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Jian Xie School of Mechanical Engineering, Beijing Institute of Technology, 5 South Zhonguancun Street, Haidian District, Beijing 100081, China e-mail: [email protected] Youyi Bi University of Michigan-Shanghai Jiao Tong University Joint Institute, Downloaded from http://asmedigitalcollection.asme.org/mechanicaldesign/article-pdf/142/3/031112/6649149/md_142_3_031112.pdf by Northwestern University, Yaxin Cui on 19 May 2021 Shanghai Jiao Tong University, 800 Dong Chuan Road, Shanghai 200240, China e-mail: [email protected] Data-Driven Dynamic Network Zhenghui Sha System Integration & Design Modeling for Analyzing the Informatics Laboratory, University of Arkansas, Evolution of Product Competitions 863 West Dickson Street, Fayetteville, AR 72701 Understanding the impact of engineering design on product competitions is imperative for e-mail: [email protected] product designers to better address customer needs and develop more competitive products. In this paper, we propose a dynamic network-based approach for modeling and analyzing Mingxian Wang the evolution of product competitions using multi-year buyer survey data. The product co- Global Data Insight & Analytics, consideration network, formed based on the likelihood of two products being co-considered Ford Motor Company, from survey data, is treated as a proxy of products’ competition relations in a market. The Dearborn, MI 48120 separate temporal exponential random graph model (STERGM) is employed as the dynamic e-mail: [email protected] network modeling technique to model the evolution of network as two separate processes: link formation and link dissolution. We use China’s automotive market as a case study to Yan Fu illustrate the implementation of the proposed approach and the benefits of dynamic Global Data Insight & Analytics, network models compared to the static network modeling approach based on an exponential Ford Motor Company, random graph model (ERGM). The results show that since STERGM takes preexisting com- Dearborn, MI 48124 petition relations into account, it provides a pathway to gain insights into why a product e-mail: [email protected] may maintain or lose its competitiveness over time. These driving factors include both product attributes (e.g., fuel consumption) as well as current market structures (e.g., the Noshir Contractor centralization effect). With the proposed dynamic network-based approach, the insights Science of Networks in Communities, gained from this paper can help designers better interpret the temporal changes of Northwestern University, product competition relations to support product design decisions. Evanston, IL 60208-311 [DOI: 10.1115/1.4045687] e-mail: [email protected] Keywords: engineering design, product competition, dynamic network analysis, ERGM, Lin Gong STERGM, design for market systems, user-centered design School of Mechanical Engineering, Beijing Institute of Technology, 5 South Zhonguancun Street, Haidian District, Beijing 100081, China e-mail: [email protected] Wei Chen1 Integrated Design Automation Laboratory, Northwestern University, 2145 Sheridan Road, Tech A216, Evanston, IL 60208-3109 e-mail: [email protected] 1 Introduction outdated products, technological progress, and social changes. For example, the market share of US brands in the Chinese auto In a dynamic market environment, product competition changes market fell from 12.2% in 2017 to 10.7% in 2018, and according over time [1], e.g., due to release of new products, withdrawal of to Refs. [2,3]2 a possible reason for this decline is due to the delayed refresh of the US lineups, which implies the negative effect of untimely design improvement on product competition. 1Corresponding author. Contributed by the Design Automation Committee of ASME for publication in the JOURNAL OF MECHANICAL DESIGN. Manuscript received June 15, 2019; final manuscript received December 2, 2019; published online December 12, 2019. Special Editor: Gary 2https://www.autonews.com/article/20180810/GLOBAL/180819982/ford-s-china- Wang. sales-fall-32-july-on-lack-of-fresh-models Journal of Mechanical Design Copyright © 2020 by ASME MARCH 2020, Vol. 142 / 031112-1 The change of customer preferences is another potential cause for and shrinking dynamics, i.e., how the explanatory factors the evolution of product competition. Fuel-efficient cars have influence the formation of new links and the dissolution of been more desirable since the energy crisis of the 1970s as custom- old links. Compared to the stochastic actor-oriented model ers become more sensitive to rising gas prices [4]. Since early [25], another widely used longitudinal network model which 2000s, higher fuel efficiency has contributed to the increasing com- treats nodes as actors who make active decisions, STERGM, petitiveness of hybrid vehicles [5]. Therefore, a thorough under- is more advantageous for our purpose because it is a standing of the dynamic changes in market competition is of link-oriented model that can include nodes which are not great significance in many engineering design scenarios, such as actors, e.g., products in our work [26]. product feature competition (e.g., whether to upgrade design fea- • Second, in the social network literature, STERGM has been tures of an existing car and by how much) and new product posi- utilized for modeling various dynamic social relations, such tioning (e.g., whether to develop a new car model to fill a specific as the evolutions of social networks of politicians [27] and market niche). international trade networks [28]. Researchers have found Downloaded from http://asmedigitalcollection.asme.org/mechanicaldesign/article-pdf/142/3/031112/6649149/md_142_3_031112.pdf by Northwestern University, Yaxin Cui on 19 May 2021 Existing research on product competition has primarily focused that both exogenous factors (e.g., economic characteristics of on investigating the strategic factors that influence the competitive- countries) and preexisting network structures (e.g., reciprocity ness of products. For example, Talay et al. [6] employed the para- for bilateral trade relations and triadic closure effects for trilat- metric hazard model to investigate the factors influencing the eral trade relations) influence international trade networks over survival of auto companies in the US automotive market. They time [28]. Thus, STERGM allows us to investigate how preex- found that rather than the quality of its innovations, it is a firm’s isting competition relations influence product competitions in ability to keep up with its competitors that determines its chances addition to the impact of product features. of survival in the marketplace. This again demonstrates the signifi- • Third, STERGM is an extension to the static ERGM. There- cance of investigating the competition relations of products. fore, the results from STERGM and ERGM can be compared Roberts [7] applied the autoregressive profit model to examine and related to further advance our understanding of product the relationship between product innovation, competition, and prof- competition relations. itability in the US pharmaceutical industry. They found the positive relationship between a firm’s ability to avoid competition (i.e., to sustain the competitive position of each innovation over time) and However, STERGM has never been employed for studying the persistence of its above-normal profit outcomes. Economic dynamic product competitions. Our objective in this paper is to growth model [8] and game theoretic models [9,10] have been extend STERGM from social network analysis to studying the adopted for understanding the dynamics of product competition. impact of engineering design and existing market competitions on However, these methods are not able to directly model the influence the evolution of product competition relations. A data-driven of engineering attributes and existing competition relations on approach is developed to create the STERGM using multi-year future product competitions. Thus, they may not provide sufficient buyer survey data. The network links are formed based on the like- insights into the impact of design improvement on maintaining lihood of two products being co-considered using the choice set competition relations. information gathered from buyers. Here, co-consideration is a situa- To understand the impact of product design change on competi- tion that a customer concurrently considers multiple products in tion relations, recent studies have explored the use of network anal- cross-shopping activities [29]. We choose co-consideration to rep- ysis to model product competitions [11,12]. Network-based resent competitiveness in this research because a product will not approaches model products as nodes and the co-consideration rela- be purchased by customers if not considered first. tions (competition) between products as links. Here, the product In the existing literature, STERGM only models the same set of co-consideration network is treated as a proxy of a competition nodes over time in dynamic networks [27,28]. However, for product network in a market. By taking the dependencies among links into competitions, the sets of products (or nodes) in different years vary consideration, network-based approaches are effective in modeling because new products appear in the market and existing products complex and interdependent relations [13,14]. In previous research, exit the market from time to time. To overcome this difficulty, we a unidimensional network-based approach based on the exponential leverage

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