Title: General business model for product modularity

Authors: A. Mehran Shahhosseini; Eric W. Friesel; Brad Richardson

Addresses: Department of Applied Engineering and Technology Management (AETM), College of Technology, TC 201J Myers Tech Building, Indiana State University, Terre Haute, IN 47809, USA ' School of Technology, Grinstead Building, Room 009F, University of Central Missouri, Warrensburg, MO 64093, USA ' Knowbility, Inc., 3925 W. Braker Lane, Austin, TX 78745, USA

Abstract: A general business model is presented to analyse the strategic 'business case' for modularity in new product development (NPD). This model for assessing modular value is presented and applied to telecommunication industry customer premise equipment (CPE). Content service provider CPE production decisions present major investments with lasting impacts. CPE, including the commonly familiar 'set top box', delivers digital content to consumer households and businesses. Typically millions of CPE units are fielded for extended time periods of up to ten years or more. Analysis results indicate a potential net present value (NPV) increase for modular compared to baseline 'integral' systems when technology innovation occurs during CPE lifetime; and upgrade supply interactions increase modular system NPV at median new technology 'take-rates'. General model theory, application, contributions and limitations are described. We suggest use of the model as an investment decision tool and for heuristic research investigating modular value structures and processes.

Keywords: modular system design; investment decision analysis; product architecture valuation; telecommunications industry; general business models; product modularity; modular products; business ecosystems; customer premise equipment; CPE.

DOI: 10.1504/IJDATS.2015.073861

International Journal of Data Analysis Techniques and Strategies, 2015 Vol.7 No.4, pp.325 - 349

Available online: 24 Dec 2015 *

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