The Modular Squad

Strength In Numbers

Modularity helps firms deal more easily with rapid change, reduce the cost of innovation and cut the time it takes to improve designs, says Baldwin. Its strength lies in numbers.

For instance, there are more than 3,500 registered developers of Palm Pilot products and services. "It ranges from things like a chart of chords for the guitar to the Singapore subway map to real estate and medical market add-ons," Dubinsky says.

Many of these products would never have been developed if left to Palm Pilot's in-house team. "We couldn't possibly recreate the investment people are making in our product," says Dubinsky. "We couldn't create an organization fast enough, and we couldn't be creative enough."

To create a modular product, you must first thoroughly define it by developing a detailed architecture or interface specification, says Baldwin. One example is the specification Microsoft lays down for creating Windows software. Boundaries must be specific so you know what you are doing and what your module maker's terrain is, adds Baldwin.

Modular companies themselves, however, must be agile and adaptable, says Baldwin. That's because modularity calls for all kinds of joint ventures: outsourcing, flexible hiring, and other complex relationships between the architecture owners and the module creators.

And business owners adopting a modular strategy have to be ready to relinquish control when it comes to exactly what their module-makers create, adds Dubinsky. "I try to take the philosophy of letting a thousand flowers blossom," she explains, "because we don't know what the next big thing is going to be."

Modularity works in two directions, of course. Small companies can prosper greatly by creating a complex new architecture as Palm did. "You can wind up like Microsoft, sitting on top," says Baldwin.

Companies without such a big vision can still profit by becoming module makers. That's what hard-drive makers have done since the 1960s, and what Windward and many other firms are doing with the Palm Pilot.

If you want to be a module maker, your strategy should be to look at a large system and try to find a piece you can do better, Baldwin says. You have to be fast (to beat the competition) and precise (to ensure a good fit with the system) if you want to succeed.

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This article was originally published in the March 1998 print edition of Entrepreneur with the headline: The Modular Squad.

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