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future studies in innovation process
NEWS, JULY 2020

Futures Studies in Innovation Processes

NEWS

Future studies in innovationDuring the past 5 months Lina Simme and Linda Eriksson from the master program in Design and Product Development at Linköping University conducted their master thesis together with us at Modular Management. It has been an exciting journey both for Lina and Linda and for us at Modular Management. Knowledge development is a strong passion for us and in the interview below Lina and Linda will share their experience and Colin De Kwant from Modular Management will give his view of the result. At the end you can download the full master thesis.

What has been the topic of your research?

The topic we chose to write about is how you could apply futures studies in innovation processes. The full title is  “The Application of Futures Studies in Innovation Processes Scenario methods as a tool to facilitate flexibility and enable
future resilient products”

Why did you decided to write about this specific topic?

Companies in different industries are under a lot of pressure. We have seen that the environment for all industries is characterised by a dynamic market with a rate of change that is higher than ever especially concerning technological developments. Laws and regulation must be followed and nobody can be certain about what is to come. Innovation has therefore become a must rather than a need and you must be able to respond quickly on the changes in your environment to stay relevant on the market. Therefore we found the combination of futures studies and innovation processes incredibly interesting as a way to prepare for future changes although we know nothing about them!

What did you do in your research?

We studied what was discussed in literature concerning futures studies and innovation processes and tried to understand how we could link these two together in order to create a more flexible and holistic innovation process. We then conducted interviews with three different companies within the manufacturing of vehicles in the Swedish industry of rail and road vehicles to investigate how they have structured their innovation processes and how they make plans for their future. We tried to find ways of how and where futures studies could be incorporated within the innovation process in order enable for companies to produce more future resilient products.

How would you summarize the findings of your research?

Through our study we have found that the conditions for companies’ capacity to innovate depend largely on their internal knowledge sharing as well as their interaction with the surrounding environment. We further found that futures studies are used in companies of the industry of rail and road vehicles, mostly at the corporate level to support planning and develop strategies. Futures studies are also moderately used in early phases if the innovation process with the purpose of detecting promising research projects, future development and product concepts. However, we have identified that there is potential and a need of making more use of the already performed futures studies as well as improving their communication within the organization.future studies

The main issue that we saw with the present futures studies conducted in the industry of rail and road vehicles is that the results are not sufficiently communicated within the organization. One way of improving the integration of futures studies in the innovation process would be to involve employees from all departments in activities aimed at creating scenarios of the future. The result from the scenario activity could then serve as input for several activities: Promote idea generation to achieve more high-quality ideas, to ensure the quality and market fit of the products during the development process and as support for the corporate strategy planning. By using the scenarios of the future for more than one purpose, companies are given a chance to overcome the problems they are experiencing with translating the corporate strategy into specific product teams’ actions as well as aligning the direction of the different departments.

What are the key insights and take-away from this report?

Communication is key! Be awake and alert and stay open minded for all possibilities!

How is your research connected to KTH’s research centre ECO2VehicleDesign?

Our master thesis is supporting the research that Colin de Kwant is conducting at Modular Management which in turn is a part of the research within the ECO2Vehicle Design centre at KTH. This way we became a part of the research center ECO2 and were further able to use it as a platform to find people to interview for our study. We were given the opportunity to participate during some of their gatherings which gave us great information and insights of the Swedish transport system in general. It turned out that the companies in the center made up for perfect candidates to investigate innovation processes as their products are very complex.

Why did you choose to do your thesis with Modular Management?

We met with Modular Management during a career fair at the University of Linköping and were introduced to what they do. As an engineer within the area of design and product development, modularization is something extremely engaging and opens a lot of possibilities. We met some of the employees and got a really good impression of the company so we started a conversation about what kind of master thesis that could be valuable for both Modular Management and us to conduct. Discussions led to an interesting subject that we could shape into something that would fit well with our prior knowledge and competences and which we really wanted to learn more about.

How have you experienced this process and what are your personal take-aways from this?

The process and collaboration with Modular Management has been great! We have had the opportunity to see how a consultancy firm really operates and how collaboration with other companies can be performed. We have been really welcomed at the company by all employees from the very first day and we have felt that we are a part of the Modular Management team. Although Covid-19 has limited us from being at the office for the last couple of months the feeling of being a part of Modular Management never changed. Thanks to the trust, freedom and support they have given us we never experienced any problems combining the criteria from our university noor our own interests with the interests of Modular Management.  – So if you are about to start a thesis, we recommend that you reach out to Modular Management!

What are your plans for the future? 

For the autumn Linda will begin her career at Axfood as a project controller for their IT department, which she is really excited about! Lina is still searching for exciting new challenges, so don’t miss out on the opportunity of grabbing her for your company! But first we will both enjoy the summer months and some time off after five years of intensive studies. Although who knows, anything can happen as the future is uncertain anyways!

Thanks Lina & Linda! Now turning to Colin De Kwant,  VP at Modular Management. You have been the supervisor, together with Arne Erlandsson  for this project and what are your reflections from the result of their research?

The results and attitude to the work by Lina and Linda have been really great. Future studies is a big field of research which is greatly under appreciated both in MSc university studies as well as industry. Not being able to know what the future holds and still being able to prepare for it in a structured way in organizations by exploring and aligning on areas of change as well as certainty builds strategic flexibility in both individuals and organizations. Modularity has since long been a means to create and sustain such strategic flexibility, and we know how to apply it in a structured way. This study helped in formalizing and structure to what ends modularity shall be evaluated and applied to a product: to fit and perform in future environments (aka scenarios). The study also identified ways to extend the use of future studies from corporate strategy and fuzzy front-end development into the full innovation process, including development of products and module systems that may enable or disable innovation and strategic opportunities along the development and module system lifecycle. 

Anything specific that stood out?

I believe the interviews with industry specialists have been really well done and valuable. Our ECO2VehicleDesign centre partners have been really helpful and generous to provide Lina and Linda with insights into their innovation processes. We at Modular Management gain a lot of insight on the role of corporate strategy and product planning when evaluating and guiding the creation of module systems in our engagements with clients. This study was a great example of the complimentary value of our research network: to discuss challenges and the innovation process with industry experts in open and unconditional conversations and structured in a broader context of the innovation process.

How are Modular management involved in KTH’s research center ECO2VehicleDesign.

Colin: ECO2 is a quite unique research center. Like I said about the interviews, the center enable to share and compare future challenges, gain insight from research across rail and road, small and large companies, at detailed technical practical as well as industry level, with academia, research labs, SMEs and even competing OEMs. That is really great. This is actually precisely the culture in which innovations are spawn and images of the future can provide structure to the conversation and diversity of perspectives. Modular Management acts as a sounding board for all of ECO2 research as a member of the center coordination group, but also conducts and shares its own research together  with some of  center partners and gaining feedback from the full center community.

What is your learning and take-away from the report?

The study and report reinforces our belief in the need for structured sustained modelling of future needs and context to guide product and organizational innovation. We believe both exploratory and normative scenarios can act as communication and evaluation platforms for the modularization options at our clients. Before, in early phases, during implementation and along the module system lifecycle. We see the need and challenges to connect corporate strategy with design realization in each of our engagements, not just vehicle industries. Innovative strategies emerge both at the top and bottom of organizations.

How will this be used at Modular Management going forward?

This is the really exciting part: how will we use this work? We are working on a next phase of this research aimed to combine the module system and scenario data to assess the robustness of a modular product system. We’ll look at both new (conceptual) and existing (current) product systems, to guide product planners, strategists and designers in strategic and design opportunities and challenges as the future unfolds.

Thank you Lina & Linda for a fantastic job and we highly recommend you all to read their full report.  You can download it below and we will send it to you.



Blog

Examples of Product configurators and the Importance of Guided Selling

By Alex Ginsburg

INTRODUCTION

In this post Alex Ginsburg, senior specialist with more then 25 years of experience in the field of product architecture and configuration, will share his personal experience when going out on the hunt for a new vacuum cleaner and the frustration he as a customer experienced. Alex will summarize his findings and what we can learn from these companies to improve their customer experience with well-designed product configurators and guided selling techniques.

