to disassemble.
• Increase the degree of fragmentation (or segmentation) of an object.
2. Taking out
• Separate an interfering part (or property) from an object, or single
out the only necessary part (or property) of an object.
248 Chapter Nine

3. Local quality
• Change an object’s structure from uniform to nonuniform; change
an external environment (or external influence) from uniform to
nonuniform.
• Make each part of an object function in conditions most suitable for
its operation.
• Make each part of an object fulfill a different and useful function.
4. Asymmetry
• Change the shape of an object from symmetrical to asymmetrical.
• If an object is asymmetrical, increase its degree of asymmetry.
5. Merging
• Bring closer together (or merge) identical or similar objects;
assemble identical or similar parts to perform parallel
operations.
• Make operations contiguous or parallel, and bring them together in
time.
6. Universality
• Make a part or object perform multiple functions to eliminate the
need for other parts.
7. Nested doll
• Place one object inside another; place each object, in turn, inside the
other.
• Make one part pass through a cavity in the other.
8. Antiweight
• To compensate for the weight of an object, merge it with other
objects that provide lift.
• To compensate for the weight of an object, make it interact with the
environment (e.g., use aerodynamic, hydrodynamic, buoyancy, and
other forces).
9. Preliminary antiaction
• If it will be necessary to perform an action with both harmful and
useful effects, this action should be replaced later with antiactions
to control harmful effects.
• Create beforehand stresses in an object that will oppose known
undesirable working stresses later on.
10. Preliminary action
• Perform, before it is needed, the required change of an object (either
fully or partially).
• Prearrange objects so that they can come into action from the most
convenient place without losing time for their delivery.
11. Beforehand cushioning
• Prepare emergency means beforehand to compensate for the rel-
atively low reliability of an object.
 Theory of Inventive Problem Solving (TRIZ) 249

12. Equipotentiality
• In a potential field, limit position changes (e.g., change operating con-
ditions to eliminate the need to raise or lower objects in a gravity field).
13. The other way around
• Invert the action(s) used to solve the problem (e.g., instead of
cooling an object, heat it).
• Make movable parts (or the external environment) fixed, and fixed
parts movable.
• Turn the object (or process) upside down.
14. Spheroidality
• Instead of using rectilinear parts, surfaces, or forms, use curvilinear
ones; move from flat surfaces to spherical ones, from parts shaped
as a cube (parallelepiped) to ball-shaped structures.
• Use rollers, balls, spirals, domes.
• Go from linear to rotary motion; use centrifugal forces.
15. Dynamics
• Allow (or design) the characteristics of an object, external envi-
ronment, or process to change to be optimal or to find an optimal
operating condition.
• Divide an object into parts capable of movement relative to each other.
• If an object (or process) is rigid or inflexible, make it movable or
adaptive.
16. Partial or excessive actions
• If 100 percent of an effect is hard to achieve using a given solution
method, then by using slightly less or slightly more of the same
method, the problem may be considerably easier to solve.
17. Another dimension
• Move an object in two- or three-dimensional space.
• Use a multistory arrangement of objects instead of a single-story
arrangement.
• Tilt or reorient the object; lay it on its side.
• Use another side of a given area.
18. Mechanical vibration
• Cause an object to oscillate or vibrate.
• Increase its frequency (even up to the ultrasonic).
• Use an object’s resonance frequency.
• Use piezoelectric vibrators instead of mechanical ones.
• Use combined ultrasonic and electromagnetic field oscillations.
19. Periodic action
• Instead of continuous action, use periodic or pulsating actions.
• If an action is already periodic, change the periodic magnitude or
frequency.
• Use pauses between impulses to perform a different action.
250 Chapter Nine

20. Continuity of useful action

• Carry on work continuously; make all parts of an object work at full
load, all the time.
• Eliminate all idle or intermittent actions or work.
21. Skipping
• Conduct a process, or certain stages of the process (e.g., destructive,
harmful, or hazardous operations) at high speed.
22. Blessing in disguise
• Use harmful factors (particularly, harmful effects of the environment
or surroundings) to achieve a positive effect.
• Eliminate the primary harmful action by adding it to another harmful
action to resolve the problem.
• Amplify a harmful factor to such a degree that it is no longer harmful.
23. Feedback
• Introduce feedback (referring back, cross-checking) to improve a
process or action.
• If feedback is already used, change its magnitude or influence.
24. Intermediary
• Use an intermediate carrier article or intermediary process.
• Merge one object temporarily with another (which can be easily
removed).
25. Self-service
• Make an object serve itself by performing auxiliary helpful functions.
• Use waste resources, energy, or substances.
26. Copying
• Instead of an unavailable, expensive, fragile object, use simpler and
inexpensive copies.
• Replace an object or process with optical copies.
• If visible optical copies are already used, move to infrared or
ultraviolet copies.
27. Cheap short-living
• Replace an expensive object with a multitude of inexpensive objects,
compromising certain qualities (such as service life, for instance).
28. Mechanics substitution
• Replace a mechanical means with a sensory (optical, acoustic, taste,
or smell) means.
• Use electric, magnetic, and electromagnetic fields to interact with
the object.
• Change from static to movable fields, from unstructured fields to
those having structure.
• Use fields in conjunction with field-activated (e.g., ferromagnetic)
particles.
 Theory of Inventive Problem Solving (TRIZ) 251

29. Pneumatics and hydraulics

• Use gas and liquid parts of an object instead of solid parts (e.g.,
inflatable, filled with liquids, air cushion, hydrostatic, hydroreactive).
30. Flexible shells and thin films
• Use flexible shells and thin films instead of three-dimensional
structures.
• Isolate the object from the external environment using flexible shells
and thin films.
31. Porous materials
• Make an object porous or add porous elements (inserts, coatings, etc.).
• If an object is already porous, use the pores to introduce a useful
substance or function.
32. Color changes
• Change the color of an object or its external environment.
• Change the transparency of an object or its external environment.
33. Homogeneity
• Make objects interacting with a given object of the same material
(or a material with identical properties).
34. Discarding and recovering
• Make portions of an object that have fulfilled their function go away
(discard by dissolving, evaporating, etc.) or modify these directly
during operation.
• Conversely, restore consumable parts of an object directly during
operation.
35. Parameter changes
• Change an object`s physical state (e.g., to a gas, liquid, or solid).
• Change the concentration or consistency.
• Change the degree of flexibility.
• Change the temperature.
36. Phase transitions
• Use phenomena occurring during phase transitions (e.g., volume
changes, loss or absorption of heat).
37. Thermal expansion
• Use thermal expansion (or contraction) of materials.
• If thermal expansion is being used, use multiple materials with
different coefficients of thermal expansion.
38. Strong oxidants
• Replace common air with oxygen-enriched air.
• Replace enriched air with pure oxygen.
• Expose air or oxygen to ionizing radiation.
• Use ozonized oxygen.
• Replace ozonized (or ionized) oxygen with ozone.
252 Chapter Nine

39. Inert atmosphere

• Replace a normal environment with an inert one.
• Add neutral parts or inert additives to an object.
40. Composite materials
• Change from uniform to composite (multiple) materials.
Example 9.5: Using 40 Principles and the Contradiction Matrix to Improve
Wrench Design
When we use a conventional wrench to undo an overtightened or corroded nut
(as shown in the following picture), one of the problems is that the corners of
the nut receive a concentrated load, so they may wear out quickly. You can
reduce the clearance between the wrench and nut, but it will be difficult to fit
the wrench onto the nut. Is there anything we can do to solve this problem?

Clearly we want to reduce the clearance between the wrench and nut to improve
operation reliability; however, this leads to the deterioration of operations.
From the TRIZ standpoint, a technical contradiction is present when a useful
action simultaneously causes a harmful action.

A problem associated with a technical contradiction can be resolved either by

finding a tradeoff between the contradictory demands or by overcoming the
contradiction. Tradeoff or compromise solutions do not eliminate the technical
contradictions, but rather soften them, thus retaining harmful (undesired)
actions or shortcomings, in the system. An engineering problem becomes an
invention one when it has a technical contradiction that cannot be overcome by
conventional means and tradeoff solutions are not acceptable. The 40 principles
and the contradiction matrix are important tools for overcoming contradictions.

Step 1. Build contradiction model: Look into the problems and find a pair of
contradictions. The contradiction should be described using 2 of the 39
parameters for technical contradictions. In this problem, the contradiction is
• Things we want to improve: Reliability (parameter 27)
• Things are getting worse: Ease of operation (parameter 33)
Step 2. Check contradiction matrix: Locate the parameter to be improved in
the row and the parameter to be deteriorated in the column in the contra-
diction matrix for inventive principles. The matrix offers the following
principles 27, 17, and 40 (see the following partial matrix).
 29. Manufacturing precision

30. Harmful action at object

What is deteriorated?

28. Measurement accuracy

31. Harmful effect caused

26. Quantity of substance

32. Ease of manufacture

33. Ease of operation

34. Ease of repair

25. Waste of time

by the object

35. Adaptation
27. Reliability
What should be improved?

35 38 10 30 24 34 24 26 35 18 35 22 35 28 4 28 32 1 35 28
25. Waste of time
18 16 4 28 32 28 18 34 18 39 34 4 10 34 10

35 38 18 3 3 2 33 30 35 33 3 35 29 1 35 29 2 32 15 3
26. Quantity of substance
18 16 28 40 28 29 31 40 39 35 27 10 25 10 25 29

10 30 21 28 32 3 11 32 27 35 35 2 27 17 1 11 13 35
27. Reliability
4 40 3 11 23 1 2 40 40 26 40 8 24

24 34 2 6 5 11 1 28 24 3 33 6 35 1 13 1 32 13 35
28. Measurement accuracy
28 32 32 23 22 26 39 10 25 18 17 34 13 11 2

29. Manufacturing 32 26 32 30 11 32 26 28 4 17 1 32 25 10
precision 28 18 1 10 36 34 26 35 23
253
254 Chapter Nine

Step 3. Interpret principles: Read each principle and construct analogies

between the concepts of principle and your situation, and then create
solutions to your problem. Principle 17 (another dimension) indicates that
the wrench problem may be resolved by moving an object in a two- or three-
dimensional space or using a different side of the given area. From principle
27 (cheap short-living) and principle 40 (composite material), we may
replace an expensive object with a multitude of inexpensive objects and
change from uniform material to composite material.
Step 4. Resolve the problem: The working surface of the wrench can be
redesigned in a nonuniform shape by applying principle 17 (see the
following picture). Principles 27 and 40 can be used together. The idea is to
attach soft metal or plastic pads on the wrench working surfaces when
tightening or undoing expensive nuts.

9.5 TRIZ Applications in the Service Industry

TRIZ research started with the study of patents. Most TRIZ principles and
methods are based on knowledge accumulated in technical areas.
However, many researchers have been studying how to extend TRIZ to
nontechnical areas.

Since the 1970s, there have been continuous efforts made by Russian TRIZ
researchers to extend TRIZ into nontechnical areas; these efforts were doc-
umented in detail in an excellent paper by Zlotin et al. (1999). The original
40 inventive principles were developed based on the study of a huge number
of patents to find inventive solutions for technical problems. Darrell Mann
and Ellen Domb (1999) and Mann (2004) studied more than 800 business
case studies and developed the first generation 40 inventive business
principles. In the software industry, Kevin Rae (2001) developed 40
inventive principle analogies of TRIZ in the context of software and
 Theory of Inventive Problem Solving (TRIZ) 255

computing. Inventive principles have also been adapted in service operation

management (Zhang et al. 2003), quality management (Retseptor 2003),
and education (Marsh et al. 2002).

In his book Hands-on Systematic Innovation for Business and Management

Mann (2004) tries to extend all major TRIZ methods, such as functional
modeling and analysis, trends of technological evolution, separation principles,
inventive principles and trimming to the business and management area.

In summary, the extension of TRIZ into nontechnical areas is still young

and in an early stage. We will expect more breakthroughs in the deve-
lopment of systematic innovation methods in the service industry in the next
few years.

In this book, we will concentrate on introducing the 40 inventive business

principles. We hope this will lay a solid foundation for readers to apply
inventive principles to their own service application areas.

9.6 Business Inventive Principles

Similar to the 40 regular inventive principles, the 40 inventive business

principles are aimed to resolve business contradictions. In the regular 40
inventive principles, the contradictions are expressed by a matrix of 39 by
39 engineering parameters. Darrell Mann identified 31 business parameters,
and business contradictions are expressed by a matrix of 31 by 31 business
parameters. These 31 business parameters are illustrated in Table 9.2.

Again, the business contradiction table and the 40 inventive business

principles do not offer a direct solution to the problem; they only suggest the
most promising directions for searching for a solution. The problem solver
has to interpret these suggestions and find how to apply them to a particular
situation.

When using the business contradiction table and 40 inventive business

principles, following this simple procedure will be helpful:
1. Decide the attribute to be improved, and use one of the 31 parameters
in the contradiction table to standardize or model this attribute.
2. Answer the following questions:
a. How can this attribute be improved using conventional means?
b. Which attribute would be deteriorated, if conventional means
were used?
256 Chapter Nine

Table 9.2 Thirty-one Business Parameters (Mann 2004)

Categories Parameters

Research and development R&D specification/capacity/means

R&D cost

R&D time

R&D risk

R&D interface

Production Production specification, capacity, and means

Production cost

Production time

Production risk

Production interface

Supply Supply specification, capacity, and means

Supply cost

Supply time

Supply risk

Supply interface

Support Support specification, capacity, and means

Support cost

Support time

Support risk

Support interface

Customer Customer revenue, demand, and feedback

Amount of information

Communication Flow

Harmful factors affecting systems

(Continued)
 Theory of Inventive Problem Solving (TRIZ) 257

Table 9.2 Thirty-one Business Parameters (Mann 2004) (Continued)

Categories Parameters

Customer (Cont.) System-generated harmful factors

Convenience

Adaptability and versatility

System complexity

Control complexity

Tension/stress

Stability

3. Select an attribute in the contradiction table corresponding to step 2b.

4. Use the contradiction table, identify the principles in the intersection
of the row (attribute improved) and column (attribute deteriorated) for
overcoming the technical contradiction.

Here we list the 40 inventive business principles as a reference (Mann 2004).

Principle 1. Segmentation

A. Divide an Object into Independent Parts

• Divide an organization into different product centers.

• Autonomous profit centers.
• Use a work breakdown structure for a large project.
• Franchise outlets.
• Image/value/satisfaction segmentation of customer purchase-related
preferences.
• Kano diagram excitement, performance, and threshold product attribute
parameters.
• Marketing segmentation by demographics, sociographics, psycho-
graphics, lifestyles, etc. (creation of microniches).
• Segmentation of idea management process into fertilization, seeding,
and incubation phases.
• Strength, weakness, opportunity, and threat (SWOT) analysis.
258 Chapter Nine

B. Make an Object Easy to Disassemble

• Flexible pensions
• Use of temporary workers on short-term projects
• Flexible manufacturing systems
• Modular furniture and offices
• Container shipment

C. Increase the Degree of Fragmentation or Segmentation

• Quality circles
• Empowerment by segmentation of decision making
• Distance learning (also see principle 2)
• Virtual office or remote working (also see principle 2)
• Creative segmentation—high-performance small car, cordless power
tool

Principle 2. Taking Out

Separate an Interfering Part or Property from an Object, or Single Out the Only
Necessary Part (or Property) of an Object

• Break down barriers between departments (point 9 of Deming’s 14

points).
• Eliminate exhortations (point 10 of Deming’s 14 points).
• Eliminate targets (point 11 of Deming’s 14 points).
• Drive out fear (point 8 of Deming’s 14 points).
• Separate the people from the problem.
• Lean manufacturing.
• USP advertising.
• Just-in-time inventory management.
• Activity-based costing instead of allocation cost accounting.
• Separate development and production activities—skunkworks, tiger-
teams, etc.
• Smart software learns user preference and filters out nonuseful infor-
mation.
• Semantic processors used to extract knowledge from text.

Principle 3. Local Quality

A. Change an Object’s Structure from Uniform to Nonuniform, Change an

External Environment (or External Influence) from Uniform to Nonuniform

• Move away from rigid salary structures and job grading.

• Flexible working hours.
 Theory of Inventive Problem Solving (TRIZ) 259

• Franchise fast-food outlets have local dishes in addition to normal

product range.
• Casual (dress-down) days.
• Introduce “Corporate Jester” (e.g., British Airways) as a method of
encouraging out-of-the-box thinking.
• Red team/blue team proposal preparation structures.
• Quiet work areas.

B. Make Each Part of an Object Function in Conditions Most Suitable

for Its Operation

• Empowerment of individuals.
• Have each employee’s workplace customized to his or her ergonomic
and psychological needs.
• Working hours phased to accommodate people working on inter-
national, shifted time-zone projects.
• Customizable software.

C. Make Each Part of an Object Fulfill a Different and Useful Function

• Organizational division by function rather than product.

• Staff specialists in centers of excellence.
• Position factory or distribution center near customers.
• Hire local people to acquire cultural knowledge of local customers.
• Kids areas in restaurants, etc.

Principle 4. Asymmetry

A. Change the Shape of an Object from Symmetrical to Asymmetrical

• Proportionately more P or more S in the Deming PDSA cycle.

• Skewed normal distributions.
• Use a different marketing approach for each class of clients. (Combine
with segmentation and local quality—make each class smaller to be
sure the approach is exactly tailored to it.)
• Budget for different departments individually rather than using a
constant percentage increase or reduction for all departments.

B. If an Object Is Asymmetrical, Change Its Degree of Asymmetry

• 360° appraisals.
• More equitable two-way dialog between management and workers.
• Shift away from calendar-influenced sales bias [e.g., shift from annual
to bi-annual car registration dates (to reduce August sales peak),
greeting card companies, etc.].
260 Chapter Nine

• Honda’s 4M—man maximum, machine minimum—product design

philosophy.
• Bigger customer focus group or Internet focus group.
• On-line, web-cam shopping—“one store serves the world.”
• Collaboration with complementary organizations when competing for
business with other directly competitive companies.

Principle 5. Merging

A. Bring Closer Together (or Merge) Identical or Similar Objects, Assemble

Identical or Similar Parts to Perform Parallel Operations

• Personal computers in a network.

• Cell-based manufacturing.
• Toyota JIT.
• Common-interest group.
• Multiscreen cinemas.
• Shopping malls.
• Merge companies with related products.
• Internet Cafe.
• The Joiner Triangle—quality, scientific approach, all-one-team.
• “Young engineers have ideas, old engineers have bad experiences”—
Japanese saying.

B. Make Operations Contiguous or Parallel; Bring Them Together in Time

• Theory of constraints.
• Enlist customer help in designing the product (Boeing 777—Working
Together Teams).
• Multimedia presentations.
• Call centers.

Principle 6. Universality

A. Make an Object or Structure Perform Multiple Functions; Eliminate the Need

for Other Parts

• Multiskilling of work force.

• Team leader acts as recorder and timekeeper.
• One-stop shopping—supermarkets sell insurance, banking services,
fuel, newspapers, etc.
• Rapid reaction forces in the military—cross-trained, equipment ver-
satility, etc.
 Theory of Inventive Problem Solving (TRIZ) 261

• Semco—members of managerial staff set their own salaries; shop floor

workers set their own productivity targets; part of change agent’s job is
to eliminate need for his or her job.
• Industry standard.

Principle 7. Nested Doll

A. Place One Object Inside Another; Place Each Object, in Turn, Inside
the Other

• Store-in-store
• Profit centers inside an organization
• Hierarchical organization structures
• Four levels of knowledge [(1) basic skills, (2) know-how, (3) process
management, (4) strategic vision] contained in effective company (e.g.,
Sony) training schemes

B. Make One Part Pass through a Cavity in the Other

• Plug holes in organization structure.

• Use 5 Whys question sequence (Liker 2004) to break through layers of
problems to get to root cause.
• Expose traditionally inward facing job-holders to external events and
customers (e.g., engineers shadow marketing people during customer
visits).
• Door sensors count customers going into and out of a store or office,
etc. (use data for market profiling, etc.).
• Casino hotel architecture (Las Vegas style): The guest must pass
through the gaming area to get to the restaurant, the hotel registration,
even the lavatories!

Principle 8. Antiweight
A. To Compensate for the Weight (Downward Tendency) of an Object, Merge
It with Other Objects That Provide Lift

• In a merger of two companies, one lifts the other with whatever its stronger
features are (distribution system, marketing, methods, capital, etc.).
• Companies increase flagging sales by making connections with other
rising products.
• Attaching the word new is the most powerful way of enhancing the
sales of fast-moving consumer goods.
262 Chapter Nine

B. To Compensate for the Weight (Downward Tendency) of an Object, Make It

Interact with the Environment (e.g., Use Global Lift Forces)

• A small company is lifted by a resource—use of a transportation

network, etc.—to the level of the larger companies.
• Political parties boost poll ratings by attaching themselves to popular
causes.
• Attach product and service marketing to customer and business
driving forces (megatrends—aging population, desire for flexibility,
simplicity, etc.).

Principle 9. Preliminary Antiaction

A. If It will be Necessary to Perform an Action with Both Harmful and Useful

Effects, this Action Should be Replaced with Antiactions to Control Harmful
Effects

• When making a public announcement, include all the information, not

just the harmful parts (e.g., Johnson & Johnson’s handling of the
Tylenol tampering case).
• Use formal risk assessment methods to quantify risk and identify mit-
igation actions before (and during) a project.
• Customer trials and segmented launch of (high-risk) new products (e.g.,
film companies film several endings to a movie and trial them with
different audiences before finalizing selection).
• Use of voluntary redundancy, pay cuts, short-time working, or job-
sharing as alternatives to downsizing.

B. Create Beforehand Stresses in an Object That will Oppose Known

Undesirable Working Stresses Later on

• Epson product development engineers spend time as sales and then

service staff before they are allowed to work on product development
activities. Prior to a layoff, prepare compensation, outplacement, and
communication packages for all affected employees.
• Team-building tasks are done before the real project starts.
• Negotiate upfront stage payment in long-term contract.

Principle 10. Preliminary Action

A. Perform, Before It Is Needed, the Required Change of an Object

(Either Fully or Partially)

• Project preplanning.
• Perform noncritical path tasks early (where circumstances permit).
 Theory of Inventive Problem Solving (TRIZ) 263

• Dialog with employees before embarking on change management

activities.
• Use story-boarding to facilitate creative problem solving (i.e., gathering
the data before the creativity session).

B. Prearrange Objects Such That they can Come into Action from the Most
Convenient Place and Without Losing Time for Their Delivery

• Kanban arrangements in a just-in-time factory.

• Cell-based manufacturing.
• Publish an agenda before meetings.
• “If I had 8 hours to chop down a tree, I’d spend 6 hours sharpening my
axe”—Abraham Lincoln.
• Benetton “retarded differentiation”—clothing is knitted before it is
dyed; color only applied when the season’s popular colors emerge.
• Dealer-fit car accessories—CD player, alloy wheels, air-conditioning, etc.

Principle 11. Beforehand Cushioning

A. Prepare Emergency Means Beforehand to Compensate for the Relatively

Low Reliability of an Object

• Contingency planning.
• Establish a worst-case, fall-back position prior to negotiation—“best
alternative to a negotiated agreement.”
• Back up computer data.
• Run antivirus software frequently (and update it frequently).
• Encourage short, effective meetings by removing the chairs.
• Put clauses in contracts requiring arbitration or mediation to avoid
litigation.
• “Eighty percent of a successful production is in the casting”—Lindsay
Anderson

Principle 12. Remove Tension

A. In a Potential Field, Limit Position Changes (e.g., Change Operating

Conditions to Eliminate the Need to Raise or Lower Objects in a Gravity Field)

• Make horizontal career changes to broaden skills.

• Team members distribute their own merit award money (rather than
often divisive management dictating distribution of money).
264 Chapter Nine

• Force-field analysis—group discussion of the phrase “forces push in

various directions.” This team-building and problem-solving technique
is discussed in Reference 3.
• Beware of the Peter principle—every employee tends to rise to his or
her level of incompetence.
• Single union agreement.

Principle 13. The Other Way Round

A. Invert the Action(S) Used to Solve the Problem (e.g., Instead of Cooling an
Object, Heat It)

• Bring the mountain to Mohammed, instead of bringing Mohammed to

the mountain.
• Expansion instead of contraction during recession.
• Benchmark against the worst instead of the best.
• Blame the process not the person.
• “I used to think that anyone doing anything weird was weird. I suddenly
realized that anyone doing anything weird wasn’t weird at all, and it was
the people saying they were weird that were weird”—Paul McCartney.

B. Make Movable Parts (or the External Environment) Fixed, and Fixed Parts
Movable

• Home shopping.
• Home banking.
• Park-and-ride schemes in busy cities.
• Do not make changes just because they are fashionable management fads.
• “If you obey all the rules, you miss all the fun”—Katherine Hepburn.

C. Turn the Object (or Process) Upside Down

• The cash-till assistant is the most important part of a retail organization.

• Computer help lines were often originally set up with relatively
no-technical staff at the front end, directing calls to progressively more
technically able staff the more complicated the problem is. Latest logic
suggests reversing this trend, i.e., place the most qualified staff as first
point of contact (e.g., IBM).
• Product-rather than function-based organization structure.
• “Ready, Fire, Aim”—Tom Peters.
• Mercedes Benz vision changed from “the best or nothing” to “the best
for our customers;” i.e., shift from internally to externally focused
vision statement.
 Theory of Inventive Problem Solving (TRIZ) 265

• The Peter pyramid (Peter 1986).

• Corporate unlearning—acquiring the ability to forget about the past
where appropriate.
• “Ours is the age that is proud of machines that think and suspicious of
men who try to”—H. Mumford Jones.
• Russian government pays inventors for patent applications; the West
makes the inventor pay to apply.
• Chairperson of company spends time in the complaints department
answering customer complaints.
• “When you reach the top, that’s when the climb begins”—Michael
Caine.

Principle 14. Curvature

A. Instead of Using Rectilinear Parts, Surfaces, or Forms, Use Curvilinear

Ones; Move from Flat Surfaces to Spherical Ones; from Parts Shaped
as a Cube (Parallelepiped) to Ball-Shaped Structures

• Ergonomic desk and workstation designs.

• Take the shortest path to the customer—around the organization rather
than point-to-point through the bureaucracy.
• “Form the wagons into a circle”—John Wayne.

B. Use Rollers, Balls, Spirals, Domes

• Mobile factory
• Mobile car service—mechanic comes to you rather than you going to
garage
• Mobile library
• “Meals on wheels” and home-delivery pizza

C. Go from Linear to Rotary Motion; Use Centrifugal Forces

• Rotate leadership of a team.

• Establish a sphere of influence, and then market to that sphere.
• Quality circles.
• Circular work cells.
• Levi Strauss’ Information Service (IS) department’s organizational
chart resembles a solar system, with the names of 20 managers
appearing once on a large circle and, in many cases, also on one of four
smaller circles intersecting the large one. The small circles represent
action groups focusing on specific tasks, including customer service
and business systems.
266 Chapter Nine

Principle 15. Dynamics

A. Allow (or Design) the Characteristics of an Object, External Environment,

or Process to Change to be Optimal or to Find an Optimal Operating Condition

• Empowerment.
• Customer response teams.
• Continuous process improvement.
• Rapid reaction force.
• Swatch design proliferation—design for specific market niches.
• “Cafeteria” benefits—where employees pick which types of insurance
and health system, etc., they want.

B. Divide an Object into Parts Capable of Movement Relative to Each Other

• Work teams are oriented to achieve the same goal, but work at different
rates on different objectives.
• Geographically or functionally independent business units.
• Conglomerate structures.

C. If an Object (or Process) is Rigid or Inflexible, Make It Movable or Adaptive

• Gallery Furniture on-line shopping—customer is able to control and

move cameras to point to different products in different parts of the
store from his or her home computer (www.galleryfurniture.com).
• Flexible organizational structure (chaocracy).

Principle 16. Partial or Excessive Actions

If 100 Percent of an Objective Is Hard to Achieve Using a Given Solution

Method, then by Using Slightly Less or Slightly More of the Same Method,
the Problem may be Considerably Easier to Solve

• When going into a new market, do “saturation” advertising by all media—

mail, newspapers, local magazines, local radio, local TV, billboards, etc.
• Communicate more often and with more information than you think
necessary.
• “If it ain’t broke, improve it anyway”—Japanese process management
philosophy.
• “The most important numbers are the ones you’ll never know”—W. E.
Deming (i.e., is it possible to ever know what 100 percent means?).
• “Communication is and should be hellfire and sparks, as well as sweetness
and light”—Aman Vivian Rakoff.
 Theory of Inventive Problem Solving (TRIZ) 267

Principle 17. Another Dimension

A. To Move an Object in a Two- or Three-Dimensional Space

• Make 360° appraisals.

• Use multidimensional organizational hierarchy charts. Use 3D charts to
show “hard” and “soft” relationships or 4D charts to include an element
of time or movement.
• Distribute responsibility and authority. For example, the quality
department advises on technical details and conducts audits, but
everyone is responsible for quality. Another good example of this is the
safety office.

B. Use a Multistory Arrangement of Objects Instead of a Single-Story

Arrangement

• Organizational hierarchy.
• Multistack storage systems use the height of a building and save floor
space.
• Employees “disappear” from customers in a theme park, descend into a
tunnel, and walk to their next assignment, where they return to the
surface and magically reappear.
• Standing on the shoulders of giants . . .
• “When two people meet, there are really six people present. There is
each man as he sees himself, each man as he wants to be seen, and each
man as he really is”—Michael De Saintamo.

C. Tilt or Reorient the Object; Lay It on Its Side

• Horizontal (peer) communication.

• Horizontally integrated manufacture.
• Switch from vertical to horizontal (lateral) thinking, and vice versa.
• Shift from line to project management dominance in a matrix organ-
ization (and vice versa depending on prevailing market conditions).
• Shift from a portrait to landscape report format.

D. Use Another Side of a Given Area

• View your organization from the outside, either directly or by using

consultants, and mystery shoppers, etc.
• Look at the selling process in new ways. Instead of selling carpets to its
commercial and industrial customers, Interface now offers what it calls
the “Evergreen lease.” Its customers no longer buy carpets or pay an
268 Chapter Nine

installation fee;—they just pay a monthly service fee that guarantees

they will always have clean, attractive carpets.
• “The seeing of objects involves many sources of information beyond
those meeting the eye when we look at an object. It generally involves
knowledge of the object derived from previous experience, and this
experience is not limited to vision but may include the other senses:
touch, taste, smell, hearing, and perhaps also temperature or pain”—
R. L. Gregory.
• “You can’t teach an old dogma new tricks”—Dorothy Parker.

Principle 18. Resonance

A. Cause an Object to Oscillate or Vibrate

• Use the process of Hoshin planning to get the whole organization

“vibrating.”
• “A good manager doesn’t try to eliminate conflict; he tries to keep it
from wasting the energies of his people. If you’re the boss and your
people fight you openly when they think that you are wrong—that’s
healthy”—Robert Townsend.
• “The things we fear most in organizations—fluctuations, disturbances,
imbalances— are the primary sources of creativity”—Margaret J. Wheatley.

B. Increase Its Frequency

• Communicate frequently, in multiple modes (newsletter, Intranet, staff

meetings, etc.).
• “I don’t think that you should ever manage anything that you don’t
care passionately about”—D. Coleman, VP and CFO of Apple (Leigh
et al. 1993).
• “He inspired in us the belief that we were working in a medium that
was powerful enough to influence the world”—Lillian Gish on D. W.
Griffiths (Leigh et al. 1993).

C. Use an Object’s Resonant Frequency

• Use strategic planning (policy deployment, Hoshin Kanri) to select the

right frequency and get the organization resonating at that frequency to
accomplish a breakthrough strategy.
• Creating extraordinary unity of purpose in a work team. A good
example of this is Don Petersen’s story of the Ford versus Mazda com-
petition to win the transmission job for the FWD Taurus.
• Kansei—Japanese term for resonance or oneness between product
and user.
 Theory of Inventive Problem Solving (TRIZ) 269

D. Use Piezoelectric Vibrators Instead of Mechanical Ones

E. Use Combined Ultrasonic and Electromagnetic Field Oscillations
(Use External Elements to Create Oscillation or Vibration)

• Bring new blood into the team.

• Hire a consultant.

Principle 19. Periodic Action

A. Instead of Continuous Action, Use Periodic or Pulsating Actions

• Use batch manufacturing.

• Tidal traffic flow schemes can ease transport into and out of busy
areas.
• Change team leadership periodically (e.g., countries take turns leading
the European Union).
• Introduce sabbaticals to refresh people’s points of view.

B. If an Action is Already Periodic, Change the Periodic Magnitude

or Frequency

• Audit at irregular intervals.

• Use monthly or weekly feedback instead of annual reviews.
• Use flexible savings schemes that pay higher interest rates when fewer
withdrawals are made.

C. Use Pauses Between Impulses to Perform a Different Action

• Get work done between meetings.

• Perform maintenance work during vacations.
• Provide 24-hour car service operation—evening pickup and return of
serviced car by breakfast the following morning (customer per-
spective).

Principle 20. Continuity of Useful Action

A. Carry on Work Continuously; Make All Parts of an Object Work at Full Load
All the Time

• Run the bottleneck operations in a factory continuously to reach the

optimum pace (from theory of constraints).
• Institute constant improvement (point no. 5 of Deming’s 14 points
(Deming 1982).
• Continuous on-line monitoring of elevators by Otis (total maintenance
responsibility).
270 Chapter Nine

• Provide 24-hour car service operation—evening pick-up and return of

serviced car by breakfast the following morning (garage perspective).
• “The power of a waterfall is nothing but a lot of drips working
together.”(Leigh et al. 1993)

B. Eliminate All Idle or Intermittent Actions or Work

• Multiskilling to enable working in bottleneck functions to improve

work flow.
• Conduct training during pauses in work.
• Institute 24-hour shift patterns.
• “Life-long learning.”
• “The more I practice, the luckier I get”—Gary Player.

Principle 21. Skipping

Conduct a Process or Certain Stages (e.g., Destructive, Harmful, or Hazardous

Operations) at High Speed

• “Incrementalism is innovation’s worst enemy”—Nicholas Negreponte,

MIT Media Lab (Peters 1997).
• “Don’t be afraid to take a big step if one is indicated. You can’t cross a
chasm in two small jumps”—David Lloyd George.
• “Fail fast; learn fast.”
• Fast cycle—full participation—a method of involving the whole
organization simultaneously and rapidly in a major change, such as a
reorganization.
• Get through painful processes quickly (e.g., firing someone).
• Use rapid prototyping.
• “If you want to succeed, double your failure rate”—J. R. Watson, IBM
founder.

Principle 22. Blessing in Disguise or Turn Lemons into Lemonade

A. Use Harmful Factors (Particularly, Harmful Effects of the Environment or

Surroundings) to Achieve a Positive Effect

• Recast an attack on you as an attack on the problem.

• Making a fuss over customers who have experienced a problem with
your goods or services tends to reinforce their overall positive feeling
about you—to a level greater than that when no problem had occurred.
• Collect information to understand the harm, and then formulate a
positive action to remove it.
• Use the provocations method of encouraging new ideas.
• “The Extra Mile will have no traffic jams”—Unknown.
 Theory of Inventive Problem Solving (TRIZ) 271

B. Eliminate the Primary Harmful Action by Adding It to Another Harmful Action

to Resolve the Problem

• Eliminate fear of change by introducing fear of competition.

• Put a problem person on an assignment in another area where he or she
can do well and not be a problem to the original group.
• Use the loss-leader strategy for increasing sales.
• Keep traffic out of cities by introducing cheap Park and Rides and
expensive downtown parking charges.
• Make potentially polluting industries place flow intakes downstream of
flow outlets on a river.

C. Amplify a Harmful Factor to Such a Degree that It Is No Longer Harmful

• The famous software solution is That’s not a bug, it’s a feature.

• Benevolent dictatorship (Roberts 1989).
• Reduce resourcing levels to such an extent that new ways of doing the
job have to be discovered.
• Restrict the supply of goods to create scarcity value (e.g., some sports
car manufacturers seek to maintain a multiple-year waiting list for their
vehicles).
Principle 23. Feedback

A. Introduce Feedback (Referring Back, Cross-Checking) to Improve a Process

or Action

• Use statistical process control (SPC)—measurements are used to

decide when to modify a process.
• Create budgets—measurements are used to decide when to modify a
process.
• Enlist customers in the design process.
• Customer surveys, customer seminars, etc.
• Active transition management—a way of controlling the product
development process between the research, development, and pro-
duction phases.
• Electronic bulletin boards.
• Supermarket loyalty cards—these provide customer shopping profile
information.
• “What you measure is what you get”—Joe Juran.

B. If Feedback Is Already Used, Change Its Magnitude or Influence

• Change a management measure from budget variance to customer satis-

faction.
• Expose designers as well as marketers to customers.
272 Chapter Nine

• Multicriteria decision analysis (valid apples-and-oranges com-

parisons).
• Toshiba’s medical systems division split into R&D, engineering, and
manufacturing sectors. As a product is being developed, key personnel
and leadership physically move from one sector to another to actively
manage transitions between product development stages.
• “Open the kimono”—everything out in the open communication.
• “Supravision” rather than supervision.
• Coevolutionary marketing; e.g., Amazon.com invites readers to write
on-line book reviews. Other readers often prefer these views to pro-
fessional reviewer evaluations; therefore people visit the site more
often.
• Motorola has an open dissent policy where employees fill in a minority
report to senior management when ideas they consider valuable are
unsupported by colleagues and immediate superiors.
• Use of half-life as a measure of improvement (e.g., the time taken to
cut product development time in half) to encourage large-scale
thinking.

Principle 24. Intermediary

A. Use an Intermediary Carrier Article or Intermediary Process

• Use of impartial body during difficult negotiation.

• PO (provocative operator)—a place between yes and no. This construct
was devised by Edward DeBono to help avoid premature discarding of
ideas.
• Subcontract noncore business (e.g., cleaning and transportation
services).
• Franchisee acts as intermediary between corporate vision and customer.
• Travel agent.
• UPS distribution system using core sorting center.
• KLM “feeder” airline concept—short flights from Germany and
England pull passengers away from national airlines so that passengers
will fly long distances with KLM using Holland as a hub.
• Video Plus—program video using simple codes to represent channels,
dates, and times.

B. Merge One Object Temporarily with Another (Which Can be Easily Removed)

• Introduce specialist troubleshooting or firefighting teams.

• Hire consultant.
 Theory of Inventive Problem Solving (TRIZ) 273

• Use bridge loan arrangements to help cash flow.

• Subcontract occasional services, e.g., accounts, cleaning, and transport.

Principle 25. Self-Service

A. Make an Object Serve Itself by Performing Auxiliary Helpful Functions

• Quality circles.
• Self-help groups.
• Brand image circularity. For example, Harvard Business School produces
bright people; these people enhance the school’s reputation, and hence lots
of people apply; hence Harvard only takes on very bright people; bright
people in equals bright people out; and so the circle reinforces itself.
• “Cookies” on the Internet gather data useful for future marketing
activities, while performing a useful service for the web surfer.
• Bar codes in supermarkets provide instant pricing information, but the
system also gathers information to assist future marketing decisions.
• Edward DeBono’s suggested to Ford UK that it buy national car parks
and then only let Ford cars into the parking lots. Thus motorists buying
a Ford would also be buying a parking place in every city.

B. Use Waste (or lost) Resources, Energy, or Substances

• Rehire retired workers for jobs where their experience is needed.

• Loan out temporarily underutilized workers to other organizations
(load-capacity balancing across companies). For example, this can be a
win-win situation in football: the football player stays match-fit, and
the loaner team saves wages and fills a skills shortage for another team.
• Industrial ecosystems—e.g., plan factories so that waste heat from one
operation provides power for another operation; install cogeneration
equipment so that waste heat can generate electricity that can be used
for your own operations or sold to the electric power utility.
• Brown-field developments.
• The Body Shop recycles used containers brought back by customers
which helps promote a corporate green image.
• Recycle all packaging material.
• Scan mail into data systems and recycle the paper.

Principle 26. Copying

A. Instead of Using an Unavailable, Expensive, Fragile Object, Use Simpler

and Inexpensive Copies

• Experience virtual reality via computer instead of taking an expensive

vacation.
274 Chapter Nine

• Listen to an audiotape instead of attending a seminar.

• Rapid prototyping (e.g., stereolithography).
• Scan rare historic books, and documents so that they are accessible to
all and the original remains protected.
• Lascaux II—reproduction of Lascaux cave paintings which is open to
visitors.

B. Replace an Object, or Process with Optical Copies

• Virtual product service manuals.

• Videoconferencing instead of physical travel.
• Use a central electronic database instead of paper records in cases
where multiple users would benefit from simultaneous access to data,
e.g., medical records, customer data, and engineering drawings.
• Keep your personal calendar on a website so you (and others if desired)
can access it from any computer and it cannot get lost.

C. If Optical Copies are Used, Move to infrared or ultraviolet

(Use an Appropriate Out-of-the-Ordinary Illumination and Viewing Situation)

• Evaluate employee morale using multiple methods such as interviews

and questionnaires (two different “wavelengths”).
• Evaluate customer satisfaction using multiple techniques.
• Have your customers and suppliers benchmark you.

Principle 27. Cheap Short-Living Objects

A. Replace an Expensive Object with a Multiple of Inexpensive Objects,

Compromising Certain Qualities (Such as Service Life, for Instance)

• Use disposable paper objects to avoid the cost of cleaning and storing
durable objects, e.g., plastic cups in motels, disposable diapers, and
many kinds of medical supplies.
• Numerical simulation–operational analysis (virtual war-gaming, virtual
business development, strategic planning modeling).
• Using a flight simulator reduces pilot training costs.

