If your resources are scarce and come at a premium, you can aim to control as many stages of production as possible. You can do this through vertical integration. Vertical integration is when businesses at different stages of production merge to control more than one stage of the supply chain. Think about iron miners and steel factories, a farm and a grocery store, and a large supermarket with it’s own brands. In the last example, ownership of manufacturing, distribution and retail provide opportunities to offer products at competitive prices. There are distinct benefits associated with being able to control access to inputs, and to control the cost, quality and delivery times of those inputs.
But times are changing. According to Techcrunch, the pace of technological advancement is rendering vertically integrated organisations practically obsolete.
Whereas historically firms have vertically integrated in order to control access to scarce physical resources, modern firms are internally and externally disaggregated, participating in a variety of alliances and joint ventures and outsourcing even those activities normally regarded as core. – McKinsey and Co.
Small teams can realize the feats of what was previously the preserve of larger giants, more quickly, and effectively. They bring agility and leaness. And a fundamental shift is what Techcrunch describe as an orientation towards plenty, in pace of dearth. The governing principle of scarcity is being challenged by an abundance mindset. At 33 Emeralds we’ve been talking about an abundance mindset for some time on a personal level, and working with individuals to re-orientate from being ‘hassled by change and disruption’, and, ‘not very good with tech’ to understanding that with all this change comes opportunity like we’ve never seen or experienced it before. Getting our heads around a glass over-flowing (rather than a half empty), is a necessary choice you make for your own future.
From an organization perspective, exponential organisations are set up to leverage abundance. Their low organizational demands are inversely proportional to huge business potential. They design for rapid and effortless growth. AirBnB, for example, leverages an abundance of real estate. Watch this 7-minute clip on Exponential Organisations by Salim Ismail if you’re curious about the exponential organization.
Exponential organisations, says Ismail, are designed for the digital business economy. And they’re the ones most likely to survive longer term.