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SUCCESS FACTOR ANALYSIS IN COMPLEX PRODUCT DEVELOPMENT
1KANHAIYALAL RAJPOOT
2ASST. PROF. ARUN KUMAR BHUNERIYA
12Department of Mechanical Engineering, R.G.P.M. college, Bhopal (M.P.) ABSTRACT
The present research addresses the concept of performance in the development of complex products within the large Indian manufacturing companies. In more clear words, its prime aim is to study how the performance is being previewed within the Indian companies. Further how the performance measurement system can be designed in a systematic way in the companies.
An exhaustive literature review has insisted the present research work.
The exploratory results regard how performance is currently perceived and measured. It is being argued that performance measured is focused on the later stages of the development of complex product thus making it difficult to performance changes during the development. The focus is lagging rather than leading indicators.
An exhaustive literature review has helped to formulate the problems to identify challenges in the performance measurement and seeking to add the body of knowledge. On the basis of research objective the survey followed by a semi structure questionnaire is being selected for the analysis purpose.
The perspective results focus on the development of models and framework to be used during the development of complex products. The methods used in the present research are mainly focused around the collection of qualitative data through a focused group interview followed by case studies.
Results are being discussed critically and salient conclusion is being drawn.
INTRODUCTION
The present thesis addresses the concept of performance in the development of complex products. More specifically, the aim of this research is to study how performance is perceived and measured within the companies, and how this can be improved. Developing complex products is a knowledge-intensive process and the single greatest challenge that managers have been facing for a long time, is to raise the knowledge of performance in workers. The ability to evaluate performance may be an important part in improving performance in this as well as in every context.
This very first chapter starts by discussing why it is important to focus on measuring and managing performance in product development.
This chapter is further followed by a body of knowledge of what is meant by
“complex products”. The objectives of the research and its organization are then presented in the last section of this chapter.
RESEARCH METHODOLOGY
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The main research methodology applied in preparing this research is being presented in this chapter. Its outline is as follows;
The various approaches to research are discussed first, this discussion being followed by the motivation for the choice of research methods. The chapter continues with an overview of the progress of research during the one years leading up to this thesis, this is being followed by more detailed descriptions of the main research studies pursued. The chapter concludes with a discussion of the quality of this research.
Research can be described as an organized, systematic, data-based, critical, scientific inquiry or investigation into a specific problem, undertaken with the objectives of finding a solution or answer (Sekaran, 1992). Leedy and Ormrod (2005), describe formal research as a systematic process of collecting, analyzing, and interpreting information in which we intentionally set out to enhance our understanding of a phenomenon and expect to communicate what we discover to the larger scientific community.
What distinguishes scientists from non-scientist is not what they study but how they study (Thomas, 2006). Hence, the research method is important when conducting research. This is in line with the arguments by Karlsson (2009) that since the role of research has been described as the creation and development of new knowledge; it needs to be carried out in a proper fashion. This is in contrast to studying, the aim of which is to contribute to one’s own knowledge.
DATA COLLECTION AND ANALYSIS
An overview of the explorative case study design applied to each of the five case companies is presented as shown in Figure 3.1.
The major source of data collection was through interviews as illustrated in Figure 3.1. The data collection was also performed by reading e.g. internal documents, organizations charts, and data from the performance measurement system currently used. An important aspect of this case study design is the other important aspects discovered during the studies depending on the case company. Explorative case studies, compared with most quantitative research methods, make it possible to have an initial general research design, but also to customize some parts of the study according to discoveries made during the progress of the research.
Figure .1. Explorative case study research design overview HOW IS THE PERFORMANCE MEASUREMENT SYSTEM PERCEIVED?
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The third research question in this chapter is how the performance measurement system is perceived within the organization. Table 1 presents an overview of the findings related to how the performance-measurement system is perceived.
Table 1. Summary of the findings related to how the performance- measurement system is perceived.
Findings related to the perception of the
performance-measurement system
Case companies where the findings were identified Performance measurements are
important
Companies 1, 2, 3, 4, and 5 There is a need to improve how
performance is measured
Companies 1, 2, 3, 4, and 5
A performance measurement process is
Missing
Companies 1, 2, 3, and 5
No mental/abstract models of performance
Exist
Companies 1, 2, 3, 4, and 5
A learning perspective is missing Companies 1, 2, 3, and 5
Performance measurements are important – 53 of 54 interviewees acknowledged that it is important to have a good performance-measurement system in their organization. Even in the organizations where there were few measurements an explicit need for having performance measurements was expressed. According to one manager at case company 1, Measurements show how the reality is and it creates incentives for improvements. What cannot be measured cannot be improved.
