To survive in today’s environment of low growth and rapid product life cycles, companies need to consistently deliver products and services that provide both the greatest total value to customers and the most attractive economics over the entire life cycle. Design to value (DTV) is a cross-functional development process that achieves these dual objectives by translating top-level strategy into design choices for products and services as well as the underlying processes along the supply chain. DTV allows companies to focus their innovation 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.
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 is propelled by “catalyst events”—workshop sessions in which a team of cross-functional stakeholders apply a robust fact base to generate ideas for designing the best products with minimal complexity and cost. Companies bring together personnel from engineering, production, procurement, and sales and marketing for these events, thereby breaking down organizational silos and increasing agreement on strategic priorities across business functions. Some companies also involve their customers or suppliers.
For example, a consumer durables manufacturer applied a series of DTV analyses and catalyst events in order to turn around an unprofitable product category that had grown increasingly complex. The manufacturer began the process by determining the optimal offerings to serve its regions and sales channels, as well as the features that would be required to differentiate each product in its market. Teardowns of competitors’ products provided insight into how to reduce costs through product design choices.
With this fact base in hand, a cross-functional team convened to generate ideas for delivering the optimal product offerings with minimal complexity. The prioritized ideas included using modular systems and standard platforms across the broad scope of products. Next, the team considered ways to deliver the desired features at the lowest cost, such as by improving the supply chain and minimizing inefficiencies in production. Last, the team met with suppliers to identify additional cost-reduction opportunities, such as using lower-cost components or outsourcing. In less than two months, this initial DTV effort allowed the manufacturer to identify more than $80 million in savings. The subsequent embedding of DTV capabilities organization-wide allowed the company to reduce its long-term cost base by more than $2 billion.