Outsourcing weakness

Published by on mars 5, 2013 at 10:01 f m

Surrounding each market leader is an ecosystem of suppliers working in a B2B (business-to-business) relationship. Some have developed a strong defence around its market share without actually having to expend its own resources. Sharks outsource their weaknesses to other fish in order to keep them clean and protected from disease. These fish help the sharks stay healthy hunters. Apple has the same strategy. Around its products are other brands supplying parts of the solution: Kensington makes the keyboard for the iPad; Harman Kardon makes the speakers; Belkin makes products for the iPhone, iPad and iPod; and Logitech makes the most out of every opportunity Apple offers it.

IKEA also outsources its weaknesses to other “fish”: Parts of Sweden makes unique furniture solutions and products to complement IKEA’s range of solutions; Bemz makes the slipcover for IKEA sofas, which results in more variation and consumer choice in design.

Not all consumers want or have the time to transport and assemble their IKEA furniture, so IKEA has outsourced this service to local suppliers (or else consumers may choose to buy furniture which is already assembled from a competitor of IKEA’s).

The above suppliers are not a threat, rather they give strength and support to the market leaders. They also function as an inspirational R&D department. As long as these suppliers are running their businesses in a way that benefits market leaders, they function as a means for market leaders to outsource their weaknesses and therefore strengthen their defences. Just as sharks let other fish protect them and clean away their problems, these suppliers compensate for the market leaders’ weaknesses and cover up their blind spots.

Above from the Sharkonomics book.