The Spectrum of Architectural Modularity and Integrality Toward a Balanced View for Analyzing Future Industrial Competition March 2013 Takahiro Fujimoto Professor, Faculty of Economics, Tokyo University Executive Director, Manufacturing Management Research Center 

An Important Part of My Work -- Genba Walk Yamagata, Japan, 2011.8 

An Industry as a Collection of Manufacturing Sites (Fields, Genba) that Share Similar Design Information Two Pillars of Field-Based (Site-Based) Industrial Analysis ① Organizational Capability in Manufacturing ＝ The Way a Firm Creates Good Flows of Design Information to Customers better than Rivals. ② Architecture ＝ The Way Design Elements (Functional, Structural and Process) Are Divided and Connected to the Whole Genba(Field)-Based View of Industries and Firms Genba (Site, Field) Industry Firm Economy Under one capital In one area C Takahiro Fujimoto, University of Tokyo 

Design-Based Comparative Advantage Manufacturing (monozukuri) Capability （local concentration） Product-Process Architecture (Selected by Products） Comparative Advantage of Design Sites Fit？ Capability- Building Environment Customer or Market Requirements Constraints imposed by Society Decisions and Behaviors of Designers Other Environmental Factors, and Chances Capability- Building Competition Capability- Building Capability Constraints imposed by Technology C Takahiro Fujimoto, University of Tokyo 

Evolutionary Framework in Social Science A Dynamic Framework that Explains Existence of Ex-Post Rational Systems or Artifacts Without Depending Entirely upon Ex-ante Rational Logic 3 Ways of Explaining Existing (Observed) Social Systems or Artifacts ① Structural Logic ・・・ Explaining What It Is ② Functional Logic ・・・ Explaining How It Moves for Users ③ Emergent Logic ・・・ Explaining How It Was Generated If We Need Both Functional Logic and Emergent Logic for Explaining a Given Structure (Structural Attributes of the System), Then We Need Evolutionary Framework for This Particular Explanation. A Logic that Explains Variation, Selection and Retention of a Given Social System or Artifact. C Takahiro Fujimoto, University of Tokyo 

Insights Derived from Design-Based Framework 1 Design-based Concept of Manufacturing -- Creating Good (Efficient and Accurate) Flows of Value-Carrying Design Information to Markets 2 General Tendency of Post-War Japanese Manufacturing Sites -- Coordination-Rich Sites (Genba) by Teamwork of Multi-Skilled Employees 3 General Tendency of Japanese Competitive Advantage – Coordination-Intensive Products – Integral Architecture Japanese Manufacturing Model – Designing and Producing Competitive Integral-Architecture Products by Coordination-rich Manufacturing Sites (Genba) This Model was Largely a Result of Industrial Evolution C Takahiro Fujimoto, University of Tokyo 

The Architecture - Capability Framework 1 Design-Information View of Manufacturing 2 Organizational Capability – Controlling Design Flows 3 Performance Measurement -- A Multi-Layer Approach 4 Product-Process Architecture 5 Capability-Architecture Fit --- Explaining Competitiveness C Takahiro Fujimoto, University of Tokyo Manufacturing (monozukuri) Capability （local concentration） Product-Process Architecture (Selected by Products） Comparative Advantage of Design Sites Fit？ Capability- Building Environment Customer or Market Requirements Constraints imposed by Society Decisions and Behaviors of Designers Other Environmental Factors, and Chances Capability- Building Competition Capability- Building Capability Constraints imposed by Technology 

Framework: Design-Information View of Open Manufacturing Key Concept: Design Information = Value A firm’s products and processes are artifacts that has been designed. Manufacturing is essentially creation and transmission of design information to customers. A firm’s manufacturing (monozukuri) capability is its distinctive ability to handle flow of design information toward customers. Product-process architecture is designers’ basic way of thinking when creating design information for the product and processes. “Design” is the common denominator for these analyses. C Takahiro Fujimoto, University of Tokyo 

Open Manufacturing (Monozukuri) Means Creating Design Information Flows to the Customers We focus on design (as opposed to material) side of manufacturing artifact = design information + medium c.f., Aristotle: object = form + material where form is more essential Products (goods and services) are the artificial (= something designed) manufacturing, if service if medium is tangible medium is intangible Primary source of customer value is design information medium design information material form intangible medium design information tangible medium design information C Takahiro Fujimoto, University of Tokyo 

Open Manufacturing (Monozukuri) as a System of Design Information between Productive Resources Manufacturing activity is design information flows between productive resources productive productive resource resource medium design information medium design information Design Information flow medium design information design Information flow material (media) flow development production sales customers firms C Takahiro Fujimoto, University of Tokyo 

Product Development Purchasing Production Body Exterior Design Embedded in Press Dies 0.8 mm thick steel sheet Media (Material) Design Information C Takahiro Fujimoto, University of Tokyo Production = Transfer (Transcription) of Design Information 

