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FINANCE AND STRATEGY PRACTICE
RESEARCH & TECHNOLOGY EXECUTIVE COUNCIL
Modular Design
PlaybookGuidelines or Assessing
the Benets and Risks o
Modular Design
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The Research & Technology Executive Council has worked to ensure
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Report Authored By
Amanda EagerKate Elsam
Rishabh Gupta
Mattias Velinder
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2010 The Corporate Executive Board Company. All Rights Reserved. RTEC5 2136 09SYN
Executive Summary 1
The Modular Design Concept 5
Advantages and Disadvantages 9
Advantages o Modular Design 10
Disadvantages o Modular Design 12
Application Considerations 15
When to Insert Modularity in the Design Process 16
Targeting Products or Modular Design 17
Deciding on the Degree o Product Modularity 17
Examining Modular Design in Dierent Industries 20
Implementation Steps and Tips 23
Typical Modular Design Implementation Process Steps 24
Organizational Barriers to Implementing Modular Design 27
Implementation Tips rom Experienced Companies 28
Case Examples 31
Betas1 Market-Aligned Modular Design 33
Alphas1 Cross-Functional Modular Design Scorecard 36
Gammas1 Central Product Strategy Team 39
Assessing Post-Implementation Performance 43
Sample Metrics or Evaluating Modular Design 46
Table o Contents
1 Pseudonym.
http://www.riskmetrics.com/knowledge/conversations/2009proxy_seasonhttp://www.riskmetrics.com/knowledge/conversations/2009proxy_seasonhttp://www.riskmetrics.com/knowledge/conversations/2009proxy_seasonhttp://www.riskmetrics.com/knowledge/conversations/2009proxy_seasonhttp://www.riskmetrics.com/knowledge/conversations/2009proxy_seasonhttp://www.riskmetrics.com/knowledge/conversations/2009proxy_seasonhttp://www.riskmetrics.com/knowledge/conversations/2009proxy_seasonhttp://www.riskmetrics.com/knowledge/conversations/2009proxy_seasonhttp://www.riskmetrics.com/knowledge/conversations/2009proxy_seasonhttp://www.riskmetrics.com/knowledge/conversations/2009proxy_season7/30/2019 Modular Design Playbook1
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Executive Summary
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EXECUTIVE
SUMMARY
THEMODULAR
DESIGNCONCEPT
ADVANT
AGES
AND
APPLICATION
CONSIDERATIONS
IM
PLEMENTATION
STEPSANDTIPS
CASE
EXAMPLES
ASSESSINGPOST-
IMPLEMENTATION
OVERVIEW
Companies employ modular design to be more agile and competitive in rapidly
changing market environments, while driving cost-eciencies internally. Usingmodular design allows companies to recombine modules across product lines
and increase product variants to satisy changing customer needs. Furthermore,
manuacturing becomes more cost and time ecient by capitalizing on economies
o scale and streamlining assembly lines. Benets withstanding, implementing
modular design is a complex and vast undertaking with enterprise-wide implications
that will challenge many organizations. Nevertheless, companies across industries
increasingly adopt modular design and are thereore continually developing new
methods and tools to successully implement and manage a modular product
architecture.
KEY TAKEAWAYS
1. Denitions o Modular Design Vary Across Companies, but Fundamental
Ideas Remain the SameAlthough exact denitions vary, the undamental
principles o modular design are common: break systems into discrete modules,
ensure modules can interchange with each other, and provide well-dened
interaces. Furthermore, modular design acilitates the design o modular product
architectures and/or the creation o modular manuacturing processes.
2. Benets o Modular Design Accrue Across the FirmEmploying modular
design has myriad well-documented benets, the most common rom cost-savings
and product line diversication. Companies that employ modular design can
produce benets across the organization, in R&D, Manuacturing, Procurement,
and Marketing and Sales.
3. Manage Against Less Well-Known Implementation Risks o Modular Design
Early on to Minimize Chances o Business DisruptionAlthough employing
modular design can provide numerous benets, companies ace less well-known
implementation risks associated with new suppliers, changes in talent skill
proles, IP protection, and coordination execution complexity. Companies that do
not consider and manage against these risks early on can lose out on the benets omodular design and signicantly damage operations.
4. Do Not Determine the Degree o Modularization Based Solely on Cost-
Efciency OpportunitiesMany companies seek to make both new and existing
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SUMMARY
DESIGNCONCEPT
DISADVANTAGES
CONSIDERATIONS
STEPSANDTIPS
EXAMPLES
PERFORMANCE
products as modular as possible to capture the greatest possible internal cost-
eciencies. However, executives must consider many actors to determine the
extent o product modularization. Besides the requisite ocus on a products
technical eciency and reliability, companies must also consider the eect
modular designs will have on customers perceptions and cross-unctional risk
exposure. Companies should identiy and employ design alternatives that satisy
all ronts, not just cost-eciencies.
5. Select High-Volume Products with Multiple Shared Components Across
Products LinesAny product could potentially be modularized, but companies
must be selective in choosing which products to redesign, especially when rst
piloting modular design. To more easily benet rom the advantages o modular
design, successul companies initially target products that have a large number o
shared components with other product lines, high sales volumes, and/or containplatorm technologies.
6. Secure Early Internal Stakeholder Buy-In or Modular Design to Enable
Successul ImplementationCompanies that implement modular design
undamentally change their product and manuacturing architecture, which
impacts the entire organization. Implementation barriers or modular design
arise rom the lack o early widespread support. For successul implementation,
executives need to obtain buy-in rom internal stakeholders rom the outset.
7. Use Direct Customer Voice to Screen Modular Redesigns BeoreImplementingExecutives need to ensure that new design alternatives are
aligned and accepted by the market to prevent alienating existing customers.
Companies should test and screen any new product design directly with the
customer beore adoption.
8. Establish a Cross-Functional Team with Broad Technical and Market Skills
to Evaluate Modular Design AlternativesAs R&D and engineering teams
are traditionally comprised o individuals with particular niche expertise in
their elds, this specialization can inhibit the ability o individuals to look across
product lines to distill modular components. Companies should establish a cross-
unctional team that possesses a broader technical skill set as well as acute market
insight to understand and explore the ull range o modular design possibilities
that exist across product lines.
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The Modular Design Concept
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DEFINITION
To oer greater product variations at lower costs, many companies employ a
modular strategy that explicitly leverages and reuses existing product design ideasand materials. To ully understand the modular concept, it is important to contrast
modular product design with a more conventional approach1:
Conventional Versus Modular Product Design
Design Approach Development Approach
Conventional Product
Design: R&D and
Marketing conduct
market research to
determine optimalattributes o product
design.
Desired unctionality
decomposed into
components, but
component interaces
are not specied in detail.
Component development
and product design
co-evolve in an iterative
process. Product
architecture is denedat the completion o the
development process by
the nal product design.
Modular Product Design:
R&D and Marketing
create product platorms
upon which they will
architect product
variations according
to market needs.
