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Journal of Operations Management 20 (2002) 289–302

Supply chains and compatibility among components


in product design
Jaya Singhal* , Kalyan Singhal
R.G. Merrick School of Business, University of Baltimore, 1420 North Charles Street,
Baltimore, MD 21201-5779, USA

Abstract
Two problems in designing and developing a product are directly tied into effective management of the marketing/operations
interface. We first consider technological incompatibility between pairs of alternatives for different components to identify
feasible product designs at various stages of product-development, from screening to the final design. We then consider
experts’ judgment on compatibility between pairs of alternatives for different attributes to generate product ideas and to
perform a preliminary screening. This expert-based approach can be used in conjunction with other expert-based approaches or
consumer-based approaches to identify potentially desirable product ideas. The methodology developed here includes explicit
simultaneous consideration of product, process, and supply chain development and it is applicable to the entire spectrum of
product novelty, from radical to incremental innovation. We also describe a real-world application. © 2002 Elsevier Science
B.V. All rights reserved.
Keywords: Engineering/operations interface; Empirical research; Innovation; Marketing/operations interface; Product-development;
Technology management

1. The product design function Customer needs generate the product’s functional
specification, which in turn generates the product
The process of designing and developing products specification (Hill, 1991). In the predominant market-
is linked to other areas of the business, such as man- ing research paradigm, the marketing function gen-
ufacturing, marketing, and supply chain management erates a spectrum of product concepts as a bundle of
(Fig. 1). The roles of these three interacting functions well-defined attributes, with price included as an at-
have been widely emphasized in the literature on prod- tribute (Shocker and Srinivasan, 1979 and Srinivasan
uct design (Clark, 1989; Clark and Fujimoto, 1991; et al., 1997). It specifies attributes in terms that are
Griffin and Hauser, 1996; Handfield et al., 1999; meaningful to customers, and they are not neces-
Karlsson et al., 1998; Malhotra et al., 1996 and sarily the same as the physical components of a
Ulrich and Eppinger, 1995). Close ties between re- product.
search laboratories and product-development activ- There can be many possible technological designs
ities are also critical to breakthrough innovations for a product expressed as bundles of attributes, and
(The Economist Technology Quarterly, 2001). there can be different manufacturing alternatives for
each design of a component. These designs have
∗ Corresponding author. Tel.: +1-410-837-4976. different implications for aesthetics, usability, manu-
E-mail addresses: jsinghal@ubmail.ubalt.edu (J. Singhal), facturing quality, and so forth. Manufacturers often
ksinghal@ubmail.ubalt.edu (K. Singhal). use modular designs to organize complex products

0272-6963/02/$ – see front matter © 2002 Elsevier Science B.V. All rights reserved.
PII: S 0 2 7 2 - 6 9 6 3 ( 0 2 ) 0 0 0 0 7 - 4
290 J. Singhal, K. Singhal / Journal of Operations Management 20 (2002) 289–302

Fig. 1. The innovation and supply chain diamond.

(Baldwin and Clark, 1997; Duray et al., 2000; Pine, 2. Design it in-house and manufacture it in-house.
1993; Stoll, 1986 and Ulrich and Eppinger, 1995). A 3. Design it in-house and outsource its manufac-
modular design is composed of modules or assemblies ture.
that are in turn made up of sets of parts. 4. Outsource the design and manufacture the compo-
In designing a new product, a firm may either de- nent in-house.
sign new components, unique to the product, or se- 5. Outsource both design and manufacturing from a
lect from those offered in the catalogs of suppliers or single supplier.
from those it already uses in other products. Ulrich and 6. Outsource the design from one supplier and the
Ellison (1999) call this the design–select decision. If manufacturing from another.
the firm decides to design a component, it may ei-
While the second option would require close coor-
ther manufacture the component in its own facility or
dination between the design and manufacturing units
ask a supplier to manufacture it. The firm, thus, has
within the organization, the last four options would
following six possible options for the make–buy and
require close coordination with suppliers.
design–select decisions for a component.
The process of designing and developing a product
1. Buy it off the shelf or select it from those already is a sequential narrowing of options, which starts with
in use in other products. generating a large possibility set and sequentially
J. Singhal, K. Singhal / Journal of Operations Management 20 (2002) 289–302 291

