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Modular companies

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Posted 04/01/2008


Chapter 5, mess and organization, of A perfect mess may be one of the most interesting part, if you’re interested in the management or stuff. Take the example of the explanation on modular companies (it’s somewhat long, but it’s certainly worth it):

The basic thinking behind this more freewheeling sort of structure is to focus on new, “spin-up” business units that quickly pop into existence when an opportunity present itself and then compete for resources within the company. If the spin-up thrives, it’s allowed to quickly expand without limit, pulling whatever it needs from other parts of the company, even if doing so hurts the rest of the company. If it doesn’t thrive, it’s quickly put out of its misery. It’s a different way of thinking about a company — not as a seamless whole, but as a fractured conglomeration of transitory, semi-independent units, some leaping into being and growing quickly, others withering away, with employees and funding flowing freely and fast between them. University of Milan researcher Mario Benassi refers to spin-up-friendly companies as “modular” companies, and espouses three basic principles for them: growing in pieces instead of holistically; being as quick to shrink or get rid of logy pieces of the company as to invest in the promising ones; and being prepared to reorient its efforts around any of the pieces. “Modular companies are more focused, and faster,” he says. “They can quickly get rid of activities they’re not interested in anymore.” Traditional companies, by contrast, tend to be so fixated on preserving the same core business that potentially hot new markets are poorly served — if they are served at all. As challenging as coming up with promising new spin-up ideas may be, the hardest part of the process may be to quickly close down those ideas that don’t show signs of panning out. Nijkamp says a company with a spin-up failure rate of 60 percent would be doing quite well, suggesting that the key is to keep a high churn rate. In that light, the spin-up concept starts to look a little less like brillian business planning and a little more like trial and error. (pp. 167 — 8)

Inertia is a terrible force. You would envy if you happen to find a person or company that defies the force over and over again. But, that doesn’t mean mimicking whatever it’s doing, you can defy the force, too. Thinking like this, however, undermines the basic assumption of the science of management: There is a certain way to make money. If somebody succeeds, by all means copy them and emulate their success. The science of management will be happy to help you out.

Very well… Try copying those successful modular companies, like Scientific Generics, “located in Waltham, Massachusetts, and Cambridge, England” (p. 167). And, good luck.


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