Peter Thiel will be vindicated in the coming years. The worst thing to happen to businesses was the philosophy of outsourcing, that businesses should instead focus on what they do best. This wave of outsourcing saw companies out of controlling most aspects of their supply chains. Some outsourced the marketing, some the production, some the inbound logistics, some the outbound. Outsourcing was the way to go, the ultimate path to efficiency and effectiveness. That organizations could now focus on their core and delegate the non-core to other people. It was also a way of saying, there’s no need to own the whole pie, just own the good piece of the pie.
But picking from groups such as LVMH, we can start to learn that the best businesses keep integrating. They integrate backwards and forwards, they never give up on mergers and acquisitions. They look at business as a universe, where organizations should find all the pieces that deserve to belong to that universe. Great businesses seek to own the whole pie, because only by doing this, do great businesses deliver on their mission.
Imagine LVMH outsourcing the design aspect and choosing to concentrate on just the marketing. Or perhaps, imagine them outsourcing the retailing component. In Uganda, the Mandela Group is a glaring example. Do not just own Café Javas, also own the inputs to Café Javas. Own the factory that produces the wheat flour. Own the vehicles that transport the wheat flour, own the quarry that produces the stone and does the concrete mixes. Yes, businesses should be in the game of owning the pie. It’s the zero to one strategy, it’s the only lasting moat. All moats are transient, but not the one where one seeks to own the entire pie.
So good people, the lesson is clear, the strategy is clear, own the whole pie, not just a piece!