Jürgen Mihm

Hierarchical Structure and Search in Complex Organizations

Organizations engage in search whenever they perform nonroutine tasks, such as the definition and validation of a new strategy, the acquisition of new capabilities, or new product development. Previous work on search and organizational hierarchy has discovered that a hierarchy with a central decision maker at the top can speed up problem solving, but possibly at the cost of solution quality compared with results of a decentralized search. Our study uses a formal model and simulations to explore the effect of an organizational hierarchy on solution stability, solution quality, and search speed. Three insights arise on how a hierarchy can improve organizational search: (1) assigning a lead function that “anchors” a solution speeds up problem solving; (2) local solution choice should be delegated to the lowest level; and (3) structure matters little at the middle management level, but it matters at the front line; front-line groups should be kept small. These results highlight the importance for every organization of adapting its hierarchical structure to its search requirements.

Incentives in New Product Development Projects and the Role of Target Costing

This paper investigates how self-optimizing engineers affect new product development (NPD) project outcomes and development times. A variety of widely used NPD project management approaches, including heavyweight project management, may allow or even encourage engineers to introduce late design changes and exhibit weak cost compliance, reducing the products profit or competitiveness. Providing specifically designed incentives for individuals can eliminate such encouragement, and thus improve cost compliance and project timeliness. This paper discusses several practical incentive schemes, including profit-sharing contracts and component-level target costing. For many industrial projects, component-level target costing makes the most efficient use of available information to optimize project outcomes and reduce development times.

Concurrent Engineering and Design Oscillations in Complex Engineering Projects

Coordination among many interdependent actors is key activity in complex product development projects. The challenge is made more difficult in concurrent engineering processes, as more activities happen in parallel and interact. This coordination becomes progressively more difficult with project size. We do not yet sufficiently understand whether this effect can be controlled with frequent and rich communication among project members, or whether it is inevitable. Recent work in complexity theory suggests that a project might form a “rugged landscape”, for which performance deterioration with system size is inevitable. This article builds a mathematical model of a complex concurrent design project. The model explicitly represents local component decisions, as well as component interactions in determining system performance. The model shows, first, how a rugged performance landscape arises from simple components with single-peaked performance functions, if the components are interdependent. Second, we characterize the dynamic behavior of the system analytically and with simulations. We show under which circumstances it exhibits performance oscillations or divergence to design solutions with low performance. Third, we derive classes of managerial actions available to improve performance dynamics, such as limiting the “effective” system size of fully interdependent components, modularity, and cooperation among designers. We also show how “satisficing”, or a willingness to forego the last few percent of optimization at the component level, may yield a disproportionally large improvement in the design completion time.

Linking Cyclicality and Product Quality

This paper examines the impact of architectural decisions on the level of defects in a product. We view products as collections of components linked together to work as an integrated whole. Previous work has established modularity how decoupled a component is from other product components as a critical determinant of defects, and we confirm its importance. Yet our study also provides empirical evidence for a relationship between product quality and cyclicality the extent to which a component depends on itself via other product components. We find cyclicality to be a determinant of quality that is distinct from, and no less important than, modularity. Extending this main result, we show how the cyclicality--quality relationship is affected by the centrality of a component in a cycle and the distribution of a cycle across product modules. These findings, which are based on an analysis of open source software development projects, have implications for the study and design of complex systems.

On the Effectiveness of Patenting Strategies in Innovation Races

Which, if any, of a firms inventions should it patent? Should it patent at all? Many companies engaged in an innovation race seek a patenting strategy that balances protection of their intellectual property against the knowledge spillovers resulting from disclosure requirements. Not much is known about factors that determine the patenting strategy best able to resolve this trade-off. Although scholars in various management, economics, and engineering disciplines have researched patents and patenting regimes, little work has addressed the normative issues that pertain to forming an appropriate firm-level patenting strategy. We develop an inventory of real-life patenting strategies and integrate them into a coherent framework. Our simulation model characterizes the optimal patenting choices for different environmental and firm-level contingencies while capturing the dynamics between competing firms. We identify the firms research and development strategy as the most salient determinant of its optimal patenting strategy. Our research contributes to establishing a contingency theory of patenting strategies. This paper was accepted by David Hsu, entrepreneurship and innovation.

