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OULU 1999

DEVELOPMENT OF TECHNOLOGICAL COMPETITIVENESS BY INTEGRATING INSTRUMENTS AND AUTOMATION IN PROCESS MACHINERY

SAKARIKAUPPINEN

Department of Economics

OULUN YLIOP ISTO, OULU 1999

DEVELOPMENT OF TECHNOLOGICAL COMPETITIVENESS BY INTEGRATING INSTRUMENTS AND AUTOMATION IN PROCESS MACHINERY

SAKARI KAUPPINEN

Academic Dissertation to be presented with the assent of the Faculty of Technology, University of Oulu, for public discussion in Kuusamonsali (Auditorium YB 210), Linnanmaa, on June 23rd, 1999, at 12 noon.

Copyright © 1999Oulu University Library, 1999

OULU UNIVERSITY LIBRARYOULU 1999

ALSO AVAILABLE IN PRINTED FORMAT

Manuscript received 21.5.1999Accepted 25.5.1999

Communicated by Professor Timo NybergProfessor Josu Takala

ISBN 951-42-5270-5(URL: http://herkules.oulu.fi/isbn9514252705/)

ISBN 951-42-5269-1ISSN 0355-3213 (URL: http://herkules.oulu.fi/issn03553213/)

K auppinen Sakar i, Development of technological competit iveness by integrat inginstruments and automation in process machineryDepartment of Economics, University of Oulu, P.O. Box 4600, FIN-90401 Oulu1999Oulu, Finland(Manuscript received 21 May 1999)

Abstract

The Finnish chemical forest industry has undergone a profound structural change over the past twodecades. The basic industry is increasingly focusing its product development investments on itsown products and operations while the development of processes and process machinery is left tospecialised companies. At the same time the purchases of the pulp and paper industry are becominglarger: there is a shift from single device purchases to larger functional units.

This research studies the Finnish process machinery industry serving the needs of the pulp andpaper industry and its product development environment and strategies, and evaluates the abili ty ofselected case companies to design integrated processsolutions. Particularly therole of measurementand automation technology in these solutions is under closer scrutiny. Aspects of product life cyclesand technology management, together with various procedures and operating models for innova-tion and product development processes, are discussed on the basis of the literature. The empiricalpart of the research was carried out as a case study with several Finnish companies manufacturingmachinery and equipment for the chemical forest industry.

The results show that the strategies of the studied industry are stil l very much dominated by thetraditional emphasis on machinery design and construction. The change in the customers' purchas-ing behaviour towards ever larger units and functions is reflected particularly as increasingly largedelivery projects. The units required by the customers are put together in the project phase, usingparts and components developed in isolation from each other. There is very little evidence of actualproduct development, design or producing of integrated process solutions. In those cases where thedesign work has explicitly aimed at an integrated functional unit, the result has been a process thatthe customer can easily purchase and where the supplier's expertise in processes and process controlisalready included in the package.

Designing integrated process solutions takes more than technical expertise and capability: thestrategy, organisation, and product development process of the supplier company must support theintegration of different technologies and expertise areas in the product. Instead of the traditionalserial product development it is imperative that the questions of process design, process machinery,and process control are treated and solved simultaneously. The in-house expertise and networkingof research and development must be promoted in such a way that the capabilities necessary toincludetherequired technologies and expertise areas in a product project arealready available whenthe product is being specified and designed.

Keywords: pulp and paper industry, product strategy, technology management, productdevelopment

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Acknowledgements

The idea for this research first arose in the late 1980s. In the previous decade, whening for a company that developed and supplied process control systems for the pulppaper industry, I was in the position to have first-hand experience of automation and itthen that I realised how important reliable measurements were for process control.on I joined my present employer, a corporation manufacturing pulp and paper proceand process machinery, speciality measurements and automation systems, and sincehave had the opportunity to watch from within the company all the different possibilitthat developments in these fields have opened. Most of the time I have worked in thetomer interface, and this experience gave further impetus for this kind of research.

I wish to thank Valmet Automation Kajaani Ltd. and the Valmet Academy for makithis research possible. My workplace, colleagues, and all the numerous customers Imet over the years, have secured me an excellent vantage point from which to obglobal business and to utilise a wide range of pulp and paper industry expertise inwork. My special thanks go to the companies studied and the persons who kindly papated in the study. Their help and contribution have been essential.

I want to thank my supervisor, Professor Kauko Leiviskä, who made me startresearch. He has shown unceasing interest towards my work throughout the proceshis guidance and advice in the stormy waters of research work has been invaluablethanks also go to my second supervisor, Professor Esa Jutila, for his inspiring attitudethe many thought-provoking discussions concerning the topic. I remember with gratithe numerous seminars and my fellow students for making the research work into asure. Special thanks to Mr. Martti Launonen; the discussions with him have largely mup for the lack of academic surroundings and given me plenty of valuable instructionsthis work.

I want to acknowledge Professors Timo Nyberg and Josu Takala for their contribuin reviewing the thesis, and Ms. Marjo Nygård for the professional and patient revisiothe language of the manuscript.

I am much indebted to my parents who have always encouraged me to studyexpand my knowledge. Sadly, my father did not have the opportunity to see this thready and cannot share with us the delight of a work completed.

dion oft that

Finally, I am forever grateful to my family: my wife Pirkko, our daughter Laura, anour sons Esko, Toni and Lasse. This research has swallowed a deplorably large portthe time we could have spent together. But it was their support and encouragemenhas decisively helped me to pull this through.

Oulu, March 1999 Sakari Kauppinen

List of symbols and abbreviations

AHP Analytic Hierarchy ProcessCTMP Chemi-Thermo-Mechanical PulpDCS Distributed Control SystemGW Groundwood PulpHW HardwareTMP Thermo-Mechanical PulpNPD New Product DevelopmentPACE Product And Cycle-Time ExellencePLC Programmable Logic Control, Product Life CycleQFD Quality Function DeploymentR&D Research and DevelopmentSW Software

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. 3031333636

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. 474748

Contents

AbstractAcknowledgementsList of symbols and abbreviations1. Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

1.1. Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.2. Special instrument sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.3. Research problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.4. Research strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.5. Research approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.6. Scope of research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.7. Structure of the thesis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2. Special instrument sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.1. Special instrument – definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.2. Product categories of special instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.3. Interface between special instruments and environment . . . . . . . . . . . . . . . .2.4. Development environment of special instruments . . . . . . . . . . . . . . . . . . . . . .2.5. Product development project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.6. Development visions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.6.1. Development of instrument and analyser technology . . . . . . . . . . . . . .2.6.2. Development of automation technology .. . . . . . . . . . . . . . . . . . . . . . . 37

2.7. Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.7.1. Global paper machine capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.7.2. Global wood pulp capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

2.8. Machinery industry of the finnish forestry cluster as a special instrumentcustomer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

2.9. Cost effect of automation and special instruments in pulp and paper millinvestment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

2.10. Customer needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.10.1.Customer needs for special instruments in paper mills . . . . . . . . . . . . .2.10.2.Customer needs for special instruments in pulp mills . . . . . . . . . . . . . .

2.11. Factors affecting customer’s purchase decision . . . . . . . . . . . . . . . . . . . . . . .2.11.1.Economic factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.11.2.Product related factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5052

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2.11.3.Service related factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.12. Special instrument sector – conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3. Related product development research. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 533.1. Definition of product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53.2. Competitive strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.2.1. Competitive forces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.2.2. Competitive advantage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.2.3. Product - market matrix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.3. Product development strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.3.1. Technology strategy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 633.3.2. Technology management .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 643.3.3. Competence management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.3.4. Product development portfolio management . . . . . . . . . . . . . . . . . . . . .

3.3.4.1. Platform model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63.3.4.2. Four-path design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.3.4.3. The wheelwright model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

3.4. Product life cycle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73.4.1. Definition of product life cycle . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 733.4.2. Factors influencing product life cycle . . . . . . . . . . . . . . . . . . . . . . . . . . 73.4.3. Product life cycle in pulp and paper industry . .. . . . . . . . . . . . . . . . . . 763.4.4. Applying the product life cycle concept in strategic product

management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73.5. New product development - part of the innovation process . .. . . . . . . . . . . . 78

3.5.1. Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73.5.2. Nature of innovation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 803.5.3. Origin of innovation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

3.5.3.1. Technology push model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.5.3.2. Need-pull model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

3.5.4. Product design – balancing between demands . . . . . . . . . . . . . . . . . .3.5.5. Measuring the effectiveness of innovation process and product

development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83.6. Models and methods of new product development . . . . . . . . . . . . . . . . . . . . .

3.6.1. Development methods . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 853.6.1.1. Quality function deployment – QFD . . . . . . . . . . . . . . . . . . . . 8

3.6.2. Development models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.6.2.1. Concurrent engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.6.3. Design approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.7. Customer orientation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.7.1. Customer - manufacturer roles in innovation process . .. . . . . . . . . . . . 913.7.2. Buyer - seller relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.7.3. Importance of customer-active approach in new product

development process. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.7.4. Identifying customer needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.7.5. Converting customer needs into product features . . . . . . . . . . . . . . . . .

3.8. Structural organisation forms of product development . . . . . . . . . . . . . . . . .3.8.1. Functional organisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2

0304105

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117118121212121212222

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1646869

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3.8.2. Matrix organisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.8.3. Organisations based on product or product groups. . . . . . . . . . . . . . . 1023.8.4. Evolution of engineering organisation . . . . . . . . . . . . . . . . . . . . . . . . . 13.8.5. Development of job requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

3.9. Knowledge absorption in product development process . . . . . . . . . . . . . . . .3.10. Towards quicker new product development . . .. . . . . . . . . . . . . . . . . . . . . . 1063.11. Risks and risk management in new product development. . . . . . . . . . . . . . . 1093.12. Related research – conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4. The empirical case study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.1. Case study design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.2. Selecting the cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.3. The structure of the case study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.4. Research cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.4.1. Case A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.4.2. Case B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.4.3. Case C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.4.4. Case D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.4.5. Case E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

4.5. Data analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.5.1. Intervies and written questionnaires. . . . . . . . . . . . . . . . . . . . . . . . . . 1224.5.2. Analytic hierarchy process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

5. Results and discussions of case study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.1. Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

5.1.1. Case results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.1.2. Observations and discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.2. Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.2.1. Case results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.2.2. Observations and discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.3. Customer orientation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.3.1. Case results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.3.2. Observations and discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.4. Product development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.4.1. Case results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.4.2. Observations and discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.5. Networking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155.5.1. Case results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.5.2. Observations and discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.6. Integration of automation in process design . . . . . . . . . . . . . . . . . . . . . . . . .5.6.1. Case results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.6.2. Observations and discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6. Analysis of case study results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.1. Building the analytic hierarchy process model . . . . . . . . . . . . . . . . . . . . . . . 1

6.1.1. Selecting the criteria for integrated product development. . . . . . . . . . 1696.1.2. Selecting subcriteria and alternatives . . . . . . . . . . . . . . . . . . . . . . . . . 1

6.1.2.1. Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176.1.2.2. Technical capability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

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6.1.2.3. Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.1.2.4. Networking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176.1.2.5. Overall model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

6.2. Defining the importance of each criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.2.1. Defining the importance of the main criteria . . . . . . . . . . . . . . . . . . . . 16.2.2. Defining the importance of the subcriteria . . . . . . . . . . . . . . . . . . . . . 1

6.2.2.1. Technical capability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186.2.2.2. Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.2.2.3. Networking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

6.3. Evaluation of the cases with the AHP model . . . . . . . . . . . . . . . . . . . . . . . . . 16.4. Validity and reliability of the research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

7. Conclusions and recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.1. Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.2. Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

8. References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Appendices

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1. Introduction

The current study is one part of the ongoing research and product development co-otion that has arisen between the Finnish automation and process machinery indurelated to the chemical forest industry. Our main focus is on the research and prodevelopment activity of the process machinery industry and, more specifically, on thegration of automation, particularly special instruments, in the products.

The foundation of the Finnish forest cluster is the basic forestry products: pulp, paboard, and sawn timber. These core industries in turn have generated supportingrelated industries: process machinery, electrical equipment, automation, engineeringchemical industries. The development of the Finnish forestry cluster has been influeby world-wide trends, including the rise of environmental awareness and recycling,economic upswing of Asia, and the shortening of distances between production unitstheir respective customer industries. Moreover, continuing globalisation and centration of the suppliers and the harmonisation of national legislation mean that the protion processes are growing increasingly similar irrespective of their geographical locaAs a consequence, industrial-scale technical solutions originally developed in Finlanalso perfectly acceptable in other parts of the world, such as Asia.

The Finnish suppliers of pulp & paper process machinery have undergone mastructural changes in the recent years. Instead of the traditional, production-celicence manufacturing, they are now strongly product development oriented, concenon their core businesses, and offer engineering consultancy on an increasingly gscale.

In Finland the automation sector includes some 3–5 large companies and a numbsmall and medium-size businesses focusing on narrow special fields. This sectorback to the first instrument manufacturers in the 1950s, and when process computersously began to gain ground two decades later, its activity concentrated on the devment of computer-based process control systems. The 1980s and 1990s have agaian era of sharpening focus. In this development both Finnish and foreign corporahave played an active role, and many foreign companies have in fact sought to estathemselves in Finland by purchasing local automation suppliers and their process tecogy expertise, particularly in the pulp & paper automation sector. Thus the role of

14

ars to

eneralf endions.vel-ortingcon-

rceduct

Finnish forest industry as pioneers in new process and machinery technologies appegive added value even to the related automation industry.

1.1. Background

Pulp & paper, the basic businesses of the cluster, are today characterised by certain gtrends: increasing the efficiency of the production processes, a broadening range oproducts, more stringent quality criteria, and an emphasis on environmental questAchieving these numerous – and often conflicting – goals calls for comprehensive deopment strategies that take into account the core businesses as well as the suppindustries. Machinery and instrument suppliers, research institutions, and specialisedsultants play a major role in this development (Fig. 1.1).

Fig. 1.1. Main players in the Finnish chemical forest industry.

As the international competition gets tougher, the pulp & paper companies are foto concentrate their R&D efforts on improving the production efficiency and prod

PROCESS MACHINERY COMPANIESDevelopment and manufacturingof processes and processmachineryExamples:- Ahlström- Kwaerner- Rauma/Sunds- Valmet

AUTOMATION COMPANIESDevelopment and manufacturing ofautomation systems, sensors, analysersand actuatorsExamples:- ABB- Fisher-Rosemount- Honeywell- Neles Controls- Valmet Automation

PULP & PAPER COMPANIESDevelopment and manufacturingof pulp and paperExamples:- Enso- Metsä-Serla- UPM-Kymmene

CONSULTANT COMPANIESMarket research, design,engineering and projectmanagementExamples:- CTS- IP-YHTIÖT- PÖYRY

RESEARCH INSTITUTES &UNIVERSITIESResearch and educationExamples:- Research institutes (KCL, VTT)- Universities (Helsinki, JyväskyläLappenranta, Oulu, Tampere, Turku)

SYSTEMS

ACTUATORS

SENSORS & ANALYSERS

PULP and PAPERPROCESSESSPECIFIC

GENERALPURPOSE

CHEMICAL COMPANIESDevelopment, manufacturing and marketingof chemicals and additivesExamples:- EKA Chemicals- Kemira Chemicals- Raisio Chemicals

15

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quality and on widening their product range. As a consequence, machinery supplierincreasingly expected to take over the development of production processes, machand instruments (Alajoutsijärvi 1996). At the same time (1981...1989) when the Rexpenditure of the pulp & paper industry has risen from 0.4% to 0.7% of the producvalue and the total technology input of its production from 6.3% to 11.3%, the sharthe industry’s own R&D input of the total technology content of its products has dropfrom 39% to 28% (Lammi 1994). In other words, the increase in the technology inputhe products comes from intermediate products, machinery and instruments. This chis also reflected by another figure: over the same period the R&D investments ofpaper & pulp machinery suppliers have risen from 1.5% to 4.1% calculated from theduction value.

The increasing responsibility for the development of processes means new challefor the process and machinery industry. The organisations that design the productioncesses must possess very comprehensive theoretical knowledge; machinery and mtechnology is not enough, they must also be familiar with the technological probleoperation, and management of processes. On the other hand, at the same time whprocess machinery must meet ever higher requirements, the companies developinmachinery have been forced to improve their cost efficiency and concentrate on theirexpertise sectors, leaving other sectors – such as automation – to external designersthe overall control and management of the product development process is becomiincreasingly crucial function.

The Finnish process machinery and automation companies are still very much chterised by a traditional emphasis on technological expertise. However, internationalisand stiffening competition in the marketplace have forced them to take a closer lootheir entire innovation process and the relationship between research and product dopment aiming at tangible commercial products. The rapid spread of information techogy and new design tools have brought a change in product design: new and upgproducts become available more quickly and the life cycle of products shortens. Key tnologies, once the factors ensuring competitive advantage, are soon outdated and tutechnologies that are necessary yet available to everyone. Companies are forced totime to seek and adopt new technologies and core expertise sectors, leaving mormore of their former core fields to outside players.

In the classification created by the OECD, the suppliers of pulp & paper procmachinery falls into the "medium–high technology" category, while the electronicsmeasurement instrument suppliers in the "high technology" category (Virtaharjuet al.1993). Technological progress in the electronics industry is far more rapid than in promachinery; but we must also observe that the machinery workshop business – usconsidered rather conventional – is also included in the "medium-high technology" cgory. As the field gets more and more technology intensive and a larger number of tnologies become necessary, there is an increasing need to enter into co-operationspecialised companies.

The focus of development in the core business has shifted, from processes and maery towards products and operating efficiency. At the same time its purchasing behahas changed: instead of machines, the customers now want larger packages andwhose expected performance and total cost, including start-up, are known weadvance. Thus the suppliers must be able to handle increasingly comprehensive and

16

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plete deliveries, and in most cases the main supplier also bears the main responsibithe whole. The delivery must include all components necessary for the operation owhole system, and the system must work as expected. Often, too, the purchaser waparticipate when supporting components are being selected, to make sure that the tcal solutions are compatible with their existing systems and quality criteria. In this sition the process machinery supplier has an increasingly crucial role to play, andincreasingly complex range of special areas to master.

Fig. 1.2. Typical purchasing limits in today's paper mills; the necessary automation is pur-chased separate from the actual process.

The usual present-day practice is to purchase process automation separately froactual process machinery (Fig. 1.2), for example a new paper machine – whetherincluded in the main machinery supplier's financing or not. One reason is that thechases are normally scheduled as separate items: machinery comes first, and automa

COMPONENTLEVEL

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17

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added later on. This no doubt reflects the conventional understanding that process maery and process automation are separate technologies, and automation is consideplay only a supporting role for the performance of the process; it is seen as somewholly apart from the system itself. Often the various parts of process automation –instruments, actuators, automation systems, and special instruments – are even puritem by item. To summarise, the promised process performance figures are understobe one thing, while the improvements in process performance and efficiency that cagained by means of automation are another matter, to be specified and verified separAs the current trend in purchasing is to acquire larger and larger operational units, thechasing behaviour described above will have to change (Fig. 1.3). When the acquisincludes both the process and the necessary automation, the purchaser can make suthe benefits of automation are already included in the performance specifications. In owords, the customer can ascertain well beforehand that the process will indeed meeperformance criteria.

Fig. 1.3. Typical purchasing boundaries when process machinery and automation are pur-chased as integrated units.

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18

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1.2. Special instrument sector

The customers of the pulp & paper industry continually make more and harder demon the paper grades and quality they buy. To meet these demands, the pulp andindustry has to tighten its process management and find new ways to characterisemeasure quality. Measurement and control of the final stages of the processes is no lenough; the whole production process, from raw material to the final product of the chmust be under control. New measurement needs may arise for a variety of reasons: apletely new quality variable must be taken into account; a laboratory measurementbe replaced by a continuous method; or an existing measurement must be applied tocess conditions and actual machinery configurations.

The special instrument sector, as defined in the current study, includes measureinstruments and analysers designed and constructed for use in the pulp & paper ind(Fig. 1.4). The development of this sector has been largely independent of the othermation fields, characterised instead by close links with the pulp & paper industry:operation of special instrument suppliers is very much application-oriented, and thereit has been only natural to form partnerships with the end users. Due to the strucchanges in the pulp & paper industry, and the strengthening trend to purchase entirecesses, the importance of process and process machinery engineering has increasin the research and product development of special instrument manufacturers.

Fig. 1.4. Structure of the automation business, divided into pulp and paper process specific andprocess independent parts.

GENERAL PURPOSE ACTUATORS

SPECIALACTUATORS

GENERAL PURPOSE SENSORS and ANALYSERS

SPECIAL SENSORSand ANALYSERS

FIELDBUS

PROGRAMMABLE LOGIC CONTROL - PLC

DISTRIBUTED CONTROL SYSTEMS - DCS

MACHINE CONTROLAPPLICATIONS

PROCESS CONTROLAPPLICATIONS

INFORMATION and MANAGEMENT SYSTEMS

PLANT MANAGEMENTAPPLICATIONS

PULP and PAPER INDUSTRY OTHER PROCESS INDUSTRIES

19

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The core competencies and key technologies of special instrument manufacturerfer considerably from the automation industry in general, for example distributed consystems suppliers. Special instruments typically integrate several different technoloand the cost of the actual electronics and software development only represent som20% of the total product development expenses, whereas knowledge of measurephysics and an understanding of the process environment and applications are essfactors. More and more application expertise is needed, the instrument suppliersexpected to solve the customers' process management problems, and therefore anstanding of automation systems is becoming increasingly important for special instrumsuppliers.

Stiffening competition and shortening product life cycles mean that the result ofproduct development process must be predicted with considerable accuracy to ensurrect timing when a new product is launched. The development and launching of newcial measurements or control applications are dependent on the economic cycles opulp & paper industry, but also on the development of the process and machinery tecogy. Well-timed research and product development supports the general developmethe field. Too early launching will result in extra expense and often gives imitators unadvantage, perhaps enabling them later on to gain a dominant position with a newernical solution. On the other hand, undue delays – particularly when introducing prodfor new processes – complicate the optimum use of the process and mean a loss of mfor their users.

1.3. Research problem

This study explores how research and development in process machinery companiebe harnessed to produce integrated process concepts where the necessary processment, including instrumentation and automation systems, are embedded in the prmachinery. The research focuses on the Finnish industry developing and manufactprocesses and process machinery for the pulp & paper industry.

Improving process performance and control by means of automation is the focucontinuous development work. In practice this means step-by-step development: thecess and process machinery are first improved, and the necessary instrumentatioautomation are dealt with after that. Moreover, the development of measurement tecogy and automation systems also takes place separately of the development of proand process machinery.

Much interest is attached to the development of this sectors in such a way as to athe utilisation of measurement and control technology with maximum efficiency, payattention to the opportunities and requirements of automation already when designinprocesses and process machinery (Ryan 1998). However, the automation sectolargely focused on the integration of various mill-scale information systems in the pcesses (Gingerich 1996). In practice, however, this integration has made veryprogress in the pulp and paper industry, and the process automation mostly has to adexisting process and instrumentation solutions. This also means that many potentialfits remain out of reach. As turnkey deliveries become more widespread also the ne

20

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integrate process machinery and automation at the product development stage is ining (Myers 1995).

The development of integrated industrial process concepts with product develophas been very little studied, and as yet no operational model exists for the integratioautomatic control (involving measurement and control technology) in the processes.in Finland and abroad, research has concentrated on the actual product developmencess and on the factors contributing to the success of new products. Rouhiainen (1has studied the new product development process in the metal industry, and theconcentrates on formulating an operational model for the new product development.vik (1977) has studied the factors contributing to the success of new products. andstudy of Heinonen (1994) concentrates on product development systems, particularutilisation of the QFD (Quality Function Deployment) model. The study of Lehtimä(1991) focused on the use of different product development models in small and medsized companies in the Finnish electronics and metals industries.

Abroad, the factors influencing the efficiency of product development systems andsuccess factors of new products have been the topic of some research, for examCooper (1993), Pintoet al. (1989), and Clarket al. (1991). Norell’s research (1996) con-centrated on the product development process and on the design and information mament tools used, particularly their effect on the efforts to improve the effectivenesproduct development.

Rajala (1997) has also studied the marketing of automation companies, but thisdoes not really deal with the development of integrated products. Piipponen (19focused on the utilisation of information technology in the Finnish forestry cluster,again the research does not pay attention to the integration of information technologthe development of integrated products.

In this study the research problem is considered against the background of the prmachinery companies' technology strategies and product development process mament. Technology management as part of the business strategy is an increasingly imtant success factor, and the competitiveness of products is dependent on both the cotive advantage achieved through technology and on the efficiency of the product devment process.

Finnish companies typically emphasise technology as a means of competition. Tha particularly strong feature in the engineering industry, which additionally focusesrather narrow fields of technology. This approach ensures short-term technological adtage and competitiveness; but the technology development curves tend to smooteventually leading to less added value to the customer, and the companies are thento compete more aggressively with prices. In order to find new added value through tnologies, the companies must learn new competencies, gain access to new technofor example by forming partnerships, and also be able to combine technologies in away.

In the forest industry cluster, the engineering and automation companies each spise in their own fields: on one hand there is process machinery, on the other the inments and automation. Co-operation between machinery suppliers and instrumenautomation companies is mainly seen in marketing, sales and delivery projects, whautomation suppliers cooperage with pulp & paper makers during various developmprojects, either new deliveries or optimising existing processes.

21

es toocess

ilityumed

alsolve a

ojectdur-

essliesl that

Fig. 1.5. Research and development connections in the value chains of pulp & paper mills, ma-chinery manufacturers and special instrument manufacturers; applied from Porter's (1985)value chain graph.

The change in the purchasing behaviour of the core business – from single devicentire processes or units – also reflects a change in its focus, leading away from prmachinery development. This trend puts much weight on the machinery supplier's abto deliver and guarantee the operation of much larger units. It can therefore be assthat in the future, competitive process machinery means an integrated package whichintegrates process management and control features. This would also seem to invomajor change in design: instead of putting the package together at the delivery prstage, the different features and functions must already be integrated into one wholeing research and development.

The goal of this work is to increase our understanding of the ways in which the procmachinery industry carries out its research and development activities, how it appmeasurement and control technics in it’s products and to create an operating modewill enhance and promote the design of integrated process concepts.

22

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In order to solve the research problem, empirical data was collected by studyingprocess machinery companies' technology and competitive strategies, product devment processes and organisation, and the companies' efforts to form networks to eand deepen their expertise. The goal was to answer the following questions from thecess machinery companies’ point of view:1. What does technology mean for the competitiveness of new industrial process

machinery products, and how does the company strategy address this aspect?2. What is the organisation of the actual research & development activity, and what is

relative importance of the various fields of expertise in process machinery devement?

3. How do industrial process and machinery product strategies and R&D projectswith automation?

4. How does the process machinery company use external resources and experintroduce new or compensate for lacking or insufficient capabilities?

5. How are the end customers' needs considered, and what is the role of customer coin R&D activity?

1.4. Research strategy

The research problem was studied by charting the views of the industry concerningfuture competitiveness of its products and its ability to use R&D to produce processesmachinery that would meet the changing needs of the customers. Applying the proproposed by Eisenhardt (1989) and an inductive research approach, existing theorthe empirical material collected from the case study were then used to design an improperating model for the production of optimised process concepts.

The purpose of the theoretical section was, first and foremost, to form the frame oreference, the overall idea of the problems associated with product development aselect the appropriate research objects and methods based on earlier research anvant publications. The literature was studied to acquire the pre-understanding necefor the empirical study. The literature study deals with features typical of new proddevelopment: product life cycle, strategies, technology management, the importancustomer orientation, and the methods, process, and risks of product developmentsection also defines the special instruments business, its markets and special feature

A preliminary construction was then drafted, based on the theoretical research anresearcher's own experience. The decision was made to apply the case study methoalso the object of research was defined.

In the empirical part of the work, several people were first interviewed in order to ga more detailed understanding of the research problem, and also to put the pre-folated ideas to the first, tentative test. The validity and reliability of the selected metwas then verified by discussing with the interviewees the conclusions that had bdrawn from the first two cases. Moreover, the material collected in the interviews waslised to design the written survey, and to choose its addressees. After these steps thstruction was tested in a larger sample by means of the written survey.

In the final stage, the material collected with the interviews and the written surwere combined. The resulting body of material then served as the background ag

23

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aimstionsineer-

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the986)

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989)

nder-sesature.es ofdary

Oneilis-pli-

s thatthisunitsating

tru-ate apro-

which the research problem was studied, and it also shed light on the problems and pbilities associated with the current operating model and the proposed new model.work resulted in the final operating model that the research proposes for the solutiothe research problem. The purpose of the model is to evaluate the efficiency of the Rprocess and organisation in the realisation of integrated process concepts.

1.5. Research approach

A constructive research approach was selected for the work. This research approachat solving problems of real-life business management by testing the possible soluduring the research process. In this way the research directly supports practical enging work (Kasanenet al. 1991 and Lukkaet al. 1998). A solution for the studied problemis first constructed, based on existing business knowledge and empirical material colleduring the research. The construction developed is then put to test in practice. The emcal material collected is mostly qualitative and it is applied descriptively. Accordingly,theoretical and empirical material were applied to create an AHP model (Saaty 1which was subsequently used to evaluate the ability of the case companies to producegrated process concepts.

The multiple case study approach was chosen because the operating models andisations of product development vary considerably in different companies and units mufacturing process machinery. Lee (1989) argues that a single case study, whenquately performed, meets the requirements of the scientific method. Eisenhardth (1has stated that 4…10 cases are enough for reliable results.

According to Gummesson (1991), case study research is a suitable means to ustand complex phenomena. Casselet al. (1994) states that case study research increaan understanding of the process, while Hartley (1994) emphasises its tailor-made nYin (1987) has stated that a case study makes possible the use of different sourcinformation and the observation of phenomena in a real-life environment. The bounbetween a phenomenon being studied and its operating environment is often vague.of the benefits of the case study method is its ability to yield new solution methods uting the interactive approach, while its drawback is that it easily leads to either too comcated or too narrow solutions (Eisenhardt 1989).

1.6. Scope of research

The scope of the research was defined as including Finnish engineering companiedevelop and manufacture process machinery for the pulp and paper industry. Withingroup, companies with sufficient resources to supply entire processes and productionare rather well represented, and it covers most of the major Finnish corporations operon the international market.

Within the automation sector, our focus is further narrowed to measurement insments and analysers specific to the pulp & paper industry. These products incorporwealth of process expertise and knowledge of the role the measured variables play in

24

asure-turerocessrocessmpre-

andpter

oper-will

takingeeds,

jects.

cess operation and on their uses for process control. Hence, the application of a mement is a natural and crucial link that brings together the special instrument manufacand process engineering industries (Sopenlehto-Pehkonen 1996). More general prautomation and common process measurements are essential parts of the total pmanagement, and they are therefore included in the research in order to obtain a cohensive views of the situation.

1.7. Structure of the thesis

The structure of the case study is presented in Fig. 1.6.

Fig. 1.6. Structure of the thesis.

Chapter 1 gives an introduction to the field of research, defines the problem,describes how the current work relates to presently available information. This chaalso drafts the selected research method.

Chapter 2 concentrates on the special measurements business and its links to theating environment. Factors affecting competitive strategies and technology strategiesbe discussed together with the product development environment and the changesplace in it. This chapter also describes the special instrument markets and customer nand takes a look at the role of automation and special instruments in investment pro

Researcher’sown experience

Case studystructure

Preliminaryconstruction

Relatedtheories

Problemdefinition

Empirical casestudy results

Finalconstruction

Analysis of casestudy results

Conclusions andrecommendations

Chapter 1

Chapter 2&3

Chapter 4

Chapter 5

Chapter 6

Chapter 7

25

pur-

influ-giesdetail

, tar-

ly. Thetoma-strat-lop-.odelthents.

of the

Customer needs are studied by defining the factors that influence the customers’chase decisions.

Chapter 3 discusses the theoretical background. Product life cycles, and factorsencing them, are first described. After this the innovation process, technology strateand product development strategies, and customer orientation are discussed in moreby means of a literature study.

Chapter 4 deals with the structure and implementation of the case study: its scopegets, and the research method.

Chapter 5 represents and discusses the results of the case study more extensivepractical approach and attitudes of the process and machinery industry towards aution and special instruments are first described, with special reference to companyegy and its potential effects. The importance of different technologies in product devement, and the role of research and development networking, are also discussed here

Chapter 6 includes the analysis of the results and the construction of the AHP-mbased on the results obtained and existing theories. The pre-formulated model isapplied to test the ability of the case companies to develop integrated process concep

Chapter 7 contains the conclusions and recommendations based on the resultsresearch.

ener-Asmes alica-n to

isctur-ableector

2. Special instrument sector

This chapter describes the special instrument sector and its typical characteristics. Gally speaking, every new application of some technology is at first a "special field".time passes and the technology spreads, its application threshold lowers and it becocommonly used technology. Usually special instruments are among the very first apptions of new technologies, due to the narrowness of the sector, its strong orientatioproblem solving, and the price/cost structure: the price of solving a specific problemdictated by the benefit given by the technical solution, rather than the actual manufaing cost of the device. The physical products of this sector typically involve a consideramount of service. By applying the service package model of Gröönroos (1990) the scould be illustrated as in Fig. 2.1.

Fig. 2.1. In addition to the core products, the special instrument business includes various facil-itating and supporting services and goods.

COREBUSINESS

Transmitters, Analyzersand Measurement

Systemsfor Pulp and Paper

Industry SupportingServices and

Goods

Control EngineeringInstallation and Start-up

Process StudiesTraining

FacilitatingServices and Goods

DistributionInstructionsSpare parts

27

cialed for a

ajormentor afibreclas-

alcu-inga titra-pro-ment

devel-pecial

pro-asure-themea-ents,

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2.1. Special instrument – definition

There is no single, unequivocal definition for special instruments. In this work, speinstruments are defined as measurement devices or analysers that have been designcertain measurement application and cannot be used for other applications without mchanges in the measurement principle or device construction. A measurement instrumay become a special instrument for example when it is installed in a specific way fcertain process application, or when it measures a specific variable, such as woodproperties. A commonly used measurement of a certain process variable can also besified as a special instrument if the physical variables it measures can be applied to clate the value of a specific process variable, or if its installation and samplarrangements have been designed for a certain process or variable. As an example,tor is a commonly used measurement device which can be applied in many differentcesses and for many process variables. But when a titrator is applied in a measuresystem which incorporates sampling and sample handling procedures and has beenoped for a certain process and variables, the resulting system can be considered a sinstrument.

2.2. Product categories of special instruments

In most cases the application of a special instrument imposes very strict limits on thecess point in which the physical measurement must be made. Consequently, the mement must be implemented within the limits of existing process machinery, whileinstallation point and physical state of the measured substance largely determine thesurement method. At the same time the method must meet another set of requiremdependent on how frequently the variable must be measured and how the obtainedwill be used. The different ways of implementing a special instrument and its interfacould be illustrated as follows:

Fig. 2.2. Types of special instruments.

PROCESSCONNECTION

PHYSICALMEASUREMENT

RESULTCALCULATION

RESULTSPRESENTATION

PHYSICALMEASUREMENT

SAMPLETRANSPORT

SAMPLEHANDLING

PROCESS

PROCESSCONNECTION

RESULTSPRESENTATION

RESULTCALCULATION

SAMPLEHANDLING

PHYSICALMEASUREMENT

RESULTCALCULATION

RESULTSPRESENTATION

On-line/in-line

At-line Off-line

28

-linenec-

mea-talledouslyalcu-

ctedsiblyon-s arelong

Special instrument types include on-line, at-line, and off-line measurements. Ondevices are in continuous physical contact with the process through some kind of contion, and they also give a continuous measurement signal. One example of on-linesurements is the brightness sensor presented in Fig. 2.3. This instrument is insdirectly at the measured process point by means of a T-piece; the sensor continutransmits light on the process being measured, measures the reflected light, and clates and reports the result without interruptions.

Fig. 2.3. Principle of continuous pulp brightness measurement (Valmet 1997, p.1.1).

At-line devices are not in immediate contact with the process. Samples are extrafrom the process, transported automatically to the measuring instrument, and posalso pre-treated in some way prior to measurement. A typical example is pulp lignin ctent (Kappa number) measurement from pulp samples illustrated in Fig. 2.4. Sampletaken from the process with a separate sampling device, transported with water ahoses to the analyser, and then prepared and analysed there.

UserInterface

29

.

nuallymen-ually,t.

Fig. 2.4. Pulp Kappa number measurement based on automatic sampling (Valmet 1995, p. 1.1)

For off-line measurement the measured substance must either be transported mato the device, or sample preparation involves manual stages. Fig. 2.5 shows fibre dision measurement, a typical off-line instrument. The measured sample is taken mantransported to the measurement device, and placed there for automatic measuremen

Fig. 2.5. Fibre dimension measurement based on manual sampling (Valmet 1998, p. 2.1).

30

pecificvolve

thes sta-wingnstru-nnot

, pres-sure-t mayrol –

ow-m are.ts, forskillthen

errorriable

2.3. Interface between special instruments and environment

In the case of measurement instruments developed and used to measure certain sprocess variables, the measurement, its interpretation and application frequently inhighly specialised knowledge illustrated in Fig. 2.6. This knowledge may be related tomeasurement method, to the application of the measured variable to illustrate procestus, or to the application of the measurement for process control. In many cases, knoexactly where and when to measure requires expertise related to a certain special iment and its use. Often, moreover, the information provided by the measurement cabe interpreted in the same way as the more common process variables (temperaturesure, flow), and understanding its significance requires a deeper knowledge of meament physics, process chemistry, and process physics. In addition, the measuremenbe associated with the control of a variable, with a specific process or process contknowledge that can only be acquired by experience and by using the measurement.

