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Name /8830/ch55 07/19/2004 03:35PM Plate # 0 pg 1368 # 1Morris (Wiley)

1368

CHAPTER FIFTY-FIVE

PROJECT MANAGEMENT IN THE

AUTOMOTIVE INDUSTRY

Christophe Midler, and Christian Navarre

The automotive industry has always been a testing ground and a powerful specifier formanagerial innovationone need only think back to Fordism, Sloanism, and theJapanese Model of Manufacturing, which was in fact quite simply the Toyota Model.

The success of the book The Machine That Changed the World is typical of this point of view

(Womack, Jones, and Ross, 1990). The assimilation of managerial techniques by the auto

industryTotal Quality Management (TQM) and just-in-time (JIT), for examplecertainly

has transformed the way in which production is managed in car plants. However, much

more than this, it completely goes beyond the dominant theories on the management ofinventory and quality, and has radically changed perception of the relative importance of

these disciplines throughout the various schools of thought on management.

This chapter explains how and why the concept of the project gradually became for-

malized and deployed in car firms, and how this development generated, directly or indi-

rectly, profound changes in (1) corporate structures and the professional practice in their

technical disciplines and (2) the relationships between carmakers and their subcontractors.

In short, it details how the development of project management transformed the automotive

industry.

Generally speaking, the strategic importance of project management methods is largely

dependent on the importance both of product strategies and the competitive environment.

The mass production of a small number of standardized, relatively undifferentiated products

with a long life cycle does not require mastery of very sophisticated project management

skills. Conversely, mass production of a large number of differentiated products has as a

direct consequence the fact that the design and marketing of a large number of distinct

products is hardly conceivable in the absence of the concomitant development of very so-

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Professional Associations and Global Initatives 1369

phisticated project management skills. The history of project management since World War

II follows closely that of the markets (Morris, 1997).

We will trace the evolution of project management in the auto industry through four

stages:

1. From the postwar period up to the 1970s, there was no differentiation between the

product strategies of carmakers in North America and Europe. Disciplined manage-

ment of projects was not a core component in competitive strategy.

2. During the 1970s and 1980s, the gradual saturation of markets changed the competitive

environment radically. Japanese carmakers succeeded in breaking into the North Amer-

ican market using (novel) product proliferation strategies, and the direct consequence of

this business model was an explosive increase in the number of projects to be managed.

The management of projects for new vehicles now assumed strategic importance.

3. In the late 1980s and early 1990s, manufacturers radically reorganized their approach

to the management of projects for new products in order to develop more quickly and

at lower cost a greater number of products of increasingly high quality. The manage-ment of projects for new vehicles was now at the heart of corporate strategy.

4. By the late 1990s, the limits of the reorganization of the beginning of the decade were

becoming blatantly obvious. In addition, new challenges emerged. Manufacturers initi-

ated a second wave of reorganization. New vehicle project management became more

complex in order to cope with the new challenges, namely: alliances, market globali-

zation, and innovation.

In characterizing the specific position of the project function in firms at each stage, we will

make use of the organizational diagrams of Clark and Wheelwright (1988). However, going

beyond this framework, we shall show that the development of project-oriented logic was

to bring about profound change in the permanent processes of companies, both internally

and in their dealings with outside firms.

First Phase: From the Postwar Period to the 1960s

The product strategies of carmakers in North America and Europe were undifferentiated. Disciplined

control of projects was not a core component in competitive strategy. The management of projects for new

vehicles operated via functional structures, coordination was informal, and learning occurred within devel-

opment projects.

From a strategic point of view, the 1950s and 1960s were typified, in Europe and even

more so in North America, by a conventional approach to mass production. The devel-

opment of car manufacturing firms exhibited a gradual formation of product ranges, namely:a small number of models, long life cycles for models (as long as 12 to 14 years), little

product diversification, competitiveness focused on cost reduction through standardization,

and longer series (over 250,000 a year for a model).

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1370 The Wiley Guide to Managing Projects

The design of these products was conducted using an organizational form of project

craft in an essentially function-oriented corporate structure (see Figure 55.1). Firms were

divided into powerful, compartmentalized, trade-focused entities: the product engineering

office, the process engineering department, manufacturing, and so on. There was no direct

linkage between functions. Projects passed in sequence from one function to the next, fol-

lowing a metaphorical relay race. Each project was handled on a case-by-case basis. The

only player joining up functions and acting as arbiter between them was the senior man-

agement team and often the CEO himself or herself.

Technical learning took place within the projects themselves, each project being a gen-

uine locus for the development of new skill sets relating not only to products but also to

production processes. The buildings of new bodies of expertise occurred in and through

successive project development programs. Given this process, the consequences of the risks

associated with major technical learning often became more visible in projects.

The resulting level of performance in terms of duration, cost, and quality in the new

products was mediocre: long development times (five to seven years), often with delays of

one or two years. Product launches were frequently beset with unforeseen problems ofindustrial feasibility. It often took several years before nominal production rates could be

achieved in plants. And, finally, even in a context in which competition was weak because

of lack of market availability of products, it is manifest that a large number of unsuitable

products reached the market, a sign that upstream project targeting and evaluation processes

had been relatively ineffective.

