Physical phenomena are the basis for all technological systems. To perform a function, certain physical phenomena should be appropriately arranged in space and time. For example, to move the bristles of an electric toothbrush, the battery supplies electric energy to the motor, which then converts it into the rotational movement of the rotor which, in turn, actuates a transmission link, setting the brush head in motion.

To improve an existing function, or to introduce a new one, means to make a transition from a particular system's physical structure and/or physics to another, more effective structure and/or physics. As an example of such a transition, consider the external combustion (steam) engine and the internal combustion engine. In the former, the piston is moved by high-pressure steam produced outside of the engine cylinder. In the latter, the fuel burned inside the cylinder moves the piston. In addition to different physical structures, these engines employ different physical phenomena for generating motion.

This chapter describes a modeling approach used in TRIZ for the analysis and synthesis of physical structures and processes in technological systems.

Minimal technological system. Substance–field models

Any interaction between a tool and an object is accompanied by the generation, absorption, or transformation of energy. Thus, the object, the tool, and the energy of their interaction are necessary and sufficient to build a model of a minimal technological system performing only one function (Fig. 3.1). An effectively performed function requires the presence of, and interaction among, these three elements.

This book describes a powerful methodology for systematic technological innovation called TRIZ (pronounced treez). TRIZ is the Russian acronym for the Theory of Inventive Problem Solving (TeoriyaResheniyaIzobretatelskikhZadach). The book acquaints the reader with basic tools of TRIZ and their applications to the conceptual development of novel technologies, products, and manufacturing processes.

This book is principally intended for practicing engineers whose responsibilities run the gamut from R&D activities, to design, to shop floor administration. Engineering students will also benefit from its contents. The book describes the vital role of TRIZ in the process of technological innovation. Technology managers who use TRIZ approaches often find strategic opportunities that non-users tend to overlook. They capitalize on these opportunities by developing new products and processes, as well as novel services and organizational structures.

TRIZ originated in the former Soviet Union, where it was developed by Genrikh Altshuller and his school, beginning in 1946. TRIZ was used extensively in the Soviet space and defense industries to enable engineers to overcome difficult technological challenges within an inefficient economic system. It was virtually unknown in the West, however, until a translation of one book by Altshuller was published in 1984 (Creativity as an Exact Science, by Gordon and Breach, New York). While the book initiated a few devotees to TRIZ, a poor translation minimized its impact.

In 1991, a TRIZ-based software package, developed by the Invention Machine Corporation, was demonstrated in New York and commercially launched.

The following is an outline of TechNav – a comprehensive process for the conceptual development of next-generation technologies and products based on the laws and lines of technological system evolution and business analysis (Fig. 6.1). The major points of this process are listed here.

1. (1) Phase 1: analysis of the past and current system's evolution. This stage is essentially about the analysis of an S-curve. The evolution of any technological system usually follows an S-shaped curve that reflects the dynamic of the system's benefit-to-cost ratio from the time of the system's inception (Fig. 6.2). An analysis of innovation activity allows for positioning the technology or product of interest on its S-curve, thus helping to define the technology (product) strategy.

2. (2) Phase 2: determination of high-potential innovations. At this phase, the laws and lines of evolution are used to identify strategic directions of the technology's evolution. In addition, the current innovation landscape (strategy) is analyzed and new ideas are developed.

3. (3) Phase 3: concept development. As a rule, transition from one stage of evolution to the next is accompanied by the development of system conflicts and other conceptual design problems that need to be resolved.

4. (4) Phase 4: concept selection and technology plan. In this phase, the developed concepts are evaluated against various engineering, economic and other criteria, and the best ones are selected for both short- and long-term testing and implementation.

TRIZ was originally developed as a tool for enhancing engineering creativity. As TRIZ evolved, it became clear to Genrikh Altshuller and his followers that its fundamental principles should be applicable to other human pursuits such as science, art and others (Altshuller, 1963, 1988b; Filkovsky, 1974). The idea was to apply the same approach used while developing TRIZ (i.e., treating all entities of study as evolving systems, accumulating a large database of “strong solutions”, formulating laws of evolution specific to that given class of entities, etc.) to analyze other evolving systems. Natural objects for such analysis would be the ones most closely related to technology – managerial and business systems. The following is an outline of TRIZ concepts and tools that might be used in business and organizational contexts.

Tools of TRIZ and management issues

There are many occurrences of the spontaneous use of the laws of evolution by businesses. For example, the law of increasing dynamism is manifested in such approaches as outsourcing, the postponing of product differentiation (delegation of final product assembly to dealers and distributors to reduce the delivery time with customer-required modifications and options [Davis and Sasser, 1995]), the use of flexible production systems (McGraw, 1996), the use of reconfigurable machining systems and modular tooling structures, and others.

