Strategic product creation: Managing new interactions of technology, markets, and organizations

Abstract

Product competition in a growing number of markets is undergoing a profound transformation. Some firms are now beginning to use new kinds of ‘flexible designs’ for products and organizations to pursue innovative product strategies that generate unprecedented levels of product variety and change. This article explores the ongoing changes in strategies for designing products and for organizing development processes that are driving this transformation of product competition. Different kinds of competitive conditions require different kinds of strategies. Basic strategy concepts and derived product strategies are compared for stable, evolving, and dynamic product markets. Concepts of modularity in products and organizations are argued to be the core concepts driving the new kinds of product strategies now emerging in dynamic product markets. Modular product design is distinguished from traditional approaches to designing products, and the potential competitive advantages to be derived from modular product design strategies are elaborated. Modularity in product designs allows the decoupling of processes for developing new products, enabling those processes to become concurrent, autonomous, and distributed and making possible the adoption of modular organization designs for product development. The ‘quick-connect’ electronic interfaces of shared CAD/CIM systems may allow firms to create electronically mediated product development networks that further enhance the flexibility of modular product creation processes. Modularity in products and organizations requires new concepts for strategically managing knowledge. Creating modular product architectures requires an intentional and disciplined decoupling of technology development and product development. As a consequence, modular product design leads to better understanding of the state of a firm's current knowledge and makes possible more effective strategic management of new technology development. A hierarchy of organizational knowledge that distinguishes know-how, know-why, and know-what forms of knowledge is presented as a basis for developing new strategies for leveraging and controlling knowledge in product creation networks. This article concludes by arguing that success - and perhaps even survival - in product competition will increasingly depend on more effective strategic management of product, organization, and knowledge architectures.