The direct connection between modularization and company success already stood out in the last ver-sion of the modularization study of 2017. Moreover the current study shows that companies who best utilized modularization achieved significant econo-mic advantages in the categories of „cost-reduction“ and „turnover average“. On average, the top group in these areas was evaluated about 50% better than the middle range.

The majority of the surveyed companies still have this perspective ahead of them as they are still be-low the success threshold on average. The study re-vealed that, based on their starting situations, 75% of all companies could considerably profit from mo-dularization even if the degrees of implementation vary depending on the industry.While the top group of companies that use modu-larization are already continuously experiencing measurable success, middle-range companies and companies that are only just starting with modula-

rization can look forward to high rates of increase in their companies‘ key figures.

In contrast, modularization experts with particularly extensive experience often find themselves facing the following risk: If the continual maintaining of previously created modular product kits is neglec-ted, the hard-won success may revert and be lost.

For the first time, the current study included the question regarding the use of IT tools for the ma-nagement of modular product architectures (see section „The role of IT tools for the management of MPAs“) and the importance of digitalization and agile methods (see section „Agility and digitalizati-on: Requirement management and cross-discipli-nary work as elements of modularization“).

MODULAR PRODUCTS DRIVECOMPANY SUCCESS

Modularization study 2018/2019Executive summary

The cooperation partners of the study

Introduction

The creation of modularized product architectures (MPA) is considered to be a suitable lever for sustainab-le product success and therefore for the success of a company. Are companies that design their products to be modular more successful than companies that do not or that do so only to a small extent? What in-fluence does the degree of modularization have on the success of the company?

The 2018/2019 version of the modularization study of ID-Consult is now addressing these questions for the fourth time. In the process, the companies that took part in the study represent various size classes from small and mid-sized companies (annual turnover up to €150 million) to large companies (annual turnover greater than €50 billion) from various industries, ranging from machine and plant building, auto-mobile manufacturing and special vehicles to household appliances and consumer goods.

Dr. Gerhard Tretow Managing Director ID-Consult GmbH

Many thanks to our cooperation partners

We would like to thank our cooperation partners Siemens PLM, VDI regional associations Munich, Lower Bavaria and Upper Bavaria, ime and ikt of RWTH Aachen University and GfPM for providing content sup-port for the study, in particular for their help in recruiting participants. Thank you very much for your de-dication in making the award ceremony of the „Modularization Readiness Awards“ an impressive event.

Method

The study evaluates the ca-pabilities of companies in regard to modular product architectures using the modularization readiness index (MRI). MRI comprises two indices:

The correlation of the MRI with company success the-refore permits conclusions regarding the influence of modularization on company success.

Fig. 1: Determination of the modularization readiness index from the competencies and degree of implementation of modular product architectures

The differentiated consideration of competencies and implementation provide information on how easily modularization strategies can be put into entrepreneurial practice.

Here, competencies in regard to modular product archi-tectures in the individual stages of adding value to the company were polled:

The degree of implementation of mo-dular product architectures was inves-tigated in three categories:

For the correlation of the MRI (modularization readiness index) with company success, the following economic criteria were used:

• Achievement of turnover and profit targets

• Achievement of market share goals

• Reduction of costs and increase in turnover due to modular product kits (in the past three years)

The evaluation of the study results permit a categorization of the companies into three clusters:

• Beginners: Companies with a low MRI

• Experts: Companies in the middle range of modularization and average company success

• Professionals: Companies in the top group

Results at a glance

1. The degree of modularization and company success are directly related: Companies with a high modu-larization competency are more successful than others

2. Three-fourths of all companies are in the lower third and middle range of companies that use modula-rization: For the vast majority of companies, modularization promises more company success.

3. The top group of companies that use modularization are even more clearly ahead of the experts in terms of company success.

How are modularization and company success related?

The consideration of company success demonstrated a clear connection between modularization and company success:

Fig. 2: The higher the modularization readiness index (MRI), the greater the company success

The higher the MRI, the more successful (measu-red using the criteria above) the companies are. The results of the top group are most noticeable. The companies that best utilize modularization are considerably ahead of the middle range in two cri-teria: The reduction of costs and increase in turno-ver through modular product architectures.

On average, the positive effects of a modularization strategy can already be observed after two years; companies that stay focussed in regard to modu-larization improve considerably within this period: Companies with four to six years of modularization experience achieve the highest values in competen-cies and the implementation of modular product ar-chitectures.

None of the companies investigated, however, have managed to jump from this stage to the top league.

Successes that have already been achieved must be actively secured, otherwise the companies are likely to fall back to the middle field: Companies with six to eight years of experience with modular product architectures score worse on average than compa-nies with four to six years of experience.

The timeline of modularization capabilities therefo-re also contains a clear admonition: If the successes achieved in the first few years are not secured by strict adherence to modular product architectures, a company could fall back to an earlier, lower level.

