Managing Competencies in Breakthrough Product Development: A Comparative Study of Two Material Processing Projects

340 IEEE TRANSACTIONS ON ENGINEERING MANAGEMENT, VOL. 54, NO. 2, MAY 2007

Managing Competencies in Breakthrough ProductDevelopment: A Comparative Study of

Two Material Processing ProjectsChristopher McDermott and Theresa Coates

Abstract—Managers face many challenges as they bring break-through products to market. Increasing pressures for short-termreturns often make these longer-term, breakthrough productdevelopment projects less attractive. At the same time, the arrayof external sourcing options available to managers has grown dra-matically over the last decade, allowing firms to outsource moreand more of their core processes. Taken together, managers oftenfind it appealing to minimize their internal exposure to break-through projects, instead choosing to either focus on incrementalprojects (with quicker, more certain paybacks), or to outsourcethe high risk elements of these breakthrough projects. Althoughoutsourcing decreases risk, it also allows other firms to developcritical expertise and competence. As such, there is an increasingneed for strategies that help firms build new core competencies asthey move these breakthrough projects forward.

Significant gaps exist in understanding what kinds of com-petencies emerge and how to manage them in the context ofbreakthrough product development. As such, the primary objec-tive of this study is to explore and document the development andmanagement of these competencies within the context of materialsprocessing firms undergoing breakthrough innovation. Utilizinga multi-case perspective allows for the delineation of commonelements within these domains that provided their respective firmsadvantage. The findings of this study are put forth as propositionsand support the notion that managers need to be cognizant of threedomains of competencies (market, technology, and integrative)(Coates and McDermott, 2002; Danneels, 2002)[7], [8] that emergefrom breakthrough innovations.

Index Terms—Breakthrough innovation, core competence, ma-terial processing.

I. BACKGROUND

A. Core Competence

COMPETITIVE advantage, from a competence perspec-tive, is achieved by focusing on and exploiting the

firm’s internal characteristics, specifically its resource profile[30], [31], [36]. In this model, the firm has internal abilities

Manuscript received June 1, 2004; revised July 1, 2005, December 1, 2005,and February 1, 2006. This work was supported in part by the North CarolinaState University (NCSU) through the Center for Innovation ManagementStudies. Review of this manuscript was arranged by previous DepartmentEditor A. S. Bean.

C. McDermott is with the Lally School of Management and Technology,Rensselaer Polytechnic Institute, Troy, NY 12180 USA (e-mail: [email protected]).

T. Coates is with the School of Business, Clarkson University, Potsdam, NY13699 USA.

Digital Object Identifier 10.1109/TEM.2007.893994

which it performs better than its competitors. These abili-ties or resources are called competencies and have specificcharacteristics. A competence is defined as follows.

A bundle of aptitudes, skills, and technologies that thefirm performs better than its competitors, that is difficult toimitate and provides an advantage in the marketplace.

A firm’s resources or competencies are generally defined asall the assets, capabilities, processes, and knowledge that re-sides in the firm [4], [13], [29] and must meet the followingconditions:

1) The competence is difficult to imitate.2) There is asymmetry among the firms with respect to

ownership.3) It must provide opportunities for the firm.Authors examining competencies have proposed that compe-

tencies should enable the firm to diversify into new markets byreapplying the competence. Thus, competencies have strategicpotential to exploit opportunities or neutralize threats from com-petitors. The competence model allows for a dynamic view ofthe firm by emphasizing the manipulation of human, physical,and intangible resources over time to create value. By remaininginnovative the firm renews itself. Penrose [29] and other re-searchers acknowledge that firm behavior is dynamic and thatfirms remain competitive by developing new combinations ofresources [2], [31], [35], [36].

Hamel and Prahalad [15] set the stage for identifying typesof core competence by suggesting that competencies are a clus-tering of skills and knowledge which are combined into productconcepts, investments, and the ability to influence the environ-ment. It is important to distinguish the type of core compe-tence, because the type of competence may impact on how itis best leveraged and developed. The main objective of paper isto work toward creating a framework for types of competenciesthrough the analysis of case studies in disparate industries andtechnology bases.

Competence research has mainly identified and focused ontechnical resources [7]–[9], [43]. Researchers have suggestedthe technological competencies are distributed across a largeand increasing number of technical fields [7]. A main difficultyin exploiting new technology is the lack of organizationalcapacity [33] and the possibility that complementary types ofcompetencies concurrently need to be developed. This investi-gation into competencies has yielded insights which are veryspecific to an industry or a product arena. Yet little work hasbeen done in grouping the competencies in such a way as togeneralize across industries, firms, products, and technologies.

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MCDERMOTT AND COATES: MANAGING COMPETENCIES IN BREAKTHROUGH PRODUCT DEVELOPMENT 341

Understanding competencies and trying to provide such aframework is difficult particularly in complex situations suchas materials processing where the product and manufacturingprocess are so tightly interwoven. Competencies are observedto develop from a variety of firm activities. Internal efforts suchas R&D and new product development are determined as one ofthe primary sources of new core competence in firms [8], [19],[31], [32], [43] Innovation and experimentation are consideredprocesses which initiate the development core competence [2],[19], [31]. Through exploration in new technology, develop-ment of new peripheral technologies and expansion into otherindustries, firms can also gain new core competencies [5].