Understanding customer needs

I have been working with product development all my adult life – more than 25 years. All good products stem from a profound understanding of customer needs. To develop a perfect product, a company needs to know where, how, when, why, how often the product is used, cleaned, maintained, stored, etc.

There are multiple tools and methods to capture customer needs and translate them to specifications containing functions, features and performance levels of the product. Few companies use these methods in a consistent and structured fashion, but most still manage to develop tacit knowledge within their product development teams. To a smaller extent the develop organizational structured knowledge in the form of target segmentation models with customer personas, check lists and other assets. Therefore, most companies have, if not great, at least an acceptable knowledge about their customers’ needs and have the capability to translate them into some form of product specifications.

The process from specification-to-design is often the more consistent and structured. There are documented methods in how to break-down specifications from systems to components and how to calculate, simulate and test to make sure specifications are met.

 

If the product and system level specification is well done, a development team only needs to verify against this specification. They don’t need to verify against the actual customer needs. An example is the customer requirement that the product must be portable. There is a clear specification for the max weight, the max distance of centre of gravity from the body of the person carrying the product, the shape and material of the handle and the max height from product base to the handle. If the development team meets these specifications the product should be portable.

If I am a professional, repetitive buyer of a certain product I have probably gained enough knowledge and experience with the product to be interested in many of the details of a very technical specification. But when I’m a one-time, novice buyer of a certain product, those details are meaningless to me. I have at least some idea about how I will use the product. I know if I want it to be easily portable. But if learn that it has an Ergo-handle covered with Tri-flex rubber and if the centre of gravity is 30 cm from my body when carrying, it doesn’t help me make a decision.

So, how come many companies are fairly successful in developing products that are fulfilling customer needs, but they are terribly bad in guiding the buyer in the purchasing situation. How come they are throwing a lot of mainly meaningless specification values, technical terms, internal brand and model names at us. Why not ask me about what I need and present the best match?

My plan is to share both mine and my colleagues’ experiences, knowledge and observations related to needs-based selling, also referred to as guided selling. I will start with my experience when buying a vacuum cleaner, but I will also discuss some more complex and industrial products. So here we go…

Example: customer experience buying a vacuum cleaner

I will start by sharing a recent personal experience when buying a new vacuum cleaner for my home. Although I actually participated in developing a new vacuum cleaner platform long time ago, I have mostly forgotten the details. Therefore, I am considering myself a regular vacuum cleaner buyer. I know the where, why and how I need to vacuum, but I am not very interested in special vacuum cleaner features or technical specifications.

My family has two vacuum cleaners. The first one is always “on display” in the kitchen to be easily at hand. It is used several times a day for small jobs. Most importantly, with this vacuum cleaner, is that it needs to look nice. An ugly product “on display” would drive me nuts. Secondly, it needs to be light and easy-to-use. It doesn’t need any exceptional high performance, and I only expect it to last 3-4 years. It definitely should not be expensive. Since it used frequently and has a short expected lifetime, the environmental aspects such as power consumption and material selections are also important to me.

The second vacuum cleaner, which this story is about, is the bigger one used every second week. It is used to vacuum the entire house and to do the occasional “big, dirty jobs” like cleaning the cars. I have destroyed one of these vacuums by cleaning the dust after having plastered a room. The last one was destroyed when my kids used it to clean an outdoor sofa from leaves. They reasoned that there could be big spiders among the leaves, and after completing the job, they left it outside in a heavy rain – game over again.

Consequently, my top priority for a replacement vacuum cleaner is that it is sturdy. At the same time, I absolutely don’t want it “on display”. It must fit into my rather narrow cleaning cupboard, preferably without half of it falling out every time I open the door. I don’t have any indoor pets and my family does not have allergies, so a normal level of cleaning performance is enough. Absolutely no extra rotating brushes or wet cleaning is necessary and, in my impression, will only jam and break down. Since it is used infrequently and I expect it to last at least 15-20 years, the previous environmental aspects and price are of less concern.

Nilfisk vacuum cleaner

I am thinking something sturdy, half-industrial, like Nilfisk , but it must be a different form factor to be stored in my small closet. I’m not planning to rebuild the closet for a vacuum cleaner.

I started to look around the internet, and almost all vacuum cleaner manufacturers had the same approach. I have included images below from the Bosch  webpage as an example. On the landing page, Bosch starts with heavy marketing of some features and innovations that do not match what I need. I start by selecting a type of vacuum cleaner and model, often with some possibility to filter on some pre-selected features or specification values such as “HighSpin motor” or cord length.  I am presented with a list of model names with some images, highlights and the specifications.

Some of these models could be a good match for me, maybe not. The issue here is that I really don’t know. What I am sure of is that none of the models presented spoke to me or my needs.

Example: when product configurators are empowered with guided selling

Out of the maybe 15 manufacturers that I looked at, Miele was the only one taking a different approach. At the start I was asked the same questions about the type of vacuum cleaner – canister with bag, bagless, upright… Afterwards, I was asked how I will use the vacuum cleaner and about some of my priorities.

At the end, I was presented with my best match (I was laughing out loud): Compact C1 Cat and dog powerline with turbo-brush and odor filter.

Miele has by far the best needs-based selection tool of all the brands I looked at. They approach guided selling in a very nice and easy-to-use manner. Unfortunately, they don’t have a product that fits my needs. I’m thinking that they have made a strategic decision to target specific segments and applications that do not include me. I fully understand that a company will not be excellent if they try to be everything to everyone.

But I was curious, so I went back and changed some of my selections. I found that my changes didn’t affect the result. I went back again and changed my selections in a more random way. It seemed that behind the nice customer-facing tool, they only have a very narrow and rigid product range. By narrow, I mean there are a few basic models to select between. By rigid, I mean that there are few possibilities to add or remove features and options per basic model.

5 insights to improve guided selling together with your product configurator

I liked Miele’s front-end, but I left disappointed with their product offering. And, when I thought about it, Miele didn’t learn anything from my interaction. They can probably track my visit, making a first set of selections followed by back-and-forth changes in more and more random ways. I don’t see how they can’t possibly guess why I left without purchasing a vacuum cleaner. They missed the opportunity for free and truly honest buyer feedback.

To summarize my insights from my vacuum cleaner purchasing experience I to:

  1. Make it easy to find the right product by explicitly asking customers about their known needs and then present the best match.
  2. Also target unknown needs by asking broader questions about how, when, where, why, how often the product is used. For example, I might have discovered that I needed a waterproof vacuum cleaner that can be forgotten outside in the rain. I never would have thought of something like that before writing this post.
  3. Don’t be afraid to ask questions even if there is a risk of not having an answers today. If buyers are asking for combinations that don’t match today’s products, the information can feed into new product development, helping to develop a better and more flexible future product range.
  4. Have one entry point for all interchangeable products. With interchangeable, I mean that they have the same basic function and a customer could replace one with the other. In the vacuum cleaner example, I don’t care if the vacuum cleaner is canister with bag or bagless. That is an annoying, irrelevant selection to me. I want the best match from all types.
  5. Finally, balance the above recommendations on asking more and wider questions with simplicity for the user. Personally, I would never spend the time to answer hundreds of questions. The solution is to expand to more detailed selections in areas of potential high interest, but the expansion into more detail must be voluntary. I would happily answer a series of questions related to max storing dimensions, because I was trying to make sure the new vacuum cleaner would fit into my small cleaning closet. On the other hand, many other buyers probably wouldn’t care and would find these questions annoying.

