Two Experts Are Better Than One: Reaping The Rewards Of Specialization Through Better Communication

Abstract

Successful product innovation requires the effective communication of consumer knowledge to inform product design decisions. Achieving successful communication across functional units normally requires learning the concepts and terminologies outside one's area of expertise. This study analyzes how the use of a common organizational language as a communication tool affects the coordination between the firm's internal marketing unit (composed of a marketing analyst) and product development (composed of a product engineer). While a common language can potentially enhance understanding through the standardization of relevant terminologies, its dependence on learning effort from both parties makes it beneficial only when the cost of learning is not too high and each party can capture an adequate share of the product's value. On the other hand, in the absence of a common language, learning efforts become substitutes as either party can exert effort to learn the other party's own disparate language. When efforts are substitutive, managerial control to allocate shares from the returns to innovation is best given to the marketing analyst who can better exert learning efforts based on its knowledge of how current designs deviate from consumer preference. However, when conditions favor the use of a common language, managerial control is sometimes best given to the product engineer who can achieve greater adoption and higher use of the language system based on its share allocation decisions.