Since the early 1990s, management gurus have predicted that corporations will go through a tumultuous transformation -- outsourcing all sorts of functions so they can focus on the things they do best. Steven Goldman, a history of philosophy and science professor at Lehigh University, has been writing about the changing shape of corporations for decades. A 1995 book he co-authored, Agile Competitors and Virtual Organizations, has become a classic. BusinessWeek Senior Writer Steve Hamm spoke to him recently. Here's an edited version of their conversation:
Q: How do you define the agile corporation?
A: We saw that a significant development in global commerce was emerging. Up until that point, the norm was the integrated firm. You do everything for yourself. But we defined an agile firm as one that identified a set of business capabilities that were central to high-profitability operations. These firms were focusing on creating solutions. They were packaging information and hardware together, and most of the profits came from information and services rather than the hardware itself.
We predicted that as firms moved in this direction...they would see that it was cheaper for others to provide certain functions, including manufacturing. We called on corporate executives to monitor their company positioning to allocate resources to the most profitable strategies.
Q: What's your reaction to how things have evolved?
A: We predicted there would be pressure on the integrated firm to [outsource]. Things have worked out pretty much as we thought. That includes the dark side. We warned of the potential job drain from the U.S. -- not just the low-skill jobs but engineering and R&D [see BW Cover Story, 3/21/05, "Outsourcing Innovation"].
Very few companies are agile -- as we defined it. But many now recognize how important it is to become agile.
Q: What's next?
A: We said that, in 2006, agility would be the price of entry into competitiveness. Once you're agile, how do you sustain profitability and growth? Unless you can sustain innovation, you stagnate. It's easier to copy in the agility era than it was in the hardware era. If a company brings out a profitable solution -- a mix of hardware and services -- others can copy it. You have only a short time to make a profit, and then you have to move on. As a result, companies are being forced to increase the speed of innovation.
Q: IBM (IBM) offers its clients product design and R&D as services. Is that going to help them increase their speed of innovation?
A: IBM is in the perfect position. They're offering their clients exactly the kind of services that an agile company needs. More rapid innovation means an ever-broadening range of products and services.
Q: What are the challenges for corporate leaders?
A: The challenge remains what we said it was 10 years ago. Agility isn't about inventing a magic box -- suddenly you're agile. It's an intellectual and structural capability. You have to be willing to embrace dynamism as the norm. There are no plateaus you can rest on. If dynamism is the norm, organizational structures can't be rigid. Organizations have to be reconfigurable. People have to be prepared to adapt rapidly and to collaborate.
Leaders also have to think about their organizations in a systemic way. They have to recognize there are no individual elements in a company. Everything is co-related to everything else.
Also, leaders have to think from the market in, not from the organization out. You don't start by saying, "This is what we can do." You start by looking at the market and seeing what the opportunities are, and then responding. If you don't have the capability to respond by yourself, you form partnerships so you can respond.