The Architecture of Complex Systems: Do Core-periphery Structures Dominate?

Alan   MacCormack; Carliss Y. Baldwin; John  Rusnak

Working Paper | HBS Working Paper Series | 2010

The Architecture of Complex Systems: Do Core-periphery Structures Dominate?

by Alan MacCormack, Carliss Y. Baldwin and John Rusnak

Abstract

Any complex technological system can be decomposed into a number of subsystems and associated components, some of which are core to system function while others are only peripheral. The dynamics of how such "core-periphery" structures evolve and become embedded in a firm's innovation routines has been shown to be a major factor in predicting survival, especially in turbulent technology-based industries. To date however, there has been little empirical evidence on the propensity with which core-periphery structures are observed in practice, the factors that explain differences in the design of such structures, or the manner in which these structures evolve over time.

We address this gap by analyzing a large number of systems in the software industry. Our sample includes 1,286 software releases taken from 19 distinct applications. We find that 75-80% of systems possess a core-periphery structure. However, the number of components in the core varies widely, even for systems that perform the same function. These differences appear to be associated with different models of development—open, distributed organizations developing systems with smaller cores. We find that core components are often dispersed throughout a system, making their detection and management difficult for a system architect. And we show that systems evolve in different ways—in some, the core is stable, whereas in others, it grows in proportion to the system, challenging the ability of an architect to understand all possible component interactions. Our findings represent a first step in establishing some stylized facts about the structure of real world systems.

Keywords: Innovation and Management; Product Design; Practice; Core Relationships; Software; Information Technology Industry;

Language: English

Format: Print

37 pages

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Citation:

MacCormack, Alan, Carliss Y. Baldwin, and John Rusnak. "The Architecture of Complex Systems: Do Core-periphery Structures Dominate?" Harvard Business School Working Paper, No. 10-059, January 2010.

Existing application performance management (APM) solutions lack robust anomaly detection capabilities and root cause analysis techniques that do not require manual efforts and domain knowledge. In this paper, we develop a density-based unsupervised machine learning model to detect anomalies within an enterprise application, based upon data from multiple APM systems. The research was conducted in collaboration with a European automotive company, using two months of live application data. We show that our model detects abnormal system behavior more reliably than a commonly used outlier detection technique and provides information for detecting root causes.

Working Paper | HBS Working Paper Series | 2019

Design Rules, Volume 2: How Technology Shapes Organizations: Chapter 13 Platform Systems vs. Step Processes—The Value of Options and the Power of Modularity

Carliss Y. Baldwin

This is the first chapter in Part 3. Its purpose is to contrast the value structure of platform systems with step processes from a technological perspective. I first review the basic technical architecture of computers and argue that every computer is inherently a platform for performing computations as dictated by their programs. I state and prove five propositions about platform systems, which stand in contrast to the propositions derived for step processes in Chapter 8. The propositions suggest that platform systems and step processes call for different forms of organization. Specifically, step processes reward technical integration, unified governance, risk aversion, and the use of direct authority, while platform systems reward modularity, distributed governance, risk taking, and autonomous decision-making. Despite these differences, treating platform systems and step processes as mutually exclusive architectures sets up a false dichotomy. Creating any good requires carrying out a technical recipe, i.e., performing a series of steps. Step processes in turn can be modularized (at the cost of lower efficiency) by creating buffers between steps. I show that the optimal number of modules (and buffers) increases as the underlying rate of technical change goes up. When the underlying technologies are changing rapidly, it makes sense to sacrifice some degree of flow efficiency for options to mix-and-match modular components.

Keywords: platform systems; step processes; computer architecture; modularity; Technology;

Citation:

Baldwin, Carliss Y. "Design Rules, Volume 2: How Technology Shapes Organizations: Chapter 13 Platform Systems vs. Step Processes—The Value of Options and the Power of Modularity." Harvard Business School Working Paper, No. 19-073, January 2019. View Details

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The IBM PC was the first digital computer platform that was open by as a matter of strategy, not necessity. The purpose of this chapter is to understand the IBM PC as a technical system and set of organization choices in light of the theory of how technology shapes organizations. In Chapter 7, I argued that sponsors of large technical systems (including platform systems) must manage the modular structure of the system and property rights in a way that solves four inter-related problems: provide all essential functional components, solve system-wide technical bottlenecks wherever they emerge, control and protect one or more strategic bottleneck, and prevent others from gaining control of any system-wide strategic bottleneck. I use this framework to understand how IBM initially succeeded with the PC platform and then lost its position as platform sponsor in the industry it had created.

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The Architecture of Complex Systems: Do Core-periphery Structures Dominate?

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