It's one of the oldest, most fundamental ideas in management theory: that executives should understand how the many distinct functional components of a firm -- production, distribution, product mix, human resources -- interrelate to achieve the proper fit. For a firm to establish an effective, overarching strategic position relative to its competitors -- what management theorists call "firm positioning" -- the varied functional elements should, ideally, be complementary and reinforcing.
In recent years, however, this notion of comprehending the "part-whole" relationship of the firm fell out of favor as thinkers turned to other concepts to analyze and explain why organizations are effective. One well-known concept that emerged was the idea that companies could turn to core competencies to attain competitive advantage. Instead of thinking holistically, companies began to embrace the notion that they should, say, benchmark and imitate the best practices of other firms in order to develop these core competencies in their own organization. In that rush many firms forgot, however, to think hard about whether practices that worked so well for other companies would fit well in their firms and, in turn, offer similar benefits.
Now, two members of Wharton's management department, Daniel A. Levinthal and Nicolaj Siggelkow, say it is time to resurrect the idea of addressing the part-whole relationship of the firm. Without this systemic way of looking at companies, the researchers say, firms run the risk of engaging in compartmentalized thinking that can lead to the adoption of practices that are a poor fit and work to the firms' disadvantage. The two scholars have addressed issues related to firm positioning and the part-whole relationship of the firm in a number of papers and articles.
"Companies should be cautious about benchmarking or imitating certain policies and practices of other firms," Levinthal warns.
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