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Technological Innovation and Modular Design

Modular Product Design

• Design Rules: The Power of Modularity
  By Carliss Y. Baldwin and Kim B. Clark.  Amazon.co.uk  Amazon.com
  We live in a dynamic economic and commerical world, surrounded by objects of remarkable complexity and power. In many industries, changes in products and technologies have brought with them new kinds of firms and forms of organization. We are discovering news ways of structuring work, of bringing buyers and sellers together, and of creating and using market information. Although our fast-moving economy often seems to be outside of our influence or control, human beings create the things that create the market forces. Devices, software programs, production processes, contracts, firms, and markets are all the fruit of purposeful action: they are designed.

  Using the computer industry as an example, Carliss Y. Baldwin and Kim B. Clark develop a powerful theory of design and industrial evolution. They argue that the industry has experienced previously unimaginable levels of innovation and growth because it embraced the concept of modularity, building complex products from smaller subsystems that can be designed independently yet function together as a whole. Modularity freed designers to experiment with different approaches, as long as they obeyed the established design rules. Drawing upon the literatures of industrial organization, real options, and computer architecture, the authors provide insight into the forces of change that drive today's economy. -Amazon

• Managing in an Age of Modularity
  By Carliss Y. Baldwin and Kim B. Clark. Harvard Business Review, 1997, vol. 75, no. 5, 84-93.
  Modularity is an efficient way to build a complex design from smaller subsystems that can be designed independently yet function together as a whole. It requires three types of visible design rules: (1) An architecture about how to assemble modules into a working system, (2) interfaces about how to connect individual modules, how one module affects another module's performance, and (3) standards for testing a modules conformity to the design rules and for measuring one module's performance relative to another. Firms can compete as architects creating the design rules for a product made up of modules, or as designers of modules that conform to the architecture, interfaces, and test protocols of others.

• Toward a General Modular Systems Theory and Its Application to Interfirm Product Modularity
  By Melissa A. Schilling. Academy of Management Review, 2000, vol. 25, no. 2, pp. 312-334.
  Modularity enables different inputs to be recombined into many variations. Factors affecting increases in interfirm product modularity are identified and discussed, including: (1) Synergistic Specificity: Interfirm product modularity is likely to increase if functionality is achieved through standard components, customers can easily assess component quality and interaction, and customers can easily assemble systems. (2) Heterogeneity of inputs: Large difference among firms in terms of capabilities and technological options increase interfirm product modularity. (3) Heterogeneity of demands: Variations in customers needed function or scale affect interfirm product modularity positively. (4) Urgency: Faster technological change and intense rivalry increase interfirm product modularity.

• Strategic Product Creation: Managing New Interactions of Technology, Markets, and Organizations
  By Ron Sanchez. European Management Journal, 1996, volume 14, no. 2, pp. 121-138.
  General overview of the modular design approach, where designs leverage multiple product variants to serve different market preferences (e.g., Sony introduced 160 Walkmen based on 5 product architectures). To achieve modularity, professor Sanchez emphasize the importance of fully specifying interfaces between components (e.g., signal exchange between components) at the outset and keep them unchanged during the development phase. An important danger of the approach is that focus is removed from the user interface to (competitively) less important interfaces. If avoiding this pitfall, modularity has frequently resulted in improved speed-to-market, better quality, and reduced need for managerial and technical staff.

• Architectural Innovation: The Reconfiguration of Existing Product Technologies and the Failure of Established Firms
  By Rebecca M. Henderson and Kim B. Clark. Administrative Science Quarterly, 1990, vol. 35, pp. 9-30.
  Architectural innovations are new design concepts that departs in a significant way from past practice. Such innovations are potentially harmful to established firms, who often fail to develop products with sufficient performance. Further, architectural innovations destroy the usefulness of established firms' architectural knowledge. Main reasons for such problems are difficulties recognizing and correcting unfamiliar technological changes.

• Modularity, Flexibility, and Knowledge Management in Product and Organization Design
  By Ron Sanchez and Joseph T. Mahoney. Strategic Management Journal, 1996, vol. 17, Winter Special Issue, 63-76.
  Theoretical discussion of the modularity concept and three key approaches to product development: (1) "Traditional" sequential development processes in which the most pressing tasks are carried out first and information structure of component interface specifications is the output. The latter is likely to result in design re-work as new insights are gained and in information loss between stages. (2) Overlapping development processes, where information flows between overlapping tasks are improved. (3) Modular development processes based on a complete information structure that defines required outputs before beginning development of components.

