It follows from this that a large, CEO-led company eager to become more sensitive and adaptable to its local marketplaces around the world should yield more power to its local units and
Trang 1collective intent What might seem to have been a strategy, such as
conquering Detroit, was in retrospect merely a fortuitous and
unpre-dictable interference pattern generated by the interplay of the actions of
the MaBE’s constituent agents, as each explored its adjacent
possibili-ties Because MaBEs don’t know where they’re going, all destinations
are open to them
Many allegedly “intentional” strategies are probably like that An
accident or chance encounter leads to a series of small steps each of
which makes sense on its own; a critical combination of actions and
circumstance produces an unlooked for success; the CEO is said to have
devised and implemented a brilliant strategy, retro-fitted on to a sequence
of more or less fortuitous events, and it is not in his or her interests to
disabuse the hero-worshippers and admit that “it just happened.”
There are lessons here for large companies
Small and local
Some say that a strength of large companies is that they have more people
than small companies in direct contact with customers This is obviously
true – a large circle has a larger circumference than a small circle But it’s
also true that the combined circumference of 10 circles is over three times
the circumference of one circle with the same total area It’s the
propor-tion of employees who are customer-facing that determines an
enter-prise’s sensitivity to the market and by that measure a 10-agent MaBE
beats a CEO-led company of the same size hands down
Another great strength of the MaBE, which is seen by many of those
who acknowledge its existence as a great weakness, is its lack of global
intent The great weakness of today’s giant company, which is often
seen as its great strength, is its subordination of local intent, of which
the MaBE has plenty, to a global vision
Local intent and locally selfish actions that may not always be in the
interests of the whole enterprise make the MaBE more sensitive to its
environment and more adaptable
It follows from this that a large, CEO-led company eager to become
more sensitive and adaptable to its local marketplaces around the world
should yield more power to its local units and allow them to pursue
their own, local goals, even if when so doing they act in ways that appear
to be against the interests of the global company as a whole
Dream on, seems the obvious response to that suggestion No CEO
being paid a king’s ransom each year to align the company behind a
Trang 2grand global strategy is going to allow local baronies to go their own
ways, ride roughshod over the rules designed to ensure global
align-ment, or generally refuse to sing from the group hymn sheet Giving
power away requires surrendering power, and only omnipotence can
justify today’s CEO pay packets
This is why CEOs tend nowadays, when embarking on the classic
CEO project of restructuring the company (almost de rigueur for a
new CEO because it affects everyone and is thus a clear
demonst-ration of CEO omnipotence), to rein in local baronies by switching
from a geography-based to a business-based structure If
globaliza-tion is to deliver value to shareholders, so the theory goes, regional
and national operations must be brought under the centre’s control
So hungry are the CEOs of global companies for “power over,” as
Mary Parker Follett put it (see Chapter 8), that, far from ceding power
to local managers, they take it away This centralization of power and
agency is an integral part of the globalization process
But there’s a disintegration yin within the integration yang
Power with
The CEO-led company is a command organization The CEO directs
and controls, through master–servant and principal–agent relationships
with its own employees, teams, and departments, and with its
value-chain neighbors (suppliers and distributors) All these have their own
plans, but it is taken for granted that they’re subordinate to the central
strategy The center dreams and everyone else realizes its dreams
But, in addition to illustrating the command nature of the CEO-led
company, globalization has been modifying it, by encouraging
CEO-led companies to form business relationships (strategic alliances,
joint ventures, and other kinds of partnership) in which they don’t
have full control
Partnership as a means to commercialize technological advances was
common long before James Watt linked his engineering genius to the
entrepreneurial flair and managerial talents of Matthew Boulton in the
18th century to develop, manufacture, and sell steam engines In our
own time, partnerships between inventive small firms and large companies
with marketing and distribution clout were often seen as an alternative to
licensing deals during the microelectronics and microbiology
revolu-tions of the 1970s and 1980s and they are still seen as a good way for
small, high-technology companies to reach overseas markets
