Exploring the Duality Between Product and Organizational Architectures: A Test of the 'Mirroring' Hypothesis

Alan   MacCormack; Carliss Y. Baldwin; John  Rusnak

Article | Research Policy

Exploring the Duality Between Product and Organizational Architectures: A Test of the 'Mirroring' Hypothesis

by Alan MacCormack, Carliss Y. Baldwin and John Rusnak

Abstract

A variety of academic studies argue that a relationship exists between the structure of an organization and the design of the products that the organization produces. Specifically, products tend to "mirror" the architectures of the organizations in which they are developed. This dynamic occurs because the organization's governance structures, problem solving routines, and communication patterns constrain the space in which it searches for new solutions. Such a relationship is important, given that product architecture has been shown to be an important predictor of product performance, product variety, process flexibility, and even the path of industry evolution. We explore this relationship in the software industry. Our research takes advantage of a natural experiment, in that we observe products that fulfill the same function being developed by very different organizational forms. At one extreme are commercial software firms, in which the organizational participants are tightly coupled, with respect to their goals, structure, and behavior. At the other, are open-source software communities, in which the participants are much more loosely coupled by comparison. The mirroring hypothesis predicts that these different organizational forms will produce products with distinctly different architectures. Specifically, loosely coupled organizations will develop more modular designs than tightly coupled organizations. We test this hypothesis, using a sample of matched-pair products. We find strong evidence to support the mirroring hypothesis. In all of the pairs we examine, the product developed by the loosely coupled organization is significantly more modular than the product from the tightly coupled organization. We measure modularity by capturing the level of coupling between a product's components. The magnitude of the differences is substantial—up to a factor of six, in terms of the potential for a design change in one component to propagate to others. Our results have significant managerial implications, highlighting the impact of organizational design decisions on the technical structure of the artifacts that these organizations subsequently develop.

Keywords: organization design; Product design; architecture; modularity; open source software; Communication; Design; Governance; Management Practices and Processes; Open Source Distribution; Product Design; Mission and Purpose; Organizational Structure; Performance; Problems and Challenges; Behavior; Software;

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MacCormack, Alan, Carliss Y. Baldwin, and John Rusnak. "Exploring the Duality Between Product and Organizational Architectures: A Test of the 'Mirroring' Hypothesis." Research Policy 41, no. 8 (October 2012): 1309–1324.

Working Paper | HBS Working Paper Series | 2019

Design Rules, Volume 2: How Technology Shapes Organizations: Chapter 8 Rationalizing Flow Processes

Carliss Y. Baldwin

The purpose of this chapter is to examine the value structure of flow production processes and to explain why it is necessary to rationalize flow processes using the tools of systematic management. I first explain the problems facing managers of multi-step flow production processes at the end of the 19th Century. I introduce a model of the value structure of a production process made up of interdependent steps and define the production bottleneck of the process. I use the mathematical definition of a bottleneck to derive two general properties of stochastic multi-step flow processes with bottlenecks. These properties imply a need for ongoing managerial oversight and intervention using a set of tools that went by the label systematic management. Without active systematic management to address production bottlenecks, large-scale flow processes can easily collapse into chaos. I then argue that that the use of automated machinery, larger (or growing) markets, and systematic management are supermodular complements: each attribute makes the other two more valuable. The next chapter will explore how the technological requirements of multi-step flow production processes affect the optimal design of organizations implementing these technologies.

Keywords: flow processes; bottleneck; systematic management; Production; Management; Problems and Challenges;

Citation:

Baldwin, Carliss Y. "Design Rules, Volume 2: How Technology Shapes Organizations: Chapter 8 Rationalizing Flow Processes." Harvard Business School Working Paper, No. 20-032, September 2019. View Details

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The purpose of this chapter is to explain what the technologies of flow production with stochastic bottlenecks require and reward in organizations. I argue that organizations successfully implementing these technologies are likely to have unified governance and exercise direct authority over process design, job definitions, and task assignments. As they come to employ more people, they will create hierarchical management structures as a means of managing information flows and delegating decision rights. Finally from the early 20th Century through the present, most of these organizations saw advantage in being legally organized as corporations, which could own assets, enter into contracts, and employ individuals in their own right. The result was a “paradigm” of mass production—a cluster of concepts that came to define both “big business” and “high technology” in the United States and elsewhere. Throughout the middle years of the 20th Century, many members of society took for granted the fact that successful businesses using advanced technology would be organized as large, vertically integrated corporations, exercise direct authority, and use managerial hierarchies to channel information and delegate responsibility.

The purpose of this chapter is to explore how technologies and organizations engaged in flow production evolve over time. To allow for an apples-to-apples comparison, I examine organizations using essentially the same physical technologies, making similar products, and competing in the same markets. Specifically, I look at the organizational differences among the largest automakers in the United States and Japan. I focus first on Ford between 1910 and 1930, then on General Motors from the 1920s through the 1960s, then Toyota (and other Japanese automakers) from the 1960s through 2000. The differences among these organizations show that while technology shapes organizations within broad limits, it does not determine an organization’s complete design nor its long-term competitive success.

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Exploring the Duality Between Product and Organizational Architectures: A Test of the 'Mirroring' Hypothesis

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