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* Corresponding author. Tel.: #44-1203-528222; fax: #44-1203- 572583. E-mail address: simon.croom@warwick.ac.uk (S.R. Croom). European Journal of Purchasing & Supply Management 7 (2001) 29}37 The dyadic capabilities concept: examining the processes of key supplier involvement in collaborative product development Simon R. Croom* Warwick Business School, University of Warwick, Coventry CV4 7AL, UK Received 20 January 1999; received in revised form 3 April 2000; accepted 4 April 2000 Abstract The increased use of suppliers in the new product development process has important implications for the strategic performance of organisations. In this paper an analysis of supplier collaboration in the development process is deployed to support the development of a dyadic (or two-level) capabilities analysis of the strategic management of the innovation process. By setting an organisation's competencies within the context of their customer or supplier interactions this paper supports the view posited by Ford et al. (1986) that interaction de"nes the value of assets and resources. In a study of collaboration in the UK auto industry, it was found that both operational and relational competences are critical factors in the performance of the new product development process. Thus, the ability of customers and suppliers to develop both structured and ad hoc processes of interaction is shown to be important to the development process from early supplier selection process. ( 2000 Elsevier Science Ltd. All rights reserved. Keywords: Strategic capability; Purchasing and supply; Product development 1. Introduction The strategic role of suppliers is one that has been facing some changes as a result of increasing use of suppliers in innovation, more speci"cally in the new product development process (Burt and Soukup, 1985; Helper, 1991; Clark and Fujimoto, 1991; Ha > kansson and Eriksson, 1993; Lamming, 1993; Hines, 1994). This role is one typi"ed by increased responsibility for the design process, and increased autonomy in the development process. It has also long been recognised that innovation is a critical strategic process central to the development of competitive advantage (Penrose, 1959; Hamel and Prahalad, 1994). Therefore, the management of supplier involvement in design and development can be posited as being a major and increasingly important strategic process. This paper presents an analysis of research conducted into supplier involvement in the new product develop- ment process in order to develop an understanding of the nature of strategic capability and the management of customer}supplier interaction. In the "rst section of the paper, following a brief discussion of the competency theory of strategy, consid- eration is given to the nature and in#uence of governance structures at the level of a dyad, that is a two-actor chain. This paper is primarily concerned with dyadic interac- tion at the customer}supplier level. A discussion of ante- cedent literature is utilised to support a contention that capabilities possessed by one party must be contex- tualised within the speci"c dyad to which they are ap- plied in order to yield strategic value. Following the conceptual discussion the research analysis from a series of in-depth studies of two new product development programmes in the UK auto industry is presented, focusing on supplier selection and the management of supplier involvement. Implica- tions for a dyadic level analysis are presented in this section. The "nal section of the paper presents the preliminary framework for a dyadic capabilities approach. Three dimensions of dyadic capability are presented, and a brief report of initial development of an operationalised form of the framework is introduced. 0969-7012/00/$ - see front matter ( 2000 Elsevier Science Ltd. All rights reserved. PII: S 0 9 6 9 - 7 0 1 2 ( 0 0 ) 0 0 0 1 9 - 8

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Page 1: The dyadic capabilities concept: examining the processes of key supplier involvement in collaborative product development

*Corresponding author. Tel.: #44-1203-528222; fax: #44-1203-572583.

E-mail address: [email protected] (S.R. Croom).

European Journal of Purchasing & Supply Management 7 (2001) 29}37

The dyadic capabilities concept: examining the processes of keysupplier involvement in collaborative product development

Simon R. Croom*Warwick Business School, University of Warwick, Coventry CV4 7AL, UK

Received 20 January 1999; received in revised form 3 April 2000; accepted 4 April 2000

Abstract

The increased use of suppliers in the new product development process has important implications for the strategic performance oforganisations. In this paper an analysis of supplier collaboration in the development process is deployed to support the developmentof a dyadic (or two-level) capabilities analysis of the strategic management of the innovation process. By setting an organisation'scompetencies within the context of their customer or supplier interactions this paper supports the view posited by Ford et al. (1986)that interaction de"nes the value of assets and resources. In a study of collaboration in the UK auto industry, it was found that bothoperational and relational competences are critical factors in the performance of the new product development process. Thus, theability of customers and suppliers to develop both structured and ad hoc processes of interaction is shown to be important to thedevelopment process from early supplier selection process. ( 2000 Elsevier Science Ltd. All rights reserved.