Principle 28. Another Sense

A. Replace a Mechanical Means with a Sensory (Optical, Acoustic, Taste,

or Smell) Means

• “Our goal is that when you turn out the lights and climb into bed, you
think you are at the Hilton”—CEO of budget motel chain.
• Have retail customers enter data by means of a touch screen, instead of
filling out a form that must be keyed in by employees (e.g., wedding
registries use this).
 Theory of Inventive Problem Solving (TRIZ) 275

• Electronic voting.
• Supermarkets pump bakery odors around the store to help advertise
bread products.

B. Use Electric, Magnetic, and Electromagnetic Fields to Interact with the Object

• Mrs. Fields Cookies has a morning video-Internet conference with all

franchisees, electronic communication replaces memos, etc.
• Automatic global positioning system (GPS) sensors inform a central
control point where (e.g., delivery trucks or taxis) are located.
• Electronic tagging.
• Pagers.

C. Change from Static to Movable Fields, from Unstructured Fields to those

Having Structure

• Mind maps.
• Tidal traffic flow schemes or high occupancy vehicle (HOV) lanes.
• Management by walking around (MBWA).

D. Use Fields in Conjunction with Field-Activated (e.g., Ferromagnetic) Particles

• Mind-mapping software tools.

• Intelligent tidal traffic flow control (e.g., using roadside sensors).
• Use a radio transponder payment system for traffic control (Highway 91
in California). The fee ranges from $0.50 to $3.50 depending on how
heavy the traffic is on the free part of the highway. Radio signals deduct
the payment from the users’ account when the car enters the special
traffic lane.

Principle 29. Fluidity

Make Solid Things into Fluid Things

• “Water logic” versus “rock logic”—fluid, flowing, gradually built-up

logic versus permanent, hard-edged, rocklike alternatives.
• Flexible (fluid) organizational structure versus old fixed hierarchical
structures.
• Liquidation of assets.
• Introduction of “breathing spaces” into contracts.

Principle 30. Thin and Flexible

A. Use Flexible Shells and Thin Films Instead of Three-Dimensional Structures

• The thinnest film is a single molecule thick. Likewise, the thinnest

organization structure is one employee thick. Get faster customer
276 Chapter Nine

service by having the single customer service agent have all the necessary
data easily available, so the customer only deals with the single, flexible
“shell” of the organization not the whole bulky volume.
• Card transactions instead of money—e.g., vending machines in companies
use employee ID card and charges are debited direct from salary.
• Cardboard police—two-dimensional policemen or police cars over
freeway bridges are used as a means of slowing down traffic.
• Inflatable passenger for lone drivers out late at night.

B. Isolate the Object from the External Environment Using Flexible Shells
and Thin Films

• Office workers in open areas can use flexible curtains to shut themselves
off from the visual chaos of the open area when they need to concentrate
rather than communicate.
• Use trade-secret methods to separate company proprietary knowledge
from general knowledge.
• Umbrella organizations.
• “We like to delegate and leave people as free as possible, so we try to
push management decisions down the line. We run Rolls-Royce with a
very thin corporate structure”—Lord Tombs of Brailes, ex-chairman of
Rolls-Royce.

Principle 31. Holes

A. Add Holes to a System or Object

• Think of the customer-facing layers of a company as a porous membrane

that filters information flow both into and out of the organization.
• Improve internal communications by creating an Intranet that is accessible
by all hierarchical layers, giving workers access to the CEO and vice versa.
• Trickle-down economics.
• Government leaks—used as a way of gauging public reaction to
(usually) controversial issues.

B. If a System or Object Already has Holes, Use the Pores to Introduce

a Useful Substance or Function

• Empower the customer-facing layer (information is the thing that fills

the pores—see inventive business principle 30A).
• Use mind maps, self-patterning capabilities, etc., to improve the
information and knowledge intake and filtering abilities of the brain.
• Media relations department turns spin doctor and/or marketing feedback
gatherer.
 Theory of Inventive Problem Solving (TRIZ) 277

Principle 32. Color Changes

A. Change the Color of an Object or Its External Environment

• Red/blue proposal preparation teams.

• Use of lighting effects to change mood in a room or office.
• Creation of corporate colors creating a strong brand image through use
of bespoke colors—BP green, British Telecom red phone boxes, Ford
blue, etc.
• Use colors to communicate a state of alert (green, black, amber, red, etc.).
• Highlighter pens.

B. Change the Transparency of an Object or Its External Environment

• Transparent organizations
• Transparent communications
• Importance of creating clear, concise mission statement (Martin 1993)
• Smoke screen or misinformation to disguise confidential R&D and
other activities

Principle 33. Homogeneity

A. Make Objects Interact with a Given Object of the Same Material

(or Material with Identical Properties)

• Colocated project teams.

• Internal customers.
• Product branding and product families.
• Boeing “Working Together Teams” bring customers and suppliers into
the design loop.
• Common data transfer protocols between different organizations.
• “The best way to make a silk purse from a sow’s ear is to begin
with a silk sow. The same is true of money”—Augustine’s Law #1
(Augustine 1983).

Principle 34. Discarding and Recovering

A. Make Portions of an Object that Have Fulfilled their Functions Go Away

(Discard by Dissolving, Evaporating, etc.) or Modify them Directly During
Operation

• Flexible, variable-sized project teams.

• Balance load and capacity by using contract labor.
• Consultants.
• Contract hire of specialized equipment, facilities, etc.
278 Chapter Nine

B. Conversely, Restore Consumable Parts of an Object Directly in Operation

• Need to periodically reenergize continuous improvement initiatives

(“enthusiasm injections”)
• Lifelong learning (where individuals are given responsibility for
managing their own personal continuing education and ensuring skills
remain up-to-date)

Principle 35. Parameter Changes

A. Change an Object’s Physical State (e.g., to a Gas, Liquid, or Solid)

• Virtual prototyping
• Numerical simulation
• Virtual shopping, e.g., Amazon.com
• Telephone banking
• Electronic voting in elections

B. Change the Concentration or Consistency

• Change the team structure (e.g., football teams use substitutes).

• Stores introduce special offers and other promotions.

C. Change the Degree of Flexibility

• Introduce intelligence into on-line catalogs (e.g., first-generation catalogs

were replicas of previous paper versions, but the latest generation incor-
porates search engines, expert systems, etc.)
• Software with options for beginner through expert usage.
• Moves away from fixed clothing size partitions, e.g., Levi’s Personal
Pairs—a customer at a participating store chooses which fabric he or
she wants and then is measured. Those measurements are transmitted
instantly to a Levi’s plant in Tennessee where the data controls a laser
cutter. The bar-coded pieces are stitched on the regular assembly line
and mailed directly to the customer. (The custom Levi’s, which
customers love, run about $15 more than off-the-rack ones.)

D. Change Emotional and Other Parameters

• Get customers excited (“hot”) about the product by giving them

ownership of the change.
• Get employees excited about the future of the company by using full
involvement strategic planning, stock options, etc.
• “A fired-up team wins games even if it’s not the best team. A fired-up
company can achieve the same result” (Martin 1993).
 Theory of Inventive Problem Solving (TRIZ) 279

Principle 36. Paradigm Shift

Use Phenomena Occurring During Disruptive Shift in an Economy

(Awareness of Macroscale Business Phenomena)

• Awareness of the requirements of different stages—conception, birth,

development, maturity, retirement—of a project (e.g., shifting labor
requirements, shifting budget requirements).
• Transition from a bull to a bear market.
• Tendency to relax after receiving a quality award, innovation award, etc.
• Forming, storming, norming, and performing phases of team development;
e.g., take advantage of enthusiasm dip during storming and norming
phases.

Principle 37. Relative Change

A. Use the Relative Differences that Exist in an Object or System to do

Something Useful

• Match personalities on work teams.

• Some organizations create creative tension by employing two independent
teams to develop a new product or process and then have them compete.
• “It seems safe to say that significant discovery, really creative thinking,
does not occur with regard to problems about which the thinker is
lukewarm”—Mary Henle.

B. Make Different Parts of a System Act Different in Response to Changes

• Expand or contract marketing efforts depending on the product’s

“hotness”—rate of sales and profitability.
• Match personalities on work teams.

Principle 38. Enriched Atmosphere

A. Replace a Normal Atmosphere with an Enriched One

• Create risk and revenue sharing partnerships.

• Have guest speakers at a seminar.
• Use internal subject matter experts.
• Use simulations and games instead of lecture-style training.
• Use case studies in training.
• Injection of new blood or a new challenge into a team.
280 Chapter Nine

• Consider personal chemistry issues when assembling a project team;

find people who will spark off interesting reactions with each other.
• Deming’s four stages of learning—unconscious incompetence, conscious
incompetence, conscious competence, unconscious competence.
• Focus teams on a single project only (give them an enriched envi-
ronment full of success factors).
• “Leadership is a potent combination of strategy and character. But if
you must be without one, be without strategy”—General H. Norman
Schwartzkopff.

B. Exposing a Highly Enriched Atmosphere with One Containing Potentially

Unstable Elements

• Corporate jester.
• “I like Bartok and Stravinsky. It’s a discordant sound and there are dis-
cordant sounds inside a company. As president you must orchestrate
the discordant sounds into a kind of harmony. But you never want too
much harmony. One must cultivate a taste for finding harmony within
discord or you will drift away from the forces that keep a company
alive”—Takeo Fujisawa, Honda cofounder.

Principle 39. Calm Atmosphere

A. Replace a Normal Environment with an Inert One

• Move away from the (normal) disruptive performance appraisal, merit

award, and reward environment to an (emotionally neutral) more fair
system of working practice.
• Hare brain, tortoise mind (Claxton 1997)
• Take time-outs during negotiation.
• Have away-days and team-building days.
• Hold corporate retreats.
• Operations room, e.g., for planning organizational change, proposal
submissions, and contract tendering, etc.

B. Add Neutral Parts or Inert Additives to an Object

• Use of neutral third parties during difficult negotiations (e.g., Senator

George Mitchell in Northern Ireland and ACAS)
• Introduction of quiet areas into the workplace
• Rest breaks and pause-for-reflection breaks in meetings
 Theory of Inventive Problem Solving (TRIZ) 281

Principle 40. Composite Structures

Change from Uniform to Composite (Multiple) Structures (Awareness and

Utilization Of Combinations of Different Skills and Capabilities)

• Create multidisciplinary project teams.

• Do training with a combination of lecture, simulations, on-line
learning, video, etc.
• Employ different personality types (e.g., Myers-Briggs) on a team.
• Hard person–soft person negotiating team.
• Mix of thinking skills in a project team.
• Positional players in a football team.
• Combined high risk–low risk investment strategy.

Example 9.5: Shorten the Product Development Duration for Complex

Products
Many manufacturers of complex products, for example, automobiles, suffer
from long product development time and cost. Quick product development
time is usually desired, but when a product is too complex, a quick product
development cycle is very difficult to achieve. Product complexity also makes
product development cost very high.

We can try to figure out some ways to resolve these difficulties by using
inventive business principles. First, we can model this problem as two pairs of
contradictions as follows:

1. The contradiction of system complexity versus R&D time

2. The contradiction of system complexity with R&D cost
For contradiction 1, by referring to the business contradiction matrix (see
Appendix B at the end of this chapter) we can find the following inventive
business principles:
5, 6, 25, 10, 2, 37

By closely examining these principles, we find the following items highly

relevant.
Principle 5: Merging
A. Bring closer together (or merge) identical or similar objects; assemble
identical or similar parts to perform parallel operations.
B. Make operations contiguous or parallel; bring them together in time.

Based on principle 5, the following approaches can be proposed for the product
development situation:

1. Develop similar components or subsystems in parallel.

2. Develop noninterfering/components or subsystems in parallel.
282 Chapter Nine

Principle 6: Universality
Make an object or structure perform multiple functions; eliminate the need for
other parts.

Based on principle 6 the following approaches can be proposed for the product
development situation:

3. Simplify parts and reduce the part count.

Principle 25. Self-service

B. Use waste (or lost) resources, energy, or substances.

Based on principle 25B, the following approaches can be proposed for the
product development situation:

4. Rehire retired workers for jobs where their experience is needed.

5. Borrow temporarily underutilized workers from other organizations.

Principle 10. Preliminary Action

A. Perform, before it is needed, the required change of an object (either fully or
partially).

Based on principle 10A, the following approaches can be proposed for the
product development situation:

6. Prepare preliminary works on key development activities long before these

activities’ starting times.

Principle 2. Taking Out

Separate an interfering part or property from an object, or single out the only
necessary part (or property) of an object.

Based on principle 2, the following approaches can be proposed for the product
development situation:

7. Break down barriers between departments and form a fully empowered

product development team.

For contradiction 2, by referring to the business contradiction matrix (see

Appendix B at the end of this chapter), we can find the following inventive
business principles:

5, 2, 35, 1, 29

In resolving contradiction 1, principles 5 and 2 have already been explored.

Now we explore principles 35, 1, and 29. By closely examining these
principles, we can find the following items highly relevant:
 Theory of Inventive Problem Solving (TRIZ) 283

Principle 35. Parameter Changes

A. Change an object’s physical state (e.g., to a gas, liquid, or solid).

Based on principle 35A, the following approaches can be proposed for the
product development situation:
8. Use more virtual prototypes and computer simulation.

Principle 1. Segmentation
A. Divide an object into independent parts.
B. Make an object easy to disassemble.

Based on principle 1A and B, the following approaches can be proposed for the
product development situation:

9. Reduce the dependencies among subsystems of the product.

10. Promote modular design practices.

Principle 29. Fluidity

Make solid things into fluid things.

Based on principle 29, the following approaches can be proposed for the
product development situation:

11. Use a flexible organizational structure for the product development team,
and adjust team structures as the product development goes through
different stages.

In summary, by using the 40 inventive business principles, the following 11

suggestions are proposed to reduce product development time and cost:

1. Develop similar components and subsystems in parallel.

2. Develop noninterfering components or subsystems in parallel.
3. Simplify parts and reduce the part count.
4. Rehire retired workers for jobs where their experience is needed.
5. Borrow temporarily underutilized workers from other organizations.
6. Prepare preliminary works on key development activities long before these
activities’ starting times.
7. Break down barriers between departments and form a fully empowered
product development team.
8. Use more virtual prototypes and computer simulation.
9. Reduce the dependencies among subsystems of the product.
10. Promote modular design practices.
11. Use a flexible organizational structure for the product development team,
and adjust team and structures as the product development goes through
different stages.
284 Chapter Nine

Appendix A: Contradiction Table of Inventive Principles

13. Object’s composition stability

7. Volume of movable object
1. Weight of movable object

3. Length of movable object

5. Area of movable object

8. Volume of fixed object

What is deteriorated ?

2. Weight of fixed object

4. Length of fixed object

6. Area of fixed object

11. Stress, pressure

12. Shape
9. Speed

10. Force
What should be Improved?
2 8 8 10 10 36 10 14 1 35 15 8 29 17 29 2
1. Weight of movable object
15 38 18 37 37 40 35 40 19 39 29 34 38 34 40 28
10 1 35 30 5 35 8 10 13 29 13 10 26 39
2. Weight of fixed object
29 35 13 2 14 2 19 35 10 18 29 14 1 40
8 15 15 17 7 17 13 4 17 10 1 8 1 8 1 8
3. Length of movable object
29 34 4 4 35 8 4 35 10 29 15 34
35 28 17 7 35 8 28 10 1 14 13 14 39 37
4. Length of fixed object
40 29 10 40 2 14 35 15 7 35
2 17 14 15 7 14 29 30 19 30 10 15 5 34 11 2
5. Area of movable object
29 4 18 4 17 4 4 34 35 2 36 28 29 4 13 39
30 2 26 7 1 18 10 15 2 38
6. Area of fixed object
14 18 9 39 35 36 36 37
2 26 1 7 1 74 29 4 15 35 6 35 1 15 28 10
7. Volume of movable object
29 40 35 4 17 38 34 36 37 36 37 29 4 1 39
35 10 19 14 35 8 2 18 24 35 7 2 34 28
8. Volume of fixed object
19 14 2 14 37 35 35 40
2 28 13 14 29 30 7 29 13 28 6 18 35 15 28 33
9. Speed
13 38 8 34 34 15 19 38 40 18 34 1 18
8 1 18 13 17 19 28 10 19 10 1 18 15 9 2 36 13 28 18 21 10 35 35 10
10. Force
37 18 1 28 9 36 15 36 37 12 37 18 37 15 12 11 40 34 21
10 36 13 29 35 10 35 1 10 15 10 15 6 35 35 24 6 35 36 35 35 4 35 33
11. Stress, pressure
37 40 10 18 36 14 16 36 28 36 37 10 36 21 15 10 2 40
8 10 15 10 29 34 13 14 5 34 14 4 7 2 35 15 35 10 34 15 33 1
12. Shape
29 40 26 3 5 4 10 7 4 10 15 22 35 34 18 37 40 10 14 18 4
21 35 26 39 13 15 37 2 11 39 28 10 34 28 33 15 10 35 2 35 22 1
13. Object’s composition stability
2 39 1 40 1 28 13 19 39 35 40 28 18 21 16 40 18 4
1 8 40 26 1 15 15 14 3 34 9 40 10 15 9 14 8 13 10 18 10 3 10 30 13 17
14. Strength
40 15 27 1 8 35 28 26 40 29 28 14 7 17 15 26 14 3 14 18 40 35 40 35
15. Duration of moving object’s 19 5 2 19 3 17 10 2 3 35 19 2 19 3 14 26 13 3
operation 34 31 9 19 19 30 5 16 27 28 25 35
16. Duration of fixed object’s 6 27 1 40 35 34 39 3
operation 19 16 35 38 35 23
36 22 22 35 15 19 15 19 3 35 35 38 34 39 35 6 2 28 35 10 35 39 14 22 1 35
17. Temperature
6 38 32 9 9 39 18 40 18 4 36 30 3 21 19 2 19 32 32
19 1 2 35 19 32 19 32 2 13 10 13 26 19 32 30 32 3
18. Illumination
32 32 16 26 10 19 6 27
19. Energy expense of 12 18 12 28 15 19 35 13 8 15 16 26 23 14 12 2 19 13
movable object 28 31 25 18 35 21 2 25 29 17 24
20. Energy expense of fixed 19 9 36 37 27 4
object 6 27 29 18
 Theory of Inventive Problem Solving (TRIZ) 285

20. Energy expense of fixed

What is deteriorated ?

26. Quantity of substance

15. Duration of moving

24. Loss of information

19. Energy expense of
object’s operation

object’s operation

23. Loss of substance

16. Duration of fixed

22. Waste of energy

movable object

25. Waste of time

17. Temperature

18. Illumination
14. Strength

21. Power
object
What should be Improved?
28 27 5 34 6 29 19 1 25 12 13 36 6 2 5 35 10 24 10 35 3 26
1.Weight of movable object
18 40 31 35 4 38 32 34 31 18 31 34 19 3 31 35 20 28 18 31
28 2 2 27 28 19 35 19 18 19 15 19 18 19 5 8 10 15 10 20 19 6
2. Weight of fixed object
10 27 19 6 32 22 35 28 1 18 22 28 15 13 30 35 35 26 18 26
8 35 19 10 15 32 8 35 1 35 7 2 4 29 1 24 15 2 29 35
3. Length of movable object
29 34 19 24 35 39 23 10 29
15 14 1 40 3 35 3 25 12 8 6 28 10 28 24 26 30 29
4. Length of fixed object
28 26 35 38 18 24 35 14
3 15 6 3 2 15 15 32 19 32 19 10 15 17 10 35 30 26 26 4 29 30
5. Area of movable object
40 14 16 19 13 32 18 30 26 2 39 6 13
40 2 10 35 39 17 32 17 7 10 14 30 16 10 35 2 18
6. Area of fixed object
19 30 38 30 18 39 4 18 40 4
9 14 6 35 34 39 10 13 35 35 6 7 15 36 39 2 22 2 6 29 30
7. Volume of movable object
15 7 4 10 18 2 13 18 13 16 34 10 34 10 7
9 14 35 34 35 6 30 6 10 39 35 16 35 3
8. Volume of fixed object
17 15 38 4 35 34 32 18
8 3 3 19 28 30 10 13 8 15 19 35 14 20 10 13 13 26 10 19
9. Speed
26 14 35 5 36 2 19 35 38 38 2 19 35 28 38 29 38
35 10 19 2 35 10 19 17 1 16 19 35 14 15 8 35 10 37 14 29
10. Force
14 27 21 10 36 37 18 37 40 5 36 18 36
9 18 19 3 35 39 14 24 10 35 2 36 10 36 37 36 10 14
11. Stress, pressure
3 40 27 19 2 10 37 14 25 3 37 4 36
30 14 14 26 22 14 13 15 2 6 4 6 2 14 35 29 14 10 36 22
12. Shape
10 40 9 25 19 32 32 34 14 3 5 34 17
17 9 13 27 39 3 35 1 32 3 13 19 27 4 32 35 14 2 2 14 35 27 15 32
13. Object’s composition stability
15 10 35 35 23 32 27 15 29 18 27 31 39 6 30 40 35
27 3 30 10 35 19 19 35 35 10 26 35 35 28 29 3 29 10
14. Strength
26 40 10 35 28 31 40 28 10 27
15. Duration of moving object’s 27 3 19 35 2 19 28 6 19 10 28 27 10 20 10 3 35
operation 10 39 4 35 35 18 35 38 3 18 28 18 10 40
16. Duration of fixed object’s 19 18 16 27 16 10 28 20 3 35
operation 36 40 18 38 10 16 31
10 30 19 3 19 18 32 30 19 15 2 14 21 71 21 36 35 28 3 17
17. Temperature
22 40 39 36 40 21 16 3 17 17 25 35 38 29 31 21 18 30 39
35 19 2 19 32 35 32 1 32 35 32 19 16 13 1 1 6 19 1 1 19
18. Illumination
6 19 19 1 15 1 6 26 17
19. Energy expense of 5 19 28 35 19 24 2 15 6 19 12 22 35 24 35 38 34 23
movable object 9 35 6 18 3 14 19 37 18 15 24 18 5 19 18 16 18
20. Energy expense of fixed 35 19 2 28 27 3 35
object 35 32 18 31 31
286 Chapter Nine

Appendix A: Contradiction Table of Inventive Principles

(Continued)

31. Harmful effect caused by the object

37. Measurement or test complexity

29. Manufacturing precision

30. Harmful action at object

28. Measurement accuracy
What is deteriorated ?

38. Degree of automation

32. Ease of manufacture

36. Device complexity

33. Ease of operation

34. Ease of repair

39. Productivity
35. Adaptation
27. Reliability

What should be Improved?

3 11 1 28 27 28 35 22 21 22 35 27 28 35 3 2 2 27 29 5 26 30 28 29 26 35 35 3
1. Weight of movable object
27 35 26 26 18 18 27 31 39 1 36 24 28 11 15 8 36 34 26 32 18 19 24 37
10 28 18 26 10 1 2 19 35 22 28 1 6 13 2 27 19 15 1 10 25 28 2 26 1 28
2. Weight of fixed object
8 3 28 35 17 22 37 1 39 9 1 32 28 11 29 26 39 17 15 35 15 35
10 14 28 32 10 28 1 15 17 15 1 29 15 29 1 28 14 15 1 19 35 1 17 24 14 4
3. Length of movable object
29 40 4 29 37 17 24 17 35 4 10 1 16 26 24 26 24 26 16 28 29
15 29 32 28 2 32 1 18 15 17 2 25 3 1 35 1 26 26 30 14
4. Length of fixed object
28 3 10 27 7 26
29 9 26 28 2 32 22 33 17 2 13 1 15 17 15 13 15 30 14 1 2 36 14 30 10 26
5. Area of movable object
32 3 28 1 18 39 26 24 13 16 10 1 13 26 18 28 23 34 2
32 35 26 28 2 29 27 2 22 1 40 16 16 4 16 15 16 1 18 2 35 23 10 15
6. Area of fixed object
40 4 32 3 18 36 39 35 40 36 30 18 17 7
14 1 25 26 25 28 22 21 17 2 29 1 15 13 10 15 29 26 1 29 26 35 34 10 6 2
7. Volume of movable object
40 11 28 2 16 27 35 40 1 40 30 12 4 16 24 34
2 35 35 10 34 39 30 18 35 1 1 31 2 17 35 37
8. Volume of fixed object
16 25 19 27 35 4 26 10 2
11 35 28 32 10 28 1 28 2 24 35 13 32 28 34 2 15 10 10 28 3 34 10 18
9. Speed
27 28 1 24 32 25 35 23 35 21 8 1 13 12 28 27 26 4 34 27 16
3 35 35 10 28 29 1 35 13 3 15 37 1 28 15 1 15 17 26 35 36 37 2 35 3 28
10. Force
13 21 23 24 37 36 40 18 36 24 18 1 3 25 11 18 20 10 18 10 19 35 37
10 13 6 28 3 35 22 2 2 33 1 35 11 2 35 19 1 2 36 35 24 10 14
11. Stress, pressure
19 35 25 37 27 18 16 35 37 35 37
10 40 28 32 32 30 22 1 35 1 1 32 32 15 2 13 1 1 15 16 29 15 13 15 1 17 26
12. Shape
16 1 40 2 35 17 28 26 29 1 28 39 32 34 10
13 18 35 24 35 40 35 19 32 35 2 15 35 30 2 35 35 22 1 8 23 35
13. Object’s composition stability
18 30 27 39 30 10 16 34 2 22 26 39 23 35 40 3
11 3 3 27 3 27 18 35 15 35 11 3 32 40 27 11 15 3 2 13 27 3 15 29 35
14. Strength
16 37 1 22 2 10 32 28 2 3 32 28 15 40 10 14
15. Duration of moving object’s 11 2 3 3 27 22 15 21 39 27 1 12 27 29 10 1 35 10 4 19 29 6 10 35 17
operation 13 16 40 33 28 16 22 4 27 13 29 35 39 35 14 19
16. Duration of fixed object’s 34 27 10 26 17 1 22 35 10 1 1 2 25 14 1 20 10
operation 6 40 24 40 33 6 35 16 38
19 35 32 19 24 22 33 22 35 26 27 26 27 4 10 2 18 2 17 3 27 26 2 15 28
17. Temperature
3 10 24 35 2 2 24 16 27 16 35 31 19 16 35
11 15 3 32 15 19 35 19 19 35 28 26 15 17 15 1 6 32 32 15 2 26 2 25
18. Illumination
32 32 39 28 26 19 13 16 19 13 10 16
19. Energy expense of 19 21 3 1 1 35 2 35 28 26 19 35 1 15 15 17 2 29 35 38 32 2 12 28
movable object 11 27 32 6 27 6 30 17 28 13 16 27 28 35

20. Energy expense of fixed 10 36 10 2 19 22 1 4 19 35 1 6

object 23 22 37 18 16 25
 Theory of Inventive Problem Solving (TRIZ) 287

13. Object’s composition stability

7. Volume of movable object
1. Weight of movable object

3. Length of movable object

What is deteriorated ?

5. Area of movable object

8. Volume of fixed object

2. Weight of fixed object

4. Length of fixed object

6. Area of fixed object

11. Stress, pressure

12. Shape
10. Force
9. Speed
What should be Improved?
8 36 19 26 1 10 19 38 17 32 3 5 6 30 6 15 35 26 2 22 10 29 14 35 32
21. Power
38 31 17 27 35 37 13 38 38 25 2 36 35 35 2 40 15 31
15 6 19 6 726 6 38 15 26 17 7 7 18 7 16 35 36 38 14 2
22. Waste of energy
19 28 18 8 13 39 6 7 17 30 30 18 23 38
35 6 35 6 14 29 10 28 35 2 10 18 1 29 3 39 10 13 14 15 3 36 29 35 2 14
23. Loss of substance
23 40 22 32 10 39 24 10 31 39 31 30 36 18 31 28 38 18 40 37 10 3 5 30 40
10 24 10 35 1 26 26 30 26 30 16 2 22 26 32
24. Loss of information
35 5
10 20 10 20 15 2 30 24 26 4 10 35 2 5 35 16 10 37 36 37 4 10 35 3
25. Waste of time
37 35 26 5 29 14 5 5 16 17 4 34 10 32 18 36 5 4
34 17 22 5
35 6 27 26 29 14 15 14 2 18 15 20 35 29 35 1 4 10 36 35 14 15 2
26. Quantity of substance
18 31 18 35 35 18 29 40 4 29 34 28 3 14 3 17 40
3 8 3 10 15 9 15 29 17 10 32 35 3 10 2 35 21 35 8 28 10 24 35 1
27. Reliability
10 40 8 28 14 4 28 11 14 16 40 4 14 24 24 11 28 10 3 3 5 19 16 11
32 35 28 35 28 26 32 28 26 28 26 28 32 13 28 13 32 2 6 28 6 28 32 35
28. Measurement accuracy
26 28 25 26 5 16 3 16 32 3 32 3 6 32 24 32 32 13
28 32 28 35 10 28 2 32 28 33 2 29 32 28 25 10 10 28 28 19 3 35 32 30 30 18
29. Manufacturing precision
13 18 27 9 29 37 10 29 32 18 36 2 35 32 34 36 40
22 21 2 22 17 1 1 18 22 1 27 2 22 23 34 39 21 22 13 35 22 2 22 1 35 24
30. Harmful action at object
2 7 39 13 24 39 4 33 28 39 35 37 35 19 27 35 28 39 18 37 3 35 30 18
31. Harmful effect caused by the 19 22 35 22 17 15 17 2 22 1 17 2 30 18 35 28 3 5 28 2 33 35 1 35 40
object 15 39 1 39 16 22 18 39 40 40 35 4 3 23 1 40 27 18 27 39
28 29 1 27 1 29 15 17 13 1 16 40 13 29 35 35 13 35 12 35 19 1 28 11 13
32. Ease of manufacture
15 16 36 13 13 17 27 26 12 1 40 8 1 1 37 13 27 1
25 2 6 13 1 71 1 17 18 16 1 16 4 18 18 13 28 13 2 32 15 34 32 35
33. Ease of operation
13 15 1 25 13 12 13 16 15 39 35 15 39 31 34 35 12 29 28 30
2 27 2 27 1 28 3 18 15 13 16 25 25 2 1 34 9 1 11 13 1 13 2 35
34. Ease of repair 35 11 35 11 10 25 31 32 35 11 10 2 4
1 6 19 15 35 1 1 35 35 30 15 16 15 35 35 10 15 17 35 16 15 37 35 30
35. Adaptation
15 8 29 16 29 2 16 29 7 29 14 20 1 8 14
26 30 2 26 1 19 26 14 1 6 36 34 26 1 16 34 10 26 16 19 1 29 13 2 22
36. Device complexity
34 36 35 39 26 24 13 16 6 28 35 28 15 17 19
37. Measurement or test 27 26 6 13 16 17 26 2 13 2 39 29 1 4 2 18 3 4 36 28 35 36 27 13 11 22
complexity 28 13 28 1 26 24 18 17 30 16 16 26 31 16 35 40 19 37 32 1 39 39 30
28 26 28 26 14 13 23 17 14 35 13 28 10 2 35 13 35 15 32 18 1
38. Degree of automation
18 35 35 10 28 17 13 16 1 13
35 26 28 27 18 4 30 14 10 26 10 35 2 6 35 37 28 15 10 37 10 10 35 3
39. Productivity 34 40 22 39
24 37 15 3 28 38 26 7 34 31 17 7 34 10 10 2 10 36 14
288 Chapter Nine

Appendix A: Contradiction Table of Inventive Principles

(Continued)

19. Energy expense of movable object

20. Energy expense of fixed object

15. Duration of moving object’s

16. Duration of fixed object’s

What is deteriorated ?

26. Quantity of substance

24. Loss of information
23. Loss of substance
22. Waste of energy

25. Waste of time

17. Temperature

18. Illumination
operation

operation
14. Strength

21. Power
What should be Improved?
26 10 19 35 16 2 14 16 6 16 6 10 35 28 27 10 19 35 20 4 34
21. Power
28 10 38 17 25 19 19 37 38 18 38 10 6 19
26 19 38 1 13 3 38 35 27 19 10 10 18 7 18
22. Waste of energy
7 32 15 2 37 32 7 25
35 28 28 27 27 16 21 36 1 6 35 18 28 27 28 27 35 27 15 18 6 3
23. Loss of substance
31 40 3 18 18 38 39 31 13 24 5 12 31 18 38 2 31 35 10 10 24
10 10 19 10 19 19 10 24 26 24 28
24. Loss of information
28 32 35
29 3 20 10 28 20 35 29 1 19 35 38 1 35 20 10 5 35 18 24 26 35 38
25. Waste of time
28 18 28 18 10 16 21 18 26 17 19 18 10 6 18 32 10 39 28 32 18 16
14 35 3 35 3 35 3 17 34 29 3 35 35 7 18 6 3 24 28 35 38
26. Quantity of substance
34 10 10 40 31 39 16 18 31 25 10 24 35 18 16
11 28 2 35 34 27 3 35 11 32 21 17 36 23 21 11 10 11 10 35 10 28 10 30 21 28
27. Reliability
3 25 6 40 10 13 27 19 26 31 35 29 39 4 40 3
28 6 28 6 10 26 6 19 6 1 3 6 3 6 26 32 10 16 24 34 2 6
28. Measurement accuracy
32 32 24 28 24 32 32 32 27 31 28 28 32 32
3 27 3 27 19 26 3 32 32 2 32 2 13 32 35 31 32 26 32 30
29. Manufacturing precision
40 2 10 24 28 18
18 35 22 15 17 1 22 33 1 19 1 24 10 2 19 22 21 22 33 22 22 10 35 18 35 33
30. Harmful action at object
37 1 33 28 40 33 35 2 32 13 6 27 22 37 31 2 35 2 19 40 2 34 29 31
31. Harmful effect caused by the 15 35 15 22 21 39 22 35 19 24 2 35 19 22 2 35 21 35 10 1 10 21 1 22 3 24
object 22 2 33 31 16 22 2 24 39 32 6 18 18 22 2 34 29 39 1
1 3 27 1 35 16 27 26 28 24 28 26 1 4 27 1 19 35 15 34 32 24 35 28 35 23
32. Ease of manufacture
10 32 4 18 27 1 27 1 12 24 33 18 16 34 4 1 24
32 40 29 3 1 16 26 27 13 17 1 13 35 34 2 19 28 32 4 10 4 28 12 35
33. Ease of operation
3 28 8 25 25 13 1 24 24 2 10 13 2 24 27 22 10 34
1 11 11 29 1 4 10 15 1 15 1 15 10 15 1 2 35 32 1 2 28
34. Ease of repair
2 9 28 27 13 28 16 32 2 32 19 34 27 10 25 10 25
35 3 13 1 2 16 27 2 6 22 19 35 19 1 18 15 15 10 35 28 3 35
35. Adaptation
32 6 35 3 35 26 1 29 13 29 1 2 13 15
2 13 10 4 2 17 24 17 27 2 20 19 10 35 35 10 6 29 13 3
36. Device complexity
28 28 15 13 13 29 28 30 34 13 2 28 29 27 10
37. Measurement or test 27 3 19 29 25 34 3 27 2 24 35 38 19 35 19 1 35 3 1 18 35 33 18 28 3 27
complexity 15 28 25 39 6 35 35 16 26 16 16 10 15 19 10 24 27 22 32 9 29 18
25 13 6 9 26 2 8 32 2 32 28 2 23 28 35 10 35 33 24 28 35 13
38. Degree of automation
19 19 13 27 18 5 35 30
29 28 35 10 20 10 35 21 26 17 35 10 1 35 20 28 10 28 10 13 15 35 38
39. Productivity
10 18 2 18 16 38 28 10 19 1 38 19 10 29 35 35 23 23
 Theory of Inventive Problem Solving (TRIZ) 289

37. Measurement or test complexity

31. Harmful effect caused by the
29. Manufacturing precision

30. Harmful action at object

28. Measurement accuracy
What is deteriorated ?

38. Degree of automation

32. Ease of manufacture

36. Device complexity

33. Ease of operation

34. Ease of repair

39. Productivity
35. Adaptation
27. Reliability

What should be Improved? object

19 24 32 15 32 2 19 22 2 35 26 10 26 35 35 2 19 17 20 19 19 35 28 2 28 35
21. Power
26 31 2 31 2 18 34 10 10 34 34 30 34 16 17 34
11 10 32 21 22 21 35 35 32 2 19 7 23 35 3 2 28 10
22. Waste of energy
35 35 2 2 22 1 15 23 29 35
10 29 16 34 35 10 33 22 10 1 15 34 32 28 2 35 15 10 35 10 35 18 35 10 28 35
23. Loss of substance
39 35 31 28 24 31 30 40 34 29 33 2 24 34 27 2 28 24 10 13 18 10 23
10 28 22 10 10 21 32 27 22 35 33 35 13 23
24. Loss of information
23 1 22 15
10 30 24 34 24 26 35 18 35 22 35 28 4 28 32 1 35 28 6 29 18 28 24 28
25. Waste of time
4 28 32 28 18 34 18 39 34 4 10 34 10 32 10 35 30
18 3 3 2 33 30 35 33 3 35 29 1 35 29 2 32 15 3 3 13 3 27 8 35 13 29
26. Quantity of substance
28 40 28 29 31 40 39 35 27 10 25 10 25 29 27 10 29 18 3 27
32 3 11 32 27 35 35 2 27 17 1 11 13 35 13 35 27 40 11 13 1 35
27. Reliability
11 23 1 2 40 40 26 40 8 24 1 28 27 29 38
5 11 28 24 3 33 6 35 1 13 1 32 13 35 27 35 26 24 28 2 10 34
28. Measurement accuracy
1 23 22 26 39 10 25 18 17 34 13 11 2 10 34 32 28 10 34 28 32
11 32 26 28 4 17 1 32 25 10 26 2 26 28 10 18
29. Manufacturing precision
1 10 36 34 26 35 23 18 18 23 32 39
27 24 28 33 26 28 24 35 2 25 35 10 35 11 22 19 23 19 33 3 22 31
30. Harmful action at object
2 40 23 26 10 18 2 28 39 2 22 31 29 40 29 40 34 13 24
31. Harmful effect caused by the 24 2 3 33 4 17 19 1 2 21 2 22 35
object 40 39 26 34 26 31 27 1 18 39
1 35 24 2 2 5 35 1 2 13 27 26 6 28 8 28 35 1
32. Ease of manufacture
12 18 13 16 11 9 15 1 11 1 1 10 28
17 27 25 13 1 32 2 25 2 5 12 26 15 34 32 25 1 34 15 1
33. Ease of operation
8 40 2 34 35 23 28 39 12 1 32 1 16 12 17 12 3 28
11 10 10 2 25 10 35 10 1 35 1 12 7 1 4 35 1 34 35 1 32
34. Ease of repair
1 16 13 2 16 11 10 26 15 16 13 11 7 13 10
35 13 35 5 1 35 11 1 13 15 34 1 16 15 29 1 27 34 35 28
35. Adaptation
8 24 10 32 31 31 1 16 7 4 37 28 35 6 37
13 35 2 26 26 24 22 19 19 1 27 26 27 1 13 29 15 15 10 15 1 12 17
36. Device complexity
1 10 34 32 29 40 1 13 926 24 28 37 37 28 24 28
37. Measurement or test 27 40 26 24 22 19 2 21 5 28 2 5 12 26 1 15 15 10 34 21 35 18
complexity 28 8 32 28 29 28 11 29 37 28
11 27 28 26 28 26 2 33 2 1 26 1 12 1 35 27 4 15 24 34 27 5 12
38. Degree of automation
32 10 34 18 23 13 34 3 13 1 35 10 25 35 26
1 35 1 10 32 1 22 35 35 22 35 28 1 28 1 32 1 35 12 17 35 18 5 12
39. Productivity
10 38 34 28 18 10 13 24 18 39 2 24 7 19 10 25 28 37 28 24 27 2 35 26
290

Appendix B: Business Contradiction Matrix (Mann 2004)

1. R&D spec/capability/means
What is deteriorated ?

capability/means
6. Production spec/

8. Production time
7. Production cost
5. R&D interface
3. R&D time
2. R&D cost

4. R&D risk
What should be Improved?

2 4 15 38 21 38 35 3 9 24 23 3 13 24 33 23 29 35 4 2 26 29 35 6 10 2 20
1. R&D spec/capability/means
23 15 36 11 38 25 13 5 40
2. R&D cost 2 4 15 38 26 34 1 10 27 9 34 16 13 26 35 10 26 35 1 7 27 26 35 1 7 10 2 6 15
3 37 1 34 3 27 34 3
21 38 35 26 34 1 1 29 10 40 15 25 35 1 5 6 20 35 2 5 29 35 2 7 26 10 15 3
3. R&D time 23 15 10 3 11 40
3 9 24 23 27 9 34 1 29 10 40 6 29 15 14 24 35 10 3 5 35 40 23 5 40 20 15
4. R&D risk
36 11 16 37 11 17 25 13 11 1 12
5. R&D interface 3 13 24 33 13 26 35 15 25 35 1 6 29 15 14 5 6 17 40 33 15 23 29 5 15 40 23 3
38 25 10 1 40 17 25 10 26 13 24 13
6. Production spec/capability/means 23 29 35 4 5 2 27 1 5 6 20 35 24 35 10 3 5 6 17 40 33 15 25 3 10 1 35 21 15 4
13 5 2 13 11 10 26 58 10
7. Production cost 2 26 29 26 35 1 7 5 29 35 2 5 35 40 23 15 23 29 5 15 25 3 10 5 1 24 29 10
40 27 34 3 1 12 13 8 27 3 14
8. Production time 35 6 10 2 10 2 6 15 7 26 10 15 5 40 20 15 15 40 23 3 1 35 21 15 4 1 24 29 10
20 3 24 13 10 27 3 14
9. Production risk 3 5 10 2 6 7 23 26 6 15 7 37 11 23 39 7 7 5 3 37 10 6 27 35 22 26 10 1 3 10 27 15 6 3
23 12 13 13 9 9 33 12 37 25 12 22 29
10. Production interface 5 7 37 1 15 35 10 25 23 35 7 3 17 23 28 40 6 29 3 25 17 35 26 1 37 25 10 15 38 20
4 25 24 29 2 13 24 13 31 30 12 13 2 28 27 6 3
11. Supply spec/capability/means 6 2 35 25 23 6 11 11 6 23 19 5 35 13 26 6 35 15 13 7 13 22 6 35 5 2 30 35 5 17 16 3 10
3 28 18 2 6 14 17 8 25
12. Supply cost 15 6 1 5 10 5 35 5 13 23 25 1 11 2 34 2 33 3 15 10 15 35 13 22 5 35 31 2 5 2 35 13 25
13 17 24
13. Supply time 21 35 2 10 19 35 10 25 7 2 1 2 11 38 5 2 35 10 12 35 5 13 22 2 35 24 10 3 10 23 40
39 22 15 13 5 13 4
14. Supply risk 11 39 30 11 13 2 23 7 29 2 13 22 25 9 5 35 13 40 3 15 16 3 2 24 2 13 10 26 13 2 35 10
31 16 24 37 35 26 9 6 29 24
15. Supply interface 11 26 2 5 10 38 13 11 7 40 38 13 22 25 9 28 40 6 15 10 25 3 33 12 3 35 5 23 12 3 24
13 24 2 35 26 29 10 7 13 7
 11. Supply spec/capability/means
What is deteriorated ?