Fig. 2.6. Know-how linked with special instruments.

How well a measurement is understood and how widely the related application knhow has spread, are factors dependent on how new the measurement and probleWhen a measurement replaces an existing manual method and an application exisexample for quality control, its future users already possess the knowledge andneeded to put this measurement to use; the manufacturer's special know-how isrelated to the measuring point, the behaviour of the measurement, and potentialsources. On the other hand, we may be dealing with a completely new process va

General process andmachinery knowledge

Process control knowledge

Measurementphysics and

signalhandling

Physical installation

Process variableseffecting themeasurement

Application related processand machinery knowledge

31

ocessse ifst be

fea-y. Theftenalin theliable: fortank

oducties, as

entased

for which there has been no measurement or control available. In this case also prtechnical and control expertise is needed, and it may be vital to acquire this expertithe instrument is to be of any commercial use. In such cases the measurement mulaunched at the same time with its applications and benefits.

In view of the current research problem, a special instrument involves numeroustures that should already be considered when designing processes and machinerdetails of installation – both the measuring point and physical installation – are ohighly critical factors for reliability or proper timing, for example due to the chemicnature of the process. More often than not, a variable measured too early or too lateprocess does not give the best result for process control purposes. In addition, a reand well-timed measurement might even influence the construction of a processinstance, if correct and dependable consistency data is available, multi-stage dilutionconfigurations may become unnecessary.

2.4. Development environment of special instruments

In the author’s opinion, a special instruments company that chooses to pursue a prdevelopment strategy must master a considerably higher number of base technologwell as key and pacing technologies, than a company following a market developmstrategy. This can be illustrated by the development environment of an instrument bon optical measurement principle:

Fig. 2.7. Development environment of an optical measurement instrument.

MEASUREMENTPHYSICS

GEOMETRICALOPTICS

OPTO-ELECTRONICS

ELECTRONICS

SOFTWARE

MECHANICALDESIGN andMATERIALS

MANUFACTURINGTECHNOLOGY

INDUSTRIALDESIGN

PRODUCT DEVELOPMENT- Resource management- Skills, tools- Networking- Life Cycle Management- Customer needs, Marketing- Competition- Cost Management- Risk Management

32

pro-asureonicsmenamate-

pos-t bemble.ng)fac-fac-om-timevice-20

adepati-ires

omered inplat-

In addition to actually designing a commercial product, the product developmentcess must be able to apply geometrical optics and opto-electronic components to mea certain optical phenomenon, and to integrate these with analogue and digital electrto data processing hardware and measurement software which relates optical phenoto the actual desired process parameter. The mechanical structures, components andrials of the designed product must survive the operating environment, and it must besible to service and maintain the product throughout its lifetime. The product mussuitable for automatic manufacturing, and it must be easy and quick to test and asseDepending on the product, the manufacturing throughput time (including final testivaries from a few hours to 3–4 weeks. Moreover, the product will probably be manutured in quantities ranging from 5–10 units/year up to 1000 units/year, and the manuturer’s service responsibility is generally 8–10 years from delivery, and therefore the cponents and other technical solutions must be chosen accordingly. When therequired to develop the product, its active time on the markets, and the follow-up serresponsibility are all counted together, the total lifetime of the technical solutions is 15years as illustrated in Fig. 2.8.

Fig. 2.8. Product lifetime (development, marketing, manufacturing, service) is about 15–20years.

Managing the situation is further complicated by incremental product changes mwhen the product is in the market phase. All changes and new features must be comble with existing technical solutions, and the rapid development of components requmodular product design in order to manage component-level changes. As the custprice of the products is between 4,000 and 500,000 USD, the technical solutions usthe design must also follow the same price scale. This means that several alternativeforms must be available, for example in electronics design, as illustrated in Fig. 2.9.

Development

Manufacturing

Service

2 6 10

Research

33

toes. Ifhouthighues,the

tion isnicsment.anu-

toarket

om-typet ser-chni-

xity,nt isarea

t, andarch

Fig. 2.9. Typical hardware platforms of special instruments and their price levels.

In the lower end of the platform, fully tailor-made electronics are usually very easyservice: no repairs are made, the defective boards are simply replaced with new onthe device interfaces are correctly specified, the technology can be serviced witadverse effects on the existing installation base. The situation is often similar in theend of the platforms: most of the electronics is based on generally available techniqand it can be replaced very flexibly. Also in this case it is important to make sure thatinterfaces to other electronic components meet the approved standards. The situathe most difficult in the integrated, medium-price systems: usually their entire electromust be constructed to meet the demands of the application and operating environStandard components are a potential risk factor, as the availability of commercially mfactured boards and their compatibility throughout the product lifetime is very hardensure or manage, and also the standards and accepted suppliers vary in different mareas; a typical example is PLC (programmable logic control) for which numerous cmercial technical solutions exist. If these technical solutions are used in analyser-instruments, the customers’ own standards must be taken into account, and producvice and maintenance is complicated by the necessity to provide several different tecal solutions.

Another, increasingly crucial factor to be considered is software: its size, compleand the number of features are steadily growing, and choice of software environmecritical for both development and maintenance. It can be said that software is thewhere products and their features are changing the most rapidly.

2.5. Product development project

Product development projects can be divided into research, technology developmencommercial product projects. In research projects the goal is to co-operate with rese

CPU-level

User Interface

100-200 USD>1000 pcs

Tailor made

500-1000 USD100-500 pcs

Modular

>2000 USD< 50 pcs

Commercial

34

rs toch ther, as

pro-ion inere

s aimshodscts as

-ori-

-

t ofr newthusmar-ud-

rn:oductfor-es fol-ctur-

institutes and universities to study new measurement methods, with end customeinvestigate new measurement and process control applications. In application researco-operating partner is the pulp or paper mill, instead of a process machinery supplieapplication development typically concentrates on getting the most out of existingcesses, rather than designing new process or instrumentation solutions. Co-operatthis field would, of course, be more efficient if also process machinery developers winvolved. In the case of special measurements, research into measuring technologieat either improving some existing methods or developing new ones. Finding new metopens new measurement and control applications and thereby generates new produillustrated in Fig. 2.10. Research into measurement technology is highly applicationented and the goal is to find a potential application already at the research phase.

Fig. 2.10. Development of measurement methods, technology and applications in the special instrument business.

Technology development projects typically concentrate on further developmenpresent-day key technologies and on the development of technologies needed fomeasurement applications. Their purpose is to lower the level of uncertainty andpave the way for actual commercial product projects where the goal is to produce aketable product for a certain application or applications within a tight schedule and bget.

A typical commercial product project, illustrated in Fig. 2.11, follows a certain pattea product idea is processed and results in a project proposal and project plan; prdesign and integration testing is followed by field tests that study the product permance; and when the final product changes are ready, the project ends. These staglow the concurrent principle and ensure from the very outset that marketing, manufa

Measurementmethodresearch Present products

Present applications

New products

New applicationsNewmeasurementmethods

Improved presentmethods

New applications

Improved presentapplications

Applicationresearch

Technologydevelopment

35

lvedppli-

ust bethe

ingble atmayappli-

tors,iffi-signspeci-

nt ofin a

mentan 5

ing, product development, application development, and customer service are all invothroughout the project. Because the result, the product, is being designed for certain acations, its operation in these applications, and hence its customer acceptance, mascertained at the earliest possible stage. Creating a true-to-life mill environment inlaboratory is difficult, so the product must be tested in real mill surroundings, beginnwith integration tests. Successful testing also requires that process expertise is availathis point. And, when new applications are in question, the original customer needseven change during the development process as the customer learns more about thecation.

Fig. 2.11. Typical sequence of activities in special instrument product development.

Since the operation of a measurement is dependent on a host of interfering facdefining realistic but sufficient requirements for new measurement instruments is a dcult task. The requirements and specifications should in fact be known during the deof the process and process machinery to make sure that the measurements meet thefications set for process control.

The developers of new measurements should become involved in the developmenew processes as early as possible. When an existing key technology will be appliednew way, the typical development time is 1–3 years; and when developing a measurefor a wholly new process variable, the time needed very easily doubles to more thyears.

Product ideaProject proposal

Project evaluation and termination

Prestudy and specificationsProject plan

System specifications and designDetailed design

Integration testingManufacturing and 0-series

Capability and acceptance testingFinal design changes

36

ineryuto-

ntro-ownvest-uto-hisat far

ity ofstate

tion toeing

o pro-ureodelsse ares.dia-

n inlogy

ing thectual

g way

2.6. Development visions

The special instruments industry is influenced by developments in process and machtechnology, by changes in mill operating strategies and running methods, by overall amation development, and by the legislation and regulations imposed by society. The iduction of new technical solutions in process and machinery technologies is slowed dby the heavy investments and long payback time of new structures, and also by the inments of suppliers in production technology. At the same time, investments in new amation are relatively far smaller and this field is, moreover, rapidly developing. Tmeans that production capacity and efficiency of existing processes can be improvedlower cost by means of automation than by investing in new process machinery.

2.6.1. Development of instrument and analyser technology

The goal in process management and control is to achieve high accuracy and reliabilthe control actions taken. Process management can be divided into two areas: staticmanagement, and dynamic state control. Static state management takes control acoptimise process status in terms of either quality or cost; in most cases, quality is boptimised within certain cost limits. Static state management needs measurements tvide reliable and accurate information of a quality variable, to control it, and to measdisturbances. The current trend in process control is to replace controls based on mand indirect measurements by controls that use direct measurement information. Thefar easier to handle when disturbances occur, in contrast to systems based on model

The development of process measurement can be described with the followinggram:

Fig. 2.12. The development of process measurements.

Analogue technology is rapidly being replaced by digital signal processing, eveconventional transmitters such as temperature, pressure, or flow rate. Digital technohas already dominated special instruments for the past 15–20 years, the reasons beneed for include calculations and for using several measured variables to obtain the ameasurement result. Another change is that single-variable measurements are givin

LABORATORYANALYSES

INDIRECTMEASUREMENTS

ANALOGUESIGNALS

SINGLE VARIABLEMEASUREMENTS

AUTOMATICMEASUREMENTS

DIRECTMEASUREMENTS

DIGITALSIGNALS

MULTIVARIABLEMEASUREMENTS

37

asure-talla-rtantd of

rectly

ea-rectlylatingice inigned

en anexam-to a

f pulp

ears,Con-Evenhys-ntra-usera-

y areded

oper-

to multivariable measurements, and thus several variables needed to support a mement – e.g. temperature – are now available from a single device. This reduces instion costs and simplifies instrument service. Yet another trend is to measure impovariables as directly as possible, such as measuring the liquid level directly insteapressure. However, in many cases the actual physical, measured variable is only indilinked with the process variable that is needed.

As the demands for process control are steadily growing, we must all the time msure new controlled variables, variables that often cannot be measured simply and dibut instead by means of sampling and sample processing. In other words, a corremethod or laboratory analysis procedure must be automated. This is common practanalytical measurements, and the same trend is repeated: an analysis originally desfor research purposes first becomes part of laboratory routines for process control, thautomated process measurement as illustrated in Fig. 2.13. Sometimes chance, forple a technological breakthrough, makes it possible to convert an analysis directly incontinuous, transmitter-type measurement. An example of this is the measurement oimpurities based on imaging technology.

Fig. 2.13. The development of process analysis methods.

2.6.2. Development of automation technology

Automation technology has gone over from analogue to digital systems in about 10 ybetween 1975 and 1985. These digital systems are usually referred to as Distributedtrol Systems, DCS, a name that does not, however, describe them well enough.though most of the present-day systems allow automation functions to be distributed pically close to the process, they are in the vast majority of cases used in a highly celised fashion, with all process signals cabled to only one or very few points; only theiris distributed, and they allow much flexibility of maintenance, reporting and actual opetion. The nature of these systems is also changing: from mere control systems, theturning into overall information systems that contain far more information than is neefor process control alone. One and the same system typically houses data on process

CONTINUOUSMEASUREMENTS(on-line)

LABORATORYANALYSES(Research)

PROCESSANALYSES(off-line)

AUTOMATICPROCESSANALYSES(at-line)

38

ied toontrols are

ation

nstru-fullylowly

es:e willmustced.t-day

sure-inte-

n theuti-

alsomentste-

ation and product quality. As a consequence, different analysis methods can be applstudy process performance, and also various on-line operation and maintenance cfunctions are being integrated in the systems. Supplier-dependent special systembeing abandoned in favour of new, general system platforms brought about by informtechnology.

The biggest change facing the suppliers of automation systems, measurement iments and process machinery, is the digital fieldbus illustrated in Fig. 2.14. Somedigital buses are in use already at the moment, but they have been diffused very swithin the industry because there is no common, generally accepted standard.

Fig. 2.14. Instrumentation fieldbus (Fieldbus Foundation 1996, p. 2).

The digital fieldbus will have a major impact on the business of all parties involvless electronics is needed to interface automation systems with the process; softwarbe largely standardised; less project engineering will be required as all instrumentsmeet the fieldbus standards and specifications; and also cabling work will be reduThe fieldbus is estimated to produce savings of about 40% compared to the presensituation (Rathje 1994).

The development of automation systems and the fieldbus have their effect on meament instruments. The user interfaces of special instruments and analysers could begrated in increasingly open automation systems, and with digital data communicatiovast amounts of important information that these devices contain can be effectivelylised in operation monitoring and maintenance. Fieldbus-type technical solutionsopen an opportunity for process machinery suppliers to integrate the basic measureand controls in intelligent field instrumentation and thus, for their own part, to create ingrated concepts independent of the actual automation systems.

Controller Controller

Input/outputSubsystem

Fiedbus

Traditional 4-20 mAOne VariableOne Direction

FieldbusMultiple VariableBoth Directions

Control SytemNetwork

Control SytemNetwork

39

essrkets.mentso thestries.stru-ty ofxper-or allto be

icalpan,effortturehowsen toboth

er-dingports

paci-aperreas

ed.

2.7. Markets

The application field of special instruments is very narrow and involves a lot of proctechnology expertise, and it is therefore necessary to take a closer look at their maBecause of the process and application orientation, the customers of special instrusuppliers and process machinery suppliers are largely one and the same group, andsame process development trends and customer needs guide both of these induAnother aspect where special instruments differ from the more general-purpose inmentation is that their marketing, sales, and technical customer service involve plenapplication-specific knowledge and measurement, process, and control technology etise, and direct consultation and guidance of the customers are important elements. Fof these reasons the marketing organisations of special instrument suppliers tendloaded with technical experts.

Special instrument markets follow the global distribution and capacity of the chemforest industry. This industry is concentrated in North America, Europe and Jaalthough many South American and south-east Asian countries have also put muchto developing their forest industries in the wake of the economic upswing. In the futhe biggest increase in capacity is predicted in Asia where paper consumption also sthe strongest rise. In the past few years the Finnish forest industry cluster has strivestablish closer ties to major paper consumers in Europe and to gain a foothold inNorth America and Asia.

2.7.1. Global paper machine capacity

The global distribution of paper production capacity is concentrated so that North Amica and the Nordic countries are net exporters, while Central Europe and Asia (excluJapan) are net importers. Despite the increase in local production capacity, the net imof Asian countries are also expected to continue their growth. Machine widths and caties are very different in the different regions, as illustrated in Fig. 2.15. The average pmachine size is the largest in the Nordic countries, North America, and Oceania, wheparticularly in China and Central Europe the machines are very small and old-fashion

Fig. 2.15. Machines and capacities by regions (Jaakko Pöyry Consulting 1996).

01020

304050

607080

90100

Nor

dic

C+

SE

ur

E.E

ur

N.A

me

S.A

me

Japa

n

SE

Asi

a

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na

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ania

ME

ast

Afr

ica

Ave

rage

Cap

acity

0

20

40

60

80

100

120

Ann

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apac

ity10

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ear

0500

1000

150020002500

300035004000

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Num

ber

ofP

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40

factuction

ber3m)cturecess

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e invest-

ems, and

theira spe-

od0%

evel-tion

near, asgrow

992hemachhite

rlyin

ries,rathercom-

batchline

tial

New investments mean larger production plants, and this is well illustrated by thethat new paper machines today are nearly identical as regards the average prodcapacity, regardless of their geographical location.

Machines under 3m wide are the most numerous (about 62%), while the total numof machines over 3m wide is 3184. However, despite their number the narrower (<PMs represent a far smaller market potential for special instruments, as the cost struof a special instrument usually is not dependent on the production capacity of the prowhere it is used. In paper machine rebuilds (200 in 1995) the proportion of under-3mhas dropped below 25%.

When calculated according to the number of >3m paper machines, the total mapotential of special measurements is around 4.0 billion USD. Some 25% of thesemachines over 5m in width, representing about 1.0 billion USD. Thus the increasmachine widths also increases the markets of special instruments, and also the inment cost per paper ton produced is then smaller. In addition, the closing of mill systand cutting water consumption complicates the management of water circulationsthus these developments further increase the demand for special instruments andmarket potential. We can estimate that the management of water circulations meanscial instrument investment of about 0.5 million USD per paper machine.

2.7.2. Global wood pulp capacity

In 1994 the world pulp production of paper making fibres was 260 million tons. Wobased fibres make up 95% of the total volume, virgin fibre 65%, and recycled pulp 3(Jaakko Pöyry Consulting 1996).

Recycling is supported by environmental concerns, the emphasis on sustainable dopment, and local legislation (USA, Germany). These trends also influence the locaof production capacity: for reasons of logistics, plants using recycled pulp tend to belarge consumption centres. The use of recycled pulp in printing and writing paperswell as tissues is increasing, and its share of the total fibre demand is expected tofrom the present 30% to over 40% by 2005.

About 65% of all chemical pulp is bleached (Jaakko Pöyry Consulting 1992). In 1there were about 400 plants world-wide producing bleached chemical pulp, 319 of tkraft pulp mills as illustrated in Fig. 2.16. These mills have altogether some 500 blelines. The size distribution of bleached pulp producers reflects the small size of sulppulp mills.

Kraft pulping is steadily gaining ground in chemical pulp production, and today neaall new pulp mills use this pulping method. Some 40% of all pulp mills are locatedNorth America, and other significant chemical pulp producers are the Nordic countJapan, and South America. The mills in Eastern Europe are old-fashioned and havelow production capacity, and the same applies to China; thus these mills cannot bepared to North American or Scandinavian mills.

When we assume that there are globally about 440 continuous digesters, 280digesters and 500 bleach lines (Jaakko Pöyry Consulting 1992), we get a total fibremarket of about 1.0 billion USD. The recovery plants of kraft mills represent a poten

41

imeout

P/arket

mall. The

thears,pe,ulp

sternt canent aecia-

entsduallyillexpe-tru-

of another 0.5 billion USD (520 causticizing plants, 815 recovery boilers, and 500 lcirculations). Thus the total market potential of special instruments in pulp mills is ab1.5 billion USD.

Fig. 2.16. Number of digester lines (Jaakko Pöyry Consulting 1994), and mill capacity structureof kraft and sulphite bleached mills (Jaakko Pöyry Consulting 1992).

The number of mechanical pulp mills is about 600 world-wide, of which 350 are TMCTMP plants and 250 are ground wood plants (Fadum 1992). These represent a mpotential of some 0.2 billion USD.

The number of recycled pulp mills is about 1500, but most of these are rather sand therefore cannot be considered very potential markets for special instrumentstotal market potential in recycled pulp mills is about 100 million USD.

From these figures we get a total market potential of around 6.3 billion USD forspecial instruments of the pulp & paper industry. Assuming a market cycle of 10 yethe annual market potential is about 630 million USD, of which one third is in Euroone third in North America and one third in other areas. For example, in 1987 the pand paper industry represented about 5% of the total automation markets in WeEurope, and all measurements made up 38% of this (Control Engineering 1990). Itherefore be stated that the special instruments of the pulp & paper industry represvery narrow market segment, and even within this segment the markets are highly splised according to products.

The degree of mill automation is steadily rising and manual testing and measuremare being automated, and consequently also the share of special instruments is graincreasing. Moreover, environmental regulations limiting emissions from mills wincrease the need for continuous and special instruments. According to the author'srience, the following environmental factors contribute to the demand for special insments:1. Demands of environmental protection groups2. Growth of recycling3. Higher degree of automation4. Larger mills

Nor

dic

C+S

Eur

Eas

tEur

N.A

mer

.

S.A

mer

Japa

n

S-E

Asi

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Chi

na

Oce

ania

M.E

ast

Afr

ica0

20406080

100120140160180

Nor

dic

C+S

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tEur

N.A

mer

.

S.A

mer

Japa

n

S-E

Asi

a

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na

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ania

M.E

ast

Afr

ica

Continuous Batch

Numberof mills

<100 101-200

201-300

301-400

401-500

>5010

20

40

60

80

100

<100 101-200

201-300

301-400

401-500

>501

Kraft Sulphite

1000 t/day

Numberof mills

42

sec-ufac-sis.

omare

uresdess; ear-

Oy,

5. Higher machine speeds6. Larger product ranges7. General rise of quality awareness

2.8. Machinery industry of the finnish forestry cluster as a specialinstrument customer

In Finland, too, the process machinery industry is heavily concentrated, and today thistor is covered by four large companies that have both product development and manturing in Finland. All of these are international companies operating on a global baTheir competitive situation can be illustrated with the graph in Fig. 2.17, modified frLammi (1994): Valmet concentrates on paper mill machinery, Rauma and Ahlströmmainly active in pulping machinery, and Finland’s Kvaerner develops and manufactlime kilns and recovery boilers. Today, Valmet is the only one of these that also incluprocess control and automation industry in both systems and measurements/analyselier the Ahlström corporation owned the automation system company Altim Controlbut this business was purchased by Honeywell in 1994.

Fig. 2.17. Competition between major Finnish producers of forest industry machinery.

Wood handlingmachinery

Grindingmachinery

Refiners

Stock preparationmachinery

Paper machinery

Pumps

Valves

Paper

Wood handlingmachinery

Digesters

Pulp bleachingmachinery

Chemicalrecovery

Drying machines

Pumps

Valves

Pulp

AHLSTROM

KWAERNER

RAUMA

VALMET

Wood raw material

43

spe-sup-

very.ecial

Thes:

perless

ulp

Machinery suppliers are potential customers for special instrument suppliers, ecially when green field mills are concerned, as in these cases the principal machineryplier usually packages the most important special measurements in their own deliOften, however, this procedure is initiated by the end customer's demand that spinstruments should be included in the process instrumentation delivery.

2.9. Cost effect of automation and special instruments in pulp andpaper mill investment

Special instruments make up a very small part of the total pulp or paper mill project.cost distribution of a typical TMP-based wood-containing paper mill project is as follow

Fig. 2.18. Typical costs of a wood-containing paper mill (TMP pulp and paper); production200 000 t/a. (Valmet 1993).

The share of automation, including field instruments, is only about 4%. Special pamaking instruments make up about 10–20% of the automation cost, in other wordsthan 1% of the total mill project. In the same way, the cost distribution of a chemical pmill project is:

PROCESSMACHINERY

52%

AUTOMATION4%

ELECTRIFICATION12 %

BUILDINGS14%

CIVIL ENGINEERING1%

PIPING7%

VENTILATION &HEATING

2%

MANAGEMENT3%

ENGINEERING5%

44

eeds,f themorerade.Stud-isecialmersified,melt areds of

t beenduc-

hinechineand

moremea-

Fig. 2.19. Investment cost of a pulp mill (Niemi 1997).

2.10. Customer needs

When customer needs are being studied, it is important to get an idea of the market nin addition to the needs of individual customers. Market needs describe the potential opresent-day business, while the needs of individual customers may deviate from thegeneral trends and reflect local conditions, or the needs of a new process or paper gGeneral market needs can be studied using a relatively small number of customers.ies on the topic (Griffinet al. 1996) have shown that an interview with 30 customerssufficient to chart 90–95% of all customer needs. The general needs with regard to spinstrument development are rather well known; therefore, the needs of single custoare particularly interesting. Unarticulated needs that customers have not yet identand customers that for some reason are outside the supplier's existing business (Haetal. 1994). An example of unarticulated needs are certain paper or pulp properties thanot important for the basic production at the moment but are instead related to the neesome further processing. Customers or customer groups whose needs have nocharted may include units specialising in further processing, or units with a small protion volume.

2.10.1. Customer needs for special instruments in paper mills

The automation needs of paper mills are mainly related to the control of paper macwet end and wet end chemistry, and to basic paper properties. The increasing maspeeds have also given a bigger role to machine-directional controls. Structuralstrength measurements are needed to control paper printability and runability, andaccurate and demanding controls are needed for drives and actuators. The relatedsurement needs are illustrated in the following diagram:

20

40

60

80

100

3

6

9

12

15

%

% Total Project Support Machinery and Materials

Insulation and CoveringMaterials

InstrumentationMaterials

Electrification Materials

Piping Materials

Materials for Towers/TanksSupport Machinery

Comissioning andMaterials

Design andCoordination

Freight and Insurance

Support Machineryand Materials

Process Machinery

Construction andMaterials

45

thehing

Fig. 2.20. Paper machine control function and measurements (Fadum 1996, p. 3-66, p. 3-70).

2.10.2. Customer needs for special instruments in pulp mills

Due to process development, customer expectations in pulp mills largely deal withneed to eliminate harmful emissions into the environment. This trend is rapidly pus

46

rocessd con-

the producers towards chlorine-free, closed processes that require changes in the pmachinery and configuration and frequently create a need for new measurements antrols.

Fig. 2.21. Pulp control applications and pulping sensors (Fadum 1996 p. 3-115, p.3-118).

47

blesvery

n thealso

trolledand

g onal fea-mo-siveevenf milln thetom-tili-

ationmpact

titive-ality.

ucting atmagets.gedentraw

f proc-

mainlynt;sured,

thercontrol

The most important aspects for the customer are digester control and quality varia(such as Kappa number and digester level), and overall pulp bleaching and recoboiler control as shown in Fig. 2.21. In all of these areas there is a wide gap betweecurrent situation and customer expectations. The need for better control applicationscreates a need for related special measurements: the direct measurement of a convariable facilitates control implementation and improves its performance in changedisturbance situations.

2.11. Factors affecting customer’s purchase decision

The customers’ purchasing decisions are influenced by a variety of factors, dependingeography and economic reasons. Geographic factors often arise from some specitures of the local raw material base, or from production-related matters. A highly inhogeneous raw material base means that producing high quality requires intenmonitoring of quality variables throughout the process; and purchase decisions maybe dictated by factors such as management cultures or the education and skill level opersonnel. The demand for special instruments is, moreover, strongly dependent oeconomic cycles of the pulp and paper industry. During an economic upswing the cusers are very interested in technical solutions that improve production efficiency and usation rate, and when the economy is low, they focus instead on quality and opereconomy. As regards large package deliveries, the financing arrangements have an ion the selection criteria and the extent of automation included.

2.11.1. Economic factors

The fundamental reason for a purchase is in most cases economic, improving compeness by either reducing operating cost, increasing volume, or improving product quReaching and maintaining a certain quality level may be utilised in two ways: the prodcan be sold at a higher price, or – due to the absence of large quality variations – sellthe same price a product that, on an average, is of somewhat lower quality. Product imay also influence the product price, particularly with more expensive special produc

The operating efficiency of a process is dependent on how effectively it is manaduring normal operation, its status in relation to the optimum level, and the managemof change situations (start-ups, breaks, and various disturbances, for example inmaterial feed). The cost of process operation is influenced by:– the number of operating personnel needed – the type of process and the degree o

ess automation contribute to this figure;– the number of maintenance personnel necessary to ensure process operation –

related to the amount of process machinery and the service needs of the equipme– cost of quality assurance – depends on the number of quality parameters mea

measuring frequency, and the time needed to measure and analyse the results.Demands for production efficiency and quality are all the time greater, and this fur

increases the importance of special sensors and analysers. More precise process

48

ontrol. Spe-

andthe

gula-

o thesup-

asised

d soft-nder

ationtfor-eeds

d intoicalsensi-e oftersTBFrtantnstru-e re-cru-ini-

mentrepairductiningtru-sys-

requires more accurate and faster information from the process, and in process cthis means that laboratory analyses must give way to real-time measurement datacial instruments are highly specific and thus it is possible in many cases to calculatepredict their benefits with rather good accuracy. When the primary reason causingneed for a measurement is instigated by legislation, for example environmental retions, the economic benefits are of secondary importance in the purchase decision.

2.11.2. Product related factors

From the customer’s viewpoint, products can be divided into three groups according tdefinition presented in Fig. 2.1: core businesses, facilitating services and goods, andporting services. Depending on the company strategy, these categories may be emphin different ways, but all of them are present in decision-making situations.

Core business comprises measurement instruments and systems and the relateware. In this area, technological superiority and product design philosophies are uclose scrutiny. As an example, a product can be designed to provide flexible operand versatile programming opportunities, or alternatively, to be simple and straighward, giving the user very few opportunities to alter its operation. Preferences and nin this respect may vary from company or geographical area to another.

Technical customer needs as regards the physical product as such can be dividetechnical performance and availability performance, as illustrated in Fig. 2.22. Technperformance describes the actual operation: measurement accuracy, repeatability,tivity to the measured variable, insensitivity to disturbances, long-term stability, easuse, interface, etc. Availability performance in turn describes the reliability parameand maintenance features of the product. One way to measure reliability is the M(Mean Time Between Failure). Maintenance time and waiting time are the most impovariables for maintenance. Maintenance time stands for the time needed to get the iment operational again after a failure, and it must be determined including possibltuning after service operations; with special instruments this may in fact be the mostcial factor determining maintenance time. Waiting time describes the time required totiate service operations after a defect. This time depends on the ability of the instruto indicate when a failure occurs, and also on the time needed to get spare parts or aspecialist. Both “easy to maintain” and “easy to calibrate” were mentioned as prorequirements in both of the customer questionnaires presented later on. By comb“technical performance”, i.e. the correctness of the information provided by the insment, with the instrument “availability” we get the performance of the measurementtem.

49

tanthysi-most

Fig. 2.22. Product reliability parameters.

According to one study shown in Fig. 2.23, no less than ten of the 11 most imporcriteria that customers use to select instrument suppliers are directly related to the pcal product properties. Measurement accuracy and instrument reliability are the twoimportant features.

Fig. 2.23. Customer rating of different factors in the purchase decision of special instrumentsand analysers (Kajaani Electronics 1994).

ProductPerformance

AvailabilityPerformance

Maintenancereliability

MaintenanceReliability

TechnicalPerformance

Failures-MTFFMean Time to First Fail

-MTBFMean Time Between Fail

MTTDMean Time To Detect

MTTRMean Time to Repair

MTTRSMean Time to Restore

Repair

Service

MWTMean Waiting Time

Spare Parts

RepeatabilityStabilitySensitivitySelectivityAccuracyRobustnessSpeed

FUNCTION WEIGHT1 ... 3

Measurement principle 1Measurement accuracy 3General design 1Sampling/Oxygen stage 3Sampling/Blow line 3Sample handling 3Service frequency 3Easy to service 2Calibration 2Measurement speed 2Service support 2

1- less important3- most important

50

d alsocus-pli-

ost ofthe

tionrviceöön-

ctinging.with ate tovices,nginga cen-us-

ticse ber to

volvedtions

2.11.3. Service related factors

The customers’ needs and requirements are related to products, their properties, anto the entire delivery and service chain. This is an extremely important factor for thetomers: the pulp and paper industry has to deal with a relatively limited number of supers and the industry of the main business is globally located to those areas where mthe paper is consumed. This industrial trend is increasingly evident, and especiallypaper industry – together with recycled pulp mills that usually operate in close connecto it – tends to be established at a minimum distance from the end customers. The sechain can be divided into facilitating services and goods and supporting services (Grroos 1990).

Facilitating services and goods include the most essential service elements affeproduct availability: distribution, spare parts supply, operating instructions, and trainCompanies may choose to provide these services themselves or seek co-operationsuitable representative or agent. Supporting services involve elements that contribuensure that the customer gets the expected benefits: start-up and installation sertraining, process research, and control implementation. When processes keep chaand operating methods develop constantly, these services and service products playtral role in the entire product life cycle. Fig. 2.24, describing the needs of an Asian ctomer, illustrates this point: service is needed both in terms of well-functioning logisand in terms of know-how and training. Special instrument suppliers must thereforvery well acquainted with these “application fields”: the customer expects the suppliepossess extensive application expertise because the supplier has previously been inin solving a number of similar or related problems. The customers’ service expectaare largely dependent on the dominant service culture in the region.

Fig. 2.24. Customer needs and their prioritisation in the operation chain as described by oneAsian customer (Kajaani Electronics 1994b).

DISTRIBUTE

PRODUCT ENGINEERING MARKETING DISTRIBUTION SERVICELOGISTICS

QUALITY-DOES WHATPROMIZED

MODULARMAINTENANCE

RELIABILITY

AVAILABILITY

CUSTOMER

LOCAL

REFERENCES

PRICE LOCAL AGENT

VALUE ADDINGSERVICE

CUSTOMERTRAINING

MANUFACTURE

INNOVATIVEADVANCED

UPWARDSUP-GRADABLE

STANDARDHARDWARE

GLOBAL PACKAGE GLOBAL DIRECTON-LINEINSTRUCTIONS

FAST SPAREPARTS SERVICE

PRODUCTSWITHSOLUTIONS

CUSTOMER

CUSTOMER

MORE IMPORTANT

FAST PEOPLESERVICE

51

uently

thatt and,e six

and

fre-solu-peciale last

ecialinto

llationocess

Process automation has become an extremely critical part of the process; conseqits performance, reliability, and service are increasingly important for the customer.

According to customer surveys Fig. 2.25, it is vital for special instrument supplierstheir technical service and sales organisation are able to provide application supporwhen necessary, even help the customer in application-related problems. Two of thfactors rated highest in importance are related to the supplier’s application expertisethe availability of technical support.

Fig. 2.25. Importance rating of decision making attributes when purchasing special instruments(Sopenlehto-Pehkonen 1996, p.58).

In the author’s experience, problems with applications and control solutions arequently related to the fact that process machinery, special instruments and controltions are delivered to the mill as separate units. Because the controls based on smeasurements represent such a tiny part of the total cost in large projects, they are thones to be defined and specified. To avoid the complications that result from this, spcontrol solutions should be integrated in the process– or at the very least, takenaccount – when a plant is being designed and purchased. The necessary instaarrangements could then be better optimised, ensuring better opportunities for prcontrol.

1 2 34 5 6 7 8

910 11 12 13 14 15 16

Attributes

1 - Reliability 7 - Value 12 - Special Features2 - Product Quality 8 - Product Support 13 - Price & Terms3 - Appl. Knowhow Service 9 - Co. Technical Rep. 14 - Delivery4 - Ease of Maintenance 10 - Appl. Knowhow Sales 15 - Warranty Duration5 - Ease of Calibration 11 - Reputation 16 - Co. Sales Rep.6 - After Sales Techn. Support

Ave

rage

Ra

ting

52

lobalre isichthat

s theamempa-

s and

ssesevel-

roductthe

sivellowcor-

s therat-and

2.12. Special instrument sector – conclusion

The market segment of special instruments is a typical global niche, and most of the gmarket must be covered to achieve sufficient business volume. Another typical featuthat their utilisation involves a lot of process and control application expertise whincreases distribution costs. This combined with the small production volumes, meansthe investment cost of a single instrument is relatively high for the customer, and thuproduction capacity of a potential customer process must be relatively high. At the stime, however, the technologies applied in the instruments are spreading and new conies are entering the markets, which is bound to lower the cost of special instrumentexpand the markets towards smaller production units.

The development of customer needs is closely linked to the development of proceand process machinery. This opens a natural field for co-operation in research and dopment between the suppliers of process machinery and special instruments. The pdevelopment of special instruments is highly technology-intensive and focuses onsolving of existing process problems. Companies might benefit from a comprehenoperating model with ties to the R&D of processes and process machinery: it would athem to envisage future customer needs better, and thus to time their R&D activitiesrectly. Another factor that complicates the identification of new measurement needs ifact that the special instrument suppliers have practically no links to potential co-opeing partners operating later in the processing chain, in the further processing of pulppaper.

in theduct

devel-ing toand

com-lay,

st and

nflu-ticipat-duces itscus-

over,hnolo-eningmar-hen

ctivebothf thetech-sameures

3. Related product development research

This chapter takes a look at the strategies and process of new product developmentlight of related research. The conceptual framework is presented in Fig. 3.1. The prodevelopment strategy and procedures adopted by a company are influenced by theopment status of the company itself, and the development process also varies accordits goals and the organisation that is pursuing it. And yet, irrespective of the patternsstrategies applied, the goal of product development is, without exception, to achievepetitive advantage: to convert a new idea into a marketable product with minimum dewith the features the customers expect to get, and at the same time predicting the coresource needs of the process with maximum accuracy.

The development work of integrated process concepts is subject to a number of iences: the product development strategies of the customers and the companies paring in the development work, and the ability of product development processes to prointegrated technical solutions. The competitive strategy of any company – and thuproduct development strategy, too – are influenced by the demands of markets andtomers, and by its competitors' actions. The focus of product development is, moredependent on a number of internal factors, such as core competencies and key tecgies. Technologies are making very rapid progress and product life cycles are shortall the time, and these factors place increasing emphasis on the synchronisation ofketing and technologies, and they also stress the importance of correct timing wadopting new technologies and abandoning currently used ones.

