Class 4:Product Architecture

October 2006

Product Platform Strategies: Examples

The differentiation plan

Differentiating Attributes Sporty Coup Family Sedan/Station Wagon Importance to Customer

Curvature of window glass More curvature Straight, vertical ***

Styling of instrument panel Evocation of English roadster Highly functional. ***

Relationship between driver Driver sits low to ground, Driver sits higher, closer, more ***and instrument panel distant from steering wheel, upright

with seat reclined.

Front-end styling Shorter nose; vehicle appears to Longer nose, more substantial ***attack road look.

Colors and textures Darker colors and mix of Practical surfaces and colors. **leather and textiles

Suspension stiffness Stiff, for improved handling. Softer, for improved comfort. **

Interior noise Some engine noise desirable, Noise minimized, 60dB. *70dB.

The initial commonality plan

Sporty Coupe Family Sedan/Station Wagon

Instrument Panel Chunks

no. of unique parts

Devel. Cost ($ millions)

Tooling cost ($ millions)

Mfg. Cost ($)

no. of unique parts

Devel. Cost ($ millions)

Tooling cost ($ millions)

Mfg. Cost ($) Comments

HVAC system 45 4 9 202 35 3.8 7.5 200 Duct work and support structure different: Share motors and other components.

Dash cover and structure

52 4 7 123 48 3.8 6.5 120 Share some brackets and components.

Electrical equipment

115 4 2.2 420 65 2 2.1 430 Share switches, wiring, and central module

Cross car beam 12 2 2 35 12 2 2 35 Cross-car beam entirely different

Steering system and airbags

26 2 0.1 200 26 2 0.1 195 All components different

Instruments and gauges

16 1 0.2 22 13 0.8 0.2 20 Can share some instruments.

Molding and Trim 10 0.4 0.2 11 10 0.4 0.2 10 All molding and trim different.

Insulation 3 0.2 0.2 8 1 0.1 0 10 Change insulation in coupe to let in more engine noise.

Audio and radio 8 0.2 0 300 0 0 0 300 Same radio option in all vehicles.

TOTAL 287 17.8 20.9 1321 210 14.9 18.6 1320

Strong Interdependence

Weak Interdependence

The revised commonality planSporty Coupe Family Sedan/Station Wagon

Instrument Panel Chunks

no. of unique parts

Devel. Cost ($ millions)

Tooling cost ($ millions)

Mfg. Cost ($)

no. of unique parts

Devel. Cost ($ millions)

Tooling cost ($ millions)

Mfg. Cost ($) Comments

HVAC system 45 4 9 196 8 0.4 0.5 195 Share all but ends of ducts.

Dash cover and structure

52 4 7 123 48 3.8 6.5 120 All new shape and structure fore coupe.

Electrical equipment

115 4 2.2 412 30 0.5 9 415 Share wiring, control module, and combination switch.

Cross car beam 12 2 2 33 1 0.2 0 33 Change horizontal beam length.

Steering system and airbags

26 2 0.1 196 21 1 0 192 Change only steering wheel and cover.

Instruments and gauges

16 1 0.2 22 13 0.8 0.2 20 Share gauge mechanisms.

Molding and Trim 10 0.4 0.2 11 10 0.4 0.2 10 All molding and trim different.

Insulation 3 0.2 0.1 8 1 0.1 0 10 Change insulation in coupe to let in more engine noise.

Audio and radio 8 0.2 0 300 0 0 0 300 Same radio option in all vehicles.

TOTAL 287 17.8 20.8 1301 132 7.2 16.4 1295Initial Plan 287 17.8 20.9 1321 210 14.9 18.6 1320Savings 0 0 0.1 20 78 7.7 2.2 25 133% Change 0% 0% 0% -2% -37% -52% -12% -2%

PISTOL DRILL

STRAIGHT DRILL

ANGLE DRILL

Drill Platform Exercise

Objective is to maximize profits:

Please complete the following steps:

1. What are the Differentiating Attributes for a drill?Complete the differentiation plan for the threemarket segments.

2. Make the following decisions and enter the resultson the response form:

Which markets will you enter?

With which brands?

Which chunks will you use for whichproducts?

3. How might you “break the rules”?

Alternative architectures/design scenarios

Intensely-Rational Drill Company Assumptions

Product line includes only drills.

Single power level (0.5 hp).

Ignore speed differences.

Market size and market price are fixed andgiven. The only response toincreased/decreased quality is a changein market share.

Modular architecture: all chunks will fitphysically with all other chunks.

Total potential market (units and factoryprice):

Economy Standard Precision

Pistol 100,000 units$42 ea.

60,000$90

40,000$180

Straight 30,000$45

25,000$105

20,000$200

Angle 20,000$60

15,000$110

10,000$240

Market Share Calculations

IR has a nominal share of 30%.

BrandingIR only: no changeARO w/label or cosmetic differences only: +5 % ptsARO w/substantial differences (e.g., different housing): (+8 % pts for pistol, +6 % pts for straight and angle)

Outsourced economy product: -10 % pts of share in economy market

Downward substitution (e.g., precision housing on standard product):+Y % pts for lower segment from increased perceived quality (0% motor, 1% anglehead, 3% housing, 3% chuck)- X % pts for upper segment from cannibalization(0% motor, 0% anglehead, -5% housing, -3% chuck)

Upward Substitution (e.g., economy motor on standard product)-Z % pts for upper segment from decreased perceived quality (-10% motor, -5% anglehead, -5% housing, -10% for chuck)

Cost Calculations

Each chunk has a “fixed cost” for design,testing, tooling, etc.

Each chunk has a component cost basedon a nominal volume of 10,000 units/year.

Achieve economies of scale of 85%-90%for each doubling of volume (e.g., 20,000units/year results in 85% of nominalcomponent cost)

Indirect costs:

$20k/year for each part #

$25k/year for each SKU/end-item

Fixed costs amortized over 5 years.

S&A of 25% of revenues.

Drill Differentiation Plan

Differentiating Attributes Economy Standard Precision

Precision level equivalent to DIY cordlesselectrics

runout (TIR) < 0.010in runout (TIR) < 0.005in

Life/Duty 500 hours 1,000 hours 5,000 hours