Why would Red Bull, Google and Apple combined fail to beat Facebook?

September 11, 2013

Read time 1 min

Let’s say we would like to build a company to compete with Facebook by composing it from the best departments in different companies. We’d pick marketing from Red Bull, software development from Google and innovation from Apple. This company, even though composed of the best parts available, would be completely unable to function for the simple and obvious reason that the different departments wouldn’t know how to work together.

Since big companies are hard to manage we try to make them more manageable by breaking them down into departments. Departments are given clear responsibilities, a budget, certain targets to meet, and bonuses tied to those targets. If all the departments are managed well, the thinking goes, the company will run smoothly. The sad thing is that this is fundamentally incorrect, since the best parts do not make the best whole.

With companies that have divided their value stream into departments customer demand is crosscutting. Departments can not provide value to the customer independently. Any department, in isolation, is useless. It’s the composition and interaction of these departments that make up a company that produces value to the customer. To be able to serve a customer the demand must walk through all departments, and the space in between, successfully.

This is why great companies focus on the whole and not the parts. Any person or department solely focused on meeting his personal or departmental goals is suboptimizing the company. Instead, everything we do should be in line with our purpose and measured from the customer’s perspective.

(This blog post is based on work by Russell Ackoff and John Seddon.)

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