Reducing throughput time of product creation processes at Philips DAP, Drachten

Smooth performance

Reducing throughput time of product creation processes at Philips DAP, Drachten

Rutger Stolting

Faculty of Management & Organisation, University of Groningen, The Netherlands

S m o o t h p e r f o r m a n c e

Reducing throughput time of product creation processes at Philips DAP, Drachten

Author: R.J. Stolting

First supervisor university: Prof. Dr. H.B.M. Molleman Second supervisor university: Dr. J. Slomp

Supervisor Philips DAP: Ir. C.J. Jorna

Groningen, the10th of September, 2004

Faculty of Management & Organisation, University of Groningen, the Netherlands.

 R.J. Stolting, 2004

e-mail: rutger@stolting.nl

M a n a g e m e n t s u m m a r y

This management summary provides a quick overview of this research into team performance. Al chapters (1 – 9) will be briefly described.

The first chapter, the introduction gives a short impression of the research. It provides basic knowledge of team performance and control and it also deals with the historical background of teamwork. Next to this, the structure of the research is also described.

In the second chapter, the focus is upon the organisation where this research takes place. This research is conducted at a centre of competence of Philips DAP, situated in Drachten. At this site, high-end shavers are developed and produced in cooperation with a sister plant in Zuhai, China. The development is carried out within a team based organisation based on the principles of concurrent engineering. The main issue of this research is that due to market conditions, a drive to shorten the through put time of the development processes has emerged. The belief of the principal of this research is that performance is influenced by the project teams but that currently, there is too little knowledge on the mechanisms of team performance to be able to significantly support the organisational strategy. Therefore a research focussing on team performance and resulting in an instrument supporting team management is demanded.

Two theoretical principles form the framework of this research. They are introduced in the third chapter which deals with research design. First, the statement is made that a team can be considered a system that has to be controlled.

From this point of view, it is possible to apply the five rules of effective control to team management. These five rules reflect all aspect of management (control) and form the first framework of this research on which especially the research questions are based. They refer to the controller of a system:

1. Knowing the goal of the system

2. Having a model of the controlled system

3. Receiving information regarding system state and environment 4. Having a sufficient number of control possibilities

5. Having sufficient capacity to process information

The second theoretical principle that forms the basis of this research is the notion that a performance that is created by a team can be seen as the mathematical function y = ƒ (x

, x

, …, x

). In this notion, the performance (y) comes about when certain pre- conditions (x

, x

, …, x

) are applied in a certain way ( ƒ ). This statement results in a input-process-output model of team performance called the team performance process –model. This results in the research goal of this research:

Support the reduction of PCP throughput time by designing a tool for diagnosis of the team performance process.

From this goal, using the rules of effective control as a framework, four research questions are formulated which comprise all aspects of control:

1. What is the desired state of the team performance process at Philips DAP?

1 2

3

2. What is the current state of the team performance process at Philips DAP?

3. How can the team performance -process be influenced in order to improve the team performance?

4. How can a tool comprehensively supply information to project managers, supporting improvement of team performance?

After this, a conceptual model is created that represents all relevant aspects of the team performance process:

Answering the research questions will lead to the creation of knowledge regarding the team performance process at Philips DAP and to the creation of an instrument that is able to support team management. Therefore, when all questions are dealt with, the goal of this research will be attained. The structure of the research is in accordance with the questions. The last section of this chapter deals with the quality aspects of the research such as relevance, validity and efficiency.

After this, the fourth chapter begins by dealing with the properties of the task at Philips DAP and the demands that flow from these properties. With this, the first step to answering the first question is taken. In this chapter the statement is made that in the complex and ambiguous situation within a product creation process (PCP), mutual adjustment and autonomy are important aspects of the team performance process.

The fifth chapter deals with the relation between the demands and the processes and conditions (input) within the team performance process. The process is broken down into three aspects: effort applied, talent applied and strategies used which cover all aspects of carrying out a task. After this, the conditions are dealt with, which results in a list of conditions that, when adequately present, support performance. Eventually, from the processes and conditions a desired state can be created which reflects ‘how things should be’ in order to optimally support performance. The desired state of the team performance process at Philips DAP consists of aspects of task structure, team composition, norms and leadership in relation to autonomy and mutual adjustment. Together, these variables act as a model of the controlled system and as a goal. By creating the desired state, the first sub question of this research is answered.

The sixth chapter deals with the second sub-question. This question is based on the third rule of effective control that states that a controller must have sufficient knowledge (feedback) of the current state of the system .The current state refers to

4 5

6

Team performance process Enabling conditions

(Input)

• Team structure

• Leadership

Process criteria (Process)

• Effort applied

• Knowledge & skill applied

• Work strategy

Performance (Output) Reduced PCP throughput time

Tool

Organizational goals PCP task

demands

Manager

the situation within the Quasar ss project. After an operationalisation of the variables from the desired state into a measurement instrument, information is gathered by subjecting the Quasar ss project to a 70 item questionnaire. The resulting information shows that there are differences in scores between groups within the project. The pattern that emerges is present in all aspects of the team performance process.

The fourth rule of effective control forms the basis for the third research question.

This question is dealt with in the seventh chapter of this master-thesis. The fourth rule refers to being able to intervene effectively. The state that was measured by the previous question is compared with the goal/model of the system that was formulated by the first question. The gap that exists between these two states is decreased by influencing the team performance process. The main interventions that are proposed in this research apply to the sharing of information and responsibility and the systems that support this. In addition, the quality of the information is a point of interest.

The last question that is dealt with in the eighth chapter, refers to the tool that is demanded by the project management. This tool is a smaller version of the questionnaire that is used in this research. By selecting only the most relevant variables and items, the size of the questionnaire is reduced to five variables. Next to these variables, also the performance to schedule needs to be measured.

In this chapter, all sub- questions and their answers are summarized. After the benefits of this research for the organisations are dealt with: creating knowledge and presenting another view on reality. The last part of this chapter deals with topics that are not extensively researched at Philips DAP but are relevant for the team performance process. I make four suggestions which concern the influence of other factors (organisational structure, remuneration and training) on performance, other types of performances, information needs and systems and team members selection at project start-ups.

