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Charlottesville, VA Business News

Business processes trends to watch

Posted by lbanner on January 9, 2008

This interesting piece picked up from the Jackson Blog, Stanford Graduate School of Business. Happy New Year:

McKinsey Quarterly reports eight new ways of doing business that will shape the economy in years to come. These trends fall within three broad areas of business activity: managing relationships, managing capital and assets, and leveraging information in new ways.

Here are a few highlights:

1. Cocreation — company harvesting talents of innovators working outside corporate boundaries. For example, the Linux operating system was developed over the Internet by a network of specialists. It is estimated that roughly 12% of all labor activity in the U.S. economy could be transformed by distributed and networked forms of innovation.

2. Consumer as innovators — for instance, the online encyclopedia Wikipedia is created by its distributed customers. Another example is Threadless, the online T-shirt store that asks consumer to submit new designes for T-shirts to be voted on by the community at large.

3. Outsourcing — companies parcel out work to specialists, free agents, and talent networks. Topcoder, a company that has created a network of software developers in order that companies can access this talent pool instead of employing experienced engineers.

4. Extracting value from interactions — companies invest in interactions may find smarter and faster ways for individuals and teams to create value that is difficult for their rivals to replicate.

6. Unbundling production — Amazon.com, for example, has expanded its business model to let other retailers use its logistics and distribution services. Unbundling enables the supply side to raise asset utilization rates and therefore their returns on invested capital. On the demand side, unbundling offers access to resources and assets that might otherwise require a large fixed investment or significant scale to achieve competitive marginal cost.

Reported in December 2007 issue of McKinsey Quarterly

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