NOVEMBER 9, 2003
 Cover Story
 BT 500
 Personal Finance
 The Other 500
 Back of the Book

Gates Against Malaria
Bill Gates, who claims
to watch the efficiency
of each dollar he spends, has put down $168 million to
combat malaria.

Age Discrimination
The UAE wants to kick
all expats above 60 out
of their jobs. A fine
start to the IMF/ World Bank meet in Dubai, eh?

More Net Specials
Business Today,  October 26, 2003
Recombination Rules

A toolkit designed to genetically reengineer the modern corporation for new challenges, plus books on enhancing shareholder value and tackling information feudalism.

Fabrica campus as designed by Tadao Ando: Value-enhanced by Benetton's fashion ideas

What this book's cover design lacks, in terms of whetting one's interest, the 'genome' word and Mohanbir Sawhney's foreword make up for. To Sawhney, this is about making the most of the information revolution in general, and crashing interaction costs in particular-a phenomenon that frees the constituent parts of business from the imposition of collective functioning under a large corporate structure (seen how email has lowered outsourcing costs?). To an observer of the 'punctuated equilibria' story of corporate evolution, this is about the shift from vertical to virtual integration.

That sounds altogether too geeky. So it's to the three A.T. Kearney authors' credit that this book packages the argument neatly in terms of discrete business capabilities, the 'genes', that make up the corporate 'genome'. A capability, by the way, is defined as "any set of value elements within the value chain that make a unique contribution to output". Their basic advice: think capabilities, focus on the most valuable genes, nurture them, formulate strategies for each, and then look for opportunities to recombine them creatively with other genes out there.

Isn't that-shudder, shudder-'atomisation'? No, argue the authors, so long as it implies the deployment of strategy at "lower levels of business aggregation". From conglomerates to corporates to SBUs to capabilities, that's progress, and the entertainment industry is already at its cutting edge.

Rebuilding The Corporate Genome
By Johan C. Aurik Gillis J. Jonk, Robert E. Willen
PP: 314
Price: 1,488.52

The chapter on strategy explains how all this builds on the concepts of C.K. Prahalad's core competence and Michael Porter's competitiveness. Freed of larger structural encumbrances, it's easier to optimise the output of individual capabilities-since their optimisation drivers differ.

So far, so theoretical. But wait, the story's all in the examples. The globalised eyecare business now operates with separate prescriptive and vanity-fulfilling capabilities. The Coca-Cola Company has long hived off its bottling operations. Handspring does little beyond applying its brains to customer needs, with all the grunt work outsourced.

The real fun begins with genetic recombination. And here, they say, the sum of parts will be greater than the whole only "when companies grasp the tremendous opportunities emerging from their individual capabilities". Examples? A unit of Philips has joined forces with a part of Sara Lee to develop a hybrid percolator-espresso machine that uses special beans to deliver a unique coffee experience (the premium part of the value chain). Apparel player Benetton has combined its ideas with those of paint maker Imagica to turn people's walls fashionable.

The only jarring example-and perhaps the book's weakest link-is the dreamt up 'what if' suggestion of separating the oil industry's yield maximisation capability from oil-well operations and exploration. The presumed benefit, of lower oil prices, is based on assumptions of power leverage that are way too simplistic (just as disaggregating other parts of this industry may lack practical sense). A reassessment of intellectual capabilities would be a better way to start.

The book also addresses the issue of value migration-down the value chain. As an industry evolves, the authors concede, the 'dominating gene' shifts from tech-specs to broader aspects of consumer fulfillment. As any genetic engineer will tell you, the consumer's mind is far more complex than anything business has ever structured, and for this reason alone, value-generation moves deeper into mindspace.

Amsterdam-based Johan C. Aurik and Boston-based Robert E. Willen (picture on the left), Vice-Presidents at A.T. Kearney and two of the three co-authors of Rebuilding the Corporate Genome, spoke to BT's at the Taj Mansingh, Delhi, about the use of genetic analogies in corporate theory. Excerpts:

Q: Given your book, where do you stand in the 'nurture' versus 'nature' debate?

In the nature-nurture debate, nature has been winning, and we think that applies to our book. The genome is just an analogy, of course, for corporations that are made up of building blocks-genes if you like-that can be rearranged and reconfigured into new animals. A gene is a capability, and in that sense, you could argue that it's a 'nature' book. It's a 'nurture' book because you can do something with it, for which we offer a framework with tools.

Q. I couldn't help notice the emphasis on 'recombination'. Is your book's central argument a case for companies to break themselves up and recombine capabilities with other 'genes' to yield new companies?

Atomisation, the breakdown of businesses, is seen as an irreversible trend. We don't agree. We think those pieces can be put together in different ways to create competitive advantage. So recombination is a very important theme. But that's just half the story. You need to look at companies as a set of capabilities, as Lego blocks, and look at these in their own right. See, A, how you can recombine them in new original ways. And B, how each individual capability can be optimised. So the other theme is focus.

Q. Do you see all this as a culmination of 'business Darwinism'?

Yeah. But Schumpeter, actually. Creative destruction. This is accelerating. That's why executives need to look ahead.

Value Leadership
By Peter S Cohan
Rs 920
PP: 312
Seven principles to enhance shareholder value: human relationships, teamwork, frugal experimentation, commitment, anti-complacency, multiple means and community sensitivity.

Information Feudalism
By Peter Drahos With John Braithwaite
Oxford University Press
Price: Rs 495
PP: 253
Who owns the Knowledge Economy? Arm yourself with this expose of the feudal structure of the current intellectual property regime, written just for India.