Businesses often try to create synergies because of the advantages they provide. In this lesson, you’ll learn what a synergy is and how it works.
Some examples will also be provided. You’ll also have a chance to take a short quiz.
Definition of Synergy
A synergy is where the whole is greater than the sum of its parts. In other words, when two or more people or organizations combine their efforts, they can accomplish more together than they can separately. They can get more done working together than they can working apart.
In mathematical terms, a synergy is when 2 + 2 = 5.Negative synergies also exist. If there is a negative synergy, the whole is less than the sum of its parts. In other words, people can actually accomplish more by working alone rather than working together.
In mathematical terms, a negative synergy is when 2 + 2 = 3. An easy example is an overly social work team that spends too much time ‘team building’ and not enough time working.
Examples of Synergy
There are many ways that synergies are attempted in the business world. Let’s look at some examples:MergersCompanies often attempt to achieve synergies by merging with other companies to which they are compatible.
For example, a manufacturing company may have the most up-to-date technology to make the best product of its type on the market, but has a lackluster logistics system. An older manufacturing company may have a stellar logistical system, but outdated manufacturing equipment. If the two companies merge, they can accomplish more together than they could apart.Organizational structureCompanies can create synergies by creating or combining products or markets. For example, if a company sells consumer electronics, salespeople will be able to increase revenue by cross-selling products. If a prospect is looking for a computer, the company can also sell them their printers and wireless Internet routers.
Cross-disciplinary work groupsCompanies can also try to create synergy through the use of cross-disciplinary work groups, where team members bring unique skills and expertise to the team. For example, a company may create a product development team consisting of all-stars from the research and development division, the marketing division, and the production division. The members’ combined skill sets and experiences can produce a better product than all the members could working separately.
A synergy exists when the whole accomplishes more than the sum of its parts, which is mathematically represented by the equation 2 + 2 = 5. In other words, sometimes people and organizations accomplish more by combining their collective efforts than if by working alone. On the other hand, a negative synergy exists when more can be accomplished by working separately, represented by 2 + 2 = 3.
Examples of synergies in the business world include business mergers, combining or creating compatible product lines, and creating cross-disciplinary work groups.
Synergy in Business Vocabulary and Definitions
- Synergy – the whole is greater than the sum of its parts
- Negative synergy – the whole is less than the sum of its parts
- Merger – in business terms, one company combines with another based on compatibility
- Organizational structure – creating and/or combining similar products and markets (computers and printers)
- Cross-disciplinary work groups – groups created where each team member brings a unique skill set
After watching this lesson, you should be able to:
- Define synergy and negative synergies and their relationships to business
- Examine examples of business synergies, including mergers, organizational structure, and cross-disciplinary work groups