winnows this set down to one or a few specific 2. The concept and a taxonomy of incompatibility
products. At each stage of this process, the designers
add more concrete information in the organization’s 2.1. Technological incompatibility
information set (Srinivasan et al., 1997). For an over-
view of the activities in the process see (Crawford, Researchers in product design and manufactur-
1994; Hayes et al., 1988; Kotler, 1999; Pugh, 1991; ing have used the term incompatibility to denote
Ulrich and Eppinger, 1995; Urban and Hauser, 1993 self-evident impossibilities and technological and
and Wind, 1982). manufacturing limitations. We define four types of
Two major steps early in the process are generat- technological incompatibilities: axiomatic, structural,
ing and screening potentially desirable new product strategic, and transient.
ideas and identifying feasible product designs (Urban Axiomatic incompatibility exists when an option for
and Hauser, 1993). One of the creative approaches, the one parameter and an option for another cannot be in-
morphological method of generating and screening cluded simultaneously because they are self-contradic-
new product ideas, consists of identifying possible al- tory or their simultaneous inclusion violates the basic
ternatives for each parameter and then evaluating some laws of nature. Zwicky (1962) describes an example
or all of the resulting product combinations (Alford for jet engines in which an extrinsic chemically active
and Mason, 1975; Crawford, 1994; Goldenberg mass cannot apply if the medium is a vacuum. Zwicky
et al., 1999; Majaro, 1988; Singhal and Singhal, used the term internal contradictions to describe such
2001; Tauber, 1972; Urban and Hauser, 1993 and incompatibilities and noted that this incompatibility
Wind, 1982). would reduce the number of jet engines to be consid-
The designers and developers of a product must ered feasible.
reconcile customer needs (including aesthetics), tech- Structural, strategic, and transient incompatibilities
nological feasibility, and cost. Two major elements are technological and manufacturing limitations re-
in this reconciliation are technological (design and lated to an interface between components or modules.
manufacturing) and marketing compatibilities among Each component or module may have an interface with
the parameters of a product. In Section 2, we de- one or more other components or modules (Swink,
velop the concepts and a taxonomy of technologi- 1999, p. 694). An interface may be defined (Asimow,
cal and marketing compatibilities in the context of 1964, p. 27; Bonaccorsi and Lipparini, 1994; Chase
the product-design function. We refer to subsets of and Aquilano, 1985, p. 31; Nevins and Whitney, 1989
a product as components in the design and man- and Swink, 1999) as a system of
ufacturing contexts, as attributes in the marketing
• mating surfaces,
context, and as parameters where the discussion ap-
• interacting product functions,
plies to both. The marketing literature uses the term
• mixed compounds,
levels to denote alternatives for attributes. How-
• electrical input–output signals and logic,
ever, we use the term alternatives in both the de-
• geometrical tolerances on physical characteristics,
sign and manufacturing contexts and the marketing
• chemical tolerances (two dissimilar metals in con-
context.
tact),
In Section 3, we define a compatibility matrix and
• interacting co-members that have matching operat-
discuss a computer code for identifying product de-
ing characteristics, for example, members in series
signs that do not contain any incompatible pairs. We
with the outputs of one becoming the inputs of the
outline a framework for developing and implement-
other,
ing a technological-compatibility matrix in Section 4
• parts that respond similarly to conditions of stress,
and a framework for developing and implementing
or
a marketing-compatibility matrix in Section 5. In
• interacting software modules.
Section 6, we describe a real-world application of the
compatibility matrix approach. In Section 7, we offer The interfacing components or modules must fit
some concluding remarks and outline possibilities for together, connect, or communicate. Asimow (1964,
future research. p. 27) regarded the consideration of compatibility
292 J. Singhal, K. Singhal / Journal of Operations Management 20 (2002) 289–302

as a necessary step in designing a product. Swink estimated benefits. A transient incompatibility can be
(1999, pp. 694–695) notes that “each product design eliminated with acceptable level of R&D efforts, and
interface embodies a test of manufacturability, since the outcome is certain.
an effective interface relies on the compatibility of After ascertaining that pair-wise compatibility ex-
design specifications among the components and on ists among components, the designer must evaluate
the degree to which the actual components meet those higher-order incompatibilities involving three or more
specifications.” Since those making the make–buy components. A feasible design will specify one alter-
and design–selection decisions may assign the design native for each component such that all components
and manufacture of just one pair of components to are technologically compatible.
four different organizations, managing interfaces can
become quite complex. As parties outside the firm 2.2. Marketing incompatibility
design or manufacture more of the new product com-
ponents, the number of inter-organizational interfaces Marketing incompatibility refers to combining alter-
increases. natives of various attributes that together form an un-
Bonaccorsi and Lipparini (1994, p. 138) describe a desirable product. For example, few customers would
real-world example of packing machines that are sys- buy a small family sedan with a 250 hp engine or blue
tems of interdependent interactive parts and modules vanilla ice cream although both are technologically
and each major module is itself a system made up feasible to manufacture. Similarly, while it is techno-
of interacting and interlocking parts. Since the func- logically feasible to manufacture an aircraft that has a
tionality of each interface depends on the careful de- small seating capacity and a long flying range, few air-
sign and manufacture of the interacting components or lines want to buy such airplanes. This is probably why
modules, the coordination between design and manu- Boeing did not manufacture such planes until 1990
facturing and the coordination with suppliers is crit- when it started manufacturing airplanes (737–700
ical to managing interfaces (Adler, 1995; Clark and series) that had a small seating capacity and a long fly-
Fujimoto, 1991; Griffin, 1993; Meyer and Utterback, ing range to satisfy demand from a small market seg-
1995; Stoll, 1986; Susman and Dean, 1992; Swink, ment, including Southwestern Airlines, that wanted
1998, 1999 and Youssef, 1994). Pisano (1992) and to buy them. The desirability of these combinations,
Hendricks and Singhal (1997) note that coordination their marketing-compatibility, was based not only on
can have a major impact on cost and development time. their perceived utility or the trade-off between per-
In some cases, a pair of interacting components may ceived utility and cost but also on the utility created
cause the product to function poorly or to break down by the interaction of an alternative of one attribute and
often and to require frequent replacement or repair. an alternative of another (Singhal and Singhal, 2001).
Before the development of the disposable cartridge,
for example, most plain-paper copiers used a drum
and a surrounding imaging mechanism. These copiers 3. The compatibility matrix
had frequent paper jams and needed regular servic-
ing. Approximately 97–98% of Canon’s copier service If a product has n parameters and M(i) represents
problems were related to the drum and its surrounding the number of alternatives for parameter i (i = 1,
mechanism (Nonaka and Takeuchi, 1995, p. 142). 2, . . . , n), then the total number of possible combina-
The classification of structural, strategic, and tran- tions of the product resulting from these alternatives
sient incompatibilities is based on the state of the art are
 n
of design and manufacturing and the required R&D
efforts. Technological advances can make an incom- N= M(i), M(i) ≥ 1 (1)
i=1
patible pair compatible. The outcome of an R&D
effort to eliminate a structural incompatibility is un- Identifying feasible products, which may be very
certain. The outcome of an R&D effort to eliminate small in number, is a large combinatorial problem.
a strategic incompatibility is certain, but the time or Singhal and Nair (1979) developed a compatibility
resources needed may not be available or exceed the matrix to address a similar problem in the context
J. Singhal, K. Singhal / Journal of Operations Management 20 (2002) 289–302 293

