A strategic resource is property one owns that is long-standing and one’s competitors cannot duplicate it without incurring serious economic loss.

 

Xerox had such a strategic resource: its 1950’s patents on plain paper copying were rock solid. Buyers were prepared to pay upwards of USD4 000 for a copier that cost only $600 to manufacture.   Its only competition came from the old wet-process copier companies.

 

Every five years, the company produced ‘Strategic Plans’ but these were only financial projections. Xerox’s position could be likened to a hydro-electric dam. It takes a great deal of labour to build the dam, but once completed it has a serviceable life for many decades without further significant inputs.

 

Xerox then created another strategic resource: a world class rapid response repair and maintenance service to keep its breakdown-prone machines in working order. From the patent strategic resource, it created another strategic resource. The value of this is to keep the machines running. From this, the firm created another strategic resource: specially branded Xerox paper that went through the machines without jamming. Essentially it had, therefore, three strategic resources.

 

Management started to tap themselves on their back ascribing current profits to recent decisions they had taken not giving credit to the planting of seeds many decades back which were now yielding a bountiful harvest.

 

Books were written about Xerox’s management style, the innovative culture at Xerox which included suggestion boxes, the dress code and their office layouts as all contributing to their success.

 

Over time, management expended untold resources in trying to get into the computer business while their core skills lay in photocopiers and their maintenance. What they failed to do was to leverage the in-house skilled engineers and technicians on trying to make paper handling better and the machines smaller so that they could sit on a desk top. Canon, Kodak and IBM saw this gap and leapt in to start the enormously profitable line of personal copiers, printers and fax machines.

 

Management started to loosen their grip on tight integration and started adding many products and projects so as to project youthful vigour through bolt-on acquisitions. They became plump and ready prey for a new generation of upstarts.

 

Being in possession of a strategic resource makes a company lax and lethargic. In this way Microsoft sidles IBM, Dell outsmarts HP, Nvidia takes business away from Intel. In time, these upstarts also become inertia-bound and there are always nimbler, younger outfits waiting to spring into action.

 

This is the cycle of life.

 

So, next time one hears, ‘You’d better tweet that’, one should remember that there was a time when Xerox was also a household name and reconcile oneself to the fact that someone in the future will ask, ‘Remember when you would Google something?’