The dynamics of innovation in complex products and systems

T his chapter examines the importance of high-technology CoPS to the economy and describes their innovation dynamics, showing that management practices and challenges differ fundamentally from those of mass-produced consumer goods. CoPS, like consumer goods, are not ‘all the same’, so we develop a simple taxonomy of complex products and projects based on their system scope and intensity of innovation. Underlining a major theme of this book, the chapter shows how and why a firm's core productive organisation, management structures and capabilities are shaped by the complexity of the product that it produces. In discussing the critical dimensions of product complexity we focus on the value and cost of the products and their degree of customisation for the buyer and user. The nature of the component inputs, complexity of component interfaces, range of knowledge and skills involved, and intensity of user involvement together determine the overall complexity of the product and the type of project needed to produce it. In this and subsequent chapters where the issues are explored in more depth, we show that the need to produce CoPS in low volumes to unique customer requirements calls for strong capabilities in the management of projects and integration of systems rather than volume production and mass marketing as in high-volume consumer goods. We also show that the project organisation is ideally suited for performing such one-off or temporary assignments, rather than the traditional functional organisations used to perform standardised and recurring activities.