Int J Adv Manuf Technol (2005) 25: 402?C408 DOI
Krsto Pandza ?? Andrej Polajnar ?? Borut Buchmeister
Strategic management of advanced manufacturing technology
Received: 20 January 2003 / Accepted: 27 May 2003 / Published online: 29 March 2004 ? Springer-Verlag London Limited 2004 Abstract The aim of this paper is threefold. First, it discusses a role of advanced manufacturing technology (AMT) within a strategic management context of a manufacturing organisation. Resource-based view is presented as a useful theoretical school for understanding strategic management of AMT. Second, a brief case from a manufacturing organisation is provided to illustrate the debate. In the reported case study, the relevant mechanisms for understanding capability accumulation process and the role of AMT within this process are depicted. Third, a framework of resources and capabilities is proposed in order to increase applicability of presented theoretical ideas. Keywords Advanced manufacturing technology ?? Case study ?? Organisational capabilities ?? Resource-based view ?? Strategic management achieving agility ?C the capability, which arguably eliminates the trade-off between ?exibility and costs. Information and communication technology alter the way organisations work and interact more ef?ciently, integrating subsidiaries and alliances. Information and communication technology together with simulation software are reported [8?C10] to be enablers for accomplishing virtual manufacturing. Information systems such us ERP and MRP II help to analyse and optimise an entire supply network. Concurrent engineering approach associated with the life cycle of the product design phase is largely determined with CAD, CAE and rapid prototyping technology [11, 12]. Although the change in manufacturing paradigms cannot be denied and the signi?cant role of AMT cannot be ignored, management of technology is still a scarcely understood phenomenon. What is more, Hayes and Pisano  report dissatisfaction with introduction of different new manufacturing concepts so often expressed by practitioners. Hottenstein et al.  argue that many AMT projects fail to meet the expectations of their adopters. Additionally, Boyer et al.  showed that manufacturing organisations with moderate investments in AMT can be equally successful as organisations with the highest investment rate. The data from that study clearly suggest that investments in technology alone are not a causal factor for performance improvement. As Gunesekaran
 asserts, the technology alone is not enough to accomplish agility in a manufacturing organisation. Hitt et al.  argue that managing technology means managing different types of knowledge. This leads to acknowledging the dual nature of AMT. Technology changes are results of engineering development. On the other hand, application and exploitation of them are rather more a complex social phenomenon than an engineering exercise. Shane  explored this cognitive dimension related to AMT when studying exploitation of a three-dimensional printing process. He showed that prior knowledge puts organisations in a better position to explore and create opportunities from AMT. It is hardly surprising that engineering development of AMT and its exploitation in the business context are disconnected because they belong to two different disciplines, namely to engineering science and to organisation science. It is, however,
It is now almost generally accepted that technological innovation is a critically important activity that will become the primary driver for competition in the 21st century. Advances in technology have moved manufacturing organisations toward a new competitive landscape. Managers in manufacturing organisations are experiencing the emergence of new manufacturing concepts or even a new paradigm . Concepts such us agile manufacturing [2, 3], virtual organisation , virtual manufacturing , supply networks  and concurrent engineering  are largely driven by successful implementation and exploitation of AMT. Technologies such as CAD/CAM, CIM, CAPP, FMS and robotics represent the most important building blocks for
Dr. K. Pandza (u) ?? Professor A. Polajnar ?? Dr. B. Buchmeister Laboratory for Production and Operations Management, Faculty for Mechanical Engineering, University of Maribor, Smetanova 17, 2000 Maribor, Slovenia E-mail: firstname.lastname@example.org Tel.: +386-2-2207634 Fax: +386-2207990
impossible to deny that practitioners involved in AMT introduction, application and exploitation need an understanding of engineering and technological features as well as the necessary knowledge about related organisational phenomena. Bettis and Hitt  argue that practitioners must develop a better understanding of the relationship between strategy and technological change and achieve a close integration of the two. This paper does not ful?l the void in interdisciplinary research about AMT. It is an attempt to provide a framework for analysing and understanding the complexity of the strategic management of AMT. This complexity is characterised with far more factors than are possible to consider. The proposed framework, therefore, seeks to help practitioners to better think through the problem by understanding its
complexity and de?ning and selecting among relevant factors. Numerous available techniques  for evaluating AMT start to look increasingly fragile because practitioners encounter uncertainty and ambiguity due to the dynamism of the competitive environment. In such a business context, practitioners will more likely ?nd useful a conceptual framework, which enables understanding of the complex phenomenon and a critical re?exivity on the AMT??s strategic role. This paper is organised as follows. In the next section, a contemporary strategic management school is presented and a role of advanced manufacturing technology within this school is discussed. In the third section, the research methodology is brie?y described. In the fourth section, a case study is presented. In the ?nal section, a framework is proposed that should help practitioners to better understand the strategic role of advanced manufacturing technology.