16. Support spec/capability/

10. Production interface

15. Supply interface

9. Production risk

13. Supply time

12. Supply cost

14. Supply risk

interface
What should be Improved?

3 5 10 2 23 12 5 7 37 1 4 6 2 35 25 3 15 6 1 5 13 21 35 2 39 11 39 30 31 11 26 2 5 13 36 11 2 35 27
1. R&D spec/capability/means
6 7 23 26 13 15 35 10 25 23 6 11 28 10 5 35 10 19 35 22 11 13 2 16 10 38 13 27 6 1 10
2. R&D cost
24
6 15 7 37 13 9 25 23 35 29 2 11 6 23 19 18 5 13 23 25 10 25 7 2 23 7 29 2 24 37 11 7 40 38 24 2 6 10 3 35 20
3. R&D time
13 2
11 23 39 7 9 7 3 17 23 24 5 35 13 26 6 1 11 2 34 1 2 11 38 15 13 22 25 9 35 3513 22 25 9 6 1 26 37 15
4. R&D risk
33 26 26
7 5 3 37 10 28 40 6 29 13 6 35 15 13 14 2 33 3 15 10 5 2 35 10 12 5 35 13 40 3 9 28 40 6 15 29 6 1 3 35 21 12
5. R&D interface
31 30
6 27 35 22 12 3 25 17 35 12 7 13 22 6 35 15 35 13 22 35 5 13 22 15 16 3 2 24 6 10 25 3 33 35 23 1 24
6. Production spec/capability/means
37 13
26 10 1 3 25 26 1 37 25 2 5 2 30 35 17 8 5 35 31 2 17 2 35 24 10 13 5 2 13 10 26 29 12 3 35 5 10 7 1 35 10 29 27
7. Production cost
12 28 25 24
10 27 15 6 3 10 15 38 20 5 17 16 3 1 0 5 2 35 13 25 3 10 23 40 13 4 13 2 35 10 24 23 12 3 24 13 7 1 35 10 38 29
8. Production time
22 29 27 6 3 25 13
5 6 23 20 7 10 5 25 3 35 2 10 5 35 23 25 2 13 22 25 1 10 5 26 35 2 25 5 10 40 2 4 25 13 35 2 15 24
9. Production risk
25
5 6 23 20 7 10 6 2 3 7 40 10 5 30 10 15 2 5 35 6 13 17 10 23 33 5 26 2 33 5 2 26 10 23 11 40 2 32
10. Production interface 25 12 24 29
5 25 3 35 2 10 6 2 37 40 10 7 35 19 1 10 35 1 13 2 24 7 8 11 10 24 12 6 30 15 40 12 2 11 23 35 1 29
11. Supply spec/capability/means
29 25 17
5 35 23 25 2 5 30 10 15 2 7 35 19 1 10 3 24 38 10 19 27 3 19 24 8 1 28 6 38 4 35 24 5 13 27
12. Supply cost
12 29 17
13 22 25 1 10 5 35 6 13 17 35 1 13 2 24 3 24 38 10 19 10 29 15 13 2 3 5 19 3 15 10 18 25 10 29 19 4
13. Supply time
10 24
5 26 35 2 25 23 33 5 26 2 7 8 11 10 24 27 3 19 24 8 10 29 15 13 2 3 5 10 25 37 2 14 1 35 6 24 25
14. Supply risk
12 25 38
5 10 40 2 4 25 33 5 2 26 10 6 30 15 40 12 1 28 6 38 4 5 19 3 15 10 18 5 10 25 37 2 14 10 31 24 35 3
15. Supply interface
2 38
291
292 Appendix B: Business Contradiction Matrix (Mann 2004) (Continued)

24. Harmful factor affecting

22. Amount of information
What is deteriorated ?

23. Communication flow

21. Customer revenue/
demand/feedback
20. Support interface
18. Support time
17. Support cost

19. Support risk

system
What should be Improved?
15 35 28 25 5 2 6 27 25 15 27 40 12 11 2 5 9 26 14 13 22 7 10 37 13 25 10 39 6 25 31 29 7 23 11 25 2 26 3
1. R&D spec/capability/means
29 27
6 1 25 10 27 6 1 25 10 27 10 25 22 2 6 10 1 7 20 7 25 30 21 10 9 37 25 28 2 32 6 18 37 13 25 35 27 3 28 2
2. R&D cost
2 22
7 15 40 26 5 7 40 1 26 15 23 24 2 37 7 6 10 26 24 2 7 19 21 29 30 7 2 37 20 25 6 26 18 19 40 26 2 35 24 11
3. R&D time
38
11 7 28 35 1 2 32 28 7 40 36 6 10 26 6 10 7 26 13 36 13 25 22 37 1 3 10 26 25 4 30 6 31 4 9 13 35 2 15 26 3
4. R&D risk
13 3 37 22
6 7 40 38 13 6 38 20 10 37 5 35 40 13 28 40 6 7 30 4 7 25 40 13 35 1 6 3 40 25 2 6 35 3 25 18 3 26 35 28 24
5. R&D interface
28
13 10 17 2 27 5 6 10 12 27 6 10 2 27 12 6 40 10 2 7 5 15 35 25 33 13 32 15 23 24 6 2 13 25 10 22 24 35 13 24
6. Production spec/capability/means
34 25 18 16 2
3 2 35 10 27 27 3 10 25 24 10 25 27 3 35 10 35 7 24 25 7 13 1 24 25 26 27 25 34 37 6 35 37 18 2 35 5 34 15
7. Production cost
3 13 25 5 35 35 25 5 4 19 35 29 13 25 2 13 9 26 23 7 13 1 37 17 31 13 15 23 25 3 2 37 18 19 25 22 35 3 13 24
8. Production time
31 29 37
3 35 19 24 24 14 13 35 2 7 5 3 10 25 5 35 33 7 25 13 22 7 13 24 5 25 3 37 32 26 25 38 3 26 10 35 2 26 34 25
9. Production risk
10 39 13 13
23 10 3 13 22 23 13 10 1 2 10 14 2 25 29 40 33 6 10 26 7 5 10 40 4 2 2 37 4 13 37 25 2 28 3 37 32 25 3 26 35 28 10
10. Production interface
2 25 10 24
23 11 2 6 26 23 11 26 2 7 11 23 24 2 9 23 11 2 25 35 10 3 25 5 15 13 4 28 37 17 7 5 25 23 10 35 13 17 29 2 35
11. Supply spec/capability/means
17 32 28 15
27 5 35 25 10 10 27 30 35 2 10 12 2 27 7 5 10 24 25 1 6 2 35 13 25 26 28 35 2 37 34 7 35 6 1 27 25 12 11 35 2 12 31
12. Supply cost
2 5 16 28 30
25 27 10 2 27 2 13 35 10 10 25 35 6 13 24 5 35 25 7 35 13 25 1 22 28 2 37 32 35 7 6 31 25 35 37 35 3 29 2 10 12
13. Supply time
10 26 16
19 10 5 27 2 2 27 10 5 25 24 25 10 7 1 5 35 2 13 19 25 22 2 35 10 5 37 15 6 32 6 16 13 35 7 2 2 13 35 31 24
14. Supply risk
17 12
5 10 26 1 13 29 30 2 25 5 5 25 10 9 2 35 5 6 38 40 25 13 25 39 24 7 3 6 37 28 32 35 2 3 13 4 12 25 3 35 13 14 39
15. Supply interface
25 32 10 17
 27. Adaptability/versatility
What is deteriorated ?

29. Control complexity

28. System complexity
25. System-generated
harmful factors

30. Tension/stress
26. Convenience

31. Stability
What should be Improved?
25 29 2 37 13 15 35 25 16 30 25 29 1 35 17 25 1 19 35 25 15 19 35 3 2 25 35 9 25 2 15 36 29
1. R&D spec/capability/means
28
28 26 2 22 8 25 2 35 1 29 35 28 19 1 8 5 2 35 1 29 25 19 35 27 2 1 19 35 27 2 18 11 25 27 15 2
2. R&D cost
35 18
26 2 15 19 35 1 2 15 19 25 15 1 35 14 4 5 6 25 10 2 37 25 28 15 2 6 37 2 39 24 10 4 13 10 3 35 22 27
3. R&D time
40 28
2 3 35 15 12 9 26 3 11 24 5 2 40 31 28 35 28 30 35 1 17 25 1 3 37 40 12 1 23 2 25 13 39 9 14 1 12 4
4. R&D risk
13 40 29 7 24
3 26 35 37 2 16 13 25 28 29 37 40 1 35 25 28 1 3 10 6 28 1 3 40 25 35 3 37 32 9 18 15 17 25 3 4 36
5. R&D interface
40 37 17 30 13 9
35 22 18 39 2 15 1 5 28 7 1 15 17 2 28 12 17 27 26 1 28 1 13 16 25 35 1 3 10 16 35 1 23 3 19 13
6. Production spec/capability/means
10 13 16 12 38 28 24 13 37 5 39 40
7. Production cost 1 35 27 10 2 1 25 2 27 29 1 30 10 38 29 35 5 1 2 29 25 6 3 25 10 32 37 1 35 2 25 13 17 10 1 35 27
35
35 22 18 10 19 2 35 26 13 10 15 30 7 2 25 28 2 35 10 25 37 3 13 28 2 20 12 25 3 13 10 15 29 2 19 7
8. Production time
24 2 30 29 25 13 15 14
25 10 39 24 3 26 6 11 35 2 40 38 30 35 25 2 26 5 29 30 12 25 40 2 25 9 24 39 7 19 9 1 37 3 19
9. Production risk
29 29 35 37
10. Production interface 3 26 35 29 24 5 19 28 32 2 29 1 17 40 38 10 18 28 2 35 18 28 19 15 40 3 40 19 1 24 11 25 1 3 4
10 2 25
10 1 34 35 15 35 3 13 2 15 13 17 7 15 19 29 30 35 17 3 6 5 28 37 3 25 2 23 5 30 10 13 15 5 25 10 35
11. Supply spec/capability/means
13 35
30 2 15 3 5 13 10 35 2 12 31 1 17 40 3 29 35 19 1 25 2 22 2 37 4 32 25 10 3 25 7 40 19 3 25 10 4
12. Supply cost
30
25 10 29 13 24 35 28 1 29 15 1 10 27 7 38 24 16 15 3 28 32 25 2 37 1 10 15 25 24 2 35 3 5 27 20 18
13. Supply time
12 21 19
2 15 19 23 40 5 16 10 13 25 15 17 40 3 29 2 4 15 28 35 2 28 15 24 37 1 19 13 10 39 9 13 1 25 14
14. Supply risk
24 2 25 32
2 30 40 22 26 5 25 3 40 20 29 28 30 3 15 28 5 3 25 37 25 8 22 28 32 5 3 17 29 13 35 33 15 23 17 7
15. Supply interface
40 37 2
293
294
Appendix B: Business Contradiction Matrix (Mann 2004) (Continued)

1. R&D Spec/capability/means

6. Production spec/capability/
What is deteriorated ?

8. Production time
7. Production cost
5. R&D interface
3. R&D time
2. R&D cost

4. R&D risk

means
What should be Improved?
16. Support spec/capability/means 36 11 2 35 27 27 6 1 10 6 10 3 35 20 6 1 26 37 15 6 1 3 35 21 12 35 23 1 24 1 35 10 29 27 1 35 10 38 29
25 13
17. Support cost 15 35 28 25 6 1 25 10 27 7 15 40 26 5 11 7 28 35 6 7 40 38 13 13 10 17 2 27 3 2 35 10 27 3 13 25 5 35
29 34
18. Support time 5 2 6 27 25 6 1 25 10 27 7 40 1 26 15 1 2 32 28 7 6 38 20 10 37 5 6 10 12 27 25 27 3 10 25 24 35 25 5 4 19

19. Support risk 15 27 40 12 10 25 22 2 23 24 2 37 7 40 36 6 10 26 5 35 40 13 6 10 2 27 12 10 25 27 3 35 35 29 13 25 2

27 13 31
20. Support interface 11 2 5 9 26 6 10 1 7 20 6 10 26 24 2 6 10 7 26 13 28 40 6 7 30 6 40 10 2 7 10 35 7 24 25 13 9 26 23 7
38
21. Customer revenue/demand/ 14 13 22 7 10 7 25 30 21 10 7 19 2129 30 36 13 25 22 37 4 7 25 40 13 35 5 15 35 25 33 7 13 1 24 25 13 1 37 17 31
feedback 92 3 28 29
22. Amount of information 37 13 25 10 37 25 28 2 32 7 2 37 20 25 1 3 10 26 25 4 1 6 3 40 25 13 32 15 23 24 26 27 25 34 37 13 15 23 25 3
39 37 18 16 37
23. Communication flow 6 25 31 29 7 6 18 37 13 25 6 26 18 19 40 30 6 31 4 9 13 2 6 35 3 25 18 6 2 13 25 10 6 35 37 18 2 37 18 19 25
23 22 22
24. Harmful factors affecting system 11 25 2 26 3 35 27 3 28 2 26 2 35 24 11 35 2 15 26 3 3 26 35 28 24 22 24 35 13 24 2 35 5 34 15 22 35 3 13 24
2
25. System-generated harmful factors 25 29 2 37 13 28 26 2 22 8 26 2 15 19 35 2 3 35 15 12 9 3 26 35 37 2 40 35 22 18 39 1 35 27 10 2 35 22 18 10 24
35 40 2
26. Convenience 15 35 25 16 25 2 35 1 29 1 2 15 19 25 26 3 11 24 5 16 13 25 28 37 2 15 1 5 28 7 1 25 2 27 29 19 2 35 26 13
28 28 13 40 10 13 16 12 30
27. Adaptability/versatility 30 25 29 1 35 35 28 19 1 8 15 1 35 14 4 2 40 31 28 35 29 37 40 1 35 1 15 17 2 28 38 1 30 10 38 29 10 15 30 7 2 29
29 7 17 30 35 25 13
28. System complexity 17 25 1 19 35 5 2 35 1 29 5 6 25 10 2 37 28 30 35 1 17 25 28 1 3 10 12 17 27 26 1 35 5 1 2 29 25 25 28 2 35 10
28 24 13 15
29. Control complexity 25 15 19 35 25 19 35 27 2 25 28 15 2 6 25 1 3 37 40 6 28 1 3 40 25 28 1 13 16 25 6 3 25 10 32 37 25 37 3 13 28
18 37 12 24 13 9 37
30. Tension/stress 3 2 25 35 9 1 19 35 27 2 2 39 24 10 4 1 23 2 25 13 35 3 37 32 9 18 35 1 3 10 16 1 35 2 25 13 17 2 20 12 25 3 13
18 13 39 14
31. Stability 25 2 15 36 29 11 25 27 15 2 10 3 35 22 27 9 14 1 12 4 15 17 25 3 4 36 35 1 23 3 19 13 10 1 35 27 10 15 29 2 19 7
5 39 40
 What is deteriorated ?

16. Support spec/capability/

11. Supply spec/capability/
10. Production interface

15. Supply interface

9. Production risk

13. Supply time

12. Supply cost

14. Supply risk

interface
means
What should be Improved?
13 35 2 15 24 23 11 40 2 32 11 23 35 1 29 35 24 5 13 27 25 10 29 19 4 1 35 6 24 25 10 31 24 35 3
16. Support spec/capability/means 29 17 17
3 35 19 24 23 10 3 13 22 23 11 2 6 26 27 5 35 25 10 25 27 10 2 19 10 5 27 2 5 10 26 1 13 25 2 25 10 35 15
17. Support cost 2
24 14 13 35 2 23 13 10 1 2 23 11 26 2 7 10 27 30 35 2 27 2 13 35 10 2 27 10 5 25 29 30 2 25 5 32 22 25 15 3 32
18. Support time 5
7 5 3 10 25 10 14 2 25 29 11 23 24 2 9 10 12 2 27 7 5 10 25 35 6 13 24 25 10 7 1 5 25 10 9 2 35 13 22 10 35 4 6
19. Support risk 17
5 35 33 7 25 40 33 6 10 26 23 11 2 25 35 10 24 25 1 6 24 5 35 25 7 10 5 35 2 13 19 5 6 38 40 25 10 28 25 5 7 2 24
20. Support interface 10 2 32
13 22 7 13 24 7 5 10 40 4 2 10 3 25 5 15 2 35 13 25 26 35 13 25 1 22 25 22 2 35 10 13 25 39 24 7 28 25 7 22 5 13
21. Customer revenue/demand/feedback 39 25 16 26 17 17
5 25 3 37 32 2 37 4 13 37 13 4 28 37 17 28 35 2 37 34 28 2 37 32 35 7 5 37 15 6 32 3 6 37 28 32 35 10 28 3 25 37 4
22. Amount of information 28 13 25 7 7
25 38 3 26 10 2 28 3 37 32 5 25 23 10 35 35 6 1 27 25 6 31 25 35 37 6 16 13 35 7 2 2 3 13 4 12 25 10 28 37 3 7
23. Communication flow 13 25 10 28 12 28 16
35 2 26 34 25 3 26 35 28 10 13 17 29 2 35 11 35 2 12 31 35 3 29 2 10 12 2 13 35 31 24 3 35 13 14 39 27 35 34 2 40
24. Harmful factors affecting system 24 15 30 12
25 10 39 24 3 26 35 29 24 10 1 34 35 15 30 2 15 3 5 13 25 10 29 13 12 2 15 19 23 40 2 30 40 22 26 2 35 40 24 26
25. System-generated harmful factors
29 13 21 24 39
3 26 6 11 35 5 19 28 32 2 35 3 13 2 15 10 35 2 12 31 24 35 28 1 29 5 16 10 13 25 2 5 25 3 40 20 27 17 40 3 8
26. Convenience
10 30
27. Adaptability/versatility 2 40 38 30 35 29 1 17 40 38 13 17 7 15 19 1 17 40 3 29 15 1 10 27 7 15 17 40 3 29 29 28 30 3 15 35 13 8 24 29
29 25
25 2 26 5 29 10 18 28 2 35 29 30 35 17 3 35 19 1 25 2 38 24 16 15 3 2 4 15 28 35 32 28 5 3 25 37 40 13 35 1 2 9
28. System complexity 35
30 12 25 40 2 18 28 19 15 6 5 28 37 3 25 22 2 37 4 32 28 32 25 2 37 2 28 15 24 37 25 8 22 28 32 11 13 2 35 25
29. Control complexity 37 40 2 25 25 37
25 9 24 39 7 3 40 19 1 24 2 23 5 30 10 10 3 25 7 40 1 10 15 25 24 2 1 19 13 10 39 5 3 17 29 13 35 11 35 24 19 2
30. Tension/stress 19 13 35 19 2 25
9 1 37 3 19 11 25 1 3 4 15 5 25 10 35 19 3 25 10 4 35 3 5 27 20 18 9 13 1 25 14 33 15 23 17 7 25 26 1 10 12
31. Stability
295
296

Appendix B: Business Contradiction Matrix (Mann 2004) (Continued)

21. Customer revenue/demand/

24. Harmful factor affecting

22. Amount of information
What is deteriorated ?

23. Communication flow

20. Support interface
18. Support time
17. Support cost

19. Support risk

feedback

system
What should be Improved?

16. Support spec/capability/means 2 25 10 35 15 22 25 15 3 32 13 22 10 35 4 28 25 5 7 2 24 28 25 7 22 5 13 10 28 3 25 37 4 10 28 37 3 7 27 35 34 2 40

6
17. Support cost 5 4 25 10 17 27 35 25 14 1 26 25 37 3 24 24 25 37 3 7 28 28 3 17 37 32 4 25 1 28 32 20 1 35 22 25 17
14 13 31 2 18 35
18. Support time 5 4 25 10 17 15 29 9 19 1 15 29 10 1 35 7 20 24 35 25 1 2 15 35 25 4 6 31 2 35 28 37 35 15 1 3 10
14 13 18 35 31 30 26 37
19. Support risk 27 35 25 14 1 15 29 9 19 1 5 6 40 33 7 24 20 7 4 13 35 25 25 3 28 35 37 29 31 6 2 30 15 25 35 11 15 19
31 18 35 31 24 10 10 1
20. Support interface 26 25 37 3 24 15 29 10 1 35 5 6 40 33 7 24 16 17 40 13 10 1 3 37 2 28 7 4 2 3 15 18 25 11 24 35 5 21
2 30 25 14
21. Customer revenue/demand/feedback 24 25 37 3 7 7 20 24 35 25 20 7 4 13 35 16 17 40 13 10 2 29 3 35 13 1 29 31 30 7 13 39 3 5 17 26 35
28 18 26 25 24 25 37 28 4 17 38
22. Amount of information 28 3 17 37 32 1 2 15 35 25 4 25 3 28 35 37 1 3 37 2 28 7 4 2 29 3 35 13 1 2 37 3 4 31 28 22 10 1 2 35
4 37 10 37 28 4 7
23. Communication flow 25 1 28 32 20 6 31 2 35 28 29 31 6 2 30 2 3 15 18 25 29 31 30 7 13 2 37 3 4 31 28 6 30 15 28 13
35 37 15 10 17 38 7 36 2
24. Harmful factors affecting system 1 35 22 25 17 35 15 1 3 10 25 35 11 15 11 24 35 5 21 39 3 5 17 26 35 22 10 1 2 35 6 30 15 28 13
19 1 14 36 2
25. System-generated harmful factors 2 24 35 22 13 35 15 29 3 1 25 3 4 35 15 25 13 22 10 17 38 10 6 5 35 24 10 21 22 29 19 1 28 4 35 7 24 35 3 24 4 13 31
31 10 19 19 15
26. Convenience 25 1 12 26 10 5 25 13 2 10 2 3 25 10 16 5 7 5 6 20 26 2 28 27 35 40 1 27 25 4 10 22 25 1 19 29 35 2 25 28 39 15
15 31 30 13 6 19 18 10
27. Adaptability/versatility 17 35 15 1 3 2 3 30 40 29 17 1 30 40 17 14 29 30 17 14 18 40 17 16 14 15 15 10 2 13 29 3 25 6 37 40 15 35 11 22 32 31
15 1 1 4 19
28. System complexity 35 1 25 2 17 28 15 17 32 13 35 4 2 37 28 17 29 37 10 25 1 2 19 10 4 10 25 13 40 2 1 25 4 37 6 18 22 19 29 40 35
37 4 13 15 10
29. Control complexity 15 25 19 28 28 25 37 15 3 10 15 1 34 37 25 15 10 30 29 25 2 7 37 6 4 2 7 25 19 1 40 25 1 19 37 10 3 15 2 22 25 9
37 14 19 37 28 26
30. Tension/stress 35 24 10 2 25 2 24 10 40 25 10 11 39 1 24 10 8 2 24 6 21 2 10 12 24 25 2 28 35 10 24 3 4 6 7 13 36 11 25 30 2 35
31 19 8 35 13 31 28
31. Stability 1 35 2 29 10 10 15 2 30 29 10 35 7 9 19 1 11 1 40 13 22 10 40 29 30 28 11 13 25 2 24 37 1 39 40 9 31 35 24 30 18 33
12 23 26
 25. System-generated harmful

27. Adaptability/versatility
What is deteriorated ?

29. Control complexity

28. System complexity

30. Tension/stress
26. Convenience

31. Stability
factors
What should be Improved?
2 35 40 24 26 27 17 40 3 8 35 13 8 24 29 13 35 1 2 9 11 13 2 35 25 11 35 24 19 2 25 26 1 10 12
16. Support spec/capability/means 39 25
2 24 35 22 13 25 1 12 26 10 17 35 15 1 3 2 35 1 25 2 17 15 25 19 28 37 35 24 10 2 25 1 35 2 29 10
17. Support cost 31 10 15 31 19
35 15 29 3 1 5 25 13 2 10 3 30 40 29 17 28 15 17 32 37 28 25 37 15 3 1 2 24 10 40 25 8 10 15 2 30 29
18. Support time 19 4 12
25 3 4 35 15 2 3 25 10 16 5 1 30 40 17 14 13 35 4 2 37 10 15 1 34 37 10 11 39 1 24 10 35 7 9 19 1
19. Support risk 19 15 35
25 13 22 10 7 5 6 20 26 2 29 30 17 14 28 17 29 37 10 25 15 10 30 29 10 8 2 24 6 21 11 1 40 13 22
20. Support interface 17 31 18 1 4 13 13 23
38 10 6 5 35 28 27 35 40 1 40 17 16 14 25 1 2 19 10 4 25 2 7 37 6 4 2 10 12 24 25 10 40 29 30 28
21. Customer revenue/demand/feedback 24 30 15 1 19 26
10 21 22 29 27 25 4 10 22 15 10 2 13 29 10 25 13 40 2 2 7 25 19 1 40 2 28 35 10 24 11 13 25 2 24
22. Amount of information 19 13 6 19 34 37 31
1 28 4 35 7 24 25 1 19 29 35 25 6 37 40 15 1 25 4 37 6 18 25 1 19 37 10 3 4 6 7 13 36 37 1 39 40 9 31
23. Communication flow 18 19
35 3 24 4 13 2 25 28 39 15 35 11 22 32 22 19 29 40 35 3 15 2 22 25 9 11 25 30 2 35 35 24 30 18 33
24. Harmful factors affecting system 31 15 10 31 15 10 28 26 28
1 15 13 34 31 3 1 29 15 10 25 3 15 22 10 25 3 15 22 10 11 25 12 8 37 35 40 27 39 2
25. System-generated harmful factors 16 24 23 13 23 13 35
1 15 13 34 31 15 34 1 16 29 26 27 32 9 12 25 5 10 12 24 10 5 14 12 13 32 35 30 25 13
26. Convenience 16 36 19 24 17 28 3 35 19 3
3 1 29 15 10 15 34 1 16 29 15 29 28 5 37 25 15 1 28 37 3 17 40 30 3 15 35 30 14 34 2
27. Adaptability/versatility 24 36 19 6 35 25 19 16 19 10
25 3 15 22 10 26 27 32 9 12 15 29 28 5 37 25 19 1 28 37 3 1 10 2 24 4 19 2 22 35 17 19
28. System complexity 23 13 24 17 6 35 25 26 26 24
25 3 15 22 10 25 5 10 12 24 25 15 1 28 37 25 19 1 28 37 11 24 35 2 40 11 28 32 37 25
29. Control complexity 23 13 28 3 3 3 26 25 24
11 25 12 8 37 10 5 14 12 13 17 40 30 3 15 1 10 2 24 4 19 11 24 35 2 40 29 35 11 24 19
30. Tension/stress 35 35 19 16 25 13
35 40 27 39 2 32 35 30 25 35 30 14 34 2 2 22 35 17 19 11 28 32 37 25 29 35 11 24 19
31. Stability
13 19 3 19 10 26 24 24 13
297
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 Chapter

Design and Improvement

10
of Service Processes—
Process Management

10.1 Introduction

There are two key aspects in delivering service to customers: the service
product and the service process. Designing and improving the main service
process and other supporting processes is a key task in achieving superior
service quality.

What is a process? Caulkin (1989) defines it as being a “continuous and

regular action or succession of actions, taking place or carried on in a definite
manner, and leading to the accomplishment of some result; a continuous
operation or series of operations.” Keller et al. (1999) defines the process as
“a combination of inputs, actions and outputs.” Anjard (1998) further defines
it as being “a series of activities that takes an input, adds value to it and
produces an output for a customer.” This view is summarized in Fig. 10.1.

Processes involve a series of steps by which the inputs are converted into
outputs, which may be goods, information, or services. The quality of
outputs is entirely dependent upon the quality with which the processes are
executed. In the manufacturing industry, the quality of a manufactured
product depends on the quality of the process used to manufacture it. In a
restaurant, the taste of a meal, the time from order to delivery, the cost, and
customer satisfaction are all highly dependent on the quality of the service
process. The quality of processes implies that the correct steps are used in
the right order, the correct tools are used in the process, the correct technique
is applied, and everything is performed at the right time.

A process that achieves maximum quality and efficiency and uses minimum
cost to run is often said to have achieved process excellence. The process

299

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300 Chapter Ten

Materials

Procedures

Methods
Products
Information (including
specifications)

Services
People
Process
Skills
Information
Knowledge

Training
Paperwork
Plant and equipment

Inputs Outputs

Figure 10.1 A Diagram of a Process (Oakland 1994)

excellence implies in part that waste is minimized. Wastes include unnecessary

steps, unnecessary works, unnecessary movements, and unnecessary con-
sumption of resources. Minimization of waste brings about more efficient
application of resources, the work force, space, raw materials, and time.
Efficient use of time and all other available resources can only be achieved
through superior design and continuous improvement of processes. The method
for designing and continuously improving processes is process management.
By enhancing the efficiency and effectiveness, process management offers the
potential to improve customer satisfaction and, ultimately, to offer increased
profits, high growth, and long-term business stability. As a matter of fact, most
organizations, both large or small, operate based on a variety of processes.

In fact, everything that we do uses some process, whether the process is

documented or not, and whether it is followed precisely or not. Figure 10.2
shows a typical business operation model for any company. The common
processes in a business operation often include
Core processes
• Service delivery process for delivering services to customers
• Manufacturing process for transforming raw materials into finished
goods
• Product development process for designing new products and enhancing
existing ones
• Marketing process for marketing products or services to customers
 Design and Improvement of Service Processes—Process Management 301

Products

Core operation
Product development
and product delivery

Business processes

Business management

Supplier management

Information technology

Figure 10.2 Business Operation Model

Supporting processes
• Accounting and finance process for running financial transactions
• Personnel process for hiring, firing, and promotion of employees
• Purchasing and supplier management process for acquiring supplies
and services needed to run other processes

In fact, processes are everywhere in an organization. Processes found in

organizations are involved in some product or service development, some
production or operations to provide a service, some customer support, some
marketing activities, some sales activities, and so on. Depending on the
nature of the company’s business, certain processes are more important than
others. For service-oriented companies, service delivery processes are
clearly very important. In an industry where frequent new product intro-
ductions are critical for maintaining market share; for example, the movie
industry, the design and development processes may be the most important
processes. The most important consideration in deciding what are important
processes is who the customer is. The most important processes are those
that directly affect the customer value creation.

Optimization of processes, especially the key processes, is extremely

important for the bottom line of service organizations. Process management
is a systematic approach to optimizing processes in terms of the following
process metrics:
• Quality
• Throughput
302 Chapter Ten

• Efficiency
• Response time and speed
• Work-in-process (WIP) inventory
• Process cost
Other metrics such as safety may also be important. Most organizations are
motivated to manage their processes through several of these metrics. In
process management, the goal is usually to maximize profits, maintain a
high level of customer satisfaction, and achieve long-term process stability.

Process management is a disciplined, systematic approach used to identify

process issues, analyze them, design and improve the process, and maintain
the improved process. Process management involves the following five
phases:
1. Process mapping
2. Process diagnosis
3. Process design
4. Process implementation
5. Process maintenance
A variety of tools are used in process management. These tools include
lean manufacturing and operation, process failure mode and effect analysis,
computer simulation, data collection, and statistical analysis. The key for
success in process management is to select the most appropriate tools to be
used at each process management phase. We now briefly discuss each
phase.
1. Process mapping: A process map is a schematic model for a process.
“A process map is considered to be a visual aid for picturing work
processes which show how inputs, outputs and tasks are linked”
(Anjard 1998). Process mapping is used to develop a process map for
the process under study. There are a number of different methods of
process mapping; these methods include a process flowchart, IDEF0
process mapping, and value stream mapping. Once the process has
been mapped and documented, the process diagnosis can then proceed.
2. Process diagnosis: Process diagnosis is used to try to identify the key
problems in process performance and the root causes for these
problems. The tools used in process diagnosis include process failure
mode and effect analysis, cause-and-effect diagrams, lean manu-
facturing and operation principles, and value stream mapping analysis.
3. Process design: Process design involves the following activities:
• Understanding the requirements of the process and translating the
requirements into process design options
 Design and Improvement of Service Processes—Process Management 303

• Developing design alternatives for the process

• Analyzing the alternatives to establish one candidate as the best
process to be implemented
Process design employs many tools including quality function deploy-
ment, lean manufacturing principles, value stream mapping analysis,
computer simulation for evaluating the candidate process designs, and
decision analysis for resolving complex tradeoffs.
4. Process implementation: Process implementation involves final val-
idation of the process and controlled dissemination throughout the organ-
ization. This includes procuring and installing tools and equipment
required for the process, as well as training activities required for the
correct application of this new process.
5. Process maintenance: Process maintenance involves ongoing
monitoring of the process and periodic improvement to ensure process
performance remains high, despite changing internal and external
conditions.

This chapter is devoted to covering all-important aspects of process man-

agement. Section 10.2 discusses some basic aspects of processes. Section
10.3 discusses several types of processes, their performance metrics, and
process features. Section 10.4 describes several commonly used process
mapping approaches. Section 10.5 discusses lean operation principles,
Section 10.6 gives a detailed description of how process management works.
Section 10.7 gives a process management case study.

10.2 Process Basics

10.2.1 What Is a Process?

Processes occur in a wide variety of forms and in many different areas, but
the common factor is that every process consists of several steps that are
used to convert some kind of input into output. Inputs may be raw materials
or information, and outputs may be finished goods or services.

A process must be clearly distinguished from the tools and resources that
are used in the process. The essence of a process is in the act of doing—the
steps involved in doing something. The tools and resources are the means
whereby the doing is accomplished. The reason why the act of doing has to
be separated from the means for doing is that there may be a variety of tools,
resources, techniques, and methods used to achieve the same objective. In as
much as the process steps are distinguishable from the process tools and
304 Chapter Ten

resources, any analysis of a process must pay adequate attention to the tools
and resources because they too will impact greatly on the output or result of
the process.

Also note that the product of a process is different from the process itself.
The process is the act of doing; the product is the result of doing. The
product is the footprint of the process that is left behind.

10.2.2 Understanding Processes

A process is similar to a project. Both processes and projects use a series of

steps or operations to convert inputs into outputs. The key distinction
between processes and projects is that processes are often fairly repetitive
and follow the same or similar steps; on the other hand, projects may be
viewed as single-pass activities or may be considered to be performed only
intermittently and to follow a potentially different sequence each time. On
the whole, however, projects and processes are more alike than they are dis-
similar. Therefore, to a great extent both terms may be used interchangeably.

A unique and particularly interesting perspective is that processes are the

integrating elements of any system. In other words, processes are the glue
that holds a system together. All the tools as well as equipment and
personnel in a system are inherently independent entities. The only way to
get them to work together and accomplish something meaningful is through
a series of process steps. This occurs as the process is performed, so flows
and interactions take place between the process steps as well as between the
resources that are in use.

If the processes are well designed, then there will be synergy between the
independent elements of the process. This is what results in excellent process
performance. If the process is poorly designed, then the result will be entropy
and, therefore, poor process performance. In integration, synergy implies
that the integrated whole is greater than the sum of the independent elements
or parts. On the other hand, entropy implies that the whole is less than the
sum of the independent parts. The final lesson, therefore, is that most system
problems are due to poor integration, and any attempt to enhance integration,
whether by using management techniques or computer integration, must
focus on improving the processes that tie all the elements together.

Because of the sequential nature of processes, some dependency will often

exist between two or more process steps. Such dependencies are known as
dynamic interactions because they are not fixed; rather, their interaction
 Design and Improvement of Service Processes—Process Management 305

patterns change constantly over time. For example, queues may form during
processes, such as those in manufacturing, when one process step or
operation is working faster than the next operation in the sequence. If there
is any variability in the operating rates, then the length of the queue may
also fluctuate.

Dynamic interactions make it so that we cannot analyze one process step in

isolation of the others, because many of the occurrences at one process step
may have been caused by another process step located upstream (or even
downstream). By the same token, any event at a process step may have
ripple effects, through dynamic interactions, both upstream and downstream.
Process starving is one type of dynamic interaction where one process step
cannot work even though it is in good operating condition, because an
upstream operation is not providing its needed input. Process blocking is
another type of dynamic interaction where an operation has to stop because
it cannot send on its output due to a problem downstream. Also, the stack-up
of variation on a part as it flows through a process where each operation
modifies a particular attribute on the part represents another type of dynamic
interaction. To obtain the variability of the overall process, we cannot
just sum up the variability of each operation as if the variabilities were
independent. The interaction effects must also be accounted for.

By considering the time dimension of a process, we can observe the manner

by which it evolves. A process is composed of one or more steps used to
transform some input into one output or a series of outputs. Each step or
operation may take some time to complete; this is the duration of the process
step. By observing the process in detail, a number of discrete points in time,
called event times, can be identified when certain changes occur in the
process. Events may, for example, include the starting and ending times for
each process step. Milestones are also event times and are highlighted in
order to focus on the occurrences at that event time. For example, the
midpoint of a project may be considered to be the milestone point at which
project progress is reviewed and certain adjustments can be made.

10.2.3 Process Resources and Constraints

A central issue in the design of a process is determining what tools and

other resources are needed for the process to be at its best. Resources are
generally defined to include key personnel with specified skills, equipment
with specified capabilities, and ancillaries necessary for the process to
operate. Such ancillaries may include space facilities or certain consumable
materials that are needed.
306 Chapter Ten

The personnel needed by a process may vary according to the types of

skills that are required, but practically all processes will call for some
degree of human participation. Personnel may be operators of the process
or equipment used in the process, they may be managers that manage the
process, or they may be repair crews fixing equipment when failures occur.
The attitude, skill, and experience of these personnel will almost always
play a major role in determining what the process does, how it accom-
plishes the job, and the degree of excellence in the process. Selecting the
right personnel for the right task is perhaps the most important step of
process design.

The equipment for a process includes all machinery, computer systems, or

other technological infrastructure that is used by the process. The equipment
resources that are selected for a process must be well matched to the
requirements of the process. Process designers must strive to avoid the
“technology for technology’s sake” mentality that may lead to the purchase
of certain equipment that will not really serve the needs of the process.
Selection of equipment is important, and justification for the selection must
not be limited to the traditional return on investment (ROI) and internal rate
of return (IRR) analysis. Rather, the impact of each type of equipment under
consideration on the entire process must be considered.

The technique or method used with each type of equipment is also an

important aspect of the role of equipment. Having correct equipment but
using it incorrectly may not be any better than not having it at all. This
emphasizes the importance of training. Equipment users should be trained
and retrained in the correct methods or techniques. In addition to regular
training, any lessons that are learned while procuring, installing, operating,
and maintaining the equipment should be documented and made available
to all involved.

Ultimately, the personnel and equipment required by a process can only be

made available with an adequate amount of financial resources. Providing
these resources is the responsibility of management in the organization. If
adequate finances are not available, this will act as a major constraint on the
ability to achieve the objective of the process.

Other constraints may also exist; for example, governmental regulations

that stipulate what can and cannot be done in a process. It is important for
process designers to distinguish clearly between constraints that are
desirable and those that are not desirable. Desirable constraints may also be
known as controls of the process. Of those controls that are undesirable and
 Design and Improvement of Service Processes—Process Management 307

act to hamper the process, it is important to know which ones can be

influenced or minimized and which are beyond the ability of process
designers to change or modify. Scarce resources must not be spent on
attempting to relieve process constraints that are unchangeable.

Process controls include all rules and regulations as well as guidelines that
are provided for the process, By carefully designing and implementing
process controls, it may be possible to improve the performance of a process.
However, process designers must proceed cautiously. The field of process
design is filled with examples of process controls that turn out to have
unforeseen side effects, and those side effects may be worse (much worse in
some cases) than the original problem itself.

10.2.4 Process Documentation

Processes are central to everything that we do, and it is important that they
be well documented. Process documentation is important because processes
are abstract, yet it is essential to communicate about them to others. A
process is very different from a concrete object that can be held, viewed,
and passed around.

Good process documentation is a prerequisite that is necessary for any

process analysis. In addition, training of personnel in the execution of a
process also requires that the process be well documented. Any method
used to document processes is known as a process description language
(PDL). PDLs range from plain English recipes, to various process maps,
such as flowcharts, IDEF0 charts, value stream maps, and even computer
simulation models. Each type of PDL has its strengths and weaknesses.
For example, plain English recipes are easy to read, but they may also be
quite easily misunderstood. Process charts are highly graphical, providing
a pictorial representation of processes; however, it is hard to use them to
describe the full details of a process. All PDLs, both structured and
unstructured methods, document, at the very minimum, what the process
does and how it is done.

Additional information, provided by PDLs, may include

• Areas of emphasis in the process
• Inputs to the process
• Outputs from the process
• Roles and responsibilities for the process
• Constraints on the process
308 Chapter Ten

• Tools and equipment in the process

• Personnel participating in the process
• General resource goals of the process
• General resources available for the process
• Rules and regulations in the process
• Guidelines and techniques for operating the process
• Any exceptions to process guidelines, techniques, rules, or regulations

Process design uses PDLs as tools for documenting processes, and the final
design of a process should be documented using a PDL. The PDL acts as the
blueprint for the process in much the same way a drawing is typically used
as the blueprint for a new product design.