7

8

9

P r e f a c e

As this section of a master-thesis is usually the place where all people are thanked that were involved with this master thesis. So, I will get right to the point.

The people that were most involved with this research are the members of the Quasar ss project team at Philips. Through their involvement and effort, I have been able to complete this research. A special thanks goes to project leader Cor Jorna, who, by acting as mentor, discussion partner and facilitator, has helped me in completing my research under the best possible conditions. The open, friendly atmosphere makes Philips a great place for a student to spend some time.

Secondly, I want to thank the university staff that has been involved in this research.

Dr. Ruel, who unfortunately could not continue my supervision, has helped me at the start of my research to establish a solid foundation. I wish her all the best. I also want to acknowledge professor Molleman for his help, especially with SPSS, and taking the time to review this master thesis. Finally, I also thank Dr. Slomp for reviewing my master thesis.

However, probably the most important people to thank are those who were not directly involved in this research. My thanks to them apply not only to this last part of my education, but extend over the past five years (and more) of my life. First of all I thank my parents who, all these years, have supported me emotionally (and financially) and who never stopped believing in my potential. Secondly, I thank my girlfriend and best friend Aletta for her love, support and patience. Under the pressure of exams or deadlines I can be high maintenance, but she always manages to love me. Last but not least, I thank my dear friends who I met during my time at the university. The discussions we had after our card games were enriching and, despite our geographic dispersion, I am confident that there will be many more to come.

Groningen, the 10

of September 2004

I n d e x

Management summary...3

Preface ...6

Index...7

1 Introduction...9

1.1 Managing, mammoths & shaving ...9

1.2 The research...11

2 The organisation...15

2.1 Philips global ...15

2.2 Center of competence Drachten...15

2.3 Changes and challenges...16

2.4 Strategy...17

2.4.1 Shorten innovation to market...18

2.4.2 Global supply competence ...18

2.4.3 Develop our people and SPEED...18

2.5 Implementation of strategy ...19

2.5.1 Glass wall management & mini companies...20

2.6 Processes of Philips DAP...21

2.7 The product creation process (PCP) ...22

2.7.1 PCP structure & coordination ...23

2.7.2 Quasar SS...25

2.7.3 PCP objectives and performance ...25

2.8 Problem exploration ...27

3 Research design ...29

3.1 Team performance process...29

3.1.1 Effectiveness ...30

3.1.2 Process criteria...30

3.1.3 Enabling conditions ...31

3.1.4 Task demands...31

3.2 Restrictive conditions ...32

3.3 Focus ...32

3.4 Research goal ...33

3.5 Rules of effective control ...33

3.6 Main research questions ...35

3.7 Model ...35

3.8 Research outline ...36

3.8.1 Research product & process ...36

3.8.2 Stages & sub-questions...38

3.8.3 Quality ...39

4 Task properties & demands ...42

4.1 Ambiguity ...42

4.1.1 Autonomy ...42

4.2 Complexity ...43

4.2.1 Mutual adjustment ...43

4.3 Summary...43

5 How it should be ...44

5.1 Process demands ...44

5.1.1 Effort applied ...44

5.1.2 Talent applied...45

5.1.3 Strategies used ...45

5.1.4 Summary...45

5.2 Conditions ...45

5.2.1 Team structure ...46

5.2.2 Leadership ...48

5.3 Desired state...49

5.4 Operationalisation of the desired state ...50

6 How it is...51

6.1 Operationalisation ...51

6.1.1 Conditions ...52

6.1.2 Criteria...53

6.1.3 Performance...54

6.2 Procedure ...55

6.3 Results ...56

6.3.1 Factor analysis ...57

6.3.2 Reliability ...58

6.4 Aggregation...60

6.4.1 Performance to schedule...62

6.5 Interpretation of data ...64

7 What to do about it ...67

7.1 Areas of improvement ...67

7.2 Possible explorations and interventions ...69

8 The tool ...71

9 Smooth performance...74

9.1 Conclusion ...74

9.1.1 The desired state...74

9.1.2 The current state ...74

9.1.3 Areas of improvement ...75

9.1.4 The tool ...75

9.2 Benefits ...76

9.3 Suggestions for further research ...77

Closing word ...79

Appendix... Error! Bookmark not defined.

I Literature...Error! Bookmark not defined.

II Concepts, dimensions & items ...Error! Bookmark not defined.

III Questionnaire...Error! Bookmark not defined.

IV Factor analysis...Error! Bookmark not defined.

V Results...Error! Bookmark not defined.

A. Conditions ...Error! Bookmark not defined.

B. Criteria ...Error! Bookmark not defined.

VI Thesaurus...Error! Bookmark not defined.

1 I n t r o d u c t i o n

Sometimes, the only way to get something done is to work together. Humanity already found this out over 10.000 years ago while hunting for big game. The strength and speed of one prehistoric man was simply not enough to bring down a mammoth and he found out that when combining the strength and speed of many, a mammoth could be killed, leaving enough spoils for everyone.

The principle of combining human abilities and working closely together did not change at all during the following millennia and has implicitly been present during man’s entire history. Today also, it is all around us in business, sports and science.

However, in business, teams have not always been as self-evident as they have been elsewhere. During the early decennia of the 20

century, the common conception was that maximum division of labour, the separation of execution & control and a tight hierarchy would lead to maximum profit. This view is strikingly portrayed in the 30’s movie ‘Modern times’ where workers are essentially reduced to machine parts in large factories.

As a reaction to this mechanistic view, during the 20’s and 30’s the ‘human relations’ movement emphasized that not the technological and structural factors, but the human factor should be the focus of attention within organisations. Later, these two biased views were combined in the so-called ‘socio-technical’

approach for which the research of the British Travistock-institute laid the foundation. An important notion of this approach is that there is a connection between the social and the technical system of an organisation.

After this, from the 50’s through the 90’s

of the previous century, a drive for democratisation of labour became more evident, eventually leading to the current conceptions regarding autonomous teams.

Nowadays, organisations are very much aware of the potential power of teams and the attention of business and science is greater as ever as 80 percent of companies with more than 100 employees use a team based-approach

.

1.1 Managing, mammoths & shaving

Despite superficial alterations during all these millennia, the main reason to combine the abilities of people into an organisational structure has not changed: a team is created to get something done. From the systems-approach

, it is possible to look at a team as a system that is applied to attain a certain goal that cannot be reached by an individual. This system-approach passes some notions regarding management and control that can be very helpful when managing a team.

