Innovation paths in product development: An empirical research

international journal of

production economics

ELSEVIER

Int. J. Production Economics 51 (1997) l-17

Innovation

paths in product development: An empirical research

Mario Calderini*,

Marco

Cantamessa

Politecnico di Torino, Dipartimento di Sistemi di Produzione ed Economia dell’ Azienda, Corso Duca degli Abruzzi, 24, I 10129 Torino. (Italy)

Abstract The paper presents the results of a research which investigated the dynamics of technological change and organisational structure in discrete-parts manufacturing firms located in the industrial area surrounding Turin, in north-western Italy. The field study focused on a micro-level analysis of the impact of innovation in product development practices on small and medium enterprises. Specifically, the paper shows that exogenous determinants of innovation, computer-aided technologies, design methodologies and organisational structures interact in a fairly complex fashion and adapt themselves to a changing competitive environment. Eventually, in order to provide an aggregate view of the phenomena, a causal model of innovative behaviour in product design is proposed. Keywords:

Product

development;

Innovation

1. Introduction An impressive amount of basic and applied research work has been devoted over the last few years to product development, from both the engineering and managerial academic communities. A distinctive feature of the majority of such studies is the focus upon individual aspects such as computer-aided technologies, methodological tools or organisational design. Recent contributions (Clark and Fujimoto, 1991) explore the central issue of understanding mutual interactions among such aspects and their impact on companies’ performance. Within this stream of literature, the paper investi-

*Corresponding author. Tel.: + 39-1 l-5647238, fax: + 39-1 I5647299; e-mail [email protected].

gates how industrial companies, particularly SMEs, are actually cherishing and using the innovative tools which are being developed through applied research. The paper is based upon an empirical research illustrated in the following. The approach is deductive in the sense that relevant phenomena are observed and used to establish consistent research hypotheses which are currently under verification. The rationale behind the choice of undertaking an innovation study circumscribing a relatively narrow aspect of operations management is primarily the relevance and the intensity of technical progress in this peculiar area of manufacturing operations, with specific reference to discrete parts manufacturing, which constitutes the backbone of the industrial economy within the region under investigation. This latter aspect possibly deserves

0925-5273/97/$17.00 Copyright cm 1997 Elsevier Science B.V. All rights reserved PII SO925-5273(97)00076-S

2

M.

Calderini,

M. Cantanwssa:Int.

a few more specifications. Product development activities are being given an ever increasing importance in terms of contribution to products’ added value; product development has been burdened with a great deal of hopes about its capacity of assuming the role of labour productivity booster, which in the last decade had been granted, with scarce success, to shop floor activities. Moreover, the peculiar structure of the industrial area surrounding Turin, dominated by the largest Italian car manufacturer and characterised by a relatively small degree of vertical integration, determines the existence of fairly complex subcontracting networks; the paper will show that, along such networks, the degree of inter-dependence between firms is ever increasing and finds its concrete application specifically in the product design phase. In conclusion, there is evidence that the core of the innovation process in small and medium sized discrete part manufacturers will pivot on the key issue of companies’ ability to integrate flexibly with customers and partners in the product design and development phase. The study is by its own nature multidisciplinary and the literature reference framework is fairly heterogeneous. Much of the theoretical background consists of purely technical studies in the field of engineering design and product development, rnaking it necessary to circumscribe and analyse the set of available technologies and methodologies in depth. Overviews of such contributions are presented in textbooks, as for instance Ulrich and Eppinger (1995), whereas research surveys usually focus upon specific techniques. On a more aggregate level, a quite common approach represents innovative behaviour in a framework defined by paradigms and trajectories, as in the pathbreaking studies of Dosi (1982) and Nelson and Winter (1982). On the side of empirical studies Sun (1994) describes innovation paths followed by companies by means of a trajectory in a two-dimensional space, defined by the two axes of technologies and of methodological/ innovations. Such a represorganisational entation is fairly suitable to describe the mutual interactions between technologies and methodological tools, together with, possibly, their sequence of adoption.

J. Production

Economics

51 (1997) l-17

2. Research structure The themes sketched in the previous section are the core of the large empirical research, the results of which are discussed in the following. The project has unfolded in three main phases: a preliminary literature survey, field research and a postal questionnaire. The former consisted of a large multidisciplinary literature survey (Boschi et al., 1995) upon the topic of product development. The results identify the sets of technologies (CAD, CAM. CAPP, RPT, etc.) and design support methodologies (QFD, DFMA, Value Analysis, etc.) of widespread use in manufacturing industries, which in the following will be addressed collectively as “techniques”. Following the completion of the bibliographical survey report, the project entered its second phase, based upon field research (Eisenhardt, 1989). This phase has been centred upon interviewing companies on the innovations they introduced in product development. Field research has provided a hands-on understanding of how specific innovations or innovative phenomena highlighted during the literature survey found actual application in the industrial practice within the region. Such experience pursued two distinct objectives: putting together a framework of structured research hypothesis concerning determinants, modes and effects of innovation in product development practice and, secondly, to decide upon which data should have been collected in a subsequent postal questionnaire for verifying such hypotheses. The twenty-one companies visited during field research were chosen from a list of enterprises spotted as “innovative” by the local Chamber of Commerce’s research unit; firms were included in the list based upon attitude to patenting, leading-edge manufacturing availability of equipment, R&D centres and participation in public-funded research projects, either at national or European level. The sample is obviously biased in the sense of technological excellence, but this was considered more than appropriate in a phase of the research which was aimed at making innovative behaviours evident. Firms’ profiles will be presented in detail in Section 3. Interviews were followed by the drafting of case studies, which

M. Calderini, M. Cantamessallnt.

were then validated by the three researchers paying each visit. Discussions over case studies led to the formulation of a set of research hypotheses, which have been structured under the topics of (a) awareness of the relevance of product development, (b) the process of product development, (c) organisational design, (d) computer-aided technologies, (e) design support methodologies, (f) determinants of the innovation process and (g) effects upon development performance. These hypotheses were then fed back to the interviewers, in order to check whether each case study would confirm or reject them. Researchers were therefore asked, for each of the case studies they attended, to evaluate the hypotheses. At first this was performed individually; then, in order to resolve differences in evaluations, the Delphi method was employed for drawing personal evaluations to convergence. In practice, each time a different evaluation occurred, the interested interviewers wrote down a defence for their assertion and circulated it to the others, until a final agreement was achieved. It has to be stressed that interviewers were not asked to give responses to very specific assertions (e.g. “Company X has adopted technique Y”), but to more general hypotheses of a higher level (e.g. “Adoption of Technique Y is peculiar to companies with high technical skills; does the case study at company X confirm this?). We devised this subjective interpretation process for deriving, from a limited number of case studies, a broad and high-level descriptive model; nevertheless, we entrust to quantitative analysis, based upon data coming from the postal questionnaire, the task of achieving an ultimate verification of the hypothesis. The set of hypothesis validated by the research team by using the process described above is introduced and discussed in the following Sections 3 and 4 of the paper. Section 3 will focus upon the first five topics (aHe), which collectively embrace the elements of the innovative phenomena which have occurred in the sample. Section 4 will then deal with the two remaining topics (f) and (g), which are instead concerned with the possible causes and the eventual consequences of such phenomena.

