A smart-platform strategy along with modularization can help combat the uncontrolled growth in solution complexity for manufacturers in several ways. It can reduce costs by minimizing operational complexity, increase competitiveness by accelerating project delivery, and deliver a benefit to customers through more competitive pricing
Even for companies that have successfully created and begun implementing a competitive, modular portfolio and achieved success with their modular solutions in real projects, many find themselves faced with challenges about their organization’s ability to hold on to this strategy in the long term. This article offers a perspective on what can go wrong and what is required of a company to firmly anchor a smart-platform strategy deep within its organization.
Smart-platform strategies may start successfully, but three hurdles can lead to ‘slippage’
Even after conducting successful pilots for developing and implementing modular solutions, some organizations struggle to translate that approach into a standard way of working. Three challenges seem to undermine many companies’ attempts to take smart platforms from a “project” level to a fundamental and enduring business strategy.
Organizational structure is not implemented properly
After an initial focus on the more technical aspect of modularizing the portfolio, organizational requirements for successful end-to-end management of that portfolio are sometimes neglected. Companies often fail to acknowledge the long-term investment needed to make change stick: clear ownership structures, adjusted roles and responsibilities, and simplified decision processes fail to get implemented. Once the program-management support is ramped down, the organization falls back into old ways of working.
The benefit is not immediately visible
As mentioned, the key objective of modularization is to reduce complexity costs or increase customer value by creating a more competitive product portfolio. However, no one wants to invest in a year-long (or even years-long) implementation of a platform strategy only to find out in the end that there are no tangible benefits. Without early, clear, and measurable corporate objectives, with ambitions that grow over time, the impact of the smart-platform strategy doesn’t become evident for quite some time, and the strategy loses momentum.
Maturity of smart-platform thinking is unbalanced across the organization
As a smart-platform strategy is inherently cross-functional, certain challenges arise with regard to the pace of different functions in the organization. In particular, different levels of maturity in R&D and sales—in understanding and implementing the smart-platform strategy—can lead to misalignment and misunderstanding when it’s time to bring the strategy to life.
Five principles can help anchor smart-platform strategies
Five principles address the challenges described above and help companies embed smart platforms in their DNA, giving them a better chance at sustainability beyond just a successful pilot (Exhibit 2).
Organizational structures support the implementation and long-term success of smart platforms
A shift from customized solutions toward a more module-based “catalog” approach commonly requires new roles, responsibilities, and authorities. Whereas multiple project managers once had oversight of their distinct and largely independent projects, module leads now take responsibility for standardized modules that span across projects. Additionally, a platform lead works to ensure the compatibility of platform and module standards across projects. To be successful, the mandate for this cross-functional ownership of the platform must be clear and is often sponsored from the highest levels of the organization.
The way companies address which function should take the lead, how to ensure customer-centricity, and whether power should be centralized falls into three archetypes:
Technology-driven model: Places end-to-end product responsibility with R&D and is represented by the module and platform leads.
Market-driven model: Module and platform leads are often placed within separate and regional departments and the product-portfolio manager has a clear customer and sales focus.
Balanced model: A central function (the platform lead) helps balance the interests of R&D (the module lead) and sales (the product-portfolio manager).
Formal processes and mechanisms ensure that the smart-platform strategy becomes completely embedded in daily work
Formal processes and mechanisms in key areas help companies adhere to the smart-platform strategy.
In sales, the process should include mechanisms that guard against moving away from the platform principles, like reviewing platform applicability in the early sales phase and platform compliance in the later sales phases. Training sales staff on the latest platform-compliant products/modules in the catalog will enable this.
In portfolio management, processes and mechanisms should support decision making in three key activities:
Adding variants responsibly requires a healthy separation between those who might benefit from additional variants (for example, sales) and those who have the authority to add a variant. A relatively independent board should be entrusted with variant approvals.
Maintaining module variants for companies where the repetition rate is very low can be supported by continuously updating supporting documents only for reference variants. An annual or semiannual portfolio conference, where all modules of the platform are reviewed—supported by a “take rate” analysis—can also support maintenance.
Removing module variants can be supported by a regular review process. If the decision is made to remove a particular variant, it is important to ensure that the decision is communicated to relevant stakeholders and that adequate support for an “end of life” process of that variant is secured.
Automated systems integrate smart platforms into all relevant workflows
Automated systems help weave modularity into the fabric of the organization. Four IT-enabled tools support smart-platform automation:
Solutions configurators can be implemented to help link customer requirements to available module configurations via predefined rules. This tool is a jointly maintained system that includes all the rules and covers all the modules of the smart platform.
