Synergy is a concept used to express the combined effects produced by two or more parts, elements or individuals. Simply put, it occurs when a whole is formed where the whole is greater than the sum of its parts. For example, if two people working separately do the same thing together or carry a heavy load together, they can carry it more easily. Synergy can occur as a positive or negative result of combined efforts.
Positive and Negative Synergy
Positive (positive) synergy can also be called the 2 + 2 = 5 effect. Working independently, each subsystem can produce two units of output. However, by combining their efforts and working effectively together, the two subsystems can also produce five units of output.
Negative (Negative) synergy can be called the 2 + 2 = 3 effect. Again, individuals working alone can produce two units of output each. However, with negative synergy, the combination of their efforts may result in less output than they would have if each worked alone. Negative synergy can result from inefficient committees, business units that lack strategic alignment, and other failing joint efforts.
History of Synergy
Synergy emerges as a theological term describing the cooperation of human effort with divine will. In recent years, this term is mostly used with systems theory. Systems theory, as applied to the biological and physical sciences, is a term that describes the interdependence of various parts of an organism, such as the human body.
The human body as a system consists of a number of interrelated subsystems, including the brain, skeleton, muscles, and others. To fully understand the larger system, it is necessary to examine the subsystems and the relationships between these systems.
Systems theory is one of the first management theories to explicitly state that changing one of the subsystems can have an impact on the total system. Synergy was developed as a measure of the effectiveness of the joint efforts of various subsystems. On the other hand, discussions of synergy are also present in the medical literature, such as research dealing with how the effects of drugs on individuals are magnified when combined with a special diet or exercise.
Relationship of Synergy with Individuals
One way to observe synergy in an organization is to observe the collective efforts of individuals working together. This energy can come from the efforts of people working in organizations or teams. By combining their knowledge, insight, and ideas, groups can often make better decisions than those of independent group members.
Positive synergy resulting from group decisions can include more idea generation, more creative solutions, greater acceptance of the decision by group members, and increased opportunities for expressing different views. Much of the current interest in teams and team building is an effort to achieve positive synergy through the collaborative efforts of team members.
Organization Level Synergy
Organizations seek to achieve positive synergies or strategic alignment by combining multiple products, lines of business or markets. One way to get positive energy is to buy related products so that sales reps can sell multiple items during a single sales call.
Rather than having two representatives make two sales calls to a potential customer, a sales representative can offer a wider range of products. In addition to merging with another company, a company may also seek to create synergies by combining products or markets.
For example, a clothing business may decide to cross-sell by offering jewelry, belts or other accessories to increase profits. Mergers and acquisitions are corporate-level strategies designed to achieve this kind of positive synergy.
Negative (negative) synergy is also possible at the institutional level. Such negative energy can lead to downsizing, reorganization, layoffs and divestment of business units. Downsizing to eliminate unnecessary levels of management has been a common course of action in the twenty-first century for companies seeking to cut costs to remain competitive.
Important Implications
- Synergy is the concept that the value and performance of two different companies will be greater than the sum of the different parts.
- If two companies can combine to create greater efficiency or scale, the result is sometimes called a synergy combination.
- The expected synergy achieved through a merger can be attributed to several factors such as increased revenues, combined talent, technology and cost reductions.
- In addition to merging with another company, a company can also create this energy by combining products or markets, such as when one company cross-sells another company’s products to increase revenues.
- Companies can also consolidate across different departments by establishing interdisciplinary workgroups where teams work collaboratively to increase productivity and innovation.
Source: One
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