Manufacturing is becoming increasingly commoditized.
In many industries, outsourcing has become commonplace. For instance, in the semiconductor industry most firms do not even consider performing manufacturing operations in-house. Even in more traditional industries, such as consumer products, manufacturing is often outsourced. Consumer electronics companies are turning to a Flextronics or a Hon Hai rather than maintaining an internal manufacturing capability. Manufacturing is now becoming a commodity to be purchased more than a corporate capability on which companies compete.
Product development cycle times are continuing to decrease.
Time-based competition is nothing new, but the drive toward faster product development cycle times continues. In fields such as consumer electronics, or telecommunications where there is stiff competition combined with significant technological innovation, customer demand for better products faster is almost insatiable. Companies that can meet this demand and get to the market first enjoy a distinct competitive advantage.
Product complexity continues to increase.
In industries such as consumer electronics, customers are demanding newer and better features, often in smaller and smaller packages. This trend leads to greater product complexity. In the semiconductor industry the increase is measurable. Complexity rises by about 40 percent per year. But design tools or typical productivity enhancements only enhance productivity by about 20 percent per year. This creates what is known as "the design gap." Many companies try to bridge the gap by allocating more resources to product development, which means that design teams tend to become larger over time.
Design teams are becoming more fragmented and dispersed.
Partly because of the innovations in communication technology and partly because of the need to address the "design gap" through forming larger teams, product development activities have become fragmented and dispersed. Way back in the 20th Century, large blue-chip companies would tend to have a large product development staff in-house. Today, it’s quite common to see people outsourcing various portions of product development to third parties. For example, a company might have one group developing the electronics, another developing the plastics, another developing the industrial design of the product, etc. The role of the company that is outsourcing these activities is to serve as the systems integrator and the brand manager.
Multi-site product development is becoming more and more common.
A corollary to the trend of dispersed and fragmented product development teams is that companies are developing products over multiple geographies. This adds complexity since these geographies are frequently on another continent, in a different time zone, with different languages and cultures. The around-the-clock activity of geographically dispersed teams is attractive to companies that are pressured to develop products faster and faster. These companies should not underestimate the complexity involved in controlling the operations of these geographically-dispersed teams.