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INTERVIEW

How to Manage Innovation?

NIKLAS GUSTAFSSON, KTH EXECUTIVE SCHOOL
INTERVIEW

Niklas on Innovation

We got the opportunity to speak with Niklas Gustafsson, Program Director at the KTH Executive School in Stockholm. Here’s what he had to say on innovation and business transformation.

You focus on innovation management, why?

I think innovation sums up a lot of the challenges we’re seeing today. In this day and age we’re witnessing the introduction of a lot of new technologies and completely new product and service offerings.

We see this in the consumer business, driven by the new tech coming out of Silicon Valley, but it’s also happening in traditional industries. Big changes are under way, from combustion to electric engines, AI, 5G changing the frontiers of telecom, financial blockchains and new sensors enabling the internet of things. All these innovations are going to transform industries of today into something new.

The question is how companies can manage transformation? And this is where innovation management is a very good tool.

What are the main challenges facing companies today?

I think the biggest challenge is to adapt to the new reality that’s coming, especially for manufacturing companies.

There are so many shifts going on at the same time, in technology, business models and internationalization. A lot is being driven by new technology, but technology itself is not the solution. It’s how you convert technology into a viable business model.

For example, the electrification that’s ongoing in the truck and automotive industry is going to put an end to traditional business models and old ways of thinking.

What are the main opportunities?

If you can adapt, innovative technology presents tremendous business opportunities. I think the future looks very good for companies that are able to transform, adapt and re-educate their personnel.

It’s going to be much tougher for traditional companies that can’t adapt fast enough, which in turn presents opportunities for new companies with interesting and exciting new solutions. Innovative start-ups have the chance to completely transform traditional industries, faster than ever before.

We’ve seen this in Sweden in the music industry, where streaming capabilities have created big new companies. Books is another, where big new companies are buying up older ones.

And it’s not just Silicon Valley type start-ups. The airline industry, for example, is changing to meet new environmental demands, and the shipping industry is also going to have to make big changes. These changes will demand innovative thinking.

Another example is healthcare, where the opportunities are enormous, and we’ll need innovation in legislation too. Legislation that fits the old world won’t always fit the new.

What advice would you give to companies?

Fill up on knowledge. Refill. Understand theory, research, as well as practice. 

I give the same advice to academia. Go out, talk, listen and really understand the companies that are out there, and their problems. There’s a balance at this meeting point of theory and practice, and if you find it you’re in a good position to take on technical innovation and business model transformation.

What's the best thing about your job?

I get to meet a lot of interesting people, ideas and questions. It’s where theory and practice meet.

Any links you'd like to share?

I like trying to understand ideas and think one of the best podcasts right now is called Hidden Brain (external link).

Thanks Niklas.

QUOTE

What I like most about my job is that I get to meet a lot of interesting people, ideas and questions. It’s where theory and practice meet.

Niklas Gustafsson
KTH Executive School
CONSULTANCY AND TECHNOLOGY

Journey

BY MODULAR MANAGEMENT
CONSULTANCY AND TECHNOLOGY

Your Path to Success

Modular Management has been the global leader in product architecture consulting for more than 20 years. We have the consultancy and technology solutions needed to support your entire business transformation.

This journey enables you to reduce complexity in your business and accelerate value creation. With a global team of specialists, we’re able to support you on each and every step, and it’s not just about people and methods, since this structured approach builds an information data model that can be governed by PALMA® technology.

Welcome to the Journey. Welcome to The How Company.

JOURNEY

Create a Competitive Advantage

Consultancy and Technology

The Journey is a tried and tested path to create a competitive advantage. It's a way to solve the executive dilemma - how to optimize operational excellence, customer intimacy and product leadership all at the same time.

Through four main phases – Formulate, Create, Implement and Govern – you can connect strategic direction to the delivery of business value. Through this structured approach, Modular Management delivers clarity, performance and customer centricity, so you can reduce complexity and accelerate value creation. 

The journey enables you to:

  • Formulate company strategy and market objectives into a business case and actionable program plan
  • Create a modular product architecture with design specifications across product families
  • Implement an information model for configurable designs throughout your entire supply chain
  • Govern configurable designs to realize the competitive benefits of a long-lasting product architecture.

Tried and Tested

After more than 20 years and 100 client programs, Modular Management combines consultancy and technology so you can deliver business value. 

Modular Function Deployment® is the foundation method, and synchronizes with a range of methods and tools to help you reduce complexity in an increasingly complex world.

PALMA® strategic software is the tool to build and govern product architectures and the information model that connects customers, products and people. The information model is integrated with CPQ, ERP and PLM solutions, and enables true enterprise digitalization.

