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Abstract

Viewing the relationship between vertical integration and product architecture (integrality and modularity) as the “mirroring” hypothesis, we examine the case of Tesla Motors. Besides dedicating an idiosyncratic architecture to battery issues and customers’ range anxiety, Tesla tailors its organization and strategy for anchoring with key stakeholders in the larger EV ecosystem that comprises charging stations, mobility services, IT, and energy providers. Our preliminary analysis demonstrates that, by and large, Tesla pursues a high degree of integrality in product architecture, and thus employs significant vertical integration. Such congruence offers initial support for the mirroring hypothesis in the electric vehicle industry.

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... Furthermore, the dominant design is still unclear in the EV industry. EV firms are introducing diverse products with diverse business model competing to establish a 'dominant design' (Chen et al. 2016). Accordingly, the EV industry is still in the introductory stage of product life cycle, and struggling to take advantage of economies of scale in small niche markets. ...
... The scope of the EV industry is much larger than it was in the 1990s: with the connection of the recharging system, EVs are at the intersection between the traditional carmaking sector and the electricity sector (Chen et al. 2016). The transition into an electric mobility trajectory will lead to fundamental changes in the value chain / ecosystem of the automobile which basically involves components from suppliers, core components and assembly from carmakers, and energy utilities. ...
... In the EV industry, most carmakers who are engaging in the EV market choose to follow their old routine of value configuration: they tend to use their existing production infrastructure, capabilities, as well as supplier network (Chen et al. 2016). This strategic choice refers to the integration-as-usual business model. ...
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Electric vehicle (EV) industry is still in the introduction stage in product life cycle, and dominant design remains unclear. EV companies, both incumbent from the car industry and new comers, have long taken numerous endeavors to promote EV in the niche market by providing innovative products and business models. While most carmakers still take ‘business as usual’ approach for developing their EV production and offers, Tesla Motors, an EV entrepreneurial firm, stands out by providing disruptive innovation solutions. We review the business model approach in the literature, then classify the innovation dimensions in the EV ecosystem. We study Tesla Motors in terms of: (1) innovation related to the vehicle, (2) innovation related to the battery (3) innovation concerning the recharging system, and (4) innovation toward the EV ecosystem.
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Nowadays electromobility is more and more becoming a cross-sectorial innovation. Electromobility is the convergence of technical innovations in battery technologies and charging systems, on Internet of things and finally on new business model developed by classical original equipment manufacturers and innovative newcomers. This developing phenomenon is really challenging for the ecosystem made of car manufacturers, electricity industry, local and national public actors dealing with clean energy transition. We review these challenges and highlight the most promising way of future researches in each of these dimensions for the EU actors.
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We are currently witnessing the re-introduction of electrical vehicles (EVs) into automobile markets. Interestingly, this re-introduction has come with the emergence of new players who are not traditional members of the auto industry and who aspire to be initiators, and then the dominant actors of a nascent Electromobility 2.0 industry. Among these new players, a number of startups have addressed the challenges involved in launching this new industry with the introduction of innovative business models. Some startups, such as Tesla Motors, are already on the path to success; others however, such as Better Place, have not succeeded in establishing the necessary conditions for their development. The goal of this research is to study how startups are establishing the conditions for achieving a dominant position in the nascent industry of Electromobility 2.0. In order to explore this, we will analyse the history of these two companies, Tesla Motors and Better Place, using the theoretical framework provided by Santos and Eisenhardt (2009) on achieving dominance in nascent industries.
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The adoption of a modular product architecture for the bicycle allowed manufacturers to meet the simultaneous needs of product innovation and cost reduction. Such an approach however, has fragmented the industry into a series of largely independent segments that are primarily linked through the operation of market-based contracts. Active coordination between firms has been replaced by the embedded coordination that comes through modularity. The fragmentation of the industry on the basis of specialized capabilities has led to economic efficiencies and low barriers to entry for most segments of the industry. However, the lack of coordination has limited the industry's capability to make changes in the product architecture beyond the component level.
