Keeping the customer
satisfied: Students learn real-life lessons
BY DAVID F. SALISBURY
Decked out as a galactic
hitchhiker plaid work shirt, backpack and bug-eyed
monster mask George Hungerford holds aloft a sleek
electric camping light. Joined by Alexandre Hoffmann, who
looks like he stepped out of the screen from Men in
Black, he shouts "Light for outer space!"
The two Stanford MBA
students are at a "trade show," pitching the
PowerPak, an electric camp light that they designed and
built themselves, along with mechanical engineering
graduate students Peter Conze and Michael Harman, as part
of an innovative course called Integrated Design for
Marketability and Manufacturing (IDMM).
Now in its eighth year,
IDMM a joint effort by the Graduate School of Business
(GSB) and the mechanical engineering department with
support from the Stanford Integrated Manufacturing
Association reproduces in a surprisingly realistic
form one of the basic processes by which wealth is
generated in modern, industrial society: applying
inspiration and information to create new products that
appeal to consumers. The course provides the students
with an unparalleled opportunity to learn the skills
required to create and market new products successfully.
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The sci-fi skit was part
of IDMM's Trade Show, which is held every February and is
the high point of the two-quarter class. The largest room
in Tresidder Memorial Union is divided into a series of
booths where 10 student teams loudly and enthusiastically
hawk the products they have created.
Although all the teams
have had exactly the same assignment, the products that
the students have come up with are remarkably diverse.
Three are lanterns for area lighting, but one is
waterproof and another comes with a small detachable
flashlight. Three are basically flashlights that also
have small area lights, but each is made out of different
materials, and one has a unique tri-lobe design. Two of
the lights are designed to be worn as head lamps, and one
is constructed primarily out of fabric. Two are extremely
small, but one is key chain size and fits between two
fingers while the other is large enough to fit in the
palm of the hand.
Wandering through the
tumult are 100 official "customers" along
with an equal number of interested hangers-on who
listen to the various spiels and make notes on
clipboards. At the end of the show, the customers are led
to a nearby room where they answer a survey regarding
which products they would buy at different price
scenarios.
Most of the booths are
elaborately decorated with props and posters, but two are
bare. They are manned by Dave Stoner and Kit Reichow,
salesmen from the camping supply retailer REI, who have
volunteered to pitch the two commercial products that the
students' products are measured against. In this case, a
Coleman lantern and a mini Maglite flashlight.
"The student products
are very impressive. They clearly put a lot of thought
and effort into them. Some look as if they would be
commercially viable," Reichow says.
According to David
Plekenpol, who graduated from the Business School in 1993
and is now a product marketing director with Lucent
Technologies, "IDMM continues to be the one course
that stands out from my business school experience."
He cites factors that make the course special: rubbing
shoulders with engineers has given him a "better
sense" of their perspective that he says has been
"incredibly valuable;" the course was "the
real thing," not just another case study -- "We
were given free reign to design a better solution, but
constrained by the reality of what was possible"
yet allowed for "outrageous creativity"; and
finally, "the professors were top notch."
IDMM has also become one
of the most popular project courses in mechanical
engineering, says mechanical engineering Professor Mark
Cutkosky. Its only downside, he adds with a smile, is
that students get so caught up in the class that
"you don't want your TAs or RAs to enroll in it if
you're hoping to get a lot of work out of them."
Basic concept of
the course
The course is simple in
concept, but difficult in execution. In two quarters
just 21 weeks 10 teams made up of two MBAs and two
engineering graduate students each must design,
manufacture and market an actual consumer product.
Each year the IDMM
teaching staff David Beach, a teaching professor in
mechanical engineering; V. "Seenu" Srinivasan,
the Ernest C. Arbuckle Professor of Marketing and
Management Science at the GSB; and Sara Little Turnbull,
director of the business school's Process of Change,
Innovation and Design Laboratory pick a new product.
So far IDMM teams have matched wits against aluminum can
crushers; citrus juicers; bicycle lights; portable camera
mounts; coffee mugs; mini bike pumps; and the camping
lights. This year's product category is wake-up devices.
First, class members
organize themselves into teams. Then they recruit a group
of 300 people to serve as official consumers. By
surveying the group they identify the basic features of
the product that are important to consumers. Then they
come up with initial designs, create mock-ups and
assemble focus groups to assess them. Once a team settles
on a single design, the students figure out how they are
going to manufacture it and make an actual working
prototype using the extensive array of machine tools
available in Stanford's Product Realization Laboratory.
The teams must fully document the cost of the parts,
materials and processes that would be required to
manufacture their design.
When they have a working
prototype, the students prepare a communication plan
like the PowerPak group's "Light for Outer
Space" theme designed to emphasize their
product's best features. They execute their plans at the
trade show, which is attended by about 100 of the
original consumers. Srinivasan feeds the consumers'
assessments into a powerful computer model, called a
conjoint analysis, that predicts the market share each
product would achieve relative to the commercial
benchmark products at a given price.
The final weeks of the
course are taken up by four rounds of market competition
that simulate a year's worth of sales. In each round, the
teams announce a retail price and production quantity for
their product. The sales generated by each team are
computed based on these decisions. Profits are determined
by subtracting the manufacturing cost of a product from
the wholesale price and multiplying by the number of
units sold. In addition, teams with unsold units at the
end of each quarter must pay an "inventory holding
cost," and those that have product left at the end
of the fourth quarter can only sell them for half cost.
