Virtual Corporations: Fast And Focused

It's one of those catch phrases that sound suspiciously like the latest reverie to come wafting out of some B-school guru's hookah. But the fact is that the virtual corporation is a powerful idea that offers some promising new approaches to the increasingly tough facts of life in the global marketplace. With product-development cycles speeding up, many companies simply can't move fast enough to take advantage of transitory market opportunities. Sure, large corporations can build new plants and lay on engineers, accountants, and marketers. But by the time they've done so, the window has closed. Nimbler, small companies often lack the clout or capabilities to respond.

To join in a virtual corporation, a company decides to focus on the thing it does best, whether it's design, manufacturing, marketing, or any of the other functions necessary to bring a product to market. It then forges temporary links with other companies, with each one bringing to the combination its own special ability. Such a "best of everything" organization could be a world-class competitor, with the speed, the muscle, and the leading-edge technology to pounce on the briefest of opportunities.

One big U.S. industry already operates this way. Ever since the collapse of the old Hollywood studio system, movies have been made by virtual corporations--assemblages of independent talents that come together for a specific project and then go their separate ways again. Maybe it's no coincidence that the movie business is one of our biggest export-success stories. As today's clumsy corporate titans struggle--and fail--to adapt to ever-faster change, maybe they would do well to ponder both the fate of the old studios and the promise of what replaced them.

Before it's here, it's on the Bloomberg Terminal.