Paper submitted to:
R&D Management Conference 2016 “From Science to Society: Innovation and Value Creation” 3-6 July 2016, Cambridge, UK
Antecedents and benefits of achieving reciprocal complementarity: a case study of the Guinness Draught in-can system project
Dusana Hullova1, Christopher Don Simms2and Paul Trott3
11University of Portsmouth, Portsmouth Business School,Portland Street, Portsmouth PO1 3DE, United
2University of Portsmouth, Portsmouth Business School,Portland Street, Portsmouth PO1 3DE,United Kingdom.
3University of Portsmouth, Portsmouth Business School,Portland Street, Portsmouth PO1 3DE, United
The development of a synchronous relationship between product and process innovation within new product development projects (NPD) can present organisations with a number of benefits including cost efficiency of production, smoother launch of new products, and new opportunities for product and process development. Yet, to date the literature provides fragmented knowledge about when and how to achieve such reciprocal complementarity as well as on the range of opportunities that open up to the company once it achieves this. In this paper we develop a new conceptual framework, drawing upon several streams of literature that proposes three components contributing to an organisations ability to achieve reciprocal complementarity within radical new product development projects: potential, co-ordinational and realized reciprocal complementarity. We apply our framework to the historic case study of the Guinness Draught in-can system project with its pre-ceding and following projects focused on froth formation. Our findings demonstrate that all three components of reciprocal complementarity are necessary for synchronous integration to occur. In particular we uncover the significance of external collaboration and absorptive capacity, the need for equal managerial attention to product and process innovation, and the important role played by cross-functional teams and crucial role of the Integrators. Analysis of our findings leads us to develop a number of propositions that drive the way forward for future research. By combining evidence from the literature and results from the case study we suggest several managerial implications.
- Introduction
Product and process innovation have been perceived as two separate stages of innovation process by both academics and practitioners (Damanpour and Gopalakrishnan, 2001; Ettlie and Reza, 1992; Lager, 2002; Reichstein and Salter, 2006). A common consequence of this discrete view is that
designs are “thrown-over-wall” to the manufacturing department, and subsequently found to be unproducible or require several modifications to improve the quality and cost of production (Adler, 1995; Collins and Hull, 2002; Säfsten et al., 2014).
More recently, scholars have begun to point to the limitations of these practices, arguing that a range of benefits can be achieved by the integral consideration of product and process innovation (Damanpour, 2014; McNulty & Ferlie, 2004; PieningSalge, 2015). Hullova et al. (2015, p. 16) defined this concept as reciprocal complementarity a “synchronous adoption and integration of product and process innovation throughout the Product or Process Development Project.” Up to now, academic literature provides fragmented understanding of the antecedents, moderators and favourable consequences from achieving reciprocal complementarity (Collins and Hull, 2002; Vandevelde and Vandierdonck, 2003; Nobelius, 2004; Säfsten et al., 2014). One of the main reasons for this are the research findings that span several research streams without a systematic presentation. These include Technology management (Bruch and Bellgran, 2014; Lager and Rennard, 2014; Säfsten et al., 2014), Operations management (Hauck et al., 1997; Vandevelde and Van Dierdonck, 2003), Innovation management (Ballot et al., 2015; Battisti and Stoneman, 2010) and General management (Adler, 1995; Wischnevsky et al., 2011). Particularly, the Innovation management area is missing to provide comprehensive guidelines on when and how to implement the reciprocal complementarity. As well as an overview of the long-term benefits companies could utilize after achieving this complementarity, within future New Product and Process Development Projects. This can be further demonstrated by a number of influential research papers that called for further investigations on conditions that lead to the synergetic adoption of product and process innovation (Battisti and Stoneman, 2010; Ballot et al., 2015; Damanpour, 2010).
The aim of this paper is to deepen our understanding of reciprocal complementarity within the Innovation Management by analysing the multidisciplinary literature on managing this relationship. We build upon terminology of the key components of Absorptive capacity, potential, combinatorial and realized capability, (Fosfuri and Tribó, 2008; Jansen et al., 2005; Zahra and George, 2002) and develop a Conceptual Framework of company’s ability to achieve reciprocal complementarity between product and process innovation in New Product and Process Development Projects.
