Building Organizational Insight: Strategy and Organization

In this chapter we focus on the organizational insight as a pivotal element in understanding the processes required to realize and achieve interrelationships among businesses. We devote particular attention to the element of synergy creation, horizontal strategy, and organizational coordination mechanisms. We do so, because at the corporate level, the development, or expansion, toward new businesses recalls the need for an organizational adaptation. Following Porter (“Competitive advantage: creating and sustaining superior performance,” Free Press, New York, 1985), among the possible sources of competitive advantage, lies the potential to develop interrelationships because of the different businesses or products that exist in the organization. Organizations shall therefore aim at developing interrelationships in order to allow the firm to avail of synergies, focusing on horizontal strategies to develop and maintain a competitive advantage. The organizational context—in terms of design, culture, and behavior—can motivate the organization to pursue interrelationships beyond other mere combinations of businesses, as synergies can produce a combined return on resources that is greater than the sum of individual parts.