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October 06, 2020 07:23 PM

Exploring the Role of Management Control Anchor Practices in new Product Development

Posted by ARC Team

Martin Carlsson-Wall, Lukas Goretzki, Kalle Kraus & Johnny Lind (Stockholm School of Economics)

 

New product development (NPD) is a key activity for organizations to successfully compete and grow because a large amount of the total product cost is determined already during this particular stage. There is hence a lot of pressure on companies to properly manage the NPD process which is also why they usually employ various types of management controls. Researchers have demonstrated that those controls often produce different and sometimes even competing information that points to different possible (strategic) directions an organization can take with its NPD activities. One can hence say that management controls not only reduce but also contribute to the complexity of NPD activities. So how do organizations then decide based on all the different information provided by their various types of management controls?

To address this issue, we draw on a single case study of ABB Robotics, a global leader in the robotics industry. Being a high-tech company with many parallel NPD projects, steering the product development portfolio is a critical task. Analyzing how the case company, over time, managed and adjusted its NPD portfolio and how various types of management controls were used in this context, we demonstrate how certain controls became more important than others with respect to facilitating strategic decision-making. In other words, our study illustrates the emergence of a hierarchy of management controls that supported the management of our case company’s NPD activities by bringing about certain prioritizations. We analyze our empirical material by drawing on Ahrens (2018) and the notion of “management control anchor practices”. This theoretical concept relates to those controls that enact an organization’s “constitutive rule”. A constitutive rule characterizes the nature or identity of an organization as well as its members and relates to the organization’s “great and enduring concerns”. We show how, in our case, a so-called integrative liaison device in the form of a Product Development Forum functioned as such an anchor practice and enacted the case organization’s constitutive rule of being a technology leader. We demonstrate how, to coordinate time, cost and, functional trade-offs between individual projects as well as the overall project portfolio, the Product Development Forum became the management control device that brought about compromises between the various project-level management controls and led to “anchored prioritizations”.

In addition to our contributions to the academic literature on management control in NPD settings, our study generates some managerial implications. First, it emphasizes the importance of implementing controls that facilitate the coordination between project and portfolio-level decisions and thereby enable prioritization concerning strategic directions and decisions. Secondly, it suggests that managers need to carefully reflect not only on what controls should be put in place to enable the management of the NPD process but also the hierarchical order of those controls. What seems particularly important hereby is to create an understanding of what controls (should) act as management control anchor practices and what should be subordinate practices.

Read our article through this link:

https://www.tandfonline.com/doi/full/10.1080/09638180.2020.1763187

 

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