10.2.5 Process Performance Metrics

Any process design or improvement effort must ultimately confront the

questions, How good is good? and What does good mean? Good for a
process may mean, for example, low cost, high quality, or highly flexible.
Therefore, in designing and improving a process, it is essential that the
process management team establish exactly what good means to the organ-
ization. These will be the metrics for measuring the quality of the process.

Commonly used metrics include

• Process quality
• Process efficiency
• Process throughput
• Process flexibility and agility
• Process stability and robustness
• Human factors, ergonomics, and morale
• Process cost
Most organizations are interested in a mix of two or more of these metrics.
The typical organization will want its processes to provide excellent
quality, while yielding low cost and a satisfactory level of employee
morale. When two or more metrics are considered, especially if an
improvement in one metric may cause degradation in another, then relative-
importance weights must be supplied for making the tradeoffs between the
different metrics.

Before a process management project begins, there must be clear agreement

regarding which metrics will be considered and how interactions between
different metrics will affect the overall system performance.
 Design and Improvement of Service Processes—Process Management 309

10.2.6 Ingredients of Process Excellence

For processes to be truly excellent, they must be designed with

1. The best steps
2. The best tools
3. The best techniques for applying the tools
4. The best timing (that is, do everything at exactly the right time)
There are however, five key ingredients that are needed in order to develop
and establish processes that conform to the four requirements for process
excellence. The ingredients are dependent on one another and must exist in
combination not in isolation. Having a few of the factors but not the others
will not yield the full benefits of process excellence.

The five ingredients of process excellence are

1. Discipline
2. Creativity
3. Skill and knowledge
4. Decision making
5. Communication
The ingredients are not listed in any particular order. They are all very
important. Discipline requires a focus on the key processes with a detail-
oriented attitude and a commitment to do what it takes to ensure that the
processes continually become better. With discipline, an increased
awareness and deep relationship with processes can be established to
understand what makes the processes tick. Discipline also provides the
ability to trade off short-term goals for long-term goals.

Once the processes have been well established, it will take discipline and
commitment to stick to the established processes and continue to apply sys-
tematic methods for managing the entire organization. The needed dis-
cipline must be embedded into the culture of the organization so that it
becomes a way of life. The foundations for such a cultural atmosphere is
created by all in the organization, but the direction is greatly influenced by
management’s leadership. Remember, process discipline may not be fun
and games, but the rewards will be great over the long term, and the effort
always pays for itself many times over.

Creativity incorporates the spark from the human mind into the whole effort
for the designing, improving and operating processes. Creativity comes
from the unique domain of the people asset. Everybody is an expert at
310 Chapter Ten

something, even the “lowly” machine operator. Considering any individual

to be irrelevant to process management is to potentially overlook a major
source of innovative ideas for process improvement. In general, those with
the most proximity to the processes of interest will know more about its ups
and downs and, if given the opportunity, might contribute many excellent
ideas for making the processes better. Remember, the manager may not
have all the answers, at least not always.

Creativity flourishes in an environment of freedom and autonomy, and

organizations that are interested in boosting the levels of their process
performance must provide such a creativity-facilitating environment so
that good ideas can bubble to the top. It is difficult to generate creativity
on demand, but it is certain that less-restrictive cultures, cultures that
focus on longer-term rather than shorter-term value, and organizations
that respect the human individual, will find ways to improve continuously.
3M is well known as an organization with a creativity-facilitating culture.
The impacts of this on the bottom line are clear and have been well doc-
umented.

With discipline and creativity, an organization must also possess the right
skill and knowledge. Like creativity, skill and knowledge lie exclusively
within the human domain. Individuals with the required skill sets must be
sought out and placed where they can influence processes in the most
positive way. Knowledge includes everything from process know-how and
techniques to guidelines, do’s and don’ts, and procedures.

No organization knows everything that it needs to know, and there are

frequent opportunities to learn from mistakes as well as successes. The
importance of such knowledge must be recognized, and a lessons-learned
process must be established to capture, document, and disseminate such
knowledge as it is discovered; this is what it takes to become a learning
organization. Furthermore, never-ending education is what it takes to have a
skill base in the organization that is able to stay current with changes in
technology and in society or lead in the introduction of such changes.

Decision making is another core ingredient for process excellence.

Organizations with discipline, creativity, and knowledge, but poor decision-
making capabilities will be severely limited in their ability to develop
excellent processes. Decision making involves all negotiation and trading-
off of the different perspectives represented in the organization. It involves
a trading-off of global versus local issues and of remote versus imminent
issues. No one perspective is universal; therefore, to make the best decisions
and to find the best configuration for its processes, an organization must
 Design and Improvement of Service Processes—Process Management 311

involve all stakeholders and balance their viewpoints in order to find out
what is best.

Decision-making skills require many attributes such as good listening skills,

clear communication and expression, logical thinking, as well as relevant
knowledge and creativity. Many techniques such as brainstorming, the
nominal group technique, and decision analysis are very useful for involving
several individuals or teams in decision making to improve the orga-
nization’s processes.

The last, but certainly not the least important, ingredient for process
excellence is organization-wide communication. Communication is necessary
to obtain the necessary buy-in and an adequate level of understanding from
all the stakeholders of the processes. Stakeholders include the organization’s
customers, those who will implement the process, those who are impacted
upon by the process, the organization as a whole, and the management team
of the organization.

Through communication, the goals of the processes must be understood by

all stakeholders. These goals should also be clear in the context of the orga-
nization’s mission statement. In addition, communication is necessary for
disseminating processes organization-wide, for access to process guidelines
and procedures, for decision making, and for tracking processes to
determine when corrective or preventive maintenance may be needed. Other
issues that need to be communicated include
1. Pressing problems that need urgent action to be solved
2. Alternatives to be considered in finding a solution
3. The problem and decision-making context
4. Factors influencing decision making
5. The selected alternative and the explanation of why it was chosen
6. The final specification of the process

New technologies such as the World Wide Web, videoconferencing, tele-

conferencing, and computer-aided group decision-making systems show
great potential in providing mechanisms for enhanced, more convenient,
and more frequent communication between individuals and teams, even
when they are separated by time and great distances.

10.3 Process Types and Process Performance Metrics

In any business enterprise, processes exist everywhere, and they are really
among the most important elements. There are many kinds of processes,
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and they work differently. The frequently encountered processes can be

classified into the following categories:
• Product design and development
• Manufacturing or production
• Office or transaction
• Service factory
• Pure service shop
• Retail service store
• Professional service
• Telephone service
• Project shop
• Logistics and distribution
• Transportation service
• Purchasing and supply chain
Each category has distinct features, and we discuss each in detail.

10.3.1 Product Design and Development Process

For the manufacturing industry, product design and development is a key

process, and it is also usually the most technically sophisticated, costly, and
time-consuming process. For the service industry, the product design and
development process does exist, but its importance and features vary from
industry to industry. For the movie industry, the products are films. Here the
product development process is clearly very important and creativity is very
important; however, mass production is simply the duplication of films. The
software industry is also very product oriented; the products are clearly the
software, and the product development process is extremely important. For
the health-care industry, the service product can be defined as diagnosis-
treatment-care; this diagnosis-treatment-care planning process can be
treated as a product development process. The plan will be different for each
patient, and it will be developed quickly after the patient is admitted and
might be changed due to changing circumstances.

Processes in product design and development include the conceptual and

detailed design of products by designers. Design focuses on issues such as
functionality of the product as well as aesthetics and ease of manufacture.
Other tasks in product development may include building and testing of
prototypes using various test equipment and analysis of candidate designs.
Common goals in product design and development processes include
shortening the required time to design new products, more frequent intro-
duction of new designs, producing designs that are more innovative while
 Design and Improvement of Service Processes—Process Management 313

meeting customers’ needs and reducing the cost required to design new
products.

In general, product development involves activities that are used to

1. Determine that a new product is required to serve some needs
2. Conceive of a concept for the product based on the wants and needs of
customers
3. Develop all technical specifications for the product
4. Devise a production process
5. Validate both the design and the production process
A simple process flowchart for a product development process is shown in
Fig. 10.3.

For many industries, product development is particularly important because

it is the activity that has the greatest impact on the cost, quality, market
acceptability, reliability, manufacturability, and disposability for the product.

Stage 0: Impetus and ideation

Stage 1: Customer and business requirements study

Stage 2: Concept development

Stage 3: Product, service design, prototyping

Stage 4: Manufacturing process preparation and product launch

Stage 5: Production

Stage 6: Product and service consumption

Stage 7: Disposal

Figure 10.3 Product Development Process Flowchart

314 Chapter Ten

Decisions made in the product development phase of a product’s life cycle

will lock in most of the subsequent attributes of the product for many years
to come.

As competitiveness hinges more and more on a company’s ability to rapidly

and efficiently bring new products to market, product development for most
companies will become a paramount area for improvement. Considerable
evidence exists that much of the success of Japanese automobile manu-
facturers has hinged on the speed, efficiency, and effectiveness of their
product development processes.

Examples of Product Development Processes

Product development, movie film production

Product Development Performance Metrics

Product Development Lead Time

Most companies consider their product development lead time to be excep-
tionally important for determining the performance of their product develop-
ment activities. Product development lead time is particularly important
because this metric determines the speed with which new products can be
introduced into the marketplace. Companies that have high speed in product
development can introduce new products more often and adapt more
quickly to changes in customer tastes. This ultimately translates into a larger
market share for the company. Lead time is usually measured in months and
can range from fractions of a month to tens of months, depending on the
complexity and skill of a company’s product development.

Efficiency
In attempting to reduce product development lead times, however, few
companies can afford to ignore the efficiency of their product development.
In product development, efficiency is the cost of the work force and other
resources required for product development.

Robustness
In addition, the robustness (including quality, reliability, flexibility—how
well the product does what it was meant to do) of the design is particularly
important for evaluating any product development process.

Life Cycle Cost

Life cycle costs, including development costs; production costs; sales and
distribution costs; service, support, and warranty costs; and disposal costs
 Design and Improvement of Service Processes—Process Management 315

may be included in computing the life cycle cost for a product. Some
companies even include the costs due to pollution during the production and
use of the product as part of the holistic analysis of the life cycle cost.
Product development has a particular vested interest in keeping the life
cycle cost for any product as low as possible.

On a longer time scale, product development lead time, efficiency, robustness,

and life cycle costs will contribute a great deal to the level of customer satis-
faction, market share, and revenues that the company will have. These will in
turn translate into profitability and influence the organization’s long-term
business viability.

Product Development Process Analysis

Typical activities in product development start from the initial step of

market research, where the needs and wants of the market are determined,
to production launch, where the product manufacturing can start in earnest.
Product development activities include
• Market research
• Conceptual design
• Detailed design
• Prototype development
• Prototype testing and validation
• Process and tooling design
• Production launch
The common problems in product development process include
1. Excessive time to market
2. Excessive resources used to develop products
3. Chaos and confusion in the product development process
4. Market rejection of new product
5. Excessive product cost
6. Poor product quality and reliability
These common problems are often caused by
• Poor tradeoffs between product features, functionality, and cost
• Excessive complexity of product
• Poor understanding of the market
• Poor product and technology knowledge
• Poor coordination actions and decision making
• Excessive information flow delays
• Poor decision-making process
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• Frequent information and data loss and incompatible data transmission

formats
• Poor or inadequate communications
• Poor project and process management
• Market complexity (number of product types, product complexity,
supply chain complexity)
• Market uncertainty or turbulence

10.3.2 Manufacturing or Production Process

Manufacturing (also known as production) involves all the activities that are
used to transform raw materials and add value to them, in a series of steps,
to bring them to a state where they will be purchased by end-customers.
Each type of operation requires certain types of equipment and may be
highly automated or mostly manual. The processes may operate on a few
product types in large volume or have a high variety with small quantities of
each product type. Scheduling of product flows through the production
processes is important in order to produce items on a timely basis for
customers. In addition, the equipment needed in manufacturing and regular
maintenance activities are required to keep them in good operating condition
and minimize downtime due to unanticipated failures. Manufacturing holds
a special place in society as the primary means whereby prosperity is
generated. As the primary engine for prosperity, it has also been recognized
by economists that manufacturing productivity or efficiency is a key
ingredient for long-term societal well being.

There are several common types of manufacturing processes:

• Job shop
• Cellular manufacturing
• Batch flow shop
• Line flow shop
We discuss these in detail.

Job Shop

A job shop consists of an arrangement of workstations, usually by function

or by the type of process they perform. Job shops generally produce a wide
variety of parts in low volume. Based on the operations required, each part
type has a routing that may not be defined until the actual production time.
This dynamic routing allows machines to be selected based on availability,
since some operations can often be performed on more than one machine.
Job shops are still the most common type of manufacturing: It is estimated
 Design and Improvement of Service Processes—Process Management 317

Raw material 1 Product 1

Product 2
Raw material 2

Raw material 3 Product 3

Figure 10.4 A Typical Job Shop

that 75 percent of all manufacturing is done in production batch sizes of

50 items or less. Job shops may be either a “one-of” type in which only one
of something is produced (tooling or prototype shop) or a repeating type in
which quantities are usually greater than one and similar jobs are produced
again in the future. In the case of job shops, the general range of processes
anticipated are considered in the selection of equipment. General-purpose
equipment is used that is capable of providing processes for a broad range
of products. The flowchart for a typical job shop is illustrated in Fig. 10.4.
The boxes in the figure are machines or workstations.

Job shops tend to be very inefficient with long lead times and high work-in-
process inventories. These are some of the reasons for the inefficiencies of
job shops:
• Manual material movement
• Manual operations
• Long setup times
• Low equipment utilization
Examples of job shops include
• Metalworking
• Fabrication or machining operations
• Maintenance facilities for the aerospace industry

During operation, the general job shop problem is to schedule the production
of N jobs on M machines. For each job, the sequence of machines is known
as well as the processing time on each machine. Due dates may also be
known. In scheduling, four principal goals or objectives are to be achieved:
1. Minimize job lateness or tardiness
2. Minimize the flow time or time jobs spend in production
318 Chapter Ten

3. Maximize resource utilization

4. Minimize production costs
The performance measures of job shops and the decision variables that can
be changed in controlling a job shop include the following:
Performance measures
• Time to complete a set of jobs (rnakespan)
• Number of completed jobs that are tardy
• The average lateness of jobs that are completed
• Utilization of equipment
Decision variables
• The job selection rule
• The sequence in which jobs are processed
• The routing for a particular job if alternative routings are possible
• The resources assigned to particular jobs
• The transfer batch size
• Use of overlapped versus nonoverlapped production
• Overtime and shift policies
• Assignment of resources to workstations

Cellular Manufacturing

An alternative to a job shop is cellular manufacturing in which machines

are grouped into cells according to common processes. A manufacturing
cell is a group of machine tools and associated materials handling
equipment that is managed by a supervisory computer. Manufacturing
cells are often called group technology (GT) cells since group technology
is the basis for designing the cell. Group technology is an approach to
design based on the premise that similar things should be done similarly.
Parts having similar configurations or similar processes should be
produced by the same cell of machines. A cell is an independent group of
machines but may be connected with other cells to form a flexible manu-
facturing system.

The flow of parts within the cell resembles the streamlined flow achieved
in line flow manufacturing. This results in greater efficiencies by con-
solidating groups or families of products together and treating them,
from a work flow standpoint, as a single product. A cell is an excellent
way to achieve the “factory within a factory” concept and is becoming a
widely adopted approach to low-volume, high-mix manufacturing. A
flowchart for a typical cellular manufacturing process is illustrated in
Fig. 10.5.
 Design and Improvement of Service Processes—Process Management 319

Cell

Raw materials

Products

Figure 10.5 A Typical Flow Chart for Cellular Manufacturing

There are three types of job flow patterns in cellular manufacturing:

• Serial flow cells
• Random flow cells
• Virtual cells
In a serial flow cell, all parts flow through the same sequence of machines and,
hence, a miniature production line is established. In random flow cells, different
parts have different routings within the cell, with the effect being somewhat
similar to a job shop. Machine utilization tends to be less in a random flow cell
than in a serial flow cell. The concept of a virtual cell was first proposed by the
National Bureau of Standards (NBS) [now the National Institute of Standards
and Technology (NIST)]. This concept uses a process layout of equipment just
like a job shop, rather than a cellular layout. Machines are treated logically as
a group even though they are physically separated. A virtual cell functions as a
cell based on the needs at the time. Individual workstations are allocated to a
virtual cell on a dedicated or time-sharing basis with other virtual cells. The
concept of virtual cells developed from the philosophy that changing production
requirements alter the part family makeup for a given production period. When
the requirements alter, the allocation of individual workstations will change.

The benefits of cellular manufacturing include the following:

• Better lead times provide fast response and more reliable delivery.
• Work in process and finished stock levels are reduced.
• Output is increased because of improved resource utilization.
• Less material handling is needed.
• Better space utilization is achieved.
• Better production planning and control is possible.
• Quality is improved, and scrap is reduced.
• Estimating, accounting, and work measurement are simplified.
320 Chapter Ten

Performance measures
• Machine utilization
• Production rate
• Utilization of the operator
• Utilization of the bottleneck station
Decision variables
• The number and types of machines in the work cells
• The batch size of a particular part type
• Sequencing of part types within the cell
• Material handling priorities within the cell

Batch Flow Shop

A batch flow shop, or flow shop, utilizes a product layout in which a

sequence of workstations is visited in the same sequence by different
product batches. Batch flow shops are similar to job shops in that many
different types of discrete parts are produced in batches. In a batch flow
shop, however, all flow is basically unidirectional following the same route
through the manufacturing facility in a production-line fashion.

A batch flow shop is composed of one or more production lines that

support a batch flow of parts. Each part may not require processing at each
station and may even bypass some stations, but the same general flow is
followed. All operations on parts of the same type are usually performed
in the same order. Batch flow shops are most commonly found in the
textile industry in which batches of different styles and sizes are processed
through the same sequence of operations. In flow manufacturing, the
emphasis tends to be on efficiency and streamlining flow. A typical batch
flow is illustrated by Fig. 10.6.

Raw Product
material

Batches of semifinished products

Figure 10.6 Batch Flow Shop

 Design and Improvement of Service Processes—Process Management 321

Performance measures
• Resource utilization
• Throughput capacity
• Work in process
• Cost
Decision variables
• Queuing between stations
• The production batch size of a particular part type
• The move batch size
• The sequence of products

Line Flow Shop (Production or Assembly Lines)

Line flow manufacturing consists of production or assembly lines and

transfer lines in which products move and are processed individually rather
than in a batch. Line flow systems are characteristic of many production
operations in which workstations are set up by product in a serial arrangement
and dedicated to manufacturing or assembling a single product. The idea is
to achieve a streamlined, continuous flow of material that leads to maximum
productivity. Labor and machines are highly utilized with little idle time.
Since transfer lines are sufficiently different from production or assembly
lines, they are treated separately.

Production and assembly operations that are of a line flow type are
comprised of a serial combination of two or more production, assembly, and
packaging stations typically connected by a continuous material-handling
system such as a conveyor. Nonsynchronous conveyors have become the
most popular and efficient material-handling system because they permit
parts to maintain a continuous flow while still allowing them to queue up
when necessary. Operations are often performed by hand and therefore
present a special challenge to keeping the flow as continuous as possible.
This is achieved by balancing the workload among stations, keeping each
station busy, and reducing the variability of each operation. Usually, the
more stations, the lower the cycle time, and hence the higher the throughput.
An alternative to stretching out a line into more stations to increase
throughput is to add parallel lines. At one extreme, a single line consisting
of n serial workstations may be used. The job is broken down into as many
small subtasks as possible without overproducing. At the other extreme
would be n parallel lines consisting of a single station each. The entire job
is performed on each single station line with as many lines as are needed to
meet demand. Many lines lie somewhere in between these two extremes and
consist of a mix of serial and parallel stations.
322 Chapter Ten

The placement and size of buffers has an impact on inventory costs and
system throughput. If the entire line stopped every time a part was
unavailable or a station failed, the line would be going down. Buffers allow
workstations to operate independently thus cushioning the effects of scrap,
part shortages, unequal production rates, workstation failures, or operator
delays. However, lean manufacturing advocates strongly disagree about the
use of buffers. They think the in-process inventories tie up the capital, hide
the operation problems, and reduce the quality.

Many products are not produced in sufficient quantities to justify a

dedicated line. Frequently a production or assembly line is used to produce
a family of similar products. Products are produced in batch runs in which
the line is temporarily shut down for product changeovers while machine
adjustments are made for the next product. The lean manufacturing process
developed quick setup procedures so that the changeover time could be
reduced to a minimum.

Production and assembly lines may be either paced, in which movement

occurs at a fixed rate and the operator must keep pace with the line, or they
may be unpaced, in which the rate of flow is determined only by the speed
of the worker. Figure 10.7 gives a typical flowchart for a line flow shop.

Examples of line flow shops include

• Appliance assembly lines
• Consumer product assembly lines
• Medical instrument assembly lines
Performance measures
• Average and variation in throughput capacity
• Average and variation in work in process
• Cost
• Balance delay (sum of the idle time for all stations/sum of the
scheduled time for all stations)
• System efficiency (actual throughput of the system/theoretical
throughput capacity of the slowest station)

Raw Product
material

Figure 10.7 Line Flow Flowchart

 Design and Improvement of Service Processes—Process Management 323

• Percentage of time stations are blocked

• Percentage of time stations are starved
Decision variables
• The number and types of machines in the work cells
• The production batch size of a particular part type
• Type of material handling
• The sequence of products
• Number of stations
• Placement and size of buffers

In the service industry, there are many processes that are similar to the man-
ufacturing process. In the restaurant business, the process of producing
meals in the kitchen is very similar to the manufacturing process. All office
processes, such as processing paperwork, insurance claims, and mortgage
applications, involve a sequence of steps on incoming materials (paperwork),
adding value to them (finishing a part of necessary procedures) in each
step, until the product is finished (paperwork done). Therefore, many well-
established manufacturing process management methods can be easily
adapted to these service processes.

Common goals in manufacturing processes are to improve throughput,

improve flexibility, increase quality, and reduce cost. Other issues such as
safety may also be important. These goals and the tradeoffs that they require
can be best attained by process management of the production processes.

Manufacturing Performance Metrics

Quality
Practically all manufacturing operations consider quality to be important.
The importance of quality stems from customers’ demands for the best value
that their money can buy. Quality, quite simply, can be assessed as the
degree to which customer requirements incorporated into the design for a
product have been met. Any manufacturing organization that does not pay
close attention to quality will slowly lose market share and disappear into
oblivion.

Production Lead Time

In addition to quality, another performance metric that influences the level
of customer satisfaction is the production lead time. Lead time is the time
it takes one piece of raw input to move all the way through the manu-
facturing process, from start to finish. In general, the shorter the lead time,
the better.
324 Chapter Ten

Work-in-Process Inventory
The lead time for a process is very closely related to the level of the work-
in-process (WIP) inventory. The WIP inventory is the amount of semifinished
units in between the process steps. For a given set of operations in a process,
the higher the WIP, the longer the lead time is likely to be. In other words,
WIP slows down the speed of a unit of product as it travels from the entry
point of the process until it becomes a finished product.

Throughput
Throughput is the rate at which a process produces its output. In a pro-
duction environment where customers will buy all units of product that are
manufactured (especially if there are demand backlogs), then it is highly
desirable to maximize throughput. The bottleneck in a production facility
acts as the primary constraint on its throughput; therefore attempts to
improve throughput must focus on the bottleneck operation.

Cost
In addition, the cost of products is particularly important in a manufacturing
environment. Since the price for which a product can be sold is usually
dependent upon the laws of demand and supply, organizations have a built-
in incentive to keep costs as low as possible in order to maximize its profit.
Cost typically has at least three main components: raw material, processing,
and overhead costs. Each of these cost components has to be carefully
managed in order to minimize the overall cost.

Flexibility
In an age of increasingly discriminating customers, where individuals are
now seeking unique customized products, flexibility is becoming ever more
important. Flexibility depends on the ability of a manufacturing system to
handle a wide variety of product types in an efficient way. Change and
market turbulence are some of the biggest challenges that a manufacturer
has to face, and flexibility is the main tool that we have to cope with change,
turbulence, and uncertainty.

Other manufacturing performance metrics include safety, process

ergonomics, human factors, and employee morale. These are all important
metrics that cannot be ignored. The bottom-line impact of these metrics is
that over the long and short term they determine, directly or indirectly, the
market share and revenues, as well as profitability. All of these ultimately tie
together into determining what the organization’s long-term business
viability will be.
 Design and Improvement of Service Processes—Process Management 325

Manufacturing Process Analysis

Typical activities in manufacturing and manufacturing support include

• Production operations
• Job setup
• Tool fabrication and repairs
• Shipping and receiving
• Shop floor control and project management
• Quality control and quality assurance
• Equipment repairs and preventive maintenance
• Scheduling
• Production planning
• Software programming
• Facilities planning
The resources needed for manufacturing range from processing equipment,
like machine tools, to material-handling devices required to move material.
Over and over again, the evidence has been upheld that good statistical
control of production processes, training for operators and support staff, and
preventive maintenance of key equipment are the primary determinants of
manufacturing success.

The common problems in the manufacturing process include

1. Low throughput and efficiency
2. Excessive production lead time
3. Excessive work in process
4. Late orders
5. Excessive rework
6. Poor quality
7. Chaos, confusion, lost parts
8. Excessive production cost
9. Lost orders
10. Poor safety record
These common problems are often caused by
• High process variability
• Poor incoming raw material
• Poor operator training
• Unbalanced processes
• Excessive setup times
• Poor process design and validation
• Poor workstation and plant layout
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• Lot size too small or too large

• Poor equipment maintenance
• Poor inventory management and shop floor control
• Low equipment reliability
• Poor operator discipline and motivation
• Improper equipment
• Low flexibility
• Inadequate process capacity

A number of generic strategies are available for solving the range of manu-
facturing problems; however, each strategy must be matched to the appropriate
diagnosis. The precise manner in which a strategy is to be applied must also
be determined after careful study. Strategies to be considered include
1. Comprehensive operator training programs
2. Buffer management
3. Comprehensive preventive and predictive maintenance programs
4. Quick batch changeover
5. Process simplification
6. Plant layout reorganization
7. Statistical quality control
8. Operator wage and incentive programs
9. Production scheduling system
10. Comprehensive production planning
11. Continuous improvement programs
12. Flexible manufacturing
13. Cellular manufacturing
It is necessary, at this point, to emphasize that many of these strategies have
become buzzwords and have, as a result, been sometimes applied inappro-
priately. To avoid these expensive mistakes, each strategy should only be
chosen after a thorough process management.

10.3.3 Office or Transaction Process

In the office environment there is a wide variety of transaction processes for

handling the administrative activities of an organization. These include
computer data entry, copying documents, filing and retrieving documents,
attending meetings, performing analyses, decision making, and documenting
reports. Each type of activity requires certain types of equipment and may be
performed individually or in teams. The processes typically focus on
information, requiring information as input and value-added information as
output. The information that is processed may be stored on paper documents
 Design and Improvement of Service Processes—Process Management 327

or be computer-based. Increasingly, attempts are being made to automate

and integrate more and more of these processes in search of the so-called
paperless office. Performance in office processes is often judged in terms of
the process cost and efficiency. In addition, many organizations are driving
toward a reduction in errors generated by the process. Some of these errors
can be very expensive and may cause serious problems for the organization.

The office process has a lot of similarities with the manufacturing process.
They are both step-by-step sequential processes, and each step contributes
some value to the completion of the job. However, office processes are usually
more dependent on people and less dependent on hardware compared with the
manufacturing process.

Examples of Office Processes

Insurance, mortgage and loan

Office Process Performance Metrics

Number of Errors or Defects

The average number of errors or defects in each transaction is an important
indicator of office process quality. Clearly, errors and defects will cost both
customers and service providers, and they should be reduced to a minimum.

Lead Time
Lead time refers to the time from the beginning to the completion of a
transaction. It is similar to the production lead time in the manufacturing
process. Again, in general, the shorter the lead time the better because all
customers want quick and error-free transactions. In addition, a shorter lead
time means a smaller work force, so it saves service providers money.

Work-in-Process Inventory
Similar to the manufacturing process, the WIP inventory refers to semifinished
paperwork and transactions between process steps. The lead time for a
process is very closely related to the level of WIP. This semifinished
paperwork may sit in drawers, bins, interdepartmental mail, or even become
lost in the paper trail. Excessive amounts of WIP will certainly slow down
the office process and will likely create errors.

Throughput
Similar to the manufacturing process, throughput is the rate at which a
process produces its output. Higher throughput in the office process usually
328 Chapter Ten

means more transactions are completed in a given time period. Clearly higher
throughput means higher productivity in the office process. The bottleneck in
the office process is usually the primary constraint on its throughput; therefore
attempts to improve throughput must focus on the bottleneck operation.

Transaction Cost
The average cost per transaction is a good measure of the cost of operating
the office process. The transaction cost depends on many factors, such as
process efficiency and labor cost. It is very important to reduce transaction
cost to a minimum to ensure operation profitability.

Flexibility
In the transaction process, it is natural that each transaction might be different.
It is a must that the office process handle mixed transactions well, and change
over from one transaction type to the next without slowing down the process.

Customer Interaction Quality

One key difference between the office process and manufacturing process is
that during the execution of the office process, the process operator may
directly interact with customers; during the execution of the manufacturing
process, the operators usually do not interact with customers. The total
experience and feeling of the customers during operator-customer interaction
is a very important part of process quality and customer satisfaction.

Office Process Analysis

Typical activities in the office process include

• Data entry
• Paperwork review
• Retrieving rules and regulations
• Database updating
• Document preparation
• Decision making
• Report generation
• Application approval
The resources needed for the office process include computers, software,
office equipment, shipping and handling, and most importantly, the work
force. Good design of the office process, good computers and software
maintenance, and training for operators and support staff are the primary
determinants of office process success.
 Design and Improvement of Service Processes—Process Management 329

The common problems in the office process include

1. Excessive errors
2. Excessive lead time
3. Low throughput or efficiency
4. Excessive work in process
5. Overdue transactions
6. Excessive rework
7. Poor customer interaction quality
8. Chaos, confusion, lost paperwork
9. Excessive transaction costs
10. Lost paperwork or transaction
These common problems are often caused by
• Poor office process design
• Poor transaction work flow
• Poor operator training
• Unbalanced processes or bottlenecks
• Poor computer or software maintenance
• Poor operator discipline or motivation

10.3.4 Service Factory Processes

Service factories are systems in which customers are provided services using
equipment and facilities requiring low labor involvement. Consequently,
labor costs are low while equipment and facility costs are high. Service
factories usually have both front room and backroom activities with total
service being provided in a matter of minutes. Customization is done by
selecting from a menu of options previously defined by the provider.

Service factory processes are similar to office processes, except that usually
the customer being served will almost immediately experience the level of
excellence, good or bad. For the service factory process, the quality of
customer-server interaction processes may be the most critical factor for
success, since poor performance in customer-server interaction will lead
very quickly to desertion by customers and loss of market share. Training of
personnel is often a key ingredient for achieving excellent customer-server
interaction. Waiting time and service time are also two primary factors for
customer satisfaction. Convenience of location is another important consid-
eration. In the service factory process, usually the customer commitment to the
provider is low because there are usually alternative providers just as conve-
niently located.
330 Chapter Ten

Examples of Service Factory Processes

Banks (branch operations); restaurants; copy centers; hair stylists; and

check-in counters of airlines, hotels, and car rental agencies.

Service Factory Process Performance Metrics

Number of Errors or Defects

The number of errors or defects in each customer transaction is an important
indicator of service factory process quality.

Waiting Time
In the service factory process, the average waiting time is an important
process performance metric. Since waiting time does not provide any value
for customers and service companies, the longer the waiting time, the
poorer the performance is. The bottleneck in the service process is one of
the leading causes of excessive waiting time. Average queue length in the
service factory process is an alternative measure for waiting time. The
abandonment rate is the portion of customers who go away due to excessive
waiting time; it is also often used as a performance measure.

Service Time
The service time is the time duration used to provide the needed service. The
service time might be “the smaller, the better” performance characteristic for
some service factory processes; for example, in fast-food restaurants. However,
for some other service factory processes, the service time for each customer
depends on his or her specific needs. So the required service time will be
different for different customer needs. Overall, average customer service time
might be an appropriate performance measure for a service factory process.

Customer Service Quality

The customer service quality in this case has two components: one is the
quality of the service, and the other is the quality of customer–service
provider interaction. The quality of service is the quality of the service
product, that is, the service provided. In the restaurant industry, the quality
of the service includes the taste of the meal and the cleanliness of the din-
nerware. The quality of customer–service provider interaction is mostly
based on how happy the customer feels about the service. It includes the
politeness of and the facial expressions (e.g., a smiling face) of the service
provider, and even the tone of the conversation. The total experience and
feeling of the customers during operator-customer interaction is a very
important part of process quality and customer satisfaction.
 Design and Improvement of Service Processes—Process Management 331

Throughput
Similar to the manufacturing and office processes, throughput is the rate at
which a process produces its output. Higher throughput in the service
factory process usually means more customers are served in a given time
period. Clearly higher throughput means higher productivity for the process.
However, depending on the nature of the service process, there might be a
tradeoff between customer service quality and throughput; the throughput
may not be “the more, the better.”
Service Cost
Service cost is certainly a measure of process performance. Service cost
depends on many factors, such as process efficiency and labor cost. A poorly
designed service process often creates a lot of waste, waiting time, errors,
and bottlenecks, and it is often one of the most important contributors to
excessive service cost.

Service Factory Process Analysis

Typical activities in the service factory process include

• Customer arriving
• Greeting customers
• Taking customer orders and payments
• Customer waiting
• Providing needed services
• Customer departing

The resources needed for the service factory process vary greatly depending
on the nature of the service. For the restaurant industry, the resources
include dining spaces, dining tables and chairs, the kitchen, and most
importantly, well-qualified cooks and waiters and waitresses. Good design
of the service process, equipment maintenance, facility design and layout,
and training for service providers and support staff are the primary deter-
minants of service factory process success.

The answers to the following questions may be very helpful in designing

and improving a good service factory process.
• How many of each type of equipment are required to meet customer
demand?
• Which layout provides the most efficient customer flow and minimizes
delays?
• Which resources can be shared to assist in peak times to minimize
waiting time?
332 Chapter Ten

• How many shifts and service providers are needed to minimize costs?
• What procedures can be used (self-service, advance ordering) to
minimize service time?
The common decision variables for a service factory process include
• Number of servers during each period
• Quantities of equipment
• Size of facilities (waiting area, parking)
• Hours of operation
• Hours of cleaning and maintenance
The following statistical data are critical for designing and operating a good
service factory process:
• Arrival rate of customers over the service cycle
• Length of line before balking occurs
• Length of wait before reneging occurs
The common problems in the customer service process include
1. Excessive waiting time
2. Poor customer service quality
3. Poor customer-provider interaction quality
4. Excessive errors
5. Excessive rework
6. Excessive service cost
These common problems are often caused by
• Poor service process design
• Poor service provider training
• Unbalanced processes or bottlenecks
• Poor operation management
• Poor work flow management
• Poor equipment maintenance
• Poor service provider discipline or motivation

10.3.5 Pure Service Shop Processes

In a pure service shop, service times are longer than for a service factory.
Service customization is also greater. Customer needs must be identified
before service can be provided. Customers may leave the location and return
for pickup, to check on an order, make a payment, or for additional service
at a later time. Price is often determined after the service is provided.
Although front room activity times may be short, backroom activity times
 Design and Improvement of Service Processes—Process Management 333

may be long, typically measured in hours or days. The primary consid-

eration is quality of service. Delivery time and price are of secondary
importance.

The customer’s ability to describe the symptoms and possible service

requirements are helpful in minimizing service and waiting times. When
customers arrive, they usually all go through some type of check-in activity.
At this time, a record (paperwork or computer file) is generated for the
customer, and a sequence of service or care is prescribed. The duration of
the service or the type of resources required may change during the process
of providing the service because of a change in the status of the entity. After
the service is provided, tests can be performed to ensure that the service is
acceptable before releasing the entity from the facility. If the results are
acceptable, the customer and the record are matched and the customer
leaves the system.

Examples of Pure Service Shop Processes

Hospitals, repair shops (automobiles), equipment rental shops, banking

(loan processing), Department of Motor Vehicles, Social Security offices,
courtrooms, and prisons.

Pure Service Shop Process Performance Metrics

Number of Errors or Defects

The number of errors or defects in each customer transaction is an important
indicator of pure service shop process quality. For example, in the health-
care industry, accuracy of diagnosis and the appropriateness of the treatment
are among the main health-care performance metrics. In customer help
centers, wrong advice or information provided to customers will quickly cut
down on the credibility of the company.

Waiting Time
In the pure service shop process, the average waiting time is an important
process performance metric. Again since waiting time does not provide any
value for customers and service companies, the longer the waiting time, the
poorer the performance is. For example, in the health-care industry, the total
length of time that a patient stays in the hospital may not be “the shorter, the
better,” because first of all, the patient’s disease should be cured or at least
reduced. Diagnosis, treatment, and care must be provided for as long as
needed. However, excessive patient and doctor waiting time, excessive
testing and report turnaround time, and excessive time required for admin-
istrative activity are definitely unwanted because excessive waiting time
334 Chapter Ten

makes customers unhappy. It slows down the process, so it increases the

cost; it may also reduce the throughput, so it affects the cash flow neg-
atively. In the health-care industry, excessive waiting time may even cause
complications in a patient’s treatment. The bottleneck in the service process
is one of the leading causes of excessive waiting time; for example, in the
health-care industry, hospital bed availability is often the bottleneck for the
whole hospital. Average queue length in the service factory process is an
alternative measure for waiting time. Abandonment rate is the portion of
customers who go away due to excessive waiting time; it is also often used
as a performance measure.

Customer Service Quality

The customer service quality in this case has two components: one is the
quality of the service, and the other is the quality of customer–service
provider interaction. The quality of service is the quality of the service
product, that is, the service provided. In the health-care industry, the quality
of service includes the quality of the treatment, quality of the diagnosis,
and quality of the recovery. The quality of customer–service provider
interaction is mostly based on how happy the customer feels about the
service. It includes the politeness of and the facial expressions (e.g., a
smiling face) of the service provider, and even the tone of conversation.
The total experience and feeling of the customers during operator-
customer interaction is a very important part of process quality and
customer satisfaction.

Service Time
The total time that a customer spends in the service facility is called the lead
time. The lead time is the summation of service time and waiting time.
Waiting time is definitely a waste for both customers and service-providing
companies. Because in the pure service shop process the services provided
to customers are highly customized, the required service times vary greatly.
Achieving sufficient service quality has a higher priority than reducing
service time duration. However, the non-value-added waiting times should
be reduced to a minimum.

Throughput
Throughput is the rate at which a process produces its output. Higher
throughput in the pure service process usually means more customers are
served in a given time period. However, in the pure service shop process, the
complexity and required service time of each task varies greatly; the
throughput may not be “the more, the better.”
 Design and Improvement of Service Processes—Process Management 335

Service Cost
Service cost is certainly a measure of process performance. Service cost
depends on many factors, such as process efficiency and labor cost. A poorly
designed service process often creates a lot of waste, waiting time, errors,
and bottlenecks, and it is often one of the most important contributors to
excessive service cost.

Resource Utilization
Resource utilization can be measured by the total time that a particular piece
of resource is used divided by the total elapsed time. For example, the per-
centage of a medical doctor’s time in doing value-added work, such as
taking care of patients, divided by his or her total time spent in the hospital,
is a measure of resource utilization of this medical doctor. It is desirable that
all important resources are used at 100 percent. However, uneven resource
utilization is a very common problem.

Pure Service Shop Process Analysis

Typical activities in pure service shop process include

• Customer arriving
• Greeting customers
• Taking customer orders
• Checking customer order and designing customer service
• Customer waiting
• Providing needed services
• Customer departing
The resources needed for a service factory process vary greatly depending
on the nature of the service. For the health-care industry, expensive labs and
diagnostic equipment; hospital infrastructure; qualified doctors, nurses, and
staff; and computer information systems are all resources. Good design of
the service process, equipment maintenance, facility design and layout, and
training for service providers and support staff are the primary determinants
of service factory process success.

The answers to the following questions may be very helpful in designing

and improving a pure service shop process:
• Which layout provides the most convenient customer flow and
minimizes delays?
• What is the peak capacity of the system?
• Which resources can be shared in peak times to minimize waiting time?
336 Chapter Ten

• How many shifts and service providers do we need to minimize costs?

• What procedures can be used (self-diagnosis, advance check-in) to
minimize service time?
The common decision variables for a pure service shop process include
• Number of service providers
• Size and location of facilities (waiting areas, service areas, parking,
restrooms, etc.)
• Number and type of service and transportation equipment
• Capacity of the facility
• Sequencing of customers waiting for service
• Number of staff and shift schedules
• Hours of operation
• Maintenance schedules
The common problems in pure service shop processes include
1. Excessive waiting time
2. Poor customer service quality
3. Poor customer-provider interaction quality
4. Excessive errors
5. Excessive rework
6. Excessive service cost
These common problems are often caused by
• Poor service process design
• Poor service provider training
• Unbalanced processes or bottlenecks
• Poor operation management
• Poor work flow management
• Poor equipment maintenance
• Poor service provider discipline or motivation

10.3.6 Retail Service Store Process

In retail services, the size of the facility is large in order to accommodate

many customers at the same time. Customers are provided with a large
number of product options from which to choose. Retail services require a
high degree of labor intensity but a low degree of customization or
interaction with the customer. Customers are influenced by price more so
than service quality or delivery time. Customers are also interested in con-
venient locations, assistance with finding the products in the store, and
quick checkout. Total service time is usually measured in minutes.
 Design and Improvement of Service Processes—Process Management 337

When customers arrive in a retail shop, they often get a cart and use that cart
as a carrier throughout the purchasing process. Customers may need
assistance from customer service representatives during the shopping
process. Once the customer has obtained the merchandise, then he or she
must get in line for the checkout process. For large items such as furniture
or appliances, the customer may have to order and pay for the merchandise
first. The delivery of the product may take place later.