2 Theoretical background
The resource-based view (RBV) of the ?rm  constitutes a highly in?uential stream of research in the strategic management literature. The essentials of the RBV lie in the assertion that the competitive position of an organisation is determined by the sum of its unique resources and capabilities and the relationships among them . In particular, RBV assumes that ?rms can be conceptualised as bundles of resources and capabilities, that these are heterogeneously distributed across organisations, and that resource differences persist over time . Based on these assumptions, RBV describes in detail the characteristics that resources and capabilities should possess to become the sources of a competitive advantage [23, 24]. They should be valuable, rare, inimitable and nonsubstitutable. AMT is a strategic resource and it is an integral part of organisational capabilities in manufacturing organisations; therefore RBV, with its introversion, represents an appropriate theoretical framework to understand the strategic management of AMT. In the RBV, resources are de?ned as more or less ?rm-speci?c assets on which a monetary value can be attached. State-of-theart manufacturing technology represents ?rm-speci?c asset and manufacturing technology available on the market is de?ned as a nonspeci?c asset. It is claimed by the RBV that the former is due to
its rareness, uniqueness and inimitability more suitable as a source of competitive advantage. However, nonspeci?c AMT can also, when productively linked with other resources, constitute a powerful capability. The strategic role of AMT can be, therefore, understood in context of capabilities the organisation possesses. Lately, the attention of RBV has shifted from exploring static resources to the study of the dynamic process of capability development . Capabilities are those combinations of resources and processes that enable the organisation to effectively and successfully implement
activities that are necessary to meet customers?? needs. A capability is actually a special type of a resource, the aim of which is to make other resources, for example AMT, more productive. In other words, a ?rm-speci?c organisational capability will make AMT differently productive in different organisations. Capabilities are often discussed in terms of level. They are classi?ed into functional and integrative capabilities. The former allows a ?rm to deepen its functional knowledge, such as R&D expertise and manufacturing knowledge. The latter binds different functional capabilities and additionally absorbs critical knowledge from external sources. Development of capability is a highly dynamic phenomenon and is therefore open to uncertainty and ambiguity. A capability evolves through idiosyncratic and path-dependant histories. Organisational learning appears as a logical mechanism for explaining capability accumulation processes. A learning mechanism is intrinsic to the capability development process and makes the process self-generating. It is, however, determined by external environment as well as by managerial decision making. The latter is determined by subjective mechanisms of sense making and imagination and the former performs selection and assures feedback necessary for interpretation of a selection process. The external environment provides organisations with network resources, through which organisations can obtain access to resources that create value and capabilities that would otherwise require time to develop. The external environment also threats to erode the value of a capability through the mechanisms of substitution, imitation and obsolescence. The above-mentioned constructs, mechanisms and characteristics are hardly familiar to practitioners involved in development, implementation and exploitation of AMT. It is, however, dif?cult to assume that ef?cient management of AMT is possible by ignoring the mechanisms that in?uence the process of capability development in manufacturing organisations. AMT is a salient building block of organisational capabilities in manufacturing organisations and its strategic role cannot be comprehended without understanding the complexity of the capability development process. The strategic management of AMT is a highly integrative activity, where AMT, technological knowledge of functions and interactions of natural and arti?cial things and organisational knowledge of how to execute business processes are coordinated, with the aim of creating or sustaining a competitive advantage. In this paper, the relevant mechanisms for understanding the capability development process and a system of resources and capabilities are presented in a proposed framework. Constitutive
elements in this framework are illustrated within the case study.
