February 10, 2006 – 11:19 pm
“Partners in Wealth – The ins and outs of collaboration” (The Economist, January 21st-27th 2006) is the title of an article that I found very intriguing. This article was part of a section in that issue of The Economist entitled “The new organization”. | Published:
The article quotes from a paper entitled “The Strategic Enterprise: Rethinking the Design of Complex Organizations” by Mercer Delta. In the paper is a description of “… its vision of the organizational architecture of the future, made up of a number of strategically aligned business ‘linked closely where there are opportunities to create value by leveraging shared capabilities, but only loosely where the greater value lies in differentiated focus.’ In other words, close and loose relationships will exist within the same organization.”
I believe that the point is that the differentiation between “We” (those of us within the organization) and “Them” (those outside our organization such as suppliers, vendors, customers(?), …) has become blurred.
“One of the most contentious of these new relationships is outsourcing – the handing over to others of what were once considered to be core functions of the company.”
The article makes the point that outsourcing is a fluid activity … that what makes business sense today, may not make business sense tomorrow. At sometime in the future, it may make strategic business sense to bring that particular function back in-house. The example that the article gives is the handling of payment processing. This activity would appear to be a natural choice for outsourcing to a low cost labor market. Apparently banks have begun to realize that by outsourcing this activity, they have given up a valuable information source. With available data mining applications, they have discovered that they are able to identify new products and/ or markets.
The example that the article gives for these “close and loose” organizational structures is the design by Boeing of their new 787 model. In a break from past aircraft development projects where the entire design work was performed in-house, Boeing is designing this aircraft with the active participation of its 787 partners in the design process. “The main reason to change, says Mike Blair, head of the 787 development team, was that the company realized it had to trawl the world and find the best suppliers in order to compete with its main rival in the market for commercial aircraft, … it scoured the globe for new partners … some in Europe, some in Japan … in the United States.” The company significantly reduced the number “partners” from previous aircraft development projects and asked “partners (to) share the responsibility for a project.” Each partner is “responsible for all aspects of their piece of the puzzle.” “As Mr. Blair says, ‘it puts a high premium on the choice of partners in the first place.’ “
In summary, I believe the implications are that organizations must remain flexible, constantly reforming the teams that will tackle each business opportunity with the team members (both internal and external partners) that provide the best value to the customer.