Modular Strategies: B2B Technology and Architectural Knowledge

Abstract

Lisiness-to-business information technology systems (B2B tecfinologies) seek to create value for customers by intensifying market competition, providing information to coordinate the supply chain, and leveraging capabilities across organizations. Business journalism has claimed again and again that these technology-enabled systems have the potential to alter the face of modern industrial activity.' Building upon the concept of modularity,^ this anicie makes a qualitative assessment of the capacity of B2B technologies to recast supply chains. The plethora of B2B technologies makes developing a comprehensive categorization difficult. Most B2B initiatives are somewhat erroneously labeled as "exchanges," even though they encompass many distinct forms-from e-marketplaces that match buyers and sellers, to private vertical exchanges that facilitate just-in-time manufacturing through information sharing. Once one appreciates that the goal of these initiatives can be represented as seeking efficiency in asset utilization and enhancing the innovative use and creation of new asset structures-which are traditionally discussed as "Ricardian" and "Schumpeterian" rents-a simple framework can characterize these diverse initiatives. B2B technologies can be used to pursue differing modular strategies. Two generic B2B strategies are: "modularization," which allows a firm to rent out its internal capabilities to others in its industry; and "architectural entrepreneurship" that alters how the supply chain is arranged by allowing a central The authors would like to acknowledge the financial support of Pennsylvania State University's Institute for the Study of Business Markets and the Centre for Corporate Change at the Australian Graduate School of Management. The manuscript and cases received significant improvement from comments from the editors and reviewers of California Management Review as well as David Midgley, Craig Knight, and Tim Coltman.

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