This illustration should provide the analogy necessary to comprehend the complex nature of strategic management of AMT.
The case study presented in this paper is concerned with illustrating the debate in order to increase its applicability rather than with rigorous inductive theory building. The methodology is, therefore, only brie?y described. This case study is a part of a wider research project, where the capability development process has been explored. For this paper, the particular case is selected because it enables depicting of relevant mechanisms and it highlights the role of AMT. The process of interest is characterised by complexity, ill structure, idiosyncrasy and path dependency. The applied casestudy methodology was an appropriate tool to tackle such a phenomenon. The dynamic nature of the phenomenon asked for incorporating evolutionary and longitudinal perspective. Interviews, archival documentation and observations were all methods for collecting the necessary data for the research. The initial interviews led to an identi?cation of the capability in the organisation and to understanding of its value in the organisation??s speci?c business context. Further interviews were focused on recollection of events, decisions and context, which were important for this research subject. In the case, extensive use was made of archival documents to prepare interviews and challenge interviewees?? memories. Sources of archival data included companies?? annual reports, news clippings, documents describing company history, project reports and, also, in some cases, strategic plans. These archival documents made it possible to construct a quantitative picture of the company. Key events, actions and decisions were mapped chronologically using archival documents. The third source of data collection was observation. It should be pointed out here that, for a period of 4 years, the researcher was directly involved in the organisation??s operations. When capability was identi?ed, the research tracked the evolutionary process of its accumulation. In the reported case study, a 10-year time period was analysed. The analysis of data and conceptualisation were performed in accordance with inductive generalisation. This was an iterative process of data collection, analysis and interpretation. At this instance, a brief introduction to the research setting is provided. Company Primat is a medium-sized producer of mechanical security equipment. This engineering- and manufacturingoriented company has 290 employees and makes 15 M ? of net sales revenues. In this case, a capability for a quick and customised new product introduction is identi?ed. The business context, within which Primat??s capability is the most successful, is the market segment of safes for automatic teller machines (ATM), which accounts for almost 30% of the total income of the company. In supplying safes to the producer of ATM machines,
operations are done in two steps, regarding the typology of the production processes. The ?rst step is the design to order. If the
product is successfully certi?ed by the testing laboratory and the contract is signed with the producer of the ATM machines, the production typology switches from design-to-order to make-toorder or even make to stock. In this instance, where the business context changes, it was especially transparent to study the relevant capabilities, mechanisms that in?uence the development of identi?ed capabilities and the role of AMT in this strategic process.
4 Case study
The analysed time period is decomposed into ?ve successive phases. 4.1 Initial phase This phase is characterised by the gap between the capabilities required by the business environment and those possessed by the company. The company reacted to the perceived gap with the formulation of a Strategic plan, which set the context for development of expert engineering knowledge. Simultaneously, the company reacted to the changing demands of the market that dictate a quick response to customers?? demands. In the initial phase, the company found no links between quick response and expert knowledge. The two were only to be linked in the evolutionary development. Resources, capabilities and relevant mechanisms for initial phase are presented in Table 1. 4.2 Learning phase The learning phase is characterised by intensive accumulation of expert knowledge in the ?eld of mechanical safety. Experimenting with materials, structural solutions and technological processes lead to the acquisition of expert knowledge. It was accumulated with intensive interaction between Primat and testing
Table 1. Resources, capabilities and relevant mechanisms in initial phase Resources, capabilities, mechanisms Obsolescence Description
The external environment as inadequate selects existing company??s capabilities. Existing technology supports obsolete capabilities. Existing capabilities are perceived as nonvaluable at the targeted market. Formulation of the plan for strategic changes is driven by the perceived obsolescence of existing capabilities. Decisions in the initial phase start up the development of capabilities and the process of organisational learning. Creating a base for a quick response capability. Setting up a context for accumulation of engineering knowledge.