Scania as an example on guided selling in complex product configurators

I will finalize this post by giving a good example of guided selling for a more complex product: Scania trucks. Scania’s configurator is not applying 100% perfect guided selling, they do have some steps in the configurator where you need some expertise to select items like wheel configuration. I guess most truck buyers would know what they want here. But Scania’s main approach is very good. They don’t ask to select a model or specification values such as a motor type or size. They ask how the truck will be used. For example, there are questions about max load and the type of roads the truck will travel. Based on these answers Scania proposes a complete product configuration including the correct motor size. Every truck they deliver is unique to meet a customer’s specific needs.

Try it yourself at Scania’s home page 

The strongest combination: when customer needs match an available product configuration

By far, the strongest combination is both a good front-end with easy-to-use guided selling and a truly configurable product that meets different customer needs with a perfectly matched offering.

There are two fundamental ways to get started:

  1. The Miele “front-end” way that starts directly with guiding a customer to the best matching product. In some cases, the product assortment and product flexibility doesn’t allow a good match with a customer’s needs. But please make sure to think about how you can learn and improve the matching over time. If you are interested in all aspects of Mass Customization, you should read [link to Mass Customization white paper] covering the Product Design, Information System and Supply Chain aspects of truly fulfilling unique customer needs. (PC: car config assessment)
  2. the Scania “back-bone” way that starts with a modular product, documented and handled in the IT-systems for easy mix and match and assembly on a flexible line for each customer order. Scania’s modularity has been one of their most valuable assets for decades, but it is only in recent years that they have started to offer their product range through guided selling. If you want to read more about Modularization – how to design a product that has the flexibility to meet a wide variation of customer needs, you should read [what is a good modular system].

 

Summary

To summarize, product managers, sales managers and sales reps should start by thinking about the principles used in selling a product. Is the product pushed to customers, or are the needs of customers pulled to align and propose the right solution?

Download Guide: How to Achieve Mass Customization
Alex Ginsburg
AUTHOR

Alex Ginsburg

Principal, Manager & Partner

 

 
INSIGHT

Configurability, Configuration and Mass Customization

BY ALEX GINSBURG & JAKOB ÅSELL

A modular product architecture enables you to reduce complexity and accelerate value creation. In this insight you will learn more on what it is and how you can harness it for mass customization.

 
 
Customers want innovative products, fast. Companies want to make customers happy and be 21st century lean. So how does all that work? Modular Management delivers clarity, performance and customer centricity so clients can reduce complexity and accelerate value creation.

DOWNLOAD INSIGHT

CASE

ABB Robotics

Business Transformation with Product Architecture

Executive Summary

ABB is a market leader in industrial robots and robot software, equipment and complete application solutions.


At the start of 2013, rising labour costs in key industrial markets, ever-increasing demands on quality, and cost reductions in robot design had led to an inflection point. Robots had become a very attractive alternative for many different industries.

Despite new and more aggressive competition, ABB Robotics was getting ready for a spike in the demand curve. And while it was increasingly important to protect prices, maintain market share, stay cost competitive and deliver orders faster and faster, the key question facing the executive management team was how to take advantage of the growth opportunities out there?

The answer was a modularization program and the results were significant:

  • 300% increase in the number of different controller cabinet products
  • 50% reduction in controller parts
  • 50% reduction in the size of smallest controller
  • All controllers ready for remote serviceability
  • 80 independent software development tracks – up from 1
  • < 1 month in time to market for new features – compared to 6 months before the program
  • 50% increase in robot arm assortment
  • Quadrupled production capacity.

 

The new product architecture had additional benefits in terms of process improvements and strategic product management, not least for the software team, where customer values and strategy could be embedded in the modules directly – for the very first time.

As software architecture can easily be circumvented by the coders, it is important to repeatedly go back and look at the reasons why certain functions were grouped into modules. We have done software modularity before, but this time we factored in customer values and strategy. I believe this makes our new architecture much stronger.

Roger Kulläng
Global Software Solution Architect
ABB Robotics

CONTACT

Working together with ABB Robotics on this modularization and transformation program have been challenging and as you can read, highly rewarding. The team at ABB are highly skilled when it comes to modularization and making business work. This project taught me a lot, and once again confirmed that modularization is truly powerful when done right.

Karl Bråtegren, Senior manager
Modular Management

Goals for the Modular Architectur

Strategic Goals

ABB Robotics launched a pre-study into modularity. It was initiated and conducted with the help of Modular Management, and inspired by the business success of a key customer, Scania.

This pre-study indicated that the company should be able to make strategic gains in sales as well as operations by implementing modularity. Complexity, as measured in unique parts, could be cut in half for several product lines and there would be many positive impacts on overhead, direct material and tied up capital cost. In addition, the management team concluded that with modularity it was a realistic ambition to deliver more and better products to ABB customers while improving product quality.

IRB 1100. The Most Compact and Fastest Robot Ever at Launch

Based on the promising results of the pre-study, the ABB Robotics management team initiated a modularity program covering all robot families, including software.

Yet since the competition was getting harder, ABB Robotics initiated a market analysis. The market analysis team was tasked to answer a fundamental question: which customer requirements should ABB Robotics strive to gain competitive advantages in?

A team of product and business line managers conducted over 100 customer interviews. The result was a customer segmentation model and product range specifications for the future modular products.

Product Scope and Goals

First out the gate were the robot controllers.
A cross-functional team used the findings from the market analysis and modular function deployment (MFD) method to create a conceptual modular architecture. Key product requirements were to:

• reduce the size of the controller
• deliver out-of-the-box intelligent safety and online service capabilities
• reduce direct cost
• reduce number unique parts to build the controllers
• enable controllers to be built by robots.

Modular, OmniCore Robot Controllers

Next up was the software used to program and move the robots. A team of leading software architects and system test managers attacked the structure of the current software. The ambition was to:
• move to a new software architecture that enables continuous release of features
• secure high independence from the hardware
• reduce bugs through upstream module level tests combined with fully automated tests of the most common functionality.
• improve the robot software overall to make robots more aware, smarter and connected.

Finally, two teams targeted robot arm modularity. Here the targets were to:
• create a technically more consistent robot arm architecture
• enable more re-use
• expanding the number of robot arm variants used for different applications.

Business Results

The results of the modularization program were significant.

Controllers

  • Number of different controller cabinet products increased by 300%
  • Unique parts cut in half
  • Size of smallest controller cut in half
  • All controllers equipped with intelligent safety capabilities, allowing removal of fences
  • All controllers ready for remote serviceability.

Software

  • Number of possible independent software development tracks were expanded from one to up to 80. ABB Robotics will scale to the number of development tracks that they see makes most sense for their customers and their own operations.
  • Level of fully automated tests are set to increase to over 90% of all test cases
  • Time to market of new features will be reduced to less than a month for many features compared to approximately half a year at the starting point.

Robot Arms

  • Product assortment expanded by over 50%
  • Number of unique parts reduced by more than 30%
  • Entire range of industrial robot arms built around only a handful of main layouts compared, which is less than half compared today.

Operations

  • Number of production lines reduced by 50%
  • Factory footprint of the new production lines to be cut in half compared to today
  • Production capacity quadrupled from 2013 level
  • Robots will be produced by robots assisted by humans in a mostly collaborative fashion.

And there were additional benefits.

According to Roger Kulläng, Global Software Solution Architect, ABB Robotics, “As software architecture can easily be circumvented by the coders, it is important to repeatedly go back and look at the reasons why certain functions were grouped into modules. We have done software modularity before, but this time we factored in customer values and strategy. I believe this makes our new architecture much stronger.”

If you are inspired by the ABB Robotics case and  interested in understanding  how your product architecture can benefit from a modularity program, please fill in form below and our specialist team will contact you to.

Contact us

Blog

When the Product Architecture is a System of Modular Systems

By Tobias Martin

INTRODUCTION

This is my second post in a series of blogs around modular systems. The first post, called What makes a Good Modular system is found here… 

In this post, I will move beyond the idea of good, balanced module systems into how they can be leveraged across multiple product platforms to generate even greater profitability. I will continue with the same example company who started with independent module systems and transitioned to ones that are broadly shared.

What is a Modular System?

