New business models and services are expected to focus on customer. There is no information asymmetry and the customers have unprecedented choices, visibility and ability to communicate their needs. Firms need to deliver customized products with enhanced service expectations at low cost and there will be more and more instances of the up-stream supply chain member absorbing the major portion of risk and costs. These circumstances have refined our understanding of the firm strategy, which is reflected in the 3-D concurrent engineering framework as provided by Cohen and Fine. It is important for firms to recognize the means of formulating the strategy and details that constitutes the core of this 3-D concurrent engineering framework.
Instead of taking a product/process/supply chain specific orientation, I consider organizational factors that constitute the core of a firm’s strategic plan. In this regard, an innovation and quality-based perspective provide a good foundation to evaluate the issues revolving around a dispersed product development process. A firm’s innovation orientation is manifested in terms of multiple dimensions of quality and in breakthrough advancements. It has been observed that most of the research involving innovation doesn’t take quality considerations explicitly. Moreover, those, which do incorporate quality aspects, consider an aggregate representation of quality, mostly as construct unrelated to the innovation levels. I assert that investigating the effect of innovation efforts as being manifested in terms of multiple dimensions of quality could lead to richer conceptualization of the underlying process.
The conceptualization integrates the innovation and quality with the learning in an organization. The strategic view, which is based on quality and innovation levels, can be considered to be residing in the aggregate learning in an organization. A firm shouldn’t focus on independent improvements of individual quality dimensions or innovation levels but should instead focus on the level and rate of growth of learning in the organization. In the context of product development, this rate of learning, which is influenced by investments in innovation and quality levels, is a key contributor to competitive advantage.
With the emergence of e-business and a supply chain view to the product development process, multiple firms with varying and at times conflicting objectives enter into collaborative arrangements. In this regard, the competitive strategy based or quality and innovation could potentially permeate into these collaborative setups aimed at dispersed product development. The existing literature doesn’t explicitly consider the implications of innovation and quality based competitive strategies in a collaborative supply chain context. It can be noted that with innovation and quality levels forming the core of a firm’s capabilities to pursue 3-D concurrent engineering, each member in the supply chain would have an incentive to control the innovation and quality landscape. This leads to a competitive framework between collaborative product development partners where the timing of innovation to gain maximal control on the innovation deliverable of a product becomes extremely important.
The constructs – innovation and quality have multiple representations as reflected in research publications in economics, marketing and operations management. The common theme underlying in all the models is that innovation and quality are very important for the strategic and operational orientation of an organization. Innovation strategy can be conceptualized to include technologies that are critical to the firm’s competitive advantage. Innovation must include the “know-how” the firm needs to create e.g. design technologies (CAD/CAM), produce e.g. process technologies (FMS, ERP, APS), market its products e.g. marketing technologies (CRM, SFA) and deliver them to customers e.g. order fulfillment technologies (OMS, WMS, TMS).
As a first step, focus defines those capabilities where the firm seeks to achieve a distinctive advantage relative to competitors. It must be recognized that the firm cannot create superior capability in all areas of technological “know-how” but instead it needs to target the technical capabilities, which leads to most distinctive set of competence. Establishing focus defines targets for investment in technical capabilities. This leads to the next decision of the source for such innovation plan. This is the second critical aspect of an innovation strategy. Technological capability may be developed internally through investment in people, equipment, facilities, and methodologies, or through advanced development projects. But technology may also be acquired from outside the firm.
The timing and frequency of implementation are the next critical element in innovation strategy. Part of the timing issue involves developing technical capabilities, and part of it involves introducing technology into the market. The frequency of implementation and associated risks will depend in part on the nature of the technology and the markets involved, but in part on strategic choice. At the extremes, a firm may adopt what has been called the “rapid inch-up” strategy – frequent, small changes in technology that cumulatively lead to continuous performance improvement. On the other hand, it may adopt a “great leap forward” strategy in which, a firm chooses to make infrequent but large-scale changes in technology that substantially advance the state of the art.
Product Innovation
Process Innovation
Integrating technology strategy with specific product or process development projects requires managers to articulate the strategy in terms of a plan for development and implementation of capability. Advanced development projects and external acquisitions need to be phased to connect in time with the planned development of products and processes. In developing these plans and linking them to specific development projects, there are two critical issues: separation of technology invention from technology application and integration of product and manufacturing process technology paths.
Components of Integrated Product-Process Technology Innovation
Garvin provides a very comprehensive strategy oriented view of quality management without biases towards any school of thought. The different dimensions of quality considered in our conceptualization are presented in the following figure.
The conceptualization of product-process innovation that is based on empirical investigation of NPD projects suggests that the effort proceeded in two basic and distinct stages. These stages were typically demarcated by the creation of a detailed “technical specification” document. The first stage, which is defined as “research” was aimed at the exploration and integration of the new techniques necessary to produce a product with the targeted specifications. During this stage, researchers explored new possibilities, and experimented with stretching old capabilities. By the end of this stage, project members developed a firm approach to the delivery of the performance targets described at the beginning of the project. The second stage, termed as “development,” was aimed at the development of a reliable process. This stage involved considerable refinements of the techniques and capabilities chosen in the research stage. The objective here was to find a specific production process that would maximize production yield, and minimize product cost. To a first approximation, the research stage was responsible for establishing the performance characteristics of the product, while the development stage determined the variable cost. Thus two critical dimensions of product objectives are delineated in accordance to the product and process innovation. These are product’s functional performance and its variable cost.
It can be argued that the degree of dispersion in quality attributes of a product may be controllable through investments in control and improvement of the production process, or through means such as inspection. These benefits of investments depend on the characteristics of customer preferences for quality and innovation as captured in their utility functions. It is assumed that the product costs depend on the external quality characterization of the product, the internal quality characterization of the product and the innovation levels. The customer effectively purchases a distribution over product attributes.
The investments in quality and innovation efforts get translated into firm’s “know-how”. This learning could be because of the internal quality and innovation efforts or it could be because of spillover effect of the knowledge of competing firms. This learning reinforces further investments in quality and innovation by means of improved performance in terms of demand enhancement, cost reduction and increased channel power.
Product-Process Innovation and Channel Power - Integrated Framework