Article - New organizing logic of digital innovation (Yoo et al, 2010)

Question 1

What is meant by generativity in technology?

Answer 1

Paper:
“A technology’s overall capacity to produce unprompted change driven by large, varied, and uncoordinated audiences.”

What they mean:
“The property of some things to become a platform for all kinds of systems to be built around it”

Question 2

What did the miniaturization of hardware enable?

Answer 2

The possibility to digitize key functions and capabilities of industrial-age products (cars, phones, books)

Question 3

What are the consequences of miniaturization of hardware?

Answer 3

1. Novel functions of these products;
2. Improved price/performance ratios (more functionalities and performance;
3. Changes in the competitive landscape;

Question 4

How does the miniaturization of hardware and its consequences lead to a change in the competitive landscape?

Answer 4

Sometimes competitiors (in different markets) work together to offer a digitized product:

Amazon books available on Apple’s Ipad

Question 5

What is a modular architecture?

Answer 5

A scheme by which a physical product is decomposed into loosely coupled components, its attributed functionality, and is interconnected through interfaces.

Focus: loose coupling between components through standardized interfaces

Question 6

What is the layered architecture of digital technology?

Answer 6

A digital product has several layers within the product archtiecture, such as the device layer, the network layer etc.

Together these layers comprise the product. They can be modified in between.

Question 7

What is digital innovation according to Yoo et al?

Answer 7

The carrying out of new combinations of digital and physical components to produce novel products.

• > It focuses on product innovation;
• > Requires digitization

Question 8

What is digitization?

Answer 8

The encoding of analog information into a digital format to enable physical products to be programmable, addressable, sensible, communicable, memorable, traceable and associable.

Question 9

What are three characteristics of digital innovation?

Answer 9

1. Reprogrammability
   Von Neumann: digital device had processing unit that executes instructions and a separate storage saving those instructions.
   These instructions can be modified -> Reprogrammability
2. Homogenization of data
   Analog data needs specific devices to hold data (text in a book). Digital data is always binary and can easily be combined with other digital data.
3. Self-referential nature of digital technology
   Digital innovation requires the use of digital technology.
   Therefore: digital technology has democratized innovation –> anyone can participate.

Question 10

What are two critical separations in the layered architecture of digital innovation?

Answer 10

1. Separation between device and service (Reprogrammability)

2. Separation between network and content
Homogenization of data

Question 11

Which four layers are there in the layered architecture of digital innovation?

Answer 11

1. Device layer
   (a) Physical machinery layer (hardware)
   (b) Logical capability layer (operating system)
2. Network layer
   Controls and maintenance of the device layer
3. Service layer
   Application functionality -> serves the user
4. Contents layer
   Data(text, sounds, videos) that are stored and shared

Question 12

What is the integral architecture in physical product design and what are its characteristics?

Answer 12

• When there is an overlap between functional elements and physical components, where components are tightly coupled and interfaces are not standardized;
• Focus on high quality and performance (high-end electronics, sports cars)
• Vertically integrated hierarchy –> single firms does most of the innovation itself;
• Value creation: economies of scale or scope;
• Components are often co-specialized with other components;
• Focus on product positioning;

Question 13

What is the modular architecture in physical product design and what are its characteristics?

Answer 13

• Product can be decomposed into components that can be recombined. Standardized interfaces between components;
• Reduces complexity and increases flexibility;
• Vertical disintegration of design and product functions –> innovation through value networks
• Value creation: ability to recombine components of a product within a single design hierarchy without sacrificing cost or quality.

Question 14

What is the layered modular architecture and what are the two ends of the spectrum?

Answer 14

The architecture of physical products when you embed digital components in them.

This adds a degree of generativity to the modular architecture.

1. Traditional Modular Architecture
2. Full-blown layered modular architecture

Question 15

How is flexibility enforced in a traditional modular architecture?

Answer 15

Flexibility through differences in degree.

For example: a new lens can make a camera work differently/better

Question 16

What are the characteristics of a full-blown layered modular architecture?

Answer 16

• No fixed boundaries at the product level;
• Components are product agnostic -> design of components require no/little product-specific knowledge;
• Components are not designed from a single design hierarchy of a given product
• -> A product is inductively enacted by orchestrating an ensemble of components;
• Generativity through loose couplings across layers –> innovation can spring up independently at any layer;
• Flexibility through differences in kind: a digital camera can also be used as video player or editor

Question 17

What is the difference between a layered modular architecture and a ‘normal’ layered architecture?

Answer 17

The product is still constrained by the physical components of the product;

Question 18

How can a digitized physical product be a product and a platform through layered modular architecture?

Answer 18

Example: Ipad is a product, but also a platform for app makers.

• The layers within a digital product platform can function as new products or enable others to innovate on that layer (cars have many electronics –> non-car manufactures make products for cars now (think Bose)
• Firms sometimes compete on a specific layer, while they co-exist on other layers
  (Apple and Kindle compete on device and content layer, but Kindle also has an application for the Ipad)

Question 19

How does a firm generate generativity with layered modular architecture?

Answer 19

By their ability to attract heterogeneous actors to design and produce heterogeneous and novel components that belong to different design hierarchies.
-> They need outsides to reach full potential: firm self is bound by economic/institutional constraints

Question 20

How is the organizing logic for a layered modular architecture doubly distributed?

Answer 20

Distributed because the primary source of value creation is the generativity that comes from the unbounded mix-and-match capability of heterogeneous resources across layers.

Doubly because:

(1) Control over the product components is distributed across multiple firms;
(2) The product knowledge is distributed across heterogeneous disciplines and communities

Question 21

How can firms maximize their generative potential?

Answer 21

If they design a platform that many other firms want to contribute to with component design.

Question 22

How did IT infrastructure look like initially, when it was mainly focused on integral product architectures?

Answer 22

IT infrastructure were vertically integrated.

• Automatization of core processes;
• Maximizing economies of scale and scope;
• Supported by transactional systems;

Question 23

How did IT infrastructures change when modular architectures began to emerge?

Answer 23

IT was no used to support critical inter- and intra-organizational processes, to make companies more competitive.
Innovation here is still within a single design hierarchy.

Question 24

How will the IT infrastructure most like change with layered modular products?

Answer 24

• It will focus on how to deal with heterogeneity of knowledge resources that stem from multiple and conflicting design hierarchies
• Each firm in a value network for layered modular products follows their own innovation trajectory. They will become interwoven and can influence each other;

Question 25

What do we still need to look up for this article?

Answer 25

• Challenges for new strategic frameworks and challenges for IT infrastructures
• Are written down in the summary.