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Integration - The Right Way, the Wrong Way

Integration - The Right Way, the Wrong Way

Because of a combination of market and technology perspectives, the looser approach to integration is very powerful.

Harvard's Marco Iansiti, who has studied the technology strategies of nearly 100 companies, says: Keep your integration expertise in-house.

What do Wal-Mart and Microsoft have in common?

Besides being giants of their respective industries, they share a similar organisational structure - at least with respect to how each company approached integration, says Marco Iansiti, the David Sarnoff professor of business administration at Harvard Business School and author of Technology Integration: Making Critical Choices in a Dynamic World (Harvard Business School Press, 1998).

While many companies outsourced their integration initiatives to Accenture, EDS, IBM or a host of other consultancies, both Microsoft and Wal-Mart created in-house teams (product managers at Microsoft; systems analysts at Wal-Mart) that focused on integration, not on one product or one process. Those teams are charged with knowing how all the technologies and processes that link their respective companies to their business partners function both inside and out. That structure allows Microsoft and Wal-Mart to be masters of their own fate and, Iansiti argues, gives them a distinct advantage over their competitors. (The first chapter of Iansiti's new book, Keystone: Operating and Technology Strategies in Business Ecosystems (Harvard Business School Press, January 2004), is tentatively titled "Why Wal-Mart and Microsoft Are Similar".)

Iansiti, who has a degree in physics, came to the Harvard Business School in 1989 after tiring of "being chained to a lab bench". The 41-year-old has spent more than 10 years studying the technology strategies of nearly 100 companies from all sectors, including retail, technology, manufacturing and the pharmaceutical industry. He has come to several conclusions about effective integration strategies and how proper integration translates directly into business advantage. He has seen companies handle integration well, and he has seen companies handle it poorly. The former, such as Wal-Mart and Microsoft, dominate their industries. The latter, such as Polaroid, end up in the headlines for all the wrong reasons.

CIO: What are the essential elements of an effective integration strategy?

Marco Iansiti: What I'm focusing on now are the external aspects [of integration]: How do you manage assets that are outside the company, and how do you integrate them? Microsoft has 40,000 business partners, and there are approximately 6 million people who build software on its platform. [Microsoft's] value is tied more to the integration with that ecosystem than it is with the company's internal resources.

It's as if you have these concentric circles. The first circle is the integration team, which could be a few product managers. The next, bigger circle is built around the core team of other resources inside the company. Then there is an even bigger circle around them that consists of developers, if you're Microsoft, or manufacturers or supply chain members, if you're Wal-Mart. The integration challenge expands from five people in a conference room to Wal-Mart's 50,000 suppliers.

Both [Wal-Mart and Microsoft] form a hub for dispersed networks of people. The companies' value is largely dependent on resources they do not own. Integration becomes not just integration of a small number of people inside the team or resources inside the company but the integration of a vast network of people or organisations, many of which are outside the company.

How do you integrate assets you don't own? What strategies are most effective?

The best strategy for the CIO is to keep technology couplings as loose as possible. That provides for greater flexibility. You can keep assembling best-of-breed solutions without committing to any particular external architecture.

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