The Value Structure of Technologies, Part 2: Technical and Strategic Bottlenecks as Guides for Action

by Carliss Y. Baldwin
 
 

Overview — This paper presents analytic tools to formulate strategy in large, evolving technical systems. It explains how value-enhancing technical change comes from the effective management of technical and strategic bottlenecks in conjunction with module boundaries and property rights. The analytic tools are used to explain the evolution of three historic technologies: early aircraft, machine tools, and container shipping.

Author Abstract

The purpose of this chapter is to present analytic tools based on functional maps that can be used to identify investment opportunities and to formulate strategy in large, evolving technical systems. I argue that the points of value creation and value capture in a technical system are the system’s bottlenecks. Bottlenecks arise first as important technical problems to be solved. Once the problem is solved, the solution in combination with module boundaries and property rights can be used to capture a stream of rents. In this chapter I extend the functional mapping techniques developed in the last chapter to locate technical and strategic bottlenecks, modules, and property rights. I then show how these analytic tools can be used to construct narratives explaining the dynamics of three nascent technical systems: early aircraft, high-speed steel in machine tools, and container shipping.

Paper Information

  • Full Working Paper Text
  • Working Paper Publication Date: October 2018
  • HBS Working Paper Number: HBS Working Paper #19-042
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