356 ENTREPRENEURSHIP
zation in the years ahead. It consists of a network of independent companies—suppli-
ers, customers, and even rivals—linked by common goals and information technology
to share skills, costs, and access to one another’s markets. This new, evolving corporate
model is fluid and flexible, a group of collaborators quickly united to exploit a specific
opportunity.
For example, Kingston Technology Corporation of Fountain Valley, California, is a
virtual corporation that has grown to over $500 million in sales. It is a world leader in
computer upgrades, and it operates within a network of related firms that lead comple-
mentary corporate lives. This is not simply subcontracting. These companies share
know-how, markets, and capital. Here’s a typical example:
On a recent Tuesday, a Los Angeles branch of ComputerLand received a call from
Bank of America. It wanted 100 IBM PCs pronto. The problem: These PCs needed lots
of extra memory and other upgrades, the better to run Windows, Microsoft’s ubiquitous
operating system, and link into the bank’s computer network. ComputerLand called
Kingston, which snapped into action. Within hours it had designed a sophisticated
upgrade system—its particular specialty—and relayed specs to a key partner, Express
Manufacturing. Express, which specializes in assembling electronic parts, cleared its
manufacturing lines, filled Kingston’s order, and sent the finished systems back that very
afternoon. By evening Kingston had tested all the components and returned them via
FedEx to ComputerLand. By the weekend Bank of America’s computers were up and
running. “You’ve heard of just-in-time inventory?” asks VP David Sun, referring to
Japan’s vaunted principle of cost-effective management. “This is just-in-time manufac-
turing.”^41
In the concept’s purest form, each company that links with others to create a virtual
corporation contributes only what it regards as its core competencies. Each firm is
organized around its specific rare, valuable, hard-to-copy, and nonsubstitutable
resources. All other resources are provided by other firms that also possess the four
attributes of sustainable competitive advantage. These advantages, however, remain pro-
tected within the other firms.
Technology plays a central role in the development of virtual corporations. Entre-
preneurs in different companies can work together concurrently rather than sequential-
ly on computer networks in real time.^42 To participate in a virtual corporation, an enter-
prise must focus on the things it does best and forge alliances with other companies,
each bringing its own special capability. Such an organization would be a world class
competitor, with the speed, power, and leading-edge technology to take advantage of
market opportunities.^43The Incubator Organization
A business incubatoris an organization that provides resources for new start-ups. It can
be a physical incubator locating all the start-ups in the same building and providing
shared space as well as shared resources like office equipment and administrative sup-
port. A virtual incubator, in contrast, can be geographically disbursed, sharing value-
added investors, leadership, and specialized expertise. Street Story 9.3 tells the story of
one of the most famous incubators—Idealab—and the entrepreneur who founded it, Bill
Gross.