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greater degree, while focus shifts to wrapping the company around the consumer experience, devel- oping vehicles that anticipate consumers’ preferences better at lower cost, and delivering these vehicles through channels that better suit their lifestyles.

It is the second approach

  • the task of restructuring one’s

value chain from an industry- structure perspective — that presents new and different chal- lenges and unprecedented oppor- tunities in this age of the Internet. E-business has broken down the traditional barriers that held competitors, even cus- tomers, at arm’s length. Upstart competitors have rewritten the rules of competition. To succeed in this cheaper, faster, more con- venient, and customized environ- ment, companies — almost by necessity — have to “open their kimonos” to the outside world to an unprecedented degree. They must partner with their competi- tors, outsource to suppliers, and render their cost structures more transparent to customers in ways they could not have imagined a mere five years ago.

The automotive industry is perhaps the most highly visible

example of this extraordinary “cooperation.” Ford, Daimler Chrysler, General Motors, and Renault/Nissan — in partnership with software vendors Oracle and CommerceOne — have pooled resources to develop a global online supply network called Covisint. Starting with procure- ment and eventually encompass- ing such services as warranty, performance, and design collabo- ration, this market site should dramatically reduce purchasing costs and increase operating effi- ciencies for all participants, although it remains to be seen who will capture the most value

  • suppliers, OEMs, or the end


Similar industry-wide e-sourcing efforts have been launched in aerospace, health care, chemicals, industrials, and other sectors. These market sites not only increase competition among suppliers, they extract value from others in the industry who may wish to participate in the bazaar. These virtual market- places consolidate industry buys, providing large and small com- petitors alike with the benefits of increased scale.

To unlock the tremendous trapped value in today’s value chains, companies need to direct their focus not only internally,

but also externally. In addition to restructuring their own supply network, they must make con- certed efforts to address the gaps and inefficiencies that exist in their industry’s value chain. They must give suppliers the assets, insights, and freedom to innovate, and they must ally with rivals, when and where appropriate, to deliver true customer solutions.

To succeed in this new environment, traditional rivals must redraw their battle lines, partnering in some areas, while continuing to compete vigorously in others, forming consortia, where necessary, to wield indus- try scale and fend off new-form competition. Fierce competitors are joining forces in a number of these new ventures to wield their collective market power. For example, major airlines and hotel chains have formed Hotwire, a consortium to sell excess, perish- able inventory, while limiting competition with their main- stream products by revealing exact flight and hotel details only after purchase. By combining inventory across many partici- pants, they dramatically increase


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