Design Rules Volume 2: Chapter 6—The Value Structure of Technologies, Part 1: Mapping Functional Components

Design Rules Volume 2: How Technology Shapes Organizations

23 Pages Posted: 16 Sep 2020 Last revised: 15 Mar 2022

Date Written: September 8, 2020


Organizations are formed in a free economy because an individual or group perceives value in carrying out a technical recipe that is beyond the capacity of a single person. Technology specifies what must be done, what resources must be assembled, what actions taken in order to convert stocks of material, energy and information into products and services of value to human beings. Technology is the guide, organizations are the means, value is the goal.

The purpose of this chapter is to build a robust and versatile language that is capable of representing the value structure of large technical systems. The language is based on elements I have labeled functional components. The language is more abstract than the language of technical recipes and task networks, thus it is capable of hiding details. However, the language also makes it possible to “trace back” from each named functional component to a technical recipe and a corresponding task network. Finally, although the language itself is non-mathematical, the value structure it reveals can be used to specify equations and prove mathematical propositions about the value of technical systems.

The plan of the chapter as follows. I first explain why it is difficult to value technologies using standard economic methods based prices, quanities and probabilities. I then describe a methodology that shows how functional components are combined through technology to create a particular artifact or technical system. The methodology uses symbolic notation to clarify relationships between and among functional components. I illustrate these relationships using an ancient technology—the technology for making a garment from pieces of cloth. I go on to describe commonly observed patterns within technical systems, including optional features; composite functions; and platforms.

Keywords: Technology, Organizations, Modularity

JEL Classification: L1, L2, O3

Suggested Citation

Baldwin, Carliss Y., Design Rules Volume 2: Chapter 6—The Value Structure of Technologies, Part 1: Mapping Functional Components (September 8, 2020). Design Rules Volume 2: How Technology Shapes Organizations, Available at SSRN: or

Carliss Y. Baldwin (Contact Author)

Harvard Business School ( email )

Boston, MA 02163
United States

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