A modular system is a collection of building blocks that can be configured in different ways, adapting for different customer needs. Over time, some modules will be developed to serve new purposes or to improve performance in some aspect. Optimization and cost-cutting can be done within modules without the typical ripple effect throughout the product and, when done well, without reducing the value to customers. Many companies use modularization as a tool to reduce product complexity or to make the customer order process more efficient by configuring-to-order rather than engineering-to-order.  

If you are interested to know how a Modular design differs from traditional design, feel free to download this explanatory guide Modular Design VS Traditional Design

The most obvious and traditionally known way to create modular systems is to group a number of product platforms that share technical properties (technology and sizing) and supply chain properties (factory footprint and supplier base) into a systems. The system, in this case, is scoped as end-to-end products. Functions that exist across other platforms are not typically evaluated or shared.

This inevitably leads to sub-optimization where functions are customized and re-evaluated towards the specific platform, rather than optimized from a holistic point of view. In the worst case, the customizations are not necessary from a performance perspective and may even decrease customer value. In all cases, they become a barrier for supply chain and aftermarket efficiency improvements that would benefit from greater commonality

High-Level Product Architecture and Shared Modular Systems

Some leading companies have taken it to the next level by defining a wide-scope product architecture. They have a  system of modular systems that can be shared across multiple product platforms. Actually, the product architecture is a configurable system of modular systems, enabling massive benefits for scale and flexibility.

One example of such a leading company is Volkswagen Group (VW), the world’s largest auto manufacturer. VW has consistently pushed the boundaries of product platforms and architecture, marking the direction of the whole industry. I often use them as an example of all sort of benefits connected to modular systems. In this blog post I will use VW to explain the concept of high-level product architecture and shared modular systems.

1997 Volkswagen Golf

1997 Volkswagen Golf

In the early 1990’s VW pioneered the use of shared platforms in the auto industry. VW had acquired AUDI in the mid 1960’s, SEAT in 1986 and SKODA in 1991 and was manufacturing more than 20 different car models. By sharing the base platform between multiple models and brands, economies of scale could be reached for component such as drivelines, interiors and chassis. Over time, the approach was criticized for limiting the ability to adapt the product to different brand images. This hurts the status of premium brands, but also increases the risk of not reaching low enough cost levels for value brands.

2011 Volkswagen Golf

2011 Volkswagen Golf

The second generation of VW’s platform concept came in the mid 2000’s. There is a clear switch from standardization to modularization, enabling wider platforms with increased economies of scale. All Audi production cars were now being built from the same platform – a dream for the supply chain. They enabled huge increases in efficiency, fewer assembly lines and greater purchasing leverage.

2017 Volkswagen Golf

2017 Volkswagen Golf

One decade later, mid 2010’s, the bomb dropped, and it is called MQB (german for Modularer QuerBaukasten, roughly translated as Modular Transversal Engine Building System). VW was now aiming to build cars of practically any size from the same product platform. In the end of 2020, the MQB platform encompasses more than 80% of the VW production volume.

A Modular System does not have to span a product End-to-End

I will use Volkswagen to explain what is a product architecture, what is a modular system and how modules relate to both concepts. As already mentioned, I define modular product architecture, as a system of modular systems that is configured on all levels. Here, I illustrate it in relation to an end-to-end-product, showing that each modular system spans only a portion of the full product:

To date, VW has a number of (Modulare Baukästen or Modular Building Systems.) They have MQB, as already mentioned, but also MLB for longitudinal engines and MMB for mid-engine cars. For electric drivelines, we have the MEB and PPE platforms. In actuality, these additional platforms only exist because VW has many premium, high-performance cars in their portfolio, especially under the Porsche and Audi brands.

As mentioned earlier, the bulk of VW’s volume today is covered by MQB. What is especially interesting to note is that this platform and all of the others are instances of the same configurable product architecture. What I mean is that the different platforms can be built by the same underlying configurable modular systems. To explain this concept, I will use the electric MEB platform:

The MEB is VW group’s first all-electric platform, built completely around the electric drivetrain. Obviously, one of the most important parts of any battery-powered electric platform is the battery. And here comes the point… the battery is actually a modular system of its own. A modular system that can be shared with the other electric platforms, including the PPE for premium high-performance electric cars.

The important factors for configuring a battery are how much space you have at hand and how much energy you need to store. If the different platforms can share the same high-voltage interface and battery footprint logic, there is no reason why this modular system could not be shared.

This is a modular system that can be configured to deliver different levels of battery capacity, charging performance and available footprint. Many of the modules inside the system can be standardized for an enormous volume consolidation. This includes, for example, the cell module, cell management controller and high voltage connector. It creates huge benefit when setting up the new battery supply chain. VW has even hinted they want to sell their electric platform to other car makers, further expanding the consolidated volumes and making the investments in development and supply chain even more profitable.

Shared Modular Systems

To add clarity, let me put some words from the VW Electric car platforms on the boxes in the earlier modular product architecture illustration. This is only illustrative, not facts:

Finally, you see modularity on different levels and an extremely systematic approach that can be leveraged across the functions of the company, e.g. Production, Strategic Product Planning, and Sales.

Product architecture and shared Modular Systems in other industries

The very same thinking can be applied in many other product segments in both industrial and consumer goods: appliances, machinery, equipment, etc.

For example, in the home appliance industry the tradition is to see different types of appliances as different modular systems. They would say that there is one modular system for washing machines and another modular system for dryers. While this makes sense from a functional perspective, it lacks the perspective of industrial design and production.

Shared styling and user interface across product types

Since the washers and dryers are typically used in combination and located together in our homes, you clearly want them to have a common design for both the aesthetics and the user interface. From a modular system standpoint, it makes a lot more sense to see the front panel and user interface as a shared modular system rather than parts that must be aligned within the washer and dryer modular systems. This way, you can introduce updates to both the styling and user interface simultaneously across the two product lines. This also matches the expectations for customers who are looking for consistency in the look and operation.

Flexible line assembly

A driving factor in the home appliance industry, just as in the car industry, is to produce many products on the same flexible assembly lines while keeping them efficient. An enabler for this is the harmonization of the approach to structural design, enabling the use of the same tools, assembly order, etc.

Let’s say that you want to produce washers and dryers on the same assembly line. This would be a clear motivation to include them in the same product architecture, sharing as many of the underlying module systems and interfaces between them as possible.

Using the same way of illustrating the product architecture for washers and dryersA shared system for control and communication could also be used across other home appliance products, including hardware and software for IoT, controls, etc.

Final Words

In this blog post I have defined product architecture as a system of modular systems. To me, this is one of the most important realizations a company must have to enable the maximum efficiency of modularization. In my previous post, What makes a Good Modular System, I have suggested a schematic model to understand how to scope profitable modular systems. I will soon continue this series of blogs with a discussion around how to design a winning modular system based on customer values, applications, and supply chain strategy.

Why Modular Design?

AUTHOR

Tobias Martin

Vice President & Partner

 

Volkswagen pictures courtesy of Volkswagen Group AG.

Blog

What Makes a Good Modular System?

By Tobias Martin

INTRODUCTION

A good modular system balances the scope of the system and its lifespan with the effort to create it. In this post, I will suggest a schematic metric that explains the value over time of such a modular system. I will also explain how this schematic metric can support decision making around modular systems, and I will conclude with an example of a company that learned how to balance, the hard way.

What is a Modular System?

A modular system is a collection of building blocks that can be configured in different ways, adapting for different customer needs. Over time, some modules will be developed to serve new purposes or to improve performance in some aspect. Optimization and cost-cutting can be done within modules without the typical ripple effect throughout the product and, when done well, without reducing the value to customers. Many companies use modularization as a tool to reduce product complexity or to make the customer order process more efficient by configuring-to-order rather than engineering-to-order.

When done successfully, the benefits of using such a system are significant. Everyone who does work related to the products will benefit. The most obvious benefits lie within development, where engineers will design and maintain fewer components. We see such benefits though the value chain – from sales, through the supply chain and into the after-market.

