OPERATIOTIONAL AND STRATEGIC MANAGEMENT

1. OPERATIOTIONAL AND STRATEGIC MANAGEMENT KTT Antti Ainamo Academy of Finland and Helsinki School of Economics and Business Administration Department of Management S-72.124 Product Development of Telecommunication systems

2. Material on which talk is based • Product design and development • Sakakakibara, K., Lindholm, C. & Ainamo, A. (1995): Product Development in Emerging Product Markets: The Case of Personal Digital Assistants (PDAs)”, Business Strategy Review. • Ainamo, A. (1999): ”Strategic Product Planning”. Hallinnon tutkimus. • Ainamo, A. & Pantzar, M. (forthcoming): ”Design for the Information Society: Learning from the Nokia Experience”. Design Journal. • New organizational forms and strategy • Djelic, ML & Ainamo, A. (1999): ”The Coevolution of New Organization Forms in the Fashion Industry: A Historical and and Comparative Study of France, Italy and the USA”. Organization Science, Special Issue on Strategic and New Organizational Forms, September-October • Ainamo, & Djelic (forthcoming): ”Image-and-Communication Portfolios”, Strategic Management Society, submitted. • Pantzar, M. & Ainamo, A. (forthcoming): ”Dynamic conservatism: a comparison of Ford, GM, Motorola and Nokia”, EGOS • Case studies: electronics, computing, mobile telecommunications

3. Outline • Management: operational and strategic • A stages model of product development • A matrix of products and systems • Product development disciplines • How to manage product development (Ainamo 1999a, 1999b)

4. The Need for Management • Different kinds of disciplines • Engineering • Marketing • Industrial design and graphic design • The humanities • Resistance to change • Turbulence in the competitive landscape • The customer values ”quality” (the whole) (Ainamo 1999a, 1999b)

5. Management • Different ways to integrate and coordinate • Operational management • Strategic management • Coping with change resistance • win-lose • win-win • Attitudes to turbulence • Adapt • Strategic choice • Shaping of the environment (Ainamo 1999a, 1999b)

6. Operational management • Implementation • Staying within given boundaries or constraints • Incrementalism • Personal Digital Assistants, early 1990s, Japanese Fujitsu (Ainamo 1999a, 1999b)

7. Strategic management • The management of the general” • Creating and changing boundaries • Radical (re)positioning of the business • Personal Digital Assistants, Apple Newton

8. PD Stages and Roles • A stages model • Design • Technical product engineering • Production planning • Marketing planning • Different kinds of products • Simple • Complex • Modular • Interface (Ainamo 1999a, 1999b)

9. A stages model of product development (see also 1999b, 327)

10. Design • Conceptualizing new products • The current state • Ideal states • Conceptualization: bridging the gap • Refining concepts • Drawings • Mock-ups • Prototypes (Ainamo 1999a, 1999b)

11. Technical product product engineering • Product architecture • Product platform • Product generations and product families (Ainamo 1999a, 1999b)

12. Product architecture • Architecture • Concept • Component • Links • To concept: function • To user: interface (Ainamo 1999a, 1999b)

13. Product platform • The central component or module in the architecture • Link between design, production and marketing • Faster • Cheaper • ’Better’ (Ainamo 1999a, 1999b)

14. Product generations and product families • Product generation • Products following a historic technical choice or theme • Technical implications • ”Historic” – analysis of products across time • Product family • Variations on the theme • Marketing implications • Synthesis of current products (Ainamo 1999a, 1999b)

15. Production planning and marketing • Production capability and productization • Commercialization and logistics (Ainamo 1999a, 1999b)

16. Four kinds of products or systems • Complex • Simple • Interface • Modular (Ainamo 1999a, 1999b)

17. A product that is a complex system... • is challenging to develop • is challenging for the user • Necessitates to calm down / educate ’distressedä user • Multidisciplinary teams (Ainamo 1999a, 1999b)

18. What is complexity? • Systems consist of ’subsystems’ (parts, components, modules) • Subsystems have dense internal relationships • Relatively few external relationships • Complex systems • Many subsystems • Many relationships between subsystems • ’Nonsimple’ relationships (Ainamo 1999a, 1999b)

19. Managing complexity • Break down complex systems into simple (sub)systems • Manage each subsystem separately • Manage the system of subsystems as a whole

20. A product that is simple... • is technically easy to handle • is easy to use for the user • can be ”boring” for the user (!) • introduces need to make product ”exciting” • Marketing (Ainamo 1999a, 1999b)

21. A product that is subsystem-driven... • is difficult to develop in part • has a product form that is stable • has all depend on one technical subsystem • Product engineering of the critical subsystem (Ainamo 1999a, 1999b)

22. A product that is an interface product... • Subsystems exist... • but their links challenge (potential) usability • The goal: increase user-friendliness • Design (Ainamo 1999a, 1999b)

