Friday, December 16, 2011

Competitive Advantage through Commonality: Finding Sustainable Benefits in Execution Challenges

By Eric Smalley

Bruce Cameron
Commonality seems like an obviously good thing. Why incur the cost of making different parts for different products if the parts do the same thing? As it turns out, however, commonality is not always the right thing to do. And even when it is right, it can be difficult to achieve. SDM's Bruce Cameron is using a healthy dose of systems thinking to tease out when commonality makes sense and how to get companies to pull it off.

Cameron, a lecturer in the Engineering Systems Division at MIT who teaches System Architecture (ESD.34), led a study of 16 companies' platforming strategies. Platforms are collections of technologies, components, and manufacturing processes that are used to produce sets of related products. One of the major benefits of platforming is commonality: using as many of the same parts and processes as possible across multiple products. This both reduces costs and makes it easier to go after niche markets, which can increase revenue.

"There's a lot of evidence out there that firms that do this very well see a lot of competitive advantage," said Cameron.

So an important question is, why do so many companies fail when they attempt to implement commonality strategies? A classic example is the Joint Strike Fighter program. The program target was to share 80 percent to 90 percent of parts across three variants of the aircraft, but in the end only 30 percent to 40 percent were shared, said Cameron. "That type of behavior and phenomenon is seen in studies that we did in automotive, consumer products, and transport," he said.

If commonality is such an obvious cost saver, why do companies struggle with it? First, it isn't right for everyone. It has "a downside as it turns out," said Cameron.

Commonality may inhibit the development process and make it hard to adjust to changes in the market that call for greater product differentiation, said Cameron. In other words, it's important that companies avoid having commonality become a straitjacket that limits the flexibility of their product development process.

Second, even when commonality is warranted, achieving it is more difficult than it appears.

One common counterproductive force is competition between product lines within a company over resources and control, said Cameron. A second counterproductive force is the intentional pursuit of uniqueness: the tendency of engineers and designers to come up with different results for the same task. Even slightly different designs can mean a company must stock more parts than if the designs were identical, he said.

Systems thinking helps tease out whether commonality is the right thing to do and how best to do it, said Cameron. Systems thinking allows companies to take a holistic view of the benefits of commonality, said Cameron. "This is much more difficult in a corporation because some departments will see big advantages, while other departments will be forced to invest in costly parts management schemes."

Once a company determines that commonality makes sense, systems thinking can help companies achieve it through platforming. Platforming is classic systems thinking, said Cameron. "If you look at each product line individually, you would make a different set of decisions. But, if you look at them globally and allow trade-offs between them, then you start to see how the benefit emerges," he said.

Cameron's current research examines how aware companies are of the positive and negative aspects of commonality and how systematically they make trade-offs. He's also studying the control mechanisms and incentive schemes available to companies for finding the right level of commonality.

Cameron is slated to deliver an SDM webinar in March on platforming and commonality. The presentation will include examples from the 16 case studies in Cameron's platforming study.

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