From this point of view, it is also possible to look at an electrical shaver as a system

Figure 1.2: Charlie Chaplin in ‘Modern Times’

Figure 1.1: Hunting mammoth

that can be applied to reach a certain goal and find that the rules that apply to managing a team also apply to using an electric shaver or hunting mammoths. The system-approach delivers 5 rules of effective control that indeed can be applied to managing a team, shaving and hunting mammoths.

When applying a team, first an idea of what has to be done is needed in order to compose an effective team. To kill a mammoth, the prehistoric team has to be composed of sturdy hunters with a certain level of spear-throwing skills and courage. To shave, a shaver needs to be composed of the right parts:

blades, a motor, sprockets and an ‘on/off’-switch. In addition, a goal is useful in determining if the system is doing the right thing. When the Neanderthals spend their days chasing rabbits, while they should be hunting mammoths, they are in need of management. The same principle applies to the shaver. If you do not know its purpose, you might try to mow your lawn with it and fail.

An understanding of the people, processes and relations within your team is needed to know how to manage your team effectively. If you do not know who does what with whom, why and how, there is no way to know if what you just did caused what happened after it.

To shave effectively it, is wise to read the manual beforehand. If you do not know what the buttons do or where to put the power cable, the chances that you end up with a smooth skin are small. Off course, many of us nowadays do not read manuals anymore and figure the working of their shaver out by themselves. It may take a bit longer and you may press the wrong buttons, but most of the time, you get the shaver to work. Ask yourself if this way of ‘managing’ is sensible with a development team that can waste millions of euros when you, by mistake or ignorance, press the ‘wrong button’?

Also, while hunting mammoths, this principle applies. If the Neanderthals do not realise that racing through the bushes while loudly arguing amongst each other, alerts the mammoth to their presence, they will never catch one. They will probably never even see one because they do not understand the relation between their actions and the actions of their prey.

A manager has to receive feedback from the team. Without knowing how things are going, it is very hard to manage the right way and reach the set goal. You are managing blind. When shaving, you can feel the smoothness of your skin (and decide to shave a little longer or stop) and you can read the indicators on the shaver. It is very hard to know how much time you can still shave if there is no battery indicator on the shaver. More absurdly, imagine shaving somebody else with your eyes closed. There is no way to know, what you are shaving, if your actions have any effect and how long you should go on.

Lack of feedback is probably also the reason why blind and deaf Neanderthals were not very successful at hunting.

When managing a team, you have to have ways to influence it: control options. For example, reward, training, sanctioning, delegation are all ways to make your team do what it should do.

With shaving, it is the same. The shaver has to be handled a certain way for it to be able to perform. If you are for whatever reason not able to press the shaver’s

‘on’-button (your hands are bound), you will not reach your goal. It is very frustrating to know what to do, but not being able to exert the power to get it done. In addition, the subtleness of your control is important:

1 1 2 2

3 3

4 4

Figure 1.3:

press too hard, and your stubbles will disappear but you break the shaver, never being able to attain a smooth skin again. Press too soft, and you will not get the result you want.

Blindly running up to a mammoth and trying to wrestle it to the ground will probably result in a Neanderthal receiving very clear feedback from the mammoth and not being able to join in another hunting trip. Throwing spears at a mammoth (another control option) is likely to be more effective and supportive of the Neanderthal’s viability.

This illustrates that even in pre-history, having control options was as important as choosing between them.

The same goes for management, being stern at times can be very useful. However, being a full-time bully will probably not make the team (or your place in it) survive long.

All the above (knowledge regarding the model, feedback) is presented to the manager as information and he of she has to be able to deal with this information. This is the kernel of the 5

rule.

Although relevant, presenting the mathematical calculations of the trajectory of his spear to a Neanderthal will not help him very much if he does not understand mathematics. Also, if you do not understand Chinese, but the only language in your shaver’s manual is Chinese, the information in it is not helpful because you cannot deal with it. This principle is all about balance between the information, flowing from the system and the abilities of the manager of the system.

The heart of the matter is that when we approach ‘management’ or ‘reaching a goal’

from the system-approach’s point of view, it does not matter what the subject of management is or when it takes place. The rules that apply to control are valid, whatever system you are trying to control. The above also shows us that these principles were as valid 10.000 years ago as they are today. I think it is safe to state that ‘control’ and its supportive principles, regardless of its contemporary linguistic disguises, has been the same for thousands of years and is therefore a very strong paradigm

.It is this paradigm that will perform a central role by providing a framework for this research.

1.2 The research

The main issue of this research is management of team performance with a focus on the ‘soft’ side of this concept. The problem-owner, a project manager at Philips DAP, expressed his need for more control over this elusive aspect of team-management because he suspects that a well-oiled team harbours a great performing potential.

When this issue was presented, I started out by asking what is needed to be able to manage effectively. When I looked the term up in the dictionary, I noticed that the meaning of the term ‘manage’ is quite similar to that of ‘control’.

1A collection of theoretical views surrounding control, its representation in models and the notion that it is useful in considering reality (De Leeuw, 1990).

5 5

What the…?

Figure 1.4: Viability-unfriendly control options

Manage²

•v.

1. Be in charge of; run.

2. Supervise (staff).

3. Be the manager of (a sports team or a performer).

4. Administer and regulate (resources under one's control).

5. Maintain control or influence over (a person or animal).

6. Control the use or exploitation of (land).

- ORIGIN (in the sense 'put (a horse) through the paces of the manège'): from Ital. maneggiare, based on L. manus 'hand'.

Control³

•n.

1. The power to influence people's behaviour or the course of events. →the restriction of an activity, tendency, or phenomenon.

- ORIGIN (in the sense 'verify accounts'): from Anglo-Norman Fr. contreroller 'keep a copy of a roll of accounts', from med. L. contrarotulare, from contrarotulus 'copy of a roll', from contra- 'against' + rotulus 'a roll'.

However, I could not escape from the notion that ‘control’ implies a more systematic approach to influencing a mechanical system whereas ‘management’ may imply a more pragmatic approach of a social system. I realised that maybe a systematic approach could be helpful in shedding more light on this situation. Thus, I started looking at pragmatic, social reality from a systematic, mechanistic point of view.