Recently, several authors have attempted to understand howfirms can obtain competencies through collaborative arrange-ments [12], [21], [25], [28]. Acquisition and R&D alliancesare also considered important methods for acquiring and lever-aging particular technological competence. The fieldwork inGraebmer’s [12] study underlines the difficulty in leveragingtechnical competence through acquisitions. Returns occurwhen firms recombine the competencies and then exploitthem in areas where there is current technological and marketexperience. Firms are also challenged when developing newcompetence through R&D alliances [21]. Oxley and Sampson[28] highlight how defining the parameters and scope of jointprojects is difficult, yet necessary to protect the competencewhich is developing between the firms.

Although scholars have identified the sources of new com-petencies, it is still unclear what kinds of competencies emergefrom these sources and how they are leveraged. This paperpresents findings from the two case studies of breakthroughproduct developments carried out at Analog Devices and GEPlastics. Prior research suggests that competencies emerge frombreakthrough product development [7]; our present goal is toexamine and expand these findings across different technologyenvironments. The intent is to document the subelements ofthese competencies that are common in the development ofbreakthrough new products based on two disparate technologybases in different firms. As such, the research described hereworks towards and articulation of the elements that might makeup dimensions of competence.

B. Case Study Methodology

Case study research is especially appropriate for exploratoryresearch, where the focus is on 1) documenting a phenomenonwithin its organizational context, 2) exploring the boundariesof a phenomenon, and 3) integrating information from multiplesources [11], [24]. The companies developing breakthroughproducts and new technologies were identified by RensselaerPolytechnic Institute centers. A number of firms were ap-proached to participate in the study, but many firms felt thattheir breakthrough projects were too strategically sensitive incontent to be exposed in an in-depth study. Analog Devices andGE Plastics were very gracious in opening the doors of theirprojects and letting us view their development. The researchinvolved multiple interviews of senior managers, project man-agers, and individual team members from projects at AnalogDevices and GE Plastics. Over a two year period 16 individualswere interviewed at Analog Devices and nine individuals were

interviewed at GE Plastics. Interviews lasted from 45 min to 2h. Some individuals were interviewed multiple times for a totalof 33 interviews.

The structured components contained questions that wereasked of all interviewees. These questions included:

1) What competencies and strategic assets did they developand compete with in the new technology arena?

2) What knowledge and skills did they use and what did theydevelop?

3) How were they utilizing their new competencies?The unstructured components allowed interviewees to share

their insights and views relating to the development of the break-through products and how their firms utilized their new compe-tencies in future projects. Interviews were recorded. To providereliability, some of the primary project participants were in-terviewed multiple times to confirm observations and opinionsfrom other interviewees [11], [44]. Multiple interviews of thesame individuals over time provide validation of the informa-tion. Using multiple interviewees reduces the risk of undue in-fluence that an individual interview may have on the case study,provides a richer portrait of the case, and allows for better dataanalysis [11], [44].

External sources for each industry were also interviewed.Their perspective gave credence to how unique the newly devel-oped competencies were at the case study sites. The input fromthese analysts and industry participants increases the validityof the findings and confirmed that the competencies identifiedmet the criteria characteristics and fit into the Resource BasedView framework.

To understand the findings, it is important to first developsome understanding of the context for each case. The qualita-tive nature of this research requires that one be grounded in arich description of the two firms’ development of the technolo-gies [Micro Electrical Mechanical Systems (MEMS) and SuperAttribute Polymers Technology (SAPT)]. The discussion belowbriefly describes the development of the technology and then fo-cuses on the specifics of each case study. Histories of the break-through product developments are also encapsulated to set thestage for understanding the findings at the case sites. The caseanalysis supports the idea that breakthrough product develop-ment does lead to the development of new core competencies.Further analysis identifies the specific types of new core com-petencies that resulted from the breakthrough product develop-ment activities within the firm.

C. MEMS Technology

MEMS integrates electrical and mechanical components intoa very small device. These devices are produced in a clean roomthrough multiple pattern and etch sequences. MEMS differ sig-nificantly from semiconductor chips. Rather than just a flat sur-face like a semiconductor chip, MEMs are 3-D sculptures, withmechanisms of levers, mirrors, and gears. As such, MEMS cancreate moving parts on or in the chip, or mechanisms withinthe chip itself. MEMS sensors are suited for a variety of ap-plications involving the measurement of gravity, shock, or vi-bration, and have found application in video games, seismicrecording, machine monitoring, and diagnostic systems. Appli-cations using MEMS technology are rapidly becoming availablein the marketplace.


There are a number of challenges surrounding the devel-opment of MEMS technology. Whereas the semiconductorindustry uses two similar manufacturing processes, MEMSinvolves three groups of widely disparate processes. Uniquepackaging and reliability testing must also be developed forMEMS devices to allow for the motion or sensing abilities socritical to the product. Because the applications involve sensinga localized environment, total isolation from the environmentas is done with traditional semiconductor chips is not an option.MEMS manufacturers must also focus considerable develop-ment on packaging approaches that encapsulate and preventunwanted motion of micromechanical elements or, in opticalmicrosystems, that interfere with optical signal transmission. Inaddition to the challenges of packaging and testing, MEMS alsoposes certain engineering problems. Traditional chips requireprimarily electrical and materials engineering expertise, butMEMS also requires other disciplines, depending on the appli-cation. As a result, developers face a huge task of managingmuch larger cross-disciplinary teams and conducting R&Dacross disciplines. There are also few experienced personnel,and MEMS developers often lack the fabrication equipment andmaterials specifically designed for microsystems manufacture.

