Evolving Management Theory and Small Businesses Using Specialized Services

An interesting article came up recently in the NYTimes that talked about how management models and practices have evolved, as opposed to the more commonly examined lens, as the original author put it, of focusing on the lessons to be gained for more precise economic policy and theory. In short, Mr. Lohr points to an insight by John Hagel III, the co-director of the Deloitte Center for Edge Innovation, as particularly interesting.

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.

I find this to be a wonderfully concise observation that has great implications. What happens to companies that transform into one of Hagel’s “bundles”? Do they lose something in the process? Or perhaps consider how a company starts off in one of those bundles. Do they end up growing some small competency out of sheer need? Are we at a point where the business process model can transcend the siloed nature of companies for a more seamless specialization model and have companies truly focus on what they do best? And if so, what happens to management layers in these companies (in other words, does specialization drive out the need for layers of management)?

Conclusion: It will be a brave new world, but I think there are two key problems that the “bundle” idea needs to overcome: trust and consequence. The majority of businesses in the US are small and things get done on an informal basis. With today’s legal infrastructure of contracts, privacy issues, and payment terms, it is hard to directly reward or control/influence the work of an outsourcer, particularly in smaller companies who rely on trust and consequence to get things done.

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