4 Towards a Structured Market Engineering
4.2 A Design Process Roadmap for Market Engineering
4.2.2 Design Process Models
4.2.2.2 Prescriptive Design Process Models
conceptually solved. It is thus independent of design details that exert a good deal of the de-sign complexity.
Opposing Tate’s opinion, the phases of the model are clearly bordered (Tate 1999). Any phase ends with a decision concerning either the concept, or the preliminary or the definitive layout (Pahl and Beitz 1984). Those boundaries are, however, blurred if iterations occur.
Nonetheless, it is possible evaluate the performance of the single phases in terms of resources and time.
The greatest weakness of phase-models concerns – as aforementioned – iterations. When the designer is forced to reiterate a phase, the subsequent detail information must be revisited. As such, iterations are highly undesirable. However, empirical studies have shown that the design process is characterized by zigzagging making the process highly iterative. Prescribing a phase model is thus often criticized to be of inferior value, as the designers anyway do not use such methodology, as it hinders creativity.
Conclusion
Having stated the pros and cons of the two types of design process models, it becomes appar-ent that neither model satisfies all desiderata. On the one hand, activity-based models are sus-pected to be vulnerable to complex design. On the other hand, phase models are too idealistic (no iterations) to trace the progression of design. The conclusion to dismiss design process models as inadequate since the designers will not exactly stick to the process is certainly over-sized. Design process models seek to structure the design process and can thus only work as a general guide – the exact procedure will vary from project to project. Nonetheless these mod-els do provide general guidance, which is more effective than ad-hoc or intuitive methods. As market engineering is an inherently complex design task, it is referred to phase-based models.
mar-ket service that is generated along the marmar-ket process in interaction with its customers (recall chapter 3.2.2.4). Failures in the configuration of the institutional rules as service prerequisites can even force the market firm out of business. Faced by competitive pressures, market firms are forced to accelerate their market engineering time. Simultaneously the costs of the engi-neering process are to be minimized, yet assuring that the quality of the resulting electronic market service remains consistent. These ambitious goals, acceleration, “minimal” costs, and consistent results of market engineering, demand for a dependable and prescriptive engineer-ing method.
In the following two sub-chapters two examples of phase-based models are presented. As such, they are closely related on an abstract level. The first model is taken from the discipline of engineering design. Basically, the use of this model assumes that any design process is es-sentially a problem-solving method. The second model is taken from the discipline of service development. This model is more specific and detailed than the engineering design model. It is chosen because market engineering is a service development problem. Having presented both models, they are compared whether they are adequate for market engineering.
4.2.2.2.1 The Engineering Design Model
In engineering design the study of phase models has a long tradition and much research has been undertaken into streamlining the design process. Already in the 1850s the Karlsruhe pro-fessor Redtenbacher pioneered some of the earliest recorded ideas on the principles of ma-chine design (Redtenbacher 1852; Pahl and Beitz 1984; Wallace and Blessing 2000). More than half a century later again a German scientist, Erkens, introduced the first step-by-step approach. Systematic design approaches became popular during the 1950s and 1960s. Several phase concepts with different phases and steps for different domains were identified. Fur-thermore, the research focus was on analyzing specific steps and, particularly deduce recom-mendations how to tackle upcoming problems within the single steps (Wallace and Blessing 2000). In the 1970s the emphasis was on the development of an engineering approach that is domain-independent, i.e. generally applicable to all design problems. The Anglo-Saxon ap-proaches stressed, in contrast to the German problem-oriented apap-proaches, a more product-oriented point of view. The product-product-oriented approaches propose intuitive methods to gener-ate the product idea and lgener-ater on discursive when the idea is stepwise refined to the final prod-uct. The emphasis of the problem-oriented approaches is, in contrast, on the concept genera-tion. This concept generation links the identified requirements for a product (i.e. the problem) with mathematics and science and creates a concept, which is intended to provide the desir-able outcomes (Parkinson and Hudson 2002). As the concept generation is one of the most demanding and least understood parts of the engineering process, problem-oriented ap-proaches are considered to bear additional potential. Accordingly, the editor-in-chief of the journal, Research in Engineering Design, Blessing notes that product-oriented approaches exemplify best practices in design, whereas problem-oriented approaches propose way to im-prove those best practices (Blessing 1996; Wallace and Blessing 2000).
