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Value Tools Applied to Everyday Problems

• A Tutorial for the
• Baltimore Section of the American Society for
  Quality
• 12 December 2005

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Topics

• Concepts of Value
• Concepts of Cost
• Value Engineering Tools
• Pitfalls in Analysis

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Wisdom Through the Ages

• give me a lever and a place to stand and I can
  move the world Archimedes, 3d
  century BC
• to measure is to know. .James
  Maxwell, 1871
• If you cant measure ityou cant manage it.
• . ???, ???
• I can measure anything... or derive a
  reasonable value for it ...???, 17
  September 2001

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Goals of this Session

• Give examples of how to begin the value analysis
  process using everyday examples
• Show that imagination must compliment data in
  arriving at product/service valuations
• Perceptions must also be quantified and
  normalized to tangible values
• Identify some of the pitfalls in valuations

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What is Value?

• A measure of appropriate cost and performance
• value always increases by decreasing cost
• value increases by increasing performance
• if Customer needs, wants is willing to pay
  for
• Maximum Value is never achieved

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Value in Qualitative Terms

• Simply
• What is received benefit
• What is paid cost
• More detailed
• Actual Benefit Perceived Benefit Price
  Inconvenience Perceived Cost

Value
Value
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Finding Data on Value

• Sources
• survey data
• focus groups
• Comparison shopping
• market research companies
• includes market share, income/expenses, product
  cost
• More on surveys
• structured to get results
• ask how much you would pay for the feature of
  service
• ask about compensation expected if needs arent
  met

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Sample Survey Questions

• Question is designed to get more information
  about what customers would pay for reliable
  appliances
• given the inconvenience of getting warranty work
  done, would you prefer not to have warranty work
  in the first place?
• How much would you pay for this level of
  convenience?
• lt 10
• 11-50
• 51-100

101-150 151-200 gt200
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Concepts of Cost

• How can we verify that the brand name is actually
  worth 8000?
• Surveys,
• focus groups
• comparison shopping

Is the Name Brand worth 8000?
PV perceived value
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Value Engineering Tools

• Kano
• Value Analysis Matrix VAM
• Spider web chart
• Value stream map
• F.A.S.T. diagram

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KANO Modeling Finding Breakthrough
Opportunities
Overview of the Model Human response to product
attributes falls along these three main curves.
Suppliers of products/services need to know how
to react to these attributes
This axis shows how positively Customers respond
to the attributes

EXCITEMENT
PERFORMANCE

• EXCITEMENT curve -
• delights Customerseven when not well executed
• commands a price premium advertise
• accumulate profit on these features as long as
  possible

-

BASIC
This axis shows how well the Customers perceives
the attributes are being supplied.

• PERFORMANCE curve -
• roughly a 1-to-1 relationship on how well a
  supplier delivers an attribute and future
  Customer loyalty
• strategy advertise those that are done well
  downplay others
• accumulate profit on these features as long as
  possible

• BASIC curve -
• must provide these attributes just to stay in the
  market.
• If poorly executed/delivered, will definitely
  lose the offended Customer, plus may lose
  others through poor word-of-mouth
• strategy dont waste money on advertising or
  sales force training, because cost would outweigh
  benefits look at cost-effective quality
  improvement programs

-
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Value Analysis Matrix VAM
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Spider Web Chart
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Value Stream Map changing a tire
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F.A.S.T. Diagram Mouse Trap
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Pitfalls part 1
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Pitfalls part 2
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Summary

• Much of Value is perceived
• One can always measure/calculate value
• Imagination is required in determining value
• Branding can add much to the bottom line
• Many ways of determining value most are easy
• Be careful of the pitfalls

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Other Examples

• not covered in the session

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Customer Feedback Survey Questions to Support
KANO
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Value Stream Map housekeeping
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Cost of Losing Customers
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For more information, contact...

• John Weisz CQE CRE
• Life Cycle Engineering Associates LCEA
• 410-987-1287
• (cell) 443-848-1641
• johnweisz36_at_hotmail.com