Table 1
Compatibility matrix
j 1 2 3 4 5 6
i p q 1 2 3 4 1 2 1 2 3 1 2 3 1 2 1 2 3
1 1 – – – – 1 1 1 1 1 1 1 1 0 0 1 1 1
2 – – – – 1 1 1 1 1 1 1 1 1 1 1 0 1
3 – – – – 1 1 0 1 1 1 1 0 1 1 1 1 1
4 – – – – 1 1 1 1 1 1 1 1 1 1 1 1 1
2 1 1 1 1 1 – – 1 1 1 1 0 1 1 1 1 1 1
2 1 1 1 1 – – 1 1 1 1 0 1 1 1 1 0 1
3 1 1 1 0 1 1 1 – – – 1 1 1 0 1 1 1 0
2 1 1 1 1 1 1 – – – 0 1 0 1 1 1 1 1
3 1 1 1 1 1 1 – – – 1 1 1 1 1 0 1 0
4 1 1 1 1 1 1 1 1 0 1 – – – 1 0 1 1 1
2 1 1 1 1 0 0 1 1 1 – – – 1 1 1 1 1
3 1 1 0 1 1 1 1 0 1 – – – 1 1 1 1 1
5 1 0 1 1 1 1 1 0 1 1 1 1 1 – – 1 1 1
2 0 1 1 1 1 1 1 1 1 0 1 1 – – 1 1 1
6 1 1 1 1 1 1 1 1 1 0 1 1 1 1 1 – – –
2 1 0 1 1 1 0 1 1 1 1 1 1 1 1 – – –
3 1 1 1 1 1 1 0 1 0 1 1 1 1 1 – – –

of project planning. Let parameter i have a set Ai given by


of alternatives numbered 1, 2, . . . , p, . . . , M(i). We  2 n 
n
can denote an alternative p ∈ Ai (i = 1, 2, . . . , n) i=1 M(i) − i=1 M(i)
2

by (i, p), ((i, p) ∈ Ai ) and construct a compatibil- Y1 =


2
ity matrix X such that each element in the matrix is 
defined as = M(i) M(j ), j <i
i,j

x[(i, p), (j, q)] = 1, In our hypothetical example, Y1 , calculated from


if (i, p) and (j, q) are compatible; Eq. (3), equals 119 pairs. Out of 119, only 15 pairs
are shown to be incompatible. The matrix is symmet-
x[(i, p), (j, q)] = 0,
rical along the main diagonal and has two entries for
if (i, p) and (j, q) are not compatible (2) each pair. Therefore, there are in all 238 elements in
the matrix.
where i, j = 1, 2, . . . , n (i = j ); p = 1, 2, . . . , M(i); A feasible or potentially desirable product design
q = 1, 2, . . . , M(j); and M(i), M(j ) ≥ 1. contains one alternative for each parameter such that
Since compatibility between the alternatives is mu- each parameter-alternative is compatible with all other
tual, the compatibility matrix is symmetrical along the parameter-alternatives. Singhal and Katz (1990) de-
main diagonal. In a hypothetical example of a prod- veloped an efficient branch-and-fathom algorithm
uct consisting of six parameters (Table 1), two of the to identify designs that do not contain any incom-
parameters have two alternatives each; three of them patible pairs. We implemented the algorithm in
have three alternatives each; and one has four alter- the form of a computer code, compatibility matrix
natives. The number of possible product designs with and design (COMMAND), written in FORTRAN
these alternatives (N), without considering compati- (Singhal and Singhal, 2001). This code can identify
bility, will be 22 × 33 × 4 = 432. The number of product designs that do not contain any incompatible
pairs (Y1 ) for which compatibility data are needed, is pairs.
294 J. Singhal, K. Singhal / Journal of Operations Management 20 (2002) 289–302

