Management of Technology and Innovation in Japan

62 K. Kusunoki
systems with internal structures that rivals cannot imitate, and countering modularization
by aggressively embracing integral architectures at the subsystem level.
Integral architectures – those with strong interdependencies between components
of the subsystem – require deep knowledge of complex interactions. Subsystems
can be made into black boxes because acquiring deep knowledge of interdependencies
and interactions is difficult. The black-box strategy looks for highly interdependent
components within the subsystem and then intentionally seeks to develop
an integral architecture based on those components.
Product Architecture
(Internal Context)
Integral
Modular
Black Box
Commoditization
Fig. 2. Innovation strategies for de-commoditization
Invisible
Innovation
Visible Invisible
Value Dimensions of Innovation
(External Context)
In contrast, the invisible innovation strategy focuses on the product's value to
customers. It seeks opportunities to increase customer WTP in the external context
of how customers use the product. It is unconcerned with internal product architecture;
it focuses instead on the actual value customers receive. When values are
pre-specified in terms of visible dimensions, competition accelerates along those
dimensions, driving commoditization. Invisible innovation is a strategy for escaping
the threat of commoditization by ignoring the rules of competition for visible
innovations and converting customer values into something along invisible dimensions.
Commoditization can be understood as the process whereby product architecture
becomes modularized and customer value dimensions grow increasingly visible:
movement is toward the lower left quadrant in Figure 2. In contrast, we can
hypothesize that customer WTP will be maximized when product architecture is
integral and customer value dimensions are invisible, as in the upper right quadrant
of the figure. But in the electronics industry, if not other sectors as well,
there's a trade-off in the relationship between the two axes, and as a practical matter
it is difficult for companies to achieve positions in the upper right quadrant.
We've examined the strong trend toward modularization at the level of finished