It is possible to view the management of a social system (such as a project team) from a systematic point of view. By looking at a team as a system that needs to be controlled and taking into account its goals, aspects and processes, it is possible to apply the rules of effective control from De Leeuw on a social system

. This view acts as the framework of this research, which will offer another way of looking at management of teams: less pragmatic and more systematic. I believe that a combination of a pragmatic approach with a systematic view can offer a manager a better understanding of his team performance process and will eventually lead to better results. The research will be based on theory and practice and is a process in which induction and deduction are both present.

In chapter 2, I will start by describing the context of the research situation. The organisation, market conditions, strategic issues are dealt with and we will descend into the organisation until we reach the level at which the main problem of this research is located: the ‘Quasar SS’ project team. A presentation of the research problem concludes the description of the organisation.

In chapter 3, I will focus on the research design. First, I will present the proposition that provides the basis for this research. It implies that the process in which a team creates a certain performance can be seen as a mathematical function ‘y= ƒ (x)’ or as an ‘input (x) – process ( ƒ ) – output (y)’ –system. From this point of view, one is able to make a clear distinction between results (output), processes and conditions (input).

Based on this proposition I will present the ‘team-performance-process’ –model that will play an important part in formulating the main research goal. The research goal is based upon the strategic issues that are present within Philips DAP and the ‘team- performance-process’-model. Together, they form a clearly defined goal:

2"manage •v." The Concise Oxford Dictionary. Ed. Judy Pearsall. Oxford University Press, 2001. Oxford Reference Online. Oxford University Press. University of Groningen. 18 June

2004 <http://www.oxfordreference.com/views/ENTRY.html?subview=Main&entry=t23.e33804>

3"control •n." The Concise Oxford Dictionary. Ed. Judy Pearsall. Oxford University Press, 2001. Oxford Reference Online. Oxford University Press. University of Groningen. 18 June

2004 <http://www.oxfordreference.com/views/ENTRY.html?subview=Main&entry=t23.e12065>

Support the reduction of PCP throughput time by designing a tool for diagnosis of the team performance process.

The research questions that need to be answered in order to be able to reach the research goal are defined next. These questions are based upon the question what

‘management’ entails. The rules of effective control come into play here. They form a clear and complete representation of the elements that need to be present in order to be able to manage effectively. By incorporating these rules into the research questions, I systematically try to cover all aspect of system-management. The questions are:

1. What is the desired state of the team performance process at Philips DAP?

2. What is the current state of the team performance process at Philips DAP?

3. How can the team performance -process be influenced in order to improve the team performance?

4. How can a tool comprehensively supply information to project managers, supporting improvement of team performance?

These four main questions incorporate all five rules. The desired state, the current state and the improvement parts, relate to different rules and are the point of attention in different research phases.

Chapter 4 and 5 deal with the so called desired state of the team performance process. This state is based upon the 1

and 2

rule of effective control. One has to have a clear notion of the intended goals, structure of the system and the processes within the system, to be able to control it effectively. In chapter 4, I will deal with the characteristics of the task and their implications on the system. This chapter will also fall back on the 2

chapter, where some characteristics of the organisation and its processes are described. The 5

chapter discusses the relation between the task demands and the team performance process. Based upon contextual factors, a

‘desired state’ of this team performance process is defined. Chapters 4 and 5 present a systematic view on ‘how things should be’.

In chapter 6, the team performance process will make the transition into the real world. By operationalising the concepts of the desired state, I will be able to measure the ‘current state’ of the team performance process. This part of the research relates to the 3

rule of effective control: information on the state of the system. When the

‘current’ and the ‘desired’ states are both defined, I will be able to look for ‘gaps’

between these states.

The gap between the current and the desired state is the focal point of chapter 7. This part is directed at influencing (improving) the current state of the system to be more similar to the desired state. In accordance with the 4

rule of effective control, I will focus on control options. Change can only be accomplished when a manager has the ability (control options) to do it.

The last rule of effective control relates to having a sufficient capacity for processing

information. This research takes place over a period of six months and is carried out

by me (a student) on a full-time basis. For a manager it is impossible to invest this

amount of time. He does not have the time (capacity) to use this tool in the form it has. Therefore, to be useable and practical, this process of scanning and diagnosing has to be made compact. What is needed is a valid extraction of the original tool, able to examine the most discriminating variables of the team performance process but at the same time be small, fast and useable. This last challenge reflects the 5

and last rule of effective control and will be the subject of chapter 8.

After having formulated an answer to all research questions and thus having dealt with all 5 rules, I will have attained the research goal.

There are five appendices added to this master thesis providing extra information:

I. A list of the literature I used during my research

II. The variables that stand central in this research their dimensions and the questions that are used to measure them.

III. A screenshot of the questionnaire that was deployed, to give an impression of the way it is presented to the respondents.

IV. The results of the factor analysis that was performed using SPSS.

V. The results of the measurements.

VI. A short thesaurus, explaining the ‘Philips-abbreviations’ that are used in this master-thesis.

2 The organisation

4 Task properties

& demands 3 Research design

5 How it should be 1

Introduction

6 How it is

7 What to do about

it

8 The tool Research goal

& questions Case

Rule 1

& 2 Rule 1

& 2

Rule 4

Rule 5 Rule

3

Figure 1.5: Research overview

2 T h e o r g a n i s a t i o n

The purpose of this chapter is to describe the context of this research. From a high level of aggregation, the global position of Philips N.V. I will descend into the organisation until I reach the product development process that occupies a central position in this research. Aspects of structure, strategy and processes will be dealt with first. This chapter will conclude with an exploration of the problem which is the reason this research is carried out.

2.1 Philips global

Royal Philips Electronics of the Netherlands is one of the world's biggest electronics companies and Europe's largest, with sales of 29 billion in 2003

. Its 164.500 employees in more than 60 countries are active in the divisions lighting, consumer electronics, domestic appliances and personal care, semiconductors, and medical systems. In many of the markets it operates in, it takes in a leading position. The market position of different Philips-divisions is illustrated in the table below.