The pressures to improve the product development process by cutting non-produactivities to increase its efficiency and by shortening product development cycles –in the special instruments and process machinery industries – require a rethinking oentire development process. Shorter development cycles put more emphasis on thenical and economic management of research and development projects, and at thetime it becomes necessary to fit together the different product development procedand organisations, internal as well as external.

54

Fig. 3.1. The conceptual framework of the development of integrated process concepts.

PRODUCTDEVELOPMENT

PROCESS

ACCELERATEDDEVELOPMENT

3.10

3.5

MODELS ANDMETHODS

3.6

STRUCTURALORGANIZATION

3.8

KNOWLEDGEABSORPTION

3.9

CUSTOMERORIENTATION

3.7

RISKSMANAGEMENT

3.11

MARKET2

PRODUCTDEVELOPMENT

STRATEGY3.3

COMPETITIVESTRATEGY

3.2

TECHNOLOGYSTRATEGY

3.3.1

TECHNOLOGYMANAGEMENT

3.3.2

COMPETENCEMANAGEMENT

3.3.3

PRODUCTPORTFOLIO

MANAGEMENT3.3.4

PRODUCTLIFE CYCLES

3.4

PRODUCT3.1

55

– ands in ato it

oreductre andcess.ding:es a

abili-nd thehaslowly.ccel-ssureining

hievests.s tottempt

peti-own

er ofrtisecom-pany

d thesingly

cru-rod-con-ucts.

ening

fac-le toment

ent.and

easement

The cornerstone of a company’s business are its products – tangible or intangiblerelated services. As the role of services increases, the goal is to define the productcomprehensive manner, including both the actual product and the services linked(Gröönroos 1990). In this way a more extensive definition of the product, involving mthan the physical product, gains a more crucial role and also the importance of prostrategy and product development strategy are increasing. At the same time the natuwider scope of products mean additional demands for the product development proWith regard to pulp and paper processes, the definition of products is thus expaninstead of a tangible physical product, a product is seen as a functional unity that givcertain process output to its purchaser.

Product development strategy is dependent, on one hand, on the company’s ownties and innovativeness, on the other hand on the market needs and requirements, acompetitive situation. The development of markets in the pulp and paper industrybeen very slow and thus also the changes in customer needs have taken place only sThe capital-intensive industry tends to favour small, gradual changes. However, the aerating development of further processing and printing technology has created a preto speed up the development of production processes, too, and problems with obtasufficient capital are contributing to the same effect: it has become necessary to acradical improvements in production process efficiency and to lower the production co

The prevailing competitive strategy of the pulp and paper machinery suppliers iachieve a leading position as regards process technologies, but it also involves an ato expand the product range and cover ever larger parts of the processes. This comtive strategy is influenced by market needs, the competitive situation, the companies’capabilities and the technologies to be the mastered.

Integrated process concepts require the ability to simultaneously utilise a numbdifferent technologies in the products. Acquiring the necessary technological expeand ability to use these technologies in the products means, in the long run, that thepany must find and develop new competencies. When the competencies of a comexpand from conventional manufacturing technologies towards product design anmastery of several technologies, the management of competencies becomes increaimportant alongside the “hard” technologies.

The ability to understand and manage the products’ life cycles is more and morecial when a higher number of rapidly progressing technologies are applied in the pucts. New further processing needs and technologies, together with environmentalcerns, strongly influence the need for new products and the life cycles of these prodCompanies must get their product development investment back in a steadily shorttime.

The competitive situation, technological development, and product life cycles aretors that influence the entire product portfolio of a company. Companies must be absimultaneously develop products that are in different phases of the product developcycle and to understand the effects of new technologies on the product developmThey must, moreover, be increasingly aware of the risks involved in the technologiesin the commercialisation of products. When product development investments incrand product life cycles become shorter, the effects of erroneous product developdecisions are multiplied.

56

hys-t. Theust beegra-nceson of

prod-abil-

out-eta-

ring to

andrd to

cus-d wellapercessearly

self.t typentlythe

ifics thats is a

rod-ecogn-lder

erssifi-

Another part of product development is the actual development process: how the pical and mental resources of a company are organised to create a saleable producdemands set by product strategies mean that new product development models mfound, models that support the accelerating product development cycles and the inttion of numerous different competencies and technologies. This development influeboth the actual operating model of product development and the role and organisatiproduct development in the company.

Faster development cycles and the introduction of new technologies mean thatuct development – both the process and the people involved in it – must possess theity to adopt new information and to use also technologies and expertise coming fromside their own organisation. Product projects have to be carried out in a short time, timbles must not be exceeded, and this creates a pressure to minimise risks by adhefamiliar, proven technologies.

Customers increasingly expect operational units instead of “mere” machinery,therefore the role of customer contacts is gaining more importance also with regaproduct development. Close contacts with customers are needed, not only to identifytomer needs but also to ensure customer acceptance for the concepts developebefore the final development work and launching of new products. As the pulp and pindustry is no more closely involved in the development of processes and promachinery, it is very important for the suppliers to gain customer acceptance at anstage of the product development process.

3.1. Definition of product

In order to understand new product development, we must first define the product itProduct structure can range from the generic product class and industry to the producor form, and down to variants and brands (Day 1981). But when is a change sufficiedistinct to justify a separate life cycle analysis? Abell (1980) defines a product asapplication of a distinct technology to the provision of a particular function for a speccustomer group. Only when there is a change along one or more of these dimensioninvolves a sharp departure from the present strategies of the participating competitorseparate life cycle necessary.

A possible answer to the question ‘what is a new product?’ is to segregate new pucts into several degrees of newness, because there appear to be some universally rised characteristics distinguishing a new product from an improved variation of an oone (Rinket al.1979). By combining variables, such as degree of perishability, customtype, degree of newness, and level of product aggregation, we get the following clacation (Fig. 3.2):

57

ustry,uctthis

withetitivegy isals.

llus-tion

Fig. 3.2. Classification of goods by newness, customer, product aggregation, and perishability(Rink et al.1979, p228).

With regard to the processes and process machinery of the pulp and paper indmost of the products can be classified in the ‘minor product change’ or ‘major prodchange’ categories. The use of brands and differentiation from other suppliers bymeans is still rather scarce and mainly limited to company brands.

3.2. Competitive strategy

The purpose of competitive strategy is to achieve a strategically favourable positionregard to competitors and the customer base, and to secure the company's compposition even in the future and in changing market situations. The competitive strateinfluenced by the prevailing competitive situation and the company’s own strategic go

3.2.1. Competitive forces

One way to describe the competitive forces acting in the markets is Porter’s model itrated in Fig. 3.3. In this model, competition comprises five competitive forces. In addi

Typeof

Customer

Consumer

Industrial

Nondurable 1 2 3

Durable 4 5 6

Nondurable 7 8 9

Durable 10 11 12

Degreeof perish-ability Class Form Brand

Level ofProductAggregation

Degree of

Newness

UNPPNP

MPCMIPC

UNP = unquestionably new product PNP = new productMPC = major product change MIPC = minor product change

58

pliers

oweraller,

vol-f pat-es ofe.theer to

rs areppli-trendare

directecteduppli-ng of

to existing competitors, the markets are subject to competitive forces caused by supand customers, and to threats introduced by new entrants and substitute products.

Fig. 3.3. Five main factors of competition (Porter 1991).

As the process machinery industry is increasingly concentrated, the bargaining pof buyers in the core business is splitting into large international corporations and smspecialised or local companies. The strong point of large corporations is their sheerume. Moreover, the buyers tend to strengthen their competitive positions by means oenting their special products and process concepts. This in turn limits the opportunitimachinery suppliers to use new process concepts as their own competitive advantag

As the end result customers are buying increasingly large units directly frommachinery suppliers, engineering companies (constructors) have less and less powinfluence the machinery purchases. At the same time mergers of machinery suppliereducing the number of alternative suppliers and dividing them into whole process suers and specialised companies delivering smaller process parts or machinery. Thisstrengthens the negotiating power of large suppliers when whole production linesbeing discussed.

When technology intensiveness increases, the suppliers are more and more incompetition with each other. The use of special components, materials, and prot(patented) machinery solutions as key components in a process concept give the sers of such processes a very strong position. Moreover, the widespread outsourci

ProcessMachinery

Competitors

New Entrants

Substitutes

BuyersSuppliers

Electric communicationNew fiber technologiesIntelligent processes

Machinery industry from otherindustrial areasNew technology companiesService companies

Pulp and Paper MillsMachinery designers

ComponentsMachineryServiceEngineering

59

on tos aretureering

o thepro-

chnol-pave

.n ofsolu-pe

pro-utoma-pro-

titiventage

strialership

pet-peti-

ge in

maintenance and service work emphasises the role of service companies in relatimachinery suppliers. When the tasks formerly carried out by engineering companiebeing incorporated into the tasks of machinery suppliers, it is possible that in the fuwe will see more and more process and machinery concepts developed by enginecompanies. This would cause further changes in the relative negotiating positions.

As the process machinery business is strongly capital-intensive, new entrants intmarkets are either backed by some large corporation active in another sector of thecess industry or come into the markets as a merger between several small, new teogy based companies. It is also possible that structural changes in the basic industrythe way for new operators that could perhaps offer production services to companies

In the future, electronic communication is bound to change the competitive situatiothe process machinery industry by introducing new supplementing products andtions. This will increase competition with prices, particularly with regard to bulk-tybasic products. Potential new fibering methods, or new product concepts and relatedcess solutions, may replace some of the present-day process machinery, and also ation may play a crucial role in this respect: it may become possible to replace largecesses with smaller, highly automated process concepts.

3.2.2. Competitive advantage

Porter (1985) differentiates four categories of competitiveness, based on compeadvantage and scope (Fig. 3.4): in terms of scope, companies seek competitive advaby either concentrating on a narrow segment or by covering a broad range of indusegments, whereas competitive advantage is achieved by aiming at either cost leador differentiation.

By optimising its strategy for the target segments, the focuser seeks to achieve comitive advantage in its target segment even though it does not possess an overall comtive advantage; in the broad target strategy the goal is to achieve competitive advantaa broad range of industrial segments.

Fig. 3.4. Generic strategies of competitive advantage (Porter 1985, p. 12).

COMPETITIVE ADVANTAGE

LOWER COST DIFFERENTIATION

BROADTARGET

NARROWTARGET

COSTLEADERSHIP

DIFFERENTIATION

COST FOCUS DIFFERENTIATIONFOCUS

COMPETITIVESCOPE

60

canat-der-

fastk toducteti-ermate-nique

evedpli-lop-

espe-w-

strat-s; forngcus-ionies

bilities

The industry manufacturing process machinery for the pulp and paper industrymainly be classified into the ‘differentiation focus’ or ‘cost focus’ categories The plforms and general instruments of the automation sector mostly fall into the ‘cost leaship’ category, special instruments industry into ‘differentiation focus’.

Lahti (1984) classifies differentiation-based strategies into unique know-how,growth, or fast reaction, according to the type of competitive advantage they seeachieve (Fig. 3.5). Unique know-how requires either specialisation in a superior proor superior skill in application or service. Superior know-how in comparison to comptors – for example dominant position in some technology – gives a relatively long-tcompetitive advantage. The fast reaction strategy in turn requires highly flexible strgies and management, and the core competence base of companies relying on uknow-how is often unsuitable for this.

Fig. 3.5. Types of differentiating competitive advantage (Lahti 1984, p. 45).

Building upon the basic competitive strategy, competitive advantage can be achiin many ways: by means of product innovation involving new technology or a new apcation of existing ones, or even by means of innovations focusing on product devement or manufacturing process.

Technologies are developing and changing rapidly, and therefore no company –cially if it works with several products – can build its strategy on just some unique knohow. Companies must be able to change their competitive strategy, either the overallegy or a strategy for a certain product or product group, according to emerging needexample, switching from “unique know-how” to “fast reaction” when a new surprisicompetitor enters the market. Often this proves extremely difficult, and a company actomed to operating with the unique know-how principle is in trouble when quick reactto a new situation is needed. In the future, instead of ‘fitting to the situation’, strategshould represent ambition that stretches far beyond the current resources and capaof the firm (Hamel 1994).

Type ofcompetitiveadvantage

Uniqueknow how

Fast growth

Fast reaction

Base ofcompetitiveadvantage

Proactive

Proactive andreactive

Reactive

Length ofcompetitiveadvantage

Reasonablylong

During the growthperiod

Until competitors’reactions

61

ts orighss to

e ofallyare ofrod-d asstru-

rketstru-

n thes illus-in thement.nessprod-

isticsrge-veralferent

3.2.3. Product - market matrix

According to Ansoff, competitive strategies can be classified according to the marketo the products developed into four categories; Fig. 3.6. A typical strategy of new htechnology companies is to design products for known, existing markets, then progrea market penetration and further to market development strategy.

The special instruments industry involves about 50 competing companies, somthem operating with a very narrow product range. Within one product group, typicsome 2–3 companies share about 90% of the market – the market leader having a sh30–70% – and the rest of the market is covered by local small suppliers. Using the puct - market matrix of Ansoff, most of the companies of this sector can be describehaving a product development and market penetration strategy, while some single-inment suppliers apply a market penetration and market development strategy.

Fig. 3.6. Ansoff’s product market matrix (Kotler 1988, p. 48).

The strategy of process machinery suppliers is to operate in the present-day mawith existing and new products. Thus the product/marketing matrix of the special insments suppliers is similar to that of process machinery suppliers.

3.3. Product development strategy

The management and organisation of product development activity are dependent onature of the business, and also on the strategic phase of the product or business atrated in Fig. 3.7. A market leader in a mature phase of the markets does not operatesame way as an experimental business that is still in the early stages of its developThe crucial question is, how to combine these different operating models within a busiso as to ensure at the same time the needs of market leadership and new, innovativeuct development, company dynamism, and its ability to change. These characteroften apply to large, established companies, and to smaller firms in the initial or enlament stage of their development. Moreover, within one company there may be sebusiness lines that are in different phases and therefore must operate in rather difways, and also different units of large corporations may follow different cycles.

CURRENT PRODUCTS NEW PRODUCTS

CURRENTMARKETS

NEWMARKETS

MARKETPENETRATION

STRATEGY

PRODUCTDEVELOPMENT

STRATEGY

MARKETDEVELOPMENT

STRATEGY

DIVERSIFICATIONSTRATEGY

SPECIALINSTRUMENTS

STRATEGY

62

ogyarket

strate-mpet-cessctor

ut ofeneralin the

sis ofore,ogy-rob-

Fig. 3.7. Three important development phases of a business unit. (Lorange 1997, p. 31).

The product development strategy of a company is closely linked with technoldevelopment, management, and markets. The strategy must take into account mdevelopment, customer needs, competitor action, and technical progress. Productgies cannot be built solely on customer needs, they must also pay attention to the coitive situation and available technologies and capabilities. The business of promachinery industry is typically in the ‘defence’ phase, and the concentration of the seis further strengthening this trend as small, growth-oriented companies are falling othe markets. The situation in the automation sector is largely the same as regards gautomation and measurements, whereas there are ‘pioneering’ phase companiesnarrow specialised fields of measurement technology.

From the technological viewpoint a company strategy can be assessed on the bahow it applies technology or how it utilises external technology sources. Furthermaccording to Nyström, technologies can be applied in a problem-oriented or technoloriented fashion: searching for technologies to solve specific product development plems, or aiming at solutions based on certain selected technologies (Fig. 3.8).

Strategiesto focusrecourses

Pioneeringphase

Fastgrowingphase

Marketleaderphase

1. Businessopportunity

2. Personnelmobilization

Completelynew businessidea

Visioncreatingteam

Growthchallenge

Fast actingentrepreneurteam

Defencee

Traditionalfact basedsurvivors

63

uch itof thentrib-ossi-

Fig. 3.8. Analytical framework for product development strategies (Nyström 1996, p. 138).

3.3.1. Technology strategy

Technology strategy as illustrated in Fig. 3.9 is part of the business strategy, and as sis dependent on the competitive strategy, marketing strategy and production strategycompany. It should therefore be studied as part of the entire business. Technology coutes to the company's ability to satisfy existing customer needs and also offers the pbility to create new needs and competitive advantage.

PRODUCT DEVELOPMENT STRATEGY

TECHNOLOGYSTRATEGY

Technology useIsolated Synergistic

OrientationInternal External

MARKETINGSTRATEGY

ProductModification Diversification

CustomersExisting New

PRODUCT DESIGNSpecific General

PROCESS DESIGNSpecific General

PRODUCT DEVELOPMENT OUTCOMES

TECHNOLOGY OUTCOMETechnology noveltyLow High

COMPETITIVE OUTCOMEProduct

Interchangeable Unique

FINANCIAL OUTCOMEprofitability over the product life cycle

64

idly.agingcepts

. Thiss at

is itslopore

h and

thuscon-gthynow-oiceaban-the

nol-

Fig. 3.9. Technology strategy as part of business strategy (modified from Hölsä 1995, p. 15).

The importance of technology for business strategies is increasing clearly and rapMany different technologies are needed in the special instruments sector, and manthese in the changing environment is a real challenge. When integrated process conare being developed, several technologies must be mastered at the same timeemphasises the availability of technologies and the ability to apply new technologiethe right time. Technology strategy is dictated by a company’s competitive strategy –sole aim to react quickly and follow others to the market, or does it strive to deveunique know-how, to enter the market first and to gain a dominant position. The memphasis a company gives to unique technology, the more it must invest in researctechnology development, outside the commercial product development.

3.3.2. Technology management

The life cycles of technologies as illustrated in Fig. 3.10 are becoming shorter, andthe evaluation of technologies at different phases of their life cycles becomes a nearlytinuous part of company strategy. Using some new technology may prove to be a lenprocess, as the skills needed for its application must be acquired as well. Moreover, king when to adopt or abandon a technology may be vital for a company. Incorrect chof technologies has far-reaching consequences for company operation, and simplydoning it will not solve the problem: existing installations and products designed usingtechnology in question will continue to demand attention still ten years after the techogy was discontinued.

Needs ofcustomers’customers

Customers’needs

Commercial goals

Technological possibilities

Business strategy

Technologystrategy

Competitivestrategy

Marketingstrategy

Manufacturingstrategy

65

ingly

use

l ofthe

Fig. 3.10. Technology maturity development curve (Rousselet al.1991, p. 61).

The pulp and paper industry technology is in the mature/ageing phase; it is increasdifficult to achieve dramatic improvements with the existing technologies.

A company's position with regard to technologies can be described with regard toand expertise. Granger (1996) has divided technologies based on their utilisation:– base technology

– essential to be in business– widely exploited by competitors– little competitive impact

– key technology– well embodied in products and processes– high competitive impact

– pacing technology– under examination by some competitors– competitive impact likely to be high

– emerging technology– at early research stage, or emerging in other industries– competitive impact unknown but promisingBy combining the position of technology in the products of a company, and its leve

expertise in these technologies, we get the company’s capability profile in relation touse of these capabilities; Fig. 3.11.

Natural Limit of the Technology

Embryonic Growth Mature Aging

Time

Sco

pefo

rA

dditi

onal

Tec

hnol

ogic

alA

dvan

tage

66

asterinfra-

tiononent

ithres thenewr, isxperi-

n keybase

enciesare

tech-ainly

se oflogy istech-

aseds andon-

Fig. 3.11. Strategic significance of capability profile (Granger 1996).

The choice of crucial technologies, and the extent to which the company must mthem, are dependent on the product range, business strategy, markets, surroundingstructure, and networking ability. By networking with preceding phases of the operachain the company ensures the availability of the necessary production and comptechnology and expertise in its development projects. Moreover, networking wresearch institutes operating at the early stages of the development process ensunecessary special know-how in certain narrow technologies and the availability oftechnologies when they are being developed. Networking forward, with the customein many cases a necessity in order to ensure sufficient process expertise and user eence, and to provide sites for field testing.

The technology development resources of a company should be focused mainly otechnologies, whereas commercialisation resources should concentrate more ontechnologies. As companies specialise, external subcontractors and engineering agare increasingly used for commercialisation. Universities and research institutessources of pacing and emerging technologies.

Continuous incremental product changes are dependent on the mastery of basenologies and mature key technologies. The development of base technologies mmeans watching the situation and implementing new, ready ideas into them; the uexternal resources and co-operation partners is the easiest in this area. Base technonecessary for business, but competitive advantage of products based only on basenologies is very short-lived.

Radical changes and innovations rely on pacing technologies and on innovations bon key technologies. Pacing technologies focus on the development of new methodon the application of solutions originally created for some other industry. Natural c

Technologysignificance Clear leader Strong Favorable Tenable Weak

Competitive position

BaseAlarm signal for waste

of resourcesAlarm signal for

survival

KeyOpportunities for present

competitive advantageIndustryaverage

Alarm signal forpresent

Pacing

Emerging

Opportunities for futurecompetitive advantage

Alarm signal forfuture

67

inesstheir

tratenolo-due

elop-hich

tech-lo-

ions:halad

in theulti-ity toies.hichchnol-rationompe-s cre-

tacts in this field include universities and research institutes. Companies whose busstrategy aims at a dominant position, specifically in new technologies, must focustechnology strategy on key and pacing technologies.

Companies for which technology leadership is not a primary goal instead concentheir technology strategies on the mastery of base technologies and mature key techgies. They may base their strategy on architectural innovations which are competitiveto differences in the product concept.

3.3.3. Competence management

Technology as such is no longer enough to describe the capability of product devment. More and more often, technology is replaced by the expression competence, wis a larger concept. Competence is not associated with the life cycle of some specificnologies, but rather with the ability of an organisation or an individual to utilise technogies. Leonard-Barton (1992) defines this as core capability, which has four dimenstechnical system, knowledge and skills, managerial systems, values and norms. Praet al (1990) speaks about core competence and defines it as the collective learningorganisation, especially how to co-ordinate diverse production skills and integrate mple streams of technologies (Fig. 3.12) Core competence may be related to the abilexploit e.g. key technologies, or it may be the ability to combine different technologThe strategically important skills of a company are its core competencies upon wmost of the company products and businesses are built. A clear competence and teogy strategy helps the company to develop its resources and to find external co-opepartners. The goal of the core competence approach is to utilise the strongest core ctence fields as effectively as possible in the company’s products. Core competencieate the core products on which the actual end products and businesses rely.

Fig. 3.12. Core competence (Prahaladet al.1990, p. 81).

BUSINESS1

BUSINESS2

BUSINESS3

BUSINESS4

COMPETENCE4

COMPETENCE3

COMPETENCE2

COMPETENCE1

CORE PRODUCTS 2

CORE PRODUCTS 1

Products

68

ureelop-may

ps tonner.

thementn the

for

ol-

3.3.4. Product development portfolio management

In order to apply new technologies at the right time, it is important to envision the futneeds of customers. At the same time companies must monitor the technological devment to constantly be aware of emerging technologies and the opportunities theseopen. On this basis a company can then draft a product portfolio strategy which helpredict resource needs and to initiate research and product projects in a timely maThis process is illustrated in Fig. 3.13.

Fig. 3.13. From technology and product visions into product portfolios.

It is important for the timing and the correct selection of project types to manageproduct development strategy as one part of the product portfolio. Portfolio managemust be able to utilise potential new technologies to ensure competitiveness, both iimmediate future and in the long run. Product portfolios can be described using,example, pipeline or roadmap models.

Cooperet al. (1998) classify the methods for product portfolio management as flows:– financial method– business strategy based– bubble diagrams (e.g. risk vs. reward, cost vs. time)– scoring model

MARKETINGRESEARCH

TECHNOLOGYRESEARCH

VISIONfor FUTUREPRODUCTS

VISIONfor FUTURE

TECHNOLOGIES

PRODUCT PortfolioROAD MAPS or PIPELINE

PRESENTTECHNOLOGIES

PRESENTCAPABILITIES

PRESENTPRODUCTS

TECHNOLOGYDEVELOPMENT

PROJECTS

COMMERCIALPRODUCT

DEVELOPMENTPROJECTS

69

delspoorjects

are

ductsformct

withan be

– check list– others

According to research, top performing businesses rely much less on financial moand methods as the dominant portfolio tool than does the average business, whileperformers place much more emphasis on financial tools. Product development procan further be classified in the portfolio according to– markets,– product lines,– project scope,– technological field,– technology platform, or– competitive situation.

Some models for the classification of different product development projectsbriefly described in the following.

3.3.4.1. Platform model

The need to quickly develop a new product often creates a panic to get many new proready as soon as possible. But in many cases the lack of product family and platthinking will eventually result in financially poorer results, due to problems with produmaintenance and further development, possibly even to technological incompatibilitythe company's expertise base. The product family and product platform approach cillustrated with the following diagram (Meyer 1993):

Fig. 3.14. The product family approach to new product development (Meyer 1993, p. 112).

New Generation Family AProduct 1’

Product 2’Product 3’

Product 4’Product 5

Product 6

Platform Development Family BProduct 7

Product 8

Platform Development Family AProduct 1

Product 2Product 3

Product 4

Adaptation of core technologiesto new markets

Plan multiple generations

Cost reductions andnew features

New niches

Time

70

ans-ancew incan

sonal

ctsign

nta-ousee andder-

od-muchrom0%.intoforelop-

dgeomic

Moreover, platforms provide a smooth migration path for derivative designs and trformation from generation to generation. Platform products have a strategic significfor companies, as they enable rapid derivative design and thus improve the cash flothe short term. Using a few well-designed platform products, a generation of productsbe built on each; an example of this is Sony, a company that has dominated the peraudio system market with more than 200 models based on just three platforms.

3.3.4.2. Four-path design

The concept of new knowledge is implicitly linked with the personnel involved in produdesign: an engineer lacking information and knowledge of a particular aspect of a dewill either fail in the specific design task, or develop a less than satisfactory implemetion, or be delayed as the relevant knowledge is solicited and assimilated (Culverh1993). The newness of information may also be implicated when mistakes are madprojects become delayed, as the individuals involved in the design may lack an unstanding of the limitations and correct utilisation of the new information. Especially pructs that integrate several technologies, each offering development potential, requireattention. Even if a product concept only includes some 10–15% of new technology fseveral fields, the total proportion of new technology in the product easily exceeds 5Furthermore, developments in the product’s operating environment must be takenaccount in the project. It is essential for both short-term profitability and cash flow andlong-term company strategies, that the company is able to manage its product devment portfolio effectively. As stated above, the quantity and quality of existing knowleessentially affect how much resources must be tied to a project and how large econrisks are involved. Product design problems can be divided into four groups:

Fig. 3.15. The four-path product design model (Culverhouse 1993, p. 150).

VARIANTDESIGN

INNOVATIVEDESIGN

STRATEGIC DESIGN

REPEAT ORDER% of new knowledgein the design

%ch

ange

inpr

oduc

tion

71

anu-ons.or tocosts indis-

ased% ofignle ofssary

put ofeces-

ms,is to

e often-new

hollyt ofecome

cts,ted inand

calriva-

ance-lving

andpec-tingntallys or

A repeat order project does not require any new product design information or mfacturing process. As the name implies, the product is delivered with fixed specificatiProjects that focus on products in this phase are typically related to quality defects,optimisation and simplification of the manufacturing process and subcontracting (engineering). Technical development is very rapid today, and therefore typical actionrepeat order projects include improving the availability of components and replacingcontinued components with new ones.

Variant design usually represents the largest share of product development. It is bon existing know-how, adding new features and functions that represent less than 20the whole product. This is particularly typical in software design, and often the deschanges and additions are in fact rather cosmetic by nature, extending the life cycexisting products. Variant design does not require external experts, as all the neceknow-how already exists in the company.

Innovative design changes the product by 20–50% and requires a considerable ineither product or manufacturing technology. The producers do not yet possess the nsary information and skills, and the risk of errors is considerable.

In strategic design, over 50% of new knowledge is applied to solve product probleand it is often regarded as the domain of a company research group. Its purposeextend the design and production knowledge base of a company.

Yet another dimension could be added to this model: application (the percentagnew knowledge in the product application). Application usually receives very scant attion when product development is being discussed. And yet, the changes required byapplications vary from small, variant design type, to absolutely strategic, such as a wnew application. Particularly when existing products are applied in the developmennew processes and process machinery, both innovative and strategic changes may bnecessary.

3.3.4.3. The wheelwright model

Wheelwright (1992) classifies projects according to their type into commercial projeresearch and development projects, and alliances and partnership projects as illustraFig. 3.16. As the name implies, commercial projects aim at a commercial product;depending on the level of difficulty – the need for new information or technologichange – they are categorised into derivative, platform and breakthrough projects. Detive projects range from cost-reduced versions of existing products to add-ons or enhments for existing production processes, and they can be classified as invoincremental changes in the product, the process, or both. Improving product qualitylowering the manufacturing cost are typical derivative projects. The other end of the strum is occupied by breakthrough projects which involve significant changes to exisproducts and processes. The resulting core products and processes differ fundamefrom previous generations, and they often incorporate revolutionary new technologiematerials and processes.

72

andarchom-ts –ent

reaseto

itiescom-t andsub-

ignhat aIn this

ancemar-betteret asonlyroval

Fig. 3.16. Mapping the five types of development projects (Wheelwright 1992, p. 74).

According to this model, research and development involve intensive researchacquisition of new know-how and know-why of new material and technologies. Resemeans strategic long-term projects that usually are not directly related to ongoing cmercial projects. Alliances and partnerships can be formed for any types of projecResearch, breakthrough, platform and derivative. This kind of product developmresources are actually becoming increasingly prevalent as companies strive to incflexibility in their product development operations. Moreover, companies are forcedconcentrate on short-term projects and they are therefore willing to employ universand research institutes to carry out actual research and technology projects. Routinemercial product development work, such as electronics design, software developmenmechanical design, is often done by subcontractors or co-operating partners. Thuscontracting can be divided into “conventional” subcontracting, without actual deswork, and co-operation where subcontractors even carry out the designing, so tdesign company also becomes a subcontractor for certain parts and components.approach the application environment could be considered as the third dimension.

3.4. Product life cycle

One of the key tasks in new product development activity is to gain customer acceptand to increase the volumes supplied over time. A new product may come to a readyket and already have customer acceptance well in advance; these products offer atechnical solution for a certain application. But a new product may also enter the marka complete novelty, without a ready application, and in this case the supplier must notlaunch the product but also create applications for it; and obtaining widespread app

Research andadvanceddevelopmentprojects

Alliances andpartnershipprojects(can includeany type ofprojects)

New CoreProduct

NewGenerationProduct

Additionto ProductFamily

DerivativesandEnhancements

Product ChangeMore Less

New CoreProcess

IncrementalChange

Pro

cess

Cha

nge M

ore

Less

Breakthroughprojects

Platform projects

Derivativeprojects

Commercial projects

73

rod-need

l life. Inthe

mi-rod-

oductyclefalls

ing-ea-

pitalong-pli-ented

therThe

ultantthesible

for a new application may take considerably longer than the actual product project. Pucts that cater to certain specific needs are also strongly dependent on how thischanges with time. Thus the examination of product life cycles in fact involves severacycles that follow different periods and influence the need for the product’s applicationother words, product life cycle is not only determined by the technologies applied,opportunities it offers, and the customers using it.

An aspect worth observing in the product life cycle concept is the question of ternology: when to use the terms product class, product form or product brand or/and puct type. Product class is the most general and thus the most stable level, while prbrand is the most specific and is subject to the greatest variation in product life capplicability. Product form is between product class and product brand and thereforesomewhere in between in terms of stability of market application (Onkvistet al.1983).

3.4.1. Definition of product life cycle

The product life cycle is the sales curve for a product over its entire life cycle (Easwood 1988). However, this definition is not without its problems, as the sales can be msured in terms of unit volume, current or constant dollar total revenue, or per caconsumption. Moreover, especially in the case of investment goods, short-term andterm variations in industrial volume and profitability, caused by economic cycles, comcate the assessment of the true product life cycle. The product life cycle is often presin a fixed shape, as follows:

Fig. 3.17. General presentation of product life cycle.

And yet, in many cases the shape of the product life cycle is not constant but is radependent on the markets, their characteristics and maturity (Easingwood 1988).nature of the innovation, the target market, the promotional campaigns, and the resword of mouth predict the distribution of first purchase times. From knowledge ofproduct technology and the consumption behaviour of the buying units it is also posto predict the likely distribution of interpurchase times (Midgley 1981).

Maturity

Decline

Growth

Introduction

Development

74

canely

Manywhobuy-ion.

d thextent.wanby

fee theycletimen be

According to Easingwood (1988), in the capital goods industry the diffusion ratebe lowered by the fact that the savings from adoption, while significant, are relativsmall compared to total production costs, and there is no pressing need to adopt.adoption decisions are influenced by direct or indirect contact with adopters. Thosemake decisions to adopt independently of the actions of others are called innovativeers. Those buyers are particularly important in the early stage of a product’s diffusFig. 3.18 illustrates different types of PLC curves.

Fig. 3.18. Different types of new product diffusion classes (Donaldson 1995, p. 432).

3.4.2. Factors influencing product life cycle

Even though several factors influencing a product’s life cycle and its shape are beyonreach of the supplier company, they can nevertheless be manipulated to some eSome markets are expandable; they will grow if the right strategic moves are made (Set al. 1982). For example, the rate of approval of a new innovation can be influencedcreating a “scientific” basis for the innovation prior to launching. A typical product licycle analysis pays no attention to that part of the innovation chain that unfolds beforproduct enters the markets; and yet this part of the whole product or innovation life cis extremely important for the actual launching. This phase also has an effect on theof launching, and during it the approval readiness of the prospective customers catested.

PlateauLow Priority

Slow Uniform

UniformDelayed

Accelerated

RapidPenetration

FastUniform Late Rush

75

asel ser-ge by

erna-

rod-pre-nds

uca-se theri-

rod-e rea-ouldthat

in adiffi-angeg itaseelyBos-

ncepter-

Manufacturers can also invest in promotion and distribution coverage to increawareness, expand sales activity to include trials, reduce risk by providing technicavice, warranties and after-sales service support, and enhance the relative advantareducing the delivered price or adding new features (Day 1981).

The development of the life cycle can, moreover, be evaluated by using some alttive development curves as illustrated in Fig. 3.19.

Fig. 3.19. Realised, demanded, potential and forecasted PLC (Swanet al.1982, p. 74).

The progress of the life cycle curve from a certain point can be applied both for pucts and for applications of the production particular, the company should be able todict the “potential” alternative. This alternative is usually dependent on the general treand overall development of the industry.

Industrial innovation, like any type of product, may require extensive customer edtion before being widely adopted, as well as encounter some initial resistance becautechnology is not fully stabilised. Similarly, the entry of competition may stimulate pmary demand, and new technology and products replace old ones (Thorelliet al.1981).

The technologies underlying a product and its manufacture must stabilise if the puct is to be widely adopted and if economies of scale and experience effects are to blised. Thus innovations that might increase manufacturing and marketing costs shmeet resistance as a product moves through its life cycle. It also seems plausibleinnovations that are the easiest to develop and implement would be incorporatedproduct first. After these changes are made, incremental innovations are likely to becult and more costly to achieve. The payback of a new product or major product chwould presumably have to be greater in order to justify the increased risk of introducin(Thorelli et al. 1981). As the product development input and marketing costs decrewhen the life cycle progresses, the profitability of the product usually remains relativgood, despite a general pressure to lower its price, and the cash flow improves. Theton Consulting Group has stated that its analysis of business dynamics led to the coof the “experience curve”; that is, the total unit cost of a product declines by a fixed p

Sal

esR

even

ue Realized PLCPotential PLC

Forecasted PLC

Demanded PLC

0 Past Present FutureTime

76

s areevel-arlyst is

the. Thef ahile

f thes andin thedevel-

oxy-ablen thisocess

centage each time the cumulative number of units produced is doubled. (Bernardet al.1974).

When the technology stabilises in the “maturity” phase, more and more companieable to enter the markets, at the same time avoiding the innovation and technology dopment costs involved in the first stages of a product life cycle. This trend is particulobvious in fields where the product technology is stable and product development colow in relation to production cost. Innovative companies striving to be the first onmarket must use higher prices to cover the high development and marketing costsinnovation marketer should plan for a non-price promotional policy at the outset oproduct diffusion. Later on the company can then trade down with a simpler version wstill holding on to the high-priced, most profitable segment of the market.

3.4.3. Product life cycle in pulp and paper industry

Oxygen delignification serves as a good example when looking at the first stages oPLC curve of pulp & paper making machinery and the related special measurementcontrol solutions. As a process (Fig. 3.20), it had already reached the industrial scaleearly 1970s and began to gain ground towards the end of the decade. However, theopment of Kappa number measurement (Fig. 3.21) – an essential special analyser ingen bleaching control – only began in the early 1980s, and the first commercially availautomatic measurement was launched in 1984, in other words about 14 years later. Icase the development of the measurement was significantly delayed in relation to prdevelopment.

Fig. 3.20. World-wide production capacity of oxygen-delignified pulp (Tenchet al.1991, ).

77

ovee forefer-pecialrfor-

ve-. Forelop-

ecialoncen-

iss anelop-us-tim-ic sit-

reateed into

Fig. 3.21. Development of STFI-OPTI Kappa (Krantz 1995, p. 95).

When marketing special instruments still in the introduction phase, the ability to prtheir benefits and getting good “references” is especially important. This can be donexample through joint testing and evaluation with a customer. However, the use of rences is complicated by a host of process technical questions related to the use of sinstruments, for example the use of chemicals and additives to improve process pemance. This kind of information may be a crucial factor for the customer’s competitiness and therefore the customer may be very reluctant to reveal it to competitorsexample, in the paper industry the use of chemistry, and questions related to the devment of chemicals and optimising their usage, may in fact prevent the use of spinstruments in that part of the process as references. On the other hand, the strong ctration of the industry promotes the spread of such information within the industry.

