The "inventor" of Arrays and Lattices, a new way of understanding clusters

His message: Give Priority to the Organisation. Strategy comes next

It may seem a paradox, but the old paradigm of "strategy first and then the rest" was challenged again. After Tom Peters heresy ten years ago, now was the time of one of the voices of Harvard Business School.

Jorge Nascimento Rodrigues

In times of emergence of a new economic tissue, as the present ones continues to be, the rule has to be inverted. The old commitment of strategy first, has to be put once again upside down. The crucial point is to design a flexible structure that allows catching opportunities. Strategic formulation and core competencies come next. The same warning had been made by Tom Peters in the start of the 90s, guessing the emergence of something new in the economy, what made him be crucified by the guardians of the temple of strategy.

Daniel Quinn Mills, one of the gurus of Harvard Business School, explains how to give priority again to structure, in this interview about his more recent (2001) book e-Leadership: Guiding your Business to success in the New Economy. In this book he introduces new concepts of analysis of emerging economic tissue, as the concept of "array" (a network of companies that concentrate around a same structuring objective of creation of value, what is different from the clusters geographically and sectorially defined with some rigidity by Michael Porter), and of company structuring as the one of global lattice (a new type of net with networking of independent companies that co-operate in a specific area). Both require a new type of thinking on the part of entrepreneurs and managers: a global atitude, metanational, without borders. Quinn Mills reclaims a new corporate culture. But thinking globally does not mean ignoring the local context. To be cosmopolitan is not loosing foot on the local field one walks on.

The author went to Harvard in 1976 having come from the Sloan School of Management of the MIT, of the other side of the river that separates Boston from Cambridge. He is preparing for 2002 a new book titled: eFuture: The World in Disorder.

He teaches management at Harvard Business School. Previous books by him include Internet University of 1999, Broken Promises: An Unconventional View of What Happened at IBM of 1996 and The GEM Principle of 1995. Previous books were about the labour relations and economy, like Labour-Management Relations and Rebirth of the Corporation (out of print).

One of the unexpected conclusions of your book "e-Leadership" is that the structure nowadays is the main issue. The old commandment that strategy precedes all the rest is being inverted. Why?

DANIEL QUINN MILLS - For a simple reason, in a emerging period, as the present one continues to be, you need an organisational structure that is flexible enough for people to take advantage and understand the Internet adequately. A company cannot and is not able to do what is essential nowadays: to discover and evaluate the opportunities of business. The idea that strategy should determine structure is the logic proposition. To follow that rigorously would take a company to ruin. It is preferable to put the formula upside down, and start by reorganising and then work the strategy.

Michael Porter, also from Harvard Business School, recently in Harvard Business Review (March 2001 edition) criticised the lack of strategy priority as being one of the capital sins of the New Economy wave. In the end of 1992, the same critic was made to Tom Peters when he came to say that the structure counted more than strategy in times of revolution of nano seconds, as he explained in the book Liberation Management. Aren't you making the same capital mistake pointed by your Harvard colleague?

D.Q.M. - The strategy can only be in the first place when it can be defined efficiently. The reason why I called attention to the question of structure, is because it is necessary to have an appropriate organisational base so that a good strategy may be developed.

But for a good positioning in an array, as you recommend, is not necessary strategic thinking and even intelligence about the competitive context?

D.Q.M. - The positioning in the arrays that I talk about has been defined as a co-operative strategy, or in co-opetition (I don't know if you have already created this term in your language for a fusion between competitive and co-operative), and not a competitive strategy. This question is particularly important nowadays, when a substantial technological change is being explored. For a start up or a small company, it is generally not possible to attack frontally a well established company or a brand. What the small can do is either develop under the wing of a big company already established or join other companies to try to create critical mass capable of challenging the incumbents. But for that, you have to look at the question of structure.

What is the main difference between your concept of an array and the concept of "cluster" of Professor Michael Porter? For example, Silicon Valley is a group of arrays of the kind you talk about?

D.Q.M. - Silicon Valley is a good example. The arrays are not geographically limited, as Mike's clusters. The importance of an array is not geographical but it is a good example, it is evaluated in terms of client's technologies and generated markets.

