The Virtual Corporation: Structuring and Revitalizing the Corporation for the 21st Century

"A compelling vision of how businesses are evolving." -- New York Times
by William H. Davidow & Michael S. Malone, 1992
(notes by Kevin Guske, 2002)

Virtual Product: Instantaneously produced according to customer specifications

Virtual Corporation: Company that uses JIT / Kanban supply & manufacturing, work teams, flexible manufacturing, reusable engineering, streamlined organization, CAD/CAE, total quality and supports mass customization.

HP Motto:  Getting the right information to the right people at the right time to achieve our business objectives.

Information Types

  • Content historical, transactions
  • Form shape and composition
  • Behavior simulation of form information, increases quality via virtual prototypes
  • Action information that coverts to action, e.g. automation

    Kaizen ongoing improvement involving everyone, not immediate results

    5 Whys drilling down to a deeper understanding of a problem to get to the true root

    Components of Total Quality Control
  • Product performance / satisfaction: better than competition
  • Freedom from deficiencies / product dissatisfaction:  perfect quality

    4 Commandments of Product Quality
  • Definition:  Quality is the performance to requirements
  • System:  The prevention of defects
  • Performance Standard:  Zero defects
  • Measurement:  The price of nonconformance to perfect quality

    Flexible Manufacturing & Material Handling: Quality >> Dependability >> Cost >> Flexibility

    Customer / Supplier relationships
  • Total commitment customers vs. Always-a-share (from Winning & Keeping Industrial Customers by Barbara Bund Jackson)
  • Train customers how to interact with a virtual corporation, competent customers are easier to satisfy

    Services (in a Virtual Corporation)
  • Intangible
  • Produced & consumed almost simultaneously
  • Cannot be inventoried
  • Involve customers in the product so products / services can be perfect

    Virtual Corporation Management
  • Raise the level of competence so individuals doing the work can be trusted to do not only what they are not told, but also what they cant be told.
  • Peter Drucker: Restructuring the organization around information invariably results in a drastic cut in the number of management levels and, with it, the number of general management jobs.
  • The change from the term MIS to IS shows that the passage of information is no longer unidirectional.
  • Virtual centralization how corporate IS networks can find the balance between centralized, corporate-level information processing and the information needs of outlying small business units.
  • Organize around outcomes, not tasks

    IS Changes Within a Company
  • Initial shift in infrastructure
  • Marketing phase
  • Information-based organization

    Sources of Motivation
  • Mission people must believe in the important of their work
  • Agenda Control give people the opportunity to be in control of their own careers
  • Share of Value Creation reward for contribution to success based on measurable results
  • Learning change to learn new skills
  • Reputation a chance to make a name for oneself in terms of public / professional recognition

    CEO in a Virtual Corporation must:
  • Define the corporate vision and skillfully convey it to all employees at every level
  • Symbolize the company
  • Be the companys premiere generalist
  • Trust employees

    Changes for workers in a Virtual Corporation
  • More sophisticated training
  • Cross-disciplinary organizations, such as work teams with extensive decision-making powers
  • Hiring policies will select for adaptability to change
  • Unprecedented emphasis on retaining employees in a shrinking labor pool (??)
  • Unions & management will enter into mutually dependent relationships
  • Traditional notion of career redefined
  • Potential for a different form of worker alienation (??)

    US Army computerized Job Skills Education Program (JSEP): a corporate class jumped 3 math grade levels in 56 hours vs. traditional 1 grade level in 60-80 hours.

    Knowledge Management
  • Learn from mistakes accepting mistakes removes fear and encourages innovation
  • Learn from successes dont reinvent the wheel

    Work Teams
  • Can increase efficiency with workers helping to complete an overall task in addition to specific duties
  • Not guaranteed to increase productivity
  • Improve involvement and performance
  • Create positive morale
  • Create sense of ownership & commitment to the product the team creates

    Team Player Traits (Individuals can exhibit one or more of these traits from researcher Glenn Parker)
  • Contributor information & performance based
  • Collaborator source of teams vision
  • Challenger devils advocate
  • Communicator the facilitating heart of the team

    A great team includes members who make sure all four traits are exhibited in the right proportions.

    Allan Coxs Effective Work Team: A thinking organism where problems are named, assumptions challenged, alternatives generated, consequences assessed, priorities set, admissions made, competitors evaluated, missions validated, goals tested, hopes ventured, fears anticipated, successes expected, vulnerabilities expressed, contributions praised, absurdities tolerated, withdrawals noticed, victories celebrated and defeats overcome (KBG addition:) and mistakes learned from.