J. Production

Economics

3. Phenomena 3. I. Description

51 (1997) I-1 7

3

observed during field research of the sample

The profiles of firms visited during field research are summarised in Table 1, which reports 1994 data. Rather than to obtain a statistically representative sample, firms were selected in order to represent a wide spectrum of product development practices, according to the following two dimensions: product complexity (high, as for industrial equipment; medium, as for automotive subsystems; low, as for single parts or of simple subassemblies of complex products); production volume (one-of-a-kind, batch, or mass production). Table 1 also shows the industrial sector and the percentages of sales exported and made with the automobile manufacturer FIAT. Many of the firms are in the automotive sector, due to the relevance of this industry in the region; such companies generally have significant sales with FIAT, low sales abroad, and mass manufacture products of low or medium complexity. Another group of companies in the sample is made up of high-tech firms working in the Aerospace or Capital Goods sectors, which manufacture highly complex products. Production for these firms is batch or one-of-a-kind, and export sales are relevant. The rest of the companies are in the Consumer Electronics sector, and produce either final goods or components. Concerning the number of employees this figure varies, being highest in companies which manufacture very complex products (where product development absorbs many of them) or very simple ones (where direct labour accounts for most of them). The contents of the following subsections, which describe phenomena observed during field research, are based upon the assertions extracted from the case study material, and then validated through the Delphi panel. Some associations between individual assertions will be introduced, and those are the ones which have been found to be statistically significant at 95% level using the non-parametric F test (for non-numeric attributes) and Kruskal-Wallis’ ANOVA (for Likert scale values); for the sake of brevity, both the starting l

l

M. Calderini. M. Cantamessa/Int.

4 Table I Profile of the sample Company

of firms visited during

Cl c2 c3

>lOOO > 500, < 1000 > 500, < 1000

c4 c5 C6 Cl C8 c9 Cl0 Cl1 Cl2 Cl3 Cl4 Cl5 Cl6 Cl7 Cl8 Cl9 c20 c21

>250, <500 > 100, <250 > 100, <250 > 500, < 1000 > 100, t250 > 100, <250 > 1000 > 500, < 1000 > 100, <250 >50, < 100 > 100, <250 > 100, <250 N/A >lOO, <250 > 100, <250 > 100, < 250 > 100, < 250 > 100, < 250

data set and numerical be omitted.

3.2. Relevance

51 (1997) 1-I 7

Sales with FIAT (%)

Sector

(%)

Type of production

Product complexity

12 11 80 34 12 8 78 40 5 50 48 17

50 9 0 25 0 64 10 0 80 21 9 47

N/A 70 85

N/A N/A 0

N/A 5 10

N/A 60 50

N/A 28 45

N/A N/A 1

Automotive Consumer Capital goods Consumer Automotive Automotive Capital goods Consumer Automotive Automotive Aerospace Automotive Consumer Automotive Capital goods Automotive Automotive Automotive Automotive Consumer Consumer

Mass Mass One Off Mass Batch Mass Batch Mass Mass Mass Batch Batch Batch Mass Batch Mass Mass Mass Mass Mass Batch

Low Low High Low Low Low High Medium Medium Low High Medium Low Medium High Medium Low Medium Medium Low High

details of such analysis

of product

Economics

field research

Sales abroad

Employees

J. Production

will

development

The first relevant fact is that, except for one, none of our companies looks at product development as it did in the past. Companies which already developed products have all spent significant resources to do it better and quicker; but a most interesting aspect is that most companies have broadened their role in product design. Especially the larger companies have perceived that, in order to sustain competitiveness, it is no longer reliable to manufacture products designed by others. As a result, there is evidence that the purely manufacturing company whose products were designed by customer companies or by a licenser, and whose activities were centred around the shop floor, now tends to leave the stage. Suppliers which only used to deal with production now develop process plans and design manufacturing equipment, while those who only

developed process plans are now given responsibility over the whole product development process. What emerges is that the integration of product development with production operations, both within and between companies, is no longer a mere academic interest, nor just a recommendation from the “best practices” literature, but is becoming a matter of survival for a host of companies even of limited size.

3.3. The process of product

development

The product development process is changing indeed; virtually, all of the companies visited are experimenting with time-based competition and are forced towards an ever decreasing time-to-market. Companies also feel the threat of design lives becoming shorter; in particular, many feel that designs must now be changed proactively, since it is no longer acceptable to wait for obsolescence with respect to market requirements or to available technology to reach a certain threshold.

M. Calderini. M. CantamessaJInt.

In such a competitive context adequate planning is felt to be necessary by all companies. However, even though nearly all of them now use project and have detailed management techniques plans for managing the product development process, just a few of them are able to keep a firm hand on the wheel and safely drive the plan through completion. Problems due to erroneous product specifications or engineering choices are seldom anticipated, but generally tackled when they show up, thus leading to late changes, often taken frantically and in a confused manner. Late changes in product specifications by large customer companies are also very common; this has raised the malicious doubt that such companies often impose concurrent engineering principles to their suppliers in order to make them more able to respond to their own inconsistencies and bad habits. In order to face these difficulties, it is common to shorten distances between the phases of product development by using interfunctional project teams. We have found that in such teams early participation from people technically responsible for downstream phases is often merely consultative, so that a true concurrent engineering process seldom takes place (e.g. process engineers give their opinion, but rarely start to really work until product design is completed). However, we have noticed that this is mostly true for companies working in the capital goods sector, where product functionality is far and away more critical than manufacturability; on the contrary, in sectors where this latter aspect is more important a higher level of integration between product and process development does indeed take place. Many companies visited, particularly those dealing with fairly complex products, have introduced principles akin to DFMA (even though the meaning of the acronym is to them unknown) and implement them through checklists, design guidelines and, less often, software applications. Finally, we have found few companies to keep accurate records of product development costs, and even fewer have adopted product life-cycle costing principles (generally those dealing with more complex products). We have noticed that these companies do so by using quite cumbersome

J. Production

Economics

51 (1997) I-1 7

procedures, and therefore tend to drown work and bureaucratic fulfilment.