Keywords: Strategic capability; Purchasing and supply; Product development

1. Introduction

The strategic role of suppliers is one that has beenfacing some changes as a result of increasing use ofsuppliers in innovation, more speci"cally in the newproduct development process (Burt and Soukup, 1985;Helper, 1991; Clark and Fujimoto, 1991; Ha> kansson andEriksson, 1993; Lamming, 1993; Hines, 1994). This role isone typi"ed by increased responsibility for the designprocess, and increased autonomy in the developmentprocess. It has also long been recognised that innovationis a critical strategic process central to the developmentof competitive advantage (Penrose, 1959; Hamel andPrahalad, 1994). Therefore, the management of supplierinvolvement in design and development can be positedas being a major and increasingly important strategicprocess.

This paper presents an analysis of research conductedinto supplier involvement in the new product develop-

ment process in order to develop an understanding of thenature of strategic capability and the management ofcustomer}supplier interaction.

In the "rst section of the paper, following a briefdiscussion of the competency theory of strategy, consid-eration is given to the nature and in#uence of governancestructures at the level of a dyad, that is a two-actor chain.This paper is primarily concerned with dyadic interac-tion at the customer}supplier level. A discussion of ante-cedent literature is utilised to support a contention thatcapabilities possessed by one party must be contex-tualised within the speci"c dyad to which they are ap-plied in order to yield strategic value.

Following the conceptual discussion the researchanalysis from a series of in-depth studies of twonew product development programmes in the UK autoindustry is presented, focusing on supplier selectionand the management of supplier involvement. Implica-tions for a dyadic level analysis are presented in thissection.

The "nal section of the paper presents the preliminaryframework for a dyadic capabilities approach. Threedimensions of dyadic capability are presented, and a briefreport of initial development of an operationalised formof the framework is introduced.

0969-7012/00/$ - see front matter ( 2000 Elsevier Science Ltd. All rights reserved.PII: S 0 9 6 9 - 7 0 1 2 ( 0 0 ) 0 0 0 1 9 - 8

Page 2: The dyadic capabilities concept: examining the processes of key supplier involvement in collaborative product development

1.1. Competence and governance

Recent literature in the "eld of strategic managementre#ects a move away from the structural determinism oftheorists such as Porter (1980) who emphasise product}market position as a key competitive concern, towardsa competence theory as expounded by Prahalad andHamel (1990) and Wernerfelt (1995) for whom competi-tive advantage results from the way in which "rms allo-cate their resources and develop new products throughtheir innovative processes. Whittington (1993) contrastsbetween the externally opportunistic approach of deter-ministic theory, and the inward, more developmentalapproach of the competency theory. Two complement-ary streams of development in the competency literaturebeing the resource-based (Wernerfelt, 1984: Kay, 1993;Montgomery, 1995) and knowledge-based (Nonaka andTakeuchi, 1995) views. Scarbrough (1998) notes thatcommon to both of these streams of literature is therecognition that organisational knowledge is `2centralto a proper understanding of the nature of resources,competencies and capabilities within the "rma.

Major elements of the deterministic view and a largesegment of the competency view assume that the strategyprocess is fundamentally concerned with an organisa-tion's response to its environmental conditions. Conse-quently, there is a tendency to attempt to analyse theenvironment as a set of interactions between di!erentorganisations that are treated as if they were single,perceiving and interpreting human actors. To counterthis perspective, Knorr (1979) questioned the productiv-ity of the dualism of system and environment that under-lies most theories of organisation. She argued thatorganisational action and relationships are subject toinherent contextuality, which challenges the mainstreamprescriptive approaches to strategic management(Charan, 1991) She presented an analysis predicated onthe view that it is the organisation which should beviewed as the environment for interorganisational ortransorganisational relationships, since contextuality isinherent in the organisation. Her contention is that theorganisation does NOT represent an appropriate level ofanalysis for understanding intra-organisational (or in-terorganisational) behaviour. Many writers reinforceKnorr's view that in order to understand the nature ofstrategic action it is necessary to recognise the sociallyconstructed nature of networks of interacting individuals,groups and organisations which emphasises the signi"-cance of perception and interpretation to the analysis ofinterorganisational relationships.

