Continuous Reconfiguration

Definition

Reconfiguration is the mechanism by which assets, people, and capabilities transition from a maturing advantage to a new one. McGrath's distinction is between organizations that reconfigure continuously, in small steady increments — "you don't see dramatic downsizings or restructurings" — and organizations that let advantages calcify until a single traumatic restructuring becomes necessary. She calls firms that get this right "shape shifters," combining a stable overall vision with high fluidity in how people and roles are deployed underneath it.

In the Book

Chapter 2 traces the pattern across several firms: Infosys shifted its talent base out of low-cost-labor outsourcing into higher-value services like independent software testing; Ford's Alan Mulally closed the shrinking Mercury brand (from 580,000 units in 1978 to 92,000 in 2009) and redeployed the freed resources into Lincoln; Verizon pulled capital out of cash-generating but declining phone books and landlines to fund FiOS and wireless. The chapter's central case is Milliken & Company, a privately held textile maker whose entire traditional industry was hollowed out by Asian competition (58% of US apparel and fabric was imported by 1991). Rather than one collapse, Milliken ran a gradual, deliberate sequence — seven plant closures in the 1980s, more in the 1990s, two in 2003, one in 2008, and disposal of its automotive body-cloth division in 2009 — while simultaneously investing in international expansion and new technology-driven arenas, reallocating displaced workers along the way. Infosys's planning head Sanjay Purohit describes reorganizing the company every two to three years specifically to prevent inertia from accumulating: "The cost of reorganizing the company is nothing compared to the growth potential it unleashes."

Why It Matters

Treating reorganization as a rare, disruptive event — rather than a steady rhythm — guarantees that when change finally does come, it arrives all at once and does maximum damage to morale, continuity, and capability. Building the muscle of small, frequent reconfiguration converts what would otherwise be an existential restructuring into routine maintenance, and it is the practice that turns "the wave of transient advantage" from a description of the environment into an organizational capability.