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An oPERATions REsouRCEs PERsPECTivE on PRoduCT And sERviCE dEvEloPmEnT 299

Figure 8.12 The ‘vicious cycle’ of under-resourcing development capacity

Development need is
confirmed only for the
short term

So, there is reluctance to invest in
long-term development resources
So, problems in the development
project result in lost business
opportunities
So, in the short term
the project runs into
problems because it is
under-resourced

be reluctant to invest in development capacity because they see it as an under-utilised
resource. This may lead to a vicious cycle in which, although there is a short-term need
for development resources, companies fail to invest in those resources because many of
them (such as skilled development staff) cannot be hired in the short term, which leads
to development projects being under-resourced with an increased chance of project
overrun or failure to deliver appropriate technical solutions. This, in turn, may lead to
the company losing business or otherwise suffering in the marketplace, which makes
the company even less willing to invest in development resources (see Figure 8.12).

Product and service development networks
Most interest in supply networks has focused on the flow of parts, products and, occa-
sionally, services. Recently, interest has also started to focus around the exchange of
product and service development knowledge, and the integrating of suppliers into
the innovation process. This network of knowledge exchange is sometimes called the
‘design (or development) network’, or ‘design chain’, and in many ways the operations
strategy decisions concerning conventional supply networks are also reflected in devel-
opment networks. Two decisions in particular do much to determine the effectiveness
of development networks. The first is the extent of vertical integration – the decisions
of how much development to do in-house and how much to subcontract. The second
is how to manage the relationship between the ‘players’ (most notably, customers and
suppliers) in the network.

Example Two development partnerships: BmW with Toyota and suzuki with vW 16

Two years after announcing a technology development partnership for a variety of projects
such as fuel cell systems, powertrain electrification and lightweight materials, Toyota and BMW
unveiled plans for a joint sports car vehicle platform. It was the first publicly announced output
from the collaboration that was set up to share the huge development costs needed to develop

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