There is a need to improve how performance is measured - 52 of 54 interviewees were positive to improvements of their capabilities within this area. It seems to be common knowledge that the performance measurements are not evaluating the real performance in a holistic supporting manner.
A performance measurement process is missing – Out of the five case companies, only case Company 4 had a clearly defined process for managing the performance measurements. Like MTBF, delays, time adherence, project cost, product quality etc. They are fairly good measurements but the difficult thing is what to do with the information
The result of the performance-measurement system is not common knowledge - Usually there is a structured way of setting the target for each performance measurement and there might even be a special place on the intranet, but it seems that most measurements are never presented or spread in the organization and therefore not discussed outside the management group.
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No mental/abstract models of performance exist - There were no explicit or mental models in use, at any of the case companies, to help managers to reason and discuss performance.
A learning perspective is missing - There are many measurements made during a development project, especially at the later phases, often involving time and cost. Measurements of the early phases and the outcome of the development project are missing.
DISCUSSION AND ANALYSIS
One of the findings from the literature review, in Chapter 2 is that there is no common perception of performance and this finding was also identified in all of the five case companies. There seems to be one definition of performance for every interviewee. However, cost, time, and quality are common elements in the various definitions of performance, while value creation was only mentioned by three of the 54 respondents. This might be explained by the difficulty of measuring and putting a quantitative value on the output, especially during the development. Also, no unified perception exists of what is most important, in terms of cost, time and quality, within the case companies.
One explanation for this may be the result of having various stakeholders, thus diversity in the aspirations. A clear strategy for what is important to prioritize within the organizations seems to be needed. Behavioral complexity is characterized by a conflict in assumptions, beliefs, and perspectives. This might explain why the prioritization of cost, time, and quality differ, depending on the interviewee.
Hence, a performance-measurement system supporting the strategies and action within the organization might clearly be beneficial in terms of communication of priorities and what is to be achieved. In line with the findings in the literature review, no measurements of value created or value to be created were identified. Measurements of productivity were also missing. The focus of the measurements systems was instead on cost, time, and quality. This might explain, as argued by Cooper and Edgett (2008), why companies today are preoccupied with minor modifications, product tweaks, and minor responses to sales people’s requests. This may also be the direct result of not having value or productivity measurements in place.
A typical case illustrating this issue is the measurements of quality that are typically focused on the product and not the process. The product is more tangible than the process. Measurements such as MTBF, quality deficiency cost, error reports from the field etc. are all lagging measurements of the product-development performance. Moreover, performance-measurements systems have traditionally been designed and managed by lag-oriented accounting and finance functions (Bourne et al., 2000). This cements the view of product-development activities as something that should be measured in terms of resource consumption rather than value created. Add to this the stock market obsession with quarterly earnings (Koller et al.,
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2005), which further motivates the cost focus of the performance measurements.
With this in mind, it is not surprising to find that there is no relation between what managers identify as important and what is measured by the performance-measurement system. It may be the result of limiting the scope of the performance evaluation system to something that is used to report to external stakeholders. The important perspectives of learning, communication and coordination, risk and uncertainty management, and performance improvement are absent. It was also concluded that overall, there is a need for extending the scope of the performance-measurements system to also include measurements of internal stakeholders. An important finding is that the performance measurements employed by the case companies, strongly relate to what managers perceive as performance in product development. It is argued in this research that performance measurements affect the perception of performance, instead of the other way around. This finding is supported by Chapman and Ward (1997) in their finding that performance is perceived primarily in terms of the dimensions that can be measured, such as time and cost, or particular aspects of quality. Still, there is a clearly articulated need to improve the way the case companies currently evaluate performance. A strong genuine will to improve the performance-measurement system was identified, but there have been no or few attempts in order to do so. Overall, there seems to be a need for performance evaluation even though there are no articulated performance criteria to derive measurements from and evaluate against. All of the 54 interviewees were positive to improvements in the organizations’ capabilities within this area. The similar findings of Driva et al. (2001) are that without exception, all of the case companies wanted to improve their performance measurements.
SUMMARY OF RESULTS AND DISCUSSION
In this chapter performance evaluation from the point of view of managers and decision makers involved in the development of complex products is investigated. The literature reveals that the area of performance measurements in product development is a diverse field of research. This is seen in both the literature, where no commonly adopted ways of defining performance or evaluating performance exists, and in practice where no consensus in perception of performance exists, even if cost, time, and quality dominates both the perception of performance and its measurements. It is concluded in this research that the performance- measurement system has affected, thus limited the perception of performance in product development.