Table 2 4.1. Step 1: identifying components or modules


Feasible designs
1 (1, 2) (2, 1) (3, 1) (4, 3) (5, 2) (6, 1) Product specifications are based on functional speci-
2 (1, 2) (2, 2) (3, 1) (4, 3) (5, 2) (6, 1)
fications, which in turn are based on customers’ needs.
3 (1, 3) (2, 1) (3, 3) (4, 1) (5, 1) (6, 2)
4 (1, 4) (2, 1) (3, 1) (4, 3) (5, 2) (6, 1) However, product designers must exercise consider-
5 (1, 4) (2, 1) (3, 1) (4, 3) (5, 2) (6, 2) able judgment to identify required components and
6 (1, 4) (2, 1) (3, 3) (4, 1) (5, 1) (6, 2) optional components, because they may be able to ag-
7 (1, 4) (2, 1) (3, 3) (4, 3) (5, 1) (6, 2) gregate or disaggregate some of the components or
8 (1, 4) (2, 1) (3, 3) (4, 3) (5, 2) (6, 2)
modules. This aggregation and disaggregation may
9 (1, 4) (2, 2) (3, 1) (4, 3) (5, 2) (6, 1)
affect the cost and performance of the product, and
the decisions to make or buy and to design compo-
By applying the algorithm, using COMMAND, we nents or select from existing components. Howard and
find that in our hypothetical example, less than 13% Sheth (1969, pp. 206–208) state that the judgments
of the pairs being incompatible rule out the feasibil- of product managers, sales personnel, distributors, re-
ity or potential viability of 423, that is about 98% of tailers, and others knowledgeable about the products
the total product designs; only nine designs are fea- and their uses may suggest additional parameters or
sible or potentially desirable (Table 2). Singhal and confirm those suggested by others.
Singhal (1996) showed that, in general, the number of
feasible combinations decreases rapidly as the num- 4.2. Step 2: identifying alternatives for each
ber of incompatible pairs increases. This characteris- component
tic makes it manageable to evaluate product designs
for higher-order interactions among three or more pa- The team must list all possible alternatives for each
rameters and to screen the designs further by using component because many possible technological de-
economic and marketing analysis. signs exist for a product that is expressed as a bundle of
attributes and each component design may have mul-
tiple manufacturing alternatives. For both radical and
4. Developing and implementing a incremental innovations, the sources of information
technological-compatibility matrix for compiling such a list may include published liter-
ature; existing products, if any, marketed by the firm
A formal four-step framework can be used to de- and its competitors; the firm’s database; and expertise
velop and implement a technological-compatibility within the firm. The team can also use the creativ-
matrix. This framework is applicable to the entire ity techniques suggested by Adams (1979), Arnold
spectrum of product novelty, from radical to incre- (1962), Osborn (1953), Prince (1970) and Von Oech
mental innovation. The process of developing and (1990) to generate additional alternatives. At this
implementing the matrix should be carried out by a point, the team should not examine the pair-wise com-
cross-functional team consisting of experts from R&D patibility between alternatives of various components
and manufacturing and, where desirable, suppliers. because, with diverse sources of information, prema-
When a manufacturer relies on suppliers to design or ture judgments regarding compatibility could elimi-
manufacture new components, inter-organizational co- nate some feasible product designs. Urban and Hauser
ordination is essential to ensure compatibility among (1993, p. 157) stress the importance of not eliminating
interfacing components. Suppliers have major roles in good ideas at the screening stage.
ensuring that the components or modules designed or
manufactured by different organizations are compat- 4.3. Step 3: developing the compatibility data
ible. Early in product-development, the team should
include suppliers whose design or technology experts In radical innovations, expert judgment is the only
can provide insights important in crafting the new basis for evaluating the design compatibility of most
product (Clark and Fujimoto, 1991; Handfield et al., pairs of components. The team may have to rely on
1999 and Ragatz et al., 1997). the expertise of suppliers, of organization members
J. Singhal, K. Singhal / Journal of Operations Management 20 (2002) 289–302 295

