Architectural Innovation and Dynamic Competition: The Smaller “Footprint” Strategy

Keywords

architecture, innovation, knowledge, modularity, dynamics, competition, industry evolution

Abstract

We describe a dynamic strategy that can be employed by firms capable of architectural innovation. The strategy involves using knowledge of the bottlenecks in an architecture together with the modular operator “splitting” to shrink the “footprint” of the firm’s inhouse activities. Modules not in the footprint are outsourced—module boundaries are redrawn and interfaces designed for this purpose. The result is an invested capital advantage, which can be used to drive the returns of competitors below their cost of capital. We explain how this strategy works and model its impact on competition through successive stages of industry evolution. We then show how this strategy was used by Sun Microsystems against Apollo Computer in the 1980s and by Dell against Compaq and other personal computer makers in the 1990s.

Original Publication Citation

"""Architectural Innovation and Dynamic Competition: The Smaller ""Footprint"" Strategy"" (2006). Harvard Business School Working Paper, No. 07-014. (With C.Y. Baldwin)"

Document Type

Working Paper

Publication Date

2006

Publisher

Harvard Business School

Language

English

College

Marriott School of Business

Department

Marketing

University Standing at Time of Publication

Full Professor

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