The unique consultancy and technology solutions integrated in the journey enable you to solve the executive performance dilemma. CXOs have to optimize operational excellence, customer intimacy and product leadership all at the same time. And this dilemma can be solved. Welcome to The Journey. Welcome to Modular Management, The How Company.

How to Solve the Executive Dilemma?

executive dashboard

SUMMARY

The Journey is a tried and tested path to business success in four phases:

  • Formulate
  • Create
  • Implement
  • Govern

Due to this structured approach, Modular Management is able to deliver clarity, performance and customer centricity, so you can accelerate value creation.

Create a Competitive Advantage

Power of Modular Design

PALMA® Software

This is the world-class solution for product management.

Standing for Product Architecture Lifecycle Management, PALMA is cloud-based strategic software for you to create, document and govern modular product architectures. With this unique structured approach, you can design, document and configure products. You can also connect enterprise systems and secure business goals.

Built on an in-memory database platform, PALMA is faster and more capable than anything else on the market, so you can create configuration rules without coding, govern product architecture life cycles and create a business advantage.

CASE

MTS Journey

MTS Systems Corporation is a global supplier of test systems and industrial position sensors.

The engagement with Modular Management began with Modular Strategy and Potential Analysis (MSAP™). A modularization program was formulated that would accomplish MTS strategic goals and provide a business case to support the investment. Complexity costs were evaluated using ValueMap™ quantifying the bottom-line benefits of modularity within the MTS value stream. A program plan addressed the creation, implementation and governance of the various product offerings within consecutive waves.

An optimized Modular Product Architecture was created using Modular Function Deployment (MFD®), and this architecture was populated with the Module Variants and rules needed to configure the full range of products. Module Finance™ supplied a model that balanced the direct and indirect cost implications of each architecture decision and the tools to analyze the profitability of the modular system. To make the modular architecture actionable, MTS inbound, outbound and production value streams were newly envisioned using Module Supply Chain Study. Plans were established for each module along with the system requirements to deliver them.

Module Design™ was used to implement standardized interfaces while managing development streams, priorities and module requirements. With these enabling concepts, the MTS approach to documentation was reimagined with process and tools and applied to the existing CAD/PDM systems. A new end-to-end, integrated Configure-to-Order system was also implemented and production was transformed from time-station assembly to a production line. MTS began to manufacture and maintain a product families with dramatically fewer unique part numbers while greatly decreasing lead times and inventory.

Modular Transformation™ established needed changes for a new way of working to ensure the benefits of modularity would be a lasting and profitable foundation for MTS. Processes in and around the value stream were enhanced with decision metrics and tools to sustain the improved business performance. New roles, such as Chief Architect and Module System Product Manager, were created with the mandate to sustain and leverage the architecture.

CASE

MTS Case Story

MSAP
CONSULTANCY

MSAP

JOURNEY, FORMULATE PHASE

Modular Strategy and Potential

The decision to move forward with modularity comes from aligning strategy with a business case that scrutinizes the costs, benefits, risks and timing. Modular Strategy and Potential (MSAP™) defines a market-driven modular strategy, sets targets and calculates the financial potential of implementing modular design and determines the expected return on investment. With this business case in hand you can set the strategic direction for your company.
JOURNEY, FORMULATE PHASE

Explore Your Potential

MSAP

The decision to go forward with modularity comes by aligning strategy and making a business case that scrutinizes the costs, benefits, risks and timing.

Modular Strategy and Potential™ (MSAP) defines a market-driven modular strategy, sets targets and calculates the financial potential of implementing modular design, plans the implementation program, and determines the expected return on investment.

Modularity is a transformative business improvement process that impacts all of the functions of your organization. It will cause you to rethink the way you approach your supply chain, production lines, marketing, IT systems, organization, and decision criteria for cost and profitability.

In conducting MSAP, Modular Management engages resources from across your organization to explore the potential of modularity. We lead management workshops to share our key findings, gain alignment on the strategy, agree on the results, and formulate a way forward. The MSAP analysis takes from eight to sixteen weeks depending upon the breadth and scope of analysis and the resource availability.

MSAP is a five-step process: 1. Establish Baseline, 2. Clarify Strategy and Objectives, 3. Establish Targets, 4. Quantify Benefits and 5. Plan Path. Make contact to find out more.

SUMMARY

YOUR POTENTIAL

Modular Strategy and Potential (MSAP) analysis defines a market-driven modular strategy, sets targets and calculates the financial potential of implementing modular design, plan the implementation program, and determines the expected return on investment.

HOW?

