Modular Innovation:How Technological Newness in New-Product Modules Leads to Radical Innovation

This paper demonstrates that the existing understanding of technological newness in product innovation lacks nuance and does not properly explain the concept of modular innovation that can lead to radical product innovation. We apply a careful examination of two technologically new products: Tesla’s car (an all-electric car) and iRobot’s Roomba (an autonomous vacuum cleaner). Product innovation in management science often refers to the function and utility of products, while our view on product innovation emphasizes the architecture of the technology itself. Using extensive data on the product architectures and patent data of components and modules within the studied products, we gain a comprehensive understanding of why these new technologies are really new. Through the nexus of engineering science and management science, we understand that modular innovation, in contrast to previous notions, can trigger architectural innovation and eventually radical product innovation. Our crystallization of the term ‘new technology’ at the system, function, module, and component levels, thus, paves the way for an argument for why some product innovations are grown in a sequence from modular to architectural and, then, to radical innovation. We identify specific modules in each product and highlight specific novelties in product modules. Finally, we discuss, conceptually, how technological newness in modules affects changes in product structures and interfaces. This discussion of modular and architectural innovation is tied to a dynamic model describing how we can differentiate incremental product innovation from radical product innovation. Our research, thus, touches on a long-called-for discussion on technological newness in product innovation and adds insight to the seminal work on modular and architectural innovation initially conducted by Henderson and Clark in 1990.