Offering Development - The product innovation matrix point of view

**?The views and opinions expressed in this article are my own and do not necessarily reflect the views or opinions of my employer?**

This is the second blog in my 2-part blog on offering development. In my previous blog, I had mentioned how hybrid offering development aids GSIs in market differentiation. Here I present how architectural innovation can be an effective strategy to extend the competitive advantage of an existing offering.

How did this thought come up??Earlier this year as part of the Product Strategy course from IIMK, we had to work on a paper related to a real-time scenario pertaining to product strategy. Our team had a few good topics, but what we zeroed in, was a scenario where one of our teammates was involved in developing an end-to-end AI/ML driven trade promotion optimization solution for retail clients. He and his team developed a minimum viable product that was ready to be launched but got shelved due to the pandemic. However, they were always looking at bringing this product back to the market. Upon listening to this brief our project guide pointed out that this looked like a case of product revitalization.

As I started researching more about product revitalization, I came across a research article by Rebecca M. Henderson & Kim B.Clark?titled “Architectural innovation: The reconfiguration of existing product technologies and the failure of established firms”.?The Henderson-Clark model of innovation focuses specifically on products and makes a distinction between components and architecture.

The distinction between the product as a system and the product as a set of components underscores the idea that successful product development requires two types of knowledge. First, it requires component knowledge or knowledge about each of the core design concepts and the way in which they are implemented in a particular component. Second, it requires architectural knowledge or knowledge about the ways in which the components are integrated and linked together into a coherent whole. The distinction between architectural and component knowledge, or between the components themselves and the links between them, is a source of insight into the ways in which innovations differ from each other.

• Radical innovation: Disruptive innovation with a new architecture and concept.?
• Incremental innovation: Innovation that does not change the architecture and concept; however, improvements to cost and performance are achieved through innovation.
• Architectural innovation: Innovation via a change in architecture; however, this innovation does not change the product’s concept.
• Modular innovation: The technological concept is fundamentally changed; however, it does not change the product’s architecture.

In the article, Henderson and Clark illustrate the application of this framework with the example of the room air fan. If the established technology is that of large, electrically powered fans, mounted in the ceiling, with the motor hidden from view and insulated to dampen the noise, improvements in blade design or in the power of the motor would be incremental innovations. A move to central air conditioning would be a radical innovation. New components associated with compressors, refrigerants, and their associated controls would add whole new technical disciplines and new interrelationships. For the maker of large, ceiling-mounted room fans, however, the introduction of a portable fan would be an architectural innovation. While the primary components would be largely the same (e.g., blade, motor, control system), the architecture of the product would be quite different. The smaller size and the co-location of the motor and the blade in the room would focus attention on new types of interaction between the motor size, the blade dimensions, and the amount of air that the fan could circulate, while shrinking the size of the apparatus would probably introduce new interactions between the performance of the blade and the weight of the housing.

Let us try to look at applying this framework for reimagining say a business process application for loan processing. Typically, such a use-case would be part of a GSIs financial business process offering. The GSI would have built out this offering using technologies that are prevalent at the time the application is being built. Let us assume that a GSI built a Java-based client-server application for this business process. Over years more and more business logic got added. If the GSI decides to go with a cloud-first approach, then it will need to re-architect this offering.

Architectural innovation involves rearranging known parts (components) into new patterns (architectures) to achieve higher levels of system performance on one or more dimensions. A GSI can study the underlying cause-and-effect relationships in its existing offering and identify “bottlenecks”. It can then redesign the interfaces of key components to make them more modular. With knowledge of bottlenecks and potential new modules, the GSI can then “shrink its footprint,” without sacrificing either performance or cost. Here footprint means the set of activities performed by the GSI that builds the offering.

ServiceNow with its one-platform, one-data model, one architecture can provide an effective means to provide architectural innovation to existing GSI offerings thereby extending their life as well as providing them a competitive advantage in the marketplace. ?

References: Architectural innovation: The reconfiguration of existing product technologies and the failure of established firms”.?This was published in the Administrative Science Quarterly Vol 35. No 1 Special Issue: Technology Organizations and Innovation (Mar 1990).

Architectural Innovation and Dynamic Competition: The Smaller “Footprint” Strategy by Carliss Y. Baldwin, Kim B. Clark

?https://worldofwork.io/2019/07/the-henderson-clark-innovation-model/