Modular product
architecture ully
species component
interaces and limits
subsequent component
development.
Component development
processes are concurrent,
autonomous, and
distributed. Product
architecture is dened
at the design stage and
does not change during
development.
Modular design oers an ecient method or mass customization, enabling multiple
product variations while keeping costs low. Especially in turbulent economic times
with unpredictable customer behavior, R&D teams can recongure products quickly
to react to changing customer needs. Companies use dierent denitions o modular
design depending on their specic organizational context.
1 Liang, Wen-Yau, and Peter OGrady, A constrained evolutionary search ormalism or remote design withmodules, International Journal o Computer Aided Manuacturing, Vol. 13, no. 2 (2000): 6579.
EXECUTIVE
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CONSIDERATIONS
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EXAMPLES
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Client Perspective: Descriptions o Modular Design
It is the breakdown o
a product into building
blocks (modules) with
dened interaces,
driven by strategic
goals.
VP, Global Technology
Consumer Product
Manuacturing Company
All design is modular;
we try to break all
our code down into
the most granular
components that can
then be reused.Technology Engineer
Aerospace and Deense
Company
[In modular design]
components are
created that can be
easily changed to be
adapted to dierent
products.Director, Engineering
Electronics Company
Although exact denitions vary, the undamental ideas are common throughout:
Break systems into discrete modules.
Ensure modules can interchange with each other. Provide well-dened interaces.
Modular design acilitates the design o modular product architectures and/or the
creation o modular manuacturing processes.
The Research & Technology Executive Councils denition o modular design is
broadly applicable or most organizations:
The Councils Denition o Modular Design
Modular design is the organization o a complex system into a number o smaller,
complementary, and distinct components, which can be designed separately andthen assembled to orm the entire system again seamlessly. Driven by strategic
goals, module interaces must be well dened with interchangeable components.
The individual components can be used to create other systems and thereore drive
multiple unctionalities.
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Advantages and Disadvantages
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I. ADVANTAGES OF MODULAR DESIGN
Employing modular design has many well-documented benets, the most common
o which are cost-savings and product line diversication. However, employingmodular design can produce benets across the organization, in R&D, Manuacturing,
Procurement, and Marketing and Sales.
Research and Development
The product design and development process undamentally changes as a consequence
o employing a modular process. As opposed to an integrated design approach where
product designs only aim to address specic market needs, a modular approach seeks
to address market needs as well as employ a ramework that can house and leverage
a variety o discrete modules. Furthermore, companies can signicantly shorten the
development process by using existing know-how and modular components whencreating a new product.
There are several benets we have seen as a result o using modular design,
like standardizing manuacturing processes, decreasing assembly lines, and
reducing changeover costs, plus part counts are down and products are
easier to servicebut this all comes down to delivering cost-efciencies.
Manager, Product EngineeringConstruction Materials Company
Manuacturing
A key component o modularization is the ability to standardize independent modules
and drive scale. This can translate into huge cost savings rom manuacturing
simplication and consolidation.
Procurement
Modular design decreases the number o unique parts needed in a product, as modules
and interaces become more standardized. This can rerame supplier management
to drive more strategic partnerships with ewer suppliers and enhance negotiating
power with scale.
Marketing and Sales
Modules provide specic unctions and benets to the overall product, which
companies can map to customer needs and segments. For example, companies can
use a high- versus low-perorming module in a product to target a high- versus
low-income customer segment. This provides Marketing with the ability to oer
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Advantages and Disadvantages 1
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customers a wider product range.
We have been able to reduce part numbers, which has helped inventory,direct cost reductions, increased product quality, and standardized assembly
lines. We work with ewer suppliers, too, which means we have better
partnerships and purchasing conditions.
Manager, New Product DevelopmentIndustrial Manuacturing Company
The ollowing table contains a ull overview o the specifc advantages that many individual
departments can achieve as a direct result o implementing modular design:
Department Specic Benets Description
Research andDevelopment
Increasedreliability
R&D can test individual modules to identiy specicproblem areas more easily than with integrated productdesign. By improving individual modules and interaces,the entire system becomes more robust.
Reuse o designand materials
Assembling and reusing modular components in multiplecombinations to orm dierent products creates savingsknown as economies o substitution. Leveraging existingdesigns and materials saves time and money.
Diversicationo product lines
Although the number o unique components in any givenproduct typically decreases through modular design, thenumber o potential product variations increases,providing a more diverse product portolio.
Manuacturing Assembly linereduction
Reducing the number o unique manuacturedcomponents oten enables companies to consolidate andretire nonessential or redundant assembly lines.
Changeover costreductions
A higher volume o more standardized modules leads toa reduction in changeover costs and the number o toolsrequired or production.
Shared processplanning
With dierent product lines using the same moduledesign, Manuacturing can implement shared processesacross product lines.
Agility andexibility
Assembly lines can manuacture modules independentlyand concurrently, enabling more agile and exibleresource planning.
Procurement Inventoryreduction
Reducing the number o unique parts required in designalso reduces the inventory o spare parts required. Thisconsolidation o unique purchased materials also leads tosimpler stock keeping and inventory management as thereare ewer product categories to manage.
Improved suppliermanagement
Managing a smaller supply base with higher volumesenables the development o strategic supplierrelationships, which can translate into higher trade credits,prolonged payment deadlines, and better pricing.
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Procurement
(Continued)Increasedsupplier designcollaboration
Asking suppliers to create sel-contained modular unitsthat interace with a variety o products oten requiresdeeper and new technical skills rom suppliers. By moreclosely integrating suppliers into the modular design
process, companies can improve easibility testing andbenet rom unique supplier design capabilities.
Marketingand Sales
Increasedcustomization
Modular products can be easily customized by switchingdierent components across product lines and interaces.Changing customer requirements can be more readilymet, and new product variations can be created tocapture new market segments or more market share.
Incrementalupgrades
As companies create new or next-generation modules,they can oer new eatures or product lines using thesenew modules either in the orm o a chargeable eatureupgrade or a new premium product line.
Quicker servicingand repair
With modular design, deects generally do not aectthe entire unction o the product. Deects can be tracedto specic malunctioning modules or interaces and
quickly rectied through repair or replacement withouta complete product overhaul. Customers value the asterservice turnaround times and decreased cost o repair.
Faster timeto market
Modular design signicantly decreases the time it takesto move a product rom concept to commercializationthrough design reuse and quicker manuacturing.
Simplersales process
Reduced complexity in product design simplies the salespitch and enables sales teams to oer a higher degree ocustomization to meet customer needs.
II. DISADVANTAGES OF MODULAR DESIGN
Although employing modular design provides a number o advantages across the
organization, companies must also consider the less discussed risks when evaluating
the decision to implement modular design or reviewing existing modular processes.
High Initial Investment
The initial costs to recongure existing systems and processes are high. Modular
design is a signicant undertaking, which may disrupt the existing fow o the
product pipeline. Visualizing and predicting the possible return and benets o such
an investment is done speculatively with no direct link between investment and
return. As such, some R&D departments struggle to secure buy-in rom the rest o
the organization.