A five-step process:

  1. Establish Baseline
  2. Clarify Strategy and Objectives
  3. Establish Targets
  4. Quantify Benefits
  5. Plan Path
CONSULTANCY

MSAP Methodology

The first step in the analysis is to establish the baseline of the business and identify the current sources and impacts of operational and product structure complexity. The analysis begins by collecting data, including financial performance, process maps such as Order-to-Delivery and Product Development, organizational structure and roles as well as the current IT infrastructure.

In addition to collecting data, we interview stakeholders across key functions at multiple levels to understand the current state, guiding principles, activities and costs. We also conduct workshops to understand the existing product architecture and market opportunity. The findings are analyzed to determine the baseline for the benefits of modularity. Some gaps will suggest an approach for further study to identify what is needed to fully transform the company and capitalize on all the benefits.

Strategy sets the course for how your company will realize its vision and mission as it competes in its chosen markets with products produced by its resources. Objectives should guide the functions of your company to achieve this strategy.

Modular Management characterizes strategy within a three dimensional framework defined by Operational Excellence, Product Leadership, and Customer Intimacy. We take a holistic view of your operational, product, market and financial situation, and, together, we decide how modularity can best support and fulfill your strategic objectives.

These decisions drive the modular design of your product families to achieve strategic objectives, focusing on all three dimensions simultaneously. This will establish the product foundation to drive increases in sales, profitability and ultimately sustainable value creation.

The benefits of modularity come from both eliminating the costs driven by non-value added complexity and by capitalizing on the opportunities resulting from a less complex operation and more flexible product architecture.

A key element of the MSAP is estimating the Cost of Complexity. This concept is widely known and accepted, but its quantification and application in making business decisions are not broadly understood. Modular Management applies our methodology and extensive experience to examine your total costs: labor, materials, capital, SG&A, etc. We identify the proportion of those costs that are driven by the existing product architectures. Product families based upon modular design are inherently less complex so the benefit is proportional to the difference between the two.

Modularity also yields top-line benefits. The MSAP explores opportunities for revenue growth with faster time to market, reduced lead times and a broader range of differentiated products offered to the market.

We will work with you to set leading targets to achieve the right level of complexity and capitalize on the available market opportunities. These targets will drive your modularization program and calibrate the financial potential of modularity. Together with your team we will plan the program and identify the required resources.

The MSAP analysis of your company’s potential with modularity and the corresponding benefits is only the first step. Beyond Formulate, a full modularity program includes the phases of Create, Implement and Govern.

THE MODULAR JOURNEY

Modular Strategy and Potential is part of the Formulate Phase of this tried and tested path to success.

TECHNOLOGY

PALMA®

This is the world-class solution for product management.

Standing for Product Assortment Lifecycle Management, PALMA is cloud-based strategic software for how to create, document and govern modular product architectures. With this unique structured approach and strategic software you can design, document and configure products. You can also connect enterprise systems and secure business goals.

Built on an in-memory database platform, PALMA is faster and more capable than anything else on the market, so you can create configuration rules without coding, govern product architecture life cycles and create a business advantage.

INSIGHT

Lean and Modularity

BY MODULAR MANAGEMENT
TOPIC

How to Find the Winning Synergy?

Go Lean and Modular to Minimize Waste

Minimizing waste is the focus of both lean and modularity. In many ways, they’re the perfect match to accelerate value creation.

Lean

The core idea of lean is to maximize customer value while minimizing waste. This is accomplished through the application of a structured way-of-working that eliminates or minimizes waste. A lean organization understands customer value and focuses key processes to continuously increase it. The ultimate goal is to provide perfect value to the customer through a perfect, zero-waste value creation process.

Lean thinking changes the focus of management from optimizing separate technologies, assets and vertical departments, to optimizing the flow of products and services through entire value streams. These value streams flow horizontally across technologies, assets and departments to customers.

Modularity

A modular product architecture also addresses waste in a company. This approach to waste comes from an understanding that each part number adds cost along the entire value chain. A modular product architecture define modules that carry market-driven variance with standardized interfaces, and enables the configuration of many different products from a limited number of module variants.

Winning Synergy

Both lean and modularity are often dependent on a cultural change in the company to be successful, and both require a clear strategy. 

Does the product require cost reduction? Is the objective to expand the product range or do we need to reduce time to market for new products? Lean and a modular product architecture can address these strategic questions if they are clear and communicated to key stakeholders.

How to Avoid the Complexity Waste Trap?

Lean and Standardization

Companies often face a situation where their product structure has become complex, after acquisitions and new product offers expansions. There can also be a significant old product legacy, if old products are not phased out to. Market expectations also drive complexity, with companies responding by expanding their offering without understanding the full consequences. 