Trang 3Partner-ships, both between CEO-led companies and within MaBEs, seem
likely to continue to play an important role in computer software
devel-opment (see Chapter 7)
Partnership was the only way for large companies to enter overseas
markets where majority local ownership was required by law It was also
seen as an effective way to respond to major plate shifts in the world
economy, such as the disintegration of the Soviet bloc, European
inte-gration, the opening up of China and globalization in general
Another partnership theme has been the replacement of
conven-tional market-based relationships between suppliers and buyers with
more intimate alliances First seen as a cheaper and less risky way to
exert control over the value chain than vertical integration, this model
later developed into the “value-adding partnership” (VAP); a group of
independent companies working together to manage the flow of goods
and services along their value chain Some early American railroads
resembled VAPs (see Chapter 7) and they’re comparable in some ways
to the Japanese keiretsu (business society) The idea of the VAP survives
in the modern VAR (value-added reseller); a firm favored by an original
supplier, because it adds additional value to its products or services
before selling them on
Whatever the motivations for such alliances and partnerships, they
all involve, to a greater or lesser extent, the teaming up of CEO-led
companies with other organizations that are not their servants or agents,
and whose life plans, although compatible with, are not subordinate
to theirs
A 1995 study by consultants Booz-Allen & Hamilton, found that
the number of joint ventures, licensing deals, collaborative research,
exchanges of technology, and marketing alliances had exploded over
the previous decade U.S companies had formed only 750 partnerships
in the 1970s, but were forming thousands a year in the mid-1990s as
globalization was getting into its stride The Booz-Allen study
esti-mated that revenues from alliances in 1995 accounted for 6 percent of
the revenues of America’s 1,000 largest companies, against less than 2
percent in 1987 The study’s authors concluded “a new chapter in the
evolution of free enterprise” had begun.1
Another study by Andersen Consulting (now Accenture) in 1999
found that 82 percent of Fortune 500 executives surveyed saw alliances
as prime vehicles for growth; alliances accounted, on average, for 26
percent of Fortune 500 members’ revenues (up from 11 percent in
1994), and for 6–15 percent of their market value; executives expected
alliances to account for 16–25 percent of the company’s market value
Trang 4within five years But there were downside risks The study estimated
that the 15 most successful alliances had created $72 billion of
share-holder value, but that the 15 least successful had destroyed $43 billion
of shareholder value.2
A study by consultants A T Kearney, found that the share prices of
the best exponents of partnership (those with a long history of successful
partnerships) outperformed their sector peers by over 5 percent, but
Whether it is because of these downside risks, which may have more
to do with the inability of CEO-led companies to yield power, than
risks inherent in partnership itself (see Partnership problems below), or
because there are only so many seats on the strategic alliance bus, and
they are all occupied now, one does not hear so much about alliances,
joint ventures, and partnerships these days In the late 1990s, alliances
between large, CEO-led companies were seen as the next “big thing”
and a lot was written about them There is still plenty of talk of networks
and alliances of small firms, but the idea of partnership strategies at
large companies has gone out of fashion
This is a pity, because the growth in partnerships between CEO-led
companies could, as Booz-Allen & Hamilton suggested, have been and
with luck may still be the start of a new chapter in the evolution of free
enterprise It is difficult but healthy for all-powerful CEOs accustomed
to commanding to be obliged, if their partnerships are to thrive, to
negotiate, compromise, and concede Partnerships only account for a
fraction of the total revenues of most CEO-led companies, but it’s a
vital fraction, because it is where business is going
Imagine a company whose business relationships consist entirely of
partnerships; a company like ARM Holdings (see box below)
From an Acorn
acorn Computers designed the world’s first commercial, single chip riSC (reduced
instruction set computer) in 1985 and used it in its Archimedes computer, launched
in 1987
But acorn, based in Cambridge in the u.K., knew the potential market for its fast, energy efficient chips, which were easy to program and had good code density (they
needed less memory than competing riSCs) extended way beyond personal
computers in an effort to tap the wider market, the company “spun out” the riSC
development team in november 1990, to form advanced riSC Machines (arM).