Second Phase: From 1970 to 1985

During the 1970s and 1980s, the gradual saturation of markets brought about radical change in the

competitive environment. The management of new vehicle projects assumed strategic importance. Firms learned

how to steer their projects strategically and centralize their coordination.

The late 1960s saw, both in Europe and in the United States, the deployment of a new

strategy that was to lead to the arrival of the modern, multiproduct vehicle model range,

to the diversification of models (power trains, bodywork, and fittings), and to the interna-

tional deployment of the companies.

In such circumstances, the project craft of the preceding period was incapable of

coping with the new complexity of product strategies. It is at this point that we see the

beginnings of a professionalization of project management:

The first project functions were created in the early 1970s, along with periodic review

systems involving corporate management.

The careful guidance of projects to completion was gradually put in place, along with

formalization of development timetables and the deployment of economic reporting tools

integrating all the variables in the projects concerned.

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FIGURE 55.1. THE FUNCTIONAL STRUCTURE.

Departmental

Departmental

project players

Contributors from

outside the company

(industrial market

partners)

management

Source: Adapted from Clark, Hayes, and Wheelwright, 1988.

Other than this centralization of control, however, there was no change in the relationship

between strategies for the building of technical skills occurring in engineering design offices

and central process planning departments, on the one hand, and development policies, on

the other (see Figure 55.2). Project teams had neither the political weight nor the expertise

to defend their own logic against the strategies of technical departments. This period can

be characterized as that of the lightweight project manager, a notion given formal ex-

pression by Clark, Hayes, and Wheelwright (1988).

These new forms of project organization and instrumentation certainly brought with

them improvements in new vehicle projects, but the limits of this form of coordinationbecame clear as early as the beginning of the 1980s. The failures that could be seen in

projects became increasingly prejudicial:

Control of project profitability and lead times was often lost, signposting the limitations

of the use of sequential input of trade-focused logic and an excessively hierarchical ap-

proach to the negotiation of compromises (Cabridain, 1988);

Product quality at start-up was disappointing on occasion, reflecting an organizational

balance in which there was no powerful internal actor capable of measuring and man-

aging the risks generated by technical innovation strategies.

Last, despite a few hesitant attempts, there was no innovation in the area of project man-

agement on the part of American or European carmakers. The innovation, in fact, came

from a small number of companies, Toyota and Honda in particular. Stalk and Hout (1990)

have shown that by the end of the 1980s, certain Japanese firms were implementing highly

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FIGURE 55.2. THE PROJECT COORDINATION STRUCTURE.

Departmental

Departmental

project players

Project

ManagerDepartmental

project

supervisors

Contributors from

outside the company

(industrial market

partners)

Project Manager's

scope

management

Project committees


aggressive product proliferation strategies, the principle of which was to drown competitors

in a flood of very rapidly replaced products. In such an environment, the products of slower

competitors quickly go out of fashion. Stalk and Hout show how the use of such strategies

by Honda and Yamaha won them dominance in the motorcycle market. A similar approach

can be seen in the conquest of the North American market by Japanese carmakers. Table

55.1 (Womack, Jones, and Ross, 1990) shows that from 1955 to 1989

the number of vehicles offered to consumers was increased by a factor of five;

Japanese producers, absent from the market in 1955, were, by the late 1980s, offering avehicle range equivalent in variety to, or even slightly more diverse than, their North

American competitors. It is worth noting that European manufacturers did not penetrate

the North American market with additional automobile models during this period. More-

over, the same study shows that in 1989 the models brought to market by Japanese car

firms were more recent and superseded more quickly by new models than those of their

North American competitors.

Average sales per vehicle declined substantially. As a consequence, it became increasingly

difficult to provide input for assembly plants designed for volumes greater than 250,000

vehicles per year.

Such proliferation strategies were based on highly effective project management methods.

Comparative studies (Clark and Fujimoto, 1987), updated in 1990 and published in 1995,

highlight a significant differential in relation to the development performance achieved by

Japanese firms according to the three metrics chosen by the researchers: lead time, project

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TABLE 55.1. FRAGMENTATION OF AMERICAN AUTO MARKET.

1955 1973 1986 1989

American Products:Number on sale 25 38 47 50Sales/product (000s) 309 322 238 219

European Products:Number on sale 5 27 27 30Sales/product (000s) 11 35 26 18

Japanese Products:Number on sale 0 19 41 58Sales/product (000s) 0 55 94 73

Total:Products on sale 30 84 117 142

Sales/product (000s) 259 169 136 112Market share captured by six largest-selling products 73 43 25 24

Source: Adapted from James P. Womack, Daniel T. Jones, Daniel Roos, 1990, Figure 5.6, p. 125.

team productivity as measured by the number of engineering hours required to develop the

projects, and the quality of the vehicles placed on the market.

This work was widely disseminated and analyzed by industry professionals. These stud-

ies stimulated intense reflection among academics, researchers, and industry professionals.

The conditions were in place for a radical change in the way projects were managed in

North American and European auto firms in the late 1980s.

Third Phase: 19851995The Rise of Project Functions and theDeployment of Concurrent Engineering

At the end of the 1980s, a new template emerged: concurrent engineering, characterized

by the spectacular rise of project functions and the deployment of new development meth-

odologies. (See the chapter by Thamhain.)

The most visible sign of this break with the past was the creation of project directors

who were destined to become genuine entrepreneurs in automotive development. The time

had come for the heavyweight project manager template described by Clark, Hayes, and

Wheelwright (1988).

