Title: The economic nature of feedback loops in product development

Authors: Olli-Pekka Hilmola, Petri Helo, Ari Maunuksela

Addresses: Turku School of Economics and Business Administration, Logistics, Rehtorinpellonkatu 3, FIN-20500 Turku, Finland. ' University of Vaasa, Industrial Management, PO Box 700, FIN-65101 Vaasa, Finland. ' Radionet Ltd., Keilaranta 6, FI-02150 Espoo, Finland

Abstract: In contemporary industrial management, Design Structure Matrix (DSM) has been applied in managing uncertain and unpredictable product development processes. In many cases the problems are arising from the feedback loops; one of the most awkward situations is the feedback dependency from the last task to the starting phase of the project. This kind of situation will not only increase the costs of development activity, but will increase the development time as well, which is the key factor to maintain competitiveness in markets. However, DSM research has been able to solve partially these problems with clustering; instead of task-based management, product development is managed through important clusters of numerous different tasks-processes. Justification of feedback loops is an increasingly important research issue in the current as well as future research of DSM. This paper will analyse further the economic impacts of probability for feedback loops and available number of strategic alternatives in decision-making to possibly avoid these situations. Economic tradeoff will occur between feedback loop costs and the costs of increasing the organisational awareness of process problems. Based on this modeling, some managerial recommendations are suggested.

Keywords: design structure matrix; feedback loops; learning; product development; economics; industrial management; clustering; system dynamics modelling.

DOI: 10.1504/IJIL.2005.006299

International Journal of Innovation and Learning, 2005 Vol.2 No.2, pp.197 - 209

Published online: 15 Feb 2005 *

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