Modularity after the Crash

Abstract:     
In "Managing in the Age of Modularity," which was written in June 1997 and appeared in the Harvard Business Review, we proposed that a new technological phenomenon, the modular design of complex computer systems, caused the emergence of a large modular cluster of firms and markets in the computer industry. We went on to say that "managing" in this "modular environment" was different from managing a large, hierarchical corporation of the type that had emerged in the early 20th Century. The events of the past four years, especially the dot.com bubble and crash, have caused us to reflect critically on both our theory and the related managerial recommendations. In this invited paper, with full benefit of hindsight, we revisit the questions: do the benefits of modularity and the modular cluster form of organization justify the costs? If so, when and why? And what do managers need to know to be effective in a modular environment?

Number of Pages in PDF File: 20

Keywords: Modularity, Modular Design, Modular Cluster, Modular Organization, Design Evolution, Real Options, dot.com, Bubble, Crash

JEL Classification: G31, L22, M10, O31, P51

working papers series