Modularity Theory (or the Theory of Interdependence and Modularity) explains how different parts of a system’s architecture relate to one another and consequently affect the development and adoption of that system.
According to the theory, a system’s architecture determines its components and systems and defines how they must interact—fit and work together—in order to achieve desired outcomes. The place where any two subsystems fit together is called an interface.
A system’s architecture is interdependent at an interface if one part can’t be created independently of the other. In other words, the way one is designed and made depends on the way the other is designed and made. Unpredictable interdependencies require the same person, team, or organization to simultaneously develop both components for the overall system to work.
In contrast, a modular interface is one in which there are no unpredictable interdependencies between subsystems, people, teams, or organizations. Modular components and subsystems fit and work together in well-understood and highly-defined ways.
A modular system architecture specifies the fit and function of all elements so completely that it doesn’t matter who makes the components or subsystems, as long as they meet specifications. In other words, to the extent that interfaces are specifiable, verifiable, and predictable, they are modular in nature. Systems that rely on modular interfaces allow people in separate teams or organizations to do their work with little to no effort spent on coordination.
Transcript:
You need a new phone, but first you have to consider a few things: How much can I spend? Do I want to customize hardware or software, or do I just want to turn the phone on and go? Each answer represents an entire chain of events.
For full control, you want a phone with a modular architecture, like an Android, with components that fit together in well-understood ways. You choose a base frame, then add hardware and software at multiple price points with different features. Choice exists because any company can sell you parts, as long as they meet Android specifications.
In a system with interdependent architecture, like the iPhone, the provider makes most of the decisions. Proprietary parts depend on one another, and the same team develops every component to ensure the overall system works. By the time the phone is sold, your choices are limited to things like size, color, and storage.
Neither architecture is inherently better than the other, and both can be extremely successful. In fact, most organizations use both at different times in the lifecycle of a product or service. But according to modularity theory—developed by Clayton Christensen and used by innovators to design and equip their business models—which architecture you choose as you enter the market predicts how quickly adoption will occur.
Let’s look at some examples. In 1988, Tooram Industries was determined to increase access to affordable, quick-to-prepare food in Nigeria, a rapidly urbanizing country where most earn less than $2 a day. Starting from scratch, they planned to create an instant noodle market under the brand Indomie. But given Nigeria’s unpredictable infrastructure, they quickly realized they couldn’t just make noodles—they needed to source energy, establish a transportation network, and train staff across all production dimensions. In other words, they had to build an interdependent architecture to control cost and create the market.
This required big initial investments and led to slow market adoption—but ultimately, it delivered big wins. Today, Tooram sells billions of packs of noodles annually, employs thousands of people, and has almost transformed instant noodles into a staple food in Nigeria. It can also easily add products to its suite of offerings, like milk, snacks, oils, cereal, and other consumer goods. Tooram started with an interdependent architecture and, over time, has integrated modular offerings.
Meanwhile, starting in 1975, Microsoft uses a modular architecture to evolve with the market and ensure growth. Microsoft supplies the operating system but lets multiple providers, like Dell, HP, and Lenovo, provide the physical devices that run Windows. This creates more options, more design styles, all at multiple price points. What’s more, Microsoft has been able to move upmarket to machines with high-end graphics cards for gaming—without outsourcing their performance-defining component or the software customers rely on to run their businesses. Instead, they set and verify specific standards suppliers must meet to achieve the desired outcome, regardless of the device it runs on.
There is a lot more to modularity theory, which is built on a number of components and conditions to determine which architecture to use and when. To learn more, visit ChristensenInstitute.org/theorymodularity.