Ford et al. (1986) argue that a primary focus for stra-tegic analysis is to view companies in the context of theirnetwork of interactions with others, whilst as far back asHall and Fagen (1956) it was argued that the de"nition ofa boundary in any social system was quite arbitrary,largely dependent upon the intentions of the observer.

The study of interorganisational relationships (IORs) isan established area of organisational theory, beingfounded upon studies in established disciplines such associology and psychology (which explains the conse-quent focus upon behavioural issues), although manyauthors commented upon the lack of an integrated, uni-"ed theoretical base. (Negandhi, 1980; Pfe!er, 1982) Thecontribution of the area of IOR to the concerns of pro-curement is that writers who view the environment asa collection of interacting parties examine the compara-tive and relational properties of an interaction network.An organisation's environment is viewed as constitutedby subsystems of interorganisational collectivities (Van deVen and Walker, 1984) which are de"ned as distinctunits. The argument here is that collectivities act e!ec-tively when their constituent organisations behave ina goal-directed manner, recognising that the primarygoals of the interorganisational collectivity are such thatno single organisation can achieve them individually.Van de Ven and Walker found in their research that therelationships between members of a collectivity are verydistinctive and almost gains legitimacy in its own right.This distinctiveness of an IOR has been acknowledged innumerous other quarters, often being referred to as con-stituting a &quasi-autonomous organisation' (Blois, 1972;Monteverde and Teece, 1982; Aoki, 1984; Levy et al.,1993). Lamming (1993) saw this as being of vital signi"-cance, stating that &&2[the challenge] is for collabor-ators to view the relationship [as a distinct] &thirdparty'2[and that] the cost of resourcing the quasi-"rmmust be justi"ed by the value it adds, the cost and timesavings it achieves, and the mutual competitive advant-age which it provides''.

2. Forms of governance structure

Concern for the way in which "rms organise the pro-duction and delivery of their goods and services is centralto both economic and social theories of the "rm. Trans-action cost economics (TCE) concentrates on the degreeof dedication of assets by one "rm to another underdi!ering exchange conditions with a view to maximisingthe e$ciency of the transaction (Williamson, 1994; Die-trich, 1994), whilst social network theory emphasisesinter"rm co-ordination, emphasising the informal socialsystems that are linked through a network of relations(Granovetter, 1992; Alter and Hage, 1993). These entitiesare involved in continuous exchange relationships withthe organisation, with each party exerting considerablein#uence on the organisation. Such forms of governancehave been observed in a wide range of industries (Joneset al., 1997) with several empirical studies (includingTurnbull and Valla, 1986; Ha> kansson, 1989) suggest-ing that this type of situation may be the rule ratherthan the exception for a wider population of business

30 S.R. Croom / European Journal of Purchasing & Supply Management 7 (2001) 29}37

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organisations in general. It is useful at this stage toexamine the propositions of the social network modelwhich have been summarised as follows (Ha> kansson andSnehota, 1989)

f Business organisations often operate in a context inwhich their behaviour is conditioned by a limitednumber of counterparts, each of which is unique andengaged in pursuing its own goals.

f In relation to these entities, an organisation engages incontinuous interactions that constitute a frameworkfor exchange processes. Relationships make it possibleto access and exploit the resources of other parties andto link the partiesa activities together.

f The distinctive capabilities of an organisation are de-veloped through its interactions in the relationships itmaintains with other parties. The identity of the organ-isation is thus created through relations with others.

f Since the other parties to the interaction also operateunder similar conditions, an organisation`s perfor-mance is conditioned by the totality of the network asa context, i.e. even by interdependencies among thirdparties.

It has been claimed that in#uence (or power) is the`central concepta in network analysis (Thorelli, 1986)and is often couched in predominantly unilateral terms(dependence), whilst the more typical phenomenon isthat of interdependence. Further, `a radical shifta is seenas emerging `2in the nature of relationships betweenorganisations. In particular there is a move away fromwhat might be termed &power-based' relationships inwhich there is some hierarchical dependence, towardsmore of a network model in which there is a sense ofmutual development within a partnershipa (Bessant,1990) The positioning of a "rm in the network in terms ofits relative power and in#uence is seen as a matter of`2as great strategic signi"cance as positioning its prod-uct in the marketplacea. (Ha> kansson, 1989).

