Pepsi’s Bottlers and Apple’s Chips
What do Pepsi and Apple have in common? Pepsi is offering to acquire its two largest bottlers and Apple is building a team to design its own computer chips for the iPhone and other products. In an increasingly outsourced world, these companies are both insourcing in very significant ways. What is the major lesson for business leaders looking at their business models and strategy?
The core question posed by the Pepsi and Apple stories is "What do we need to own?" In an outsourced world, you can outsource virtually any task or function. So how do you decide what to own? This question is at the heart of strategy. What capabilities or assets provide a true competitive advantage to you?
In Pepsi's case, they decided that the changing nature of the beverage market required them to re-acquire bottling assets that they had spun out ten years ago. Henry Ford recognized that his costs started the moment ore left the ground and continued until the customer received the car. Pepsi is recognizing that dividing the pie among different entities doesn't necessarily make sense.
In Apple's case, they decided that designing their own chips would give them a proprietary advantage in product features and would prevent competitors from stealing their designs.
As you look at your own business model, what are the critical capabilities that you need to own?