D. MEMS at Analog Devices

While the origins of the project could be traced back to 1979,it was not until 1990 that Analog began testing potential designsfor the automotive market, their first target. Unlike other Analogcustomers, the automotive market required manufacturing chipsin large volume and demanded incredible reliability. Althoughthe target market was defined, the specific application was stilluncertain. The first actual large shipment of product (accelerom-eters) was delivered to Siemens late in 1993 for use in Saabautomobiles.

The uncertainty of operations in this environment created newchallenges for Analog. It was difficult for the project to supplyorders because every time the project ramped up the manufac-turing process volume, the process would fail. As one man-ager explained, “we had no idea why it worked; then in themiddle of ramping up and major product delivery, everythingfailed.” In fact, the project did not really make accelerometersin volume for two years, because they had neither the capacitynor a process that could produce thousands of devices on a costeffective basis. Instead, work was done in small batches witheach unit hand tested. By 1994 they had only shipped a total ofabout 60 000 accelerometers.

By 1996, the MEMS team at Analog was shipping six mil-lion accelerometers a year and had moved into their newly cre-ated micromachining division in Cambridge, MA. The CEOand company founder approved funding for the new division todevelop separate manufacturing facilities away from the com-pany’s centralized manufacturing plants, as MEMS needed spe-cific equipment and a facility for experimentation to understandthe new process. By this time, the original group of three hadbecome a division with over 80 employees.

By 2000, Analog’s MEMS division began to operate in theblack. The firm had developed a host of MEMS designs andproducts, targeted at new customers and markets that were nottraditional to Analog. The company also had created a strongreputation in the MEMS community and was perceived as one

of the few successful companies in this technological arena. Ahost of new opportunities and challenges were just beginning tobe addressed.

E. Super Attribute Polymers Technology

SAPT are often referred to as “smart materials” or “advancedplastics.” SAPT materials are designed to be adaptive and re-spond to their environment. For example, shape memory ma-terials react in a predetermined way under a specific stimulus,such as temperature, chemical additives, or because of the phys-ical characteristics of the environment in which they are placed.For manufacturers, SAPT means a plastic can be many timesstronger or clearer than the less uniform plastics produced inexisting processes.

During the 1990’s, plastics research began to develop a crit-ical understanding of important chemicals called catalysts thatguide the intricate linking of molecular building blocks intothousands of different plastics. Until then, catalysts were sopoorly understood that much new plastics research was donein university laboratories and was ad hoc. Over time, scien-tists around the world cracked the code of one important classof these workhorse molecules called single-site catalysts. As aresult, SAPT manufacturers could now use these chemicals toproduce plastics with tailor-made properties such as toughness,elasticity, and the ability to withstand temperature extremes. Thenew polymers could be light absorbing, electrically conductive,or even magnetic. Because of such new properties, it is not sur-prising that developers of new products wish to supplant othermaterials with SAPT.

The plastic production process begins by heating hydrocar-bons in a “cracking process.” In the presence of a catalyst, largermolecules are broken down into smaller ones. This process re-sults in the conversion of the natural gas or crude oil com-ponents into monomers such as ethylene, propylene, butane,and styrene. These monomers are then chemically bonded intochains called polymers. Different combinations of monomersyield plastic resins with different properties and characteris-tics. Each monomer yields a plastic resin with different prop-erties and characteristics. Combinations of monomers producecopolymers with further property variations.

There are a variety of different processing methods usedto convert resins into finished products. These include bothextrusion and injection molding. Although these processesare similar to traditional plastic processing, they are differentin certain key aspects when applied to SAPT. Unlike regularplastics, the properties of the super attribute plastics requirean understanding of other disciplines like optics and electricalengineering and SAPTs are more unstable in processing. Thesedifferences create a number of challenges surrounding not onlythe formulation, but also the manufacturing of SAPTs. Usingtraditional manufacturing methods would negate the uniqueproperties of SAPTs. Retaining the unique properties throughthese multiple manufacturing processes is challenging.

F. Super Attribute Polymers at GE Plastics

The Solex project originated in 1996 when the vice presidentof corporate R&D decided to set up a project to explore thepossibility of making a weatherable plastic. The concept of thisproject was initiated by theoretical discussion on formulations


TABLE IINTERVIEW SUMMARY

which could produce a highly durable plastic for outdoor use.The project manager was assigned a small cross-functional teamof researchers to develop a formula. This group operated on thefringe of other corporate R&D projects, the majority of whichwere focused on improving current product lines.

In late 1998, the cross-functional team went to Detroit to dis-cuss their product concept and formulation to automotive ex-ecutives. They persistently lobbied and provided potential cus-tomers with the samples and test results until they got a spark ofinterest. Selling the new material was difficult. Due to prior dis-agreements, the Solex team bypassed their technical group (thepart of the organization that traditionally bridged the R&D/cus-tomer interface) and went directly from R&D to the automotivecommercial group themselves. This gave them immediate entréeinto current automotive customers. The team worked hard to de-velop new relationships with potential customers. During 1999,the reaction process for small amounts had been stabilized. Theteam also learned that required product characteristics for an au-tomotive application went well beyond just sun and rain dura-bility, to include enhanced characteristics relating to scratching,shine, and metallic colors. By 2000, the Solex team had droppedthe molded weatherable polymer application and was focusedon making layers of film for the automotive application. Theteam also started to supply the product to a number of otherapplications and customers, who paid a premium for the mate-rial and did not need high volumes. At this time the team faceda number of technical and organizational challenges, not theleast of which was that the processing had to fit within the con-straints of the current equipment and process utilized for anotherproduct, LEXAN®. The LEXAN® plant was originally chosenbecause it had a similar base and, thus, had the right “pots andpans” necessary to produce the new weatherable polymer. How-ever, plant management insisted that the team change the SAPTcatalyst to insure internal consistency with other products thatalso used some of the same processing equipment. This changeaffected the formulation as well as the reaction process, whichmeant that both product and process were in fluctuation at thesame time. Concurrently, the window of development time wasshortened dramatically as Chrysler indicated that they would putthe new material on the fascia of one of their 2005 car models. Toproceed, new testing programs were developed from scratch, asexpertise in these optical properties did not currently exist insidethe firm. At the same time, the team was also pursuing smallerapplications, selling a thousand pounds of the material to newcustomers such as telecom device manufacturers and outdoorvehicles.

