Loh Yao Sheng

Review: “Architectural Innovation: the Reconfiguration of Existing

Product Technologies and the Failure of Established Firms”

The paper starts by suggesting a framework for classifying innovation.

Successful product innovation can take four forms, one of which is

architectural innovation, in which the core components are reinforced but

new linkages are established in the system.

The paper argues that established firms are hampered by the way

knowledge is organized and managed. There are two concepts involved in

this. The first is that of a dominant design. Once a dominant design is

established, the experimentation period ends and future progress works

within the framework of a stable architecture.

The second concept is that of information filters and communication

channels. A dominant design moulds the organization’s filters so they

embody its knowledge of key relationships between the components of

the technology, enabling engineers to work efficiently but causing them to

be reliant on recurrent problem-solving strategies.

Since the core designs are unchanged, an established organization may

rely on old frameworks and fail to recognize the nature of the innovation.

Even then, the organization faces the challenge of building and applying

new architectural knowledge effectively. A larger firm might find itself not

as nimble as its smaller competitors and not as willing to incur the costs in

building new channels and strategies to utilize the innovation. The

significance of this distinction explains why new entrants to the industry

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are able to exploit and maximize architectural innovation better than their

bigger brethren.

In this paper, I would also like to discuss a strategy that can be employed

by firms capable of architectural innovation. The Smaller “Footprint”

strategy involves making use of bottlenecks in architecture to shrink the

“footprint” of the company’s inhouse activities, resulting in a greater

invested capital advantage which is used to dominate the competition.

In the early 1980s, the market for engineering workstations began to

grow. Apollo was the first to enter the market and it was quickly followed

by competitors like Sun Microsystems.

The established standards of the time were that integration between the

core elements of hardware and software was required to achieve optimal

processing speeds in a computer. In 1984, Apollo had 60% market share

and was growing rapidly. Sun took an unconventional approach to the

business, challenging the established standards by studying weakness in

computer architecture.

Sun aimed for low cost by using standard interfaces and off-the-shell parts

but also targeted superior speed and performance. Sun’s breakthrough

came when they patented a special Memory Management Unit (MMU) and

a high-speed internal memory bus. These two patented parts enabled Sun

to achieve a more effective design on the existing single board design

using standard parts.

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Sun leveraged upon its architectural knowledge to revamp its

manufacturing process. The single board design simplified materials flow,

reduced inventory and decreased the need for hard assets. Sun also

outsourced many steps in their production process and only kept critical

design elements for inhouse production. With a smaller “footprint”, Sun

had a strong Return on Invested Capital (ROIC) and assets turnover

advantage over Apollo.

Apollo was eventually acquired by HP but Sun failed to dominate the

market. Sun’s competitors used their financial muscles to retain market

share and the quantitative approach to computer architecture it pioneered

had become commonplace.

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