Product Architecture Design for Global Performance

Abstract

In this paper, I characterize the impact of product global performance on the choice of product architecture during the product development process. I classify product architectures into three categories: modular, hybrid, and integral. Existing researches show that the choice of product architecture during the new product development is a crucially strategic decision for a manufacturing firm. However no single architecture is optimal in all cases, thus analytic models are required to identify and discuss specific trade-offs associated with the choice of the optimal architecture under different circumstance. This paper develops analytic models whose objectives are obtaining global performance of product through a modular/hybrid/integral architecture. Tradeoffs between costs and expected benefits from different product architectures are analyzed and compared. Multifunction products and small size are used as examples to formalize the models and show the impact of the global performance characteristics. I also investigate how optimal architecture changes in response to the exogenous costs of system integrators. Some empirical implications obtained from this study show that if one considers global performance, modular architecture is an absolutely sub-optimal decision and integral architecture is an all-the-time candidate for optimal architecture.