The new (and clunky-named) book from John Hagel and John Seely Brown is out and getting good reviews. Called “The Only Sustainable Edge: Why Business Strategy Depends on Productive Friction and Dynamic Specialisation”, the book argues that the recent ardor for small organizations is misplaced, that increasingly competitive global markets favor larger companies in many ways — but those companies must change the way they are structured:
Hagel and Seely Brown are particularly enamoured of Li & Fung, the Hong Kong-based clothing supplier that they define as a “process orchestrator”. It makes goods for western companies by drawing on a network of 7,500 partners – getting yarn from Korea, having it dyed in Thailand, woven in Taiwan, cut in Bangladesh and assembled in Mexico with a zipper from Japan.
Of course, the wonders of global supply chains are becoming familiar to all of us, but the authors’ point is not that there is a lot of manufacturing capacity out there for anybody smart enough to use it. They emphasise that these companies are partners to Li & Fung rather than simply suppliers. By operating in a network partners can help each other to innovate in both design and manufacture. There lies the catch for many western companies that are already struggling to get their heads around the impact of global outsourcing. The most obvious solution for a manufacturing company that can no longer afford to make things in its home country is to devolve all such responsibility to companies in Asia while holding on to higher-end functions such as design and marketing.
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