John Hagel III (MBA '77) and Marc Singer are the winners of the 1999 McKinsey Award for the best article published in the Harvard Business Review. "Unbundling the Corporation," which appeared in the March/April 1999 HBR, argues that most companies are really engaged in three kinds of businesses. One function builds relationships with customers, another develops products, and the third oversees the operational infrastructure. Even though these activities often conflict with each other, traditionally they have been bundled together because separating them would incur high interaction costs -- expenses associated with everyday activities such as management meetings, conferences, phone conversations, sales calls, reports, and memos.

Hagel and Singer maintain that by dramatically reducing interaction costs, the Internet and other electronic networks will force companies to unbundle into their three component parts. This change will give rise to three very different kinds of businesses: large infrastructure businesses, large customer-relationship businesses, and small, nimble product innovators.

"Executives will be forced to ask the most basic and the most discomforting question about their companies: What business are we really in?" the authors write. "Their answers will determine their fate in an increasingly frictionless economy."

Both Hagel and Singer are principals at McKinsey & Company. Their award-winning article was adapted from their book, Net Worth: Shaping Markets When Customers Make the Rules.

The 1999 second-place article, "Bringing Silicon Valley Inside," was written by HBS research fellow Gary Hamel. His article argues that large companies can capture some of Silicon Valley's entrepreneurial fervor by concentrating less on resource allocation -- an exercise focused mainly on avoiding risk -- and more on resource attraction, which nurtures innovation.

For the past 41 years, the McKinsey Foundation for Management Research has offered awards recognizing the two best HBR articles published each year. Judged by an independent panel of business, academic, and consulting experts, the awards recognize outstanding works that are likely to have a major influence on the actions of business managers worldwide.

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