• Developing Products on Internet Time
  By Marco Iansiti and Alan MacCormack. Harvard Business Review, 1997, vol. 75, no. 5, 108-117.
  Firms in turbulent environments need flexible product development processes that allow designers to continue to define and shape products even after implementation has begun. (In professor Sanchez' language this is an "overlapping problem solving approach to product development", see above.) Also, extensive user studies based on "soft releases", beta testers, surveys, focus groups, and alternative designs are regareded as beneficial. An interesting case study of the Netscape Navigator 3.0 development is presented.

• Product Modularity, Information Structures and the Diffusion of Innovation
  By Peter Galvin. Int'l Journal of Technology Management, 1999, vol. 17, no. 5, 467-479.
  Not recommended: Yet another article on the management of modular design processes. Centers on the creation of information structures in modular architectures, but doesn't reveal new knowledge. Most insights from the article are already available in work by Henderson and Clark (1990), Sanchez (1996), Sanchez and Mahoney (1996) cited on this page.

• Integration and Dynamic Capability: Evidence from Product Development in Automobiles and Mainframe Computers
  By Marco Iansiti and Kim B. Clark. Industrial and Corporate Change, 1994, vol. 3, no. 3, 557-605.
  Firms with high-performing product development activities in terms of product quality, productivity, and lead time are also efficient and consistent integrators of new competences that continually renew their knowledge base. In particular such firms 1) generate, frame, and evaluate more options and 2) manage change, coordinate across subunits, and establish clarity more efficiently than their counterparts. Reading this article requires familiarity with the literature on dynamic capabilities and statistical inference.

• Planning for Product Platforms
  By David Robertson and Karl Ulrich. Sloan Management Review, 1998, vol. 39, no. 4, 19-31.
  Robertson and Ulrich provide practical advice on how to implement modular strategies. Their primary tools are the "commonality plan" (attributes that familiar products share) and the "differentiation plan" (attributes that makes products competitively distinct). Through these plans firms can bring down costs, while keeping the uniqueness of their products.

• Modular Architectures in the Marketing Process
  By Ron Sanchez. Journal of Marketing, 1999, vol. 63, Special Issue, 92-111.
  Firms identify and exploit market opportunities through the "marketing process" -- (so usability engineers are marketers ;-) -- not me). Opportunity identication happens as product variants are introduced to different customer segments; the less successful products are filtered out. Opportunity exploitation is driven by modular designs that keep costs low and enable fast product updates. Note that modular designs are not user tested as introduction of new variants is assumed to be cheaper than usability testing. I predict this approach will change in favor of usability. For instance, Yahoo experiment with new designs in realtime but meanwhile perform usability tests of their services. I predict that also brick-and-mortar companies will start using both methods to avoid costly mistakes.

Technological Innovation

• The Innovator's Dilemma
  By Clayton M. Christensen.  Amazon.co.uk  Amazon.com
  What do the Honda Supercub, Intel's 8088 processor, and hydraulic excavators have in common? They are all examples of disruptive technologies that helped to redefine the competitive landscape of their respective markets. These products did not come about as the result of successful companies carrying out sound business practices in established markets. In The Innovator's Dilemma, author Clayton M. Christensen shows how these and other products cut into the low end of the marketplace and eventually evolved to displace high-end competitors and their reigning technologies.

  At the heart of The Innovator's Dilemma is how a successful company with established products keeps from being pushed aside by newer, cheaper products that will, over time, get better and become a serious threat. Christensen writes that even the best-managed companies, in spite of their attention to customers and continual investment in new technology, are susceptible to failure no matter what the industry, be it hard drives or consumer retailing. Succinct and clearly written, The Innovator's Dilemma is an important book that belongs on every manager's bookshelf. Highly recommended. -Amazon

• Technological Paradigms and Technological Trajectories: A Suggested Interpretation of the Determinants and Directions of Technical Change
  By Giovanni Dosi. Research Policy, 1982, vol. 11, no. 3, 147-162.

• Technical Change and Industrial Transformation
  By Giovanni Dosi, 1984
  Out-of-print.

• Technological Discontinuities and Organizational Environments
  By Michael L. Tushman and Philip Anderson. Administrative Science Quarterly, 1986, vol. 31, 439-465.

• Technological Discontinuities and Dominant Designs
  By Philip Anderson and Michael L. Tushman. Administrative Science Quarterly, 1990, vol. 35, 604-633.

• Patterns of Technological Innovation
  By Devendra Sahal, 1981
  Out-of-print.

• Dominant Designs and the Survival of Firms
  By F.F. Suarez and J.M. Utterback Strategic Management Journal, 1995, vol. 16, 415-430.