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The Unbundling of the Corporation

Here is an interesting article from the New York Times on the impact the credit crisis is having on corporate models.

Part of the article discusses the transformation of corporate structures:

Let’s try a different lens. How have past crises shaped management thinking and strategy? Innovation in management, after all, is adaptive. Management is not a science, like physics, with immutable laws and testable theories. Instead, management, at its best, is an intelligent response to outside forces, often disruptive ones.

Times of severe economic duress, management experts say, can serve to sharply accelerate trends already under way.

The technologies made it possible to monitor and coordinate business operations as never before. And the Depression made it imperative for managers to achieve efficient economies of scale to tap national markets, ensuring corporate survival amid a downward spiral in total demand.

A modern version of that kind of technology-aided shift in management practice and corporate organization could be in the offing, says John Hagel III, the co-director of the Deloitte Center for Edge Innovation, a research arm of the consulting firm.

The sharp downturn, according to Mr. Hagel, will force companies to go beyond simple cost-cutting to take a hard look at the economics of their businesses. Most companies, he says, are actually bundles of three different businesses: infrastructure management, product and service development and commercialization, and customer relations.

The current crisis, Mr. Hagel says, opens the door to “an unbundling of the corporation” to achieve greater efficiency and profitability. The trend, he notes, is already exemplified by specialist companies that focus on particular infrastructure fields. In logistics, Mr. Hagel says, many companies farm out those chores to Federal Express and UPS; in call centers, he points to Convergys; and in contract manufacturing, to Flextronics.

.. look like an Internet-era rerun of the corporate transformation of the 1930s and ’40s. “We’re facing the potential to have that play out again — this time with digital infrastructures that allow companies to organize and manage their activities in new ways”

The un-boxing of the organization is a trend I alluded to in my Ten Predictions for Project Management Trends in 2009 (see #8 the rise of the project workforce).

The article also mentions how large companies are creating smaller almost independent organizations within the larger entity and smaller teams within their product and service development divisions (for example) because they have learned that innovation and progress is far more likely to occur with such small teams. A trend I also see over and over in every project I have been involved with in my entire career.

The second part of the article discusses how the economic crisis is redefining the role corporations have to play now that government has been forced to get so intimately involved in their oversight and bailout:

TODAY, the pendulum is swinging back to a model in which corporations will be regarded more as social organizations, whose obligations extend well beyond Wall Street, according to Rakesh Khurana, a professor at Harvard Business School.

It is truly remarkable how important transparency, accountability, and social responsibility have become. I would even venture to say that these metrics are becoming as important as profits and growth in assessing a company’s value and whether it is deemed to be a dependable partner or a worthwhile investment.


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