The story so far: Creating disruptive innovations for the bottom of the pyramid requires ecosystems. But how do these ecosystems get created? My next learning is that to bootstrap the process, one entity has to put together the whole solution. Others will join in when they see that entity become successful, but not initially. This means that someone has to take the plunge and demonstrate that there is indeed a business opportunity in which we want others to participate.
But before we go ahead, we need to understand product architectures and interfaces and the interplay between interdependence and modularity, as explained by Clay Christensen and Michael Raynor in their book The Innovators Solution:
A products architecture determines its constituent components and subsystems and defines how they must interact fit and work together in order to achieve the targeted functionality. The place where any two components fit together is called an interface. Interfaces exist within a product, as well as between stages in the value-added chain.
An architecture is interdependent at an interface if one part cannot be created independently of the other part if the way one is designed and made depends on the way the other is being designed and madeInterdependent architectures optimize performance, in terms of functionality and reliability.
In contrast, a modular interface is a clean one, in which there are no unpredictable interdependencies across components or stages of the value chain. A modular architecture specifies the fit and function of all elements so completely that it doesnt matter who makes the components or subsystems, as long as they meet the specifications.
When product functionality and reliability are not yet good enough to address the needs of customers in a given tier of the market, companies must compete by making the best possible products. In the race to do this, firms that build their products around proprietary, interdependent architectures enjoy an important competitive advantage against competitors whose product architecture are modular.
Think back to the computer industry in the 1970s. The likes of IBM, Digital, HP and Apple were all integrated companies they did everything in-house. As performance improved and overshot what customers wanted, the basis of competition shifted and the industry modularized into the sub-systems, which greatly benefited two of the component makers: Intel in chips and Microsoft in software.
We will take these ideas from Christensen and apply them in our context, to see how the disruptive innovations need a single entity to provide the whole solution, as a precursor to building the ecosystem.
Tomorrow: of Integrated Solutions (continued)