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Increasingly heterogeneous markets, together with shorter product life cycles, are forcing many companies to simultaneously compete in the three domains of product, process, and supply chain. Dependencies among decisions across these domains make this competitive situation very complex. To address this complexity, three-dimensional concurrent engineering (3D-CE) has been suggested ([Fine, C.H., 1998. Clockspeed—Winning Industry Control in the Age of Temporary Advantage. Perseus Books, Reading, MA.]). Applying 3D-CE requires an operationalization of one of its core elements: the product architecture. In this paper, I develop a multi-dimensional framework that enables comprehensive product architecture assessments. The framework builds on existing product characteristic concepts such as component commonality, product platforms, and product modularity. The framework's utility is illustrated with two example products, showing how individual product architecture dimensions link decisions across different domains. This framework can be used to focus advice for product design on product architecture dimensions that are critical for a given operational strategy, to assess advantages and limitations of operational strategies in conjunction with given product architectures, or to develop dynamic capabilities such as planning effective product–operation strategy combinations.
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A substantial literature stream suggests that many products are becoming more modular over time, and that this development is often associated with a change in industry structure towards higher degrees of specialization. These developments can have strong implications for an industry's competition as the history of the PC industry illustrates. To add to our understanding of the linkages between product architecture, innovation, and industry structure we develop detailed product architecture measurements based on a previously proposed method [Fixson, S.K., 2005. Product architecture assessment: a tool to link product, process, and supply chain design decisions. Journal of Operations Management 23 (3/4), 345–369] and study an unusual case in which a firm – through decreasing its product modularity – turned its formerly competitive industry into a near-monopoly. Using this case study we explore how existing theories on modularity explain the observed phenomenon, and show that most consider technological change in rather long-term dimensions, and tend to focus on efficiency-related arguments to explain the resulting forces on competition. We add three critical aspects to the theory that connects technological change and industry dynamics. First, we suggest integrating as a new design operator to explain product architecture genesis. Second, we argue that a finer-grained analysis of the product architecture shows the existence of multiple linkages between product architecture and industry structure, and that these different linkages help explain the observed intra-industry heterogeneity across firms. Third, we propose that the firm boundary choice can also be a pre-condition of the origin of architectural innovation, not only an outcome of efficiency considerations.
Article
Evidence on entry, exit, firm survival, innovation and firm structure in new industries is reviewed to assess whether industries proceed through regular cycles as they age. A leading depiction of the evolution of new industries, the product life cycle, is used to organize the evidence it is shown that the product life cycle captures the way many industries evolve through their formative eras, but regular patterns occur when industries are mature that are not predicted by the product life cycle. Regularities in entry, exit, firm survival and firm structure are also developed for industries whose evolution departs significantly from the product life cycle. Opportunities for further research on the nature of industry life cycles and the factors that condition which life cycle pattern an industry follows are discussed. Copyright 1997 by Oxford University Press.
Article
A variety of academic work argues a relationship exists between the structure of a development organization and the design of the products that this organization produces. Specifically, products are often said to "mirror" the architectures of the organizations from which they come. This dynamic occurs because an organization's problem solving routines and normal patterns of communication tend to constrain the space of designs within which it searches for new solutions. Such a link, if confirmed empirically, would be important, given that product architecture has been shown to be an important predictor of product performance, product variety, process flexibility and industry evolution. We explore this relationship in the software industry by use of a technique called Design Structure Matrices (DSMs), which allows us to visualize the architectures of different software products and to calculate metrics to compare their levels of modularity. Our research takes advantage of a natural experiment in this industry, where products exist that fulfill the same function, but that have been developed using very different organizational modes - specifically, open source versus closed source development. We use DSMs to analyze a sample of matched-pair products - products that perform the same function but that have been developed via these contrasting modes of organization. Our results reveal significant differences in modularity, consistent with a view that larger, more distributed teams tend to develop products with more modular architectures. Furthermore, the differences between systems are substantial - the pairs we examine vary by a factor of eight, in terms of the potential for a design change to propagate to other system components. We conclude by highlighting some implications of this result for both innovating managers, as well as researchers in the field. We also assess how future work in this area might proceed, based upon these first steps in measuring "design."
Article
Product architecture is the scheme by which the function of a product is allocated to physical components. This paper further defines product architecture, provides a typology of product architectures, and articulates the potential linkages between the architecture of the product and five areas of managerial importance: (1) product change; (2) product variety; (3) component standardization; (4) product performance; and (5) product development management. The paper is conceptual and foundational, synthesizing fragments from several different disciplines, including software engineering, design theory, operations management and product development management. The paper is intended to raise awareness of the far-reaching implications of the architecture of the product, to create a vocabulary for discussing and addressing the decisions and issues that are linked to product architecture, and to identify and discuss specific trade-offs associated with the choice of a product architecture.
The Wide Lens: a New Strategy for Innovation
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