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• Working Paper | HBS Working Paper Series | 2020

  Design Rules, Volume 2: How Technology Shapes Organizations: Chapter 6 The Value Structure of Technologies, Part 1: Mapping Functional Relationships

  Carliss Y. Baldwin

  Organizations are formed in a free economy because an individual or group perceives value in carrying out a technical recipe that is beyond the capacity of a single person. Technology specifies what must be done, what resources must be assembled, what actions taken in order to convert stocks of material, energy and information into products and services of value to human beings. Technology is the guide, organizations are the means, value is the goal. The purpose of this chapter is to build a robust and versatile language that is capable of representing the value structure of large technical systems. The language is based on elements I have labeled functional components. The language is more abstract than the language of technical recipes and task networks, thus it is capable of hiding details. However, the language also makes it possible to “trace back” from each named functional component to a technical recipe and a corresponding task network. Finally, although the language itself is non-mathematical, the value structure it reveals can be used to specify equations and prove mathematical propositions about the value of technical systems. The plan of the chapter as follows. I first explain why it is difficult to value technologies using standard economic methods based prices, quanities and probabilities. I then describe a methodology that shows how functional components are combined through technology to create a particular artifact or technical system. The methodology uses symbolic notation to clarify relationships between and among functional components. I illustrate these relationships using an ancient technology—the technology for making a garment from pieces of cloth. I go on to describe commonly observed patterns within technical systems, including optional features; composite functions; and platforms.

  Keywords: modularity; Technology; Organizations; Value Creation;

  Citation:

  Baldwin, Carliss Y. "Design Rules, Volume 2: How Technology Shapes Organizations: Chapter 6 The Value Structure of Technologies, Part 1: Mapping Functional Relationships." Harvard Business School Working Paper, No. 21-039, September 2020.  View Details

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• Working Paper | HBS Working Paper Series | 2020

  Design Rules, Volume 2: How Technology Shapes Organizations: Chapter 7 The Value Structure of Technologies, Part 2: Strategy without Numbers

  Carliss Y. Baldwin

  Functional analysis as set forth in the last chapter decomposes a technical system into functional components that do things to advance the system’s purpose and the goals of its designers. Functional analysis in turn can be used to construct value structure maps of technical systems. Such maps reveal targets of potential action and investment in the technical system where value may be created and captured. Value structure maps can be constructed without using numerical estimates based on prices, quanities and probabilities, thus they are an appropriate means of analyzing technical systems subject to radical uncertainty, complexity, and complementarity.
  
  The purpose of this chapter is to illustrate how value structure mapping combined with narratives can be applied to problems of strategy in large technical systems. I first argue that the salient points of value creation and value capture in a large technical system are the system’s bottlenecks. I then use value-mapping methodology to trace the evolution of bottlenecks of three large technical systems: early aircraft; high-speed machine tools; and container shipping. Finally, I distill the lessons of the case studies into four principles for creating and capturing value in large, evolving technical systems.

  Keywords: modularity; value structure mapping; Value Capture; Technology; Organizations; Strategy; Value Creation;

  Citation:

  Baldwin, Carliss Y. "Design Rules, Volume 2: How Technology Shapes Organizations: Chapter 7 The Value Structure of Technologies, Part 2: Strategy without Numbers." Harvard Business School Working Paper, No. 21-040, September 2020.  View Details

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• Working Paper | HBS Working Paper Series | 2020

  Design Rules, Volume 2: How Technology Shapes Organizations: Chapter 3 Transaction Free Zones

  Carliss Y. Baldwin

  In Chapter 2 we saw that the most economical locations for transactions in a task network are the so-called thin crossing points—places where transfers are easy to define, count and pay for. However, in many places in the task network, transfers of material, energy, and information are so dense and complex that the costs of treating each one as a transaction would be prohibitive. Such areas can become transaction free zones.
  The purpose of this chapter is to build a theory of transaction free zones within a task network. I first consider how transaction free zones are related to the economic view that a firm is a “nexus of contracts.” I then explain how transaction free zones are created and governed. I describe three types of transaction free zones: (1) corporations in which all decision rights flow from a single, central authority; (2) commons organizations which govern through consensual rule-making and monitoring; and (3) collaborative communities with open boundaries which govern through consensus and shared norms.

  Keywords: modularity; Technology; Organizations;

  Citation:

  Baldwin, Carliss Y. "Design Rules, Volume 2: How Technology Shapes Organizations: Chapter 3 Transaction Free Zones." Harvard Business School Working Paper, No. 21-031, August 2020.  View Details

  CiteView DetailsSSRN Read Now

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