who are not on the team, and of outside experts. For and imaging mechanism were incompatible, Canon
incremental innovation of existing products, the team invented the disposable cartridge. It fitted all three
can determine the design compatibility of most parts major parts of the copier mechanism—the photosensi-
by examining the firm’s existing products or those of tive drum, toner, and the development assembly—into
its competitors. It would need expert judgment only a disposable cartridge. While its predecessor had an
for components affected by innovation. open-ended operating life that required service after
We interviewed design teams in eight manufactur- frequent failures, the cartridge had a limited but known
ing companies to improve our understanding of roles life expectancy and made the copier maintenance free.
and characteristics of various types of incompatibili- It lowered the cost and increased the reliability at the
ties during the product-development process. Two of same time (Nonaka and Takeuchi, 1995, p. 143).
the companies were defense contractors, four manu- Seven of the eight design teams had experience
factured consumer goods, and the remaining two man- in dealing with strategic incompatibilities. Strate-
ufactured industrial goods. gic incompatibilities may arise at any stage of the
In three of the companies, team-members gen- product-design process as the team identifies addi-
erally identified axiomatic incompatibilities at the tional design alternatives. Teams may find that the
research stage or during transition from research to time or resources needed to eliminate a strategic in-
development although they did not use the term; compatibility for a particular pair are not available
axiomatic incompatibilities were not considered rel- or they exceed the estimated benefits. However, ade-
evant in the remaining five companies. Identifying quate resources to do so may be available for another
axiomatic incompatibilities is important in choosing project at a later time. In some cases, a firm may go
research projects and in making technological fore- ahead with the current project without eliminating
casts. Team-members carry the information about the incompatibility and invest in doing so for a future
axiomatic incompatibilities over to the design and project.
development stage. Transient incompatibilities can arise in almost all
Structural incompatibility is a major issue in mak- product-development efforts and at almost all stages of
ing technological forecasts and in designing products product-development. Two of the eight design teams
that require the adoption or development of new we interviewed noted that some of the incompatibili-
product and process technologies. In the later case, ties thought to be transient turned out to be strategic,
a lack of knowledge about technological solutions to resulting in delays and cost overruns.
design and manufacturing problems leads to uncer-
tainty (Monaert and Souder, 1990; Swink, 1999 and 4.4. Step 4: identifying feasible designs
Utterback, 1971). Swink notes that projects to de-
velop new products that are technologically uncertain COMMAND identifies designs in which all com-
require a great deal of experimentation and analy- ponents have pair-wise compatibility. Design teams
sis and that, because of high risks, managers often can evaluate designs for compatibilities among three
test product technologies thoroughly before investing or more components to identify feasible designs in
in process design. All eight teams we interviewed which components are compatible. Design teams then
had extensive experience in dealing with structural subject the designs to further screening and economic
incompatibilities. Structural incompatibilities must and marketing analysis (see a real-world example in
be resolved early in the product-design process ei- Section 6).
ther by making an incompatible pair compatible
or by dropping their simultaneous inclusion in the 4.5. Modular architecture and design compatibility
design.
Structural incompatibility may become an impor- Firms often use modular design to organize com-
tant issue even in projects concerning the performance plex products. In Section 2, we mentioned packing
and reliability of an existing product. It may lead machines that are systems of highly interdependent
to a radical innovation. For example, in addressing interactive parts and modules and each major mod-
its problem with copier jamming because the drum ule is itself a system made up of interacting and
296 J. Singhal, K. Singhal / Journal of Operations Management 20 (2002) 289–302

interlocking parts. The compatibility matrix can be 5. Developing and implementing a


used at various hierarchical levels of such products. marketing-compatibility matrix
For example, consider a product that consists of k
modules. Each module consists of n1 , n2 , . . . , nk com- We use a similar four-step framework for devel-
ponents, and some of these components have alter- oping and implementing a marketing-compatibility
nate designs. One can follow the following four-step matrix. It is also applicable to the entire spectrum
procedure. of product novelty, from radical to incremental inno-
vation. This framework integrates the compatibility
1. At the first level, construct k different compatibility
matrix with some other expert-based approaches to
matrices, one for each module.
generating and screening product ideas. A cross-func-
2. Use COMMAND to identify designs for each mod-
tional team consisting of experts from R&D, and mar-
ule such that the first-order compatibility require-
keting, and where desirable, manufacturing should
ments between paired components for that module
develop and implement the marketing-compatibility
are satisfied.
matrix.
3. Examine designs generated for each module
for higher-order compatibilities among its com-
5.1. Step 1: identifying attributes
ponents to identify feasible designs for each
module.
The team must exercise judgment to identify both
4. Use feasible alternate designs for each mod-
required and optional attributes. For example, experts
ule as inputs to a higher-level compatibility
must evaluate attributes to discover whether they affect
matrix in which each module is treated as a
the utility of other attributes. If not, they are candi-
component.
dates for exclusion. In some cases, the experts may not
4.6. Application beyond the screening stage have enough information to determine whether they
do or they do not. Product managers, sales personnel,
Firms can also use the technological-compatibility distributors, retailers, and others knowledgeable
matrix after generating and screening ideas (Singhal about the products and their uses may suggest addi-
and Singhal, 2001). They may have to reformulate tional attributes or confirm those identified through
the matrix for two reasons. First, as they acquire other means (Howard and Sheth, 1969, pp. 206–
new information, they may need to add, delete, ag- 208).
gregate, or disaggregate the components or modules.
In the process, they may create new components or 5.2. Step 2: identifying alternatives for
module interfaces and corresponding intra- and inter- each attribute
organizational interfaces. Second, as the designers
consider the details of component and their interac- The team can follow the procedure described for
tions, they may produce additional alternatives. These Step 2 in Section 4 to identify alternatives for each
alternatives may differ from one another in such details attribute.
as geometry, tolerances, choice of materials, compli-
ance of assembly, and so forth (Nevins and Whitney, 5.3. Step 3: developing the compatibility data
1989). These details define new sets of interactions
among components. Although most of the incom- For radical innovations, teams must rely on experts
patibilities in such interactions are transient, it is to evaluate compatibility of most pairs. The team
important to identify them early. Knowledge of in- may have to seek expertise from product managers,
compatibilities can help designers to choose the most sales personnel, distributors, retailers, and others
desirable alternative, minimizing the cost of making knowledgeable about the customers’ needs. For in-
an incompatible pair compatible and shortening the cremental innovation of existing products, the team
cycle time. This knowledge is very important if dif- can determine the marketing-compatibility of most
ferent organizations are responsible for designing and attributes by considering existing products produced
manufacturing interacting components. by the organization and its competitors. It would
J. Singhal, K. Singhal / Journal of Operations Management 20 (2002) 289–302 297