Lack o Customer-Centricity
In an integrated design, companies determine product specications based on
customer needs; however, a modular architecture uses both customer needs and
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cost-eciencies. With a dual goal, companies can become too internally ocused
while searching or cost-eciencies and lose sight o customer needs. At its worst,
this can lead to lost market share and revenue. (See Beta1 solution on page 33.)
The danger o modular design is that i it is taken to the extreme or done
wrong, the product will not meet customer needs, while a customized
process will always create something that meets customer specications.
Manager, New Product DevelopmentIndustrial Manuacturing Company
Coordination Complexity
Modular design requires a signicant restructuring o processes and can increase
product development complexity i companies do not assign clear ownership and
responsibilities in a well-planned implementation process. Post-implementation, a
lack o cross-unit collaboration can cause 1) duplication o processes, 2) inconsistency
across product specications, purchase orders, and manuacturing plans, and 3)
incongruous interaces across business units. I companies do not address these
coordination issues, products may suer rom a quality and stability standpoint.
The main disadvantage is that there is a high cost and major overhaul
needed when undertaking modular design. But in the long term, it pays o,
allowing you to be quicker in and to the market.
Vice President, Global TechnologyAppliances Manuacturing Company
Supplier Risk
Companies that adopt modular design will alter their supplier base and the services
needed. When collaborating with new suppliers, companies can experience delays,
incorrect specications, and poor material quality. Also, companies may have to
share inormation and technical expertise to ensure suppliers deliver according to
new specications and cost. A company surrendering too much technical expertise,
especially in areas that provide a competitive advantage, may lose technical control
to the supplier. (See Alpha1 solution on page 36.)
Low Flexibility or ExceptionsTo ensure consistency o product lines and reap the rewards o modularity as an
organization, companies must sometimes apply modular design to products that
1 Pseudonym.
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would be cheaper to produce through an integrated design. This can reduce margins
and decrease competitiveness or certain products. When making these tough
modular decisions, companies should leave the nal verdict to business units. (See
Gamma1 solution on page 39.)
You may have to make a ew tough callssome products, which would make
more sense i they were let as integrated products, are orced into a modular
conguration to t in with the wider product line redesign.
Manager, Product EngineeringConstruction Materials Company
Broad Skills Requirement
Design engineers must have a broad technical understanding across product lines to
identiy modular components or synergies. This is a departure rom more traditional
engineering activities, and companies may not capture potential benets i the design
team lacks this broad skill set. (See Gamma solution on page 39.)
Intellectual Property Risk
Producing discrete modules simplies the product architecture, enabling competitors
to more easily discern technologies employed and mimic modules. To counter this,
organizations must increase patent documentation to prevent competitors using key
modules in their product architectures.
1 Pseudonym.
EXECUTIVE
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Application Considerations
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OVERVIEW
Companies apply modular design in various ways, depending on actors such
as industry, brand strategy, organizational structure, product architecture, etc.Independent o these issues, most companies cite very similar screens or deciding
when to implement modular design. This section helps companies determine the
ollowing:
I. When in the design process to consider modular alternatives
II. How to target individual products or modular design
III. To what extent a design should be made modular
IV. How modular design maniests itsel in dierent industries
I. WHEN TO INSERT MODULARITY IN THE DESIGN PROCESSCompanies need to explicitly dene the particular phase in the development process
where they will apply modular design. Ater assessing the market and technical
capabilities and determining a high-level design vision, companies typically consider
how to apply modular design in the easibility stage.
Product Development Process
During the easibility stage, manuacturing, engineering, project management, and
marketing team members meet to discuss various modular alternatives and design
possibilities. The outcome o these discussions is a decision on design architecture
design parameters. This process ensures that the design can be made modular and
can also meet product unctionality considerations incorporating both customer and
technical considerations. Once designs are approved, companies must assess how
the modular design choices will impact supplier relationships: the number o unique
suppliers, required supplier technical expertise, and preerred supplier locations.
Furthermore, R&D needs to select the right projects or applying modular design.
Study
market to
identiy
customer
segments
and marketneeds.
Design
vision based
on market
segments
and needs.
Assess
current
and uture
technological
capabilities
againstdesign
vision.
Determine
easible
design
alternatives
by
assemblingstakeholders.
Develop
prototypes
based
on best
designs to
test againstmarket.
Present
internal
business
case
or bestprototype.
Open
project
or
commerc-
ialization.
Modular Design
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II. TARGETING PRODUCTS FOR MODULAR DESIGN
Although companies could potentially design any product modularly, they should be
selective in which products to redesign, especially when rst piloting modular design.
Successul companies initially target products that exhibit the traits described below
to more easily benet rom the advantages o modular design:
Design Architecture
1. Common ComponentsProducts that have a high number o components in
common with other product lines should be primary modular design targets.
Time and cost savings rom reuse combined with higher potential product
variation possibilities make these products the most benecial or leveraging
modular design.
2. Platform InfrastructureProducts that have a platorm inrastructure to
support various modules (opposed to a wholly integrated design) makeinterace design a simpler and quicker process.
3. Non-Client-Facing ModulesProducts that can be redesigned modularly
without changing the outward appearance or unctionality o the product
enable customer perceptions to go unchanged (reducing uncertainty
associated with redesign), while the organization can benet rom
cost-eciencies.
Production Processes
4. Ability to Leverage Existing Production ProcessesProducts produced on
similar assembly and production lines that can generate the highest-potentialreturns through improved utilization o manuacturing capabilities and
acilities.
Demand Considerations
5. High VolumeProducts manuactured and sold in high volumes will benet
most rom modular design through reuse savings. Low-sale volume products
typically do not generate enough margin to justiy the high initial cost
attached to implementing modular design.
III. DECIDING ON THE DEGREE OF PRODUCT MODULARITY
Many companies strive to make both new and existing product lines as modular as
possible to gain the highest degree o cost-eciencies. But there are many actors
executives must consider when deciding on the extent to make any product modular.
Besides the obvious requisite ocus on technical eciency and reliability, companies
must also ocus on the impact on customers and other unctions.
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Customer Impact o Modular Design
Companies can group modules into either client-acing or non-client-acing modules.
Client-acing modules are visible to the customer and/or directly contribute to aunctionality that satises a customer need. Non-client-acing modules provide
hidden unctionality, where customers do not directly interact with or observe the
technologys unctionality.
For non-client-acing modules, companies do not need to limit the degree o
modularity, but rather should seek to maximize modular design or cost savings.
However, client-acing modules need to align with customer needs and preerences
and should not solely be designed or cost-eciencies.
Companies can modularize a product in dierent ways depending on the technical
capabilities o the company, existing component structure, materials available,know-how, etc. Companies should initially assess which modular design to choose
based upon the balance between cost savings and market alignment by overlaying
the product lines and modular design options on a matrix as shown below.
