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Handling of strategic uncertainties in integrated product development [Elektronische Ressource] / Markus Lorenz

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Published 01 January 2008
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Lehrstuhl für Produktentwicklung
der Technischen Universität München





Handling of Strategic Uncertainties in
Integrated Product Development

Markus Lorenz

Vollständiger Abdruck der von der Fakultät für Maschinenwesen der Technischen
Universität München zur Erlangung des akademischen Grades eines
Doktor-Ingenieurs
genehmigten Dissertation.

Vorsitzender: Univ.-Prof. Dr.-Ing. habil. Boris Lohmann
Prüfer der Dissertation: 1. Univ.-Prof. Dr.-Ing. Udo Lindemann
2. Univ.-Prof. Dr.-Ing. Gunther Reinhart



Die Dissertation wurde am 29.04.2008 bei der Technischen Universität München
eingereicht und durch die Fakultät für Maschinenwesen am 17.09.2008
angenommen.
FOREWORD OF THE EDITOR
Problem
Innovation projects have to face external and internal uncertainties, resulting from lacking or
incomplete information on the market, customers' behavior, competitors' moves, or
unexplored technological fields. Generally, the level of perceived uncertainty increases with
the degree of innovativeness and novelty of the product, as one cannot draw from past
experience in these cases. The mentioned sources of strategic uncertainty are highly
interconnected and can have a propelling effect on each other. In the case of radical
innovation, where the actual usage in the customer's system is often not known in advance,
the uncertainty on the market side will not only be carried over to the technical side, but will
also lead to increased complexity and uncertainty in the derivation of technical solutions.
Thus, the early phase of product development, in which pivotal decisions for both market and
technology are made, is characterized by an especially high level of uncertainty. Yet, the
effective and holistic handling of the implied uncertainty is rarely addressed in prevailing
procedural product development models.
Objectives
The aim of this work is to develop an enhanced approach supporting product development
teams, as well as sponsors of innovation projects in effectively dealing with implicit and
explicit uncertainties they are facing. The purpose of such an approach is to promote the
deliberate and regulated acceptance of risks in order to realize highly innovative business and
technology ideas which might otherwise be subject to abandonment.
Results
This thesis describes an extended approach for the handling of strategic uncertainties in
Integrated Product Development, consisting of a procedural model and its associated tools
and methods, as well as the consideration of individuals' and teams' behavior in uncertain
situations. In the integrated model, fields of uncertainty are defined and subsequently

explored through options. This approach integrates a real-options perspective into the
established logic of integrated product development, in order to allow for the exploration and
control of risks associated to radical innovations. The simultaneous acquisition of information
and generation of solution options is methodically supported, leading to an integrated holistic
decision base. In addition, measures for addressing human limitations in dealing with
complex and uncertain problems are being derived and integrated in the model.
Conclusions for industrial applications
The uncertainty and complexity in radical innovations can become a major reason to avoid
risky - yet possibly also highly rewarding - breakthrough innovations. The discussed
approach aims at enabling the development team to effectively explore and deal with the risks
of such an innovative development. At the same time, the sponsors of these ventures gain
transparency on the proceedings on the "fuzzy front end" of innovations and receive prompt
feedback on a project's chances of success. In addition, the model integrates often diverging
commercial and technical issues in innovations. Overall, the ability of an enterprise to
successfully originate innovative solutions is enhanced, which represents a major source of
competitive advantage in technology-driven and dynamic industries.
Conclusions for scientific researches
The analysis of prevailing procedural product development models yields characteristic
shortcomings in the handling of simultaneous strategic uncertainty on the market and
technology side. The discussed approach presents an extension of the Integrated Product
Development framework in order to support the development of such highly innovative
products. The developed approach is capable of handling a larger number of uncertainty
areas, for example, on the operative side through the provided options generation and matrix
evaluation logic. The model can contribute to the further understanding of effective radical
innovation management and provides a base for further research in the interface of
psychology and behavioral sciences and engineering with regards to the implications of
cognitive limitations for engineering design models.
Garching, December 2008 Prof. Dr.-Ing. Udo Lindemann
Institute of Product Development
Technische Universität München