In addition to the technical hurdles, the team also had to over-come organizational obstacles. Late in 2000, the team prepared

the project proposal for a high level review. The successful out-come of the review removed a number of organizational obsta-cles and resulted in the naming of a business manager and ahigh level project champion. Resources were allocated to helpdevelop a robust process and explore the next generation of thematerial. Along with money for capital investment to improvethe LEXAN® plant, the team was expected to produce two mil-lion pounds of the material in 2001.

By spring of 2001, the team increased the batch size from100-liters (L) to 350-L. Thanks to their increased organizationalsupport from above, significant modifications of the LEXAN®

plant occurred, as well as additional training for process techni-cians. One interviewee indicated that this was a significant im-provement “as the plant hasn’t changed in 30 years.” The teampursued even more applications for the material and already hadcontracts with John Deere, Motorola, and Nokia for significantamounts of the Solex material. The next generation of the Solexproduct was already in development. As well as consideringother optical properties, the team developed self-protecting ele-ments against heat. Things were so good, in fact, that the teambegan to turn away customers, and other companies were begin-ning to recognize the original team members of this GE projectas experts in the emerging field of weatherable polymers.

G. Data Analysis

The case analysis approach outlined by Miles and Huberman[26], Yin [44], and McCutchen and Meredith [24] was employedto uncover and examine the key themes in the data. Within andcross case comparison techniques such as mapping were usedto explore, describe, and confirm themes and constructs. Thesecomparisons allow an understanding of the phenomena in thefirm’s context and increase the validity of the observations [11].

The interview data, observation notes, and press release doc-uments were used as information sources for each case site. SeeTable I for an overview of the interviews. This data set was an-alyzed and coded by the researchers to discover commonali-ties between what the team members described as competen-cies which emerged from the projects. Groupings of similarlythemed data emerged and were then compared to informationfrom press release documents, observation notes, and industryexperts’ opinions. Great care was taken to make sure that theinterviewees described the same themes and trends. The codingand comparison process followed the procedure suggested byMiles and Huberman [26, p. 57]. Coded data was kept in seg-ments in category groups which allowed for an examination offrequency and specifics about competencies. Codes were thenused to retrieve and organize the groupings of data within each


site. This data was compared and cross-tabulated between inter-viewees to identify critical capabilities. The within case analysisprovides conceptual coherence from the observations and infor-mation garnered from the interviews at one site. To provide phe-nomenological validity, six experts were asked to provide feed-back on the findings. These include industry consultants fromboth MEMS and SAPT, university professors involved in cen-ters doing research in the technologies, presidents of MEMS andSAPT industry associations, and an administrator of a nationallaboratory. Using such experts is consistent with Miles and Hu-berman [26], who recommend the use of experts in qualitativeresearch as a method of ensuring the accuracy of findings andobjectivity.

Analysis of the case study sites confirms that the break-through product development produced new competencies.Both projects at Analog Devices and GE Plastics were de-veloping and utilizing new skills, knowledge, and capabilitiesto experience successful commercialization outcomes. Bothprojects had multiple applications which they were sellingand had future generations of the application in the pipeline.They were also expanding into a family of products for theirfirst application. In the case of Analog Devices, they havesuccessfully completed their second MEMS application. Thatapplication is becoming the nucleus for a family of products.Analog currently is moving into other application areas as well.The GE Plastics team is actively pursuing a second applicationin the SAPT technology and is already planning its third andfourth applications. Both projects have seen tremendous salesgrowth to such a degree that meeting demand is limited bymanufacturing capacity. The findings of the case studies sug-gest that breakthrough product development is the basis for thedevelopment of core competencies at these two firms.

II. FINDINGS

A. Core Competence Development and Types

In both projects, the new competencies created led to newcustomers and new products for the firm. The abilities have thedefining characteristics of new competence as indicated by theresources based view theory. These capabilities were extend-able, as they have led to multiple current product families aswell as the expectation of future new product families. Cus-tomer value is provided through these new abilities. Intervie-wees agreed that customers found a level of value in the firm’snew abilities with the technology. Team members at both siteswere asked to participate in conferences and were asked to teachand consult for customers’ engineers. Customer value is alsodemonstrated by Analog’s evolution into a clearing house andmanufacturer for other MEMS companies.

There are a number of potential and current competitorsin the technology, but industry experts concur that the twocases study sites are considered exemplars in the respectivetechnology arenas. Competitors have not been able to duplicatetheir success nor their underlying capabilities. Intervieweesat both companies felt that the process of undertaking thebreakthrough product development had created a barrier ofnonimitability of the competencies. Experts confirmed thatother firms could not yet duplicate their abilities. As one engi-neer at Analog indicated, “Competing firms cannot understand

the intricacy, complexity, and interactions of our (Analog’s)abilities to perform product development and manipulate thedesign and process with MEMS technology.”