What is Going on at the Press Shop Body exterior design information, embedded in press dies (steel block), is transmitted to 0.8 mm thick sheet steel (media) Information transmission time = value-adding time Information non-transmission time = MUDA C Takahiro Fujimoto, University of Tokyo body design cast iron body design sheet steel transmission press dies body panel 

Sheet Steel (Media) Absorbs Design Information through the Press Operation Design information, embedded in press dies, is transmitted to sheet steel C Takahiro Fujimoto, University of Tokyo body design cast iron press die body design cast iron press die body design cast iron press die body design cast iron press die 

Product = Design Information + Media Production = Marriage of Design Information and Media Body Exterior Design Embedded in Press Dies 0.8 mm thick steel sheet C Takahiro Fujimoto, University of Tokyo 

Goods and service as flows of design information physical goods ・・・ 2 stage transmission：① to tangible medium ② to customers service・・・ intangible medium; direct transmission to customers design info medium (tangible） medium (tangible） design info medium (tangible） design info design info production design info medium (intangible） design info Design info sales consum- ption satis- faction unsatisfied customers development satisfied customers unsatisfied customers satisfied customers development production sales consum- ption medium (intangible） ① ② C Takahiro Fujimoto, University of Tokyo 

Creating a Good Flow of Customer Experience: A Super Market Entrance – Unsatisfied Customers Exit – Satisfied Customers Lead Time = Information-Receiving Time Reception Floor Design Talks to Customers Product & Price Design Cashier Timely and Accurate Information Transmission to Customers Productivity = Information-Sending Efficiancy Quality = Information Sending Accuracy 設計 情報 Tangible Medium Design Info 設計 情報 Tangible Medium Design Info 設計 情報 Intangible Medium Design Info 設計 情報 Intangible Medium Design Info Intangible Medium Design Info C Takahiro Fujimoto, University of Tokyo 

The Architecture - Capability Framework 1 Design-Information View of Manufacturing 2 Organizational Capability – Controlling Design Flows 3 Performance Measurement -- A Multi-Layer Approach 4 Product-Process Architecture 5 Capability-Architecture Fit --- Explaining Competitiveness C Takahiro Fujimoto, University of Tokyo Manufacturing (monozukuri) Capability （local concentration） Product-Process Architecture (Selected by Products） Comparative Advantage of Design Sites Fit？ Capability- Building Environment Customer or Market Requirements Constraints imposed by Society Decisions and Behaviors of Designers Other Environmental Factors, and Chances Capability- Building Competition Capability- Building Capability Constraints imposed by Technology 

Manufacturing (monozukuri) Capability （local concentration） Product-Process Architecture (Selected by Products） Comparative Advantage of Design Sites Fit？ Capability- Building Environment Customer or Market Requirements Constraints imposed by Society Decisions and Behaviors of Designers Other Environmental Factors, and Chances Capability- Building Competition Capability- Building Capability Constraints imposed by Technology Design-Based Comparative Advantage C Takahiro Fujimoto, University of Tokyo 

Organizational Routines and Capability of Manufacturing Organizational routine of manufacturing ------ medium design info medium design info Repeated control of design information flow between productive resource medium design info medium design info medium design info medium design info medium design info medium design info medium design info medium design info medium design info medium design info medium design info medium design info Organizational capability ------- of manufacturing routine A system of organizational routines for fast, efficient and accurate flows of design information to customers routine routine routine routine routine routine C Takahiro Fujimoto, University of Tokyo 

Toyota’s Manufacturing Capability as Coordinative Information-Processing Toyota’s manufacturing capability - Dense and accurate information transmission between flexible (information-redundant) productive resources. (1) Higher Productivity and Shorter Throughput Time (TPS) Muda is unnecessary non-transmission time, which includes inventory, over-production, and defects on the information receiver side, (2) Higher Manufacturing Quality (Lower Defect Rate) (TQM) Building-in quality: - Errors of information transmission are avoided in the first place (vs. inspection) C Takahiro Fujimoto, University of Tokyo 

Information Transmission and Reception in Production productivity (#1station) （person-hour per unit） cycle time Worker material Work-in-process product #1 station inventory time Inven -tory Tans port cycle time production lead time Reception side (process) Transmission side (working) cycle time Worker Value adding time (transmission） Value adding time (reception） Non-value-adding time Inventory, waiting, transporting, etc. Productive resource productivity (#2station) （person-hour per unit） cycle time design information flow material flow Inven -tory inventory time C Takahiro Fujimoto, University of Tokyo #2 station 

Figure 9 Organizational Capability Regarding Productuvity and Throughput Time (Toyota) M+A Product Design (M+A+B) product design for manufacturability A supplier's Kaizen (impronements) supplier M reduction of work-in-processi inventory or piece-by-piece transfer process step 2 process step 1 B regular pace of information transmission (levelization, small lot) Worker and Equipment Worker and Equipment customer Work Design Equipment Design Parts Design (M) parts design for manufacturability black box parts system A A B B Work Design Equipment Design reduction of raw material inventory reduction of finished goods inventory designing process flow pror to work & equipment design M+A+B low cost automation in-house design of equipment revision of work designs by supervisors maximizing value-adding time flexible equipment workers participate in Kaizen (improvements) quick set-up change multi-skilled worker pull system mixed-model (small lot) assembly lshort-term levelization of production volume dealer visualizing non-value time (JIT, andon, line stop cord) levelization of product mix (heijunka) M M M supplier Kanban JIT delivery communication preventive maintenance flexible task assignment (shojinka) incremental impovement of equipment (1) Higher Productivity and Shorter Throughput Time C Takahiro Fujimoto, University of Tokyo 

