Business Handedness
Last night the December issue of Harvard Business Review landed in my inbox and it had an excellent article by Geoffrey Moore called “Strategy and Your Stronger Hand.” The main idea of the article is that businesses have to choose between being supporting “Complex Systems” or a “Volume Operations.” When companies try to straddle this dilemma, they cause problems for themselves.
The best strategic moves for a company are ones that supplement rather than complement the company's current dominant business model. This is a form of saying “stick to your knitting” but requires a new understanding of the knitting involved. A better metaphor would be to say that companies should favor their dominant hand.
This is an interesting insight, because I have perceived that an important decision for a business is where along the continuum from products to services companies wish to operate. Inherent in that choice was whether to handle volume operations oneself or to outsource it and focus on adding value in some other way.
Moore's article indicates that it's a more complex choice. Does your organization want to seek out customers and make complex custom solutions for them (the example used was IBM Global Services, the consulting arm of IBM) or does it wish to deliver products for thousands or millions of customers making a small amount of money on each sale? IBM shows up on the opposite hand of Dell. Obviously both companies make money, but they do it in quite different ways. Also, each company rises and falls as new innovations take hold in the marketplace.
Moore indicates that these two models are the only ones that scale to large organizations. There are other models when it comes to small businesses, but at some point you must choose between being a McDonald's or being Ruth's Chris. It's very hard to be both. In another vein, at some point your custom-built PC business needs to decide between making custom solutions (hand-built servers for specific purposes, tied with maintenance and support) for a small number of customers or mass-producing the most popular PC designs for a large marketplace.
Moore concentrates on the various choices that result from the selection of the model, and the implications for all functions of the organization. He points out the negative consequences of acquiring an organization with the opposite handedness (recall Compaq merging with DEC, for example). To me, it seems like he's got another book in the works, because he is clearly laying out a plan of attack for either hand, and the mixed model of trying to do both sets of activities in one organization. We'll have to see if it's another Crossing the Chasm or Inside the Tornado.
It's a great article, and with HBR you can usually get reprints in a few months. For this one, look for Reprint R0512C or 2394 on Harvard Business School Press's website.
Amazon.com links:
Josh Poulson
Posted Sunday, Nov 27 2005 09:55 AM
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