The heavyweight project manager structure, under the label Susha, had existed for

many years in the Japanese firm Toyota (The first Susha was appointed at Toyota in 1953!).

A Susha is an independent project director with wide-ranging powers, enjoying authority

from the preliminary project stage right up to design and manufacture. As early as 1984, a

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TABLE 55.2. ADJUSTED LEAD TIME AND ENGINEERING HOURS.

Japan U.S. Europe Korea Total

(w/o Korea)

TotalAdjusted engineering hours (EHAD):

1980s 1703 3366 2915 2507 2507(843) (642) (950) (1084) (1084)

1990s 2093 2297 2777 2127 2438 2477(500) (947) (723) (926) (739) (755)

Total 1847 2880 2843 2127 2474 2493(745) (936) (822) (926) (926) (941)

Adjusted lead time (LTAD):1980s 44.6 60.9 59.2 53.5 53.5

(7.4) (5.6) (6.1) (9.9) (9.9)1990s 54.5 51.6 56.1 54.5 54.7 54.7

(12.6) (3.8) (12.2) (3.6) (10.3) (10.9)Total 48.6 56.7 57.6 54.5 54.1 54.1

(10.7) (6.7) (9.7) (3.6) (10.1) (10.3)

Total Product Quality (TPQ):1980s 53 35 60 52 52

(29) (29) (21) (27) (27)1990s 61 42 59 21 52 56

(16) (18) (17) (1) (20) (18)Total 56 38 60 21 52 54

(25) (24) (19) (1) (24) (23)

Definitions:Adjusted engineering hours-The number of hours required to develop a project of average project complexity. See

Appendix II for further details on the adjustment method, which is based on a multiple regression model.

Adjusted lead time-The number of months required to develop a project of average project complexity. See AppendixII for further details on the adjustment method, which is based on a multiple regression model.

Total product quality (TPQ)-The TPQ index presented in Table 2 makes quality comparisons relative to other vehicles

in the same class. As a consequence, the TPQ index has already been adjusted for project quality and is presented

here to allow comparisons across the three measures of development performance.Adapted from Ellison, David J., Kim B. Clark, Takahiro Fujimoto, and Young-suk Hyun. Product Development Performance

in the Auto Industry: 1990s Update.. #w-0060a, IMVP 1995, p.11.

few perspicacious managers visiting Japan had discovered the Susha system and pointed,

using the example of Toyota, to its strategic dimension for the management of new vehicle

projects.

In the United States, the company that took the heavyweight project manager template

furthest was Chrysler. Early in the 1980s, Chrysler was close to bankruptcy and its project

performance was poor: Development was taking 60 months with little or no cost control,

and vehicles devoid of strong identity were being launched, which was undermining the

companys commercial credibility. The team around Lee Iacocca pointed to the inability ofvertical functional groups (trades) to cooperate and to soft compromises on policy. Vertical

functional groups were clearly incompatible with innovation and audacious product poli-

cies.

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FIGURE 55.3. THE PROJECT DIRECTOR STRUCTURE.

Departmental

Departmental

project players

Project

managerDepartmental

project

supervisors

Contributors from

outside the company

(industrial market

partners)

Project manager's

scope

management


The new management redefined how the development of new vehicles was to be or-

ganized on the basis of range segments functioning as autonomous enterprises in their own

right. All engineering and project management resources, which previously had been con-

ventionally organized by trade, were divided into five platforms: Top of the Range (Large

Car), Entry Range (Small Car), Jeep, Truck, and Minivan. The entire 10,000-strong work-

force employed in the development of products and engineering design was split into

medium-sized units comprising between 2,000 and 3,000 people and provided with clear

leadership.

In Europe, Renault was the first manufacturer to put in place powerful project directorswith a genuine entrepreneurial dimension in the late 1980s (Midler, 1993).

These structural changes went on to drive profound modifications in project commu-

nication and decision processes. We summarize these modifications in five broad categories

in the text that follows.

Overhaul of Project Control Processes

The previous stage was characterized by the development of sophisticated control of plan-

ning and project costs. The limitations of this bureaucratic template have been thoroughly

analyzed in the literature, namely: inertia and cost of control, lack of accountability, and

lack of solidarity on shared general goals. In contrast, the new template emphasized the

importance of adherence to an overall vision and the meaning of the projectof the per-sonal involvement of individuals in seeking collectively to achieve objectives of a more gen-

eral nature. There was a shift from burdensome controls that removed any sense of personal

accountability to an encouragement for individual responsibility and self-regulation by proj-

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ect participants, within a framework defined by meta-rules guaranteeing minimum co-

herence (Jolivet and Navarre, 1993).

At Chrysler, the new compact organization based on clear leadership created a new

feeling of solidarity, favoring early resolution of problems, encouraging calculated risk taking,

and reducing the inertia in decision making inherent in structures of the matrix type.

In Europe, at Renault, followed by PSA Peugeot Citroen, this logic of personal ac-

countability for overall objectives, quality-cost-duration, was rolled out for all vehicle sub-

assemblies: seats, engine, dashboard, and so on.

