JOINING THE NEW ECONOMY

David Glassman

Journal of Applied Corporate Finance, 2000, vol. 13, issue 3, 116-127

Abstract: The decline in the costs of communicating, coordinating, and collaborating across firms in the value chain has led to the emergence of new business models—virtually integrated companies, retail “bricks and clicks” organizations, and networks like AOL and eBay—that can be used by all kinds of companies to exploit new opportunities. With these new organizations comes a need for new governance practices—practices that permit swifter decisions, best practice sharing, and more focused operations. The author argues that improvements in governance should focus on achieving the following: ▪ Organization structures that leverage external alliances while improving internal collaboration. This involves gaining acceptance of and support for a common aspiration across the company—the goal of deploying financial and human resources, complemented by technology, to build shareholder wealth. ▪ Performance measures that encourage managers to make longterm investments in capabilities even when accounting measures penalize earnings in the short term. This requires more than a change to internal measures that capitalize the spending; it also necessitates a more open dialogue with the investment community. ▪ Human resource policies that strengthen business literacy, reward collaboration, attract and retain entrepreneurs, and align objectives across the company's regions, functions, and product lines. ▪ Building a culture that embraces the opportunities brought by change, and accommodates the partnerships and collaborations required of a business ecosystem.

Date: 2000
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