"The key thing that
the students accomplish is the integration of the
features that customers want, both functional and
aesthetic, with cost and engineering," Srinivasan
says.
He provides the
intellectual structure of the course, the procedures that
are used to identify and quantify the attributes of the
product that are important to consumers and the method
that predicts how well the students' products would
compete with the commercial benchmark products.
"The course reminds
me of a dinghy race," Beach says. "The students
are working very close to the water."
Beach directs the Product
Realization Laboratory, where the students learn to turn
their ideas into glass, metal and ceramic. His basic
focus is the integrity and quality of the design and
manufacturing process. "I grew up in a material
world, and I can tell you that it is much tougher to make
physical devices work than you think," he says.
Turnbull, who celebrated
her 80th birthday recently, brings a wealth of real-world
experience to the class. She had a distinguished career
as an industrial designer before coming to Stanford to
foster interdisciplinary learning. Among her best known
designs are Corningware dishes and 3M disposable dust
masks.
"This course is a
miracle," Turnbull says. "It is unstructured,
undictated learning. The students learn from their own
experience, with only careful input from the
faculty."
Culture clash
causes creative tension
A basic benefit that both
the MBA and engineering students gain from the class is
an appreciation for each other, Beach says. "It
teaches MBAs respect for the details of design, and
engineers respect for the importance of presentation and
the supply chain. The tension between the two helps make
this a wonderful learning system."
Both Beach and Srinivasan
acknowledge that this interdisciplinary education extends
to the two of them as well.
"Before teaching this
course I didn't have the slightest idea what marketing
was all about. Now I know that it can be an important
design tool," Beach says. He cites the case of the
citrus juicers. Srinivasan's consumer analysis revealed
that juice drinkers fall into two distinct categories:
those who like pulp in their juice and those who don't.
This led to a design innovation: a switch that allowed a
juicer to produce juice with or without pulp.
Srinivasan adds,
"Originally I thought that when you had a design you
could just ask an engineer how much it would cost to
manufacture and he could tell you. Now I realize that
people actually design as part of the manufacturing
process: the interaction between person and machine leads
to mental activity that causes better design."
Cheaper can be
better
Traditionally, engineers
have seen market research as the enemy of high quality
design because marketers put limits on a product's cost
and dictate its features. That attitude makes one insight
that has come out of the class particularly
counter-intuitive: Cheaper can be better.
"When you realize
that cost is important, it affects the design,"
Beach says. "It can actually improve a product's
quality."
For example, one way to
cut cost is to reduce the number of parts in a device.
But reducing the parts count can also improve reliability
and repeatability.
History of course
IDMM was the brainchild of
William Lovejoy, who was an associate professor of
operations management at the Graduate School of Business
from 1987 to 1994. With strong behind-the-scenes support
from Turnbull, Lovejoy decided that Beach and Srinivasan
were the right people to enlist to help him teach the
course.
The first class began in
the fall of 1991 with 20 students. Their challenge was to
design a can crusher. By Christmas, the class was running
considerably behind schedule and Beach, for one, wasn't
sure that they would be able to finish their prototypes.
By the end of the class, however, all the teams had
produced working crushers.
"To the students it
was a new adventure and they were willing to follow our
lead. All of them loved working in the laboratory,"
Beach says.
Lovejoy and the teaching
team had assumed that the best way to evaluate the
projects was to have a panel of experts judge them. So
they impaneled a group of world-class designers. It was a
disaster. The experts were not concerned enough about
pricing. They also exhibited a tendency to judge designs
by their potential, rather than evaluating them as they
were. Worst of all, the students didn't accept their
judgments.
In the second year the
IDMM teaching staff selected citrus juicers as the
product. They weren't ready to give up on the experts,
however, so they tried a mixed panel of buyers and
experts to rate the products. The two groups ranked the
student's products much differently, adding fuel to the
controversy.
Not until the third year
bicycle lights did the instructors hit upon an
acceptable method of evaluation. They settled on an
audience of 100 real customers to act as judges. They
took over Cubberley Auditorium. The students gave
presentations on stage and set up booths in the lobby.
The students accepted the customers' evaluation, and the
teaching team settled on the trade show format as the
most effective way to give the consumers the information
that they needed to evaluate the products.
The fourth year was marked
by Lovejoy's departure. He was hired away by the graduate
school at the University of Michigan, which was building
up its manufacturing program. "When he left, Seenu
and I had to establish a direct partnership, and it has
worked really well," Beach says.
Since then Beach,
Srinivasan and Turnbull have been continuously refining
their approach. Two years ago they introduced two
innovations, both contributed by teaching assistants,
whom they consider an integral part of their teaching
team. One was a new method for allocating time on the
machines in the Product Realization Laboratory that
reduced conflicts between IDMM students and others lab
users. The second was a document detailing the proper
methods for evaluating consumer reactions to product
designs.
The bottom line: "You
should be proud that all 10 teams had market shares
comparable to the benchmark products," Srinivasan
told the class on their final day. "Compared to
previous years, not a single team did badly." SR
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