Design-to-value - McKinsey's View
Design-to-value (DTV) is an integrated approach to product development that considers multiple perspectives:
What customers want?
What competitors are offering?
What it costs to manufacture and distribute an end product?
As a part of DTV, companies interact with customers and identify the product features that consumers value most, as well as those that generate little market interest. Based on this information, they can redesign their products, adding new features that promote sales while eliminating unnecessary attributes. DTV also evaluates cost elements of products and helps companies optimize efficiency in product design and manufacture by highlighting areas for improvement.
DTV is in application in many companies. The applications are available across multiple industries, including automotive and assembly, high tech, telecom, consumer goods, and electronics.
DTV is a systematic, fact-based approach
During the DTV process, all product development decisions are based on facts— hard data from consumer research, clean-sheet-based cost models, and competitive intelligence from teardowns of products of competitors.
Developing a robust and deep understanding of features that drive value up and quantifying their how much consumers are willing to pay for those product features highlights important product features that need to be added. Conducting “teardowns” of competitors' products to document technical and functional differences provide ideas for reducing costs of providing various features,
Clean sheet modeling, which involves determining the detailed “should cost” for each product and developing strategies to reduce expenses based on that "should cost", by redesigning products or processes or by negotiating differently with suppliers
After doing the three information gathering steps and developing various ideas by involving many experts from various functions, the list of ideas is compiled for further evaluation. In the evaluation process, a list of specific and pragmatic ideas that companies can implement to increase customer value while reducing product costs is arrived at.
By using the DTV methodology, many companies have redesigned and optimized their products and uncovered significant savings—often in unexpected areas.
Across sectors, DTV stimulates growth, improves customer satisfaction, and optimizes brand positioning by keeping the focus on product features that customers value. This results in impressive financial benefits. McKinsey claims that on average, our clients achieved a 10 to 40 percent increase in gross margin and a 10 to 40 percent reduction in product and supply chain cost. DTV also helps increse product preference in the market and helps companies gain additional market share as well.
DTV Resources and Capabilities of McKinsey
McKinsey has invested significant time and resources into DTV over the last decade, and now has many proprietary, cutting-edge assets to assist clients. These include:
A database of 400 should cost sheets that show labor rates, material costs, and machine costs are created by them.
A library of linear performance pricing models to help clients identify when the cost of commodities and standard parts, such as batteries, motors, or raw materials, appears to be excessive
Proprietary software that allows clients to track and manage their innovative product improvement ideas from creation to implementation and financial validation.
It has a pool of over 300 experts and consultants who are trained in DTV techniques, many of whom have deep technical knowledge and several years of industry experience in relevant fields. They lead and facilitate workshops for cross-functional client teams composed of a general manager and staff from marketing, engineering, operations, and other groups.
McKinsey holds workshops at client sites or in one of their global design labs. They can create design labs in client organizations also.
McKinsey Case Studies
Redesign of Medical Device
DTV Application to Forklift Truck
DTV Application to Household Fan
DTV Applied to Shampoo Packaging
Designing Products for Value - McKinsey QuarterlyBy Ananth Narayanan, Asutosh Padhi, and Jim Williams
McKinsey Quarterly October 2012
Design-to-value - BCG's View
The environment of low growth and rapid product life cycles, requires from companies products and services that provide the greatest total value to customers (thus get the highest price) and the most attractive economics (profit margins) over the life cycle of the product. Design to value (DTV) is a cross-functional product development and improvement process that achieves these dual objectives by translating top-level strategy (product - market choice) into design choices for products and services as well as the underlying processes in the production facilities of the company and the facilities of the supply chain partners. DTV allows companies to focus their innovation (creation and commercialization) efforts on the features that their customers are willing to pay for and to select cost optimization approaches that will improve and protect long-term profitability.
Boston Consulting Group's Capabilities in DTV
The Boston Consulting Group has developed a flexible and broadly applicable approach to DTV that companies in diverse industries can apply to both new and existing products and services. The approach uses “catalyst events”—workshop sessions in which a team of cross-functional executives, operators and stakeholders apply a robust fact base to generate ideas for designing the best products with minimal complexity and cost. The executives and operators are from engineering, production, procurement, and sales and marketing for these events. This team effort breaks down organizational silos and increasing agreement on strategic priorities across business functions due to information transfer that takes during discussions. Some companies also involve their customers or suppliers in these workshops.