need expert opinion only for attributes affected by the 5.5. Integration with consumer-based approaches
innovation.
In three situations, experts may not be able to clas- Although the compatibility matrix approach is es-
sify all pairs as compatible or incompatible. First, if sentially expert-based, it can be integrated with some
the experts find that some pairs are compatible for one consumer-based approaches. For example, the team
market segment but not for others, they can develop can run focus group sessions and include consumer
separate compatibility matrices for each market seg- judgment in the compatibility matrix. Through these
ment. Second, attributes may be compatible to some sessions, consumers can contribute possible alter-
degree, neither completely compatible nor incompat- natives for each attribute to the list and eliminate
ible. In such situations, experts can assign a number alternatives that are undesirable or inferior to other
between 0 and 1 (Singhal and Singhal, 2001). Third, alternatives for an attribute.
experts may disagree. In such situations too, they can Similarly, teams can use focus group sessions to
assign the pair a number between 0 and 1 depending determine compatibility relationships. In collecting
on the degree of agreement. For example, if 70% of information from customers, a researcher may find
them consider a pair to be compatible and 30% con- a pair of attribute alternatives rated desirable (com-
sider it to be incompatible, they would assign it a value patible) by some customers and undesirable (incom-
of 0.7. patible) by others. If these differences arise because
the group includes individuals from different market
5.4. Step 4: identifying potentially desirable segments, then the team should organize focus groups
designs along market segments. If the members of the group
belong to the same market segment, the team can
When the team has classified all pairs as compat- classify pairs of attribute alternatives on the basis of
ible or incompatible, COMMAND identifies poten- the percentage of customers rating a pair desirable.
tially desirable products. It may suggest too many For example, if 80% of the members of the focus
or too few. If it lists too many for further screening group find a pair to be desirable, it can be assigned a
and analysis, the team can go back to Step 2 and value of 0.8 (Singhal and Singhal, 2001).
use additional criteria to screen out some attribute Depending on the objectives of the organization and
alternatives. If it lists too few for further analysis, the characteristics of the product line, both expert- and
the team can review Step 3 to see whether some consumer-based approaches can be used sequentially
of the pairs designated as incompatible should be or simultaneously.
considered as compatible. The team can use Steps
2–4 iteratively until it has an appropriate number of
ideas. 6. A real-world application
Singhal and Singhal (2001) suggest the following
procedure if some of the pairs have been assigned val- We describe an application of the compatibility ma-
ues between 0 and 1 in a matrix: experts could specify trix approach to a line of 36 manufacturing machines
a cut-off point, over which the pair would be assigned produced by a single business unit of a company. Each
a 1. Experts can adjust the cut-off point, beginning machine consisted of modules and individual compo-
with 1, until the algorithm yields the desired number nents, many of which were interdependent. A num-
of designs. These designs would be a ranked set of ber of modules and parts were common to multiple
product ideas ranging from those with the highest de- machines. The company’s strong R&D department
gree of compatibility to those with the lowest: designs and advanced CAD/CAM capabilities facilitated de-
in which all pairs of attributes have values equal to 1, sign changes and the evaluation of alternatives. The
designs in which some pairs have values, say, between company’s database was shared by all units in the or-
0.9 and 1, designs in which some pairs have values, ganization, including accounting, design, manufactur-
say, between 0.8 and 0.9, and so-forth. ing, marketing, and purchasing. The combination of
The team then subjects these designs to further CAD/CAM and the common database made it easy
screening and economic and marketing analysis. to estimate the costs of components after a change in
298 J. Singhal, K. Singhal / Journal of Operations Management 20 (2002) 289–302

