2.1 Buyer‐supplier relationship and NPD
2.1.3 Development responsibility and scope
2.1.3.1 Management alignment matrix
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2.1.3 Development Responsibility and Development scope
In this part the literature connected with the development scope and ways of suppliers are integrated into the NPD are presented. Every NPD project is different, and therefore also the managerial considerations should differ from project to project. It was suggested by the
literature not to employ the same approach every single time, but rather use specific guidelines to choose the best approach for that particular project.
2.1.3.1 Management alignment matrix
A number of research papers (Monczka et al, 1999, Dowashahi 1998 etc.) indicate, that in order to successfully integrate suppliers into the New Product Development, the suppliers must be tightly integrated into the product project so that the developing team can benefit from all the component knowledge possessed by the supplier.
They propose so called cross‐functional development teams that will create an counter balancing body towards every company`s own R&D team, working as an negotiating body between the all firms, trying to find the best solution for the project and thus lower the level of opportunism every company will try to raise. Also, they mention that in order for the project to be successful, a full time involvement of the top management is necessary. The top
management role is to litigate the risks – in situations the targets and goals are unsure and the developers might even start to question their work and goals, it is the top management role to provide with leadership support and vision to show the clear aim of the project so that the whole team won`t flatter.
This, however can be the case of very innovative projects, that involve high risks and not clear idea on the targets and goals of the project.
Would this however be the case for all of the projects where suppliers are involved? Would this be the best practice even in cases of products with lower complexity and lower innovativeness, where the speed of consultations with suppliers might not be that crucial and on the other hand would only bring another layer of technology consideration and confusion into the project?
Olson et al. (1995) argues that the degree of the innovativeness (or product newness) is an important moderator of the impact of different coordination structures on the development
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all the functional levels of the companies will be only for the ,ost important group of suppliers – who possess technology, innovative capacity or both.
In their study, Olson et al. (1995) base the major cooperation platforms on the typology of some heavyweights of the organizational theory – on the works of Nathanson and Mintzbeg.
Bureaucratic control/hierarchical activities is the most formalized and centralized as well as the least participative form of all the cooperation forms. All the mechanisms stay on the standard operation procedures and the oversight of high level manager who will coordinate all the activities across the functions. Most of the communication flow is vertically within the
department and the general manager serves as the primary communication link and arbiter of conflicts across functions.
Individual liaisons is a coordination structure, where individuals from one or more departments are assigned to communicate directly with their counterparts from other departments. This supplements some of the communication need from the bureaucracies – making the information flow a bit faster as well as less formalized form.
Temporary task forces is basically the institutionalized form of individual liaisons – of the repetitive interaction between these contact within the context of specific project. Since the task force members represent various functions and interact directly, this form of alignment is quite interactive, participative and much less formalized than those above. Still, high level managers would still retain authority to govern these task forces by assigning tasks, imposing directives and mediating disagreements among members.
Integrating manager is an additional management position superimposed on the functional structure – he will be responsible for coordinating the efforts of various functional departments but won`t have any the formal authority to impose the decision on those units. These managers are usually very strong in their negotiating skills – since they don’t have any other means how to make things happen!
Design teams bring together a set of functional specialists to work on specific new product development project. Such a team, however is rather independent and is more or less self‐
governing unit. The members have greater authority to choose their own leaders internally, instead of having leaders point out from outside their structures. They have free hands to choose their own procedures based on what they believe would be the most suitable way to the goal and would resolve any conflicts through discussions and consensual group process.
The relatively organic mechanisms such as design teams have some particular advantages for coordinating product development. The open minded atmosphere, participative decision making and consensual conflict resolution, where everyone has the right to point out possible
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problems to his/her part in real time can foster innovative ideas creation and proposition.
These might be discussed right away and either accepted or refused based on educated discussion. So the chances that such an team would come up with innovative and very new products, that would address adequate market niches or needs is quite high. Furthermore – since the discussions start early, critical issues, that might become problems later (e.g. during the manufacture phase) might be tackled right away and thus lower or negate their impact.
On the other hand – there are some disadvantages to this way of management alignment – in terms of costs and temporal efficiency. Creating a number of such a teams – where all would have the background necessary for their work as well as staffing them with highly skilled
specialist might drain necessary resources that might be better employed somewhere else. Also, the discussion based approach can be rather time consuming and less efficient than more centralized forms of management – which might be an issue when developing products with short development cycles.