This might explain why value creation and learning is not associated with measurements of performance. At the same time managers are dissatisfied with the current performance evaluation systems, without having any ideas of how to improve the situation. It is argued in this research that a change in the performance-measurement system should begin with the criteria for performance and how the performance evaluation system is used, not by
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focusing on what is easy to quantify in measurements. For this to become a reality a change in the way performance is perceived by managers and other stakeholders involved in product development is needed.
On the other hand, when asking managers about what is important for success, a completely different set of factors are discovered. Factors that have more of the character of a leading performance indicator, i.e. factors affecting the process. It is therefore argued in this research that managers today need to change their focus from performance measurements to what is important in order to be successful and determine relevant measurements accordingly. It is also important that not every measurement needs necessarily to be easily quantifiable, as long as there is something that can be used to improve the process. The important thing is that the evaluating system fulfills its purpose.
Traditionally, performance-measurements systems have been designed and managed by lag-oriented accounting and finance functions (Bourne et al., 2000). According to the findings from this study within complex product development, this is clearly evident. Hence there is a need to complement this limited application of the performance-measurement system, to also support continuous improvements, learning, etc. For this to become a reality much work must be performed to change the culture and perception of performance, since an effective measurement system must be grounded in its performance criteria. Future research should focus on the relevant performance criteria for product development, i.e. on what characterizes high performance in a particular project or organization. This changes focus to leading indicators of performance that can be used by managers and decision-makers during the development in improving the performance of the product-development process.
The basic aim of operations management research is to create scientific knowledge. At the same time, this field of research is practically oriented and practicing managers are among the major consumers of the knowledge created (Handfield and Melnyk, 1998). In this research the need for more holistic studies with a system perspective of performance evaluation in product development has been argued for by highlighting some of its challenges. More research is needed with a more cross-functional perspective in order to address these issues that are important for managers.
There is a need for review articles and conceptual papers, integrating various fields of research such as marketing, operations management, engineering design, decision making, software engineering, and systems engineering in order to advance the state of knowledge in this field. It is also suggested that a future research opportunity would be to make use of the literature on success factors and performance measurements to permit the design of a measurement system based on what is important in order to achieve success.
7 CONCLUSIONS
This chapter presents the overall conclusions and implications based on the findings in this research. The outline of this chapter is as follows: the contributions from this research are summarized first and followed by an outline of the implications first for practice and then for theory of this research. The latter includes a discussion of future research.
MAIN CONTRIBUTIONS FROM THIS RESEARCH
This research is in the field of applied sciences and aims at contributing to both theory and practice. The objectives set for this research were:
1) To evaluate the current state of practice and identify challenges of measuring performance in the development of complex products.
2) To add to knowledge by addressing one or several of these challenges.
The first objective and second objective are directly mapped to the following list of contributions is argued for:
1) There is no link between success factors and what is being measured by the performance-measurement system.
2) Product management is not integrated in the performance-measurement system related to product development. Focus is instead on evaluating activities related to the project management function.
3) The measurement system is not focused on the early phases of product development but rather on the later phases of the development.
4) The architecture or technology aspect was identified as an important success factor but it is rarely addressed explicitly by the performance measurement system.
5) Value is not measured by the performance-measurement system, the focus being on time, cost, and quality. Value creation seems to be taken for granted.
FUTURE RESEARCH AND SCOPE
Within the academic research field, the management of the development of new products is mainly analyzed from the viewpoints of marketing and operations management. This is particularly the case in connection with the performance and performance-measurement literature within product development. One conclusion from the frame of reference discussed in Chapter 2 and the explorative multiple case studies conducted in this research, is the need a more consistent and less diverse terminology. It would be beneficial to initiate research studies with the aim of unifying the basic concepts and definitions.
Moreover, there is inadequate consideration of the early activities in the product-development process and how they can be evaluated. There is a need for further research focusing on the evaluation and measures addressing the early phases of the product-development process. The planning activities i.e. deciding on what to develop is not explicitly treated in the existing literature, focus tend to be on input, process, and output and outcome related measurements.
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Similarly, the technology or architecture as a success factor is not explicitly treated in the literature related to performance measurements in product development. This is somewhat surprising since there are many companies developing complex products which are completely dependent on the technology in their products. It is suggested that this is the result of there being many quantitative studies focusing on product development as whole. Hence, specific attributes that are unique for e.g. the development of complex products, can be missed in a more general perspective. Addressing the role adopted in the overall performance of the technology of the product development is something that needs further research. How the architecture can be evaluated in order to ensure that it contributes to the overall performance in product development also deserves attention.
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