3.4. Organisational

5

in paper-

design

Organisational design has turned out to be a key issue in the innovation process. Besides some descriptive remarks, which will be presented at the end of this section, there are two important pieces of evidence stemming out of field work: the first is related to the nature of the forces driving organisation’s evolution, the second refers to the reiationship between organisational structures and adoption behaviours. As far as the former aspect is concerned, field work has supported the hypothesis that the shaping of organisations is fundamentally a self-evolutive process, which is by far and large dependent on the past history of the organisation itself; a natural corollary to this latter statement would therefore be that the role of managerial thrust in the innovation process is rather minimal and is limited to setting the appropriate framework for beneficial evolution. Empirism should be here supported by the theoretical background which is referred to in evolutionary economics literature as the capabilities approach (Nelson and Winter, 1982); for the sake of brevity we will limit to recalling how such approach, which leads to representing firm’s capabilities in terms of routinary behaviour, is indeed appropriate to the peculiar nature of design operations, i.e. being remarkably knowledge intensive, hardly codifiable and firm-specific. Field work has demonstrated that the set of available organisational configurations is not actually a space of discretionary choice to the managers. On the contrary, organisational innovation appears to be driven by significant pathwhich sensibly narrow dependent phenomena, the frontier of possible evolution to the firm. The role of the manager seems therefore to be limited, as far as organisation is concerned, to imposing small perturbations to the process of spontaneous evolution and endogenous growth of the organisation. Managers influence the path of evolution by setting different organisational frameworks, whereby capabilities and competences are created.

6

M. Calderini, M. CantamessaJInt.

The process of endogenous growth, if virtuous, is deemed to create the appropriate conditions for efficient technological/methodological adoption. This is the second general remark which stems out of our analysis. Actually, there seems to be a precise relationship, both causal and temporal, between re-organisation of design activities and efficient adoption and utilisation of methodologies and technologies. Specifically, case studies give evidence of a systematic full exploitation of techniques when the former preceed the latter. On the contrary, exogenous shocks, such as adoptions due to technology-push or forced by customer companies (in the following, referred to as customer-push) have often triggered unaware innovation processes, characterised by a low level of performance in the utilisation of techniques. High performances have been found to be significantly associated to an adoption sequence which precisely sticks to the pattern organisation -+ methodology + technology. Our view of organisational innovation is therefore twofold: first, there is no space of organisational configurations whereby the manager can choose the most appropriate one, but the path of organisational innovation is traced by the past history of the organisation itself; second, organisational re-configuration is the compulsory step which triggers innovation processes characterised by a consistent degree of awareness by the adopters of technologies and methodologies. On a more descriptive ground, the evidence is that few companies have turned their organisation upside down to facilitate product development, so that the traditional functional organisation, in which product and process designers respectively operate under technical and production line managers, still resists. However, most companies have introduced project managers as liaisons between functions, bestowing them with varying levels of responsibility. Introduction of project managers generally comes hand in hand with interfunctional project teams; in our research, these teams were more common in FIAT suppliers, which confirms the automotive industry’s declared efforts in promoting new product development practices. Surprisingly enough, we did not observe relevant problems in managing the dual membership to the team and to the function,

J. Production

Economics

51 (1997) I-17

a fact which is often reported in the literature. Such problems were found in a minority of cases, generally in companies developing consumer products; this may be either due to their broader functional articulation, or to the lack of a supportive cultural environment. Finally, we have found that the intensity of participation in the team often shifts quite dramatically during the process (typically from sales, to engineering, to production and back to sales), therefore reducing the team’s effectiveness.

3.5. Computer-aided

technologies

As strongly suggested by the literature, adoption of computer-aided technologies is one of the main streams through which companies innovate product development: Computer-aided technologies may potentially have a dramatic impact, both concerning the simple aspect of producing designs, as well as for supporting and integrating several engineering tasks (calculus, analysis, product and process simulation and prototyping). We have found the diffusion of Computer-aided technologies to be particularly strong for CAD, which has been adopted by virtually all of the companies interviewed, probably because of its technological maturity and since its usage is often explicitly required by inter-firm relationships. However, we have observed some break-out friction for 3-D CAD, which companies credit to the difficulty of its usage. Because of this, and because of the limitations found in current product exchange standards such as IGES, CAD is still generally viewed as a tool for expediting the production, storage, communication and maintenance of designs; on the contrary, its role for achieving integration with other computer-aided technologies (CAE, CAM, etc.) is still somehow misconsidered. Adoption of Computer-Aided Engineering (CAE) tools has been increasing only recently; due to the specialist skills required to operate, hi-tech companies usually have long experience with it, whilst other companies tend to postpone its acquisition. In our companies, Computer-Aided Manufacturing (CAM) is generally adopted as a “natural” follow-up to CAD. We have noticed that CAM is primarily used for developing tools

M. Calderini, M. Can!amessalInt.

and dies or prototypes, while only a few low-volume manufacturers use it for production. We think this is due to the fact that metal cutting processes are less widespread than deformation, plastic moulding, or assembly; moreover, high-volume producers who do work with metal cutting processes tend to use custom-made (and not NC) machine tools. Even though this finding is probably biased by the region’s special attitude to the automotive industry, it might just the same suggest that stronger attention should be given to integrating CAM into the initial phases of product and process development, rather than at its very end. Computer-Aided Process Planning (CAPP) is the true mythological phoenix among Computeraided technologies: only one company in our sample had developed software routines in order to achieve partial support of process planning; anyway, though using the concept of CAPP, they were not - like any other company - aware of the term. The distance between academia and industry is evident on this subject. We have also found that rapid prototyping techniques (RPT) are not largely widespread yet, even though their diffusion seems to be increasing quite quickly. Cost currently seems to restrict adoption to the larger companies, and the quick pace of diffusion is probably due to the fact that companies feel prototyping is a crucial phase of the development process. Moreover, we have found firms to be quite keen on reverse engineering techniques, with the expressed wish to facilitate the transfer of manual modifications on prototypes back to the CAD model. Apart from the advancing integration within the kernel of computer-aided tools we have just discussed, another integration which companies wish to increase is in enterprise-wide information systems. We have found such integration currently at work in the companies which more strongly use project teams, and which thanks to this have felt the need for it. Eventually, we have found groupware tools are not so well known to companies, even though their diffusion is now starting; adopters generally limit themselves to using standard facilities, such as file exchange and E-mail services, while none of them has developed more sophisticated applications (e.g. workflow automation procedures).