Just as there are great examples of modular systems, there are also bad examples, including modular systems that focus on one aspect of efficiency, ignoring the others. For example, the standardizing of platforms across brands to decrease supply chain complexity while neglecting the impact on customer value as brands become the same products with different labels. Another example is creating a flexible system to reduce complexity for an existing assortment of products while failing to take customer-driven future developments into account. These approaches can create a system that is flexible, but for the wrong things.

This leads to the question: how can you tell a good modular system from a not so good modular system?

The Scope Factor

Many companies have turned to modular design for their product platforms as a solution for coping with ever-increasing complexity in their product offering. While the promise of complexity reduction, consolidated volumes and supply chain efficiency coupled with increased flexibility is very attractive, many companies still face common issues:

  • Improvements only span a small portion of the complete portfolio, making it hard to implement broader improvements in complexity and supply chain
  • Number of platforms increases over time
  • Subsystems that could be shared across several platforms are not captured

The fundamental driver behind working with modular products is to enable high flexibility while reducing the needed complexity – Do more with less. This sounds easy in theory, however it proves to be hard in practice.

A wider scope (i.e. a more flexible modular system) means more customers and more volumes are consolidated in the modular system. However, there’s a risk that we go too wide in the same modular system, sacrificing performance or cost with products that have completely different needs.

The Lifespan Factor

what makes a good modular systemLet’s recognize that modular system development comes with a cost. Developing the system is inherently more costly than developing a single product. It takes time to consider all possible products to be included in the system. Spending this time up-front pays off over time by making all the subsequent launches less resource and time consuming.

 

Once we have developed and implemented the system, maximum leverage is gained by using it as much as possible. You want more volume to carry the development cost, more volume to purchase and more volume to manufacture efficiently. Simply, volume on a platform can be increased in two ways: scope flexibility and change robustness. With the two, you can create many products for a long time.

The Effort Factor

While the above discuss explains the benefits of a modular system, we must also understand the effort needed to create and maintain the modular system. The greater the complexity and effort; the more volume is required for profitability. Many companies use the count of unique components, also known as part numbers, as a measure of complexity. To understand the effort to create and maintain a modular system, we use the average part number count over the life of the modular system. With this measure of effort, we can formulate an equation that explains the profitability of the modular system.

Profitability of a Modular System

Profitability is a concept that compares the net outcome of something with the effort of doing it. Given the factors we have already discussed, we can define the profitability of the modular system:

Profitability of a Modular System

 

With this simple model in mind, it is easy to understand that you should think twice before making these three decisions:

  • Reducing the scope of a platform development project
  • Face-lifting only parts of a platform, practically splitting it in two platforms of the same volume with an increase in total part number count (i.e. effort)
  • Developing a platform without having a long-term perspective of changing requirements

 

Reducing the scope of a platform development project

I often hear about projects that are reduced in scope with the purpose of enabling a shorter time-to-market. While time-to-market is a critical factor, I would argue that in many cases the scope reduction is not the best decision. It may be a short-term win, but it is likely a mid-term loss.

In one example, I have seen the increased scope of developing the platform add approximately three months to the initial six-month project. Each subsequent project based on the platform saved two months. Look at what happens:

TTM

Note that the first two projects are assuredly launched later in the wider-scope alternative. By spending the extra three months with front-loading the first project, time and resources were saved on projects 3, 4, and into the future. The longer the platform lifespan – the more time-to-market (TTM) benefit we get!

Since you are aiming at covering a wide scope with one system, you should be very careful about standardizing with the high-performance products. While a seemingly simple solution to commonality, it will destroy the profit margin for less demanding products. Standardization, in this case, will reduce the scope of the platform, even if you try to sell the standardized product to a wider range of customers.

Face-lifting Only Parts of a Platform

This item is related to the previous one but comes from another angle. Consider a platform that has been running for some time and that needs an upgrade from Technology A to Technology B. However, you must first create a specification for the whole platform to use Technology B. To cut the time-to-market of this project, you reduce the scope so that you are only upgrading the high runners. What happens? One platform becomes two! You can’t phase out the old platform because it includes products that are crucial to completing your portfolio. Therefore, you must spend the effort of maintaining and producing two platforms rather than one. Until you replace both these platforms with a complete, new generation platform, you are stuck. If you don’t, you’re caught in a spiral of more and more platforms – and fewer and fewer resources, putting even more focus on reducing the scope of development projects because of resource constraints!

Developing a platform without a long-term perspective of changing requirements

Determining the requirements that exist today is often not that difficult. Look at your existing portfolio, your competitors’ portfolios and ask some key customers, and you are likely 95% there. It is harder to foresee the future, but it is the key to increasing the lifespan of the platform. How can we be prepared for change?

While random changes are problematic, this is often not the case. By understanding the actual needs of your customers, having a solid strategy for the customers you want to win and having a good technical roadmap, you can foresee or even lead the change – at least many parts of it. The more we can do to isolate change to specific parts of the product, the longer the life of the platform and the more profitable it will be. 

A great example of a Modular System

One of the best examples of a modular system is the Volkswagen Group cars. There is both incredible flexibility of the system, and there is a clear learning and improvement path over a long period of time. Volkswagen has shown strong commitment and has improved by learning over time, which is now paying off in the third generation of their modular system.

modular system

                                                                              The Volkswagen Group MQB Modular System has a very wide scope

Today, Volkswagen modular systems span the whole range of passenger cars. They are only defined by differences in fundamental structural design principles, including electric (MEB, PPE platforms) and internal combustion (MQB, MLB platforms) drive lines. Innovations save more than $3 billion annually1. In 2020, the MQB platform consolidates more than 80% of Volkswagen Group’s total production volume – almost 11 million cars. This MQB platform was launched in 2012, so it’s already 8 years old! Only time will tell how long it will live. It is exciting to think of the MQB platform and its siblings as something even bigger, where multiple modular systems are made from sub-systems that can be shared across the modular systems. This will be covered in a future blog post. 

To achieve this great platform, Volkswagen started working with modular systems in 1993. At this time, the called it platforms. In order to reach scale effects and supply chain efficiencies, Volkswagen standardized the 20 car models they had into 5 common platforms based on car size. The A‑platform, for example, was created for cars of the same size such as Audi A3, Audi TT, Volkswagen Golf, Seat León, and Skoda Octavia.

This A-platform is a clear example of a poor modular system. Why? Because standardization was used to reduce complexity instead of modularization to reach flexibility. Since so much of the actual performance of the cars was tied to the standardized platform, it became much harder for the customer to see and feel the differences between the different models.

Fourth generation Golf, based the common A-platform

 This meant that many of the brand characteristics were lost. What happens when an Audi customer understands that she can get a very similar car for half the price with the Seat brand? Either she buys the cheaper brand, or – if the premium brand is a purchase driving factor – she visits the competing premium brand instead. Explained with the model for the profitability of a modular system, Volkswagen reduced the scope of the platform but still used the narrower scope to fulfil the needs of a wide-scope market.

This almost 30-year evolution of working with modular systems at Volkswagen is a great example of focus and long-term commitment to this strategy. By continuously improving on the execution, excellence has been reached. If you are interested to read more on this topic I suggest that you check out our insight paper on Why Modular Design, where we compare traditional product design with modular design. 

 
Why Modular Design?
AUTHOR

Tobias Martin

Vice President & Partner

 
1Kotabe, M., & Helsen, K. (2020). Global Marketing Management. John Wiley & Sons
Volkswagen pictures courtesy of Volkswagen Group AG.
Why module design?
INSIGHT

Why Modular Design?

BY LUTHER JOHNSON

Does your product design methodology support your company strategy​?

Most companies today are operating in multiple market segments and regions where customers demand unique products customized to their preferences with a steady stream of new features and performance.

Companies are also looking across their established internal silos to find ways to improve the performance for their organization. 

The challenge is to simultaneously meet the market demand of mass customized products while cutting internal costs, complexity, lead times and time to market.