We are assisting to the surging of new arrays, around the electronic commerce or distributed computing or around genomics?

D.Q.M. - Absolutely. As happened before around the personal computer and the explosion of the Internet.

Another organisational concept you talk about is the "lattice". What is the difference with the networked organisation? For example, looking at the case of Cisco Systems, the so much talked about ciscoism in terms of organisation of the chain of value and its leadership, what is the difference?

D.Q.M. - The ciscoism of Cisco is exactly an example of my "lattice" model at a global scale. But there are a lot of other varieties of that form of organisational structure I talk about. The Cisco network is very well organised, it is not vague and loose, as many other nets.

But many analysts started thinking the Cisco went to far, exaggerated in the outsourcing, and talk about correcting a little. What do you think?

D.Q.M. - I agree with them.

Arie de Geus, for example, talks about an extreme example - and very successful - of a model of co-operation, or co-opetition, very well intertwined in an organisation, quoting Visa's case. Do you agree?

D.Q.M. - Yes, VISA is an excellent example.

In the arrays you talk about, what is essential is co-operation. But, as Porter argued in the already mentioned article in HBR, doesn't that kill the competitive advantage?

D.Q.M. - I think that in the long run it does. But the companies must go by stages. I think that Mike is always imagining a big and well established company, while I worry about the start ups and small companies that try to make a name in the market, particularly in the periods of emergence of the new.

One of the main arguments in your book may lead us to conclude that a company should be managed like a temporary portfolio of businesses. We buy, get fatter and stronger, and after sell businesses, is that the secret of business longevity?

D.Q.M. - My dear, General Electric, a company with longevity, has done this with success, particularly in the two last decades, with "Jack" Welch leadership.

Globalisation is not where but the way you do business, thinking globally, with no frontiers. Looking for opportunities at a world basis. It is not geographic dispersion that sometimes cannot have a valid justification.

Another of your central arguments is that it is necessary to have a global posture from the start...

D.Q.M. - Nowadays, in the present turbulence and the market globalisation, a company looses opportunities if it does not have a really global perspective, that is, it has to take into account in its decisions the whole globe. If it does not do so, it becomes vulnerable to the concurrence, which may come from anywhere. But it has to do it in a balanced manner, avoiding two deviations - a company that only looks at the space around it, that is parochial, looses many opportunities of crossing of markets, and another that runs after universal visions, may loose small opportunities that are right beside it. The global posture that I talk about is glocal - both global and local.

The famous federalist structure of ABB is a good example of a global company that is glocalised?

D.Q.M. - I do not think so. It is reasonably centralised nowadays, or at least it was under Barnevik's leadership.

But what are the fundamental rules for a good glocalisation strategy?

D.Q.M. - The geographic flexibility that is necessary to take into account the local markets and the different marketing situation, and at the same time enough centralisation to obtain cost advantages in various markets.

The global firm is home everywhere. There is no such separation between the mother house and subsidiaries abroad. It does not export its national culture. It tries to create a global culture.

But is it worth having a multinational strategy, or the multinationals are a mistake at the origin?

D.Q.M. - In the first place: it is true that I underline that the multinational live in many places, but they do not act as if it were their home. They tend to clone the domestic way of being. Today it is anachronic to talk about country of origin and operations abroad. The geographic dispersion is not the same as globalisation. Sometimes it is done without a valid justification. For me, globalisation is not where, but how you do business.

SOME ANSWERS AGAINST THE MAINSTREAM

The old Greek philosopher Aristoteles was wrong?

D.Q.M. - I think so. What came from his philosophical attitude was an archaic separation between strategy and execution, planning and implementation. I reclaim a unified view of the problem.

The strategic planning was not buried with the book of his main "father", Mintzberg, when he wrote The rise and fall of strategic planning?

D.Q.M. - No, not at all. The strategic planning is extremely important nowadays. To plan is to transform potential in reality.

What are the limitations of the concept of "core competencies" defined by Hamel and Prahalad?

D.Q.M. - They look at the past. What is more important nowadays is to look at the opportunities that can be grabbed through new competencies. It is the contrary of being stuck to the existing ones. My point of departure is that it is more important to put emphasis on the company's potential. There are so many opportunities that what really maters are the potential competencies that the company does not still have.