It is indeed true that many, if not most of the organizations that have engaged in this type of downsizing become “anorexic”, incapable of generating healthy growth. In a very real sense, these organizations have made themselves less fit to survive in a landscape where robustness and flexibility are valued more than “slimness”.
It seems that what is true for people is also true for organizations: good health is not synonymous with slimness, but is definitely associated with fitness.
Following this reasoning, the underpinning principles for the development of a strategy for industry in Australia should be:
- Build the whole into all the parts, focusing on culture, governance systems, structure and roles.
- Design a degree of redundancy, “excess capacity that can create room for innovation and development to occur”.
- Requisite variety, “the internal diversity of any self-regulating system must match the variety and complexity of its environment if it is to deal with the challenges posed by that environment”.
- Minimum specs, a “degree of "space" or autonomy that allows appropriate innovation to occur”.
What Does This Mean for Governments Around the World?
The lesson to be drawn from this is that the large transnational or “champion enterprise model” is not the only way to create critical mass. In fact, it may not be the best way - it is risky and expensive for a small or medium size economy to put all its eggs in one basket. Also, innovation does not usually come from large, dominant enterprises - it comes from medium to small enterprises that are on their way up.
There is an alternative, as Northern Italy demonstrates. It is possible to create critical mass and to generate very large innovation and export potentials by relying on a constellation of micro to small to medium enterprises.
The strategy is to create an environment where medium size enterprises can compete globally in niche markets (which are small only in a relative sense), with tactics suitable to “pocket multinationals” - the objective is not to dominate a market, but to be a serious “player”). The “pocket multinationals” are kept on their toes not only by competition in the international marketplace, but by the knowledge that if they falter there are many other enterprises back home that can step in at a moment's notice.
This potential for substitution is crucial to the strategy and is itself sustained by a highly mobile, skilled and “autonomous” workforce and by a craft-oriented culture. Both these elements could be re-created, with a bit of time and patience, and we already have the constellation of enterprises. What we do not have is a strategy to put it all together, but this could be it.
As Drucker warns, this strategy, based on creating an innovation rich environment, is a discipline, requiring time, effort, patience and sweat. It is not about grand gestures or strokes of genius - but if it works, we have a recipe for success that is self-sustaining, requiring little or no government support and intervention.
The strategy sketched here meets the principles outlined earlier; strategies based on creating large, dominant global companies do not.
