SB Program
Thinking Beyond Lean
How Multi-Project Management is Transforming Product
Development at Toyota and Other Companies
(Cusumano, M. A. & Nobeoka, K. 1998)
Qian Wang
Sanna Teiskonen
Heikki Paananen
Jani Liimatainen
University of Jyväskylä
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Outline
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Preface
Chapter 1: Introduction: Beyond “Lean” in Product Development
Chapter 2: Case study of Toyota
Chapter 3: Organizing Product Development in the World Auto
Industry Introduction
Chapter 4: Strategies for Product Development and Multiple Projects
Ch. 5 Multi-Project Strategies and Project Performance
Ch 6 Multi-project Strategies and Company Performance
Chapter 7. Organizational Requirements for Multi-Project
Management
Ch. 8 Implications and Lessons for Managers
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Preface
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Study began by creating a database on 210 automobile
products from public information
This enables to determine which cars share “platforms”
– Platform is an underbody of an automobile and an expensive
critical subsystem that defines the performance of the product
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Then launched a survey of several hundred project
managers and engineers
The survey data enabled to analyze project performance
and organizational issues
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Preface
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This book is a culmination of six years study
Overall, they interviewed 335 managers and engineers at
17 auto makers
Interviews made between 1994 and 1997
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Outline
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Preface
Chapter 1: Introduction: Beyond “Lean” in Product Development
Chapter 2: Case study of Toyota
Chapter 3: Organizing Product Development in the World Auto
Industry Introduction
Chapter 4: Strategies for Product Development and Multiple Projects
Ch. 5 Multi-Project Strategies and Project Performance
Ch 6 Multi-project Strategies and Company Performance
Chapter 7. Organizational Requirements for Multi-Project
Management
Ch. 8 Implications and Lessons for Managers
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Ch. 1 Introduction: Beyond “Lean” in Product
Development
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Book is about how to manage product development more
strategically and efficiently
Book discusses about multi-project management and the
benefits that kind of thinking can bring to projects and
companies
The basic idea is to create new products that share key
components but to utilize separate development teams
that ensure each product will differ enough to attract
different customers
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Ch. 1 Introduction: Beyond “Lean” in Product
Development
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Projects that share components and engineering teams
should overlap in time so that a firm can deliver many
products quickly and utilize new technologies
The evidence suggest that by following these principles
firms can achieve dramatic improvements in performance
In multi-project thinking firms view each development
project as part of a broader portfolio of projects
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Ch. 1 Introduction: Beyond “Lean” in
Product Development
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Automobile manufacturers provide excellent cases to this
study because:
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They have numerous product lines
Lots of projects ongoing simultaneously
Products can contain more than 30 000 components
Products takes a million or more engineering hours per project to
develop
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Ch. 1 Introduction: Beyond “Lean” in
Product Development
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Critical decision for automobile companies is whether or
not to organize groups around functional activities or
projects
So, the main question is how to balance what is optimal
for the individual project versus what is optimal for the
organization as a whole
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Ch. 1 Introduction: Beyond “Lean” in
Product Development
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In this book that question is broke down to several
issues:
– Which functions should companies keep centralized?
– Which functions should companies disperse among projects?
– How much authority over budgets and personnel should a project
manager have versus managers of functional departments?
– To what extent should companies seek a balance of functional
with project management by grouping related projects together
and then sharing technologies as well as functions at least for
clusters of similar projects?
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Ch. 1 Introduction: Beyond “Lean” in
Product Development
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Word “Lean” refers to a general way of thinking and
specific practices that emphasize less of everything –
fewer people, less time, lower costs
In product development there are two especially
important lean principles:
– Overlapping different functional activities or development phases
– Using relatively independent product team led by “heavyweight”
project managers
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Ch. 1 Introduction: Beyond “Lean” in
Product Development
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No doubt that lean thinking has significantly improved
project performance:
– During the 1980s, Japanese auto makers required only two-thirds
of the lead time for the average projects compared to U.S.
companies
– Engineering hours per project were in Japan 1.7 million and in
U.S. 3.4 million hours
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This efficient and rapid model change or expansion
allowed Japanese auto makers to introduce new features
and quality improvements into their projects as well as
expand their sales
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Ch. 1 Introduction: Beyond “Lean” in
Product Development
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Multi-project thinking usually fits reality much better than
focusing on a single projects, because
– Most companies have more than one product
– Most companies have more than one new product under
development at the same time
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The best companies today view projects as part of a
portfolio and make the most of their investments by
introducing new technologies in as many products as
possible as frequently as possible
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Ch. 1 Introduction: Beyond “Lean” in
Product Development
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Leading companies have shifted their attention beyond
simply the efficient management of individual projects
They now take more time in planning and focusing more
on how to create innovative designs and avoid low-value
features and unnecessary unique parts
The best companies follow a deliberate approach and
leave little to change. They create families of wellintegrated products that share design concepts, key
components and basic technologies
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Ch. 1 Introduction: Beyond “Lean” in
Product Development
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This study categorizes new projects into four types of
project strategies
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New design
Concurrent Technology Transfer
Sequential Technology Transfer
Design Modification
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Ch. 1 Introduction: Beyond “Lean” in
Product Development
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New Design
– Projects that develop platforms primarily from scratch
– This strategy is most appropriate for incorporating the latest
technology or totally new designs into a product without placing
many restrictions on the development team
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Concurrent Technology Transfer
– New project begins to borrow a platform from a base or preceding
project before the base before the base project has completed its
design work
– New and a base project overlap and that overlapping provides
opportunities for effective and efficient technology sharing
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Ch. 1 Introduction: Beyond “Lean” in
Product Development
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Concurrent Technology Transfer
– Because development phases overlap chronologically, engineers
in the new project and the base project can discuss adjustments
in the platform and other component designs
– In order to make this work, the two interdependent projects often
require extensive coordination and thus some from of multiproject management
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Ch. 1 Introduction: Beyond “Lean” in
Product Development
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Sequential Technology Transfer
– Project inherits a platform from a bas project that has finished its
design work  the project reuses a platform design that already
exists
– Design constraints may be very high because engineers from two
projects cannot make adjustments in the platform to suit the
different projects
– The following project may have to force changes to
accommodate elements of the core design and other components
from the preceding project
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Ch. 1 Introduction: Beyond “Lean” in
Product Development
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Design modifications
– This refers to a project that replaces an existing product but
without creating a new platform or borrowing a platform from
another product line
– Project simply inherits or reuses the platform from the
predecessor model in the same product line
– Engineers have to live with any constraints imposed by platform
of the predecessor
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Ch. 1 Introduction: Beyond “Lean” in
Product Development
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According to research auto makers that follow concurrent
technology transfer more often would grow between 37
and 68 percent more over three years compared to firms
that followed one of the other three strategies
With concurrent technology transfer firms saved between
33 and 64 percent in engineering hours
Firms also saved between 12 and 17 percent in lead
times over projects that relied on new platform designs
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Ch. 1 Introduction: Beyond “Lean” in
Product Development
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Even companies that are excellent already can improve
their performance by thinking about how to manage
multiple projects
For example Toyota, which many companies us as a
benchmark, introduced a new organizational structure to
support concurrent technology transfer and then reduced
its engineering costs for new models by 30 percent as
well as cut lead time by several months
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Ch. 1 Introduction: Beyond “Lean” in
Product Development
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Its also important to link product strategies and
organizational strategies in product development
The book considers companies that success in multiproject management to be more advanced in strategic
thinking as well as organizational capabilities compared
to firms that simply manage projects one at the time or
utilize traditional functional departments or even
traditional matrix structures
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Outline
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
Preface
Chapter 1: Introduction: Beyond “Lean” in Product Development
Chapter 2: Case study of Toyota
Chapter 3: Organizing Product Development in the World Auto
Industry Introduction
Chapter 4: Strategies for Product Development and Multiple Projects
Ch. 5 Multi-Project Strategies and Project Performance
Ch 6 Multi-project Strategies and Company Performance