In this insight paper Luther describes the difference between Traditional Design and Modular Design methods, with suggestion on how you can implement modular design in your product development process.

Luther Johnson

AUTHOR
Customers want innovative products, fast. Companies want to make customers happy and be 21st century lean. So how does all that work? Modular Management delivers clarity, performance and customer centricity so clients can reduce complexity and accelerate value creation.

DOWNLOAD INSIGHT

More readings

Guide To Agile Line Production

Guide How to Design for Fast Service

CASE

Edscha Trailer Systems

FOR MARKET LEADERS

Product Architecture Power

In order to reduce the number of part numbers, while maintaining and growing the number of product variants, the team at Edscha Trailer Systems paid special attention to the primary mechanical system of the sliding roofs. 

They optimized the interfaces and modules that make up the hinges, rollers and rails. 

The result? 

What used to take 108 different component variants was reduced to 32 module variants connected through standardized interfaces.

The consistent implementation of modular platforms is one of our major strategic concepts for the future. The competence and know-how that Modular Management offers has been a great support for us when implementing changes of vital importance in the areas of R&D and manufacturing processes.

Anders Birgersson
Edscha Trailer Systems

Company Description

VBG, now part of Edscha Trailer Systems, was started in 1951 by an engineer, Herman Krefting, who had a passion for making improvements to traffic safety. He designed and patented a new truck coupling that greatly improved the attachment of trailers to heavy trucks. The business he started to manufacturer these couplings grew rapidly during the 1950’s and continued to grow over the years with the addition of new coupling products and new sales offices across Europe.

Today, the VBG Group is in the business of developing and manufacturing many different components for the heavy vehicle industry. It is comprised of four divisions that total $ 375M USD in annual revenue. Sales are direct to OEM vehicle manufacturers or to specialty truck body builders, and there are also retail outlets for aftermarket purchases.

The VBG Truck Equipment division is a leading supplier of coupling equipment for truck and heavy trailers. It has more than 50% market share for coupling equipment through VBG and Ringfeder brands. Customers are truck and trailer manufacturers and aftermarket body builders who assemble specialty vehicles from chassis they purchase from the manufactures.

The Edscha Trailer Systems division is a leading supplier of moveable enclosures for trucks and trailers. It has just below 50% market share for sliding roofs through the EdschaTS and Sesam brands. Customers include European trailer manufactures Krone, Wielton, Tirsan, Kässbohrer, Fruehauf und Berger along with truck body builders and aftermarket retailers. 

The Ringfeder Power Transmission division is a global market leader in mechanical power transmission niches within and energy and shock absorption for widely differing industries including construction, machinery, power and mining.

The Mobile Climate Control division is active in the market for climate control systems for buses, off-road, utility and defense vehicles. The division is focused on customized solutions in small to medium-sized series. Its solutions include heating, ventilation, air conditioning, and controls, as well as a wide range of associated components.

Business Description

Up through the 1980s, the company focused on improving and delivering the core set of trailer coupling products under a single brand name. In addition to the original couplings, they developed high quality fifth wheel attachments for semi-trailers and tow-bars for automobiles. Sales grew steadily over the years and they expanded with in northern Europe with new sales offices and more advanced manufacturing facilities.

In the 1990s VBG started acquiring other small companies to add to products and brands to their portfolio. They added complimentary products and new products to go after different markets. The complimentary products were aligned with existing products and they strived for synergy across the businesses and bottom-line cost savings.

With growth and acquisitions, VBG was faced with having to offer a large assortment of products into a relatively small market where the flow of orders was highly varied. Costs and lead times were on the rise due to the large number of different products and they had little to no ability to gain scale. The production of drawbar couplings was customer-controlled, and variations in the number of incoming orders were managed by re-allocating resources, working overtime, employing temporary personnel and maintaining high volumes of inventory to cover the peaks. VBG was having trouble keeping up with their competitors with offering the product features demanded by customers.

In 1993, VBG began a relationship with Modular Management. An initial modularity project was completed for the original truck couplers, and it succeeded in lowering total costs and reducing the number of unique parts and article numbers by 42%. A series of modularization projects were some of the major contributors to raise net profits. There was also a considerable reduction in lead-time that made it possible to deliver products to customers in Scandinavia within 24 hours

In 1997, VBG acquired Ringfeder who was a direct competitor for trailer couplings and also offered machine elements for power transmissions. By leveraging the Modular Product Architecture that was previously developed, VBG was able to quickly integrate Ringfeder couplers into the VBG product family gaining the efficiencies of a single product platform.

Edscha Trailer Systems

In 2005, the company increased its product diversification with the acquisition of Edscha Trailer Systems  and Sesam sliding roof systems for trucks and trailers. The company is the inventor of the sliding roof system for trucks and trailers with products that enable easy cargo loading from either the top or sides of a truck. The Sesam included the same types of products with lower price and performance. 

In 2009, the global economy reduced the overall demand in the truck market. Edscha Trailer Systems and Sesam were the hardest hit in the VBG portfolio when OEMs were unable to move inventory of trucks and trailers. Many fewer sliding roof systems were being installed. The lower demand had exposed the inflexibility of the product costs to the volume of production. 

Having been a recent VBG acquisition, sliding roof systems had not yet benefited from the creation of a Modular Product Architecture. Past success with implementing modular platforms gave VBG the confidence that this approach would be a viable solution for the cost challenges of this division. Edscha Trailer Systems ’s journey will be the subject of the remainder of this case story.

Typical Trailer Sliding Roof System offered by Edscha

Product Marketing & Management

For Edscha Trailer Systems it had become increasingly difficult to differentiate trailer systems products from competitors. On average, the market was conservative, and innovations required real changes in customer value and extra time for customers to adapt.

The marketing team at Edscha Trailer Systems identified a unique product offering for each model year. They decided what features and options would be offered to customers as standard products while special features could be developed upon request. The team was also balancing the two brands, Edscha Trailer Systems and Sesam, and inevitably they were offering some products with overlapping performance. 

Product Design & Engineering

Sliding roofs are a mature product line and there have only been incremental changes over the years. The engineering team was small and had never completed a large product development project. The annual change in product offering required only small design changes, and the team spent the rest of the year fulfilling customer requested options. They also spent a large amount of their time on solving quality issues. 

Product Operations

Portions of the products we assembled at the Edscha Trailer Systems  factory in the Czech Republic where purchased components for the sliding roofs were cut and riveted together. Other components were delivered directly to OEMs or to the retailers for assembly on the vehicles. Most components are sourced exclusively for the company from 140 different suppliers. In 2011, they produced approximately 30 000 to 35 000 sliding roof systems.

The consistent implementation of modular platforms is one of our major strategic concepts for the future. The competence and know-how that Modular Management AB offers has been a great support for us when implementing changes of vital importance in the areas of R&D and manufacturing processes.

Anders Birgersson
Edscha Trailer Systems (formerly VBG)

Modular Architecture Goals

By creating a Modular Product Architecture for sliding roof systems, Per Ericson sought to significantly reduce their overall costs and make the business more robust to downturns in the market. 

Per looked to combine Edscha and Sesam branded products into the same product platform. He was confident in the fact that VBG had realized many benefits in 1997 doing the same with the VBG and Ringfeder trailer couplers.

We are acting in a mature market with hard competition from both local and international players. Through a modular concept, we can increase our completive edge and work more efficient with a good profit level. Modular Management supported and guided us through the process from being a company with a large assortment with unique components to a modular structure with drastically fewer components. My opinion is that we would not been in the position to work through this process by ourselves. Modular Management’s support and guidance was needed and necessary to bring the project to a successful ending.

Per Ericsson
Formerly Edscha Trailer Systems, retired 2017

The Himalaya project was launched in January 2011, and the investment would all be paid back within 4-5 years after the product launch. The company looked to develop the underlying product architecture and then implement specific products via smaller projects that reduce risk and increase speed to market. The key performance indicators for the project included the following:

  • Meet customer´s various demands via increased configurability
  • Increase barrier for competitors by being an undisputed market leader
  • Be agile with faster time to market and reduced time to delivery
  • Reduce the number of unique components.

