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298 CHAPTER 8 • PRoduCT And sERviCE dEvEloPmEnT And oRgAnisATion
usually means that the financial breakeven point for a new product or service is delayed
far more than the original delay in the product or service launch.

An operations resources perspective on product and service
development
An operations resources perspective on product and service development involves
examining the decision areas that we would normally use but applying them specifi-
cally to the development process. This is not difficult since all the categories can be
applied directly. The capacity of the organisation’s development processes needs man-
aging over the long term, choices need to be made about whether some activities are
performed in-house or subcontracted, investments in process technology are becoming
an increasingly important element in managing new product and service development,
and the organisation of the development process has become an important factor in
managing the development process. Furthermore, behind each of these decisions lies
the general objective of nurturing and exploiting the organisation’s capabilities.

Product and service development capacity

As in any other process, the management of capacity involves deciding on the overall
level of activity that an operation can support and also deciding how that level of sup-
port can be changed in order to respond to likely changes in demand. Essentially, all the
issues discussed in Chapters 4 and 5, in the context of the whole operation, also apply
to the product and service development process. However, remember that the devel-
opment process is a service in that it creates and works with knowledge for the benefit
of its (usually internal) customers. This means that such options as building up an
‘inventory’ of designs are not usually feasible, as such. Storing knowledge in a relatively
developed form, however, may be possible. Indeed, in many ways, the whole develop-
ment process can be characterised as building up and then deploying ‘inventories’ of
design-based knowledge. Similarly, a ‘capacity lagging’ strategy (see Chapter 3) is not
usually practical. The whole ethos of product and service development is one of broadly
anticipating market requirements and attempting to bring ideas to market as early as
possible. Deliberately planning to have a level of design capacity lower than the likely
demand for such development rather implies extended time-to-market performance.
Uneven demand for development
The central issue for managing product and service development in many organisa-
tions is that the internal ‘demand’ for such development is uneven. Even in very large
companies, the rate of new service or product introduction is not constant. The need for
product/service innovation is likely to be dictated by several complex and interrelated
market factors. This may lead to several new offerings being introduced to the market
close together, while at other times little development is needed – thus posing a resourc-
ing problem. The capacity of a firm’s development capability is often difficult to flex.
The expertise necessary for development is embedded within designers, technologists,
market analysts and so on. Some expertise may be able to be hired in as and when it
is needed, but much development resource is, in effect, fixed. Such a combination of
varying demand and relatively fixed development capacity leads some organisations to

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