Transcript Carliss Baldwin

Design Architecture—
Is What Links Knowledge to the
Economy
Carliss Y. Baldwin
Advancing Knowledge in the Knowledge-based
Economy
January 11, 2005
Slide 1
© Carliss Y. Baldwin and Kim B. Clark, 2004
A Strategic Perspective

In 1995, Andy Grove described a vertical-tohorizontal transition in the computer industry:
Sales & distribution
retail stores
Software
word
super stores
dealers
lotus
excel
direct
etc.
Operating system
DOS
OS/2
MAC
UNIX
Hardware
IBM
Compaq
Dell
HP
Chips
Intel
IBM
DEC
Risc
Sperry Wang
Univac
"Vertical Silos"
Slide 2
Motorola
"Modular Cluster"
© Carliss Y. Baldwin and Kim B. Clark, 2004
The Computer Industry: 1980
Services
Systems Integration
Applications Layer
Middleware Layer
Operating Systems
Hardware
IBM
S
P
E
R
R
Y
D CVC
U H E
N P C
S
Y
XRC
S
AMP
Components
TI
Slide 3
Intel
Top 10 Public Companies in US Computer Industry
(Area reflects market value in constant US $)
© Carliss Y. Baldwin and Kim B. Clark, 2004
The Computer Industry: 1995
IBM
S
P
E
R
R
Y
D CVC
U H E
N P C
S
Y
XRC
S
AMP
TI
Services
Systems Integration
First Data
EDS
Oracle
Intel
I
Applications LayerB MSFT
Middleware LayerM
Operating Systems
Hardware: Printers
Hardware: Servers
Hardware: Routers
Components
CA
HP
IBM
Cisco
Intel
Micron
Slide 4
Top 10 Public Companies in US Computer Industry
(Area reflects market value in constant US $)
© Carliss Y. Baldwin and Kim B. Clark, 2004
The Computer Industry: Today
Services
First Data
ADP
Systems Integration
Oracle
Applications LayerIBM
Middleware Layer
MSFT
Operating Systems
Hardware: Printers
Hardware: PCs
Hardware: Servers
Hardware: Routers
Components
Slide 5
HP
Dell
IBM
Cisco
Intel
TI
Top 10 Public Companies in US Computer Industry
(Area reflects market value in constant US $)
© Carliss Y. Baldwin and Kim B. Clark, 2004
Turbulence in the Industry
Departures from Top 10:
 Xerox (~ bankrupt)
 DEC (bought)
 Sperry (bought)
 Unisys (marginal)
 AMP (bought)
 Computervision (LBO)
Slide 6
Arrivals to Top 10:
 Microsoft
 Cisco
 Oracle
 Dell
 ADP
 First Data
© Carliss Y. Baldwin and Kim B. Clark, 2004
What Changed?
 Look
to the underlying designs
"Option-rich" modular design architectures
(ORMDAs) preceded and enabled these
transformations
Slide 7
© Carliss Y. Baldwin and Kim B. Clark, 2004
Modularity
 Division
of knowledge and effort
 Module = a set of tasks separable from
others
– Unit of design architecture
Global Design Rules
Module A
Slide 8
Module B
Module C
Module D
© Carliss Y. Baldwin and Kim B. Clark, 2004
Design Structure Matrix Map of a
Laptop Computer
Drive
System
Main
Board
.
x
x
x
x
x
.
x
x
x
x
.
x
x
x x
x
x
x
x
x
x x
x
x
x x
x
. x x
. x
x x .
x
x
x
x x
x
Packaging
x
x
x
x
x
. x
x . x
x .
x x x
x x
x
x
x x
x
x
x
x
x
x
x
x
x
x
x x
x
x x
. x
x
x . x
x x . x
x .
x
x
x
x
x
x
x
x
x
x
. x x
x
x . x x x
x
. x
x x x . x x
x x x x
x x x . x
x
x x .
x x
x
.
x
x
x
x
x
x
x x x
x
x
x x
x
x
x
x
x x
x
x
x
x
x
.
x
x
x
x
Slide 9
x x
x
x x x
x
.
x
x
x
x x x
x
x x
LCD
Screen
x
x
x
x
x
x
x
x x
x x
x
.
x
x . x
x
. x
x
x .
x
x
x
x x
x
x
x x
x
x
x x
.
x .
Graphics controlle r on Main Board or not?
If yes, screen specifications change;
© Carliss Y. Baldwin
If no, CPU must process more; adopt different interrupt protocols
and Kim B. Clark, 2004
Modularization of a Laptop
Computer Design
Des ign
Rules
Drive
System
. x x
x . x
x .
x x
x x x
x x
x
x x
. x
.
x
.
x
x
x
x
x
x
x
x
x
x
Design Rules Task Gro up
x
.
x
x
x
x
.
x
x
x x
x
x x
x
. x x
. x
x x .
x
x x x x
Main
Board
LCD
Screen
Packaging
System
Testing
& Integration
Slide 10
x x
x
x
x x
x
x
x x
x x
x x
x x
x
x
x x
x
x
x x
x x
x
x
x x
x
x x
x
x
x
x
x
x
x
x
x
x
x
x
x x
x
Hidd en M o du le s
man y Task gro up s
.
x
x . x
x
x x . x x x
x
x .
x
x x x x . x
x
x x x .
x
x x x
x x
x
x
x
x
x
x
. x
x .
. x x
x
x . x x x
x
. x
x x x . x x
x x x . x
x
x x .
x
.
x
x
x
x x
x x
x x
.
x
x
x . x
x
x
. x
x
x
x . x
x
x
x .
x x
x x x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
.
x
x
x
x
x
x
x
.
x
x
x
x
x
x
.
x
x
x
x
x
x
x x
. x
x
x . x x
x x x x
x
.
x
x
x
System
x Integ ration
and Testin g
x Task Gr oup
.
© Carliss Y. Baldwin and Kim B. Clark, 2004
The Power of Modularity
 Makes complexity manageable
 Enables parallel work
 “Welcomes experimentation”
 Creates options
Slide 11
© Carliss Y. Baldwin and Kim B. Clark, 2004
A Modular Architecture “Frees Up”
Design Option Value
System before Modularization
System after Modularization
System
Option
Design Rules
Option
Option
Option
Option
Option
Option
Split options,
decentralize decisions,
fragment control
evolution
Slide 12
Option
© Carliss Y. Baldwin and Kim B. Clark, 2004
Option-Rich Modular Architecture
Design options have "technical potential," denoted

