Resource Redeployment and the Pursuit of the New Best Use: Economic Logic and Organizational Challenges

Abstract

Shifting economic circumstances may suggest some degree of resource redeployment of capacity-constrained capabilities. However, a separate question remains as to how corporate actors operate within the space of this economic logic. While prior literature on diversification has tended to highlight the fungibility of resources as a basis for their redeployment, we point to an additional consideration of the complementarity of resources that makes allocation within the firm attractive, what we term a “new best use.” Further, we point to a potential tension as the economic logic suggested by this property of complementarity, and more generally interdependence with the firm’s other resources and activities, may make assessing what constitutes what we term the “new best use” of a resource challenging. The latent fungibility of a resource may differ from the range of reliable assessment of relative value creation. The allocation of resources and capabilities across a firm of any scale or scope is generally guided by the organizational and task structure of the enterprise. Building on these arguments, we consider two classes of factors that might impact the realization of the latent opportunities of resource redeployment. One is the “pipes” of organizational structures and grouping of business units and allocation of decision rights of specific managers to those units, and the other is the “prisms” of the various metrics of performance and value creation that may make resource use across different domains of the business more or less comparable.