Examples of Retail Service Store Process

Department stores, grocery stores, hardware stores, and convenience

stores

Retail Service Store Process Performance Metrics

Time Waiting for Assistance

This time refers to the average time that a customer might wait to get assistance
in helping to locate merchandise, have questions on product features answered,
and so on.

Average Queue Length in Checkout Lines

A long queue length could be caused by fluctuations in customer arrival
rates and work force management. Queue length is proportional to the
average waiting time for checkout.

Number of Checkout Errors

Checkout errors are quite common in the retailing business, and customers
do care about these errors. Checkout errors can be caused by labeling errors
or data entry errors.

Customer Service Quality

The customer service quality in this case has two components: one is the
quality of the service, and the other is the quality of customer–service
provider interaction. In retailing service stores, the quality of service includes
the promptness and the correctness of the merchandise information provided.
The quality of customer–service provider interaction is mostly based on how
happy the customer feels about the service. It includes the politeness of and
the facial expressions (e.g., a smiling face) of the service provider, and even
the tone of conversation. The total experience and feeling of the customers
during operator-customer interaction is a very important part of process
quality and customer satisfaction.
338 Chapter Ten

Average Number of Shopping Carts Available Over Time

The availability of shopping carts provides convenience for customers.

Retail Service Store Process Analysis

Typical activities in a retail service store process include

• Customer arriving
• Customer looking and collecting goods
• Customer waiting for payment
• Customer making payment
• Customer departing
The resources needed for a pure service shop process include shopping
spaces, a warehouse, an information system, and checkout counters. Good
design of the service process, equipment maintenance, facility design and
layout, and training for service providers and support staff are the primary
determinants of process success.

The answers to the following questions may be very helpful in designing

and improving a retail service store process:
• Which layout provides the most convenient customer flow and
minimizes delays?
• Which resources can be shared to assist in peak times to minimize
waiting time?
• How many shifts and service providers do we need to minimize costs?
The common decision variables for a retail service store process include
• Number of servers
• Number of checkout stands
• Number of dock doors for delivery and pickup and number of carts
• Size of facility
• Location of merchandise, carts, and service desks
• Shifts for cashiers and customer service representatives
• Replenishment frequency and quantity of inventory
• Hours of operation
• Maintenance schedules
The common problems in pure service shop processes include
1. Excessive waiting time
2. Poor customer service quality
3. Poor customer-provider interaction quality
4. Excessive checkout errors
 Design and Improvement of Service Processes—Process Management 339

5. Poor in-store assistance

6. Excessive service cost
These common problems are often caused by
• Poor service process design
• Poor service provider training
• Poor store layout and labeling
• Poor scheduling
• Poor operation management
• Poor equipment maintenance
• Poor service provider discipline or motivation

10.3.7 Professional Service Process

Professional services are usually provided by a single person or a small

group of experts in a particular field. The service is highly customized and
provided by expensive resources. The duration of the service is long,
extremely variable, and difficult to predict because the customer involvement
during the process is highly variable. Processing may be performed by a
single resource or multiple resources. When the customer arrives, the first
process is of a diagnostic nature. Usually, an expert resource evaluates the
service needed by the customer and determines the type of service,
estimated service time, and cost. This diagnosis then dictates the resources
that will be used to process the order. The duration of the service or the
type of resources required may change during the process of providing
service. This is usually a result of the customer’s review of the work.
After the service is provided, a final review with the customer may be
done to make sure that the service is acceptable. If the results are acceptable,
the customer and the record are matched and the customer leaves the
system.

Examples of Professional Service Processes

Auditing services, tax preparation, legal services, architectural services,

construction services, and tailoring services

Professional Performance Metrics

Number of Errors
The average number of errors or defects in each service is an important
indicator of process quality. Clearly, errors and defects will cost both
customers and service providers, and they should be reduced to a
minimum.
340 Chapter Ten

Customer Service Quality

The customer service quality in this case has two components: one is the
quality of the service, and the other is the quality of customer–service
provider interaction. In professional service, the quality of service includes
the effectiveness of the service. For example, in a tailoring service, the
service quality includes the fit and style of the tailored suit. The quality of
customer-service provider interaction is mostly based on how happy the
customer feels about the service. It includes the politeness of and the facial
expressions (e.g., smiling face) of the service provider, and even the tone of
conversation. The total experience and feeling of the customers during
operator-customer interaction is a very important part of process quality and
customer satisfaction.

Average Service Time

The average service time for each case is an indicator of process efficiency.
However, professional service is a highly customized service; the actual
service times vary from case to case.

Resource Utilization
Resource utilization can be measured by the total time that a particular piece
of key resource is used divided by the total elapsed time. In professional
service, the most important key resources are often the key professionals,
such as consultants, experts, and attorneys.

Time Spent Doing Rework

Rework time is certainly a waste for both customers and service providers.
The time spent in rework should be reduced to a minimum for good process
quality.

Professional Service Process Analysis

Typical activities in the retail shop service process include

• Customer arriving
• Greeting customers
• Reviewing customer orders
• Designing service
• Delivering service
• Reviewing and checking service
• Receiving payment
• Customer departing
 Design and Improvement of Service Processes—Process Management 341

The most important resources for professional services are well-qualified

professionals. Other resources include office spaces, an information system,
and specialized tools and equipment. Good design of the service process,
excellent project management and discipline, continuous training of profes-
sionals and supporting staff, facility design and layout, and equipment main-
tenance are the primary determinants of process success.

The answers to the following questions may be very helpful in designing

and improving a professional service process:
• How many of each type of equipment are required to meet a project
deadline?
• Which resources can be shared to assist in making up lost time?
• How many shifts and service providers are needed to minimize costs?
• How can the available resources be scheduled to meet the deadline?
The common decision variables for a professional service process include
• Staff schedules and shifts
• Number and type of service providers
• Project review times
• Hours of operation (overtime)
The common problems in pure service shop processes include
1. Excessively long service time
2. Poor customer service quality
3. Poor customer-provider interaction quality
4. Excessive number of errors
5. Excessive service cost
These common problems are often caused by
• Poor service process design
• Poor service provider training
• Poor scheduling
• Poor project management
• Poor equipment maintenance
• Poor service provider discipline and motivation

10.3.8 Telephone Service Process

Telephone services are provided over the telephone. They are unique from
other services in that the service is provided without face-to-face contact
342 Chapter Ten

with the customer. The service may be making reservations, catalog

ordering, or providing a customer support service. In a telephone service
system, issues to address include the following:
• Overflow calls. The caller receives a busy signal.
• Reneges. The customer gets in but hangs up after a certain amount of
time if no assistance is received.
• Redials. A customer who hangs up or fails to get through calls again.

The most important criteria for measuring effectiveness is service time. The
customer is simply interested in getting the service or ordering the product
as quickly as possible. The customer’s ability to communicate the need is
critical to the service time.

Calls usually arrive in the incoming call queue and are serviced based on the
first in, first out (FIFO), or first in, first serve, rule. Some advanced telephone
systems allow routing of calls into multiple queues for quicker service.
Processing of a call is done by a single resource. Duration of the service
depends on the nature of the service. If the service is an ordering process, then
the service time is short. If the service is a technical support process, then the
service time may be long or the call may require a callback after some
research.

Examples of Telephone Services

Technical support services (hotlines) for software or hardware, mail-order

services, and airline and hotel reservations

Telephone Service Performance Metrics

Service Time
Usually the average service time per call can be used as a measure of
efficiency for telephone services.

Waiting Time
Average waiting time per customer is an important measure for telephone
service efficiency and is closely related to customer satisfaction.

Abandonment Rate
Abandonment rate is the proportion of customers who give up waiting and
abandon the service. It is usually highly correlated with waiting time and is
an important measure of customer satisfaction.
 Design and Improvement of Service Processes—Process Management 343

Customer Service Quality

The customer service quality in this case has two components: one is the
quality of the service, and the other is the quality of customer–service
provider interaction. The quality of service is the quality of the service
product, that is, the service provided. In the call center, the quality of the
service includes the correctness of the information provided. The quality of
customer–service provider interaction is mostly based on how happy the
customer feels about the service. It includes politeness of the service
provider and the tone of conversation. The total experience and feeling of
the customers during operator-customer interaction is a very important part
of process quality and customer satisfaction.

Number of Errors
The number of errors for telephone services usually means the average
number of wrong pieces of information that the operators give to customers
per call. It should be reduced to zero or near zero to stay in business.
Operator training is the key to reduce the number of errors. Sometimes the
number of errors could mean the number of telephone system errors, such
as failing to redial or switching to the wrong operator.

Telephone Service Process Analysis

Typical activities in a telephone service process include

• Customer call arriving
• Customer waiting for service
• Operator talking to customers and providing services
• Customer departing
The resources for telephone services include phone systems, computer
information systems, and well-trained operators. Good design of the call
routine process, capacity management, and training of operators are the
primary determinants of process success.

The answers to the following questions may be very helpful in designing

and improving a telephone service process:
• How many shifts and service providers are needed to minimize
costs?
• Which resources can be shared to assist in peak times to minimize waiting
times?
• What automation technologies can be used to minimize service times?
• How can calls be routed to minimize waiting times?
344 Chapter Ten

The common decision variables for a telephone service process include

• Number of operators
• Capacity of the phone system
• Staff schedule and shifts
• Call routing
• Hours of operation
The common problems in a telephone service processes include
1. Excessive long waiting time
2. Poor customer service quality
3. Poor customer-provider interaction quality
4. Excessive number of errors
5. Excessive abandonment rate
These common problems are often caused by
• Poor call routine design
• Poor capacity management
• Inadequate automation
• Poor service provider training
• Poor scheduling
• Poor equipment maintenance
• Poor service provider discipline or motivation

10.3.9 Project Shop Process

A project shop process could be applicable to both manufacturing and service.

In a project shop, the part or batch of parts is stationary while the resources are
brought to the product for processing. The product is often quite large, such as
a building or ship, a software development project, or a research and
development (R & D) project; and it requires considerable time to complete.
Production quantities are usually low with products often being produced
from start to finish one at a time. Projects typically involve many resources
where the quality of the end product and the time to finish the product are
dependent on the capability of the resources as well as the planning and
scheduling of those resources. Often, multiple overlapping projects must be
coordinated, all requiring the use of common resources. A project process is
not the same as that of a factory process, because a project is a progression
through time rather than the progression of entities through space.

Because of the time and cost of the project, the quality of the end product is
of utmost importance. Delivery time is also a key consideration, and
penalties are sometimes assessed if due dates are not met. The project cost,
 Design and Improvement of Service Processes—Process Management 345

although important, is less of a concern. Customer feedback is frequent and

can have an impact on the priority and scheduling of remaining activities.
Customer commitment is very high because it is difficult to find another
producer or to start from scratch once the project is under way.

Projects are typically modeled using the critical path method (CPM),
program evaluation and review technique (PERT), or Gantt charting. Many
project management software packages have become available to help
organize and track the progress of projects.

Examples of Project Shop Processes

Software development, R&D projects, book writing, building construction,

shipbuilding, aircraft manufacturing, satellite construction

Project Shop Performance Measures

Quality of the Project

Quality of the project usually refers to the functionality and reliability of the
finished entity. For example, the quality of the software includes func-
tionality, satisfaction of customer needs, and reliability.

Time to Complete the Project

Because the time to complete the project usually means the time to market
or time to users, a shorter completion time, given the project quality is not
compromised, is very important.

Cost to Complete the Project

An excessive project cost could be caused by excessive project delays, poor
resource allocation, waste, and rework.

Utilization of Resources
Highly utilized or overutilized resources could be indicators for bottleneck
resources. Underutilized resources could be sources of excessive project costs.

Errors and Rework

Errors and rework in critical path activities will usually cause both project
delays and cost overrun. Errors and rework in noncritical paths will also
cause cost overrun.

Project Shop Process Analysis

A project usually consists of many activities. Some of the activities can

be worked on simultaneously, and some depend on the completion of
346 Chapter Ten

other activities. The subdivision of tasks affects the project progress because
it changes the interdependence structure. Project network, CPM, and PERT
can be used to model and control project execution.

The answers to the following questions may be very helpful in designing

and improving a project shop process:
• What is the optimum project plan that minimizes total costs?
• What is the length and/or cost of a project given a defined set of
activities?
• What is the best use of resources to minimize the delay of a project?
• How many resources are needed to meet a particular deadline?
• What is the best coordination of multiple projects to minimize delays?
The common decision variables for a project shop process include
• The subdivision of the project into individual tasks
• The time required to complete each task
• The resources required to perform each task
• The priorities with which activities access resources
• The order in which multiple projects are performed
The common problems in project shop processes include
1. Excessive long project completion time
2. Poor project quality
3. Cost overrun
4. Excessive number of errors and reworks
These common problems are often caused by
• Poor subdivision of the project into tasks
• Poor project management
• Poor coordination
• Excessive changes of plans
• Poor cost estimation
• Excessive complexity of the planned product
• Poor resource allocation

10.3.10 Logistics and Distribution Processes

Logistics and distribution processes are used for packing, warehousing,

shipping, and setting up materials. Materials include raw materials, finished
goods, work-in-process, as well as equipment, tools, and even personnel.
The materials involved may be large or small, they may be compact or
clumsy, or indeed, they may be delicate or rugged. The distances involved
 Design and Improvement of Service Processes—Process Management 347

may be short, such as a few feet, or extremely long, as in moving items from
one continent to another. The goals of logistics processes typically are to
minimize damage and loss of items, to reduce costs involved, and to increase
the response time for moving items around.

Typically there are different modes for the transportation aspects of logistics;
certain items may be moved by air, sea, or over land by truck or rail.
Depending on the items being transported, these methods each have different
attributes regarding cost, speed, and damage potential. Process management
can be very useful in improving the performance of these processes.

For example, in France, the Minitel system, which resulted from a process
management study, has reduced logistics and shipping costs through better
coordination between the different trucking companies. The Minitel system
helps pair up shipments and trucks so that trucks returning to their original
point of origin, which may have returned empty, are now being subcon-
tracted to carry other items, thereby avoiding the need for extra round-trips.

Examples of Logistics and Distribution Processes

Mail and package delivery, food delivery, flower delivery, and moving
services

Logistics and Distribution Processes Performance Metrics

Shipment Damage or Loss

Loss or damage of shipped items is clearly a key failure for a logistics and
distribution process. Loss of items may be caused by poor handling, failure
in a shipment tracking system, or failure in a sorting process or of equipment.
Damaged items are mostly due to poor handling or packaging. Clearly, it is
desirable to reduce shipment damage and loss to a minimum.

Delivery Delays
Delivery delay means that the items arrive in a customer’s hands later than
promised. It clearly makes customers unhappy and damages the shipper’s
credibility. Delivery delay may be caused by poor handling, poor shipment
tracking, inadequate shipping capacity, bottleneck resources, and poor
scheduling.

Logistic Cost
Logistic and distribution costs depend on many factors. The important
factors include scheduling and routing, location and capacity of distribution
348 Chapter Ten

centers and transshipment centers, effectiveness of the computer information

system and shipment tracking system, and effectiveness of the paperwork
process.

Vehicle Usage and Carrying Capacity Utilization

Capacity utilization levels of key resources, such as vehicles and handling
equipment, are often indicators of bottlenecks or wastes. Overutilized or
fully utilized resources often indicate that they are bottlenecks. Underutilized
resources often indicate that they create waste.

Customer—Service Provider Interaction

In the logistics and distribution process, the amount of customer–service
provider interaction is less than that of the customer service process. The
interaction mostly happens in the shipping and receiving.

Logistics and Distribution Process Analysis

Typical activities in the logistics and distribution process include

• Taking customer shipment orders
• Verifying and registering shipment orders into the shipment tracking
system
• Sorting shipment goods
• Scheduling and routing of shipments
• Loading and unloading of shipments
• Different modes of transportation (land vehicles, sea, air)
• Processing paperwork
The resources needed for logistics and distribution service processes typically
include vehicles, ships, airplanes, air hubs, sorting centers, a high-capacity
computer information system, a sophisticated scheduling and routing system,
shipment collection and delivery centers, and well-trained employees.

The answers to the following questions may be very helpful in designing

and improving a logistics and distribution process:
• How many of each vehicle are required to meet customer demand?
• Which delivery routes will maximize productivity?
• How many loads per vehicle maximizes the productivity?
• How many shifts and service providers are needed?
• What procedures can be used to minimize service or product selection
time?
 Design and Improvement of Service Processes—Process Management 349

The common decision variables for a logistics and distribution process

include
• Number of vehicles and drivers
• Facility size and layout
• Routing sequence
• Frequency of deliveries and delivery size
• Pickup loads from vendors, etc., on the backhaul or return to the
warehouse where possible to avoid deadheading (i.e., driving
empty).
The common problems in the logistics and distribution process include
1. Lost items
2. Damaged items
3. Shipment delays
4. Shipment errors
5. Excessive shipping cost
6. Poor customer service quality
These common problems are often caused by
• Poor logistics and distribution process design
• Poor scheduling and routing
• Unbalanced processes or bottlenecks
• Poor operation management
• Poor work flow management
• Poor equipment maintenance
• Poor service provider discipline or motivation

10.3.11 Transportation Processes

Transportation services involve the movement of people from one place to

another. A fundamental difference between transportation and logistics and
distribution systems is that people are being transported rather than goods.
Another important difference is that the routes in transportation services
tend to be fixed whereas the routes in delivery services are somewhat
flexible. Customers are interested in convenient and fast transportation.
Cost of transportation plays a significant role in the selection of the service.
Because set schedules and routes are used in transportation, customers
expect reliable service. Two types of pickup and drop-off points are used in
transportation: multiple pickup and drop-off points and single pickup and
drop-off points. In multiple pickup and drop-off point systems, customers
enter and leave the transportation vehicle independently. In single pickup
350 Chapter Ten

and drop-off transportation, customers all enter at one place and are dropped
off at the same destination.

Examples of Transportation Processes

Airlines, railroads, cruise lines, mass transit systems, and limo services

Transportation Processes Performance Metrics

Boarding Time
This is the average total time to board a shipment of customers.

Exit Time
This is the average total time to disembark a shipment of customers.

Transportation Time
This is the average time to transport between two given locations. It is
desirable to avoid longer transportation times than promised and to reduce
variations of transportation times.

On-Time Arrivals
This can be measured by the percentage of on-time arrivals.

Customer Service Quality

Customer service quality includes the quality of reservations, purchasing
tickets, onboard service, and other assistances.

Utilization of Transportation Vehicles

Again, overutilization of vehicles usually indicates bottlenecks; underuti-
lization often indicates wasted resources.

Travel Cost
Excessive travel costs may be caused by wasting of resources and poor
scheduling.

Transportation Process Analysis

Typical activities in a transportation process include

• Customer making reservation and/or purchasing tickets
• Customer arriving
• Customer boarding
 Design and Improvement of Service Processes—Process Management 351

• Scheduling and routing

• Onboard service
• Transporting
• Customers leaving
The resources needed for a transportation process typically include vehicles,
ships, airplanes, air hubs, sorting centers, a high-capacity computer information
system, a sophisticated scheduling and routing system, and well-trained
employees.

The answers to the following questions may be very helpful in designing

and improving a transportation process:
• How many of each vehicle are required to meet passenger demand?
• Which transportation routes will maximize productivity?
• How many customers can there be per vehicle?
• How can the departures be scheduled for maximizing customer con-
venience?
• How many shifts and service providers do we need?
• What procedures can be used (for example, preassigning seats) to
minimize service time?
• How will reliability procedures (baggage checking, etc.) affect overall
service time?
The common decision variables for a transportation process include
• Size and location of loading and unloading areas
• Number, size, and speed of transportation vehicles
• Scheduling of departure and arrival times
• Scheduling of vehicles and operators
• Maintenance scheduling
The common problems in a transportation process include
1. Excessive delays
2. Poor customer services
3. Excessive travel cost
These common problems are often caused by
• Poor transportation process design
• Poor scheduling and routing
• Unbalanced processes or bottlenecks
• Poor operation management
• Poor equipment maintenance
• Poor service provider discipline or motivation
352 Chapter Ten

10.3.12 Purchasing and Supply Process

As more and more companies move away from high levels of vertical inte-
gration to focus primarily on their core competency and purchase everything
else from suppliers, the role of purchasing and supply will continue to increase.
As globalization continues on its relentless path of growth, your suppliers are
now just as likely to be one block away as they are to be halfway around the
globe. Thus, purchasing and supply is fast evolving into global purchasing and
supply. Purchasing and supply involves the activities that are used to
1. Identify the best suppliers for goods and services
2. Specify exactly what is needed and find prospective suppliers to bid
on the organization’s purchase requirements
3. Negotiate the best purchase terms for the organization
4. Ensure that adequate legal contracts are signed
5. Ensure that goods and services are delivered as required and in a
timely manner
6. Ensure that certification for supplier payment is processed
7. Ensure that suppliers are well integrated (as required) into the orga-
nization’s operations
8. Ensure that supplier morale is high and stays high

Purchasing and supply is particularly important because this is the activity

that is responsible for integration of the firm’s activities with those of its
most important suppliers. In the U.S. automotive industry, for example,
there are tier-1 suppliers who supply to the major automobile companies,
tier-2 companies who supply to the tier-1 companies, and so on. Obviously,
the customer does not really care about who built what components; errors
made by a tier-2 supplier will give a company just as big a black eye as if
the company had committed the error itself. This all means that the job of
integrating supplier activities, the supply chain, in order to ensure customer
satisfaction, is extremely important to every company’s long-term success.

Purchasing Performance Metrics

Frequency of Material Shortage and Percent on-Time Receipts

Production activities are the areas in an organization that are most dependent on
the performance of purchasing and supply. Performance metrics such as
frequency of material shortages and percent on-time receipts indicate the degree
to which purchasing and supply facilitates the smooth flow of production.

Expenditure on Premium Freight

Expenditure on premium freight also measures the extent to which rush orders
have to be placed because of poor planning or unreliability of suppliers.
 Design and Improvement of Service Processes—Process Management 353

Order Processing and Information Flow Lead Time

Information flow lead time means the time needed for a piece of information
to move from one point of the process to another point of the process. For
example, how long it will take from order request to purchasing order issuing.

Order Processing Accuracy

To ensure high accuracy for purchasing transactions, order processing
accuracy is usually expressed as number of errors per thousand transactions.

Inventory Turnover and Obsolete Material Inventory

Purchasing and supply also influences levels of inventory to a very great
extent. Inventory turnover is one measure of inventory performance;
obsolete material inventory is another.

These metrics interact with other factors in other areas such as manufacturing
to determine the operations or production effectiveness. In addition, the
material cost will depend on purchasing and supply’s ability to identify the
best suppliers and negotiate the most beneficial terms for the orders. Over
the long term, purchasing and supply’s efficiency and effectiveness will con-
tribute to every organization’s profitability, and hence to its business viability.

Purchasing and Supply Process Analysis

Typical activities in purchasing and supply include everything that is

required to work with suppliers. Purchasing and supply activities include
• Vendor identification
• Vendor evaluation and selection
• Contracting
• Request for quote and request for purchase development
• Ordering and purchase order development
• Supply verification
• Payment authorization
• Vendor relationship management and supplier auditing
These are some of the standard purchasing and supply activities; however,
each organization may need to customize exactly how these processes are
implemented. There are factors relating to the nature of the product, the
market that is served, and the type of suppliers, which will require an
application of process management to improve the process.

Information is the primary commodity that the purchasing and supply

process works with. The primary tool that is required for purchasing and
supply is a purchasing information system. This system should be integrated
354 Chapter Ten

with the enterprise resource planning (ERP) system for the organization,
based on the need to customize the purchasing and supply information
system to match the unique processes of the organization.

The common problems in the purchasing and supply process include

1. Wrong material or wrong specification delivered
2. Poor material quality
3. Material shortage
4. Material not delivered on time
5. Difficulty in finding needed material
6. Waste through spoilage, material obsolescence, and wrong item rdered
7. Wrong specification ordered
8. Excessive delay in order processing
9. Excessive delay in payment processing
10. Financial loss due to fraud, lawsuit, or inappropriate supplier payment
11. Excessive inventory on hand
12. Escalating material purchase cost
These common problems are often caused by
• Problem in coordinating action and decision making with suppliers
• Flow synchronization of long-lead-time items
• Mismatch between material flow methods (for example, lean and mass
production systems)
• Poor or inadequate communication with suppliers
• Mistrust between suppliers and customers
• Cultural differences
• Market complexity (number of suppliers, number of items to order)
• Market uncertainty or turbulence
• Poor decision-making processes
• Poor product or technology knowledge
• Poor project or process management
Numerous strategies have been applied, in various situations, to enhance the
efficiency and effectiveness of purchasing and supply activities. Each
strategy has some unique area of application relative to the different causes
of process performance problems. The following list shows a number of
these strategies.
• Production planning and scheduling
• Inventory management
• Enterprise resource planning (ERP) systems
• Information sharing with suppliers (e.g., end-customer data, sales
trends, and forecasts)
 Design and Improvement of Service Processes—Process Management 355

• Collaborative scheduling with suppliers

• Long-term contracts, alliances, partnerships, supplier partnerships,
virtual organizations
• Paperwork process streamlining
• Application of purchasing cards
• Electronic commerce and electronic data interchange (EDI)
• Internet commerce and Internet-based purchasing and supply
• High-speed distribution systems
• Colocation with suppliers
• Stock pooling
• Vendor-managed inventory
• Just-in-time (JIT) or pull material flow control method
• Vendor consolidation and single sourcing
• Supply chain integration and management
• Purchasing and supply automation
• Purchasing and supply information systems
• Strategic sourcing
• Global sourcing
• Supplier development programs (e.g., technical assistance, process
improvement assistance, or financing assistance)
• Purchasing and supply process management
• Statistical process control of purchasing and supply activities
Some of these strategies simply represent best practice and require little or
no capital expenditure to implement. Others are quite comprehensive and
require extensive changes to processes and procedures. After the necessary
process management analysis has been used to identify the best strategy,
adequate effort must also be put into implementation and maintenance
planning for the system.

10.4 Process Mapping

Many business processes, especially service processes, are poorly defined

or totally lacking in description. Many procedures are simply described by
word of mouth or may reside in documents that are obsolete. In process
management, it is often that by simply trying to define and map the process,
we provide a means for both understanding and communicating operational
details to those who are involved in the process. We also provide a baseline,
or standard, for evaluating the improvement. In many cases, merely defining
and charting the process as it is can reveal many deficiencies such as
redundant and needless steps and other non-value-added activities. Process
mapping is a visual descriptive model for a process. “A process map is
356 Chapter Ten

considered to be a visual aid for picturing work processes which show how
inputs, outputs and tasks are linked” (Anjard 1998). Process mapping is
used to develop a process map for the process under study. There are a
number of different methods of process mapping; these methods include a
process flowchart, IDEF0 process mapping, and value stream mapping. In
this section, we are going to discuss these three methods in detail.

10.4.1 Process Flowchart

The flowchart is a graphic way to describe a group of activities in a process.

The basic purpose of the flowchart is to provide a graphical representation of
all the activities performed in the sequence in which they are actually
conducted. One advantage of the graphical flowchart is the ease with which
the activities in the process and their relationships can be visualized and
understood. However, a flowchart alone usually does not provide enough
level of detail for each activity. Therefore, supplementary writing procedures
for all activities are also provided with the flowchart to provide the details.

Flowcharts use symbols connected by arrows to describe processes. The

commonly used flowchart symbols are illustrated in Table 10.1.

Example 10.1
This example illustrates a flowchart for typing a document as follows:

Start
Return to
sender

No Review
document

Ok

Type/retype
document

No
Inspect

Return to
sender

End
 Design and Improvement of Service Processes—Process Management 357

Table 10.1 Commonly Used Flowchart Symbols

Symbol Name Activity Represented

Boundary Identifies the beginning or end
(start or end) of a process. Start or End
can be written inside.
Activity or Identifies an activity or task in the
task process that changes input.
Usually, the name of the activity is
written inside.
Movement or Indicates movements of outputs
transportation between locations.

Inspection Identifies that the flow has

stopped in order to evaluate the
quality of the output or to obtain
an approval to proceed.

Delay Identifies when something must

wait or is placed in temporary
storage.

Storage Identifies when an output is in

storage waiting for a customer.

Decision Identifies a decision or branch

point in the process.

Document Identifies when the output of an

activity is recorded.

Database Identifies when the output of an

activity is electronically stored.

Connector Indicates that an output from this

flowchart will be input to another
flowchart.

Arrow Indicates the sequence and

direction of flow within the process
and usually transfers an output of
one activity to the next activity.
358 Chapter Ten

10.4.2 IDEF0 Process Mapping

IDEF0 (International DEFinition) process mapping is a method designed to

model the decisions, actions, and activities of an organization or system. It was
developed by the U.S. Department of Defense, mainly for the use of the U.S. Air
Force during the 1970s. Although it was developed over 30 years ago, the
Computer Systems Laboratory of the National Institute of Standards and
Technology (NIST) released IDEF0 as a standard for function modeling in FIPS
(Federal Information Processing Standards) Publication 183, December 1993.
Computer packages (for example, AI0 WIN) have been developed to aid
software development by automatically translating relational diagrams into code.

An IDEF0 diagram consists of boxes and arrows. It shows the function as a box
and the interfaces to or from the function as arrows entering or leaving the box.
Functions are expressed by boxes operating simultaneously with other boxes,
with the interface arrows constraining when and how operations are triggered
and controlled. The basic syntax for an IDEF0 model is shown in Fig. 10.8.

Mapping using this standard generally involves multiple levels. The first
level, the high-level map, identifies the major processes by which the
company operates (Peppard and Rowland 1995). The second-level map
breaks each of these processes into increasingly fine sub-processes until the
appropriate level of detail is reached.

For example, Fig. 10.9 shows the first-level IDEF0 process map of a printed-
circuit board (PCB) manufacturing process. Figure 10.10 shows the second-
level IDEF0 process map of the PCB manufacturing process, and you can
go further down with every subprocess.

There are a number of strengths and weaknesses associated with IDEF0.

The main strength is that it is a hierarchical approach, so users can choose
the mapping at their desired level of detail.

Controls

Inputs Process Outputs

Mechanisms
Figure 10.8 A Basic IDEF0 Process Map Template
 Design and Improvement of Service Processes—Process Management 359

PCh PFs

Process planning data

Copper clad
PCB Finished
Resist material
manufacturing product
Etchant
A1

Operator
Machine CAM software

Figure 10.9 Level-1 IDEF0 Process Mapping for Printed-Circuit Board (PCB)
Manufacturing

10.4.3 Value Stream Mapping

Based on process mapping, a value stream mapping can be developed to

analyze how well a process works. Once a process map is established at an
appropriate level of detail, the flows of products, programs, and services,

PCh
PFs
PP data Bonding
Outer &
layer Drilling
Al1
Inner
layer
Metalising
Solution
Al2
Inner
layer Photomech
Mask Al3

Plating
Solution
Al4
Etching
&
Stripping
Etchart Al5
Coating
& Totest
Finishing
Material Al6

Operator
Machine

Figure 10.10 Level-2 IDEF0 Process Mapping for Printed-Circuit Board (PCB)
Manufacturing Process
360 Chapter Ten

material; information; money; and time can be mapped. Figure 10.11 shows
an example of a value stream map that maps not only material flows but also
the information flows that signal and control the material flows.

After a value stream map is developed, value-adding steps are identified for
each kind of flow, such as material and information flow. Non-value-adding
steps (waste), value inhibitors, costs of flow, and risks to flow are also
exposed, and their implications to overall process performance are analyzed.

After the problems in the existing process are identified by value stream
mapping, process revision or redesign can be initiated to eliminate the defi-
ciencies. In manufacturing processes, the revision can be made by elim-
ination of non-value-adding steps and redesign of the layout and sequence
of subprocesses, thus reducing cost and cycle time. In office processes, the
revision can be made by redesigning the organizational structure, reporting
mechanisms, building layout, and functional responsibilities of various
departments in order to reduce non-value-added steps and paperwork travel
time and mistakes, thus reducing waste and improving efficiency.

Based on the analysis, an ideal value stream map is created, in which all waste
and value inhibitors are removed, the cost and risk for flow are similarly reduced
to a minimum level, and we call it the ideal state. The full implementation of the
ideal state may not be feasible, but it often leads to a much-improved process.

The following is a case example of a value stream mapping project (Bremer

2002) which involves a manufacturing-oriented company. The companywide
information flow is illustrated by two value stream maps. The first map,
Fig. 10.12, shows how management thinks the information flows in this business;

Production
control

Supplier Manufacturer Distributor Customer

Note:
Information flow
Material flow

Figure 10.11 An Example of a Value Stream Map

 Design and Improvement of Service Processes—Process Management 361

Inventory
Forecast centers Forecast
Suppliers Customer
Orders MRP
Customer Daily
service order
Manual
entry of
orders

Daily
MPS shipments
and backlog
Shipping

Sequence VCD Coolant RLS Manual Station D Test Packaging Pump

Figure 10.12 Value Stream Map of a Company

the management thinks that the flows are simple and straightforward. The second
map, Fig. 10.13, shows how information really flows. It’s a lot more complicated.
Many process steps add no values, and they actually impede the production
process. Also there are huge amounts of hidden information transactions in the
process that add no value to a business from a customer’s perspective.

Inventory
Forecast control
Suppliers

Forecast
Orders Customers
MRP

Customer
service
Manual Daily
entry of order
Scheduling orders

Daily
shipments
MPS & receiving
Shipping
Work
order
pubs

Sequence VCD Coolant RLS Manual Station D Test Packaging Pump

Figure 10.13 Actual Value Stream Map of the Company

362 Chapter Ten

Because of these problems, the company usually takes over 34 days to go

from raw material to delivery to customers. After identifying these
problems, the company redesigned the business process. The improved
process reduced most of the hidden transactions, and the company is now
able to move from raw material to delivery in five days.

10.5 Lean Operation Principles

Lean manufacturing is a very effective manufacturing strategy first

developed by Toyota. During a benchmarking study for the automobile
industry in the late 1990s (Womack, Jones, and Roos 1990), it was found
that Toyota clearly stood above its competitors around the world with the
ability it developed to efficiently design, manufacture, market, and service
the automobiles it produced. This ability made a significant contribution to
both the company’s profitability and growth as consumers found the
products to simultaneously exhibit both quality and value. The researchers
found that the focus on recognizing and eliminating wasteful actions and
utilizing a greater proportion of the company’s resources to add value for
the ultimate customer was the key to the operating philosophy. “Lean pro-
duction” is first mentioned in this study and is used to describe the efficient,
less wasteful production system developed by Toyota, called the Toyota
production system. Lean production in comparison to mass production was
shown to require one-half the time to develop new products, one-half the
engineering hours to design, one-half the factory hours to produce, and one-
half the investment in tools, facilities, and factory space (Monden 1993,
Ohno 1990, Shingo 1989).

Although the lean manufacturing approach was originally developed in the

traditional manufacturing industry, lean manufacturing mostly deals with
production systems from a process viewpoint, not a hardware viewpoint. It
has been found that most lean manufacturing principles can be readily
adopted in other types of processes, such as product development, office,
and service factory processes. When these lean manufacturing principles
are applied to nonmanufacturing processes, we call them lean operation
principles.

In process management practice, lean operation principles can be used to

analyze the current process and discover any problems in process design
and operation. Lean operation principles can also be used to guide the
process redesign and improvement.
 Design and Improvement of Service Processes—Process Management 363

The key objective of lean operation is to eliminate all process wastes and
maximize process efficiency. The key elements of lean operation include
the following items:
• Waste elimination in process
• Pull-based production system
• One piece flow
• Value stream mapping
• Setup time reduction
• Work cells
Now we discuss these key elements in detail.

10.5.1 Waste Elimination in Process

In observing the mass production, Tachii Ohno (Ohno 1990, Liker 2004), an
engineering genius of Toyota and the pioneer of the Toyota production
system, identified the following seven wastes in production systems:
1. Overproduction: Producing too much, too early
2. Waiting: Workers waiting for machines or parts
3. Unnecessary transport: Unnecessary transporting of moving parts
4. Overprocessing: Unnecessary processing steps
5. Excessive inventory: Semifinished parts between operations and
excessive inventory of finished products
6. Unnecessary movement: Unnecessary worker movements
7. Defects: Parts need rework or are scrap
These seven wastes are called muda, a Japanese term for missed oppor-
tunities or slack. These items are considered waste because in the eyes of
customers, these activities do not add desired values to the products.

In lean operation principles, the seven wastes can be identified mostly by

the value stream mapping method. The waste caused by overproduction can
be reduced or eliminated by a pull-based production system. The waste
caused by excessive inventory, waiting, and unnecessary transport can be
greatly reduced by one-piece flow and work cells (cellular manufacturing).
It is often necessary to use a setup time reduction technique to make one-
piece flow possible. One-piece flow and work cells also make defect
detection easier. Besides lean operation principles, other techniques, such as
ergonomics, poke yoke (foolproof), and statistical process control should
also be applied to reduce the waste caused by defects and unnecessary
movements.
364 Chapter Ten

We will first discuss the value stream mapping method. The value stream
mapping method has two stages. The first stage is to draw a current state
map, which is a map of the current process. The second stage is to draw a
future state map, which is a value stream map of the proposed new process.
Since the drawing of the future state value stream map requires other
knowledge of lean operation, such as one-piece flow and work cells, Sec.
10.5.2 discusses current state value stream mapping, Sec. 10.5.3 discusses
one-piece flow and work cells; Sec. 10.5.4 discusses waste reduction and
future state value stream mapping, and Sec. 10.5.5 discusses other issues in
lean operation.

10.5.2 Current State Value Stream Mapping

Value stream mapping is a good method to use to chart the process and
identify and quantify the waste in a process. Value stream mapping was
developed to map and analyze the production process, especially the batch
flow shop and flow shop processes. A value stream is all the activities (both
value-added and non-value-added) required to bring a product through the
main flows.

Value stream mapping is a pencil-and-paper exercise that helps you to see

and understand the flow of material and information as the product makes
its way through the value stream. When you want to draw a value stream
map, do not use a computer; just bring a writing board, a good piece of
paper, and a stopwatch. The best way is to work backward, that is, from the
last step of the process to the first step of the process. In a production
process, the last step is usually the shipping dock; in a restaurant kitchen
process, the last step is at the point where the meal is done and the waiter is
taking it away from the customer. In a production process, the first step is
usually the receiving deck for the incoming materials; in a restaurant kitchen
process, the first step is usually the point where the customer’s order is
brought into the kitchen.

Figure 10.14 is a simplified value stream map for a production process.

Clearly, based on the definition of seven wastes, the staging, transportation,
setup, and inspection are value-added steps; casting, machining, and
assembly are value-added steps. In the figure the horizontal length of each
step is proportional to the time required to do the step. The total time
duration from the beginning of the process to the end of the process is often
called the process lead time. Clearly, in this example, the value-added time
is a small portion of the total lead time.
 Design and Improvement of Service Processes—Process Management 365

Staging Transportation Setup Inspection Staging

Casting Staging Machining Assembly

Time

Value-added time Non-value-added time

Figure 10.14 A Simplified Value Stream Map for a Production Process

We can see that this simple value stream map identified and quantified waste
in the process and provided clues for process improvement. Clearly, the
process can be improved if we can shorten the non-value-added time.

This kind of simple value stream mapping can also be used to analyze a
service process. Figure 10.15 shows a simplified value stream map for a

Start

Search Book value Wait in batch Add header

(2 min) (1 min) (2 min) (3 min)

Add items, Wait for Cross check Wait in folder

print quotes cross check (1 min) (60 min)
(6 min) (60 min)

End

Confirm Wait for PC

(3 min) (60 min)

Figure 10.15 A Simplified Value Stream Map for a Sale Order Process
366 Chapter Ten

sale order process. The lighter shaded boxes are value-added steps; the
darker shaded boxes are non-value-added steps. The first box, Search,
does not really add value for customers, but it is an essential step for now,
so a lighter shaded box is used.

In many service processes, the simplified value stream map as shown by

Fig. 10.15 is sufficient to map the process and identify and quantify the
wastes in the process. In some cases, the simplified value stream map is
not sufficient to describe the process; in this case, a more formal type of
value stream map illustrated in Sec. 10.4.3 can be used to map the
process.

The formal value stream map uses arrows and icons to illustrate the process.
There are two types of flows that are of major concern. One is the material
flow, the other is the information flow. Figure 10.16 shows the commonly
used icons for the material flow in value stream maps. Figure 10.17 shows
the commonly used icons for the material flow in value stream maps.

In material flow, the process boxes should be identified one by one. A data
box should be established for each process box. In each data box, the
following data should be measured (by stopwatch) and recorded:

C/T = 45 sec.
Assembly C/O = 30 min
3 shifts
XYZ
2% scrap
Process Outside sources Data box

Mon.

Truck shipment Supermarket Buffer or 300 pieces

safety stock 1 day
Inventory
max. 20
FIFO
Finished goods First-in, first-out Physical
to customer sequence flow pull/withdrawal

Push arrow

Figure 10.16 Icons Used in Material Flows in Value Stream Maps

 Design and Improvement of Service Processes—Process Management 367

Manual Electronic
information Load leveling Sequenced-
information
flow Signal box pull ball
flow
kanban

Weekly
Withdrawal Production schedule
kanban kanban Kanban Schedule
post
Figure 10.17 Icons Used in Information Flows in Value Stream Maps

1. Cycle time (C/T): Time required to produce one piece of product by a

machine, station, and/or operator or the time required to repeat a given
sequence of operations or events.
2. Change over time (C/O): Time required to switch from one product
type to another product type, for example, the time it takes for a pizza
maker to switch from making one type of pizza to another type of pizza.
3. Uptime: Proportion of time a process step is operational.
4. Production batch size (EPE).
5. Number of operators.
6. Number of product variations.
7. Scrap rate.

