The Product Family and the Dynamics of Core Capability
Why is it that some firms introduce distinctive new products time and time again, when so many other firms are far less able to generate new products? More specifically, some firms, while strong in product design, fail to gain commercial reward, but their more successful counterparts exhibit the right mix of capabilities in implementation, manufacturing, and distribution as well as product design. Much current management thought addresses developing single products as rapidly as possible. Product development when seen from this perspective has two essential problems: redundancy of both technical and marketing effort and lack of long-term consistency and focus. We will argue for a broader approach to managing new products.
Concentrating at the level of the product family, and more specifically on the development and sharing of key components and assets within a product family, is the vital issue. The benefit of examining elements shared by products within a family is that firms will then develop the foundation for a range of individual product variations. At an even broader level, one can examine relationships between product families themselves to achieve even greater commonality in both technologies and marketing. For an existing product family, renewal is achieved by integrating the best components in new structures or proprietary designs to better serve evolving customer needs. Integration improves all products within the family. Diversification can be achieved by building on and extending capabilities to build the foundations of new but related product families. For example, Hewlett-Packard built on a foundation of core capabilities in scientific instruments to create families of computers and peripherals, and also to enter into the medical systems business. Similarly, Canon built on its copier and facsimile machine platforms to create laser printer and scanner businesses.
Figure 1 portrays a set of products and their relationships over time that we believe is conducive to sustained success. Each generation of a product family has a platform used as the foundation for specific products targeted at different or complementary market applications (“Platform Development Family A,” Products 1 through 4). Successive generations refresh older platforms with improved designs and technologies (“New Generation Platform Family A,” Products 1 through 6). Starting work on the next product platform while completing specific products based on the current platform helps the company maintain product leadership.
1. D. Teece, “Profiting from Technological Innovation: Implications for Integration, Collaboration, Licensing, and Public Policy,” Research Policy 15 (1986): 285–306; and
C.K. Prahalad and G. Hamel, “The Core Competence of the Corporation,” Harvard Business Review, May–June 1990, pp. 79–91.
2. J.B. Quinn, T.L. Doorley, and P.C. Paquette, “Technology in Services: Rethinking Strategic Focus,” Sloan Management Review, Winter 1990, pp. 79–87.
3. Sanderson posited that “virtual designs” serve as the basis for a series of “product realizations” within particular generations of a product family. See:
S. Sanderson and V. Uzumeri, “Cost Models for Evaluating Virtual Design Strategies in Multicycle Product Families” (Troy, New York: Rensselaer Polytechnic Institute, Center for Science and Technology Policy, 1991, and forthcoming in Journal of Engineering and Technology Management.
4. R. Henderson and K. Clark, “Architectural Innovation: The Reconfiguration of Existing Product Technologies and the Failure of Established Firms,” Administrative Science Quarterly 35 (1990): 9–30.
5. Sanderson and Uzumeri (1991)
6. The four major innovations were miniature stereo headphones, miniature super flat motors, disk drive mechanisms, and small, rechargeable Ni-Cd batteries.
7. A. Lehnerd, “Revitalizing the Manufacture and Design of Mature Global Products,” Technology and Global Industry: Companies and Nations in the World Economy, ed. B.R. Guile and H. Brooks (Washington, D.C.: National Academy of Engineering Press, 1987), pp. 49–64.
8. By simpy varying the length of the motor field, power from 60 to 650 watts could be achieved.
9. Wheelwright and Clark employ a similar framework in their new book on product development. See:
S.C Wheelwright and K.B. Clark, Revolutionizing Product Development (New York: Free Press, 1992).
10. Events and years to anchor data gathering and analysis over a span of time have been used to study and illustrate that successful R&D teams pursue a number of alternative technical solutions before arriving at final solutions. See:
T.J. Allen, Managing the Flow of Technology (Cambridge, Massachusetts: MIT Press, 1977), pp. 13–26.