In this way, considering the innovativeness as a variable, themore participative structures are likely to improve the effectiveness and timeliness of the development process when the product being developed is truly new and innovative. However, the model also predicts that more bureaucratic structures may produce better outcomes on less innovative projects, such as those involving line extensions or product improvements. (Olson et al. 1995)
2.3.3.2 Degree of knowledge Sharing
Fine and Whitney (1996) believe, that the assemblers (buying companies) should rely on their suppliers for tasks only, but not for critical knowledge. If the companies follow such a strategy, they could live with outsourcing without fear, that the suppliers will gain more negotiation power during the purchasing of components. Also this is the way they can mitigate the risk of being surpassed by more potent suppliers, who will over the time overpass the former customers position and replace their position.
Another risk might be the possibility of losing the control over the technology so it will spill over to the buyer`s direct competitors through the supplier network so the design will lose some of
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their knowledge areas necessary in order to co‐create the product, knowledge partitioning implies that different organizations have control over different knowledge spaces and also over different tasks (Takeishi, 2002). The bottom line is that knowledge is not always homogenous and there is nothing like one same knowledge, that can be applied onto differing areas. On the other side, knowledge might be separated into independent parcels containing mutually contradictory information within the same area. We can say, that every company is an
independent entity, with specific set of knowledge that will determine its modus operandi and thus the way they create value.
However, typically any one company does employ suppliers in development of products, and therefore the total knowledge necessary for the artifact creation won`t be present in one company only, but to get the complete picture we would have to cross the boundaries of companies if we want to gather all the necessary knowledge necessary to create the end product.
This is often the case – companies would try to reach out for more knowledge necessary to develop the products.
This is the rationale for Takeishi`s (1998) observation, that companies should go and try to gather some more of the useful knowledge beyond their boundaries – both sides need to acquire knowledge of their partner`s products, be it components providers or suppliers. In other words – the firms should know more than they make in order to stay competitive and there should be an overlap in knowledge between the supplier and customer when new technologies are to be developed.
This also means, that they will have to develop common language to open the channels of knowledge sharing. There is strong uncertainty in every new product development on goals as well as processes that would lead to these goals, the companies must communicate openly with their counterparts in order to mitigate these.
Takeishi (1998) suggests that it is particularly important for customers (buyers) to have a higher level of component‐specific knowledge when the project involves new technology. In general the assembler’s capacity to integrate all the components into one system might be increased by their greater knowledge of components, particularly when the project involves the task uncertainty with development of new technologies.
The same logic applies to suppliers – higher level of architecture knowledge by suppliers should increase the likelihood that they will be more ready for the problem solving necessary when faced with new project development requirement by the architecture integrator and thus being seen as an best suited supplier to provide with the right problem solution. Takeishi (1998) writes:
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“Building up architectural knowledge about the component was recognized as a critical success factor for suppliers to win design competition”
2.2 On Modularity
This section deals with the general concept of modularity so to provide the reader with solid background information on the research. Even though theory of modularity is fairly simple, I spend quite a lot of space to cover this topic thoroughly, so that the reader can get a deep understanding of all the challenges in modular product development. The basic modular theory is introduced followed with the major challenges to modularity – the architectural innovation and the modularity trap.
2.2.1 Theories related to Modularity
Modularity can be seen as a general concept, which help us understand systems and their organization. According to Schling (2000) modularity is an abstract term (a continuum) which describes the degree, to which system`s components can be separated and recombined.
Therefore all systems are characterized by some degree of coupling between components, and only very few systems have components which are completely inseparable and cannot be
recombined. This is the reason we can say that almost all systems are, to some degree, modular.
Simon(1995) in his pioneering research shows examples of modularity from very wide specter of situations and postulate, that modularity might be found in almost all entities around us – social, biological or technological. Simon use the familiar example of biological organism to introduce the very basic concept of modular system and its ability of decomposition ‐ “which is composed of organs, which are composed of cells, which contain organelles, which are
composed of molecules and so on.
Simon use the term “hierarchically nested systems” – meaning that at any unit of analysis, the entity is a system of components and each of the components is, in turn is a system of finer components, until we reach a point, where the components are “elementary particles” or until
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question is, whether the systems can be put back together and still be functional in the same manner, as before – and is it necessary for them to be re‐configured in the same, original way to keep working? This is where we can differentiate between the high and low levels of modularity (Sanchez, 1995).
High level of modularity are those systems, whose components might be disaggregated and recombined into new configurations – and possible substituting many new components into the configuration of the system with minimal or none loss of functionality. These components are relatively independent on each other, and the only dependence is to the overall system – the architecture of the system.
Still, there always will be some configurations, which would be more powerful – the
components in that particular combination would overall provide better system output than other configurations. This optimization is a crucial concern during the design of modular artifact.
