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June 15, 2005
The role of the firm
Being successful in business means living on the edge, according to a new book The Only Sustainable Edge: Why Business Strategy Depends on Productive Friction and Dynamic Specialization by John Hagel and John Seely Brown. In recent interview (Can Your Firm Develop a Sustainable Edge? Ask John Hagel and John Seely Brown - Knowledge@Wharton) John Hagel explained:
In fact, the title has multiple meanings, as anyone who knows John Seely Brown and myself will appreciate. We are never content with a single meaning. "The only sustainable edge" certainly has to do with the notion of competitive advantage, but it also has to do with the view that the ability to develop capabilities involves operating at the edge. Of course, "edge" has multiple meanings as well. It means the edge of the enterprise, the edge of business processes, geographic edges in terms of emerging economies, demographic edges in terms of younger generations coming in with different mindsets - it's a whole set of edges that create the opportunity for accelerating capability building.
While their theory of accelerating capability is interesting (I wonder how long capabilities can continue to accelerate), I am more interested in their ideas on the future of the firm.
Ultimately what we see is the re-conceiving of the role of the firm. Traditionally the role of the firm has been to increase the efficiency of transaction costs, whereas we see more and more that the firm has to provide opportunities for capability building of the people within the firm. If the firm cannot do that, people will leave and seek out environments that can help them accelerate capability building better. It's a very different way of thinking about what the firm needs to provide to its employees, and the role of the employees within the firm.
This may be a bit of "blue-sky" thinking. But the trend toward virtual organizations continues, with companies outsourcing more and more functions to other companies (e.g. shipping and logistics to UPS, payroll and even HR functions to Paychex, etc.). The current corporate form was an invention of the late 19th Century (as Alfred Chandler described so well in The Visible Hand). The organization form for business in the 21st Century is likely to be very different.
Posted by Ken Jarboe at June 15, 2005 12:20 PM
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