The Smiling Curve Positioning Model
Choose a defensible edge of the value chain instead of getting trapped between them
- Difficulty
- Moderate
- Time to result
- ~weeks to results
- Steps
- 5
- Confidence
- 96%
Map the industry from upstream production through design, distribution, and the final customer experience, then evaluate where value and defensibility accumulate. One attractive edge is scaled, capital-intensive execution, such as semiconductor fabrication or contract manufacturing. The other is controlling the differentiated product, brand, ecosystem, and user experience. Companies caught between these positions may perform meaningful design or integration work without possessing the scale economics of the upstream edge or the customer control of the downstream edge. The framework therefore turns positioning into a deliberate choice: dominate a defensible edge, acquire the capabilities needed to move there, or accept that stronger partners may capture most of the value.
Origin
The hosts apply Ben Thompson's smiling curve to HTC, contrasting contract manufacturers and semiconductor foundries with companies such as Apple that control the user experience.
Core principles
- 01Value concentrates at differentiated ends of a value chain
- 02Undifferentiated middle layers face margin and bargaining pressure
- 03Operational scale can be defensible even without owning the customer
- 04Controlling the user experience can capture disproportionate value
How to run it
- 1
Map the value chain
List the major activities from raw inputs and manufacturing through product design, distribution, software, and customer experience.
Pro tip Include important complements such as supply-chain coordination and platform ownership.
Watch out Do not collapse distinct activities into a vague category such as hardware.
- 2
Locate value and control
Estimate the margins, bargaining power, differentiation, and customer ownership associated with each activity.
Pro tip Look for control over scarce capacity, standards, data, distribution, or demand.
Watch out Revenue volume alone does not prove that a layer captures durable value.
- 3
Diagnose the current position
Determine whether the company occupies a defensible edge or an exposed middle position that partners can replace, acquire, or commoditize.
Pro tip Test the position by asking which party could walk away most easily.
Watch out Technical contribution does not automatically translate into strategic control.
- 4
Choose an edge
Decide whether to win through scaled specialist execution or through control of the integrated customer experience.
Pro tip Choose the edge that best matches existing assets and organizational DNA.
Watch out Trying to occupy both edges without sufficient capital and coordination can increase complexity without increasing power.
- 5
Realign capabilities
Invest, partner, acquire, or divest so that talent and capital reinforce the selected position.
Pro tip Track whether each investment increases differentiation or scale at the chosen edge.
Watch out Remaining in the middle by default is still a strategic decision, but usually a weak one.
In the wild
In a hypothetical application, HTC sheds weak consumer-brand activities and focuses its capital on becoming a highly reliable design-and-manufacturing partner for emerging device companies. It builds supply-chain scale, faster launch cycles, and specialized engineering capabilities rather than competing directly with its customers.
→ HTC gains a clearer position at the operational edge of the value chain and reduces its exposure to consumer-brand competition.
A hardware company that already owns a differentiated operating system acquires product engineering expertise, coordinates component sourcing, and tightly connects silicon, security, software, and industrial design.
→ The company moves toward the customer-experience edge and can deliver features that loosely coordinated competitors struggle to reproduce.
Common mistakes
Confusing activity with value capture
A company may perform difficult design or manufacturing work while another participant controls the customer, standards, or economics. Evaluate bargaining power rather than effort alone.
Straddling without an advantage
Trying to be both a specialist supplier and a branded competitor can create channel conflict and divided priorities without securing either edge.
Treating all manufacturing as commodity work
Scaled manufacturing and supply-chain expertise can be strategically defensible when they require scarce capital, relationships, or operational knowledge.
Is it for you?
Best for
It is best for companies deciding whether to specialize in infrastructure, manufacturing, platforms, products, or customer experience.
Not ideal for
It is not ideal for young markets whose value chain and sources of differentiation remain too fluid to map reliably.
From the transcript
“back to Ben Thompson's smiling curve.”
“either you're at one end of the spectrum where you're just the contract manufacturer, you are the semiconductor foundry, uh, or you are you know…”
“but if you're in the middle there, like that's a bad place to be.”
From the episode
HTC, Google and the Future of Mobile