Design Rules Volume 2: Chapter 7—The Value Structure of Technologies Part 2: Strategy without Numbers
Baldwin, C. Y. (2020) “The Value Structure of Technologies, Part 2: Strategy without Numbers,” Harvard Business School Working Paper (Rev. September 2020).
19 Pages Posted: 16 Sep 2020
Date Written: September 8, 2020
Functional analysis as set forth in the last chapter decomposes a technical system into functional components that do things to advance the system’s purpose and the goals of its designers. Functional analysis in turn can be used to construct value structure maps of technical systems. Such maps reveal targets of potential action and investment in the technical system where value may be created and captured. Value structure maps can be constructed without using numerical estimates based on prices, quanities and probabilities, thus they are an appropriate means of analyzing technical systems subject to radical uncertainty, complexity, and complementarity.
The purpose of this chapter is to illustrate how value structure mapping combined with narratives can be applied to problems of strategy in large technical systems. I first argue that the salient points of value creation and value capture in a large technical system are the system’s bottlenecks. I then use value-mapping methodology to trace the evoluion of bottlenecks of three large technical systems: early aircraft; high-speed machine tools; and container shipping. Finally, I distill the lessons of the case studies into four principles for creating and capturing value in large, evolving technical systems.
Keywords: Technology, Organizations, Modularity
JEL Classification: L1,L2, O3
Suggested Citation: Suggested Citation