Modular pricing tools are convincing enablers for both sales teams and customers for whom price is a key factor. By transparently making the link between complexity and price through connecting the solutions configurator to the pricing tools, modular pricing tools set the right incentives and highlight the benefit of adhering to the smart-platform boundaries.
R&D road-map tools should reflect the development of modules based on the same rule-based logic as the solutions configurator, helping prevent the development of specific configurations that fail to take into account future variations and balancing complexity costs with market coverage. Linking the R&D road map automatically with the solutions configurator provides transparency on the status of the platform.
Automated sales documents can shorten lead times for the creation of offers, incentivize sales teams to stick to the smart-platform solution, and reduce errors, which might lead to renegotiations with customers. These documents could include, among others, detailed technical specifications or 3-D visualization.
Performance management ensures progress and effectiveness of all efforts regarding smart platforms
Two categories of key performance indicators (KPIs) measure different aspects of smart-platform performance and progress:
Platform-initiation KPIs shed light on a company’s success in smart-platform ramp-up and include the following metrics:
Adoption level: What is the evidence of an organizational commitment to smart platforms, and how well has the company managed to comply with processes?
Portfolio maturity: How big is the share of modules where the technical design is complete or where the module is ready for use in sales, including all relevant documentation?
Expected financial benefits: What are the direct savings as well as the indirect financial benefits, such as reduction in lead times and higher engineering productivity?
Platform-impact KPIs measure the company’s performance in the steady state and include the following metrics:
Financial indicators: For product-oriented organizations, the cost reduction by all or selected “standard” products can be tracked. For project-oriented organizations, a reference project can be used whose cost is regularly recalculated based on the modular system.
Portfolio-time expenditure: Tracking the number of hours invested and lead time per project by sales, engineering, and other functions shows performance in lead-time efficiency.
Level of standardization: Tallying the number of monthly requests to change or add elements of the platform points to how well the module portfolio reflects the market demand. Tracking variants, SKUs, or part numbers sheds light on the level of standardization and supply-chain complexity across the module portfolio and customer solutions. Tracking the number of items used in only one product line can point to which items might be replaced with items with a higher use across different product lines.
Mindset and culture—not just formalized structures—are critical to embed smart platforms in a company’s DNA
In addition to new systems and processes, making a smart-platform strategy stick requires a transformation of how a company thinks about its approach to business, its understanding of and belief in its objectives, and its confidence in its ability to deliver on those principles. We have identified five areas that are fundamental to creating the right mindset and culture and have pinpointed where focused efforts can help ensure that a smart-platform strategy endures.
Vision. Companies will need to clearly define the purpose and benefit of implementing a smart-platform strategy in the first place. The reasons should be compelling—not just addressing the bottom line but also the identity of the organization. Importantly, co-constructing that vision in a way that involves leaders throughout the company goes a long way toward ensuring broad buy-in and commitment to the vision.
Communication. How people talk about the smart-platform journey will be key to its success. First, leaders must provide “communication toward understanding” through the development of a common language—for example, what is meant by “variant”? What exactly does “configuration” mean? Second, the company must employ “communication as motivation.” Transparency on the progress of each module, including the announcement and celebration of incremental successes, both manages expectations and keeps momentum going.
Incentives. Especially for sales, a clear system that discourages excessive customization and delivers benefits for using the platform will foster adoption and help keep the smart-platform momentum going. This also means being aware of the potential of competing incentives, e.g., rewarding salesforce proportionally to the value of a project sold, which might be higher if a project includes a lot of customization.
Capabilities. Building capabilities includes systematically assessing gaps and conducting training sessions, for example, module days, where a traditional teacher–student format is used, as well as train-the-trainer approaches. It is also important to commit to the idea that capability building is not a single checklist but an ongoing commitment.
Transparency. The impact of a complex portfolio needs to be evaluated along the full value chain and made (painfully) visible to all leaders—from those in sales to sourcing and manufacturing to project execution.
The road map to sustaining smart platforms will vary by company, but there are early steps that all companies can take. To get started, organizations should ask themselves some important questions to assess their maturity of smart-platform anchoring:
- Who is managing our module portfolio within the organization?
- Which processes need to be adjusted or strengthened to anchor our smart-platform strategy throughout the organization?
- Does our IT landscape properly reflect our smart-platform ambition?
- Which formal mechanisms do we have in place to facilitate smart platforms?
- Which part of the organization has already embraced the smart-platform approach—and which groups still lack the mindset and behaviors to support smart platforms’ sustainability?
Honest answers to these questions can help companies gauge where they stand today and begin laying the groundwork for cementing their smart-platform strategy.