| Abstract: | Developing products that are more easily adaptable to future requirements can increase their overall value. Product adaptability is largely determined by choices about product architecture, especially modularity. Because it is possible to be too modular and/or inappropriately modular, deciding how and where to be modular in a cost‐effective way is an important managerial decision. In this article, we gather data from four case studies to model effects of firms’ product architecture decisions at the component level. We optimize an architecture adaptability value (AAV) measure that accounts for both the benefits of more architecture options and the costs of interfaces. The optimal architecture prompted each firm to rearchitect an existing product to increase its expected future profitability. Several insights emerged from the case evidence during this research. (i) Although decomposing an architecture into an increasing number of modules increases product adaptability, the amount of modularity is an insufficient predictor of the adaptability value of a system. AAV, which also accounts for interface costs, provides an improved measure of appropriate modularity. (ii) Managers can influence the path of architectural evolution in the direction of increased value. This influence may diminish but does not disappear as products become more mature. Also, modularity and innovations coevolved, as the new modularizations suggested by AAV optimization prompted and guided searches for further innovations. (iii) When presented with the concepts of options, interface costs, and AAV, the firms’ designers and managers were initially skeptical. However, in each case, the modelers were able to rearchitect an actual product not only with increased AAV by our model (theoretical improvement) but also with actual future benefits for their firm. Postproject reports from each firm confirmed that the AAV modeling and optimization approaches were indeed helpful, equipping them to increase the adaptability, cost‐efficiency, lifespan, and overall value of actual products. The evidence suggests that firms can benefit from designing products for adaptability, but that how they do so matters. This study expands our understanding of modularity and adaptability by illuminating managerial decisions and insights about appropriate approaches to each. |