Jones et al. (1997) synthesise the network literaturearound two `clustersa, one pertaining to patterns ofinteraction, the other to #ows of resources between inde-pendent units. This clustering can be seen to accommod-ate much of the supply chain management literaturewhich generally considers that competitive advantage isderived from the physical and social processes that sup-ply products and goods through the chain's constituentorganisations. (Christopher, 1992; Bowersox andCloss, 1996; Gattorna and Walters, 1996; Houlihan,1987; Poirer and Reiter, 1996; Stevens, 1989; Saunders,1997).

3. Towards a dyadic model of capability

By adopting an inter-organisational approach to strat-egy it can be argued that the distinctive capabilities of an

organisation could be considered to be developedthrough its interactions in the relationships it maintainswith other parties* in other words the so-called `ident-itya of the organisation is created through its relationswith others. Since the other parties to the interaction alsooperate under similar conditions, an organisation's per-formance is conditioned by the totality of the network asa context, i.e. even by interdependencies among thirdparties. In examining the impact of interaction upon"rm's capabilities, Ford et al. (1986) and Anderson et al.(1994) make a critical claim for the development ofa dyadic capabilities view* that resources possessed byan organisation may be considered to be inert (passive)and of no competitive value until activated by interactionwith others. This is an important point, and is similar toTeece's (1987) contention that competitive advantage isgained through the development of distinctive capabili-ties supported by `complementary assetsa through thenetwork. Cox (1997) has also considered the nature ofcore and complementary competencies located withinother "rms in the network (the central point in his thesisbeing that "rms access capabilities through various formsof contractual arrangements). The interdependence ofenterprises and processes is clearly a major issue in thedevelopment of strategic competency.

Croom and Batchelor (1997) have argued that withinthis interactive environment strategic capability isfounded on two forms of capability: operational andrelational. The former refers to the technical and eco-nomic capabilities of the "rm such as superior manufac-turing process design or rapid delivery systems; the lattercategory of capability relates to institutional and socialdimensions that constitute an as organisation's `architec-turea (Kay, 1993), namely the formal and informal tieswithin and between individuals, groups and functions.Advantage from operational capability may be relativelytransitory in nature. Firstly, such capabilities are oftenimitable (Teece et al., 1992), and secondly an increasingrate of technical change increases the threat of substituta-bility by industry rivals and new entrants (Porter, 1980).Imitability is a major concern when it is `creativelydestructivea, resulting in a new source of strategic ad-vantage for a competing "rm. Many of these operationalcapabilities impact on the performance characteristics ofthe product or system under development (Cooper,1984).

Thus, whatever an organisation may see as its corecompetence is only so because of its strategic contribu-tion within the context of the resources and relationshipsthat exists in its network. As Knorr argued, an importantissue for organisational studies is the contextualisation ofresources and assets within an interactive environment,which Granovetter (1992) de"nes as `structural embed-dednessa recognising the in#uence on economic actionand outcomes at the dyadic and overall network levelcon"guration of relations.

S.R. Croom / European Journal of Purchasing & Supply Management 7 (2001) 29}37 31

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This line of reasoning predicates the study of compet-encies founded on suppliers' and customers' resourcesand activities in the domain of the customer}supplierdyad. The research theme here was thus to examine theimpact of the supplier management process on strategicperformance at a dyadic level of analysis (Ellram andHendrick, 1995).

4. Research methodology

In order to explore dyadic processes research wasconducted into the process of collaborative new productdevelopment, an important change process which wasdeemed to be the most appropriate domain within whichto examine the impact on the performance of core com-petencies (Hamel and Prahalad, 1994p. 202). The re-search process involved document analysis, interviews,site visits, observation and detailed performance dataanalysis over the duration of two development pro-grammes by one major player in the automotive industryconducted over an eight-year period. The research pro-grammes concentrated on analysing the development ofpurchasing strategy and identi"cation of strategic com-petency within a number of customer}supplier dyads.