23. Functionality, meaningfulness, and user-friendliness • Functionality • Designed concept translated into technical language • Product engineering (and design) critical • Meaningfulness • Functionality translated into marketing language • Marketing (and design) critical • User friendliness • Functionality translated into the language of the end-user • Design (and product engineering and marketing) critical (Ainamo 1999a, 1999b)

24. Find role for each type of product

25. Mobile phones • 1st Generation analog phones • Complex systems • Productl engineering • 2nd Generation digital phones • Once systems in place, both 1st and 2nd G were simple products • Marketing • 3rd G smart phones, communicators etc. • All subsystems exist • Design of usability and user-friendliness critical Ainamo & Pantzar (2000)

26. 1G, 2G, 3G and the three discliplines • 1st G • From complexity towards simplicity • PRODUCT ENGINEERING: product architecture • 2nd G • From simplicity towards marketing and segmentation • MARKETING: product families: new product forms,features and subsystems • 3rd G • From segmentation towards lifestyle design • DESIGN AND REAL-TIME MARKETING: Integration of technologies into new interfaces Ainamo & Pantzar (2000)

27. Trends in product development • Need for new product development methodologies • ’Hero designers’ rare (Bell, 1999) • Product developement is multidisciplinary • Strategic organization design • Organization design more important than product development • Interaction • ”Incorrect” use of products • Learning • Flexibility and customization Ainamo & Pantzar (2000)

28. Product development strategy:Lessons from the fashion industry • Organization forms: lLessons from the fashion industry (input) • Changing ideas and techniques (process) • Brands (output) (Ainamo 1999a, 1999b) Ks. myös Ainamo, A. (1999c): Fashion as Strategy: Ideas and Techniques about organizing in the Fashion Industry as a Model for Stategy. Invited Paper and Presentation at INCAE, San Jose, Costa Rica, Aug. 31. Hosts: N. Phillips and P. Martin de Holan.

29. Product development fashions • New fashionable ideas and techniques • ”Transitory collective beliefs” (Abrahamsson, 1996) • ”Useful error” (Huczynski, 1996) • Learning by failure an important part of learning • Reinterpretation of failure • Interventions • Reframing failure • Consistency or shift

30. Product development personnel: Commitment and building commitment • Commitment of PD personnel • Loose link to business results • Interpretation of results based on beliefs and values (”social construction”) • Doing at the forefront (”tacit knowledge”) • Building commitment • The ideal and and (current) constraints • Learn and develop language and communication • Link results and doing (Ainamo 1999a, 1999b, 2000)

31. Strategic management of PD • Strategic management is communication • The constraints • The ideal • Linking the two • ”People busines” • Develop common language • Understand subordinates but don’t overdo it • Treat tensions • Explicit or tacit interventions • Management • Funding and support • Learning and innovation • Link with market development & industry analysis

32. Knowledge management ja oppiminen • All knowledge is not explicit – it is ”silent” (tacit knowledge; Nonaka 1994) • New knowledge builds on the old, when there is success (March & Simon 1958) (Ainamo 1999a, 1999b, 2000)

33. Summary: Management and product development • Operational and strategic management • Need to integrate different kinds of competences • Turbulence • Resistance to change (Ainamo 1999a, 1999b)

34. Turbulence • New products are ”revolutionary” • Markets are reactionary • Revolution does not happen • Change is slow • Change is difficult to predict • Change • Partial or temporary • Sudden shift into a new standard • Rhetoric and reality • ”Revolution” and design are rhetoric • Evolution and a random process are reality (Ainamo 1999a, 1999b, 2000)

35. Dealing with resistance to change • Question current model • New ideal • Reset organizational boundaries • Feed short-term results into process • ’Make’ results if you need to • Motivation • Momentum (Ainamo & Pantzar 2000)

36. Product development and interorganizational networks • Product development does not happen only within the organization • Interorganizational networking – between market and organizational hierarchy • Need for trust, the ”glue” between organizations • Trust and networking are contingent phenomena (”it depends”) • Japan: keiretsu • Finland: government and technology (Ainamo 1999a, 1999b, 2000)

37. Interorganizational networks: the fashion industry • Interorganizational networking is ’global’ only on a high level or abstraction • Trust is the ”glue” • The basis of trust differs from one country to the next • France: regulation • Italy: socially embedded flexible networks • The U.S.A: the virtual organization • Interorganizational networking differs from one country to the next

38. Intraorganization network: IBM ThinkPad • Early 1990s • Parallel projects • USA • Italy • Japan • Japanese ”bento box” became the global choice

39. Product engineering: the Sony Walkman • Several technologies • A small portable dictaphone • Ear phones

40. ”Product development” or ”product planning”? • Definitions differ • ’Product planning includesonly productization and commercialization (ks. esim. Ainamo, 1999a,b) • ’PD includes only design and technical product engineering’ • ’Also production planning is included’ • ’Also marketing is included’