MIT Sloan Management Review had a somewhat interesting article Putting It Together: How to Succeed in Distributed Product Development. The idea is pretty straight forward: as products get increasingly complex and competitive pressures require companies to work ever faster, more companies are forced to distribute product development across multiple organizations.
COMPANIES HAVE TRADITIONALLY been protective of the innovation activities they use in product and process development, seeing the activities as part of their crown jewels. That thinking, however, is starting to change. The increase in outsourcing, offshoring and alliance building has resulted in innovation efforts that often require the orchestration of multiple organizations separated by cultural, geographic and legal boundaries.
As the article points out, distributed nature of R&D varies:
At one extreme are centralized arrangements, with a clear lead organization and subsidiary “supplier” organizations. At the other are innovation efforts performed by decentralized “open-source” networks. In between is the realm of outsourcing and offshoring — the key building blocks in a trend called distributed product development or DPD, whose success factors are still not widely understood.
We have discussed the impact of distributed R&D on innovation. We have also seen that the impact of distributed teams on learning. We have also seen how virtual teams multiple times in the past. This article points out that distributed development adds significantly to the uncertainty in team performance:
Outsourcing complex product development work subjects companies to significant uncertainty. Companies can make perfectly reasonable decisions and still find themselves needing to make expensive changes, ranging into the millions or even billions of dollars. Our contention is that, by anticipating some of these changes, managers can reduce risk and, ultimately, cost.
So how does the article suggest we manage distributed product development:
The flippant answer — “very carefully” — is also the right one.
1. Communication must be perfectly clear, especially if the project involves people from different cultures.
2. Incentives must be carefully aligned.
3. Despite upfront planning, you still should be ready to adapt and realign as the inevitable snags occur.