We position our study in the context of process industries that are characterised by undertaking predominantly incremental product and process innovations (Lager, 2002). Particularly, companies operating within the low-technology process industries often underestimate the opportunities created by undertaking radical projects due to lack of knowledge and experience (Kurkkio et al., 2011; Frishammar et al., 2011). The existing studies on the New Product Development (NPD) focus on single projects, trying to explain their success/failure (Pinto and Prescott, 1990) or studying projects as independent phenomenon, irrespective of their history, context or future (Engwall, 2003; Kreiner,
1995; Lakemond and Berggren, 2006). In our study we aim to look beyond the single project level to illustrate the new concept of firm’s ability to achieve reciprocal complementarity. We use a case study of the most revolutionary beverage
packaging innovation in the beer industry, the Guinness Draught in-can system project with its preceding and following projects focused on creating the foam head on the beer.
The paper proceeds as follows. The contents of this paper will be separated into two main parts. The first part presents a Conceptual framework of firm’s ability to achieve reciprocal complementarity, the second part illustrates the developed concept on the case study of Guinness Draught in-can system project and its preceding and following projects. Finally, we discuss our findings and contributions made within the paper, managerial implications and future areas for research.
2. Literature review
Product and process innovation have been studied in the innovation literature as two separate phenomenon (Cabagnols and Le Bas, 2002).Product innovation is commonly characterised as driven by desire to create new products to meet an external user or market need (Damanpour and Gopalakrishnan, 2001). While Process innovation is concerned with the delivery of these products, including quality improvements, cost and time savings and productivity enhancement (Ettlie and Reza, 1992; Lager, 2002; He and Wong, 2004). Therefore, studies of product innovation have focused on how the innovations are created as well as what are the consequences of product innovation on the firm’s performance (…). On the other hand, literature on process innovation has focused on organisational determinants and outcomes of successful process innovation (Damanpour and Aravind, 2006; Frishammar et al., 2012). Limited attention has been devoted to explain how a relationship between these two innovation types is achieved (Ballot et al., 2015; Bruch & Bellgran, 2014; Wischnevsky et al., 2011;Damanpour, 2010; Lager and Rennard, 2014).
Prior studies in the innovation literature have tended to portray a linear innovation process that would follow a sequential stage-gate model (Ford et al., 2014). For example, the product-process pattern in the metal manufacturing companies (Kraft, 1990) or the process-product pattern in the pulp and paper industries (Novotny and Laestadius, 2014).[DH1]Further, studies in this research area have developed only conceptual contributions to the literature, often at the industry level (Abernathy & Utterback, 1978; Barras, 1986; Hayes & Wheelwright, 1979; Kim et al. 1992). Existing empirical studies have predominantly proposed contingencies that are likely to influence the complementarity, often using large scale surveys and quantitative data analysis at the industry level (BattistiStoneman, 2010; Evangelista & Vezzani, 201[DH2]0). Only a handful of studies investigated existence of complementarity between product and process innovation adopting qualitative data collection methods to examine specific New Product and Process Development Projects (Kurkkio et al., 2001; Lim et al., 2006; Novotny and Laestadius, 2014).
2.1 Conceptual framework of firm’s ability to achieve reciprocal complementarity in the New Product and Process Development projects
At any point in time, a company may be facing a decision to introduce a radical product and process innovation that would require achieving reciprocal complementarity. However, not every company can take upon this opportunity in an effective manner, deliver the innovation and utilize all of the opportunities this provides to the company. Managers often perceive projects as fundamentally similar “a project is a project” (Hobday, 1998). They seem to overlook that effective project management is becoming the “wave of the future of global business” (Pinto and Kharbanda, 1995). Some of the reasons for this are increasing product complexity, decreasing time-to-market period and the need to respond to customer needs.
