A key component is the asset a company owns or controls that gives it a competitive advantage in the market in which it operates. The ability to build a business on the key component depends entirely on the business owner so this is an opportunity, not an obligation. But once a business has been built on that key component the business owner must vigilantly preserve its value by protecting and maintaining it, or risk losing its competitive advantage.
Even a powerhouse like Google dedicates resources to maintaining and improving their key component: the search algorithm. In this FAQ by Danny Sullivan, Founding Editor of Search Engine Land, you can better understand how Google has maintained and improved their search algorithm with their Panda, Penguin, and Caffeine updates. And, how after 15 years the original algorithm was replaced with a new one, called Hummingbird.
“Hummingbird is a brand new engine, though it continues to use some of the same parts of the old, like Penguin and Panda. … Some of the parts are perfectly good, so there was no reason to toss them out. Other parts are constantly being replaced. In general, Hummingbird — Google says — is a new engine built on both existing and new parts, organized in a way to especially serve the search demands of today, rather than one created for the needs of ten years ago, with the technologies back then.”
Updating and revising your business’s key component is one of the most important – if not the most important – activities you need to engage in to keep your competitive advantage. But knowing when it is time to change it completely will ensure the business’s survival. As the quote states, the investment horizon was 10-15 years. Just think how short the payback period was on the initial investment and what the return on invested capital could be. Mind blowing!