Companies need to get virtual to make money, but only four per cent of senior executives worldwide believe they are in a position to meet the challenge.
Andersen Consulting said today that the key sources of competitive edge will change from ?squeezing out productivity gains? to achieving a flexible organisational structure and good customer/supplier relationships.
According to 'Vision 2010', a study by the 'Economist Intelligence Unit' and Andersen Consulting, 79 per cent of senior executives at multinationals believe that the structure of large businesses is set to change by 2010. The move will be towards 'virtual companies' where employees may work in different physical locations and within a rapidly changing structure, and where many functions are carried out by partners.
While less than three per cent of senior executives rated their organisations as fully fledged virtual organisations, 40 per cent of executives predicted that companies would become virtual by 2010. By 2001 they expected 13 per cent of firms to become virtual businesses. ?The flexible organisational structure goes to the heart of the study we are doing, and organisational structure itself will become a driver of competitive advantage by 2010,? said Barry Rutizer, vice president at the EIU. ?Companies realise that they can?t have monolithic structures and still remain competitive.?
But the executives interviewed worried that they did not have enough 'soft' business skills to cope with the change from a traditional to a virtual organisation. Over 90 per cent of directors and senior executives believed they would have to develop more sophisticated communications skills. Nearly 80 per cent felt their companies lacked relationship building skills and just over 70 per cent saw a need for greater cultural sensitivity.
?The areas they felt they were not comfortable with included managing people across business cultures in joint ventures and alliances - it was a recognition that it was something they had to think about,? said Mark Otway, partner at Andersen Consulting. ?The organisations who are leading already do outsourcing, joint ventures and alliances; these are the early movers in behavioural training.?
Part of the trend to a virtual organisation will be the increasing amount of work done with third parties. By 2010 executives expect the number of outsourced activities, joint ventures, alliances and mergers to have doubled. Andersen highlighted the need for firms to focus on set areas of expertise, and outsource other departments that do not create revenue and can be run by third parties. ?Companies need to concentrate on competitively critical competencies,? said Mark Otway, partner at Andersen Consulting.
The study shows that the major forces driving change in 2010 will be customer demand for higher quality and services; ability to attract and retain the best people; new and rapidly changing technologies, and global competition and new market entrants.
?Almost 60 per cent of companies surveyed say they have gone through profound change over the past five years, particularly in outsourcing and downsizing,? said Otway. ?But there are certain industries that tend to be leading edge, like energy, oil and the chemical and pharmaceutical industries.?
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