Shoaling or School of Fish: A Knowledge-Era Smarter Strategy
"We are witnessing a new wave of firms restructuring into a Shoaling formation (School of Fish Strategy). Google, Alcoa, and HP are setting a new trend in splitting their structure and corporate governance into a group of small companies.
Shoaling design can be practiced at corporate governance, product or business unit level, production organization or alliance and franchise management. Although 'shoaling form' resembles traditional SBUs, the strategic intent, function and process within 'shoaling or school of fish strategy form' are quite distinct from that of SBUs."
Google has restructured the entire corporation into a collection of companies under the holding company called Alphabet -which can be considered an excellent model of Shoaling formation. Alphabet includes the following entities:
A smaller company called Google, headed by CEO Sundar Pichai, that includes the company's core businesses. Those businesses: "search, ads, maps, apps, YouTube and Android and the related technical infrastructure."
Other businesses, "such as Calico, Nest, and Fiber, as well as its investing arms, such as Google Ventures and Google Capital, and incubator projects, such as Google X," which "will be managed separately from the Google business."
Larry Page is CEO of Alphabet. Sergey Brin, Google's other co-founder, is the president of Alphabet. In the release, Page lays out the priorities for Alphabet. These are his words:
Getting more ambitious things done.
Taking the long-term view.
Empowering great entrepreneurs and companies to flourish.
Investing at the scale of the opportunities and resources we see.
Improving the transparency and oversight of what we’re doing.
Making Google even better through greater focus.
And hopefully ... as a result of all this, improving the lives of as many people as we can.
Shoaling or School of Fish Strategy enhances autonomy and delegation facilitating innovation and entrepreneurship across a large organization. In the news release, Larry Page says, "It is clear to us and our board that it is time for, Sundar, a new CEO to run the slightly slimmed down Google with still Android and YouTube in Google organization chart. In the future they could also become subsidiaries of Alphabet eventually.
Alcoa (Aluminum Corporation of America) is another industrial era giant that transformed into two leading public companies. How this transformation at the corporate governance and production levels and operating in a shoaling form of two different companies is helping the giant industrial company to achieve innovation, growth, quality and value creation will be an important strategy lesson for similar large corporations. Alcoa’s new decision and resulting operational consequences will reveal how this new structure enables reducing bureaucratic cost, transfer pricing practices to achieve value maximization, providing autonomy to businesses to achieve organic growth through market and product innovation, and repositioning.
The separation will launch two industry-leading, Fortune 500 companies. The globally competitive Upstream Companywill comprise five strong business units that today make up Global Primary Products - Bauxite, Alumina, Aluminum, Casting and Energy. The innovation and technology-driven Value-Adding Company will include Global Rolled Products, Engineered Products and Solutions, and Transportation and Construction Solutions.
HP is another interesting story of restructuring. Following the split of Hewlett-Packard into two separate publicly traded companies in October 2015, HP Inc.will sell personal computers and printers, and Hewlett Packard Enterprise will sell commercial computer systems, software and tech services.Hewlett-Packard was an early pioneer of what became the model for Silicon Valley start-ups: Founded in 1939 by two Stanford graduates in a Palo Alto, California, garage, HP was long celebrated for its engineering know-how and laid-back corporate culture. It made hefty profits as it grew into a multinational giant that sold a wide range of computer gear and commercial tech services.
Reference: Muthusamy, Senthil Kumar. 2015. Shoaling (School of Fish) as Competitive Strategy, Strategic Change Journal (November, 2015).
Muthusamy, Senthil Kumar., & Dass, P. 2014. Toward A Smarter Enterprise: Disaggregation and Dispersion for Innovation and Excellence,Competitiveness Review, Vol. 24 (3): 211-239.