Organisational learning Integrative capabilities Functional capabilities
405 Table 2. Resources, capabilities and relevant mechanisms in learning phase Resources, capabilities, mechanisms Organisational learning Path dependency Description Resources, capabilities, mechanisms A period of very intensive learning characterised by
experimentation and improvisation in manufacturing and R&D. Despite no signi?cant ?nancial indicators, the company keeps up with development caused by decisions from the initial phase. The value of accumulated functional capabilities is perceived through products?? certi?cates. Accumulation of engineering expertise in the ?eld of mechanical security. Accumulation of manufacturing operations capabilities. Accumulation of individual knowledge in the ?eld of mechanical security. A close cooperation with local university in developing new products. Establishment of a supply network. Membership in institutions that set technical trends in the industry sector. Table 4. Resources, capabilities and relevant mechanisms in exploitation phase Resources, capabilities, mechanisms Path dependency Integrative capabilities Description Sense making Description Table 3. Resources, capabilities and relevant mechanisms in con?rmation phase
The 5-year contract with ATM producer for supplying safes presents radical con?rmation in business environment. A capability is perceived as valuable. The core capability for a quick and customised new product development is accumulated. The core capability is developed in an evolutionary process, with engineering knowledge and capability of quick response mingled together. Large strategic commitment by investments in CNC machines and CAD/CAM technology.
Integrative capabilities Path dependency
Sense-making interpretation Functional capabilities
Individual knowledge Network resources
laboratories. With their testing logic, the laboratories dictated the development of engineering knowledge. In spite of the fact that Primat??s products started to appear in lists of certi?ed products, which are regularly published by testing organizations, and the circle of potential buyers increased, this was not followed by an increase of revenues. In spite of nonexistence of tangible ?nancial effects, the strategic orientation of the company could not be simply changed. Table 2 shows relevant factors for the learning phase. 4.3 Con?rmation phase The business with automatic telling machines was the ?rst to gain clear con?rmation from the business environment that company??s accumulated capabilities have gained value on the market. In doing business with the producer of automatic telling machines, expert knowledge mingled with the capability of quick response to customers?? demands, which originates from the necessary reaction demanded by the business environment at the beginning of the 1990s. Expert knowledge accumulation and the capability of quick response to customers?? demands were combined into the capability of quick development of products of adequate safety levels for buyer??s demands. Table 3 summarises factors relevant for the con?rmation phase. 4.4 Exploitation
phase The exploitation phase is characterised by the company??s exploitation of accumulated capabilities in business opportunities emerging on the market. With investments into AMT, the com-
Reacting to opportunities where accumulated capability is exploited Different cross-functional capabilities such as quality management, dependability of delivery and cost management are developed in order to support and to complement the core capability. Further investments in CNC machines, CAD/CAM technology and rapid prototyping technology. New research project with the university.
Resources/assets Network resources
Table 5. Resources, capabilities and relevant mechanisms in proactive phase Resources, capabilities, mechanisms Description
Path dependency Capability development process progresses further, and organisational whereby its structural complexity increases. learning Imagination The company proactively in?uence the unarticulated needs of the market with new products.
Imitation and substi- The company analytically benchmarks competitors tution in order to prevent imitation and substitution of its capability. Resources/assets Network resources Investment in ?rm-speci?c technology for simulation of burglar techniques. Cooperation with partners in developing new products.
pany tries to maintain the level of accumulated capabilities. Table 4 presents relevant factors for the exploitation phase.
4.5 Proactive phase The proactive phase is characterized by the shift from simple exploitation of existent capabilities for emerging business opportunities toward the active generation of opportunities. Primat no longer plays a reactive role, subordinating its capabilities to the buyer of safes for automatic telling machines but actively creates business opportunities based on accumulated capabilities. Proactive phase is summarised in the Table 5.