Modular Design: Market Alignment Matrix
Design Y
Design ZDesign Y
Design X
Design X
Design Y
Design X
High
Low
Low HighCost Savings
MarketAlignment
C D
A B
Product
Line 1
Product
Line 2
Product
Line 3
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A Lower-Let Quadrant: These product designs should either be revised or discarded.Implementing either o these alternatives may cause harm to the brand image o the
organization by not ullling customer needs. Plus, the complexity and/or costs associated
with these designs typically prevent them rom achieving acceptable ROI levels.
B Lower-Right Quadrant: These design alternatives benet rom substantial cost savings, butclient-acing modules ail to properly align with the market needs, either by not providing
unctionality expected by customers or visually impairing the perception o the product
by customers.
C Upper-Let Quadrant: These design alternatives ensure that client-acing modules are marketaligned, but do not reap the ull potential rewards o modular design. Companies may either
explore urther potential cost savings or decide that sales orecasts and/or margins are high
enough to warrant implementation. Furthermore, some organizations opt or break-even or
even loss design alternatives to benet rom the experience o implementing modular design
or because these products support a avorable brand image in the market. Typically, however,
companies discard these design options as they do not yield high enough cost savings.
DUpper-Right Quadrant: These products and design alternatives successully balance
maximized cost savings with customer expectations. Products and designs in this quadrant
should be prioritized or uture commercialization.
Cross-Functional Impact o Modular Design
Dierent modular designs can have varying consequences or unctions across
the company. These repercussions play a signicant part when deciding on
the nal modular design. I a company is presented with a number o dierent
designs to modularize a product, it should review the impact each o these design
alternatives will have on costs, process eciency, and risks specic to dierent
departments. The design alternative chosen may not be the most benecial in
terms o cost savings, but one that minimizes risks across the most areas.
Companies should establish mechanisms to ensure that repercussions or
going modular are ully considered or all stakeholders. To track these risks,
some companies establish simple stoplight risk assessments or each design,
monitoring potential risk levels by unction. Each department determines
the acceptable level o risk and tracks parameters. For example, i quality and
manuacturing risks reach a certain threshold, it triggers a red light status,
which orces the company to abandon Design X and consider Design Y that has
acceptable risk levels across departments.
Cross-Functional Risk Monitoring
Illustrative
Quality Risks Engineering
Risks
Procurement
Risks
Manuacturing
Risks
Marketing
Risks
Status
Design X
Design Y
SUMMARY
DESIGNCONCEPT
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STEPSANDTIPS
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PERFORMANCE
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IV. EXAMINING MODULAR DESIGN IN DIFFERENT INDUSTRIES
A modular strategy provides rms with fexibility, agility, and new design
alternatives. However, modularization should be adopted cautiously. The ability oindividual companies to capitalize on modular design advantages is oten dependent
on industry-specic dynamics. Provided below are examples o how companies
across various industries have capitalized on modular design.
Automobile Industry1
Modular design helps car manuacturers cut costs and reduce complexity. A good
example o this comes rom Mercedes-Benzs sports vehicle manuacturing plant in
Alabama. The vehicles design required them to source parts rom a large number
o external suppliers and manage a vast supply system. Instead o trying to manage
this system as a whole, Mercedes-Benz structured the manuacturing process into a
number o smaller production modules. They outsourced the production modules to
suppliers, who were ully responsible or manuacturing and delivery. For example,
the entire drivers cockpit is a separate module produced at a nearby supplier plant,
under the complete responsibility o the supplier.
Volkswagen adopted a similar approach or its truck actory in Brazil by making the
actory available or use by its suppliers. Suppliers procure their own materials and
manpower to create separate modules, while Volkswagen provides the inrastructure
and designs the interace between manuacturing units.
High-Technology Industry2
In the high-tech industry, product customization is in high demand. For example, Dell
modularizes its product designs and supply chain to ensure high customization or its
customers. Customers can choose rom a wide array o modules like motherboards,
power systems, operating systems, and input devices. The modularity o Dells PCs
helps them deliver against a wide array o customer wants quickly and eciently.
Dells made-to-order strategy enables the company to be a supplier o choice or its
customers.
Sotware Industry3
Modular sotware design reers to a design strategy that organizes relatively smallroutines together to compose a system. With signicant modular development, the
sotware industry has rapidly become decentralized, as smaller companies begin to
share their technology with outside programmers. For example, Salesorce.com, a
ast-growing CRM provider, externally published standards or interconnecting its
1 Garud, Raghu, Arun Kumaraswamy, and Richard N. Langlois, Managing In The Modular Age, Blackwell PublishersLtd. (2002).
2 Fine, Charles H., Are You Modular or Integral? Make Sure Your Supply Chain Knows, Strategy+Business(Summer 2005).
3 Marko, John, Sharing Lego blocks: Modular sotware reshapes the computing landscape, The New York Times(5 April 2006).
EXECUTIVE
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sotware. This enabled developers inside and outside the company to add powerul
abilities to its core products and create new ones rom scratch. The ollowing drive
organizations to apply modular sotware:
Complex problems can be broken down into simple parts and solved part by
part, simpliying project management.
Developers can reuse sotware code written modularly as part o other
programs, saving time by providing standardization and consistency.
Construction Industry
Construction rms regularly apply modular techniques, where a building is built in
three-dimensional sections (or modules) in an enclosed actory environment.1 Every
modular building starts with a foor plan design. This plan is divided into smaller
sections or modules that are constructed separately using existing technologies suchas conventional commercial wall, foor, roo, and ceiling materials. To maximize
time savings, the site development teams prepare the site and perorm any needed
on-site construction (a process called concurrent construction). Manuacturers cite
the ollowing reasons to apply modular design:2
Time Savings: Modular construction allows or building and site work to
progress simultaneously, reducing the overall completion schedule by as much
as 50%.
Weather Autonomy: Dierent weather conditions do not aect assembly,
which increases work eciency and avoids damaged building material.
Supplier Bargaining Power: Large-scale manuacturers can eectively bargain
with suppliers or discounts on materials.
Reduced Complexity: Reusing the same plans or modules means that the
manuacturer has records o the quantity o materials needed or a given job,
reducing waste and maximizing the use o purchased material.
Environmental Impact: Modular construction generates less material waste
and less site disturbances than comparable site-built structures and is more
environmentally riendly.
Consumer Packaged Goods (CPG) Industry
The CPG industry generally implements modular design to introduce greater
customization in their product oerings. For example, Nike uses modular design to
empower consumers to choose the component parts, both or aesthetic and unctional
1 What Is Accelerated Construction?, Comark Building Systems, www.comarkbuilding.com.
2 Modular Homes Make Sense, www.bobvilla.com.
SUMMARY
DESIGNCONCEPT
DISADVAN
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CONSIDERATIONS
STEPSANDTIPS
EXAMPLES
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reasons, to compose their own shoes. This enables Nike to serve customers with
diering preerences equally well.1
Furthermore, Whirlpool employed modular design to produce a new built-in (opposedto stand-alone countertop) microwave oven with two new cooking modes while
decreasing costs by 60%. Although the new product line is still evolving, Whirlpool
reports initial benets o reduced prices o purchased components, increased quality,
and improved product variation or the new product range.
