Michael Porter’s Competitive Advantage, first published in 1985, remains the unparalleled foundation text for anyone with an interest in corporate and business strategy. It’s not for the faint-hearted – it’s systematic and thorough rather than inspiring, but it anticipates and can accommodate many of the later developments in the field. I often wonder whether those who criticise or seek to differentiate themselves from Porter have actually gone to the trouble of studying, in detail, what he wrote.
Something he covers in some depth is the role of technology and innovation in strategy – “technology affects competitive advantage if it has a significant role in determining relative cost position or differentiation”. He takes an expansive view of technology – “a firm, as a collection of activities, is a collection of technologies”. He cites ‘motivation research’ as a technology employable in HR activities, for example.
Porter views activities as the basic units of strategy, and linkages between activities as being fundamental to a given strategic position. His view of technology follows the same schema – “technology is embodied in every value activity and is involved in achieving linkages among activities”, since “the technologies in different value activities can be related, and this underlies a major source of linkages within the value chain”.
I don’t see any reason why we shouldn’t take Porter’s view of technology one step further and view the value chain itself as a technology.
Although the ‘activity map’ is actually Porter’s fundamental and universal strategic representation of a business, he uses the ‘value chain’ as a means of organising activities into a generic and thematic picture. Some have found the value chain to be a little inflexible, and it may be that it is more useful to use some other kind of business model formulation to achieve the same thing. My point is that the business model is a technology in its own right.
Technology scales almost indefinitely through a series of architecture or system layers, compromising configurations of modules or components. A system or architecture at one layer becomes a module in the next layer up. The architecture of activities and linkages – the business model – can therefore comprise a technology in itself. This isn’t such an odd concept if we look at business models such as Starbucks or McDonalds.
But the idea can be extended further by virtue of linkages horizontally or vertically between business models, for example in corporate groups, supply chains or peer-to-peer systems. Value networks, in other words, can also be viewed as a technology.
Why might this be important? Because it may mean that general principles of design, engineering and innovation can apply equally to business models as to ICT or manufacturing processes.
It means that business models can be hacked.