The New Practice of Global Product Development

Many manufacturers have established product development activities in different countries around the world. Yet their senior managers often struggle to tie those decentralized organizations into a cohesive, unified operation that can efficiently drive growth and innovation. New empirical frameworks may help unlock practices with which managers can deploy well-coordinated global product development strategies.

Globalization pressures have begun to have a major impact on the practice of product development across a wide range of industries. A new paradigm has emerged whereby companies are utilizing skilled engineering teams dispersed around the world to develop products in a collaborative manner. Best practice in product development (PD) is now rapidly migrating from local, cross-functional collaboration to a mode of global collaboration. Global product development (GPD) therefore represents a major transformation for business, and it applies to a broad range of industries.

The objective of this article is to present frameworks that can help companies address various strategic and tactical issues when considering adoption of GPD. The concepts have been developed mainly through detailed discussions with managers at more than 100 companies in 15 countries in North America, Europe and Asia. Some data are from a recently completed study on GPD that product development company PTC has conducted with BusinessWeek Research Services, interviewing and surveying more than 1,100 engineering managers worldwide. (See “About the Research.”)

About the Research »

In our discussions with managers, many have found the ideas, frameworks and perspectives presented in this article to be helpful in addressing the transformation to global product development and its implementation today. There is no blueprint, but senior managers can more effectively plan for global product development and take fuller advantage of its promise by examining the various strategies, staged approaches and key success factors described herein and adapting those insights to their own unique set of circumstances.

Defining Global Product Development

Several best practices in product development evolved through the 1980s and 1990s.

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References

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O. Gassmann and M. von Zedtwitz, “Trends and Determinants of Managing Virtual R&D Teams,” R&D Management 33, no. 3 (2003): 243–262.

2. J. Santos, Y. Doz and P. Williamson, “Is Your Innovation Process Global?” MIT Sloan Management Review 45, no. 4 (summer 2004): 31–37.

3. “Mastering Complexity in Global Manufacturing: Powering Profits and Growth Through Value Chain Synchronization,” Deloitte Research, 2003.

4. T.L. Friedman, “The World Is Flat: A Brief History of the Twenty-first Century” (New York: Farrar, Straus and Giroux, 2005).

5. These specific country categorizations are based on salary survey results obtained from Mercer Human Resource Consulting for a representative type of engineer. (Systems Engineer – Intermediate, defined as “under general supervision, provides technical support to sales force during sales negotiation. Configures hardware, software, and design application requirements of products offered to customers to meet their requirements. Resolves complex technical issues with guidance from senior engineers. Frequently reports to a Systems Engineering Manager. Typically requires a Bachelor’s Degree and two to four years of experience.”)

6. “Global Product Development — Moving From Strategy to Execution,” PTC and BusinessWeek Research Services, 2006.

7. “Services Export Study,” Federation of Indian Chambers of Commerce and Industry, July 7, 2005.

8. “Strategic Review 2006, The IT Industry in India,” NASSCOM, 2006.

9. N. Repenning, “Understanding Fire Fighting in New Product Development,” Journal of Product Innovation Management 18, no. 5 (2001): 285–300.

10. N. Bajpai, J. Sachs, R. Arora and H. Khurana, “Global Services Sourcing: Issues of Cost and Quality,” CGSD working paper no. 16, The Earth Institute at Columbia University, Center on Globalization and Sustainable Development, New York, June 2004.

11. A.S. Blinder, “Offshoring: The Next Industrial Revolution?” Foreign Affairs 85, no. 2 (March–April 2006): 113–128.

Acknowledgments

We would like to thank the many colleagues, MIT research sponsors and PTC customers who have generously shared their GPD experiences and knowledge with us. We could not have developed the observations in this article without their support and partnership. We are also grateful to several colleagues and anonymous reviewers who provided insightful comments and helpful suggestions.