Revenue Growth

Edscha Trailer Systems sought to maintain their market share defending it from a new and growing competitor. This would be accomplished by offering additional, desirable product variants and a substantial reduction in average lead time to the customer.

Profitability Improvement

 

The downturn in the market was a harsh awakening for the company. They needed to make drastic changes to their product costs basis in order to remain solvent in the future. The overarching goal was to reduce the number of unique parts by 70%. These are parts that needed to be designed and managed within the supply chain system. With part number reduction, it was estimated that the number of different suppliers could be reduced by 70% and inventory costs would be reduced by 45%. Direct material costs would be reduced as well.

Business Results

By the end of 2013, Edscha Trailer Systems was already seeing the impact of their modularity efforts with trailer sliding roof systems. Even though the product had not yet officially launched, they were seeing the impact of decisions and efficiency improvements that had been made along the way. Backward compatibility allowed new components to work in old systems. 

Edscha Trailer Systems – enhanced profitability in continued weak market

Heading into 2013, the division expected the trailer business to perform positively and that demand would increase in the second half of the year. However, the market remained weak for much of 2013 and it was only toward the end of the year that an improvement could be seen. Despite this weak market, where growth in turnover for the division only amounted to 1 percent, Edscha Trailer Systems improved its profitability and its operating margin rose to 9 percent. Lower costs and more efficient processes contributed to this and the division expects to further improve profitability as a result of the launch of the newly developed generation of sliding roofs in the market in 2014. However, it is principally the result of the anticipated increase in turnover volumes due to the improved market situation that Edscha Trailer Systems will also produce the necessary growth. The main market driver over the next two to three years is primarily the clear need to exchange or replace the existing trailer stock in Europe.

I hold great hope and expect Edscha Trailer Systems, with its strong market position and newly developed products, to have a solid basis in 2014 to continue its journey towards long-term profitable growth

Anders Birgersson talks about the financial impact in the 2013 Annual Report

Future cost savings were also being booked as new contacts
were being negotiated with the smaller set of suppliers. Overall cost
reductions were zeroing in at 15%. This was very close to the initial estimate
by the team and Modular Management. Upon these early successes, the Edscha Trailer System division has already launched the development of another Modular Product Architecture
for the line of sliding roofs that are installed on tipper trailers. 

Product Marketing & Management

The market launch of the new product range will be coordinated with each customer and should be implemented within one calendar year.

In addition to key customers, the team performed a market study of 20 truck body builders and 130 end customers. They confirmed with customers that increased product variety and reduced lead time would be the key to maintaining their market share. They also discovered that product reliability, safety and fast open and close are the critical customer experiences they needed to deliver.

Through the development of the Modular Product Architecture, the marketing and product engineering teams have developed new ways of working together. They have created a strong connection between customer needs and the technical solutions provided within the product. They know very clearly what modules and components deliver significant customer value and prioritize their product development efforts accordingly.

Product Development Engineering

The clear product priorities allowed the engineering and design team to spread out the development effort over time. With limited resources and funds, the team could not develop the entire range of module variants in one large program. They first developed the underlying product architecture that would last over time and then some of the key common module variants. Then, they could space out the introduction of additional modules over time. In fact, the product could be launched while the team was still developing new modules variants. They planned to keep introducing new ones to support the ongoing need for product variety in the market.

Development time for new module variants was set to the following:

  • New module or important module variant is 12-18 months (requires prototype and field test)
  • New product update (module variant without prototype of field test) in 6 months
  • Customer adaption: hole pattern of minor change will take 1 month.

A long-term focus around modularity has been implemented in Edscha Trailer System’s design department. Specifically, the team is much better at designing for production and supply chain and is saving money down the line. Even if it makes the design effort a bit more complex, they are developing and maintaining interfaces that enable efficiencies within operations.

Product Operations

The impact to product operations could be estimated early on as the team negotiated new deals with their suppliers. With reduced part numbers they could plan for higher volumes, fewer suppliers, less inventory and lower costs. At the start of the project, the team predicted a certain reduction in direct material costs, and after the initial planning with suppliers, they were achieving a reduction very close to the original predicted figure. The number of suppliers was reduced from 140 to 40.

The benefits of a more efficient supply chain were being extended to the retailers. Many were planning to keep less stock on hand because they were getting shorted lead times from EdschaTS.

 

Modular Architecture in Action

In order to reduce the number of part numbers while maintaining and growing the number of product variants, the team at Edscha Trailer Systems paid special attention to the primary mechanical system of the sliding roofs. They optimized the interfaces and modules that make up the hinges, rollers and rails. 

What used to take 108 different component variants was reduced to 32 module variants connected through standardized interfaces.

39 Hinges Reduced to 4. 23 Rollers Reduced to 5.

44 Rails Reduced to 8

SPECIALIST
Anders Leine

Anders Leine

SOLUTION
CASE

Sidel

Business Transformation with Product Architecture

CASE

Sidel

In the face of increasing complexity and aggressive competition, Sidel CEO Mart Tiismann decided to invest in a modular product architecture program. The results were remarkable.

Executive Summary

Sidel is the leading global provider of PET solutions for liquid packaging 

The company is market leader in blowing, filling, labelling, material-handling and line-engineering solutions for the beverage, food, home and personal care industries.

In 2010, Sidel was struggling with a complex assortment and high costs for order engineering.

Since the company sells both complete lines and individual subsystems, a relatively high degree of product complexity and order engineering can be expected. Yet the situation was made worse by a Sales culture of saying ‘yes’ to all market requests for customization, and this was more than a question of culture. The market needed more configurable solutions. 

While Sales was saying yes, Engineering and Supply were having a hard time delivering what was sold and the competition was heating up. Margins were under pressure, not least as the competition ate into the most lucrative customer segments, geographies and solutions. 

In the face of increasing complexity and aggressive competition, Sidel CEO Mart Tiismann decided to invest in a modular product architecture program. The results were remarkable:

  • 60% of solutions sold were now configure to order – up from 33%
  • 40% reduction in part numbers
  • 50% fewer new part introductions
  • 10% in reduced cost
  • >300% in product assortment configurations
  • 30% reduction in total cost of ownership
  • 50% shorter order to delivery lead time
  • 30% shorter time to market
  • 80% reduction of engineer to order hours.
CONTACT
Mart Tiismann

As CEO of Sidel, I learnt that it’s possible to transform a business by connecting products, customers and organizations. Modular product architecture and information management tools made it possible.

Mart Tiismann, Former CEO of Sidel Group

Full Case Story

Sidel

In 2010, Sidel had 5 300 employers and a turnover of EUR 1 400 million. 

The company ran engineer-to-order operations at many of its 26 plants for liquid bottling, blowing, filling, capping, labeling and conveying solutions.

Sidel’s product portfolio includes both entire lines and subsystems, with all the products needed for packaging liquids: blow molding machines, fillers, conveyors, labellers, pasteurisers, palletisers, depalletisers, robotic equipment, end–of–line operations, service and spare parts. 

Sidel’s systems are innovative, large, complex and high precision. They are built from expensive materials, demand big and costly spare parts, and run at high speed with high tolerance.

In 2010, the high degree of order–engineered custom products was resulting in lots of customization in production. In fact, every third product had some type of new feature or design.

Challenges

In ‘The Discipline of Market Leaders,’ Treacy and Wiersema present three value disciplines: Operational Excellence, Customer Intimacy and Product Leadership. This is the transformation model Mart Tiismann focused on together with Modular Management’s Alex von Yxkull and Alex Ginsburg.

Both challenges and targets for the Sidel modularization program were structured according to the value discipline model with the goal of reducing costs, increasing market share and increasing price premiums.

Sidel’s business challenges were analyzed and summarized as reasons why the company wanted to initiate a modularization program. Each challenge was allocated to a specific value discipline.

