Be a system builder

Real moments of change in business and society are best identified by looking at developments in price. When the price goes down, mass adoption awaits.

But what is the right business strategy if you want to win the market?

The short answer: You need to be a system builder.

Systems matter

History has shown us that systems matter, Chris McKenna of Oxford University’s Saïd Business School told me in a recent interview.

Henry Ford is the most famous example of a “system builder”. The key to his success was his integrated approach to his supply chain. Instead of buying from suppliers, Ford took control of his supply chain by producing his own parts. This enabled him to standardise, lower the costs and improve performance.

In turn, his Model T became affordable and he could take it to the masses.

“If you want it done right, do it yourself,” he later explained in his book Today and Tomorrow (1926).

That said, to do everything yourself is not always the best strategy. It comes with enormous risks. What if your vision of the future turns out to be wrong?

Another approach is to build a win-win supply system where the company and its suppliers have a vested interest in helping each other succeed. McDonald’s supply chain system is the perfect example of this.

But no matter what kind of approach you choose (“do it yourself” or “strong partnerships”) it’s clear that systems matter.

Imagine a future…

Today, a classic system builder is someone like Elon Musk.

Like Ford did with the Model T, Elon Musk and Tesla Motors are looking to bring their electric car to the masses. And in a move also similar to Ford, Tesla are integrating vertically by building “gigafactories” to produce the batteries themselves.

However, Musk is not only building a production system.

More than anything, he is imagining a future where people’s own ‘systems’ will change dramatically: Before long we will have affordable self-driving electric cars that are charged by affordable batteries in our affordable solar powered smart homes.

If anyone is looking to build those systems for us, it would be Elon Musk.

Next up

If building a system is key for businesses, then the next question is: “How do you go about building a system? Is there a winning formula for this?”

I will try to answer that question in my next post.

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As with my previous posts, I would like to thank business historian Chris McKenna of Oxford University’s Saïd Business School for inspiration and input to this blog post.