Chapter 7. Organizational Requirements for Multi-Project
Management
Ch. 8 Implications and Lessons for Managers
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Ch. 2 Case study
Reorganizing for Multi-Project Management
Toyota’s New Structure of Product Development Centers
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Outline for chapter 2
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Introduction
– In early 1990s, Toyota moved beyond lean thinking and
heavyweight project managers when it reorganized its
product development groups around platform centers.
WHY did Toyota reorganize?
HOW did Toyota perform for the reorganization?
OUTCOMES of reorganization?
Analysis and Conclusion
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Ch. 2 Introduction
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Toyota
– Japan’s leading auto maker
– A leader in adopting new organizational structures and
processes both in
• Manufacturing
• Product development
– A benchmark for different industries
– Toyota’s type of organization was named as ” Heavyweight
project management system”
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Ch. 2 Introduction (Cont)
– Toyota performed remarkably well with its project-centered
organization during past several decades
– In recent years, all auto companies much more concerned with
efficiency in new product development.
– Because of appreciation of yen and western competitors’ improvements,
in the major markets, demand either slowed or declined.
– Toyota introduced the most radical changes in its product development
organization to remain the leading position in auto industry
– Especially, during 1992-1993 it adopted a strategy and structure
specifically for multi-project management of product development
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Ch. 2 Introduction (Cont)
– The new organization features (Figure 3)
• Three vehicle development centers
– group similar projects together
– based on common platforms
• Fourth center provides common components to the
different development centers
• Differs from Toyota’s former project centered
organiazaion (Figure 1)
• Differs from traditional functional and matrix
organizations
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Ch. 2 Why did Toyota reorganize?
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In Gereral
– why to make the changes for its product development
groups around platform centers?
Organizaional problems – Internal problems
Changes in competitive environment – External problems
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Ch. 2 Why did Toyota reorganize? (Cont)
-- Organizational Problems (1/2)
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Five major problems in former Toyota’s product development
organization
– There were too many functional engineering divisions and
too narrow a specialization of engineers.
– There were too many vehicle projects for each functional
manager to manage the engineering details of each project
as well as coordination across projects.
– It had become much more complicated and difficult for
chief engineers to oversee all the engineering functions
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Ch. 2 Why did Toyota reorganize? (Cont)
-- Organizational Problems (2/2)
– The chief engineer organization did not foster coordination
across projects
– Management did not sufficiently coordinate the
RAD(Research & Advanced Development) group and
individual vehicle projects
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Ch. 2 Why did Toyota reorganize? (Cont)
-- Changes in competitive environment
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The competitive environment surrounding Japanese automobile
firms started changing around 1991.
– Rapid growth in production levels virtually ended.
– The importance of cost reduction became even more critical for
international competition than before
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In addition to the appreciation of yen, Japanese advantages in
development and manfacturing productivity were diminishing.
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Ch. 2 Why did Toyota reorganize? (Cont)
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A good engineering orgnization should be able to
– Create distinctive new products with new platforms and
other innovative technology by project managers and
engineers for the competitive reasons
– share technologies and coordinate different projects
efficiently
Thus, creating well-integrated new products and creating
productis efficiently by leveraging existing technologies
require a firm to be well organized to promote sharing.
All above problems (interal & external ) and reasons indicates
that it’s time for Toyota to reorganize.
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Ch. 2 How did Toyota perform for the
reorganization?
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In General
Six important features
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Reduction in the number of functional engineering division
Reduction in the number of projects for each functional manager
Changes in the roles of the center heads for multiple projects
Establishment of planning divisions in each center
Adoption of a hierarchical organization for chief engineers in related
projects
– The new role of Center 4
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Ch. 2 How did Toyota perform for the
reorganization? (Cont)
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-- In General
Not reduce total number of people working in product
development, even rose
1991, Divided all its new product development projects into
three development centers
Center groups focus on the similarity in platform design.
– Center 1 is responsible for rear-wheel-drive platforms and
vehicles; Center 2 for front-wheel-drive ones; Center 3 for
utility vehicle/van ones.
Toyota created Center 4 to devlop components and systems for
all vehicle projects.
– by reorganized RAD (Research and Advanced
development)
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Ch. 2 How did Toyota perform for the
reorganization? (Cont)
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-- Feature 1
Reduction in the number of functional engineering division
– By widening the engineering specialization within each
division and by transferring some component development
into Center 4, Toyota reduced the number of functional
divisons in Centers 1-3.
– Toyota divided each function into three centers, the wider
specialization did not require larger functional divisions.
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Ch. 2 How did Toyota perform for the
reorganization? (Cont)
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-- Feature 2
Reduction in the number of projects for each functional
manager
– Each functional manager is responsible for a smaller
number of projects in the new center organization.
– For example, managers in Center 1 can focus only on
vehicle projects with rear-wheel-drive platforms.
– Before, in some functional areas, there used to be too many
projects for functional managers to oversee, it was difficult
for them to pay careful attention to all the projects.
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Ch. 2 How did Toyota perform for the
reorganization? (Cont)
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-- Feature 3
Changes in the roles of the center heads for multiple
projects
– The center heads are supposed to play two important roles
that have to be deliberately balanced.
• First, a center head helps each chief engineer integrate
different functions.
• Second, each center head is responsible for the
coordination of different vehicle projects within the
center.
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Ch. 2 How did Toyota perform for the
reorganization? (Cont)
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-- Feature 4
Establishment of planning divisions in each center
– The management scope used to be so large in the old
organization that the project portfolio planning and resource
allocation for each project were too complicated to be
effectively managed.
– Now the Planning Division in each center can consider
technology sharing and resource allocation among multiple
projects in the present and the future more carefully than
before, by focusing on a limited number of closely related
projects.
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Ch. 2 How did Toyota perform for the
reorganization? (Cont)
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-- Feature 5
Adoption of a hierarchical organization for chief engineers
in related projects (Figure 5)
– Share same platform and driveline design
– differnt target customer segments and separate product
concept
– need extensive coordination between two projects
hierarchical chief engineer organization to achieve two goals in
parallel for the projects
– achieve differentiation in product characteristics
– achieve integration in product development simultaneously
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Ch. 2 How did Toyota perform for the
reorganization? (Cont)
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-- Feature 6
The new role of Center 4
– Most significant improvements regarding Center 4 was the
introduction of a new organizational mechanism, called the
cross-area system project.
• develop some new systems need new technical
knowledge in multiple technical areas. (figure 6)
– In the old RAD Group, different technical areas usually
worked separately and their coordination mechanism was
not strong enough to deal with this type of project.
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Ch. 2 Outcomes of reorgnization?
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Because of the introduction of the center organization, Toyota
achieved significant improvements in several areas. In
particular, it simultaneously improved both cross-functional
project integration and multi-project integration.
– Project integration through a streamlined structure
– Multi-Project Integration Within a Center
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Ch. 2 Outcomes of reorgnization? (Cont)
-- Project integration through a streamlined structure
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The impact of the reorganization on reducing coordination
tasks for chief engineers as they manage differeent functional
groups
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Ch. 2 Outcomes of reorgnization? (Cont)
-- Project integration through a streamlined structure
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Ch. 2 Outcomes of reorgnization? (Cont)
-- Multi-Project Integration Within a Center
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The new organization strengthened the multi-project
management perspective with the strong leadership of the
center head and strong support from the center-oriented
planning division.
– VS: before, because of the large number of vehicle projects, it was
difficult to manage Toyota’s entire project portfolio and inter-project
coordination.
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In order to achieve the integration within a center, to begin
with, each center defines its own vision and theme for product
development. Sharing a basic vision that focuses on projects
within the center helps members effectively coordinate
engineering activities.
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Ch. 2 Analysis and Conclusion
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Toyota has shifted from project-oriented management to multiproject management. One of the most important aspects of
effective multi-project management is to improve both cross
functional and inter-project integration at the same time.
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Ch. 2 Analysis and Conclusion (Cont.)
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However, there are some potential problems of the center
system such as
– it is difficult to balance the chief engineer's autonomy and
the center integration.
– there may be some problems regarding inter-center
coordination.
Although inter-center coordination could become the problem
for Toyota, benefits from the inter-project integration within the