The "potential" life cycle of a special instrument for the pulp & paper industrystrongly influenced by the development of the process and equipment technology. Aexample, focusing on certain printing paper grades which are dependent on fast deving printing technology, influences the life cycles of all technologies used in this indtrial sector. The cyclical nature of the pulp & paper business further complicates theing of new product launches, as customer needs may change radically if the economuation changes.

3.4.4. Applying the product life cycle concept in strategic productmanagement

In strategic product management the product life cycle analysis can be applied to calternative product and business strategies. These alternative strategies can be dividfive basic groups, as shown below in Fig. 3.22:

78

mercost

. Thesed asmar-mon

matic,lvedarch

tech-

Fig. 3.22. The search for a strategic advantage (Onkvist 1986, p. 55).

3.5. New product development - part of the innovation process

The goal of new product introduction is to create new offerings that satisfy custoneeds. Achieving timeliness, performance, and price that delight the customer, at athat ensures profitability for the suppliers, is the measure of its success (Arnold 1992)process from idea into a successful commercial product is nowadays much emphasithe product life cycle is getting shorter, technologies develop at increasing speed andkets are globalised. More rapid spread of research results and their becoming comproperty has changed the nature of the product development process: from a systelong-term effort including research, product development and production, it has evointo a quick process which must pay attention to and apply new technology and reseresults more quickly than ever before. The learning time of new competencies and

Pioneer:

Get first crack at the market.Obtain patent.Create legal hurdles for others.Match/surpass imitator’s prod-uct features.Dominate/saturate the marketwith more of own brands.Be offensive (give trade dis-count, samples, coupons, andso forth).Promote own product system asthe industry’s standard.

Imitator:

Avoid being first.Let a pioneer open a newmarket.Learn from pioneer’s mistakes.Be a fast imitator.Offer an improved productversion for differentiation.If not fast or different, offer alower price.

Expansion:

Promote more frequentusage.Promote more varied usage.Attract new users.Make a new productfrom the same technicalbase.

Transition:

Look for product replace-ments.Use today’s stars as cashcows.Avoid milking cash cowstoo dry.

Future:

Observe new technologies, evenin unrelated fields.Understand the implications ofthe S-curve.As the S-curve approaches itstechnology limit, plan for anorderly switch to a new tech-nology.Avoid switching too quickly.Consider cost and timing forswitching.

79

func-

s atwo. Ons, andrcial

s ofion-ucts

sts

va-

sen-

ead-

sscus-

andy dif-op-

nologies must be shorter and the product development process also includes othertions: marketing, production, quality assurance, to name but a few.

3.5.1. Definition

Innovation, by definition, involves the creation and marketing of something new; it icomplex process that is difficult to measure and control. It is controlled basically bydistinct sets of forces that interact with one another in subtle and unpredictable waysone hand there are the market forces, such as changes in incomes, relative priceunderlying demographics, that combine to produce continual changes in commeopportunities for specific categories of innovation. On the other hand, the forceprogress at the scientific and technological frontiers often suggest possibilities for fashing new products, or improving the performance of old ones, or producing those prodat lower cost. (Klingeet al.1986).

Innovation is not a matter of intuition or serendipity. Most of the time, innovation reon systematic perseverance, guided by scientific theory (Jelineket al.1990).Innovation in industry is often associated with the development of products; but innotion may also be:– a new process of production;– the substitution of a cheaper material, newly developed for a given task in an es

tially unaltered product;– the reorganisation of production, internal functions, or distribution arrangements l

ing to increased efficiency, better support for a given product or lower costs; or– an improvement in instruments or methods of creating innovations.

According to Olsonet al. (1995) product development is a part of innovation procewhere one converts an abstract idea into a tangible product, delivering it to potentialtomers when and where they want, providing it at a price they are willing to pay,earning at least a reasonable profit – a process that requires the application of manferent skills and the solution of a variety of functional problems. Most product develment projects require the participation of many functional specialists.

80

lan-nsid-

ng ision of

duc-nge:

ove-truc-

major

n”were

e to aring

Fig. 3.23. Product development as part of the innovation process (Roozenburget al.1995, p. 13).

Product development, as illustrated in Fig. 3.23, in turn consists of the product pning and strict development stages. In most cases, only the strict development is coered to be "product development" or "product design". Nevertheless, product plannian important part of the product development process and is necessary for the incluscustomer needs and market potential in the plans.

3.5.2. Nature of innovation

Most innovations are by nature incremental. As an example, European machinery proers between 1950 and 1975 confirmed the evolutionary nature of technological chathe bulk of patented changes (more than 90%) were technically relatively small imprments to existing machines; a small number (less than 5%) represented fairly major stural changes to an existing machine; and a still smaller number (1%) represented adesign breakthrough or a major technological step forward (Rothwellet al. 1989). Thusthe vast majority of innovations could be classified as “re-design”, not “re-innovatiochanges. The ideas for incremental innovations arose more frequently in-house, butless often associated with formal in-house R&D; in most cases they were a responscustomer’s direct request, and often they involved collaboration with suppliers dutheir development (Rothwell 1991).

The entire iterative innovation process can be described with the following figure:

Productiondevelopment

Generating andselecting ideas

Formulatinggoals andstrategies

ProductionDistributionand sales

UseNewbusinessidea

Productdesign

Productdesign

Productpolicy

Marketingplan

Marketingplanning

Productionplan

Policyformulation Idea finding

Product planning Strict development

Product development

Innovation

81

to5, ins are

Fig. 3.24. Innovation as an iterative design process (Rothwellet al.1989, p. 148).

Hendersonet al. (1990) have divided innovations into four categories accordingtheir core concept and the way these are linked together. As illustrated in Fig. 3.2addition to the conventional radical and incremental innovations, two new categorieincluded: architectural and modular innovation.

Fig. 3.25. A framework for defining innovation (Hendersonet al.1990, p. 12).

BASIC IDEAOR

CONCEPT

INVENTION INNOVATIONRE-

INNOVATIONPractical and MaterialEmbodiment of theBasic Idea or Concept

Design forMarketable Product

CommercialExploitation of theBasic Idea orConcept ie.specific productcharacteristics ata practical price

Altered Productand ProcessSpecificationse.g. improvedperformance oflower cost

MASTERPATENTS

IMPROVEMENTPATENT

Patents, Registered Design and Trade Markstaken out for protection

Mk Mk Mk MkI II III IV

Mk Mk Mk MkV VI VII VIII

Re-design

Design forDemonstration

Post-Production Design Process

Pre-Production Design Process

Core conceptsReinforced Overtuned

IncrementalInnovation

ArchitecturalInnovation

RadicalInnovation

ModularInnovation

Lin

kage

sbe

twee

nC

ore

Con

cept

san

dC

ompo

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s

Unchanged

Changed

82

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costions

3.5.3. Origin of innovation

The innovation process can be classified according to its nature and also to its origintraditional classification applies the need or availability of technology; but as the conof innovation has expanded, the innovation process itself has also become a source oinnovations. Thus the need-availability-process chain has given rise to new models.

Fig. 3.26. The origin of innovations (Rothwell 1986, p. 110).

3.5.3.1. Technology push model

The technology push model illustrated in Fig. 3.26 (a), is the traditional one andwidely in use. This approach requires that the company keeps in close contactresearchers and research institutes, and moreover possesses good product develcapacity to convert the research results into tangible products (Rothwell 1986).model is in action when an unconventional technology is applied to replace existingor when it is used to create wholly new solutions and operating models.

Innovation and design often arise, not only from the desire to meet the originaltomer or user need as well as possible, but also from in-house “design philosophThese include the demand that the product must be possible to manufacture at a lowand be applicable to further incremental design, for example to allow new versaccording to the competitive situation without major changes in the basic solutions.

(a) SCIENCE DISCOVERS, TECHNOLOGY PRODUCES, FIRM MARKETS

BasicScience

AppliedScience andEngineering

Manufacturing Marketing

(b) NEED PULLS, TECHNOLOGY MAKES, FIRM MARKET

MarketNeed

DevelopmentManufacturing Sales

83

ce ofduct

ed-iny to

and, thelow-

n foris a

s theyd cus-roject.er-

timeper-

3.5.3.2. Need-pull model

The need-pull model, Fig. 3.26 (b), assumes that customer need is the main sourinnovation, and the firm does not need actual research at all; even the role of prodevelopment has been questioned. Firms adopting this role run the risk of being lockto a regime of incremental innovation in existing areas as a result of innovating onlmeet gradually changing user specifications.

3.5.4. Product design – balancing between demands

Modern market trends, such as shorter lifetimes and increasing demand for varietynewness, are having a profound effect on the process of product design. In additionpace of technological change in electronics is now very rapid and shows no signs of sing down; and concepts like value engineering, design for manufacturing and desigserviceability are increasingly emphasised. At the start of any design project therecompromise to be made between four fundamental demands; Fig. 3.27.

Fig. 3.27. A framework for efficient product design (Hall 1995, p. 5/1).

Reaching a balance between these four design parameters is a true challenge, aare all dependent on either the end users or the markets. Moreover, competition antomer needs may cause changes in these parameters even during the product pThus, the longer the product development time is, the more likely it will be that the opating environment will change in the meantime. For this reason time, especially theneeded for development, is today of prime importance. The time a new product can oate on the market without competition is very short.

PRODUCTCOST

DESIGNCOST

PRODUCTPERFORMANCE

DESIGNTIME

84

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al orova-tar-

er, isess ofacity

tohno-

uni-the

fit-etheright

high-rtain

sed,ions.t are

3.5.5. Measuring the effectiveness of innovation process and producdevelopment

The effectiveness of the innovation process is commonly measured by either techniccommercial criteria. In the business world, the final measure of the success of the inntion process is, naturally enough, its approval by customers and its ability to solve thegeted customer need in an economically profitable way. The economic result, howevalso dependent on other than product technical innovations, such as the effectivenmarketing and distribution channels. Thus when measuring the overall innovative capof a firm, the criterion should be the final economic result; innovations related onlytechnology or economic processes will give a distorted picture of the whole. The teclogical approach is very common in research projects in which research institutes andversities are involved. The assumption then is that solving the given problem andtechnical solution, in terms of technological excellence, will give an economically proable result. Today, technical and economic criteria are more and more often used togwith “softer” values, such as environmental factors. One way to measure innovation malso be to study its effect on the company image. For example, a company building atech image may do this by means of patenting, publishing and innovations within a cetechnological field. Fig. 3.28 illustrates different attributes of innovation.

Fig. 3.28. Attributes of the innovation (Hauschildt 1991, p. 605).

Typical criteria of the strict development stage include the amount of resources uthe duration of the project, and the accuracy of timetables and technical specificatOften also the warranty and modification costs coming after the development projecconsidered as criteria indicating the efficiency of the product development project.

Attributes of the innovation

Technical effects(technical dimensions)

Other effectsEconomical effect(financial dimension)

directeffects

specifictechnological

attributes

directeffects

- sales- subsidies- profit/

contributionmargin

- costs

indirecteffects

- reducing the salesof the competitors

- raising the costs ofthe competitors

- social profitability

system-specificeffects

- ecological effects- social effects- effects of

autonomy

individualeffects

- scientific reputation- self actualization

indirecteffects

- learning effects- experience

know how- transfer effects

spin-offs- publicity effects- defensive effects- discovery of

bottlenecks/weaknesses

85

rent. alpro-

ch as.

think-

t vari-

and

ut or

ified

pt or

3.29.tureannerto a

3.6. Models and methods of new product development

Systematic product development is extensively discussed in the literature, giving diffemodels and methods (Pahlet al.1996). Companies studied in the research of Mahaja et(1992) mentioned 24 different models that were applied in the product developmentcess. Some of these were limited only to a certain part of product development, suproduct design, while some of them were applied to product development as a whole

According to Roozenburget al.(1995), design methodology defines:– models of design and development process as representation of the structure of

ing and action in designing, and– methods and techniques to be used within these processes.

Sarens (1984) uses the following classification of product development models:– departmental stage models – based on departments and functions, who carry ou

ous tasks;– activity-based models – based on activities carried out by separate functions

departments;– decision-stage model – series of evaluation points, where the decision to carry o

abandon the project is made;– conversion models – holistic view of the process based on collection of unspec

tasks and flow of information– response models – focus on the individual’s or organisation’s response to acce

reject an idea or a project

3.6.1. Development methods

Connections between method, organisation, and treated system are illustrated in Fig.Roozenburget al. (1995) define method as the consciously applied diachronous strucof an action process. In a diachronous structure, elements are arranged in a certain mwith regard to time. A method is not an order or recipe; it is more general and referswhole class of actions.

86

Fig. 3.29. Connections between methods, organisation, and treated system (Roozenburget al.1995, p. 46).

Roozenberg (1995) and Pahl (1996) list typical characteristics of method:– a specific way to proceed,– a rational procedure,– general,– the use of the method is observable,– encourage a problem-directed approach,– foster inventiveness and understanding,– does not rely on chance,– be easily taught and learned,– facilitate the application of known solution to related task,– reflect modern management-science thinking

Acting system(material organization)

Treated system(Product Development Task)

Action process(New Product Development)

Functional organization

Method

87

wasthem

oductrd toes the

rtainqual-

ges:vel-

model

3.6.1.1. Quality function deployment – QFD

Of the methods used in product development, QFD is one of the newest. This methoddeveloped for use when describing and interpreting customer needs and convertinginto product features and tangible product. The customer needs are turned into prfeatures by using a matrix where the importance of each need is estimated with regathe users, competitive situation, and company goals. The result is a scale that describimportance of the different product properties when aiming at the satisfaction of cecustomer needs. The first part of QFD as described in Fig. 3.30, called the ‘House ofity’ is used to transfer customer need to product attributes.

Fig. 3.30. QFD – House of Quality (Griffin 1996, p. 225).

3.6.2. Development models

The typical progress of product development is traditionally divided into certain stafinding or getting an idea, planning the product and its architecture, actual product deopment, and delivery. Cooper describes the New Product process with a stage-gate(Cooper 1993):

Customer needs(200-300 in hierarchy)

Clarity Crispness of linesDistinguish detailRead graphics textMore than one person

No eye Easy to read textstrain Flicker not noticeable

Comfortable eye level

... ...

Relationshipsbetween

customer needsand

design attributes

Cost and feasibility

‘Engineering’measures

5

2

1

4...

Designattributes

Customerperceptions

NEXT NEC IBM

Importance

88

epa-se ofnd to

newel ton bes canlatedcusns of

Fig. 3.31. A generic stage-gate process of new product development (Cooper 1993, p. 108).

The purpose of the model is to split the process into easily identifiable phases, srated from each other by a distinct step that involves certain decisions. The purpothese decision-making steps is to reduce uncertainty as the project progresses, aensure that the goals set for the project are reached.

Different models have been created to organise and carry out the tasks involved inproduct development, and the links between the different tasks vary from one modthe next. Based on the relationship and timing of the different tasks, the project caorganised in the ways illustrated below. Within the proposed models, various methodbe applied to the different activities. For example the customer needs can be transinto product specifications by applying suitable parts of the QFD method or the fogroup method, while the characteristics of the user interface can be studied by meaconjoint analysis (Mahajaet al.1992).

Fig. 3.32. Different models for the organisation of product development projects (modified fromEppinger 1996 by adding the concurrent model).

Gate1

Stage1

Gate2

Stage2

Gate3

Stage3

Gate4

Stage4

Gate5

Stage5

Idea PIR

Ideation

InitialScreen

PreliminaryInvestigation

SecondScreen

Decision onBusiness

Case

Development

PostDevelopment

Review

PrecommercializationBusinessAnalysis

PostimplementationReview

DetailedInvestigation

(Build BusinessCases)

Testing &Validation

Full Production& Market Launch

A

B

A B

Dependent(serial)

A

B

Interdependent(coupled)

Independent(parallel)

A

B

C

D

Overlapping, iterative andintegrative (concurrent)

89

enteachdevel-e iselsr andce ofionore-ant

sameclear,ideasffer-takes

n thel by

ping,ger

riousrod-ility,chal-

theFD)

rket-t of antrate

e parts/herject in

theandddi-says

Fig. 3.32 illustrates different models for the organisation of product developmprojects. In the serial model the different stages of the project are subsequent toother, so that one stage must be completed before the next one can begin. Productopment according to the serial model is very straightforward, and its typical principlthe Total Quality Management statement ‘Do it right the very first time’. Serial modhave been much criticised as the product development cycles have become quickequality expectations higher. The serial model also under-emphasises the importanprocess innovation; if the scheme fits innovation at all, it is only a product innovat(Teece 1989). Process innovations often do not require marketing or new tooling. Mover, the serial model does not highlight the many small but cumulatively importincremental innovations that are often at the heart of technological change.

The benefit of the parallel model is that several tasks can be performed at thetime, thus shortening the cycle. But in order to be successful, this model requires adetailed description of the tasks, and its biggest drawback is that innovations andemerging in the process are very little taken into account. In the parallel model the dient project stages are not clearly separated from each other and a lot of re-designplace as the interest groups participating in the project have their say on matters isynthesis phase. The coupled model in turn aims at improving the parallel modeincreasing interaction and iteration during the process.

The principle of the concurrent model is to accelerate sequential tasks by overlapsolving coupled issues by interaction and co-ordinating parallel activities (Eppin1996).

3.6.2.1. Concurrent engineering

Concurrent engineering is generally recognised as the practice of incorporating valife-cycle values into the early stages of design. These values include not only the puct’s primary functions but also aesthetics, manufacturability, assembly, serviceaband recyclability. Concurrent engineering is largely an organisational and manageriallenge: communication between the different parties involved, early design reviews bydevelopment team, and applying value engineering/quality function deployment (Q(Kosuke 1993).

In concurrent engineering, everyone from engineering, manufacturing, design, maing and finance has to be involved in the development phase. As 50-70% of the cosproduct is already determined when the layout is completed, it makes sense to conceengineering resources in the earliest part of the development cycle (Eaton 1987).

Concurrent engineering means asking each player of the organisation to becomof the project from the very beginning. Here each player can at any time express hiconcerns, suggestions or constraints, and thus influence the development of the proreal time (Durand 1995).

Additional cost will appear in an organisation that uses concurrent engineering:representatives of each function will have to be involved in the project much morelong after their own perspective, expertise and opinion are absolutely required. In ation, there is a contradiction between concurrent engineering and Total Quality that

90

tens

mustof the

n thensi-

heduc-

dur-nismsnderimen-

prin-erac-r of

).

‘do it right the very first time’. This principle does not very well fit in with the iterativenature of design and development in concurrent engineering, but it significantly shorthe time usually needed for launching a product.

Moreover, when the benefits of concurrent engineering are being evaluated weremember that changes and corrections to the product structure in the later stagesproject are not only costly; they may even mean that the other resources involved iproject simply have to wait while changes are being made outside their field of respobility.

By involving marketing in new product development from the very beginning, tPACE (product and cycle-time excellence) program of Du Pont Co. has achieved a retion of 40% to 60% in the product development project duration (Stevens 1995).

Japanese firms have made the transition from imitator status to world-class statusing the last decade. This has been achieved through the use of a variety of mechafor integrating managerial functions, technical competencies and information (Bowaet al. 1993). Japanese innovation processes are highly interactive and consist of dsions such as:– emphasis on commercialisation rather than on basic research;– rapid diffusion of identified technologies;– continuous, regular product and process innovation;– rapid competence building;– organisational learning; and– forming new subsidiaries through tie-ups for integrating technologies.

One reason for the efficiency of the Japanese innovation process is the concurrentciple based on the integration of different functions. This could be described as an inttive and synergistic process in which functional integration is supported by a numbeelements, as seen in Fig. 3.33:

Fig. 3.33. Elements of information strategy and new business development (Bowander 1993, p. 153

NEWBUSINESS

DEVELOPMENT

TECHNOLOGYSCANNING

TECHNOLOGYINNOVATIONS

TECHNOLOGYDIFFUSION

TECHNOLOGYACCUMULATION

CONCURRENTENGINEERING

TECHNOLOGYFUSION

HORIZONTALINFORMATION

FLOWSYSTEM

ORGANIZATIONALLEARNING

91

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ends,ty tos but

rocess,

e inds toprod-uctsturedif-

anyaches

3.6.3. Design approach

Engineering design is concerned with the design of products and systems from anneering perspective. There are three fundamental approaches to engineering desiglytical, procedural, and experimental as described in Fig. 3.34. The analytical approaa function of precisely defined problem attributes. The procedural approach is a tradprocess where the objective is modified as the design proceeds, resulting in a solutiosatisfies all the design objectives in the best manner. The experimental approach to drelies on the matching of design attributes to the objective of the design processearches for numerous possible solutions to arrive at a solution to the design problem

Fig. 3.34. Approaches to engineering design (Noble 1993, p. 405).

3.7. Customer orientation

Today innovative companies emphasise the importance of understanding world trregardless of their association with the present product/technology mix, and the abilidraw hints from those trends on how to not only meet a customer’s expressed needhis unarticulated needs as well (Stevens 1995). Innovation has become a business pnot a research process.

3.7.1. Customer - manufacturer roles in innovation process

Typically, in consumer goods the supplier and manufacturer play a very active rolproduct innovations. In this sector there are also many marketing tools and methostudy and chart customer needs, customer likes and dislikes, and to refine these intouct features. These tools have been very little applied in the industrial and capital prodmanufacturing; reasons stated for this include (von Hippel 1979) differences in the naof the multi-person decision processes that is characteristic of industrial buying, andferences in buying behaviour resulting from the complex “systems-like” nature of mindustrial products, e.g. an assembly line. Customer-active and supplier-active approcan be illustrated with the following picture:

Analysis

a) Analytical Approach

Iteration

b) Procedural Approach

Extensive Search

c) Experimental Approach

Input output input output input output

92

andlop-the

ine

d-bethe

cus-ances. Fig.

pro-

Fig. 3.35. Two paradigms for new product idea generation (von Hippel 1979, p. 83).

When a firm and its potential customers are relatively unfamiliar with each otherhave little previous experience of a new product, the functional task involved in deveing the concept and bringing it to market are more difficult and challenging than whenproject involves a more straightforward modification or extension of an existing l(Olson 1995).

The customer-active paradigm can only be applied in situations where the woulcustomer is overtly aware of his product need – while methodologies developed incontext of the manufacturer-active paradigm can be applied to either overt or latenttomer needs. The manufacturer-active paradigm can be applied only under circumstin which the new product opportunity is accessible to manufacturer-managed action3.36 illustrates the user and manufacturer roles in different phases of the innovationcess.

Fig. 3.36. User and manufacturer roles in the innovation process (von Hippel 1977a, p. 61).

CUSTOMER

CUSTOMER

CUSTOMER

MANUFACTURER

- need data analysis

- product ideageneration

- idea screening

MANUFACTURER

- idea screening

Need search&

test

CUSTOMER

CUSTOMER

CUSTOMER

new productidea

fromone user

A Consumer Product IdeaGeneration Practice andManufacturer-active Paradigm

B Empirically Observed IndustrialProduct Generation Practice and

Hypothesised Customer-activeParadigm

INNOVATIONPATTERN DOMINANT LOCUS OF ACTIVITY

User-Dominant

ManufacturerDominant

Marquis and MeyersInnovation Process

Stage

(CapsuleStage

Descriptions)

Product User Manufacturer

User Product Manufacturer

RecognitionIdea

FormulationProblemSolving Solution

Utilization andDiffusion

Pre-commercial

Utilization andDiffusion

Commercial

(Recognition oftechnologicalfeasibility of oninnovation andpotential demandfor it.)

(Fusion of feas-bility and demandperceptions intoa design concept.)

(R&Dactivity)

(Invention)

93

hip asd then theinstru-et” ormon

pecialica-axi-

tantoten-for-

3.7.2. Buyer - seller relationship

The user-manufacturer relationship in the marketplace is also a buyer-seller relationsshown in Fig. 3.37. The competitive position and marketing strategies of the seller anpurchasing strategies of the buyer influence the future innovation process betweebuyer and seller. The relationship between process machinery suppliers and generalments and automation systems suppliers is largely characterised by a “buyer’s mark“subcontract market” situation: the buyer has several alternatives, as the most cominstruments and automation systems are nearly identical. The situation as regards sinstruments and control applications is more “interdependent”. Particularly in appltions, both the buyer and seller strive for a co-operative strategy in order to realise mmum benefits from the solution. Often such a co-operative solution involves imporexpertise and knowledge that each party must reveal to the other to fully realise the ptial of the application; and at the same time, due to tight competition, keeping this inmation from reaching the competitors is of primary importance to both parties.

Fig. 3.37. Classification of buyer-seller relationship (Campbell 1985, p. 37).

Marketing StrategiesCompetitive Cooperative Command

Pu

rcha

sing

Str

ate

gies

Com

petit

ive

Coo

per

ativ

eC

om

ma

nd Independent

Perfect Market

Independent

Seller’s Market

Mismatch

MismatchIndependent

Buyer's Market

Mismatch

Dependent

SubcontractMarket

Interdependent

DomesticatedMarket

Dependent

Captive Market

94

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manu-f cus-trivehat

theno-ificembly

78,

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3.7.3. Importance of customer-active approach in new productdevelopment process

In areas where it is feasible, manufactures have a great deal to gain from involvinguser in the design and development process, both in its pre-launch (initial innovation)post-launch phase (re-innovation) (Gardineret al. 1985). Firstly, the manufactures cancomplement their own R&D efforts through plugging in to the technical strengths of thcustomers. Secondly, involving the user is a great aid to establishing the optimum pemance/price combination which in turn establishes optimum design specificatiThirdly, involved users undergo a learning process that enables them to operate theequipment better and accelerates the acceptance process for major new design. Thefacturer has, however, to ensure that he is plugging in to a representative sample otomers, otherwise his design will have little general market appeal. He should also sto plug-in to innovative customers who demand high quality, high reliability products tprovide him with a stringent design stimulus.

In the innovation process of capital goods, the end user often plays a key role inbirth of the innovation. In his research von Hippel (1979) found that user-dominant invation accounted for more than two-thirds of first-to-market innovations in scientinstruments and in process machinery used in semiconductor and electronic subassmanufacture.

Table 3.1. The role of product users as innovators in different industries (von Hippel 19p. 34).

Number in parentheses indicates the number of case in each sample.

Customer-driven innovation varies considerably according to the nature of the bness. This is largely due to how much and how detailed expertise and information o

First device used in the field developed andbuilt:

Field of innovations and sample selection crite-ria By product user

By productmanufacturer

Instrumenta-tion

Scientific instrument innovations:First of type (4)Major functional improvements (44)Minor functional improvements (63)

100%8270

0%1830

Processequipment

Innovations in semiconductior and electronicsubassembly manufacturing equipment:First of type used in commercial production (7)Major functional improvements (22)Minor functional improvements (20)

100%6320

0%2129

Polymers All engineering polymer innovations developedin the U.S. after 1955 whose production in 1975exceated 10 million pounds (6)

0 100

Additives All commercialized plasticizers and ultravioletstabilizers developed after 1945 for use withfour major polymers (16)

0 100

95

owl-

” tolows:

n thestage

on-aches

var-

eedswith-ring

ays.rojectucelved

field is needed to produce innovation. The user-innovator must possess sufficient knedge of the field as well as sufficient theoretical background.

The readiness of a customer-active innovation may vary, from “description of needa ready and tested product. von Hippel (1979) has classified the levels of ideas as fol– Complete product design– Development of product functional specifications– Determination of a solution type– Apprehension of a problem (need)

How far the customer develops the idea is dependent on his own abilities and oco-operation partners available. In most cases the role of the customer ends with the“development of product functional specifications”. In addition, the time required to cvert an idea into a commercial product is dependent on whether the customer approa supplier or chooses to develop the product himself, to meet his own needs; the timeies from one year to 3.7 years (von Hippel 1979).

Studies show that failed product innovators do not understand customer n(Fig.3.38), they design products that cannot be manufactured, and launch productsout regard for the realities of intermediate and ultimate users (Cooper 1983). Assuthat the product is ‘right’ for the customer’s needs is important in avoiding serious delThis means that the product concept has to be tested to find out what the product pwill be. Much more front-end work has to be done to find the concept and to redexpensive changes at the end of the project. Various functional groups must be invoin the early stages of the project.

Fig. 3.38. Most difficult to accomplish NPD activities (Guptaet al.1990, p. 33).

0 10 20 30 40 50 60 70

launching the product

defining product performancespecifications

getting the 'go-ahead'from senior management

developing the business plan

managing marketing/ R&D interface

managing manufacturing/ marketing interface

transition from R&D tomanufacturing

finalizing the product design

market testing

assessing market potential

96

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nd on

ologyprob-

s arethese

isg the

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Donnel.989)., but

those

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Another study (Cooper 1983) states that the main reasons for product failuresmostly market dominated:1. underestimated competitive strength and/or competitive position in market;2. overestimated number of potential users;3. product price too high;4. technical difficulties/deficiencies with product.

In the same study, the most important success factors were found to be:1. recognition of a technical opportunity;2. need (market) recognition;3. proficient internal R&D management;4. well-executed venture decisions;5. ample development funds;6. a technical entrepreneur.

Nearly all studies state that the most important success factor is the understandiuser needs and of the marketplace. And yet it seems to be a common occurrence inuct development to forget market assessment and market research. Successful projemarket-pull based and rely heavily on market information. Success seems to depedoing many things right, whereas failure can result from a single error.

Often the end user, at the need charting stage, is not interested in the technapplied to meet the stated need, but rather emphasises the necessity of solving thelem. According to the author's own experience, however, when product requirementbeing defined, attention must be paid to the other interest groups of the customer, asgroups may be very interested in the way and technology with which the problemsolved. Thus their requirements for the product must be also heard when formulatincustomer requirements.

Even though the contacts of marketing and product development reach different fand levels of industry, the role of true pioneers is particularly important for a proddevelopment process (Maidiqueet al. 1984).

3.7.4. Identifying customer needs

The identification of needs is critical for the profitable expenditure of R&D dollars. R&personnel must thus be closely connected to the market and to the marketing persScientists must have one foot in the laboratory and one in the marketplace (Teece 1It is not just a matter of identifying user needs and assessing engineering feasibilityone must also separate those user needs which are being met by the competition andwhich are not.

There is a feasible set of attributes at a particular time that a product needs to mato be viable. This feasible set may be nebulous and shifting as the market and technboth emerge interactively over a period of years. For some product ideas there mayfeasible set, and discovering this fact as quickly as possible is also a positive outc(Dougherty 1992). When technology develops very quickly, technology-related custoneeds may change very rapidly and the accuracy of estimated customer needs is ddent on the product development time as illustrated in Fig. 3.39. This is very importan

97

omerut in

prod-uire-con-and

oneousoundomer, or a

oorlyat is

regards the timing and duration of a product project: potential rapid changes in custneeds make it a necessity to master the technologies applied to carry the project ominimum time.

Fig. 3.39. Accuracy of market estimates is dependent on product development time (McGrath1996, p. 7).

Defining product requirements when the customer has no experience of such auct is complicated. Product specification is based on performance or operation reqments set by users or the environment. The product specification situation thus easilycentrates on solving technical problems by engineering, and the problem settingactual customer need has already been passed by. Another possible reason for errsolutions may be that the actual “need” has been defined incorrectly, as the solution fhas not satisfied the market. This may be caused by a wrong choice of target custgroup (demography, geography), a lack of economic background (investment goods)change in customer needs during the product project.

As illustrated in Fig. 3.40, in many cases the needs expressed by customers are pstructured and may in fact be related to another problem instead of the problem thexpressed.

Reduced Development Cycle

% Accuracy WithReduced Development Cycle

% Accuracy WithNormal Development Cycle

Accuracy Curve

Time

%A

ccu

racy

inE

stim

atin

gM

ark

et C

on d

ition

Normal Development Cycle

98

itutetioncon-andatelysignbodylogy

fer-iousl pos-lving

at-con-uch asg of

houlduct

with-ea.o be

Fig. 3.40. Requirements expressed by customer (Jokela 1996).

Moreover, company orientation, values, abilities and organisational factors constadditional "filters" influencing the way customer signals are interpreted. The informafilters of an organisation also embody its architectural knowledge. Organisations arestantly barraged with information; but when the task facing it begins to stabilisebecomes less ambiguous, the organisation develops filters that allow it to immediidentify what is crucial in the information stream. The emergence of the dominant deand its gradual elaboration moulds the organisation’s filters so that they come to emparts of its knowledge of the key relationship between the components of the techno(Hendersonet al. 1990). Over time, engineers acquire a store of knowledge about difent technical solutions to the specific kinds of problems that have arisen in prevprojects. When confronted with such a problem, the engineer does not re-examine alsible alternatives but, rather, focuses first on those that he found to be helpful in soprevious problems.

In the author's experience, the most difficult factor with special instruments is estiming the customers’ willingness to accept new methods and solutions that differ fromventional standards or methods. Other complicating factors are external pressures, slegislation and environmental groups; these particularly complicate the correct timinneeds.

Instead of searching for customer needs, customer-active product development slook for the customers’ solutions, as two thirds of significant innovations and prodimprovements have been initiated by customers or end users (von Hippel 1977b).

3.7.5. Converting customer needs into product features

Customer needs should always be expressed using the customer’s own terminology,out confusing it with product features of a potentially existing product or product idThe customer may already have a solution in mind, and this solution should als

WHATHOW

99

OneQFD

prod-Fig.ke sure

es ornot beppingnsed in

theopedmore

described in the customer’s words, using the voice of the customer (Sullivan 1986).method used for transferring customer needs to product design attributes is themethod.

When customer needs are being studied, it must be remembered that a potentialuct concept may in fact be the seed of a larger product family (platform) as shown in3.41. In such cases the customer needs should be studied extensively enough to mathat the product requirements also cover all of the future application potential.

Fig. 3.41. Principle of platform-type charting of customer needs.

In product specification some things can be expressed as concrete numeric valuwords whereas some features are based on feelings and “touch”. Such features canexpressed numerically, and understanding and finding these properties requires “steinto the user’s boots”; Fig. 3.42. While visceral knowledge is richly grounded in inteinterpersonal relations and action research, feasibility knowledge is richly groundeexpertise and professional know-how (Dougherty 1992). Firms that have anticipatedtrajectory of technology and market know-how for new product ideas and have develthose underlying resources would be able to generate feasibility knowledge evenquickly for specific products.

Customer needA

Customerrequirements

Customersolution

Designattributes

Productconcept(s)

Customer need incustomer’s words

Customer’s own solutionin customer’s words

Customer needX

Customerrequirements

Customersolution

100

,

ed onachs areation,

ofys in

Fig. 3.42. The content and process of market-technology knowledge creation (Dougherty 1992p. 81).

3.8. Structural organisation forms of product development

Company organisations have been governed by different organisational models bashierarchical thinking as illustrated in Fig. 3.43. Often this hierarchical authority approhas also affected the way in which the different company functions and departmentheard and respected when making decisions. Despite differences in formal organisproduct projects have been carried out in highly similar ways; only the introductionconcurrent thinking and the erosion of hierarchical structures have changed the wawhich product development works.

R&DMarketing

SalesManu-facturing

Visceral-ization

Feasibility

Fit with Firm

Emerging Trends

ConventionalConceptualization

Reconceptionwith Recluster of Knowledge

Content: Implicit in each function

Process: not described

Visceral-ization

image ofproduct inuse

stories ofcustomerstechnology

Expedition;Explorers

Content: Feasibility

expert insight,judgment ofpossibilities

forecasts,paths ofdevelopment

Research;Scientists

Fit withFirm

deep senseof firm’scapabilities

core compe-tencies, re-newal plan

Council ofElders;Councilors

EmergingTrends

sense offorces ofchange

scenariosof likelyevents

StrategicScouting;Leaders

101

.

thatm, its

Fig. 3.43. Summary of historical trends in engineering management style (Bertodo 1988, p. 696)

3.8.1. Functional organisation

In functional organisations, product projects are organised by creating project teamsinclude resources from one or more functions. Depending on the autonomy of the teaposition can be illustrated as follows:

Fig. 3.44. Four models of development organisation (Clarket al.1991, p. 254).

ORIENTATION

FOCUS TASK PEOPLE

FUNCTION &COMPANY

PRODUCT &CUSTOMER

CONVENTIONALHIERARCHICAL

PRE 1960’s

MATRIXORGANIZATION

1960’s - 1970’s

PROJECTMANAGEMENT

1970’s - 1980’s

MULTI-FUNCTIONALTEAM

1980’s & BEYOND

D1 D2 D3 MPG MKG

FM FM FM FMFMFM

FunctionManager

D1 D2 D3 MPG MKG

FM FM FM FMFM

WorkingLevel

PM’sAssistants

ProductManager (PM)

Liaison (L)Area of strong PM Influence

L L L LLL

D1 D2 D3 MPG MKG

FM FM FM FMFM

L L L LLLL

PM

Con-cept

Market

D1 D2 D3 MPG MKG

FM FM FM FMFM

L L L LLL

Con-cept

Market

PM

1. Functional Structure 2. Lightweight Product Manager

3. Heavyweight Product Manager 4. project Execution Team

102

ductvary

niesoject

ssesmentre ine theucts

avy-on-

inter-cus-

atrix

The development has progressed from a purely functional model towards promanager organisation where the role and responsibilities of a product manager mayfrom engineering co-ordination to overall co-ordination and product planning. Compausing the product manager model have gradually moved towards heavyweight prmanagement.