J. Production

Economics

51 (1997) I-1 7

3.6. Methodologies

7

for product development

In order to tackle the complexity of product development, a number of engineering support methodologies have been elaborated, the basic role of which is to enable the production and communication of a very broad range of information types, for which traditional means of communication (such as engineering drawings) are no longer sufficient. In fact, it is known that, when using the life cycle and concurrent engineering approaches, information produced is heterogeneous, fuzzy, incomplete, and often inconsistent; moreover, the importance of product development as a process requires to aggregate and communicate information related not only to the product, but also to the engineering process. The set of methodologies considered during field research is quite comprehensive, and includes the ones which are most commonly debated in the technical literature: Project management (PERT and CPM), Product Development Process modelling, Value Analysis and Engineering, Design of Experiments (Taguchi), Quality Function Deployment, Design for X, Reliability Analysis (FMEA and FTA), techniques for group communication and discussion (Wall Charting, Cause-Effect Diagramming, etc.). It is outside the scope of the paper to discuss the findings upon each of them, and some collective conclusions will be presented. First of all, our research has suggested that a good metaphor for describing methodological support to product development is as a “toolbox” of instruments which companies pick up and customise, sometimes with a thorough planning process but, more often, in a quite erratic manner. The decision to adopt methodologies often simply follows standards set by parent companies or, especially in the automotive and aerospace sectors, by customer companies. It is interesting that some firms subject to such pressure from customers, each of which has a particular taste and set of preferences, know these methodologies but tend to use them at the lowest possible level, and avoid fully transforming them into operational standards. A quite weird but common explanation is that nearly identical products often have to be developed using different sets of methodologies for

8

M. Calderini, M. Cantamessa:‘Int.

different customers. Only a few more brilliant companies have capitalised upon learning methodologies, and thus developed a customised “toolbox”, well tailored to the company and to its products. Methodologies are looked upon fairly suspiciously, particularly the ones with less “engineering taste”, which are frequently deemed to be good for wasting time (this is the case for QFD and techniques for group discussion and communication). Regarding all methodologies, we have generally found little knowledge concerning the appropriate mode d’emploi, their benefits and limitations; many companies put the blame upon the lack of adequate skills and of software packages supporting their usage. As a matter of fact, we have found that unfamiliarity, scepticism and incomplete usage of methodologies generally go together, and are peculiar to companies in which awareness of time-based competition is lower and project teams and leaders are weaker. This finding confirms, as stated in Section 3.4, that organisational innovation is beneficial not only for its own sake, but because it helps to create a favourable climate concerning the introduction of methodological tools.

4. Determinants

and effects

Having given the coarse description of changes occurred in companies’ product development operations and of the micro-level innovations they have adopted, it is now possible to take up a somewhat higher-level perspective and try to look at the determinants and effects which are connected to such behaviour. The literature typically provides two classes of determinants, namely availability of technology and market dynamics (which are often referred to as “technology push” and “demand pull”). A glance at the managerial literature also hints to add a third kind of determinant, which could be referred to as “managerial thrust”; this factor is not fully orthogonal to the other two, and in some way may be thought to be a catalyst rather than a true determinant. Referring to this latter aspect, evidence has been found that a very poor endogenous impulse has been given by management to innovation processes; besides the general remarks made in Section

J. Production

Economics

51 (1997) I I7

3.4, i.e. managerial role is shadowed by relevant path-dependent phenomena, a second matter is related to a widespread lack of managerial culture from people with an engineering background. It is quite rare to discover clues for self-determination, either in the adoption of technologies or in the introduction of design methodologies. Nearly all of the innovations which we have sorted out to be clearly “pulled by management” are connected to internationalisation of company ownership. As far as “technology push” is concerned, the full maturity of technologies appeared to be a necessary condition for their spontaneous introduction; only in the case of CAD the simple availability of such technology has been seen as a determinant for adoption. However, an objective glance at the toolbox of technologies presented to firms during the surveying phase is enough to understand that other technologies or methodologies were, in the last decade, at least as mature as CAD was. The question is therefore to point out those factors which determine the perceived maturity of a technology. A little hint is that the more a technology is crosssectorial, the more it is perceived as mature by companies. If this proves to be true, only technologies with an all-round industrial scope are able to play the role of “innovation pushers” even in poorly innovative environments. The other kind of determinant envisaged was categorised as demand pull and its specification has relied upon a detailed analysis of market dynamics which we found to be relevant not only in giving the initial impulse to innovate, but also in shaping the subsequent choices. Such analysis relied on a scheme of classification which has been proposed for its explanatory power. Firms are assigned to the following three categories: (A) firms offering standard products through catalogues, (B) firms offering customised products and competing through tenders and (C) subcontractors vertically integrated with their customer companies. The partition was based on the temporal relation between the design phase and sales transactions. Type “A” companies design products first (generally basing product specification upon market analysis techniques), and think about marketing them later. In type “B” companies, product design activities unfold at the same time as transactions, since

