Virtual Corporations – Actual Reality

The Internet and all technology is the true “mover and shaker” of the modern corporate world. Along with the flood of technological changes, organizations have been forced to change and adapt. To a great extent, corporate monoliths have been unable to change quickly enough. This inability to meet the requirements of technology, resulted in the eventual shift from top-down management practices to the “revolutionary” ideas of empowerment and the reversal of the age old flow of communications. Today, the pyramid of communication has not only been turned on its head, it has been smashed into individual pieces. The latent power from within has truly been released and the ramifications of this reality will only become known after the dust has settled.

The modern corporate wave has come as a result of the formation of project and design teams: virtual corporations. Technology, which is so simply complex, has created the niche-oriented specialist, indispensable to so many in so few areas. As these specialists become increasingly crucial and increasingly expensive, they tend to contract themselves out rather than stay with one firm. Virtual corporations have become popular because it takes only a handful of visionaries with adequate financial backing to track down these individuals and hire them on a project-by-project basis. Many large computer and electronics firms have recently joined forces with competitors to share knowledge and personnel in these types of virtual corporations for particular projects.

This new revolution is completely consistent with the first and most influential study of manufacturing technology by Joan Woodward in the 1950s which suggests a single best way to approach these situations. In essence, virtual corporations fall into Woodward’s Group I category: Small-Batch and Unit Production. These corporations form for a specific one-time purpose. The principle difference is that today, we are no longer dependent on a larger employer to provide the necessary technical equipment.

Specialists are now able to provide the same level and quality of output from their homes and even briefcases that previously required an entire corporate division.

A textbook example of Woodward’s analysis, these virtual corporations which closely resemble a type of federal union, consist of many highly skilled individuals working with very little supervision in an organic structure where constant communication is critical. There is no room for redundancy in these groups, thus creating a lean and temporary organizational unit where everyone has a particular task to fulfil.

There are many key factors that contribute to a successful team. The appropriate objectives, the right personnel, and the myriad of other factors that go along with any successful enterprise. The one critical element in virtual corporations upon which its success hinges, is a well-organized and focused management team. In dealing with small groups in very specific and technologically intricate areas, there is no room for indecision. These types of individuals with the management and technological background are few and far between. The lack of these individuals, who are largely responsible for the success of virtual corporations, may result in its eventual downfall.

Perhaps the most striking effect of this revolution is the union of competitors, suppliers and customers for a common cause. As resources have become increasingly difficult to obtain and sustain, virtual corporations have been a type of panacea for the industry, especially in Canada. This niche-oriented, low-volume and high quality production process has truly captured the spirit of the Canadian economy, both past and present. The most successful Canadian companies have followed this format without deviation and virtual corporations continue this legacy.
Apart from its successes with projects that have seen companies such as Apple, IBM, Oracle and Hewlett-Packd join forces, virtual corporations will still have to address our current reality, which includes issues such as: allegiance, commitment, trust and a long standing reputations for excellence. These keys are the cornerstones of any business and have also become increasingly contested as individual interests will inevitably take over centre stage. As employees come and go with each new project, there will be only the marketers and sales people to ensure delivery of goods. This thought has many individuals worried about proprietary information and corporate ethics.

In addition, non-technical employees will no longer be able to rely on the human resource management of large corporations to ensure benefits and advancement. Once projects have been completed, those involved are asked to move on. Each individual must defend his/her best interests, in terms of present employment and future obligations. These concerns influence all the players involved in business: employers, employees, suppliers, clients, and government. As this type of association will most certainly result in a much greater and more ferociously competitive environment on an individual basis, we should all be aware.
As more will be written about virtual corporations, it will become abundantly clear that what is really at issue is the continuous creation of strategic alliances on a per project basis. Not only will this result in a tougher job environment, but a re-definition and expansion of many professional careers. Networking, which has long been touted as a necessity in the business world, will now become a necessity in everyone’s world. Individuals must be connected to the right groups and circles of individuals. It will no longer be enough to network within certain industries; it will be essential to connect with individuals throughout the business community. There are those within the industry who are well-connected and should be sought after to protect your individual and corporate interests. Times are constantly changing and whether or not this is a transitional phase or the new reality for many years to come, still remains to be seen.

Regardless, the idea of virtual corporations will survive and preparedness is the only solution.

By: Mark Borkowski president of Mercantile Mergers & Acquisitions Corporation, a mergers & acquisitions advisory based in Toronto. He can be contacted at (416) 368-8466 or