Functional Integration

Globalization and rapid technological change have made traditional growth strategies of horizontal and vertical integration less effective. Rather than using old strategies based off older versions of the world (which were a lot slower), we now have a proposed functional integration: the two-pronged idea of the creation of new things (products and services) and the integration of those things into the existing ecosystem.

Functional integration is a new take on merging the traditional horizontal and vertical integrations. When these two dimensions work perfectly together, the ecosystem will expand, and the company will grow in market share and profits at a rate far faster than traditional horizontal or vertical integration.

The beginning of vertical integration, by contrast, started with the advent of new hardware technologies focused on increasing efficiency, thereby decreasing production and distribution costs. These new technologies allowed companies to improve the allocation of resources across the vertical chain.

It’s increasingly necessary for companies to work in interactive and interconnected ecosystems. This evolution has helped digital pioneers like Amazon, Apple, and Google effectively outperform other more traditional players.

Work hard, play hard, integrate hard (and functionally).