Aom panel
There is a long debate in management regarding the borders of the firm. The spread of multiple platforms influenced this debate. The growth of it will do this again.
Summero Summer, the Management Academy holds its annual conference where 5,000 – 10,000 business professors and business researchers collect ideas. For the last five years, I have been expecting a symposium made up of some of the best thinkers in the world for multi -side platforms. At Agoikago in August 2024, the panel included Liz Altman from the University of Massachusetts Lowell, Annabelle Gawer from the University of Surrey, Grace GU from the University of Southern California and Marshall Van Alstyne from Boston University.
As the conversation touched on dozens of issues at the intersection of platforms with many sides and he, one still lasts in my mind a few months later.
The firm’s border
Where should a leader set the company’s borders? Initially, this question regarding VS partners and relied on economic theories of transaction costs. For example, should the leader of a company that makes automobiles directly hire people who make motors, or should the engine (or its subcomponents) transfer to suppliers to a different company?
This is not an insignificant or purely theoretical question. Ford’s chairman has admitted that his company struggles to build a fully electric vehicle because there are thousands of supplies, each with its own program for its ingredients. Controling all parts of the business model, from production to sale, is what has allowed Tels to explode in what many considered a closed industry.
Although unequal throughout the industries, the general tendency has been to transfer many parts of an operation so that each firm can focus on its unique competence. The result (usually) results in higher quality products and lower costs. There are some visible exceptions, such as Boeing, where firms transferred a lot and proved unable to constantly integrate thousands of suppliers into a single product.
This question evolved where new ideas should come from. Should a leader rely exclusively on employees within the firm to think about new innovative ideas, or should the company look for opinions from people outside the company walls? The latter, labeled “Innovation Open”, dramatically accelerated the rhythm, field and creativity of the company’s innovations.
Multi -sided platforms again changed conventional wisdom at strong borders. Expedia books more travel than any other firm in the world and yet do not own a plane, boat, car or hotel room. Not only does he not own its supply, nor does it control its supply. An airline can stop a flight route without the consent of Expedia. Or, in the absence of a contract, a hotel can remove itself from the inventory of Expedia. This change created a change in leadership research, expanding beyond advice on how a company’s general director should lead employees and activities within a firm on how a company CEO should orchestrate partners in a company ecosystem.
The spread of it within the companies will postpone another shift to the firm’s borders. While open innovation brings ideas from other people within the firm, it brings all human knowledge to every employee, client and competitor. The Director General is no longer the person in the company with more wisdom or knowledge. In many cases, the role of CEO is the first to accelerate the adoption of it to improve employee productivity, second to promote thinking about how it can improve customer offers, and third to give priority in which energy projects it should continue in implementation.
This evolution of a firm’s roles and boundaries may seem gradual to those who live through it on a daily basis, but it is harsh when comparing companies with different borders with each other. The leaders of the multifaceted platforms they embrace are facing very different challenges than the leaders of vertically integrated manufacturing companies. The former have much less direct control over most aspects of the service they provide and, therefore, should emphasize indirect obedience and adaptation. In contrast, the latter improves benefit by exercising more control.
Wider impact
The narrative of a firm’s boundaries does not only affect the firm or its supply chain. If many firms decide to transfer some of their existing “out -of -company” positions to him, we will see a huge decline in general employment. This part of the story is already known. This article shows the specific logic of the company that flows into greater trends.