Are you letting your “crown jewels” soar?

Companies often use their crown jewels to protect less efficient aspects of their business, instead of maximising their value as a stand-alone businesses.

All companies do some aspects of their value chain better than others.  The strong “crown jewels” are the real source of profit, although conventional management accounts tend not show this by subsidising the weaker aspects.

One radical growth option for a company is to see if a strategy can be built by “unbundling” its value chain, and opening up the crown jewels to others to use.

Companies have to be brave to open up their crown jewels fully, since the crown jewels will only be truly free if even a competitor can use them. This will have a negative impact on the company’s existing end-product, as it loses differentiation. But the crown jewels will be liberated to earn their full value in a free market.

An example of a company that has opened up its value chain bravely is Amazon. They had world-class capabilities in running data centres. Instead of using this to boost their competitive advantage for their e-commerce business, they chose to open it up, selling these skills to other companies, even their competitors. As a result, Amazon Web Services is now a $3 billion business.

Microsoft has made the opposite choice. For example, Microsoft has “crown jewels” in the Office applications: Excel, Word and Powerpoint. With almost every business in the world locked in to these, it would be very attractive for users to have compatible applications on their mobile phone and tablets.  Microsoft chose to use its crown jewels by bundling it with its Windows mobile operating system to try to make its Windows Mobile Operating system more competitive. At the current time, this strategy is not working, and Microsoft is missing out on the attractive profits and customer access that launching these as Apps for Android and iOS would bring.

Blackberry initially constrained their BBM Messenger service, making it available only to their phone users yo boost the competitive advantage of their phones. With the recent shift in strategy, they have opened it up, letting it value maximise on a level playing field against WeChat and Whatsapp. Hopefully it is not too late.

It is not always right to open up your value chain – for example, it is probably still too easy for Apple to license out iOS, since it still has a hardware advantage.

However, as you try to come up with creative new growth strategies, it is an avenue you should investigate.

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