Xvii) Using Categories Of Core Competency To Decide Whether To In Source Or Outsource

- this means if it is a core competency, it is performed inside the organisation; in contrast non-core activities are sent outside. The problem with this is that what is currently non-core may be core in the future, and vice versa.

The classic example of this is IBM's decision to outsource the micro processor for its PC business to Intel and its operating system to Microsoft. IBM made these decisions in the early 1990s so that they could focus on what they do best - designing, assembling and marketing computer systems. At the time these appeared good decisions. Subsequently, these decisions resulted in most of the future profits of the industry going to Intel and Microsoft. To avoid these outcomes, the following questions should be asked

"...What do we need to master today, and want will we need to master in the future, in order to excel on a trajectory of improvement that customers will define as important. The answer begins with the job-to-be-done approach: customers will not buy our product unless it solves an important problem for them..."

Clayton Christensen et al, 2003

Furthermore, core competence is an inward-looking notion. An alternative notion addressing competitiveness, ie what customers value, rather than what you think you are good at. Competitiveness involves a willingness and ability to learn new things, rather than clinging hopefully to past successes.

When the functionality and reliability of a product/service becomes more than good enough, the basis of competition changes.

"...the customer interface is a place in the value chain with the ability to excel.....Hence, companies that are integrated in a proprietary way across the interface to the customer can only compete is not-good-enough dimensions more effectively......than in those firms that interface with customers in an arm's-length, modular manner......why Dell computer was more successful than Compaq during the 1990s. Dell was integrated across an important not-good-enough interface, whereas Compaq was not......the proper cost accounting would show that Dell's profit from retail operations are far greater than profits from its assembly operations..."

Clayton Christensen et al, 2003


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