Previous research has begun to examine the types of compe-tence which emerge from different firm activities such as jointventures and technology adoption. However, these case studiesusually focus on one type of competence, primarily technolog-ical abilities [9], [40], [45]. Evidence from the cases reveals anumber of different types of competence which emerge as a re-sult of breakthrough product innovation. The cross case com-parison of the two projects confirmed the creation of three cate-gories of competence. Newly generated competencies resultingfrom breakthrough product development are grouped into threecategories: Technology, Market, and Integration. Utilizing twoprojects in different technology bases in the cross case compar-ison establishes strong evidence for the types of newly generatedcompetencies within the materials processing arena.

The set of competence types found is much larger than thoseidentified by other authors, who were either categorizing on aspecific capability such as reputation or look only at technicalabilities [1], [8], [18], [23], [43]. The three core competencetypes of technological, integrative, and market are described infurther detail in Table II. Our observations suggest that each ofthese competency domains can provide significant long-termbenefit to the firm, and that managers need to actively worktoward growing these areas to achieve the maximum benefitfrom the breakthrough product development. To focus on onlyone area (e.g., technology competencies) would be shortsighted.These specific competencies allow Analog and GE Plastics todesign and manufacture products based on the newly developedtechnologies. Each category of competence refers to differentabilities that the breakthrough product development process hasdeveloped.

The competencies listed are strategic capabilities that havethe potential to be significant long term revenue generators. Al-though other firms may be able to duplicate the design or for-mulation, their ability to exploit it will not be as great, sincethey do not have the knowledge base and learning comprisingthese competencies. The expertise, skill sets, and knowledgeresident within the competencies as well as the interaction ofthe competencies with each other, provide a barrier to duplica-tion and exploitation. Analog and GE Plastic view these abil-ities as independent of the design, formulation, or application.In essence, these abilities give the firm a variety of opportuni-ties for products and applications. For example, testing abili-ties now trans-fer into other areas and also open the door forquickly understanding new scientific properties necessary fornew applications.

Technology competencies give the firms the ability to de-sign and manufacture these new technology based products.These competencies involve design and manufacturing skills,equipment, know-how or processes, which stem from an un-derstanding of the MEMS and SAPT technologies. We founda number of specific technology competencies that developedin the course of these breakthrough initiatives. Although eachof these capabilities stands alone, they also interact with eachother to enhance the difficulty of imitation and to provideaccess to new markets.


TABLE IITYPE OF CORE COMPETENCIES DEVELOPED THROUGH THE

BREAKTHROUGH PRODUCT DEVELOPMENT

Examples of a technology competency include GE’s SAPTformulation processes. New processes incorporate a number ofnew features into new polymer formulas, thus giving the newmaterial a wide range of new characteristics for a host of newapplications. In the same sense, Analog has the ability to de-velop designs that incorporate both electrical and mechanicalproperties and can be manufactured in volume. They have beenable to capture the potential needs of an application, materials,and fabrication in the design.

Another technology competence is in the newly developedsoftware used for testing, simulating, and prototyping. Newsoftware capabilities emerged at Analog, where they havedeveloped proprietary design software for combining elec-trical, mechanical, and optical properties. GE also createdproprietary software which simulates weather conditions andthe parameters necessary for testing. Their new software alsomanages combinatorial weather testing necessary to examinemultiple new properties of the polymers have been developedfrom the GE project. This new software gives GE an advantagein the market place and again allows them to develop moreapplications that have additional desirable characteristics. Asone engineer indicated “Our new combinatorial procedure andsoftware provides us the ability to test a multitude of factorsmore often and quickly move through iterations to find sets ofcharacteristics. It will be used in many other technology andmarket areas as well ”

GE in their Solex project has also had to develop new testingprocedures. This ability has involved not only identifying theparameters, but developing the standards for these parameters.In the area of optical properties, and weathering, a host of stan-dards and quality parameters have been developed. Programsand testing processes have also been created to examine thepolymer pellets as well as the end product. Automotive cus-tomers as well as other scientists are coming to them for answersabout weatherable testing.

A similar theme is found in the new manufacturing compe-tencies built around the breakthrough product and technology.Cross case comparison indicates that new manufacturing abili-ties comprise new toolsets, equipment, processes, and facilitiesas well as the experience to create, manipulate, and modify theseobjects. We found that Analog created a technology competencein their ability to develop and manage the production processesneeded to fabricate MEMS devices. Originally, they used modi-fied semiconductor manufacturing equipment, but this produceda defect rate of over 50% and the process was never stable.Over time they developed prototype testing equipment and cre-ated new manufacturing equipment for the MEMS devices. Thenewly created manufacturing competencies are very apparent asAnalog has built a brand new manufacturing and R&D facilitydedicated to MEMS.

In contrast, GE has refurbished their manufacturing facilitiesfor the new polymer. They used their LEXAN plant and modi-fied the process and added new equipment. As one GE managerdescribed the manufacturing of the polymer.“We had the rightpots and pans, we just didn’t have the mixing ability.” GE hasgone beyond manipulating their own manufacturing process,they have also developed a unique insight in how the newpolymer material responds when manufactured by the customer


(e.g., extrusion and molding). A strong competence now existsrelating to producing formulation, which incorporates multiplemanufacturing processes.