The main concern of the research was with humanperceptions of competitive criteria, and the physical con-"guration of resources and procedures adopted to man-age interaction. Given the interest in both subjective andobjective variables and constructs a mixed-methodologycase study approach was therefore taken. Broadly speak-ing, a principally qualitative methodology was con-sidered appropriate in the observation of behaviours andperceptions informing decisions using primarily semi-structured interviews as the research method. It was alsopossible to engage in participant observation for thedevelopment of the case studies. In the observation andexamination of more objective elements of the study(such as vendor rating pro"les, process capability andfacilities layout), the use of archives, reports, and perfor-mance measurement were key methods of data collec-tion. In particular, a longitudinal content analyses ofa series of customer}seller team meetings between thebuying company and three of their suppliers overa three-year period provided an insight into the concernsaddressed during formalised interactions. However, manyof the interactions between actors in the dyads studiedwere of an informal nature and here contemporaneousnotes and post event interviews were employed withinthe customer organisation and six suppliers. It is felt thatby the adoption of a multi-method approach in theexamination of speci"c customer}supplier interaction,the concern for triangulation and methodological plural-ism has been addressed.

The analysis of the "eld research presented in thispaper concentrates on the initial supplier selection pro-

cess and the subsequent collaboration of the suppliersand customer over the duration of the development pro-grammes studied.

5. Supplier selection

Supplier selection for speci"ed goods and services isa critical decision for many purchasing organisations,since supply performance can have a direct "nancial andoperational impact on the business. (Baily et al., 1994). Incollaborative design the selection of suppliers becomes ofincreased signi"cance since suppliers are involved in thespeci"cation of goods and services, and therefore thecommitment to a particular source of supply may beembedded in the product/service design. It has thus beenargued that in such circumstances organisations are buy-ing the supplier's capabilities (Croom, 1992). Study of thesupplier selection process is thus useful to test the in#u-ence of operational and relational criteria on the selec-tion decision.

The sourcing decisions behind supplier selection fora range of vehicle systems including steering, interiortrim, wiring harnesses, climate control, braking systemsand fuel tank systems were examined. Supplier selectionwas seen by the customer organisations as a criticalprocess, and documented sourcing procedures, or proto-col, were set out to codify these capabilities in a struc-tured manner. To support the protocol, the sourcingdecisions were undertaken by a team representing designengineering, "nancial analysis, manufacturing, logisticsand purchasing.

Ceteris paribus, the formal sourcing protocol reliedheavily on the supplier's ability to meet cost targets.However, from the research analysis it was clear that inpractice a wider set of concerns were involved. Theseincluded concerns for carry-over of components to otherprogrammes; warranty and productivity performance,design system compatibility, availability of key projectmanagement skills and personnel and R & D resources.In addition, the perceptions of the sourcing team werenoted and in some cases were seen to be the determiningfactors.

In presenting the summary analysis of the sourcingdecisions it was clear that major and signi"cant di!er-ences existed between the decision process relating tototally new suppliers and the decision relating to existingsuppliers.

The summary analysis is presented in Table 1.The signi"cance of the di!erence between existing and

new suppliers lies predominantly in the emphasis placedon relational capabilities when considering existingsuppliers.

Following this analysis a paired investigation of sup-pliers' perceptions of the sourcing selection decision wasundertaken in order to identify the degree of congruence

32 S.R. Croom / European Journal of Purchasing & Supply Management 7 (2001) 29}37

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Table 1Sourcing criteria * a comparison of existing vs. new suppliers

Existing Supplier New Supplier

Operational Quality audit Quality auditProduction process

analysisProduction process

analysisExisting product design Existing product designDesign capability (e.g.

CAD)Design capability (e.g.

