Managing New Product Design and Development: an Anglo-German Study

London Business School, Business Strategy Review, 1996, Volume 7 Number 3, pp 1-1 5

Managing New Product Design and Development: an Anglo-German Study Chris Voss, Kate Blackmon, Philip Hanson and Tim Claxton

This article reports the results of a study of innovation and product development at 245 manufacturing sites in the UK and Germany It examines the relationship between design and performance and the competjtiveness of the UK and Germany in design and manufacturing. Ovemlll few sites reached “world-class” standards - 9% in Germany and 3% in fhe UK, although many sites were not far below these standards.

Competitiveness of manufacturing companies docs not come just from managing the manufacturing process well It also comes from successful exploitation of new technology, from a deep understanding of customer requirements and thc ability to bring the right products and services to market faster than competitors. This is not simply a matter o f creativity, but the ability to develop products that are easy to build, easy to ship, easy to usc and a pleasure to own. This process of innovation (the continuous generation of new product concepts and ideas) plus product dwelupment (processes which systematically turn concepts into products and deliver them to market) is often called design.

This article on thc “design” process is based on the results from the htcst phase of a long programme of study of the competitiveness of manufacturing organisations in Europe. The programme - theh4ade in Europe study - has been led by the LBS Centre for Operations Management and IBM, with collaborators in Europe. The UK data is now being collected in conjunction with the Confederation of British Industry Probe benchmarking programme. The first part of this field study focused on the competitiveness of naanufachtring in four European countries (Britain, Germany, the Netherlands and Finland) measuring both operational practicc - total quality, lean production etc - and operational performance - productivity, profitability etc (Voss et al 1995).

This second study focuses on the competitiveness of design processes in British and Geirnan companies. Wc wanted to test the age-old rhetoric that the UK breeds great skills of invention - which itself suggests the importance British manufacturers attach to design. By developing a model of world class practice and performance, th~s study aimed to better definc and mcasure the importance of design for manufacturing industry. Interviews were conducted at 245 manufacturing operations in the

Figure 1

Business Strategy Review 0 London Business School and International Business Machines Corp

2 Chris Voss, Kate Blackmon, Philip Hanson and Tim Claxton

two countries, examining how well companies were managing their design and development processes against world class standards.

The Study

The Made in Europe design study is based on a conceptual model that links design practice to operating and business performance (figure 1 ). “Practice” refers to the established processes that a company has implemented to manage its manufacturing business. “Performance” refers to the measurable outcome of these practices at both the operational and business levels. The central hypothesis tested by this study is that adopting best practice will lead to attainment of high performance.

Methodology

The data collection process was through a multi- level, cross-functional team at each participant site. Using a structured questionnaire, they assessed the level of practice and performance against a set of descriptions of good and poor practice.

For the study reported in this article, 27 new questions on innovation and product development were added to the original 46 core questions on manufacturing. Each question resulted in a ranking of site practice or performance on a 1 to 5 scale, with 5 representing world class performance, 3 representing average performance, and 1 representing poor performance.

Each site was then visited by an expert practitioner, who conducted an on-site review of the assessment team’s responses. In addition, the reviewer provided feedback that positioned the site against its industry sector and against the entire sample. These results provide a powerful datum for regularly measuring the site’s rate of progress towards world class. (There are many definitions of world performance. For the purposes of this study, a company defined as world class has to emulate and surpass the very best international companies in every area of its business.) Some sites have used the study’s measurements as supporting evidence in their European and British Quality Award assessments.

122 UK sites and 123 in Germany were visited during 1994 and 1995. These represented a broad

range of site sizes, industry sectors, parent company origins and ownership structures. 41% of the sites had over 500 employees, and another 34% had 200- 500. Industry sectors ranged from “aeronautical and automotive” (1 5% of the total) to food (3%), with “mechanical” as the largest single group (1 WO). Nearly three-quarters of the sites were domestically owned, and nearly half were subsidiaries of other companies. Each site assessment becomes part of the Made in Europe database, which now includes more than 800 reports.