Division Global

position

European position

Lighting 1 1

Consumer electronics (audio/video) 3 1

Monitors (units) 4 3

Shavers 1 1

Steam irons 2 2

Semiconductors 9 4

Colour picture tubes 3 1

DVD recorders 1 1

Medical imaging equipment 2 1

Dental care (electric toothbrushes) 2 2

Table 2.1: Divisional market position

Within Philips, the Domestic Appliances and Personal Care (DAP) division is responsible for a wide range of products. Among them are kitchen appliances, irons, vacuum cleaners, shavers, electric toothbrushes, beauty-care products and home health and fitness products.

Philips DAP has production sites in 7 different countries and approximately 9000 employees worldwide. With a turnover of 2294 million in sales and an income from operations of 401 million in 2002, DAP is one of the most successful and profitable Philips divisions.

DAP’s business units are supported by corresponding Centers of Competence.

These Centers of Competence carry out research, consumer testing and trends analysis and make sure that technological know-how and scientific insights are turned into actual products.

2.2 Center of competence Drachten

The Center of Competence (CoC) shavers in Drachten

is the main industrial site of the business unit ‘Shaving & Beauty’ and employs about 2000 people. It is assigned to develop, manufacture and deliver men shavers under the Philishave/Norelco

1Source: www.philips.com

2Further: ‘Philips DAP’

3Norelco Consumer Products Company is a division of Philips Electronics North America Corporation, a subsidiary of Royal Philips Electronics N.V.

brand throughout the world. The production structure has a high vertical integration.

Many parts and sub-assemblies for the shavers (in 2003 a volume of 10.5 million) are produced in-house.

Besides in Drachten, shavers are also being assembled in the sister factory in Zhuhai, China. Its production-volume is around 6.5 million units. Philips DAP is responsible for the competence build-up & support to Zhuhai. All product development and process, equipment and tool engineering is done in Drachten, except the equipment engineering for Zhuhai products, which is managed by Zhuhai.

2.3 Changes and challenges

Over the last decade, the environment of Philips DAP has changed. In spite of a growing market for dry (electric) shaving (sales increased from 8 million to 16 million shavers the last 10 years), the overall wet/dry ratio is deteriorating. An increasing number of young men shave wet and in practice, men hardly change their shaving habit. Besides this long-term problem, the competitive environment has changed, as Remington became a fierce competitor on the USA market. A second successful, innovative competitor is Braun. These market conditions have led to a higher industrial pace and a less predictive competitive environment. Together with the fall back of the economy, fiercer competition and a lower US-dollar Philips is forced to take actions.

To understand the changes affecting Philips DAP, it is useful to consider some theoretical views on environmental conditions. The uncertainty an organisation experiences, differs in nature and intensity within different environmental conditions. The environment can be divided into two aspects: the internal environment, consisting of components within the organisation (personnel, functions, structures), and the external environment, which comprises components outside the boundaries of the organisation (customers, suppliers, competitors, technologies et cetera). Among others, Duncan

has formulated typologies regarding the environmental state. He uses two dimensions, ‘complexity’ and ‘stability’, to describe the environment. Complexity refers to the number of different environmental factors and the extent to which they are similar.

Stability refers to the extent in which these factors remain the same over time. Duncan proposes that higher complexity and lower stability cause higher perceived uncertainty because in these situations, organisational units have a more difficult time obtaining relevant information for decision making

.

Complexity

Stability Simple Complex

Static Low perceived uncertainty

Moderately low perceived uncertainty

Dynamic Moderately high perceived uncertainty

High perceived uncertainty Table 2.2: perceived uncertainty

In addition to Duncan’s views, Thompson and Mintzberg have constructed typologies referring to similar terms: Mintzberg adds the terms ‘diversity’ and ‘hostility’ whereas Thompson uses ‘homogeneity’

and ‘stability’

. Bottom line is that all three authors

refer to the same principle: environmental characteristics affecting

uncertainty in different ways.

In terms of Duncan’s typology

, one can argue that the environmental conditions for Philips DAP have become more dynamic over the last ten years. Due to fiercer competition, more pressure is put upon Philips DAP to stay ahead of competition in areas of efficiency, competitive products and technological requirements. In addition, the predictability of environmental conditions (competitor’s behaviour) has reduced.

Mintzberg

argues that an environment that becomes more dynamic demands a more organic structure. This implicates that within Philips DAP, formalisation, standardisation may have to be reduced to become more flexible and reliant on mutual adjustment for coordination. The definition of the industrial strategies reflects the reaction on changing environmental conditions, implicating a more flexible, organic way of working (entrepreneurship and speed).

2.4 Strategy

In order to strengthen its competitive position, Philips DAP aims at improvement of efficiency by reducing costs. Philips DAP has succeeded so far in doubling the efficiency and material savings. In addition, the production of 3-Header shavers in Zhuhai is started. Cost reduction through a higher efficiency in the innovation- and supply chain, and via a further transfer of assembly activities to Zhuhai are current goals. This will lead to a reduction of assembly workers. The production volume of Drachten will change (2005 / 2006) to approximately 8 million shavers. The volume of Zhuhai will increase to 11 to 12 million shavers. The industrial strategies (introduced in 2002) are defined as follows:

1. Shorter innovation to market

The right products for the right consumers at the right moment at the lowest cost.

2. Global supply competence

Production at the lowest integral cost for the business.

3. Develop our people

Entrepreneurship based on the right competencies.

4. SPEED

A mind-set for fast and efficient processes throughout the whole organisation.

Figure 2.1: strategy

2.4.1 Shorten innovation to market

The focus for the innovation chain is on both value creation and cost reduction. Break away and distinctive innovations must lead to high added value for the consumer. In order to come to breakthroughs in cost reduction in the industry the goal is to create a smart architecture in the dry range to cope with the increasing diversity. The reduction in the throughput time of the Product Creation Process (PCP) will shorten the time to market and reduce the costs. Currently the major part of the innovation costs is in the PCP.

2.4.2 Global supply competence

The focus is on a competitive Industrial base. The factory in Drachten has to excel in the production of complex and innovative shavers. The production facility in Zhuhai focuses on mature products and delivers an expanding range of high quality shavers at minimum integral costs and investments.