center seem to surpass the potential problems at that point of
time.
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Outline
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Preface
Chapter 1: Introduction: Beyond “Lean” in Product Development
Chapter 2: Case study of Toyota
Chapter 3: Organizing Product Development in the World Auto
Industry Introduction
Chapter 4: Strategies for Product Development and Multiple Projects
Ch. 5 Multi-Project Strategies and Project Performance
Ch 6 Multi-project Strategies and Company Performance
Chapter 7. Organizational Requirements for Multi-Project
Management
Ch. 8 Implications and Lessons for Managers
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Chapter 3:
Organizing Product Development in the World Auto Industry
Introduction
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Need for strategies, structures, and management systems for
Individual circumstances, capabilities, and competitive objectives
Framework for comparing basic organisational structures used in
product development
Nine major auto makers in Japan, United States, and Europe
Smaller or less profitable firms have tended not to adopt Toyota-style
development centers
Some companies have introduced multi-project managers, modified
conventional matrix-approaches, multi-product projects
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Ch 3 Organizing Product Development in the World Auto Industry
Introduction
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Four types of product-development organizations in the auto industry
Vary on size and scope of company’s product portfolio, and on
functions that management centralizes or locates within projects
Traditional Matrix Organization: different teams working on one or
more projects simultaneously, permanent functional engineering
departments: Renault(France), Mitsubishi (Japan), and Fiat (Europe)
Product Team Organization: independent projects, one project at a
time, multiple variations of a product, minimal barriers between
functional departments: Chrysler (U.S.), and Honda (Japan)
Semi-Center (Mazda, Nissan, GM)& Center (Toyota & Ford)
Organizations: many product lines, share components, clusters of
similar projects. Semi-center organizations include a matrix structure
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Ch 3 Organizing Product Development in the World Auto Industry
Introduction
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Tendencies:
– largest firms use development centers or semi-centers
– smaller firms with production levels under 2 million vehicles use matrix
organizations
– more variety of organisation types in medium-size firms (2-4 million)
– centers and semi-centers maybe uneconomical for small companies
because of the duplication of engineering functions
– use of multi-product projects is common
– imitation influencing organisation structure
– matrix organization seems to become unwiendly if a firm has many
projects active at the same time
– dedicated product teams, though they promote innovation, are not very
economical if a firm has many similar products
Grouping similar product models by development centers or semi-centers is
useful way to simplify project management and promote component sharing
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Ch 3 Organizing Product Development in the World Auto Industry
Matrix Organization
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Prior to the mid 1980s
Project management ranging from middleweight to heavyweight
Strong functional departments
More dedicated product teams
Many firms have relatively few product lines
Effort in optimizing product performance rather than ”costperformance”
Traditional Matrix Organisation:
– different teams working on one or more projects simultaneously,
– permanent functional engineering departments
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Renault(France), Mitsubishi (Japan), and Fiat (Europe)
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Ch 3 Organizing Product Development in the World Auto Industry
Matrix Organization - Renault
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Conventional matrix, permanent and strong functional departments
since 1989
Projects draw personnel from the engineering departments
Departments contain smaller sections
Project managers report to a senior executive and negotiate
contracts with functional managers
Engineers report to functional department managers and project
management staff
Renault tries to assign engineers to work only on one project, as in a
dedicated team
Technical Center opened in 1996: houses all the product
development engineers
Many engineers work on more than one project - differentieted matrix
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Ch 3 Organizing Product Development in the World Auto Industry
Matrix Organization - Renault
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In 1990 established a small team to encourage learning - Group Delta of
seven people
Group worked with project managers and functional managers as a change
agent, for better development methods such as heavyweight project
management and more task overlapping
Problems at Renault: lead times, costs, quality, and competitors
Tried to improve quality by slowing development times, but this increased
costs - no significant advantage
Tries to reduce development time by task overlapping, working closely with
suppliers, using more CAD/CAM systems, and increasing size of
engineering teams
Because Renault wants to produce hit products rather than compete with
product lines, project teams are not interested in sharing platforms or
components - difficult when considering platform sharing is more stable for a
small firm
Concurrent transfer technology could help to produce distinctive products but
also to share platforms
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Ch 3 Organizing Product Development in the World Auto Industry
Matrix Organization
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Ch 3 Organizing Product Development in the World Auto Industry
Product Team Organizations and Multi-Project
Management
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Engineers working on a product to a specific project more of less full time,
atleast until they complete their main task
Bring together all the engineers on a team
Product team – best way to coordinate and integrate functional departments
for a particular project
Objective of multi-project management is to coordinate both across
functional departments and across projects
Important to manage effectively the functional groups that make up individual
projects
A firm should tackle the more complex process of coordinating groups
across multiple projects
Chrysler (U.S.) and Honda (Japan) are good examples of product team
organisations as well as lean practices for managing individual projects
Product Team Organisation:
– independent projects, one project at a time, multiple variations of a product,
minimal barriers between functional departments
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Ch 3 Organizing Product Development in the World Auto Industry
Product Team Organizations and Multi-Project
Management - Chrysler
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In 1989 abandoned its traditional matrix organization in favor of product
teams - calls them platform teams
Yet teams have not been so lean since continued to use several hundreds
more engineers per project than comparable Japanese projects
Involved major changes in product strategy, organizational structure, and
work processes:
– Split its body design into two departments
– Divided these and other functional departments among five new platform
teams: small cars, large cars, minivans, jeeps, and trucks
– Eliminated a central R&D department and decided to rely on the product
teams to develop new technologies
Independent product teams, new platform designs, and rapid introduction of
multiple models based on common platforms have been a successful
departure from sequential design transfer strategy and the old matrix
organization
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Ch 3 Organizing Product Development in the World Auto Industry
Product Team Organizations and Multi-Project
Management - Chrysler
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Chryslers relatively multi-stage projects resemble concurrent technology
transfer because they try to build multiple products relatively quickly based
on the same platform
In 1991 established Chrysler Technology Center which colocated most
platform team members on individual floors in one huge building
Chrysler had a little need for multi-project management due to relatively few
models
Yet promoting sharing, which was considered important, company
executives encouraged engineers to establish an informal organization of
Tech Clubs - small groups of engineers from different platform teams
working on similar components or problems
The product team approach may not continue because of gradually
increasing model lines
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Ch 3 Organizing Product Development in the World Auto Industry
Platform Team Organization
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Ch 3 Organizing Product Development in the World Auto Industry
Semi-Center Organization
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Toyota’s influence on establishing development centers
Group multiple projects around shared platforms
Somewhere between matrix and center organizations
Semi-Center Organisations (Mazda and Nissan (Japan), General Motors
(GM in U.S):
– many product lines, share components, clusters of similar projects,
– duplicate some fuctional departments for groups of related projects,
– retain centralized functional departments that provide most of the
components or engineering services to all projects,
– mix the centralized departments with clusters of projects,
– clusters include a matrix structure that break up some key functional
departments just for the projecs grouped together,
– resembles the differentiated matrix
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Ch 3 Organizing Product Development in the World Auto Industry
Semi-Center Organization - Mazda
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In 1993 abandoned its traditional matrix organization in favor of product
development centers - established three, like Toyota
Adopted also the name shusa for project managers
Grouping of vehicles: recreational vehicles, higher-priced cars, and lowerpriced cars - not a logical division from technical point of view
Difficulties in achieving integration and standardization of components like
Toyota achieves with its centers
Mazda moved back to matrix in 1996 because:
– Unable to increase the number of product lines, managers found it difficult to
separate technically related products into three separate groups - there was
always overlap in components
– No sense in dividing groups when limited resources
– Integration with Ford - sharing platforms with Ford was more important than
sharing components across Mazda projects
– Matrix easier to manage projects centrally and coordinate development work with
Ford
University of Jyväskylä
SB Program
Ch 3 Organizing Product Development in the World Auto Industry
Center Organizations
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Each center includes most engineering functions (Ford)
Centers specislize in particular types of vehicles and design products for
world markets (Toyota)
Company executives want engineers to develop new products more
frequently and quickly while lowering development costs (Toyota)
Ford’s goals:
– to shorted lead time
– to design more vehicles in parallel from common platforms
– projects to reuse its 25 standardized modules in different product lines –
important practice for effective multi-project sharing
Center Organisations (Toyota & Ford) :
– many product lines, share components, clusters of similar projects,
duplicate most fuctional departments for different clusters of projects
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SB Program
Ch 3 Organizing Product Development in the World Auto Industry
Center Organization
University of Jyväskylä
SB Program
Ch 3 Organizing Product Development in the World Auto Industry
Comments