The questions that we sought to answer included:

0 How far have manufacturing sites progressed in implementing world class design practice and performance?

0 How many sites in the UK and Germany have reached world class levels in design practice and performance?

0 What are the similarities and differences between the UK and Germany in design?

0 Do better design practices lead to better design performance?

0 What are the variables linking design and business performance?

0 Is there a preferred sequence for improving specific design practices?

0 Where are the critical opportunities for improvement?

0 What is the link between design and a nation’s competitiveness?

The breadth and depth of the sample made it possible to draw valid results and conclusions.

Practice and Performance

In the areas of both innovation and product development, we identified and measured the level of use of a number of key practices. In addition we identified and measured indicators of the resulting performance as well as measuring business performance.

Business Strategy Review Autumn 1996

Managing New Product Design and Development: an Anglo-German Study 3

Innovation management

This begins with a culture of innovation where creativity and entrepreneurial behaviour are encouraged and rewarded. The innovative company involves different functional areas, customers and suppliers in generating new product concepts that meet or anticipate customer needs; it plans the development of future product generations; and it has explicit mechanisms for maximising the contribution of new technology - both inside and outside the company.

The study’s results show that most sites had technology strategies in place, but fewer demonstrated a good environment for innovation and creativity. A third of firms were poor at planning beyond the life cycle of their current generation of products (figure 2).

Innovation performance

Good innovation management should be reflected in higher innovation performance. Measures of innovation performance include the percentage of sales taken by new products; the introduction of significant changes to product lines; and the company’s lead over its competition in product technical performance (figure 3). In each case the performance of a site was rated against its competition. The proportion of sites with high technical performance reflects the strength of their technology strategies. Lower ratings for both innovation culture and forward planning reflect less significant changes in product lines and lower percentage of sales from new products.

Systematic product development process

Turning new ideas from concepts into marketable products requires processes that are systematic, rather than ad hoc. Activities associated with systematic product development include industrial design; monitoring and feeding back information about product performance to design teams; designing for production; defining and documenting the product development process; and setting priorities through resource allocation and management. Product development costs should be understood and used as a focus for improvement.