Prior research investigating the antecedents, moderators and consequences of achieving the reciprocal complementarity spans several literature streams. This includes articles in Technology management (Bruch and Bellgran, 2014; Lager and Rennard, 2014; Säfsten et al., 2014), Operations management (Hauck et al., 1997; Vandevelde and Van Dierdonck, 2003), Innovation management (Ballot et al., 2015; Battisti and Stoneman, 2010) and General management (Adler, 1995; Wischnevsky et al., 2011). As stated by Lager and Renner (2014) these literature streams are aimed at different readership, which has resulted in few, if any, attempts being made to systematically structure and present prior research findings in a cumulative manner. Therefore, our Conceptual framework provides a comprehensive overview of when and how to achieve reciprocal complementarity, but also how to benefit from this in the following New Product and Process Development Projects, See Figure 1. We build upon terminology of the key components of Absorptive capacity (Fosfuri and Tribó, 2008; Zahra and George, 2002) and argue that the company’s capability to achieve reciprocal complementarity between product and process innovation in New Product and Process Development Projects is determined by its potential, combinatorial and realized capability (Jansen et al., 2005). Below we will divide the description of the Conceptual framework into three areas; potential reciprocal complementarity, combinatorial reciprocal complementarity, realized reciprocal complementarity. The selected studies captured factors identified to influence the development of relationship and favourable consequences of this complementarity between product innovation and production (Vandevelde and Van Dierdonck, 2003; Turkulainen and Ketokivi, 2012; Wheelwright and Clark, 1994), product design and manufacturing (Ettlie, 1995; Kim et al., 1992) and product and process design (Adler, 1995), product and process innovation (Freeman and Soete, 1997; Utterback, 1994; Ballot et al., 2015). In the following, we summarize prior findings along these categorizations and this overview will serve as a basis for the analysis section.
FIGURE 1. Conceptual framework of firm’s capability to achieve reciprocal complementarity
2.1.1 Components of achieving reciprocal complementarity
Potential reciprocal complementarity
We define the potential reciprocal complementarityas being faced with the necessary antecedents to undertake radical product and process innovation with an aim to achieve reciprocal complementarity. We organised the antecedents into the following three categories: Industry level, Company level and Project level.
Industry level. The organizational theorists have pointed to the impact of the organizational environment on its internal behaviour for decades (Thompson, 1967; Woodward et al., 1965; Lawrence and Lorsch, 1967). The average rate of introduction of product generations to the marketplace for a particular industry has been termed as the “industry NPD clockspeed” (Carrillo, 2005). For example, the beer packaging category is one of the most innovative within the packaging industry. Innovations such as the PET moulded container in the shape of can by Volksbier, Bluetooth-enabled bottles of Grolsch that allow users to unlock free movies on their smartphones and tablets are just a few of the recent beer packaging innovations arriving on the market annually (Canadean, 2014).
Company level. Support at the company level, specifically in terms of allocation of necessary resources by the managerial board, plays an important role when deciding whether to pursue a radical project. Majority of companies have scarce resources and capabilities, therefore they have to wisely allocate these towards the “suitable complementarity projects.” While at the same time it is crucial that they work on a balanced project portfolio in which incremental, short-term oriented NPD projects are combined with more radical, long-term oriented projects (Bruch and Bellgran, 2014).Findings from the CIS surveys further identified size of the firm (Ballot et al., 2015; Battisti and Stoneman, 2010; Evangelista and Vezzani, 2010) and R&D intensity (Ballot et al., 2015; Battisti and Stoneman, 2010) as contingencies influencing the choice of complementarity strategy.
Project level.At the project level, the level of disruptiveness of the project combined with the level of system complexity between product and process innovation have also been identified as antecedents of achieving potential reciprocal complementarity. Instances when companies are faced with radical innovations tend to involve changes in both product and process innovation (Freeman and Soete, 1997; Utterback, 1994; Reichstein and Salter, 2006). Reichstein and Salter (2006) identified a strong two-way relationship between the share of sales of products new to the market and degree of novelty in the process innovation. Hobday (1998) argued that the product complexity is determined[DH3]by quantity of tailored components, degree of technological novelty and the hierarchical manner in which they are integrated together. All of these features would add to the uncertainty, risk and the speed with which companies are able to introduce new products (Carrillo, 2005). However, effective management of the above mentioned antecedents is dependent on Product and Process Development Managers, who should be allocated with equal levels of importance since the beginning of the project. The success of the project is often determined by their collaboration, when they share and build on existing experience in product and process innovation as well as external collaboration.