3.8.2. Matrix organisation

As a functional organisation grows larger, clearly separate product lines or busineemerge within the company. These functions then take responsibility for the developand competitiveness of their own operations, while the business units in the matrix acharge of the competitiveness and development of the whole company, and usresources of the functions for the development and manufacturing of their own prod(Fig. 3.45). This model may apply the models described above, from lightweight to heweight. The project leader may come from the individual functions or from a unit respsible for business.

Fig. 3.45. Matrix organisation.

3.8.3. Organisations based on product or product groups

The striving to speed up the innovation process, by closer co-operation between thenal interest groups of a company and by easier exchange of information between thetomer and product developers, has led to reorganisation of functional and m

RESEARCH

DEVELOPMENT

PRODUCTION

SERVICE

PRO

DU

CT

GR

OU

PA

PRO

DU

CT

GR

OU

PB

PRO

DU

CT

GR

OU

PC

PRO

DU

CT

GR

OU

PD

PRO

DU

CT

GR

OU

PE

103

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g in-ancearatech-to aearly

organisations into smaller, more autonomous product or product group based models3.46). In this model, both profit and development responsibility is given to highly automous product groups. Product development responsibility is carried out by teams winclude the necessary development and managerial resources. In addition to the ndevelopment tasks, some of the people involved in product development also particin other functions such as technical customer service and sales support. In this way aconnection to the customers, their needs and problems, is created in a natural waalso the transfer of information between marketing and product development is meffective.

Fig. 3.46. Product group based organisation.

In the product group model, some functions are usually shared by all groups; tinclude logistics, administration and marketing. The product groups may be also divaccording to customer segments or technologies.

3.8.4. Evolution of engineering organisation

The business of the 1990’s operates in an open system where greater weight is givcreative use of external resources. Vertical integration is loosing its popularity becaureduces flexibility, slows response time, and intensifies demand for capital (Steel 19To a growing extent, managers are concluding that they cannot justify assemblinhouse all the various skills and facilities needed to carry out development. The importof strategic coherence and consistency, nimbleness, and the ability to integrate dispskills and functional cultures, is steadily increasing. The growing power of existing tenologies moreover imposes greater constrains on “fit”. Inserting a new capability insystem is becoming more difficult because so many conditions have to be satisfied. N

MANAGINGDIRECTOR

PRODUCT GROUPA

MARKETING andSALES

RESEARCH

DEVELOPMENT

MANUFACTURING

SERVICE

PRODUCT GROUPB

PRODUCT GROUPC

ADMINISTRATION

MARKETING andSALES

MARKETING andSALES

RESEARCHRESEARCH

DEVELOPMENTDEVELOPMENT

MANUFACTURING MANUFACTURING

SERVICESERVICE

104

selythe

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to be

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ely

every innovation now requires some system engineering to fit it in to an ever more clocoupled infrastructure. More effort is necessary to identify market niches in whichpotential advantage is sufficient for new technology to demonstrate its growth.

The most effective adaptive organisations are based on compact, multi-functigroups characterised by a fluid relationship based on expertise, rather than rank sLearning is through a series of small incremental steps, rather than a sequence of intions, characterised by a fast, direct and unfiltered flow of information and feedback.steps taken in an attempt to approach this idea fall into three categories: organisamodifications, compression of the product life cycle, and easing the flow of w(Bertodo 1988).

The degree of innovativeness or newness of the product being developed is an imtant moderator of the impact of different co-ordination structures on the developmentcess and its outcome (Olson 1995). Increased autonomy, lower centralisation of auity, and fewer rules and regulations lead to more interactive decision making and mconceptual conflict resolution processes. Control and reward mechanisms also tendmore decentralised and more focused on the outcome of a specific project.

The suitability of an organisational model is also largely dependent on how the sand markets required for a product project coincide with the momentary skill level ofcompany: the larger the gap between company capabilities and the needed innovlevel, the more the organisation should be oriented towards autonomy, independentling teams and technology centres. If the product and markets are familiar and the inntion level is relatively low, a more centralised and closely managed model will be meffective. In other words, the project co-ordination structure must fit the newness ofnew product concept. Steel (1991) argues that we need to differentiate the paradigR&D, to recognise explicitly that quite different kinds of R&D are necessary in differeindustries, at different stage of maturation, and in multi-industry, decentralised comnies.

3.8.5. Development of job requirements

The change from centralised to decentralised organisation inevitably means a chanpersonal job descriptions. Fig. 3.47 illustrates different types of engineering organisabased on orientation and focus. In many instances promotion had been a reward for tecal excellence within the function, rather than demonstrable management skill. Movindecentralised organisation will move specialists from managerial positions into technpositions within the multi-functional teams where their expertise could be effectivdeployed (Bertodo 1988).

105

hycom-nd

ptiontheirl pro-

highwhichns of

tolandst theelsrts.

om-eak-tingtegicitiverma-

r toin

Fig. 3.47. Evolution of an engineering organisation (Bertodo 1988, p. 706).

The change of engineering philosophy will be a difficult one – from a philosopbased on academic values, optimal solutions, breakthrough innovations, novelty andplexity, to a program of ongoing incremental improvements involving everyone ausing similar proven methods.

3.9. Knowledge absorption in product development process

One of the bottlenecks in product development is information transfer and the absorof new knowledge. In order to eliminate this problem, companies are decentralisingresearch and product development closer to manufacturing, which enables parallecesses. Decentralised R&D provides a sharper market focus for the products, andusage of the technologies that are developed. The manufacturing technologies oneffort is spent are targeted for multiple product applications, across related generatioproducts (Jelineket al.1990).

Successfully innovative firms are generally well ‘plugged in’ to the marketplace andexternal sources of technological expertise and advice. Research in the Nether(Rothwell 1991) has indicated that small and medium size companies operating aleading edge of the innovation diffusion cycle, generally enjoy significantly higher levof communication with the external environment than do their innovative counterpaExternal technology networking in these firms was largely a strategic activity. The cpanies were generally well aware of their own and their competitors’ strengths and wnesses. Their search for external know-how, while sometimes initiated to plug exisknowledge gaps (tactical search), was mainly guided by the need to develop stratechnological leads over competitors in areas that would provide long-term competadvantage in the marketplace. It is essential here to access knowledge, not only infotion.

Product innovators need another kind of market technology knowledge in ordeaddress what should be for the firm. Knowledge of a product’s fit with the firm refers

ORIENTATION

FOCUS TECHNICAL MANAGERIAL

NARROW

BROAD

SPECIALISTENGINEERING

FUNCTIONALORGANISATION

PROJECTLEADERSHIP

STRATEGICDIRECTION

106

w tohuside

n ahno-optrrow

e areers in

y theew.48.isci-

rimarynd towthrtercts,

tdatedthusor

part to its synergy, or how the product might combine resources, skill, and know-hoenhance the firm’s competitive strength. The ability to exploit external knowledge is ta critical component of innovative capabilities. The ability to evaluate and utilise outsknowledge is largely a function of the level of prior related knowledge (Cohenet al.1990). At the most elemental level, this prior knowledge includes basic skills or eveshared language but may also include knowledge of the most recent scientific or teclogical developments in a given field. The ability of individuals to understand and adnew innovations is partly based on his experience. A company operating on a very naexpertise base may encounter “gatekeeper” situations: only one or very few peoplcapable of understanding external signals, and thus they become mediators and filtthe diffusion of these signals to the organisation.

Fig. 3.48. Absorptive capacity in new knowledge adoption (Cohenet al.1990, p. 141).

In the case of several, accidental sources, most of the information may pass b“gatekeeper” who never comes in contact with it. The ability of a firm to acquire nexternal information is dependent on its “absorptive capacity” as illustrated in Fig. 3If this capacity is missing, the company has no ability to generate innovative, interdplinary (cross-platform) solutions combining several different techniques (Cohenet al.1990).

3.10. Towards quicker new product development

The markets are changing at an increasing speed and thus time has become the pparameter in product development. The speed with which an organisation can respoexternally stimulated requirements determines its competitive survival and gro(Gehani 1995). It is increasingly important to turn innovations into products in a shotime. Identified customer needs must be quickly converted into commercial produbefore external factors change the identified need and make the product already ouwhen it is introduced. This ensures that the company is the first on the market and cangain a dominant position, either in technology or on the marketplace. If either timemoney must be compromised, the cost has to give way.

Absorptive Capacity

Own R&DTechnicalKnowledge

Spillovers of Competitor’s KnowledgeExtraindustry Knowledge

107

ofp the

ti-

evel-

gether

-

Various electric tools play a growing role in product development. Quick productionprototypes and simulation of structures with product development software speed udevelopment cycle and reduce the need for design changes during the project.

The role of different factors contributing to the profitability of product projects is esmated in the following:

Fig. 3.49. Effect of exceeding development lead times (Sommerlatte 1992, p. 265).

According to research, 87% of all companies feel the need to accelerate product dopment in order to launch new products more quickly (Guptaet al.1990). Fig. 3.50 fromthe same report, evaluates the reasons for accelerating product development, towith reasons for difficulties, such as exceeding schedules.

Fig. 3.50. Reasons for the acceleration of product development process and for development delays (Gupta et al.1990, p. 29).

Deviationfrom plan

Loss of profitover productlife time

Development lead time Manufacturing cost R&D expenditure

+ 10 %

+ 50 %

+ 10 %

-25 to 30 %

-15 to 20 %

-5 to 10 %

+

-

Reasons to AccelerateProduct Development

- Increase Competition (42%)- Rapid Technological Changes (29%)- Market Demands (11%)- To Meet Growth Objectives (11%)- Shortening of Product Life Cycle (8%)- Senior Management Pressure (8%)- Emergence of New Markets (5%)

Reasons forProduct Development Delays

- Poor Definition of ProductRequirements (71%)

- Technological Uncertainty (58%)- Lack of Senior Management Support (42%)- Lack of Resources (42%)- Poor Project Management (29%)- Other (20%)

108

thenew

s thatnd,n-rob-

ult –one

emsject.rs oftur-duct

“engi-much

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oduc-sures.

lsod inhilee forlue-

Clearly the two main reasons for accelerating projects is harder competition andrapid change of technology. Market needs came only third, and the emergence ofmarkets was named in only 5% of all cases. A look at the reasons for delays reveal“poorly defined product requirements” is by far the most common. On the other haamong the ”most difficult to accomplish NPD activities” the evaluation of market potetial is found to be the hardest part. Defining product performance specifications is a plem in only about one third of the cases.

When dealing with the speed of product development, we usually see only the resnew products – but not the process itself. Product development processes vary fromproject and company to another. A common feature in rapid new product launching seto be clear and determined preliminary work prior to starting the actual product proAs an example, Compaq reports that a commercial project is preceded by two yeasystematic product definition work which involves engineering, marketing, manufacing, sales and finance. The definition work must reach consensus before the proproject begins. Quantum has stated that one reason for long project schedules is theneering based” approach which means that commercial product projects include toonew technology which is supposed to yield a nearly-perfect result (Uttal 1987).

In the chemical forest industry, pressures to accelerate the innovation procescaused by changes in the consumption patterns of end product users, the developmfurther processing, and emphasis on environmental factors. The progress of the prtion process technologies and the technologies used to control it create further presHowever, the primary cause is competition within the sector.

The profitability of product development is dependent on the project portfolio and aon the effectiveness of the product development process itself. Typically, as illustrateFig. 3.51, product developers use 40–50% of their time in direct development work, wthe rest of the time is used for control, co-ordination, and administrative tasks that arthe most part ineffective and could be either eliminated or streamlined through vaanalysis (Sommerlatte 1992).

Fig. 3.51. Direct development time is only 40–50% of the total effort (Sommerlatte 1992, p. 264).

Direct42%

Indirect53%

External

3%Design

SpecificationsChanges

List ofmaterials

Concepts

Calculations

6%

11%

14%

14% 27%

28%

Direct developmentactivities

Indirect developmentactivities

NormsControl

AdministrativeCoordination

50%

12%20%

18%

109

r twowith

d in

suc-tition

ak-e of

f riskreak-

andewch-pat-are

gs for

age-ge ofriousost of

indcess-andg thecon-

t

sed sotions

3.11. Risks and risk management in new product development

Studies show that success or failure can rarely be explained in terms of only one ofactors; instead, the explanations were multi-factored. Success is rarely associatedperforming one or two tasks brilliantly, but rather with doing most tasks completely ana well co-ordinated manner.

A company aiming at technology leadership cannot build its product developmentcess merely on small, continuous improvements – more is needed to survive compeand to hold market leadership. A policy of minor changes will not bring major brethrough innovations; to accomplish this the organisation must be able to shake freexisting solutions and to embrace new technology. This is one of the key questions omanagement in product development: how much is invested in the search for bthrough innovations, and how much is reserved for maintaining existing businesskeeping it competitive and profitable. As an example, in the automobile industry ndesign typically consists of 10–15% new technology integrated with existing, tried tenical solutions. On the other hand, safeguarding the existing solutions by means ofents and model registration gives protection for an increasingly brief period: patentsless a means to protect business than a marketing tool and a channel for new findinexample by competitors.

To be consistent with the multiple entry and termination approach, operating manment should engage in explicit evaluation of each new product candidate at every stathe development process. Fig. 3.52 illustrates that it is imperative to evaluate the vanew product candidates already very early in the development process, since the cdevelopment and testing increases considerably with the time of development (W1982). Companies, particularly smaller ones, do not pay enough attention to the proing of ideas at an early stage. Allowing an unproductive idea to reach the productmarketing stage ties up a lot of resources, and the commitment that emerged durinprocess makes it very difficult to drop the project. As a consequence, a poor ideaverted into a product may still consume company resources years after its launching.

Fig. 3.52. Relationship between stages of new product development, survival proposals and cosof testing (Wind 1982, p. 226).

In the product design phase design changes and error checking should be supervithat their peak is reached in the early stages of the product project. In organisa

Idea/concept

generation& evaluation

Idea/concept

generation& evaluation

Concept/product

development& evaluation

Concept/product

development& evaluation

Testmarket

Testmarket

Commercialization Commercialization

Time Time

Per

cen

tage

ofsu

rviv

ing

idea

s/co

nce

pts/

prod

ucts

Co

stpe

rpr

ojec

t

110

eachible.r andesultorderects

andcom-es itestomi-iable

lvedwith

stra-com-

divided into departments or other divisions between the parts of the product project,employee only checks and verifies things for which they themselves are responsNobody is responsible for the entire project, and thus spotting errors is pushed closecloser to the end. Errors that are finally found in the very last stages of the process rin crisis situations, and the management moves key resources from other projects into finish the problematic project – thus endangering also the priorities of other proj(Dimancescuet al.1997).

Product development projects can be evaluated from the technology-marketsattractiveness-risk approaches as shown in Fig. 3.53. Depending on market position,panies must follow different technology strategies: a moderate market share makmore difficult to introduce many highly innovative products. Instead it is better to invselectively in technologies to achieve a good market position. Generally, reaching a dnant technology or market position creates good opportunities to pursue profitable, vbusiness.

Fig. 3.53. The overall monitoring of R&D programs (Sommerlatte 1992, p.269).

Risk-attractiveness analysis helps to clarify the expectations and uncertainties invoin a chosen product development strategy. In this way the projects can be evaluatedregard to both technology and markets. The maturity of existing technology and thetegic competitive position of a technology must be studied, and at the same time the

Technologymaturity

Risk

Attractiveness

1 2

3

6

7

4 5

12

8

9

10

11

13 14

17

15

16

24 23

18 19

22

20

21

Technologyposition

Technologicaluncertainty

UncertaintyEconomicuncertainty

Marketuncertainty

Closenesstocurrent business

Investmentrequirements

Need forscarce resources

Danger forcompetitiveposition

Damagepotential

Risk

Marketpotential

Limitingfactors

Marketshare

Reachablemarket

Marketposition

Attrac-tiveness

Contributionto portfolio

Entrybarriers

Differentia-tion potential

Competitiveintensity

Growth

Profitpotential

111

must

illus-s byappli-ain-rfor-istingespe-

, theheserow-lica-irespicaloftenductsing

gingtech-

petitive situation and segmentation of markets and uncertainty of market acceptancealso be taken into account.

Technological uncertainties related to special instrument development can betrated with a curve describing technological uncertainty versus allocated resourceadding the different development phases of a new measurement instrument and itscations to the curve (modified from Matthews 1995). In Fig. 3.54, the biggest uncertties are involved in the development of new measurement methods, their technical pemance and customer acceptance. New measurements frequently deviate from exstandards, and achieving acceptance for a new method may take 5–10 years. This iscially true as regards quality-related methods that replace an older one. In additionapplication of a measurement method to a process involves further uncertainties. Tmay be due to local conditions, such as wood species or water quality, but also the ging number of paper grades introduces uncertainties in the operation of a new apption. Verifying that a new application really works is a complicated process, as it requan expensive and time-consuming field testing stage that covers all of the most tyapplication environments. Comprehensive trials and testing is costly, so this phase iscarried out incompletely, with the result that application testing and subsequent prochanges still continue during the commercial project or even after it – possibly cauproduct changes that range from cosmetic to fundamental.

Fig. 3.54. Uncertainties in special instrument development (Modified from Matthews 1995).

3.12. Related research – conclusion

Applying strategic planning to rapidly changing markets and environment is a challentask for any company. Rapid technological development has emphasised the role of

RESEARCH- measurement methods- new applications- new technologies

PRE DEVELOPMENT- technology testing- measurement concepts- new material testing- new platforms

COMMERCIAL DEVELOPMENT- new products- new versions MARKET

IDEA

RESOURCES ALLOCATED

TE

CH

NO

LOG

ICA

LU

NC

ER

TA

INT

Y

IS IT POSSIBLE ?

IS IT ATTRACTIVE ?

IS IT PRACTICAL ?

IS IT DESIRABLE ?

HOW DO WE DO IT ?

112

firmetitiventppor-

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ithinopt atage

ener-85).angeip-itiveationcessandpaperll as, neworter

lifeerrorsoustech-s ofineryeringin-uiresnning

ds, areus-dict.com-tifieds are

m-rs and, cus-

nology in strategic planning. However, it is not enough to acquire technologies – themust also possess the capabilities needed to utilise technology and to use for compadvantage (Prahaladet al. 1990). This means mastering many technologies at differestages of development, and the ability to combine these with the market needs and otunities. Mastering technologies in turn requires the ability to assess their usefulnespossibilities; and moreover, it calls for more and more links to other companiesresearch institutes (Granger 1996). Companies should strive to acquire knowledge inof mere information. In such a situation a company's or organisation’s absorptive capto adopt new knowledge is crucial (Cohenet al.1990). Maintaining strategic competitive-ness also requires continuous renewal (rebirth) of companies: companies operating wnarrow market segments compete with specialisation, not prices, and easily tend to addefensive strategy. This may gradually lead to the erosion of the competitive advanand push towards price competition instead.

Automation systems and general measurement technology, being by definition gally applicable, can be classified among the ‘broad target’ strategies (Porter 19Instead of many minor improvements, systems have undergone an architectural ch(Henderssonet al. 1990). The shift towards more open systems utilising common equment and software platforms, is pushing automation companies to look for competadvantage in application know-how and service. The increasing importance of applicexpertise requires not only conventional control technology, but also expertise in protechnology. This offers a promising opportunity for co-operation between automationprocess machinery companies. In the field of special measurements for the pulp andindustry, the focus is on differentiation involving measurement technological as weprocess technological expertise. When a technology reaches the maturity stageentrants especially tend to compete using the fast reaction-cost focus strategy (P1985 and Lahti 1984).

The life cycle approach easily assumes a uniform life cycle shape. However, thecycles of products and customer needs are influenced by numerous factors; andwhen predicting the future development of a life cycle only too easily result in erronedecisions concerning the development of new products and the application of newnologies (Easingwood 1988). Too early entry into the markets may lead to the loscompetitive advantage and quickly outdated technology. A look at the process machand electronics industries reveals that the technologies they employ have very difflife cycles. Applying rapidly progressing information technology in the process machery industry opens an opportunity to create new competitive advantage, but this reqthat new technologies are adopted and taken into account at an early stage when plaproduct strategies.

The expressed needs of customers, and the services aimed at satisfying these neerelatively easy to identify in such a narrow industrial segment as the pulp & paper indtry (Griffin et al.1996). The development of needs also seems to be rather easy to preIn view of earlier research, the main problems seems to be found in the weakness ofmercial market analysis (Cooper 1993). Opportunities that are outside the needs idenby existing customers and offered services are often forgotten when customer needcharted (Hamelet al.1994); and yet these would open a wholly new way to develop copany competitiveness. Identifying these needs and opportunities requires researcheproduct developers to establish close ties to the markets (Teece 1989). Moreover

113

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tomer needs should be assessed throughout the processing chain and not concenonly on the internal needs of a production plant. For example in the paper industryneeds of the final stages of processing – such as printing houses – influence the dement of quality requirements. And in the early links of the chain the demands imposesustainable development may in the future dictate the choice of raw materials, therebtiating changes in process technology.

In the future the efficiency of the internal organisation is no longer enough to enscompany competitiveness. The organisation must also be able to work efficientlyexternal interest groups and organisations as if they were an integral part of it. Accorto research, organisations are evolving towards decentralised, compact, multi-functand flexible team organisations (Bertodo 1988). At the same time the working produres of product development projects are developing towards concurrent and simneous models. In small organisations where the same people are involved in seprojects at the same time and are also required to perform various tasks and traveapplication of the simultaneous and concurrent models is very difficult. The researchproduct development models and methods progresses without close ties to the dement of organisations, and thus it has been unable to respond to the need for small,ble organisations, increasing networking and use of information technology. AccordinSommerlatte (1992), product development personnel only use 40–50% of their timdirect development work. Networking and the introduction of multi-functional teahave turned organisations from clear functional or matrix organisations into 'virtual' on

Based on the reports (Guptaet al. 1990) and (Cooper 1993), the risks of producprojects are primarily related to insufficient research prior to the project itself. The mimportant reasons for product failures and product development delays are the ladetailed market analysis and poor definition of the product. This indicates a missingbetween marketing, designers and customers. Technological uncertainties are avery important reason for product development delays: companies attempt to start prprojects straight from detailed product design, without preceding research into custneeds and risks. As a consequence, projects aiming at commercial products also inresearch in applications and new technologies. Product projects proceed fully beliethat all problems can be solved as they are encountered during the project. Good mament of product strategy and the product development portfolio is emphasised in a rachanging environment (Meyer 1993).

A preliminary construction, based on theoretical research and the author's own exence, assumes that the design of integrated process concepts requires an expansioconcurrent design principle. From optimum realisation of individual sectors – procprocess machinery, or automation – we must progress to concurrent, simultaneous dand implementation of all of these areas.

Launching new integrated concepts on the market at the right time calls for gknowledge of the customer needs. On the other hand, supply also has an impact odevelopment of customer needs. Thus the customers' purchasing behaviour can beenced by developing and offering them integrated process solutions.

In the future, companies developing processes and process machinery must be aintegrate external know-how in their own expertise and product development projeThe capability of single companies to design integrated process solutions is subjemany factors:

114

clu-

- its product strategy,- close contacts with markets, enabling it to correctly identify customer needs,- its technological level,- level of expertise,- ability to adopt and integrate new information,- its product development organisation,- product development process, and- networking.

A significant weakness in one of these may effectively prevent, for example, the insion of automation in the design of process machinery.

ns ofcessd of

(Fig.

4. The empirical case study

The empirical case study was carried out between June and October 1997 by meainterviews and a written questionnaire. The study includes three leading Finnish promachinery manufacturers and their units in Finland. The share of the industry studiethe total gross national product is 2.8 % and 26.2 % of the mechanical engineering4.1).

Fig. 4.1. The position of the case companies in the Finnish forest industry cluster and metal in-dustry (Fimet 1998).

ELECTRONICS AND ELECTROTECHNICS INDUSTRY

ME

TA

LS

,E

NG

INE

ER

ING

AN

DE

LEC

TR

ON

ICS

WOOD PROCESSING

FOOD

POWER (GAS AND WATER)

CHEMICALS

GRAPHICS

TEXTILES

OTHERS

TOTAL GROSS PRODUCTION 443.6 Mill.FIM

19.8 %

11.2%

10.7%

10.3%

4.6%

1.8%

37.5%

4.1%

33.8%

ME

CH

AN

ICA

LE

NG

INE

ER

ING

48.2%

METALS INDUSTRY18%

MACHINERY

59%PULP AND PAPER MACHINES 26.2%(2.8% from total gross prod.)

116

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4.1. Case study design

The case study was carried out in three parts. The first part was to interview the key peof the case companies to obtain a pre-understanding of the problem field and to foridea of the operating procedures of the machinery industry. In the second part, a wquestionnaire was prepared based on the results of the interviews. This questionnairsubsequently sent to the case companies and it was answered, in addition to productopment personnel, by project leaders of delivery projects and by sales and marketingsons working in close co-operation with product development. The third part of the swas to analyse the results of both the interviews and the written questionnaires. Thestudy is illustrated in Fig. 4.2.

The first part of the case study was constructed on the basis of existing theories anauthors’s own experiences. The first case interview (Case A) was conducted accordthe resulting plan. The observations obtained from this interview were subsequentlyfied with the interviewees, and the final interview result was applied to design and demine the contents of the following interviews. Cases were selected for the interviewthen conducted in each of the selected case companies. The results were checked imately after each interview, and the contents of the next interview were improved as nesary. Finally the results of the interview study were analysed and conclusions were dfrom them.

In the second part of the case study, the written questionnaire was prepared obasis of the interview results, and the survey study was then carried out. Again the reof the written survey were combined and analysed.

The questionnaire used in the study contained two types of questions (appendOne set of questions concentrated on the importance of various factors and experienthem in product development and delivery projects. The scale of responses in thesetions was 5–1 (e.g. Very important - Not at all important) and the responses arereported with the scale 1-5. The averages, distributions and standard deviations arelated and reported in appendix 2.

The second set of questions inquired the readers' opinion of certain statements orments on existing or proposed practices. Also in this set of questions the responsesgiven with the scale 5–1 (e.g. Agree completely - Disagree completely). The responsthese questions are reported using the scale -2 – +2, with class 3 as the middle pointfor example -2 indicates that the reader absolutely disagrees with the statement, whindicates that he completely agrees with it. Averages relative to the middle point areculated as well as distributions and standard deviations of the answers for each ques

In the third part that followed the written survey, the results of the empirical stuwere analysed, using the total material obtained by combining the interviewsresponses to the written survey. In order to compare the case companies and tomore tangible results, a model based on the AHP method was prepared.

117

usedsup-

ctur-nglynnishsitiondus-f theelop-

can-this

Fig. 4.2. Structure of the case study.

4.2. Selecting the cases

Company size and a product range that covers both the pulp and paper industry wereas selection criteria. All cases are from large, international companies that are able toply and bear responsibility for comprehensive process deliveries, with global manufaing and marketing operations. The cultural background of the companies is stroScandinavian and Finnish, and they represent both pulp and paper industries. Fimanufacturers of process machinery for the forest industry hold the market leader poin many market sectors, and thus the industry is highly representative of the global intry of their fields. Moreover, company mergers mean that the production technology obasic industry is increasingly homogeneous, which means that also technological devment trends are highly international. The prominent position of the forest industry in Sdinavia means, moreover, that the personnel in this sector is highly educated; in

Interviewresults analysis

Written surveydesign

Case studydesign

Interviewcase A

Selectingcases

Interviewcase B C

D/PD/AU

E

BC

DD/AU

Written surveycase A

E

Empirical casestudy results

Case study resultsanalysis

118

een

iples.llus-erate

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ally a9). Aslectedpre-e both, andesign

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respect the material of the empirical study may differ from material that would have bavailable in North America or Southeast Asia.

The selected cases are different both as regards their size and operating princThis fact, however, reflects the real situation in the companies studied, and it also itrates how different the operating models may be in companies that nevertheless opin the same field. Consequently, in spite of the fact that only three companies wereied, the material still covers a broad range of organisation. This can also be considbeneficial for the research, as it offers useful empirical material for the construcresearch method that requires that the operation of the solutions developed and contions must be tested and proven (Eisenhardt 1989).

All of the case companies have undergone profound changes in their companyorganisation structure in recent years, and these changes are also reflected in the opprocedures. The units selected for the study differ considerably from each other as reorganisation and operating procedures: some of them are fully independent product dopment units, whereas in some research, development and project management havcombined. Thus the people who participated in the interviews and written survey resent the companies' research, product development, project management, marketingeneral management functions.

The research focused on the operational level, its goal being to study the prevailinuations and approaches instead of officially planned patterns. In addition, the casessent a variety of research and product development cultures, and the companies invalso have links to research and development units outside Finland. Altogether 8 cwere covered with interviews, and the written questionnaire was sent to 7 cases; ususuitable number of cases in a case study is considered to be 4...10 (Eisenhardt 198there are rather few companies operating in this field, the case companies were senot according to statistical criteria, but instead with the goal of finding cases that resent very different operating procedures and achievements. Thus the cases includextensively integrated products as well as products with no integrated automationalso the operating procedures are very varied in some of the companies automation dis an essential part of product development while in others it is totally overlooked. Incase a more profound study of only one case would not have yielded a representativof the situation prevailing in the industry. With regard to this fact we can conclude thawas necessary to include several cases to illustrate the large variety of prevailingtices.

4.3. The structure of the case study

When selecting the interviewees, the goal was to choose persons working in manapositions in the R&D departments. As Case A was the first place where interviews wcarried out, the interview outline designed for the R&D personnel was tested therincluding also the vice president, marketing and sales manager, and general manaprojects. As the internal organisations and operating models of the companies difconsiderably from each other, the tasks and duties of the interviewees were rather valthough all were in a managerial position in their R&D organisations. Thus a mere

119

case

atom-views

g ineralleenost

iliar

to theand

title does not give an unequivocal picture of the person’s duties. The structure of thestudy is presented in Fig. 4.3.

All interviewees held key positions, either in their units' product development orleast in close co-operation with it, and they also had an opportunity to influence the cpany strategies and operating patterns of their respective business units. Thus theirillustrate the organisations' operating procedures outward of the process design.

The written survey was also sent to sales and delivery project personnel workinclose co-operation with the R&D. This ensured a more comprehensive idea of the ovsituation than would have been available if only the actual R&D personnel had bincluded. All persons outside the R&D who responded to the written survey had, almwithout exception, an R&D background and thus the questions were not totally unfamto them.

Fig. 4.3. Structure of the case study.

As regards the educational background of the persons (Fig. 4.4) who respondedwritten questionnaire, college and university level education was clearly prevalent,67% of them had more than 10 years of working experience.

Case study

B

Interviews- 1person

Writtensurvey- 1 group- 26 persons- 16 responses

D

Writtensurvey- 2 groups- 105 persons(79 + 26)- 41responses(22 + 19)

Interviews- 3 persons- 3groups

Interviews:D/P, D/AN, D/AUWritten interviews:D, D/AU

E

Interviews- 1person

Writtensurvey- 1 group- 40 persons- 31 responses

A

Writtensurvey- 2 groups- 18 persons(6 + 12)- 12 responses(6 + 6)

Interviews- 5 persons- 2 groups

Groups: A1 and A2Together: A

C

Writtensurvey- 1 groups- 10 persons- 7 responses

Interviews- 1person

120

andabout

Fig. 4.4. Educational background and working experience of the responders.

Moreover, the responses indicate that the majority of all projects in the processprocess machinery industry are small, 42% with teams of fewer than 5 persons andone half of them involving 5–10 persons (Fig. 4.5).

Fig. 4.5. Project size distribution.

UNIVERSITY50 %

ENGINEERINGCOLLEGE

36 %

ENGINEERINGSCHOOL

13 %

OTHERS1 %

10 - 20years41 %

over 20years26 %

0 - 5 years14 %

5 - 10years19 %

121

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4.4. Research cases

4.4.1. Case A

This is part of a corporation with global product development and manufacturing options. Interviewees from this company, selected from two departments, included thepresident, manager of marketing and sales, general manager, general manager of prand chief process engineer. Thus the interviewees represent the entire business chaiketing, research, product development, and customer projects. The written questionwas answered by product development persons from both of those departments, sothem also acting as additional resources in the delivery of projects.

4.4.2. Case B

This business unit is part of an international company with R&D operations both in Fland and abroad. The company is well established in the marketplace. The interviewmade with the head of research and development, and the R&D department, sales, pmanagement, and general administration answered the written questionnaire.

4.4.3. Case C

This case is an independent business unit of an international corporation. The prodevelopment department consists of two parts; a development and manufacturing unia research unit that handles pilot testing, all product development trials and tests, andtomer service. The product development manager of the business unit was intervieand the questionnaire was answered by persons from product development, saleproject management from the development and manufacturing unit.

4.4.4. Case D

This unit, part of an international corporation, forms the core business of the corporatmain product line and is also its principal product development unit. Product developmis divided into teams according to unit processes, and three of these teams participathe written questionnaire.

The unit also includes separate teams in charge of automation, process design ancess analysis. The automation team concentrates on the automation of delivery prand participates in product development projects providing expertise in machine auttion and supporting systems. The process design department mainly gives process tcal support to product projects and handles questions of process technology in deprojects. The process analysis department in turn supports customer service, delive

122

ology,.AU),ouseand

p (D/deliv-cesse pro-luating

it inn theer asration.

. Theurvey.naly-ned,

wasl wasarchyblemjec-

ision

projects and product development in questions of measurement and analysis technits task being principally to analyse the operation and efficiency of existing processes

In this case the interviews were made with the leaders of the automation team (D/process technology team (D/P) and process analysis team (D/AN), representing in-hdevelopment activity and close contacts with external groups such as customersresearch institutes. Three product development teams (D) and the automation grouAU) answered the written questionnaire. Here the automation teams represent bothery projects and R&D projects but are organisationally a separate group. The proanalysis group has extensive experience of process performance analyses, from thcess research phase to commercial process installations, and is thus capable of evathe importance of measurement and automation for process performance.

4.4.5. Case E

Case E is a profit unit in an international corporation that acquired the business unquestion a few years ago. Its product development department has long traditions iintegration of automation and process machinery, and its products can be sold eithseparate unit processes or as parts of larger delivery packages supplied by the corpoOne of the three product lines of the unit participated in the study.

4.5. Data analysis

4.5.1. Intervies and written questionnaires

The interviews were recorded and subsequently transcribed down from the audiotaperesults were analysed and then used to prepare the questionnaire for the written sThe results of both the oral and written part were combined and subjected to textual asis. The original construction was finally evaluated on the basis of the results obtaiand corrections were made as necessitated by them.

4.5.2. Analytic hierarchy process

After the analysis of the empirical data, a hierarchical model for the research problemconstructed by means of the Analytical Hierarchy Process (Saaty 1980). This modethen used to evaluate the cases against the research problem. The Analytical HierProcess is a decision-support method, which decomposes a complex multi-factor prointo a hierarchy in which each level is composed of specific elements. The overall obtive of the decision lies at the top of the hierarchy, and the criteria, subcriteria and decalternatives are on each descending level of this hierarchy.

123

d onandthis

mentt sup-

po-ericalAHP

andlytic

The AHP method is suited for decision-making and evaluation of alternatives basequalitative data. APH method is qualitative technique that rely on the judgementexperience of management to prioritise information for better decisions. Based onmodel, the suitability of the case companies to carry out integrated product developwas assessed. Fig. 4.6 illustrates the hierarchical AHP model for selecting the besplier (Partovi 1989).

Fig. 4.6. Example of AHP method, Decision hierarchy for supplier selection (Partovi 1989, p.10).

AHP is a method of breaking down a complex, unstructured situation into its comnent parts. It arranges the parts, or variables, into a hierarchic order; assigning numvalues to subjective judgements on the relative importance of each variable. Finallysynthesises the judgements to determine which variables have the highest priorityshould be acted upon to influence the outcome of the situation (Saaty 1982). The AnaHierarchy Process is described in Fig. 4.7.

FourEvaluationcriteria

Pricingstructure Delivery Quality Service

Selecting thebest supplier

Timeliness CostsQuality ofincoming lots

Costs Personnel Facilities

Alternatives

Vendor A Vendor B Vendor C

124

thethat

itiesthe

umed4.8.

Fig. 4.7. The working principle of the Analytic Hierarchy Process (AHP).

The first step in the Analytic Hierarchy Process is to build a hierarchic structure ofproblem. A hierarchy is a particular type of system that is based on the assumptionthe entities, which we have identified, can be grouped into disjoint sets, with the entof one group influencing the entities of only one other group, and being influenced byentities of only one other group. The elements in each group of the hierarchy are assto be independent (Saaty 1980). Example of the hierarchy with two levels is in Fing.

Fig. 4.8. Hierarchical model.

Analytic Hierarchy Process Concept

Hierarchic structuringrepresentation and decomposition of the problem

by breaking it down into separate elements

Priority settingdiscrimination and synthesis by ranking

the elements based on relative importance

Logical consistencyensuring that elements are grouped logically andranked consistently according to logical criterion

Elements e.g.alternatives orsubcriteria

Criteria or Goal“Selecting the best supplier”

A“Pricing structure”

B“Delivery”

C“Quality”

D“Service”

125

Topto

king.d intol of

vail-

wn-jec-

ps ofvel.it isarchy.siseiori-com-

n is

A isues-, C

nt B.