Design To Value - PWChttp://www.strategyand.pwc.com/media/file/Strategic-product-value-management.pdf
Companies require a unique set of capabilities — which PWC refers to as strategic product value management — to reduce product costs, drive growth, and expand margins. Strategic product value management uses commercial and design levers to provide the discipline and methodology required to manage the product development. It adds significant value early in the process, particularly through two aspects: design to value (DTV) and design to cost (DTC). Design to value entails analyzing what customers need in terms of features, efficacy, or other attributes (i.e., the value proposition of a particular product, including pricing). Design to cost, by contrast, entails analyzing all costs of a particular product and developing rigorous models to reduce those costs at every
Design To Cost - Capgeminihttps://www.fr.capgemini-consulting.com/resource-file-access/resource/pdf/design_to_cost.pdf
Optimize Cost Across Value Chain and Product Lifecyclehttps://www.cognizant.com/whitepapers/optimizing-product-realization-costs-across-the-value-chain-codex1611.pdf
Design To Value - Other Consultants
Design to Value – A cost reduction study of a specific wastewater pumpThesis submitted for examination for the degree of Master of Science in Technology
Techniques involved in Design To Value Method
Should Cost Modeling
Management of Design To Value Programmehttp://nraoiekc.blogspot.com/2016/10/management-of-design-to-value-programme.html
I came to know of this method through a presentation a J & J team on 21 October 2016
Director of DTV (Design-to-Value) / Value EngineeringJohnson & Johnson, Bridgewater, NJ
Advertisement in October 2016
Johnson & Johnson Family of Companies is currently recruiting for a Director of DtV (Design-to-Value) / Value Engineering. This position can be located in Bridgewater, NJ, USA or Zug, Switzerland.
Caring for the world, one person at a time, inspires and unites the people of Johnson & Johnson. We embrace research and science bringing innovative ideas, products and services to advance the health and well-being of people. Employees of the Johnson & Johnson Family of Companies work with partners in health care to touch the lives of over a billion people every day, throughout the world.
The Director DtV / Value Engineering will:
• Lead or Co-Lead DtV product conventions and other DtV project types
• Role-model DtV behavior and cross-functional ways of working
• Create positive financial impact with DtV savings and value creation opportunities
• Follow-up at high level on convention results and selectively further guide or assist segment staff responsible for implementation
• Assist businesses and partner with R&D and commercial in identifying and assessing opportunities and planning a DtV roadmap, with the objective of creating and maintaining a continuous stream of DtV work
• Create showcases on DtV application and further develop our process descriptions and training materials
• Assist in developing the Design-to-Value (DtV) Process and Framework, as an integrated approach to Product Development considering multiple dimensions: Customer, Quality, Cost, Technology, Value Add
• Ensure that the DtV processes are properly documented, provide work instructions which have to be used by the operational/segment teams, indicating in particular the intersection points between the functions with clear R&R; important in the cross functional supply chain environment.
• Be aware of product related trade-offs and make best use of the customer / consumer insights, to ensure DtV improves overall product competitiveness, with proper balance of cost and attractiveness while ensuring quality and regulatory compliance
• Identify and drive leverage DtV opportunities wherever reasonable. Across business, or across segment. Use / integrate centrally managed resources as well, wherever appropriate
• University degree in engineering or scientific field is required, an advanced scientific degree (MS) or MBA is preferred
• Minimum of 10 years of experience in engineering / R&D, manufacturing, product management or supply chain (ideally across multiple functions) is required, as well as broad technical and scientific expertise
• Expertise in understanding Product Development and Design is required
• Understanding the linkages from product development through manufacturing and delivery to the customer is required, deep practical understanding of the linkage between product and process development is required
• Leadership experience in a large scale multi-location operational change program, preferrably DtV / Value Engineering, but possibly also Six Sigma or Lean programs is preferred
• Familiarity with state-of-the art DtV tools, including consumer / marketing related tools is preferred
• Multifunctional background, or proven track record of working easily and achieving results across functional boundaries is required
• Understanding of typical regulatory and quality requirements is preferred
• Ability to create strong relationships across multiple functions and businesses is preferred
• Change management and project management experience is required
• Strong executive presentation skills is required
• Strong analytical and strategic skills with a Bifocal approach - ability to zoom-in/zoom-out for strategic and tactical, high-level and detailed, etc. is required
• Experience in driving broadly based culture change in a train-the-trainer setting is required