Another business application of increasing dynamism is eloquently described: “Small jets are starting to do to the airline industry what PCs did to mainframe computing; fractional horsepower machines did to turbines; minimills did to steel; cellular is doing to telephony; mutual funds are starting to do to centrally managed corporate and government pension plans, and eventually will do to Social Security, and what coming; mini-generators will do to massive power plants – give customers more service, more flexibility, more control at less cost, as well as generate new products and services.

Introduction

This case study focuses on a telecommunications equipment manufacturer. The telecommunications industry has been characterised by extensive outsourcing by original equipment manufacturers (OEMs) over the last few years due to issues such as shortening product cycles and time to market pressures. Many OEMs in this industry have increasingly become ‘systems integrators’; namely specialists in the management and co-ordination of production and service providers. This case study identifies the drivers that have influenced outsourcing in the telecommunications industry. The case organisation has outsourced many activities to suppliers including assembly operations, manufacturing, logistics and design. A central part of this strategy has been the adoption of more collaborative relationships with its key suppliers in order to reduce the risks associated with outsourcing. The company will be referred to as Telco for purposes of confidentiality. The implications of the outsourcing strategy are drawn from an analysis of this company and three cases of outsourcing evaluation and management over an 18-month period. These three case studies are related to the stages in the outsourcing framework presented in this book in order to illustrate both its explanatory and prescriptive nature. A critical evaluation of Telco's experience with outsourcing is carried out and in particular, its attempts to develop collaborative buyer–supplier relationships. The implications of the case organisation adopting a modular approach to the arrangement of its supply base are examined. Some of the issues developed in this case study are for illustrative purposes only.

Introduction

This chapter provides an overview of the theoretical perspectives that have influenced the development of the framework for outsourcing evaluation and management. The framework draws upon a wide body of literature from a number of areas including business strategy, economics and inter-organisational relationships. This chapter outlines the characteristics and limitations of a number of theories from these areas including transaction cost economics (TCE), the resource-based view of the firm (RBV), the industry view (IV) and the relational view (RV). The analysis of the literature in these areas has had a major influence on the development of the outsourcing framework, which includes a number of aspects from each theoretical standpoint. It is argued that there are a number of inter-dependencies with each of the theoretical perspectives that can assist in outsourcing evaluation and management. The framework recognises the importance of the business strategy and inter-organisational relationship literature to an understanding of outsourcing. There is a growing emphasis in the business strategy literature of the importance of managing beyond the boundaries of the firm as well as within them. This chapter serves as a preface to the following chapter, which provides an outline of the practical problems with outsourcing and an overview of the stages in outsourcing evaluation and management.

Transaction cost economics

The most influential theory on outsourcing has been Williamson's theory of transaction cost economics (1975).

Introduction

The objective of this book has been to summarise and integrate the latest research in outsourcing into a comprehensive framework for understanding the process of outsourcing evaluation and management. It has been shown that where outsourcing is evaluated and managed effectively it can be a very powerful vehicle to enhance the competitive position of an organisation. The trend towards outsourcing is set to continue as organisations are expected to do more with fewer resources. Outsourcing is not limited to the peripheral areas of the business but is increasingly impacting business areas that can contribute significantly to competitive advantage. It has been shown how organisations can benefit from accessing the supplier capabilities and employ supply relationships to enhance their own skills and capabilities. This book has also illustrated the consequences of outsourcing failure and has argued that outsourcing evaluation and management requires considerable effort and resource. Indeed, outsourcing can involve considerable risk through the loss of key skills and a failure to evaluate all the costs associated with the outsourcing process. Considerable emphasis has been placed on the issues that should be considered in evaluating whether outsourcing is appropriate for organisational activities. This involves aligning outsourcing evaluation and management with the overall strategy of the organisation. Approaching outsourcing strategically involves gaining an in-depth understanding of the competitive environment, organisational capability, supplier capability, and supply market risk.

A key issue to have emerged for many organisations has been the growing importance of outsourcing. The drive for greater efficiencies and cost reductions has forced many organisations to increasingly specialise in a limited number of key areas. This has led organisations to outsource activities traditionally carried out in-house. Outsourcing involves re-drawing the boundaries between the organisation and its supply base. Although, the term outsourcing has become in vogue in the last few years, organisations have always made decisions on determining the boundary of the organisation. However, the increasing prevalence of outsourcing has led to the concept receiving a significant amount of attention from both academia and practitioners. Outsourcing has progressed from involving only peripheral business activities towards encompassing more critical business activities that contribute to competitive advantage. On the one hand, outsourcing can involve the transfer of business support functions such as cleaning or security to external suppliers in order to obtain higher levels of performance at a lower cost with relatively little upheaval for the organisation. On the other, it can lead to major organisational change that involves dismantling the traditional structure of the organisation, transferring staff to external suppliers, re-defining staff terms and conditions and altering the expectations of the employees that remain within the outsourcing organisation. As a result, outsourcing has become an increasingly important and complex issue for many organisations.

