Appropriateness and Impact of Platform-Based Product Development

In their quest to manage the complexity of offering greater product variety, firms in many industries are considering platform-based product development. Product platforms, which are component and subsystem assets shared across a product-family, enable a firm to better leverage investments in product design and development. While the platform approach offers a number of benefits, it also imposes certain additional costs that have not received adequate research attention. In this paper, we use an industrial example both to illustrate some of the costs and benefits of platform-based product development and to motivate the development of a mathematical model. The model is formulated to better understand the appropriateness of product platforms and their impact on product-planning decisions. Our results indicate that platforms are not appropriate for extreme levels of market diversity or high levels of nonplatform scale economies. Also, a firm's product positioning and introduction sequence decisions made during the product-planning phase are significantly impacted by the presence of platforms. Specifically, a platform increases the separation among products and offers a multitude of product introduction strategies. We translate our model findings into a managerial framework.