CAD)Facilities location &

layout (e.g. Flowlines)Facilities location & layout

(e.g. Flowlines)Quality assurance (SPC;

FMEA etc)Quality assurance (SPC;

FMEA etc)Product complexity Product complexity

Relational Interpersonal relations Team structuresFriendships Dedicated individualsShared experiences Communication channels

(internal & external)Team structures Quality managementQuality management ReputationResponsiveness RecommendationCommunication channels

(Internal & external)Dedicated individualsPersonal competensiesTrustFamiliarityEmpathy

Table 2Ranked paired analysis of customer and supplier perceptions of sourc-ing criteria

Perception of key sourcing criteria

Case example Customer Supplier

A &Brand reputation' Design capabilityExperience (vicarious) SizeRespect and trust Market penetration and

scopeAttitudes

B Adapted relationship AttitudesEmpathy ResponsivenessFamiliarity Service #exibilityTrust Developement capabilityCorporate technical

supportAttitudes

C Familiarity Dedicated productionfacility

Corporate productcapability

Attitudes

Process capability ResponsivenessExperience ClosenessTrustCustomer focusEmpathyAttitudes

D Familiarity Quality focusEmpathy AttitudesProcess capability Service responsivenessReputation Process capabilityTrustCustomer focusAttitudes

E Technical developementcapability

Design capability

&Brand' Reputation ResponsivenessCustomer focus Process capabilityAttitudes Market penetration and

scope

F Familiarity AttitudesEmpathy DesignAdapted relationship ResponsivenessMaterials technology Materials expertiseAttitudes ClosenessProcess capability Process capability

between suppliers' and purchasers' views. The processemployed for this analysis was to interview all membersof the relevant sourcing teams in order to identify andrank selection criteria. Once the preliminary ranking hadbeen identi"ed, respondents were invited to evaluate andamend the ranking. The same process was repeated withthe main contacts in each of the six suppliers chosen forthis analysis (representing both new and existing sup-pliers, and a representative range of systems). This analy-sis is presented in Table 2.

For the customer, the importance of familiarity, empa-thy and the ability of the supplier to demonstrate adapta-tion to the customer were dominant criteria, re#ectingthe recognition that interaction is a critical developmentprocess. Suppliers, on the other hand, were less aware ofinteraction and relational capabilities than technical ex-pertise. This was not surprising given the emphasis of thesourcing protocol on operational capabilities such asquality assurance systems, design software and skills andproduction tooling capabilities.

As a result of this analysis, the buying organisationexpanded their sourcing protocol to incorporate moresubjective and relational elements in the analysis. Thisre#ected their recognition that supplier selection neededto re#ect the supplier's strategic capabilities (includingtheir management of their customer interactions) ratherthan merely concentrating on component/system-relatedcriteria.

6. Supplier involvement

Throughout the duration of each of the developmentprogrammes the progress of supplier involvement in theprocess was studied. The progress of supplier involve-ment involved varying degrees of interaction and com-munication between customer and suppliers, oftenfocused on the technical issues relating to design

S.R. Croom / European Journal of Purchasing & Supply Management 7 (2001) 29}37 33

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Table 3Classi"cation of buyer}seller interactions

Speci"c General

Programmed Pre-scheduled teammeetings andnegotiations convenedto address mattersrelating to supplier'sinvolvement, (e.g.project team meetingsduring new productdevelopment

More general supplierinteractions suh atattenance at open daysor deploymen ofresident engineers

Ad Hoc Supply related, un-scheduled. Suchepisodes are reactive* e.g. response to anunforeseen event suchas a quality problem ordelivery failure

Casual, social interactionsbetween individuals andgroups outside of theoperating environmentof the relationships (e.g.dining out, playinga round of golf )

concerns, but also frequently involving discussion of rela-tional issues pertaining to the degree of on site repres-entation, the #ow of information through the supplierorganisation, and demonstration of commitmentthrough dedicated project management teams. In Table3 the format of interaction is categorised according to thecontent and focus of the interaction. The use of generalprocesses of interaction such as team meetings and de-ployment of resident engineers served to provide theformal and pre-determined channels of interaction (cf.communication channels). These were found to be pres-ent across the supply base. The less formal or reactiveinteractions arose as a consequence either of operationaldi$culties (such as design or manufacturing problems) orin response to relational issues (for examples open sup-plier events or social events).

The signi"cance of categorisation of customer supplierinteraction is to focus attention on the nature of interac-tion channels. This was of particular use in analysing themechanisms employed to manage supplier involvement,in which a critical incident approach was utilised toexplore a number of events during the development pro-grammes.