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
In 1990s managing individual development projects shows lean thinking
Speeding up projects by overlapping phases and giving more authority to
project managers, product teams, and suppliers
Among firms that have moved beyond simple matrices or product teams to
coordinate multiple projects, the most popular organizational innovation
seems to be multi-project managers
Multi-project managers exist in firms of center or semi-center organizations
and managers for these
Not many semi-centers because
– inherent disadvantages
– they do not simplify functional management as much as pure centers
– some functions within centers, but mostly outside centers
– creates very complex matrices ->debates over authority between
functional dept managers and project managers
University of Jyväskylä
SB Program
Ch 3 Organizing Product Development in the World Auto Industry
Comments
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A potential problem of development centers: how to minimize redundancy in
enginering work
Some redundancy is desirable to simplify the span of control for project
managers and multi-project executives
Though generally wanted to maximize scale or scope economies in
engineering through centralized departments -> counter to the product teams
Scale or scope economies can be difficult to achieve for center or semicenters, unless firms adopt appropriate product grouping schemes and
effective management techniques within the centers
Desired independent projects with strong project managers
Desired maximize chances for innovation and hit products
Even multi-project organizations need to be flexible anough to handle these
exeptional projects
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Outline

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






Preface
Chapter 1: Introduction: Beyond “Lean” in Product Development
Chapter 2: Case study of Toyota
Chapter 3: Organizing Product Development in the World Auto
Industry Introduction
Chapter 4: Strategies for Product Development and Multiple Projects
Ch. 5 Multi-Project Strategies and Project Performance
Ch 6 Multi-project Strategies and Company Performance
Chapter 7. Organizational Requirements for Multi-Project
Management
Ch. 8 Implications and Lessons for Managers
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SB Program
Chapter 4: Strategies for Product
Development and Multiple Projects
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Studies of Product Strategy Categories
Product Innovation
Multi-Project Strategy Maps
4 Strategies
Multi-Project Strategy Typology
Comments
University of Jyväskylä
SB Program
Ch 4 Studies of Product Strategy Categories
(1/3)

Strategies of competitors –approach
– A company’s strategy based on how it relates to the strategies of
competitors
– Three strategic types
• leaders
• rapid followers
• followers
– Companies can be successful only if they realize a low-cost
position through superior development and production processes
– Approach is rather reactive than proactive, so it is not so useful
for managers
– Key issue is implementation and how to be first to market
University of Jyväskylä
SB Program
Ch 4 Studies of Product Strategy Categories
(2/3)

Past investments -approach
– Relationship between strategy and how a particular firm has
accumulated capabilities in technology or organization from past
activities or investments
– According to Johnson and Jones, focus is on ”technological
newness” and ”market newness”
University of Jyväskylä
SB Program
Ch 4 Studies of Product Strategy Categories
(3/3)
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Multi-project management adheres more closely to this
”past investment” –approach
Primary strategic issue: to what extent managers want to
utilize the technology as well as other knowledge or
capabilities already accumulated in past projects
The concept of multi-project strategy and management
requires a linkage between technology and organization
It emphasizes the leveraging of accumulated firm level
resources or capabilities
University of Jyväskylä
SB Program
Ch 4 Product Innovation

In the literature there is also another basic distinction in product
strategy:
– Radical innovation
– Incremental innovation

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How new or old product is compared to a firm’s previous products
and existing capabilities
There are problems with current studies:
– The findings and the implications for managers are ambiguous
• E.g. in competitive markets leading firms need to be innovative, but
they do not introduce radical innovations because they are
successful in what they are doing
• Ability to compete effectively with incremental technology not
prooven: purely technological competence is hard in long run
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SB Program
Ch 4 Product Innovation (cont.)

Some studies emphasizes the importance of producing
incremental innovations in continuous streams
– In many cases firms have created radical innovations and then
lost out to technological followers

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Companies have a better chance of succeeding if they
develop products related in technology or markets to their
previous product offerings
To develop truely innovative products one needs to
change its existing organizational processes, but to
create incremental innovations one often needs to do no
more than make key organizational processes routine
University of Jyväskylä
SB Program
Ch 4 Product Innovation (cont..)

How to keep competitive edge?
– unlikely to remain competitive simply by following a strategy of
incremental product innovation
– Not always necessary for companies to make distinction between
radical and incremental product innovations
– Perhaps the best strategy is to develop highly innovative products
very frequently, as long as these innovations does not alienate
customers or take too long to find markets

A strategic framework would allow a firm to take
advantage of its existing organizational capabilities and
acknowledge advantages and disadvantages
University of Jyväskylä
SB Program
Ch 4 Multi-Project Strategy Maps (1/3)

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A tool to visualize a company’s product strategy by
mapping out patterns among several generations of
products
Can produces a picture of long-term productdevelopment strategy
Benefits:
– It illustrates a company’s product lines and their life cycles
– Shows the technological relationship among products
University of Jyväskylä
SB Program
Ch 4 Multi-Project Strategy Maps (2/3)
Example
Company A
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
(Year)
•The circles indicate when the company introduced a model change
•The dark circles indicate the introduction of a new platform
•The open circles indicate a new product based on the transfer or utalization of
existing platform from another model line or previous model in the same line
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SB Program
Ch 4 Multi-Project Strategy Maps (3/3)
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In recent years, through effective multi-project strategies,
various automobile companies around the world have
been able to standardize platforms across number of
products
Common platform strategy makes it possible for firms to
introduce a variety of new products cheaply and quickly,
and respond speedily to new market trends
These strategies can be transfered into other industries,
such as software industry, as well
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SB Program
Ch 4 Strategies
1. Rapid expansion of the market for recreational vehicles

The rapid expansion of demand in different segments has
created new opportunities for companies
– E.g. Recreational or sport-utility vehicles in the 1990s

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Some companies have developed new platforms as the
basis for their recreational vehicle products
For economic reasons most companies have reused
existing passanger car platforms
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SB Program
Ch 4 Strategies
2. Intra-company platform standardization across brands
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Reducing the number of platforms needed to support
different brands has become a major strategic issue
E.g. the PSA group has made considerable progress
toward common platform with Citroen ZX (introduced in
1991) and used the same platform later in the Peugeot
306 (1993)
E.g. Fiat introduced the Fiat Tipo in 1988 and then
transferred that platform to the Lancia Dedra in 1989 and
to Alfa Romeo 155 in 1992
University of Jyväskylä
SB Program
Ch 4 Strategies
2. Intra-company platform standardization across brands (cont.)

Companies have faced several problems with
differentiating the products that share the same platform
1. Customers do not like paying more money for cars that are too
similar in style and performance
• Brands may suffer if the same platform is offered also in
other ”level of luxury” model
• E.g. Fiat Lancia is positioned as cheap and low luxury
brand, but uses the same platform than Alfa Romeo, which
is positioned as luxurious and sporty
2. A company receive no cost savings if it wants to keep different
brands separately by maintaining large number of unique
components for each model
– E.g. Volkswagen brand vs. Audi brand
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Ch 4 Strategies
3. International platform sharing


Sharing platforms across development groups in different
parts of the world
For example, in the mid-size segment, Ford used to offer
the Sierra in Europe and the Tempo/Topaz in the US
(different platforms), but introduced the Mondeo
(successor to the Sierra) with a new platform, and then
used this same platform to build the Contour/Mystique
(successor to the Tempo) in the US.
University of Jyväskylä
SB Program
Ch 4 Strategies
4. Platform sharing through alliances

In the past, companies with equity relationships have
been sharing platforms
– E.g. Ford and its Japanese partner Mazda (Ford is the largest
shareholder)
– Models, such as, the Mazda 323 (Familia) and Ford Escort share
the same platform

In recent years also companies with no equity
relationships have been developing platforms in a joint
projects
– E.g. Mitsubishi’s Charisma and Volvo S40/V40
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SB Program
Ch 4 Multi-Project Strategy Typology

Managers need a relatively sophisticated methodology to
create a good multi-project strategic map
– The map should capture the technologial relationship among
projects
– It should also allow managers to measure the impact of their
strategy on market performance as well as on development costs
for related products


Typology is presented in the next two chapters
Critical for strategic product development: the spesific
application and timing of technology leveraging across
multiple projects
University of Jyväskylä
SB Program
Ch 4 Multi-Project Strategy Typology
(cont.)

