Consider, for example, IBM's decision to outsource the microprocessor for its PC business to Intel, and its operating system to Microsoft. IBM made these decisions in the early 1980s in order to focus on what it did best-designing, assembling, and marketing computer systems. Given its history, these choices made perfect sense. Component suppliers to IBM historically had lived a miserable, profit-free existence, and the business press widely praised IBM's decision to out-source these components of its PC. It dramatically reduced the cost and time required for development and launch. And yet in the process of outsourcing what it did not perceive to be core to the new business, IBM put into business the two companies that subsequently captured most of the profit in the industry. How could IBM have known in advance that such a sensible decision would prove so costly? More broadly, how can any executive who is launching a new-growth business, as IBM was doing with its PC division in the early 1980s, know which value-added activities are those in which future competence needs to be mastered and kept inside? 2"
( Clayton M. Christensen )
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