One such critical incident was encountered with a newsupplier of electrical distribution systems. The customerhad no previous experience of dealing directly with thiscompany but was well aware of their reputation andability from their various sources within the industry.Problems and delays began to arise during the develop-ment, which had serious repercussions across the wholeproject. Whilst the product (electrical distribution sys-tem) was to speci"cation, delivery was often late, orcomponents needed modi"cation in order to integratefully with other components. The main source of prob-lems seemed to be related to logistics, "tting and integra-tion with other components.

Investigations found a number of critical causalfactors.

1. The supplier was not aware of the peculiarities of thecustomer's operations processes and the particulartechnical requirements of the new project.

2. Design engineers were not used to delegating so muchresponsibility to their suppliers, and were conse-quently resolving minor problems without includingthe supplier in the process.

3. Many of the design, quality and production engineersfelt a strong loyalty to the previous, displaced,supplier.

Analysis of the management of this supplier's involve-ment illustrated a lack of any ad hoc interactions, andconsequently a lack of real empathy between the parties.This focused the failure recovery on greater interpersonalinvolvement and also the need for this supplier to placea resident engineer in the customer design facility.

7. Summarising the management of supplier involvement

In presenting the summary analysis of the manage-ment of supplier involvement during collaborative devel-opment three main elements of the customers' formaldevelopment protocol were identi"ed. These representthe signi"cant strategic elements of the new productdevelopment protocol adopted by the client organisa-tion, and relate to a. the deployment of structured con-current engineering, b. the emphasis of quality in theprogrammes studied, and c. the impact of supplier in-volvement in the process. These dimensions were re-garded as common to the programmes studied, andalso subject to review as part of the organisation'sproduct development strategy process. The analysisof the research data collected over the duration ofthe study has been concentrated into common and domi-nant factors through axial and subsequently selective,coding of the research narrative analysis. (Punch, 1998,p. 214-218).

The elements identi"ed in Table 4 represent the keydrivers of e!ective collaborative development and areintended to summarise the collaborative processdesign.

The use of clear project management and quality man-agement approaches have been recognised widely ascritical to product development performance, and suchcapabilities are widely acknowledged as essential in prac-tice and the literature (Wheelwright and Clark, 1992).From this research the development of cross-functionaland inter-organisational mechanisms for the manage-ment of supplier involvement are regarded as importantprocess structures for the facilitation of collaborativeproduct development performance. However, in additionto the formal structures laid down, this research has

34 S.R. Croom / European Journal of Purchasing & Supply Management 7 (2001) 29}37

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Table 4Signi"cant elements of the collaborative development process

Concurrentengineering

Quality planning Supplier involvement

Cross functionalteam dedicated tothe project

Integration ofdecision makingboth cross-functionally andcross-organisationally

Acess to supplier by thecustomer

Deconstruction ofa complex projectinto clear, short-term tasks andtargets

Clearly prescribed,establishedmethodologies suchas FMEA, QFD andVA/VE asa common,comparable systemof control

Suppliers viewed ascentres of excellence

Identi"cation ofdevelopment time,quality performanceand product cost ascritical performancecriteria

Customer's primary roleone of co-ordinationrather than operation

Customer's able to focuson core competencies.

identi"ed the existence of ad hoc interaction within thecollaborative process. It is thus contended that given theimportance of interaction for the management of supplierinvolvement (see also Ellram and Hendrick, 1995), analy-sis of the nature of interaction has enabled us to posit theview that interaction is constructed by both formal andad hoc interactions. Formal interactions may be pre-scribed through standard operating procedures and pro-cesses. As this research has found, ad hoc interactionspose more of a challenge.

The performance of the supplier involvement processmay depend on personalities, proximity, and familiarityof the parties, but in addition the process of ad hocinteraction is often seen by the more e!ective suppliers tobe an integral element of their account managementprocesses. In some ways traditional sales practices ofbuilding close working and personal relations are verysupportive of this process. The di$culty arises wheresuch processes are frowned upon as `unethicala or seenas non-commensurate with proactive purchasing behav-iour. It is here that there is an important role for thepurchaser in the management of interaction and relation-ships with suppliers.

From the analysis of supplier involvement it is claimedthat since interaction is a dyadic process, e!ective collab-orative performance is dependent on the management ofrelationships by both the supplier and the customer. Inthe cases where there was evidence of a lack of ad hocinteraction, or evidence of unitary management of therelationships, di$culties and examples of failure weretypically encountered.