    Changes in Marketing a Virtual Corporation
  • Product differentiation by brand name alone meaningless as store brand quality improved
  • Traditional media outlets are no longer effective as competition from new media increases
  • Decline of mass marketing that has no meaning in a mass customization world

    From strategic & tactical marketing to value marketing
  • Corporate & product credibility
  • Quality
  • Service
  • Fairness
  • Customer Satisfaction what does customer expect?

    Creating good service for virtual products requires careful administration and interaction of 6 factors:
  • Strategy match companys service strengths with customers expectations
  • Leadership top management committed to customer service
  • Personnel customer face
  • Design design for service
  • Infrastructure to support providing service
  • Measurement test if other components are still working toward strategic goals

    Toward a Revitalized Economy

    We must produce goods in order to create jobs in both the industrial and service segments.

    We need products to export in order to earn the foreign exchange so we can afford to buy the goods and services we cannot effectively produce in our country.

    Many of the current problems of the United States, especially those in business, arise from a nation struggling and stumbling through the no-mans-land between one industrial era and the next.  Some of our businesses are already climbing into the twenty-first century, while many are still trapped in the labor wars of the 1930s or in management theories of the 1950s.  The laggards, despite heroic efforts, are losing ground to new domestic and international competitors because theyve failed to notice that the game has not only changed but moved to a different field.  Unless they adopt a different approach to their business, they will be lost and will not be able to be a part of the solution to the problem.

    It must be recognized that there will be no great masterstroke or earth-shattering new invention that will revivify our industry and restore vibrancy to our economy.  To succeed, a transformation must take place in almost every office of almost every company in almost every industry in the nation.  Furthermore, it must also be recognized that before wealth can be reinvested, redistributed, or spent, it must be created.

    The only way a large, advanced society can do this is to create high-quality, value-added products and services.  We cannot maintain, much less improve, our standard of living by building low-cost, undifferentiated commodities and pitting our highly paid labor against that of the developing countries of the world.

    The virtual corporation...will do best in a society that is highly educated with a high level of technical and computer-related skills.  It will most likely succeed in a country that possesses leading technology in fields related to consumer needs.  It will best be able to function in a country with an excellent communications and transportation infrastructure.  It will work best in an environment where there is teamwork between business and government.  It will function best in a society that is less confrontational.  It has its best chance to survive in an environment dedicated to long-term goals and constant improvement.  Its interests are best served by a society that saves more and consumes less.  And it will proliferate most widely in an environment that rewards business contributions that create jobs and wealth rather than merely rearrange them.

    The US has a de facto industrial policy, not the de jure policy it needs to support virtual corporations. Need an institution similar to the Federal Reserve Board to keep the US a major presence in all key technologies and to support the emergence of those technologies but not to interfere once underway. Select industries important to the future of the country, invest and provide incentives to encourage their development. E.g. DARPA, Malcolm Baldrige, SEMATECH

    Tax Policy
  • The only effective wealth redistribution system is prosperity.
  • Encourage long-term investment, savings, education, research
  • Discourage consumption of non-basic and luxury items and precious resources such as oil and water.
  • Steeply tax short-term gains and reduce or eliminate the tax on long-term gains for all investors to encourage both managers and investors to adopt a more distant business horizon.
  • Tax consumption?

  • Decentralize authority
  • Tax credits for employee training
  • Government (?) offer targeted incentives for specific skills by making loans and scholarships more readily available

  • Install national fiber-optic network or rebuild nations highways?
  • Encourage mass-transit

    Legal Reform
  • Force tort case losers to pay inconvenience fine
  • Assuming ALL costs discourages individual litigants from bringing suit against large corporations
  • Loser to pay portion of attorneys costs to discourage nuisance suits and settlement fishing expeditions
  • Alternative forms of dispute resolution
  • Limit punitive damages to reasonable multiple of actual damages?
  • Give responsibility of setting damages back to judges?

  • Management should form teams with labor OR rid itself of unions
  • Trust and teamwork: We must all hang together or assuredly we shall all hang separately.  -- Benjamin Franklin
  • Added: September 7th 2003
    Reviewer: Kevin Guske
    Score: 10  
    Hits: 4142