 Technical potential, , varies by module
 Versions are evidence of option values being
realized over time

Global Design Rules v.1
Version 1.0
Version 1.2
Version 1.5
Version 1.8
 = Low
Slide 13
Medium
Zero
High
© Carliss Y. Baldwin and Kim B. Clark, 2004
Options and Modules Together
Create Lots of Value
30
25
20
15 Value
10
5
0
25
21
17
25
13
19
No. of Experiments
9
13
5
7
Slide 14
No. of Modules
1
© Carliss Y. Baldwin and Kim B. Clark, 2004
In conclusion, an analogy…
An ORMDA is like …
Slide 16
© Carliss Y. Baldwin and Kim B. Clark, 2004
Public Policy—Involve the Users

Eric Raymond:
– If you treat your beta testers [users] as your most
valuable resource, they will be…
In an ORMDA, new sources of value are most
easily perceived by users
 Motivated users can do new things at a radically
low cost: Apple II, Napster, Linux
 The rights of use are as important… perhaps more
important than low price
 Interface ownership is a problem

Slide 17
© Carliss Y. Baldwin and Kim B. Clark, 2004
Public Policy—Intellectual Capital
 Map
the ORMDAs
 Track the evolution of designs
 Track the movement of value
 Understand institutions—what the
ORMDAs need from the economy
Requires integration of engineering,
economics and management
knowledge—a true science of design
Slide 18
© Carliss Y. Baldwin and Kim B. Clark, 2004
Public Policy—Safety Net
 Turbulence
and wealth disparities are
endemic to ORMDAs
– Designs come and go
– Products come and go
– Firms come and go
 Regions
must balance overall value against
social costs of turbulence and inequities
 In competition with other regions …
Slide 19
© Carliss Y. Baldwin and Kim B. Clark, 2004
Public Policy—Regulation
 ORMDAs
create conflict, need economical
rulemaking
–
–
–
–
–
Competitive practices
Intellectual property
Mergers & Acquisitions
Corporate governance
Bankruptcy
Quick, informed, consistent, accessible
Slide 20
© Carliss Y. Baldwin and Kim B. Clark, 2004
Thank you!