1757
n
Making far-reaching decisions
(instead of DRAMs), and more and more the plant manager’s
formula told him to produce microprocessors (and not DRAMs).
When the whole company had chosen microprocessors, Andy
said, “Now I am ready to make a decision: we’re going to be a
microprocessor company.” And everybody said “duh”, because
that’s what they had been doing already.
I’d say his “indecisiveness” served Andy rather well, as Intel
became one of the most successful and protable companies in
the world for the ensuing two decades: not by him making a
tough decision quickly and decisively, but by not making it at all,
instead enabling the organization to do it for him – just like Tony
Cohen lets his organization decide what television programs to
promote.
Retaining your ability to make money? Causal
ambiguity’s the answer
All this turbulence and ambiguity in the world of business of
course makes life difcult. Things would be much easier if every-
thing was nicely predictable and transparent, right? Wrong.
Actually, if everything was unambiguous in our world, I doubt
you’d be able to make any money. Let me explain.
Whenever people hear that I am a professor at a business school,
the reply I most often receive is, “Oh, so you teach people how
to make money?” And I usually nod while I display a weak smile
and simmer in silence.
Some time ago though, I was teaching in New York, at Columbia
University’s business school, and took a taxi from JFK airport.
The driver, making small-talk, said, “What do you do?”
“I am a professor at a business school.”
“So you teach people how to make money?”
“Yeah (sigh), I teach people how to make money.”
But then, the guy continued, “So, what’s the answer?” That was
a minor credibility crisis, right there on the spot!
Business Exposed176
I don’t remember what I said, but I remember thinking later what
I should have said. I guess it is about “creating value” (and selling
it for more than it cost you to create) but also about “retaining
value” (namely, why wouldn’t anyone else be able to come in
and do exactly the same thing – thus driving the price down till
you can only sell it for what it cost you in the rst place)?
And, of all business plans and proposals I get to see, people
usually think a lot about the rst bit: “how to create value”. They
talk about their unique value proposition, and why customers
will love it, buy it, scream for it, and so on.
But they often forget about the second bit; why would they be
able to do it, or at least do it better or cheaper than anyone else?
What do they have or own that enables them to retain the value-
adding ability, which protects them from immediate imitation by
competitors?
For a start-up, that’s often tricky. You don’t have anything yet, so
what could you possibly have or do that others couldn’t do too?
The trick is that you don’t have to have it now, but you do need it a
year or two from now, when you’re starting to have a real business.
Thus, the thing that makes you “difcult to imitate” does not
necessarily have to be a patent, brand name, unique location, etc.
It could also be found in other sources; something that you build
up over time. Over the years, I have found that one of the most
powerful sources of being difcult to imitate is a rather mundane
thing . . . The rm’s competitive advantage is difcult to imitate
because the rm itself doesn’t quite know what it does to be so
good at it . . .
We call this “causal ambiguity”. It may sound silly but is surpris-
ingly common. Firms, for example, see that they have a much
lower cost base than their competitors, or they see that their
salesforce is much more effective than theirs, or they manage
to have a much lower error rate in their production process, but
they don’t quite know why . . .
Causal ambiguity makes it difcult to put your nger on what it
is you do that makes you so much better than your competitors.
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