Figure 10.18 shows a complete value stream map for a manufacturing process.
In the figure, we can see that below each process box, there is a data box. For
example, in the leftmost process box, Stamping, the cycle time is 1 second,
the changeover time is 1 hour, uptime = 85 percent, and the production batch
size (EPE) is 2 weeks of supply, that is, the stamping press produces a big
batch of parts (enough to supply for 2 weeks) in one shot. In Fig. 10.18,
between the first process box, Stamping, and the second process box, S.
Weld 1, there is an in-process inventory of semifinished parts. The average
inventory holding time is 7.6 days. In the first process box, the value-added
time is 1 second, which is equal to the stamping cycle time. From the lean
operation point of view, the in-process inventory holding is a non-value-added
activity. If we add all value-added time for the whole process, it is equal to
184 seconds, which is recorded at the lower-right corner of Fig. 10.18. The
production lead time for the whole process is 23.5 days. Clearly, in the whole
production lead time, only a tiny proportion is value-added time. The top
portion of the value stream map shows the information flow pattern.

Cycle time, value creation time, and lead time are among the most important
measures in lean operation management. Figure 10.19 gives good defi-
nitions and illustrations for these measures.
368
6-week Production 90/60/30 day
Michigan
forecast control forecasts State street
Steel Co. Weekly assembly
MRP Daily
fax order
500-ft coils 18,400 pcs/mo
−12,400 “L”
Weekly schedule −6,400 “R”
Tray = 20 pieces
Tues. +
Thurs. 2 shifts
Daily ship
schedule

1x
daily

Stamping S. weld #1 S. weld #2 Assembly #1 Assembly #2 Shipping

Coils Staging
200 T
5 days 4600 L 1100 L 1600 L 1200 L 2700 L
2400 R 600 R 850 R 640 R 1440 R

C/T = 1 second C/T = 38 seconds C/T = 45 seconds C/T = 61 seconds C/T = 39 seconds
C/O = 1 hour C/O = 10 minutes C/O = 10 minutes C/O = φ C/O = φ
Uptime = 85% Uptime = 100% Uptime = 80% Uptime = 100% Uptime = 100%
27,000 sec. avail. 2 shifts 2 shifts 2 shifts 2 shifts
EPE = 2 weeks 27,000 sec. avail. 27,000 sec. avail. 27,000 sec. avail. 27,000 sec. avail. Production
= 23.5 days
5 days 7.6 days 1.8 days 2.6 days 2 days 4.5 days lead time

1 second 38 seconds 45 seconds 61 seconds 39 seconds

Value-
added = 184 sec.
time

Figure 10.18 A Complete Value Stream Map for a Manufacturing Process

 Design and Improvement of Service Processes—Process Management 369

C/T
In a flow shop, cycle time
is the time between two pieces
of finished product pieces,
or the production time between
two consecutive pieces.

Lead time

Lead time is the time it takes for one

piece of product to move all the way
from start to finish of the whole process

Value-added time
Value-added time is the time of those
work elements that actually transform
the product in the way that customers
are willing to pay for.

Figure 10.19 Some Important Process Metrics Used in Value Stream Mapping

10.5.3 Lean Operation Techniques

In many production systems, there are huge amounts of muda (the seven
wastes) in the process. From the examples given in Sec. 10.5.2, we can see that
out of the whole production lead time, the value-added time is usually only a
small fraction. The ratio of value-added time over production lead time can be
used as a measure of process efficiency. Specifically this can be stated as

value-added time
Process efficiency = (10.1)
total lead time

The major goal of lean operation is to increase process efficiency. A process

that has a high efficiency will have much less waste, a shorter lead time, and
lower cost. As a rule of thumb, a process is considered to be lean if the
process efficiency is more than 25 percent. Based on the research by
Michael George (2003), the typical process efficiency and world-class
efficiency for many types of processes are summarized in Table 10.2.

Clearly, the process efficiencies of typical processes are very low. A big pro-
portion of process lead time is not used to do value-added work, but to do
non-value-added work, that is, muda (the seven wastes). Lean operation
attempts to redesign the process flow and layout so that the portion of
process time spent doing non-value-added work is greatly reduced.
370 Chapter Ten

Table 10.2 Process Efficiency for Various Processes

World-Class
Typical Process Process
Process Type Efficiency (%) Efficiency (%)

Machining 1 20

Fabrication 10 25

Assembly 15 35

Continuous manufacturing 30 80

Transactional business processes 10 50

Cognitive business processes 5 25

The most frequently used techniques in lean operation include the

following:
• One-piece flow
• Work cells (cellular manufacturing)
• Pull-based production
• Quick setup time reduction
We now discuss these in detail.

One-Piece Flow

As we discussed in Sec. 10.3.2, there are several types of manufacturing

processes, such as the job shop, batch flow shop, and line flow processes.
The job shop process is also called the “machine village,” which means that
similar machines are grouped together. The job flow patterns of such pro-
duction systems can be quite erratic and messy, as illustrated in Fig. 10.20.
The job shop process is featured by low utilization, long delays, high work-
in-process inventory, and a long lead time. The advantage of the job shop
process is that it can take a large variety of tasks.

Many service processes are also job shop processes. For example, in most
organizations, the departments are functionally grouped together, such as the
personnel, accounting, and benefit departments. If a new employee wants to
finish all his or her paperwork, he or she must go through all these
departments. In many organizations, paperwork has to be approved by many
departments, so each piece of paperwork will first go to one department, then
 Design and Improvement of Service Processes—Process Management 371

Figure 10.20 A Typical Flow Pattern of A Job Shop

through interdepartmental mail, and then to the next department; if a mistake

occurred in the previous department, the paperwork could be sent back for
correction. It is also quite usual that documents become lost or buried in the
paper trail and eventually get lost or take a very long time to be completed.
A batch flow process has a better flow pattern, as illustrated by Fig. 10.21.

However, there are still a lot of work-in-process inventories. The value

stream map illustrated by Fig. 10.18 is a batch flow process. We can see
clearly that most of the lead time is spent on inventory waiting in the stock.
This is better than that of the job shop in terms of flow pattern, but it is still
inefficient.

One-piece flow, or single-piece flow, is the solution proposed by the lean

operation principle. One-piece flow is actually the line flow shop illustrated

Raw Product
material

Batches of semifinished products

Figure 10.21 Flow Patterns of a Batch Flow Shop
372 Chapter Ten

by Fig. 10.7. The objective of process-oriented line flow is to convert

functional layouts of machines in the factory into a series of processes,
based upon the production of families, or commodities. Process-oriented
flows are superior to traditional functional layouts since they reduce
travel distance, required floor space, and total throughput times. A single-
piece flow means that the workpiece is worked on one piece at a time, not
one batch at a time. This will eliminate the work-in-process inventory
completely.

On the other hand, in a single-piece line flow process, any error or defect in
any process step will cause the whole line to stop. In traditional Western
operation management, the work-in-process inventory, or buffer inventory,
is used to temporarily feed the downstream process steps so the line will not
stop. However, the Toyota production system believes that the buffer
inventory has more disadvantages than benefits; buffer inventory ties up
money and hides hidden problems. In the Toyota production system, zero
buffer inventory is used to expose all the hidden problems in the production
process; it forces you to debug all hidden problems so eventually, you will
have a zero-defect production process.

Work Cell (Cellular Manufacturing)

The ideal production process setup for lean operation is a one-piece flow
work cell, as illustrated by Fig. 10.22. A work cell is a U-shaped layout
of several different kinds of machines that form a one-piece flow line. The
U-shape is used because it saves floor space and shortens travel distance for
operators.

If a production facility has to make many kinds of products, these products

can be grouped into several categories such that the products are similar
within each category. Each category of products will be produced by one

Cell

Raw materials

Products

Figure 10.22 One-Piece Flow Work Cell

 Design and Improvement of Service Processes—Process Management 373

particular work cell; this work cell is equipped with machines that are fit to
produce this category of products. This multiple-cell setup is illustrated by
Fig. 10.23. This group work cell setup can handle as large a number of
product varieties as that of the job shop illustrated by Fig. 10.20. However,
the flows of the work cell group will be much smoother and faster than that
of the job shop.

In an office process, such as insurance claim processing, there are many

types of claims, and each type should be processed in a different way. Many
office processes use a similar process to that of the job shop; each claim
goes to a different path, and flows are really messy and erratic. A lot of
errors and delays can be caused by this job shop setup. If we use the work
cell group concept, we can establish several separate flow line departments,
each one handling one category of claims. Within each category the claims
type and paperwork procedures are similar, and each department has several
operators, each one handling one step of the paperwork. All the paperwork
needed for one piece of the claim will be finished after one complete flow
through a work cell, as illustrated by Fig. 10.23. This departmentalization-
type work flow is usually more efficient than the job shop or batch flow shop
processes.

Pull-Based Production

A pull-based production system is a demand-driven production system. It is

modeled after the supermarket shelf replenishment operation. On
supermarket shelves, there are lots of goods, such as milk, eggs, and orange
juices, that are ready for customers to pick up. The customers pull the goods
from the shelves, and then depending on how many items are taken away,

Cell 4 Cell 1

Cell 3 Cell 2

Figure 10.23 A Group of Work Cells

374 Chapter Ten

the inventory person in the supermarket will refill the same amount of items
by pulling them from the warehouse; then the warehouse person will order
roughly the same amount of items that were pulled from the warehouse.

Restaurant operation is a perfect example of pull-based production. The

customer places the order, and then the kitchen produces exactly what the
customer ordered. In general, the key feature for pull-based production is
that the information flow direction is opposite to that of the material flow.
The information flow means the production control order. In the restaurant
case, the production control is the order for the kitchen to cook. This order’s
direction is from customer to kitchen; on the other hand, the direction of
material flow is the flow of food in the restaurant case, the direction from the
kitchen to the customer. Clearly, the information flow direction and material
flow direction in the restaurant kitchen are opposite to each other.

The opposite of pull-based production is push-based production. The key

feature for the push-based production is that the direction of information
flow is the same as that of the material flow. In push-based production, each
work stop sends the work downstream of the operation, that is, pushes the
work downstream, without considering whether the downstream areas can
make use of it. Typically, activities are planned centrally but do not reflect
actual conditions in terms of idle time, inventory, and queues.

Agricultural production is a typical push-based production. Because the

production cycle is very long, there is no way that farmers can produce only
the amount of food based on real-time demand. The production plan is
purely based on market forecasts and sometimes just based on last year’s
production. The production command will flow in the same direction as the
work flow. It is well known that agricultural production often suffers from
oversupply and market fluctuations. Clearly, pull-based production,
whenever possible, will create much less overproduction, so the waste
caused by overproduction can be reduced.

In value stream mapping, the symbols illustrated in Fig. 10.24 are used to
describe the pull production system.

Physical
Supermarket pull/withdrawal

Figure 10.24 Pull Symbols in Value Stream Mapping

 Design and Improvement of Service Processes—Process Management 375

Quick Setup Time Reduction

When one-piece flow and a cellular manufacturing system are used, it is

very important that the setup time needed between producing one type of
product and another type of product be greatly reduced. Otherwise, the pro-
duction system will be overwhelmed by frequent, long changeover times
from one type to the next.

The Toyota production system developed many quick setup time reduction
techniques. However, the key idea is to divide the setup time into two cat-
egories of elements: internal elements and external elements. The internal
elements are the actions needed in the setup where the regular production
has to stop. The external elements are the actions needed in the setup where
the regular production does not have to stop. The key strategy in the quick
setup time reduction technique is to redesign the work elements in setup so
that overwhelming amounts of setup work are done externally, that is,
without production stoppage.

There must be at least a thousand years of history using the quick setup time
reduction technique in the restaurant industry. One of the keys for success
in the restaurant business is to reduce the production lead time, that is, the
time from customer order to serving the food. Nobody wants to wait in a
restaurant for hours without food. The kitchen has to be able to switch over
from one item to another without much delay, and the setup time for
different dishes must be very fast. It is impossible to batch-produce the
same dishes and save those as inventory, so one-piece flow should be strictly
enforced. People in the restaurant kitchen found numerous ways to do the
quick changeover. The main trick is to do a lot of preparations off-line, that
is, when there is no customer order or in parallel with the cooking process.
This is the same idea as that of the Toyota production system.

10.5.4 Future State Value Stream Map

As we discussed in Sec. 10.5.3, lean operation techniques can be used to

generate a new process design in order to reduce the product lead time and
to increase process efficiency. The value stream map for the new design is
called the future state value stream map. Figure 10.25 is the future value
stream map for the production system illustrated by Fig. 10.18.

In this future state value stream map, the batch size for the stamping
operation is reduced from 2 weeks of supply to one shift of supply. The
batch line process of welds and assemblies in the old value stream map is
changed to a U-shaped work cell. Several supermarket shelf symbols in
 6-week
376 Production 90/60/30 day
forecast State street
Michigan control forecasts
Steel Co. Daily assembly
Daily
order order
Daily order

Coil
Daily 20
(milk run) 20
20

Coil
1x
daily

Batch 20

Tote 20

Coils Stamping Weld + assy. L Shipping

ver
Changeo Staging
R

(at the press)

EPE = 1 shift Takt = 58.6 sec.
C/O < 10 min. Weld C/O = φ
over
change Uptime = 100% Elim. waste
2 shifts
Welder Total work
uptime Time = 165 sec.
Production
1.5 days 1 day 2 days lead time = 4.5 days
1 sec. 165 sec. Value-
added = 166 sec.
time

Figure 10.25 The Future State Value Stream Map

 Design and Improvement of Service Processes—Process Management 377

Fig. 10.25 indicate that the push-based production is changed into a pull-
based production. As a result of this process redesign, the lead time is
reduced to 4.5 days from the 23.5 days of Fig. 10.18.

10.6 Process Management Procedures

10.6.1 Process Management Overview

Process management is performed by following a series of steps in the

correct order and applying the appropriate tools for each step. It is very
important that this methodology be customized to match the requirements
of different types of processes and particular process situations. For
example, the process management procedures for a project shop case will
be very different than the procedures for the supply chain case.

Process management involves the following five phases:

1. Process mapping
2. Process diagnosis
3. Process design
4. Process implementation
5. Process maintenance

10.6.2 Process Mapping

In the process mapping stage, the following tasks must be performed:

1. Identify the process under study. In any DFSS project, we are going to
work on one process at a time. We need to identify which process we
want to work on and define the scope of the project and the boundary
of the process.
2. Outline the process. The process types and performance metrics
discussed in Sec. 10.3 can be very helpful in identifying what type of
process that we are working on, and what are the possible process
features and performance metrics.
3. Document process objectives and performance metrics. Based on the
knowledge provided by Sec. 10.3 and detailed analysis of the process
under study, we can finalize what are our process objectives and per-
formance metrics.
4. List the process steps.
5. Determine the layout process sequence.
6. Identify the process resources for each process step.
378 Chapter Ten

7. Document the process. We can use any or all of the process map
techniques:
a. Process flowchart
b. IDEF0 chart
c. Current state value stream map
The goal of the process mapping is to derive the detailed visual definition of
the process and capture the strengths and weaknesses of the process that
will drive the process design and improvement activities.

10.6.3 Process Diagnosis

The goal of process diagnosis is to identify the key weaknesses of the

process and provide the guidelines for process redesign and improvements.
The following approaches are often used in process diagnosis:
1. Value stream map analysis: Value stream mapping can expose non-
value-added activities and process efficiency problems. By using lean
operation principles to analyze the current state value map, possible
improvement ideas can be generated.
2. Process map analysis: A real detailed process map may expose
“hidden factories,” that is, unnecessary loops and steps. This
process map analysis may help to generate process improvement
ideas.
3. Process analysis based on process types: The knowledge outlined in
Sec. 10.3 can also be used to analyze the possible weaknesses of the
process. For example, if we find that our process is an office process
but we use a job shop type of layout, then we can immediately know
that this process type is inefficient for the office process and probably
should change to using several lean work cells.
4. Cause and effect diagram or fishbone diagram analysis.
5. Data collection: Collecting such data as the waiting time, process
time, or equipment and operator utilization for each process step may
help to identify the weak links and bottlenecks of the process.
6. Process simulation: For many service processes, discrete event sim-
ulation can be a very useful tool to evaluate the current process and
identify weak links and bottlenecks.

10.6.4 Process Design (Redesign)

After the process diagnosis step, the weaknesses and bottlenecks of the
process should be known. Now is the time to propose the process change
and generate new designs. New designs can be generated based on
 Design and Improvement of Service Processes—Process Management 379

1. Applying lean operation principles: For example, the future state

value stream map can be derived by applying lean operation principles
to the current state value map.
2. Brainstorming: The DFSS team can use brainstorming to generate
new designs.
3. Process knowledge: The process knowledge described in Sec. 10.3
can be used to generate design ideas. For example, if we identify our
process as a project shop–type process, then the redesign solution
should be based on project management techniques, such as redividing
the work breakdown structure, generating a different project network,
or redistributing the resource allocation.
Discrete event simulation experiments can be used as a valuable tool to try
out each design alternative. The evaluation of the simulation results will
help us to select the best design alternative.

10.6.5 Process Implementation

Process implementation involves final validation of the process and con-

trolled dissemination throughout an organization. This includes procuring
and installing tools and equipment required for the process, as well as
training activities required for correct application of the new process.

Even after the main features of the new or improved process have been
determined, the team must not rush to implement. It is likely that additional
refinements in the process will be required before it is ready for “prime
time.” A convenient method for validating the process is to develop small
pilot implementations, evaluate the performance of the pilot processes,
validate them in detail, and carry out refinements in detail. Refinements may
be found in different areas, from the sequence of steps in the process, to the
configuration of tools and resources selected, and even the documentation
of the process manual. The piloting, validation, and refinement might take
anywhere from a few days to several months. The validation plan and all the
necessary follow-through should be overseen by the DFSS team in order to
determine that all the process needs will be met.

Once validation is complete, final documentation of the process manual can

be developed. The process manual should serve as the document that will be
used as a reference for operating the process as well as all training and
future maintenance of the process. In documenting, reference should be
made to all the process documentation information that has been developed
in the mapping and design phases. The process manual should be doc-
umented in an attractive and easily understood manner. Optionally, new
380 Chapter Ten

technologies such as the World Wide Web and Intranets may be used as the
medium for access to the process manual.

Many processes will require the hiring of new employees with certain
specific skills and the purchase of specialized tools or equipment. Following
the specifications of the process design, such employees can be hired and
the equipment purchased. Procuring long-lead-time equipment or hiring
employees with hard-to-find skills should start early so that everything can
be in place for the process to commence operation. Installation of equipment
should follow recommended procedures, and new employees should be
trained quickly so that they can be at their most effective as soon as possible.

10.6.6 Process Maintenance

Process maintenance involves ongoing monitoring of the process, as well as

periodic improvements to ensure that process performance remains high
despite changing internal and external conditions. After the process has
been implemented, it should not just be abandoned to its fate. Rather, the
process should be treated like one would treat any other valuable asset of the
organization; track its performance over time and schedule periodic
reexamination to determine if it needs any major or minor overhauls. This
maintenance will ensure that if conditions were to change or tools and
equipment were to wear out, an opportunity would be available to update
the process and cope with the new requirements. For tracking and process
monitoring, it is recommended that, at the minimum, the most important of
the performance metrics considered in the process design should be tracked.
In addition, other data providing early warnings regarding the state of the
process should be collected.

For example, for critical equipment, failure times and downtime durations
should be logged. Data collection systems or data tracking forms need to be
designed for acquiring the data of interest. All statistical process control
activities for the process are an integral part of the process maintenance.
Maintenance schedules for important equipment should be based on the
frequency recommended by the manufacturers of the equipment.

10.7 A Process Management Case Study

10.7.1 Background

This case study is from Mejabi (2003). USAA is an insurance company that
started losing market share due to price competition from competitors and
 Design and Improvement of Service Processes—Process Management 381

customer service complaints about excessively long waiting times. To

reverse this trend the company needed to improve service levels and reduce
cost by providing a fast, cost-efficient, high-quality, and customer-focused
claims process. A process management approach was adopted, and a
process management project was initiated. The objectives of this project
were the following:
• Seek ways to redesign the process to yield simpler and more cost-
effective procedures for claims adjudication.
• Reduce process lead times to have fast and effective customer service.
• Improve customer-focused process characteristics in the company.
The process involved in this project was an office process. The following
process performance metrics were used in this study:
• Service lead time: Average response time for processing an insurance
claim
• Throughput: Claims processed per week
• Efficiency: Percent net activity value to activity cost ratio

10.7.2 Process Mapping

Following a standard process management procedure, the first step was to

draw a process map. The process map is illustrated in Fig. 10.26. A sim-
plified process map is illustrated in Fig. 10.27. The drawing of process maps
helps us understand how the process worked. It was found that there were
two types of insurance claims: simple claims and complex claims. The labor
needs and work procedures for dealing with these two kinds of claims were
quite different, as illustrated in Fig. 10.27.

The drawing and study of these process maps also helps us understand the
following process performance metrics:
• Service cost: Average cost to process a claim
• Service lead time: Average response time for processing a claim
• Throughput: Claims processed per week

10.7.3 Process Diagnosis

Several methods were used for process diagnosis. First, the claim case
types were analyzed based on historical data. Fifty-two percent of claims
were of the complex claims type, and 48 percent were of the simple claims
type. Roughly 90 percent of claims ended up with insurance coverage, and
10 percent of claims ended up with no coverage. This case type distribution
382 Chapter Ten

Taking loss report (steps 1, 2, 3) Loss investigation (steps 4, 5, 6, 7, 8)

Step 1 Step 2 Step 3 Step 4 Step 5 Step 6
Obtain Step 7
Screen & Identify Document Review Open Obtain
statements/
route mail customer loss report loss report coverage documents
info.

Determine exposure (steps 9, 10, 11)

Step 10 Step 9 Step 8

Determine Evaluate Determine
preliminary
cause inv. value
of loss materials of damages

Step 12
Step 11 Assess medical
CAgreed Determine injury and
coverage physical
damages

No Yes
Step 13
End Evaluate damages
Determine
(steps 12, 13, 14)
causality

Step 15 Step 14
Determine Control
what part of monetary
loss is value
covered of loss

Evaluate liability (steps 15, 16)

Step 16
Determine
fault

Negotiate claim
(steps 17, 18) Conclude claim (steps 19, 20, 21)

Step 18 Step 20
Step 17 Step 19 Validate Step 21
Make offer
Develop Take action accuracy Close the End
and reach and
strategy as agreed file
agreement appropri.

Figure 10.26 USAA Insurance Claim Processing Process Map

study helps us to understand the workload distributions for each of the

process steps. It is illustrated in Fig. 10.28.

Then, cause-and-effect diagrams were used to analyze the root causes of

current process problems, the low level of customer satisfaction, excessive
claim processing lead time, and low throughput. Figure 10.29 is the cause-
and-effect diagram for customer satisfaction. It was found that customer sat-
isfaction was dependent on three factors: customers’ perception of the
fairness of the settlement, speed of payment and overall claim service quality,
 Design and Improvement of Service Processes—Process Management 383

Perform
Log loss loss Simple Determine Simple Evaluate Negotiate Conclude
report investig- claim exposure claim liability claim claim
ation

Complex Complex
claim claim

Perform
Evaluate
loss
damage
analysis

Figure 10.27 Simplified USAA Insurance Claim Processing Process Map

Customer
agrees (0.5)
No coverage (0.1)
Customer (0.5)
doesn’t agree
Complex (0.52) Coverage (0.9)

Case

Simple (0.48) Coverage (0.9)

No coverage Customer
agrees (0.5)
Customer (0.5)
does’t agree
Figure 10.28 Claim Types Distribution

Fairness
of the
settlement

Speed of
Personnel payment and Customer
utilization overall claim satisfaction
service quality

Information
about the
claims process

Figure 10.29 Cause-and-Effect Analysis of Customer Satisfaction

384 Chapter Ten

and information about the claim process. All these three factors depended on
how much time relevant service providers worked with the customers. If
there was an uneven workload among the service providers, some of the
providers would be too busy and have very little time to explain to customers.

Figure 10.30 is the cause-and-effect diagram for the process throughput and
processing lead time. Long queue times, a high work-in-process level
(unfinished paperwork), and long activity processing times were the causes
of the low throughput and long lead time. Inefficient workload allocation
and workload balancing were the causes for the long queue times and high
work-in-process level.

Another cause-and-effect analysis was conducted on cost efficiency.

Based on lean operation principles, all the activities were classified as
value-added or non-value-added. The following value-added activities
were identified:
Customer value-added
• Identify customer
• Take action
• Access damage
• Document loss report
• Determine preliminary value of the damage
Regulatory value-added
• Open coverages
• Obtain documentation
• Determine coverages
• Make offer and reach agreement

Inefficient
workload Long queue
times and Process
allocation and
high WIP throughput
workload
balancing levels

Long activity
times

Figure 10.30 Cause-and-Effect Diagram for Throughput and Lead Time

 Design and Improvement of Service Processes—Process Management 385

The customer value-added activities are the activities that add value to
customers; the regulatory value-added activities are the activities that are
required by law or company regulations.

The non-value-added activities included

Screen and route mail
Review loss report
Obtain status and information
Evaluate investigation materials
Determine the cause of loss
Determine loss coverage
Control monetary value
Validate accuracy
Close file

Figure 10.31 is the cause-and-effect diagram for the cost efficiency. Clearly,
the inefficient process flow compounded the problem of a low ratio of value-
added time versus non-value-added time. Figure 10.32 illustrates the
itemized cost figures for conducting value-added works versus non-value-
added works.

In addition to the cause-and-effect analysis, the project team decided that a

simulation study was very necessary to further analyze the process and

Customer value-
added work

Ratio of
Regulatory value- value-added/ Cost
added work non-value-added efficiency

Non-value-
added work

Inefficient
process flow

Figure 10.31 Cause-and-Effect Diagram for Cost Efficiency

386 Chapter Ten

Net activity value to activity cost ratio

4185
1500
1300
1100
900
700
500
300

100

−100
−300

.
fo
O et s r es

C ch ca oss
M rag e

er le

au te e
m n

D e ges

D vs ove ss

ea et. of l s

bt c ue
. c the g
C ro (s)

et Re cur y
se ke er

Ev lo vie acy

O on eem ty
co . v rt

l. rat lt

a. t
t

st en
ai ey. en
l
u

.c a g
oc a io

ac eg
D ose utin

Va . st fau

se ria
ov fi
n re po

/in
. m gr al
As a tom

in c o
D los ag

ve al

et . m ra

O do val
D s d act

ai e

ai um
a. ss w l
a

on a su
pe . p e

ev t.
s
cu

n
y
T

n
s
tif

D
et
en

bt
.
Id

R
D

Figure 10.32 Value-Added versus Non-Value-Added Costs

determine the root cause of the current problems and to evaluate any
suggested process change to improve the system performance. Specifically,
the simulation analysis could
• Help develop a dynamic template for value stream analysis (resource
cost: capital cost, labor cost, overhead, and activity cycle times)
• Show the effect of process changes on cost per claim, claim response
time (lead time), and throughput (claims processed per week)
• Show the effect of activity processing time on cost per claim

Before the simulation study could be started, data had to be collected in

order to set up the parameters for the simulation study. The following data
were collected:
• WIP levels at the bottleneck activity
• Difference between highest and lowest personnel utilization of overall
activities
• Throughput members served per week
• Average cost for one insurance claim
• Average cycle time to complete a claim
Table 10.3 shows a portion of simulation output on cycle times and process
costs for several key activities.
 Design and Improvement of Service Processes—Process Management 387

Table 10.3 Simulation Results on Cycle Time and Process Costs

Activity Cycle Time (min) Process Cost ($/min)

Taking loss report 28.58 0.37

Perform loss investigation 52.73 0.61

Perform loss analysis 12.33 0.40

Determine exposure 12.2 0.63

Evaluate damage 18.2 1.36

Evaluate liability 14.15 0.38

Negotiate claim 12.03 0.67

Conclude claim 15.6 0.46

10.7.4 Process Design

Based on the process diagnosis conducted, the following design alternatives

were developed.
Alternative 1: As-is current USAA insurance process
Alternative 2: Process simplification of USAA insurance process
Alternative 3: Case type departmentalization of USAA insurance
process
Alternative 1 was the current design. Further simulation analysis on this
current design yielded the following results:
• Average cycle time to complete a claim was 21.4 hours (1283 minutes).
• Average number of claims in process (waiting) at the bottleneck activity
was 239.
• Difference between highest and lowest personnel utilization was
93 percent.
• Throughput was 25 claims per week.
Figure 10.33 shows the service providers’ utilization rate. Obviously, there
were tremendous workload inbalances among different service providers.

Alternative 2 was a design simplification of the current process; it had the

following features:
388 Chapter Ten

Utilization

Name 0% 25% 50% 75% 100%

P_SCREEN_ROUTE_MAIL
P_IDENTIFY_CUSTOMER
P_DOCUMENT_LOSS_REPORT
P_OPEN_COVERAGES
P_OBTAIN_STATEMENTS INFORMATION
REV_L_R_DPVD
FIELD_INSPECTOR_1
FIELD_INSPECTOR_2
P_DETERMINE_COVERAGE
P_ASSESS_MED_INJURY_DAMAGES_
P_DETERMINE_CASUALTY
P_CONTROL_MONETARY_VALUE_OF_LOSS
P_WHAT_PART_OF_LOSS_IS_COVERED
P_DETERMINE_FAULT
P_TAKE_ACTION
P_MAKE_OFFER_REACH_AGREEMENT
P_DEVELOP_STRATEGY
P_VAA
P_OBTAIN_DOCUMENTS
P_DETERMINE_CAUSE_OF_LOSS
P_CLOSE_FILE

Figure 10.33 Personnel Utilization of Design Alternative 1

• Combine the “reviewing loss report and open coverage(s),” “determine

cause of loss and casualty,” and “develop strategy and reach agreement”
activities.
• Reduce total USAA work force from 21 to 14.
• Increase the work force for the “document loss report activity” (the bot-
tleneck) from 1 to 3.
• Eliminate denied claim call costs by moving the “determining
coverage(s)” activity upward in the USAA process. Thus, an early
checkpoint would be installed in the system to keep these calls from pro-
ceeding forward and adding unnecessary costs to the total claim process.

Further simulation analysis on this current design simplification yielded the

following results:
• Average cycle time to complete a claim was 20.6 hours (1233 minutes).
• Average number of claims in process (waiting) at the bottleneck activity
was 176.
• Difference between highest and lowest personnel utilization was
75 percent.
• Throughput was 62 claims per week.
Figure 10.34 shows the service providers’ utilization rate based on sim-
ulation. Clearly, design alternative 2 had a much more balanced personnel
 Design and Improvement of Service Processes—Process Management 389

Utilization

Name 0% 25% 50% 75% 100%

USSA1_SERVICE_PROVIDER
USSA2_SERVICE_PROVIDER.1
USSA2_SERVICE_PROVIDER.2
USSA2_SERVICE_PROVIDER
USSA3_SERVICE_PROVIDER
USSA4_SERVICE_PROVIDER
USSA5_SERVICE_PROVIDER
USSA6_SERVICE_PROVIDER
USSA7_SERVICE_PROVIDER
USSA8_SERVICE_PROVIDER
USSA9_SERVICE_PROVIDER
FIELD_INSPECTOR
PBX_OPERATOR
USSA10_SERVICE_PROVIDER

Figure 10.34 Personnel Utilization of Design Alternative 2

utilization rate; its throughput, cycle time, and work-in-process (WIP) were
also improved.

Design alternative 3 was the case type departmentalization; specifically it

had the following features:
• Use two types of process flow regarding two different cases. In this
case, simple and complex insurance claims use two different process
procedures to complete insurance claim activities.
• Increase work force assignment for “documenting loss report activity”
(bottleneck of the as-is process) from 1 to 3.
• Combine “reviewing loss report” and “open coverage(s),” “determine
cause of loss and casualty,” and “develop strategy and reach agreement”
activities all together.
• Separate the “determine preliminary value of damage” activity into two
different activities:
Field inspection
Determining preliminary value of damage
• Reduce total USAA work force from 20 to 13.
• Move “determine coverage” activity up-front (close to the beginning of
the process) in order to reduce denied claim costs in the process.

Further simulation analysis on this current design yielded the following

results:
• Average cycle time to complete a claim was 19.2 hours (1154 minutes).
• Average number of claims in process (waiting) at the bottleneck activity
was 178.
390 Chapter Ten

Utilization

Name 0% 25% 50% 75% 100%

PBX_OPERATOR
USSA_1.1
USSA_1.2
USSA_1
FIELD_INSPECTOR
USAA3_COMPLEX
USAA2_COMPLEX
USAA4_COMPLEX
USAA_NEG1
USAA_NEG2
USAA2_SIMPLE
USAA3_SIMPLE
USAA_5_COMPLEX

Figure 10.35 Personnel Utilization of Design Alternative 3

• Difference between highest and lowest personnel utilization was 67

percent.
• Throughput was 90 claims per week.
Figure 10.35 shows the service providers’ utilization rate based on the
simulation.

Design alternative 3 had an even better personnel utilization rate; its

throughput, cycle time, and work-in-process (WIP) were also improved
compared with design alternative 2.

Table 10.4 Comparison of Three Design Alternatives

Evaluation Metrics

Throughput Average Cost Average Lead

Alternative (Claims/Week) per Claim ($) Time (min.)

Alternative 1: 25 116.10 1283

as-is process

Alternative 2: 62 105.47 1233

process simplification

Alternative 3: 90 102.7 1154

case type
departmentalization

Importance weight 0.15 0.25 0.60

 Design and Improvement of Service Processes—Process Management 391

Table 10.4 lists key performance metrics for these three designs. Clearly,
design alternative 3 was the winning design. Case type departmental-
ization could increase the throughput from the current 25 claims per week
to 90 claims per week; the average cost per claim was reduced to $102.7,
compared with the current level of $116.10; and the average lead time was
reduced to 1154 minutes from the current 1283-minute level.
This page intentionally left blank
 Chapter

Statistical Basics and

11
Six Sigma Metrics

11.1 Introduction

Six Sigma is a data-driven management system with near-perfect performance

objectives (Pande et al. 2000). By data-driven we mean that in Six Sigma,
the real data collected in the process under study is the only source to measure
the current performance, analyze the root causes for the problem, and derive
improvement strategies. Near-perfect performance objectives means that in
Six Sigma, we will improve the process until it achieves a very low level of
defects and a very high level of performance. Clearly, it also needs the real data
from the process to verify if the desired performance requirements are met.

Data analysis is a very important part of Six Sigma. In the real business and
engineering process, many data collected are random variables; that is, their
value will vary with some degree of uncertainty. Let us look at Example 11.1.

Example 11.1
In a semiconductor manufacturing process, we have a step where an oxide film
is grown on a silicon wafer by using a furnace. In this step, a cassette of wafers
is placed in a quartz “boat” and the boats are placed in the furnace. A gas flow is
created in the furnace, and it is brought up to temperature and held there for a
specified period of time. In this process, it is required that the most desirable
oxide film thickness be 560 angstroms (Å); the specification of the oxide
thickness is 560 ± 100 Å. That is, an oxidized wafer is out of specification if its
thickness is either lower than 460 Å or higher than 660 Å. We collected the
following film thickness data in the process:
547 563 578 571 572 575 584 549 546 584 593 567
548 606 607 539 554 533 535 522 521 547 550 610
592 587 587 572 612 566 563 569 609 558 555 577
579 552 558 595 583 599 602 598 616 580 575
Does this process satisfy our quality requirement?

393

Copyright © 2005 by The McGraw-Hill Companies, Inc. Click here for terms of use.
394 Chapter Eleven

In Example 11.1, clearly the film thickness varies from wafer to wafer, so it
is a random variable. A random variable is either discrete or continuous. If
the set of all possible values is finite or countably infinite, then the random
variable is discrete; if the set of all possible values of the random variable is
an interval, then the random variable is continuous. Clearly, the film
thickness variable is continuous.

The theoretical basis for modern data analysis is statistics. There are
different methods in statistics that can be used to analyze data; some of
them are very simple, such as descriptive statistics. Descriptive statistics
can provide intuitive display and analysis of the data. Some methods are
more sophisticated, such as the probability distribution models and sta-
tistical inferences; these analyses are more powerful, can provide more
insights, and are able to provide credible inference and prediction about the
process based on data. All popular Six Sigma performance metrics are based
on the theory of statistics; therefore, familiarity with basic statistics is very
essential in understanding Six Sigma metrics.

In Sec. 11.2 we review several descriptive statistical methods. In Sec. 11.3

we review several commonly used probability distribution models. In
Sec. 11.4 we review some basic aspects of statistical estimation. Finally, in
Sec. 12.6, we discuss Six Sigma metrics.

11.2 Descriptive Statistics

11.2.1 Graphical Descriptive Statistics

Descriptive statistics are a set of simple graphical and numerical methods

that can quickly show some intuitive properties displayed in the data. The
commonly used graphical descriptive statistical methods include the dot
plot, histogram, and box plot.

Dot Plot

The dot plot, as illustrated by Fig. 11.1, is a simple yet effective diagram;
each dot represents a piece of data. The dot plot can display the distribution
pattern and the spread of data points.

Histogram

A histogram is a diagram displaying the frequency distribution. The hor-

izontal axis is partitioned into many small segments. The number of data
points (or the percentage of points) that fall in each segment is called the
 Statistical Basics and Six Sigma Metrics 395

532 546 560 574 588 602 616

Film thickness

Figure 11.1 Dot Plot of Film Thickness Data

frequency and is displayed as the height of the bar corresponding to that

segment. For example, the histogram for the film thickness data is displayed
in the histogram illustrated in Fig. 11.2. The leftmost segment is the bracket
(515, 525). In the data set, there are two data points (521 and 522) in this
range, so the height of the bar is 2. We also can see that a large portion of
data fall in-between 545 to 585.

Box Plot

A box plot is also a very useful way of displaying data. A box plot displays
the minimum (lowermost point), maximum (uppermost point), median
(centerline), 25th percentile (lower bar of the box), and 75th percentile
(upper bar of the box). Figure 11.3 shows the box plot of the data in
Example 11.1; the centerline of the box corresponds to 572, which is the
median of the data. The lower bar of the box corresponds to 552, which is
the 25th percentile of the data; the upper bar corresponds to 592, which is
the 75th percentile of the data; the uppermost point corresponds to 616,
which is the maximum of the data; and the lowermost point corresponds to
521, which is the minimum of the data.

9
8
7
6
Frequency

5
4
3
2
1
0
520 540 560 580 600 620
Film thickness

Figure 11.2 Histogram of Film Thickness Data

396 Chapter Eleven

620

600
Film thickness

580

560

540

520

Figure 11.3 Box Plot of Film Thickness Data

11.2.2 Numerical Descriptive Statistics

Numerical descriptive statistics are numbers calculated from a data set in

order to help us to create a mental image of the distribution pattern of the
data. There are three types of numerical descriptive statistics:
1. The numerical measure that describes the central tendency of the data,
that is, where the center of the data set is. Frequently used measures of
central tendency include the mean and median.
2. The numerical measures that describe the spread of data, are also called
the measures of variation. Frequently used measures of variation
include variance, standard deviation, range, maximum, and minimum.
3. The numerical measures that describe the relative position of the data,
are often called the measures of relative standing. The frequently used
measure here is percentile points.

Measures of Central Tendency

Mean
The mean y is also called the arithmetic mean. Of a set of n measurements,
y1, y2,…, yn is the average of the measurements, specifically

1 n
y= ∑ yi
n i =1
(11.1)

Example 11.2
The mean for the data of Example 11.1 is
1
y= (547 + 563 + ⋅⋅⋅ + 575) = 572.02
47
 Statistical Basics and Six Sigma Metrics 397

Clearly, the mean is simply a numerical average, which gives a good

sense of where the center is for a data set. It is the most commonly used
measure of central tendency. However, in some cases, it is not a preferred
measure. For example, assume that in a subdivision, there are 20 families.
Most of families have an annual income around $40,000; however, there
is one family with an annual income of $1,000,000. If we use the
arithmetic mean as the measure of central tendency, then y will be in the
neighborhood of $90,000, which is by no means a family’s typical
midincome in this circumstance. The median would be a better measure
in this case.

Median
The median of a set of measurements y1, y2,…, yn is the middle number
when the measurements are arranged in ascending (or descending) order.
Specifically, let y(i) denote the ith value of the data set when y1, y2,…, yn are
arranged in ascending order. Then the median m is the following:

⎧ y[( n+1)/ 2 ] if n is odd

⎪
m = ⎨y
( n / 2 ) + y( n / 2 +1)
⎪ if n is even (11.2)
⎩ 2

Example 11.3
The median of the data set in Example 11.1 can be calculated as follows. First,
we arrange the data in ascending order:

y(1), y(2),…, y(n−1), y(n) = 521, 522, 533,…, 610, 612, 616

In this data set, n = 47, and it is an odd number, n + 1/2 = 48/2 = 24. It can be
found that y24 = 572. Therefore, m = 572.

Measures of Variation

The most commonly used measures of variation are the range, the variance,
and the standard deviation.

Range
The range is equal to the difference between the largest (maximum) and the
smallest (minimum) measurements in a data set, specifically
Range = maximum – minimum (11.3)

Example 11.4
For the data of Example 11.1, the maximum = y(n) = y(47) = 616 and the
minimum = y(1) = 521; therefore, the range = 616 – 521 = 95.
398 Chapter Eleven

The range is very easy to compute, but it only gives the distance of the two
most extreme observations. It is not a good measure of variation for the
whole data set. The variance and standard deviation are better measures in
this aspect.

