Thursday, March 23, 2017
A Systemic Approach to Corporate Performance and Cross-Corporate Innovation
Consider the nature of an organization that is based on a number of departments such as design departments, production departments, advertising departments, etc... Each has a value to the organization but often become non-competitive due to the captive nature of their internal customers. Such departments can lose their efficiency, and when this occurs across an entire organization, it could mean bankruptcy.
According to the article, if we were to allow them to bill internal customers for their budgets and take on additional work outside of the firm it is possible to raise their performance level by keeping them connected to the needs of the market. If internal departments become non-competitive they should be adjusted and changed or closed down so the function can be outsourced.
While the article doesn't address this question, the selling of services to the outside market creates greater cross-corporate collaboration by encouraging transferring of new ideas through corporate collaboration. The greater connection among businesses within a cluster, the more likely they will transfer new knowledge, reduce costs, and innovate. Selling services allows companies to borrow competencies for projects.
One one hand, we have the benefit of improved internal performance, efficiency, and costs while on the other hand we have greater collaboration with other companies that can lead to cluster collaboration and innovation.
1. Improved performance
2. Improved Efficiency
3. Reduction of Internal Costs
4. Increased revenue sources.
1. Improved collaboration.
2. Stronger transference of knowledge.
3. Development of more efficient clusters.
4. Creation of new industries.
The systemic approach to billable services and outside customers can work for some departments. For example, product design, labor competencies, marketing, product knowledge, and many others have formulated specific competencies based on their unique approaches to the market. Cluster members may want to contract those abilities to help them launch or service a new product. As these companies buy and sell their unique abilities they increase the performance of the entire cluster and create new cluster efficiencies that may be difficult to match in other areas.
Rother, W. (2014). A systemic approach to improving corporate performance. Business Management Dynamics, 4 (4).