（2） Higher Manufacturing Quality Toyota-style system as an integrative manufacturing capability M+A M+A+B yes no yes no yes no M+A+B Product Design (M+A+B) design for manufacturability M+A A prevention from sending error messages (poka-yoke, jidoka, etc.) maintenance of process information stock (total productive maintenance, worker training, standard operating procedures) M supplier's Kaizen (impronements) supplier supplier's on the spot inspection on the spot inspection scrap or rework scrap or rework elimination of inspection of receovomg parts yes no M M? reduction of inventory or piece-by-piece transfer M+A? scrap or rework process step 2 process step 1 quick feedback of defect information M+A+B M+A+B? M+A+B? scrap or rework B final inspection Kaizen (continuous impronements) Worker and Equipment Worker and Equipment Worker and Equipment customer dramatizing the defect information (andon, jidoka, etc.) information flow material flow A,B,M information content inspection productive resource transformation Key: Figure 10 Organizational Capability Regarding Manufacturing Quality (Toyota) C Takahiro Fujimoto, University of Tokyo 

Efficient /Accurate Information Processing at Toyota Flow-Oriented (Lean) Manufacturing Capability Production --- Dense and Accurate Transmission of Design Information from Process to Product Development --- Early and Integrative Problem Solving Cycles For Fast Creation of Design Information Purchasing --- Long-Term Relationship, Capability-Building Competition, Bundled Outsourcing for Joint Creation of Design Information with Suppliers Toyota’s Manufacturing capability - Smooth, dense and accurate transmission of design information between flexible (information-redundant) productive resources. --- Integration-Based Manufacturing Capability C Takahiro Fujimoto, University of Tokyo 

Manufacturing (monozukuri) Capability （local concentration） Product-Process Architecture (Selected by Products） Comparative Advantage of Design Sites Fit？ Capability- Building Environment Customer or Market Requirements Constraints imposed by Society Decisions and Behaviors of Designers Other Environmental Factors, and Chances Capability- Building Competition Capability- Building Capability Constraints imposed by Technology C Takahiro Fujimoto, University of Tokyo History Matters in Industry’s Capability-Building 

Economy of Scarcity : An Evolutionary Hypothesis Common Experience during the High-Growth Era May Create A Common Set of Capabilities at Manufacturing Sites of the Same Country “Economy of Scarcity” ・・ Hungry Organizations Are Forced to Become Lean Common Experience of “Poverty” (Input-Hungry Situations) When the Organization Was Young, Small and Growing. → 1 Limiting Intra-Firm Division of Labor (= Multi-Skilled Workers) 2 Promoting Inter-Firm Division of Labor (= Supplier Systems) 、 3 Promoting Coordination Inside and Between Firms (= Team Work) → Forced Increase of Productivity (High Altitude Trainings Runners) → Subsequent Increase of Inputs Results in Rapid Expansion of Outputs, But Expansion of Supplies Also Intensifies Competition Among Firms. Capability-Building Continues in the Sectors of Tradable Goods. ・・ Partly Unintended Results of Industrial Histories in the Late 20th Century. C Takahiro Fujimoto, University of Tokyo 

The Architecture - Capability Framework 1 Design-Information View of Manufacturing 2 Organizational Capability – Controlling Design Flows 3 Performance Measurement -- A Multi-Layer Approach 4 Product-Process Architecture 5 Capability-Architecture Fit --- Explaining Competitiveness C Takahiro Fujimoto, University of Tokyo Manufacturing (monozukuri) Capability （local concentration） Product-Process Architecture (Selected by Products） Comparative Advantage of Design Sites Fit？ Capability- Building Environment Customer or Market Requirements Constraints imposed by Society Decisions and Behaviors of Designers Other Environmental Factors, and Chances Capability- Building Competition Capability- Building Capability Constraints imposed by Technology 

Manufacturing (monozukuri) Capability （local concentration） Product-Process Architecture (Selected by Products） Comparative Advantage of Design Sites Fit？ Capability- Building Environment Customer or Market Requirements Constraints imposed by Society Decisions and Behaviors of Designers Other Environmental Factors, and Chances Capability- Building Competition Capability- Building Capability Constraints imposed by Technology Design-Based Comparative Advantage C Takahiro Fujimoto, University of Tokyo 

