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Competing on Resources11.pdf
Competing_on_Resources11.pdf
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Page 11
Competing on Resources
•
•
•
B
EST
OF
HBR
harvard business review •
j
uly–august 2008
page 10
resources are evaluated against the standard
of competitive superiority. Or what if a com-
pany’s valuable resources have been imitated
or substituted by competitors? Or perhaps its
resources, like Masco’s, are valuable only in
industries so structurally unattractive that, re-
gardless of how efficiently it operates, its fi-
nancial returns will never be stellar. In these
cases—indeed, in nearly all cases—companies
must continually upgrade the number and
quality of their resources and associated com-
petitive positions in order to hold off the al-
most inevitable decay in their value.
Upgrading resources means moving beyond
what the company is already good at, which
can be accomplished in a number of ways.
The first is by adding new resources, the way
Intel added a brand name, Intel Inside, to its
technological resource base. The second is by
upgrading to alternative resources that are
threatening the company’s current capabilities.
AT&T is trying to build capabilities in multi-
media now that its physical infrastructure—
the network—is no longer unique or as
critical as it once was. Finally, a company can
upgrade its resources in order to move into
a structurally more attractive industry, the
way Nucor, a U.S. steel company, has made
the transition from competitive, low-margin,
downstream businesses, such as steel joists,
into more differentiated, upstream businesses,
such as thin-slab cast-steel sheets.
Perhaps the most successful examples of up-
grading resources are in companies that have
added new competencies sequentially, often
over extended periods of time. Sharp provides
a wonderful illustration of how to exploit a
virtuous circle of sequentially upgrading tech-
nologies and products, what the Japanese call
“seeds and needs.” In the late 1950s, Sharp
was an assembler of televisions and radios,
seemingly condemned to the second rank of
Japanese consumer electronics companies. To
break out of that position, founder Tokuji Hay-
akawa, who had always stressed the impor-
tance of innovation, created a corporate R&D
facility. When the Japanese Ministry of Inter-
national Trade and Industry blocked Sharp
from designing computers, the company used
its limited technology to produce the world’s
first digital calculator in 1964. To strengthen its
position in this business, Sharp backward inte-
grated into manufacturing its own specialized
semiconductors and made a strong commit-
ment to the new liquid crystal display technol-
ogy. Sharp’s bet on LCD technology paid off
and enabled it to develop a number of new
products, such as the Wizard electronic orga-
nizer. Over time, the superiority of its display
technology gave Sharp a competitive advan-
tage in businesses it had previously struggled
in, such as camcorders. Its breakthrough prod-
uct, Viewcam, captured 20% of the Japanese
market within six months of release in 1992.
At each stage, Sharp took on a new chal-
lenge, whether to develop or improve a tech-
nology or to enter or attack a market. Success
in each endeavor improved the company’s re-
sources in technology, distribution, and organi-
zational capability. It also opened new avenues
for expansion. Today, Sharp is the dominant
player in the LCD market and a force in con-
sumer electronics.
Cooper provides another example. Chal-
lenged to justify its plan to acquire Champion
Spark Plug in 1989, when fuel injection was
replacing carburetors and so extending the life
of spark plugs, Cooper reasoned that it had the
resources to help Champion improve its posi-
tion, as it had done many times before with
products such as Crescent wrenches, Nichol-
son files, and Gardner-Denver mining equip-
ment. But what really swung the decision, ac-
cording to Cooper chairman and CEO Robert
Cizik, was the recognition that Cooper lacked a
critical skill it needed for the future—the abil-
ity to manage international manufacturing.
With its numerous overseas plants, Cham-
pion offered Cooper the opportunity to ac-
quire global management capabilities. The
Champion acquisition, in Cizik’s view, was a
way to upgrade Cooper’s resources. Indeed, a
review of the company’s history shows that
Cooper has deliberately sought to improve its
capabilities gradually by periodically taking on
challenges it knows will have a high degree of
difficulty for the organization.
Leveraging resources.
Corporate strategies
must strive to leverage resources into all the
markets in which those resources contribute
to competitive advantage or to compete in
new markets that improve the corporate re-
sources. Or, preferably, both, as with Cooper’s
acquisition of Champion. Failure to do so, as
occurred with Disney following the death of
its founder, leads a company to be underval-
ued. Eisner’s management team, which ex-
tended the scope of Disney’s activities into
A
dd new competencies
sequentially, and learn to
exploit the virtuous circle
of “seeds and needs.”
For the exclusive use of D. Newberry
This document is authorized for use only by Dave Newberry in BUSE 37000 (Autumn 14) Marketing Strategy (Sections 03, 04, 81) at , 2014.
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