Commonality, or the reuse and sharing of components, manufacturing processes, architectures, interfaces, and infrastructure across the members of a product family, is a strategy targeted at improving corporate profitability. Companies from Toyota to GE use product platform strategies to deliver more variety to their customers and compete more effectively. For example, Black and Decker uses shared motors and batteries across a range of power tools. Volkswagen models such as the Jett and TT share similar underbody components and other aspects.
Typical benefits of a commonality, or a product platform strategy, include:
- Shared development costs
- Common testing procedures
- Production economies of scale
- Amortized fixed costs
- Reduced inventory
By definition, commonality seems like an obviously good thing. Why incur
the cost of making different parts for different products if the parts do the
same thing? Because as it turns out,
commonality is not always the right thing to do. And even when it is right, it
can be difficult to achieve.
Dr. Bruce Cameron is a lecturer in MIT's Engineering Systems Division and a consultant on platform strategies. His research at MIT uses a healthy dose of systems thinking to tease out when commonality makes sense and how to get companies to pull it off. Cameron oversaw the MIT Commonality Study, which closely examined 30 firms over eight years. The study was the first work to uncover that many firms fail to achieve their desired commonality targets, showing weaker investment return on their platform investments. "That type of behavior and phenomenon is seen in studies that we did in automotive, consumer products, and transport," says Cameron.
Where commonality goes wrong
So why do many companies fail to reap the benefits of commonality? Cameron's research has shown that many firms face systematic downward pressure on commonality.
First, commonality may inhibit the development process and make it hard to adjust to changes in the market that call for greater product differentiation. Therefore, commonality can sometimes limit the flexibility of the product development process.
Another downside--"Competition between product lines within a company over resources and control," says Cameron. Also counterproductive is the intentional pursuit of uniqueness: the tendency of engineers and designers to come up with different results for the same task. Even slightly different designs can mean a company must stock more parts than if the designs were identical, he said.
The systems thinking solution
"Platforming is classic systems thinking," says Cameron. "If you look at each product line individually, you would make a different set of decisions. But, if you look at them globally and allow trade-offs between them, then you start to see how the benefit emerges," he says. Cameron suggests these initial criteria for assessing the value of a product platform approach:
- Technical feasibility, technical depth and motivation behind the plan to understand how a set of common components can scale
- Clear risk and revenue benefits--commonality is only useful in as much as it delivers financial benefits
- Organizationally feasible--the company must have the ability to coordinate across multiple products in order to see benefits
Join Dr. Cameron for a free live webinar on September 22, 2015, from 12:00-1:00 Pm (EDT) to better understand how product platforming can deliver ROI for your organization. Register now for Product Platforms: A Source of Competitive Advantage.
You can also learn more about commonality and product platform strategy in greater depth in Dr. Cameron’s upcoming Executive Education program, Managing Product Platforms: Delivering Variety and Realizing Synergies.