In 2003, a priority was cost reduction. The fall back of the economy, fiercer competition and a lower US-dollar enforce the CoC to take actions. Cost reduction through a higher efficiency in the innovation- and supply chain, and via a further transfer of assembly activities to Zhuhai are current goals. This will lead to a reduction of assembly workers. The production volume of Drachten will change (2005 / 2006) to approximately 8 million shavers. The volume of Zhuhai will increase to approximately 12 million shavers.

2.4.3 Develop our people and SPEED

According to Philips DAP, the key elements of the enablers to drive the key strategies are:

The availability of the right competencies.

The organisation can be characterized as “knowledge intensive” because the creation and innovation of shavers is a highly technical task that requires many different skills. The main aspects to manage to ensure a competent organisation are the availability of competent knowledge workers (professionals) with the right knowledge and behaviour, a transparent product & technology roadmap and a structure and system to exploit all knowledge and to create new knowledge.

A mindset on speed.

The reduction of waiting times is the best driver to enable lower cost and higher quality. Employees have to understand the “mechanisms” behind this speed philosophy so that they can incorporate this value into their activities.

As we will see later on, the implementation of the strategy in different parts and processes of the organisation focuses on different parts of this strategy. For example, the nature of the support of the FCP

and the PCP

is different.

4Function Creation Process; see 2.7

5Product Creation Process; see 2.7 & 2.8

2.5 Implementation of strategy

Implementation of strategies into actual plans and actions is made visible using a strategy tree. The strategy (for example: SPEED in all we do), as formulated in the sections above, is translated into improvement areas. These areas are global, company wide values (for example: understand mechanisms behind fast & efficient innovation). These values are in their turn are translated into required situations: more concrete situations that support or reflect the improvement areas (example: develop a PI for speed).

Required situations (tactical goals) are then supported by contributing projects: concrete projects, supportive of the organisational strategy (for example: this research).

As stated in the first paragraph of this chapter, the function of a CoC is ‘ to carry out research, consumer testing and trends analysis and make sure that

technological know-how and scientific insights are turned into actual products’.

Regarding the function of Philips DAP Drachten the emphasis is on innovation and

‘innovation to market speed’. At Philips DAP Drachten, a competitive strategy through differentiation through fast product innovation is chosen. The most important activities in Drachten comprise of the creation of new types of shavers; innovation in products and processes. Recently, cost reduction has also become important and added the

‘fast’ aspect in the competitive strategy.

Currently, one initiative to shorten the throughput time of PCP projects is running (shortening the innovation-to-market time). The YES

-project is aimed at reducing throughput time of R&D projects with 30% by reducing for example waiting times.

This is done by working according to the M.E.D.I.C principle. This is a Philips designed, phased

, method for process improvement.

Producing the same product within a shorter timespan means that unproductive time is taken out of the process. However, this ‘slack’ can fullfill an important function in the reduction of uncertainty. According to Gailbraith

In the case of increasing uncertainty, an organisation will search for ways to realise an effective reduction of uncertainty. This concerns instruments aimed at adaptation to the environment as well as influencing the environment. Gailbraith argues that there are two possible strategies to adapt to increasing uncertainty: increasing the capacity to process information and reducing the need for information and thus the need to process it

. Jägers & Jansen distinguish two types of instruments: intra- and extra-organisational instruments. The resulting four aspects can be placed in a matrix that represents four ways to cope with organisational uncertainty.

6Yield Efficiency Speed

7The phases are:Measure & Map, Explore & Evaluate, Describe & Define, Implement & Improve and Control &

Confirm. The method is aimed at measuring, assessing and improving processes.

Strategy

‘SPEED in all we do’

Improvement areas

‘Understand mechanisms...’

Required situations

‘Develop a PI for speed’

Contributing projects

‘This research’

Figure 2.1: Implementation of strategy

Instruments

Strategies Intra organisational Extra organisational

Enlarging the capacity to process

information

• Vertical information systems

• Decentralisation of decision-making

• Expansion of task environment

• Cooptation

• Coalitions

Reducing the need for information

• Creation of slack

• Smoothening

• Planning

• Autonomous units

• Development of alternatives

• Employing force/

dominance

• Networking Table 2.3: reduction of uncertainty

At Philips DAP, all Gailtbraith’s intra organisational instruments are present. Philips DAP employs numerous information systems

that are being used for different purposes (both vertically and horizontally oriented). The main purpose is to share information on a local, national and international level. It succeeds in making communication lines faster and shorter and enlarging the available knowledge. The creation of slack is a topic under discussion at this moment because of the recent drive to reduce the throughput time of processes. At this moment, looking at the PCP, slack is present, both in human capacity and in time. Planning refers to the presence of operational, tactical and strategic goals, which are present at Philips DAP. Two important instruments that are employed at Philips DAP are decentralisation of decision-making and employing autonomous units. Both instruments are implemented through project teams and mini companies.

2.5.1 Glass wall management & mini companies

At Philips DAP, the principles of self-management are applied to several departments. Most departments have developed a customer – supplier relationship and are considered as separate companies within the company where every employee can be regarded as president of his own area of responsibility. This principle is known as the ‘mini company’

. In accordance with this view, most departments in production, research & development and project management make use of ‘glass wall management’. This principle is based upon the notion that tying people’s resources together requires open communication throughout the (mini-) company. Key principles of glass wall management are consciousness, openness, sharing of progress and a free market system within the company. A practical implementation of glass wall management at Philips DAP, is a board in ‘project one rooms’ where all processes, progress, goals, objectives, team members (i.e. all relevant information regarding the project) is presented and visible for all project members.

8 Intranet on local, national and international levels for sharing general information, ‘Domino.doc’ for sharing documents, ‘Isoware’ for information regarding processes and structures, ‘Philips yellow pages’ for international functional knowledge sharing on a personal level and Lotus information system for e-mail and scheduling.

2.6 Processes of Philips DAP

The main processes at Philips DAP are the strategy process, the business creation process, operations and supporting processes.

Strategy process

During the strategy process, the strategic direction of Philips DAP is determined. It involves integration of business units plans with industrial strategic plans and regional plans toward an overall DAP strategy.

Business creation process

The business creation process (BCP) includes the process of planning and producing, focused on marketing, technology and resources.