M. Caldeuini, M. CantamessaJInt.

in general each tender is related to a specific product. Instead, type “C” companies’ sales depend upon long-term and stable relationships with customer companies, which largely precede the design of each specific product. Even though, broadly speaking, companies often belong to more than one of these categories, we have observed that a dominant membership to one class is always bound to emerge, and has an undeniable relevance to the company’s behaviour. Not only the membership of a class influences the practice of product development and its innovation paths, but also the frequently observed propensity to switch from one class to another. Such changes seem to have, as far as our research shows, a remarkable influence upon the strategic positioning of companies and are quite closely related to the starting up of product development in companies which did not previously deal with it. For this reason, the profile of companies will be discussed first on the basis of their original membership of the three classes; afterwards, the possible causal links between inter-class flows and innovation in product development will be outlined. “A” type companies typically develop moderately complex consumer products or standardised components to be assembled further on into final products. A peculiar feature which has emerged in the sample is that such companies feel a strong pressure to reduce their time-to-market, although their ability to manage the product development process and follow plans closely is rather scarce. The “B” type operation is typical of companies manufacturing products of high complexity, generally in the capital goods or aeronautical sectors. Their competitive environment is very tough: such companies generally operate on the global market, and tender-based competition causes them to be evaluated not only upon the quality of the final product (which is generally quite complex and customised) but also upon the process followed to develop it (this is also true for type “C” suppliers, which however have the advantage of relying upon stable and long-term relationships with their customers). For this reason, such companies show outstanding performances for what concerns the process of product development, including adherence to plans. In particular, the bid preparation

J. Production

Economics

51 (1997) I-I 7

9

process is critical, since it must be performed quickly (customer companies require fast responses, and probably pre-screen contractors by imposing artificially low bidding deadlines), economically (in order to be able to participate in more tenders at a limited cost) and with very high quality (since inaccuracy in bidding may spoil the technical and economic outcome of the contract). “C“ type companies are components manufacturers supplying a single (or, at most, a couple) large customer company (FIAT in our research). Traditionally, many of them did not even have, until the end of the 1980s true product development responsibilities; they usually received detailed drawings from the customer’s designers (in some cases even process plans) so that their main and only concern was to manage shop floor operations. Between the 1980s and 1990s following a widespread trend in the automotive sector, the relationship between FIAT and its subcontractors changed, in some cases progressively and in other cases quite abruptly; suppliers were required to take charge of developing products, starting from simple functional requirements, and in cooperation with its internal design staff (the so called co-design practice). Suppliers were granted long-term exclusive contracts on each product but not on each product family; in this way competition between suppliers takes place at each new-product development project and no longer on a day-to-day basis. Suppliers were also supported through consultancy and education services for developing the required product design skills. For “C” type companies emerging from this evolution, the typical objective is to improve and enforce integration with customers’ product development operations, even though the short experience in managing the product development process still leads to problems, delays and replanning actions. Following this discussion, readers are likely to have figured out that the arena of “B” companies is not only an arduous place in which to operate but is, at the same time, a land of opportunities for capturing new markets. In fact, we will now show the significance of companies’ movements towards or from “B” Type “A” companies we visited have been forced to face the choice of sticking to products designed

IO

M. Calderini. hf. Cantamessa~lnt. J. Production Economics 51 (1997) I-1 7

for catalogues or, instead, moving towards the development of more customised products, thus adopting the type “B” kind of operations. On the contrary, no trend from “A” to “C” has shown up in the research. In the former case firms aim to reduce time-to-market and increase the process efficiency; product development becomes a continuous process whose goal is the minimisation of completion time. Such companies have only moderately innovated product development practices, leaning on the adoption of methodologies rather than technologies; reports from these companies give evidence of modest achievements. In the latter case, companies shifting from “A” to “B” have experienced a new way of performing product development, now strongly time-constrained by customers’ requirements even in the process’ first phases. Such companies have, instead, shown a lower level of innovation as far as methodologies are concerned. Type “B” companies have, in principle, three possible choices: continuing to compete in the same area, shifting towards standardised production (“A” operation), or seeking the security deriving from a stronger integration with a customer company. Companies having made the first choice have experienced even more severe competition, due to shrinking purchase volumes connected to each tender and increasing number of competitors. Such companies represent the real frontier of excellence; the usual care and skill in managing the product development process have been boosted with the successful adoption of carefully chosen leadingedge technologies and methodologies, generally with the aim of supporting the product development process and making it more visible to the customer. Some “B” type companies, on the other hand, have decided to move towards “A” type competition by reducing engineering-to-order operations; in most cases, this has been achieved by offering a very wide range of standard products based upon modular concepts, so that customisation options could still be possible, but as a consequence of a “configuration” process based upon combining a wide set of options, rather than of a true engineering design process. In these companies we have pointed out a strong attention towards innovation by adoption of methodologies, rather than technologies. It is interesting and

remarkable that, although the third option of shifting from “B” to “C” is theoretically viable and interesting, we did not run into any company which had taken it up. Indeed, it seems to us that “C” type competition is becoming, in the eyes of management, a rather arid and barren area, however much for a number of companies it has represented an important starting point for innovating product development. An interesting question arising, an answer to which is still awaited, is whether the absence of flow from “B” to “C” has been a conscious self-determination of companies, or whether large customer companies have actually discouraged such movements by deterring a stronger integration of their “tender-based subcontractors”. Finally, as far as “C” companies are concerned, the option of shifting towards “A” operation is quite unusual and has not, as a matter of fact, been observed, so that two choices are left: sticking to the same kind of operation, or moving towards “B”. Incidentally, it has to be noted that “C” type operation for suppliers with product development skills and exclusive contracts for a single product tends to resemble in some way “B” operation, since sales competition occurs in coincidence with design. In this case the discriminant between “B” and “C” companies lies in the number of relevant potential customers, a large one in the former case, a smaller in the latter. Companies which have chosen to remain in “C” are the smaller ones and manufacture less complex products; they have essentially tried to integrate more closely their product development process with their customer’s one. They have not taken up so many new, or broader, responsibilities concerning product development, and their innovative behaviour has mainly been determined by their customer’s desires. For this reason, technologies and methodologies used by them do not reflect a real choice, so that innovative processes have brought quite good results, but only after a considerable amount of time. Anyway, in some cases, some technologies or methodologies still remain unexploited (even if officially adopted) because of passiveness and internal resistance to change. Other companies (the larger ones manufacturing more complex subsystems), have moved towards type “B” competition. Many of them, up to eight or

