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Interdependency among activities is central to the concept of an activity system. Interdependencies provide insights into the processes that enable the evolution of a focal firm’s activity system over time, as its competitive environment changes.
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The architecture of the firm’s activity system – shaped by the choice of activities, how they are linked, and who performs them – captures how the focal firm is embedded in its “ecology”, i.e., in its multiple networks of suppliers, partners and customers. It also defines who the firm’s potential suppliers, partners and customers (and competitors) are in the first place.
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Second, the activity system perspective encourages systemic and holistic thinking when designing the business model of the future, instead of concentrating on isolated, individual choices (such as the “make or buy” decision about a particular product, or the outsourcing of a particular activity).
The message to managers is clear: look at the forest, not the trees – and get the overall design right, rather than optimizing details. Fashion retailer Inditex, a fast-growing Spanish firm that manages global brands such as Zara, has clearly understood and internalized this message and made business model thinking a corporate priority. Their Annual Report begins by explaining the Inditex business model and highlights its innovative elements. The company has made many activity system choices that, viewed in isolation, seem inefficient. For example, they perform many generic activities in-house, such as the dyeing and cutting of fabric, and the washing, ironing, and ticketing of finished garments. Moreover, they outsource sewing to small workshops located close to their Spanish production facilities. Both of these choices are questionable. As a whole, however, their carefully designed activity system allows Inditex to bring new fashionable garments from the design stage to the shop floor within record time – days as opposed to months – which makes a big difference in the fast-moving fashion business."
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