IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article

Design Architecture and Introduction Timing for Rapidly Improving Industrial Products

  • Karthik Ramachandran

    ()

    (Cox School of Business, Southern Methodist University, Dallas, Texas 75275)

  • V. Krishnan

    ()

    (Rady School of Management, University of California, San Diego, California 92093)

Registered author(s):

    Technological advances present firms in many industries with opportunities to substantially improve their product's capabilities in short periods of time. Customers who invest in these products may, however, react adversely to rapid improvements that make their previous versions obsolete by deferring their purchase. In industrial markets, there is an emerging trend of sequentially improving products designed to be upgraded in a modular fashion. We study the impact of product architecture and introduction timing on the launch of rapidly improving products. We find that by localizing performance improvements in a sequence of upgradable modules of the product, a firm can better manage the introduction of rapidly improving products. Specifically, we show that modular upgradability can reduce the need for slowing the pace of innovation or forgoing upgrade pricing. The additional flexibility in pricing and timing makes the modular, upgradable approach preferable to an integrated architecture, even in some situations where there may be distinct performance or cost-related disadvantages to pursuing the modular architecture. We differentiate between proprietary and nonproprietary approaches to modular upgradability and consider the implications for profits. Our central contribution in this paper is the innovative integration of product architecture with pricing and timing decisions for managing the introduction of rapidly improving products.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://dx.doi.org/10.1287/msom.1060.0143
    Download Restriction: no

    Article provided by INFORMS in its journal Manufacturing & Service Operations Management.

    Volume (Year): 10 (2008)
    Issue (Month): 1 (December)
    Pages: 149-171

    as
    in new window

    Handle: RePEc:inm:ormsom:v:10:y:2008:i:1:p:149-171
    Contact details of provider: Postal:
    7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA

    Phone: +1-443-757-3500
    Fax: 443-757-3515
    Web page: http://www.informs.org/
    Email:


    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Sanjiv Erat & Stylianos Kavadias, 2006. "Introduction of New Technologies to Competing Industrial Customers," Management Science, INFORMS, vol. 52(11), pages 1675-1688, November.
    2. Preyas Desai & Sunder Kekre & Suresh Radhakrishnan & Kannan Srinivasan, 2001. "Product Differentiation and Commonality in Design: Balancing Revenue and Cost Drivers," Management Science, INFORMS, vol. 47(1), pages 37-51, January.
    3. Bulow, Jeremy I, 1982. "Durable-Goods Monopolists," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 314-32, April.
    4. Kim, Kilsun & Chhajed, Dilip, 2000. "Commonality in product design: Cost saving, valuation change and cannibalization," European Journal of Operational Research, Elsevier, vol. 125(3), pages 602-621, September.
    5. Langlois, Richard N. & Robertson, Paul L., 1992. "Networks and innovation in a modular system: Lessons from the microcomputer and stereo component industries," Research Policy, Elsevier, vol. 21(4), pages 297-313, August.
    6. J. Miguel Villas-Boas, 1998. "Product Line Design for a Distribution Channel," Marketing Science, INFORMS, vol. 17(2), pages 156-169.
    7. Sunder Kekre & Kannan Srinivasan, 1990. "Broader Product Line: A Necessity to Achieve Success?," Management Science, INFORMS, vol. 36(10), pages 1216-1232, October.
    8. Ulrich, Karl, 1995. "The role of product architecture in the manufacturing firm," Research Policy, Elsevier, vol. 24(3), pages 419-440, May.
    9. Anirudh Dhebar, 1994. "Durable-Goods Monopolists, Rational Consumers, and Improving Products," Marketing Science, INFORMS, vol. 13(1), pages 100-120.
    10. Nancy L Stokey, 1986. "Learning-by-Doing and the Introduction of New Goods," Discussion Papers 699, Northwestern University, Center for Mathematical Studies in Economics and Management Science, revised May 1987.
    11. Marshall Fisher & Kamalini Ramdas & Karl Ulrich, 1999. "Component Sharing in the Management of Product Variety: A Study of Automotive Braking Systems," Management Science, INFORMS, vol. 45(3), pages 297-315, March.
    12. Arthur Fishman & Rafael Rob, 2000. "Product Innovation by a Durable-Good Monpoly," RAND Journal of Economics, The RAND Corporation, vol. 31(2), pages 237-252, Summer.
    13. Sanderson, Susan & Uzumeri, Mustafa, 1995. "Managing product families: The case of the Sony Walkman," Research Policy, Elsevier, vol. 24(5), pages 761-782, September.
    14. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    15. Laura J. Kornish, 2001. "Pricing for a Durable-Goods Monopolist Under Rapid Sequential Innovation," Management Science, INFORMS, vol. 47(11), pages 1552-1561, November.
    16. K. Sridhar Moorthy & I. P. L. Png, 1992. "Market Segmentation, Cannibalization, and the Timing of Product Introductions," Management Science, INFORMS, vol. 38(3), pages 345-359, March.
    17. Nancy L. Stokey, 1979. "Intertemporal Price Discrimination," The Quarterly Journal of Economics, Oxford University Press, vol. 93(3), pages 355-371.
    18. Bhattacharya, Shantanu & Krishnan, V. & Mahajan, Vijay, 2003. "Operationalizing technology improvements in product development decision-making," European Journal of Operational Research, Elsevier, vol. 149(1), pages 102-130, August.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:inm:ormsom:v:10:y:2008:i:1:p:149-171. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.