14 K. Sakakibara and Y. Matsumoto Product Architecture and Appropriability In this section the evolution ofink jet printer products in the market is discussed from a product architecture perspective. The architecture of the product is the scheme by which the function of the product is allocated to its physical components (Ulrich 1995; Baldwinand Clark 2000). Our objective is to discover the relationship between product architecture and appropriability ofinnovations. Although the running cost comparison above is cross sectional at certain points in time, the following analysis is dynamic. Previous studies about printers indicate that modular architecture cuts lead time, is able to produce diverse products at lower costs, and is suitable for recycling (Davis and Sasser 1995; Ishii 1998; Kiyama 2000). Our study is, instead, interested in how corporations try to control profitability by choosing a specific product architecture in a specific competitive environment. As mentioned earlier, in the ink jet printer market, competitive dimensions evolved from portability to sufficient functionalities for desktop use, to colorization, and to high print resolution. Also, price reduction was a common competitive dimension throughout the decade. When we discuss appropriability, it is essential to consider the relationship between competitive dimensions in the market and products, as well as the interrelationships among competitive products. In the section that follows, we focus on the analysis of Canon, which we supplement with the analysis of Epson. Portability Canon introduced the idea of portability to the market as a competitive dimension with its revolutionary BJ-10v printer. This was path breaking, but the head used in this product was already installed in two of the previous models and was not particularly developed for the BJ-10v. From the business user’s perspective, the BJ-10v was a functionally inferior product because several functionalities, such as auto paper feed that handled a large quantity of paper, were eliminated to make it portable. The reason why the BJ-10v was so revolutionary was its product architecture. Its head was “disposable when ink is used up.” The architecture realized a maintenance-free printer for personal use and miniaturized it by eliminating the complex structure of a supply pump and recovery system. Furthermore, in terms of appropriability ofinnovation, the BJ-10v introduced something new. Prior to the introduction of the BJ-10v in 1990, the BJ-80, a printer for PCs, which used the BJ technology, had been introduced in 1985. The durability problem of the head caused a temporary production stoppage. However, production resumed after the head was improved to be lasting permanently and reliability was assured. In other words, Canon’s head technology at that time was able to produce sufficiently durable heads, and it was the same head technology that Canon used for its BJ-10v. However, the company dared to categorize the head of its BJ-10v as consumable in order to realize the revolutionary product concept – a compact notebook printer.
Designing the Product Architecture for High Appropriability: The Case of Canon 15 The architecture of the BJ-10v was characterized by expanded replacement modules, which consequently necessitated the high added value of the replacement parts. Thus, the change in product architecture enabled revolutionary portability as well as high value-added replacement parts. The result was reflected in the running costs of the printer. Table 2 contrasts the BJ-10v against Canon’s non-notebook printer BJ-130J, which was introduced prior to the BJ-10v in February 1989. The running cost of Y6 of the BJ-10v was higher than Y3 of the BJ-130J despite the fact that the BJ-10v was introduced after the BJ-130J. As the icons indicate, the architectural change in the replacement cartridge caused the increase. In sum, by increasing the added value of replacement parts, which users repetitively purchase, Canon was able to expand the post-sales profitability. The focus of profit gaining shifted away from the point of sales to the period when products were in use. It is supposed that the profitability shift positively contributed to the overall profitability of BJ-10v and to the Corporation. Table 2. Evolution of Canon products: portability Model name (launching date) BJ-130J (2/89) BJ-10v (10/90) Price, body only (Y) Y198,000 Y74,800 Resolution (dpi) 360 x 360 360 x 360 Print speed (char/sec) 148(kanji characters) 83 Running cost (Y) Y3 Y6 Replacement cartridge style Source: Appendix 1 and 2. Sufficient Functionalities for Desktop Use No head, black ink All-in-one head, black ink What are sufficient functionalities for desktop use? The pioneer that posed this competitive dimension was Epson’s MJ-500, introduced to the market in March 1993. It was equipped with practical business functions, such as the auto sheet feed mechanism and faster printing speed than the BJ-10 series, although the size was larger than the BJ-10 series. Canon countered Epson with its BJ-desk series, specifically, with the BJ-220JS and the BJ-220JC introduced in June 1993. Printing speed was significantly improved. They were capable of printing 248 characters/second (in the alphanumeric