Organising For Modularity In Dynamic Markets

Facing constantly increasing product variety and changing customer demands, many companies have adopted a product modularisation strategy to increase strategic flexibility. Despite the dominant view that product modularisation directly increases strategic flexibility, it is argued here that the causal link between product modularisation and strategic flexibility is mediated by specific complementary organisational factors which enable firms with a modular product structure to develop strategic flexibility. Moreover, the interrelationship between product architecture and organisational structure is regarded as reciprocal. That is, product architecture and organisational structure are considered to co-evolve and mutually influence each other. The purpose of this paper is to elucidate how firms applying a modularisation strategy organise in order to increase the strategic flexibility, and how the organisational structure is interrelated with the product architecture, especially the ability to maintain a modular product architecture over time. Two International automotive companies, both of them implemented a modularisation strategy in the mid-1990s, have been studied. From the cases it can be concluded that the alignment of product and organisational architecture, decision-making structures, and the management of knowledge affect a firm's ability to evolve its products and maintain a modular product structure over time.