The Development of Concurrent Engineering

The new project actors laid down new game rules for the coordination of project contrib-

utors. These changes were at three levels. First, they related to the timing of the contributions

by the various specialists: Traditional sequential processes gave way to a planning logic

aimed at maximum anticipation of problems through the early involvement of the trades

involved in production: Plants were involved in the manufacture of prototypes in order tovalidate process feasibility, future products were tested with the sales networks, and so on.

Next, they concerned communications between functions: Previously, intertrade dialogue

had occurred largely at the top of the management tree. Project management departments

now began to promote such dialogue at the bottom in decentralized work groups responsible

for all aspects of the development of a given part of the vehicle (seats, dashboard, etc.). And

last, the changes related to the spatial organization of work, with systematic use of co-

location of participants in project office suites, and development of tools to accelerate in-

tertrade communications.

To point to the example of Chrysler once again, the construction of a single develop-

ment center had the effect of locating transverse project communications within the work-

place. Chryslers management realized that the companys conventional functional

organization, which consisted of the usual design, engineering, manufacturing, marketing,

and sales departments, was a prime culprit. Each functional group tended to operate as an

independent fiefdom with its own goals . . . When there was a major decision to be made,

it had to go up to the president, because each functional group had its own objectives, and

it was difficult to get agreement among them. Chryslers president often ended up having

to arbitrate among groups that should have been cooperating instead of competing. The

implementation of integrated multifunctional platform design teams allowed Chrysler to

replace the conventional sequential engineering with simultaneous engineering. To enhance

communications among engineers and to make concurrent product development possible,

it was seen as extremely important to have all platform teams members collocated. Despite

limited financial resources at the time of the turnaround, the costly decision to relocate all

the people developing new cars under one roof was made. Lee Iacocca, then the company

chairman, announced the new technical center in 1984. Construction began two years later.

When an economic recession hit in 1989, Wall Street and a lot of others called for Chryslerto abandon the project to save money, but Iacocca refused, believing it was too important

to Chryslers long-term health . . . The Chrysler Technical Center opened in 1991 and

quickly became an important part of the enterprise.

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The architecture of the design center placed each platform/project physically on the

buildings floors (horizontally), disposing trades vertically (along a vertical axis connected by

escalators). The company implemented simultaneous engineering tools and, more generally,

transverse communication systems (the center thus pioneered intranet and extranet devel-

opment). Support programs were initiated to encourage cross-category culture and contin-

uous learning processes: ongoing vocational training for staff and an aggressive policy of

recruitment of young engineers, along with the overhaul of the system of personnel man-

agement and evaluation (notably by introducing coworker evaluation, etc.).

The Dynamic of the Technical Trades Involved in Projects

While project process efficiency is a necessary condition of the new product innovation

strategies, the excellence of the technical disciplines is just as essential. However, the new

types of organization implemented profoundly destabilized the processes of capitalization

and development of expertise in the various trades involved in vehicle engineering. One of

the crucial problems facing carmakers in the 1990s was therefore the issue of how to createa project management capability without this being detrimental to the key disciplines ex-

pertise base.

The example of Chrysler illustrates an extreme case in which trade-focused logic has

manifestly been subordinated to project platform logic. However, the company set up

expert clubs to maintain cross-platform solidarity learning on key technical skills. Initially

informal, this system was consolidated and officially instituted in 1994, under the sponsorship

of a general manager.

In Europe, Renault preserved the trade-based structure of its vehicle engineering but

thoroughly overhauled the boundaries between specialities to ensure their assimilation of

product-process engineering logic by dividing up departments on the basis of vehicle sub-

assemblies and functions.

In Japan, the issue of how to organize corporate technical departments was at the heart

of Toyotas engineering reorganization in 1992.

A Change in Relations with the Outside World:From Subcontracting to Codevelopement

The development of the project concept did not undermine internal corporate mechanisms

alone. Automotive projects usually unfold in a space much wider than that of single com-

pany: Today, the proportion of production cost relating to parts bought in from suppliers

is generally more than 70 percent. The new project actors have come to play a major role

in the development of new types ofcodevelopment between carmakers and suppliers Calls

for bids from and subsequent selection of suppliers operate from the outset of a project, on

the basis of agreement on core project objectives. The chosen supplier is then associated

closely with the engineering study process: co-location in the project office suite, par-ticipation in project progress meetings, and so on. Compared with the conventional template

for competition between suppliers based around detailed project specifications, this new

template for the relationship involves, for those taking part in it, the need to modify their

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organizational and contractual frameworks (Banville and Chanaron, 1991; Lamming, 1993;

Garel, Kesseler, and Midler, 1997; Kesseler, 1998). The purchasing process in particular is

completely revolutionized.

Once again, Chrysler can be seen to be, in North America, a precursor in its imple-

mentation of the extended enterprise concept, closely involving suppliers in projects. In

Europe, Renault also consciously committed to codevelopment policies (Midler, 1993; Kes-

seler, 1998).

Developing Project Management Professionalism within Automobile Firms

The empowerment and generalization of project function called for institutionalization of

project management professionalization processes. Beyond the variety of the programs and

professional patterns that developed in the late 1980s and 1990s, we will pinpoint the fol-

lowing characteristic points (Boudes, Charue-Duboc, Midler, 1998):

Project management was not generally developed into a specific professional pattern, as,for example, in construction. On the contrary, human relations rules organized trans-

versal carrier trajectory, mixing skilled-based and project-based roles. Two ideas are be-

hind that choice: (1) that a key difficult point is to maintain solidarity between project

and functional populations and (2) that alternating the role will enhance the capitalization

of inside project learning. Emphasizing the individual project management expertise ap-

peared in that perspective not as important as developing a more collective project man-

agement competency.