Product Architecture and Quality: A Study of Open-Source Software Development

We examine how the architecture of products relates to their quality. Using an architectural representation that accounts for both the hierarchical and dependency relationships between modules and components, we define a new construct, system cyclicality. System cyclicality recognizes component loops, which are akin to design iterations — a concept typically associated with models of product development processes rather than the products themselves. System cyclicality captures the fraction of mutually interdependent components in a system. Through a multilevel analysis of several open-source, Java-based applications developed by the Apache Software Foundation, we study the relationship between system cyclicality and the generation of bugs. At the system level, we examine 122 releases representing 19 applications and find that system cyclicality is positively associated with the number of bugs in a system. At the component level, we examine 28,395 components and find that components involved in loops are likely to be affected by a larger number of bugs. We find that, in order to identify the set of product components involved in cyclical dependencies that are detrimental to product quality, it is imperative to remove from consideration the architectural decisions by which components are assigned into modules: it is necessary to focus only on the patterns of dependencies among product components without considering how components are grouped together into modules. Our results suggest that new product development managers are likely to benefit from proactively examining the architecture of the system they develop and monitoring its cyclicality as one of their strategies to reduce defects.

On Styles in Product Design: An Analysis of US Design Patents

Products combine function and form. This paper focuses on product form. The authors combine state-of-the-art clustering techniques with experimental validation to identify styles (groupings of new product designs of similar form) among the more than 350,000 US design patents granted from 1977 through 2010.Thus the authors compile, for the first time, a rich data set of styles that can serve as an empirical platform for a rigorous study of the role played by product form in new product development. Building on this platform, the authors analyze the determinants of “style turbulence”: the year-to-year unpredictability of changes in a style’s prevalence.The authors find that (i) style turbulence follows a U-shaped relationship with respect to function turbulence (the turbulence of product functions associated with a given style) and (ii) style turbulence increases over time. The authors discuss the implications of these findings for managing design in new product development.

Sourcing Innovation: On Feedback in Contests

Contests, in which contestants compete for a prize offered by a contest holder, have become a popular way to source innovation. Despite great interest from the academic community, many important managerial aspects of contests have received very little formal inquiry. The most important of these is feedback from the contest holder to the contestants while the contest unfolds. This paper sets out to establish a comprehensive understanding of how to give feedback in a contest by answering the questions of when to give feedback and when not to give feedback and which type of feedback to give, public (which all solvers can observe) or private (which only the concerned party can observe). We find that feedback will not affect the behavior of competing problem solvers unless the contest holder credibly precommits to a truthful feedback policy. We then set up a framework that reduces the feedback decision to a pair of conceptual questions. First: Is the contests ultimate objective to increase average quality or to find the best solution? Second: How uncertain are outcomes for the solvers? We show that no feedback or public feedback generally dominate private feedback. However, if the host is interested exclusively in the best performance and if the contest displays large uncertainties, private feedback is optimal.

Revisiting the Role of Collaboration in Creating Breakthrough Inventions

Problem Definition: Is teamwork better than working alone for creating breakthrough inventions? We challenge the widely accepted affirmative answer to this question. Academic/Practical Relevance: Extant research has consistently found that lone inventors significantly underperform teams in creating breakthroughs; thus it extols the benefits of teamwork while neglecting the role of single inventors. This paper offers an important counterweight to those empirical results by identifying a fundamental contingency under which teams might or might not outperform lone inventors: the degree of decomposability of the invention. By ignoring this contingency, past literature has systematically underestimated the role that lone inventors can play for companies. Methodology: We use utility and design patent data for 1985–2009 to compare the effect—on the probability of creating a breakthrough—of working alone versus working with a team. Results: For utility patents, we do find that working alone reduces the likelihood of achieving a breakthrough. Yet this disadvantage of lone inventors is not evident for design patents. We theorize that the nearly non-decomposable nature of design is a major factor contributing to lone designers’ relative efficacy of achieving breakthroughs. This theory is then tested in the context of utility patents, where we can observe variation in inventions’ decomposability. We find that technology inventions that are difficult to decompose also relatively advantage lone inventors compared with teams, and we demonstrate that this finding reflects greater coordination costs when such inventions are attempted by teams. If one takes a myopic view of collaboration’s role, then our results suggest that working with others does not help develop outstanding non-decomposable inventions. Yet taking a long-term view reveals that lone inventors benefit more than do teams from having collaborated with others in the past. In fact, we find that past collaborations can help lone inventors outperform teams with regard to developing non-decomposable inventions. Managerial Implications: Past research has suggested that collaboration is universally beneficial in creating breakthrough inventions. However, such efforts have ignored crucial contingencies: We show why inventors should explicitly consider both the targeted invention’s decomposability and their own history of collaboration when deciding whether (or not) to work with a team on a given innovation.

R&D Spending: Dynamic or Persistent?

It is well established that the benefits of RD under a dynamic policy, RD the predictable part has no or even positive effects. Finally, our results are more pronounced for firms in higher quantiles of the performance distribution: rather than coping with the negative effects of dynamic allocation, such companies are especially affected by them.