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278 CHAPTER 8 • PRoduCT And sERviCE dEvEloPmEnT And oRgAnisATion
product and service development are now seen as the mechanism by which all parts of
the business, but especially operations, leverage their capabilities into the marketplace.

developing products and services and developing processes
For convenience and for ease of explanation we often treat the design of products and
services on the one hand, and the design of the processes that produce them on the
other, as though they were totally separate activities. In many organisations the two
developments are organised separately. But this does not imply that they necessarily
should be treated or organised separately, and they are clearly interrelated. It would be
foolish to develop any product or service without taking into consideration the con-
straints and capabilities of the processes that will produce it. Similarly, developing pro-
cesses to take advantage of new technologies or process methods will have implications
for the development of products and services in the future. Successful developments
often have a history of both product/service and process development.

The degree of product change is important
Just as it was important in chapter 7 to understand the degree of process change expected
of the development process, so here it is important to understand the degree of product
or service change. Again, we can construct a conceptual scale that helps to give some
degree of discrimination between different levels of change. Also again, we can calibrate
this scale from relatively minor modifications to a product or service at one extreme,
through to the novel and/or radical changes exhibited by a ‘pioneer’ product or service.
In the previous chapter we distinguished between what is done in a process and how it
is done. The equivalent here is the distinction between what is seen externally to have
changed in the product or service and how the product or service performs its function
through its internal mechanisms. Table 8.1 describes four levels of change, ‘modifica-
tion’, ‘extension’, ‘development’ and ‘pioneer’, in terms of the product’s or service’s exter-
nal and internal characteristics. It also shows two illustrative examples, one based on a
company that manufactures exercise machines, the other a financial service company
that runs a bank card service. Remember, though, that the level of change implied by
these categories of development to products and services is approximate. What is impor-
tant is to recognise that the nature of the product and service development process is
likely to be different depending on the degree of product/service change.
Relatively small ‘modification’ changes, such as those described in the two examples
in Table 8.1, are likely to be relatively frequent and will probably be made using routine
procedures. Most companies have standard procedures such as ‘engineering change
orders’ (ECOs), where small changes are proposed in one part of the organisation and
approved by other relevant departments. But although these small modifications may
be incorporated into standard procedures, they may still require organisation-wide
exposure, especially if the part of the product or service being modified has high ‘con-
nectivity’. Connectivity is the degree to which changes in one part of a product or
service impact on other parts. It is a concept that can also apply at an organisational
level and is important in understanding why, as the degree of product or service change
moves thorough ‘extension’ and ‘development’ to ‘pioneer’, the changes become more
difficult and more risky. Fundamental changes to products and services almost always
involve the whole organisation. So, in addition to the obvious difficulties of market
acceptability and resource capability inherent in high degrees of product and service
change, the coordination between functional strategies must be well managed.

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