Treacy and Wiersema's Value Disciplines

Product Leadership

  • Need to focus more on innovation – and less on redesigning parts – to regain market leadership.
  • Cross–fertilization and use of innovation partners will demand a modular product architecture and defined interfaces
  • A solution range based on derivates of a standardized base model will leave too many holes and unpredictable complexity costs.

Operational Excellence

  • Too many parts and too many suppliers make systematic improvement impossible
  • Unstable designs make a truly global supply chain impossible
  • Complexity costs are much higher than understood.

Customer Intimacy

  • Standardization of the product offering does not work
  • Order engineering is too slow and expensive.

The next step was to set clear goals.

Goals for the Modular Architecture

Goals for the architecture development program were set according to the same value framework as the challenges.

Product Leadership

  • Improve technology leadership
  • Reduce time to market 
  • Improve performance, primarily speed of new product introduction and improved total cost of ownership.

Operational Excellence

  • Reduce lead times 
  • Reduce complexity costs through fewer parts needed
  • Enable the splitting of design, sourcing and assembly across different geographical locations
  • Enable increased reuse and reduce customer–specific engineering
  • Improve quality.

Customer Intimacy

  • Enlarge the product offering
  • Better serving the increasing variety of customer requirements
  • Enable the development of services.

Liquid Packaging Line

Program Scope

The scope of the modularity program was Fillers, Blowers, Conveyors and Labellers and focused on:

  • Need for market-driven variance and development
  • Complete line configurations, harmonization and balancing of performance
  • Equipment internal modularization and compliance to complete line interfaces
  • Additional focus on control systems (complete line and equipment)
  • Process and information management for maintaining modular products
  • Process and information management for configure-to-order.

Results

Product Configurations

Sidel’s new modular product architecture included the building blocks, or module variants, needed for a better and bigger product assortment. Product–specific results included:

  • More solutions on offer, including triple the number of blower products
  • More options available on more products, thanks to standardized interfaces
  • Aligned product ranges, with specifications defined at complete line level
  • Three conveyor ranges were moved to one architecture, leading to better performance and a higher degree of configurability – without increasing complexity – and 30% fewer new part numbers.

Previous Conveyor Range

New Modular Matrix Conveyor Range

Business Results

The business results were even more remarkable:

  • 60% of solutions sold were now configure-to-order – up from 33%
  • 40% reduction in part numbers
  • 50% fewer new part introductions
  • 10% in reduced cost
  • >300% in product assortment configurations
  • 30% reduction in total cost of ownership
  • 50% shorter order to delivery lead time
  • 30% shorter time to market
  • 80% more engineering hours available for new product development.

As CEO of Sidel, I learnt that it’s possible to transform a business by connecting products, customers and organizations. Modular product architecture and information management tools made it possible.

Mart Tiismann, Former CEO of Sidel Group
CASE

Johnson Controls Hitachi

How Market Segmentation Helps Bridge Strategy and Products

INTERVIEW

Why Market Segmentation?

Rodolphe Jacson shares some thoughts on market segmentation and product planning.

Please introduce yourself

I’m Director of Global Product Management at Johnson Controls Hitachi (JCH), based in Tokyo. 

JCH offers Residential Air Conditioner (RAC), Package Air Conditioning (PAC) for light commercial application and Variable Refrigerant Flow (VRF) systems for commercial buildings. We also supply chillers, compressors and IoT-connected offerings.

The job of my team is to analyse market trends, define product strategy and build product roadmaps in collaboration with our local presence. After building the roadmap, we develop products with cross-functional teams (Engineering, Procurement, Manufacturing and Sales) in order to meet customer, channel and company expectations. The Global Product Development Division is often defined as the engine for growth.

How do you link market needs to product development?

At JCH we collect market trends and customer needs for product development roadmaps. We have 3- to 5-year roadmaps, but they’re often much shorter due to innovation and regulatory changes in terms of energy efficiency, refrigerant use and safety.

For example, one hot topic right now is which refrigerant to use. Ongoing policy changes will impact in just a few years, so we have to prepare for different scenarios. This is not like the car industry, where you can have a 5-7-year development platforms. Our business is more dynamic, like TVs and appliances, where something new comes out almost every year.

Our job is to feed market needs into the product vision, position, pricing and specification, not least at kick-offs with engineering teams who’ll develop and deliver the product.

Why did you choose to work with Modular Management?

It basically came as a package, as we’re working to implement modularity in JCH. This whole package, or journey, starts with understanding market requirements and customer needs. Then you move on to Modular Function Deployment (MFD) and the product architecture. 

For me, market segmentation is a very important opportunity, because we can be a bit technology driven. Most of my team started in engineering and moved on to product management, and despite our success, there’s a risk of focusing too much on technology and stacking features on top of each other. You should never lose sight of the end-customer. 

The customer needs to be in the centre of the conversation. You have to ask, “What really matters?” And to be able to do that, you have to clarify your segments and define groups of customers who want to achieve the same outcome.

How did it go?

It went well. 

We started with the customer journey, when people first start thinking about buying air conditioning. We linked the outcomes to what they want, clustered and grouped them, and looked at providing benefits based on what’s important for each group. With trait-based segments you put the same importance on the same set of benefits and look less at others. The same kind of customer has the same kind of view.

We fully implemented this methodology and ended up with six segments. And with these segments we were able to re-evaluate the size of market based on data and statistics from our market intelligence.

What were the main challenges?

The main challenge is to focus on end-user segments and make sure that their needs drive product development and planning. Our business mainly goes through professional channels, but it’s still important for us to focus on the end user. 

For example, take a hotel. 

We sell air conditioners to distributors and contractors, who in turn sell and install them to a hotel chain. We know that for the channel, on-time delivery, easy selection of product, installation and commissioning will be very important. But the hotel owner will be more interested in energy saving, easy operation or the user experience.

MARKET SEGMENTATION AND PRODUCT PLANNING METHOD

What are the main benefits of doing market segmentation?

The main benefit is to structure and clarify which segments we have and how we should address them. 

We also see how segments can exist in all regions. In the past we’ve had a more fractured, regional focus. Customers in one country were considered to have unique needs. This may be true, but that doesn’t mean that one segment can’t exist in another country or region. In fact, although segment size and market value differ, segments themselves probably don’t. 

Take the example of well-planned heavy user, who thinks a lot about which air conditioner they want at home. This segment may be big in a country like Japan, and smaller in another country where the product has more of a mass market feel. But it’s still highly likely that there are well-planned heavy users in all countries.

Another useful insight is to see whether we’re under- or over-represented in a segment. Analytics show that the global market is worth USD 66 billion. Each segment represents a share of this, and when you put actual sales in each segment, you can see where you’re focusing too much – or too little. It’s important not to unconsciously give up on segments, and by checking the size of each one you can address them properly.

Another benefit is that we can work together across product portfolios (RAC, PAC and VRF), all looking at the same customer benefits. It’s really beneficial to apply a finding like the relative importance of energy saving across both regions and product portfolios. It’s also good to bring together teams together that usually work separately, and get everyone to address the same customer benefits.

What would you have done differently?

The method’s good. No problems there. 

One of the challenges, for each segment, is to design a customer persona. This is difficult because the final document needs to be both very comprehensive and very easy to understand. 

In the end we asked our marketing team and one of their communications agencies to finalize this. The customer persona is important and you need a very fine-tuned document for internal communication. And we’re not specialists at doing that.

What were the key learnings for you?

The real benefit is that you put the customer at the centre of attention. 

Today, we use the customer canvas to benchmark where we are, in addition to competitor comparisons and functional gaps. We spend more time thinking about the needs of the end-customer and the messaging they want. I would have run this exercise for my team in isolation, even if we weren’t proceeding with modularity as a company.

Thanks Rodolphe for your time

JOHNSON CONTROLS HITACHI

Rodolphe Jacson

SOLUTION

Market Segmentation