YDA Synergy

Sick of Synergy?

You may be sick of hearing Synergy.
But, do you really know what it is?

An official definition (?) is
"The whole is greater than the sum of its parts." Or, 1+1>2.

Here-under, I present two rounds of Synergy: one facetious, the other serious.


<Round 1>

What is your answer to the single easiest math problem 1+1= ?

 

Your Answer Tells Who You Are

Question: Simplest in the World

1+1=?

Answer	Most probably you are a
2	Ordinary person
2?	Neurotic
3 period	Psychotic
I I	Pictographer, Roman, Chop-stick maker
10	Computer scientist
0	Infighters/ Duelists
1	Chemist (Amedeo Avogadro)
1	Wedding master
3, 4, 5…..	Anti-contraceptionist
Anything (It depends)	Physicist
Explosion	Nuclear scientist (Enrico Fermi, et al.)
Infinity	Bar tender (cocktail maker)
No idea	Idiot
How could I know that?	Philosopher
Who knows?	Skeptic
Only God knows	Convert
Who cares?	Nihilist
Doesn’t matter	Buddhist
C’mon	No-nonsense
Let me think about it	Second-guesser
Why?	Suspicious-minded
Excuse me?	Absent-minded
?	Narcotic
11	Artist
Window in the making	Architect
Window in the breaking	Vandal
King sidelined	Chinese
Buy one, get one free	Bargain hunter
>2	Synergist

<Round 2>

Now, let's be serious.

What are sources of synergy? There could be many, including the following:

1) Division of labor

As advocated by none other than Adam Smith,

two people working together can become more productive

by division of labor than two working independently.

2) Economies of scale or scope

When you have a fixed cost,

your average cost of production may decrease

as you increase the quantity of production.

3) Network effect

As the number of participants increases in your network,

its effectiveness grows in square of the number.

4) Cross learning

When different elements in an industry of across industries gather together in the same place, they can learn from each other.

5) Cross selling

Now they can sell to each other's customers.

        When is synergy the most often referred to? Probably one of such occasions is when a company takes a diversification strategy. Remember Korean chaebols, Japanese keiretus, or American conglomerates? More often than not, the prime rationale for them is the synergy effect.

         What are you reminded of when you hear the term "conglomerate "?
Two of the most popular candidates may be ITT in 1970s and GE now.
  
        You know what?

1) ITT (International Telephone and Telegraph) 

        Beginning as an international version of AT&T, the company was expanded into a conglomerate of hundreds of companies in 1960s and 1970s under the leadership of Harold Geneen, master, father and godfather of the diversification strategy.

        You may be surprised that Mr. Geneen published his second and last book "The Synergy Myth" months before his death in 1997. Got that? Yeah, you're right.

2) GE (General Electric)

         GE had 12 business divisions under god-like Jack Welch. His sucessor Jeff Immelt consolidated it into six divisions and subsequently into four in July 2008.

         At any rate, GE does not buy in the synergy effect. Each business is supposed to be No. 1, No. 2 or equally excellent on its own. Otherwise, the iron rule "Fix, sell or close" waits for it.

Now, what do you think?
If you'd like to be more serious, please refer to Synergy and Cost Economics (Real)