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Aiming at competitive products and delightedcustomers in the time of recession

March 21, 2013

Juhani AnttilaInternational Academy for Quality (IAQ)Helsinki, Finlandjuhani.anttila@telecon.fi ,ww.QualityIntegration.biz

These pages are licensed

under the Creative Commons 3.0 License http://creativecommons.org/licenses/by/3.0

(Mention the origin)

Kari JussilaAalto University, School of ScienceEspoo, Finlandkari.jussila@aalto.fi

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Main themes of the paper:

1. Extended product concept

2. Product characteristics and quality, and customer satisfaction

3. Processes and technologies

4. Product and corporate brands

5. Challenges at the time of recession

Aiming at competitive products and delightedcustomers in the time of recession

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Processes and product in a Business Connection

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Supplier (Product producer)Customer (Product recipient)

Supplier’s business processesCustomer’s business processes

Business interface(business interactions)

Product(Goods + Service)

Organizations in business connection:

Partner

Process is activity and product its result.Product use and perception reveal value and satisfaction.

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Understanding the concept “product”

Product:”result of a process”

Normally many processes are involved in producing a product,and processes may be in different organizations.

A product includes always service, and may also include goods.

Service”result of processes performed at the interface between the supplier and the customer”

Service is the essential part of all products, or factually all products are compositeproducts consisting of goods and services.

There is no justification to use a phraseology ”products and services” or ”productsor services” that factually means “goods and services”.

Value of goods may only be achieved through using the goods. Hence, also goodsmay be seen as service providers.

The value of a product is co-created by both the supplier and the customer.

4023/12.2.2013/jan (Ref.: ISO 9000)

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A product consists of goods and services

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Goodsvalue

to customer

ServicevalueTo customer

Pure goods

Pure service

100%

100%0%

0%Product = Result of processes = Goods + Services

Value provided for the customer is based onboth goods and services. The role of service is dominant, and especially today increasing.

The goods value may be achieved only by usingthe goods. Hence, also goods may be seen as atype of service provider.

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Three elements of a composite product producing value to the customer

The product is composed of three elements that create value to the customer (“Valueadding channels”):

- G: Goods service: Value from using the goods element- H: Human service: Value from human services- A: Automatic service: Value from automatic or mechanical services

H A

G

P

v

u

w

The composite product and itselements co-create added-value Pto the user with his/her process(es):

P = uH + vA + wGu, v, and w are contributory portions ofdifferent product elements to the value

Tendency

Each point within the triangle represents a particular product.

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What is the product,and what are the processes involved?

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Essential questions:

1. What is the product, incl.a) The service, andb) The goods?

2. How the customer value isbeing created, througha) The value creating

processes, andb) The structures

supporting theprocesses?

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Service is result of processes, Examples

• Tourist service

– Memorable experience

• Restaurant service

– Well-nourished, fullness

• Entertainment service

– Emotional response

• Design service

– Product specifications, prototype

• Training /education service

– Skills, competence

• Financial service

– Loan

• Health care service

– Health, well-being

• Telecom service

– Completed phone call

• Transport service

– Material, people transported

• Maintenance service

– Equipment repaired

• Lawyer service

– Trial supported

• Consulting service

– Development supported

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Quantitativesufficiency

Dependability

Environmentalcompatibility

ReliabilityperformanceMaintainabilityperformance

Maintenance supportperformance

Ergo-nomics

Serve-ability(*) Security Esthetic Ethics

Effective-ness &

EfficiencyEconomy

(*) accessibility + retainability

EcologySocial per- formance

General systematic grouping of inherent characteristicsof any product (7E+3S)

The product performancecharacteristics may be

designed systematically andobjectively by the product

developer but they are alwaysperceived comprehensively

and subjectively by theproduct user.

All product characteristicsare interlinked with each others

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0017/30.11.2008/jan

quality (of a product)- degree to which a set of inherent characteristics (of the product) fulfils requirements

grade (of requirements)- category or rank given to the different requirements for the products having the samefunctional use

Note:- requirement (generated by an interested party): need or expectation that isstated, generally implied or obligatory- interested party: person or group having an interest in the performance orsuccess of an organization (a product)

(Ref.: ISO 9000)

Quality Grade (of a product)

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Customer perception

Indifference

Dissatisfaction

High

High

SatisfactionLow

Low

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How can I understand whether a customer is satisfied or not?