Application leveraging:
– A company can try to enhance the competitiveness of their
original product (using existing technologies in a product
redesign)
– A company can try to extend its investment to move into a new
market segmentand achieve economies of scope in development

Timing leveraging:
– The speed with which a company can exploit existing
technologies is another critical factor that affects its
competitiveness
– E.g. a project might try to borrow new components from another
ongoing project that started earlier
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Ch 4 Comments

Emphasized points and issues:
– Speed with which a firm can transfer component technologies
from one project to another
– Strategic portfolio planning to organize the transfer of component
technologies and efficiently utilize them in more than one product
– Allocation of engineering resources and the structuring of design
work
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SB Program
Outline









Preface
Chapter 1: Introduction: Beyond “Lean” in Product Development
Chapter 2: Case study of Toyota
Chapter 3: Organizing Product Development in the World Auto
Industry Introduction
Chapter 4: Strategies for Product Development and Multiple Projects
Ch. 5 Multi-Project Strategies and Project Performance
Ch 6 Multi-project Strategies and Company Performance
Chapter 7. Organizational Requirements for Multi-Project
Management
Ch. 8 Implications and Lessons for Managers
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Ch. 5 Multi-Project Strategies and
Project Performance



In this chapter book examines the impact of four multiproject strategy types on lead time and engineering hours
in new product development
The examined data comes from a survey of 103 projects
at 10 auto mobile firm in Japan and the United States
Finding indicate that projects using the concurrent
technology transfer strategy are the most efficient in
terms of engineering hours
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SB Program
Ch. 5 Multi-Project Strategies and
Project Performance

The reason is clear  only through concurrent
technology transfer can a company reuse technology
from a base project in another project, effectively share
tasks among projects and make mutual adjustments and
also conduct joint design work
University of Jyväskylä
SB Program
Ch. 5 Multi-Project Strategies and
Project Performance

Research decided to explore three propositions:
– Projects using the new design strategy should require the longest
lead time and the most engineering hours because these projects
build most components from the scratch and probably try to
maximize innovations
– Concurrent technology transfer projects should require the fewest
engineering hours and perhaps the shortest lead time because of
task sharing and the ease of making adjustments in the designs
– The lead time and engineering hours for sequential technology
transfer and design modifications should fall somewhere between
new design and concurrent technology transfer projects
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Ch. 5 Multi-Project Strategies and
Project Performance

Organizational implications of concurrent transfer
– In this strategy engineers can transfer a design from a preceding
base project to a new project more efficiently than in other
strategies
– There are two basic reasons: 1. The time lag between completion
of a base project and a new project 2. Overlap between a
preceding base project and a new project
– These reasons can be broke down to five areas: 1. Advance
planning 2. Mutual adjustments 3. Transfer of fresh versus dated
designs 4. Problems of anonymous designs 5. The role of
general manager for multi-project management
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SB Program
Ch. 5 Multi-Project Strategies and
Project Performance

Advance Planning for Technology Transfer
– When a new project transfers a platform from a preceding project,
the new project needs to adjust the base platform design to fit the
new product’s individual architecture or specifications
– It’s more efficient for companies to make advanced plans during
the base project for future reuse of a platform
– The time lag between a base project and a concurrent technology
project is much shorter than between a base project and other
transfer strategies
– Sequential transfer and design modification projects time lags are
66.6 and 81.2 months
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SB Program
Ch. 5 Multi-Project Strategies and
Project Performance

Advance Planning for Technology Transfer
– These long time lags may indicate that a company designed a
base platform without any plans to transfer it to future projects
– In only 33 percent of the sequential technology transfer and
design modification projects had companies made a decision to
reuse the platform before completing the base project
– It’s almost impossible to make accurate plans to modify the base
platform for reuse in the new project when there is a long time lag
between two projects
University of Jyväskylä
SB Program
Ch. 5 Multi-Project Strategies and
Project Performance

Mutual Adjustments, Task Sharing and Joint Design
– Because only concurrent technology transfer projects have
significant overlap with a base project, only in this strategy can
engineers designing components make mutual adjustments with
the base project
– In addition, because of the overlapping and interactions, two
linked projects also can share engineering tasks and project
resources  this is called “task sharing”
– Engineers from two projects can jointly work on certain
engineering tasks as a group, such as creating one brake system
to go into two different products  this is called “joint design”
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Ch. 5 Multi-Project Strategies and
Project Performance

Mutual Adjustments, Task Sharing and Joint Design
– These three factors which only concurrent technology transfer
projects can implement fully, may have contributed to the
reduction in engineering hours
– Companies tend to develop the platform (the chassis, suspension
system and other under-body components) in a joint team that
includes engineers from a base project and the follow-on project
– Two projects create two separate groups to develop upper-body
components  that’s because upper-body should be different for
each product
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Ch. 5 Multi-Project Strategies and
Project Performance

Transfer of Fresh Designs Versus Dated Designs
– There are couple of fundamental problems with use of a dated
platform design as a base in a new project following sequential
technology transfer or design modifications
– Projects using an existing design as a base, developed mostly
new components  this mixture may create some difficulties in
linking the old platform with new components in other parts of the
product
– The design requirements often change after they complete the
original design, especially when the time lag between the
completion of the base design and the transfer to a new project is
long
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Ch. 5 Multi-Project Strategies and
Project Performance

Transfer of Fresh Designs Versus Dated Designs
– Requirement change is often made by non-technical reasons,
these reasons include changes in perceived customer needs,
market competition or governmental regulations
– These design changes tend to increase engineering hours in the
sequential technology transfer projects because the modifications
touch many different components
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Ch. 5 Multi-Project Strategies and
Project Performance

Problems of Anonymous Designs
– In sequential technology transfer or design modification projects
companies usually transfer the design from base projects through
drawings and written specifications
– This is because engineers may have completed the base project
and started working on other products
– Therefore, engineers on the new project can have a hard time
finding and communicating with engineers who worked on the old
base platform
– These issues are important because face-to-face technology
transfer can be much more efficient than transfer through
specifications and drawings
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Ch. 5 Multi-Project Strategies and
Project Performance

Problems of Anonymous Designs
– In general, it’s difficult to transfer intangible or tacit understanding
of design details without chronological overlap and direct
interaction with engineers familiar with the original technology
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Ch. 5 Multi-Project Strategies and
Project Performance

Role of the General Manager for Multi-Project
Management
– Companies with lots of technology transfers usually have general
managers or vice-presidents responsible for product development
above the project managers
– These executives are likely to oversee both a base project and a
concurrent technology transfer project because the time lag
between these projects is short
– Changes in executive leadership can clearly affect the efficiency
of technology transfer between two projects
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Ch. 5 Multi-Project Strategies and
Project Performance

Role of the General Manager for Multi-Project
Management
– A general manager is likely to consider the total productivity of the
base project and the concurrent technology transfer project
together
– In general, the shorter time lag between multiple interrelated
projects, the greater the potential benefit of a strong general
manager who can lead and manage multiple projects
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Ch. 5 Multi-Project Strategies and
Project Performance

Conclusion
– The efficiency of managing projects through concurrent
technology transfer is somewhat analogous to the efficiency of
managing overlaps among different functions within a single
project
– Overlaps among multiple projects through concurrent technology
transfer also enable a firm to avoid wasted or redundant work
– Managers can coordinate project objectives and engineers can
adjust designs as they go along rather than rework designs later
University of Jyväskylä
SB Program
Ch. 5 Multi-Project Strategies and
Project Performance