The mind-set o modularity allows us to predict the impact o any
request or change much more quickly than beore. This saves time and
energy. In our old, non-modular designs, when someone asked us or a
styling or perormance change, we had to review the entire design. Now we can
easily see which modules are impacted and provide a response much more quickly
than beore.
Jorma MkilWhirlpool Employee and Owner o the Opera Platorm2
1 Sacks, Danielle, The Fast Company 50, Fastcompany.com , www.astcompany.com/ast50_09/prole/list/nike (11February 2009).
2 Whirlpool Opera Case Story, Modular Management AB, www.modular.se.
EXECUTIVE
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Implementation Steps and Tips
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OVERVIEW
While the degree to which companies implement modular design varies, the
steps taken to implement are airly typical. This section provides an overview o atypical six-step modular implementation process, highlights some o the common
organizational barriers that companies should watch out or, and outlines a ew
implementation tips rom experienced companies.
I. TYPICAL MODULAR DESIGN IMPLEMENTATION PROCESS STEPS
1. Determine Product(s) to Modularize
Beore starting the journey to implement modular design, a cross-unctional team,
composed o individuals rom Marketing and Engineering, initially decides on the
extent to which the company will employ modular design. This team will drive
the modular design project orward and needs expertise that will refect the voice
o the customer as well as the technical capabilities o the organization.
Some organizations decide to launch a pilot run on a single product to gain
experience and demonstrate the success o using modular design with a view to
implement this approach incrementally. Other organizations consider all product
lines across the company to implement on a large scale. This decision depends
upon careul evaluation o the individual risk and reward proles or each product
line.
2. Dene Customer Requirements
The second step ensures that designs align with current and uture requirements
o customers. The cross-unctional team, through primary and secondarymarket research, creates a high-level uture product vision and specication
requirements. Teams oten use various voice-o-customer tools at this stage, such
as the quality unction deployment (QFD) matrix, to ensure customer needs are
well documented.
1.
Determine
product(s) to
modularize.
2.
Dene
customer
requirements.
3.
Assess
and select
technical
solutions.
4.
Identiy
modules
and create
designs.
5.
Evaluate
modular
design
alternatives.
6.
Implement,
improve,
or reject
modular
design.
EXECUTIVE
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3. Assess and Select Technical Solutions
Once everyone is aligned on what modular design must achieve rom a market
standpoint, the cross-unctional team explores the viable design alternatives thatwill meet customer needs and are possible rom a technical standpoint. The team
should view the product(s) in terms o unctional purpose. By breaking down the
product(s) into the unctions that satisy distinct customer needs, the team can
choose the technical solution that delivers against each unction. There may be
several technical solutions available, depending on technical capabilities, or any
given unction. When several technical solutions exist, the team chooses the most
applicable solution based on criteria such as production goals, part number count,
and material reuse. The outcome o this stage is to create a diagram o a products
unctional structure (which satises customer needs) and technical solutions
(that deliver the required unctions).
4. Identiy Modules and Create Designs1
This phase identies potential modules based on technical solutions. Teams
should assess each module by the ollowing criteria: Technology evolution
Reuse possibility
Potential cost savings
Supplier and distributor complexity
I a single technical solution scores high against multiple criteria, the team
considers the solution a viable candidate to become an independent module. The
team then either groups or integrates technical solutions that do not map well
against the evaluation criteria in the design. (For more inormation on evaluation
criteria, see Alpha2 case on page 36). Following this analysis, the team should
identiy and suggest the most relevant modular concepts or review, pairing them
with some rough specications and structures.
5. Evaluate Modular Design Alternatives1
For any modular design, the interaces between modules have a vital infuence
on the nal products architecture and fexibility. Thereore, it is essential thatteams closely examine each interace and its relation to dierent modules. This
examination serves as an indicator o the interaces that need improvement and
guides the modular manuacturing process. Based on the relationship between
modules and interaces, the team organizes assembly lines or optimal eciency.
1 Modular Function Deployment, Lean Directions, www.sme.org/cgi-bin/get-newsletter.pl?LEAN&20060609&1& (9 June 2006).
2 Pseudonym.
SUMMARY
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With inormation on modular designs, interaces, and assembly orders in hand, the
team must assess the ull view o eects each modular design alternative carries
and create a summary or each alternative. Companies assess each alternatives
eect on the overall product using the ollowing parameters:
Quality
Variation fexibility
Lead time
Development costs
Development capacity
Production costs
Service and upgrade possibilities
6. Implement, Improve, or Reject Modular Design
In the nal step, the cross-unctional team chooses the most promising design
alternatives and documents technical inormation, cost targets, planned
development, and other inormation discovered in the process or each
alternative. From here, the team chooses to either implement, improve, or reject
the modular concept. The team assembles a business case to present to senior
management, which shows that the design alternative can ulll customer needs,
is technologically possible, and can generate tangible benets. At this step, the
team should also reach consensus on the metrics strategy or tracking ongoing
perormance o modular implementation. (See Assessment section on page 43 or
more inormation on developing a metrics strategy.)
Pilot Implementation Case Snapshot: ESAB Welding Equipment1
Company Overview
ESAB manuactures and supplies welding and cutting equipment, welding ller metals, and welding
technology. The ESAB group has annual sales o $1 billion and more than 7,000 employees.
High Complexity
To supply local regions with local products, ESAB bought a number o geographically dispersed
SMEs. Due to these acquisitions, ESAB aced increased internal complexity, high part numbers,
signicant indirect costs, and overlapping projects.
Implementing Modular DesignTo tackle these problems, ESAB ran a pilot project or a new modularized product platorm, driven
by a cross-unctional team, to prove the advantages o modularity. The pilot proved successul with
a 40% reduction in part numbers; a 90% decrease in lead-time production; and a 50% increase
in product variants. The success encouraged senior management to proceed with implementing
modular management across the division.
1 ESAB Welding Case Story, Modular Management AB, http://www.modular.se.
EXECUTIVE
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Benets o Modular Design
Through implementing modular design across the division, ESAB achieved the ollowing: 40% reduction in part numbers 50% shorter assembly time Order-to-delivery lead-time reduction rom eight days to one 50% reduction in suppliers 50% increase in product variants
40% reduction in time to market
II. ORGANIZATIONAL BARRIERS TO IMPLEMENTING MODULAR
DESIGN
Companies that implement modular design on a large scale must undamentally
change their product and manuacturing architecture. When considering the
potential roadblocks o modular implementation, companies should be aware o a
ew key organizational barriers.
Difculty Achieving Senior Management Buy-In
To implement modular design, a company requires high initial investment o
resources, which requires senior management sign-o. Sign-o proves to be the rst
barrier many companies encounter as uture returns are dicult to guarantee and
quantiy.