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• When asked, the reply is ”Yes”

• Says he is even not asked

• Tells this to his friends

• Buys more of what he is satisfied

• Buys something else, too

Situation consists of a complex mixture of rational, non-rational (emotional)and irrational human phenomena:

– satisfaction, dissatisfaction, indifference

– confidence, trust

– goodwill / badwill balance

– to buy or not to buy

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Recognized professional approaches:

Kano modelA theory of customer satisfaction and product development that identifies productqualities based on how they affect the customer's perception of the product (NoriakiKano 1980)

QFD (Quality Function deployment) A method to transform user demands into design quality, to deploy the functions

forming quality, and to deploy methods for achieving the design quality intosubsystems and component parts, and ultimately to specific elements of themanufacturing process (Yoji Akao 1966)

Kansei engineeringA method that aims the development or improvement of products and services bytranslating customer's psychological feelings and needs into product's designparameters (Mitsuo Nagamachi in the early 1970’s)

Linking product characteristics with customerpreference and satisfaction

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Different business situations:

Products from a single organization:- Gaps in the organization‘s business processes impact on the customer‘s perception.The phenomenon is described by the ServQual model that was developed in the mid-1980s by Zeithaml, Parasuraman & Berry. We have modified the model for the extendedproduct and process concepts.

Products from business networks and ecosystems:- Product (and in particular service) is not produced only by one organization’s

processes but by many organizations’ processes operating in a business network or an ecosystem. Different networks and ecosystems compete with each other. However, one organization has the commercial relationship with the customer.

Products from a networked community:- A customer is an independent and collaborating member of a network. He or she and

also all the other network members produce something to and get something from the other network members. A network product is a cumulative result from network member’s value creating interactions with all other members. Network members also get value from the whole network through the general recognition or privileges of the network.

Linking customer’s perception with business processes

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Linking product quality with the supplier’s businesssuccess, Customer satisfaction index (CSI)

CustomersatisfactionIndex, CSI

Perceivedquality

Perceivedvalue

Expectations

Complaints

Loyalty

Drivers

CONSEQUENCES: Business success

(+)

(+)

(+)

(+)

(+)

(+)

(-)

(+)

(+/-)

(Ref. A. Westlund 1996)0503/23.2.2013/jan

Results

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New technologies have essential impacts onproduct characteristics and the effectivenessand efficiency of the related processes. Thesetechnologies include: Information technology Biotechnology Nano- and microtechnology Optical technology Energy technology Social technology Etc.

Technology challenges

We have been involved with the followingexamples of the ICT (information andCommunication technology):

Radio frequency identification(RFID)

Ubiquitous information technologyInternet internet of things (IoT) andmachine-to-machine applications

Mobile payment technology Cloud services Mashup products.

In addition to the impact on quality of products, the new technologies also have challenginginfluence e.g. on environmental, social, safety and security performance, including:

Environmental protection Information security Health risks

Traditional technological progress in products took place due to the sustaining technology,but today disruptive technology innovations present greater challenges.

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• Brand value: The overall value statement to the user

• Brand authority: Excellence aspects

• Brand personality: Rational brand characteristics Emotional brand characteristics

• Brand benefits: Concrete value features in use

• Brand service: Service provision to the user

Product brand and its consistency with corporate brandin market communication

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Corporate brandCorporate brand

Product brandProduct brand

ConsistencyConsistency

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Attractiveness and consistencyof the corporate and product brands

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Apple Apple

Lumia 920Lumia 920 Galaxy S III 4 G

Samsung Samsung

iPhone 5iPhone 5

NokiaNokia

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The time of recession causes problems andtroubles in organizations: Business competition becomes tougher Uncertainty and difficulty increase in

getting new capital People and organizations decrease

spending money on consumer andinvestment products

Revenue of firms declines Organizations encounter difficulties in

not only to grow but to maintainprofitability

Self-sustaining negative attitude drivesto giving in to the business challenges

Conclusion: Aiming at competitive products anddelighted customers at the time of recession

Challenges for the time of recession inorganizations: More competitiveness through flexibility,

effectiveness and efficiency, and relatedmanagerial skills are required.

Organizations need to address themselvesinto essential issues and strive for leansolutions.

Quality approaches should be concentratedon the basics, and systematic practices arebeneficial.• Producing competitive goods and

services• Creating overpowering customer value

and satisfaction• Refining business process

performance

The recession is always a threat and an opportunity. Recession is the time ofconsidering critically the old and courageously learning and innovating the new.