Conclusion
– Researcher believe that the ability to overcome problems of
concurrent engineering and task overlapping at least partially
explains why concurrent technology transfer projects
demonstrated such high levels of productivity
– Overlapping projects that share components creates significant
interdependencies between these projects and makes it difficult
to coordinate across projects as well as across interdependent
functions
University of Jyväskylä
SB Program
Ch. 5 Multi-Project Strategies and
Project Performance

Conclusion
– Companies need to introduce specific organizational structures
and processes that facilitate coordination across projects and
functions as well as the process of mutual adjustments, task
sharing and joint design
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Outline









Preface
Chapter 1: Introduction: Beyond “Lean” in Product Development
Chapter 2: Case study of Toyota
Chapter 3: Organizing Product Development in the World Auto
Industry Introduction
Chapter 4: Strategies for Product Development and Multiple Projects
Ch. 5 Multi-Project Strategies and Project Performance
Ch 6 Multi-project Strategies and Company Performance
Chapter 7. Organizational Requirements for Multi-Project
Management
Ch. 8 Implications and Lessons for Managers
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Ch 6 Multi-project Strategies and
Company Performance
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Ch 6 Outline





Introduction
Sales Growth and New Product Introductions
Research Data
Analysis
Conclusion
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Ch 6 Introduction


Companies are collections of projects -- on the point view of
production development
Efficient performance in individual projects, effective strategies
for linking projects and creating a product portfolio will lead
company with superior performance.
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Ch 6 Introduction (Cont)


How multi-project strategies impact on company performance,
in the book it is measured by
– market share and sales growth at all the world’s leading auto
makers
– based on an analysis of 210 projects from 17 automobile
manufactures.
The analysis based on four strategy types (new design,
concurrent technology transfer, sequential technology transfer
and design modification)
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Ch 6 Sales Growth and New Product Introductions
(1/2)

Whether firms that introduce more new products than
competitors actually increase sales more over time?
– Frequent product introductions have a positive influence on
sales growth
• New product introduction rate is imported to measure
the frequency of new products within each firm.
– measuring lingage across projects such as whether a
platform is new or transferred
– measuring the speed of the transfer
– For industries, such as automobiles, freshness in styling and
product functionality has a significant influnence on sales
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Ch 6 Sales Growth and New Product Introductions
(2/2)


Which type of multi-project strategy is the most
appropriate to develop a large number of new products.
Three proposition were explored:
– Firms that develop more products than their competitiors over the same
time periods should have greater increases in market share and sales
– Firms that frequently follow the concurrent technology transger strategy
should increase market share or slaes more than firms that do not follow
this strategy so frequently.
– Firms that rely on design modifications primarily for new products
should not increase their market share or sales as much as firms
following the other three strategies
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Ch 6 Research Data


In General
Summary of performance and stratagy variables
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Ch 6 Research Data (Cont)
-- In General

17 largest passenger car manufactureres in the world
– 5 Japanese (Toyota, Nissan, Honda, Mazda, Mitsubishi)
– 3 U.S. (General Motors, Ford, chrysler)
– 9 Europe (W-Audi, M-Benz,BMW,Opel,Ford, etc.)



210 new car products into U.S. European and Japanese markets
in 1980-1991
Interviewed 130 engineers and 30 project managers
Data was divided into four three-year time periods
– 1980-1982, 1983-1985, 1986-1988, 1989-1991

65 (data points) [= 17 firms x 4 time periods – 3 (no new
product) ] describe company-level strategies and sales growth
over a series of three-year periods
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Ch 6 Research Data (Cont)
-- Summary of performance and stratagy variables (1/4)

New Product Introduction Rate
– # of new products during a 3-year period, divided by # of product
offerings in the beginning of the first year of the period.
– A new product includes all model variations developed within a single
project.
– A new product has new interior and exterior styling. Additional
variation projects such as new body types or styling are not counted as
new products.
– "Special off-line" products are not counted as new products
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Ch 6 Research Data (Cont)
-- Summary of performance and stratagy variables (2/4)

Average Platform Design Age (years)
– An average of platform design ages for all new products introduced
during a 3-year period. The platform design age is defined as time
passed since a platform each new product uses was originally developed
and introduced

Usage of Multi-project strategies (in percentage)
– # of new products using each multi-project strategy during a 3-year
period, divided by the total number of new products introduced during
the 3-year period.
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Ch 6 Research Data (Cont)
SB Program
-- Summary of performance and stratagy variables (3/4)
 Multi-project strategy
– New Design
• New products that develop a new platform.
– Concurrent Technology (Rapid Design) Transfer
• New products that use a platform a project for a separate product
line originally developed. Transfer occurs within 2 years of the
introduction of the product that originally develops the platform.
– Sequential Technology Transfer
• New products that use a platform a project for a separate product
line originally developed. Transfer occurs at least 2 years after the
introduction of the base product.
– Design Modification
• New products that use a platform a predecessor (an earlier
generation) of the same product line originally developed.
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Ch 6 Research Data (Cont)
-- Summary of performance and stratagy variables (4/4)

Market Share Change (percentage)
– Percentage change in market share (revenue in $) from the
beginning of each three-year period to the end of the period.
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Ch 6 Analysis


Various analysis from different perspectives to examine the
impact of different multi-porject strategies on market
performance.
Following are two of anaylsis samples based on the reasearch
data and variables
–
–
–
–
17 firms
over four three-year periods
65 data points
measuring by 5 variables
• four different multi-project strategies
• new product introduction rate
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Ch 6 Analysis (Cont) -- Sample 1
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Ch 6 Analysis (Cont) -- Sample 1

Figure 4 shows
– total number of new product introductions increased rapidly after 1989
• 50 (1986-88)  61 (1989-91)
– use of the rapid design transfer strategy also increased sharply in the
middle of 1980s
• 6% (1983-85) 20%(1986-88) & 18%(1989-91)

This trend implies
– the speed of new product development has been accelerating during this
period
– firms have been transferring new platform designs more quickly to other
product lines throughout the period
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Ch 6 Analysis (Cont) -- Sample 2
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Ch 6 Analysis (Cont) -- Sample 2

Table 4 shows
– Firms in Group 2,which used the rapid design transfer
strategy most extensively among the four strategic groups.
– Used new desgin strategy in 46% of their new products
during the 3 year period.
– They developed more new products with relatively new
average platform designs
• Gained the largest market share 23% during the 3-year
period.
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Ch 6 Conclusion

In order to increase market share, it seems essential for firms to
develop new designs and at the same time leverage these new
designs quickly in other products
– rather than only developing a new design or transferring a design slowly
to other projects.

The speed with which new technologies are leveraged across
multiple projects or products within the firm at least partially
determines corporate-level market performance in the form of
revenue growth.
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Ch 6 Conclusion (Cont)

Firms need to expand their scope in new product strategy to
consider the effective multi-project strategy.
– Otherwise, as long as firms focus on individual projects for a product
line, either new design or design modification strategies are not as
effective as rapid design transfer strategy for market share growth for
the entire firm.

The rapid design transfer (concurrent technology transfer )
strategy is actually more efficient organizationally than
sequential design transfer or design modification strategies,
– because Only through rapid design transfer can a preceding design be
transferred from a base project to a new project with effective task
sharing among engineers and mutual adjustments between the two
projects.
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Ch 6 Conclusion (Cont)

Variables used here to predict market performance have
limitations.
– for example: Sales growth should result from the ability of a firm to
design and build products that customers want to buy, and this relates to
quality, price performance, advertising, product availability, service, and
numerous other factors.