The maturity the project management approach of the firm can be correlated to the

hard/soft orientation of project management learning programs: the deeper in organi-

zational and strategic themes, the heavier the project management function.

The more technical side of project management (planning tools, budgeting . . .) diffused

through highly specialized staff people in the firm.

Emphasizing on the entrepreneurial aspect of project function led to develop cross-practitioner learning and capitalizing programs. Such project managers exchanges not

only occurred within each firm but also extensively in cross-sector clubs and associations.

The Results: The Spectacular Success of Western Carmakers

The implementation of these new project management modes led to significant progress in

the performance levels achieved by Western manufacturers in terms of new vehicle launches.

Duplicating the study they had conducted in the 1980s, Ellison, Clark, Fujimoto, and Hun

demonstrated that Western carmakers had very much caught up with the Japanese according

to the various metrics they had defined as being most indicative of project management

performance levels (see Table 52.2).

At Chrysler, the results were initially impressive. The . . . Neon compact car modeltook 31 months to bring to market, while the current Dakota pickup truck made it in only

29 months. Over the first five years from the initial setting up of these new structures,

Chrysler developed more new models than in the 20 previous years.

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Unquestionably, from the mid-1980s to the mid-1990s, Chrysler has been a exemplar

company, especially for the development of new products. During the 1990s and up to the

time of the merger with Daimler, Chrysler was generating by far the highest average profit

per vehicle of any North American auto manufacturer (Harbour and Associates, from 1995

to 1999). In addition, its assembly plants also ranked, according to the same studies, among

the non-Japanese plants with the highest productivity.

In Europe during the first half of the 1990s, Renault reaped the benefits of its break-

through in project management, bringing to market an innovative product range while also

restoring its image in terms of product quality and improving its cost base. The success of

vehicles such as the Twingo and the Megane Scenicwhich were to create new market

niches as the Espace minivan had done in years pastwas the most spectacular result of

the new project systems.

New Difficulties in the Late 1990s

The 1990s ended less happily than they had begun. Surprisingly, the effectiveness of thenew systems put in place a few years before seemed to run out of steam. Chrysler got into

trouble and was taken over by Daimler-Benz. Unfortunately, excellence in new product

development is not sufficient by itself to sustain profitability and growth on a long-term

basis. The inescapable turmoil induced by a merger, the disruptive effect of the 9-11 terrorist

attack combined with a cutthroat competition made again Chrysler vulnerable. Since the

end of 2001, Chrysler is again in crisis.

In Europe, the most advanced carmakers evidenced slower product cycles, losses of

control over lead times, and mismatches between vehicles and customer expectations. Dur-

ing this period, in Japan the landscape was very mixed. Toyota could do no wrong in any

market around the world, while Nissan was mired in a profound crisis. This crisis ended

only with its takeover by Renault, when the deep renewal was implemented triumphantly

by the new managers of the company under the leadership of Carlos Ghosn.

Fourth Phase: 19952003

Project management faces new challenges in the automotive industry.

Several factors serve to explain what might seem at first sight to be a relapse, but that

was in fact another stage in the intensification of innovation-based competition in the au-

tomotive industry; a stage described as one of intensive innovationinnovation that is

both more radical in content and repeated at a faster rate (Hatchuel and Weil, 1999; Ben-

ghozi et al., 2000) and that has been increasingly deployed against the background of global

alliances.

The comparative benefit of efficient project systems for the pioneers in the early 1990stended to run out of steam as best practices spread rapidly to their competitors. To find

new values for differentiation, firms went down the road of innovation policies that were

far more radical in terms of both engineering and styling. On the one hand, in doing so

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they were adding a source of higher risk; on the other, they were facing problems for which

heavyweight types of automotive project organization were unsuited, since the most rel-

evant context for the deployment of technical innovation is not vehicle development but

transverse learning covering both the preliminary project stages and whole product ranges.

No cross-functional and cross-product project existed to address, coordinate, and control

these learning tracks on radical innovative features and technologies (a good example is car

telematics; Lenfle and Midler, 2003).

The increasing number of projects in firms clearly highlights problems associated with

the heavyweight project management template, problems that were not burdensome when

such forms of organization were the exception. As early as the beginning of the 1990s,

Toyota had taken a critical look at its Susha system (Cusumano and Neoboka, 1998). By

1992 the number of platforms rose from 8 to 18, along with a decline in average production

volume per platform.

Communication and coordination problems became critical. In 1991, a Susha was

communicating and working with 48 departments in 12 engineering divisions, plus the R&D

division. Trade divisions were conducting concurrent dialogues with 15 projects. The rela-tionship between Sushas and senior management in the plan-product division was all the

more strained because detailed supervision of 15 Sushas was impossible without setting up

an enormous project-focused bureaucracy. Staff in the plan-product division were finding it

difficult to monitor all 15 projects and became disconnected from reality. R&D was per-

ceived as being distantand its interfacing with projects became very problematic. The

influence and power enjoyed by Sushas were considerable and difficult to control because

of the failings of the system.