Figure 2

INNOVATION MANAGEMENT

Poor Middle Good or best Dractice

0 10 20 30 40 5 0 60 70 80 90 100

Figure 3

INNOVATION PERFORMANCE

Poor Middle Good or best practice

0 10 20 30

Figure 4

PRODUCT DEVELOPMENT

Poor Middle

~~~

40 50 60 70 80 90 100

PROCESS

Good or best oractice

0 10 20 30 40 50 60 70 80 90 100

Overall, product development proved the strongest area found in the study, with more than half of sites performing well by most criteria, industrial design in particular. The weakest areas were resource allocation and cost management (figure 4).



Figure 5 CONCURRENT ENGINEERING


l ~ i ~ ~ ~ l i ~ ~ ~

0 10 20 30 4 0 50 60 7 0 80 90 100

Figure 6

ENGINEERING AND MANUFACTURING SYSTEMS

Poor Middle Good or best oractice

1 1 1 1 1 I l l l l l

0 10 20 30 4 0 5 0 60 7 0 80 90 100

Figure 7

PRODUCT DEVELOPMENT PERFORMANCE


t l l l t 1 1 1 1 1

0 10 20 30 40 50 60 70 80 90 100

Concurrent engineering

Systematic design processes are necessary for concurrent engineering - which involves overlapping development activities and interaction between everyone involved in the product development process, whether inside or outside the enterprise. As figure 5 shows, companies have clearly recognised the need for teamwork and integration between company functions, though involvement of external partners was not as strong.

Engineering and manufacturing systems

A wide variety of sophisticated information systems and tools are available today to support systematic product development processes and concurrent engineering. These include engineering application tools that support team working across functions; and electronic design processes (eg computer aided design and manufacture - CAD/CAM) that are integrated to facilitate data access and exchange across internal boundaries and with external partners. Effective management of a consistent bill of materials and control of engineering change orders also figure prominently.

As seen in figure 6, many sites had basic systems in place for managing their bills of materials and engineering change orders. These systems were often manual and as a result are slow and prone to errors. Fewer sites were using more sophisticated information technology tools to introduce and support concurrent engineering; and lack of integrated systems across the site and supply chain was still resulting in “islands of automation”.

Product development performance

By implementing systematic development processes and concurrent engineering, supported by engineering and manufacturing systems, companies should improve product development performance - ie shorter design cycle times, faster time to market and fewer cancelled products.

This in turn should lead to better business



5.0 -

4.5 -

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performance, as measured by customer satisfaction, market share growth and higher return on assets relative to the competition (figure 7). Though most sites were reducing cycle times and time to market, few reported exceptional performance in these areas. Customers were generally satisfied, but there were fewer reports of delighted customers with expectations exceeded. Most sites reported market share growth and return on assets equal to or better than their international competitors.

Are the UK and Germany World Class in Design?

It is frequently stated that it is of vital importance for companies to attain world class standards of management practice and operational performance. We compared results to a yardstick of world class design practice and

Figure 8

WORLD CLASS DESIGN

1 Out of balance 1

.I:.

performance (figure 8) . Those sites reaching “world class” standards account for 3 per cent of the UK sample and 9 per cent in Germany. At the other end of the scale, only 2 per cent of UK companies and no German companies can be classified as “vulnerable” - companies well behind the pack, with both poor practice and poor performance.

Although there are few world class sites in either country, in design there is a higher level of world class and average performance in both countries than there was in manufacturing in our 1994 study. In addition, the long tail of poor performers found in UK manufacturing does not seem to be present in design and innovation.

As can be seen from figure 8, there is a strong relationship between design practice and performance. In addition we found that the quality of design practice was strongly linked to overall business performance.

Poised

Vulnerable Out of balance 2

. . - I I I I I I I

10 15 2 0 25 30 35 40 45 5 0

Design practices

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Figure 9

LEADERS AND LAGGERS Areas of biggest difference - YO deviation from average Practice Laggers Leaders

I Product lie cycle planning

1 Technology strategy I

I Culture of innovation

1 Design for production

1

Performance

lnnovativeness (sales fro!

Product technical performance I

1 Time to market

7 Il I] 7

I

-30 -20 -10 0 10 20 30 40

Figure 10 DESIGN PRACTICE AND PERFORMANCE COMPARISON OF UK AND GERMANY

No of sites

50 -

40 -

30 -

20 -

1 0 -

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0 10 20 30 4 0 5 0 60 70 8 0 90 100

Overall design practice and performance 56

Innovation as the Source of Leadership

To gain insights into what makes world class design, we contrasted the top and bottom 10 per cent of the sample - the leaders and laggers (figure 9). The leaders are substantially above average and the laggers substantially below average in every area measured.

Where are the leaders furthest ahead? A strong pattern emerges. Four of the top practice areas where best companies excel have to do with innovation. It would seem to be innovation management, in all its dimensions, that distinguishes the leaders from the rest of the pack. In particular, the leaders plan for future innovation. In the market- place, this is reflected in their innovation performance and technical leadership. In addition, they are more able to lead through faster product development times. The level of innovativeness - the percentage of sales coming from new or enhanced products - is particularly high. Leaders also have a major strength in technology, as reflected in technical performance, and were rapidly improving their cycle times and time to market. External integration was another particular strength of leaders. Laggers proved to be particularly poor in industrial design and design for production.