In the following the engineering design approach is illustrated in more detail. As the problem-oriented approach promises to be the more potential approach than the product-problem-oriented ap-proach, only an example of the former approach will be discussed. However, the engineering processes are rarely defined in exactly the same way by authors. Hence it will be referred to one of the most cited engineering process provided by Pahl and Beitz (Pahl and Beitz 1984;
Eekels 2001; Pavkovic and Marjanovic 2001).
Task Clarification Specification Conceptual Design
Concept Embodiment Design
Definitive Layout Detail Design
Solution
Upgrade and improve
Figure 17: Engineering Design Process (Pahl and Beitz 1984)
Figure 17 shows the steps of the canonical engineering process. Basically, the phases are ex-actly the same as the ones in the phase-based model. What differs is the way, how the phases are performed. While the descriptive phase-based model merely describes design as a “from the abstract to the concrete” process, the engineering process model by Pahl and Beitz pre-scribes, how the design steps can be solved.
As with any phase-based model, the market engineer has to make a decision, whether the process is to be continued or whether previous steps have to be repeated at any step if the process. Those iterations are necessary in order to improve upon previous decisions. Ideally, the iterations are kept to a minimum, although it must be avoided to hurry through the process only to discover that serious mistakes have been committed at an earlier stage. It is to note that one important decision has been omitted in Figure 17, namely the prevalent decision to stop the development due to cost reasons. Furthermore, Figure 17 does not include prototypes.
Prototypes provide the engineer with helpful information, which can be needed at any point at the engineering process. As such, they do not fit into a particular time slot (Pahl and Beitz 1984).
Clarification of the Task
Every engineering activity commences with a particular problem. Presumably there are re-quirements that the solution must meet. Note that these rere-quirements may not be stable over time. For the engineer it is important to understand the problem in its totality, in order to find the “optimum” solution. From the beginning, the task needs a clear and comprehensive defini-tion so that amendments in subsequent steps are limited. The clarificadefini-tion step is accordingly concerned with the gathering of information about the requirements a solution must satisfy.
The result of this step is a full specification (i.e. a requirement list) of the design problem. The specification ideally comprises four components: Firstly, the specification contains a list of the objectives and performance criteria as well as their relative importance. Secondly, it also comprises a list of the resources that are available such as time, space, budget, employees, specific knowledge and also physical facilities. Thirdly, the specification defines the bounda-ries of what is to be designed. Lastly, it also specifies a list of sub-problems that may occur during the design process.
Conceptual Design
In the conceptual design step, the artifact that is to be designed, say a machine, is described on an abstract level. The machine is subsequently regarded as a system that is connected to the environment by means of inputs and outputs. This system – representing the machine– can be fully depicted on the basis of its functionality, i.e. the relationship between the inputs and out-puts. In technical domains the relationship between the inputs and outputs is rather determi-nistic. For example, it is usually expected from a machine to produce identical outputs for identical inputs. In non-technical (especially in social) domains this relationship is naturally less deterministic. Either way, those relationships are subject to a thorough design in order to meet the previously gathered requirements. The relationships can be represented by a func-tion. At this stage of the engineering process there is no need to specify what solution embod-ies the function. The function apparently constitutes an abstract version of the artifact, e.g. as previously the machine, that is independent of any particular solutions.
Furthermore, the overall function explains the behavior of the entire system, by expressing the relationships on the aggregate level between inputs and outputs. Depending on the problem, the resulting overall function will be either more or less complex. Complex overall functions are characterized by nontransparent input-output relationships, by intricate processes that are necessary or by high numbers of components involved. Reducing complexity, the overall function can be divided into several sub-functions that are less complex. The combination of all sub-functions yields the function structure, which in turn represents the overall function.
During the step of conceptual design the function structures of the problem are established.
Then, the appropriate solution principles for the single sub-functions must be investigated. A solution principle is intended to ease the search for solutions. The functions are hitherto repre-sented more or less as black boxes with no link to particular solutions. Now these black boxes are replaced by combinations of physical effects and form design features that can constitute such a function.