As crisis after crisis occurred, the powers of Sushas were strengthened, along with their

responsibilities, which had the effect of locking them in to projects and encouraging the

appearance of a blinkered silo mentalityalbeit transverse silos. The rapidly expanding

number of projects led to the appointment of young, inexperienced Sushas. Coordination

became increasingly difficult, or even impossible. The increased number of departments and

divisions led to narrow specialization in the engineers, making it more and more difficultfor them to understand cross-category logic and interfacing, and this in turn led to less well-

thought-out, less integrated products. Capitalization and transfer of expertise from one proj-

ect to another became extremely problematic. The same solutions were continually being

reinvented. The total workforce assigned to development was not far from 15,000.

The end of the 1990s was also a period of unprecedented strategic shifts in the auto

industry. There were more and more alliances of all kinds. Projects needed to assimilate

this new factor, which was a source of further difficulty and new constraints compared with

the previous stage.

These strategic changes led eventually to new developments in automotive project man-

agement, which can be summarized in terms of five interdependent trends:

Deployment of the project function downstream of initial product development

Implementation of systems better suited to steering radical innovations, both upstream

and between product development programs

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Increasing numbers of projects conducted by intermanufacturer partnerships

Development of platform projects as a way of managing the plethora of multibrand

product development programs

Enlargement of supplier-manufacturer cooperation fields: modularization and colearning.

Deployment of the Project Function in the Commercial Phases

The intensification of innovation-based competition in the automotive industry had conse-

quences. Downstream of development projects, it undermined the stability of the products

commercial life cycles. This was because, since the mid-1970s, the initial development of

new products was a key stage that allowed the introduction of innovations, whether in

products or processes. Between product launches, there was room for minor modifications.

In the mid-1990s, the price war in the European and North American markets led to a

new strategy involving more systematic deployment of development forces for products al-

ready in the market, in order to obtain immediately all the benefits of the innovations

introduced between new product cycles. Transverse integration, formerly restricted to thedevelopment phase, now spread to the entire product life cycle. This led in European car

firms to a rise in importance of new actors, the series life project manager and the

program director, with the task of coordinating the various trade components within a

segment of the manufacturers range throughout the life cycle.

The Management of Radical Innovation Projects: The Growing Importance ofPredevelopment as a Base for Differentiation Strategies

At the same time as this increase in the rate of appearance of innovations, the differentiation

strategy increasingly included research activities in order to find new competitive advantages.

The quality-cost-lead time triangle no longer sufficed. It was necessary to introduce more

strikingly radical innovations in the services offered to customers: hence, recent changes in

upstream development disciplines, which had until this point remained relatively aloof fromongoing changes.

At Renault, by the end of the 1990s, the research division was totally overhauled,

strengthened, and tightly interfaced with the preliminary project design departments. The

logic of this reorganization was clearly expressed in the change of director: Previously led

by a scientist with a past career in a French pure research body, the French National

Research Council, the division was now led by a former vehicle project manager. The

divisions activities, previously based around scientific disciplines, were now guided by pro-

grams focused on areas for innovation allying services and technology and that have clear

importance for the evolution of automotive transport. Within vehicle development programs,

the post of innovation project manager was created to manage the convergence of com-

plex technical innovations (the keyless car, for example). At Peugeot-Citroen Group, an

Innovation Division provides a focus for all upstream specialists.

By the early 2000s a new form of project organization was gradually being put in place

to guide exploration upstream of vehicle projects (Lenfle and Midler, 2002). Although one

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can find in this type of project some of the features of vehicle projects (specifically the need

to conduct such exploration by coordinating a plurality of forms of expertisetechnical,

marketing, design, etc.), these projects also have novel characteristics. First, the level of risk

is much higher because of the extent of the innovation in terms of both technology and

product features. This leads projects to be conducted within exploration portfolios in which

efforts are made to maximize synergy and offset risks, rather than mobilizing teams on one-

shot operations, which is the principle underlying conventional projects. (See the chapter

by Jamieson and Morris.) Second, the direct result of such a project is not a product

placed on the market but a concept that is validated and knowledge that is acquired, which

it will be necessary to exploit later in actual products. (See the chapters by Artto, Thiry and

others.) This virtual, intangible character of the result is undoubtedly one of the difficulties

of this type of project: The tangible, practical nature of a new product launch is no longer

present as a focus for the contributors to the project.

The Development of Projects by Intermanufacturer Partnerships and the Interfacing

of Project Management and Strategic Alliances

The auto industry is one of the sectors that saw a spectacular wave of globalization and

corporate restructuring in the 1990s (mergers, acquisitions, strategic alliances, industrial co-

operation, as well as spin-offs and exit). Internationalization strategies and the importance

of size are, of course, not new features of this sector, but the changes seen in the 1990s

were unprecedented in their scale and generalized character, giving the impression of a

fashion phenomenon that has swept all company strategies along in its wake. Such strategies

for growth through alliances were reflected in two ways in projects. First, manufacturers

increased the number of one-off cooperative programs in joint projects, in order to round

out their model ranges in niche markets and gain access to new markets by pooling with

others the costs and risks involved in such developments. Second, where alliances were more

global in character, projects for new products provided useful leverage for the exploitation

of synergy between merged companies through the sharing of platforms, systematic exchangeof mechanical subassemblies, and so on.

