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February 8, 2006

Excerpts: Let Go to Grow -- Part V

By: 800-CEO-READ @ 5:05 PM – Filed under: Management & Workplace Culture

The General Response: Tighten Control
The typical ecosystem reaction to commodity hell is control centered: Try to get on top of the changes. This tighten control strategy centers on cost cutting, outsourcing, efficiency, mergers and acquisitions, and restructuring. There is a truly hellish catch here, though: Control fuels the very forces that created the need for control in the first place, creating a terrible feedback loop (as depicted in Figure 2.1).
Figure 2.1 Commoditization cycle.
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The Alternative: Let Go to Grow
There is an alternative response to commodity hell: an on demand business platform that we characterize as Let Go to Grow. The winners in creating and sustaining growth in the era of commoditization will profit and thrive by putting the pieces together in new ways and by changing their traditional thinking.
The term platform is used in many contexts, but it is fundamentally a foundation, launch pad, and set of standardized interfaces. A business platform is essentially a set of business capabilities on which other capabilities can be built, linked, and expanded to meet the pace of customer demand and relationship needs. In the technology world, a platform is a set of technologies on which other technologies are built. Windows is a software platform on which thousands of applications are built and linked. Microsoft was able to leverage Windows through its market might, but it appears that the company is seeing Linux, backed by IBM and a number of other players, as an increasing threat. The Linux platform provides similar capabilities but in a more open development arena, using open standards that have, through the inevitable forces described in this book, enabled Linux to take a significant foothold. Similarly, Intels individual products constitute the core hardware platform of the PC ecosystem. In the car industry, standardized manufacturing platforms have replaced independent model designs and facilitated reuse of components, global coordination of designs and production. In financial services, the credit card is a platform on which entirely new payment services have been developed. Through its links to a wide range of processing capabilities, the credit card has also been extended into non-credit areas. For example, credit cards now enable automated check-in at airports; the airline uses this standardized identification in a completely nonfinancial manner.
This content is excerpted from Chapter 2 of the book titled, "Let Go to Grow: Escaping the Commodity Trap", authored by Linda Sanford, with Dave Taylor, copyright 2006 by International Business Machines Corporation, ISBN 0131482084, published Dec. 2005 by Prentice Hall Professional. Reproduced by permission of Pearson Education, Inc. All rights reserved.