• Physical Effects
In engineering design the emphasis is on physical processes: “nearly all engineering so-lutions are based on physical phenomena” (Pahl and Beitz 1984, 26). Accordingly, most functions can be fulfilled by means of physical processes, which are in turn based on physical effects. Sometimes more effects have to be combined in order to satisfy a function.
• Form Design Features
The functions can also be satisfied by the arrangement of surfaces or the choice of mo-tions. In this case, the shape and the type of a surface may meet the function. For exam-ple, a car wheel receives its function through the form of the wheel and through the ma-terial.
Both components together form a solution principle. Basically, a solution principle must re-flect the (physical) effects and the form design features required for the fulfillment of the function. In other words, it is searched for an abstract explanation how a solution can satisfy the function. The major ramification of this approach is that the solution space – comprising all feasible solutions – can be confined to the (much smaller) space that can be constructed by varying the applicable physical effects and the form design features.
Usually the reduced solution space still involves numerous solutions. At this early stage of the engineering process those solutions that are theoretically possible but practically unattainable are sorted out. Apparently, this decision, on the one hand, makes the design problem more manageable but on the other hand also bears the disadvantage that “good” solutions are sorted out early in the process. Those solution principles that surpassed the sorting are firmed up into
concepts. Firming up comprises the enhancement of the solution principles with more con-crete qualitative and also (rough) quantitative information. This information can be obtained by means of simulations verifying the intended solution principles. Up to this point, solutions exclusively focus on the technical function. A concept, however, must also satisfy general constraints such as economic feasibility. Information about the satisfaction of the general con-straints also belongs to a meaningful concept. At the end of the conceptual design step the concepts are evaluated against each other and the most promising concept is selected.
In summary, in the conceptual design step the requirements are abstractly stated as functions that are, if necessary, decomposed into sub-functions. For each sub-function a possible solu-tion class is provided from which the most promising solusolu-tions are firmed up to concepts. At the end of the conceptual design step the concepts are evaluated according to some criteria and the most appropriate concept is chosen.
Embodiment Design
Having developed a solution concept during the conceptual design step, embodiment design attempts to work out the concept in layouts and forms. In abstract terms embodiment design strives for filling the overall function with an appropriate layout, component shapes and mate-rials.
An overall layout design basically determines the general arrangement and the spatial com-patibility of the function carriers, i.e. the entities, which embody the functions. Furthermore, also the form designs, particularly the material, of the function carriers are to be elaborated.
Layout and form of the function carriers are stepwise developed taking technological and economic aspects into consideration.
As a matter of fact, the embodiment process is rather difficult, as the resulting layout and form must meet the all the general constraints but still must fulfill the overall function. Thus, embodiment design is naturally characterized by a large number of corrective steps. A typical embodiment design process can be conceived to proceed as follows: the engineer proposes a concrete layout and form for the relevant function carriers. The downstream verification may yield that this layout and form proposal satisfies the technical function but fails in terms of reliability as a general constraint. The engineer has then to identify the design faults and adapt layout and form, which is again followed by a subsequent evaluation. Through these iterations the engineer learns more about the problem and can attain better layout and form solutions.
The definitive layout is reached if the layout design and form exhibits no serious design faults in function or in the other general arrangements (Pahl and Beitz 1984).
Detail Design
Finally the step of detail design is concerned with the completion of the detailed layout and form. That is, all function carriers are fully defined including the definitive selection of the material and a final scrutiny of the production methods and costs (Pahl and Beitz 1984). Fur-thermore, the elaboration of the details such as the production documents, detailed component drawings, and appropriate parts lists is in the center of attention. The result of the detail de-sign step and also the solution of the engineering dede-sign process is the final production docu-mentation.
