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A mARKET REquiREmEnTs’ PERsPECTivE on PRoduCT And sERviCE dEvEloPmEnT 295
more likely they are to occur. This is why flexibility within the development process
is one of the most important ways in which dependable delivery of new products and
services can be ensured.

Flexibility of product and service development
Flexibility in new product and service development is usually taken to mean the ability
of the development process to cope with external or internal change. The most com-
mon reason for external change is because the market in general, or specific customers,
change their requirements. This may be prompted by their own customers and mar-
kets changing, or because developments in competitors’ products or services dictate a
matching or leapfrogging move in specification. Internal changes could include the
emergence of superior materials or technical solutions. One suggestion for measuring
development flexibility is to compare the cost of modifying a product or service design
in response to such changes against the consequences to profitability if no changes
are made. The higher the cost of modifying a product or service in response to a given
change, the lower is the development flexibility. 13
Two trends in many markets make development flexibility particularly important.
The first is the pace and magnitude of environmental change. Although flexibility
may not be needed in relatively predictable environments, it is clearly valuable in
more fast-moving and volatile environments. The second factor, however, which
amplifies environmental volatility, is increasing complexity and interconnectedness
of products and services. A bank, for example, may bundle together a number of sepa-
rate services for one particular segment of its market. Privileged account holders may
obtain special deposit rates, premium credit cards, insurance offers, travel facilities
and so on, together in the same ‘product’. Changing one aspect of this bundle may
require changes to be made in other elements. So, extending the credit card benefits
to include extra travel insurance may also mean the redesign of the separate insurance
element of the package.
One of the biggest benefits from development flexibility is that it can reduce devel-
opment risk. Much development risk derives from the changes that occur during the
development period. At the beginning of the development time, managers will pre-
sumably form a view concerning customer requirements, available technologies and
specification of competitor products and services. During the development period any,
or all, of these might change. Customers may change their mind, either because their
needs have changed or because they did not understand their own needs in the first
place. The boundary of what was technologically possible may change as new technolo-
gies come onto the market, and competitors introduce rival products and services with
superior or different performance. Development flexibility can help to minimise the
impact of such occurrences.

The newspaper metaphor
Not all aspects of a development programme need to be flexible. Some aspects of a prod-
uct or service may be judged unlikely to change over the development period, whereas
others may be particularly difficult to forecast. It would seem sensible, therefore, to delay
decisions regarding the uncertain elements until as late as possible in the process and
build in sufficient flexibility in these elements rather than ‘waste’ it on the more sta-
ble elements. This is exactly how a daily newspaper designs its content. Special feature

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