Measuring and Analyzing Industrial Performance -- From Competitiveness to Profitability Productive Performance Market Performance Profit Performance other factors of environments and strategy Arena of Capability-building Competition productivity lead time conformance quality etc. price delivery perceived quality etc. organizational routine Figure 12 Capability, Competitiveness, and Profitability Organizational Capability C Takahiro Fujimoto, University of Tokyo 

Example: Productive Performance of Japanese Auto Firms -- Development Productivity (Adjusted Person-Hours per Project) -- C Takahiro Fujimoto, University of Tokyo 0 500000 1000000 1500000 2000000 2500000 3000000 3500000 Period 1 1980-84 Period 2 1985-89 Period 3 1990-94 Period 4 1995-99 USA Europe Japan Adjustment scheme: (1) # of body types=2, (2) New design ratio=0.7, (3) Supplier’s contribution=0.3, (4) Product class=compact/sub-compact *Following Graphs Cited from Nobeoka & Fujimoto(2004) 

© HBS-MMRC The Sample Average’sTrend for Adjusted Engineering Hours Prepared by Daniel Heller, Yokohama National University 

© HBS-MMRC The Sample Average’s Trend for Adjusted PD Lead Time (from Exterior Styling fix to Start of Sales) Prepared by Daniel Heller, Yokohama National University 

Example: Productive Performance of Japanese Auto Firms -- Assembly Productivity (Adjusted Person-Hours per Vehicle) -- C Takahiro Fujimoto, University of Tokyo 16.8 24.9 35.5 41.0 16.5 21.9 25.3 29.7 12.3 16.8 20.1 28.0 0 10 20 30 40 50 日/日 米/北米 欧/欧 新興国 1989 1994 2000 US/NA JP/JP EU/EU Developi ng Cont. Source: M. Howleg & F.K. Pil, The second century (IMVP Survey) (Hours*Person) (Hours*Person) 

34 34 Final Assembly Productivity (2006) Assembly Productivity (person hours per vehicle) Factories of Asian Multinationals in Asian Countries Productivity（man-hour/vehicle） (assemble) 5.1 9.7 9.8 7.5 9.7 14.5 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 Japan Average(10) Korea&Taiwan Average(6) Taiwan Average(3) Thailand Average(6) China&India Average(6) India Average(3) C Takashi Oshika, and Takahiro Fujimoto, IMVP 

Example: Productive Performance of Japanese Auto Firms -- Assembly Throughput Time (from Welding to Assembly) -- C Takahiro Fujimoto, University of Tokyo Throughput Time (Start of Body Assy-Final Line off) 17.1 20.1 25.5 36.3 20.5 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 日本 海外日本 北米 欧州 韓国 （hr.) JP/JP JP/NA NA/NA EU/EU KR/KR Data: IMVP2000yr. Survey, made by Jeweon Oh, MMRC (Hours) 

Source: Yuka Shoken Hokokusho (有価証券報告書) Consolidated profit (連結) by Daniel Heller Operating Profit Ratio of Japanese Auto Makers 36 

The Architecture - Capability Framework 1 Design-Information View of Manufacturing 2 Organizational Capability – Controlling Design Flows 3 Performance Measurement -- A Multi-Layer Approach 4 Product-Process Architecture 5 Capability-Architecture Fit --- Explaining Competitiveness C Takahiro Fujimoto, University of Tokyo Manufacturing (monozukuri) Capability （local concentration） Product-Process Architecture (Selected by Products） Comparative Advantage of Design Sites Fit？ Capability- Building Environment Customer or Market Requirements Constraints imposed by Society Decisions and Behaviors of Designers Other Environmental Factors, and Chances Capability- Building Competition Capability- Building Capability Constraints imposed by Technology 

Manufacturing (monozukuri) Capability （local concentration） Product-Process Architecture (Selected by Products） Comparative Advantage of Design Sites Fit？ Capability- Building Environment Customer or Market Requirements Constraints imposed by Society Decisions and Behaviors of Designers Other Environmental Factors, and Chances Capability- Building Competition Capability- Building Capability Constraints imposed by Technology Design-Based Comparative Advantage C Takahiro Fujimoto, University of Tokyo 

3 Architectural Thinking and Industrial Classification Supplementary industry classifications -- based on product-process architecture Product architecture, Basic way of thinking of engineers when they design functions and structures of a new product Product Function Sub-functions Product Structure Interface Interface Component Compo nent Mapping between Functional and Structural Elements Figure 4 Product Architecture C Takahiro Fujimoto, University of Tokyo 

Basic Classifications of Product-Process Architecture Modular architecture one-to-one correspondence between functional and structural elements Integral architecture many-to-many correspondence between the functional and structural elements Body Suspension Engine Handling Ride Fuel Efficiency PC PC System Automobile Computing Printer Projection Projector Printing Open architecture： mix and match of component designs across firm Closed architecture： mix and match only within a firm C Takahiro Fujimoto, University of Tokyo 