5 Framework of resources and capabilities in a manufacturing organisation
To conceptualise the complexity of the capability development process and the role of AMT within this process, a framework with three perspectives is proposed (Fig. 1). A static perspective is usually presented as a hierarchy. In this framework, however, a static perspective emphasises the system nature of a capability. A capability is regarded as a system of integrated knowledge bases. An integrative capability represents an integration of different knowledge, which spans an entire value chain. AMT has to be understood as a constitutive element in the system of knowledge integration and its value should not be analysed in isolation. AMT has its value and meaning only when productively linked with other knowledge bases in organisation in order
to create valuable integrative capability,
Fig. 1. Framework of resources and capabilities in a manufacturing organisation
which is cross-functional by its nature. Available strategic techniques for analysing AMT largely address competitive analysis and accordance with business objectives, yet they fall short of enabling analysis about a particular AMT investment??s in?uences on a knowledge base in an organisation. Firm-speci?c AMT can be a result of integration of manufacturing and R&D expert knowledge and, as such, represents a powerful resource in the system of integrated knowledge. On the other hand, nonspeci?c AMT will only be a relevant resource if ef?ciently and effectively tied with knowledge of individuals, different functional knowledge as well as with cross-functional organisational knowledge. In other words, a ?t between AMT and organisational capabilities has to be carefully analysed and explored when the strategic role of AMT is considered. Depicting a capability as a system of integrated knowledge and assets such as AMT is not enough for understanding strategic management of AMT. A capability as an organisational knowledge is a dynamic phenomenon, where knowledge is generated through a very intensive learning process. This process can hardly be rationally planned in details; therefore, managers should encourage trail-and-error learning and improvisation. The same holds true for practitioners involved in implementing and exploiting AMT. Experimenting with AMT to explore different possibilities of its exploitation should be encouraged. For strategic management of AMT, it is highly important to foster learning about implementation and exploitation of AMT. Where this is concerned, the managerial decision making and mechanism of sense making start to play an important role. Managers decisively shape the process of capabilities development also by decisions about AMT. Their decision making is largely in?uenced by the ability to make sense of events and impart a meaning to
them. Better decision making in regard to AMT implementation and exploitation can be achieved by fostering a deliberate learning. Every new investment in AMT and its further implementation can be de?ned as a strategic event that should be analysed as a case. Because investments in AMT are not an everyday activity, knowledge about implementation and exploitation will increase if made more analytical and available. Intranet or internet may present a useful technology to design such a knowledge management system about lessens from prior implementation and exploitation of AMT. Path dependency is an important mechanism for understanding the capability development process. It implies that
choices in the future are determined and constrained by choices made in the past. This mechanism is central to management of AMT because AMT requires high investments. Investments in AMT are irreversible and therefore ask for a strategic commitment, which may prove problematic due to the uncertainty in the business environment. Managers involved in management of AMT should ?nd a way to deal with uncertainty and how to manage risk associated with large commitments. The presented case shows that gradual investments in AMT are appropriate when the value of an organisation??s capabilities is not clearly perceived. When the market con?rms the value of organisational capabilities, it is less risky to make large commitments to AMT, which should in return upgrade and maintain the developed capability. What is more, in this instance, the imagination mechanism becomes relevant. Every investment should be considered as a future oriented option for innovation, change and productive opportunity. Path dependency is also closely related to learning mechanisms. What an organisation can plan to do regarding AMT in the future is narrowly constrained by what it has been capable of doing in the past. Every investment in AMT should, therefore, be perceived as an investment in the stock of knowledge that opens options for the future. The external perspective is the last in the framework. The external environment largely shapes the capability development process by in?uencing learning and interpretation mechanisms. The external environment selects whether organisational learning leads capability development to the source of competitive advantage or reduce its value. It also provides managers with relevant events to be interpreted for future action. The selection is provided through mechanisms of imitation, obsolescence and substitution. Interpreting these mechanisms is of extreme importance for managing AMT. Imitation implies that AMT supports capabilities readily replicated by competitors. Obsolescence refers to AMT that supports capabilities that no longer matter in the business environment. Substitution implies that competitors can emulate a certain capability, usually by adopting a new AMT or by using it in an alternative way. When managing AMT, a practitioner should develop a systematic scanning of the business environment in order to prevent a harmful in?uence of the above-mentioned mechanisms. The external environment provides organisations with network resources. Where AMT is concerned, a question arises, that is, which is the core technology that should be kept in-house and which to outsource? This governance choice should be largely
Table 6. Some suggestions for a strategic management of AMT Activity Benchmarking Description Assure analytical comparisons with competitors in order to reduce threats of obsolescence, imitation and substitution. Acquire quantitative and qualitative data necessary for