11. A fifth basic dimension, service, has been made part of our research with other companies.
12. For Family A, seven individuals participated in the study; for Family B, ten individuals; for Family C, nine.
13. We settled on these four dimensions of core capability based on the literature. We are also examining core capabilities for data gathering and analysis.
14. In our work with other firms, managers have chosen to identify specific manufacturing processes as core capabilities for data gathering and analysis.
15. The metric used to assess capability was as follows:
5. Best in class — industry leadership
4. Above par
3. On par
2. Below par
1. Worst in class
16. The underlying databases for these studies can be quite large. For example, over a thousand data points were gathered for the horizontal application family alone. We computed standard deviations to examine the variance in responses among participants for each core capability. These have been left out of this article to simplify the presentation.
17. In our work for other firms, participants have requested that we weight certain core capabilities more heavily than others to reflect their importance in the products studied.
18. Prahalad and Hamel (1990); and
Quinn, Doorley, and Paquette (1990).
19. The scale for performance was:
5. Among the most successful new business development efforts in the company
4. Above par
3. On par
2. Below par
1. Among the least successful new business development efforts in the company
20. In another study at the same company, we have gathered data on individual product performance for recent years. Grouping individual products into their respective families provided a cross-check on the validity of the executives’ relative assessments. Cross-checks for earlier years were not feasible because performance data for individual products were not recorded.
21. We are presently applying this method to a number of other product-developing firms in order to gather sufficient data to generalize the finding reported here with meaningful statistics.
22. The scale for market growth was:
5. >25% per year: rapid growth
4. >10% and <25%: fast growth
3. >5% and <10%: moderate growth
2. >=0% and <5%: slow growth
1. <0%: contracting market
23. The scale for level of competition was:
5. Many competitors, with several dominant firms
4. Many competitors, but no dominant firms
3. A few large competitors
2. A few small competitors
1. No competitors
24. The scale for effective product life cycle was:
5. Five or more years
4. Four years
3. Three years
2. Two years
1. One year
25. Sony spent approximately twenty years in basic research for the development of its video camera products. See:
M. Cusumano, Y. Mylonadis, and R. Rosenbloom, “Strategic Maneuvering and Mass-Market Dynamics: The Triumph of VHS over Beta” (Cambridge, Massachusetts: MIT Sloan School of Management, International Center for Research on the Management of Technology, Working Paper 40–91, 1991).
26. W.J. Abernathy and J.M. Utterback, “Patterns of Innovation in Industry,” Technology Review 80 (1978): 40–47;
R.N. Foster, “Timing Technological Transitions,” Technology in the Modern Corporation, ed. M. Horwitch (Cambridge, Massachusetts: MIT Press, 1986);
W.J. Abernathy and K.B. Clark, “Innovation: Mapping the Winds of Creative Destruction,” Research Policy 14 (1985): 3–22; and
M. Tushman and P. Anderson, “Technological Discontinuities and Organizational Environments,” Administrative Science Quarterly 31 (1986): 439–465.
27. J.M. Utterback, Mastering the Dynamics of Innovation (Boston: Harvard Business School Press, forthcoming).
28. M.H. Meyer and E.B. Roberts, “Focusing Product Technology for Corporate Growth,” Sloan Management Review, Summer 1988, pp. 7–16; and
Quinn, Doorley, and Paquette (1990).
29. C. Freeman, The Economics of Industrial Innovation (Cambridge, Massachusetts: MIT Press, 1986);
R.G. Cooper, Winning at New Products (Reading, Massachusetts: Addison-Wesley, 1986); and
M.A. Maidique and B.J. Zirger, “The New Product Learning Cycle,” Research Policy 14 (1985): 299–314.
30. J.M. Utterback, “Innovation and Industrial Evolution in Manufacturing Industries,” Technology and Global Industry: Companies and Nations in the World Economy, ed. B.R. Guile and H. Brooks (Washington, D.C.: National Academy of Engineering Press, 1987), pp. 16–48; and
E.B. Roberts and M.H. Meyer, “New Products and Corporate Strategy,” Engineering Management Review 19 (1991): 4–18.