Piron (2001) and Midler, Monnet, and Neffa (2002) have emphasized the importance

of three problem sets that exist in cooperative projects, compared to the traditional auto-

motive project culture:

Mutual understanding within joint project teams. In single-manufacturer project teams, coordination

is based on numerous unarticulated bodies of expertise forged throughout the companys

past history. Once projects begin to be conducted as cooperative endeavors by more than

one manufacturer, the risks of misunderstanding will be high if the participants do not make

substantial efforts to make themselves clear. Such effort is costly and difficult to gauge

correctly, since it runs counter to the participants need to protect their knowledge and

expertise.

The management of fair and equal treatment of the partners. This becomes a prerequisite for cohesion

and focus in joint project teams. Studying a joint project by General Motors and Renault,

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Midler, Neffa, and Monnet (2002), adapting Piron (2001), have demonstrated that the prac-

tical implementation of fair treatment in projects could take three forms: Distributive justice

involves the search for a balanced proportionality between the partners, a fair return, in

Pirons words. The point is, for the firms, to find a fair distribution of goods and powers

based on the goals sought and the resources committed by each. Procedural justice refers to

the feeling that procedures have been fair. The point is for the participants to judge a

decision-making process relative to a reference that is well known and considered legitimate.

The factors that influence this include a feeling of participation in decision making, an

explanation of decisions, and clarity concerning expectations and the rules of the game, all

of which influence whether the participants feel they have been treated fairly and equitably.

Finally, interactive justice refers to individual interactions based on fairness in behavior, which

makes it possible for a decision to be considered doable. Hence, respect and courtesy be-

tween allies prove to have an important contribution to make in the fostering of a positive

atmosphere for interpersonal relations during the cooperation process.

Regulation of tensions between the project and the strategies of the parent companies. Cooperation projectsare by their very nature unstable and vulnerable to exogenous events. In the case of the

Renault-GM project, joint decisions have been upset by shocks coming from outside the

project, such as the Renault-Nissan alliance in 1999 and the GM-Fiat alliance in 2000.

However, the nomination of a project general manager representing the interests of both

firms and the governance structures has strengthened the joint program and attenuated the

impact of external events such as the Renault-Nissan and GME-Fiat Alliances or the high

currency rate between the euro and sterling.

The Growing Importance of the Platform Concept in Vehicle Design Strategies

One of the core tensions in the automotive industry has always been the product-

standardization/product-differentiation dilemma. In the 1980s, the myth of the global car

was a subject much talked up by manufacturers, and a burden on the accounts of thoseAmerican manufacturers who actually developed the concept. The development of highly

entrepreneurial project managers allowed, in the early 1990s, the rapid launch of innovative

products in market niches that conventional strategies were incapable of reaching. The

successes achieved at that time by a firm like Renault can certainly be put down to this

logic.

However, with the advent of strategies for growth by merger and acquisition in the

1990s, the advantages of design strategies based on platforms common to different products

took on new relevance. Firms such as the VAG group, PSA, and, less successfully, Fiat used

such strategies to drive their development in Europe.

Although the concept of the platform is an attractive one, putting it into practice in-

volves, in project terms, a dual difficulty in interfacing the platform-driven projects with

product-driven projects. Specifically, the issues are as follows:

The core issue is how to benefit from covert standardization while nevertheless preserving

differentiation in the finished products. The boundary is, however, far from obvious here.

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In multibrand groups, it usually leads to the de facto domination of one brand identity

over the others, which must fit in with the constraints imposed by the initial designer of

the platform.

The second issue is how to link up the replacement cycles for platform and products. If

a requirement to use a platform is imposed on a product, it will often mean that recent

innovations cannot be introduced, with the consequence that a risk is taken in a market

characterized by swift obsolescence. But if the platform evolves at the same speed as the

products derived from it, there is no longer much of a distinction between the concept

and the conventional notion of carry-over.

The New Boundaries of Manufacturer/Supplier Relationships and Vehicle Programs:Toward Colearning and Modular Codesign?

In the 1990s, the successes achieved in efforts at codevelopment led first-rank suppliers to

gradually broaden their field of competence and learn trades that had in the past been the

reserved domain of carmakers. Major value shifts were observed as subcontracting wasgeneralized. How far should one go in this new allocation of the roles of the manufacturer

of the vehicle as a whole and the suppliers of its components? The issue of extension of

supplier responsibilities and involvement is apparent today in two main areas.

The first area relates to timing. In the 1980s, suppliers provided input in the later stages of

projects, in the context of relationships that were precisely governed by detailed technical

specifications laid down by the car manufacturer. In the 1990s, it became gradually possible

to define effective arrangements for codevelopment (Garel and Midler, 2000; Kesseler,

1998)that is to say, cooperation between the carmaker and its suppliers on the basis of

overall functional objectives. However, with the increasing importance of innovation policies,

carmaker/supplier cooperation sought to extend itself upstream within development proj-

ects, in colearning arrangements (Lenfle and Midler, 2001) for the design of innovative

concepts for product features in which more effective coordination of the partners respectiveroadmaps was sought. The expanding importance of concept competition phases com-

pared with the more traditional competitive bid processes was the visible sign of this strong

trend, which raises several questions: For example, how should one allocate the costs and

risks involved in such upstream explorative programs, whose outcome is highly uncertain?