Trang 5the traditional way to exploit such a lead is to raise a bundle of money and set
up an integrated, design, development, manufacturing, and marketing business
When robin Saxby (now Sir robin) was being interviewed for the job of arM’s Ceo
he proposed another approach “My idea was to run lean and quickly, and get into
profit fast We had outstanding people, a leading architecture and the chance to
transform it from an acorn, into a global standard But we did not have the capital for
manufacturing.” 3
Saxby saw arM’s raison d’être as designing and developing advanced riSC processors and systems arM would stick to that everything else needed to make
arM’s chips world beaters would be provided by what Saxby called “partnering in
multiple dimensions.” arM did not form partnerships from time to time as
expedi-ency dictated it was built on them “that’s the benefit of a clean sheet of paper,”
said Saxby “We had no history so we could plan for [partnerships] from the outset
and concentrate on doing what we were best at.”
arM licenses its designs to its partners, who manufacture, develop applications and market their products “We can license to anyone we want,” said Saxby “We
charge an upfront license fee and then a royalty per piece.” one important attraction
for arM’s partners is that arM’s multiple partnerships make it easy for them to
arrange local sources of supply another attraction is the arM practice of publishing
its product development plans, or “roadmaps” as Saxby called them this allowed
arM’s partners to plan their own product development around specifications for
more advanced chips that arM had committed itself to developing.
the roadmaps exemplified arM’s partnering philosophy, because they revealed
to partners product development plans that a conventional semiconductor company
would have regarded as highly confidential Saxby saw it differently he wanted
arM’s partners to commit long term to the arM architecture to be willing to do that,
they would need, he believed, to know what arM was planning “it costs us and our
semiconductor partners, several million dollars to develop a new chip … we have to
be sure there are products ready and waiting for it.”
arM’s research and development is also based on partnerships, with universities and other research institutions as Saxby put it, “We recycle intellectual property.”
arM was part of what Saxby called the “Cambridge keiretsu”; an autocatalytic
network of academic and business people, which spawned arM’s parent, acorn,
and many other high-tech firms that have sprung up around the university town.
When i spoke with him in 1997, Saxby was happy with the results of the novel business model that he had proposed at his interview six years earlier Sales had
risen from less than £1 million in 1991, to £10 million in 1995, and after start-up
losses of £2 million, operating profits had reached £3 million “it seems to work in the
early stages, at least We are self-funding and cash generating.” Sales and profits
were £42 million and £9 million respectively in 1998, the year arM’s shares were
listed on the London and naSdaQ stock exchanges Saxby retired as chairman in
2006, leaving arM in rude health in the year to december 31st, 2008 arM revenues
were almost £300 million and pre-tax profits reached a new peak of over £100 million.
Trang 6ARM’s strategy, if one can call it that, is indistinguishable from its
partnership business model In effect, it borrows its strategy from its
partners It’s part of several distributed enterprises in several markets,
and its fate is the fate of all its partners ARM sees itself and its partners
as members of a community It claimed in a press release issued in
February 2009, for example, that the fact that over 60 “ARM Connected
Community” members would be showcasing ARM technology at the
forthcoming Mobile World Congress, in Barcelona, demonstrated “the
impressive strength and growth of the ARM ecosystem.”
ARM sees each partnership as long term It has no idea of where it
will lead It’s content to take one step at a time Its people are inspired,
not by visions, but by faith in the RISC technology they have mastered
They go where it leads They have no desire to plan its life in detail
They are great project planners, but they have no “strategy,” in the
normal sense
The parasite’s strategy
The emergence of companies such as ARM, with what might be called
“reduced instruction set” strategies derived from the strategies of other
companies, is a sign of evolutionary activity reminiscent of the activity
Thomas Ray observed in his computer-simulated, virtual world, Tierra
One of the problems in previous “Alife” (Artificial Life) research had
been that self-replicating computer programs were “brittle,” in the sense
that any mutation caused them to crash (in biological terms, they became
non-viable monsters that were invariably stillborn) Ray realized that the
quality of the genetic code that made it so robust when mutating, was its
small instruction set; only 64 instructions from the nucleic acid bases, are
translated into only 20 amino acids Ray gave Tierra, which first went live
on January 3, 1990, 32 instructions, far less than conventional computers
After Tierra had been running for a while a “mutant” appeared with
a slightly smaller instruction set, which quickly outnumbered its
ances-tors A few generations later a program emerged with half the original
instruction set (too few to reproduce in the conventional way), which
depended on others to reproduce These parasites were later displaced
in their turn by hyper-parasites, which reproduced by forcing other
parasites to help them by sharing their operating instructions This led
to the emergence of “societies,” where each creature relied on at least