4.2.2.2.2 Service Development Process
As previously mentioned, the engineering design process is a more general design process that can be used for any design purpose. This approach can accordingly be used for service development as well.153 However, services literature has bred out a more specific design
153 Parallel to the concept of new service development in America, the discipline of service engineering has been emerged in the mid-nineties particularly in Germany and Israel. While new service development is
proach that reflects the uniqueness and peculiarities of the product to be developed – the ser-vice. Services are not produced as goods but are generated along the service process. Custom-ers do not buy services like goods, instead they buy solutions to their problem or satisfaction for the desires and needs (Haksever, Render et al. 2000). To provide the service in consistent quality the prerequisites of the service, consisting of the service concept, procedure and sys-tem must be deliberately planned. Thus, service development is not left to chance, but is thor-oughly designed.
Designing services is not a one-shot endeavor; it is rather a frequently repeating task: A ser-vice company must create new serser-vices, and improve serser-vices that are already in use in order to meet the changing needs of the customers. The success of a services company in the com-petition hinges on its ability to discover the needs of their customers quickly and, moreover, on the ability to meet those needs with the development of adequate services.
Having the dynamic and competitive environment of service companies in mind, the need for a systematic service development process becomes clear. Coming up with innovative service ideas that meet the actual needs of the customers is a creative activity. Creativity cannot be forced, but by following a systematic approach the risk of product failure are alleviated. The systematic approach helps to address all relevant questions concerning the development of new services that could be easily forgotten in intuitive approaches: Not only is the service concept, i.e. the idea, developed but also the service procedures as well as the service system.
These two latter components are in most of the time the hindering factors of a successful launch of new services. Due to a lack of a clear description of the service content, the proc-esses and the necessary resources the successful implementation of a service is heavily im-peded (Scheuning and Johnson 1989; Haksever, Render et al. 2000; Bullinger, Fähnrich et al.
2003).
Traditionally, service development had received only scant attention in the service literature (Tax and Stuart 1997). Bowers summarizes this observation as follows “The single most compelling criticism of the new service development literature is the lack thereof” (Bowers 1985, 42; Bullinger, Fähnrich et al. 2003). In recent years this deficit was tackled by a rising number of publications proposing several more or less sophisticated product development processes. The efforts can be classified into two groups according to their core theme.
1. The first class of themes focuses on the derivation of key factors on the basis of compari-sons between successful and unsuccessful new service developments (de Brentani 1995).
Those approaches, however, are descriptive in nature and give only little advice how to approach a new service development (Tax and Stuart 1997).
2. The second class of themes comprehends prescriptive planning frameworks to new service development. Several planning frameworks have emerged for the last years (Cowell 1988;
Scheuning and Johnson 1989; Edvardsson and Olsson 1996; Ramaswamy 1996).
All these approaches have in common that they origin in the linear planning framework for product development by Booz-Allen & Hamilton (Booz-Allen & Hamilton 1968; Scheuning and Johnson 1989). Linear planning frameworks decompose the planning process into several
purely marketing oriented, service engineering adopts a more holistic view on service design. In essence service engineering can be understood as “a technical discipline concerned with the systematic develop-ment and design of services using suitable models, methods and tools” (Bullinger, Fähnrich et al. 2003, 276). Market engineering is apparently a special form of service engineering. However, service engi-neering is like market engiengi-neering a very young discipline. Currently, the precedent disciplines engineer-ing design and service development are more mature and currently offer more detailed insights into spe-cial problems. As market engineering is devoted to the spespe-cial problem of designing electronic markets, the general approach of service engineering does not yet provide answers to those problems. As such, market engineering founds more on the originally engineering design and service development.
phases that are linearly proceeded one at a time. Those approaches differ with respect to at least three issues. Firstly, the terminology among the different approaches varies considera-bly, although the underlying notion of the phases is too a large extent alike. Secondly, the approaches distinguish themselves by the degree of their formalization. Some approaches are highly elaborated and formal while others are very simple and informal. Thirdly, the different approaches vary in their prospected way through the phases. Some approaches prescribe that the phases must be followed in strictly linear way while others allow phases to be repeated. In short, the differences among those approaches are not as compelling than the similarities (Cowell 1988).
In the following, the service development approach from Scheuning and Johnson is presented.