When profit starts to drop, cost reduction projects kick in and the product structure tends to get a quick fix by standardization. Lean manufacturing is also pointed out as part of the remedy, but this approach may improve efficiency – but not effectiveness.

What can be done according to true lean thinking, for example the Toyota Production System (TPS)? TPS is about being effective, doing the right things first, and then doing them efficiently. And here’s a way to make it happen.

Lean and Modularity

Business often starts with development of products, where market needs provide the cornerstone, and the product structure must be flexible and effective. 

A modular product structure is effective since it starts with customer needs and configurability. It is easy to expand within the platform limitations, reduces internal complexity, requires less resources and is relatively future proof. Other benefits are faster time to market for new products, a wider product offering, reduced lead times, reduced manufacturing costs and higher quality.

How do we recommend implementing lean and modularity?

Step 1, Analyze Waste and Complexity

There are many lean tools a company can use to find and eliminate waste with a product, e.g. 5S and continuous improvement. But it is important to first understand how complex is the product structure and whether it has been expanding over the years without update or rationalization. An overly complex product structure will typically have many part numbers that are difficult to maintain. The reuse of existing parts numbers will be difficult, and it may include the situation where a designer is making a new part rather than trying to reuse an existing part. Quality problems will also be prevalent with purchased or manufactured parts. If the product structure has indications of being very complex, it is a good idea to investigate how big this unnecessary complexity is and then define an action plan how to reduce the complexity.

This internal complexity translates to extra work in most departments of a company. The driver for this extra work is each part number that is created in the design department. Each number represents a part that has to be developed, tested as a prototype, detailed in a drawing, manufactured, procured, transported, stocked in a warehouse, quality checked, picked from the warehouse, transported to assembly, and assembled into the final product, just to mention a few. All these steps mean more time for a product that has many part numbers and a low volume of each compared to a product where there are few part numbers and high volume of each.

Step 2, Build an Effective Product Structure

The entire cost structure is affected when decreasing the internal complexity of the product. Typical results from mechanical industries, both business to business and consumer products are a part number count reduction of 50% and a cost reduction of 10% in the total value chain.

Modular product architectures address internal complexity by enabling a company to configure a range of products by combining different module variants with standardized interfaces. It is important to create an efficient product structure before applying lean directly on the existing product structure. If lean is applied on a bad product structure limited results will be achieved because the negative effects of too many part numbers in the product architecture will still exist. It will not be possible to gain the leverage of increased purchase volumes if too many different part numbers are being used. 

In terms of money this increased purchase volume will generate a substantial reduction of direct material cost (dM), often in the range of a few % up to 10% reduction. What cost reduction project can achieve these savings at the same time as quality is improved?

It is important to understand that neither lean nor modular product architecture is in any conflict with one another. They are both striving in the same direction – minimizing the waste defined as non-value added activities for the customer that will buy the product. modular product architecture and lean are not primarily aiming at the level of individual processes, but target the entire value chain of a company.

Many lean-thinking organizations are doing the wrong things more right. Making things efficient that shouldn’t be done in the first place. Doing a lot of efficient things but not effective things.

Step 3, Implement Lean

Modularity is how to be effective. Lean is how to be efficient. 

This is what Toyota built on with TPS, following the work of Taguchi: ‘Let’s do the right thing first, then make them efficient.’ This encourages you to start with an effective modular product structure and then implement it efficiently throughout your organization.

Modularity and lean create powerful synergies in a company. After more than 20 years of experience of developing modular product architectures with lean implementation, we’ve seen a reduction in client product costs, decreased lead times and reduced tied-up capital. All at the same time as the product offering has expanded. 

On top of cost reductions, there are also important increases of revenue due to offering more customizable products to the market. One common question is which to start with, modularity or lean? Or can both initiatives be run in parallel? Our experience is that it’s best to start with an effective product structure and then apply lean efficiency. This will give you a competitive advantage, with lean putting the turbo on modularity.

Anders Leine
Anders Leine

info@modularmanagement.com

SUMMARY

Lean and Modularity

Modularity and lean create powerful synergies in a company. Both strategies focus on minimizing waste and in many ways they’re the perfect match. 

After more than 20 years of developing modular product architectures with lean implementation, Modular Management has seen a reduction in client product costs, decreased lead times and reduced tied-up capital. And all at the same time as the product offering has expanded.

How to Implement Lean and Modularity?

One natural question is which comes first? One size doesn’t fit all, but experience leads us to recommend a three-step implementation program: 

1) Analyze Waste and Complexity

2) Build an Effective Product Structure

3) Implement Lean and Continuously Improve.

"Modularity is how to be effective. Lean is how to be efficient."

Anders Leine, Modular Management
LINKS

Power of Modular Design