Systems Integration and Competitive Advantage

1. Andrea Prencipe The 12th International Conference on Industrial Technology Innovation Taipei, Taiwan, 25-26 August 2011 Systems Integration and Competitive Advantage

2. What is systems integration? What is driving it? Systems integration as a business model? Sector-specific phenomenon? Open issues Implications for policy-makers and researchers Questions & Answers Content

3. Rolls-Royce Trent 800

5. Defining systems integration I • “The abilityto understand and model the overall requirements for a major system and the interaction and performance of its many interrelated parts in an unambiguous way, accommodating the various subsystems technologies; then to design the complete systems together with its manufacturing processes and production facilities” (Technology Foresight Defense and Aerospace Panel, 1990)

6. Defining systems integration II • ‘The deployment of the Polaris submarines required the synchronised development of a dozen different technologies….To build a system that involved interdependent progress in a dozen technologies was, however, unprecedented’ (Sapolsky, 1972, p. 137)

7. Defining systems integration III • ‘The prime task the prime contractors performed was systems integration. Weapons were being conceived as complex systems that required the design and simultaneous development of component subsystems such as the platforms, sensors, weapons, and propulsion that were both compatible with each other and optimized for overall system performance. Tradeoffs had to be made among the component subsystem to meet standards and achieve desired system characteristics. System reliability, easy of maintenance, and crew needs also had to be considered.’ (Sapolsky, 2003, pp. 23-24)

8. Systems integration as capability • The emphasis is on the understanding of the underlying bodies of knowledge and ensuing system behaviour, rather than on the activities of design and assembly • Systems integration firms maintain an understanding of the bodies of knowledge and system behaviour to re-compose what has been decomposed

9. Synchronic systems integration • Synchronic systems integration are the capabilities to set the requirements (also concept design), specify, source equipment, materials, and components, which can be designed and manufactured either internally or externally, and integrate them into existing products’ architectures • At the architectural level, synchronic systems integration relates to the refinement, adaptation, and optimisation of the architecture set by a product family and, therefore, it refers to the exploitation of the potential of the architecture to meet customer demands

10. Assumptions in modularity story new architectures developed recombining existing modules embedded coordination – through design rules Architectural-level innovation is more than recombination of existing modules From modularity to …..

11. The limits to embedded coordination Developing and maintaining systems integration capabilities despite (IT-enabled) strategic outsourcing Role of systems integrators (broad capabilities, lean activities) which very actively coordinate transitions Enacted coordination … modularization

12. What makes possible the transition between architectures? • Systems integration capabilities provide focus and closure to a range of specialists • the evolution of these capabilities drives the evolution of firms’ boundariesand industrial structure • ‘Firms know more than they make’ • Key individualswho have broad and deep expertise about the whole (or most of the) system • the presence of such ‘architects’ which enable the introduction of new architectures/platforms • problem framing vs. problem solving

13. Diachronic Systems Integration I • Capabilities required to envisage new architectures to meet evolving customer and regulatory requirements in an effective and efficient way • Diachronic systems integration relates to the search for and experimentation of new product architectures, and therefore, it refers to the exploration of different and alternative paths of product configurations

14. Diachronic Systems Integration II • Capability to co-ordinatechange across • (a) new and emerging bodies of technological knowledge – as characterised by uneven rates of advance • (b) organisational boundaries – firms cannot master in-house all the relevant scientific and technological bodies. The management of the relationships with and co-ordination of external sources of technologies, such as universities, research laboratories, and suppliers, becomes therefore a central task for multitechnology firms

15. One of the core capabilities of high technology firms Makes outsourcing possible Capabilities that enable organizations to: define and combine together all necessary inputs for a system agree on a path of future systems development Systems integration may be defined according to the nature of the system being integrated What is Systems Integration?(Hobday et al., 2005)

16. Firms have been extensively outsourcing to lower-tier suppliers cannot do everything in-house move downstream to make more profit, by providing solutions to customers What is driving Systems Integration? I

17. Increasing complexity components and systems pace of technological change increasing specialization of knowledge required to design and manufacture complex products What is driving Systems Integration? II

18. External drivers liberalisation and de-regulation of markets globalisation service-intensive customer demands What is driving Systems Integration? III

19. Systems Integration business models I • Rolls-Royce Aircraft Engines • University research • Systems design • Focus on key components/subsystems/software in terms of design and manufacturing • Intelligent customership • Service

20. Systems Integration business models II • Ansaldo STS • System design • Software design • Intelligent customership • Service

21. Mobile phone industry • ‘When smartphones were still young and computing tablets not yet born, some analysts predicted that the market for mobile devices would sooner or later look much like that for personal computers: there would be a clear division of labor and intellectual property between makers of hardware and software; a dominant operating system would emerge; and Apple would again become a niche player. If proof is still needed, Google’s take-over of Motorola is the strongest sign yet that this will not come to pass, at least in the near future.’ (The Economist, August 20th-26th, 2011, Vol. 400, n. 8747, p. 54)

22. Systems Integration as business model (Baden-Fuller and Morgan, 2010) • Business models provide a description of the relevant elements of a real business • Business models are recipes • define the business characteristics and its activities in a concise way, a way that matches the generic level that defines a kind or type of behaviour • suggest why it works, because it embodies the essential elements and how they are to be combined to make them work

23. Open issues I Linking and connecting Brokerage, structural holes Norming Coordinators, standard-setting Communication, language-building and -sharing Sense making, interpreting, framing Boundaries definition, exploration Knowledge integrators

24. Open issues II Brokers connect and keep control Trust Knowledge integrators forge new relationships and release control It is more about setting the rules of the game, rather than playing it

25. Economics and Social Sciences Science and Engineering Business Anthropology and Design Complex Engineering Systems Organizational Change & Learning IT and Information Systems Business and Management Math and Operations Research T-Shaped ProfessionalsDeep Expert Thinking and Broad Skills in Business, Organization Deep in one… Broad across many…

26. From T to Π • Multi-disciplinary • Multi-language • Multi-cultural • Multi-relationships

27. Implications for researchers Analyse / scrutinize systems integration business models Investigate the development of skill profiles of key, innovative individuals through an analysis of their career paths and network relationships

28. Implications for policy makers Take into account the variety systems integration business models when device industrial policies Rethink educational paths for key, innovative individuals – in the light of a thorough analysis of their career paths and network relationships