Enhancing Flexibility Through Modular Design: Strategic Knowledge Management

1. Modularity, Flexibility, and Knowledge Management in Product and Organization Design Strategic Management Journal, 1996 Ron Sanchez Joseph Mahoney Modified* by Tom DeBerge *Original Presentation By Amit Darekar

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

4. Modularity in Product Design - I • Modularity – • 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

5. Modularity in Product Design - II • Modular product architecture • Uses standardized interfaces betweencomponents 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. Modular Design Products

7. Models for managing knowledge and learning in product creation • Modes of learning in product creation processes Learning @ Component Functions and Designs Learning @ Component Interactions and Configurations Moderate Significant Moderate Significant

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

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

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

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 • ‘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?