Two alternative ways can be used to build a hierarchic structure the Bottom up orDown priciple. In Bottom Up structuring, we select the alternatives, which we haveevaluate and enter the pros and cons of each alternative involved in the decision maThese pros and cons are then converted into objectives, which in turn are organiseobjectives and subobjectives. Finally a hierarchical model is built, consisting of a goathe decision making, objectives (or criteria), subobjectives (or subcriteria) and the aable alternatives.

Top down structuring starts from the goal of the decision making and proceeds dowards to the objectives (or criteria) affecting to the goal. This is continued for each obtive to set subobjectives and finally alternatives to be evaluated.

According to Saaty (1982), elements should be clustered into homogeneous groufive to nine so they can be meaningfully compared to elements in the next higher leAlso one must very carefully prioritise the highest levels of the hierarchy becausethere that consensus is most needed, since these priorities decide the rest of the hier

The next step in the AHP method is to set priorities for the criteria and to synthetithe judgements to yield a set of overall priorities. The first step in establishing the prties of elements in a decision problem is to make pairwise comparisons. In pairwiseparison we compare the elements in pairs against given criteria. This comparisodescribed in Fig. 4.9.

Fig. 4.9. Pairwise comparison of the elements against criteria to calculate relative priorities andconsistency ratio.

Pairwise comparison is started from the top of the hierarchy. In Fig. 4.9. elementfirst compared with elements B to D. The comparison is done against the criteria in qtion to find out how much more element A contribute to the criteria than elements Band D. In Fig. 4.9., Element A has twice as much influence on the criteria as eleme

Criteria“Selectingthe bestsupplier”

A B C D

A

B

C

D

1 2 3 5

1/2 1 2 3

1/3 1/2 1 2

1/5 1/3 1/2 1

reciprocals

judgments

Elements to be compared

Relative priorities respect toCriteria

Consistency Ratio

126

entscals.nablehipsted in

then cal-eory

f

By doing this comparison for each row, we have made judgements between the elemagainst the criteria. In Fig. 4.9 the left-hand corner triangle represents reciproAccording to Saaty (1980), experience has shown that a scale of nine units is reasoand reflects the degrees to which we can discriminate the intensity of relationsbetween elements. The explanations of the nine scale evaluation criterias are presenFig. 4.10.

Fig. 4.10. The pairwise comparison scale (Saaty 1880, p. 54).

To obtain a set of overall priorities for a decision problem, we have to synthesisejudgements made in the pairwise comparison. In Fig. 4.11, those priorities have beeculated by Expert Choice software (Expert Choice 1998), which is based on the thand method developed by Saaty (1980).

Fig. 4.11. Calculated priorities with respect to used criteria – ”Selecting the best supplier”.

Intensity ofimportance Definition Explanation

1 Equal importance two activities contribute equally to the objective

3 Weak importance of one Experience and judgement slightly favor oneover another activity over another

5 Essential or strong Experience and judgement strongly favor oneimportance activity over another

7 Very strong or An activity is favored very strongly over another; itsdemonstrated dominance demonstrated in practiceimportance

9 Absolute importance The evidence favoring one activity over another is othe highest possible order of affirmation

2, 4, 6, 8Intermediate values between When compromise is neededadjacent scale values

A ,483

B ,272

C ,157

D ,088

127

utes

levelinria it

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AHP

In our example these criteria show that element A is more preferable or contribmuch more to the criterias than B, C and D.

When proceeding in the hierarchy, priorities are synthesised from the seconddown by multiplying local priorities by the priorities of their corresponding criterionthe level above, and adding them for each element in a level according to the criteeffects (Saaty 1986).

Once we have built the hierarchy and made judgements for the elements, we haevaluate how consistent we have been when making pairwise comparisons with muattributes. Consistency is expressed by the consistency ratio, which is the ratio of thesistency calculated from our judgements and random consistency index of the samof the matrix. A consistency ratio equal to 1.0 is equivalent to random judgement. Onother hand, a good low consistency ratio does not mean necessary that our judgemegood. A consistency ratio less than 0.1 indicates good consistency (Saaty, 1980). A rfor inconsistency (high consistency ratio) can be little or no information about the facbeing compared. In such cases judgement is random and will result in a high consisratio. Another reason for high inconsistency can be a model structure, where the itemcompare differ by orders of magnitude. This leads to extreme judgements and high insistency, but the results can still be acceptable. It is not the goal to get a low consisratio; it is more important to be accurate than consistent (Dyeret al 1990).

The AHP method is based on certain axioms. Based on the formal axioms of S(1986) and Harkeret al (1987), Partoviet al (1989) have given a short and simplified version of these axioms as follows:Reciprocal condition axiom:

This axiom derives from the intuitive idea that, if alternative or criterionis n times preferred to B, then B is 1/n times as preferred as A

HomogeneityThis axiom states that comparisons are meaningful if the elementscomparable. In other words, we cannot compare automobiles with app

Dependence:This axiom allows comparisons among a set of elements with respecanother element at a higher level. In other words, comparisons at the lolevel depend on the element at the higher level.

Expectations:This axiom simply states that any change in the structure of the hierarwill require new evaluations of preferences for the new hierarchy.

Saaty (1982) has stated that the design of an analytic hierarchy – like the structuria problem by any other method – is more art than a science. There is no precise fofor identification or stratification of elements. But structuring a hierarchy does requsubstantial knowledge about the system or problem in question. A strong aspect oAHP is that experienced decision-makers, who specify the hierarchy also supply juments on the relative importance of the elements situation.

Korpelaet al (1996) have concluded in their benchmarking study that AHP is an efftive method for documenting the benchmarking process in order to communicateresults to interest groups. Fig. 4.12. summarises the features and benefits of themethod.

128

Fig. 4.12. Advantages of the Analytic Hierarchy Process (Saaty 1982, p. 23).

Unity:The AHP provides a single, easilyunderstood, flexible model for a widerange of unstructured problems

Process Repetition:The AHP enables people to refine theirdefinition of a problem and to improvetheir judgement and understandingthrough repetition

Complexity:The AHP integrates deductive and systemsapproaches in solving complex problems

Interdependence:The AHP can deal with the interdependenceof elements in a system and does not insiston linear thinking

Judgment and Consensus:The AHP does not insist on consensusbut synthesizes a representative outcomefrom diverse judgments

Tradeoffs:The AHP takes into consideration therelative priorities of factors in a systemand enables people to select the bestalternative based on their goals

Synthesis:The AHP leads to an overall estimateof the desirability of each alternative

Hierarchic Structuring:The AHP reflects the natural tendency of themind to sort elements of a system into differentlevels and to group like elements in each level

Measurement:The AHP provides a scale for measuringintangibles and a method for establishingpriorities

Consistency:The AHP tracks the logical consistencyof judgments used in determining priorities

AHP

ted in

the

t arein it;

sonss thewees,ed in

amse thelevel.tegy.

5. Results and discussions of case study

In order to solve the research problem, the interview study based on the questions lissection 1.3 and the research material derived from it, were divided into six parts:– strategy,– technology,– customer orientation,– product development,– networking and– integration of automation in process design.

The results of the written survey were processed using the same division, andobtained empirical research material was combined under these headings.

5.1. Strategy

The purpose here was to study company strategies with regard to the following: whathe strategic goals of the companies and the importance of their various productswhat is the current position of automation in the company strategy; how the perinvolved in research see the importance of automation in the future; and in what waycompany should change its operations to better integrate automation. As the interviewith the exception of case A, represented R&D management, the opinions expressthe interviews mostly represent ideas prevailing inside R&D concerning strategy.

5.1.1. Case results

Case A. A corporate strategy meeting is held once a year, and additionally smaller teworking with smaller parts of the strategy are continuously active. The teams preparstrategy that takes its final shape in the hands of a smaller team on the corporateThere is no distinct technology strategy; technology is an integral part of business stra

130

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The goal is to achieve a globally leading position within the business both in quaand operations, and to do this profitably. The business unit is an engineering agency,machinery workshop. All workshops of the corporation are independent units actinsubcontractors.

The company is best known as an equipment supplier, but the image is now bforged into an image of a process supplier with own equipment to implement thecesses its customers need.

“It is rather questionable policy to draw a clear line between processes and equment. The difference nowadays is that earlier we concentrated on equipmentthen found places where to use it. Today we think about the process and wequipment it needs.”

This change in strategy and approach is also reflected in the education profile ocompany: its personnel now includes a higher proportion of process engineers, intrast to the earlier mechanical engineer dominance. And with the increasing significof automation, automation engineers have also entered the scene.

The two departments of the company that participated in the current research eacdifferent approaches to automation. The strategy of one department was to packagprocess control expertise into a commercial product that is an essential part of the prdelivery. This strategy relies on a product development and research unit located abas this unit is well acquainted with the modelling and control of the processes in qtion. The special measurements or analysers needed for the process have noincluded in the implemented solutions. The other department relies on external compto provide automation; automation and measurements are not included in the delpackages, but are instead specified in connection with customer projects.

The company strategy does not contain any unequivocal ideas on the future roautomation and measurement technology in the total process. As the two departmhave such different approaches, we can deduce that the company has a rather free atowards measurement technology and automation, allowing the departments to decithemselves how to handle these questions. Automation is not really used as a tool otegic competitiveness; rather it provides functions that simplify the overall process dery and start-up.

Case B. The company has declared itself to be a technology oriented company strito make progress with superior technology. The leading technological position is sguarded by innovative operation. The company or its business units have no septechnology strategy; technology is part of the business strategy.

Management participates in the strategy process mainly through long-term planninThe business strategy does not address in any way the question of the role of au

tion and measurement technology in the process technology of the future, nor is auttion used to get added value or competitive advantage in existing processes.

Case C.

“All development work that is done must be reflected as a higher and more hogeneous quality in the end of the process.”

The company strategy is to develop products so as to offer complete process lines

131

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ny

n thebusi-re part

The strategy process builds on the corporate strategy and must support it. Thepany operates as a profit unit, and therefore its strategy must ensure that its producalso competitive on a global market, also as individual devices.

The company strategy is highly process-oriented and gives particular emphasis trole of unit processes in the whole. The role of automation or measurement technolonot specified in the strategy; in the future their role is mainly seen to grow in the conof unit processes.

Case D/AN. This unit does not participate in the strategy process in any way; the segies of the company and of the business unit are given to it for information.

The operation of the unit is not prescribed in any great detail. Its function is to prodmeasurement and analysis services for the entire business unit, and its operation iscally divided into two areas: the measurement needs of customer service, and seneeded by research and development.

The unit possesses measurement technology expertise that is needed by the cuservice, process design and equipment design of the entire business unit. Its own stis to produce measurement and analysis services for other units.

Case D/P.

“Separate technology strategy; according to it, the goal is to achieve technolocal dominance and superiority in the marketplace through spearhead produThese spearhead products have a strong positive impact on the company imand also for the other products of the company.”

The unit acts as a process specialist group for the entire business unit and its deprojects, research and product development projects. Measurement technology andmation are not very clearly dealt with in the strategy, but their importance is seeincrease in the future, as factors such as rising production speed and quality requirecontinue to complicate process control.

Case D/AU. The unit is involved in the strategy process from the very beginning. Tbusiness unit has a separate technology strategy which is mainly prepared by prdevelopment specialists and then combined with the business strategy. People resble for business prepare the business strategy.

The unit is responsible for automation design and its implementation both in commcial delivery projects and in product development projects. The tasks mainly involvedesign and realisation of machinery automation and support systems. The unit doeparticipate in the design of actual process automation.

The strategy is to package process machinery automation as an integral part omachinery delivery. The role of measurement technology is limited to the most comfield instruments as required by each customer order.

Case E.

“Automation as part of machinery manufacture was not originally in the compastrategy, it came from outside the strategy.“

According to the current strategy preparation process which has been used i1990s, the main guidelines for research and product development areincluded in theness strategy annually. The unit has no separate technology strategy; technologies aof the business strategy.

132

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“The strategy process that we now follow has had a positive effect on proddevelopment. When the main guidelines are given in the strategy, it gives strofeeling that the management supports the work. It makes the goals clear, soworkers and management know where we are going. Earlier our operationrelation to automation were more like some private enterprise. The strategy gus the direction but does not drown good ideas, and on the other hand it doesforce us to run against the wall over and over again with bad ones.”

5.1.2. Observations and discussion

This industrial sector can be considered to be in the mature stage, and companies scompetitive advantage are in the transition and future phases (Onkvist 1986). The preday key technologies are near the end of the S-curve, approaching their technologyIt is very difficult to find new, permanent competitive advantage, for example, in machbuilding that was mentioned as one of the key areas.

The strategies of the case companies and units do not pay much attention to the rmeasurement technology and automation in the future development of processesaspect came up frequently in the interviews, in statements such as “the importanautomation will increase”, but its impact on strategy was hardly identified, or if it widentified, it was understood to mean machine automation and basic measuremepressure, temperature and flow. The only exception is case E where the interrevealed automation to be an explicit part of the strategy. A look at the product rangthis case company shows that in its products a high degree of automation is integraan essential part of the product. In this case, automation design has been part of thepany’s product development since the early 1980s, and automation expertise hasaccumulated in the company. Another exception is one of the departments in casestrategy includes the integration of overall process control in process deliveries. Howmeasurement and analysis technology was not part of the company strategy, norelated know-how been acquired; process control is based on process models. Bothese cases have developed automation as key-technology according to strategic teogy evaluation and they have created automation design as one of their core compe(Grander 1996).

A general impression is that the attitude of strategies towards measurement tecogy and automation is very reserved in the commercial sense. Moreover, the widesview that measurements and controls will play an increasingly central role in the protechnology of future (Fig. 5.1) is either not reflected in strategies, or the strategy mahave not identified the trend, or it has not been communicated to them. In practicestrategies are still very strongly dominated by process machinery or process technoHowever, these cases allow us to draw the conclusion that the strategy of companunits with regard to measurement technology and automation has emerged from theioperations, not as a conscious effort of the management to steer the course. The straof all case companies considered a high technology level to be an important featutheir products, but in most cases this is understood to mean mainly excellence in prtechnology and machinery, not process control.

133

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Fig. 5.1. Need for measurement and control technology in the future, and companyresponsibility.

The written survey showed that all of the case companies agreed on many topiwas generally considered that a company development processes should also be fawith questions of process measurement and control, and they also saw the need forsurement and control expertise to increase rapidly. At the same time there was geunwillingness to take clear responsibility for process measurements and control.Case A considered measurements and controls to be largely within the responsibilitycompany development processes and process machinery. In case E, automatioincluded in the strategy but the people who answered the questionnaire were of theion that the company is not expressly responsible for these questions. There wasvariation in the responses as regards this question (appendix 2). The author’s concis that this is largely due to unclear strategies, or insufficient definitions of automaand measurement technology in marketing and product development.

These results indicate that measurements and control are seen to be, at best, onporting or auxiliary technologies. The companies consider knowledge of measuremand control to be important for product development, but not strategically importanview of these results and the interviews presented above, we can summarise that inof the cases the strategy is typical to the ‘market leader’ phase (Loran 1997). Thecompanies are traditional, fact based survivors who see business opportunity as to dthe present business and personal mobilisation.

5.2. Technology

This section concentrates on the role of technology in company strategies, and theof the responders concerning the companies' own key technologies. Key technologie

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the foundation of a company's technological competitiveness, they are extensively utin its products. Key technologies and the expertise to utilise them extensively formcore competencies of a company. Moreover, the study focused on technology managand the procedures related to the monitoring and adoption of technologies.

5.2.1. Case results

Case A.

“Technology is the cornerstone on which everything else is built. Our goal is noimitate but to develop something ‘new’. We do not attempt to gain dominant tenology, because there are also many other things that are important in the marplace, such as financing etc.”

The key technology is process technology; manufacturing technology and design cafter it. Automation and instrumentation are considered to be of secondary importathey are supporting technologies; for example piping design is more important than amation. In practice the product groups are rather independently responsible for theirnologies.

Case B.One key technology provides the basis for most of the company’s proceand unit processes. Technological development is followed actively; marketing watthe actions of competitors, while the research and development personnel keep inwith research institutes and universities.

“The biggest problem when new signals are received is usually how to makeorganisation and the people understand how important these new things are,to get the message home.”

“The attitude of top management, the vision of technology friendliness, and fdom in product development, have all contributed to our ability to adopt new idand encouraged us to innovative action. Being proud of what we are doinggreat booster.”

The process and research engineers of the company are young, enthusiastic andudiced. A high-level theoretical background helps in adopting new things. Good idabound, and prioritising their realisation is dependent on the required developmentand expected benefits.

The core parts of the machinery and processes are manufactured in-house, thcomes from subcontractors.

Case C. The company has one strong core sector in process technology, and the remachinery technologies. In this area the focus is primarily on overall process dewhile the study of basic phenomena has been less active in the design of unit procand machinery. In the 1980’s process simulation was employed as a tool to solve plems and to achieve the set targets. However, these simulations usually paid little ation to the operation of unit processes, and consequently the number of unit processeincreased for better efficiency. This has resulted in processes that are complicated,fective and difficult to control, and process simplification has largely been achieved

135

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applying existing theoretical knowledge, experience and intuitions. This developmroute has now reached the end of its road, and new information and theories are neesupport further development. The responsibility for monitoring and developing techngies have been distributed to research managers according to their respective pareas.

Case D/AN. Key technologies include sensors and signal processing. As ready-msolutions are rarely available for the measurements needed in research, these mdeveloped in co-operation with external partners, or acquired as half-ready devicesthen adapted to the situation. The company possesses no resources for sensor techdevelopment. Some own sensors have also been constructed, but these projectproved too large and time-consuming to be carried out with the company’s own resouthe need has already been passed by the time the sensor is ready. Expertise is mainited to the monitoring of available technologies. A typical co-operation partner is a uversity, research institute, or a smaller company or individual person linked with these

“Nothing prevents the use of a new sensor and measurement in research, asally we are then dealing with a need-based project. “

The main problems associated with introducing new measurement solutions inpractical process and machinery design are attitudes: measurements and automatconsidered rather alien things. People are used to thinking that making things bmeans improving the machinery and device construction, by trial and error, using nuous tests. A suggestion that something could be done differently with a measurearouses great suspicion, as this would mean dependence on computers; things woube completely under control. Entering the realm of new technologies outside the deers’ own experiences causes uncertainty. On the other hand, cost/price thinking doesupport an increase in automation. If improvements in the form of measurements areposed, the doubt arises that the customer will not be prepared to pay for one sensothe related software, whereas the customers will be willing to pay for the benefitsvided by equipment-based solutions. This attitude is considered to be part of an elished culture in the industry, both among suppliers and customers, and changing thiture is very slow.

Case D/P. Key technology includes the key components of processes, and the cpany wants to keep their development and manufacture in firmly in its grasp as theirformance and quality must be flawless. Key expertise involves process and machtechnologies throughout the process line. In recent times the importance of chemisprocess control has risen very clearly.

“Adopting new things is dependent on understanding the real need. Signals fcustomers are highly important when estimating the commercial viability ofneed. An example of this is the importance of chemistry in solving pitch probleThis is a clearly customer-driven problem which must be solved.”

In-house expertise is not absolutely necessary in order to adopt new technology, atechnologies in this field are not very complicated. New technologies are monitorednot very systematically, mainly by reading professional journals.

Case D/AU. Key technologies are described as rather little detailed scenarios, whethe expertise fields of the different units have been defined with great detail. Process

136

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“New technology comes from the process and in this way it works better than tenology introduced by machinery design. This is the way it should be, to avoid sations where the machinery construction has already made certain solutionswe then have to solve process control problems by means of automation. Inrespect the situation has improved in recent times.”

Case E. Technologies have not been classified into key and supporting technoloThe company strives to keep certain expertise fields in the house, such as the desmachinery automation applications. The goal is to ensure sufficient capability and extise in overall process deliveries, including maintenance. In addition, machinery desiconsidered such an essential sector that the company must possess the related knoMeasurement and sensor technology is purchased from external parties, concentratmeasurement applications and on control technology.

The company actively follows the development of sensor technology but isinvolved in joint development work with sensor suppliers, as its target is to use stanproducts. Some processes cannot be modelled, and their control solutions are baspractical experience. However, if certain variables could be measured directly, phyknowledge could be applied to produce more active controls, instead of acting onexperience and accumulated knowledge. The goal is to reach deeper into the proces

In order to adopt and apply new technologies the company must have informatiothe technology in question. It is also necessary to have people actively watch the devment of new technologies; these people are then able to evaluate the benefits and pouses of the new technologies against their own application background. It is importareact to new technologies at the right time, so as to avoid unnecessary delays in theirsation.

“We could still improve our ways of monitoring the information available from thoutside world; we are not very systematic yet. Before, the responsibility for tenology monitoring was distributed to certain people and they were also requiredreport their findings. This system stumbled on compulsory reporting. Becaureport had to be produced regularly, also things that should not have bereported yet were nevertheless included. If there is nothing to report, why do it.


In most of the case companies technology strategy was an integral part of the busstrategy, rather than a separate entity. This observation is in line with the theoretical sWhen the role of technology grows, it has become a highly essential part of businessegy (Hölsäet al. 1995). The interviews clearly show the key technologies to be procand machine construction technology. Measurements and controls are not key ortechnologies, they are in a supporting or auxiliary role, or regarded as pacing technol(Grander 1996). When ‘high technology’ is mentioned, it mainly refers to processes

137

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equipment and not to entire processes which would also include process control andsurements.

When automation is mentioned at all, it refers to machinery automation and supposystems. The inclusion of machinery automation in the products, for example in pmachine lines, has been promoted by the easy application of programmable logic anrelatively easy transfer of applications between different suppliers in the more simapplications. The attempts to provide easier start-ups by means of basic automationalso contributed to this trend. The only exceptions to this rule were case E, where othe key technologies was machine automation, and one department of case A, whichgrates process automation in process deliveries. Both of these cases have developemation as key technology according to a strategic technology evaluation (Grander 1In the terminology of the core competence model, these two cases have created aution design as one of their core competencies (Prahalad 1990).

The companies largely agreed that factors complicating the use of new technoloare related to the technical risks involved. According to the interviews, the main reapreventing the adoption of new technologies was the difficulty to understand theneed. As new technologies have been very little tested and adopted prior to proprojects, these new solutions are seen as technical risks that also jeopardise the pschedule. Insufficient theoretical knowledge further complicates the integration oftechnology in product development projects. The ability of a firm to acquire new exteinformation is dependent on its ‘absorptive capacity’ (Cohenet al. 1990). Case companiesthat have a more active role in automation tend to show bigger variation in the ansregarding project schedules and technical risks (appendix 2).

There was also widespread agreement that communication between departmeinsufficient and that this makes it more difficult to adopt new technologies. In some ccommunication between different professional groups was considered a complicatingtor, whereas in others it was not seen to complicate matters. Based on these resuwould seem that in small product development teams – multifunctional teams – the bers between expertise fields and professions were smaller than in larger units. This ovation is also supported by other research suggesting that small multifunctional grbased on expertise, rather than rank status, work best (Bertodo 1988).

Fig. 5.2. Factors complicating the adoption of technology in new product development projects.

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Contacts with other machinery manufacturers were hardly considered to complthe adoption of technology. This may also indicate an introverted attitude in proddevelopment: contacts with other suppliers are not considered important. Opinions oinformation supplied by other manufacturers were largely neutral, which may alsointerpreted to reflect a lack of activity as regards product development, for instancespecial sensor manufacturers, or a lack of necessary basic knowledge among madesigners. The development work may be less ambitious, or the organisation has doped filters to evaluate technologies (Hendersonet al. 1990). Opinions concerningresearch institutes and end users were conflicting. Nevertheless, based on the intewe can conclude that an active attitude, systematically organised monitoring of newnologies, and co-operation projects with research institutes have a positive impact oadoption of new technology.

Attitudes towards end users were conflicting, too, and the opinions expressed ininterviews and in the written survey reflect the different orientation of organisations. Mof the cases had a manufacture-oriented way of operating (Hippel 1977a). Organisawith overlapping product development and projecting did not consider a lack of custocontacts as any hindrance to the adoption of technology: these multifunctional teamsable to utilise their expertise to get customers’ opinion more easily (Bertodo 1988).interviews also revealed that customer contacts are not seen to be very important irespect. There were, however, big variations in the answers that dealt with missingtacts with the users (appendix 2). This indicates that in some cases missing contactsseen to prevent the introduction of new technology to the users.

A positive attitude of the company management creates a favourable atmosphethe search for new technologies and clearly promotes the adoption of new technologcases B and E this was expressed both in the interviews and in the written survey.the answers regarding atmosphere showed very much variation. the researcher’s csion is that introducing new technology to an old organisation is, after all, a big challebecause of lacking adoptive capacity (Cohenet al 1990) or because of individual attitudesthat tend to stick to old, proven technology.

Fig. 5.3. Factors complicating the adoption of technology.

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These results allow us to conclude that the presence of new technology – such acial measurements and measurement technology in general – in product developprojects is considered a source of both technological and economic uncertainty (Somlatte 1992). The adoption and acceptance of technology could be promoted by introdand testing new measurement techniques at an early stage, in research projects (Get al. 1985). At the same time theoretical knowledge of special measurements and reapplications should be increased among the people developing processes and pmachinery.

An interesting observation is that case E that has a multifunctional organisation anusing the concurrent development process has more variation in the answers thaother cases (appendix 2). The researcher’s conclusion is that in a multifunctional orsation, development projects include many technologies and both communicationproject management is more complicated than in a functional organisation.

5.3. Customer orientation

The importance of customer contacts and customers' participation in product developis much stressed in the literature. This research concentrated on studying the imporand role of customers for the companies' product strategies, the views of the compconcerning the change in customer needs and the customers' attitude towards new teogies and technical solutions.

5.3.1. Case results

Case A.

“The customer wants someone who bears the overall responsibility, and usuais the process supplier or the main machinery supplier.”

Nowadays the customers demand ever larger deliveries. In earlier times they hadorganisations to handle project design, purchases, installations, and project managetoday their organisations are smaller and no more able to manage large projects. Intion, customers may not always be willing to use external consultants, instead they ethe machinery suppliers to carry out the project design, a task that used to be the reaconsultants and customers. In the 1970’s the customers would invite quotationsdevices and their features, and they even played an active role in process developtoday they want a certain operation or result and ask for a comprehensive solution.the role of consultants has changed: today they specialise in process technical knowand partly make up for the reduction in the customer’s expertise.

“The impression as regards automation is that the customer takes care of the binstrumentation but wants the special instruments to be included in the procsupplier’s package. They feel that some kind of sensible control must bestructed around special instruments.”

140

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Customer needs even differ considerably according to geography. For exampIndonesia and Thailand, all instruments tend to corrode very rapidly due to high chemdosages. The reason for this phenomenon is that the personnel in new mills has noous experience and they simply cannot run the processes as they were meant to. Icases the degree of automation should in fact be even higher than normally.

Case B

“We must feel what the customers want. They are involved in some projects,ideas then emerge mainly with regard to process technology and economy, eronmental technology, and process control. Not so much machinery technologthe customers are not specialists in that field.”

The customers are very conservative and react slowly. For them everything less tyears old is “new”, and getting new ideas accepted has been really difficult. In this resthe 1990’s has been a peculiar time, as many rapid changes have taken place mainto pressures imposed by environmental protection. Another big change is that endhave come closer to the production plant: common marketing organisations haveished, the mills now have to sell their own products and take responsibility for custoservice. This has certainly meant some over-reaction, as the mills have not been atake a realistic attitude to the demands of their customers.

The pulp producers should also establish closer contacts with printing houses, bein this way new goals for pulp production could be formulated.

Case C.The customers’ demands are largely related to the quality of the end prodDetailed suggestions for solutions, or highly developed proposals and plans are very

Geographical differences between the customers’ situation and requirements aresiderable. In countries where tropical wood species are used the inhomogeneoumaterial poses a great challenge; but the technology used is still very much the sambally.

Printing houses set very tough requirements for paper and thereby also for pulp. Trequirements should be better understood.

Case D/AN.

“The biggest problem related to new technology is that the customers are vconservative. They can accept for example a new measurement as long as it isonly for measurement. But as soon as control is mentioned they become concefearing production losses, quality disruption, and problems with running tmachines. Any changes or new things are very hard to drive home.”

Ideas coming from the end customers are mainly related to research and studiealways disturbances but also phenomena that cannot be measured with availablements. These are usually relatively small single things, very seldom any dramatic nties, and they are typically associated with the effect of some unit process on runabiliwith product quality.

Case D/P.

“The customers give us some ideas, and usually they arise over a cup of coReady suggestions are rare, demands and general needs more common. Thehave less personnel and so the number of ideas the customers present is drop

141

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too. Today the customers more readily suggest co-operation projects, someyears ago those were hardly ever heard of. In those times co-operation projwere mainly limited to solving problems that came up in delivery projects.”

Case D/AU.

“Nearly all customers give us hints and wishes regarding their needs and hthings should be handled. Usually these are not very large, concept-type sugtions, but primarily smaller things related to automation, controls and measuments. Ideas concerned with applications and user interface, too. In machinconstruction, small things come up for which the customers have improvemand suggestions.”

Case E. In large projects, dozens of customers have been interviewed both in Scanavia and the USA.

“Large ideas seldom come up in these interviews, rather they help to find out ifselected path is the right one. Customer interviews help to ensure that the cusers will later on accept the choices made.”

Customers also feel their involvement in product development projects very positivand this influences both the idea of the company and their commitment to the solution

“If a new reference installation works well and the product also gives a high-quity impression, the customer is ready and willing to purchase it. The customersinterested in new technology, and they are very technology oriented.”


None of the case companies applied any systematic method to describe customer necommon feature revealed by the interviews is that the customers provide very few soltype ideas. Their ideas are usually related to either quality or production economy, to sextent also to process control. Product development mainly seeks the customers’ opin order to get support for their choices and for the concepts being developed. Thecompanies have adopted the manufacturer-active approach (von Hippel 1977a).

The customers of the process machinery industry are considered rather conserand thus developing new, different technical solutions is risky. On the other hand,1990’s have been an era of relatively rapid change for example in the pulp industrcase E the customers were even considered to have an active attitude towards newnology. This shows how important it is for the development of new solutions to find invative buyers, as these represent the best knowledge also with regard to future(Easingwood 1988).

Measurements used for process monitoring are more easily accepted than mements associated with control. This is in conflict with the attempts to get added vthrough measurements and control, as in most cases control is precisely the factowill yield efficiency or quality improvements. New control solutions are felt to add unctainty to process operation and to reduce the opportunities of operating personnel to

142

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trol the process. The acceptance of operating personnel is the basis of all solutionson measurements and automation. Moreover, the author's own experiences from thcial instruments sector are in sharp contrast with the observations of process machsuppliers: in most cases the primary target when buying a new measurement instrumto harness it in control.

In recent years the customer companies, too, have undergone a structural changare now using less and less of their research and development resources for macand process development, seeking instead co-operation with dedicated companiepersons who answered the written questionnaire were also of the opinion that the endshould be involved in product development processes from the very beginning,though the answers varied quite a lot (appendix 2). The results of Teece (1989) emphthe importance of researchers' links to the markets; and also our interviewees felt thatening to the customers' opinions and securing their involvement improved market actance of the concept and promoted customer commitment to the choices made (C1983).

Fig. 5.4. Involvement of end users throughout the product development project, and informa-tion related to measurements and analysers received from the customers.

Pulp and paper mills were not seen to provide information related to measuremenanalysis needs. The interviews indicated that the customers would like to handle thechase of basic instrumentation themselves whereas special instruments were leftprocess and machinery suppliers. This is due to the perception that special measureinvolve process control expertise and thus are a more integral part of the process cthan the common basic measurements (temperature, flow rate, pressure).

Solutions based on special instruments should be developed simultaneously withcesses and process machinery, offering them to the end user as a clearly structuredage. In order to accomplish this the process supplier must also have sufficient knowin the application of special measurements in the process. This would even promoteacceptance: the measurements and controls would be thoroughly integrated in the wfrom process design to training and start-up.

Importance to include end userin the project

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Pulp and paper mills give alot of information from new

sensors and analyzers

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5.4. Product development

This part studies first and foremost the organisation and management of researcproduct development. Another aspect was to study the participants' views: how impowere the different technologies and expertise areas felt to be for product developmenhow much related experience and theoretical know-how they possessed. Based onerature, a person’s ability to evaluate and utilise outside knowledge is largely a functiothe level of prior related knowledge (Cohen 1990). As regards the organisation of prodevelopment, multifunctional team and concurrent principles have been found to givebest results both in terms of time and end result (Bertodo 1988, Eaton 1987).

5.4.1. Case results

Case A. The organisation of product development varies from one department to the nWithin a department, one team may be responsible for research, product developmeprojects, or these functions may be separated.

“It’s hard to draw the line, and I also think that there should be no barrier betweeproduct development and delivery projects. The people who go to the millsstart-ups, who see the problems and learn things the hard way, they are best qfied to think about matters and to suggest improvements.”

The company used to have a separate product development department, but thiswas abandoned and it now forms a group which possesses process expertise and phelp to the process units but no longer handles product development.

The organisation of customer projects is dependent on the needs of each project.example in Indonesia a typical organisation involves people who are able to leaproject, and each department bears process responsibility, or “product responsibilitythe process solutions. The project department handles the largest projects, whileprojects or smaller machinery packages may also be managed by a single departme

“Product development in most cases begins with an existing concept, and devement is a steady stream of small steps. We should be able to get more out oconcept. Everything should be controlled more accurately. More accurate msurements for all variables, and for example predictive controls for them.”

The company also aims higher than merely answering customer needs and rements. All the time there are research and projects going on that reach beyond the ccustomer demands.

Case B. Development resources are partly divided, with one research and devement centre in Finland and another abroad. These centres share with other businesa research centre for pilot trials. The unit abroad concentrates on research, while thin Finland is more concerned with device development. In addition to development wthe personnel is also involved in delivery projects.

144

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“One example of the time spans in product development could be ozone bleacThe fact that ozone has a bleaching effect already has been known for 100 ybut the idea of a mill-scale process arose in 1988–89, and the first mill-scale tstarted in 1992–93. And this was extremely fast. The same development in oxdelignification took about 20 years. Oxygen delignification began to spread in1980s, and in Finland it was more widely adopted in this decade. The technowas there, but the reason why it was accepted and adopted was elsewhere, lenvironmental protection. In this case the external pressures were a good thing

“Some products require a long research project. It begins from laboratoresearch, progresses to pilot tests, and the idea is then converted into a commeproduct. If we are dealing with an existing product, a separate product projecusually initiated and the product manager is then responsible for the project. Tproject involves people from research, such as process technology, manufactutechnology and material technology, or other specialists.”

The rule in product development is that every new product mainly builds uponexisting one. Many older solutions are used even developing a wholly new product geation. This is partly to achieve customer acceptance: when a customer sees a new prit is new until about five years later. Product development designs modular devices.

“Education of personnel and theoretical knowledge makes it easier to understnew things, and thus also to adopt and apply them. Our product developmentsonnel has a rather heterogeneous theoretical background, and this meansmany different ideas and opinions are expressed. One person is a specialist inthing, another person in another.”

Case C.

“Product development must have visions.”

Product development has four cornerstones:– everything aims at improving the level and uniformity of end product quality,– processes must be simple, with more efficient unit processes,– total energy consumption must drop, and– the solutions must have a positive impact environmentally.

The operating environment of the unit changed after the business acquisition,nowadays product development must pay attention to numerous matters relatedneeds of other units. The problem is not developing new things, but rather their piloting. The time span of development work is 1–2 years, for solutions coming from resemuch longer, and often the actual research phase takes about 3 years. Responsibiproduct development is divided according to process or unit process.

Case D/AN.This group is not involved in actual product development, instead it pvides measurement and analysis services for it. Sensors designed for own researchdeveloped in co-operation with research institutes and small specialised companies.

Case D/P.Product development and research projects are initiated by suggestionsproduct development managers responsible for the different sectors. Work teams prthe proposals five times a year. These work teams are specialised according to unicesses, and they also involve people from other functions: customer service, pr

145

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design, and automation. This activity is not guided by any specific regulations or insttions, the routines have emerged in practical work. Project duration varies a lot, but oaverage the time span from project start to the first pilot phase is about one year. Afsuccessful pilot phase the project then progresses rather quickly to the first deliverycustomer. Development is based on existing basic solutions. Changes and innovationat first glance appear rather small often in fact have a crucial effect on process opera

Case D/AU.

“In all process related matters we think about the measurements and contdown to the actuator level. In all cases where this has been done the solutionsoperated pretty well.”

Most of the work of the automation group is related to machinery controls and toautomation of delivery projects. Process control above the machine controls is hanelsewhere. Some business units of the company also develop controls for their owncesses, as these units consider their control problems to be far too specific to be givoutsiders.

Process design has always relied on automation, while machinery design hasmore separate. The automation group strives to be self-guiding, participating inprojects in order to make its own work easier in the subsequent delivery projects. Thelier things are solved and bottlenecks found and cleared, the easier things will be lateThe automation people have become more active as the degree of process and macautomation is rapidly rising.

“Product development builds on concurrent engineering from the very beginniand so learning from mistakes should be gradually replaced by solutions madadvance. This is a good model and it works well in large projects. But in smaones where the biggest problems are encountered it does not work. In supgrade projects automation is forgotten, people think it has no effect on proccontrol. Then they seek help when problems are already imminent, for exampmill trials.”

Responsibility for the management of large entities must be given to the peopleinitiate projects. Their task should be to invite interest groups and to inform about mters. The groups involved in the start-up – including automation – must be invitedproduct development projects. Only then it is possible to see what the project needwhat the different specialist groups can give to it. In large projects this procedurmostly followed, whereas the practice in smaller projects is still unsatisfactory. The oall guidelines specify the different steps of the product project, how projects are staand who must be informed, but the guidelines are not fully followed.