Outsourcing often provokes contrasting reactions from a range of organisational stakeholders including business leaders, unions, employees, politicians and governments.

Introduction

This stage in outsourcing evaluation involves determining the level of importance of the activities that have to be performed in order to satisfy customer needs. It is crucial for an organisation to determine which activities are critical to competitive advantage. Identifying critical activities involves understanding the major determinants of competitive advantage in the markets or the industries in which the organisation competes or might wish to compete. An analysis of the competitive environment and customer needs can have an important role in identifying which activities are critical for success in the business environment. Critical activities will enable an organisation to differentiate itself from its competitors in the way in which it serves its customers. An understanding of critical activities is central to outsourcing evaluation. For example, if an organisation possesses a superior capability in a critical activity relative to competitors or suppliers, then it should continue to perform that activity internally. The organisation must also have a clear understanding of how sustainable this position is over time. Alternatively, where possible, activities that are not key influences on the ability of the organisation to achieve competitive advantage should be outsourced. Critical activities are those that can be used to build sources of advantage that are difficult and costly for competitors to replicate. Focusing attention on customer needs and competitive advantage will involve the organisation applying its distinctive capabilities to meet the needs identified.

Introduction

This chapter provides an overview of the stages involved in evaluating and managing the outsourcing process. Background information outlining the stages in the development of the outsourcing framework is presented. The initial analysis in the development of the framework revealed a number of problems encountered by organisations in their efforts to both evaluate the suitability of outsourcing for their organisation and the management of the outsourcing process. These problems stemmed from the lack of a structured step-by-step approach to the evaluation and management of outsourcing. In addition, it was found that many organisations were misinterpreting the core competence approach, which has had a major influence on outsourcing both in theory and practice. It is shown how the outsourcing framework is influenced by a number of the theoretical perspectives discussed in the previous chapter including transaction cost economics (TCE), the resource-based view (RBV) of the firm, the industry view (IV) and the relational view (RV). An outline of the issues that should be considered in the key stages of the outsourcing framework is presented. This section also provides an outline of the structure of the book in the following chapters. Finally, the theoretical implications of the outsourcing framework are discussed.

Practical problems with the outsourcing process

There is evidence to suggest that organisations have not been achieving the desired benefits from outsourcing.

Introduction

The increasing prevalence of outsourcing has led to it being considered central to the strategic development of many organisations. Outsourcing is increasingly being employed to achieve performance improvements across the entire business. For example, one particular growth area has been the externalisation of Information Technology (IT) with a recent report showing companies outsourcing 38% of their IT functions to external providers (Barthelemy, 2001). Another area of the business that is also increasingly being outsourced is the human resource function. An American Management Association survey found that 77% of firms surveyed in the US had outsourced a number of human resource activities including training and development, executive recruitment and payroll management (Anonymous, 1997). The outsourcing decision can often be a major influence on the profitability and competitive position of the organisation. However, many organisations possess a limited understanding of outsourcing and in particular the potential benefits and risks and how they should be managed. This chapter provides an overview of the outsourcing concept. It outlines a number of key developments in the business environment that have occurred including globalisation, advances in information technology, reforms in the public sector and more demanding consumers. These changes have forced organisations to be more flexible and responsive to customer needs. As a result, many hierarchically controlled organisations that have previously performed the majority of business activities internally have been forced to create more network-oriented organisational structures, which involves outsourcing activities to specialist suppliers.

Introduction

A major part of outsourcing evaluation is determining whether an organisation can achieve superior performance levels internally in critical activities on an on-going basis. Clearly, if the organisation can perform the activity uniquely well, then this activity should continue to be carried out internally. However, many organisations assume that because they have always performed the activity internally, then it should remain that way. In many cases, closer analysis may reveal a significant disparity between their internal capabilities and those of the world best suppliers and competitors. Organisations considering outsourcing must rigorously evaluate their capabilities in relation to both their suppliers and competitors. Analysis from an activity perspective is important given that organisations are increasingly positioning themselves in specific parts of the value chain in order to gain competitive advantage. In effect, each organisation is in competition with all potential suppliers of each activity in its value chain. In the case of a critical activity, each point in the value chain relevant to providing the activity should be assessed. Again, this analysis is concerned with identifying the disparity between the sourcing organisation and potential external sources. This analysis can identify sources of competitive advantage that can be exploited more fully by further developing certain activities. It also assists in revealing weaknesses that need to be addressed – either through internal improvement or outsourcing – to become more competitive.