design. CAD/CAM also made it possible to develop required and 6 were optional. The required parame-
virtual prototypes of components or pairs of interact- ters had two or more alternatives and the team had to
ing components and approximate virtual prototypes of choose exactly one alternative for a design. For the
whole products. optional parameters, the team treated the parameter
The company constantly sought customer input for non-inclusion as an additional alternative. The detail
improving its products, focusing on components with is as follows.
the highest failure rates. It used demand for spare parts
• Twelve parameters had two alternatives each. A
as a surrogate measure of failure rate. The company
product would require exactly one alternative for
pursued improvements in those components through
nine of them and at most one alternative for the re-
R&D and through focused continuous improvements
maining three.
in manufacturing. It then started the next cycle of im-
• Seven parameters had three alternatives each. A
provements by pursuing the next set of components
product would require exactly one alternative for
prone to failure. It had doubled the expected useful
six of them and at most one alternative for the re-
life of most of the components during the preceding
maining parameter.
9 years. The company had acquired a reputation for
• Three parameters had four alternatives each. A
producing high quality products.
product would require exactly one alternative for
Out of 36, 5 products accounted for 42% of revenue
two of them and at most one alternative for the
of the product line, another 10 products accounted for
remaining parameter.
37% of revenue, and the remaining 21 products ac-
• One parameter had five alternatives and a product
counted for 21% of revenue. The company referred to
would require exactly one of them.
these product sets as high-volume, medium-volume,
• Thus, 9 of the 23 parameters in the compatibility
and low-volume products. The product line had
matrix had two alternatives each, another 9 had three
evolved over time. The products had many common
alternatives each, 3 had four alternatives each, and
parameters. In spite of economies of scale from com-
the remaining 2 had five alternatives each. The total
mon parameters, many low-volume products were
number of possible combinations resulting from the
either running losses or contributing only marginally
configuration was 16,124,313,600.
to operating profits.
The company wanted to explore new product ver- 6.2. Steps 3 and 4: developing the compatibility
sions that it could produce with existing parameters. data and identifying designs
It had two goals: to increase market share and to re-
place a number of low-volume products with a smaller The team needed compatibility data for 2137 pairs
number of new products such that each new prod- (Eq. (3)). The team treated the pairs of parameters
uct would have the most desirable parameters of sev- present in any of the 36 existing products as com-
eral low-volume products. The company organized a patible and the rest as incompatible. By using the
project team consisting of representatives from design, code, COMMAND, the team identified 218 designs,
manufacturing, and marketing. of which 182 were new designs and 36, existing.
Although all the parameters in the new designs were
6.1. Steps 1 and 2: identifying parameters and included in existing machines, no new design had
alternatives for each parameter identical parameters to an existing machine. Each
new design was unique, and although some were only
As a first step, the team developed a compatibil- slightly different from one or more existing machines
ity matrix to identify new product versions that would in terms of composition, cost, or performance, others
meet these goals. Some of the parameters were neces- were substantially different.
sary for all product combinations and had no bearing
on technical design or marketing-compatibility. Thus, 6.3. Economic and marketing analysis
the team excluded them from the compatibility matrix.
The team also excluded such parameters as color and Since all of the 182 new designs required only ex-
finish. The matrix included 23 parameters; 17 were isting parameters and existing interfaces between pairs
J. Singhal, K. Singhal / Journal of Operations Management 20 (2002) 289–302 299

of parameters, it was easy to produce their virtual pro- to buy it, they thought the economy of scale would
totypes. The virtual prototypes revealed that 11 of the reduce its cost.
designs had some fit (compatibility) problems related To meet the company’s second goal to replace the
to interactions of three or more components. The de- 21 low-volume products with a smaller set of new de-
sign and manufacturing departments easily resolved signs, with each new design replacing and possibly
the problems in 10 of them. The remaining design improving on two or more existing designs, the team
had problems that would take considerable time and first identified new designs in which not more than
money to solve, and the team dropped it from further three parameters differed from those in two or more
consideration. The team also calculated direct costs of low-volume products. For each new design Da (a =
the remaining 181 designs. 1, 2, . . . , 181), the team identified a set Sa (a = 1,
Next, the team developed a measure for the degree 2, . . . , 181) of existing low-volume designs Pb such
of novelty for each new design. It compared each new that Yab ≤ 3 (b = 16, 17, . . . , 36). It deleted the sets
design Da (a = 1, 2, . . . , 181) with each existing de- containing only one low-volume design. The team then
sign, Pb (b = 1, 2, . . . , 36; high-volume designs in- used the following three criteria to examine the re-
dexed from 1 to 5, medium-volume designs indexed maining sets Sa that contained two or more existing
from 6 to 15, and low-volume designs indexed from low-volume designs.
16 to 36) to determine Yab , the number of parameters
1. The extent to which the new design meets the needs
that were different in Da and Pb . The team calculated
of the customers for the products it would replace.
the degree of novelty for a new design, Da , as
2. The extent to which customers would perceive the
new design as an improvement allowing the firm
Ya = min(Yab ),
to market it as an improved model.
a = 1, 2, . . . , 181 and b = 1, 2, . . . , 36 3. The direct cost.
The team ranked new designs based on the degree In evaluating the designs based on the first two crite-
of novelty. ria, the team consulted extensively with the corporate
To meet the goal of increasing the firm’s market- marketing department and field managers. The team
ing share, the team asked the marketing department recommended that the company retain 4 of the exist-
to examine the designs on the basis of the following ing low-volume designs and replace the remaining 17
criteria. with 6 new designs.
The team’s recommendation would also eliminate
1. Degree of novelty.
five components or modules, four of which it out-
2. Direct costs.
sourced. Eliminating these components could save
3. Customer needs as judged by the “experts” in the
on indirect costs and overhead. Out of 6, 2 new de-
marketing department.
signs recommended for meeting the second goal were
These experts included staff in various branch of- among the 27 recommended for meeting the first goal.
fices and a few selected experts from the company’s Thus, the company needed to build 31 prototypes.
distributors. They first dropped most of the designs After building the prototypes, the manufacturing de-
that ranked low in degree of novelty and that would partment determined that one of them would require
not, in their judgment, serve customer needs any bet- redesign of some parts of the assembly line and that
ter than the existing machines. Then they examined the redesign would require additional investment and
the remaining designs to see whether the improved disrupt production for several days.
response to customer needs would justify the direct The team divided 31 prototypes into seven subsets,
cost of the machine. They selected 27 designs for fur- showing each subset to one of seven focus groups
ther evaluation, 22 of which came from the top 38 in of customers. Some individuals served on two or
the ranked list. They included the design that had the more groups. The focus groups consisted primarily of
highest direct cost because they thought that its su- the company’s current customers, along with a few
perior features would be of great interest to high-end customers of its competitors. The feedback from the
customers. If they could persuade enough customers focus groups was a major factor in deciding which
300 J. Singhal, K. Singhal / Journal of Operations Management 20 (2002) 289–302

