The Virtual Corporation
by James L. Morrison

[Note: This is a re-formatted manuscript that was originally published in On the Horizon, 1992, 1(4), 4-5. It is posted here with permission from Jossey Bass Publishers.]

The use of the word virtual in the concept of how tomorrow's corporations will be configured is taken from the computer industry, but is not related to the computer term virtual reality, which means, in one sense, that computers provide instantaneous, split-second processing and immediate access of real world data and information, and in another sense, that computers generate a three-dimensional simulated environment that is sufficiently like actual experience that the participant feels that he or she is really there. Rather, the term, virtual, comes from an earlier term, virtual memory, which described the process for making a computer act as though it had more storage capacity than it in fact did.

According to John A. Byrne, "Today's joint ventures and strategic alliances may be an early glimpse of the business organization of the future: The Virtual Corporation. It's a temporary net-work of companies, even erstwhile rivals, that come together quickly to exploit fast-changing opportunities."

Companies of tomorrow can be expected to share costs, skills, and market access, with each company contributing its key capabilities or core competencies to the venture without forming perm-anent alliances or merging through either friendly means or hostile takeovers.

In many ways, the virtual corporation will disobey all the rules of organizational design textbooks of the past. It will have no central office, no organization chart, no hierarchy, and no vertical integration. Its strengths will be power, fluidity, and flexibility. Says John Sculley, Chairman of Apple Computer Inc., "Ten or twenty years from now, you'll see an explosion of entrepreneurial industries and companies that will essentially form the real virtual corporations. Tens of thousands of virtual organizations may come out of this." The risks include companies' dropping the ball, leaving their virtual partners in the lurch, risking proprietary technology and information, and losing management control critical to corporate success.

Global competition and fast-paced technology require more innovation, speed, and knowledge than companies can manage alone. In order for the virtual corporations to be viable, Byrne says, "changes in antitrust policy and intellectual-property laws may be necessary to spur cooperation among companies." Additionally, a computing super- highway, a national infrastructure linking computers and machine tools across the nation, must be in place before optimal communication, which is essential to virtual corporations, can be achieved. [Byrne, J. A. (1993, February 8). The virtual corporation. Business Week, pp. 98-103. Submitted by Linda Blanton, Fayetteville (NC) Technical Community College]

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