c
 



  


cc
November 29, 1993|By TOM PETERS

In 1981, Du Pont bought oil company Conoco, in one of the last-gasp attempts to control an industry's supply
chain. Fearing another oil embargo, the chemicals giant wanted to ensure a constant supply of raw material to
fuel the insatiable appetite of its downstream-products operation.
Today, old-fashioned backward integration -- the idea of owning a steel mill if you're a carmaker, or a forest if
you're a newspaper publisher -- is fading away. Now welcome a new form of integration, FORWARD
integration.
"Services form an envelope around the product," write Joseph Fuller, James O'Conor and Richard Rawlinson
in the May-June 1993 Harvard Business Review. "Companies make markets by pushing the envelope."
Consider, then, nine increasingly encompassing elements of forward integration:

* The product (or service) itself. Begin with the basic offering, such as the textile or the mortgage loan.
Whether or not it's well made -- and exciting -- remains the heart of long-term vitality.
* Friendliness. A little more than a dozen years ago, Apple reinvented computing with the Apple II; everything
from the company logo to the operating-system software promised ease of use. In general, making a fetish of
friendliness can pay enormous dividends.
* Embedded intelligence. Products are getting smarter. Otis Elevators, Trumpf machine tools and Xerox
copiers use arrays of microprocessors to diagnose (and sometimes medicate) their own ills. I sometimes think
my Minolta camera would cut the grass if I asked it nicely.
* Joint product development. More and more companies are intimately involving suppliers, distributors and
customers in product development from the start. Ingersoll-Rand's power tool division is master of this
discipline -- and a recent deluge of enormously friendly (and profitable) products is the result.
* Have it your way. At Boeing, customers "wanted a plane in which the galleys and lavatories, pipes and all,
could be relocated almost anywhere in the plane's cabin, within hours," Business Week writes. And in May
1995, when the first Boeing 777 rolls off the production lines, "its owners will be able to rearrange a plane
within hours, configuring it with one, two or three classes to fit the market at the time." In Japan, marketing
pundits label this a shift from "just-in-time to just-for-you."
p