Architecture is the first of the three primary sources of distinctive capability. It is a network of relational contracts within, or around, the firm. Firms may establish these relationships with and among their employees (internal architecture), with their suppliers or customers (external architecture), or among a group of firms engaged in related activities (networks)
The value of architecture rests in the capacity of organizations which establish it to create organizational knowledge and routines, to respond flexibly to changing circumstances, and to achieve easy and open exchanges of information. Each of these is capable of creating an asset for the firm--organizational knowledge which is more valuable than the sum of individual knowledge, flexibility, and responsiveness which extends to the institution as well as to its members.
So I introduce architecture through the experience of Liverpool Football Club, which has not only consistently performed well but which has consistently performed better than the abilities of its players would seem to allow. This distinction between the attributes of the firm and the attributes of its members is important in appreciating both the social and the commercial implications of architecture. But such structures can only be created, and protected from imitation, in a framework of relational contracts. What can be written down can be reproduced. Architecture therefore depends on the ability of the firm to build and sustain long-term relationships and to establish an environment that penalizes opportunistic behaviour. As with other distinctive capabilities, it is easier to sustain architecture than to set out to create it.
Some companies--like IBM or Marks & Spencer--have a powerful and identifiable corporate culture. The term culture has been widely used, and abused, in business over the last few years, often to refer to rather superficial aspects of corporate organization. But with these firms everyone knows what is meant. Although admiration for their products and their achievements in the market-place is virtually universal, their culture is not to every