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When the founders of Palm Computing set out to create what wouldbecome history's hottest computer gadget, they didn't go italone. Instead, they wrote detailed specifications for a hand-heldelectronic organizer called the Pilot--then they invited othercompanies to create parts of the product that eventually sold morethan 1 million units in its first 18 months.
One company that contributed to the project was The WindwardGroup, a 75-person software developer in Los Gatos, California,that created desktop applications with a link to the Pilot."We decomposed the system into chunks which we developed ontheir behalf," president Doug Engfer explains.
The system benefits both Palm and those who build the piecesand, in many cases, sell them independently, says Donna Dubinsky,president of Palm Computing, now a subsidiary of networking giant3Com Corp. "The metaphor that springs to mind is the RussianMatreshka dolls, where each layer takes from the layer above andgives to it as well," she says.
The strategy is called modularity, and it's theup-and-coming thing in business, according to Carliss Baldwin, aHarvard Business School professor and co-author of the forthcomingbook Design Rules: The Power of Modularity (MIT Press). Themessage of modularity, says Baldwin, is that "you don'thave to do everything to be important."
Mark Henricks is an Austin, Texas, writer specializing inbusiness topics.
Breaking It Down
Modularity is defined as building a complex product, service orprocess from many smaller pieces that can be created independentlyand then combined to make a whole. It's what allows computerhard-drive makers to build drives they know will work in any PC. Atthe same time, it enables PC makers to build their boxes, confidentthat hard-drive companies will supply the needed accessories.
Low-tech industries can also be modular; bedsheet makers cutcloth they're confident will fit standard mattresses. Evenservices can be modular, such as when an investment advisor farmsout the mutual fund management portion of his or her services to afund company.
Modern modularity started with innovations in project managementin the 1960s, enabling IBM to design many versions of its System360 mainframe computer, all using the same basic software andadd-ons, such as printers. Previously, all computers needed theirown special programs and peripherals, says Baldwin. The modularityof IBM's design allowed it to virtually take over the mainframecomputer industry and made the 360 one of the most successfulproducts ever, she says.
Many products are manufactured in modular fashion, of course.Car makers give parts specifications to suppliers, who come backwith modules that can be assembled into an automobile. Modernmodularity goes beyond manufacturing, however, and encompassesdesign as well. That means that parts suppliers not only producepieces according to the manufacturers' specifications, but theyalso design new parts that will fit into and add to the overalldesign.
Strength In Numbers
Modularity helps firms deal more easily with rapid change,reduce the cost of innovation and cut the time it takes to improvedesigns, says Baldwin. Its strength lies in numbers.
For instance, there are more than 3,500 registered developers ofPalm Pilot products and services. "It ranges from things likea chart of chords for the guitar to the Singapore subway map toreal estate and medical market add-ons," Dubinsky says.
Many of these products would never have been developed if leftto Palm Pilot's in-house team. "We couldn't possiblyrecreate the investment people are making in our product,"says Dubinsky. "We couldn't create an organization fastenough, and we couldn't be creative enough."
To create a modular product, you must first thoroughly define itby developing a detailed architecture or interface specification,says Baldwin. One example is the specification Microsoft lays downfor creating Windows software. Boundaries must be specific so youknow what you are doing and what your module maker's terrainis, adds Baldwin.
Modular companies themselves, however, must be agile andadaptable, says Baldwin. That's because modularity calls forall kinds of joint ventures: outsourcing, flexible hiring, andother complex relationships between the architecture owners and themodule creators.
And business owners adopting a modular strategy have to be readyto relinquish control when it comes to exactly what theirmodule-makers create, adds Dubinsky. "I try to take thephilosophy of letting a thousand flowers blossom," sheexplains, "because we don't know what the next big thingis going to be."
Modularity works in two directions, of course. Small companiescan prosper greatly by creating a complex new architecture as Palmdid. "You can wind up like Microsoft, sitting on top,"says Baldwin.
Companies without such a big vision can still profit by becomingmodule makers. That's what hard-drive makers have done sincethe 1960s, and what Windward and many other firms are doing withthe Palm Pilot.
If you want to be a module maker, your strategy should be tolook at a large system and try to find a piece you can do better,Baldwin says. You have to be fast (to beat the competition) andprecise (to ensure a good fit with the system) if you want tosucceed.
Calculating Risks
Neither architects nor module makers are guaranteed an easyride. IBM's modular System 360 let third-party makers ofplug-compatible equipment flourish at its expense. The PC that IBMwent on to create was later almost completely taken away from themby cheaper competitors who plugged into its highly modulardesign.
Module makers face the problem of rivals being better at theirgame than they are. "If you can be a substitute," warnsBaldwin, "then somebody can be a substitute for you. So youshould always be looking over your shoulder."
Modular strategies can go wrong from the beginning if thearchitect doesn't know enough about the details of the overallproduct, adds Baldwin. The flaw commonly shows up only at the end,when the pieces of the puzzle don't fit. "That's whenyou have cost overruns, time overruns and systems that don'twork," she says.
The major cost of a modular strategy, accordingly, is indeveloping the knowledge about your product or service. You have toknow not only how to make it work but how to tell other people howto build a wide variety of add-ons that will function togetherseamlessly. This can be costly, Baldwin warns. IBM's original360 development effort ran far over budget, for example, and Palmhad to be acquired by modem maker US Robotics, which was laterbought by 3Com, in order to fund the manufacturing and marketing ofthe Pilot.
The Modular Era
Despite its risks and limitations, modularity may be thedominant strategy of the future simply because it's easier todo today. Joint ventures and outsourcing, both key to modularity,are widely accepted now, notes Baldwin. And moderninformation-processing technology simplifies the creation andmanagement of the knowledge needed to specify and control modulararchitectures.
Most important, modularity will catch on because it must. Therapid pace of change long familiar in the computer industry ismaking itself felt in other industries as well. Since modularity isone of the best ways of coping with rapid change, says Baldwin, itmay soon be that you're either modular or you'remarginal.
Contact Sources
3Com Corp., Palm Computing, (888) 619-7488, http://www.3com.com/palm
The Windward Group, (888) 395-9442, http://www.wwg.com
