P1251930714netFD

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SPRU Masters - Spring 2003 managing innovation in
complex products and systems
Product complexity, innovation industrial
organisation
Andy Davies
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Overview

• Mike Hobday (1998) 'Product complexity,
  innovation and industrial organisation', Research
  Policy
• Key characteristics of CoPS -
• Links between product complexity project-based
  production
• Contrast with mass produced consumer goods

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What is complexity?

• Compared to these aircraft, cars are a joke.
• A Pontiac has five thousand parts, and you can
  build one in two shifts. Sixteen hours
• Aircraft are a completely different animal. The
  widebody has one million parts and a span time of
  seventy-five days. No other manufactured product
  in the world has the complexity of a commercial
  aircraft. Nothing even comes close. And nothing
  is built to be as durable. You take a Pontiac and
  run it all day every day and see what happens.
  Itll fall apart in a few months. But we design
  our jets to fly for twenty years of trouble-free
  service, and we build them to twice the service
  life.
• (Airframe, Michael Crichton)

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CoPS defined

• Capital goods - complex products, systems,
  networks, constructs and services
• Purchased by large business user or government
  agency (or small number of users)
• High cost, software- and engineering-intensive
• Produced in one-off projects or small, tailored
  batches

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The role of capital goods

• Rosenberg (1976)
• capital goods sector plays a crucial role in
  introducing new technology into the economy as a
  whole
• output - new products or manufacturing plant
  (e.g. machines)
• customers in consumer goods, other capital goods
  and service sectors

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CoPS examples

• automated printing press
• Control systems
• air traffic, railway, electricity, telecoms,
  global finance
• One-off projects
• Millennium dome
• Channel Tunnel Rail Link

• flight simulators
• mobile communication systems
• corporate network management
• business IT systems
• aero-engines
• commercial aircraft
• high-speed trains
• intelligent buildings
• baggage handling systems

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Economic value

• High proportion of industrial output (av.
  1997-1999)
• 45 billion value added
• 21 total value added in manufacturing
  construction
• 1.35 million employed
• 96,000 companies
• Technological infrastructure
• transport, energy, IT, communications,
  manufacturing
• inputs to other goods and services
• EU competitiveness
• Ericsson, Nokia, Thales, ABB, Siemens, BAe
  Systems, Rolls Royce Alstom

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Product complexity

• Many interacting components sub-systems
• e.g. Boeing 777 - 3 million total parts to be
  assembled
• Highly customised
• Components, subsystems final products
• High software content
• e.g. Eurostar - has twice the fly-by-wire
  circuitry found in an Airbus airliner
• Design feedback loops
• Difficult to achieve design freeze prior to
  production
• Design is modified to meet customer needs at
  later stages in project life cycle

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Systems
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Example of a system
Mobile switching centre (MSC)
Mobile switching centre (MSC)
Subscriber data base
Roaming data base
Base station Controller (BSC)
Base station Controller (BSC)
RBS
RBS
RBS
RBS
RBS
RBS
RBS - Radio Base Station
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CoPS projects
System scope
Array
One-2-One implementation project
3G mobile system
System
2G radio base station
Subsystem/ component
Assembly
Low tech
Medium tech
High tech
Super-high tech
Technological uncertainty
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Innovation in projects

• Low-tech projects
• implementation of familiar technology
• e.g. roads and many construction projects
• Medium-tech projects
• adaptation of familiar technology
• e.g. incremental improvements of existing
  products
• High-tech projects
• first use of new technologies (but existing prior
  to project)
• e.g. defence new product development in IT,
  telecoms,
• Super high-tech projects
• new technologies (not existing at project
  initiation)
• e.g. Apollo moon landing

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Process of production

• Project-based or small batch
• efficiency gains not by moving into high-volume
  production
• Project management
• temporary project organisation (often involving
  multiple firms)
• Systems integration
• design and integrate components and subsystems
• manufacture and assemble is increasingly
  outsourced
• Sequence of production
• mass production - product development, production
  marketing
• CoPS - secure an order, develop the product
  modify the design during production to suit the
  customer

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Production process categories
Unit/project
Intelligent building Military system
Flight simulator Trains
Small batch
Metal machined plastic moulds
Large batch
Cars Semiconductors
Mass production
Petrochemicals Chemicals
Continuous process
Low
High
Volume of output
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Systems integration
Customers
Prime Contractor/ systems integrator
Subsystem suppliers
Component suppliers
Parts
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PRODUCTS High unit value, complex, long product
life
PROCESSES Project or small batch, long lead times
SYSTEMS INTEGRATION
SUB-SYSTEMS
COMPONENTS
custom
Batch/series
PARTS
standard
custom
standard
custom
Low unit-value, short product life
Higher unit-value, short product life
Mass production
Batch to series production
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Project web

• Suppliers
• Systems integrator and/or prime contractor
• Subcontractors (manufacture sub-systems
  components
• Specialised services (e.g. design software)
• Buyers or customers
• Business users, government bodies
• Regulators, formal industry associations,
  standard-making bodies, etc.

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Example of a web
Regulators
Industry Bodies
Mobile operators
Systems integrators
Suppliers
Specialised services
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CoPS vs mass production
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CoPS vs mass production
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CoPS vs mass production
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Conclusions

• Links between product complexity and
  project-based production
• CoPS require distinctive capabilities and
  organisation forms (cf. mass production)
• Understanding of innovation CoPS is vital
• Enable firms to improve their performance
• Guide policy and regulatory bodies involved in
  decision-making