How to Drive Value Your Way

The story of the PC industry has been etched in the minds of strategists as a template for how industries evolve in the knowledge economy. In the natural order of things, so the story goes, industries disaggregate as interfaces between various stages of the value chain become open and standardized, allowing value to migrate up or down the value chain. But value migration away from established players doesn't have to be inevitable, argue authors Michael Jacobides and John Paul MacDuffie. Auto manufacturers, for example, have kept a fairly constant share of their industry's total market capitalization despite much recourse to outsourcing and intense competition in the sector. Carmakers and other industry leaders like Apple and Google gain and hold on to strategic control and value in their industries in four key ways: (1) Controlling the assets least likely to be commoditized (and blocking others' efforts to do the same); (2) Serving as "guarantor of quality" to the end customer (including assuming responsibility for the entire product, even components made by suppliers); (3) Staying in close touch with changing customer needs (changes in the end consumer are often accompanied by shifts in who captures the most value in an industry); (4) Balancing the imperatives of growth and strategic control of the value chain. Through the lens of the auto industry, the authors look at how established players can defend value in their industries and how emerging players can change the competitive landscape to drive value their way.

• Profitability
• Competitive strategy