Variance
The variance of a sample of n measurements y1, y2,…, yn is defined as

1 n
s2 = ∑ ( yi − y )2
n − 1 i =1
(11.4)

Example 11.5
For the data of Example 11.1, the variance can be computed as

1
s2 = [(547 − 572.02)2 + (563 − 572.02)2
47 − 1
+ ⋅⋅⋅ + (575 − 572.02)2 ] = 601.72

Sample variance s 2 is obviously an average of the sum of squared deviations

from the mean of all observations. Squared deviation makes sense because
no matter if an observation is smaller or larger than the mean, the squared
deviation will always be positive. The average of the squared deviation is a
measure of variation for the whole data set. However, the numerical scale
and measurement unit of variance is the square of the original data. For
example, if the original data is length in inches, the variance will be in the
unit of squared inch, which cannot compare well with the original data.

Standard Deviation
The standard deviation is the square root of variance, specifically, the standard
deviation of a sample of n measurements y1, y2,…, yn and is defined as

1 n
s = s2 = ∑ ( yi − y )2
n − 1 i =1
(11.5)
`
Example 11.6
For the data of Example 11.1, the standard deviation can be computed as

s = s 2 = 601.72 = 24.53

Measure of Relative Standing

The measure of relative standing provides a numerical value or score that

describes a predefined location relative to other observations in a data set.
 Statistical Basics and Six Sigma Metrics 399

A very commonly used measure of relative standing is the 100pth per-

centile, or simply called percentile points.

The 100pth percentile of a data set is a value y located so that 100p percent
of the data is smaller than y, and 100(1 – p)% of the data is larger than y,
where 0 ≤ p ≤ 1.

Example 11.7
The median is the 50th percentile, because 50 percent of data points are
smaller than the median and 50 percent of data are larger than the median. The
25 percent percentile is often called the lower quartile and is denoted by QL or
Q1; 25 percent of data will be smaller than QL and 75 percent of data will be
larger than QL in a given data set. The 75th percentile is often called the upper
quartile and is denoted by QU or Q3; 75 percent of data will be smaller than QU
and 25 percent of data will be larger than QU.

MINITAB can compute all types of descriptive statistics conveniently. The

following MINITAB output is the printout of the descriptive statistics for the
data set of Example 11.1.

Descriptive Statistics: Film Thickness

Variable N N* Mean SE Mean StDev Minimum Q1
Film Thickness 47 0 572.02 3.58 24.53 521.00 552.00
Median Q3
572.00 592.00

Variable Maximum
Film Thickness 616.00

11.3 Random Variables and Probability Distributions

The data set collected in a process, such as the data set described in Example
11.1, is called a sample of data, because it only reflects the reality of a
snapshot of the process. For example, the data set in Example 11.1 is only a
small portion of the production data. If we are able to collect all the film
thickness data for all wafers in the whole life cycle of the oxidation furnace,
then we collected a whole population of data. In real-world business
decision making, the population is of more interest for the decision makers.
We are definitely more interested in the overall quality level for the pop-
ulation. Random variables and probability distributions are the mathe-
matical tools used to describe the behavior of populations.

A random variable can be defined as a variable that takes different values

following some specific probability distribution. A random variable is a discrete
400 Chapter Eleven

random variable if it can take only a countable number of values. A simple

example of a discrete random variable is the number of points that a fair six-
sided die will show on a toss, y. It can only be 1, 2, 3, 4, 5, or 6, with equal prob-
abilities. A random variable can also be a continuous random variable if it can
take all real numbers in a given interval. For example, a random person’s height
(that is, a person you randomly met on a street) is a continuous random variable.

The probability structure of a random variable, say y, is described by its

probability distribution. If y is a discrete random variable, then its prob-
ability distribution is described by the probability function, often denoted
by p(y). If y is a continuous random variable, its probability distribution is
described by its probability density function, often denoted by f(y).

The properties of the probability function p(y) and probability density

function f(y) are summarized as follows:
Discrete random variable y
0 ≤ p (yi) ≤ 1 yi’s are the possible values that y can take
P(y = yi ) = P(yi )

∑ p( yi ) = 1
All − yi

Continuous random variable y

f ( y) ≥ 0
b
P( a y b) = ∫ f ( y) dy
a
+∞
∫−∞ f ( y) dy = 1

11.3.1 Expected Value, Variance, and Standard Deviation

The random variable and probability distribution deal with the population.
The mean of the population (or population mean m) is the most frequently
used measure of central tendency for the population; m is also called the
expected value of the random variable y.

The expected value E(y) = m is defined as follows:

⎧ ∑ yp( y) if y is discrete
⎪All− y
m = E( y) = ⎨
⎪ +∞ yf ( y) dy
⎩∫−∞
if y is continuous
 Statistical Basics and Six Sigma Metrics 401

The population variance is often denoted by s 2, and it is often simply called

the variance. The variance of a random variable y is defined as follows:

⎧ ∑ ( y − m )2 p( y) if y is discrete
⎪All− y
s2 = ⎨
⎪ +∞ ( y − m )2 f ( y) dy
⎩∫−∞
if y is continuous

Variance is often denoted by V(y). From the definition of expected value, it

is clear that

s 2 = Var(y) = E[(y − m)2]

The population standard deviation is often called the standard deviation σ,

where s is simply the square root of variance s 2, that is,

s = s2

In Six Sigma–related applications, there are several probability distribution

models that are often used as the basis for data-driven decision making. They
are the normal distribution, exponential distribution, binomial distribution
and Poisson distribution. We give an overview for each of these distributions.

Normal Distribution

The normal distribution (or Gaussian distribution) was first proposed by

Gauss (1777–1855). It is often used to model the probability distribution of
continuous variables that have the following properties:
1. There are many random factors that can affect the value of the random
variable.
2. Each of these random factors has relatively small influence on the
random variable; there is no dominate factor.
The normal distribution is the most popular distribution in quality engi-
neering and Six Sigma. It is often used to model the follow random
variables:
1. Quality characteristic of parts from suppliers
2. Students’ test scores or employee performance scores
The probability density function of the normal distribution is as follows:

1 ⎛ y− m ⎞ 2
1 −
⎝ s ⎠
f ( y) = e 2 − ∞ < y < +∞
2ps
402 Chapter Eleven

f(y)

Distribution
with smaller s

Distribution
with larger s

Figure 11.4 Normal Probability Density Curve

For the normal distribution,

E(y) = m and Var(y) = s 2
A normal random variable y with E( y) = m and Var( y) = s 2 is denoted by
N(m, s 2). The probability density function f(y) displays a bell-shaped curve
as illustrated by Fig. 11.4. The distribution is centered at m, and the smaller
s results in a tighter curve and vice versa.

An important special case of the normal distribution is the standard normal

distribution. In the standard normal distribution, m = 0 and s 2 = 1. The
standard normal random variable is often denoted by z ~ N(0, 1). The
standard normal distribution table is mainly used to calculate probabilities
for all kinds of normal distributions.

Figure 11.5 shows that if y ~ N(m, s 2), then P(m − s ≤ y ≤ m + s) = P(–1 ≤

z ≤ 1) = 0.6826 = 68.27%; that is, 68.27 percent of observations from a

1s
−∞ +∞

68.27%
95.45%
99.73%

Figure 11.5 Percentage Distribution Properties of Normal Random Variable

 Statistical Basics and Six Sigma Metrics 403

normal population will locate within a distance of one standard deviation

from the mean. Similarly, P(m − 2s ≤ y ≤ m + 2s) = P(–2 ≤ z ≤ 2) = 0.9545 =
95.45%, that is; 95.45 percent of observations from a normal population
will locate within a distance of two standard deviations from the mean. In
addition, P(m − 3s ≤ y ≤ m + 3s) = P(–3 ≤ z ≤ 3) = 0.9973 = 99.73%; that is,
99.73 percent of observations from a normal population will locate within
three standard deviations distance from the mean.

Exponential Distribution

An exponential distribution is featured by the following probability density

function:
e − y /b
f ( y) = for 0 ≤ y < ∞
b

with a mean and variance of

E(y) = m = b and Var(y) = b 2

The exponential distribution is often used to model the following:

1. Lifetime of some electronic components
2. Interarrival time of customers entering a service facility
3. Time between consecutive machine failures or earthquakes

Binomial Distribution

The binomial distribution is a discrete probability distribution that charac-

terizes a binomial random variable. The binomial random variable can be
used for the following situation:
1. There are n successive trials. Each trial will only have two distinct
outcomes, S (success) or F (failure).
2. The probability of success P(S) = p, and P(F) = 1 – P(S) = 1 – p.
3. The result of each trial will not affect the results of any other trials.
If this situation is true, then the number of successes y out of n trials will be
a binomial random variable and its probability function p(y) will be

n!
p( y) = p y (1 − p) n− y y = 0, 1,…, n
y!(n − y)!

The mean and variance of the binomial random variable are

E(y) = m = np and Var(y) = s 2 = np(1 – p)

404 Chapter Eleven

This binomial distribution is often denoted by y ~ B(n, p). The following are
examples of binomial random variables:
1. The number of defective parts, y, in a lot of n parts in a sequential
quality inspection
2. The number of positive customer responses, y, in a survey involving n
customers

Poisson Distribution

The Poisson probability distribution provides a model for the probability of

occurrence of the number of rare events that happen in a unit of time, area,
volume, and so on. Actually, the Poisson distribution is an extreme case of
the binomial distribution, where n is very large and p is very small. That is,
the probability of a rare event occurrence p = P(S) is very small, but the
number of trials n is very large.

In the Poisson distribution, the parameter l(l = np) is used. The probability
function of the Poisson distribution p(y) is

ly e − l
p( y) = y = 0, 1, 2, . . .
y!

The mean and variance of the Poisson distribution are

E(y) = λ and Var(y) = s 2 = l

11.3.2 Statistical Parameter Estimation

All probability distribution models depend on population parameters, such

as m and s 2 in the normal distribution, and p in the binomial distribution.
Without these parameters, no probability distribution model can be used. In
real-world applications, these population parameters are usually not
available; however, statistical estimates of these population parameters can
be computed based on a sample of data from the population.

_ statistical estimate for m in the normal distribution is

The commonly used
the sample mean y, where
1 n
y= ∑ yi
n i =1

For a sample of n observations y1, y2,…, yn, from y ~ N(m, s 2).

 Statistical Basics and Six Sigma Metrics 405

The commonly used statistical estimate for s 2 in the normal distribution is

the sample variance s2, where

1 n
s2 = ∑ ( yi − y )2
n − 1 i =1

for a sample of n observations y1, y2,…, yn from y ~ N(m, s 2) and

y = n ∑ i =1 yi .
1 n

The commonly used statistical estimates for p in a binomial distribution

B(n, p) is the sample ratio p̂ :

y
p̂ =
n

where y is the actual number of successes (S) in n trials.

However, statistical estimates are only approximations of the true pop-

ulation parameters. When the sample size is small, there will be sub-
stantial discrepancies between population parameters and statistical
estimates. As the sample size becomes larger, the discrepancies will get
smaller.

11.4 Quality Measures and Six Sigma Metrics

For any product or business process, there are always performance metrics
that we want to measure and improve. For example, in a loan approval
process, the cycle time (the time between the application and the loan
decision) is a performance metric. In Example 11.1, the oxide film thickness
is a performance metric and the ideal thickness is 560 Å. Most of the actual
process performance metrics are also random variables; clearly, the cycle
time of each loan application is a random variable, and the oxide film
thickness is also a random variable.

There are many quality measures that have been developed to measure the
process performance with the presence of randomness. Quality measures
compare the degree of randomness in the process performance and compare the
degree of randomness with the process performance specification. The most
commonly used process performance quality measure is the process capability
index. In Six Sigma practice, many other process performance–related metrics
406 Chapter Eleven

have also been developed, such as Sigma quality level and DPMO (defects per
million opportunities).

In this section, we first discuss the process capability index, and then we
discuss other Six Sigma metrics.

11.4.1 Process Performance and Process Capability

Process performance is a measure of how well a process performs. It is

measured by comparing the actual process performance level versus the
ideal process performance level. For the oxide film building process, per-
formance may be measured by the oxide film thickness, and its ideal per-
formance level would be 560 Å in thickness. For most processes, the
performance level is not constant. We call this variation the process vari-
ability. If the process performance can be measured by a real number, then
the process variability can usually be modeled by the normal distribution,
and the degree of variation can be measured by the standard deviation of
that normal distribution.

If process performance level is not a constant but a random variable, then

we can use the process mean and process standard deviation as key per-
formance measures. The mean performance can be calculated by averaging
a large number of performance measurements.

If processes follow the normal probability distribution, a high percentage of

the process performance measurements will fall between ±3s of the process
mean, where s is the standard deviation. That is, approximately 0.27 percent
of the measurements would naturally fall outside the ±3s limits and the
balance of them (approximately 99.73 percent) would be within the ±3s
limits.

Since the process limits extend from −3s to +3s, the total spread amounts
to about 6s total variation. This total spread is often used to measure the
range of process variability, also called the process spread.

For any process performance measure, there are usually some performance
specification limits. For example, if the oxide film thickness in a wafer is too
high or too low, then the wafer will not function well. Suppose it is required
that deviation from the target value of 560 Å cannot be more than 100 Å;
then the specification limits would be 560 ± 100 Å, or we say that its speci-
fication spread is (460, 660), where 460 Å is the lower specification limit
(LSL) and 660 Å is the upper specification limit (USL).
 Statistical Basics and Six Sigma Metrics 407

11.4.2 Process Capability Indices

Capability indices are simplified measures that quickly describe the relationship
between the variability of a process and the spread of the specification limits.

The Capability Index Cp

The equation for the simplest capability index Cp is the ratio of the speci-
fication spread to the process spread, the latter represented by six standard
deviations or 6s.

USL − LCL
Cp =
6s

When using Cp we assume that the normal distribution is the correct model
for the process.

The capability index Cp can be translated directly to the percentage or pro-

portion of nonconforming product outside specifications, if the mean of the
process performance is at the center of the specification limit.

When Cp = 1.00, approximately 0.27 percent of the parts are outside the
specification limits (assuming that the process is centered on the midpoint
between the specification limits) because the specification limits closely
match the process UCL and LCL. We say this is about 2700 parts per million
(ppm) nonconforming.

When Cp = 1.33, approximately 0.0064 percent of the parts are outside the
specification limits (assuming the process is centered on the midpoint between
the specification limits). We say this is about 64 ppm nonconforming. In this
case, we would be looking at normal curve areas beyond 1.33 × 3s = ±4s
from the center.

When Cp = 1.67, approximately 0.000057 percent of the parts are outside

the specification limits (assuming the process is centered on the midpoint
between the specification limits). We say this is about 0.6 ppm nonconforming.
In this case, we would be looking at normal curve areas beyond 1.67 × 3s =
±5s from the center of the normal distribution.

The Capability Index Cpk

The major weakness in Cp is that, for many processes, the mean per-
formance is not equal to the center of the specification limit; also many
408 Chapter Eleven

process means will drift from time to time. When that happens, the prob-
ability calculation about nonconformance will be totally wrong when we
still use Cp. Therefore, one must consider where the process mean is
located relative to the specification limits. The index Cpk is created to do
exactly this.

USL − m m − LSL ⎫
C pk = Min ⎧⎨ , ⎬ = Min{CPU , CPL}
⎩ 3s 3s ⎭

We have the following situation. The process standard deviation is s = 0.8

with a USL = 24, LSL = 18, and the process mean m = 22.

LSL = 18 Process USL = 24

center
Center = 22

24 − 22 22 − 18 ⎫
C pk = Min ⎧⎨ , ⎬ = Min(0.83, 1.67) = 0.83
⎩ 3×8 3×8 ⎭

It is also clear that

CPU = 0.83 and CPL = 1.67

If the process mean is exactly centered between the specification limits,

Cp = Cpk = 1.25

Example 11.8
For the film thickness data given in Example 11.1, LSL = 460 and USL = 660. _
We do not know the exact value of m and s ; however, we can calculate that y =
572.02 and s = 24.53. Because the sample size_ of this data set is fairly large
(n = 47), we can substitute m and s by using y and s. Then we have

⎧ 660 − 572.02 572.02 − 460 ⎫

Cpk = Min ⎨ , ⎬ = Min(1.19, 1.51) = 1.19
⎩ 3 × 24.53 3 × 24.53 ⎭

MINITAB can be used to conduct a comprehensive process capability analysis.

The following MINITAB output is the process capability analysis for the film
thickness data.
 Statistical Basics and Six Sigma Metrics 409

Process capability of film thickness

LSL USL
Process data Within
LSL 460.00000 Overall
Target *
USL 660.00000 Potential (within) capability
Sample mean 572.02128 Cp 1.35
Sample?N 47 CPL 1.51
StDev (within) 24.66804 CPU 1.19
StDev (overall) 24.66804 Cpk 1.19
CCpk 1.35
Overall capability
Pp 1.35
PPL 1.51
PPU 1.19
Ppk 1.19
Cpm *

480 510 540 570 600 630 660

Observed performance Exp. within performance Exp. overall performance

PPM?<?LSL 0.00 PPM?<?LSL 2.80 PPM?<?LSL 2.80
PPM?>?USL 0.00 PPM?>?USL 180.89 PPM?>?USL 180.89
PPM?Total 0.00 PPM?Total 183.68 PPM?Total 183.68

11.4.3 Sigma Quality Level (Without Mean Shift)

In 1988, the Motorola Corporation was the winner of the Malcolm Baldrige
National Quality Award. Motorola bases much of its quality effort on its Six
Sigma program. The goal of this program was to reduce the variation in
every process to such an extent that a spread of 12s (6s on each side of the
mean) fits within the process specification limits.

Figure 11.6 gives a graphical illustration of this Six Sigma quality. If the
actual variation is measured by standard deviation s, 6s quality means that

LSL USL

−6s −3s m +3s +6s

Figure 11.6 Normal Distribution and Six Sigma Quality

410 Chapter Eleven

the total spread of the specification is six times the standard deviation on
each side of the mean. For a Six Sigma quality level,

USL − LSL 12s

Cp = = =2
6s 6s

By using the normal probability distribution, it can be computed that

P(y will be in specification) = P(LSL ≤ y ≤ USL) = P(−6 ≤ z ≤ 6)
= 0.999999998 = 99.9999998%

Clearly, P(y will be out of specification) =1 – 0.9999999998 = 0.000000002,

or 0.002 defective parts per million. Similarly, if the spread of specification
is 5 times s on each side of the mean, it is called 5 sigma quality.

Table 11.1 summarizes the relationship between Cp, Sigma quality level
(without mean shift), percentage in specification, and defective ppm.

11.4.4 Sigma Quality Level (With Mean Shift)

_
In most actual_processes, the process mean y is not usually a constant. The
process mean y will shift from time to time. For example, in a manufacturing
process, with the change of raw material, operator, the process may
suddenly change its mean level. In a service process, with a change of
server, shift, and the process mean may also change. In order to take into
account this mean shift effect, Motorola allocates 1.5s on either side of the
process mean for shifting of the mean. For a Six Sigma quality level, with

Table 11.1 The Relationship Between Sigma Quality Level, Process Capability
and Defective Levels

Sigma Quality Level Percentage in Defective

(Without Mean Shift) Cp Specification ppm

1 0.33 68.27 317,300

2 0.67 95.45 45,500

3 1.0 99.73 2,700

4 1.33 99.9937 63

5 1.67 99.999943 0.57

6 2.00 99.9999998 0.002

 Statistical Basics and Six Sigma Metrics 411

4.5 1.5 1.5 4.5

sigma sigma sigma sigma

LSL USL
Process
mean

Figure 11.7 Six Sigma Quality Level with 1.5 Sigma Mean Shift

Table 11.2 The Relationship Between Sigma Quality Level, Process Capability
and Defective Levels with 1.5 Sigma Mean Shift

Sigma Quality Level Percentage in Defective

(With Mean Shift) Cp Specification ppm

1 0.33 30.23 697,700

2 0.67 69.13 308,700

3 1.0 93.32 66,810

4 1.33 99.3790 6,210

5 1.67 99.97670 233

6 2.00 99.999660 3.4

the maximum possible mean shift of 1.5s, the minimum distance from
process mean to one of the specification limits could be as small as 4.5s.
Figure 11.7 illustrates the relationship between the mean shift and Six
Sigma quality level.

Thus, even if the process mean strays as much as 1.5s from the process
center, a full 4.5s remains. This ensures a worst-case scenario of 3.4 ppm
nonconforming on each side of the distribution. With the inclusion of a 1.5s
mean shift, for the same Six Sigma quality level, the defective ppm will be
much larger than that without considering the mean shift.

Table 11.2 summarizes the relationship between Cp, Six Sigma quality level
(with mean shift), percentage in specification, and defective ppm.
This page intentionally left blank
 Chapter

Theory of Constraints
12
12.1 Introduction

For all profit-earning corporations, it is natural that the goal of the cor-
poration is to make as much profit as possible for now and in the future.
Moneymaking is also a process; there is also a process management problem
in running, improving, and possibly redesigning this moneymaking process.
Naturally there are several questions about this moneymaking process:
1. How does this moneymaking process work?
2. What is the determining factor for the capacity of this process?
3. If we want to make more money, what is the most efficient way to
improve the process?
The theory of constraints (Golratt and Cox 1986, Goldratt 1990) tries to
answer these questions. Goldratt and Cox (1986) wrote a book titled The
Goal. This book is in a novel format and describes the life of a plant
manager who struggles to simultaneously manage his plant and his
marriage. The term “theory of constraints” is not mentioned, but the main
ideas of this theory are discussed in bits and pieces. The following terms are
often mentioned in The Goal:
• Bottlenecks
• Throughput
• Inventory
• Return on investment
• Cash flow
• Socratic way
• Fear of change
The Goal also reminds readers that there are three basic measures used in
the evaluation of the moneymaking process:

413

Copyright © 2005 by The McGraw-Hill Companies, Inc. Click here for terms of use.
414 Chapter Twelve

• Throughput
• Inventory
• Operational expenses
In a manufacturing plant circumstance, Goldratt and Cox think that these
measures are more relevant in moneymaking than frequently used performance
measures such as machine efficiency, equipment utilization, and downtime.

In The Goal, the following basic concepts of the theory of constraints are
outlined (Goldratt and Cox 1986):
• Bottleneck resources are “resources whose capacity is equal to or less
than the demand placed upon it. A non-bottleneck is any resource whose
capacity is greater than the demand placed on it.” If a resource presents
itself as a bottleneck, then things must be done to lighten the load. Some
of the appropriate steps might be to off-load material to relieve a bot-
tleneck or to work only on the parts in the bottleneck that are needed now.
Beware of lost production at a bottleneck due to poor quality or rejects.
• Balanced plants are perhaps not a good thing. Do not balance capacity
with demand, but “balance the flow of product through the plant with
demand from the market.” The plant may be capable of generating
inventories and goods at record levels, but this may jam up the plant’s
system. The idea is to make the flow through the bottleneck equal to
market demand. One can do more with less by just producing what the
market requires at the time. It is possible that the existing plant has more
than enough resources to do any job, but the flow must be controlled.
• Dependent events and statistical fluctuations are important. A sub-
sequent event depends on the one prior to it. The story of Herbie and
the local scout pack describes how the slowest member of a group
restrains the pace of the group (Fig. 12.1). Similarly, a bottleneck
restrains the entire throughput.

Figure 12.1 The Slowest Member of a Team Sets the Speed for the Whole Team
 Theory of Constraints 415

The Goal also defines the following terms:

Throughput “The rate at which the system generates money through
sales.” The finished product must be sold before it generates money.
Inventory “All the money that the system has invested in purchasing
things that it intends to sell.” This can also be defined as solid investments
or patents.
Operation Expenses “All the money that the system spends in order
to turn inventory into throughput.” This includes depreciation, lubricating
oil, scrap, and carrying costs.
The terms throughput, inventory, and operational expenses can be simply
defined as incoming money, money stuck inside, and money going out,
respectively.

In his 1990 book Theory of Constraints, Goldratt provided more details

about his theory; he proposed the following five-step method:
1. Identify the process constraints. A process constraint limits the firm
from achieving its performance and goals. Thus constraints must be
identified and prioritized for impact.
2. Decide how to exploit the process constraints. The nonconstraints in
the process should be managed properly so that resources or materials
are provided to feed the constraints.
3. Subordinate everything else to achieve the decisions in steps 1 and 2.
Constraints may have a limit, so look for ways to reduce the effects of
a constraint, or look to expand the capacities of the constraints.
4. Elevate the system’s constraints. Try to eliminate the problems of the
constraints. Strive to keep improving the system.
5. Go back to step 1. After the constraint has been broken, go back to step
one and look for new constraints.
After Goldratt’s groundbreaking books, many researchers and practitioners
(for example, Goetsch and Davis 2000, Stein 1996, Woeppel 2001) applied,
developed, and improved the theory of constraints.

The theory of constraints can be applied to many service processes beside

that of the manufacturing sector and achieve significant gains in revenue
and profitability. In the Design for Six Sigma practice, the theory of con-
straints can be used with process management as a process diagnosis tool to
pinpoint the limitation and bottleneck of the service process under study
and generate improvement ideas for the process. We first discuss some fun-
damental concepts of the theory of constraints in Sec. 12.2. Section 12.3
416 Chapter Twelve

discusses the practical implementations of the theory of constraints.

Because process improvement deals with many possible changes, Sec. 12.4
addresses the issues of change management.

12.2 Basic Concepts in the Theory of Constraints

In the theory of constraints, every business entity is a “moneymaking

machine,” or a moneymaking process. A moneymaking process is like a river;
the money is like water, and the flow direction is from the customers’ end to
the company (business entity). Clearly, the key for this moneymaking process
to work well is to “make the water flow.” Figure 12.2 and Example 12.1
illustrate such an example for a restaurant.

Example 12.1: A Restaurant as a Moneymaking Machine

This moneymaking process is a restaurant. The customers are the “sources of
water.” The first step is marketing; if the marketing is not very good, then there
will not be a sufficient flow of customers into the process (the restaurant).
Fortunately, the marketing was good, so the customer arrival rate is 200 per hour.
The second process step is the dining hall; the dining hall only has enough
capacity to serve 100 customers per hour. The third process step is the kitchen;
the kitchen has the capacity to make 200 meals per hour. Obviously, the dining
hall capacity is a bottleneck, or a constraint. For this moneymaking process, the
maximum flow of money cannot exceed the flow rate allowed by the bottleneck,
which is 100 customers per hour. Therefore, the throughput for this process is 100
customers per hour. In order to make more money, the first thing this restaurant
needs to do is to increase the capacity of the dining hall; every unit of capacity
improvement will create one unit of improvement in the throughput. Before this
happens, any improvement in the kitchen or in marketing will not help anything.

The theory of constraints is based on several important concepts. One is its

throughput-based operation performance measures; the other is constraints
and constraints management. In this section, we discuss these in detail.

Inputs
1 2 3 Throughput ($)
(customers)
200/h 100/h 200/h
1. Marketing: Capacity 200 customers/hour
2. Dining hall: Capacity 100 customers/hour
3. Kitchen: Capacity: 200 meals/hour
Figure 12.2 A Restaurant as a Moneymaking Process
 Theory of Constraints 417

12.2.1 Throughput, Inventory, and Operating Expense

In the theory of constraints, there are three key measures for the mon-
eymaking process: throughput, inventory, and operating expense. The
definitions of these concepts are slightly different than those people
usually refer to.
Throughput The money produced by the system is called throughput.
By adding the time factor, throughput is also defined as the rate at which
money is generated by sales. The regular definition of throughput often
refers to the production output per unit time. In the theory of constraints,
the production output is not a throughput unless a consumer purchases
it. Throughput is also not gross revenue, because some of the revenue
might be simply components purchased from suppliers and their sales
simply pass through our process and do not add any value to us. In the
theory of constraints, the throughput is calculated by taking gross
revenue minus all totally variable expenses, such as purchased material
cost, sales commissions, and any subcontract expenses.
Inventory Inventory is the money captured (locked) within the
process. From the viewpoint of the theory of constraints, not only the
parts, unused raw material, unsold goods, but also all of the assets
(buildings, equipment, and so on) are considered as inventory.
Operating Expense Operating expense is all the money spent to turn
inventory into throughput. It includes all direct or indirect payroll
expenses, all supplies, and all overheads. In other words, all expenses
related to time are operating expenses. In general, the operating
expense is the real money you take from your pockets to produce
products or services to satisfy customers.

These three measures are related to the regular financial performance

measures, such as net profit, rate of return, and productivity. The detailed
relationships are given as follows:
Net profit = throughput − operating expense (12.1)
throughput − operating expense
Rate of return (ROI) = (12.2)
inventory
throughput
Productivity = (12.3)
inventory

Based on these relationships, Fig. 12.3 shows the relationships between

throughput, inventory, operating expense, and profit.
418 Chapter Twelve

Profits

Operating
Throughput + Inventory + expenses

Figure 12.3 Relationships between Throughput, Inventory, Operating Expenses,

and Profit

Clearly, high profitability can be achieved by increased throughput and

decreased inventory and operating expense. The theory of constraints
believes that the throughput is always limited by at least one constraint, as
we illustrated by Example 12.1, so the throughput will not be able to
increase unless the corresponding constraint is elevated, that is, the bot-
tleneck is enlarged. Therefore, the most efficient and economical way of
increasing throughput is to work on enlarging the bottleneck. Consequently,
the best way to increase the profitability is to enlarge the bottleneck. Any
improvement on nonbottleneck activities will not improve the throughput;
therefore, it will not improve the profitability.

12.2.2 Constraints

A constraint or bottleneck is defined as any department, workstation, or

operation that restricts the flow of product through the production system.
Constraints management is crucial in improving process throughput and
profitability. There are three types of constraints: policy, resource, and
material. Each type of constraint has a different impact on the process
and should be managed differently.

Policy Constraints

A policy is a rule, a measurement, or condition that dictates organizational

behavior. According to Woeppel (2001), policy constraints are the most fre-
quently encountered constraints and are the least expensive to fix. Batch
size rule, resource utilization rules, and project management policy are all
considered as policy constraints.

Policy constraints cannot be spotted directly, but a shortage of resources

(material, machine, time, and so on) in some process steps may lead to the
 Theory of Constraints 419

discovery of a policy constraint. Many times, a policy constraint is often

mistaken as a resource constraint. Example 12.2 gives a very common
policy constraint in the software development process.
Example 12.2: A Policy Constraint in Software Development
Many software companies suffer from long product development time and cost
overruns. On the surface, many of these problems appear to be caused by the
shortage of labor and resources. These bottlenecks delay the software release
time to the market, so they directly reduce the throughput. However, many
researchers indicate that most of these constraints are actually policy con-
straints. One very common policy constraint is the practice of multitasking, that
is, where one programmer is involved in many software development projects
simultaneously. If the programmer is involved in too many projects, then mul-
titasking can delay the project completion time, so this practice is often a policy
constraint. The following examples show how multitasking practice can delay
the software project completion times.

Figure 12.4 shows three software development projects. Each has 10 modules,
that is, module A through module J. Assume each module needs 2 weeks to be
completed and that each project will take 20 weeks. However, in these three
software development projects, there are three types of modules. Modules A, B,
and C are type-1 modules and need to be written by one type of programmer
(resource 1); modules D, E, F, and G are type 2 and need to be written by
another type of programmer (resource 2); and modules H, I, and J are type 3
and need to be written by yet another type of programmer (resource 3). The
company only has one programmer for each type, so these three projects cannot
be done as described in Fig. 12.4. So the company can use the multitasking
approach described in Fig. 12.5, in which each programmer (resource) is
involved in all three projects simultaneously and switches between projects all
the time. We can see that each software development project will take from
48 weeks up to 52 weeks to finish with the multitasking approach.

Figure 12.6 shows a nonmultitasking approach; each programmer is involved

in one project at a time. We can see this approach actually reduces the software

Project 1 A B C D E F G H I J 20 weeks Resource 1

Project 2 A B C D E F G H I J 20 weeks Resource 2

Project 3 A B C D E F G H I J 20 weeks Resource 3

Figure 12.4 Three Software Development Projects

420 Chapter Twelve

Project 1 A B C D E F GH I J 48 weeks

Project 2 A B C D E F GH I J 50 weeks

Project 3 A B C D E F GH I J 52 weeks

Resource 1
Resource 2
Resource 3

Figure 12.5 Three Software Development Projects, Multitasking

development time for all three projects, with exactly the same amount of
resources (programmers). Clearly, this example shows that the multitasking
practice slows down the project completion times, so it is a policy constraint.

Resource Constraints

Resource constraints are resource-related constraints. The resources are

usually machines, people, skills, and market. The market constraint means
that the market demand is less than the throughput of the process. According
to Woepple (2001), resource constraints are less common than policy con-
straints. Many times, policy constraints are mistaken as resource constraints.

Material Constraints

Material constraints involve a shortage of scarce material. According to

Woepple (2001), the material constraints are the least common. However,
they do happen occasionally. In the year 2003, some types of steel became
a scarce commodity for the automotive industry.

Project 1 A B C D E F G H I J 20 weeks

Project 2 A B C D E F G H I J 28 weeks

Project 3 A B C D E F G H I J 36 weeks

Resource 1

Resource 2

Resource 3

Figure 12.6 Three Software Development Projects, No Multitasking

 Theory of Constraints 421

The heart of the theory of constraints is constraints management. Constraints

management is the systematic approach to identifying, managing, and loosening
up the binding constraints and moving the moneymaking process to a new level.
Constraints management will be discussed in Sec. 12.3.

12.3 Theory of Constraints Implementation Process

The practical implementation process of the theory of constraints is featured

by the following five-step constraints management process:
1. Identify the constraint(s)
2. Decide how to exploit the identified constraint(s)
3. Subordinate everything else in the process to step 2
4. Elevate the system’s constraint(s)
5. Go back to step 1
Now we describe these steps for a constraint.

12.3.1 Identify the Constraint

Identifying the constraint is very essential. The answers to the following

questions will help to pinpoint the constraint:
1. Where is the work backed up? Where are the piles of work waiting?
2. Where do most problems seem to originate?
3. Are there any resources with high utilization? Which one has the
highest resource utilization rate? If it is a constraint, it will never run
out of work and it will always be behind.
The effects of a constraint are always blockage of the resources proceeding
to the constraint resource (resulting in a queue) and starvation of resources
downstream of the constraint resource, as illustrated by Fig. 12.7.

These additional questions should be answered to verify if it is really a con-

straint:
1. If we add another resource, would the output of the facility increase?
2. When this resource is starved or idle, will the entire production plan be
thrown off?

Example 12.3: Bottleneck in a Hospital

Figure 12.8 is a flowchart that shows a simplified version of a patient’s pathway
through the hospital process. It is clear from this that general practitioner (GP)
422 Chapter Twelve

Blockage Starved
Constraint process step
Figure 12.7 Symptoms of a Constraint

referral, appointment making, joining the waiting lists, and discharge in this
mock system are all steps where large numbers of patients can be processed
within a given time. The outpatient consultation and the follow-up visit are
lower-volume steps where fewer patients are dealt with in the same period of
time. The lowest throughput of all, however, is at the surgery stage. This is the
step that constitutes the bottleneck or constraint in this fictitious patient
pathway. No matter how many more patients are being dealt with at any of the
other stages, the process cannot be speeded up so long as the surgery stage
remains incapable of increasing its throughput.

No matter how hard clinicians and managers in this particular example try to
improve throughput elsewhere in the system, they will never succeed in driving
down waiting lists if the surgery stage remains incapable of processing more
patients in a given time. In fact, any efforts to improve matters could actually
lead to bigger waiting lists for surgery.

12.3.2 Decide How to Exploit the Identified Constraint

Once you have found where the constraint is, you should decide what to do
with it. First, you may have to do more investigation on what kind of con-
straint it is. Is it a policy, resource, or material constraint? The following are
some ideas of how to deal with the constraint:
• If it is a policy constraint, find a better way to do the job, such as was
illustrated in Example 12.2.
• Increase the capacity of the constraint.
• Ensure well-trained and cross-trained employees are available to
operate and maintain this constraint.

Appointment Outpatient Add to Follow-up

GP referral Surgery Discharge
made visit waiting list visit
100 100 50 150 15 60 140
Theoretical numbers of patients that can be processed at each step

Figure 12.8 A Constraint in a Hospital

 Theory of Constraints 423

• Develop alternate routings, processing procedures, or subcontractors.

• Move inspections and tests to a position just before the constraint in
order not to add additional strain to the bottleneck.

In the constraint or bottleneck, every hour of wasted time, whether it is

downtime or idle time, is a lost hour of the whole production system. So
every technique should be used to reduce every form of wasted time.
Employing well-trained people to run the bottleneck is very essential.
According to a story by Woepple (2001), in one of his consulting projects,
he found a bottleneck process step. Unfortunately, this most important step
in the whole production system was run by the lowest-paid people and the
employee turnover in this step was really high, which made the problem
even worse. When the pay structure was changed and the people in this
position became the highest paid, the employee turnover was greatly
reduced and the throughput was greatly increased.

12.3.3 Subordinate Everything Else in the Process to the Constraint

If you cannot increase the capacity of the bottleneck, you have to live with it.
Your throughput will not be greater than the capacity of the bottleneck. The
best you can hope for is that the throughput is exactly equal to the bottleneck
capacity. In this case, the plan will be to achieve the production pace equal to,
and not less than, the bottleneck capacity. An important precondition to achieve
this is the smooth production flow from the beginning of the process to the end,
with exactly the rate of the bottleneck capacity. Any fluctuation of the flow rate
will cause more blockage and starving, thus reducing the throughput.

The following are some basic rules in the theory of constraints (Goldratt and
Cox 1986, Goldratt 1990):
1. An hour lost at a bottleneck is an hour lost for the entire system.
2. An hour saved at a nonbottleneck is a mirage.
3. Do not balance the capacity; balance the flow.
4. The level of resource utilization of a nonbottleneck is not determined
by its own potential but by some other constraint in the system.
5. Bottlenecks govern both throughput and inventory in the system.
6. Priorities can be set only by examining the system’s constraints. Lead
times are the result of a schedule.

Goldratt also proposed a production control strategy based on the theory of

constraints. He called it the drum-buffer-rope (DBR) strategy (Goldratt and
Cox 1986, Goldratt 1990, Mabin and Balderstone 2000). This strategy is
based on the following ideas:
424 Chapter Twelve

• Drum-buffer-rope (DBR) is a production control technique used to

implement the theory of constraints.
• If a system has a bottleneck, its production rate controls the pace of the
system. Its beat drives the system, hence the name drum for this control
point.
• A buffer is placed in front of the bottleneck to protect the bottleneck
from fluctuations and variations in the feeding rate to the bottleneck.
The buffer size is measured in the standard time required for the bot-
tleneck to process all items in the buffer.
• The buffer is connected to the raw material dispatching point via a
feedback loop called the rope. The dispatching point will release only
that amount that will keep the buffer inventory build up.

Figure 12.9 shows how this drum-buffer-rope strategy works. In this drum-
buffer-rope production control system, the drum is the pace maker because
the optimized production rate is exactly equal to the bottleneck capacity, so
the bottleneck capacity is the pace of the production. For all the process
steps before and after the bottleneck, it is also ideal to set the paces of pro-
duction rates equal to that of the bottleneck in order to avoid blockages of
resources, clogs of the process steps, as well as starved process steps. The
buffer right before the bottleneck is the buffer inventory that is designed to
offset the possible fluctuations in the flow. If the upstream process steps
before the bottleneck produce too much, the buffer inventory will hold the
surplus; if the upstream process steps produce too little, this buffer inventory
will be used to feed the bottleneck in order to keep the bottleneck busy all
the time. The inventory level in the buffer is used as the control signal. If the
buffer inventory level becomes too high, then the rope will feed this
information to the beginning step of the process; it will ask the incoming
flow rate (the upstream production rate) to be reduced. On the other hand, if
the buffer inventory level becomes too low, the rope will feed this
information to the beginning of the process; it will ask the incoming flow
rate (the upstream production rate) to be increased.

Drum
Raw Bottle-
1 2 m neck n
material

Rope Customers
Buffer
Figure 12.9 Drum-Buffer-Rope Production Control System
 Theory of Constraints 425

The theory of constraints also believes that the balanced capacity may not
be a good approach for maintaining high throughput. The most important
issue is to balance flow. This is illustrated by Example 12.4.

Example 12.4: Capacity Balance versus Flow Balance

Table 12.1 describes a sequential production process with five workstations.
Specifically, the incoming job is first worked on station 1, then on each of
stations 2 to 4, and finally on station 5. The second column in Table 12.1 lists
the current task completion times for each workstation. Clearly, workstation 4
takes the longest time to complete its work, so it is the slowest workstation and
the bottleneck of the whole production flow. A proposed improvement plan is
improvement option 1, which balances the capacity of each workstation to be
53 seconds, in terms of work completion time. This is the balanced capacity
approach. However, from the viewpoint of the theory of constraints, option 1 is
not the desirable approach. Because there will always be fluctuations in the
production that will affect the actual capacity of the process steps, if an
upstream process is clogged, it will immediately become a bottleneck for the
whole production system, as illustrated in Fig. 12.10. Improvement option 2 is
a better approach, because it gives downstream process steps progressively
bigger capacities so the clogs are less likely to form (Fig. 12.10).

12.3.4 Elevate the System’s Constraint

After identification of the constraint, efforts should be made to increase

the capacity of the constraint. For a policy constraint, a low cost or even a no-cost
fix is possible. For a resource or material constraint, additional investment is
usually needed. Elevation of the system constraint will usually increase the
throughput. However, when the old constraint (the weakest link) is gone,

Table 12.1 Workstation Task Completion Times

Work Completion Improvement Improvement

Workstation Time (Seconds) Option 1 Option 2

1 45 53 59

2 40 53 56

3 60 53 53

4 70 53 50

5 50 53 47

Total time 265 265 265

426 Chapter Twelve

Fluctuations become bottlenecks

Progressively larger capacity downstream will make clogs unlikely

Figure 12.10 Balanced Capacity versus Unbalanced Capacity

there will always be another part of the process (second weakest link) that
becomes a constraint. Example 12. 5 shows this process.