This pattern supports the proposition that superior organisations compete through their whole manufacturing and engineering system. It is not enough to trade off excellence in some areas against poor practice and performance in others.

We also examined some of the background influences on design practice and performance. Site size was found to be significant in both UK and Germany, with the largest sites (more than 500) having better average practice and performance, though there were some excellent smaller sites. A similar pattern was found with ownership with foreign owned organisations in both the UK and Germany having better average practice and performance.

An Anglo-German Comparison

In studying design at sites in the UK and Germany, one objective was to identify any significant differences between these two strong manufacturing nations, and to try to understand their

Business Strategy Review ~ ~

Autumn 1996


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nature, possible causes and implications. In most areas the study indicates an overall German lead, with more German sites applying best practice in design and achieving correspondingly higher performance (figure 10). A number of areas deserve particular attention (figure 1 1 ) .

The widest gap between the UK and Germany is in monitoring the cost of developing new products. With German firms facing high employment costs (wages plus social costs) and a strong Deutschmark, it is not surprising that they have adopted practices and systems to track design errors and the cost of re-work. UK firms, with lower labour costs, are under less pressure to understand exactly where costs are incurred in the product development cycle. German firms also place greater emphasis on allocation of resources and pay significantly more attention to design for production - another source of cost reduction.

German firms are significantly ahead in some aspects of applying new technology to the way they work. This lead is apparent in a wider use of computer-aided engineering and design tools and in the communication of data internally and externally via integrated systems.

Just as it is interesting to note where UK firms can improve in design, there are areas where they either match or surpass their German counterparts. UK manufacturers focus on industrial design - style and ergonomics - earlier in the design process. They also appear to be slightly ahead in setting themselves a corporate vision that is shared throughout the organisation.

It is often said that the UK does not value engineering enough. Thls was not supported by our data. The great majority of UK manufacturers - 72 per cent, say they consider engineering to be vital to innovation and a major source of competitive advantage, and only 7 per cent view engineering as just another overhead expense. This positive attitude to engineering is slightly stronger amongst German firms.

Computer-aideddeslgn tools --.J Design cycle time

Design for production Internal integration - 1 Omeration Of new product Product configuration

j

concepts -

Strengths and weaknesses

German managers were asked some additional questions concerning their perceptions of national strengths and weaknesses in design. They consider their key problem areas to be costs, labour flexibility,

Figure 11

BRITAIN VERSUS GERMANY Significant gaps in practice

Rank Areas where Germany Areas where the UK is ahead is significantly ahead or no significant difference

1 ' Control of development costs Industrial design ." . .

- . -

Teamwork

Technology strategy

I Overlap of development

' Computer aided

activites

engineering tools

Figure 12

MANAGERS OPINIONS ON DESIGNING IN GERMANY

Rank Positive aspects Negative aspects

1

2

3

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5

over-regulation and over-taxation. They see their strengths primarily in terms of the technology interaction and infrastructure available to firms in Germany.

The UK has been aggressively trying to create a more flexible, de-regulated and lower tax environment than its counterparts in the rest of Europe. Despite British success in creating a positive economic climate, many organisations would like to see Britain copy Germany's infrastructure for developing and exchanging technical skills and knowledge (figure 12).


8 Chris Voss, Kate Blackmon, Philip Hanson and Tim Claxton ~~

Figure 13 RELATION BETWEEN NEW PRODUCT LEAD TIME AND QUALITY MEASURES

Highly significant w Significant w Fairly significant relationship relationship relationship

0 No significant positive or negative relationship

Figure 14 High

111 Low

Low Process maturity High

w S o m e impact Very high impact

0 Negative impact

High impact

Figure 15

Process change

Learning about Design Management

The availability of a large database of design practice and performance enabled us to examine in more detail a number of aspects of design management.

Time and quality - no longer a trade-off?

Traditionally, managers have sought to trade off quality and speed to market, believing that trying to compress product development time will inevitably result in some compromise on quality. However, the data from the study suggest otherwise - that speed to market and quality are positively correlated (figure 13). Through effective use of concurrent engineering and design systems, leading companies are simultaneously compressing their cycle times and improving their quality. This implies that average or lagging companies will no longer be able to compete on just cycle time or just quality. Reducing cycle times also gives sites business benefits, such as reduced development costs and the ability to better anticipate customer requirements and market trends: as a result, the gap between world class and the rest is likely to widen.

The technology trap

