This Focused Performance Weblog is a "business management blog" containing links and commentary related primarily to organizational effectiveness with a "Theory of Constraints" perspective. TOC is noted for its applications in Project Management and Multi-Project Management (Critical Chain) and Operations Management (Drum-Buffer-Rope), as well as in Marketing, Strategic Planning and Change Management (TOC Thinking Processes). If you are on an archive page, current postings are found here.
Thursday, November 06, 2003
Corporate Dis-Integration -- Dave Pollard, in Is a "World of Ends" the Future of Business, Too? takes a look at the dis-integration of formerly integrated entities known as "big corporations." He comes to a conclusion that I hinted at a while back. If outsourcing is taken to its logical conclusion, the original entity runs the risk of becoming an empty shell, consisting primarily of, in Dave's words,
"A small management team and an army of lawyers who contract all of the risky functions of the company to outside organizations. Assets that are all intellectual -- patents, trademarks, contracts, etc. Essentially no front-line employees, no liabilities, and no risks. And no direct contact with those pesky customers. The corporation has buffered itself against everything. In the all-important ROI, it has minimized its 'I', and guaranteed that, while the 'R' might not be as high as it was in the high-flying dot-com days, it's now virtually risk-free."
But not quite risk-free. To actually perform the manufacturing, the customer service, even the marketing and promotion, the "service providers" will inevitably start to understand the business better than those few at the center. As I said back in September, you better watch out if those to whom you outsource figure out how to do things better than you ever did because you don't want to do them anymore. The usual TOC advice of segmenting markets but not resources is being ignored to the nth degree in such situations, but then TOC usually assumes a goal of sustainability and growth of the organization to which it is applied.
(The Creative Generalist also touches on this in a recent post regarding the effects of the dis-integration of the creative industries. I wish CG would add an RSS feed. I keep missing good stuff on that weblog.)
Taking a cue from the concept of a world of ends that so aptly defines the network known as the Internet, Pollard points to the potential of critical knowledge disseminating out into the network of outsourced functions, leaving those at the center with little control over what once was their organization, with little role to play, and with less and less value add associated with their existence.
It's interesting that some organizations think that they need to break down functional silos and others are running full speed to create them through outsourcing. (These might not even be different organizations, come to think of it.) Our old siloed companies really probably only look like that cliched model when looking at an organization chart, since all the real work gets done in the "white space," in the cross-functional processes, and probably most importantly, in the informal networks of underlings that carry the real knowledge of the organization and actually get things done. The replacement of the org chart pyramid with the sphere of a networked (or as Dave Weinberger refers to it, hyperlinked) org is already a done deal in most organizations, and becoming openly evident even in that public world of power known as politics.
In the 80's and 90's, the effect of dissemination of knowledge and disintegration of power relationships was most strongly felt by middle management. I suspect that as we go forward, it's top management that might just need to watch out for their futures, unless they learn how to facilitate the internal network rather than dismantle it, only to watch it re-form outside of their illusory "control."
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