Wintelism and CPNs have been very important to the outcome of competition in
the electronics industry. They were the
principal means by which the US
electronics industry recovered from its
mid-1980s nadir in competition with
Japanese firms to re-emerge as the global
technical and market leader by the
mid-1990s; they were also the enablers that
permitted indigenous electronics producers to emerge and prosper in the rest of
Asia. Wintelism shifted the
industry’s product market strategies away from
final assembly and toward the
distinctive value-added products backed by
standards strategies in which American
innovations and entrepreneurial companies were
strong. Simultaneously, the
American CPNs created an alternative supply
base in Asia, an alternative to
reliance on Japanese competitors for
underlying component technologies and
manufacturing capabilities. By exploiting an
ever more intricate and flexible
division of labor based not on cheap factor
endowments but on increasing local technical specialization in Asia—a division
enabled by Wintelist product strategies—CPNs helped to lower production costs
and turnaround times while keeping pace with rapid technological progress and
responding rapidly to unpredictable market
shifts. Also, the networks spawned Asian-based
direct competitors to Japanese
firms in several of their stronghold markets (e.g. memory chips, consumer
electronics, and displays).
Taken together, Wintelism and CPNs enabled a
new generation of US firms to
pioneer a new form of competition in
electronics: one that grew out of the
distinctively American market environment and
was adapted to overseas
opportunities. It is a form of competition in
which “core assets” are the
intellectual property and know-how associated
with setting, maintaining, and
continuously evolving a de factomarket
standard, a process that requires perpetual
improvements in product features,
functionality, performance, costs, and quality.
And the core managerial skill has become
orchestrating the CPN itself: managing
the continuously changing sets of external
relationships and melding them with
the relatively more stable core of internal
activities in order to access relevant
technologies, design, develop, and manufacture
the products, and get them from
product concept to order fulfillment in
minimal time.
For Wintelist American firms the innovations
in product concept and corporate
organization appear to have fulfilled the single
most important strategic imperative
of competition in high-technology markets:
developing and sustaining monopoly
niches, whether through ownership and control
of a de factostandard or by
maintaining a differentiated product through
the ability to add performance,
functionality, features or to improve costs
faster than their competitors.
Profitability and market capitalization in
electronics are almost purely a function of
achieving such market structures, high where a
quasi-monopoly position can be
maintained in fast-growing markets, low or
non-existent everywhere else. As Intel
and Dell demonstrate in components and PC
distribution, and Sony and
Symantec demonstrate in their recent struggles
with content creation (Columbia
Pictures) and software, respectively, profits
can be won or lost at any point in the
value-chain if the market is structured
accordingly. Future competitive battles in
electronics will continue to center around the
creation of and defense against a
quasi-monopoly position, as the concerted
attack by Silicon Valley on Microsoft’s
position and practices demonstrates.
It is also instructive that traditionally
vertically integrated assemblers like HP,
Motorola and, more recently, IBM have been the
first among the traditional players to embrace the new form of competition.
That fact suggests the hypothesis that in a globalizing world
economy, new, epochal forms of competition like those described here will
increasingly originate in a firm’s ability to exploit location-specific advantages at its point of origin and to fill in complementary elements as necessary with
relationships that exploit locationspecific advantages elsewhere. Thus, for
example, the shape and character of US firm CPNs clearly reflect the advantages they
derive from their point of origin in the US launch market: the setting,
maintenance, and evolution of de factostandards set in the domestic US launch market was the
principal instrument used by US firms to structure and preserve control over
their inter-firm networks. So long as US firms maintained that role in the division
of labor—by defining and executing an evolutionary path for improved performance,
functionality, and cost that kept customers and licensees locked in to their
standards—it was extremely difficult for other firms in the network to challenge for
the lead. US networks could be relatively decentralized because control over
standards enabled devolution of responsibility for significant value-added to
partners without fear of losing the ability to orchestrate the network. By
contrast, with control residing in their domestic-based manufacturing and
core-component technologies, any significant devolution of responsibility by
Japanese firms over those competencies to outside partners risked creating a direct
competitor. Japanese networks had to be centralized to avoid that outcome.
For most firms, new forms of competition are
initially linked to the domestic
point of origin because that is where
development of new product or process
concepts and associated launch market
opportunities are most developed, where
local capacities and technical specialization
are still exploited most fully, where the
initial patterns of constraint and opportunity
to which firms respond are first set. But, increasingly, the future of
competition will lie in the ability to exploit
complementary capabilities originating
elsewhere in the world, to combine them
effectively and thereby generate innovations
in strategy and organization.