prototypes to market or test market. The focus groups and the reduction in the product line from 36 to 29
also suggested improvements in the prototypes. The products, the inventory turnover in the downstream
suggestions were for cosmetic changes in the pro- supply chain increased by 16%.
totypes, with two exceptions. First, the group that The focus group’s suggestions that required major
evaluated the design with the highest direct cost used R&D undertaking led the company to initiate a project
that design as a benchmark to make suggestions that to develop a product that would be superior to all ex-
would mean major R&D undertakings for products isting products manufactured by the company and its
designed in the future. Second, based on of the com- competitors. To get new insights, it is following two
ments of another group, the team built an additional avenues: it is reverse-engineering competitors’ prod-
prototype for one of the 150 new designs that had ucts and it is examining possible component and mod-
been eliminated from consideration and asked that ule interfaces that the team assumed to be incompatible
group to evaluate it. because they were not part of any existing products.
The prototypes played a critical role in identifying The application of the compatibility matrix and the
potential problems in manufacturing, making accu- code COMMAND played a critical role in identifying
rate estimates of costs, and getting useful customer new designs that the company marketed successfully.
feedback on the desirability of products and possible It is unlikely that the company could have identified
improvements. Srinivasan et al. (1997) advocate de- those designs using judgment or trial and error since
veloping a spectrum of customer-ready prototypes it had to choose from more than 16 billion possible
to facilitate determination of customer response and combinations of machines.
costs. They note that leading design firms prefer prod-
uct designs driven by prototypes rather than specifica-
tions. Schrage (1993) quotes Davis Kelley, president 7. Concluding remarks and suggestions for
of the successful design firm IDEO, as saying that the future research
number of prototypes and the quality of those proto-
types is directly proportional to the ultimate quality We addressed two problems in the design and de-
of the product. velopment of a product that are directly tied into
effective management of the marketing/operations
6.4. Implementation and results interface. We first considered technological incompat-
ibility between pairs of alternatives for different com-
The company marketed 11 new designs, 5 of them to ponents to identify feasible product designs at various
expand its market share and the remaining 6 to replace stages of product-development, from screening to
17 existing low-volume products. These 11 designs the final design. We then considered experts’ judg-
included the design with the highest direct cost, the ment on compatibility between pairs of alternatives
design that required redesign of part of the assembly for different attributes to generate product ideas and
line, and the design for which a prototype was built to perform a preliminary screening. Companies can
because of focus group’s comments. An unexpected use this expert-based approach in conjunction with
benefit of redesign of part of the assembly line was that other expert-based approaches or consumer-based
it reduced the average assembly time for all products approaches to identify potentially desirable prod-
by 6.5%. uct ideas. We have also developed a taxonomy of
Two years after it introduced the new designs, the technological-compatibility and integrated the litera-
company’s sales volume had increased by about 48% ture on this topic. Our methodology includes explicit
and inventory turnover by 12%. The new designs also simultaneous consideration of product, process, and
cannibalized one of the medium-volume products, supply chain development, and it is applicable to the
which the company subsequently dropped from the entire spectrum of product novelty, from radical to
product line. The company later realized that one of incremental innovation.
the designs introduced to replace the low-volume de- The simultaneous consideration of technologi-
signs was very similar to the cannibalized product. cal and marketing compatibilities strengthens the
Further, as a result of the increase in the sales volume production/marketing interface, since technological
J. Singhal, K. Singhal / Journal of Operations Management 20 (2002) 289–302 301

incompatibilities are related to design, manufactur- Adler, P.S., 1995. Interdepartmental interdependence and coordi-
ing, and supplier related issues. The compatibility nation: the case of the design/manufacturing interface. Organi-
matrix is quite simple to implement and the inputs zation Science 6 (2), 147–167.
Alford, C.A., Mason, J.B., 1975. Generating new product ideas.
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