For any organisation setting out to design and bring its products to market in a competitive way, there are typically two target areas for design improvement. One is to refine the design process so that it is simple, fault-free, and sharply focused on the customer. The other is to seek the advantages of speed and accuracy, for example through the use of information technology. In many organisations the “technology route” is easier to justify and for this reason it is often undertaken first.

However, this study indicates that ultimate success in design comes, not surprisingly, from successful progress in both dimensions of change. Where the emphasis is on one or the other route, it can be seen that a process improvement focus has a greater impact than a technology specific focus (see figure 14).

When the “technology first” route is employed, the logic of business process flow may be effectively entrusted to software (eg in project management or



manufacturing resource planning -MRPII - systems). In this event, any subsequent change required to simplify or re-focus the business process is made more difficult by the need to change activities that have been frozen into the software. Thus, technology can become a brick wall, precluding attempts to continuously improve the operational processes.

When competitive benefits are not achieved because process change has not been accomplished, many sites do not recognise the cause and continue to seek progress through even more technology change. It is not unusual for sites to employ many generations of project management software, or implement new MRP systems that have the same operational logic as their predecessors. This cyclical replacement of technology - without accompanying strong process improvement, amounts to a “technology trap”. (see figure 15).

For design processes, the technology brick wall has so far been relatively insignificant. The use of information technology to capture, transform and transmit data does not have the effect of encapsulating process flow logic. For example, implementation of CAD or configuration management software does not usually preclude process simplification. However, as the progressive integration of software systems across both design and commercial processes takes place within the enterprise and to its outside collaborators, the brick wall will grow. World class design will not be easily achieved by a reliance on software alone.

The alternative approach is strongly process- focused. This route also has to overcome inertia, more cultural than technological. Sites that set out to achieve elegant, focused design processes in the context of a clear technology vision are more likely to reach world class design performance. The implementation of “digital mock-up”, for example, enables fundamental process re-design to remove the need for physical prototypes, but it can only be accomplished through the use of three-dimensional modelling and data management tools.

Partnership in design

Should manufacturers be worried by the possibility that the UK could be in danger of becoming a workbench, assembling products

designed elsewhere? The data do not support this concern. In both the UK and German samples, most products - 89 per cent - were designed in the home country and 81 per cent were designed on the site studied.

However, the fact that most design is done domestically and on-site belies the complex and diverse nature of today’s technological environment. Nearly two thirds of sites reported some sharing of design with other company-owned sites, other companies, suppliers or customers. Not only is design often shared with overseas partners, but the poorest design performance frequently comes from sites without any external design input.

That companies are sharing some of their design and interacting with others indicates that design is being conducted within a networked organisation. There are many potential benefits in interacting with the vast and complex networks of joint ventures, partnerships, suppliers of technologies and components, expert consultants, academia, government and customers. To be effective, this interaction requires skills in managing relationships with external partners, suppliers and customers, as well as the skills to integrate this knowledge internally. Though the majority of design may remain in-house, the leaders will seek out the best technologies, ideas and skills from wherever they are available.

Quality Awards

The European and British Quality Awards (EQNBQA) model is increasingly being used as a template for assessing a company’s overall business excellence. Its fundamental premise is that excellence in the “enablers” (see figure 16) will lead to superior results in terms of employee and customer satisfaction, impact on society and business results. This is the same link between practice and performance that underlies Made in Europe.

The processes studied in Made in Europe I and 2 include many of the key enablers in a manufacturing site, together with the key measures of operating and business results. It is therefore possible to evaluate the data collected for this study using the EQNBQA model, thus providing the opportunity to evaluate the model’s effectiveness in manufacturing and design.

Autumn 1996 Business Strategy Review


Figure 16

STUDY RESULTS AND THE EQAlBQA Business excellence model

Figure 17 LEADERS - TOP 10% OF EQNBQA SCORE

Figure 18

LAGGERS - BOTTOM 10% OF EQNBQA SCORE

Enablers 50%


Managing New Product Design and Development: an Anglo-German Study 11 ~

The results of this evaluation, as shown in figure 16, provide strong support for the EQA/BQA model. The lines illustrate where the relationships in the model are most strongly supported, with the width of the lines indicating the strength of the relationship. (The lack of an arrow does not indicate there is no lmkage, only that a strong relationship was not found in this study.)

Overall, business performance was found to be strongly related to each of the enablers and performance measures. Process excellence and performance were linked in both manufacturing and design. There was a clear relationship between leadership and both quality management and people management - supporting the view that lack of executive leadership often causes failure of Total Quality Management.