Resistance rom Business Units
The decision to use modular design at the corporate level may yield overall cost
savings and increase product variants. However, particular products may be cheaperto produce using an integrated approach. The corporate center may orce business
units to employ modular designs or certain products (although more costly to the
business unit) or the overall benet o the company, which can make divisions o the
organization resistant to adopt modular design.
Lack o Knowledge-Sharing Inrastructure
To enable reuse in modular design, inormation on dierent product and
manuacturing designs needs to be readily available across the organization.
Interoperability and mutual substitution between modules are key success actors
or modular design. Without a centralized inormation-sharing structure, this
cannot be done eectively.
Traditional Innovation Culture
Companies that have a long history o using an integrated design approach where
whitespace innovation and individual ingenuity are praised and protected may nd
SUMMARY
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STEPSANDTIPS
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corporate culture to be a big barrier when implementing modular design. Two ways
that organizations can resolve this are by rewarding reuse over design novelty and
implementing modular design gradually, allowing changes to slowly take root.
Organizational Complexity
Preparing any company to implement modular design can be dicult. Implementing
modular design in a large, complex, and/or highly diversied company heightens the
diculty o coordination. Companies should consider organizational complexity and
coordination costs when determining the extent to which modular design will be
successul.
III. IMPLEMENTATION TIPS FROM EXPERIENCED COMPANIES
Gain Senior Management Support rom the BeginningGetting senior management involved with production, engineering, and product
design decisions ensures support or the initiative rom the decision-making ranks
o the company early on. Temporary setbacks and losses can be dealt with in the
moment through direct communication with senior stakeholders, instead o creating
ormal meetings where issues are explained to senior management.
Communicate Adoption Benets
To gain buy-in, clearly communicate and amiliarize the business units o the
long-term advantages o modular design in terms o cost savings and increases in
eciency.
Create and Promote Modular Design Knowledge Sharing
To benet rom time savings, create IT systems that enable divisions to access relevant
designs rom across the organization. Indicate contact details or the lead designer to
assist other divisions that may want to employ a particular modular design. Once the
inrastructure exists or knowledge sharing, usage must be promoted and embedded
in the workfow across the company. For example, in the design phase o any new
product, ensure the design team includes a new step o searching internally beore
creating new designs.
Provide Training on Modular Design
Hold continuous training sessions or sta to inorm them o the benets o modular
design, the resources available to them, and how to apply modular design in their
particular work streams. Training sessions reinorce the message o modular design
and keep the issue top o mind.
EXECUTIVE
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Limit Implementation Risk While Assessing Benets
Focus eorts on implementing modular design as a pilot phase or a specic product
to gain experience in modular design and limit risks o redesign. Use the successes o
this implementation as a stepping stone to harness buy-in and experience or wider
implementation across the company.
SUMMARY
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DISADVAN
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STEPSANDTIPS
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Case Examples
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OVERVIEW
Executives ace an uncertain economic landscape with mounting cost pressures.
Against this backdrop, organizations increasingly consider modular design as asolution to achieve cost-eciencies and ancillary benets needed or survival. This
cost-cutting mind-set may cause companies to neglect consideration o the impact
that modular design will have on customer perceptions and its eect on business
activities across the entire organization. Furthermore, specialized engineering
organizations oten lack the cross-unctional, crossproduct line expertise to ully
exploit modular benets across the entire company.
R&D organizations oten all prey to three key downalls in implementation:
1. Lack o ocus on customer impact
2. Insucient assessment o cross-unctional impact
3. Inability to properly assess the ull range o modular possibilities.
The ollowing case examples detail how three pseudonym companies address each
o these challenges to successully implement modular design:
FEATURED SOLUTIONS
1
1
1
Market-Aligned Modular
Design
Beta uses direct voice-o-
the-customer inormation
to implement a customer-
ocused modular redesign
o a key product line.
Cross-Functional Modular
Design Scorecard
Alpha implements a
product design scorecard
to assess the impact o
various modular designs
on dierent departments
and processes across the
organization.
Central Product Strategy
Team
Gamma establishes a central
product strategy team that
possesses broad technical skills
across product lines to ensure
that the ull potential o modular
design synergies are explored and
captured when introducing a new
product.
EXECUTIVE
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BETAS MARKET-ALIGNED MODULAR
DESIGN
Industry: Industrial and Consumer Products Manuacturer
FY2008 Revenue: US$1 Billion$5 Billion
FY2008 Employees: 1,0005,000
Beta makes air conditioners, humidiers, gas urnaces, heat pumps, and other products. Beta
sells its products through many independent distributors in one main market.
OVERVIEW
Beta uses direct voice-o-the-customer inormation to implement a customer-ocused
modular redesign o a key product line.
SOLUTION HIGHLIGHTS
Voice-o-the-Customer Review SessionsThe Beta engineering team proposesmodular design alternatives to marketing and sales teams and customers to balance
ecient redesign alternatives with market needs.
SCENARIO
Faced with a new energy directive, Beta reviews its electrical home appliance product
range to ensure compliance and also to assess the possibility o cost reductions
rom implementing modular design. Throughout the review process, the manager
o product engineering solicits eedback rom commercial peers and customers to
ensure that the newly modular products are not only more ecient, but also in line
with customer needs.
1
SUMMARY
DESIGNCONCEPT
DISADVAN
TAGES
CONSIDERATIONS
STEPSANDTIPS
EXAMPLES
PERFORMANCE
1 Pseudonym.
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Beta ollows a three-stage implementation approach or redesigning its electrical
home appliance product line around modularity and customer needs:
Product Line Redesign Process
1. Product Line Review
Engineering reviews
existing product line
and designs optimal
alternatives based on
cost-efciencies.
2. Market Alignment
MeetingsMarketing
and Sales provide input
to dismiss or approve
design alternatives
based on high-level
market characteristics.
3. Customer Review
Customers are invited
to review redesign
alternatives or nal
judgment on market
applicability.
1. Product Line Review
First, Betas engineering team scrutinizes the electrical home appliance product
line, breaking each product into subassembly parts. The team categorizes and
clusters similar parts to provide ull transparency on the various existing
components across the multiple products. This analysis reveals that the
electrical home appliance product line had 16 dierent heights, 32 chassis, and
more than 200 SKUs. Where possible, the Engineering team identies areas
where SKU rationalization is possible and components can be modularized or
reuse.
2. Market Alignment Meetings
Next, the engineering team holds a series o meetings with Marketing and
Sales to review product redesign proposals, suggesting the business case or
optimal cost-eciencies. With in-depth consumer insight, Marketing andSales can immediately dismiss alternatives that are misaligned with customer
needs at a high level. As a result o these iterative meetings, Beta redesigns
product alternatives to meet the dual objectives o Engineering and Marketing
and Sales or driving cost-eciency and maintaining market relevance.