The effective management of multiple projects organizationally
may also get problems
– for example: it is argued that heavyweight project manager system and
relatively autonomous project team approach are important for an
individual project performance.
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Outline









Preface
Chapter 1: Introduction: Beyond “Lean” in Product Development
Chapter 2: Case study of Toyota
Chapter 3: Organizing Product Development in the World Auto
Industry Introduction
Chapter 4: Strategies for Product Development and Multiple Projects
Ch. 5 Multi-Project Strategies and Project Performance
Ch 6 Multi-project Strategies and Company Performance
Chapter 7. Organizational Requirements for Multi-Project
Management
Ch. 8 Implications and Lessons for Managers
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Chapter 7. Organizational Requirements
for Multi-Project Management






Overview
Functional vs. Project-Centered Organizations
Organizational Requirements for Multiple Projects
Communication and Coordination mechanisms
Multi-Project Management Through Matrix Management
Knowledge Retention and Transfer Mechanisms
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Ch 7 Overview
Organizational Requirements for Multi-Project Management

In order to manage multiple projects well, companies need:
– Specific organizational capabilities that promote coordination
– Communication across functions as well as across projects

”Cross-functional” management
– Brings together engineers and staff from different functional areas to
form multi-disciplinary teams
– Helps components groups and functional departments communicate
better, share knowledge more easily and establish common goals

Concurrent engineering and lean product development encourage
– Overlapping activities helps engineers speed up development and solve
various problems simultaneously
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Ch 7 Overview (cont.)
Organizational Requirements for Multi-Project Management



Cross-functional teams and concurrent engineering have
led to more effective management of individual projects
Managers need to coordinate multiple projects in order to
achieve optimal efficiency and effectiveness from the
perspective of the corporation as a whole
To manage managers need to understand the
organizational capabilities and processes that this way of
thinking requires
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Ch 7 Functional vs. Project-Centered
Organizations

Project-centered organizations and their advantages:
– They help break down walls between functional departments and
bring different departments together toward a common product
concept (e.g. luxurious economy car) and common goals (e.g.
shorter lead time or lower costs)
– Engineers from different specialties might combine to make
product development more innovative (for example, Sony’s CD
Walkman, where electronic, mechanical and laser engineers
cooperated in a joint project)
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Ch 7 Functional vs. Project-Centered
Organizations (cont.)

Functional organizations and their advantages:
– More tight and intensive group that stay together – whereas
project groups forms and disbands members every time they
complete a product
– Functional organizations has a better position to produce radical
innovations in particular technologies or be state-of-the-art in
selected areas
– For example, they may produce the best component desing and
performance, possibly at the expense of total product integrity
(some customers will want this type of excellence, like CR
players with the longest battery life)
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Ch 7 Functional vs. Project-Centered
Organizations
Matrix structure

We saw in the case of Toyota and other car makers that
companies tend to introduce matrix structures
– These matrix structures combine functional departments and
cross-functional product teams in the form of projects

Projects within a matrix structure usually succeed in
integrating across functions while maintaining some
functional expertise within the organization
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Ch 7 Functional vs. Project-Centered
Organizations
Matrix structure (cont.)

A matrix that combines projects with functional departments may
obtain some of the advantages of both approaches, but it also
creates particular problems:
– Level of authority held by the project manager as opposed to the
functional department managers
• Disagreement on how to solve the problems
• Who will deside (functional manager, project manager or senior
manager?)
– Responsibilities and physical location of engineers
• Should an engineer be responsible for a particular technology and
remain with a functional group or should he / she be member of a
project team and co-locate all in same place
– These problems are strategic, not just simply organizational: Do
managers want to optimize a particular technology or maximize the
chances of innovation?
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Ch 7 Functional vs. Project-Centered
Organizations
Conditions determine organization

3 conditions determine whether a project-centered or a functional
organization is more appropriate:
– The rate of technological change
– The length of the development project
– The degree of interdependency among the functional components being
developed for the product


In case of rapid technological change, there is a high chance that
engineers involved a project will become detached from information
on the latest advances in their field
If the project takes a long time (even though the pace of change is
not rapid) engineers are likely to fall behind the state of the art in
their field
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Ch 7 Functional vs. Project-Centered
Organizations
Conditions determine organization (cont.)



Functional organizations help a firm’s long-term
competitiveness because they do not pursue the shortterm goals
If there are few interdependencies among the functional
components in a product, then there is little need for a
project-centered organization
On the other hand, if the engineer cannot design good
components without interacting extensively with
engineers making other components because of
significant technical interdependencies, then a projectcentered organization is most suitable
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Ch 7 Organizational Requirements for
Multiple Projects

Functional organization seems to be better in effective
management of multiple projects than project-centered
organization, because functional managers generally
have more authority
– E.g. If a major objective is to lower costs  Through functional
organization we have ability to standardize components across
multiple products  reduction in task duplication

A key benefit of project-centered organizations is the
ability to create differentiated products with an integrated
or cross-functional management style
– Share technologies and knowledge across multiple product lines
and projects
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Ch 7 Organizational Requirements for
Multiple Projects (cont.)

Integration across departments is especially important
because of the potential impact it has on the speed of a
project
– Design changes during a project come from interference
problems between sub-system components (and usually causes
schedule delays)
– In order to reduce these problems, utilize both cross-functional
and project-centered management
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Ch 7 Organizational Requirements for
Multiple Projects (cont..)

Multi-project management is a way to manage multiple
product lines without resorting to the disadvantages of a
purely functional structure
– Objective is to share as many components among different
product lines as makes sense
– This cannot be done easily with functional organizations

For effective multi-project management, both crossfunctional integration and cross-project integration are
necessary
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Ch 7 Organizational Requirements for
Multiple Projects (cont...)


The diagram illustrates multiproject organization and how it
differs from a functional
organization
To integrate across one or
more projects, multi-project
management requires:
– A level of control above the
project manager that
coordinates different projects
– Individual functional
departments and individual
engineers
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Multi-Project
Management (Mgmt)
Project (CrossFunctional) Mgmt
Functional
Mgmt
Individual Mgmt
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Ch 7 Communication and Coordination
Mechanisms

In order to utilize concurrent technology transfer, project managers
and engineers have to
– Communicate well
– Coordinate their work properly


If insufficient communication occurs, then functional managers and
engineers are not able to adjust their activities to the requirements of
multiple projects
Because the communication has such a important role, only strong
project managers can effectively manage cross-functional
interactions caused by such interdependencies
– Even the component-level interactions between multiple projects may
require project-level or system-level coordination when components are
parts of sub-systems and interdependency occurs
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Ch 7 Communication and Coordination
Mechanisms (cont.)


Project managers for concurrent technology transfer
need to spend time on coordination with other projects
through meetings with other project managers
In car industry companies used 4 different organizational
mechanisms to coordinate multiple projects:
1. Mutual coordination among the project managers, such as
through meetings
2. Coordination by executives who supervise the project managers
3. Coordination of multiple projects by functional department
managers
4. Direct mutual coordination among the individual engineers
working on each separate projects
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Ch 7 Communication and Coordination
Mechanisms
General Manager
Inter-Project Coordination Mechanisms
Project Manager
Functional Manager

1.
2.
3.
4.
Engineer
In the survey of project managers
founded out that direct
coordination among the project
managers is the most effective
mechanism, followed by
coordination through supervision
of the project managers
Direct coordination between project
managers
Coordination by general managers
Coordination by functional managers
Direct coordination between engineers
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3
2
1
4
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Ch 7 Multi-Project Management Through
Matrix Management

There are two mechanisms that companies are using to
move beyond simply trying to balance a functional and a
project-oriented structure
– The differentiated matrix
– The dual responsibility system for engineers

These organizational innovations have become more
common since the early 1990s
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Ch 7 The Differentiated Matrix and
Component Characteristics





The differentiated matrix provides a balance that minimizes the
conventional trade-offs between a functional vs. a project-oriented
structure
It allows functional groups to focus on components that management
wants to standardize across multiple projects
It allows also projects to create distinctive products by creating
separate groups for those components that makes the real
differentiation in the eyes of customer
To make the differentiated matrix structure work, a company needs to
have a strategy for creating sub-systems and then for sharing these
across products
Organizing and coordinating these to different groups and project
teams are also needed
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Ch 7 The Differentiated Matrix and Component
Characteristics
Framework