ACKNOWLEDGEMENT
This dissertation was submitted to the Technische Universität München in Mai 2008 is the
result of my work completed as an external researcher at the Institute of Product
Development in the years 2005 until 2008.
I am indebted to my doctoral advisor Prof. Dr.-Ing. Udo Lindemann for the support and
encouragement throughout this research project. When I approached him with rather
uncommon proposal for a research project dealing with radical innovations he saw more
chances than risks on both the academic and practice-oriented side. In particular, his
provision of scientific freedom as well as guidance and participation in the case studies
provided the basis of the present work.
I want to thank Prof. Dr.-Ing. Gunther Reinhart for taking over the position of second
examiner of this dissertation. His intense review and propositions of improvements that are
grounded in empirical experiences largely enhanced the reasoning in this thesis.
Also, I want to thank Prof. Dr.-Ing. habil. Boris Lohmann for being the chairperson of the
examination committee and for the handling of the dissertation process.
Representative for the colleagues at the Institute of Product Development I want to thank
Matthias Kreimeyer for the collaboration and the valuable input ranging from structuring of
conference papers to specific academic processes at large.
On the industry side, I want to thank Dr. Richard Piock, Dipl-Wi-Ing. Ludwig Harrer, and
Dipl-Ing. Heinz Knuppertz for opening the doors of their respective companies for
discussions and active collaboration in ongoing research projects. Specifically I would like to
thank Mag. Michael Lackner and Dipl-Ing. Peter Weingartner for their openness and friendly
cooperation throughout the years. As a team they remarkably personify one of the central
elements of this thesis, namely target-oriented and joint collaboration in commercial and
technical aspects.
I want to express my deepest gratitude to my long-term partner Isabel who always encourages
me in my ventures and who provided both mental and pragmatic support to this work.
Finally, I am very grateful to my parents for their unwavering faith and support. The
education and support they offered me have built the basis of this work.
Munich, December 2008 Markus Lorenz
i
Table of Contents
1 INTRODUCTION............................................................................................. 1
1.1 Starting Point and Problem ...................................................................................................................1
1.2 Motivation and Scope of the Study .......................................................................................................6
1.2.1 Empirical and Literature-based Motivation..............................................................................................6
1.2.2 Scope of the Topic between Engineering and Management ................................................................... 11
1.2.3 Scientific Approach ................................................................................................................................14
1.3 Structure of the Thesis .........................................................................................................................18
2 NEED FOR INTEGRATED UNCERTAINTY HANDLING IN PRODUCT
DEVELOPMENT ........................................................................................... 21
2.1 Introduction to Case Study: Development of a New Digital Printing System .................................21
2.1.1 Company and Market Background.........................................................................................................21
2.1.2 Technical Background ............................................................................................................................24
2.2 Uncertainties in Product Development....27
2.3 Conclusion.............................................................................................................................................31
3 UNCERTAINTY HANDLING IN PRODUCT DEVELOPMENT MODELS ..... 33
3.1 Managerial and Economic Approaches ..............................................................................................34
3.1.1 Stage-Gate Models .................................................................................................................................34
3.1.2 Probe and Learn Process ........................................................................................................................38
3.1.3 Real Option Modeling ............................................................................................................................41
3.2 Technical and Engineering Approaches..............................................................................................48
3.2.1 Engineering Design Process according to Pahl and Beitz ......................................................................48
3.2.2 Mechanical Design Process according to Ullman ..................................................................................53
3.2.3 Concurrent and Simultaneous Engineering ............................................................................................56
ii Table of Contents
3.2.4 Integrated Product Development according to Andreasen and Ehrlenspiel .......................................... 59
3.2.5 Munich Procedural Model according to Lindemann.............................................................................. 64
4 FORMULATION OF RESEARCH NEED ...................................................... 67
4.1 Synthesis of Existing Approaches and Derived Gap ......................................................................... 67
4.2 Requirements for Procedural Models Handling Uncertainty in Product Development ................ 72
5 MODEL FOR UNCERTAINTY HANDLING IN INTEGRATED PRODUCT
DEVELOPMENT ........................................................................................... 77
5.1 Founding Principles ............................................................................................................................. 77
5.1.1 Process Orientation.................... 77
5.1.2 Front-loading.......................................................................................................................................... 79
5.1.3 Embedding Options................................................................................................................................ 82
5.1.4 Interdisciplinary Work Mode ................................................................................................................. 86
5.2 Model Overview ................................................................................................................................... 87
5.3 Process Logic...................... 90
5.3.1 Front End: Idea Phase and Development Agreement............................................................................. 92
5.3.2 Front End: Option Generation and Assessment Phase ........................................................................... 95
5.3.3 Back End: Detailed Design, Testing, Prototyping, and Launching ...................................................... 100
5.4 Embedded Methods and Tools .......................................................................................................... 103
5.5 Individuals, Teams, and Organizations ............................................................................................ 108
5.5.1 Dealing with Uncertainty and Risk ...................................................................................................... 108
5.5.2 Cross-functional collaboration ............................................................................................................. 114
5.6 Comparison to Prevailing Product Development Models............................................................... 117