There is a balance between cost-efciencies and market needs when
considering modular design. We strive to make our designs as modular
as possible to drive costs down, but we will always ensure were aligned
with what the preponderance o our customers want.
Manager, Product Engineering
Beta Manuacturing
1
1 Pseudonym.
EXECUTIVE
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3. Customer Review
Once Beta achieves internal agreement on a uture vision or its electrical home
appliance product line, the team invites key customers to review the suggested
changes through rolling one-day sessions. Obtaining direct customer input
proves to be a key success actor in ensuring that the new modular product line
does not compromise the customer experience.
RESULTS
Armed with commercial team eedback and direct customer input, Betas engineering
team presents the internal business case to senior management to transition the
newly designed electrical home appliance line into production. Once the new process
is signed o and implemented, Beta reduces the number o chassis and heights by
more than 50%.
Impact o Modular Design on Electrical Home Appliance Product Line
Furthermore, Betas modular design reduces overall purchased components by 52%
and rationalizes production rom two actory sites down to one. Beta also reports
other ancillary benets such as increased production eciency, lower costs, and
increased market share.
ActualNumbers
Sample Metrics
Beore Modular Design
Ater Modular Design
32
15 16
7
1
1 Pseudonym.
Chassis Heights
SUMMARY
DESIGNCONCEPT
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STEPSANDTIPS
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ALPHAS CROSS-FUNCTIONAL MODULAR
DESIGN SCORECARD
Industry: Electronics
FY2008 Revenue: US$15 Billion$30 Billion
FY2008 Employees: 80,000120,000
Alpha is a global manuacturer o electrical and distribution equipment. The company has
operations in Arica, Asia, Europe, the United States, and the Middle East.
OVERVIEW
Alpha Company implements a product design scorecard (that requires input rom
cross-unctional and external stakeholders) to assess the impact o various modular
designs on dierent departments and processes across the organization.
SOLUTION HIGHLIGHTSCross-Functional Modular Design ScorecardAlphas new product development
team creates dierent modular design alternatives or any new product. These
alternatives are tested using a cross-unctional scorecard across the organization to
decide which designs to implement.
SCENARIO
Alpha recognizes that the potential eciencies that can be gained through modular
design are usually assessed by a ew key technical stakeholders, which provides a
limited picture o modular designs total eect on the organization. Major investment
decisions cannot be made on such a limited view o potential impact. To address this,
Alpha develops a scorecard that solicits eedback rom multiple internal and external
stakeholders to test the potential uture impact o implementing dierent modular
designs across the organization.
1
1 Pseudonym.
EXECUTIVE
SUMMARY
THEMODULAR
DESIGNCONCEPT
ADVANT
AGES
AND
APPLICATION
CONSIDERATIONS
IM
PLEMENTATION
STEPSANDTIPS
CASE
EXAMPLES
ASSESSINGPOST-
IMPLEMENTATION
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Case Examples 37
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Alphas New Product Development (NPD) process begins and ends with the customer
in mind and considers existing and uture technical capabilities to orm the design
vision o a new product. Alpha considers modular design possibilities in the viability
stage o its NPD process. An overview o this process is presented below:
New Product Development Process
1 Market Study Dene target
market. Identiy
customer
preerences.
2 Design Vision High-level design
vision is based on
market studies.
7 Commence Project Open project or
commercialization.
3 Technology Assess current
and uture
technological
capabilities or
design.
6 Sign-Of Assemble and
present internal
business case.
4 Viability Invite internal
and external
stakeholders to
dene platorm
architecture.
5 Prototypes Develop
prototypes to test
on the market.
During the viability stage, the engineering team targets a certain aspect o a
products design that has the most potential or modularity. The team assembles up
to three dierent modular designs that ulll the design vision and are easible rom
a technological standpoint. The team bases these designs upon the various possible
combinations o components, materials, and interaces.
Cross-Functional Modular Design Scorecard
To assess the impact o each design across the organization, the NPD team uses a
cross-unctional scorecard. This assessment shows which o the modular design
layouts will result in the greatest net benet across the organization.
The NPD team divides the scorecard into specic sections or various departments
to ll out. The rationale is that the individual departments have the best insight to
assess the impact each design will have on their own business activity and processes.
The inormation is not just gathered internally, but also rom external key suppliers.
Alpha invites suppliers to meetings to share their perspective and experiences
related to the potential advantages and disadvantages associated with each possibledesign alternative.
1
1 Pseudonym.
SUMMARY
DESIGNCONCEPT
DISADVAN
TAGES
CONSIDERATIONS
STEPSANDTIPS
EXAMPLES
PERFORMANCE
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Cross-Functional Modular Design Scorecard
Illustrative
Choosing a Design Alternative
Once the scorecard is ully populated, the NPD team has a clear and ull view along
various parameters rom across the organization o the benets and red fags attachedto each o the design alternatives. The team chooses the modular design alternative
that has the most positive implications across the company (and no major negative
implications) to employ in the new product architecture. This tool helps acilitate
productive discussions and ensures that all potential risk areas are suraced when
making decisions. Once a design is selected, Alpha develops a prototype and tests it
with customers beore moving into the commercialization phase.
Specic sections are sent to dierent departments across the
organization. These departments indicate the impact each modular
design will have on a range o department-relevant metrics.
Departments communicate the
implication through answering
positive, negative, or no change.
FunctionalResponsibility Metrics Impacted by Modular Design Design A Design B Design C
ManuacturingCost per production run
Through rate
Operations
and Quality
Deect rate
Inventory turnover
ProcurementNumber o unique components purchased
Raw materials pricing
R&DR&D spend as a percentage o sales
Time to market
Legal and
Compliance
Regulation compliance
Patent lings
SupplierDistribution efciency
Inventory management
kHealth ri k
S
1
1 Pseudonym.
EXECUTIVE
SUMMARY
THEMODULAR
DESIGNCONCEPT
ADVANT
AGES
AND
APPLICATION
CONSIDERATIONS
IM
PLEMENTATION
STEPSANDTIPS
CASE
EXAMPLES
ASSESSINGPOST-
IMPLEMENTATION
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Case Examples 39
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RTEC5213609SYN 2010 The Corporate Executive Board Company. All Rights Reserved.
GAMMAS CENTRAL PRODUCT STRATEGY
TEAM
Industry: Industrial Manuacturing
FY2008 Revenue: US$45 Billion$60 Billion
FY2008 Employees: 80,000120,000
Gamma makes construction and mining machinery with diesel and natural gas engines.Gamma has plants worldwide and sells its equipment globally.
OVERVIEW
Gamma establishes a central product strategy team that possesses broad technical
skills across product lines to ensure that the ull potential o modular design
synergies are explored and captured when introducing a new product.
SOLUTION HIGHLIGHTSBroad-Based Central Product Strategy TeamGammas central team consisting
o midlevel managers looks across product lines to capture modular design
synergies.