In the marketing planning and demand generation process, the strategic direction of a line of business (LoB) is worked out into detailed business plans. In the demand generation process, these plans are carried out. This varies from fundamental market research to actual product introductions.

Technology planning and innovation to market combined are also called the

‘innovation process’. Technology planning consists of the elaboration of the LoB strategy focussing on technology. One of the outcomes of this process is a technology roadmap defining long term plans as well as plans for FCP and PCP projects. During the innovation to market process (divided into a function creation process (FCP) and a product creation process (PCP)) plans defined in technology planning (the roadmap) are carried out.

The innovation process possesses a dual character. This is illustrated by the functions and outputs of the FCP and the PCP. The first process is aimed at specifying the new products as they should roll of the production line. It is an innovative process, integrating market demands with product specifications.

The FCP relies more on creative processes to come up with new ideas and designs. It deals with marketing and behavioural issues, next to technical and engineering issues. The outputs of this process are (more or less) exact specifications of the shaver to be. The PCP’s function is to translate these specifications into an actual product. It deals purely with technical and engineering issues and comprises the integration of product specifications with an actual process and product. This process relies more on problem-

Strategy process

DAP strategic direction Strategic business planning

Operations

Operational business planning Æ Operational marketing and sales Æ Supply Chain Management

Marketing planning Æ Demand generation Technology planning Æ Innovation to market Resource planning Æ Resource generation

Supporting processes

Business control, infrastructure creation & control and human resource management

Planning Execution Figure 2.3: Philips DAP main processes

solving capabilities and is aimed more at control and construction. New product design can be seen as a process in which an organisation creates and defines problems and then tries to solve them. In this case, the FCP creates the problems and the PCP tries to solve them. However, the specification of the PCP’s input is rarely complete, leaving much open to be specified later in the process due to time pressure of uncertainty regarding market demands. This way, a part of the FCP’s functions and its inherent uncertainty is transferred to the PCP, making it a more uncertain process than intended.

During the planning process, resources (financial and human) needed for realisation of the LoB strategy are defined and their generation is planned.

Resource generation consists of the implementation of these plans.

Operations

After products have been developed and introduced, operations takes care of day to day business activities as operational marketing & sales and the supply chain process; the actual mass-production of shavers.

Support

Supporting processes include ‘business control’, ‘infrastructure creation &

control’ and ‘human resource management’.

The object of this research lies on the product creation process, located within the innovation process.

2.7 The product creation process (PCP)

The PCP has been designed to successfully develop new products. It consists of seven phases, each ending when a so-called ‘milestone’, the product of an individual phase, is delivered.

The first step in the process, orientation, is to come to a clear and concise project order and to minimize uncertainties. After the project-order, innovation will turn into realization. The product gets more concrete with each phase.

In the definition phase of the chosen product, concept and industrial design are worked out into a more detailed technical design (e.g. 3D CAD files) and a manufacturing & logistics concept.

Orientation

Definition

Development

Preparation

Product release

Ramp up

Release Milestones

PCP phases (relative duration)

Figure 2.4: the product creation process Project

start

Project order

Concept

consolidated Prototype consolidated

Consolidated engineering

samples Release for production

Release for

delivery Project end

The definition phase is followed by the development phase, in which the design is further detailed. Ultimately it will be transformed into a fully dimensioned and functioning prototype that is used to verify the product design.

After this verification, all tools are built and ordered during the preparation phase.

These tools are used to make the first product samples, which are tested and have to be released.

The purpose of the next step in the process, the product release phase, is to release the product for volume production. The definitive tools and equipment (incorporating the changes from the previous phase) are used to do a pilot run of the right batch size. These products are tested and a cover sheet for product release is drawn up.

Pilot runs serve to demonstrate the stability of the process. Production will be ramped up to full capacity and both the product design and the manufacturing system are verified during this phase. At the end of this phase, the cover sheet, stating that the product is released for delivery, is signed.

Finally, in the mass-production release phase the right quality level of the product is ensured. Based on the experiences during the initial production phase and the first market feedback, corrective actions (if necessary) are taken and ultimately the project is transferred to the production organization.

2.7.1 PCP structure & coordination

The product creation process is carried out within a project team. A project team is divided into work groups and is headed by the project leader. The project organisation is based upon the principles of concurrent engineering where traditional functional barriers have become less important and project members have started focusing on parallel (concurrent) execution of all design tasks. In this setting, different disciplines work together on the same project. This approach is based upon the realisation that decisions made by one function will affect other functions. This interdependency results in a need for coordination which is made easier by using multidisciplinary teams. In such teams, each functional department is represented in a project to the extent it is needed for that project.

Due to the size of the projects, its organisation is decomposed into work groups to prevent overloading communication and to facilitate development and production. It is possible to differentiate between the project and its environment.

The project boundary is marked by the dashed line. Within this boundary, a number of work groups can be distinguished.

Coordination takes place on project-level, between the project and its environment across the project boundaries. For example, between work groups and their functional departments or between the project leader and higher management, suppliers, customers and other project leaders. Within

the work groups, there is also coordination; intra-group coordination is needed to perform a certain task with a group of people. All groups, together with the project manager form the project team. This team has a collective goal and has to work together in order to reach this goal. Therefore, coordination also takes place between the work groups. Not all relations are equally strong. Some groups are linked more strongly than others are. This level of coordination is called ‘system level coordination’

(Oosterman, 2001)

.

PM

Figure 2.5: Project-level-, intra-group and system level coordination

When we look at the PCP from the viewpoint of Mintzberg’s coordination mechanisms

(Mintzberg, 1983)

, it is possible to distinguish different types of mechanisms used at different levels within the PCP structure. At the project level, coordination is done by standardisation. As seen in 2.6 and 2.7, the business creation process is a well- documented and formalised process, which has been standardized as a form of

coordination; everybody knows how the PCP is done, so no discussion (coordination) regarding phases and responsibilities is needed. This mechanism is called ‘standardisation of work processes’ by Mintzberg and is mainly present on the higher levels of the PCP project.

The second coordination mechanism is ‘standardisation of output’.

This means that the outcomes of the process are defined and that workers use this defined outcome as a means to figure out what they should do. This is also present within the PCP. At all levels, specifications of the product-to-be are known and coordinate the actions of workers.