Breakthrough product development in the new technologiesinitiatives has provided Analog and GE with a host technolog-ical competencies. External experts indicate that many firmshave launched expensive research and development programsto develop these technologies and ulitimately failed. One ex-pert expressed his opinion that a number of exciting MEMS andSAPT applications have been designed and prototyped, but fewhave been massed produced and were successful. Analog De-vices has been able to mass produce their MEMS accelerom-eter used in airbags and then mass produce the gyroscope forthe PC gaming industry. Likewise, GE has started to mass pro-duce their Solex material for automotive applications and alsohas entered the cellular phone market. These firms are also plan-ning on using these competencies to enter more markets and toadd new physical properties to their devices and materials.

In sum, we observed that when firms successfully undertakethe breakthrough product development, technology competen-cies emerge. Technology competencies encompass knowledge,skills and abilities which are utilized in development subsequentapplications and the delivery of customer value. Specifically, ourobservations lead us to propose that:

Proposition 1: Technology-based core competencies re-sulting from breakthrough innovation include: Manufacturing,testing processes and procedures, equipment development,product design, as well as software and design tools.

Market competencies help Analog Devices and GE to exploittheir new technologies and products. Our observations identifythree market competencies which have developed around thenew breakthrough technology and products. The first is a com-petence in market exploration. This competence involves “vi-sioneering” of the technology and product in a set of applica-tions and understanding how it will fill market needs. Identi-fying other markets and customers for the new technology andbreakthrough products is critical for long term growth. Both GEand Analog took the breakthrough product beyond the currentcustomer base to other new customers. For example, Analog tar-geted MEMS products to an automotive clientele which at thattime was an entirely new customer base for the firm. At the sametime they targeted high order volume customers which differedfrom Analog’s smaller batch customer set. Our observationsnoted that this competence has been instrumental in shapingand targeting Analog’s future MEMS development efforts. Theyhave created a MEMS gyroscope which has opened up the com-puter and gaming markets, both which are new to Analog. Manyexperts interviewed believe that much of Analog’s current andfuture success resides in their unique ability to continue to domarket exploration for MEMS technology.

Similar market exploration abilities developed at GE. As theproject manager described how the product features evolved,“We went in to the market thinking weatherability and dura-bility were the main features and found out that color and op-tical properties were in some ways more crucial to this industry.In the current state that’s not what it is designed for. So we haveto go back and redesign, but now we can make the technologydo other things ”

Another scientist described their ability to move the break-through product into other markets, “The engineering membersof the team will sit down with someone representing some ideaof what the customer expects, and where that is missing, we haveto guess what the customer wants or would expect, and then welist those down. It is then the responsibility of someone to verifythat those assumptions are valid, in terms of what we think thecustomer wants. Our ability to guess has become very good.”

At both sites, scientists and engineers described their marketvisioning abilities as “we can look and identify new marketareas,” “we are and can foresee the future and developmentideas,” or “Now I see opening an area and the growth of a typeof product.”

To take advantage of this market exploration, the two projectshave also had to manage the customer. This “management” in-volves communicating to the customer’s product developmentpersonnel, about what are the important features, how are theymeasured, and can the product interface with the customers’ sys-tems. Customers buying breakthrough products to incorporateinto their products have a number of reservations and often arereluctant to commit. In both projects, the participants were en-gineers and scientists, who had little marketing or sales experi-ence. In the case of Analog, their first MEMS product was goingautomobile safety systems and, therefore, they had to deal with anumber of reliability issues. Also the automobile industry has avery tight cost structure and were operating in cost constraints.They learned how to present their testing results and help thecustomers product development group understand the parame-ters within which the product worked.

For the GE project members dealing with the customer di-rectly was new occurrence. None of the team had any marketingexperience. As one member recalled “we learned how to pitchour product and technology to [the automotive firm].”

Another GE scientist remarked, “we can see other applica-tions of the product, our ability to read the customer and re-spond is better, and our new clients are less hesitant about howweatherable film might fit into their product design or if we caneven do it.”

The final market competence we observed in the two break-through products was the creation and leveraging of a strongreputation. Analog’s ability to develop and manufacture MEMShas created a reputation that acts as a competence and that is ex-ploited by the firm. Reputation is an interesting competence, asit is derived from other competencies within the firm, yet at thesame time supports them. For example, Analog’s strong newtechnical competencies and newly developed marketing exper-tise have lead customers and other developers to ask for advice,building their reputation which then is a draw to other poten-tial customers. Analog Devices is aware of the impact of theirmicromachining division’s reputation and they actively managethis reputation. Their solid reputation is a resource which opensthe door to new customers. It also helps influence the develop-ment of MEMS technology industry wide by setting standardsin packaging and by influencing customer opinion. Their rep-utation, therefore, plays an influential role in maintaining theircompetitive advantage.


We observed that these marketing-related core competenciestake a long time to develop. Although Analog has fully devel-oped a full cadre of market competencies, GE Plastics has not.There are indications that GE is beginning to develop these. Themarket exploration competence and relationship managementare observable in GE’s development of a number of smallerapplications with new customers. The reputation competenceis beginning to emerge as other industry firms and customersare soliciting their advice. However, the development of thesenascent abilities is hampered by a number of factors. First, GEis not as far along in the process of commercialization, or in thepractice of utilizing the newly developed core competencies inmultiple applications. They also may be hampered by their orga-nizational culture and its pursuit of their traditional client base.In contrast, Analog has pursued nontraditional clients in mar-kets that are unknown to the company. Their market explorationability in identifying the applications and potential customersexceeds that of GE’s. They have shown a surprising capacity forleveraging the learning accomplished during the developmentof the breakthrough MEMS product for smaller OEMs. Theknowledge that they have acquired through their interactionswith external parties has given them an ability to understandapplications and customer needs which is hard for competitorsto duplicate. It is possible that GE is on the cusp of developingspecific market competencies as it may be that market compe-tencies develop last.