A framework for analyzing
Needed
technical requirements and
Different sub-systems
then creating different types of
component groups
Product
First step: Clarify what is
Group
necessary to coordinate among Coordination Among
functional departments as well Functional Departm.
as among projects
Second step: Form different
component development
groups, which we have divided
Different individual
into four types as we can see
Not
components
Needed
from the framework
Not Needed
Common sub-systems
Multi-project
Component
Group
Component
Group
Standard components
Needed
Coordination Among Projects
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Ch 7 The Differentiated Matrix and Component
Characteristics
Framework

Examples to illustrate the framework:
– Standard sub-systems: Audio equipment
• Can be common across multiple products
• They do not require much coordination across groups (engineers ”buy” these
parts through basic specifications)
– Multi-project groups: Automobile platforms
• Sub-systems that require high levels of coordination amond different
engineering groups but management wants different projects to share them
– Product groups: Microsoft (MS) Office
• Three major sub-systems (Excel, Word and PowerPoint)
• Product groups share about half of their components
• E.g. Word group has the most experience with text processing and file
management, so MS management has decided that the Word group should
build these modules for all the applications groups
• One group take the lead: this will clear responsibilities and deciding the
design requirements for the common component
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Ch 7 Dual Responsibility System for
Engineers

The differentiated matrix
 Coordination among different functions or component groups
 But does not address the issue of coordinating engineers across
different functional departments and projects

Problem is whether to control engineers through the
functional department structure or through the project
structure
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Ch 7 Dual Responsibility System for
Engineers
Example
Project A
Project B
Project C
Project D
Components development
a b
1
2 X
Engineer 3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
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c
d
e
f g h
i
j
k
X
X
X
X
X
X
X
X
X
X
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Ch 7 Dual Responsibility System for
Engineers
SB Program
Example (cont.)




As we can see from the figure, there are 4 projects and
20 engineers working for the project
In this example individual engineers take on coordination
responsibilities for specific components
Individuals make sure that different groups share the
appropriate information regarding the specific
components
Engineers that are working on the other projects are
responsible for giving technical information and
specifications to the responsible component engineer
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Ch 7 Knowledge Retention and Transfer
Mechanisms

According to Aoshima, there are 2 types of knowledge:
– ”Local” knowledge
• Related to the development of specific components
• E.g. engine or brake
– ”System” or ”Integrative” knowledge
• Related to integration of different components

”Local” knowledge
– Archival-based mechanisms, such as documents, reports etc., are more
effective in promoting knowledge retention than individual-based
mechanisms such as transfer of people or direct connection
– This is because component-level knowledge is specialized and possible
to write down
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Ch 7 Knowledge Retention and Transfer
Mechanisms (cont.)

”Integrative” knowledge
– This type of knowledge needs individual-based mechanisms,
primarily face-to-face communication and transfer of people
– Difficult to communicate and write down
– Integration requires knowledge of many different areas

Findings for multi-project management
– To implement technology transfer, firms should overlap projects
so that engineers can communicate and solve design problems
face-to-face
– Important to keep people together because complex products
require different type of knowledge, some of which is hard to
learn and transfer to new people
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Ch 7 Product Variety and Manufacturing

Important In multi-project management
– The manufacturing is flexible
– The manufacturing supports platform families and product
variations

Companies have many strategies to overcome the
potential negative impact of product variety on
manufacturing performance:
–
–
–
–
Products designed to share subsystems
Subsystems designed to share modules
Low-inventory production techniques
Parallel assembly etc.
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Outline









Preface
Chapter 1: Introduction: Beyond “Lean” in Product Development
Chapter 2: Case study of Toyota
Chapter 3: Organizing Product Development in the World Auto
Industry Introduction
Chapter 4: Strategies for Product Development and Multiple Projects
Ch. 5 Multi-Project Strategies and Project Performance
Ch 6 Multi-project Strategies and Company Performance
Chapter 7. Organizational Requirements for Multi-Project
Management
Ch. 8 Implications and Lessons for Managers
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Ch. 8 Implications and Lessons for
Managers



Managers are better off if they leverage investments in
new technology as opposed to not leveraging these
investments at all
Leverage of investments should happen quickly across
markets (as in concurrent technology transfer) rather than
slowly across time (as in sequential technology transfer)
Toyota and other firms have explicitly adopted multiproject management systems that work  they have
evolved beyond traditional functional, matrix or singleproject organizations
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Ch. 8 Implications and Lessons for Managers
Lessons from Toyota and others

It’s important to improve integration across different engineering
functions as well as across different projects simultaneously 
Toyota provides an excellent sample of how to do this
– Its center organization facilitates coordination among technically related
projects
– Toyota has improved integration across functions by strengthening the
authority of project managers over functional management
– Toyota streamlined tasks for integrating across functional groups in order
to make it easier to integrate multiple projects
– As people stay together in multiple product generations, consistent
design philosophy can be learned and carried out from project to project
– Competition in performance among centers promotes learning,
improvement, efficiency, and innovation
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Ch. 8 Implications and Lessons for Managers
Lessons from Toyota and others

Grouping related projects is not so effective without
introducing a logic for grouping projects and then
supporting mechanism and processes for multi-project
management
– Grouping according to market similarities or to technical
similarities - the latter is recommended
– Problems in grouping products, especially in semi-centers: what
to leave out and how many centers to establish
– Explicitly establish management positions before grouping

Insufficient thought and analysis of goals and problems
before a fundamental reorganization can lead firms to
make too frequent organizational changes
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Ch. 8 Implications and Lessons for Managers
Why concurrent technology transfer



Firms that follow concurrent technology transfer appear to grow more
quickly than competitors who develop products one at a time or
sequentially transfer platforms to other projects
Firms do better if they leverage key components across multiple
product lines while technology is still relatively new
There are also several reasons why firms might not to try concurrent
technology transfer:
– Some firms want to maximize product innovation or product
integrity in every project - fear on compromises
– There is some danger in transferring technologies not proven in
the marketplace or in transferring designs that may have some
flaws
– Concurrent technology transfer places too heavy burden on
company planners for new product - fear of long-time plans
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Ch. 8 Implications and Lessons for Managers
Why concurrent technology transfer

More of why firms might not to try concurrent technology transfer:
– Concurrent technology transfer complicates project management
due to increased interdependencies among projects
– Managers fear that companies relying heavily on suppliers could
face an additional complicating factor in coordinating multiple
projects
– Some managers and engineers prefer to invent their own
technologies rather than rely on outside sources, even within the
same company
– Some managers simply want to expand the size of a single
project to accommodate multiple distinct products, rather than
have a separate base project and a follow-up project relying on
concurrent technology transfer
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Ch. 8 Implications and Lessons for Managers
Applicability of multi-project management



Even though a company has only one product it is
important to that managers and engineers still think about
transferring technology or specific components across
different product generations
This sequential transfer over time is also a form of multiproject management
Multi-project management addresses the future
– when expanding the product lines
– when introducing new technologies into existing products
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Ch. 8 Implications and Lessons for Managers
Applicability of multi-project management
Breadth of Target
Market Segments
The Framework
Diversified
Relevant Area for
Multi-project
Management
Focused
Niche
Markets
Mass
Markets
Size of Target
Market Segments
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Ch. 8 Implications and Lessons for Managers
Applicability of multi-project management


The book also introduces a framework for thinking about when it is
appropriate to adopt multi-project management
– The framework compares the breadth of a firm’s target market
segments and size of the target segments
– Multi-project management is most appropriate in mass-market
and / or diversified markets
Project structures are not particularly good at fostering radical
innovation in particular areas because they do not promote deep
technical excellence or specialization
– Here permanent functional departments are better
– Continuity in department membership and technical knowledge is
somewhat lost in project structures
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Ch. 8 Implications and Lessons for Managers
Final Thoughts




Fundamentally, companies need to decide if they want to
think and manage in a multi-project mode
There are numerous ways to manage and focus business
in this industry: one can decide to produce hit poducts
one at a time or they can manage projects as part of a
portfolio etc.
Multi-project management requires integrating across
engineering functions that cut across multiple projects
These activities require more long-term planning and
more frequent communication among project members
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