2.1.2 Combinatorial reciprocal complementarity
Once having made an informed decision that a reciprocal complementarity would be required in the New Product and Process Development Project, the Product and Process Development Managers have to develop combinatorial capabilities to manage the relationship between product and process innovation related activities. Prior research used different terms to describe such managerial techniques, e.g. integration or co-ordination mechanisms (Adler, 1995; Ballot et al., 2015; Säfsten et al., 2014). We define these as combinatorial capability, an ability to choose and adopt suitable managerial techniques with an aim to achieve the complementarity between product and process innovation. Even though prior literature has predominantly explored advantages of different mechanisms separately (Sriparavastu and Gupta, 1997), we agree with the findings of Cua et al. (2001) that combining the strengths of several different approaches with requirements of the project enhances the management of product and process innovation.This tendency might have resulted in a lack of managerial awareness about:
1)The range of practices they might adopt in projects
2)Inefficiency in executing complex projects that required synchronization between product and process innovation activities
3)Identifying instances how and when product and project success contribute to long-term strategic advantages to firms needs to be further investigated (Fowler et al., 2000)
We have categorised combinatorial capabilities across three key areas; cross-functional collaboration, co-ordination between product and process and transfer management.
2.1.3 Cross-functional collaboration
Cross-functional collaboration includes collaboration between product and production engineers, Integrator and knowledge integration between buyer and supplier. Collaboration between product and production engineers. A close collaboration between product and production engineers was found to significantly reduce development time and lead to less mismatches between departments (Adler, 1995; Nobelius, 2004; Turkulainen and Ketokivi, 2012). Vandevelde and Van Dierdonck(2003) reported that engineering designers who take into consideration the situation in the production positively influence development of the product/production interface. According to Egelhoff (1991) such cross-functional collaborations enhance reciprocal information processing and knowledge flows across functional boundaries. At the same time they improve commitment and decision making (Bahrami and Evans, 1987).Integrator. Integrator is defined as a core group of individuals that possesses relevant knowledge and skills in the necessary areas and helps to ensure the stability in a project developing a new product. Integrators are responsible for keeping both design and manufacturing perspectives in balance, commonly working in a role of general manager or product champion (Dean and Susman, 1989; Markham and Griffin, 1998; Wheelwright and Clark, 1994; O’Connor and McDermott, 2004). During the New Product and Process Development projects companies often collaborate with a range of external parties, because the necessary knowledge and expertise is not available within the organisational boundaries (Grant and Baden-Fuller, 2004; Harryson, 1997).Knowledge integration between buyer and supplier. As emphasized by Rosell et al. (2012) increased level of knowledge integration between buyer and supplier can provide input to align the supplier’s manufacturing process and product technology expertise to the buyer’s product development. This type of joint learning represents a ‘coupled knowledge integration process’ that often precedes, but also follows the R&D/manufacturing interface.
Co-ordination between product and process design
This area consists of Design for manufacturing, Concurrent engineering and Quality Function Deployment.Design for manufacturing Pisano (1997) argued based on a sample of pharmaceutical companies that those, which followed “learning-before-doing” strategy and considered the production at the early stages of new product development process performed better than those leaving the process development for the later stages of NPD process (Adler, 1995; Vandevelde and Van Dierdonck, 2003). This practice is similar to the Producibility Design Reviews, when companies capture the learning from previous projects and develop a detailed knowledge about company’s manufacturing capabilities that could be used in the design phase to assure producibility (Lakemond et al., 2007; Walters, 2014).
Concurrent engineering. Concurrent Engineering has become a paradigm for industrial product development, the collaboration across different functions along the value chain has proven to be more effective and faster than serial input (Clark and Fujimoto, 1989; Liker et al., 1999).For example,Collins and Hull (2002) examined how much influence downstream functions such as manufacturing engineering should exert in product design decisions among 74 companies. They concluded that the Early Simultaneous influence, a cornerstone of Concurrent engineering, is especially effective among the first three stages of development. This enables the downstream functions to have concurrent input to upstream product decisions, through frequent communications, regardless of position among the value chain, leading to time and cost efficiencies.Quality Function Deployment. The methodology of Quality Function Deployment, originated in Japan in 1950’s, however, it is very complex and often difficult for companies to comprehend (Lager, 2005). Therefore, several simplifications have been developed such as “House of Quality” (Akao and Mazur, 2003), QFD system adapted for process industry (Lager, 2005) and “Matrix of Matrices” (Akao, 1990). It has proven to enable companies to develop links between development cycles, ensuring that requirements of all ‘customers’ in the product design process are taken into account, including downstream users in the company, end users, suppliers etc. (Wheelwright and Clark, 1994).