Case E. The automation department originally operated as part of the project depment, and the operation was traditional machinery production: first the machinerydesigned and built, then automated. Later on the automation department was sepand automation design began to be included in the design project from the very bning. This resulted in the first unit process with integrated automation. In this proautomation designers came into contact with machinery design and new solutionsdeveloped together. A separate automation unit also caused problems with marketinsales: the goal of the department was also to develop and sell its own automation

146

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ucts, and managing the entire operation, prices and responsibilities became too difProcess design and automation design were therefore combined into one deparwhich bears overall responsibility for projects. Now the total product concept – procmachinery, automation, and design – is implemented in one procedure.

Product development sees very clearly the development curves of both technoland learning. When operation begins, external knowledge is overlooked: the peoplevery little previous experience, they are all the time learning new things and this givfeeling of quick development. New people introduce new ideas and the level of theocal knowledge rises, and it is good to have people of different ages, as this meansknowledge and experience, youth and curiosity. Gradually, however, the company’spotential is exhausted, new people do not bring any radically new information toorganisation, and outside help must be sought to solve special problems.

Product life cycles have been radically compressed over the past few years, andone reason why product development input has been much increased. Continuousopment and renovation of products is a strategic target as well. Products are no loupgraded merely because of competition, but also because new products “eat” olderwhen production efficiency constantly rises.

Product development projects are realised in two phases. Key questions are stand verified with prototypes, allowing the actual product development pilot phase tocompleted quickly. Pilot equipment is always built before customer delivery. Proddevelopment makes everything ready and takes responsibility for the first customer deries and potential changes necessitated by the first installations. Only after the first dery is the operation transferred to the project department. The goal in product desimaximum flexibility and modularity, easy tailoring for different customers. Moduldesign also provides a flexible product construction and automation. An engineeringtre operating inside product development handles product maintenance and mimprovements in both machinery and automation, and thus releases the rest of the pdevelopment group to concentrate on actual development projects.

Product development operates on the concurrent principle. Each project alwinvolves a designer, production unit, purchasing, process expertise, mechanics dautomation expertise – both equipment and software – and possibly even a custorepresentative. When a mechanical device is being designed, all functions are firstgrated before determining its final mechanical shape and outlook. Product documentis a very important part of the product project.

Schedules are usually extremely tight for the crucial product development projeThe target is to prepare very detailed project plans, in order to provide reliable costtimetable estimates. A more general project plan does not pay sufficient attention timpact of numerous details on the amount of work to be done. Moreover, the peinvolved usually tend to give far too optimistic estimates of the work required; especiin software design it is very difficult to estimate the amount of work involved.

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In many of the case companies, product development and delivery projects are partlyaged by the same resources, or the product development department has some resseparated from the actual product projects to handle delivery projects. This was felt tothe product development important experience of how their solutions operate, and theof user contacts was not felt to be a problem (Jelinek 1990). The instructions and glines given for product projects appeared to be varying; usually the operations are noulated by very strict instructions or check lists of things that should be included in prodprojects (Fig 5.5). It seems that variations in the answers were bigger in those cases (AU, E) where automation is part of the projects. It appears that the use of different tnologies and different specialists makes project management more challenging.

The lack of guidelines, for example in the preliminary research phase, meanswhen the timetable is tight, things that are new to the participants are easily left out opre-study and thus from the entire project. This applies particularly to questions relatspecial instruments. Some of the case companies reported that they followed the corent principle, while this principle was quite unfamiliar to some. Even when the concrent principle was mentioned, in real life it did not mean function overlapping, and ingration between departments was weak as well. Applying the concurrent principlefelt to produce more comprehensive and ready solutions than the conventional waopinion that agrees with the research results to be found in literature (Duran 1995this case the concurrent principle had been only applied to existing, in-house operatio

Fig. 5.5. Clarity of product project guidelines, and separation of research and product projects.

The line between research and product development projects is rather unclearcase companies. Probably this is at least partly due to the fact that most of their prodevelopment work is by nature incremental, based on small improvements. Sepresearch projects are usually associated with the study of a limited problem field or totain national research programs. The separation of research projects from product dopment projects appeared to cause variation in the answers (appendix 2). the resea

There are clear instructionswhat should be included in

the research anddevelopment projects

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conclusion is that this is partly due to the difficulty of separating these two typesprojects from each other. All case companies mentioned that they also conducted reswith a longer time span. According to the survey, a unanimous opinion was that reseprior to actual product development should be increased; Fig. 5.6. This opinion was sger in case companies already working with total process management issues (app2, cases A and E). Based on these result, the product development model could incases be described by Culverhouse’s or Wheelright’s models (Culverhouse 1993, Wwright 1992) where variant or derivative design plays a major role.

Fig. 5.6. Need to increase research projects preceding product development.

Measurement technologies are not among the technologies employed or masterproduct development. This interpretation is also supported by the results of the wrsurvey: special measurements, similar to field instrumentation and general measuretechnology, were considered to have the least importance in product developmen5.7). Of all the cases, A1 has rated all the instrumentation and automation technolrather low, but the answers vary considerably (appendix 2). The researcher’s conclusthat this is due to their goal: packaging process and process management knowtogether in delivery projects.

Research projects precedingcommercial development projects

should be increased

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Fig. 5.7. The importance of different technological expertise fields in a product developmentproject.The people involved in product projects obviously have more experience of machiconstruction and process technology, and very little experience of field instrumentageneral measurement technology, or special measurements (Fig. 5.8). Knowledge ocial measurements was limited to the experiences of product development people whparticipated in customer delivery projects.

Fig. 5.8. Experience in product development projects.

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The same thing is even more clearly demonstrated by the question of theoreknowledge (Fig. 5.9). Project groups possess a lot of theoretical knowledge of machconstruction and process technology, while their knowledge of automation is stroconcentrated on machine automation. The interviewees stated that a good theobackground helps to understand and adopt new things. Against this background it sobvious that the lack of theoretical knowledge and practical experience of special inments prevents their inclusion in research and product development projects, a dedsupported by theoretical studies (Cohen, 1990). Even theoretical knowledge in meaments and automation was rated much lower than in process technology and mabuilding (appendix 2), the answers varied also much more with measurement and aution. The researcher’s conclusion is that there exists knowledge in this area, butbased on a few individuals and it is not fully recognised in the teams.

Fig. 5.9. Theoretical knowledge in product development projects.

As companies specialise and the need for more profound expertise increases, apany developing process machinery obviously cannot accumulate very extensive knedge of special instruments. At the same time its product development should be aapply and test measurement technology at an early stage of its research and pprojects in order to recognise the potential and risks of new measurement technoloThis would require close co-operation with companies developing measurement tecogy, especially when dealing with measurement problems in highly specific proareas. The most important aspect in application is that the product development hasrience of measurement and analysis technologies and devices, or at least has anthrough networking to the experience.

All of the case companies expressed a positive attitude towards the application ofmeasurement and analyser solutions of which the project people or other product devment personnel already had some experience (Fig. 5.10). There were, however, bigtions in the answers regarding willingness to apply new measurement technology b

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Fig. 5.10. Importance of internal and external experience for the use of special instruments inproduct development projects.

From these results we may conclude that it would be extremely important to hmore pre-studies related to special measurements and analysers. These allow thedeveloping process machinery to test measurement technology and get familiar wiperformance and application opportunities. Moreover, the customer expects the prmachinery supplier to deliver the special measurements as well, as these are seinvolve information and control applications that are essential for process control. Fing applications and studying their role is one of the most important tasks of the pre-sies and research co-operation. Supplier-customer co-operation plays a crucial roapplication development and profitability studies. The best results are achieved wheobjectives are defined together and both parties bring their own expertise to the proCo-operation also ensures that the technical, economical and quality factors are proconsidered in the process. (Sopenlehto 1996).

5.5. Networking

In this section the goal was to find out how the companies exploit external resourcetheir product development activity, and how large contacts the product development hexternal research institutes and suppliers. The study also takes a look at how easy ocult the utilisation of external expertise was felt to be.

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5.5.1. Case results

Case A.Contacts with research institutes are usually associated with long-term reseprojects, while smaller projects related to existing processes are handled in-house.

The company has joint research and projects with the KCL. The goal is to particiin larger programs and thereby influence the direction of research projects and univeresearch in general. Measurement problems always come up as limiting factoresearch projects, but their development is not included in the projects. When meaments and measurement accuracy is mentioned, the prevailing situation is first studfind out what is available at the moment, and this information is subsequently used indesign. When a highly developed process is being designed, a measurement and ation specialist should be involved throughout the project.

The main co-operation partner is a private laboratory, and this laboratory also actsprocess specialist – mainly with regard to chemistry – in research projects.

Co-operation in the field of automation is decided ‘case by case’ in each delivproject.

Case B.Starting joint projects is very easy in Finland because the local forest induis so strong. Research programs are very important and the company also participathem (VTT, KCL, universities). Participation in many national programs is desired, bin Finland and abroad. If a program suits the company line and appears interestingcompany is very quick to get involved. Questions of automation are introduced by acmeasurement instrument suppliers; in research programs measurements are usualsidered very little.

“We do not try to steer university research, but rather we build our case by caprograms. We know what each university specialises in, and always try to usebest available knowledge.”

Subcontractors, research institutes and other companies of the forestry clusterquite a lot of information to product development. All the information coming from sucontractors is transferred by means of product design and value engineering to theucts; this information may be related for example to automation, electric drives, or mrials. One example of materials are new steel grades. Some of the benefits obtthrough the cluster goes to the machinery workshop. The principle is that the core pucts are manufactured in-house, the rest is made by subcontractors.

“Product development is not very widely networked. We know what each univespecialises in, and always use the best available knowledge and expertisedecide by ourselves and also bear the responsibility. We try to see where theexpertise can be found..”

“Printing know-how is missing from the cluster? We do not know how it affectsshould affect our way of thinking. Should we pay attention to the needs of prinhouses? Are the pulp producers in close contact with printing houses?”

Case C.Research activity is mainly concentrated on co-operation with one univerand this has continued throughout the 1990’s.

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The principle is to manufacture all the key components in-house. Process machsubcontractors are mainly used for routine work and thus they contribute very little extise or new ideas to the products. The company does not wish to take responsibility fodevelopment of automation and measurements, instead it seeks co-operation with sers. At the same time there exists a desire to increase know-how related to the applicof measurements, analysers and controls in the company’s own process developmen

Case D/AN.

“Signal processing methods (fuzzy logic, neural networks) will be marketeduniversities purely as technologies. We should then find problem areas and devapplications where these could be used. Here the problem is that we have toopersonnel for this, and also the university world and our world are so differeOne easily gets a little sarcastic when one constantly meets guys burstingenthusiasm who claim to have the solution to all the problems. Then a prostarts, the theories and methods do not work as they were expected to, and thappointment is enormous on both sides.”

Co-operation with measurement instruments suppliers would function well, basedexample on a scenario model. It would be possible to estimate what measurements wneeded to realise the process and machinery visions of the future and how these codeveloped. A study of scenarios has shown that there are enormous product develogoals but details, such as all specifications for measurements, are missing. Greatmism prevails, and people assume that a process will operate optimally without anysurements or controls. The goal may be to manage one specific variable, but its dynaand interdependence with other process and control variables are forgotten; the nemeasurements is noticed only when they become a bottleneck. In a situation like tsuitable measurement cannot be found overnight, and in worst case it may take yThis of course causes unnecessary delays and problems with process control. The sios related to automation should be taken apart, reduced to the level of measuremencontrols, and the necessary development projects should then be started with specpartners.

Case D/P. Process development relies on external resources – mainly VTT – foranalysis and testing of processes. When used selectively, this gives benefits andinformation.

Case D/AU.Projects with the VTT and universities are all the time going on. Theparties are mainly used as research resources, for example in the design and applicavarious analysis tools.

Product development is mainly carried out by own personnel. Subcontractors arein the application design of projects, but even in this case the control models comethe company. Subcontractors mainly perform routine automation tasks and are nimportant source of information and know-how.

Measurements and process automation expertise is provided by other units of thecorporation.

Case E.When operation started, matters were so simple that there was felt to bneed to seek co-operation with universities or research institutes. The company hadlittle knowledge of automation but much willingness to develop automation know-hand expertise was actively sought by employing new, young people with the approp

154

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studies behind them. In this way the basic expertise of the company increased anneeds and problems could be seen better. Co-operation with universities and resinstitutes only began when the role of automation increased and measurement andtrol problems became more complicated. This co-operation is considered highly fruwhen the problem can be precisely defined and is related to a narrow special field. Wout external expertise the development of new measurement and control solutions wbe very slow and the company would easily fall behind the times.

A factor that complicates co-operation with universities and research institutes isstrong orientation to research problems and only secondary interest in the timetabcommercial product projects. Research generates new research, and the utilisatsolutions already found is easily forgotten.

Another problem is that the universities and research institute ‘over-market’ new tnologies, giving the impression that a new technology will solve all problems. Whetrial shows that this is not the case, mistrust too easily ensues and results in sceptowards all new technologies. The researchers should be more ‘factual’ in their infotion, telling only about things that are possible.

Design subcontractors provide very little new information or suggestions for new stions. There are very few innovative subcontractors.

The company management also emphasises in its strategy the importance of co-otion with research institutes to accelerate and ensure the acquisition of new informand technology.


Networking in product development is rather rare in the companies studied. The mpartners in research and design are universities and research institutes, employed tolimited problem areas. The problem in this co-operation is the cultural difference betwbusiness and university worlds; according to the interviews, projects with commerciagets fit in rather poorly with the universities’ working culture. This observation can abe seen to reflect a certain inflexibility of operation, caused by the large size of the comnies in question; this interpretation is supported by Rothwell (1990) who found that sand medium sized companies operating at the leading edge of the innovation cycle,significantly higher levels of communication with the external environment. The goaresearch and product development co-operation with research institutes is to acquirfound knowledge in narrow fields to support in-house product development work.operation begins only when there is a strong feeling that the company’s own know-honot enough to ensure progress. Based on this criteria the product development stratethe case companies could be classified, in the terminology of Nyström (1996), as ‘clstrategic orientation’ where technology use is isolated and orientation internal.

The use of other external co-operation partners is mainly limited to routine designcontracting. Subcontractors were felt to bring very little design-related added value. Ecially in process questions, outside help is hardly ever used and the companies stract very independently in this area. Based on the written survey all case companiessidered the use of outside experts in process design to be problematic. On the other

155

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cases with limited in-house automation or field instrumentation design felt it relativeasy to use external help for this tasks (Fig. 5.11, cases A, B and C), whereas compwith some own design capacity saw more problems. Without exception, the sushowed that increasing co-operation with suppliers and subcontractors was consinecessary.

Fig. 5.11. Ease of using external experts for product development.

Nearly all of the case companies also felt that companies representing measureexpertise are not willing to give information on measurement opportunities that arecommercially available. This type of information was seen crucial for the research ofprocesses and evaluating the possibilities to utilise new technology. A ‘scenario’approach was mentioned as one alternative way to initiate new process-oriented devment projects. This scenario would give all participants an idea of the possibilities offby different technologies.

Easy to use external expertisefor process technology

development

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supplier should be increased

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On the other hand, the case companies had very little contact with measuremenpliers prior to starting a new product development project, to discuss the related meament and control needs and opportunities. Based on the results of this study, the quecompetitive advantage through networking seems to be mainly limited to using reseinstitutes to obtain expertise within narrow sectors. Accelerating product developmprojects or finding new product concepts through networking were not mentioned amthe goals of the case companies. For example, networking in the field of measuremand automation, and the resulting commitment to certain co-operation partners, seebe hindered by the customers' unwillingness to purchase process machinery, mements and automation as one package. Moreover, the need to prevent the diffusion ocial design information to external parties complicates more extensive networking infield of design work.

Networking was, moreover, never mentioned with regard to strategies or the prodevelopment process. We may therefore assume that networking is based on indivactivity arising from the need of a moment, instead of being a conscious strategic chIt is not a tool to achieve long-term competitive advantage, for example by handingthe responsibility for certain parts of the development work to an external partner;working takes place on an individual level and focuses on narrow speciality fieAnother factor that stands in the way of more extensive networking is the lack of abstive capacity (Cohenet al.1990).

5.6. Integration of automation in process design

In this part of the study we look at how automation and its various aspects are observreal-life product development projects, how it should be managed in product devement, and what factors complicate the inclusion of automation in product developmprojects. The integration of automation in products is guided by company strategy,tomer requirements and their ways of operating, company expertise in the field in qtion, and the available information and specialist network.

5.6.1. Case results

Case A.

“The goal is to implement the process and process chemistry in such a waythe result is stable, so that it would give correct results even without any insment to control it.”

“Perhaps there is some discussion or thoughts about what some instruments cdo, but mostly we concentrate on trying to model the process as completely assible.”

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“Nearly always the process development begins with the existing measuremWhen processes are being developed, we don’t think at that moment how thetrol based on measurements actually works, but rather we use lab analysespecify the correct optimum values for the process model.”

“When some single machine is developed, its design drawing and process solcontain those standard instruments and measurements that are needed tosure the machine operates as it was meant to be. Our own instrumentationautomation group is there and the solution is tested in the laboratory, but we duse any external measurement specialists.”

In one exceptional process the strategy was to integrate all automation in thepackage in order to keep the know-how in their own hands. Process control was pathe project from its outset – not because it could not have been supplied by some exautomation company, but because the solution encompasses all the process andknow-how. It is not always necessary to start from scratch and to do the same workand over again for each system, and this also simplifies process start-up. This appdiffers from the end-of-process strategy which leaves automation questions to thetomer.

Process analysis and measurements have not been part of the operations from thset, they have only recently entered the scene. The lack of measurements is due to eences from earlier processes, the opinion was that processes are largely ‘self-controOnly later on real life has shown that reliable measurements could be useful.

“Product projects should be carried out as sort of teamwork, so that when proccontrol questions are discussed there is a measurements specialist who cawhat is possible and what alternatives there are.”

“It is hard to imagine that an automation company supplies the process consystem when they cannot in any case take responsibility of the whole processproblem is then that even though the customer purchases the field instrumentsarately, in practice it is the process supplier who has to take responsibilitythem, too.”

“In the research phase, when the fundamental questions are studied, thehardly any co-operation with subcontractors or automation suppliers. There is tfeeling that this is such a special field that nobody from the outside can help.then it is not understood that some instruments manufacturer or some othersider might bring in something useful.”

When a process or its machinery is being designed, no thought is given to meaments: what must be measured continuously and where, and how these could begrated in the package. These matters are somebody else’s business. In the designprocesses the implementation of basic instrumentation – needed to ensure the mechoperation of the machine – and the compatibility of components with each other arewith. The company’s own instrumentation and automation experts are involved, extespecialists hardly ever. When a measurement has not been used or been availablimpossible to say whether it would be needed or not.

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“With regard to process control it can be said that when the situation is noted awritten down once a day, it looks like everything is on an average OK, and kning it once a day is enough. But the difference between spot measurements anline measurement is like the difference between still photographs and movie fiit can be enormous.”

“The current procedure is partly limited by the timetables of product projects apartly by sheer cliquishness – we just cannot accept that there might be beexperts outside the house in such a special field as process control.”

“In a modern mill the control takes place through the DCS. If we go over to ingrated packages, selling them might not be so easy. The customer would askthey should buy exactly this control system from us, and we would then havanswer them. Now we can say that we can just as well use the parametersbuild control algorithms in another DCS. Of course we have been flexible,always. We have the know-how and usually this kind of information is given ininstrumentation and automation documents.”

“Another problem is the maintenance required by separate electronics componor systems. A control system integrated in the machinery would be one more tto require maintenance. When we go to modern mills that only have a few opeing people, this is seen at once as extra cost. If we have a separate control unsuch devices, it requires training, service, maintenance, maybe even spares –question of money. With distributed automation, in some situations we have basked why we have some individual components controlled by their own logicwere asked why we had to make it so complicated, why it could not be broughthe DCS?”

If something new is developed in co-operation with an automation supplier, the pawould have to agree to keep the information secret. On the other hand, too closewith some particular automation supplier might have a negative effect in competitionations, as the customers are ultimately the ones to decide which automation systemwill purchase. Product development should nevertheless get information on new meament and control possibilities, as these may be needed for example to optimise the dsions of process machinery.

The machines are made “to be sure”, to give the promised efficiency and output,they are usually dimensioned with enough safety margins. Giving performance guatees for processes based on existing installations is in some areas difficult due to thevariations in local circumstances. If measurement results could show that a processin a certain way in a particular plant, the dimensions could be made much more accu

Case B.

“If a research program shows that some particular measurement causes probleit is seen as a problem complicating the program, but usually there is no attempsolve the measurement problem.”

The role of measurement and analysis techniques in the research and product dement of processes and machinery is very varied. As an example, when a new machbeing designed its process technical performance and questions of manufacturing a

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main concerns. This is the company’s own area, what it does and can do. Later on,the machine is introduced into a process, various measurements are added to it –rate, temperature, pressure, consistency – measurements that are the task of aorganisation. And yet there is a feeling that the process machinery supplier, customemeasurement supplier should work together. Process start-ups require “over-instrumtion” as every day of the start-up costs money, but in one or two years the everydayfor instruments is far smaller because the operators have learned how to run the prWhen the instrumentation proposal is made at the early stages of purchase negotiavery few measurements are included. When the plant is then built, it is full of measments simply because it is not known which of them will be needed after the starphase.

“We are no experts in process control, and so we think very little about measuments and automation in the process and machinery construction design. Therather seen to be part of the environment. Some basic measurements, such assure, are a fixed part of a device. When we are looking at a new process, it oincludes laboratory measurements and usually there is no need for continumeasurements. If something absolutely new comes up in the laboratory phaseit is discussed. Measurement and analyser technology then comes into the pilater, and very often we try to rely on the information and devices we alreaknow.”

Developing process control and its integration into process machinery deliveriescomplicated task. If there are runability problems or if some part of the total delivery dnot work, the responsible supplier must face the storm. There should be more co-otion between the suppliers of the different parts to get the best possible result. Butthe customers split the deliveries into such small pieces that there is no chance ofing larger packages.

“There is a tendency to build in more intelligence in the devices. For examplsystem that operates independently, including measurements, could be devetogether with an automation specialist. Process specifications would come fthe machinery supplier, measurement measures, and the system would then bgrammed to handle the control. Process and machinery designers should mathe process dynamics well enough to specify the dimensions correctly, so thaprocess can be controlled accordingly. But the tendency is however that we mmachines. There is no automation or instrumentation personnel who could keecontact with these specialists. In order to know how a device should be maderegard to control and how to optimise it, we should know the abilities and needthe automation side. There should be more co-operation at the development pand process control questions should be discussed in advance. When a delproject arrives in a mill, by then everything is basically cast in iron and the prcess control just has to make the most of what there is.”

Case C.

“The more precise the product quality specifications become and the more acrately the unit processes must be designed, the more important automabecomes.”

160

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Basic automation design (pressure, flow and temperature measurements) is partproduct development project. The design of every product is brought so far that thedelivering automation is able to implement the necessary automation. Ready meament and control solutions are applied to simplify and accelerate the actual start-up.

“It would be very good if special instruments and on-line analysers were alreaavailable when the development work begins. They could speed up the tests,would be no need to wait for laboratory analysis results. At the same timewould see their performance and determine the features of measurements nefor the process. Some analysers on the market have already become superfluocertain unit processes, because they are not accurate enough for process coOn the other hand, direct measurement of a key variable would be a great leapward when discussing guarantee values and how they can be met.”

So far special measurements have not been included in research and developrojects. The goal in new development projects is, however, to pay attention to newsurement opportunities throughout the project, and in this way include their testingapplications in the testing phase.

“Field instruments, or at least a recommendation, should come from the procmachinery supplier to provide easy process start-up. We cannot act so that wesell a device – we must also understand where it will be used and how it will win the customer’s mill. We have to understand the process around it. A machinsupplier should have a program that can be installed in any system – control inmation. If the controls and measurements could be included in one package, sup would be far easier. It is necessary to include more in the packages, to inccontrol as well. The problem has always been that we concentrate on calculatnot on getting the right information. And this is still a problem, that we don’t pattention to getting the right information.”

The biggest obstacle in the use of special instruments as compared for exampbasic measurements is lack of confidence. Bad experience with one measurement mattitudes, and including a measurement in a project is then felt to be too risky. Anoproblem is their price as compared to the price of a process: the business is basedsale of the company’s own products, and everything “extra” included in the deliverfelt to undermine the competitive position. From the process machinery supplier’sspective, simplifying processes and adding intelligence deteriorates the price strucOn the other hand, the increased efficiency gives the customer an extra benefit whicclear competitive advantage and for which the customer is also willing to pay.

Case D/AN. In the case of one process the integration of automation started fromneed to give the process more quality and runability potential. The solution howrequires a much more complicated process. In practice this may mean losing the potif efficient process control is not included, and in the worst case the process canncontrolled and run. Consequently the process had to be packaged with a compreheautomation solution to ensure the operation of the system. Using third-party control stions endangers the delivery if the supplier in question does not know the processoverall responsibility always presses on the process supplier.

161

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“To some extent automation was already in the picture in the first trials in the piplant. Results were supplied to the unit responsible for automation and they wasked to prepare for this kind of process. But integrating automation was stillwithout difficulties. In this case the situation was improved by a co-operatiproject a few years earlier, during that we sort of learned to know each other’s tminology and way of operating. We began to learn about each other, what is avable and what the needs are. In co-operation everything depends on people king each other.”

“If we now had to engage in a similar project, we would look at process controlthe time when designing the process. The product project has been slow,though the necessary automation is included in the delivery. In sales the prothat is in this phase has been difficult to specify. Also the start-up phase involvlot of tailoring, and the local automation people and start-up people have not btrained. Due to insufficient documentation and finalising the design there has bno single uniform product.”

Flexible co-operation in the development phase is also complicated by distancepowerful barrier. However, co-operation has been largely dependent on personal relaand familiarity with each other’s terminology and ways of operating. Effective co-opetion is not seen to be so much a question of time or financial resources but rather ation of attitude. Experience and results of joint development projects are the most etive tool in changing attitudes. The organisation of product development functionsalso complicate the inclusion of automation in product development projects. The grresponsible for process and machinery design should be accompanied by a group ming process automation which would look at the process development from the viewpof measurements and control. Process development is not always seen as a whole,either development of machinery or automation.

Case D/P. The practice is largely to rely on machinery design to first develop a suitaconstruction with regard to operation (e.g. flow conditions) and then to see where asurement could be installed and how the necessary control is implemented. Inwords, the framework is first fixed and the other components are then adapted to it. Thave also been well-informed product development managers who have ensured themitment of contact groups early on. For example, flow measurement is an essentialponent in a certain process. At first the designers considered its operation self-eviand it was not given enough attention. The higher-level optimisation software and vperformance curves were there, but measurement expertise and field instrumentationnot sufficiently involved in the process. Processes and process machinery are toodeveloped from components upwards, overlooking the whole process and particumeasurements and process dynamics.

“The biggest problem in product projects is that process and automation desigseparated from the product development projects. How these aspects are dealin projects is dependent on the project leader. On the other hand the developmunit in question has its own automation resources only for the design of machinautomation and auxiliary systems. The design of field instrumentation and ac

162

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process automation are missing from product development, and for this partside designers have to be used. This causes problems in the production phasethis in turn is reflected as a need for extra work in delivery projects.”

Process developers do not feel familiar enough with measurement technology beof the specialised measurement, electricity and information technology expertise asated with measurement instruments. Even if some specific measurement instrumknown to them, it is difficult to find such an interface that the company could take respsibility for the measurement and its use. If measurement instruments were integratprocess packages the process supplied would also have to provide the necessary ation know-how. In addition, the customers are used to purchasing measurementsafter the main machinery acquisitions. For the control of entire processes it would beeficial if the measurements were already integrated in the package.

Case D/AU.

“Paying attention to automation starts from process design. It means thinkwhat measurements and controls the process will need, what requirements arand how these are related to machinery design. Machinery design then looks arequirements set by that area. The easiest way to include automation in the syis through process development.”

“Whether or not special measurements are included depends on what kind of puct development is being done and what needs it causes. Generally speakinmeans process measurements or special machinery measurements. Now alssistency measurements have entered the scene. We look at the entire process,whole package includes consistency measurements and controls. These are pthe process, and they are also included in the sales concept. Consistency meaments are becoming such everyday things, they are a natural part of the procand they are not felt to be anything special anymore. Still a couple of yearsthey were too exotic and difficult to understand. Now when we have used thetrials and projects and have had to get acquainted with them, they have becfamiliar and been accepted for normal use.”

Measurement needs often do not emerge before the first pilot tests are being caout in mill conditions. People imagine the processes to be far easier to control thanactually are. Process and machinery design builds upon the idea of a ‘self-controllingcess’ that hardly needs any measurements or control, and so the dynamics and conbility of the process receives far too little attention at the design stage. It is easy tocentrate on one key variable important for the end result of the process, forgettingmanagement of the whole thing. Information of special measurements is available, budiffusion of information should be ensured. Usually only a small group of people atttraining sessions and thus the information does not spread enough.

“Automation has rather little effect on the quality or production performancguarantees, because the margins are very small. Benefit is achieved when themation has been built and adapted to the machinery and is properly controllAlso start-ups are easier and usually succeed better than without measuremand control packages.”

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Measurements and controls have quite an impact on process performance, buteffect on the guarantee values is difficult to define. Process guarantees are dependmany other factors, such as the action of competitors and local conditions. If the prois sold as a package and given a certain guarantee, it is all the same for the end resuthe guaranteed values are reached. Problems in measurements or control are just acal as mechanical malfunction of a process machine. Even though in real life thedelivery is not dependent on minor things, theoretically even a very small malfunctioncomponent might cause a disaster in a very critical situation, such as accepting theantees. In contracts the guarantee values cannot be specified in extremely fine detexcluding minor components from the guarantee.

“The main problem in large package deliveries is that if the measurementscontrols are not included in the same package and managed by us, when thetrouble with the process performance guarantees we easily end up with throwthe ball back and forth and looking for the culprits among the different supplieThe customer tends to push the problem to the suppliers and does not want toa stand in the matter, even if the customer has decided to purchase the diffeparts separately.”

Case E.

“When new measurements are being developed, there should already then betacts with units developing different processes. This creates a good relationwhich certainly would give new ideas. Co-operation with product developmenalso internal marketing. At the same time the measurement instrument supwould receive valuable process expertise needed in its development work ancontacts. This could provide the basis for good integrated applications. And gapplications increase the value of the entire delivery for the customer.”

General knowledge of processes is considered to be enough for a measurementplier, and very profound specialisation is not needed. Specialisation in processesrealm of units developing processes. In the same way, process design units should penough knowledge of measurement technology to be able to receive deeper informof measurements and to apply it to their own processes.

“Automation engineers have an integrating role in design, because they havlook at things with regard to processes, machinery, and users alike.”

A supporting factor is the general process approach of the automation business; iway the ideas emerging in different areas of the process industry can be utilisedwidely.

Questions of industrial jurisdiction were not seen to be major problems in co-operaor in the joint development of measurement solutions. Keeping the developmentreasonable requires that the developed products must have large enough markets.other hand, co-operation also strengthens and increases know-how which the co-opepartners can subsequently use in their own product development.

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Process and machinery design is often based on the idea of 'ideal design', designeregard to process technology and device technology in such a way that no outside cis necessary. Basically, process design pays no attention to the utilisation of measurand control technology; these questions only arise when the process has alreadydesigned and constructed and its control causes problems due to insufficient meaments or control technology. In the written survey, most of the case companies clathat their technical process solutions pay attention to measurement and control oppoties and questions of process automation and control, and that these matters arobserved in technology and product development projects (Fig. 5.12). The intervreveal, however, that only the machine automation needed for immediate control is tinto account, while process automation, process controls and optimisation, are in nopart of process design. In cases D and D/AU, machinery designers (D) reported mmore frequently than the automation group of the business unit (D/AU) that measureand automation questions were included in product development projects. Machdesigners assume that the automation people take care of measurement and automatters both in product development projects and in process technical solutions. Thiscates that the interactive and synergistic process, typical of concurrent engineeringfact not supported (Bowander 1993).

Fig. 5.12. How questions of measurement and process control are dealt with in process development projects.

The written survey further indicates that special measurements get very little attenin product development projects and are largely left out of them altogether. This is pexplained by the insufficient guidelines, knowledge and experience, but also by the cplicated nature of special instruments. According to Bertodo (1988), learning is throuseries of small incremental steps; and also this research shows that in those casesthe design personnel had come into contact with special measurements in connectioprocess trials or machinery testing, these instruments were much more easily acc

-2

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Process measurement andcontrol needs are included

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An example of such measurements are consistency measurements which, due to ining designer experience, are fast becoming an everyday thing. This observationagrees with the theoretical finding that knowledge and experience of a certain topicessential for the adoption of new related information (Cohen 1990). The interviewswritten survey reveal that systematic product development models and methods areatively little use, and in most cases they do not seem to promote overlapping, iterainteractive operation. With the exception of case E, the case companies seem ratrepresent a serial, decision-stage model of product development (Cooper 1993).

The people responding to the surveys agreed on the need to test special measureand analysers in separate research projects prior to their application in product devment projects (Fig. 5.13). This is also supported by the observation that special meaments are more easily included in the process development projects when the pgroup or product development group has some experience of them. The testing andspecial measurements in research projects was also seen, at least in some cases, terate the actual research projects because measurement results are more easily ava

Fig. 5.13. The necessity of testing special measurements and analysers in separate researprojects prior to product development, and the development of control solutions in deliveryprojects.

As process control is very little thought about in the product development of proceand process machinery, the responders considered it a common and normal thidevelop control solutions in connection with delivery projects (Fig. 5.13). However,then all the technical solutions of machinery design have already been made and scontrol solutions must be adapted to the existing situation. This means that optimumcess control and performance will most likely be not achieved.

It was generally agreed that the development of processes, process machinery, ancess control should take place simultaneously (Fig. 5.14). To be possible in practicemeans that the organisations developing processes and machinery should be suppo

New special sensors andanalyzers should be tested

before inclusion intodevelopment projects

-2

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Most control solutions aredeveloped in delivery projects

and start-ups

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people acquainted with measurement and control technology, or seek close co-opewith companies developing this technology. Answers to this question also deviated(appendix 2). The researcher’s conclusion is that this is due to the lack of a clear strand instructions for product development.

Fig. 5.14. Concurrent development of processes, process machinery, and process control automation solutions.

Similarly, it was agreed that a company delivering processes should also be abdeliver the necessary process instrumentation and control solutions in the same pa(Fig. 5.14), but the difficulty of managing these control packages in delivery projectsthe purchasing behaviour of customers complicated this considerably. This was alsocated by the variation in the answers (appendix 2). The companies are concerned wipossibility of having to bear responsibility for the control system maintenance and spservice as well, and in some competitive situations very close commitment to a cemeasurement or automation supplier was seen as a weakness. The customers’ purcbehaviour does not yet altogether support fully integrated solutions, which might besidered to reflect the prevailing ‘Independent/Buyer’s Market’ buyer-seller relationshipregards automation (Campbell, 1985). All solutions offered to the customers aremuch identical as far as integration is concerned; packages that include automatioput together with the pretext of simplifying delivery routines and the benefits they yieldthe purchaser do not differ enough from each other.

Another problem is the change this would mean in the price structure of process deries (Fig. 5.15). Automation pushes the price up and thus creates pressures to lowprice of process machinery correspondingly. There was much variation in the ansregarding the effect of automation on the price of process machinery (appendix 2).researcher’s conclusion is that this is caused by the unclear situation in marketingsales strategies of the case companies.

Process supplier shouldsupply instrumentation and

control in one package

-2

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Fig. 5.15. Effect of measurements and automation on prices and sales.

Even though integrated processes help to accelerate the project and simplify prstart-up, process suppliers are very cautious in their attitudes towards the effect ofmation on process performance. This is partly due to matters of competition, partuncertainty about the true effects. In many cases the process is started up by the comthat delivered the process machinery, and the role of special measurements and pcontrols in the overall process efficiency comes only after that. The process suptherefore has very little experience of their effects. If a process delivery also includesmost important special instruments and controls, the supplier could better evaluatbenefits they bring and even apply this experience later on in process developmeorder to design comprehensive optimum solutions we should strive from the presenIndependent /Buyer’s Market or Dependent/Subcontract Market situation towardsInterdependent/Domesticated Market (Campbell 1985).

Including measurements and controlsin a process delivery increses the

price and makes sales more difficult

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6. Analysis of case study results

The results obtained show that in the case companies, the development of integrateduct (processes and machinery) had not proceeded to the point where the resulting sohas typically product-like features, such as clearly specified limits or dedicated prodocumentation. The company that was closest to this situation was case E where thetion had reached the status of a unit process.

Based on the empirical study, we can conclude that in Finnish pulp and paper maery industry the following factors are the main criteria when considering integrated puct development:– company strategy,– organisational model,– product development process model,– technological ability,– experience, and– networking.

When the empirical results concerning the essential factors for the design of integsolutions are compared to the initial construction, attention is drawn to the finding tharole of customer contacts and the ability to adopt new information were not emphasas strongly as anticipated. In addition, the ability to apply technology and to master dient technologies appeared more important than the technological level and expertsuch.

