Architectural Innovation: The Reconfiguration of Existing Product Technologies and The Failure of Established Firms

Radical and incremental innovations have long been the cornerstone of which firms base their knowledge and methods of technological innovation. However, this paper serves to bring attention to one of the less apparent forms of innovation, whose importance is increasingly being brought to light. Architectural innovations are, as defined by Henderson and Clark, "innovations that change the way in which the components of a product are linked together, while leaving the core design concepts (and thus the basic knowledge underlying the components) untouched".

The paper gives an example of how Kasper, (which was at that time) the leading firm in semiconductor photolithographic alignment equipment, lost its market share to Canon; as what the engineers at Kasper assumed to be a minor incremental innovation by Canon was in actual fact, an architectural innovation. Henderson and Clark draws on this example to fully illustrate how the specialized methods in which information is efficiently processed and passed down in a firm can work against it instead. This is due to the fact that when there is architectural innovation, the communication channels in the firm, which are assumed to be built around how a technology works (i.e. the key components of the technology) are throw into disarray, resulting in great inefficiency.

In the paper, Henderson and Clark state that for firms to overlook architectural innovation may be a huge mistake. However, despite being published 17 years ago, the paper is even more pertinent in today's context. This is especially due to the autocatalytic nature of technological innovations; new products are entering the market at an increasingly fast pace, thus firms have to grasp any advantages or improvements that can let them stay level or pull ahead of the competition. This is an important point to note, as the firms that ignore architectural innovation are quickly deemed obsolete due to the fact that they are unable to compete effectively with their counterparts and eventually lose a high percentage of their market share within a very short period of time.

This has been increasingly significant, especially in the current Information Technology (IT) industry and the digital age, where innovations have been taking place at an increasing pace. However, I feel that architectural innovation is the key to harnessing the vast potential of these technologies that have been developed. One good example is the iPod, developed by Apple Inc. which effectively combined storage software, an instinctive user interface and a brilliant packaging design to devise a portable music player from preexisting components without changing any core concepts of the various parts that it comprises of. This architectural innovation allowed Apple Inc. to gain an extremely high percentage of market share. This market share is maintained through various other architectural innovations as the company develops its product to stay ahead of the competition (e.g. the development of iPod video). Nevertheless, the importance of Apple's