What is the essential core for sustaining business growth strategies with all the touch points that your customers can find and purchase your products/services? Customers will not buy your product unless it met their needs and affordable. At the same time, the challenges for the company are to what methods in use to fit in with demand, low cost, and time. Which activities required to design, produce, sell, and distribute your product should your company do internally? Will you build the product internally, hire a company to build it or buy a company that already has the basis of the product in place? This requires much more research and time for testing new markets and collecting customers’ feedback.
“Decision about what to in-source and what to procure from suppliers and partners have a powerful impact on a new-growth venture’s chance for success”, said the authors. As in the case of IBM, its’s decision in the early 1980s, to outsource the micro-processor for its PC business to Intel, and its operation system to Microsoft. IBM put into business the two companies that subsequently capture most of the profit in the industry.
A brilliant entrepreneur’s decision that his product fit perfectly the theory of “being in the right place at the right time”. William Levitt, a co-founder of Levitt & Sons, joined forces with his father, Abraham and brother, Alfred to form Levitt & Sons in 1929. Perfected the assembly-line approach to housing construction which followed high demand housing at that time. The Levitt’s purchased 1,000 acres of land on Long Island, 25 miles east of Manhattan and embarked on a bold venture to build 17,000 homes. They broke down the construction process into 27 separated tasks and assigned each task to a group of workers who would go from house to house repeating their specific task at each site. When the process was in high gear, houses were completed at the rate of 36 per day and during the first weekend, they sold more than 300 houses. To keep down lumber costs, the Levitt’s bought their own forests and built a sawmill in Oregon. They purchased appliances directly from the manufactures, cutting out the distributor’s markup. They even made their own nails. The Levitt’s’ methods kept costs so low that in the first few years, their cookie-cutter two-bedroom houses – which features fireplaces, radiant-heated floors, up-to-date kitchen equipment, laundry rooms and televisions – could be sold for just &7,900…a price that still allowed the Levitt’s a profit of about $1000, at that time. In 1949 alone, the Levitt’s built 4,600 houses and sold them for a total of more than $42 million.
Clearly their mass-production technique, cost-and time-cutting method were the keys to the company’s future. “If something fits your core competence, you should do it internally. If it’s not your core competence and another firm can do it netter, the theory goes, you should rely on them to provide it”, said the author. The Levitt’s beat competitors with speed, responsiveness, and convenience.
The Innovator’s Solution: Creating and Sustaining Successful Growth – by Christensen, Clayton M. and Michael E. Raynor, 2003
Radicals & Visionaries – Entrepreneurs who revolutionized the 20th Century – by Thaddeus Wawro, 2000