As the empirical study concentrates on technology and the product developmentcess, the evaluation excludes, for example, the following factors that naturally influencompany's ability to develop integrated solutions:– business culture and management culture,– organisational capabilities,– geographical locations of operations,– physical organisation of R&D projects (centralised / decentralised),– investment level and span in R&D,– strategic targets:

169

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–main supplier vs. sub-supplier,–green field vs. rebuild supplier–focusing on production units of a certain size,–focusing on certain geographical areas.

6.1. Building the analytic hierarchy process model

An Analytical Hierarchy Process model (AHP model) was built both in order to analthe results of the empirical study and to study reciprocal relations, and to compare theity of the cases studied to design integrated products and concepts.

6.1.1. Selecting the criteria for integrated product development

For the AHP model, six of the factors most essential to the ability to design integraproducts were selected as the highest-level criteria. Thus the highest hierarchy levelmodel can be described as shown in Fig. 6.1.

Fig. 6.1. Hierarchical model for the highest level criteria having effect to Integrated Product De-velopment capability.

Developing integrated solutions is dependent on the company's competitive straand the related product strategy. Heinonen (1994) has stated in his study that ‘prdevelopment has to be integrated to form a central part of the company’s strategicagement’. Rouhiainen (1997) has found that communication of the goal has a crimpact on the successful product development. If the competitive strategy does notintegrated solutions, integrating various technologies into a ready customer packaleft to individual product development organisation and delivery projects. The resulproducts are extensively tailored for each individual project and they cannot combineferent technologies in the optimum way. With the case companies integrated produc

INTEGRATED PRODUCT DEVELOPMENT

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The formal organisation of the case companies showed much variation, from dement-type to multifunctional team organisations. The results suggest that organisatmodel has a clear impact on the organisation’s ability to design integrated solutionscreating barriers between departments the organisation may even complicate integrInformation transfer was felt to be the easiest in organisations where the product devment was not split into different departments. Also having the product developmentdelivery projects in the same department was felt to be highly beneficial. Communicabetween different departments was seen to make adaptation of new technology morficult, too.

Product development processes varied from serial to concurrent. Comparison ocase companies clearly showed the effectiveness of the overlapping, iterative prmodel typical of the concurrent principle. Moreover, the strong emphasis this princgives to the early stages of the product development project was felt to be essential fintegration of measurement and automation solutions in processes and process macThe product development process is a very strong factor promoting or hinderinginclusion of new knowledge and experience in projects.

The technological expertise and experience of the case companies was also veryent. Some of them were highly specialised in a narrow field, while in others severaltinct technologies were represented in product development; however, the focus is cin the fields of machinery design and process expertise. In these cases the developmintegrated process solutions was clearly complicated by a lack of broader experienctechnical knowledge. Insufficient technical knowledge of automation also makes it vdifficult to consider the benefits and opportunities of automation when new prodprojects are being started.

Moreover, the lack of in-house expertise complicates the use of external specialisproduct development. Typically the contacts to external parties aimed at obtaining mcomprehensive information of some key technology, and thus the technologies thatoutside the company's own expertise were not supported by networking either, alththe survey revealed a strong need for this. It can thus be stated that the ability oorganisation to complement its technological and knowledge base by means of netwing is a prerequisite for the design of integrated solutions, if and when all of the necesexpertise cannot be found in-house.

Networking with customers was felt to be necessary, though not a very imporsource of new product ideas. This opinion is in sharp contrast with published reseaccording to the literature, the overwhelming majority of product ideas come from ctomers (Hippel 1978). The reason for such a considerable deviation from the rest oresults is the strong changes that have taken place within the customer industry. Thetomers have moved their development input from process machinery developtowards the end product, and thus also their interest in process machinery developwork is diminishing. Customers are involved in product projects in order to test the deoped concepts, and thus it is a means to obtain advance acceptance for the productnotion is supported by Cooper (1993) who states that a big reason contributing to profailure was insufficient ‘prototype testing with customer’ and ‘test marketing’.

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6.1.2. Selecting subcriteria and alternatives

The highest hierarchy level was further split into subcriteria and finally into alternatiused in the evaluation. It was not felt necessary to use the strategy, organisation, andprocess in the subcriteria level; instead these were directly given alternatives to be usthe evaluation.

6.1.2.1. Strategy

The following strategy alternatives were chosen (Fig. 6.2)

whereINSTRAT integrated products are defined in the strategy.INPRACT integrated products are not clearly defined in strategy but in practice

the task of product development is to design integrated products.NOSTRAT integrated products are not defined in strategy nor is their develop-

ment seen as a goal.

Fig. 6.2. Hierarchical structure of the strategy criterion and its alternatives.

The research did not aim to study the official company strategies for the product deopment, but rather to look at how product development is dealt with in the strategy. Hever, the results would seem to indicate that the strategy has not been very effeccommunicated to product development, as different units of the same company appto have greatly differing ideas of the strategy.

The following alternatives were given for organisation (Fig. 6.3):


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whereFUNCTION functional organisationTEAM team-based organisationMULTIFUN multifunctional team organisationMATRIX matrix organisation

Fig. 6.3. Hierarchical structure of the organisation criterion and its alternatives.

The following alternatives were given for the RTD process (Fig. 6.4):

whereSERIAL serial product development modelSIMULTAN simultaneous/parallel modelCONCURR concurrent model

Fig. 6.4. Hierarchical structure of the RTD-process criterion and its alternatives.


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6.1.2.2. Technical capability

The hierarchy structure of technical capability is shown in Fig. 6.5. Technical capabhere stands for the theoretical knowledge of a product development group and the ato apply it. In the hierarchy, Automation involves overall expertise in process manament, and control, technologies, and it is further split into two subcriteria: Applicatioand Tools. When the necessity of different technologies was evaluated in the writtenvey, process technology and machine building appeared to be far above the rest, athis respect the answers were largely similar (appendix 2). The model combines gecontrol technology and machine automation under one label. ‘Field instruments’ inclugeneral measurement devices (flow, pressure, temperature) and commonly used act

The hierarchy further splits the ‘Automation’ criterion into subcriteria Applicationand Tools. ‘Applications’ is here understood as the ability to apply control technologyautomation tools for various process management purposes, while ‘Tools’ describemastery of the various automation system tools. Both of these subcriteria were consiequally important for the Automation criterion.

Fig. 6.5. Hierarchical structure of the Technical Capability criterion, its subcriteria and alterna-tives.


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The following alternatives were given to Process technology:COMPPRO complete process technology capabilityUNITPRO unit process technology capabilityPROSDET capability in some specified process technologiesNO PROC no process technology capability

‘Complete process technology’ requires profound technological mastery of the eproduction process: its unit processes, links between them, and understanding owhole. ‘Unit process technology’ involves profound technological knowledge of sounit process, while ‘Specified process technologies’ limits the technological expertissome specific part of the process and does not require deeper understanding of ptechnology. Alternative ‘No process technology capability’ stands for no significant pcess technology expertise.

The following alternatives were selected for the System engineering tools (TOOLSthe Automation criterion:

AUTIMPLE ability to implement automation systems, including installation andstart-up

AUTDESIG ability to design automation systemsAUTSPEC ability to give specifications for automation systemsNO CAPAB no significant ability to understand or deal with automation systems

The ‘ability to implement automation systems requires excellent mastery of automasystems and engineering tools, including design and testing as well as start-up. Thealternative means the ability to design automation systems in all necessary detail. ‘Amation system specification’ involves the ability to define what kind of automation sysis required for the control of a given process, but detailed system design and implemtion are beyond this level.

The Automation subcriteria ‘Applications’ was divided into the following alternativeOVERAUT ability to design process control and management for an entire produ

tion processUNITAUT ability to design process control for unit processesAUTSPEC ability to give specifications for process controlNO APPL no process control abilities

An ability to design entire production process control requires extremely good extise of the process technology, control technology, and optimisation methods usedparts of the process in question, while unit process control design requires similar etise within a limited area, one unit process. The ability to give specifications involdefining process technical models so as to allow the design of an automatic processtrol system.

‘Machine building’ alternatives are:MACHINER ability to design process machinery for entire processesMACHPART ability to design parts of process machinery or machinery for small

process unitsNOMACH no ability for process machinery design

Designing process machinery for entire processes requires profound mastery of nuous areas in machinery design and construction; designing parts of process machcalls for expertise in certain limited areas of the process.

‘Field instruments’ and ‘Special instruments’ alternatives are:

175

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NO FIELD very little knowledge of field instrumentsFIELDSPE ability to give specifications for field instrumentsFIELDDES ability to design applications for field instrumentsNO SPEC very little knowledge of special instrumentsSPECSPE ability to give specifications for special instrumentsSPECDES ability to design applications for special instruments

Application design ability requires knowledge of both operation and utilisation ofnecessary field instrumentation and special instruments in order to choose the mosable measuring methods and to dimension the measurements to suit the prevailing pconditions. Specification ability requires knowledge of field instruments and speinstruments on the process flow chart level.

6.1.2.3. Experience

The subcriteria of ‘Experience’ were defined and selected in the same way as tho‘Technical capability’ (Fig.6.5), and also the same alternatives were used for all subcria (Fig. 6.6).

whereOUTSTAND outstandingABV AVG above averageAVERAE averageBLW AVG below averageUNSATIS unsatisfactory

Fig. 6.6. Hierarchical structure of the Experience criterion, its subcriteria and alternatives.

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‘Outstanding’ experience means experience over a long time, with several compand functioning projects. This also includes that several people have experience osame field. ‘Above average’ requires proven experience in several projects butsmaller scope, either limited to certain areas of the process or possessed by fewer p‘Average’ alternative involves limitations in the number of projects, width of scope, anumber of people. In the ‘Below average’ alternative, experience is limited to a narfield, possessed by few people, and no projects have been delivered. ‘Unsatisfacalternative means that both experience and proof are missing.

6.1.2.4. Networking

‘Networking’ can be divided into subcriteria as shown in Fig. 6.7. Networking influencthe development of integrated products in two ways. Firstly, it is a way to gain deeunderstanding of the special expertise fields. Information can be obtained from reseinstitutes, universities, and suppliers possessing special knowledge. Research institutypically used to provide information on certain process and control technical questlimited to narrow sectors. Suppliers are experts in their own products and their apptions; typical sectors are chemicals and questions related to their use, as well as maand components. Secondly, companies may network with each other for purposdevelopment and manufacturing. According to this research, the need for this kind ooperation is growing. Networking was seen to be easiest when in-house knowledgescant. This attitude in product development may be caused by the tendency to keepcompany’s own proven technologies and it may thus slow down the introduction oftechnology. Handing out existing mature technologies to specialised networking parmight, however, free own resources for adopting new technologies.

Networking with customers was seen as a positive thing but it was not consideredimportant. Here, too, the answers varied considerably (appendix 2). Based on theviews, the customers were mainly seen as the ones to accept new technical solutionas active developers of new techniques.

177

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whereCONTINUO long-term networking based on continuous co-operationCASEBCAS co-operation in projects or case-by-caseSELDOM co-operation only seldom

Fig. 6.7. Hierarchical structure of the Networking criterion, its subcriteria and alternatives.

Under ‘Networking’ the criteria describing research institutes and suppliers have bfurther split into subcriteria by technology type, key/supporting technology. Alternatifor both these subcriteria and for the Customer criterion were selected on the basis ocontinuous and regular the co-operation is.

Long-term, continuous co-operation requires close teamwork aiming at new solutas well as transferring some responsibilities to the partners. In the Case-by-case altive the partnership network exists but it is used in single projects and no responsibfor continuing development is transferred to the partners. Intermittent co-operatiomainly very limited and problem-solving oriented.


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6.1.2.5. Overall model

Using the hierarchic analysis presented above, a hierarchic model can now be buevaluate the ability of the studied case companies and product development groudevelop integrated products. The AHP model obtained is illustrated in appendix 3.evaluation is based on qualitative values and on information accumulated with intervand with a written questionnaire.

With regard to the AHP model presented here, the strategic and operational targetcompany function as higher level criteria for this model. These higher level criteria cobe e.g. growth, profitability, cost competitiveness, delivery capability, technological copetitiveness and geographical presence. In this respect this model, describing the caity of product development to produce integrated process concepts, is one of the enafactors that support these higher level criteria as factors in the success of a company

6.2. Defining the importance of each criteria

The relative preferences given to the different criteria and alternatives are defined obasis of the hierarchic model. This is done by comparing the criteria and alternativeswise in relation to the higher level criteria. The preferences obtained are local, and relto the immediately higher hierarchy level of the compared criteria.

6.2.1. Defining the importance of the main criteria

In pairwise comparison of the highest hierarchy level of the model to the GOAL (Fig. 6strategy (STRATEGY) was considered slightly more important (2.0) to integrated proddevelopment than organisation (ORGANIZA). When the product development strategan entire company must be turned to the same direction, the strategy must be comcated in the same way to all units. Moreover, strategy can be considered to have a gueffect on the organisation. Also the study of Heinonen (1994) states that strategyimportant guiding factor in product development.

In addition, the RTD process (RTDPROC) was considered to be slightly more imptant than strategy (2.0) for integrated product development. In the light of this reseathe RTD process has been in the key position in this respect, and also numerous s(Kosuke 1993, Duran 1995, Bowander 1993) support this conclusion. Realising thecurrent principle in product development is the most important factor that enables leing and transfer of many new things. The RTD process was also considered to be swhat more decisive for integrated product development than the formal organisathrough it we can influence the very first stages of the product development procestages that are of crucial importance for integrated product design.

179

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Fig. 6.8. Pairwise comparison of criteria.

Technological capability (TECCAPAB) was seen to be somewhat less importantintegrated product design than organisation, but equally important to strategy andRTD process. Product development strategy is often closely linked with a compatechnological capability to implement its strategy. Thus it would seem that stratshould have a far higher preference in the model than technological capability, as strshould direct the acquisition of technological capability. According to this research, hever, exactly the opposite seems to be true: technological capability dictates whatucts are developed. In the researcher’s opinion this is caused by the fact that the conies in the sector studied tend to give very much emphasis to technology as the key mof competition, and also their strategies reflect this attitude. Another possible reasonslow development of this mature field, and the concentration of companies.

Experience (EXPERIEN) possessed by the product development groups was eated slightly higher than other factors, equal only to the RTD process in importaBased on the empirical study, prior experience of the product development team plcentral role in the early stages of product development processes. The participantsresearch considered ‘tied project schedules’ and ‘technical risks of new solutions’ afactors that most strongly complicate the inclusion of new technologies in product deopment projects. When the group has more earlier experience, there are fewer tecrisks and also the effects of new technologies on the project schedule are easier toate.

Networking (NETWORK) was given equal importance as the other criteria. Accordto the results of the current research, networking does not have any crucial role ingrated product development. However, it is an important factor when the product deopment group working on integrated products does not possess enough expertise to

STRATEGY 2,0 2,0 1,0 2,0 1,0

ORGANIZA 2,0 2,0 2,0 1,0

RTDPROC 1,0 1,0 1,0

TECCAPAB 2,0 1,0

EXPERIEN 1,0

RTDPROC EXPERIENORGANIZA TECCAPAB NETWORK

Compare the relative PREFERENCE with respect to: GOAL

Where 2,0 means e.g. that RTDPROC is 2,0 times more important thanSTRATEGY

2,0 means e.g. that STRATEGY is 2,0 times more important thanORGANIZA

180

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age the entire product. The necessary capabilities can be quickly accessed when aneed arises.

As Fig. 6.8 shows, none of the criteria has been given a clearly superior poswithin the scale recommended for the AHP method (Fig. 4.7). In order to develop igrated products, many things must be done right (Guptaet al. 1990). In this scale, allevaluations are within the range ‘equal importance’ – ‘weak importance of one oanother’.

The pairwise comparison presented above yielded a table from which a synthesisobtained (Expert Choice 1998), and this synthesis gives the priorities of the criteriaregard to ‘Integrated product Development’ (=GOAL). The results are presented in6.9.

Fig. 6.9. Synthesis of the criteria under GOAL – ‘Integrated Product Development’.

Fig. 6.9 shows that experience (EXPERIEN) is the most important factor for integraproduct development. It is also worth observing that when the lower range of the recmended evaluation table (low priorities) was used, the effect of experience (EXPERIwith regard to the goal is 1.7 times the effect of technological capability (TECCAPAInconsistency is 0.04, clearly below the 0.1 limit that is considered to be an accepmaximum (Saaty 1980).

6.2.2. Defining the importance of the subcriteria

The importance of subcriteria and alternatives is determined in the same way as the imtance for the higher-level criteria. Also here the preferences are determined by compthe criteria or alternatives of each criterion or subcriterion pairwise to the next higher-lcriteria to obtain local preferences for each.

6.2.2.1. Technical capability

When comparing the importance of the different criteria (Fig. 6.10) for Technical Capaity, ‘process technology’ (PROCESST) was regarded by all participants as more impo

Synthesis of Leaf Nodes with respect to GOALOVERALL INCONSISTENCY INDEX = 0,04

EXPERIENRTDPROCNETWORKSTRATEGYORGANIZATECCAPAB

,225,204,159,147,134,131

181

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than other technologies. The equal importance of automation (AUTOMAT) with ‘machbuilding’ (MACHBLT) is the researcher’s own subjective assessment and it is basethe necessity to understand the entire process in order to control it. The results oempirical study do not support this conclusion, as they put ‘machine building’ cleaabove automation. Both ‘field instruments’ (FIELDINS) and ‘special instruments’ (SPCIAL) were given equal importance. Fig. 6.10 also shows the relative importance facand inconsistency ratios for the different criteria, calculated from the synthesis basepairwise comparison. It should be noted that the preferences obtained are relativelocal criterion, ‘Technical capability’ (TECCAPAB). Global preferences are obtainedmaking a synthesis in relation to the Goal (GOAL).

Fig. 6.10. Pairwise comparison and synthesis of the criteria under ‘Technical Capability’.

PROCESSTAUTOMATMACHBLTFIELDINSSPECIAL

,377,204,191,120,108

Inconsistency Ratio =0,02

PROCESST 2,0 3,0 2,0 3,0

AUTOMAT 1,0 2,0 2,0

MACHBLT 2,0 2,0

FIELDINS 1,0

AUTOMAT MACHBLT FIELDINS SPECIAL

Compare the relative PREFERENCE with respect to: TECCAPAB < GOAL

Where

TECCAPAB technical capability under GOALPROCESST capability in process technologyAUTOMAT capability in automationMACHBLT capability in machinery buildingFIELDINS capability in field instrumentsSPECIAL capability in special instruments

182

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6.2.2.2. Experience

Evaluation of the importance of the different criteria for ‘Experience’ (Fig. 6.11) giveslightly higher preference to process expertise. Here the importance of ‘process tecogy’ in relation to ‘machine building’ is dependent on the process with which each pruct development group works with: If the process in question involves severalprocesses and a large amount of process machinery, process technology experclearly emphasised, whereas groups developing independent mechanical prmachines associate process technology expertise with machinery technology. The nsity to give equal importance to automation and process machinery building could, inresearcher’s opinion, be justified by the need to understand overall processes andmanagement. Experience in the use of automation in process control is a uniting featintegrated product development.

With regard to field instruments and special instruments, experience of the lattegiven a somewhat higher preference: in the researcher’s own experience, special iments are specifically related to process technology and they also play a crucial roprocess control and optimisation.

If a company has some experience of the design and use of automation with itsproducts, its attitude towards new automation solutions and its ability to utilise themvery much improved. This is particularly true with case E where all of the persinvolved in the current research had years of experience with automation and its uttion in process and machinery design. Also in case A1 the goal was to handle the ovprocess control, projecting and start-up by using automation designed in-house. Spinstruments were best accepted by the automation specialists of case D/AU; theypractical experience of special instrument and had begun using them.

183

hesis,thansultsm-

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Fig. 6.11. Pairwise comparison and synthesis of the criteria under Experience.

6.2.2.3. Networking

Pairwise comparison of the set criteria, as well as the preferences obtained with syntare presented in Fig. 6.12. Networking with customers is given a higher preferencenetworking with research institutes or suppliers. This is based on earlier research re(Hippel 1978) and is in some contrast to the empirical material. Networking with custoers is particularly important in order to gain customer acceptance for the solutions doped. Feedback from customers at an early stage of the development process heguide the project to the correct direction and ensures customer acceptance when theuct is launched (Cooper 1983).

PROCESSAUTOMATIMACHBUILSPECIALIFIELDIN

,388,210,203,113,085


PROCESS 2,0 3,0 3,0 3,0

AUTOMATI 1,0 2,0 3,0

MACHBUIL 3,0 2,0

SPECIALI 2,0

AUTOMATI MACHBUIL SPECIALI FIELDIN

Compare the relative PREFERENCE with respect to: EXPERIEN< GOAL

Where

EXPERIEN experience criteria under GOALPROCESS experience in process technologyAUTOMATI automation system level experienceMACHBUIL experience in machinery buildingSPECIALI experience special instrumentsFIELDIN experience field instruments

184

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Fig. 6.12. Pairwise comparison and synthesis of the criteria under Networking.

Based on the hierarchical model and the pairwise comparison of the criteria and anatives, a synthesis with respect to the Goal can be done. The detailed structure withnatives, abbreviations and global priorities (calculated with respect to GOAL) is psented in appendix 4.

6.3. Evaluation of the cases with the AHP model

Each of the case companies was evaluated by applying the criteria specified in the mThe evaluation was based on the material collected with the written questionnaire, iviews made by the author, and the author's observations. The entire evaluation of thewith judgements based on the selected alternatives is presented in Appendix 5, ayielded the following weight indices describing the ability of the case companies to deintegrated process solutions. The value 1.0 represents the optimum case where the ative has got the best judgements for every criteria. The lower the value is, the further athe case is from the best possible alternative. Thus case E is rated very high relative‘integrated system development’.

CUSTOME 2,0 2,0

RCH INTS 1,0

RCH INTS SUPPLIER

Compare the relative PREFERENCE with respect to: NETWORK< GOAL

CUSTOMERCH INTSSUPPLIER

,500,250,250


Where

NETWORK network criteria under GOALCUSTOME networking with the customersRCH INTS networking with research institutesSUPPLIER networking with other suppliers

185

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E 0.801D 0.574 (D includes both D and D/AU as one entity)A/1 0.540B 0.460C 0.420A/2 0.413

Fig. 6.13. Performance sensitivity of the cases studied with regards to ‘integrated system development’ for nodes below it.

In Fig. 6.13 the vertical hollow bars represents the criterion priorities and the horiztal lines represents the priority of each case for the given criterion. When looking atgraph, we can see how different operating models the companies studied have. Thgest differences between the cases are in organisation, R&D-process and strategy,technical capabilities and experience are relatively similar. In networking only casdeviates from others. In appendix 5, we can see that in the judgements the differenctechnical capabilities and experience are found in the side of automation. Technical cbilities are not alone decisive for the ability to produce integrated process concepts.

In case D, when the results of two units of the same company were combinedresult was only slightly better compared with separate evaluation. The product devement process still did not show signs of the concurrent feature. Expertise in automatinot enough to produce integrated process concepts. It must also be effectively harnto aid the research and product development functions at the very outset of projects.E, with a strategy that defines integrated solutions and, with a product development

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6.4. Validity and reliability of the research

The research material includes the largest and most central companies of the Finniscess machinery industry and is therefore representative of the product development iindustry. Altogether seven (7) groups of three separate companies were included bothe interviews and written survey. Eleven persons were interviewed, and 107 sent anto the written questionnaire. As the questionnaire was sent to 199 persons, the replycentage is 53.8%. The selected groups represent the most crucial product develounits of the companies, and thus the results very well describe the industry studied.

A more comprehensive study in the companies, for example by applying the Amodel to find a consensus on the selected criteria and their preferences, wouldimproved the accuracy and reliability of the model. Including cases from outsideselected industrial sector would also have made the model better suited for this kinevaluation regardless of the industry, but also limited the specificity of the model forselected research problem.

When evaluating whether the number of studied cases was sufficient, it was obsethat later interviews yielded far less new information that the first ones (Eisenhardt 19Moreover, with regard to the theoretical background, the information obtained in theinterviews did not have any profound effect on the preliminary constructions. It can thfore be concluded that a higher number of cases would not have introduced any radnew information to the research material.

As the research problem was to find out how R&D can be used to produce integrprocess concepts, the empirical study concentrated on R&D. In their research, Hölsä(1995) have stated that the general manager level plays a decisive role in making thenology strategy an essential part of business strategy. In this research the focus wR&D and on the topics that the R&D personnel felt to be important.

The written questionnaire was prepared and its addressees selected so as to iR&D personnel as well as persons working in close contact with the R&D: peoinvolved in customer projects, and sales personnel. All interviews were recorded andsequently written down in great detail. Textual analysis was made for the interviematerial, and this is one possible source of error. However, all parts of the research mrial that the author has considered essential have been included in the research repthe questionnaire was answered by persons working in product design and managof product development as well as persons participating in product development or wing in close co-operation with it (such as marketing, project management), the reobtained can also be considered to give a reliable and representative idea of the gsituation in the industry studied.

The reliability of the results with regard to small product development teams is sowhat undermined by the small number of people needed to apply specialised and eknowledge: when dealing with the inclusion of new expertise areas in product devement, many people are not needed to ensure, for example, the application of sp

187

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instruments. Thus it is also possible that the expertise needed to apply them does nenough emphasis in the questionnaire.

The results concerning company strategies can be considered to give a reliableview of the strategies pursued by the case companies at the moment. As the interviewith some exceptions, did not have a written strategy at hand, their comments onstrategy illustrate their own views and ideas of it. And, as these views guide the operof the units, they can be regarded as the prevailing strategy that is being followed indecision-making in product development within the units. As the general manager lwas not included in the empirical part of the study (with the exception of case A),results do not tell how well the interviewees’ ideas of company strategy reflect the oion of the management. It does not tell either, how important integrated products arcompany strategy.

A possible flaw in the reliability of this section is caused by the long time span of stegic planning. During the research the author had no opportunity to study the stravisions of the top management or the possible discrepancies between official, statedegy and the strategic views that emerged during the research. For example the possand desirability of strategic alliances, or potential business acquisitions to strengthehouse expertise, did not come up. When we look at the size of the companies studiedthe division into different business units within the companies, changes in strategiesitably involve major delays. The empirical part indicates that even the different unitsthe same corporation may operate in widely different ways and pursue different stratwith regard to product strategy. Thus the research results reflect the different opermethods of different company units also in this respect.

The empirical research results suggest that the concepts of key technology andcompetence are not unequivocally understood, and thus the results are somewhatmined by the fact that these two terms are often mixed up. As an example, machine bing was frequently mentioned as a key technology. In most cases, however, buildingcess machinery requires to be able to adopt new theoretical knowledge, new matenew production technology and to develop the whole business logistics from the facto the installation site. In this respect key technologies may become obsolete and repby new ones, but the core competence to design and produce process machinerychanged.

How truthfully the AHP model constructed evaluates companies' ability to prodintegrated process solutions is a question influenced by the following factors:– the selected criteria and subcriteria,– priorities set for criteria and subcriteria, and– the qualitative rating of each alternative

The reliability of the model and evaluation can also be estimated by applying'inconsistency ratio' calculated by the AHP method; the inconsistency ratio mussmaller than 0.1 (Saaty 1980). In the model presented here, all inconsistency ratiosbelow 0.04 and thus the model construction and the results it yields can in this respeconsidered reliable. Low consistencies are partly due to the weak differences in pairevaluations. Evaluation criteria can be specified relying on existing informationresearch and on empirical research results. The reliability of the results would be etially improved by using the method directly for assessment; the persons participatin

188

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the research would then apply the selection criteria proposed in the model. In addincluding quantitative information to the model would further improve its reliability.

The benefit of the AHP method is its hierarchical nature and ability to handle quative data; the inherent hierarchy ensures that single factors, such as individual experttechnical capability, only receive priority relative to the overall priority given to techniccapability, and thus their importance for the whole is not over-emphasised.

Albeit that all of the cases came from Finnish firms, the results can still be consideapplicable also on an international scale. Companies and corporations of the fieldgrowing more and more international, and thus also the customer needs and basictries are increasingly uniform. The customers are clearly aiming at single-source purcing agreements (Scharpf 1998) and process machinery suppliers in the plastic industdeveloping capability to supply the integrated process concept (Myers 1995).

Moreover, the process machinery and automation industries have integrated inttionally: mergers of machinery suppliers have resulted in units that are capable of suing entire production lines and plants, and at the same time automation suppliers areing to act as single-source partners in all sectors of process management. The supplprocess machinery and automation, intent on developing integrated process solutiontotal deliveries, are forming networks and strategic co-operative alliance agreem(Lissner 1994). And yet, even in these alliances the main challenge will be: how to btrue integration to the hands-on product development work and create products in wintegration is a feature that arises from the product development and design, productcould replace packages tailored and put together just prior to delivery.

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7. Conclusions and recommendations

7.1. Conclusions

According to the research, the strategies of the process and process machinery indusheavily technology-based, both with regard to product development and competadvantage. Their goal is to reach technological superiority in a narrow niche, particuin process and machinery technology, and to gain very thorough expertise in increassmall sectors. This was also assumed to give the company a corresponding image.ever, when the current key technologies reach the mature stage, finding real longcompetitive advantage and breakthrough solutions is becoming more unlikely andexpensive in relation to benefits.

Changing customer needs guide the product development of processes and pmachinery, and also the content and extent of delivery projects. Customers now purlarger process units instead of single devices; they want service packages that includnecessary design, physical devices, and start-up work. Moreover, pressures to reducost of large investments has also transferred design work from third parties to turn-keycess suppliers.

Process machinery suppliers have focused on their ability to integrate single prounits and to deliver larger subprocesses and production lines. At the same time theylook their ability to develop more intelligent equipment and process solutions by integing process management in the devices. Instead they offer packages constructed fodelivery project, integrated to the extent required by each case. Instead of clearly defideveloping and documenting integrated products they focus on project based tailoring.

There is widespread agreement that the role and need for measurement and autotechnology is increasing, but this understanding is not reflected in the strategies of conies developing and manufacturing process machinery. The internal needs, abilitieinnovativeness of individual business units, rather than outside needs or the action omanagement, have guided the role of automation in their product strategies. Developprograms pay no attention to the possibility of improving the performance of unit proceor process machinery by integrating process management and the related instrumenautomation and control applications into a single product with the process. This p

190

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explains why the customers’ purchasing behaviour does not favour solutions wheresurements and automation are an integral part of the whole.

As a consequence, measurements and control solutions are developed independeprocesses and process machinery until a delivery project is imminent. The researcdevelopment work of each field concentrates on its “own” technology and the benefitconcurrent design and development remain out of reach. In cases where the measutechnology and automation have been handled as part of the product development pthe result has been an integrated solution with automation as an essential part of the sThe integrated solution includes not only routine controls but also applications with proexpertise.

A closer look at the development of integrated processes shows that the existing resand operating models are undermined by their very narrow approach: they focus, for eple, on technology and technology management, or on organisation, or product developprocedures. The current research shows, nevertheless, that developing integrated pconcepts takes more than a good, or even excellent, operating model and its good mament within a narrow sector. Mastering technology and developing products based soletechnological knowledge and experience will not result in process concepts where thegration of automation begins from the very foundations of design. To accomplish this cpanies must take a broader look at their own operation. Strategies, product developprocesses, and creating new competitive advantage by means of networking, are all fthat contribute decisively to the end result.

The prevailing product development models and methods are rather poorly suitesmall, multitechnology based product development teams. Realising the concurrent dprinciple is particularly difficult in an environment where the members of the team acexperts in several projects or have projecting and marketing duties that involve a lot ofelling. And yet small development teams are a rule rather than exception even in laorganisations: according to this research, 91% of the projects involved less than 10 peo

In this research, existing theory and empirical research material were applied to dea new model; this model describes the product development process of integrated pconcepts in a new way, and also provides better tools for this work than previous moUsing the new model developed, the ability of product development organisationsteams with regard to integrated process development can be better evaluated. Using tteria presented, the teams and organisations can also be compared to well-functioningpanies, organisations, or projects. In addition, the empirical research material used istudy verifies that the evidence presented supports the theory (Eisenhardt 1989).

7.2. Recommendations

When the customer need shifts from single machines towards complete unit processeprocess lines, suppliers must be able to handle and take responsibility for increaslarge units. Another factor contributing to this development is the fact that customerscontinually setting harder demands on process performance. In order to meetrequirements the functions and construction of processes and systems must alreaoptimised at the design stage, instead of tailoring the different parts and deliveries to

191

mentduring

pro-rch and

pment. This

meth-

essaryin thepro-

cessand

ain-

pro-ible onpment

together only when the delivery project is at hand. At the same time process manage– including measurements, systems and applications – is integrated into the processthe process research and design. As illustrated in Fig. 7.1, companies developingcesses and process machinery must integrate process management in their reseadevelopment process and also consider this question in their strategies.

Fig. 7.1. From sequential to integrated process development.

When process management and control technologies are integrated in the develoof process technology, process physics and chemistry can be designed optimum waytype of development may, moreover, indicate needs for new measurement or controlods necessary to control and optimize process conditions.

Simultaneous design of process machinery and control also means that the necmeasurements, actuators, and controls can be integrated in the process machineryoptimum way observing the needs of measurement and control technology, machineryduction technology and the actual delivery and installation alike. Moreover, the promachinery can then be designed to utulize the numerous ways in which automationinformation technology can be harnessed to simplify machinery troubleshooting and mtenance.

Integrated process, machinery and automation design gives a powerful tool to createcesses that are easier to operate and control. To achieve this, the operators responsrunning the process, their needs and process expertise, must be heard in the develo

ProcessTechnology

ProcessMachinery

ProcessManagement

ProcessTechnology

ProcessMachinery

ProcessManagement

ProcessManagement

Machinery design andautomation integration (machinecontrols, basic instruments,machine related special instrumentsand actuators)

Process design andautomation integration(application expertise, process controls,basic instruments, process relatedspecial instruments and actuators)

ProcessManagement

ProcessMachinery

ProcessTechnology

Integrated process design(Concurrent planning and developmentof process, machinery and processmanagement)

192

evel-

hnol-has a

signissing.llowinganage-

ertainrkinge andnet-

lizedelop-

eedsads toini-

eval-gementin thetypeen-pur-

process. It is therefore important to also include the process operators in the product dopment network.

Companies are increasingly focusing on their core competencies and special key tecogies, and therefore co-operation between companies mastering different technologiesvital role to play in the development of integrated technical solutions. Concurrent dewithin companies does not give the desired results, as the necessary knowledge is mThe concurrent model thus has to be expanded to encompass several companies, aconcurrent development in process technology, process machinery and process mment.

The development of integrated, comprehensive industrial process products sets crequirements: a concurrent development model is a necessity, and moreover, netwomust be deeply rooted in the design and development organization. Gaining experienceffective adoption of new technology and competence can only be achieved throughworking at the action level; and in this situation, cooperating partners posessing speciaskills and experience are an integral part of the company’s research and product devment process.

Creating integrated technical solutions – or, to put it in another way, observing the nof process management when designing the process and machinery configuration – lea new definition of processes as products as illustrated in Fig. 7.2. This approach will mmise the labour-intensive project engineering, and it also allows the purchaser to betteruate the performance of a process before purchasing decisions, as the process manaand the necessary measurements, automation and applications are already includedoverall process performance figures. Integrated technical solutions, introducing a newof product, even call for a new marketing approach. The integration, including its documtation, must meet the specified needs; it must allow the customer to really see the entirechased product and its properties.

Fig. 7.2. From separate machinery and automation development and deliveries towards inte-grated operational product development and deliveries.

FROMSEPARATE

MACHINERY andAUTOMATION

DEVELOPMENT andDELIVERIES

TOINTEGRATED

PROCESSDEVELOPMENT and

DELIVERIES

PROCESS LINEOPTIMIZATION

Quality and productiontargets

Other UnitProcesses

Other UnitProcesses

FeedforwardInformation

FeedbackInformation

PROCESSMACHINERY

MACHINECONTROLS

UNITPROCESS

Pro

cess

mea

sure

men

tsan

dco

ntro

ls

PROCESSMACHINERY

MACHINECONTROLS

UNITPROCESSCONTROLS

Pro

cess

mea

sure

men

tsan

dco

ntro

ls

Development and Delivery limits

FeedforwardInformation

Integrated Process line delivery limit

Integrated Unit Process delivery limit

UNIT PROCESSMACHINERY ANDAUTOMATION

PROCESS LINEMACHINERY ANDAUTOMATION

Quality and productiontargets

Other UnitProcesses

Other UnitProcesses

FeedbackInformation

193

ctua-appli-rt cir-

n theprod-

ategy.duct

betterlds ofationgeo-

nage-enttheand

s and

An integrated unit process product comprises of the physical process machinery, ators, basic instrumentation, special instruments, automation systems, and the controlcations needed for process management. A typical example of a unit process is the shoculation of a paper machine.

We are not dealing with mere technical product but instead a change that is based onew product strategy and influences the entire business chaing. In addition to strategicuct decisions, it requires the development of operations so that they support the strThis means moving from delivery project dominated development processes to prodominated planning and development and to multi-skilled team organizations.

Research into product development processes and technology management shouldaddress the needs of small product development teams operating within several fietechnology at the same time. In addition, the opportunities opened by the latest informtechnology to carry out the concurrent principle in product development, even betweengraphically separate groups and individuals, should be given more attention. The mament of product information and the use of design tools in a decentralised environmwould make is possible to employ the different expertise areas far more effectively indesign of integrated process solutions. The environment should be sufficiently simpleguide the operations, as in small project organisations the adoption of new methodmodels is very much dependent on chance.

liffs

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ournal

al of

-28

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