Surface Treatment Steel for Automobile’s Outer Panel Function Process Surface Appear- ance Corrosion Resist- ence Dent Resist- ence Form- ability Weld ability Paint ability Dimen- sional Accuracy Rigidity Iron Making Converter ○ ○ ○ ○ ○ Secondary refining ○ ○ ○ ○ ○ Continuous casting ○ ○ Hot Rolling ○ ○ Pickling ○ Cold Rolling ○ ○ ○ ○ ○ Continuous Annealing ○ ○ ○ ○ ○ ○ Continuous Galvannealing ○ ○ ○ ○ ○ ○ ○ Integral Architecture Index = 0.48 = 33 ÷(9X8) Relatively integral C Ge and Fujimoto, University of Tokyo 

Cold Rolled Steel for Inner Panels of Automobile Function Process Surface Appear- ance Corrosion Resist- ence Dent Resist- ence Form- ability Weld ability Paint ability Dimen- sional Accuracy Rigidity Iron Making Converter ○ ○ ○ Secondary refining ○ ○ ○ Continuous casting ○ Hot Rolling ○ Pickling ○ Cold Rolling ○ ○ ○ ○ Continuous Annealing ○ ○ Integral Architecture Index = 0.23 = 15 ÷(8X8) Relatively modular C Ge and Fujimoto, University of Tokyo 

(1) Closed-integral (2) Closed-modular (3) Open-modular Modular Integral Closed small cars compact consumer electronics internet bicycle LEGO (building-block toy) motorcycle machine tools Figure 6 Basic Types of Product Architecture Open game software mainframe computer personal computer (PC) PC software Three Basic Types of Product Architecture C Takahiro Fujimoto, University of Tokyo 

Closed-Integral Architecture (Car) Modular Integral Closed small cars compact consumer electronics internet bicycle LEGO (building-block toy) motorcycle machine tools Figure 6 Basic Types of Product Architecture Open game software mainframe computer personal computer (PC) PC software C Takahiro Fujimoto, University of Tokyo 

Closed-Modular Architecture (Mainframe Computer) Modular Integral Closed small cars compact consumer electronics internet bicycle LEGO (building-block toy) motorcycle machine tools Figure 6 Basic Types of Product Architecture Open game software mainframe computer personal computer (PC) PC software C Takahiro Fujimoto, University of Tokyo 

Open-Modular Architecture (PC) Modular Integral Closed small cars compact consumer electronics internet bicycle LEGO (building-block toy) motorcycle machine tools Figure 6 Basic Types of Product Architecture Open game software mainframe computer personal computer (PC) PC software C Takahiro Fujimoto, University of Tokyo 

Manufacturing (monozukuri) Capability （local concentration） Product-Process Architecture (Selected by Products） Comparative Advantage of Design Sites Fit？ Capability- Building Environment Customer or Market Requirements Constraints imposed by Society Decisions and Behaviors of Designers Other Environmental Factors, and Chances Capability- Building Competition Capability- Building Capability Constraints imposed by Technology C Takahiro Fujimoto, University of Tokyo Evolution of Architecture – a Macro-Micro Loop – There is no such thing as product-specific architecture 

Integral Architecture Modular Architecture PC Note Book Mobile Desktop 60’s 70’s 2000 Digital Color TV Autom obile Family Car Truck Mortor Cycle Japanese Chinese Camera Single Lenz Reflex Digital Camera Mobile Phone 1990-95 1995- VCR DVD Steel Automobile Use Construction Use JAPAN? Europe? U.S? Korea? China? Estimated Architectural Spectrum and International Division of Labor by Architecture (by Shintaku) Source:Fujimoto and MMRC（2006） 

Designer variation Simplifying Structures Improving Functions Under-performance Over-Performance Constraints by Society, Markets, Physics -- Designers’ Intentions -- or Chances Surviving Architectures Unintended Design Changes Evolutionary Dynamics of Macro-Micro Architecture -- by Performance Macro- Architecture Micro- Architecture selection retention -- by Cost C Takahiro Fujimoto, University of Tokyo 

Macro-Architectures ・・ are Selected by Society, Market and Technology Architecture of the Whole Product ＝ Aggregation of Parts’ Architectures Macro-Architectures Affect Structures and Cultures of Industries and Firms Macro-Architectures Affects Micro-Architectures through Structures/Cultures Micro-Architectures ・・ are Selected by Designers’ Intended/Unintended Behaviors The Same Product may Have Different Architectures Layer by Layer (Vertically), or Area by Area (Horizontally) Ex Ante, Designers Intend to Improve Performances or Decrease Costs by Changing Micro-Architectures Ex Post, Micro-Architectures that Survived in Internal/External Selection Environments are Aggregated into a Macro-Architecture of the Whole System Loops of Macro-Architectures and Micro-Architectures 