Example 12.5: Constraints in a Restaurant

At the opening of a new restaurant, marketing is not good; there are only
50 customers per hour entering the restaurant. The dining room capacity is 100,
and the kitchen capacity is 200 meals per hour. Clearly marketing is the con-
straint (Fig. 12.11). After a marketing campaign, more customers are attracted
to the restaurant, at a rate of 250 customers per hour. But the dining hall can
only hold 100 customers per hour, so the dining hall becomes a new constraint
(Fig. 12.12).

1. Marketing 2. Dining hall 3. Kitchen

capacity: capacity: capacity:
50 customers/hour 100 customers/hour 200 meals/hour
Figure 12.11 Restaurant Grand Opening
 Theory of Constraints 427

1. Marketing 2. Dining hall 3. Kitchen

capacity: capacity: capacity:
250 customers/hour 100 customers/hour 200 meals/hour
Figure 12.12 Restaurant after Marketing Campaign

After that, the restaurant struggles to enlarge the capacity of the dining hall, by
increasing the dining area, adding more dining tables, and increasing the table
turnover rate. Then the capacity of the dining hall beomes 250 customers per
hour. However, the kitchen can only cook 200 meals per hour, so the kitchen
becomes a new bottleneck (Fig. 12.13). Now restaurant management will have
to work on this third constraint.

12.4 Change Management

No matter which aspect of the DFSS deployment you are involved in,
whether it is applying the theory of constraints, DFSS process design, or
DFSS service product design, changes are inevitable and will shake many
guarded and old paradigms. People’s reaction to change varies from denial
to pioneering and passes through many stages. On this venue, the objective
of a DFSS team leader, such as a Black Belt, is to develop alliances for his
or her efforts as the team progresses through the process. We depict the
different stages of change in Fig. 12.14. The stages are linked by what is
called frustration curves. We suggest that the DFSS team leader draw such

1. Marketing 2. Dining hall 3. Kitchen

capacity: capacity: capacity:
250 customers/hour 250 customers/hour 200 meals/hour
Figure 12.13 Restaurant after Dining Hall Expansion
428 Chapter Twelve

Decelerate Stop Accelerate

Denial Harvest
alliance

Communicate

Anger/
anxiety Planning

Old paradigm
loss
Fear

Frustration

Old paradigm Uncertainty Acceptance

Figure 12.14 The Frustration Curve

a curve periodically for each team member and use some or all of the
strategies listed below to move his or her team members to the positive side,
the “recommitting” phase.

There are several strategies to use to deal with change. To help decelerate
(reconcile), the Black Belt needs to listen with empathy, acknowledge diffi-
culties, and define what is over and what is not. To help stop the old
paradigm and reorient the team to the DFSS paradigm, the DFSS team
leader should encourage redefinition, utilize management to provide
structure and strength, rebuild a sense of identity, gain a sense of control and
influence, and encourage opportunities for creativity. To help recommit
(accelerate) the team in the new paradigm, the team leader should reinforce
the new beginning, provide clear purpose, develop a detailed plan, be con-
sistent in the spirit of Six Sigma, and celebrate success.
 Theory of Constraints 429

A successful change management should have the following elements:

1. Grassroots participation: You need to get support from all the people
involved and affected.
2. Upper-level management support: Upper-level management involve-
ment in change is definitely needed. Without upper-level management
support, any change will be impossible. However, it is advised that
micromanagement from the upper level should be avoided.
3. Collaboration of team members: Change requires joint efforts
involving many people. The more people involved in all aspects of
change, the better.
4. Implementation of change in a stepwise fashion: Because change
implementation can be very draining and tiring, people can get very
stressed and tired after some changes are implemented; people need to
take a rest. However, you also need to guard against reversal of change.
5. Measurement of the work: You need to develop measurable metrics
for the change, such as a quantitative measure or “change gate,” that is,
the exit criteria for a change stage. In this way, you will really know
what type and how much progress you have made.
6. Development of strategies: You need several strategies. One is the
overall strategy. The others are special strategies for every change
stage. It is advised that several alternative strategies be prepared, so in
case the first strategy does not work, you still have other alternatives
available.
7. Recognition of the fact that changes are often political: If you only
prepared the technical change plan and business change plan, you will
almost certainly fail. Changes heavily involve people; you need to
work on the people part of change and do your homework.
8. Cultural sensitivity: You need to be aware that cultural factors affect
a person’s ability to change, and you need to know how to deal with it.
There are three levels of culture that must be addressed: culture of the
country, culture of the organization, and culture of the department.
You need to understand all three in order to facilitate the change.
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 INDEX

A functional, 231–236, 244–245

Aaker’s brand identity model, 193–196, 199 S-curve, 245
Abandonment rate value, 56, 94
in service factory processes, 330 Analyze phase
in telephone service processes, 342 in DFSS service process design, 44–45
Accuracy in purchasing and supply in DFSS service product design, 36–39
processes, 353 Another dimension principle, 267–268
Achievement goals in job plans, 177–178 Another sense principle, 274–275
Actions in TRIZ, 233–234 Antiaction principle, 262
continuity of useful action principle, Antiweight principle, 261–262
269–270 Apparent solution level in inventions,
partial or excessive actions principle, 266 227–228
periodic action principle, 269 Arithmetic means, 396–397
preliminary action principle, 262–263 Arrows in IDEF0 process mapping,
preliminary antiaction principle, 262 358–359
Activities in FAST diagrams, 154 Assembly lines, 321–323
Actual costs in cost visibility analysis, 136 Assisting functions in TRIZ, 232
Administrative costs in cost visibility Associations with brands
analysis, 137 in brand equity, 206
Affinity diagrams, 105 description, 201–202
Allowances in cost visibility analysis, 137 product-related, 194–196
Alternatives Asymmetry principle, 259–260
in DFSS service process design, 45 Attitudes
in DFSS service product design, 38–39 Likert scale for, 68
in value engineering, 131–132 in plan development, 178–179
Analysis Attributes in quality function
brand strategy, 212–216 deployment, 123
cost visibility, 136–137 Automobile dealership construction case
in information phase, 150–154 study, 180–181
for processes Autonomy for creativity, 310
logistics and distribution, 348–349 Average queue length
manufacturing, 325–326 in checkout lines, 337
office, 328–329 in service factory processes, 330
product development, 315–316
professional service, 340–341 B
project shop, 345–346 Balanced plants, 414
purchasing and supply, 353 Basic functions
pure service shop, 335–336 in FAST diagrams, 153
retail service store, 338–339 for information phase, 143
service factory, 331–332 in TRIZ, 231
telephone service, 343–344 Batch flow shops, 320–321
transportation, 350–351 Beforehand cushioning principle, 263
in TRIZ Behavior, buying, 190–192
analysis diagrams, 233–234 Benchmarking in quality function
contradiction, 245 deployment, 110–111, 113

437

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438 Index

Benefits features, 192–193

in brands, 199 models, 193–194
in value, 50–51 value proposition in, 198–200
Best costs for functions, 163 loyalty, 204
Best value method, 50 name awareness, 204
Bias in surveys, 59 perceived quality, 205–206
Binomial distributions, 403–404 Budgets for surveys, 63
Black Belt members, 15 Buffer inventories in lean operation, 372
Blank columns and rows in quality function Buffers in DBR strategy, 424
deployment, 112–113 Burden overhead in cost visibility
Blessing in disguise principle, 270–271 analysis, 136
Blocking, process, 305 Business case in quality function
Boarding time in transportation deployment, 113
processes, 350 Business contradiction matrices, 290–297
Book center case study, 122–126 Business inventive principles, 255–283
Bottleneck resources, 414 Business requirements in define phase,
Box plots, 395–396 30–34
Boxes in IDEF0 process mapping, Business strategy changes with brands, 196
358–359 Buying behavior, 190–192
Brainstorming
in creative phase, 165 C
in design analyze phase, 45 Calm atmosphere principle, 280
in process design, 379 Capability in quality measures, 406
in process excellence, 311 Capability indices, 407–409
in quality function deployment, 123 Carrying capacity utilization, 348
in value engineering, 131–132 Case studies
Brands process management, 380–391
associations quality function deployment, 122–126
in brand equity, 206 value engineering
description, 201–202 automobile dealership construction,
product-related, 194–196 180–181
buying behavior with, 190–192 engineering department organization
definition, 187–188 analysis, 181–185
development of, 187–190, 206–207 Cause-and-effect diagrams
communication and marketing in, in process design, 45
222–223 in process diagnosis, 378
evaluation in, 223–225 Cellular manufacturing
implementation, 222–223 in lean operation, 372–373
key factors in, 207–210 in manufacturing process, 318–320
process overview, 210–212 Central tendency, measures of, 396–397
strategy analysis, 212–216 Champion members, 15
strategy development, 217–222 Change management, 427–429
equity, 203–206 Channel strategy, 222
identity of Cheap short-living objects principle, 274
brand as organization, 196 Checklist questions for surveys, 66
brand as person, 196–198 Checkout errors, 337
brand as product, 194–196 Checkout lines, 337
in brand development, 207–208 Chronological order for survey questions, 70
brand persona, 202–203 Classification in TRIZ, 230, 245–246
Davis’s brand image model, 200–203 Closed-ended survey questions, 65–67
 Index 439

Cluster sampling, 77 table of inventive principles, 284–289

Collaboration in change management, 429 technical, 238–239
Color changes principle, 277 Controllable factors in brand
Commercial costs in cost visibility development, 207
analysis, 137 Convenience factors
Commitment in process excellence, 309 in service organizations, 7
Communication for surveys, 58
in brand development in value, 51
implementation, 222–223 Conventional solution level in inventions,
promotion, 209 227–228
in brand strategy development, 221–222 Coordination, product-brand, 220–221
in process excellence, 311 Copying principle, 273–274
Comparisons, paired, 170–172 Core processes, 300–301
Competitor analysis Correcting functions in TRIZ, 232
in brand development, 210 Cost-function relationships, 158–164
in brand strategy analysis, 216 Costs
customer value analysis, 94 in information development
in quality function deployment, 110–111 cost visibility analysis, 134–137
Complexity of surveys, 59 sources, 137–138
Composite structures principle, 281–283 in processes
Concepts logistics and distribution, 347–348
in FAST diagrams, 153 manufacturing, 324
in TRIZ problem-solving process, 246 office, 328
Conflicts in quality function deployment, product design and development,
113, 121 314–315
Constraint theory, 413–416 project shop, 345
basic concepts, 416 purchasing and supply, 352
change management, 427–429 pure service shop, 335
implementation process, 421–427 service factory, 331
material constraints, 420–421 transportation, 350
policy constraints, 418–420 of surveys, 58–59
resource constraints, 420 and value, 52
throughput, inventory, and operating Country of origin in product brands, 195
expenses in, 417–418 Creative design in DFSS, 26–27
Constraints Creative phase in value engineering job
elevating, 425–427 plans, 164–166
exploiting, 422–423 Creativity
identifying, 421–422 in functions, 145–149
for processes, 305–307 in process excellence, 309–310
subordination for, 423–425 Credibility in brand positioning, 219
Continuity of useful action principle, Critical-to-delivery (CTDs)
269–270 characteristics, 101
Continuous random variables, 400 Critical-to-quality (CTQs) characteristics, 101
Contracts in brand positioning, 218–219 Critical-to-satisfaction (CTS) metrics, 31–34
Contradictions in TRIZ, 227 Cultural sensitivity in change
analysis, 245 management, 429
business contradiction matrices, 290–297 Culture in brand development, 210
definition, 230 Current state value stream mapping,
eliminating, 246–254 364–369
physical, 239–240 Curvature principle, 265
440 Index

Cushioning principle, 263 Decision-making in process excellence,

Customer-oriented design, 25–26 310–311
Customer service quality and interaction in Declined stage in technical system
processes, 3, 8, 10–11 evolution, 243
logistics and distribution, 348 Defects in processes
office, 328 office, 327
professional service, 340 pure service shop, 333
pure service shop, 334 service factory, 330
retail service store, 337–338 Define, Measure, Analyze, Design, and
service factory, 330 Verify (DMADV) procedure, 20
telephone service, 343 Define phase
transportation, 350 in DFSS service process design, 42–43
Customer surveys, 57 in DFSS service product design, 30–34
administering, 72–73 Delivery
instrument design, 64 in logistics and distribution processes, 347
length, 71–72 in project shop processes, 344–345
question order, 70–71 in service, 3, 8–9, 11, 23
question types, 65–69 Demand-driven production systems,
question wording, 69–70 373–374
interviewer selection and training, 64 Demographics in brand development,
sample size determination for, 78–82 209–210
sampling methods in, 73–78 Dependent events, 414
stages of, 60–65 Dependent functions in FAST diagrams,
types of, 57–60 154
use of, 61–62 Deploying value, 56
Customers Descriptive statistics
in brand strategy, 213–214 graphical, 394–396
desirability indexes, 108 numerical, 396–399
needs and requirements Design
in DFSS design phase, 30–34 for Lean Six Sigma, 20–21
in value creation, 56 in process management, 302–303
in quality function deployment in service, 23
attributes, 106–107, 123 for value maximization, 55–56
competitive assessments, 110–111 Design for Six Sigma. See DFSS (Design for
intent, 106 Six Sigma)
value for Design phase
in business excellence, 21 in DFSS service process design, 45–46
competitive analysis, 94 in DFSS service product design, 40–41
deployment, 94–99 Design process, 378–379
maps, 89–93 DFSS (Design for Six Sigma), 18–20
Cycle time in value stream mapping, 367 customer-oriented design in, 25–26
in service industry, 27–30
D service process design phases, 42–43
Data analysis of surveys, 65 analyze, 44–45
Data collection define, 42–43
in DFSS analyze phase, 45 design, 45–46
in process diagnosis, 378 measure, 43–44
Data-driven management, 393 verify, 46
Davis’s brand image model, 200–203 service product design phases, 30
DBR (drum-buffer-rope) strategy, 423–424 analyze, 36–39
 Index 441

define, 30–34 Drum-buffer-rope (DBR) strategy, 423–424

design, 40–41 Duplicated survey elements, 74
measure, 34–36 Dynamic interactions in processes, 305
verify, 41–42 Dynamic routing, 316–317
system design and creative design in, Dynamics of value, 53–55
26–27 Dynamics principle, 266
Taguchi method and fire prevention
philosophy in, 27 E
Diagnosis, process, 302, 378 Economic factors
Diagnostics in quality function in service organizations, 7
deployment, 119 in value, 51
Diagrams Efficiency
FAST, 150–154 in job shop processes, 317
establishing, 157–158 lean operation techniques for, 369
symbols and graphs in, 154–157 in product design and development
functional analysis, 233–234 processes, 314
tree, 105 80/20 percent relationships, 170
Differentiation of brands Emotional benefits in brands, 199
in brand positioning, 218 Encounters, service, 11
failures in, 195 Engineering department organization
Direct involvement, 60 analysis case study, 181–185
Direct measurement, 60 Enriched atmosphere principle,
Directions in FAST diagrams, 154–155 279–280
Discarding principle, 277–278 Equipment for processes, 306
Discipline in process excellence, 309 Equity, brand, 203–206
Discovery level in inventions, 229 Errors in processes
Discrete random variables, 399–400 office, 327
Distribution professional service, 339
in brand development, 209 project shop, 345
logistics and distribution processes, 5, pure service shop, 333
346–349 retail service store, 337
Distributions, statistical service factory, 330
binomial, 403–404 telephone service, 343
expected value, variance, and standard Esteem value, 54
deviation, 400–401 Evaluation
exponential, 403 in brand development, 223–225
frequency, 394–395 function, 150–154
normal, 401–403 project, 17
Poisson, 404 in TRIZ, 231
probability, 399–405 in value engineering, 132, 166–172
statistical parameter estimation, 404–405 Events
DMADV (Define, Measure, Analyze, dependent, 414
Design, and Verify) procedure, 20 rare, 404
DMAIC strategy, 18–19 Evolution in TRIZ
Documentation of processes of technical systems, 240–243
elements of, 307–308 trends in, 230
process mapping, 377–378 Excellence
Dot plots, 394–395 ideality as, 237–238
Drop-off points in transportation processes, in processes, 309–311
349–350 roles in, 21
442 Index

Excessive actions principle, 266 Functional analysis

Exchange value, 54 in information phase, 150–154
Exit time in transportation processes, 350 in TRIZ, 230–236, 244–245
Expected value, 400–404 Functional analysis system technique
Expenses in constraint theory, 415, (FAST) diagrams, 150–154
417–418 establishing, 157–158
Exponential distributions, 403 symbols and graphs in, 154–157
Extensions of brands, 196 Functional benefits in brands, 199
Eye-openers in quality function deployment, Functional factors
113, 121–122 in service organizations, 6–7
in value, 50
F Functionality in TRIZ, 230
Facility design, 8 Functions
Factory service process, 4 for creativity, 145–149
Factory within a factory concept, 318 defining, 139–142
Fair-value zones in customer value maps, 91 in information phase, 138–150
FAST (functional analysis system technique) processes in, 149–150
diagrams, 150–154 in product brands, 194–195
establishing, 157–158 of products, 52
symbols and graphs in, 154–157 in TRIZ
Feedback modeling, 231–236, 244–245
in project shop processes, 345 resources for, 237
in technical system evolution, 242 statements, 232–233
in TRIZ, 271–272 in value engineering
Fields in TRIZ, 233, 236 evaluating, 131
Final results in TRIZ, 230, 245 identifying, 130–131
Financial resources for processes, 306 types of, 142–145
Fire prevention philosophy, 27 Funnel pattern for survey questions, 70
Fit in brand positioning, 220 Future state value stream mapping, 375–377
Fixed burden in cost visibility analysis, 136
Fixed costs in cost visibility analysis, 136 G
Flexibility Goals
in manufacturing processes, 324 in quality function deployment, 114
in office processes, 328 of surveys, 61
Flow shops, 320–321 in value engineering job plans, 177–178
Flowcharts Government regulations, 306–307
in process mapping, 356–357 Graphical descriptive statistics, 394–396
Six Sigma, 17 Graphs in FAST, 154–157
Flows Grassroots participation in change
in cellular manufacturing, 319 management, 429
in lean operation, 370–372 Green Belt members, 15
in value stream mapping, 364 Group technology in cellular
Fluidity principle, 275 manufacturing, 318
Foreign elements in surveys, 74 Growth stage in technical system
Freedom for creativity, 310 evolution, 242
Freight costs in cost visibility analysis, 137 Guidelines for processes, 307
Frequency distributions, 394–395
Frustration curves, 427–428 H
Full rollout Handover
in DFSS service process design, 46 in DFSS service process design, 46
in DFSS service product design, 42 in DFSS service product design, 42
 Index 443

Hard brand associations, 206 Image in brand strategy self-analysis, 215

Harmful functions in TRIZ, 232 Image models, brand, 200–203
Hierarchy of needs, 54–55 Implementation
High-order functions in FAST, 150 in brand development, 222–223
High performance capability in DFSS in constraint theory, 421–427
design, 40 in process management, 303, 379–380
High-value zones in customer value maps, 91 of surveys, 65
Highest-order functions in FAST diagrams, 152 in value engineering job plans, 132, 176–179
Histograms, 394–395 Importance in quality function deployment
Holes principle, 276 calculations, 117–119
Homogeneity principle, 277 ratings, 108–109
House of quality, 105–106 Improvement in inventions, 228
How Much in quality function In-person interviews, 58–59
deployment, 110 In-person surveys, 73
Hows in quality function deployment, 107 Incremental costs in cost visibility
correlation, 109–110 analysis, 136
identification, 114–117 Independent functions in FAST diagrams, 154
importance calculations, 117 Infancy stage in technical system
quality characteristics, 124 evolution, 242
Information
I surveys for, 62–63
Ideal final result (IFR) in TRIZ in TRIZ, 237
calculating, 245 Information flow
in ideality, 238 in purchasing and supply processes, 353
as limit, 230 in value stream mapping, 365
Ideality in TRIZ Information phase in value engineering job
calculating, 245 plans, 133
elements of, 237–238 cost-function relationship in, 158–164
IDEF0 process mapping, 358–359 FAST diagram construction in, 154–158
Identification tasks in process mapping, 377 function analysis and evaluation in,
Identify, Design, Optimize, and Verify 150–154
(IDOV) procedure, 20 function determination in, 138–150
Identifying constraints, 421–422 information development in, 134–138
Identity Instrument design, survey, 64
of brands length, 71–72
brand as organization, 196 question order, 70–71
brand as person, 196–198 question types, 65–69
brand as product, 194–196 question wording, 69–70
in brand development, 207–208 Intermediary principle, 272–273
brand persona, 202–203 Interval-scale variables, sample size for,
Davis’s brand image model, 200–203 81–82
features, 192–193 Interval scales for survey questions, 67
models, 193–194 Interviewers
value proposition in, 198–200 bias in, 59
in TRIZ, 230 selecting and training, 64
IDOV (Identify, Design, Optimize, and Invention outside technology level,
Verify) procedure, 20 228–229
IFR (ideal final result) in TRIZ Inventive principles in TRIZ
calculating, 245 business, 255–283
in ideality, 238 contradiction table of, 284–289
as limit, 230 regular, 246–254
444 Index

Inventories one-piece flow in, 370–372

in constraint theory, 415, 417–418 pull-based production in, 373–374
in lean operation, 372 techniques, 369–375
in processes value stream mapping
manufacturing, 324 current state, 364–369
office, 327 future state, 375–377
purchasing and supply, 353 waste elimination, 362–364
Inventory questions for surveys, 66 work cells in, 372–373
Inverted funnel pattern for survey Lean Six Sigma design, 20–21
questions, 71 Lemons into lemonade principle,
270–271
J Length
Job plans in value engineering, 132 questionnaire, 71–72
creative phase, 164–166 queue
evaluation phase, 166–172 in checkout lines, 337
implementation phase, 176–179 in service factory processes, 330
information phase, 133 Levels of measurement for survey
cost-function relationship in, 158–164 questions, 67
FAST diagram construction in, 154–158 Liabilities in value, 51
function analysis and evaluation in, Lifecycle costs in product design and
150–154 development, 314–315
function determination in, 138–150 Likert scales, 68
information development in, 134–138 Line flow shops, 321–323
planning phase, 172–174 Local quality principle, 258–259
reporting phase, 174–176 Logistics and distribution processes, 5,
Job shops, 316–318 346–349
Lowest-order functions in FAST
K diagrams, 153
Kano model of quality, 111–112 Loyalty, brand, 204
Key customer identification
in DFSS service process design, 43 M
in DFSS service product design, 30 Machine village process, 370
Knowledge Mail-out surveys
in process design, 379 administering, 72
in process excellence, 310 advantages and disadvantages of, 58
in TRIZ, 237 Main basic functions in TRIZ, 231
Maintenance in process management,
L 303, 380
Labor in cost visibility analysis, 136 Management support in change
Layout in process mapping, 377 management, 429
Lead time Manufacturing processes, 316
in processes analysis, 325–326
manufacturing, 323 batch flow shop, 320–321
office, 327 cellular manufacturing, 318–320
product design and development, 314 job shop, 316–318
purchasing and supply, 353 line flow shop, 321–323
in value stream mapping, 367 performance metrics, 323–324
Leading survey questions, 69 Mapping processes, 302, 355–356
Lean operation principles, 362–363 analyzing, 44
in DFSS service process design, 45 in case study, 381
 Index 445

developing, 43 Missing elements in surveys, 74

flowcharts in, 356–357 Models
IDEF0, 358–359 brand identity, 193–196, 199
tasks in, 377–378 brand image, 200–203
value stream, 359–362 functional, 244–245
analyzing, 44, 378 quality, 111–112
current state, 364–369 Moneymaking machines, 416
future state, 375–377 Monitoring processes, 380
Maps, customer value, 89–93 Motivation and needs hierarchy, 54–55
Market-perceived profiles Muda, 363
price, 88–89 Multiple-choice survey questions, 65–66
quality, 84–88 Multipurpose survey questions, 69
Market position, 216
Market segment, 218 N
Marketing Name awareness for brands, 204
in brand development implementation, Needs hierarchy, 54–55
222–223 Nested doll principle, 261
in brand strategy development, 221–222 Net profit in constraint theory, 417
Maslow, Abraham, 54 Nominal scales for survey questions, 67
Master Black Belt members, 15 Nonbasic but beneficial functions in TRIZ,
Materials 231–232
as constraints, 420–421 Nonprobability survey sampling, 75–78
in cost visibility analysis, 136 Nonproduct-related characteristics in brand
in purchasing and supply processes, 352 personality, 198
in value stream mapping, 365 Normal distributions, 401–403
Matrices Numerical descriptive statistics, 396
business contradiction, 290–297 measures of central tendency, 396–397
in quality function deployment, 107–109, measures of relative standing, 398–399
114–117 measures of variation, 397–398
Maturity stage in technical system evolution,
242–243 O
Maximizing value, 55–56 Objectives
Means, 396–397 in FAST diagrams, 153–154
Measure phase in quality function deployment, 113
in DFSS service process design, 43–44 realistic, 110
in DFSS service product design, 34–36 of surveys, 61
Measurement levels for survey Objects in TRIZ, 232–233
questions, 67 Obsolete material inventory, 353
Measurement of performance. See Office processes, 4, 326–329
Performance metrics On-time arrivals in transportation
Measures of central tendency, 396–397 processes, 350
Measures of relative standing, 398–399 On-time receipts in purchasing processes, 352
Measures of variation, 397–398 One-piece flow in lean operation, 370–372
Medians One-shop service organizations, 2
determining, 397 Open-ended survey questions, 68–69
in histograms, 395 Operation expenses in constraint theory,
in percentiles, 399 415, 417–418
Merging principle, 260 Operation items in quality function
Methods and tools in Six Sigma, 17 deployment, 124, 126
Metrics. See Performance metrics Opinions, Likert scale for, 68
446 Index

Optimizing processes, 301–302 office, 327–328

Order of survey questions, 70–71 product design and development, 314
Order processing, 353 professional service, 339
Ordinal scales for survey questions, 67 project shop, 345
Organization, brands as, 196 purchasing and supply, 352–353
Organizational infrastructure, 15–16 pure service shop, 333–335
Other way around principle, 264–265 retail service store, 337
Outlining task in process mapping, 377 service factory, 330–331
Overflow calls in telephone service telephone service, 342
processes, 342 transportation, 350
Overhead in cost visibility analysis, 136 for quality, 406
for value, 51–53
P Periodic action principle, 269
Paced assembly lines, 322 Persona, brand, 202–203
Paired comparisons, 170–172 Personalities, brand, 197–198
Paradigm shift principle, 279 Personnel for processes, 306
Parameter changes principle, 278 Persons, brands as, 196–198
Parameter estimation, statistical, 404–405 Physical contradictions in TRIZ, 239–240
Pareto voting, 169–170 Pickup points in transportation processes,
Partial or excessive actions principle, 266 349–350
PATH (promise, acceptance, trust, and hope) Pilot implementations for processes, 379
for brand names, 189 Pilot tests
Path functions in FAST diagrams, 154 in DFSS service process design, 46
PDLS (process description languages), in DFSS service product design, 41
307–308 Placement in brand development, 209
Perceived quality Planning in value engineering, 132,
brands, 205–206 172–174, 178–179
and value, 52–53 Planning matrices in quality function
Percentiles deployment, 109
in histograms, 395 Plans, job. See Job plans in value
in measures of relative standing, 399 engineering
Perceptions with brands Poisson distributions, 404
in buying decisions, 191 Policy constraints, 418–420
in competitor analysis, 216 Politics in change management, 429
Performance Population of data
in cost-function relationships, 160 for probability distributions, 399
in DFSS service process design, 44 for surveys, 63–64, 73–75
in DFSS service product design, 40 Positioning in brand strategy development,
in product brands, 195 217–220
and value, 52 Pregnancy stage in technical system
Performance metrics evolution, 241
for batch flow shops, 321 Preliminary action principle, 262–263
for cellular manufacturing, 320 Preliminary antiaction principle, 262
for change management, 429 Premium freight expenditures, 352
for DFSS service product design, 34–36 Pretesting surveys, 64
for line flow shops, 322–323 Price
for processes, 308 in brand development, 208–209, 222
job shop, 318 in brand personality, 198
logistics and distribution, 347–348 and value, 52
manufacturing, 323–324 Price profiles, market-perceived, 88–89
 Index 447

Primary path functions in FAST professional service, 339–341

diagrams, 154 project shop, 344–346
Privacy of surveys, 58–59 purchasing and supply, 352–355
Probability distributions, 399–400 pure service shop, 332–336
binomial, 403–404 quality measures of, 406
expected value, variance, and standard resources and constraints for, 305–307
deviation, 400–401 retail service store, 336–339
exponential, 403 service factory, 329–332
normal, 401–403 supporting, 301
Poisson, 404 telephone service, 341–344
statistical parameter estimation, 404–405 transportation, 349–351
Probability sampling, 75–76 Product-brand coordination, 220–221
Problems in TRIZ Product-related associations, 194–196
classification, 230, 245–246 Product scope in brands, 194
definition, 230, 243–245 Production batch size in value stream
problem-solving process, 243–246 mapping, 367
Process description languages (PDLS), Production lead time, 323
307–308 Production lines, 321–323
Processes and process management Production processes, 316–326
capability of Productivity in constraint theory, 417
indices, 407–409 Products
quality measures, 406 in brand development, 208
case study, 380–391 in brand strategy self-analysis, 215
control in brands as, 193–196
in DFSS service process design, 46 design, 8, 312–316
in DFSS service product design, 42 in services, 9
core, 300–301 Professional service processes, 5,
design in, 378–379 339–341
in case study, 387–391 Profitability in service organizations, 6
in DFSS service process design, 43–45 Profits
in services, 8 in constraint theory, 417
diagnosis in, 378 in cost visibility analysis, 137
in case study, 381–387 Project charters
in DFSS service process design, 44–45 in DFSS service process design, 42–43
documentation, 307–308 in DFSS service product design, 30
elements of, 304–305 Project scope
excellence in, 309–311 in FAST diagrams, 152
features of, 303–304 in information development, 138
implementation, 379–380 Project shop processes, 5, 344–346
introduction, 299–303 Projects
lean operation principles. See Lean evaluation, 17
operation principles execution, 16
logistics and distribution, 346–349 flowcharts, 17
maintaining, 380 management, 17
manufacturing and production, 316–326 in quality function deployment, 113–114
mapping. See Mapping processes selection, 16
office and transaction, 326–329 team members, 15
optimizing, 301–302 Promise, acceptance, trust, and hope (PATH)
performance metrics for, 308 for brand names, 189
product design and development, 312–316 Promotion in brand development, 209
448 Index

Proportions, sample size for, 78–81 Questions in surveys

Psychological factors order, 70–71
in service organizations, 6–7 types, 65–69
in value, 50–51 wording, 69–70
Public relations in brand development, 223 Queue length
Pull-based production, 373–374 in checkout lines, 337
Purchasing and supply processes, 5, in service factory processes, 330
352–355 Quick setup time reductions, 375
Pure service shop processes, 4,
332–336 R
Purpose of surveys, 61 Random flow patterns, 319
Push-based production, 374 Random sampling, 76
Random variables, 399–405
Q Ranges, 397–398
QFD. See Quality function deployment (QFD) Ranking in paired comparisons, 171
Quality Rapid development stage in technical system
perceived, 205–206 evolution, 242
in processes Rare events, Poisson distributions for, 404
manufacturing, 323 Rate of return (ROI) in constraint theory, 417
professional service, 340 Rating questions for surveys, 66
project shop, 345 Ratings in quality function deployment,
pure service shop, 334 108–109
retail service store, 337–338 Realistic objectives, 110
service factory, 330 Recovering principle, 277–278
telephone service, 343 Redesign process, 378–379
transportation, 350 Redials in telephone service processes, 342
product brands, 195 Refining
and value, 52–53 in DFSS service process design, 46
Quality function deployment (QFD), in DFSS service product design, 41
101–103 Regulations for processes, 306–307
analysis in, 112–113 Relationship matrices, 107–108, 114–117
benefits, assumptions, and realities in, Relative change principle, 279
103–104 Relative standing, measures of, 398–399
case study, 122–126 Remove tension principle, 263–264
in DFSS, 19 Reneges in telephone service processes, 342
example, 113–122 Reporting phase in value engineering job
history, 103 plans, 132, 174–176
Kano model of quality, 111–112 Reports from surveys, 65
methodology overview, 104–111 Requirements
summary, 126–128 in DFSS service product design, 30–34
for value deployment, 56 in value creation, 56
Quality levels Resonance principle, 268–269
without mean shifts, 409–410 Resources
with mean shifts, 410–411 bottleneck, 414
Quality measures, 405–406 as constraints, 420
process capability indices, 407–409 for processes, 305–307
process performance and capability, 406 mapping, 377
Quality profiles, market-perceived, 84–88 professional service, 340
Questionnaires project shop, 345
length of, 71–72 pure service shop, 335
in quality function deployment, 125 in TRIZ, 230, 236–237
 Index 449

Response rates of surveys, 58–59 Screening techniques in value engineering

Restaurant service job plans, 166–172
analyze phase in, 36–39 Secondary functions for information
customer needs for, 31–34 phase, 143
Results Secondary research, 60
of surveys, 61–62 Secondary useful functions, 231–232
in TRIZ, 230, 245 Segmentation principle, 257–258
Retail service store processes, 4, 336–339 Selection
Return on brand development, 223 survey interviewers, 64
Revenue in service organizations, 6 survey samples, 64
Revisions in value stream mapping, 360 in value engineering job plans, 169–172
Rework Self-analysis in brand strategy, 214–216
in professional service processes, 340 Self-expressive benefits in brands, 199
in project shop processes, 345 Self-service principle, 273
Roadblocks in value engineering job plans, Serial flow patterns, 319
174 Service
Robustness DFSS for. See DFSS (Design for
in DFSS service product design, 40 Six Sigma)
in product design and development Six Sigma for, 21–23
processes, 314 system design and creative design in,
ROI (rate of return) in constraint 26–27
theory, 417 Service costs
Roles in business excellence, 21 in pure service shop processes, 335
Rollout in service factory processes, 331
in DFSS service process design, 46 Service factors in value, 51
in DFSS service product design, 42 Service factory processes, 329–332
Roofs in quality function deployment, Service industry applications of TRIZ,
109–110 254–255
Rope in DBR strategy, 424 Service organizations, 1–6
Routing in job shop processes, 316–317 Six Sigma in. See Six Sigma overview
success factors for, 6–12
S Service processes, 3
S-curves in TRIZ, 240–243, 245 Service products, 2–3
Samples of data, 399 in DFSS. See DFSS (Design for Six Sigma)
Sampling for surveys value creation in, 47–48
methods for value maximization in, 55–56
cluster, 77 Service time in processes
frames, 63–64, 73–75 professional service, 340
nonprobability, 75–78 pure service shop, 334
probability, 75–76 service factory, 330
random, 76 telephone service, 342
systematic, 76–77 Shipment damage and loss, 347
selection process, 64 Shopping carts, 338
size, 64, 78–82 Short-living objects principle, 274
Scales for survey questions, 66–68 Shortages in purchasing and supply
Schedules for surveys, 63 processes, 352
Science in inventions, 228–229 Sidewalk surveys, 78
Scope Significance in quality function deployment,
in FAST diagrams, 152 113
in information development, 138 Simulation in process diagnosis, 378
in product brands, 194 Single-piece flow, 370–372
450 Index

Six Sigma overview, 12 Stepwise implementation in change

fundamental beliefs, 13–14 management, 429
methods and tools, 17 Strategy analysis in brand development,
organizational infrastructure, 15–16 212–216
projects in Strategy development
evaluation, 17 for brands, 217–222
execution, 16 in change management, 429
flowcharts, 17 Stratified random sampling, 77
management, 17 Strengths
selection, 16 in brand strategy competitor analysis, 216
team members, 15 in quality function deployment, 121
summary, 18 Stress in surveys, 59
training, 16 Subjects in TRIZ, 232–233
Six Sigma standard, 14 Substance resources in TRIZ, 236
Size, sample, 64, 78–82 Substantial invention inside technology level
Skills in process excellence, 310 in inventions, 228
Skipping principle, 270 Success factors for service organization,
Small invention inside paradigm level in 6–12
inventions, 228 Superior performance in DFSS service
Snowball sampling, 78 product design, 40
Soft brand associations, 206 Supply and purchasing processes, 5,
Solution generation in TRIZ, 230, 246 352–355
Space resources in TRIZ, 236 Supporting functions
Specifications in FAST diagrams, 153–154 in FAST diagrams, 154
Spread, process, 406–407 in TRIZ, 232
Stakeholders, communication with, 311 Supporting processes, 301
Standard deviation, 398, 400–404 Surveys
Standard normal distributions, 402 customer. See Customer surveys
Starving, process, 305 in quality function deployment, 125
Statements in TRIZ, 232–233 Sustainability in brand positioning, 219–220
Statistics Symbols
basics, 393–394 in FAST, 154–157
descriptive in flowcharts, 356–357
graphical, 394–396 System design, 26–27
numerical, 396–399 Systematic survey sampling, 76–77
quality measures, 405–406
process capability indices, 407–409 T
process performance and capability, 406 Taguchi method, 27
quality levels with mean shifts, 410–411 Taking out principle, 258
quality levels without mean shifts, Target market segment in brand
409–410 positioning, 218
random variables and probability Targets in quality function deployment, 110
distributions, 399–400 Team members
binomial, 403–404 in change management, 429
expected value, variance, and standard in Six Sigma organizations, 15–16
deviation, 400–401 Technical competitive assessments, 111
exponential, 403 Technical contradictions, 238–239, 246–254
normal, 401–403 Technical importance ratings, 108
Poisson, 404 Technical systems, evolution of, 240–243
statistical parameter estimation, Techniques for equipment, 306
404–405 Technological evolution analysis, 230
 Index 451

Technology in inventions, 228–229 function modeling and functional analysis

Telephone service processes, 5, 341–344 in, 231–236
Telephone surveys, 59 ideality in, 237–238
administering, 72–73 inventive principles in
advantages and disadvantages of, 59 business, 255–283
Theory of inventive problem solving (TIPS). contradiction table of, 284–289
See TRIZ (theory of inventive problem regular, 246–254
solving) problem-solving process in, 243–246
Thin and flexible principle, 275–276 resources in, 236–237
Threatening survey questions, 69 S-curves and evolution of technical
Throughput systems in, 240–243
in constraint theory, 415, 417–418 service industry applications of, 254–255
in processes for value deployment, 56
manufacturing, 324 Turn lemons into lemonade principle, 270–271
office, 327–328
pure service shop, 334 U
service factory, 331 Uncontrollable factors in brand
Time pressure of surveys, 58 development, 209–210
Time resources in TRIZ, 236 Uniqueness in brand positioning, 219
Time to complete in project shop Units of analysis in survey sampling,73–75
processes, 345 Universality principle, 260–261
Time to market in brand development, 209 Unnecessary costs, 129
Time waiting for assistance in retail service Unpaced assembly lines, 322
store processes, 337 Unspoken wants, 111
Tools Upper-level management support in change
in Six Sigma, 17 management, 429
in TRIZ, 230, 245–246 Use value, 54
Total costs in cost visibility analysis, 137 Users in product brands, 195
Training Uses in product brands, 195
equipment users, 306
in process excellence, 310 V
Six Sigma, 16 Validation
survey interviewers, 64 in DFSS service process design, 46
Transaction costs in office processes, 328 in DFSS service product design, 42
Transaction processes, 326–329 Validation plans for processes, 379
Transportation processes, 5, 349–351 Value
Transportation time, 350 analyzing, 56
Travel costs, 350 in brand positioning, 219
Tree diagrams, 105 creating, 47–48
Tree pattern for survey questions, 71 deploying, 56
TRIZ (theory of inventive problem solving) elements of, 48–51
contradictions in, 227 maximizing, 55–56
analysis of, 245 metrics for, 51–53
business contradiction matrices, 290–297 versatility and dynamics of, 53–55
definition, 230 Value councils, 179
eliminating, 246–254 Value engineering, 129–132
physical, 239–240 case studies
table of inventive principles, 284–289 automobile dealership construction,
technical, 238–239 180–181
in DFSS, 19 engineering department organization
elements in, 230–231 analysis, 181–185
452 Index

Value engineering (Cont.) Verbs in TRIZ, 232–233

evaluation, planning, reporting, Verify phase
implementation in, 132 in DFSS service process design, 46
functions in in DFSS service product design, 41–42
evaluating, 131 Versatility of value, 53–55
identifying, 130–131 Virtual cells, 319
types of, 142–145 Vision development in brand strategy
job plans in. See Job plans in analysis, 212–213
value engineering Voice of the customer (VOC), 25, 101
Value management, 83–84 Voting, Pareto, 169–170
customer value in
competitive analysis, 94 W
deployment, 94–99 Waiting time
maps, 89–93 in pure service shop processes,
market-perceived profiles 333–334
price, 88–89 in service factory processes, 330
quality, 84–88 in telephone service processes, 342
Value of systems in cost-function Waste in processes, 300, 362–364
relationships, 160 Weak columns and rows in quality function
Value proposition in brands, deployment, 112–113
198–200 Weighting in paired comparisons, 171
Value stream mapping, 359–362 Whats in quality function deployment
analysis of determining, 123
in DFSS service process design, 44 identifying, 114–115
in process diagnosis, 378 obtaining, 106–107
current state, 364–369 weak, 119
future state, 375–377 Work cells in lean operation, 372–373
Variability, process, 406 Work-in-process inventories
Variable burden in cost visibility analysis, 137 in lean operation, 372
Variables in manufacturing process, 324
expressed in proportions, 78–81 in office processes, 327
random, 399–405 Working populations for survey sampling, 74
Variance, 398, 400–404
Variation measures, 397–398 Y
Vehicle usage Yaesu Book Center case study, 122–126
in logistics and distribution processes, 348
in transportation processes, 350