Slide 1

Architectural Innovation: The Reconfiguration
Existing Product Technologies and the Failure
of Established Firm(1990)
Rebecca M. Henderson
John and Natty McArthur University Professor
Harvard University
Kim B. Clark
George Fisher Baker Professor of
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
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
– 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
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 productdevelopment
• 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 welldefined 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
• Organization develops filters allow it to identify
immediately what is most crucial in its information
• 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
• Switch to a new mode of learning and then invest
time and resources in learning about the new
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
– Empirical context different from the one where theory was
• 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.