Going to Pieces
It’s hard to miss the changes in the media world, specifically, the demise of the Blockbuster empire. I’m fascinated by Netflix, the Blockbuster busting competitor, implementing the very strategy that made Blockbuster king. Blockbuster was the brainchild of Wayne Huizenga. Huizenga’s strategy took businesses that were fragmented and integrated them, creating customer value. Interestingly, Netflix saw the Blockbuster blindness to its current fragmentation and jumped in.
I recall the early days of video rentals, comprising many small businesses, typically mom and pop entities, often nearby. Customers had memberships in several, or had to wait or hunt about for specific video titles. If the corner store did not have it, you got into their cue or drove to another store. These small stores could not afford levels of inventory for high demand titles, creating unavailability, customer disappointment, and frustration. Summing the collective inventory of 4 or 5 of these small stores, the likelihood of unavailability of a title on any given day would shrink by orders of magnitude. Fragmentation created opportunity for the integrator, Blockbuster. The one stop shop created customer value delivering with more convenience and reduced waste. Netflix took video content another step, they integrated home delivery with web access and eliminated the need to drive to stores. No stops to do all the shopping meant more convenience and less waste. Lower inventories; no brick and mortar, large payrolls and high overhead per rental, made the business more profitable, flexible, and attractive to investors.
Overcoming fragmentation improves capability to meet demand. Fragmentation may be the most ubiquitous problem across enterprises, public or private, local, national, or global. Fragmentation of information between agencies contributed to the horrors of 9-11-2001. Fragmentation impacts supply chains, manufacturing, services, responsiveness, growth, quality, cost, timeliness, decision making, cultures, overhead costs, waste creation, market share loss … countless calamities. Performance improvement programs invariably run into fragmentation issues as big obstacles to implementing improvements or as big root causes of variability and waste (that accounts for Six Sigma and Lean). Fragmentation has always been a tough nut to crack, often because of increasing growth and complexity. There are a multitude of sources for fragmentation; org charts, functions, budgets and accounting processes, legacy and competing systems, data, risk management, fear, control mechanisms, geography, growth … ad infinitum.
I would suggest that fragmentation is a result of being bigger in size within organizations, or more dispersed across organizations. Being both bigger and highly dispersed makes it all the harder. The way variation is quantified and analyzed typically examines variation within an entity and variation between entities.
Basically:
• The bigger we get, the harder it is to be bigger.
• The more places we’re at, that much harder it is to be at more places.
There is no question that the business and governance marketplace is bigger and more globally distributed, increasing with an astounding velocity. Boeing knows the problems all too well with the perennially delayed Dreamliner. Toyota was challenged last year, their size complexity, diversity, and global presence surfacing a vulnerable underbelly. Military organizations will confess to the same challenges. There are solutions for some of today’s fragmentation problems, as there were in the past. Roads, railways, telegraphs, telephones, networks, systems and models … many of those solutions created the root causes of today’s fragmentation.
Thoughts?