M. Caiderini, M. Cantamessallnt.

ten years ago, could not even dream of dealing with product development at all. Instead, having been induced by their main customer to do so, they have capitalised upon the acquisition of both technical and managerial skills for performing product development, and have started thinking seriously about how to best exploit such an asset. They have started broadening their reference market and competing on a wider basis, trying (successfully, in many cases) to become suppliers for other manufacturers both in the same sector of origin, and in different sectors as well. For such companies exports are rapidly becoming an important part of their market, and sales less and less concentrated, thus allowing for diversification of risks. Companies described above have to integrate closely their product development process with their customers’ one, in order to achieve high quality and time-based performance. Close integration however has to go hand in hand with flexibility, since there is a much feared risk that the effort to integrate deeply with a single customer would block the ability to integrate with a wide variety of different customers. This concept of “flexible integration” has emerged as quite novel and worthy of attention, as long as its very meaning counts for the capability of starting intense but at the same time agile (if the reader can come to terms with this abused term!) customer-supplier relationships. In principle, the ideal company for staging flexible integration should be very skilled at managing the product development process and have a large “toolbox” of technological aids and methodologies, in order to be ready to use the subset required by each specific contract and customer (including his specific needs, modes of operation and, often, idiosyncratic behaviour). The image is not as simplistic as it seems, if one would just think about the variety of different CAX (computer-aided whatever) software applications, or about the different interpretations which companies around the world give to similar methodologies. However, companies we have found shifting from “C” to “B” type operations have leaned quite heavily upon the adoption of sophisticated technological tools, albeit without caring too much for their integration; on the other side, they have not heeded the managerial and methodological aspects so much, so that they now

J. Production

Economics

51 (1997) I-17

II

often experience problems in this regard, especially in managing the product development process. In order to resume the previous discussion, its contents have been synthesised in Table 2. Within each box, determinants which have induced firms’ state transitions or non-transitions are described under the letter (a), whilst the effects on product development are sketched under the letter (b). This accounts for the side of determinants. As far as effects are concerned, if one looks at competitiveness, companies which have worked to innovate their product development practice have gained significant advantages, especially the ones which have managed to match such innovations with an appropriate market strategy (i.e. choice of “A”, “B” or “C” operation). However, if one looks at the intrinsic outcome of the adopted innovations from a technical point of view, the picture is somewhat less encouraging, since most innovation processes have fallen short of stated objectives. This has not prevented them from achieving good results concerning competitiveness, since many technical problems are fairly common to most companies. Incidentally, if exception is made for very specific sectors (e.g. aerospace), most industries seem to have a deeply relative and local perception of competitiveness, which also helps to give reason for the crucial role of internationalisation in innovation processes. Firm-level integration is far and away the key obstacle that companies have found in adopting technologies and methodologies. Furthermore, there is a poor attitude to an overall understanding of the technologies, particularly when they are domain specific. The proof for efficacy and appropriateness is searched for through widespread commercial availability rather than through intrinsic capabilities. This leads to investment in self-contained techniques which guarantee an autonomous operation rather than in modular resources to be installed and interfaced incrementally. The methodologies’ side is even less encouraging; the absence of a specific technology is often perceived, the absence of a methodology rarely. Whether this is due to lack of control on firms’ own product development processes, or to the ignorance of methodologies’ “off the shelf’ availability, is still to be investigated. It cannot be neglected that the overwhelming majority of interviews

12

M. Calderini, M. Cantamessu/Int.

Table 2 Characterisation To

of movements

among

different

competitive

J. Production Economics

51 (1997) I-1 7

bases

A

B

C

A

(a) Pressure to reduce timeto-market, great emphasis on product differentiation. (b) Product design becomes a continuous process aimed at minimising completion time

(a) Dramatic need for customisation, shrinking markets. Firms move towards tender-based competition. (b) The product development process becomes strongly time constrained also in the first phases of design.

No significant

flow

B

(a) Organisational flexibility required to cope with tender-based competition is too high (b) Companies standardise product and design process, possibly offering customisation options.

(a) Shrinking purchase volumes force firms to more frequent and crowded competition on tenders. (b) Success is not only dependent on products’ quality, but also on the quality of the design process itself, that has therefore to be totally visible to the customer.

No significant

flow

C

No significant

(a) Firms pushed by the customer, formerly unique, to develop an autonomous design capability, which have used it to appeal to new and differentiated customers (b) Design process has to simultaneouslyj/exihle and inteyrcrted when interfacing with different customers.

(a) Firms which, because of favourable market conditions or poor technological knowledge, deal with product development passively, according to their customers’ wills and decisions. (b) Only a few product development activities are taken in charge; firms integrate such activities with customers’ ones, without reaching true product development autonomy.

From

flow

outlined that specific methodologies are deemed to be time-wasting stuff, thus revealing a hardly surprising short term perspective. Concerning the relationship between technologically centred and organisationally/methodologitally centred innovation, the two-dimensioned space envisaged in Section 1 seems to be quite appropriate, since it has allowed us to put into evidence distinct patterns of behaviour between companies; the usage of two dimensions is justified by the independence we have observed between technological innovations on one side and methodological/organisational ones, on the other. However, we accept that the qualitative nature of the research performed up to now still doesn’t allow us to find an indisputable evidence of dynamic cor-

relation between the adoption of methodologies and technologies. This may also be partially explained by rather incomplete information, particularly on the side of design methodologies, which are often perceived like commercial buzzwords rather than useful tools. On the other hand, the predictable evidence that methodologies and technologies’ usage should be carefully matched and shaped one upon the other, is often associated by firms with high investments in terms of training of human capital, which is apparently the resource which is less happily sacrificed on long-term objectives. What seems to emerge is a textbook example of localised technological change (Antonelli, 1993 where firms, although dramatically keen on innovation, have an extremely narrow view of what

M. Calderini, M. Cantamessa/Int.

technologies and methodologies offer and, by consequence, move randomly in search of remote and unidentified optimal solutions. It has been previously mentioned that innovation paths show remarkable discontinuities related to well-identifiable shocks; no matter of surprise, one would expect the same also as far as effects are concerned. On the contrary, case studies give evidence of the fact that pretty smooth internal adjustments follow sudden and intense innovation activities. Such adjustment processes often fall quite short of declared objectives, resulting in the rather poor success rate of innovation programs we have found. Actually, when properly investigated, such programs seem to have the nature of random walks after initial shocks, rather than precise trajectories. On the average, it looks as if managers, after radical initial intervention, tend to let the organisation unconstrained, probably evolve in order to prevent the growth of internal stresses. This is remarkably true when dealing with employment and workers’ skills issues. The much feared massive firing of designers as a consequence of the introduction of computer-aided technologies has not come true at all. Former draughtsmen have been given considerable design responsibilities, resulting in a generalised process of job qualification, and new designers have often been hired by companies starting to deal with product development. Our initial research therefore suggests that job loss appears to be relatively small, if any. Nevertheless, it is still to be verified whether this can be stated also for large firms which, allocating to SMEs more and more design activities, might have considerably reduced manpower in design departments. Finally, another effect we have found is that the spirit of TQM and IS0 9000 standards has generally been fully cherished by most companies. Firms, in particular the ones competing on tenders, have recognised the importance of selling (or marketing?) processes instead of products. Keeping kitchens open (fancy restaurants have done that since ever) has a positive fallout both on the perceived quality of products and on employees’ involvement in the whole product development process. This latter aspect is hopefully expected to provide some endogenous impulse for tackling integration issues,

J. Production

Economics

51 (1997) I-I 7

which still appear to be crucial and partially resolved in most industrial environments.

