1. Ron Sanchez Joseph Mahoney
9/12/2018 4:54 AM
Modularity, Flexibility, and Knowledge Management in Product and Organization Design
Ron Sanchez
Joseph Mahoney
Strategic Management Journal, 1996
Modified* by Tom DeBerge
*Original Presentation By
Amit Darekar
© 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries.
The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

2. Introduction
Managing knowledge in product design to improve flexibility in a changing environment.
Modularity: “a nearly independent system of ‘loosely coupled’ components.”
Standardized component interfaces governing outputs
Modularity in product designs becomes an important strategy for achieving modularity in organization designs

3. Nearly Decomposable Systems
A system in which interactions among subsystems are weak – Simon(1962)
Multidivisional firm are intentionally designed to require low levels of coordination
“little or no overt exercise of managerial authority”
Quasi-independent divisions as loosely coupled subsystems
Environmental disturbances can be localized
Decomposed product designs >>> Decomposed organization designs
A system – consists of interacting & interdependent parts
Hierarchy – organizing principle of complex systems

4. Modularity in Product Design - I
A special form of design that intentionally creates loose coupling between component designs using standardized component interface
Two Methodologies
Traditional
Constrained optimization
Highly integrated
Intensive managerial coordination
Alternative
Modular (as defined above)
Effective coordination with less
Managerial intervention
Product Architecture
Component 1
Component 2
Component 3

5. Modularity in Product Design - II
Modular product architecture
Uses standardized interfaces between components to create flexible product architecture
Allows “substitution” of components without having to redesign other components
Greater ability to “mix-and-match” that can lead to ease of large number of product variations
Strategic flexibility – enable firm to respond quickly to changing markets and technologies
Standardized component interfaces enable coordination of loosely coupled organization structure linking geographically dispersed component developers

6. Form of modular product design
Modular Design Products
Products
Form of modular product design
Aircrafts
Common wing, nose and tail component
Automobiles
Engine components, interior parts
Consumer Electronics
Circuit boards,
Household Appliances
Modules to build up scaled products, such as dish washers
Personal Computers
Dell
Software
Modules of codes
Test Instruments
Philips
Power Tools
Usage of common components

7. Models for managing knowledge and learning in product creation
Modes of learning in product creation processes
Component Functions and Designs
Component Interactions and Configurations
Moderate
Significant
Moderate
Incremental Learning at the component level
Modular learning at the component level
Architectural Learning
Radical Learning at Architectural and Component levels
Significant

8. Traditional sequential development process
Information Structure is incomplete
Require managerial adjudication
Desired o/p can’t be fully specified in the beginning
Hence tightly coupled organization structure

9. Overlapping problem solving process
Possible greater sharing of current info
Has an evolving info structure
Improves information flow, allowing some inter-related component development to proceed more quickly
Requires intensive managerial coordination for incompletely specified tasks

10. Modular Product Design Process
Creates complete info structure
Improved component level learning
A firm must have advanced “Architectural Knowledge”

11. Modular Product Design Process
Creates a complete information structure – firm must have advanced architectural knowledge
Improved component-level learning
Improved architectural-level learning
Using modular product architecture as mechanisms for coordinating organizational learning
The shifting focus of knowledge management in modular product development

12. Conclusions
This paper suggests that modular product architecture creates -
Flexible product designs
Enables the design of loosely coupled, flexible, “Modular” organization structures
Reduces need for exercise of managerial authority
Gives greater flexibility to undertake large number of projects
Knowledge management may result in increasingly dynamic product markets
The paper expects to extend the concept of modularity to designing marketing, distribution, and other processes as well to help attain flexibilities

13. Discussion Relating to Real Options RBV
‘Flexibility’ in the midst of a changing environment and organizational learning is the connection to Real Options Theory.
RBV
Is modular product/organization design difficult to imitate, thus making it a potentially advantageous resource?