The approach is chosen as it provides a rather detailed view on the development of new ser-vices and thus accounts for the additional complexity that serser-vices adhere. The entire process is divided into 15 different steps that can be grouped into four stages: direction, design, test-ing, and introduction (cf. Figure 18). For comparison, traditional product development ap-proaches consists of at most seven different steps (Booz-Allen & Hamilton 1968; Scheuning and Johnson 1989). Nevertheless, all 15 steps may not be necessary for any service develop-ment. Much will depend on the characteristics of the new service, the competitive pressure or on the time and resources that can be spend (Cowell 1988).
Formulization of new service objectives and strategy Idea generation
Idea Screening Concept development
Concept testing Business analysis Project authorization Service design and testing Process and system design testing Marketing program design and testing
Service testing and pilot run Test marketing Full-scale launch Post-lauch review
DirectionDesignTestingIntroduction
15
13 12 11 10 9 8 7 6 5 4 3 2 1 Personnel training
14
Figure 18: Service Development Approach (Scheuning and Johnson 1989, 30)
Sometimes the approach by Scheuning and Johnson is specified as a linear framework, but in fact it constitutes a phase-based model, which allows for iterations. Feedback loops are not only possible, but also even necessary to cope with the complexity of the service development process. As such, iterations can occur at any step of the process (Scheuning and Johnson 1989; Tax and Stuart 1997).
Direction
The first stage commences with determining the direction of the development process. As depicted in Figure 18, the first stage consists of three primitive steps: The process starts with a concise formulization of the objectives and the strategy of the envisioned development proc-ess. In other words, it must be clarified what customer needs are to be targeted. At this stage the service company can principally configure new services and/or address new customer groups. Either way, this definition of the customer needs and the corresponding strategy must take place before ideas for its fulfillment are generated. Scheuning and Johnson paraphrase this as follows:
“Driven by a sense of urgency and a perceived need for the “quick fix” many service firms jump right into idea generation. Doing this is akin to lifting anchor without first determining the desired direction. The course of the ship then becomes the result of whim and happen-stance” (Scheuning and Johnson 1989, 28). Self-evidently, the service development strategy must be derived from the corporate objectives and strategy.
Subsequently in step 2, ideas for the fulfillment of the objectives are generated. Sources for idea generation can be drawn from internal (e.g. employees) and external sources (e.g. cus-tomer - in particular from their complaints, suppliers, competitors). Not all of these generated raw ideas are adequate for the operation as a service. Thus, in step 3 the raw ideas are crudely screened and evaluated. Only the most promising ideas in terms of feasibility and projected profitability are kept.
Design
Steps 4 to 11 comprise the original designing effort of the service prerequisites including the service concept, procedure and the system. The design of services is a rather intricate process as the number of individual steps within this stage already indicates.
At the outset of the design stage, step 4, the ideas that survived the sorting are firmed up to a fully-fledged service concept (conceptual design). As previously mentioned (see chapter 3.2.2.3), the service concept comprises the value proposition of the service. For rectification purposes the reason why this particular new service is under consideration to be offered is also attached to the service concept.
Having established the potential service concepts, the most appropriate ones are to be ex-tracted. Under the label of concept testing in step 5 the service concepts are evaluated on the basis of buyers’ responses. Potential buyers are asked, whether the service concept is conceiv-able for the prospective users, whether they appreciate the service, or, whether the service delivers a benefit that corresponds to unsatisfied needs. Service concepts that fail to convince the customers are subsequently eliminated. The step of concept testing actually poses a very high hurdle for the concepts. Only few concept proposals are intended to surpass the strict sorting out.
In the previous steps the service concepts are only analyzed from a customer-oriented point of view. In other words, the value proposition for the customers stands at the beginning of the development in center of attention. In step 6, the business analysis enriches the service con-cepts with business models. The attention shifts from the value proposition to the analysis whether the service company can earn a decent profit with the operation of the service con-cepts. As such, business analysis includes a market assessment, demand analysis, revenue and cost models. On the basis of this information, the top management of a service company can decide over the implementation of the service concepts.
The most critical decision along the development process occurs at the project authorization in step 7. The top management has finally to decide which service concept will be imple-mented. This decision coincides with the commitment to assign resources of the service com-pany to the development process.