Interviewees at both sites viewed the market core compe-tencies of relationship and reputation management as criticalto current and continued success. These abilities are valuedby their current and potential customer bases, as customerscome for advice and information on MEMS and weatherablepolymers. At GE, the project participants act as missionaries.They talk about their polymer and its potential to everyone.The project has created expertise in optical properties and col-orants in plastic. They have new software and testing programswhich are unique. Within the automotive and outdoor furniturecompanies they have established a reputation for understandingpolymers and applications where optical and color propertiesare important. They are viewed as potential problem solvers bythese firms.

The marketing competencies which have emerged providevalue to the customers and allow access to new market. Thecompetencies developed by these projects are viewed as un-common by external parties. It was very common to have in-dustry consultants comment on how unique the capabilities thathad developed from these projects. For example, on industryconsultant stated, “Analog has done an incredible job in beinga missionary in MEMS based products. They have a knack forknowing how to present MEMS to a wide spectrum of potentialclients. I don’t know anyone else, who can do this ”

These conclusions lead to our second proposition:Proposition 2: Market-based core competencies resulting

from breakthrough innovation include: Market exploration,relationship management, and reputation management.

Integration competencies are the problem solving skills nec-essary to create the new applications and develop the new tech-

nology. Those who do breakthrough product development rec-ognize how difficult it is to manage the interdisciplinary natureof these projects. Integration competencies help overcome theknowledge domain barriers and are important because they fa-cilitate and increase the “comingling” of different knowledgeareas. One major integration ability is in the technical and scien-tific cross-linkages. This important capability allows the firm’sengineers to mesh multiple knowledge and functional domainsto overcome the numerous engineering challenges in developingand fabricating the application with the new technology. De-signing MEMS devices involves expertise in mechanical, op-tical, electrical, and biomedical engineering fields. Analog hasbeen able to develop that ability to manage this interweaving ofknowledge areas. We also observed this capability at GE whenproject engineers and scientists meshed multiple fields (e.g., ma-terials science, optical, thermo, and physical) when creating for-mulations and testing for different features. As one engineeringmanager commented, “we are always able to throw what weknow into a big bowl and come up with some solutions andideas.”

The ability to interlink specialty areas, equipment, and pro-cesses is also an integration competence. It is a capability thatdeals with the interactions of the physical items and functionalareas. For example, GE had begun to sell small quantities oftheir Solex formulation out of R&D batches. As they were get-ting set to begin processing at a LEXAN® plant, they found thatthe current formulation did not have the essential inputs nec-essary for processing at that plant. To move forward with theproject, they needed to integrate their knowledge about func-tions, tool sets, and manufacturing equipment to face the chal-lenge of creating a totally new formulation with the same char-acteristics and qualities to work at that plant. At the same time,they also modified the existing process and equipment at theplant. They understood the limitations and the capabilities andhow formulation and the process may interact. This competencebecomes more critical as both of these projects continue to mi-grate toward commodity like conditions.

The development of multiple applications is an outcome ofstrong cross linkages between market knowledge and the po-tential in the technology. Cross linkages between technologyand market, ease the problem solving necessary to create newapplications while also spurring the development of devices andformulations. Accessing and building upon their knowledge isa formidable competence that competitors are hard pressed toduplicate. Their ability to enable creative action by combiningideas, knowledge, and information generates solutions. Analogcapitalizes upon these abilities to help in their continued problemsolving, learning, and innovation. It allows them to add productswhich incorporate other engineering domains like optical anduse other production techniques. The VP of Business Devel-opment indicated that “Cross pollination is very important andcritical to success in capitalizing upon what we know weare able to develop numerous new MEMS devices for our newcustomer and have leveraged our knowledge to do so.”

GE extends their applications and customers by using thiscompetence to enhance the formulation to be fire retardant, and


in looking at other forms of output for their Super AttributePolymer. Their integrative competencies facilitate the incorpo-ration of new knowledge domains in testing and prototyping.Like Analog, GE can quickly engineer new applications orsecond generations of the breakthrough product. Modificationsof the manufacturing process do not create so many glitches. Asone engineer stated, “Engineering new solutions does not causelow yields or missed deadlines. We are not so disappointed; wecan now control the properties, the stresses, the thickness, andthe given reactor.”

These competencies exhibit themselves when project par-ticipants collaborate. Their actions of communicating, beingsounding boards, and displaying their findings illuminatetheir integrative abilities. The new knowledge and heuristicsthey have developed in the course of breakthrough productdevelopment is utilized by their integrative competencies. Ourobservations about integrative competencies and their impor-tance in capitalizing upon new knowledge led to the followingproposition:

Proposition 3: Integrative core competencies resulting frombreakthrough innovation include: toolset use and their interac-tions, technical and scientific cross-linkages, and market/tech-nology cross-linkages.

The case study sites provide strong examples that core com-petencies in all three types are developed through breakthroughproduct development activities. Specific details about the com-petencies are outlined in Table II. Interviewees confirmed thatthe core competencies developed would still be utilized even ifeither MEMS or weatherable SAPT technology ceased to existat the firms. The findings presented here build toward the propo-sitions, and begin to provide a framework for identifying thesecompetencies which emerge during breakthrough product de-velopment. As we discuss, these propositions clearly need fur-ther exploration in subsequent studies.

