The Modularization of Products and Organizations: Improving Lead-Time in Product Development

The impact of modular products on the organization of product development has recently attracted interest in academia. This paper explores the economic rational behind the idea that modular products result in modular product organizations using a team-theoretic approach. An important implication that can be drawn from team theory is that the nature of the design problem and the way in which it can efficiently be decomposed into design tasks strongly influence the information structures of organizations and therefore also the extent to which the organization can be characterized as a modular organization. Different economic rationales behind task definitions are identified and discussed. The organization of product development activities also can be expected to vary with the main goal of the product development team. I argue that when the minimization of lead-time is the main goal one should expect to find a more modular product development organization among firms that follow a modular product development strategy compared to those that follow an integral product development strategy.