The challenges of globalisation
All advantage is temporary. The ultimate advantage is achieved by choosing high value competencies well and establishing how long to invest in them, and identifying commodity competencies to divest. The faster the product life cycle the shorter the advantage. In 1888 Kodak created the slogan “you press the button we do the rest” and from this a highly vertically integrated model was created maintaining an almost Neolithic control of the photographic market. This was achieved until digital technology arrived. It is essential that an organisation becomes flexible enough to jump when required.
There is no competence more critical to a business than the development of an end to end competency chain from the consumer to the raw material supply. There is no one make or buy strategy that will stand the test of time. It is by defining the long term distinctive specialisation of the organisation, and the organisations position in a network of complimentary specialist diversified suppliers that an organisation will achieve a competitive position. Diversified suppliers bring a wealth of experience from other customers; they provide an early warning platform and the ability to easily modify their existing loosely coupled customer business processes.
Captive suppliers often have hard wired business processes making innovation more difficult. The speed of learning is then the key source of advantage, and the loose coupling provides the supplier the space to innovate to deliver clearly set performance targets. Further more; the scale enjoyed by many diversified suppliers enables them to provide attractive career paths to retain highly skilled employees. When looking at the business as a whole, the decision is how much of the past should be taken forwards and how much should be reviewed.