one other to reproduce
Trang 7Ray’s societies are strikingly reminiscent of ARM’s ecosystem, and
the Linux community (see Chapter 7)
Tierra and other artificial worlds have shown that parasitism is a
powerful evolutionary strategy, and there is no reason to suppose the
business world is any different Few firms can produce without the help
of other agents and, as outsourcing and partnership-based enterprise
increase, companies in general are becoming less self-sufficient The
way they cling to their core competences and key functions suggests
CEOs see this reduction of self-sufficiency as a weakness Tierra suggests
the opposite Plans that are so simple as not to deserve the name
“strategy” and must borrow instructions from other agents, are more
robust than conventional strategies, because they work with, rather
than against, the self-organization that shapes their environment
Partnership problems
A partnership is a more complicated enterprise, both operationally and
psychologically, than an integrated, CEO-led company It has a different
shape It is bipolar, rather than monopolar, and cannot be managed by
command A CEO who, for good business reasons, forms a partnership
with another company (or companies), must recognize this difference
in shape and adopt a different management approach that relies less on
power and more on persuasion
In The Partnering Imperative, Anne Deering and Anne Murphy say
the essence of the challenge is the need to confront contradiction and
paradox To succeed in the era of partnership enterprise, agents
(individ-uals and firms) must learn to value difference and make it work for them
CEOs find working with difference hard going “How can we
main-tain our sense of identity, while accommodating different ways of doing
business locally?” they wonder “How can we allow our partners and
employees to grasp local opportunities, without causing chaos? How
can we develop understanding and trust and retain control? How can
we share without being exploited; open ourselves to the influence of
others and remain true to ourselves; share visions, when we see things
differently and see different things?”
The choice is between controlling partners, which risks alienating
them, and surrendering control, which risks chaos (As we’ve seen in
Chapter 7, it need not be chaos – except in a technical sense – because
complex adaptive systems can organize themselves and reach a state
where things are under control, but no one is in control.)
Trang 8One way to look at the competition between the CEO-led company
and new forms of enterprise, such as the MaBE, is as an exploration of
a “relationship space.” CEO-led companies favor or are confined by
their nature within one particular area of the relationship space, while
other forms of enterprise are free to roam further afield to more
productive regions Deering and Murphy aren’t as concerned as I am
with the structural implications of different regions of the relationship
space, but their “grid,” plotting relationships both within and between
partners according to their “ambitions” for the relationship on the
vertical axis, and “response to difference” on the horizontal, is an
elegant depiction of this space It is worth summarizing the six boxes
generated by their grid.3
Figure 9.1 The partnering grid
Reprinted with the kind permission of John Wiley & Sons Ltd
Command and control (bottom-left)
The widely held view is that the source of most of the problems in
relationships (including business partnerships), from the trivial, to the
life-threatening, is differences between the partners This leads to
poli-cies designed to eliminate or minimize differences in goals, processes,
values, and behavior, typically by establishing standards and rules, and
requiring all parties to the relationship to comply with them
Such relationships are based on formal contractual agreements, and
assume every contingency can and should be planned for in advance
Great care is taken, in pre-contractual preparation, to ensure the
part-nership is “set up right.” In these relationships, it is usual for one
partner, usually the largest, to draft the rules Because the partnership is
Command and control
Do and review Hearts and minds
Arm’s length
Radically new
Gridlock
Promote the positive
Trang 9merely a vehicle for completing a project, or a transaction, and consists
of little more than a formal exchange of resources, the relationship is
usually seen as short term, and its character usually reflects the character
of the dominant partner
Hearts and minds (top-left)
In this box, difference is reduced by a search for alignment rather than
an imposition of rules It’s assumed that if all the partners think alike,
they will work harmoniously and achieve the mutually desired outcomes
When leaders stress the need for the partners to “sing from the same
hymn sheet,” they’re advocating this hearts and minds approach CEOs
who believe that expressing a “vision” is the way to gain the
commit-ment of their people, tend to bring the same philosophy to their
partnerships
Arm’s length (bottom-middle)
There’s always a tendency for perceptions of a partnership to move to
an adjacent box as partners’ attitudes to difference change A
partner-ship that begins in hearts and minds, for example, may fail to achieve a
cultural fusion and move to command and control, or a command and
control partnership may mutate into arm’s length, when partners
become more tolerant The latter move is inevitable when neither
partner is dominant and the relationship continues for any length of
time, because differences can only be papered over for a while Sooner
or later they will become too obvious to ignore, and will have to be
tolerated if the partnership is to survive
In arm’s length relationships, risk is managed by agreeing to