III. CONCLUSION

Competence in the resource based perspective represents acombination of knowledge, skills, and technologies which pro-vide opportunities for the firm and are difficult for competitorsto duplicate. This research provides a framework for identifyinga portion of a firm’s stable of resources by examining three dif-ferent types of competence which emerged during breakthroughproduct development. An analysis of competencies developedduring the commercialization of MEMS and SAPT technologyprovides evidence of the complexity and the types of resourcesspawned through breakthrough product development. AnalogDevices and GE have found themselves uniquely positioned asleaders in these emerging technologies and products. Throughthe commercialization of a new technology and product theyhave also acquired new competencies in the areas of technology,market and integration. The new competencies give these firmsthe ability to pursue and develop new opportunities whilehelping them develop attractive product market positions andadvantages as first movers in their industries. To pursue growthopportunities, the firms must now focus on the management oftheir abilities in product and technology development and the

production expertise, while directing complementary humanand physical investments.

The abilities arising in these firms are competencies definedby the resource based view paradigm. Competence types arecomprised of abilities which can be used separately or in somecombination provide competitive advantage against competi-tors. The findings also highlight and support the concept thatcompetencies are complex skill sets which are acquired throughlearning. Competence types found include technological skills,complementary assets, and routines and capabilities. These ca-pabilities have assembled in clusters of tangible and intangibleabilities that span individuals and groups. This study’s find-ings also suggest that competencies build on each other and thatthe ability to link these capabilities is crucial, as demonstratedby Analog Devices’ and GE’s ability to commercially succeedin their breakthrough product development. Using the compe-tencies has also opened the door for these firms to enter newmarkets.

The technology competence type is the most easily identifiedset of competencies. Technology competencies tend to surroundan artifact of proprietary technology and included knowledgebases. Besides technical experience and knowledge, technologycompetencies are also comprised of hardware, software, equip-ment, and process as demonstrated in Analog Devices. Newlycreated core competencies have been leveraged into multipleMEMS product families.

Market competencies were explored and defined in this re-search. The exploitation of the new technology in the break-through product, adaptation of the product to many potentialapplications, ability to see opportunities, and ability to makethe breakthrough product transparent for the customer are allmarket competencies. Developing these skills was very hard forthe team because they were often unrelated to their experienceand skill base.

The emergence of an integrative core competence type is oneof the more interesting aspects of this research. Integrative com-petencies have multiple functions. They emerge as a result ofthe need to coalesce diverse systems of meaning and fields ofknowledge by scientists, engineers, and managers who are in-volved in the project. Other researchers have also suggestedthe idea that integrative competencies may exist (Hendersonand Cockburn [17]; Tyler [40]; Zahara and Neilsen [45]). Thisresearch found that the outcome of the breakthrough productdevelopment is a strong combinative and collaborative abilityamong different knowledge and skills. Integrative core com-petencies seem to help project participants interact and com-bine their shared expertise. Both Analog Devices and GE Plas-tics project participants expressed how they had to mesh dif-ferent knowledge domains, and that these were key abilities inleveraging the breakthrough product development. In both casestudies, the integrative abilities were seen as furthering the func-tionality and future generations of the product.

The research has limitations, as the data are subjective in na-ture and limited to the two subject case study firms. Although wedid attempt to interview all the key people on the developmentteam for the MEMS project, not all were available. Nor did we


attempt to interview all functional and SBU managers who wereoutside of the MEMS project at Analog, but who interacted withit. However, these interviews provide good information and thedata set is notable for its richness and longitudinal nature, but itis only a starting point. Further investigations can provide sup-port through a larger set of observations.

Using the competence based perspective provides an aware-ness of how breakthrough development is critical activity forgrowth opportunities. Firms may not initially be aware of howvaluable these competencies generated by such development areto the firm. For example, these observations may have impli-cations for outsourcing decisions, as outsourcing elements ofthe development process may hamper the creation of these newcapabilities, and firm needs to be aware of this pitfall. Man-agers need to be aware that these abilities arise during develop-ment and with careful management can be source of competitiveadvantage.

ACKNOWLEDGMENT

The authors would like to thank Analog Devices and TheGeneral Electric Company for their participation.

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Chris McDermott received the B.S. degree in engi-neering from Duke University and the Ph.D. degree inmanagement from the University of North Carolina.

He has worked at Westinghouse Electric andFairchild, where he was an on-site Contractor atNASA. He is currently an Associate Professor atthe Lally School of Management at RensselaerPolytechnic Institute, Troy, NY. His research inter-ests include new product development, managingbreakthrough innovation, operations, and healthcaremanagement. He teaches courses in these and other

subjects at the undergraduate, graduate, and executive levels. His work hasbeen published in such journals as IEEE TRANSACTIONS ON ENGINEERING

MANAGEMENT, the Journal of Operations Management, Decision Sciences, theJournal of Product Innovation Management, and the Journal of Engineeringand Technology Management.

Dr. McDermott is a member of the Academy of Management, the DecisionSciences Institute, and the Production and Operations Management Society.

Theresa Coates received the Ph.D. degree inmanagement from Rensselaer Polytechnic Institute,Troy, NY.

She is currently an Assistant Professor at ClarksonUniversity, Potsdam, NY. Her research interestsinclude the development of emerging technologies,product development, and the exploration of compe-tencies and entrepreneurial firms. Her work has beenpublished in the Journal of Operation Management.She teaches strategic management and technologymanagement in the School of Business.

Dr. Coates is a member of the Academy of Management.

Documents

Managing Competencies in Breakthrough Product Development: A Comparative Study of Two Material Processing Projects