No company can assemble all the skills it needs within its own walls. You need a network of talented and trusted allies to succeed today.
In the premier issue of the publication Leader to Leader (1996), Peter Drucker made the following observation:
I met with a very big company not long ago - around 80 or so on the Fortune 500 list. They expect to be number 5 on that list in 10 years, and I shocked them by saying I don't think that list will exist, so that goal is meaningless. That list basically assumes that everything you do is under your roof and is owned by you and run by you. But already in many companies, most work is done through alliances, joint ventures, minority participation, and very informal agreements which no lawyer could possibly handle."
I don't agree with Drucker that the Fortune 500 list will be meaningless, but the trend he's citing is unequivocal. In a knowledge-based, free-market global economy, it is naive to assume that any organization can lock up all the necessary resources under one roof. Why would you want to do so, anyway? In a world where speed and agility are paramount virtues, and where your goal is to leap over - not waddle among - competitors, is it smart to weigh yourself down with a heavy, often debt-laden, vertically integrated organization?
Here's an alternative. As Tom Peters has noted, the key nowadays is not to own the resources, but to have access to them. So consider: Why not keep your in-house workforce as small as possible and borrow the best resources and talent? Why not determine what you are "world-class great" in and then link up with partners who are world-class great in other functions and in the non-value-adding activities that currently bleed you costwise while under your roof?
In the past few issues of Management Review, I have been outlining the "giant steps" described m my latest book, Leapfrogging the Competition: Five Giant Steps to Market Leadership. What I have described thus far in this column represents the fourth giant step in strategic management. As the title states, you literally must transform your organization into a web of relationships.
The premise is simple: To leapfrog, you need allies. Organizations that wish to leapfrog the competition continually cultivate trusted networks around the world because they do not believe for a minute that they, or anyone else, can magically collect and hoard the most valuable assets - tangible and intangible - within the confines of their four walls. In fact, they don't even view their organizations in terms of four walls. They view them as extensions of other organizations -their allies - all of which contribute unique value.
This is why Sun Microsystems enthusiastically relies on companies such as Netscape, IBM and Oracle to help develop software and business applications for its burgeoning Java technology. This is why EDS takes over many of Rolls-Royce Aerospace Group's software and hardware functions, designing engineering processes that substantially reduce the Group's product-development cycle time. This is not a simple case of "outsourcing"; it is what EDS calls "co-sourcing." The two have a genuine partnership aimed at achieving commonly held, bold goals. It is a sincere collaboration in which the parties physically intermingle with each other at work and hold ongoing, open discussions on planning, design and execution. It's also a vital product-development web, to the extent that EDS has built a research center near the Rolls-Royce facility and several hundred Rolls-Royce people technically "report" to EDS folks.
Think Global, Think Focused
Webs allow each participating organization to concentrate on developing and capitalizing on its own special competencies and niches without being diverted by activities and functions in which it is not splendid - but which someone else in the web is. Hence, each web member becomes an active and vibrant part of a network tide that raises all boats. …