differ and formal procedures for resolving disputes Good
communi-cations, and periodic checks on understanding, are seen as absolutely
vital in these partnerships Flexibility is seen as valuable, as long as it
does not require the loss of too much identity Relationships tend to
be distant and tinged with mild, mutual suspicion As with all
defen-sive relationships, there is a temporary quality to arm’s length
part-nerships They continue as long as anticipated benefits materialize,
but the partners reserve moral as well as contractual rights to
with-draw at their convenience, or seek other partners if the relationship
encounters problems
Do and review (top-middle)
A relationship that tolerates differences but takes a longer term view than
an arm’s length partnership, requires more committed and trusting
Trang 10part-ners Do and review extends arm’s length emphasis on planning and
process design, from the operational to the strategic aspects of the
part-nership Partners accept that goals are multi-dimensional and should
change in response to new opportunities and threats There is an ethic of
cooperation, an assumption that the partnership is long term and a focus
on learning and improving the partnership’s processes and systems
There is a feeling of sharing a future as well as a present These
part-nerships still move step by step, from project to project, but the purpose
of the reviews following each step is to learn how to improve the
part-nership, rather than to decide whether it is worth continuing with
Gridlock (bottom-right)
This box is easy to enter from arm’s length, but hard to occupy for
long, because of inherent contradictions Its location on the grid shows
it as lacking ambition, but valuing difference Deering and Murphy say
these attitudes are hard to reconcile If difference is regarded by both
partners as valuable, two things can happen Its potential can be
real-ized, in which case the partnership will tend to become more
ambi-tious; or can fail to materialize (because of conflict, bad management,
or disagreements about the appropriate balance of power), in which
case partners will begin to doubt the value of their differences, and be
inclined to move to the left of the grid
Radically new (top-right)
When differences are not merely valued but actively explored, the
part-ners may begin to see the relationship as a possible solution to the most
pressing problem of all; the need to change themselves utterly to cope
with a turbulent present and unpredictable future In these circumstances,
the partnership is seen, not as an adjunct to each partner, but part of its
essence Difference is valued and the perspectives of everyone in the two
organizations contribute to and define the relationship Instead of seeking
a shared vision of the future, the partners seek a picture of their shared
present by exploring each other’s views and outlooks They stop trying to
change, or convert each other (that would take them back to hearts and
minds) and embark on a joint search for the “common ground” on which
there are opportunities for profitable joint action
The partnership is never defined – it is encouraged to emerge from
the day-to-day experiences of working together All the prejudices of
separateness that made gridlock uncomfortable and frustrating are
abandoned, and a shared sense of destiny comes to dominate the
outlooks of all those involved
Trang 11Deering and Murphy say “radically new” should be seen as a hole in
the relationship space, because once you’re there, you are willing to
deal with all agents, wherever they are or see themselves to be on the
grid Those in radically new will partner with anyone, the more different
the better, and their much wider choice of partners gives them a
competitive advantage
Yielding power
On the Deering and Murphy grid the most comfortable habitats for a
CEO-led company are command and control, and hearts and minds
The hierarchical shape of such organizations, and the power with which
it endows their CEOs, make the middle two boxes hard to enter, and
the radically new box virtually inaccessible
Huge CEO pay packets contribute significantly to the immobility of
CEO-led companies in the relationship space, because moving to the
right of the grid involves yielding power and, as we’ve seen, only
omnipotence can justify enormous rewards
Given the complexity of the modern business landscape, the
erosion of economic and technological frontiers and the endless
battle for competitive advantage, the inability of CEO-led companies
to yield power to partners, and to regard difference as desirable and
life-sustaining, is a serious weakness The ability to attract and keep
good partners is becoming as crucial as the ability to attract and keep
good people
Most CEOs of large companies probably realize they need to move
to the partnership area of the strategic space, but because they have a
personal interest in the status quo (in integrated, hierarchical
organiza-tions where they have all the power) many are unwilling to move to the
appropriate area of the relationship space They play at partnerships on
the peripheries of their companies Even if it could be shown to be in
the interests of shareholders, it’s not in their interests to move their
companies lock, stock, and barrel to areas in the relationship space
where they have less control, but from where I believe the successful
enterprises of the future will emerge
A company that wants to move through the hole in the relationship
space should identify the business relationships where it has less than
complete control and use them as models for all relationships in a new
policy of multi-dimensional partnerships Once the route through the
hole has been negotiated, however, what emerges at the other end