The Power of Strategic Integration

All corporations engaged in multiple lines of business face a paramount strategic imperative imposed by the stock market: Maximizing the profitable growth that is possible from their constituent businesses. Meeting this imperative over the long term requires such corporations to develop new strategy-making capabilities. So how can company leaders identify and exploit the opportunities that take the fullest advantage of their companies' capabilities and potential to pursue new strategies?

In their attempts to meet the stock market's imperative, multibusiness companies in the past have pursued operational efficiencies by integrating business activities and have extended their existing strategies by combining resources from various business units. But that is not enough, say Robert A. Burgelman, professor of management at Stanford University, and Yves L. Doz, professor of global technology and innovation at INSEAD. Multibusiness corporations need to develop a capability for what the authors call complex strategic integration, which involves the discovery and creation of new business opportunities by combining resources from multiple units within the firm -- each with its own perspective and vested interests -- in order to extend the corporate strategy in new directions.

Only a few multibusiness companies are currently trying to develop a CSI capability. But the challenges and imperatives for all companies are the same. Company leaders need to manage the evolving tension between reinforcing the company's core business and redirecting strategy in new directions, as well as the sharing and transferring of resources. They also must ensure that senior executives develop the political and entrepreneurial skills necessary to effectively pursue CSI initiatives, along with the ability to conceive of these new strategies. Above all, company leaders have to create a corporate context that facilitates CSI as an ongoing institutionalized process rather than as an infrequent occurrence that depends on the ad hoc championing efforts of some highly dedicated senior managers. That includes developing the appropriate organizational structures, control systems and incentives.