Competing in the New Economy
steer academic research but also guide the decision making processes of firms.
1. How to Conceptualise Economies of Expertise?
Unlike in the era of portfolio of businesses and portfolio of capabilities, the role of corporate ventures and investments now has emerged as an important mechanism to create network centrality and consequently increase economies of expertise. Long considered a critical resource for strategy, the new challenge today is how economies of expertise are being leveraged through relationships.
The benefits of economies of expertise come from a firm’s centrality in the knowledge network. Centrality within a network matters because of preferential access through understanding the likely trajectories of knowledge. These relationships could be through linkages with leading academia transfer technology offices or leading laboratories for developing pilot ideas and prototypes. These are different from passive, tangential relationships in the limited domain of high-technology areas in the industrial age and are emerging as central to acquire and leverage expertise in a faster knowledge life cycle.
For example, Venture Capitalist are centrally connected to the creation of new knowledge today as they have preferential access to expertise through the rights that they have received as part of their initial investments. In addition, Microsoft and Intel have used a significant part of their venture funds as investments in a wide domain of expertise. They use these funds to probe, test and stimulate how the technology might evolve in this fast changing era.
2. Does Economies of Expertise Lead to Differential Performance
Strategy has always been a field called to explain performance through strategic actions – whether they relate to business unit strategy or corporate strategy. That is today can one best explain the success of today’s business leaders wit the concepts of scale and scope or can this success be better explained by concepts rooted in expertise?
Performance = f(scale, scope, expertise)
As such, one needs to understand that the drivers of market capitalisation are calling for better measures of understanding knowledge based measures of understanding. Practitioners like Skandia, Xerox and BP are experimenting with different ways of assessing how their approaches to managing knowledge drives their bottom line. The complication is that expertise may indeed be a common cause of scale and scope based effects. For instance, knowledge may enhance an organisational’s ability to manage scale and scope (by deploying managerial expertise across divisions and across relationships).
For example, GE is in the midst of developing and extending its learning activities to tap into and learn from its extended network of alliances and partnerships. In addition, its Corporate Learning Centre has spearheaded the sharing of best practices across the different business units in areas such as globalisation, services, six-sigma quality processes and the internet/e-business.
3. Does One Need New Organising Principles?
Our traditional principals of organising revolved around efficiency. Right from Frederick Taylor, businesses have been preoccupied to designing work units that limit uncertainty or what the organisation considers the [next page]