Architectural strategy and design evolution in complex engineered systems

• Authors: Carliss Y. Baldwin;David C. Parkes;Charles Jason Woodard
• Venue: Architectural strategy and design evolution in complex engineered systems
• Year: 2006

Engineers have traditionally been trained to solve design problems without regard to the potentially competing interests of other designers. But just as technology strategists are increasingly drawn into the technical minutiae of product development decisions; engineers are increasingly exposed to the competitive forces that shape their requirements and the resources at their disposal. I propose that architectural strategy---the application of strategic thinking to system design problems---should therefore be integrated with the theory and practice of engineering design. This task is made difficult by the fact that system architects and business strategists focus on problems at different levels of abstraction that lend themselves to different kinds of tools. My dissertation research bridges this gap in three ways. First. I develop a representation scheme, based on design structure networks; that allows economic relationships among system components to be expressed in a graphical language that is both visually intuitive and formally rigorous. Second, I model the evolution of designs as a sequence of "moves" by designers that see and seek economic value. Although these system design games can be formalized using game theory; they are often impractical to study analytically. My third contribution, a set of agent-based models; shows how to overcome this limitation using computational techniques. I construct three progressively richer models of strategic system design, culminating in one that explores the role of architectural control as a source of tension between platform owners and application developers in industries that produce hierarchically structured systems like computers and software. The first model, which examines the costs and benefits of building a product on a platform controlled by another firm; is analytically tractable. For the second and third models. I conducted computational experiments to explain stylized empirical facts including the emergence of local coordinating institutions and the existence of deeply nested multiproduct systems despite the threat of architectural lock-in. By bringing together economic tools for reasoning about complex incentives and engineering tools for mapping complex designs, this work lays a foundation for studying a wide range of phenomena that were previously inaccessible to formal techniques.