Since its inception, BuyIT has been using an off-the-shelf solution to manage its inventory. However, its business intelligence reports are continuously showing inade‐ quate predictions of its customers’ demands. Consequently, BuyIT fails to replenish its stock of the most popular products and is wasting warehouse real estate on the unpopular products. After evaluating a few alternative inventory management solu‐ tions, BuyIT’s management team makes the strategic decision to invest in designing and building an in-house system. This in-house solution will consider the intricacies of the products BuyIT sells and make better predictions of customers’ demands.

BuyIT’s decision to replace the off-the-shelf solution with its own implementation has turned inventory management from a generic subdomain into a core subdomain: successful implementation of the functionality will provide BuyIT additional compet‐ itive advantage over its competitors—the competitors will remain “stuck” with the generic solution and will not be able to use the advanced demand prediction algo‐ rithms invented and developed by BuyIT.

A real-life textbook example of a company turning a generic subdomain into a core subdomain is Amazon. Like all service providers, Amazon needed an infrastructure on which to run its services. The company was able to “reinvent” the way it managed its physical infrastructure and later even turned it into a profitable business: Amazon Web Services.