8. Conclusion: a dyadic capabilities framework

A distinction has been made in this paper betweenoperational and relational competencies (Croom andBatchelor, 1997). Operational competencies are typicallyrelated to the process capabilities obtaining to design,manufacture and delivery. Relational competencies arethose competencies obtaining to the processes of com-munication, interaction, problem resolution and rela-tionship development. This paper has set out todemonstrate that in the management of supplier interac-tion, management concerns need to recognise that in-creased emphasis upon relational competency hasa signi"cant impact on collaborative product develop-ment performance. In this "nal section, an interpretationof the research analysis is presented that sets out a con-ceptual framework for understanding the nature ofdyadic capabilities. Further research is on-going to re"nethis framework, so this section presents the initial devel-opment of this model.

As we saw earlier, advantage from operational capabil-ity may be relatively transitory in nature. One set ofoperational capabilities may be classed as a product-based dimension of the dyadic capabilities framework, anexample of which would be the technical function ofa component (weight, hardness, output, etc.,). As much ofthe strategic management and operations managementliterature acknowledges, (Slack et al., 1998) the strategicperformance of an organisation is heavily in#uenced bythe structures employed to transform resources of theorganisation or network. These structures may processmaterials or components (as in production processes) orthey may facilitate control, co-ordination and commun-ication through organisational and interorganisationalsystems. Thus, a second dimension may be classed asstructure-based capabilities, examples here includingmanufacturing process cells, just-in-time delivery systemsand the institutional characteristics of the formal and adhoc interaction structures

When attention is given to the relational dimensions ofcollaborative performance, the exploitation of new tech-nological developments or improved operational capa-bilities is founded on the e!ectiveness of the interactionprocess. The e!ectiveness of supplier and customer inter-action has been shown to be a signi"cant factor in theperformance of collaborating suppliers, and the nature ofinteraction to be strongly in#uenced by both formal andad hoc processes of interaction. Thus, it is argued thata third dimension of dyadic capability is interaction-basedcapabilities, examples of which would include familiarityand empathy between the parties.

The dyadic capability framework thus sees capabilityas founded on the appropriate combination of product-,structure- and interaction-based capabilities. This buildson the operational/relational dichotomy espousedearlier, and has been found to have a conceptual utility,

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and interestingly a clear, practical application outside ofthe auto industry. A brief case example demonstratessome of the issues raised through its application.

The recognition that strategic capability is dependentupon interorganisational relationships is not particularlynew, or even novel (see Teece, 1987; Hines, 1994), yet thisresearch has found that the formal processes employedby customers and suppliers to align their interactions tothe idiosyncrasies of their partners do not re#ect therelationship-speci"c nature of individual dyadic collab-oration throughout the development process. By under-standing the dimensions and development of dyadiccapabilities, organisations will be better positioned tomanage their customer and supplier interactions andrelationships for improved collaborative developmentperformance.

9. Operationalisation

In an attempt to demonstrate the operationalisation ofthe framework discussion with operational managersfrom production, design, sales and purchasing from threeengineering businesses in the UK, the dyadic capabilityframework was applied to speci"c customer and supplierdyads. Some of the issues identi"ed in their analysishighlighted the in#uence of interaction-based capabilitiesand their implication for improved supplier manage-ment, in particular noting the role of the purchasingexecutive in the development of dyadic capabilities. Theproduct- and the structure-based dimensions did not pres-ent the delegates with too many di$culties in terms ofidenti"cation and evaluation. Where some initial di$-culty was encountered was with the interaction-baseddimension, largely due to the rather qualitative nature ofthe analysis. One group of executives `mappeda the fre-quency and form (i.e. formal or ad hoc) nature of theinteractions between themselves and one selected sup-plier. By eliciting the help of the supplier in this exercise itwas felt that both parties began to focus more clearly ona signi"cant area in their processes of development andalso helped to provide a better insight into the supplier'sand their own modes of interaction.

The next stage of the research is to develop a focusedworkbook aimed at further developing an operationalform of the dyadic capabilities framework This work willbe the subject of a future paper.

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