Exploring the Interplay Between Standard Products and Customer Specific Solutions

Doctoral thesis, 2005

This thesis deals with how a company may handle the interplay between the development of standard products and customer specific solutions. There are three aims of the thesis. The first aim concerns how a buyer and a supplier in interaction arrive at a solution involving a mix of standard and customer specific product features. The second aim concerns how the supplier can manage the balance between exploitation of standard products and exploration of new product features during the development of a particular solution. The third aim concerns how the development of specific solutions affects the development of the standard product. The frame of reference is primarily based on the Industrial Network Approach, and deals with utilization and development of products within networks of interdependent resources. While resource utilisation is seen as dependent on how the resources are embedded into the network, resource development takes place when their features are changed in order to make the resources fit into new combinations. The thesis is based on a case study focusing on a Swedish ERP-system provider's development of new product features. The main part of the case deals with the company's development of a customer specific solution in interaction with one particular buyer whose requirements could not be met by existing product features. The buyer is a subcontractor on the second tier in the automotive industry and implemented the ERP-system in order to improve the coordination of certain sequentially dependent operations. To understand how the products have developed over time, a series of preceding and subsequent customer interactions and their influence on the use and development of the product features is also part of the case. The thesis concludes that when developing specific customer solutions the supplier must exploit on existing resource features while adjusting to the customers' particular resource constellations. Likewise, the customer needs to maintain most of its resource constellation while adjusting some parts of it to the new resource. Different strategies that a supplier and a buyer may apply in order to deal with the effects that a certain change may have on other parts of the resource network are suggested. Furthermore, it is concluded that a company, in order to balance between exploration and exploitation, needs to manage three interrelated aspects of resource embeddedness. First, it needs to economise on existing product features when developing customer specific solutions. Second, the company needs to identify similarities among different customer specific solutions when developing the standard product. Third, it needs to deal with a large number of interdependent interfaces, both within the product itself and towards different customer solutions. Finally, it is concluded that separating the issue of efficiently developing customer solutions, and the issue of developing standard product features, into different organisational units may benefit the balancing between exploration and exploitation.