Architectural Innovation: The Reconfiguration

Existing Product Technologies and the Failure

of Established Firm(1990)

Rebecca M. Henderson Kim B. Clark

John and Natty McArthur University Professor George Fisher Baker Professor of
Harvard University Administration, Emeritus
Harvard University
 The Phenomenon
The Xerox 914 copier was
introduced at a trade show in New
York City, on September 16, 1959.
Establishing Xerox as a leader in
copier technology.
In the mid-1950s engineers at RCA's
R&D developed a prototype of a
portable, transistorized radio
receiver. The new product used
technology in which RCA was
accomplished
 The Decline
• Xerox
– Competition from smaller copiers
– Took Xerox eight years of mis-steps and false starts to introduce
a competitive product into the market.
– Lost half of its market share and suffered serious financial
problems
• RCA
– Sony, a small, relatively new company, used the small
transistorized radio to gain entry into the U.S. market
– RCA remained a follower in the market as Sony introduced
successive models
– Sony's radios were produced with technology licensed from RCA
What explains the disastrous effects on
industry incumbents of seemingly minor
improvements in technological products?
Innovation: Traditional Categorization
• Radical innovation establishes a new dominant design
and, hence, a new set of core design concepts
embodied in components that are linked together in a
new architecture

• Incremental innovation refines and extends an

established design. Improvement occurs in individual
components, but the underlying core design concepts,
and the links between them, remain the same

But are they sufficient to explain the phenomenon ?

 Architectural Innovation
• Unit of Analysis: Manufactured product sold to an end user and
designed, engineered, and manufactured by a single product-
development
• Architectural innovation: Innovations that change the way in which
the components of a product are linked together, while leaving the
core design concepts (and thus the basic knowledge underlying the
components) untouched
• Architectural innovation destroys the usefulness of a firm's
architectural knowledge but preserves the usefulness of its
knowledge about the product's components
• A component is defined as a physically distinct portion of the product
that embodies a core design concept and performs a well-defined
function.
This is the kind of innovation that confronted Xerox and RCA
 Product as a System vs.
Product as a set of Components

• Successful product development requires two

types of knowledge

– Component knowledge: knowledge about each of the

core design concepts and the way in which they are
implemented in a particular component
– Architectural knowledge: knowledge about the ways
in which the components are integrated and linked
together into a coherent whole.
Framework For Defining Innovation
Innovation Type and Firm Knowledge
• Incremental innovation reinforces the competitive
positions of established firms, since it builds on their
core competencies

• Radical innovation creates unmistakable challenges

for established firms, since it destroys the usefulness
of their existing capabilities

• Architectural innovation: what the firm knows is

useful and needs to be applied in the new product,
but some of what it knows is not only not useful but
may actually handicap the firm
Management of Architectural and Component
Knowledge
• Dominant design: Technical evolution is
usually characterized by periods of great
experimentation followed by the acceptance
of a dominant design

• Organizations build knowledge and capability

around the recurrent tasks that they perform
which are shaped by the organization's
experience with an evolving technology
 Managing Architectural Knowledge
Channels, filters, and strategies

• Organizational communication channels embody its

architectural knowledge of the linkages between
components
• Organization develops filters allow it to identify
immediately what is most crucial in its information
stream
• Organization's problem-solving strategies summarize
what it has learned about fruitful ways to solve
problems in its immediate environment

Emerge to cope with complexity

Problems Created by Architectural Innovation
• Information about architectural innovation
screened out by information filters
– rely on old beliefs about the world that a rational
evaluation of new information should lead them to
discard
• Switch to a new mode of learning and then invest
time and resources in learning about the new
architecture
Because architectural knowledge is embedded in channels, filters,
and strategies, the discovery process and the process of creating
new information (and rooting out the old) usually takes time
 Empirical Testing
• Context: photolithography alignment equipment
industry
– Empirical context different from the one where theory was
evolved
• Data: Panel data set consisting of research and
development costs and sales revenue by product for
every product development project conducted between
1962 and 1986
• Supplemented by a detailed managerial and technical
history of each project
• Amassed data cross validated by informed managers
Photolithography Alignment Technology
 The Kasper Saga
1. Kasper introduced the first contact aligner to be
equipped with proximity capability in 1973
2. The widespread use of proximity aligners occurred
with the introduction and general adoption of
Canon's proximity aligner in the late 1970s.
3. Kasper conceived of the proximity aligner as a
modified contact aligner.
– The firm "knew“
– The Canon aligner was pronounced to be "merely a
copy" of the Kasper aligner
 Future Research
• How the formulation of architectural and
component knowledge are affected by factors
such as the firm's history and culture

• Examine the extent to which these insights are

applicable to problems of process innovation
and process development.