How to declutter product portfolios with modular productization
When Steve Jobs returned to Apple in 1997, Apple was bleeding money and sales was plummeting. There were many product lines and different versions of the same products made to meet different customer needs. One of the first things Steve did was to simplify the product line — cutting it by 70%. He mapped a simple 2x2 that outlined 4 products for Apple to focus on. Needless to say what happened to Apple afterwards 📈.
That was an extreme case of modular productization. But, the principle of this practice can benefit most scaling companies today.
📦 What is modular productization?
It’s the practice of standardizing the core building blocks (modules) that make up products.
As markets become more segmented, companies scale by trying to meet segmented needs. As such, product portfolios become increasingly complex and bloated. Modularization can manage the complexity and customization in product development. It helps to create an organized product portfolio with consolidated value propositions.
Examples of modules:
- 🔨 For hardware/physical products: categories of key parts, material, interfaces, brand
- 💻 For software products: design interface, data sets, infrastructure
- 💆 For service products: people expertise, customer experience, and process. (Professional services, such as healthcare professionals, are often already productized. But less tangible services such as consulting often need productization to be commercialized.)
Modularity allows companies to better leverage its capabilities to expand into adjacent services. For example, Uber developed Uber eats, based on modules such as its already established network of drivers and tech platform that can track and predict driving times.
Amazon Web Services was also born out of a modularized infrastructure. Inspired by the book “Creation” by Steve Grand, Jeff Bezos decided to create “primitives” (ie. building blocks) and let them evolve. These primitives were S3 (cloud storage) and EC2 (cloud computing), which later became AWS. The modules were turned into a shared infrastructure available to outside developers. This gave Amazon massive economies of scale. (More on Stratechery.)
⚙ How does one do “modular productization”?
There’s no one right way to do modular productization — it depends on the product strategy. It’s a mindset of building systems of reusability and integration, where individual modules can be changed without creating a new system. It should guide product development from idea conception. But it can also help simplify an already complex portfolio.
At the beginning of development
Modular design should guide the product development process from the very beginning, at concept development. Øystein Eggen from the Norwegian University of Science and Technology explained the process beautifully.
Here’s a condensed version:
Step 1. Match customer’s needs to product specifications. Indicate the level of “modularity” for those specifications. This becomes the design requirement.
Step 2. Break down the overall function of the desired product into sub-functions. Each should function independently with minimal interactions. One way to define these functions is to trace the user flow.
Step 3. Identify the function carriers. For example, capabilities and technology required to perform these defined functions.
Step 4. Define modularity drivers based on company-specific factors such as strategy and financial limitations. Give these drivers a weight. Score each function carrier by the modularity driver. Then extract the ones with the highest scores as module candidates.
For example, Apple’s A12 bionic chip is a key “module” for Apple products. It’s used in iPhones and iPads, and is critical to the amazing performance of these products. So if Apple was to develop a new product that requires a super fast and energy-efficient chip, a modular system would allow the A12 to be easily plugged in. Imagine if a different team was building a new chip from scratch, it’d mean a significantly longer development cycle, higher cost, new marketing messaging, and ultimately a more complex portfolio.
There’s also a strong cultural component to maximize the benefits of modular productization. Documentation and open communication are key to ensure that teams are aligned and aware of modules. This will prevent unnecessary duplication of efforts and mismatched integration.
When facing an already complex portfolio
In a real world, many companies have already scaled without this modular practice in place. It’s like how our houses fill up with endless “things” overtime. And maybe you didn’t have a system from the beginning to organize them. Then one day you realized it’s taking too long to find something and many of these things don’t bring you joy anymore.
Similarly, when a product portfolio becomes too complex, customers will get confused about the offerings. Different teams might be building their own versions of a similar product, and processes might be reinvented each time to yield inconsistent outcomes.
So just as you “Marie-Kondo” your house, you could organize a product portfolio by:
- defining the building blocks that drive the greatest value for the majority of products,
- categorizing those building blocks in to modules,
- getting rid of things (eg. features that don’t add value or disrupt user experience; small, non-scalable products made for very specific customers; and components that can’t integrate easily into future roadmap),
- documenting and sharing the architecture of modules for easy access across the company.
Defining the modules is probably the hardest part, but the discipline to documenting and sharing them (and maintaining that library) is also critical.
Check out GitLab’s handbook on how they run the company, and Shopify’s design system Polaris for great examples of such libraries.
🦄 Strategic advantages of modular productization
The point is to scale in an organized way. Having a modular product architecture gives companies a number of strategic advantages.
🎯 Keeps products focused and consistent
Working with modules provides discipline to create with a standard set of components. Since each module directly produces a function, they can be combined to create customization without adding too much complexity to the system, while maintaining consistency across the portfolio. The library that documents these modules also becomes an excellent guide for new employee onboarding. This way, the modular mindset is instilled from day 1.
⏳Reduces development cycle & cost
Modules are shared and reused across products, which enables economies of scale in development. Development efforts are focused on module improvement rather than system redesign. It allows for cost savings, much shorter development cycles, and shorter time to market. For example, Volkswagen saves billions in annual development costs by having a shared automobile platform between Volkswagen and Audi models.
🛒Makes choice easy for customers
A modular architecture helps present value propositions and bundles in a clearer way for customers. It also makes it much easier for sales to understand and educate customers about the products. It’s obvious if you compare Apple’s product releases in 1996 to its portfolio in 1997.
⚡️Get started
Just as it’s never too late to organize your house, it’s never too late to start applying modular thinking in product development. The benefits are scaled for the long term. Final note: routinely evaluate the process and outcomes through feedback from customers, sales, and marketing.
Questions to help you think about using modular productization:
- Can the modules be shared across products?
- Can the interface easily integrate other components in the future?
- Are the components well documented and shared across the company?
- (If you have established product principles) Are the modules consistent with first principles?
For more readings on modularity:
- Christensen Institute has defined a broader Modularity Theory, as a framework that standardizes the way by which components fit and work together in codified ways.
- Bain & Company leveraged this approach to help companies focus product development.
What are you thoughts?
Was this article helpful to you? How could I make it better? How would you apply the modular concept in your work? I’d love to hear your feedback. Share in the comments below! Hit/hold the 👏 if you enjoyed this piece.