What type of regulation of intellectual property issues might encourage the partners to

provide the transparency imperative to the success of the partnership?

The second relates to the spatial and functional boundaries of supply. The last two decades have been

ones in which the functional and spatial scope of the suppliers role has expanded: There

has been a shift from the individual part to the component, followed, in the 1990s, by entire

systems (complete functional assemblies) and modules (an assembly whose boundaries can

be geographically isolated). The principle is to define interface standards to enable theproducers of components (whether modules or systems) to develop items that are simulta-

neously less expensive (volume effects), more versatile (offering greater variety), and com-

patible with open-architecture interiors. Suppliers delivering similar or homogeneous items

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to more than one manufacturer are in a position to gradually define commonalities in

the components they offer. They are also in a position to define the best ways to differentiate

them at low cost and to contain, or even to eliminate, the extra cost because of variety.

Volume also allows R&D costs to be spread over a number of client manufacturers.

This approach, summed up in the black box sourcing concept, suggested by Clark,

forms part of a particularly active flow of work on modular design (Henderson and Clark,

1990; Ulrich, 1995; Baldwin and Clark, 2000). The area that has been revolutionized by

the modular architecture concept is that of telecommunications and information technology.

Is the auto industry ready to be rethought in terms of combinations of interchangeable

components whose interaction can be predetermined through the adoption of common

standards and integrated into platforms with a strong and sharply defined architecture? A

highly futuristic concept car, Autonomy, presented by GM in 2002, is a step in this direction.

However, many authors rightly emphasize the integrity that is characteristic of the car as

object: It is very difficult to uncouple components without penalizing overall performance,

given that its functions are split between a number of component parts (vehicle behavior,

weight, compactness, noiseall these are examples of highly distributed functions). On theother hand, industrial vehicles do allow much more advantageous use of modularity.

Finally, one of the original features of the car as product is that while this dual evolution

toward platforms and modular black box design provides a rich mine of inspiration, it cannot

be applied literally as it has been in information technology. (There is, in fact, a need to

specify this area more precisely: Portable computers, like mobile telephones, have integrity

characteristics associated with their compact dimensions, which place tight constraints on

the deployment of modularity.) This observation is of major importance where project man-

agement is concerned because it forces partners to interact during the design phase in order

to arrive at compromises on distributed functions. Given that fact, a template for contrac-

tualized coordination capable of handling black box logic in terms of functional performance

is inadequate. It must be overlaid with procedures for interaction enabling the detection of

problems and the negotiation of compromises aimed at resolving them.

Limits of Performance in New Product Development Are Constantly Surpassed

Today, in a nutshell, the performance envelope for new vehicle project management can

probably be located in the following ranges in North America:

1. Cost of development of a new vehicle: between USD1bn and USD1.5bn (compared

with USD3bn to USD5bn ten or so years ago).

2. Accelerating fragmentation of market supply and creation of innovative new product

lines (Mini Rover, Beetle, Crossover, Hybrids, Nissan Cube, SUVs, etc.). In addition,

some manufacturers, with Renault in the forefront, are taking the risk of introducing

radical styling that breaks with the past, staking the visual identity of their products.

3. Development duration is of the order of 24 months or less (with a mean of around 36months), compared to 60 months (and a years delay) at the beginning of the decade.

Lead times are shortening between concept cars and serial production.

4. Carmakers in North America are now generally close together in terms of measured

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quality, which, however, does not preclude wide variations in quality as perceived by

the consumer. In addition, quality is no longer a competitive advantage but a prereq-

uisite. However, a worrying rise in the cost of vehicle recalls can be seen.

5. A continuous decline is apparent in the costs of assembly and processes (productivity

gains estimated in the region of 7 percent per yearcf. Harbour Report) as well as

components (on the order of 20 percent to 30 percent for each new vehicle). In addition,

manufacturers have included systematic annual volume-linked price reductions in their

contracts with suppliers.

6. These savings are passed on to the consumer through constant enrichment of the fea-

tures offered by vehicles at a constant price level. Moreover, for the last three years the

beginnings of further reductions in prices targeted on certain model ranges have been

observed. In short, there are now more features for a given price in constant, declining

money terms.

7. Architecture is controlled in terms of platforms and modules in order to take advantage

of scale effects on common portions while nevertheless preserving the diversity and

identity of the vehicles. For example, Toyota sells, on the basis of the same platform,vehicles as different as a sedan, a van, a Lexus, and an SUV.

Summary

From the postwar period until the present time, the development of project management

has radically changed structures and processes within car manufacturing companies. But on

the reverse, we can say that project management had been changed by its implementation

within the automotive context: from technique and tool orientation to more strategic and

organizational approaches, from highly precise contractualized relation patterns to proce-

dural open learning meta-rules. The auto industry was a latecomer to project manage-

ment, compared to military equipment or construction business. But these sectors are nowtrying to transform there project management tradition and adopt the project management

practices that were developed in the late 1980s and 1990s in the auto sector. We can see

various reasons behind such a dragging effect: the economic importance and symbolic no-

toriety of the auto sector, of course, but also the importance of researches in management

science and economics in the field, that happened to evaluate the performances of various

project patters and to trace the transformations round the world.

This process is not yet complete, since performance limits are constantly increasing.

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