5. A qualitative development

13

un-

model of innovation in product

The paper has so far gone through a descriptive discussion of phenomena which our field research has revealed to be relevant in describing firms’ innovative behaviour on product development. It is now convenient to try to place such phenomena into a comprehensive framework, able to provide an aggregate model of such innovation. The model of the innovation process upon which we will found the discussion (Fig. 1) is an adaptation of existing schemes, such as the strategic decision model by Mintzberg et al. (1976) and the stepwise adoption model by Nabseth and Ray (1974). The model is split in two parts: the metadesign and design phases. Metadesign represents innovation in product development, since it deals with “designing the design function” of the firm. The design function, in turn, has the objective of transforming product specifications in the final design. Of course, the evolutionary nature of the innovation process, as described in Section 3.4, makes it rather arbitrary to separate these two phases from one another. Nonetheless, doing so allows to isolate the interactions between different factors. In fact, design is an extremely complex activity, in which different elements interact very closely with each other in a non-additive fashion. Collectively, one can address such different elements as the set of design capabilities of the firm. A possible categorisation of such capabilities, which conforms to the structure of previous sections’ discussions is the following: (a) skills in managing the product development process, (b) computer-aided technologies, (c) methodological support, (d) organisation, and (e) the competitive base the company has chosen to operate upon. Metadesign deals with the innovation of these five aspects of design capabilities. The metadesign process may be split into three phases, namely the decision to innovate, the proper metadesign phase and, finally, the implementation phase. The metadesign phase is concerned with deciding which design support techniques should

M. Calderini, M. Cantamessa:Int. J. Production Economics 51 (1997) l-17

14

! I

! Pressure from

; customers Wailable techniques

i I i

1 Final design *

II

i i i

I

Fig. 1. A qualitative

model of innovation

be adopted by the company. Adoption depends upon which techniques are perceived to be suitable by the company itself, since a number of factors restrict the choice to a subset of techniques, both during metadesign and as an a-priori prejudice established before the process is actually initiated. We call this restriction element a lens, in analogy with the “lens models” used in marketing research. Thick arrows in Fig. 1 show the innovation process advance, whilst thinner ones indicate the principal influences among the components of the model, which have emerged from our research. Such influences will be summarised here briefly since they have been discussed at length, though not following the structured scheme arising from the model, in the previous sections.

in product

development

First of all, the decision to innovate product development has been seen to be influenced by internationalisation of company ownership, pressure from customers (for companies acting as suppliers to other companies) and by the competitive base upon which the company is currently operating. In particular, tender-based competitors have appeared to be more sensitive in understanding the importance of product development and the necessity of innovating in this field, which may be explained by the faster and more complex dynamics which characterises the milieu in which they compete. Second, the perception of which available techniques are suitable for the company and of their potential (i.e. the lens) is influenced again by factors

M. Calderini, M. Cantamessa/Int.

such as internationalisation, the competitive base and the skills in managing the product development process. Such skills deserve attention since they represent an overall capability and maturity in product development, which is more comprehensive than the sheer collection of support techniques which the company has adopted. Firms which do not have such strong skills tend to adopt techniques in a more confused manner, drawn by external pressure rather than pushed by internal commitment. Moreover, they generally look at support techniques and computer-aided technologies as turnkey appliances; therefore, they fail to understand the importance of their implementation process and the necessity of integrating all the design capabilities which together make up the design function of the firm, as previously described. Such finding also helps to support a non-mechanistic perspective upon design and product development as non-linear and knowledge-intensive processes, in which strong and elusive interactions occur among their elements (people, tools and methods). Such view of design leads to look upon the design processes as a unit of measure in research, rather than upon individual elements performing them (Frankenberger and Badke-Schaub, 1996). On the other side, it becomes apparent that such elements (mostly computer-based tools) ought to be studied and developed in view of their efficacy in a broader context, rather than for their usage in isolation. Concerning the metadesign phase, we have expanded it according to our five design capabilities, so as to detail the factors influencing the decision to innovate each capability. All of them, exceptions made for the competitive base, are influenced by the pressure exerted by customer companies, which definitely have an active role in innovating the product development process. Similarly, also the competitive base has been revealed to influence choices made by companies; as already mentioned, while catalogue-based competitors have pushed upon methodological capabilities and type “C” suppliers upon technological ones, tender-based competitors have worked upon these aspects together, thus progressing upon a more balanced innovative trajectory. This latter element contributes to demonstrate the influence given by tenderbased competition upon innovative choices.

J. Production

Economics

51 (1997) I-1 7

15

Furthermore, methodological innovations have been favoured by companies with more integrated organisational designs (i.e. teamwork), which is in line with the common advice that methodologies should be used as tools for cross functional integration (e.g., Boothroyd and Dewhurst 89, Hauser and Clausing 88). However, some doubts arise concerning the causal link’s direction, whether organisational innovation has been a part of methodologies’ implementation process, or whether methodologies have been introduced to facilitate interfunctional cooperation in a pre-existing organisational design. Last, we have found that innovative choices related to the competitive base are quite closely connected to skills in managing the product development process; specifically, our research suggests that the shift towards tender-based competition is generally fostered (and at the same time supported) by the growth which the company has achieved in such skills. Such connection is interesting and rather surprising and, at least to the authors’ knowledge, has not been exhaustively examined in literature. Tentative explanations, to be further verified, could be based upon the demanding selection mechanism induced by tenders and upon the higher degree of products’ technological complexity which characterises many tenderbased manufacturers.