There was a strong and important link between people management (training, teamwork, empowerment, recognition, etc.) and quality management. In turn, quality management underlies both manufacturing and design performance. And a key route to design excellence may be via quality management.

The Made in Europe data can be used to measure both the enablers - in particular core processes - and their impact on manufacturing and design performance. Made in Europe data can be used to estimate a site’s likely EQMBQA standing based on manufacturing and engineering processes. The estimated scores for the leaders and laggers of the sample are shown in figures 17 and 18.

German and UK Manufacturing Competitiveness - an Operational View

The Made in Europe studies have enabled us to develop a strong picture of both the capabilities and performance of manufacturing organisations in the UK and Germany.

Made in Europe I showed that in manufacturing the best UK companies are as good as any in Europe, but that a tail of poor performers is holding the UK back relative to international competition. By way of contrast, Made in Europe 2 has shown that in design Germany holds a lead over the UK - indicating a “phase shift” rather than a UK tail (figure 19).

Figure 19

UKVERSUSGERMANY COMPETITIVENESS -



Figure 20 DRIVERS OF COMPETITIVENESS

Figure 20 presents a model of international competitiveness showing four of its key drivers - manufacturing capability, design, costs and investment. Apart from a long tail, the UK’s manufacturing capability is similar to Germany’s, but Germany holds a lead in design. Indicators of investment, such as the level of implementation of systems in both manufacturing and design point to a German lead. Finally, German companies report higher cost levels than those in the UK - any productivity differences not being enough to overcome the high costs of labour and the strong Deutschmark. Overall, the UK leads Germany in one of the drivers of competitiveness, is virtually equal in one, and behind in two.

The relative competitiveness of the two countries will depend ultimately on markets. In some markets the key basis of competitiveness is price; in others it is manufacturing capabilities such as quality, responsiveness and service; and in others it is based on the technical performance of the products,

For companies in Germany, reducing costs is central to increasing international competitiveness. For UK companies, design is key to increasing competitiveness relative to Germany. In addition, UK companies need to raise levels of investment. In both countries, with most companies still far below world class, there is a need to improve practice and performance in all areas of design and manufacturing.

The data show that most European companies employ good practice in manufacturing and in design, but overall few have achieved world class practice and performance. Moreover, world class is a moving target. What is world class today may not win tomorrow, as new ideas, techniques and technologies appear.

Many international companies are now establishing manufacturing capacity away from their home base in countries where labour costs are lower. Globally, this means the newly industrialised countries of Asia, South America and Central



Europe. For some companies, it means looking at the cost and infrastructure advantages currently present in the UK.

For manufacturers this poses a strategic dilemma: which capabilities should be exported and which should be retained at home? The prevailing view is to keep intellectual capital and design know-how at home, building and shipping the complete product from the low wage country. But is this the best strategy? Surely, design, technical and manufacturing capability must be maintained in Europe. The strategy of some Japanese companies is to differentiate according to product, keeping both the design and manufacture of strategically important products at home, allowing only final assembly of labour intensive products to move overseas. This may provide the best business model where lean production and automation are delivering a continuous reduction in labour content, as opposed to labour cost.

Leading companies in this study have shown that the design and build processes are not independent of one another. World class products come from a continuous and intimate learning relationship between design, manufacture, supplier and customer. Separating these for short-term cost improvements may result in sub-optimal products in the medium term. Exporting manufacturing is possible, but only if it does not risk the maintenance of a strong technical and manufacturing base at home.

In order to realise long-term product and service excellence, companies with global aspirations must maintain and encourage the intimate relationship between design and manufacture. At the same time, suppliers must be given scope to contribute their unique know-how to the overall design process, and customers must be part of the innovation and product development process from the outset.

These close relationships are the foundations of learning and improving. Acheving them, while at the same time taking advantage of significant geographic cost advantages, is central to a truly global manufacturing strategy.

The simplistic decision to build entire product families in low wage economies may bring a short- term cost advantage that, in the long run, is at the expense of the continuous improvement of design

and manufacture. It is not unusual to see such decisions eventually reversed in favour of a strategy to design out labour content, rather than merely to reduce labour cost. It is clear that national strength must be built upon the synergy that comes from an intimate relationship between design and manufacture across all collaborating parts of every supply chain.

The Learning Factory

