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Re-framing the dichotomies: Open/Closed vs. Integrated/Fragmented

Google likes to market itself as “Open” in contrast to “Closed” alternatives.

Apple likes to market itself as “Integrated” in contrast to “Fragmented” alternatives.

These dichotomies are judgmental and meant to portray “us=good” vs. “them=evil”. Neither gets to the point of how the two companies are structuring their businesses relative to the mobile computing value chains and clouds the judgement of observers.

I propose using a more informative and less judgmental distinction. It’s a division defined clearly by Clayton Christensen in his classic “The Innovator’s Solution” from 2003.

He introduced the concept of interdependent vs modular systems.

Interdependent systems have linkages between elements ranging from product components to the members of a product value chain. Essentially, the pieces communicate or interface via non-public or non-licensed protocols and have only specific partners (e.g. the iPod and iTunes).

Modular product architectures, on the other hand, are similar to the concept of plug-and-play and resemble building blocks, consisting of standardized interfaces, enabling parts to be easily swapped in and out and multiple suppliers or partners to compete.

Neither of these architectures is “good” or “bad”. They are natural ways to organize according to what business model or point in the evolution of a technology you are at.

Interdependent architectures are the only way to rapidly and competitively improve the performance of not-good-enough systems. Modular architectures are the only way to squeeze profitability from more-than-good-enough commoditized technology.

Interdependent systems often lead to higher performance than modular systems because the system is optimized. Engineers can iterate more rapidly to squeeze the maximum performance from sub-systems by connecting them in ways that makes the best complete solution. In contrast, modular systems often lead to lower costs because there are a greater number of suppliers, since interfaces are standardized and pieces can be swapped in and out.

Interdependency is often required to raise the performance of a new solution. In contrast, modularity is required to lower the cost of an overserving solution.

Continued interdependency often drives the performance of that solution beyond that which the target market is willing to pay for. The target market then frequently turns to modular solutions which, at that point, often offer good enough performance along with modularity-driven advantages such as lower cost, convenience, or other benefits.

So the question is not whether one is better than the other but when either one should be used.

Modular architectures are often the solution when interdependent architectures prove too costly. Interdependent architectures are the solution when modular architectures are not good enough or can’t solve new jobs that users discover they need to solve.

Apple’s value systems, priorities and processes are all tuned to interdependent architectures. Google’s value systems, business models and competencies are all tuned to modular architectures.

Apple solves the problems of new markets, Google solve the problems of over-served markets.

So the winning[1] strategy depends on detecting where a product lies in its march up the performance trajectory. Before it’s good enough, interdependent systems win. After it’s good enough, modular architecture wins.

So where is the smartphone on its evolution? If it’s still early days, iPhone will keep growing. If it’s saturating and improvements are neither valued nor used, then it’s time for a modular approach.

Place your bets now according to your vision.

By winning, I mean capturing the bulk of the profits in the industry.