6. Conclusions It is, of course, early to draw ultimate conclusions from the field research performed so far, and we expect the quantitative analysis based upon the postal questionnaire to achieve this final objective. Up to now it is however possible to point out some implications which arise from the most important facts encountered during our research. We hope a message emerges quite clearly by reading that pot-pourri of facts which makes up Section 3 of this paper: companies have moved out to innovate product development, the ingredients of such innovation are quite if not totally established and available to companies (or at least will be so in short time), but this innovation still needs to reach true maturity. In fact, the adoption of techniques often follows a quite confused process,

16

A4. Calderini, M. Cantamessu!lnt.

techniques are left partially unexploited, and are rarely harmonised in a well-structured whole. Of course, this raises a number of issues for industrial managers and policy makers alike, and also for engineering researchers and educators as providers of such techniques. These issues can not, of course, be discussed at length in an article section dedicated to conclusions, but we wish to introduce them as a research agenda for the future. Concerning individual companies, our research has shown quite clearly that the competitive base seems to be the fulcrum of product development innovation, due to the mutual influences it exchanges with most other elements of the innovation process. Therefore, if a link between business strategy and product development operations is to be located, it can probably be found in the characterisation of the three competitive bases we have identified, each of which has its own specific set of required product development practices and support techniques. In particular, we have found of great interest the “flexible integration” capability which characterises many successful companies moving towards the opportunities of tender-based competition. For the individual company seeking to innovate its product development function, working upon the competitive base should therefore be at the top of the list, due to its close link with business strategy, and to its all-round influence upon product development. This, of course, is closely linked with the need of tackling attentively the task of metadesign, from the initial commitment down to the final implementation phase. The stated relationship between organisational structure, methodologies and technologies is indeed an important matter of research. A first consideration is that, whereas methodologies and technologies define a set of available techniques among which firms select the most appropriate ones in the innovation process, the same cannot be said as far as organisational configurations are concerned. On the contrary, organisational innovation is fundamentally driven by path-dependent factors, and the phenomenon has an intrinsic self-evolutive nature. Two corollaries to this statement arise: first, we cannot postulate the existence of a pre-defined set of organisational solutions to be chosen, second the

J. Production

Economics

51 (1997) I-17

role of managerial thrust seems to be relatively little, or at least limited to modifying the background in which firms capabilities and competences evolve. The growth of organisations prior technological/methodological innovation ife. th e creation of appropriate competences and capabilities) is the feature which is shared by the majority of adoption processes which have been analysed during field work. The evidence is therefore that the sets of design technologies/ methodologies have little value per se, but their potential is inherent to the firm’s routines and capabilities they are embedded in. Further empirical analysis should therefore be able to demonstrate that technology-push, or even worse customerpush innovation processes are less efficient than the ones that naturally stem out of an organisational reconfiguration. From the policy maker’s perspective, field research suggests that the critical points of the innovation process could be located in the decision to innovate and in the “lens” which filters companies’ visibility of support techniques. Therefore, the factors acting upon these elements could be seen as the “knobs and handles” upon which the policy maker could act for promoting product development competitiveness. Among these, we remind the competitive base, internationalisation of company ownership and pressure from customers; it is apparent that such factors, internationalisation in primis, are quite critical because of their economic implications, so we suggest that policy issues may be among the most sensitive aspects of product development, and deserve special attention. From the perspective of engineering education, we have shown how close the relationships between the most disparate aspects of product development operations are. Therefore, the importance of a broad education upon product development emerges quite clearly, in order to draw all such aspects together into a single picture, instead of leaving them scattered around into a variety of disciplines. Similarly, many opportunities for engineering research may be envisaged not only concerning the growth of specific areas connected to product development (computer-aided technologies, methodologies, design theories and so forth) but, even more, in focusing efforts upon product

M. Calderini, M. Cantamessallnt. J. Production Economics 51 (1997) I-17

development as a crossroad discipline drawing and integrating results from other disparate fields.

7. Acknowledgements We wish to thank the Camera di Commercio, Industria e Artigianato di Torino for supporting the OTEO initiative, of which the research described in this paper is part. We also thank our colleagues Domiziano Boschi, Luigi Buzzacchi, Emilio Paolucci, Elena Ragazzi and Daniele Romano, who took part with us in visiting companies and preparing the case study material. Finally, we express our appreciation for the comments provided by the two anonymous reviewers upon a previous version of this paper. None of them is responsible for remaining errors.

References Antonelli, C., 1995. The Economics of Localised Technological Change and Industrial Dynamics. Kluwer, Dordrecht, NL. Boothroyd, G., Dewhurst, P., 1989. Product Design for Assembly. Boothroyd Dewhurst Inc., Wakefield RI.

11

Boschi, D., Buzzacchi, L., Calderini, M., Cantamessa, M., Paolucci, P., Ragazzi, E., Romano, D., 1995. L’innovazione nella progettazione e sviluppo de1 prodotto industriale: un’analisi bibliografica e una proposta di sintesi per la ricerca empirica nel settore. Working Paper no 32/95 (in italian), DSPEA, Politecnico di Torino. Clark, K., Fujimoto, T., 1991. Product Development Performance. Harvard University Press, Boston, MA. Dosi, G., 1982. Technological paradigms and technological Trajectories. Res. Policy 1 l(2), 147-162. Eisenhardt, K.M., 1989. Building theories from case studies research. Academy Mgmt. Rev. 14(4), 532-550. Frankenberger, E., Badke-Schaub, P., 1996. Influences on design processes in industry: empirical investigations of cooperative design work in practice. Proc. 1st Internat. Engineering Design Debate, Glasgow, September 23324. Hauser, J., Clasuing D., 1988. The house of quality. Har. Bus. Rev. 66(3), 63-73. Mintzberg, H., Raisinghani, D., Theoret, A., 1976. The structure of unstructured decision processes. Administrative Sci. Quart. 21(2), 246-274. Nabseth, L., Ray, G.F., 1974. The diffusion of New Industrial Process. Cambridge University Press, Cambridge, MA. Nelson, R.R., Winter, S., 1982. An evolutionary Theory of Economic Change. Harvard University Press, Cambridge, MA. Sun, H., 1994. Patterns of organisational changes and technological innovations. Int. J. Technol. Mgmt. 9(2), 2022218. Ulrich, K.T., Eppinger, S.D., 1995. Product Design and Development. McGraw-Hill, Singapore.