In our studies of both manufacturing and design in Europe, one attribute of excellence that has been common to all top performing sites is the ability to learn. The world class manufacturing site is likely to be a “learning factory” - one that actively seeks knowledge from inside and outside the organisation, and then translates that knowledge into improved practice and performance.

External learning should be a source of knowledge and motivation and internal learning should lead to continuous improvement.

External learning

0 Sites that benchmark are far more likely to be realistic about their competitiveness than those that don’t. Benchmarking allows sites to learn what is possible, identify their strengths and weaknesses, focus their improvement activities and set challenging goals.

0 Sites that interact well with their suppliers and customers are more effective in design.

Sites that do everything on-site may perform less well than those that interact with outside sources in designing and developing new products. This implies that the better sites have acquired new knowledge from their interaction with the others. The worst performers are often those with no international partners.

0 Foreign companies bring in knowledge that is transferable. For example: the adoption of Japanese “lean production” methods in the UK, and North American design management in Germany.

Suppliers to best practice manufacturing sites



in high performing industries like electronics apply better practice than those that supply poor practice organisations .

performance. It also reviews the results from this and previous studies and develops conclusions about competitiveness and the way forward. The main conclusions are:

Learning is an important link in the supply chain.

The importance of design Internal learning

Teamwork and good internal integration are key contributors to learning nithm an organisation. Companies that recognise and practice this will perform better than those that don't.

In manufacturing the use of techniques of quality management, such as problem-solving tools. are learning processes in themselves. Those that use these tools wil l outperform those that don't.

Failure to learn

On all of our indicators, m\.opic organisations - those that do not look outside - performed badly. It is easy to see why.

Without knowledge, many companies become complacent. By failing to realise that they have to take action, they fall behind their faster moving competitors.

Without knowledge of their own strengths and weaknesses, companies won't know where to direct their limited resource for managing change. Indeed, improvement activities may be arbitraq2 rather than focused on the vital few priority areas requiring attention.

The widening gap

If, as the study indicates, the best sites are already learning organisations, then the gap between the best and the worst cannot help but widen. Poor companies that do not look outside and fail to learn will be left behind by those that exploit knowledge from every available source.

Summary

This article describes the results of a field study of management practice in design and the resulting

Strong design practice leads not only to strong design performance, but to improved business results.

Four key drivers of manufacturing competitiveness are manufacturing capability, cost, design and investment. In the UK, economic infrastructure delivers a cost advantage, but a stronger focus on design could enhance Britain's international competitiveness.

Manufacturers in both the UK and Germany claim to value the engineering function highly.

In design and manufacturing, there exists a positive relationship between enabling factors (eg leadership and people management) and results as suggested by the European and British Quality Awards.

The UK and Germany

3 per cent of UK sites studied and 9 per cent in Germany have world class design practice and performance.

In manufacturing practice and performance both British and German leaders rank with the best in the world, though the UK has a tail of low achievers. In design, however, the UK sample consistently lags that of Germany.

German manufacturers have more systematic cost management in the design process than those in the UK.

German executives express concern about employment costs, regulation and labour flexibility.

UK companies focus on industrial design - style and ergonomics - earlier in the design process.



Competing in the future

0 The widest gap between design leaders and laggers is in the management of innovation and new ideas.

0 Design advantage can come from a close collaboration with customers and suppliers.

0 Successful manufacturers need not trade off product reliability and quality to achieve time to market gains.

0 Implementing Information Technology alone, without having implemented systematic design processes, is not as effective as both together and may even lead to a ‘technology trap’.

0 National strength must be built on a combination of design and manufacturing capability.

0 The way forward towards competitive advantage requires a systematic focus on managing “know-how” and becoming a “learning factory”.

Chris Voss is BT Professor of Total Quality Management and Director of the Centre f o r Operations Management at London Business School, where Kate Blackmon i s a Research Fellow. Philip Hanson is Manufacturing Practice Leader of the IBM Consulting Group in the UK, where Timothy Claxton is also a Management Consultant. This article is based on research sponsored by IBM and published as “Made in Europe 2, An Anglo-German Design Study”.

Acknowledgement

and Physical Science Research Council This research was funded by the Engineering

References

Hanson, Philip, Chris Voss, Kate Blackmon and Tim Claxton (1996) Made in Europe 2, IBM and London Business School, April. See also Made in Germany I1 (in German)

Voss, Chris, Kate Blackmon, Philip Hanson and Bryan Oak (1995) The Competitiveness of European Manufacturing - a Four-country Study, Business Strategy Review, Spring. This article summarised the earlier IBM-sponsored study, Made in Europe: a Four Nations Best Practice Study


Managing New Product Design and Development: an Anglo-German Study

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