・ Technological Progress Expands Cost-Performance Frontier ・ The Same Kind of Products with Different Architectures May Have Different Cost-Performance Frontiers ・ Customers of Different Tastes (e.g., Performance-Oriented or Cost-Oriented) May Select Products of Different Architecture 1 Performance-Oriented Customers May Choose Integral Architecture; 2 Cost-Oriented Customers May Choose Modular Architecture ・ Architectures, Coordination Mechanisms, Industrial Structures Selected Simultaneously 1 Integral Architecture – Organizational Coordination – Concentrated Structure 2 Modular Architecture -- Market Coordination -- Dispersed Industrial Structure ・ Organization’s Coordination Capability Building → Shift to Integral Architectureｓ Market’s Coordination Capability Building → Shift to Modular Architectures ・ Middle Range in the Architecture Spectrum Relational (Long-Term) Contracts and Other Hybrid Coordination Mechanisms. Selection of Macro-Architectures by Markets 

Technological Progress Expands Cost-Performance Frontier 性能 t ｔ＋1 ｔ＋2 平均費用 （価格） 技術進歩 Average Cost (Price) Performance Technological Progress C Takahiro Fujimoto, University of Tokyo 

Expanding the Frontier (Electric Calculator) Price (yen) Function Index Casio Sharp C J.Shintaku 

Integral Architectures and Cost-Performance Frontier Modular Intermediate Performance Average Cost (Price) C Takahiro Fujimoto, University of Tokyo 

Integral Price-Oriented Customers – Tend Toward Modular Architecture Selected Architecture = Modular Modular Selected Architecture = Integral Average Cost (Price) Indifference Curve of Price-Oriented Customers Intermediate Market Tastes and Selection of Architectures Performance-Oriented Customers – Tend Toward Integral Architecture Average Cost (Price) Integral Modular Intermediate Indifference Curve of Performance- Oriented Customers C Takahiro Fujimoto, University of Tokyo Performance Performance 

Integral Performance Modular Overall Cost-Performance Frontier (Envelope) Average Cost (Price) C Takahiro Fujimoto, University of Tokyo 

Macro Architecture is Determined by Market & Society Functional Performance Indifference Curve of Function -Oriented (Performance-oriented) Customers Indifference Curve of Price-Oriented Customers Price (Average Cost) Choice of Price-oriented Customers = Modular Products Note: Modified from Fujimoto (2012) Comprehensive Function-Price Frontier As an Envelope Choice of Function-oriented Customers = Integral Products Function-Price Frontier of Modular Architecture Products Function-Price Frontier of Integral Architecture Products Function-Price Frontier of Middle Range Products 

The Long Tail of the Industry Lifecycle 1880s Invention Ford System Time Rate (frequency) of Innovation 1900s 1890s 1910s 1920s 1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s Dominant Design (Ford T) Sloan System Toyota System Emergence Safety/Energy/ Environmental Regulations Lean System Diffusion Digital Technology Alternative Engines Downsizing of US cars “Long Tail” Abernathy-Utterback Cycle Note: The author’s subjective estimation based on Abernathy (1978), Cusumano (1985), Womack et al (1990), Clark and Fujimoto (1991), Fujimoto (1999), and other sources. C Takahiro Fujimoto, University of Tokyo 

Performance Curve、Market Size、and Average Complexity Time Performance (≒Complexity) Range of Relevant Performance for Customers Incumbent Alternative１ Alternative２ １ Christensen Model – Disruptive Technologies Repeated? Over-Quality Over-Quality Over-Quality Disruptive innovation Disruptive Innovation Complex Simple C Takahiro Fujimoto, University of Tokyo 

Time Advanced Technology Emergent Country １ ＝ Market Size ＝ Performance Curve ＝ Average Complexity Note ２ Automobile Case (Two Paths Co-Existing) Performance Curve、Market Size、and Average Complexity Performance (≒Complexity) Complex Simple Emergent Country 2 Range of Relevant Performance for Customers C Takahiro Fujimoto, University of Tokyo 

Current Changes of Automobile Architectures Ex-ante Ex-post In the Past Future Goal Ex-ante Ex-post C Takahiro Fujimoto, University of Tokyo 

The Architecture - Capability Framework 1 Design-Information View of Manufacturing 2 Organizational Capability – Controlling Design Flows 3 Performance Measurement -- A Multi-Layer Approach 4 Product-Process Architecture 5 Capability-Architecture Fit --- Explaining Competitiveness C Takahiro Fujimoto, University of Tokyo Manufacturing (monozukuri) Capability （local concentration） Product-Process Architecture (Selected by Products） Comparative Advantage of Design Sites Fit？ Capability- Building Environment Customer or Market Requirements Constraints imposed by Society Decisions and Behaviors of Designers Other Environmental Factors, and Chances Capability- Building Competition Capability- Building Capability Constraints imposed by Technology 

Manufacturing (monozukuri) Capability （local concentration） Product-Process Architecture (Selected by Products） Comparative Advantage of Design Sites Fit？ Capability- Building Environment Customer or Market Requirements Constraints imposed by Society Decisions and Behaviors of Designers Other Environmental Factors, and Chances Capability- Building Competition Capability- Building Capability Constraints imposed by Technology Design-Based Comparative Advantage C Takahiro Fujimoto, University of Tokyo 

