Collocating new product development teams: why, when, where and how?

Business Horizons, Nov-Dec, 1997 by Anthony Lee Patti, James Patrick Gilbert

First to market with new products is crucial, and physically collocating the members of the development team is one way to achieve this. But what should be considered in making such a decision?

In recent years, it has become achingly apparent that swift and accurate new product development is essential for competing in this tumultuous global business environment. Consider the competitive pressures faced by the Japanese after World War II. First, they took advantage of a low-cost work force and wrested market shares from U.S. firms by offering low-priced products. As their cost of labor rose, they shifted their strategy to product differentiation based on high quality. Now the competitive pressures from Japan emphasize high-speed new product development (NPD). The Japanese are introducing new products with additional features at ever increasing speeds. American companies must reduce their NPD times if they are to remain competitive.

Traditionally, the typical NPD process in the West used a linear procedure. A project was divided into various sequential steps: conducting market research, writing design specifications, designing and testing prototypes, and developing manufacturing processes. Assigned to each task set were functional "experts" who completed their procedures and passed the project onto the next function. Marketing wrote the product characteristic specifications from research data, R&D designed and tested the prototype, and manufacturing engineers came up with the production processes. Each function performed its work virtually isolated from the others. Because of such isolation, this style of NPD is commonly known as the "over-the-wall" technique.

However, decisions made at one step of the NPD process greatly affect the decisions made at another step. Because of the significant interdependency of the various functions involved, managers have begun seeking ways to foster cross-functional cooperation. Several techniques can be used to increase such integration between manufacturing and R&D. One is to give the manufacturing department sign-off responsibilities on all engineering documents. Another is to appoint an integrator who has cross-functional knowledge and attempts to communicate the concerns of each department to the others. A third technique is to use cross-functional teams to develop new products, with team members appointed on a project-by-project basis. The most extreme examples of firms trying to improve cross-functional cooperation are those that create product-process design departments, which entails a permanent change in organizational structure.

The new business environment calls for both rapid and flexible NPD. To reduce their cycle times, many firms are turning to concurrent, or simultaneous, engineering. In over-the-wall development, R&D does not begin until specifications have been written, process design does not begin until the product has been designed, and so on. Concurrent engineering (CE) calls for the overlapping of the different phases of an NPD project. Each begins before the preceding phase is complete, thereby slashing the cycle time.

As Dean and Susman (1989) point out, cross-functional teams and product-process design departments are the only structural techniques that facilitate CE. But perhaps because of the radical structural changes needed to implement product-process design departments, this technique is not widely employed. This leaves cross-functional teams for companies to turn to when they need to reduce NPD cycle times. In implementing these teams, managers are faced with many new challenges and questions. One of the more formidable questions is, "Should we physically collocate the members of the NPD team?" Yes, say several companies, whose stories testify to the benefits of collocation.

Anecdotal Evidence Supporting the Use of Physical Collocation

Anecdotal evidence on the use of collocation is abundant. Many companies have reported positive effects. Of course, NPD processes are quite complex, with numerous variables. It is impossible to claim that the use of collocation was solely responsible for any project outcomes. However, these cases do link the use of collocation with successful project outcomes.

Tektronix. Tektronix used collocation when designing its 4211 graphics net station. Previously, the only input manufacturing engineers would have had in new product design was during formal design reviews, when it might have been too late to be useful. So they moved their desks to the design area, thereby Becoming involved in the informal discussions and decisions. Several positive benefits were reported as a result of this collocation, reports Schamisso (1992). The 4211 graphics net station required fewer parts than its predecessors. The pieces snapped together rather than requiring fasteners, thus allowing for easier final assembly. Moreover, fewer hand-inserted parts made more automation possible.

Motorola Communications Sector. Motorola's collocated "Bandit" pager project team was composed of members from industrial engineering, robotics, process engineering, procurement, product design/computer integrated manufacturing, human resources, and accounting/finance. An employee of Hewlett-Packard, a key supplier, was also part of the team. The project was completed in 18 months--about half the time for a normal project of such magnitude. According to Wheelwright and Clark (1992), in contrast to the more typical three-sigma process tolerances for U.S. firms (2,700 defects per million), manufacturing process tolerances of five-sigma (0.57 defects per million) had been reached by the end of that 18-month period. Moreover, the target production cost for the pager was achieved.