The Long Tail of the Auto Industry Life Cycle

Abstract

This article explores how the industry life‐cycle theory, proposed by Abernathy and Utterback, can be reinterpreted from the viewpoint of product architecture dynamics. The “long tail” of the automobile industry life cycle, observed during the past several decades, is explained by an evolutionary framework in which a product's architecture is treated as an endogenous variable affected by customers' functional requirements, environmental‐technical constraints, and their changes. The present article explains how the existing industry life‐cycle model effectively explains the early history of automotive product‐process innovations, but that it fails to explain the “long tail” of the life cycle, and that an evolutionary approach of product architectures can be used to explain the architectural sequence and the long‐term trend of the increase in nonradical innovations. That is, the industry life‐cycle model certainly fits well with the actual pattern of product‐process innovations at the early phase of the automobile's development, between the 1880s (invention) through the 1920s (the end of the Model T) and into the 1960s, when product differentiation continued without significant product/process innovations (e.g., the Big Three's annual model change). But the question remains how this model can explain the rest of the industry's history (1970s to 2010s), which is characterized by “rapid incremental innovations,” or a “long tail of the life cycle,” with its upward trend of technological advancement rather than the end of innovations or the beginning of another industry life cycle (i.e., “dematurity”). The evolutionary framework of product architecture predicts that the macro architecture of a given product category (e.g., passenger cars) will be relatively integral when the functional requirements that customers expect, the constraints imposed by society and the government, and the physical‐technical limits inherent in the product are strong, and that it will be relatively modular when they are weaker. The dynamic architectural analysis starts from the Lancaster‐type analysis of a set of function‐price frontiers for a given product category (e.g., cars). Based on the design theories, it hypothesizes that the shape of function‐price frontiers are different between integral models and modular models. It then hypothesizes that price‐oriented customers tend to choose relatively modular products, whereas function‐oriented customers choose relatively integral products more often than not, other things being equal. Thus, the macro architecture of a given product can be determined depending on whether each architecture's price‐function frontier touches the price‐function preference curves of its customers. As for the future architecture of the car, its macro architecture, determined by markets and environments, will remain relatively integral and complex as long as it continues to be a fast‐moving heavy artifact in the public space, whereas its micro architecture, determined by engineers, will be somewhat mixed, as the engineers try to simplify and modularize the automobile design wherever the market and technology permit. The evolutionary framework of architectures also predicts that the architectural sequence inside the industry life cycle will differ by products (e.g., cars and computers) depending upon the dynamic patterns of technological advancement (e.g., shifts of the price‐function frontier) and market‐societal constraints (e.g., shifts of the price‐function preference curve).