Hypothesis: Capability-Architecture Fit at National Level A group of genba (sites, fields) in the same country or region, facing similar environmental constraints, national-regional institutions, demand patterns or other forces specific to a particular geographical area may develop similar types of organizational capabilities Products with the architecture which fits this organizational capability tend to demonstrate competitive advantage (-- if not profitability) History matters Modular Integral Closed small cars compact consumer electronics internet bicycle LEGO (building-block toy) motorcycle machine tools Figure 6 Basic Types of Product Architecture Open game software mainframe computer personal computer (PC) PC software C Takahiro Fujimoto, University of Tokyo Japan’s Architectural Comparative Advantage 

Ratio of Export and Integral Architecture Index Scatter chart(1) （Regression Equation for Assembly products：52sample） Ratio of Export and Integral Architecture Index　Scatter chart（assembly products：52sample） 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% -3.000 -2.500 -2.000 -1.500 -1.000 -0.500 0.000 0.500 1.000 1.500 Week　　　　　　　　　　　　　　　　　　　　　　　　　　Integral Architecture Index 　　　　　　　　　　　　　　　Strong Ratio of Export Ratio of Export Regression Curve C Oshika and Fujimoto, MMRC, University of Tokyo 

Ratio of Export and Integral Architecture Index Scatter chart(2) （Regression Equation for Process-Oriented Products：43sample） Ratio of Export and Integral Architecture Index　Scatter chart（Raw Materials products：43sample） 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% -2.500 -2.000 -1.500 -1.000 -0.500 0.000 0.500 1.000 1.500 2.000 Week　　　　　　　　　　　　　　　　　　　　　　　　　　Integral Architecture Index 　　　　　　　　　　　　　　　Strong Ratio of Export Ratio of Export Regression Curve C Oshika and Fujimoto, MMRC, University of Tokyo 

Not clear Thuru-Nakajima’s Statistical Analysis (2012) Generally Sopported “Competitiveness = f(C-A Fit)” Hypothesis Japan Linear Estimation significan t Integral Architecture Modular Architecture Korea China Coordi nation- oriented Speciali zation -oriented significant Not clear Not clear Non-Linear Estimation Integral Architecture Modular Architecture significan t significant significan t significant Not clear peciali Coordi nation- oriented Speciali zation -oriented Speciali zation -oriented Coordi nation- oriented Data Concentrated here C Takahiro Fujimoto, 

Predictions on Architecture-based Comparative Advantage Japanese firms -- integration capability More competitive in products with closed-integral architecture. based on integration-based manufacturing capability Chinese firms – mobilization capability More competitive in labor-intensive products with open-modular (or quasi-open) architecture Korean (large) firms – concentration capability More competitive in capital-intensive products with modular architecture (moving toward integral?) ASEAN firms – labor-retaining capability?? More competitive in labor-intensive products with closed-integral architecture? U.S. firms – conceptualization capability More competitive in knowledge-intensive products with open-modular architecture European firms – expression capability More competitive in closed-integral products based on brand-design-marketing capability C Takahiro Fujimoto, University of Tokyo 

Architectural Geopolitics: A Prediction in the Pacific Region Integral Axis Modular Axis ＵＳ China (south) Japan ＡＳＥＡＮ India? Taiwan Korea C Takahiro Fujimoto, University of Tokyo ? 

Hypothesis: Many Chinese Industries Tend to be Competitive in Goods with Open-Modular Architecture Architectural Transformation -- From Integral to Open Architecture Quasi-Open Architecture (Mix-and-Match of Copied-Modified Parts) e.g., Motorcycle, Consumer Appliances, Cellular Phone -- Many Assemblers, Module Suppliers, Huge Production Volume Tough Price Competition, Thin Profit Rates, Export Quality?? Historical Origin – Soviet-Style National Innovation System Shortage of Design Assets Modular Integral Closed small cars compact consumer electronics internet bicycle LEGO (building-block toy) motorcycle machine tools Figure 6 Basic Types of Product Architecture Open game software mainframe computer personal computer (PC) PC software C Takahiro Fujimoto, University of Tokyo China’s Architectural Comparative Advantage 

Case of Car Industry Integral Architecture --- VW PASSART (2000) Modular Integral Closed small cars compact consumer electronics internet bicycle LEGO (building-block toy) motorcycle machine tools Figure 6 Basic Types of Product Architecture Open game software mainframe computer personal computer (PC) PC software 

Italian Exterior Design, Mitsubishi Engine Italian Exterior Design, Mitsubishi Engine Sedan (Brilliant) by a local Chinese Auto Maker Modular Integral Closed small cars compact consumer electronics internet bicycle LEGO (building-block toy) motorcycle machine tools Figure 6 Basic Types of Product Architecture Open game software mainframe computer personal computer (PC) PC software 

Similar Exterior Design to Honda, Similar Exterior Design to Honda, but Very Different Architecture but Very Different Architecture -- -- Rear Drive, Truck Architecture, Rear Drive, Truck Architecture, Toyota &Mitsubishi Engines Available Toyota &Mitsubishi Engines Available SUV(SR-V) by a local Chinese Auto Maker Modular Integral Closed small cars compact consumer electronics internet bicycle LEGO (building-block toy) motorcycle machine tools Figure 6 Basic Types of Product Architecture Open game software mainframe computer personal computer (PC) PC software 

