MP3 Players (BSSE, Tuesday, Week 5)
building-and-sustaining-successful-enterprisesyear-twoIntegration vs. modularity => driven by (1) the basis of competition in an industry and (2) maturity of technology/business model.
(1) Are players competing on price or quality (because it's hard to be "good enough" to satisfy customers)?
(2) How well-defined is the problem and the solution?
Example: Apple iPhone's interdependent architecture wins because competition centers around basic capabilities. Competitors could not provide remotely adequate customer experience without integration across hardware, OS, apps, music, and video. Problem: HTML 5 and other developments that might enable "good enough" performance without high degree of integration.
Does modularity destroy profits? Maybe, but probably just shifts profits around the value chain.
Example: PC performance improves to meet minimum threshold; most components become modular (memory, hard drive, DVD drive, etc.). Profits shift to processor (Intel), OS (Microsoft), software (Microsoft).
Trend: interdependent products become modular. But it's hard to figure out when "the time is ripe."
Example: Boeing Dreamliner. Boeing attempted to outsource design/manufacture of almost all components. Technology problems are poorly understood, high minimum threshold for performance. Boeing ends up with hydraulic lines that do not meet, wing surfaces that do not fit together. The Dreamliner arrives four years late and $15bn over budget.