Design Rules Volume 2
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Design Rules, Volume 2
How the innate physical properties of different technologies influence the strategy and structure of the organizations implementing the technologies, the sequel to Design Rules: The Power of Modularity. In Design Rules, volume 2, Carliss Baldwin offers a comprehensive view of the digital economy by putting forth an original theory that explains how technology shapes organizations in a market economy. The theory claims that complementarities arising from the physical nature of technologies can be arrayed on a spectrum ranging from strong to very weak. Two basic types of technologies in turn exhibit different degrees of complementarity between their internal components. Flow production technologies, which are found in steel mills and auto factories, specify a series of steps, each of which is essential to the final product. In contrast, platform technologies, which are characteristic of computer hardware, software, and networks, are modular systems designed to provide options. Baldwin then investigates the dynamics of strategy for firms in platform ecosystems. Such firms create value by solving technical bottlenecks—technical barriers to performance that arise in different parts of the system as it evolves. They capture value by controlling and defending strategic bottlenecks—components that are (1) essential to the functioning of some part of the system; (2) unique; and (3) controlled by a profit-seeking enterprise. Strategic bottlenecks can be acquired by solving technical bottlenecks. They can be destroyed via tactics such as substitution, reverse engineering, bypassing the bottleneck, and enveloping a smaller bottleneck within a larger one. Strategy in platform ecosystems can thus be viewed as the effective management of technical and strategic bottlenecks within a modular technical system.
Design Rules, Volume 2
How the innate physical properties of different technologies influence the strategy and structure of the organizations implementing the technologies, the sequel to Design Rules: The Power of Modularity. In Design Rules, volume 2, Carliss Baldwin offers a comprehensive view of the digital economy by putting forth an original theory that explains how technology shapes organizations in a market economy. The theory claims that complementarities arising from the physical nature of technologies can be arrayed on a spectrum ranging from strong to very weak. Two basic types of technologies in turn exhibit different degrees of complementarity between their internal components. Flow production technologies, which are found in steel mills and auto factories, specify a series of steps, each of which is essential to the final product. In contrast, platform technologies, which are characteristic of computer hardware, software, and networks, are modular systems designed to provide options. Baldwin then investigates the dynamics of strategy for firms in platform ecosystems. Such firms create value by solving technical bottlenecks—technical barriers to performance that arise in different parts of the system as it evolves. They capture value by controlling and defending strategic bottlenecks—components that are (1) essential to the functioning of some part of the system; (2) unique; and (3) controlled by a profit-seeking enterprise. Strategic bottlenecks can be acquired by solving technical bottlenecks. They can be destroyed via tactics such as substitution, reverse engineering, bypassing the bottleneck, and enveloping a smaller bottleneck within a larger one. Strategy in platform ecosystems can thus be viewed as the effective management of technical and strategic bottlenecks within a modular technical system.
Design Rules, Volume 1
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.