Flash Forward

Must-know management ideas to keep your business moving.
Magazine Contributor
7 min read

This story appears in the January 1999 issue of Entrepreneur. Subscribe »

Like a bride on her way to the altar, an entrepreneur looking for the latest trends in management will come up with something old, something new and something borrowed (though hopefully not something blue). Among the hottest management trends are tried-and-true strategic alliances, leading-edge knowledge management, and the idea that theories borrowed from biology help explain the world of business.

Mark Henricks is an Austin, Texas, writer who specializes in business topics and has written for Entrepreneur for 10 years.

Strategically Thinking

Cooperation between companies has been going on for as long as people have been doing business, but lately the interest in alliances seems to be heating up. Companies are getting together to share expertise, set technological standards, market cooperatively and pursue many other joint objectives.

A Coopers & Lybrand LLP study of fast-growing businesses found 48 percent more alliances in 1997 than three years ago. Mitchell Lee Marks, a San Francisco alliance consultant and co-author with Philip H. Mirvis of Joining Forces (Jossey Bass), cites separate studies showing some 25,000 alliances were formed by U.S. firms in 1995. And small business led the pack: About 90 percent of CEOs of small, fast-growing companies reported intentions to form business alliances. Marks estimates that in the last four years, U.S. companies have formed upwards of 45,000 alliances.

Why now? Globalization is one spur, according to Marks. "There are many, many international alliances," he says. "That's because so many foreign countries have regulations against foreign ownership."

The ever-increasing pace of technological change and the opportunities it presents also encourages alliances, according to Hal R. Varian, dean of the school of information management and systems at the University of California, Berkeley, and co-author with Carl Shapiro of Information Rules (Harvard Business School Press), a guide to the new networked economy. Companies are especially prone to form alliances to set technological standards, such as the standard for 56K computer modems that went into effect in 1998, he says.

Joining a standard-setting alliance gives members a technological edge over those who try to go it alone, Varian contends. "You can't compete if you're not compatible," he says.

Alliances aren't the easiest management tool to use, however. Marks estimates three-quarters of all alliances fail to achieve their objectives. But with adequate management resources, constant communication between participating companies, and a careful description of the alliance's goals in the beginning, joining up with a friend or even a foe can prove to be a valuable business move, according to Dillard Tinsley, a marketing professor at Stephen F. Austin State University in Nacogdoches, Texas, and author of a small-business alliances study.

"The number-one reason to form an alliance is that you see a particular type of competence is going to be important and you don't have the time or resources to develop it," says Tinsley. "And access to the right kind of expertise today is extremely important." (For more on alliances, see "United We Stand," April 1998.)

It's What You Know

While some companies try to acquire expertise from outside sources, many others make the most of what they already know. The business discipline of knowledge management, defined as the practice of organizing and distributing the collective wisdom of a company's employees, only dates back to about 1995, when the first convention devoted to the subject was organized, according to Carla O'Dell, president of the American Productivity & Quality Center in Houston and co-author of If Only We Knew What We Know (Free Press), a book on managing corporate knowledge.

O'Dell notes that people have been trying to organize knowledge since at least the days of Plato and Aristotle, but only in recent years has knowledge management made much of an impact in business. She traces the boom to an increasing interest in best practices, benchmarking and other attempts to identify and recreate world-class competitive techniques; the development of information technology powerful and flexible enough to do the job efficiently; and the simple fact that the ideas have been out in the workplace long enough to be tested and refined.

"We're at the desirable point--beyond the bleeding edge, but where we've learned enough lessons to benefit from what we know," says O'Dell. What we know now is that knowledge management is essentially a three-step process. First, you ask yourself what knowledge your company possesses that gives you a competitive edge. It may be the ability to make accurate bids, understand customers, design superior products or any other component of competitiveness. Next, you find out where in your organization that information resides and which employees know it best. Finally, you organize and disseminate the crucial knowledge to the other people in your company who need it.

Knowledge management benefits companies of all sizes, but it's particularly well-suited to small businesses because they don't face the same barriers of geography and complexity that larger, more dispersed organizations do, says O'Dell. Small companies that do business with larger companies are soon going to find they must learn to formally manage knowledge, she adds. It will be just as it is with quality, where many large firms demand evidence of quality management processes before considering small suppliers.

The Living, Breathing Business

Management thinkers have compared business to sports, war, physics and many other fields. Massachusetts Institute of Technology professor Charles H. Fine is one of many recent theorists who has attempted to explain business in terms of biology.

In his book, Clockspeed: Winning Industry Control in the Age of Temporary Advantage (Perseus), Fine compares fast-evolving industries such as the computer software sector to short-lived organisms like fruit flies. Biologists study fruit flies, which live only two weeks or so, to learn a lot about genetics in a short time, Fine notes. By looking at computers and telecommunications, two especially fast-evolving fields, he hopes to discern lessons about how all businesses can develop traits to help them survive in a fast-paced world.

It may seem like a stretch to seek business solutions in the world of biology. But biological concepts like tipping points, which describe how species succeed in competitive environments, also seem to explain how companies like Microsoft achieve such powerful market dominance. And looking at things in a different way, using tools developed for another purpose, can be helpful, Fine notes. "Sometimes if you use somebody else's model on your problem," he says, "you gain insight you didn't [have] before."

Business-as-biology may prove to be a long-lived idea. Fine notes that physics has been most commonly compared to business so far. In the 21st century, he says, biology will replace physics as the scientific place to be. "Business analysts are great borrowers of ideas," he notes. "As long as there's innovation in biology, the business world is going to watch that and see if any of the conceptual structures apply to them as well."

The Next Big Thing?

There has probably never been a time when more effort was being expended to devise new management tools. The rich payoffs reaped by theorists such as James Champy and Michael Hammer, co-authors of the multimillion-dollar book, Reengineering the Corporation (HarperBusiness) and co-parents of the reengineering movement, have inspired other consultants and academics to take a shot at starting the next management craze.

No one knows whether any of these currently hot management trends will be tomorrow's next Total Quality Management or reengineering movement. But one thing's for sure: By this time next year, there will have been many lessons learned and plenty of new and improved management ideas from which to choose.

Next Step

  • Learn more about comparing business to biology by reading Clockspeed: Winning Industry Control in the Age of Temporary Advantage (Perseus) by Charles H. Fine.
  • A Web site devoted to strategic alliances and other competitive requirements in the Information Age can be found at ,a href=http://www.inforules.com>http://www.inforules.com
  • Learn more about knowledge management by contacting American Productivity & Quality Center, 123 N. Post Oak Ln., 3rd Fl., Houston, TX 77024, (800) 776-9676, fax: (713) 681-1182.
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