How are modularization and company success related?

Fig. 3: Modularization is a significant lever for company success

What do companies that successfully use modulariz-ation do differently?

The top group in MRI stands out due to special capabilities in three areas:

1. They manage to consistently implement their modularization competency

2. They take advantage of the overproportional impetus from the move from the middle field to the top group

3. They „stay on the ball“ and become continuously better over time

On the other hand, supportive IT solutions and key figures for the monitoring of the modular product architectures seem to have a small percentage in success according to the viewpoint of the companies surveyed: Both criteria land on the last evaluation places in regard to success factors.

The role of IT tools for the management of MPAs

Only 58% of the companies surveyed consider supportive IT solutions to be decisive for the success of product architectures; an examination of the IT landscape also shows why this is the case:

94% of all companies surveyed use Microsoft Excel for the management of modular product archi-tectures, i.e., an Office tool designed primarily for individual users.

In regard to the question about IT tools for modularity, the following impression arises as a whole:

A surprising image results: Even if most of the companies (77%) already have company-wide IT solutions in use, the majority of them do not seem to be able to do without a „personal productivity tool“ for the management of modular product architectures. This suggests that version-secure, structured ERP and PLM applications are supplemented by a kind of „agility layer“ in practice.

This apparently only conditionally contributes to success, as shown by the evaluation above. It can be assumed that Excel-based information can be integrated only insufficiently into the processes and data structures of the company.

• For the management of modular product architectures, companies use several IT solu-tions in combination.

• In the case of corporate solutions, ERP systems dominate before other software catego-ries, including PLM.

• Only about half of the companies use dedicated tools for complexity management.

• Almost all companies use Excel for the management of modular product architectures.

Agility and digitalization: Requirements Manage-ment and cross-disciplinary work as elements of mo-dularization

Fig. 4: When it comes to the main criteria of company success, professionals are considerably better than the others

For clear decision-making processes in regard to ch-anges in and additions to the modular product ar-chitectures, the ability to make continuous updates through the link to market requirements has parti-cular significance:

84% of the companies surveyed consider agili-ty in product development to be important or very important. The same applies to the topic of digitalization, which 77% of the companies sur-veyed consider to be an important or very im-portant criterion.

Companies appear to be conscious of the prime im-portance of this topic; to which extent do compa-

nies already manage to implement this manner of work?

In this context, the current knowledge of market re-quirements, the up-to-dateness of the function and product structures and the organizational ancho-rage of the updating process were surveyed. Here, even the top group of companies that use modu-larization did not assess themselves to be better than average. The high prioritization of clear decisi-on-making processes and a cross-disciplinary focus on cooperation show the following: The important of agile methods was recognized, but even the best are just barely „agile-ready“.

What differences exist between the different indust-ries?

The study differentiated between the automobile manufacturing, machine and plant building, consumer goods and household appliance industries:

Fig. 5: In the automotive, construction, agricultural and forestry machine industries, there is a significant gap between beginners and expert

As expected, fewer companies in the „Beginners“ ca-tegory number among the manufacturers of consu-mer goods; most of these companies are already on their way to the middle field. The automobile manu-facturers represent the greatest number of compa-nies in the top field. The machinery equipment ma-nufacturers are a mixed bag: 27% of the companies surveyed from this industry are just starting out on the path to modularity. The number of beginners is even greater when it comes to plant manufac-turing companies, where a third of all companies are still in the „Beginners“ category. What‘s worth notice here, however, is the expected impetus: When taking the step from beginner to expert, plant builders can expect a 52% increase in

success, the highest value among the branches under consideration.

Accordingly, it has also been demonstrated that a company from the automobile or special vehicle manufacturing industry must make a lot of effort to reach even the middle field of companies that use modularization. Beginners from these industries must improve their MRI by about 80% to reach the next category. The good news for this companies is that, once the first step has been taken, the jump to the top turns out well with little effort and high impetus in relation to the expected success.

Where do areas of action arise?

Depending on the starting situation, a number of recommendations can be derived from the results of the study.

For modularization beginners: don‘t miss the connection!Especially companies in the automobile and special vehicle manufacturing industries that have not yet intensively dealt with the topic of modularization must try to catch the connection to the middle field as soon as possible. In the process, however, these companies must manage their expectations realistically because no company achieves the jump from beginning to expert wi-thin two years.

For companies with experience in modularization: don‘t ease up!The initial positive results will manifest, but the best is yet to come: Companies hat consistently work towards the top group can expect above-average results with moderate effort.

For modularization professionals: beware of the modularization dip!Especially experienced modularization professionals with six to eight years of experience have to secure their success actively to prevent a fallback. Continuous maintaining of the modular pro-duct architectures, cross-disciplinary cooperator and secure procedures prevent this problem.

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