skate to where the money will be!

Using an analogy of ice-skating hall-of-famer Wayne Gretzky's strategy, Mr. Christensen introduces a concept called "disruptive technologies" that displace industry leaders who failed to recognize or absorb new technologies. IBM and automakers are examples used. Developing companies become the king of an industry while the product is innovative and proprietary, but eventually becomes fragmented into little value streams that are commoditized and spread all over.

So the product life cycle will go through stages (emerging, growth, maturity, and decline) and will simultaneously go through levels of integration to fragmentation (and possibly back to re-integration). Companies need to anticipate which fragments will be cash cows and which can be outsourced. IBM outsourced chips to Intel and the operating system to Microsoft. Neither product was standardized and fully-developed and therefore IBM lost the competitive edge and the profits. Intel kept the infinitely developed processors and sold off the memory chips which had become commoditized.

Before considering outsourcing a component, ensure that it passes 3 tests :
specifiability : specify which attributes are critical and which are not, is the product standardized and a spec
verifiability : can you verify the specs received are what is needed
predictability : can the component be integrated in the system with absolute predictability?

Products will be developed beyond 'good enough' for the mainstream consumer. At this point, the product becomes standardized and a commodity. Prior to this level of development, there is a high-risk of large technology shifts and advances.

Companies must consider which businesses they want to compete in when they see fragmentation begin and should choose the fragments that will continue to have development and interdependence; that's where the money will be.

HBR : skate to where the money will be : clayton M. Christensen