BUSINESS has always been about providing value, and being competitive and sustainable means you are better than anybody else at providing that value.
There used to be a time when in producing something, the business had to do pretty much everything. For instance, when Ford started making cars, they did everything from mining the iron ore, to producing their own electricity, to producing the whole car, and selling it themselves.
As a business becomes bigger and more complicated, it starts to outsource to companies that can do these things better.
So pretty much, a big car company will buy from hundreds, if not thousands, of suppliers various products that other companies can produce better and more efficiently. And they get dealers and resellers to sell and market their cars and banks to finance them to make the whole business ecosystem. Of course, they now get their power from power companies, and advertising and marketing from other companies.
Others also hire through agencies and use contractors. We are not called the age of specialization for nothing.
One of the things you see is that people get from other countries or companies things that they can do better.
Nike and Apple focus on designing and marketing their products, and much of it is produced in China. Currently, almost all tech support and phones of most English-speaking countries are outsourced to the Philippines.
Such kind of outsourcing produces winners and losers.
For instance, it is touted that in the new economy, the biggest operator of car or taxi services actually does not own any of the cars (Uber). The biggest operator of hospitality and rooms (AirBnb) does not own any of the places they rent out. Alibaba and Amazon are huge marketplaces, but they are just aggregators. Spotify does not produce any music that is on their music subscription. Apple and Google sell millions of apps every day, but almost all are developed by third parties.
The new mantra is not only to focus on core competence, but also to accept coopetition. That means businesses substantially agree that they compete, but they also cooperate.
It is not a secret that there is a fierce battle between Samsung and Apple to sell smartphones. On the other hand, many of the components and technology in Apple are also sold by Samsung.
The leading video streaming provider is Netflix. Netflix is hosted on Amazon Web Services. A few years ago, Amazon launched Amazon Prime to compete with Netflix. Disney used to have their films viewed over Netflix. Now Disney is touted to be making its own video on demand service.
The biggest competitor of Microsoft for servers is Linux, but now Microsoft is hosting Linux servers in its Azure service and actively contributing to the open source community.
I guess there are no hard and fast rules. Business will evolve according to the practices and according to what practitioners see as giving them utmost flexibility and sustainability.
October 12, 2018
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