Some time ago, Peter F. Drucker, the great observer and commentator on business and management trends, wrote in "The Effective Executive" that, at its heart, "the organization is an (Abstract)ion." By that, Mr. Drucker meant that organizations, whether in the private or public sectors of the economy, are constructs of the human mind. Mr. Drucker went on to compare organizations to the mathematical definition of a point -- something with neither size nor extension. The organizations in which we work are not made of bricks and mortar, he argued, but of ideas that dwell in the realms of strategy, structure, operations, finance and law. Business, therefore, is a uniquely human construct.
Many of today's leading business authors, including some of those contributing to this issue of Strategy & Business, would disagree with the venerable Mr. Drucker. True, organizations are built upon a bedrock of ideas, but they are also the product of a set of relationships, formal and informal, that have their roots in nature. Understanding these relationships -- how they work and how they can be managed -- can offer business leaders many practical insights that will help them compete.
For example, in "The Four Stages of a Business: Life Cycle Lessons From Nature," James F. Moore, of Geo Partners Research, writes that companies do not exist independently but rather as members of what can be called "business ecosystems." Business ecosystems include suppliers, customers and eventually competitors. By carefully managing the relationships necessary to support an ecosystem, a business can grow, prosper and avoid extinction, Mr. Moore contends. He bases his findings not simply upon observations of today's successful and unsuccessful companies, but also upon a thorough reading of the latest research in biology.
This issue's Thought Leader, C.K. Prahalad, of the University of Michigan, and the subject of the business leader interview, Jean-René Fourtou, chairman of Rhône-Poulenc, both argue that companies must pay more attention to how they structure their internal relationships. Both leaders, one from academia and the other from the front lines of European business, believe that meaningful human connections inside businesses are vital.
In Professor Prahalad's view, strategy should be set from the bottom up, instead of from the top down, and he outlines a new way to organize the strategy-making process so that contributions come from a company's younger and brighter staff -- and even from its more contrary members. The reason for doing this, he says, is that strategy-setting should be seen as a revolutionary act aimed at guaranteeing a company's survival.
In Mr. Fourtou's view, companies are composed of individuals who freely choose to come together and act as teams. But at Rhône-Poulenc, teams don't make decisions, individuals do, and to support individual decision-making, Mr. Fourtou has designed a new set of relationships within the company. At Rhône-Poulenc, one of France's largest and most global businesses, people are grouped into "families." Some families are technically oriented -- research scientists, for example -- while others are specialized in different ways, such as marketers and lawyers. In Mr. Fourtou's system, each family has to meet at least once a year in an effort to create a sense of common purpose, to share information and values and to renew their sense of commitment to the organization.
Internal relationships are only one set of issues. Companies must also manage their relationships with customers. But how does a company pull that off if it does not control its own distribution channels? Using case examples and an analytical framework derived from field research, Evan R. Hirsh, a principal at Booz-Allen & Hamilton, argues that the best companies maintain a dialogue with their end customers and work with their channel partners to insure that the customers' needs are met. To guarantee that the "channels challenge" is won, companies must design their processes so that they can deliver service and gather information in new ways, Mr. Hirsh says.
In this issue's case study, Rosabeth Moss Kanter, a professor at the Harvard Business School, explores the Lippo Group of Indonesia and Hong Kong. By building and then carefully managing an intricate set of personal relationships, Lippo's founder, Mochtar Riady, created from scratch a global financial powerhouse with $11 billion in assets. Lippo's relationships stretch from rural Indonesia to cosmopolitan Hong Kong and throughout the United States. Lippo uses these relationships not only to build its business and sell its services, but also to deploy new capabilities. These networks help Lippo learn.
Also in this issue, "The New Nature of Trade," by Nico Colchester, editorial director of the Economist Intelligence Unit, "Along the Infobahn: Data Warehouses," by Lawrence M. Fisher of The New York Times, and reviews of the winning books in the 1995 Financial Times/Booz-Allen & Hamilton Global Business Book Awards, by Charles E. Lucier, of Booz-Allen. In addition, there are briefs, more reviews and capsule summaries of the world's best business books.
Joel Kurtzman, Editor
Joel Kurtzman is editor-in-chief of Strategy+Business.