The Biz of Coding

Global Product Development Models (including Offshoring, Outsourcing)

by Ujwal Tickoo on November 9th, 2007

Two models I find useful in understanding how MNCs organize their global teams are from MIT Sloan Management Review. The first from Eppinger and Chitkara  focuses on resource location and ownership. The Eppinger Chitkara Model (PDF) is often referred to when we hear about Offshoring, Outsourcing etc. The second from Santos, Doz and Williamson looks at market and technological knowledge complexity while organizing product development teams.

Eppinger and Chitkara Model

  A model of Global Product Development that puts global offshoring and outsourcing models in perspective is offered by Steven D. Eppinger and Anil R. Chitkara in their paper “The New Practice of Global Product Development”. This paper looks at two dimensions of “Resource Ownership” and “Resource Location.” The model by Eppinger and chitkara is useful to identify the Macro Level R&D strategy of a company. Companies tend to "Insource" core technology development as these are considered central to their competitiveness, growth or survival. However this is not a rule. Electronics manufacturers in Tiawan for example do crucial mobile phone developments but finally these mobile phones are "marketed" by established brand name players.

Often outsourcing is done on non-core technologies. However even core-technology development is outsourced in situations where building a specific skill team is time consuming, impossible at the desired headcount, cost prohibitive or risky.

When "InSource" development is done away from the homecountry of company headquarters –a Captive Offshore center emerges. Most development centers set up by companies like Microsoft, Google, Yahoo! etc in India can be categorized as Captive Offshore Centers.

There can be multiple development projects running at a Captive Offshore Center. But not all projects are equally complex in terms of technological or market knowledge. How should global R&D teams be then structured? This question is answered by the Santos, Doz, Williamson model.

Santos, Doz and Williamson Model

  Jose Santos, Yves Doz, and Peter Williamson offer a model of global innovation and product development in their paper “Is Your Innovation Process Global?” by looking at two dimensions the “Complexity of Market Knowledge” and the “Complexity of Technological Knowledge”.

When complex market knowledge and technological knowledge meet in a single project — employees can expect increased learning. If a project at a captive offshore center is Low in Technological or Market knowledge complexity — capable employees can be expected to feel frustrated and the project could experience attrition.

Also Read: MIT eBusiness Center survey (PDF) by Michael Cusumano's and others on Global Development Models employed by various companies

MIT Working Paper "System Architecture Approach to Global Product Development" by Steven Eppinger and Anshuman Tripathi

HBS Reserach Paper Innovation through Global Collaboration (PDF)

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POSTED IN: Product Management