Product Development Research Project

General Instructions:

1. You must use information and data provided in the problem statements below as the starting point for your solutions. If you use information and data that is not in the problem statements (for example, if the numbers you use in Problem 3 are different from the numbers that are provided in the problem statement), then we would regard this as “irregular” behavior, and give you “0” for the exam score, and request that you meet with us to clarify the irregularity.
2. Create your own “template” for the structured Problem-Solving Process. Then use this Structured Problem-Solving Process for solving all problems on the final exam.
3. As part of your problem-solving approach, make appropriate assumptions when necessary, and clearly state the assumptions you make. Be sure to revisit these assumptions when drawing conclusions.
4. Be sure to explain everything all your work. To improve readability of your explanations, structure your work with appropriate captions/headings.
5. In addition to headings, all explanatory text must be accompanied by clearly labeled figures, tables, and diagrams as necessary. Also, key points, results, and conclusions should be clearly marked (e.g., highlighted, underlined, etc.)
6. All results, recommendations, and conclusions must be supported by facts (evidence) and/or analysis. To improve readability, include appendices at the end of each problem to show relevant details.

1. Planning (10 points; Approximately 1.0 hour)

Review the examination questions, below, and then develop a non-trivial task-based plan for completing this final examination:

1. Make a list of the necessary activities/tasks, and draw the design (activity) structure matrix showing the task dependencies.
2. Use Gantt charts to develop a schedule for completing the exam on time with high quality.
3. Keep track of your progress and document when each task is completed.

On completion of the exam, draw conclusions, and develop guidelines to improve your own planning process and implementation in the future.

2. Product Development for a Virtual Reality Entertainment System (continued from the Midterm, Problem #3) (50 points; Approximately 4.0 hours)

Recall that (in the midterm) the R&D/product development group of the enterprise performed the following tasks, and then presented the results to management in the form of a carefully structured and written report:

• Created a process for developing a HOQ for a video-game console, and then implemented this process to create a house of quality for the proposed (“Exbox”) game console.
• Attempted to benchmark the proposed (“Exbox”) game console against 2 competitors, both with respect to customer needs and with respect to technical metrics.
• To the extent possible, developed a list of target specifications for customer needs, and a list of target technical specifications for the proposed (“Exbox”) game console.

The results of your midterm can and should be used in this problem.

The software giant has successfully entered the market with the “Exbox” video-game console/system (last seen in the Midterm). The company is now ready, in 2020, to develop the next generation of video-game console following its success with the “ExBox”. As the senior product/technology manager of the “Video Game Systems” division and following the success of the current VR headsets, you have been asked to design and develop the next generation console that incorporates an immersive virtual reality experience where the user can move around and interact with a virtual world.

The proposed new virtual reality (VR) entertainment system, which will use the existing video game console as the basic platform, will need to have the following combination of sub-functions:

• Basic video game console functionality (you will need to identify/define these sub-functions)
• Display a virtual environment to the user in order provide the user with a visual VR experience
• Track user movement in order to allow the user to control the virtual environment, i.e. when the user takes a step-in real world then their avatar in the VR environment will also take a step
• Electronic connectivity between the game console and the VR unit. Two options are –
  1. Have a wired connection between the two (also known as “tethered”)
  2. A wireless connection between the two (also known as “wireless”)

As the manager of the new product development team, you have been asked to:

• Provide a written statement of your structured process for generating a feasible design concept for further development. (This process should include steps such as: functional specification, concept generation, and concept selection.)

1. Dissect the following products:
   1. Video game console (Some of your earlier work on the video game console, from the midterm, might be useful in this regard.)

• Virtual reality headset (e.g. the Oculus Rift)

1. Video-game motion-tracking sensor (e.g. the Microsoft Kinect)

• Implement your structured process and create a feasible concept for the VR entertainment system based on the functional requirements listed above. Provide a concise explanation of how the selected product concept works.
• Develop a product platform and product line strategy for the following three market segments:
• “serious gamer” users who are almost exclusively interested in high-resolution graphics and a realistic VR experience for playing video games (e.g. first person shooters)
• “casual” users who are interested in using VR to have new experiences, e.g. travel, meditation, and education
• “professional” users who are interested in using VR for business applications such as designing and prototyping new products.

3. Financial Modeling for the Virtual Reality Entertainment System (25 points; Approximately 2 hours)

The software giant would like to build a quantitative financial model for the development and commercialization of the proposed Virtual Reality (VR) entertainment system. Nominal (base case) costs and schedules for the project are as follows:

Costs (“Magnitude”):

• Development Costs: $45,000,000 / year
• Sales and Production Volume: 500,000 units / year
• Unit Sales Price: not specified (see part (a) below)
• Unit Production cost: $150 / unit
• Ramp-up cost: $500,000 / quarter
• Marketing and Support cost: $2,000,000 / year

Schedule (“Timing”):

• Development: 12 months (Year 1, Q1-Q4)
• Ramp-up: 6 months (Year 1, Q4; Year 2, Q1)
• Marketing and Support: ongoing (starts Year 2, Q1 until Year 4, Q4)
• Production and Sales: ongoing (starts Year 2, Q2 until Year 4, Q4)

The software giant has asked you to model the impact of the unit sales price on the Net Present Value (NPV) of the expected profit for the project. Perform a four-year quarterly NPV analysis (assume a discount factor of 10% per year) in order to determine the following:

4. The minimum value, of the unit sales price for the product that will result in a positive NPV by the end of year 4. (Hint: first set unit sales price equal to the unit production costs and then adjust the sales price until the NPV is equal to zero)
5. What is the trade-off law between NPV and unit sales price?
6. What price would you recommend that the software giant charge a wholesale distributor (e.g. Costco) for 1 unit of the VR entertainment system? Explain your answer.
7. What is the NPV of the expected profit, based on your recommended sales price from part (c)
8. Information Technology For Product Design and Development (10 points; 1 hour)

The software giant would like you to develop an Information Technology (IT) system to support the design and development of the proposed Virtual Reality (VR) entertainment system.

1. Develop your own Product Design and Development framework, based on the appropriate modification of the MDC framework handed out in class.
2. Design an Information Technology (IT) system to automate and integrate the steps and stages in your framework. Your design should make use of the appropriate tools from this course, as well as (to the extent possible) tools from other courses such as software engineering, computer architecture, networking, and databases.
3. Conclusion (5 points; Approximately 0.5 hours)

What are the key lessons that you learned in this course (lectures, case studies, homework, and project)? Provide at least one example for each key lesson.