The third mechanism, ‘standardisation of skills’, is present through the functional organisation in which the projects are imbedded. All project teams are composed of members of the functional organisation that act as suppliers of resources for the projects. These ‘resources’ (engineers) possess certain skills and are assigned to a project based on its ‘skill-requirements’.

This functional organisation presents a solid, steady supply (stock) of resources. At Philips DAP, there is a transition from a functional-oriented to a project-oriented organisation in order to facilitate the ‘new’ way of working. One drawback at this moment is that (in this case) the bureaucracy of the old, functional organisation is interfering with the (intended) flexibility of the new, market-oriented project organisation.

According to Mintzberg, standardisation as a coordination mechanism is very useful in relatively stable situations. However, when an environment becomes less stable, other mechanisms become more important. At Philips DAP, the environment has changed, compelling the company to react by shortening its development time as is being done by the YES programme (see 2.5). This reduction of throughput time, will for example lead to a reduction of waiting times within the PCP, thus shortening the throughput time and making the process more competitive.

However, as we have seen in 2.5, this seemingly unproductive time, or ‘slack’ within the process has an important function

. By taking the slack out of the process, the need for coordination will increase. This effect mainly will manifest itself on the system level of the PCP structure, where different groups are interdependent and are linked by a supplier – customer relation.

9Gailbraith claims that by creating slack within a process, the need for coordination is reduced, which will positively influence the outcomes of the process: see 2.5(Oosterman, 2001, Jägers & Jansen, 1999).

For example, see figure 2.6.1; when a supplier delivers part A in week 2 or 3, and the customer needs part A some where in week 3 or 4, there is a maximum slack of 3 weeks. From the supplier’s point of view, it does not matter when part A is completed, it is always in time for the customer so no coordination is needed with the customer. The same goes for the customer, part A is always ready when needed, so no coordination is needed with the supplier regarding delivery time. Thus, slack reduces the need for coordination. When slack is eliminated to reduce unproductive time, for example by connecting schedules more tightly, the period for delivery by the supplier and the period part A is needed by the customer will shorten to the extreme of one single moment. This way slack is reduced to zero, but the need for coordination has increased in order to make sure part A is ready at the right time (especially when ‘the right time’ is not specified or is subject to change).

The situation where there is uncertainty (regarding timing) is especially relevant in a development setting (i.e. Philips DAP), where the actual work is subject to a relative high degree of variance (see 4.1). As seen in 2.5, one of the reactions of Philips DAP at the changing environment is the drive for reduction of the throughput time of the PCP. Next to the positive outcomes of reducing the throughput time of the PCP, one has to be aware of the possible implications on the need for coordination within the project team.

2.7.2 Quasar SS

This research takes place in a PCP-project team at Philips DAP, called ‘Quasar shaving system’ or ‘Quasar ss’. One of the objectives of Quasar ss is to develop a new type of shaving head for electric shavers. The Quasar ss project also aims to create all production processes and means involved, delivering a complete, production ready shaving head. Around sixty people are involved in the Quasar ss project. The project organisation is divided into multidisciplinary teams, each responsible for a part of the design process. For reasons of confidentiality, I will not further describe the content of the project.

2.7.3 PCP objectives and performance

As argued in 2.6, the function of the PCP is mainly technical and is aimed at the translation of specifications into a design of a product and a process (problem solving). Within this function lie the characterisations of the process, which is aimed at problem solving (constructing) according to a structured method. The performance of a PCP should therefore mainly be indicated in terms of efficiency whereas FCP

1 2 3 4 5

Internal supplier delivers part A

Internal customer needs part A

Slack

1 2 3 4 5

Internal supplier delivers part A

Internal customer needs part A

Slack Figure 2.6.1: 3 weeks slack Figure 2.6.2: zero slack

performance is mainly defined in terms of creativity. The output of the PCP is a finished production process and a finished product design.

As argued before, product development can be viewed as a process in which an organisation creates and defines problems and then tries to solve it

. At Philips DAP, This process has been formalised in a PCP to reduce uncertainty.

Problems are solved according to a structured planning. Due to the function of the PCP, the type of behaviour needed in this process is aimed at problem solving.

However, as argued in 2.6, due to uncertainty spilling over from the FCP into the PCP, uncertainty is increased, leaving a need for flexibility and creativity.

When we combine the characteristics of the PCP with the organisational strategy, we can conclude that not all aspects of this strategy are equally leading for the PCP. The drive for innovation of Philips DAP, reflected by terms as ‘break away’ and ‘distinctive innovations’ are mainly applicable on the FCP. The efficiency oriented aspects

‘speed’ and ‘shorter time to market’ are more applicable on the PCP, where efficiency is a more important issue than creativity. The creativity-efficiency ratio is illustrated by the figure below: efficiency becomes more important when the investment (time &

money) increases.

The creation of complex products calls for division of labour because it is impossible to combine all required skills and knowledge into one worker. In addition, in situations where the simultaneous combination of a large number of skills is needed, teams perform better than a collection of individuals

. At Philips DAP, where complex electric shavers are created, the division of labour results in a complex organisation

. In order to facilitate this, the work is carried out by teams, combining all skills needed for the task, that have to cooperate and coordinate their actions in order to reach their goals.

Combining the previous arguments, it is possible to define what a PCP project team should do. In other words, what its performance entails. The meaning of the word

‘performance’ is in my opinion twofold: it comprises the extent to which objectives are reached (the effectiveness) and the way in which they are reached (in the right way):

the efficiency.

Beyerlein et.al.

argue that effectiveness refers to the ability of team and team members to collaborate and meet group and organisational goals. I argue that in this line of reasoning, efficiency is the ability of team and team members to collaborate and meet group and organisational goals the right way. Therefore, performance is all about reaching the right goals, the right way. Contrary to Hall and Beyerlein, Hackman

incorporates the way thing are done (the efficiency aspect) into the concept of effectiveness. This way, my concept of performance becomes synonymous to Hackmans’ concept of effectiveness.

One of the key indicators of the performance of a PCP project team can be defined as fast creation of a complex product. Performance can be improved through the reduction of PCP throughput time. In this research, the focus will lay upon the ‘fast’

aspect of the performance.

Creativity

FCP PCP

Focus

Time Figure 2.5: focus on creativity & speed

Efficiency