Platt Perspective on Business and Technology

Rethinking vertical integration for the 21st century context 12

Posted in business and convergent technologies, strategy and planning by Timothy Platt on November 9, 2016

This is my 12th installment to a series on what goes into an effectively organized and run, lean and agile business, and how that is changing in the increasingly ubiquitously connected context that all businesses, and that all individuals operate in (see Business Strategy and Operations – 3 and its Page 4 continuation, postings 577 and loosely following for Parts 1-11.)

I initially offered and began discussing a set of three topic points in Part 9 of this:

1. What makes global online interactive connectivity so powerful an enabler, in making a more vertical integration system work?
2. How does this compel a rethinking and a redefining of what “lean and agile” means?
3. And how will that affect and even redefine business-to-business collaborations, as individual enterprises determine what they should do themselves in-house and what they would more effectively outsource, for example to supply chain partners?

And I focused on addressing Point 1 of this list there in Part 9 and in Part 10 and Part 11. My goal for this installment is to continue that overall line of discussion by at least beginning a more thorough exploration of Point 2 and its issues.

Let’s begin with the fundamentals there, and with the basic goals of a business as it seeks to effectively offer value as it competes in a marketplace. And let’s begin with the basic business model that it puts in place and follows in pursuit of that goal.

• What type of business is this?
• More specifically, what types of products and/or services do its owners and managers seek to offer, and at what competitive prices and how?
• And how would this business set itself apart from its competition in doing so, and in what it offers, how or where it offers that, or according to some other point of distinction that the members of a marketplace community would see as offering greater value to them?
• Now, what are the core resources and operational systems in the business that enable this, and that make their being competitively successful, their reality?
• What does this business do in the way of processes and what does it maintain as resources for them that directly enables this success, or that makes that success more reliable and stable but that might be more peripheral to it in nature?
• And what does the business simply maintain and do that is at most just peripheral to its core business-defining functions and needs and that might in fact not actually be offering any real sustaining value at all – and even just as more emergency back-up for definable risk management purposes?

What can be reduced, refocused or even eliminated outright in the business without loss and without increasing risk of loss to the business? When you trim back and refocus what is done and maintained and trim out any excess or inefficiencies found, you are left with lean and agile. And this can mean doing without, and it can, and certainly for more supportive resources and capabilities that are needed, but not in-house, mean outsourcing or obtaining through supply chain or related channels.

• And my description up to here only reflects one cycle of what in practice has to be a dynamic ongoing process, in both moving a business toward being leaner and more agile, and keeping it there.
• Lean and agile is not a goal that can simply be reached and then checked off as having been completed. It is an ongoing business approach as pursued by ongoing coordinated business processes and reviews of results obtained from them.

Let’s consider Apple, Inc. here and its two forays into attempted highly vertical in-house integration, and I add horizontal integration as well. Or to be more precise, let’s reconsider Apple again for this, as I have already touched several times in this series, on the question of what that company should, and should not have seen as their true best possible lean and agile core.

Most of the time when managers and business analysts review the efficiency of a business, they do so from the inside, and with an eye towards cost centers, profit centers, and how different functional parts of the business feed into and support what of all of this. That means both processes and activities followed, and resources that are maintained in doing so – plus any resources that are simply there doing nothing (e.g. unsold and even unsellable obsolete inventory as a case in point example that many businesses have at least some of.)

For purposes of this discussion, I begin all of that from outside of the business, and with market pressures and market drivers that shape what a customer base would want to buy and pay for. Ultimately, the success of any market-facing business is in the level and commitment of its market audience to buy the goods and services that are offered – as that is where all incoming revenue comes from, and it is where any and all real business success comes from.

• Ultimately, lean and agile is a function of what more effectively helps a business to complete sales, and in ways that positively address and at least in-the-moment resolve consumer needs, and at a cost to them that they see as offering them net positive value.
• Excess and even bloat and waste, are anything else that that business does and/or maintains, that does not connect into and support this market-facing activity, and cost-effectively to the business.
• That detail is crucial here, and it directly addresses why I wrote of adjusting and adaptively changing processes and resources that support them, above. At least as far as lean and agile business development is concerned, the goal is not simply that everything there is functionally supportive and necessary. It is that everything there is cost-effective in this – and even for more strictly cost-center functions and resources that are necessary but that do not directly contribute to positive revenue generation as an immediate functional consequence or output.

I wrote here in earlier series installments (as an admitted example of 20/20 hindsight as much as anything else) of Apple missing out in connecting into and supporting what could have been a major market for its desktop computers the first time that they sought to pursue a highly vertically integrated business model. They did not really see, let alone value the business market for desktop computers, and particularly small and medium sized businesses that were poised to jump into desktop computer adaptation and use. So they of necessity had gaps and disconnects as they sought to build and function efficiently, and according to anything like a lean and agile approach. But the very breadth and depth of what they sought to both do and dominate, made this type of efficiency essential. So the best they could do was to realize a solid niche market position, in the market segments that they did successfully identify, understand and serve.

The second time they tried such a massively vertically integrated business model approach, this time in an immediate-feedback driven interactive context, they saw and connected more effectively and more fully into wider available markets. And this time their more inclusive efforts at controlling large areas of their overall industry and its markets, were much more successful and they did and they have broken out of their first-try niche status into real global strength.

I am going to continue this discussion in a next series installment where I will turn to address the third numbered point from my top of posting list, as repeated here:

3. And how will that affect and even redefine business-to-business collaborations, as individual enterprises determine what they should do themselves in-house and what they would more effectively outsource, for example to supply chain partners?

Then, as noted at the end of Part 11, I will turn to consider a set of more technical issues that I have been holding off on, until completing this foundation for addressing them. Meanwhile, you can find this and related postings and series at Business Strategy and Operations – 4, and also at Page 1, Page 2 and Page 3 of that directory. And see also Ubiquitous Computing and Communications – everywhere all the time and its Page 2 continuation.

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