SCENARIO
While R&D and engineering teams are traditionally composed o individuals with
particular niche expertise in their elds, Gamma realizes that this specialization
inhibits the ability o individuals to look across product lines to distill modular
components. Gamma assembles a central team, rom the middle management layer,
with a broad technical skill set to understand and explore the ull range o modular
design possibilities that exist across the company.
1
1 Pseudonym.
SUMMARY
DESIGNCONCEPT
DISADVAN
TAGES
CONSIDERATIONS
STEPSANDTIPS
EXAMPLES
PERFORMANCE
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Gammas middle management layer o the organization sets the product strategy
where modular design is initially considered. Product managers, Marketing,
Product Development, and Engineering at the corporate center comprise the
product strategy team. These individuals have responsibilities and experience
across at least two or more product lines. When considering product line strategies,
this group meets to discuss market characteristics and the product portolio mix
and also considers opportunities or implementing modular components.
A View Across Product Lines
The product strategy team has the visibility and collective expertise to look across
multiple projects and product lines to identiy optimal cross-business modular
components. Modular design synergies can initially be captured through two
primary means: Reusing existing components and incorporating them into a new product
Creating new components (created or a new product) and making them
available or use by existing product lines
Furthermore, as more modules become available through the introduction o new
products, the central team explores the potential o building a product exclusively
through dierent congurations o existing modules.
The illustration below demonstrates the three lenses employed by the team and the
process at a high level when considering possible modular design synergies.
Identiying Modular Synergies
IDENTIFY AND GROUP
MODULAR COMPONENTS
EXPLORE RELATIONSHIP
BETWEEN MODULES
REASSESS
OR PROGRESS
Three Lenses to IdentiySynergies
Can we make use o existingmodular components andincorporate them into ournew product?
Can any o the new modular
components that we createor a new product be usedby existing product lines?
Ater creating this newproduct, can we createanother product basedsolely on existing modularcomponents and interaces?
Capture SynergyInormation andCascade to RelevantProduct Line
Reassess ROIPotential o ProductLaunch
Yes to AnyQuestion
No to AllQuestions
Engine Engine
Suspension
Axels Chassis
CircuitBreaker
Tires
Rotor
Hydraulics Axels
BrakeSystem
Hydraulics
1
1 Pseudonym.
EXECUTIVE
SUMMARY
THEMODULAR
DESIGNCONCEPT
ADVANT
AGES
AND
APPLICATION
CONSIDERATIONS
IM
PLEMENTATION
STEPSANDTIPS
CASE
EXAMPLES
ASSESSINGPOST-
IMPLEMENTATION
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Decisions at the Business Unit Level
The middle management team cascades the potential opportunities o using
modular components to the business units. Manuacturing, Purchasing,Engineering, product managers, and Marketing hold business-level group meetings
to design and create possible interaces. The design decisions are made with the
inormation about potential modular components in hand.
The business units have in-depth understanding o their specic product lines and
markets and are held accountable and incentivized on the perormance o their
products. As such, Gamma empowers the business units to make the ultimate
decision whether implementing the suggested modular design synergy proposal is
economically sound or their area. I the business unit does not leverage the insight
rom group level, they pursue a design that will be created and produced within the
business unit, as it is more advantageous rom their specic standpoint.
Benets o Modular Design
Since establishing a product strategy group to identiy modular design
opportunities, Gamma has experienced a wide variety o benets, including
the ollowing:
Part number reduction aiding swit inventory management and direct
cost-eciencies
Supply chain benets rom reducing the number o suppliers, increasing
purchase volume, and developing more strategic partnerships Manuacturing eciencies by using shared process planning and
standardized assembly
Product quality improvements rom reducing design complexity
1
1 Pseudonym.
SUMMARY
DESIGNCONCEPT
DISADVAN
TAGES
CONSIDERATIONS
STEPSANDTIPS
EXAMPLES
PERFORMANCE
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Assessing Post-Implementation
Perormance
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Accurately assessing the impact o modular design is pivotal or justiying the high
initial implementation costs and maintaining ongoing support or the approach.
Many organizations simply track a ew cost savings metrics to demonstrate that
initial objectives have been achieved, but struggle to establish a metrics strategy
that successully evaluates the broader benets gained rom modular design. To best
assess the impact o modular design, companies should ollow three basic steps:
1. Establish alignment on what metrics to track.
2. Capture perormance on these metrics prior to modular implementation.
3. Evaluate and report metrics post-implementation.
1. Aligning on Metrics
The cross-unctional team leading the modular design initiative should solicit
eedback rom dierent departments to determine the best metrics to track andthe best method or quantiying these metrics. To assess enterprise-wide benets,
the team should ask leaders in R&D, Procurement, Manuacturing, Marketing,
and Sales to choose two metrics they believe will show the biggest impact o
modular design. (See page 46 or a composite table o the most commonly cited
metrics.)
2. Establishing a Pre-Implementation Benchmark
Once all unctions are aligned on the right metrics to track, the lead team must
ask individual departments to quantiy these metrics or a certain period o time
prior to modular implementationusually or a quarterly, semiannual, or annual
period.
3. Evaluating Post-Implementation Perormance
Ater the team implements the modular architecture, they compare the compiled
pre-implementation to post-implementation perormance scores. The modular
design team then uses these individual departmental perormance scores to
supplement the metrics that track the initial goals o modular design. The
team creates a composite dashboard and communicates the results to senior
management, as well as cascades the success metrics to the rest o the organization
to drive urther adoption and buy-in.
EXECUTIVE
SUMMARY
THEMODULAR
DESIGNCONCEPT
ADVANT
AGES
AND
APPLICATION
CONSIDERATIONS
IM
PLEMENTATION
STEPSANDTIPS
CASE
EXAMPLES
ASSESSINGPOST-
IMPLEMENTATION
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Assessing Post-Implementation Perormance 45
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Timing o Assessment and Setting Expectations
There is no general consensus on an optimal timeline or capturing perormance
and reporting the impact o modular design. The timing depends on the extent oredesign, organizational complexity, and average product liecycle. Timelines will
vary signicantly rom industry to industrya CPG companys timeline will dier
greatly rom an energy company. But regardless o the industry, modular design
is a major undertaking or most companies and requires airly long time horizons
to realize benets. As such, executives need to clearly communicate that early
assessments will most likely not capture the ull benets o modular design. I the
team does not manage expectations properly, an unavorable early assessment may
lead to premature abandonment o modular design. Teams must set clear expectations
when developing a metrics strategy to ensure reporting is not required too early.
Realizing the Benets o Modular Design at VBG Limited1
Company Overview
The VBG Group develops, manuactures, and markets trailer couplings with coupling equipment.
VBG is also the distributor o VBG th wheel products on the Scandinavian atermarket.
Fragmented Operations
To accommodate a highly variable order ow, VBG maintained high inventory levels to cover order
peaks and oten employed temporary personnel working overtime. VBG had trouble keeping up with
their competitors in oering the newest customer-requested product eatures, yet struggled with
too many unique parts. This led to elevated procurement costs and long lead and set-up times in
manuacturing and assembly.
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