"The act of modularizing your product is the very act of inviting your future competitors into existence."

Carliss Baldwin and Kim Clark, authors of the landmark Design Rules: The Power of Modularity, join Aidan McCullen for an Innovation Show exclusive. Their book is the Rosetta Stone of platform strategy — the mechanic underneath the Innovator's Dilemma — and it has never been more relevant than in this age of AI.

In this conversation, Carliss and Kim reveal:

Why the power of modularity underpins Moore's Law — and everything digital around us
How IBM engineers, locked in a Connecticut motel before Christmas, invented the first conscious modular platform strategy
How the System/360 turned IBM from a competitor into "the environment"
Why the engineers who walked out of IBM's San Jose plant spawned the entire disk-drive industry
How IBM owned 30% of Intel and contracted Microsoft — yet failed to own the only two sources of profit in the PC ecosystem
Why "the game is never incontestably won"
Why Sears couldn't become Walmart, and Walmart couldn't become Amazon
The Chevy Vega that shook itself apart on the test track — and the cost of losing tacit knowledge
Why AI agents are forcing companies to map their workflows for the first time
How Haier replaced twelve layers of management with 4,000 entrepreneurial teams
Why leadership is the operating system of the organisation

00:00 Why This Book Matters
00:33 Modularity For Founders Investors
01:39 Meet The Authors
02:25 What Are Design Rules
03:43 Design Rules Everywhere
06:50 Digital Tech Meets Software
10:52 IBM System 360 Breakthrough
14:22 Artifacts And Interfaces
20:55 Ecosystem Value Migration
26:10 Capturing Value In Platforms
30:23 AI And Measuring Modularity
34:08 Architectural Change And Retail
37:37 Why Incumbents Survive Or Die
43:28 Modularity Creates Options
44:48 Incumbents Miss Nuances
47:09 AI Needs Workflow Maps
52:18 Tacit Knowledge Lost
54:13 Small Car Hood Failures
59:00 Why Ideas Bomb
01:01:28 History Constrains Firms
01:05:52 Modular Organisations Rise
01:08:58 Haier Team Ecosystems
01:17:41 Leadership As Operating System
01:21:55 Spandrels And Tech Reality
01:27:53 Closing Reflections

About the Guests
Carliss Y. Baldwin is the William L. White Professor of Business Administration, Emerita, at Harvard Business School and author of Design Rules, Volume 2: How Technology Shapes Organizations (MIT Press). Kim B. Clark is a former Dean of Harvard Business School, NAC Distinguished Professor of Management at BYU Marriott School of Business, co-author of Leading Through, and co-founder of the Leading Through Institute. Together they wrote Design Rules, Volume 1: The Power of Modularity (MIT Press).
Design Rules, Volume 2: https://mitpress.mit.edu/9780262049337/design-rules-volume-2/
Leading Through Institute: https://leadingthrough.co

About the Host
Aidan McCullen is a 2025 Thinkers50 Innovation Award recipient, keynote speaker on AI, disruption, innovation and change, host of The Innovation Show, and author of Undisruptable: A Mindset of Permanent Reinvention (Wiley). More at https://theinnovationshow.io/about-aidan-mccullen

About The Innovation Show
The Thinkers50-recognised podcast where square pegs find their place in a world of round holes.

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Carliss Baldwin & Kim Clark — Design Rules: How IBM Created Ecosystems (and Competitors)

The Innovation Show

Carliss Baldwin & Kim Clark — Design Rules: How IBM Created Ecosystems (and Competitors)