TATA NANO (India) base model price = $2500 (upper model is more expensive) More toward integral architecture than we expected Modular Integral Closed small cars compact consumer electronics internet bicycle LEGO (building-block toy) motorcycle machine tools Figure 6 Basic Types of Product Architecture Open game software mainframe computer personal computer (PC) PC software Different architectural strategies between Chinese and Indian local auto makers? C Fujimoto and Ge, University of Tokyo ？ 

Challenge to the Complexity Complexity Driven by Science, Society, and Market Japanese are Not Good at Science-Based Integral Products? Higher Level of Cross-Disciplinary Integration is Needed Balancing Capability Building and Complexity Reduction is Key 

Japanese Advantage in Speed of Trial and Error by Teamwork Goal -- optimal design Initial position found by existing scientific and practical knowledge Engineering coordination by trial and error – Japanese are fast here Case 1 -- Integral Architecture – Not So Science-Intensive © Takahiro Fujimoto, University of Tokyo 

American Advantage in Modular Architecture Optimal Design Initial Position （１） Japanese firms rely on trial and error – not on scientific knowledge? （２） Japanese advantages disappear by the short-cut effect ! Case 2 -- Short-Cut Effect by Modularization © Takahiro Fujimoto, University of Tokyo 

Western Advantages in Scientific-Knowledge-Intensive Products? Goal: Optimal Design Western = Smart Turtle? Japanese =Not-So-Smart Rabbit? （１） Very Integral, Science-Based Products （２） Japanese Rely on Trial and Error （３） Western Rely on Prior Scientific Knowledge? Science-based Integral Products -- Rabbit and Turtle? © Takahiro Fujimoto, University of Tokyo 

Japanese Advantages in Middle Range Integral Products? Simulation Results ① Modular Architecture Product Japanese Design Speed American Design Speed ② Integral , but not so Science-Intensive Product ③ Integral, and Science-Intensive Product American Design Cost Advantage Japanese Design Cost Advantage Japanese Design Speed American Design Speed Japanese Design Speed American Design Speed American Design Cost Advantage? © Takahiro Fujimoto, University of Tokyo Turtle-Rabbit Hypothesis 

Toyota Problem as Complexity-Capability Imbalance Over-Confidence of Quality-Handling Capability Explosion of Product Complexity Toyota Problem In Design Quality Out of Balance Capability- Building Environment Customer or Market Requirements Constraints imposed by Society Decisions and Behaviors of Designers Other Environmental Factors, and Chances Capability- Building Competition Capability- Building Capability Constraints imposed by Technology C Takahiro Fujimoto, University of Tokyo Cf. MacDuffie and Fujimoto (2010) Harvard Business Review 

Coordinating Multiple Methods for Dealing with Complexity --- A New Form of Cross-Functional Integration constraints ⑤ Automation ④ TQM ③ Digital/Real Engineering Cap. ② Quality Engineering ① Architecture theory (modularization) function T. Fujimoto, University of Tokyo 

Industrial Evolution Continues What is Going On in the Early 21th Century? Globalization – as Realization of International Division of Labor Microscopic Intra-industrial Trade based on Comparative Advantage The Key Is Architecture-Capability Fit -- Comparative Advantage of Design Capability-Building Competition Evolutionary Learning Capability Strong Strategies and Strong Operations C Takahiro Fujimoto, University of Tokyo 

Reference • Asanuma, B. (1989). “Manufacturer-supplier relationships in Japan and the concept of relation- specific skill,” Journal of the Japanese and International Economies, Vol. 3, pp.1-30. • Baldwin, C. and Clark, K.B. (2000). Design Rules, MIT Press • Clark, K.B. and Fujimoto, T. (1991). Product Development performance, Harvard Business School Press, Boston. • Fujimoto, T. (1999). The Evolution of a Manufacturing System at Toyota, Oxford University Press • Fujimoto, T. (2007). Competing to be Really, Really Good, I-House Press, Tokyo. • Fujimoto, T. (2007) “Architecture-Based Comparative Advantage – A Design Information View of Manufacturing.” Evol. Inst. Econ. Rev. 4(1): 55-112. • Fujimoto, T. and Shiozawa, Y. (2011, 2012) “Inter and Intra Company Competition in the Age of Global Competition: A Micro and Macro Interpretation of Ricardian Trade Theory.” Evol. Inst. Econ. Rev. 8(1): 1-37; 8(2):193-231 • Ohno, K., and Fujimoto, T., ed. (2006) Industrialization of Developing Countries: Analyses by Japanese Economists, National Graduate Institute for Policy Studies • Ulrich, K. (1995). “The role of product architecture in the manufacturing firm,” Research Policy, Vol. 24, pp. 419-440. • Womack, J., et al. (1990) The Machine That Changed the World. Rawson.