The designer must take into consideration the possible advantages (trade offs) of fully modular and decomposable product, or product with lower modularity, however having possibly higher efficiency. Schling (2000) describes such phenomena as “synergistic specificity”. These are situations, when through the combination of components we can achieve functionality unobtainable through combinations of more independent components (components with higher modularity). Such an architecture functions will be unchallenged by more modular systems, however later changes into these architectures are very difficult to do, as the components are more tightly organized and more deep interconnected.(Schling, 2000).
Baldwin and Clarke (2000) define modular systems as systems, which are composed of units (or modules) that are designed independently but still function as an integrated whole.
Modularity means building complex products or process from smaller subsystems, that can be designed independently yet function together as whole. They do n comprehensive research of the different communication patters among the components, but also companies responsible for them.
The modular design allows the creators to use components designed by other entities than the creators (people, but also companies or organizations) so the end product will still work – this is due the compatibility of the components with each other and the interfaces.
Since not only one company is usually in charge of more complex products, this brings us to knowledge management and information sharing across these organizations. Baldwin and Clarke (2000) specify different types of information, accessible to only selected classes of users or designers – the visible information is the architecture designed by the architect. This
information is accessible to everyone who wants to participate on the modular design, and the
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participants must follow it in order so their modules would be compatible with the overall architecture. The hidden information however is created by the designer of the module, and they do not need to enclose it to others – since this would leverage their competitive advantage.
In plain words – as long as the component is functional within the architecture and follows its purpose, its designers does not need to share any more information than necessary. The visible design rules are therefore decisions, that affect subsequent design decisions, and they should be specified early in the design process and communicated broadly to those involved.
Visible rules might be further divided into 3 categories:
Architecture –specifies what modules will be part of the system and what their functions will be
Interfaces – that describe in detail how the modules will interact, including how they will fit together, connect, and communicate
Standards for testing a module`s conformity to the design rules (e.g. can module X function in the system?) and for measuring one module`s performance relative to another (how good is module X versus module Y?)
The hidden design parameters are decisions, which do not affect the design beyond the local module – they have no influence over any other modules. They can be chosen late and and changed often and they do not have to be communicated to anyone beyond the module design team – so long they fit the original architecture and do their functionality does not interfere with any other modules in the system, or they change the functionality of the whole system. In other words, the hidden rules might be also described as component know‐how.
The standards are the main advantage of the modular design. Once established and articulated to the suppliers, they allow a face speed competition as well as price reduction and
innovation – since they allow numerous firms to experiment with a variety of implementations, and this resulting complexity far exceeds what could be produced inside a single firm. This experimenting and miss and match process allows a great deal of innovation, and the development of an product platform is much speeded. (Chessbrough and Kusunoki, 2001)
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2.2.2 Modular product design and Modular Organization Design
Literature differentiates between Modular product design, modular organization design and also Modular manufacture design (Ernst, 2005).
However for the purposes of this paper, I will work with the first two only, since they are closely connected with the topic of product development and knowledge management, where the third deals with manufacture strategy and tactics.
All modular systems might be described as “loosely coupled” (Weick, 1976). This means that modularity involves independence between the particular modules of the system, and changes of one module will not affect design of any other modules. This independence is intententional.
In computing, these might be described as systems, where the components use little or no knowledge of the definitions of other separate components. All they need, is the access to the visible rules and as long it is compatible with the architecture, they can work and improve their own product (component) – until they reach the physical technological constraints of the given architecture.
It is very important to note, that the term “loosely coupled” is strictly abstract. So for example a computer, even though the modules and all the components are tightly integrated and all are physically interconnected (and sometimes even touching each other) on the motherboard, we can say that all the modules are “loosely coupled” – as they are interchangeable (by substitutes) and thus create a platforms for “economies of substitution” (Garud and Kumaraswamy, 1993) ‐ a range of component variations in order to configure a range of product variations.
For the reasons explained earlier, the modular product architecture is flexible – by substituting modules and using standardized interfaces between components enables variation. Particular modules, which over time become bottlenecks might be easily exchanged with more powerful and suitable ones. This “mixing and matching” provides the whole organization with strategic flexibility and creates potentially large number of product variations, distinctive functionalities, new features and/or performance levels (Sanchez, 1994).
Once the outputs of particular processes and components are clearly specified and explicitly announced, the design of these might be than partitioned into tasks, that can be performed autonomously and concurrently by loosely coupled organizations (von Hippel, 1990). The interfaces between the modules would be a building block for inter‐firm or inter organizational communication channels for loosely coupled development process – so as long as the designers follow the design rules, the final product will be compatible with the rest.
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This is in contrast with the traditional tightly coupled organization structure, coordinated by a
This is in contrast with the traditional tightly coupled organization structure, coordinated by a